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: July 7, 1998
Commission File Number 1-13123
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 July 2, 1998, Metals USA, Inc. (the "Company") and Philip Services Corp.
("Philip") received the necessary administrative approvals which permitted the
Company and Philip to complete the Company's acquisition of Intsel Southwest
Limited Partnership ("Intsel") from Philip. The acquisition had been previously
announced on June 24, 1998, and was completed on July 7, 1998.
Intsel is a leading distributor of heavy carbon steel products with
approximately 185 employees. Intsel sells to a broad and diversified customer
base throughout the southwestern and southeastern regions of the United States.
Intsel is headquartered in Houston, Texas, with additional distribution
facilities in Dallas and San Antonio, Texas; Birmingham, Alabama; Tulsa,
Oklahoma; and Lafayette, Louisiana. Intsel had net sales during the year ended
December 31, 1997 of approximately $138.9 million.
In addition, the Company has acquired eleven small metal processing
companies which together with Intsel have combined net sales of approximately
$316.1 million for the year ended December 31, 1997. The twelve companies were
acquired for a combination of cash, notes and stock. The consideration paid was
determined by negotiations between appropriate representatives of the Company
and the companies acquired. Total consideration for the acquisitions consisted
of 2,496,248 shares of the Company's common stock, notes of approximately $3.7
million and cash of approximately $134.7 million. The cash component of the
aggregate purchase price was paid with borrowings from a commercial bank.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The Company believes that it is impractical to provide financial
statements of the company 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
Pro forma financial information reflecting this acquisition is hereby
incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 (Registration Statement No. 333-49823) filed with the
Securities and Exchange Commission on July 7, 1998.
(C) EXHIBITS:
10.0 Agreement and Plan of Merger dated June 24, 1998, by and among Metals
USA, Inc., Philip Metals (USA) Inc., Philip Services Corp.
and Philip Enterprises Inc.
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METALS USA, INC.
FORM 8-K
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.
By: /s/ TERRY L. FREEMAN
Terry L. Freeman
Vice President, Corporate Controller
Date: July 10, 1998 and Chief Accounting Officer
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, made and entered into this 24th day of June,
1998, by and between
METALS USA, INC., a corporation organized and existing under the laws of
Delaware, having its principal place of business at Three Riverway, Suite
600, Houston, Texas (hereinafter referred to as the "Buyer"),
PHILIP METALS (USA) INC., a corporation organized and existing under the
laws of Ohio, having its principal place of business at 100 King Street
West, Hamilton, Ontario, Canada (hereinafter referred to as the "Seller").
PHILIP SERVICES CORP., a corporation amalgamated under the laws of the
Province of Ontario having its principal place of business at 100 King
Street West, Hamilton, Ontario, Canada (hereinafter referred to as
"Philip").
PHILIP ENTERPRISES INC., a corporation amalgamated under the laws of the
Province of Ontario having its principal place of business at 100 King
Street West, Hamilton, Ontario, Canada (hereinafter referred to as
"Canadian Parent").
W I T N E S S E T H:
WHEREAS Intsel Southwest Limited Partnership, a Connecticut limited
partnership (hereinafter referred to as the "Partnership"), is engaged in the
business of purchasing, warehousing, distributing, processing, and selling heavy
carbon steel products;
WHEREAS PEN Metals (Delaware), Inc., a Delaware corporation, owns a one per
cent (1 %) Partnership Interest in, and is the general partner of, the
Partnership;
WHEREAS Philip Metals (Delaware), Inc., a Delaware corporation, owns a
ninety-nine per cent (99%) Partnership Interest in, and is the sole limited
partner of, the Partnership;
WHEREAS the Seller is the owner of (a) all of the outstanding shares of
capital stock of Philip Metals (Delaware), Inc., being 1,000 common shares (the
"Limited Partner Shares"), and (b) all of the outstanding shares of capital
stock of PEN Metals (Delaware), Inc., being 1,000 common shares (the "General
Partner Shares");
WHEREAS Philip is the indirect parent of the Seller;
WHEREAS the Seller desires to sell to the Buyer and Buyer desires to
purchase from Seller the Limited Partner Shares and the General Partner Shares
upon the terms and conditions set forth herein;
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
INTERPRETATION AND APPLICATION
1.01. Defined Terms. As used in this Agreement, the following terms shall have
the meanings respectively ascribed thereto:
"Affiliate" shall mean, in respect of any Person, another Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, the first Person.
"Agreement" shall mean this Stock Purchase Agreement entered into by and between
the Buyer and the Seller, as the same may be amended, modified, supplemented,
and/or restated from time to time, together with all Schedules attached hereto.
"Business Employee" and "Business Employees" shall mean, respectively, each
employee of the Partnership and collectively the employees of the Partnership.
"Buyer" shall mean Metals USA, Inc.
"Buyer's Documents" means and includes this Agreement and the other agreements,
instruments, certificates or other documents executed and delivered by Buyer or
any Affiliate thereof in connection with this Agreement and/or the Closing.
"Buyer's Indemnified Affiliates" shall have the meaning ascribed thereto in
Section 9.01.
"Claim" means and includes any losses, claims, liabilities, damages, judgments,
payments, costs and expenses (including reasonable legal fees and expenses
incurred after the Closing Date in defense of any Claim.)
"Closing" means the consummation of the purchase and sale of the shares of the
Companies and the other transactions contemplated by this Agreement.
"Closing Date" shall have the meaning ascribed thereto in Section
8.01.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Companies" shall mean, collectively, PEN Metals (Delaware), Inc., and Philip
Metals (Delaware), Inc. and "Company" shall refer individually to PEN Metals
(Delaware), Inc. or Philip Metals (Delaware) Inc.
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"Contract" means and includes any contract, agreement, instrument, undertaking,
commitment or arrangement, of any kind or description whatsoever to which the
Partnership or either of the Companies is a party or by which any property,
assets, capital stock or partnership interest (as the case may be) of the
Partnership, or the Companies is subject or bound.
"Control" shall mean, in respect of any Person, the power to control the
direction, management and policies of that Person, or to elect a majority of the
directors, managing directors, trustees or other governing authorities of that
Person. The verbal forms "controls" and "controlled" shall be interpreted
accordingly.
"Disclosure Schedule" means the Disclosure Schedule comprising the Schedules
referred to in Section 3.01 hereof, delivered by Seller to Buyer
contemporaneously with this Agreement (or prior thereto).
"Employee Benefits" shall have the meaning ascribed thereto in Section 4.07.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"GAAP" means generally accepted United States accounting principles in effect
from time to time.
"General Partner Purchase Price" shall have the meaning ascribed thereto in
Section 2.01(a).
"General Partner Shares" means all of the issued and outstanding shares of
capital stock of PEN Metals (Delaware), Inc., being 1,000 shares of common
stock.
"Group Benefit Arrangement" shall have the meaning ascribed thereto in Section
3.01(k)(i)(B).
"HSR Act" means the Hart- Scott -Rodino Act of 1976, as amended.
"Indemnitee" shall mean the party seeking indemnification pursuant to Article
IX.
"Indemnitor" shall mean the party from which indemnification is sought pursuant
to Article IX.
"Intercompany Indebtedness" shall mean all indebtedness of the Partnership due
to the Seller, the Companies or any Affiliate thereof and all indebtedness of
the Companies due to the Seller or any Affiliate of Seller.
"Law" or "Laws" shall mean and include all federal, state, regional, local and
foreign laws, statutes, ordinances, codes, judgments, orders, decrees,
directives, rules and regulations of any governmental authority, court or
arbitrator.
"Liens" shall mean and include all liens, security interests, mortgages,
pledges, covenants, easements and other encumbrances and defects in title.
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"Limited Partnership Agreement" shall mean that certain Agreement
of Limited Partnership of Intsel Southwest Limited Partnership,
by and between PEN Metals (Delaware), Inc. and Philip Metals
(Delaware), Inc., dated February 1, 1997.
"Limited Partner Purchase Price" shall have the meaning ascribed thereto in
Section 2.01(b).
"Limited Partner Shares" means all of the issued and outstanding shares of
capital stock of Philip Metals (Delaware), Inc., being 1,000 shares of common
stock.
"Material Adverse Effect" means a condition or event which has had, or if it
should come about would reasonably be expected to have, a material adverse
effect on the business, financial condition, operations, properties or assets,
earnings or prospects of the Companies or the Partnership as the case may be
taken as a whole.
"Notice of Claim" shall have the meaning ascribed thereto in
Section 9.05.
"Partnership" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Partnership Benefit Arrangements" shall have the meaning ascribed thereto in
Section 3.01(k)(ii).
"Partnership Financial Statements" shall have the meaning ascribed thereto in
Section 3.01(i)(ii).
"Partnership Interest" shall mean the entire interest in the Partnership held by
PEN Metals (Delaware), Inc., and Philip Metals (Delaware), Inc., respectively,
as set forth in the Limited Partnership Agreement or otherwise existing,
including all rights to receive distributions of capital and profits in respect
of such interest.
"Partnership's Facilities" shall mean, collectively, the facilities from which
the Partnership carries on its business as at the Closing Date, which are
located in or around (i) Tulsa, Oklahoma, (ii) San Antonio, Texas, (iii)
Houston, Texas, (iv) Dallas, Texas, (v) Lafayette, Louisiana, and (vi)
Birmingham, Alabama.
"Permit" means and includes any governmental licenses, permits, rights,
privileges, registrations, required reports, franchises, authorizations and
other consents which are required under any applicable Law to own and/or operate
the business of the Companies or of the Partnership.
"Permitted Liens" shall mean (i) construction, warehousemen's, mechanics',
carriers', workers', repairers', and other similar liens arising or incurred in
the ordinary course of the business that relate to obligations not yet due or
delinquent or obligations that are being challenged through appropriate
procedures and for which adequate reserves have been established; (ii) such
title defects and irregularities, charges, easements, rights of way or
restrictions, if any, which either alone or in the aggregate do not materially
detract from the value of, or materially interfere with the present use of, the
real property which is subject thereto or affected thereby; (iii) all liens,
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exceptions, imperfections in title, charges, easements, restrictions and
encumbrances established pursuant to or permitted by this Agreement; (iv) liens
on equipment or goods acquired or held in the ordinary course of the business,
incurred solely to secure purchase-money financing for the acquisition of such
equipment or goods; (v) undetermined or inchoate liens and charges incidental to
construction, maintenance or operations that relate to obligations not yet due
or delinquent or obligations that are being challenged by appropriate procedures
and for which adequate reserves have been established; and (vi) liens for taxes
and assessments for the then current year, liens for taxes and assessments not
at the time overdue and liens securing workers' compensation assessments not at
the time overdue.
"Person" shall include an individual, corporation, partnership, limited
partnership, limited liability company, limited liability partnership, joint
venture, association, trust, unincorporated organization, government or
governmental agency, and any other legal entity.
"Philip Plan" shall have the meaning ascribed thereto in Section 4.06 hereof.
"Real Property" shall have the meaning ascribed thereto in Section 3.01(aa).
"Returns" shall have the meaning ascribed thereto in Section 3.01(t).
"Retirement Plan" shall have the meaning ascribed thereto in Section
3.01(k)(i)(A).
"Seller" shall have the meaning ascribed thereto in the preamble to this
Agreement.
"Seller's Documents" means this Agreement, and the other agreements,
instruments, certificates or other documents executed and delivered by Seller or
the Companies in connection with this Agreement and/or the Closing.
"Seller's Indemnified Affiliates" shall have the meaning ascribed thereto in
Section 9.02.
"Shares" shall mean, collectively, the General Partner Shares and the Limited
Partner Shares.
"Taxes" shall have the meaning ascribed thereto in Section 3.01(t).
"Third-Party Claim" shall have the meaning ascribed thereto in Section 9.06.
"U.S. Parent" shall have the meaning ascribed thereto in Section 6.05(ii).
1.02. Other Rules of Construction. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." All references to
"party" and "parties" shall be deemed references to the parties to this
Agreement and to a party's successor in title unless the context shall otherwise
require. All references to Sections and Paragraphs shall be deemed references to
Sections and Paragraphs of
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this Agreement, unless the context shall otherwise require. All references
herein to Schedules shall be deemed to be references to the Schedule(s) attached
to this Agreement. The terms "this Agreement," "hereof," "hereunder," and
similar expressions refer to this Agreement as a whole and not to any particular
Article or Section or other portion of this Agreement and include any agreement
supplemental hereto. The conjunction "or" shall be understood in its inclusive
sense (and/or). Any reference to the best of a party's knowledge in relation to
a representation or warranty of such party shall mean that the officers of such
party (or of the Affiliates of such party) listed on Schedule 1.02 hereto have
no knowledge, after making reasonable inquiries into the relevant subject
matter, that such representation or warranty is not true.
1.03. Effects. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns. This Agreement shall not create or confer, or be construed as creating
or conferring, any right, remedy, claim or benefit upon any Person, including
any Business Employee or former Business Employee, other than the parties hereto
and their respective successors and permitted assigns.
1.04. Waivers and Amendments. Any amendment or supplementation of this Agreement
or any waiver of any term or condition thereof shall be effective only if in
writing. A waiver of any breach of the term or condition of this Agreement shall
not in any way be construed as a waiver of any subsequent breach.
1.05. Severability. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Agreement shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
1.06. Counterparts. This Agreement may be executed in one or more counterparts,
all of which together shall constitute one and the same instrument.
1.07. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict-of-laws rules thereof.
1.08. Entire Agreement. This Agreement, and the Schedules hereto and the other
documents, agreements and instruments executed and delivered pursuant to or in
connection with this Agreement contain the entire agreement between the Buyer
and the Seller in respect of the transactions contemplated by this Agreement and
supersedes all prior arrangements or understandings with respect thereto.
1.09. Interpretation of Schedules. The fact that any asset, item, action,
entity, event, condition, or other matter is set forth or described in any one
or more of the Schedules hereto shall not alone be construed as a
representation, admission (by any Person) or evidence that such asset, item,
action, entity, event, condition, or other matter is, or may at any time be or
have been, material in any way to the business or to the transactions
contemplated by this Agreement.
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1.10. U.S. Dollars. All dollar amounts referenced in this Agreement shall be in
U.S. Dollars.
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Shares.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Seller agrees to sell, and Buyer agrees
to purchase, the General Partner Shares for a purchase price equal to
$xxx,xxx (the "General Partner Purchase Price"). The Seller and Buyer
agree that all of the General Partner Purchase Price shall be
allocable exclusively to the acquisition of General Partner Shares
hereunder and that reports or returns filed for Federal income tax
purposes shall be consistent with such allocation.
(b) Upon the terms and subject to the conditions set forth in this
Agreement at the Closing, the Seller agrees to sell, and Buyer agrees
to purchase, the Limited Partner Shares for a purchase price equal to
$xx,xxx,xxx (the "Limited Partner Purchase Price"). The Seller and
Buyer agree that all of the Limited Partner Purchase Price shall be
allocable exclusively to the acquisition of Limited Partner Shares
hereunder and that reports or returns filed for Federal income tax
purposes shall be consistent with such allocation.
2.02. Payment; Delivery of Certificates. At the Closing, subject to the terms of
an escrow agreement to be entered into on Closing between Buyer and Seller as to
$xxx,xxx of the General Partner Purchase Price, (a) Buyer shall pay by wire
transfer of immediately available funds, as directed by Seller, the amount of
the General Partner Purchase Price; (b) Buyer shall pay by wire transfer of
immediately available funds, as directed by Seller, the amount of the Limited
Partner Purchase Price; (c) Seller shall deliver to Buyer certificates for the
General Partner Shares, duly endorsed or accompanied by stock powers duly
endorsed in blank; and (d) Seller shall deliver to Buyer certificates for the
Limited Partner Shares, duly endorsed or accompanied by stock powers duly
endorsed in blank.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties of the Seller. The Seller represents and
warrants to Buyer that, as of the Closing Date:
(a) Organization and Standing of the Seller. The Seller is a corporation
duly organized and validly existing under the laws of the State of
Ohio. The Seller is
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qualified to transact business and is in good standing as a foreign
corporation in any jurisdiction where the failure to be so qualified
would have a Material Adverse Effect on the ability of the Seller to
execute this Agreement and the Seller Documents or to perform its
obligations hereunder or thereunder.
(b) Organization and Standing of the Companies. Each of the Companies is a
corporation duly organized and validly existing under the laws of the
State of Delaware and each has all requisite power and authority to
own its assets and properties. Each of the Companies is qualified to
transact business and is in good standing as a foreign corporation in
any other jurisdiction where the failure to be so qualified would have
a Material Adverse Effect on the ability of such Company to own its
interest in the Partnership. The Seller has delivered to the Buyer
complete and correct copies of the Certificate of Incorporation and
By-Laws of each of the Companies, as amended and in effect on the
Closing Date. There are no minutes or resolutions of the Companies,
which have not been made available to Buyer and all such minutes and
resolutions are correct and complete in all material respects.
(c) Organization and Standing of the Partnership. The Partnership is a
limited partnership duly organized, validly existing and subsisting
under the laws of the State of Connecticut and has all requisite power
and authority to own, to operate and to lease its assets and
properties, and to carry on its business as currently conducted. The
Partnership is qualified to transact business and is in good standing
as a foreign limited partnership in any other jurisdiction where the
failure to be so qualified would have a Material Adverse Effect. The
Seller has delivered to the Buyer a complete and correct copy of the
Limited Partnership Agreement, as amended and in effect on the Closing
Date.
(d) Capital Stock of the Companies.
(i) The authorized and issued capital stock of each of the Companies
is as set out in Schedule 3.01(d)(i). The Seller is the owner of
all of the issued and outstanding shares of capital stock of each
of the Companies. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable and are owned of
record and beneficially by the Seller. There are no outstanding
options, warrants or other rights to acquire, or any plans or
commitments for the issuance of, or the granting of rights to
acquire (A) any shares of capital stock of the Companies or (B)
any securities convertible into or exchangeable for any shares of
capital stock of the Companies. There are no outstanding
contractual obligations of the Companies to repurchase, to
redeem, or otherwise to acquire any outstanding shares of the
capital stock thereof.
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(ii) Upon delivery of certificates for the Limited Partner Shares to
Buyer pursuant to this Agreement, Buyer will acquire valid and
marketable title to the Limited Partner Shares, free and clear of
all Liens.
(iii) Upon delivery of certificates for the General Partner Shares to
Buyer pursuant to this Agreement, Buyer will acquire valid and
marketable title to the General Partner Shares, free and clear of
all Liens.
(iv) Except for the Partnership Interests, neither of the Companies
owns, directly or indirectly, any capital stock in any
corporation or any voting or management interest in any other
Person nor do the Companies carry on any business.
(e) Capitalization of the Partnership.
(i) The Partnership Interests represent one hundred percent (100%) of
all interests in the Partnership, and the Partnership Interests
are comprised solely of those rights and obligations set forth in
the Limited Partnership Agreement and in the Connecticut Uniform
Limited Partnership Act (as set forth in Conn. Gen. Stat. 34-9 to
34-38q (1993)).
(ii) Except for the Partnership Interests, there are no partnership
interests or other securities (whether or not such securities
have voting rights) of the Partnership issued or outstanding or
any options, warrants, calls, rights or other agreements or
commitments of any character obligating the Companies to cause
the Partnership to issue, to transfer or to sell, or to cause the
issuance, transfer or sale of, any partnership interests in the
Partnership.
(iii) At the time of Closing, the Partnership Interests will be free
and clear of all Liens and there are no outstanding contractual
obligations of the Companies, that relate to the purchase, sale,
redemption, acquisition, transfer, disposition, holding, or
voting of the Partnership or the management or operation of the
Partnership.
(f) Authorization and Binding Effect. All proceedings required by the
Certificate of Incorporation and By-Laws of the Seller or
otherwise for the execution and delivery by the Seller of this
Agreement and each of the Seller Documents to which the Seller is
a party and for the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly
taken. (i) The representatives of the Seller executing this
Agreement have the authority to bind the Seller to the terms of
this Agreement; and (ii) the Seller has the legal right, power
and authority to execute, to deliver, and to perform this
Agreement and the Seller Documents to which the Seller is a party
and, upon obtaining all necessary consents and approvals
described in Schedule 3.01(g), to consummate the
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transactions contemplated hereby and thereby. This Agreement
constitutes, and when duly executed and delivered the Seller
Documents to which the Seller is a party will constitute, the
legal, valid, and binding obligations of the Seller, enforceable
against the Seller in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
reorganization, insolvency, and similar laws of general
application relating to or affecting the enforcement of rights of
creditors and, further, except that the availability of equitable
remedies is subject to the discretion of the court, arbitrator or
tribunal before which any proceeding may be brought.
(g) Consents and Approvals. Except as set forth in Schedule 3.01(g), no
consent, approval, authorization, waiver or notice to or from any
Person is required for the execution, delivery, or performance by the
Seller of this Agreement or any of the Seller Documents to which the
Seller is a party.
(h) No Violation. The execution and delivery by the Companies
or Seller of the Seller Documents to which they are respectively
a party, and the performance by such parties of their respective
obligations thereunder, does not and will not contravene,
conflict or be inconsistent with, result in a breach of,
constitute a violation of or default under, or require or result
in any right of acceleration or create or impose any Lien under
(all or any of the foregoing a "breach"):
(i) the Companies' or Seller's respective articles or certificate of
incorporation or by-laws (or other organization documents);
(ii) any Law applicable or relating to the Companies or Seller or any
of the businesses or assets of the Companies except any violation
which alone or in the aggregate would not be material;
(iii) any material Contract or Permit; or
(iv) any judgment, order or decree of any court or governmental
authority which is binding upon the Companies or the Seller.
(i) Financial Statements and Financial Condition. Attached as Schedule
3.01(i) hereto are:
(i) the unaudited balance sheet of the Partnership as of December 31,
1996, and December 31, 1997, and the related income statements
for the years then ended; and
(ii) the unaudited balance sheet of the Partnership as of March 31,
1998 and the related income statement for the three (3) months
period then ended (collectively the balance sheets and income
statement described in (i) and (ii) are called the "Partnership
Financial Statements").
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The Partnership Financial Statements present fairly, in all material
respects, the financial position and results of operations of the
Partnership as at the respective dates thereof, and have been prepared
in conformity with GAAP applied on a consistent basis throughout the
periods involved except as disclosed in Schedule 3.01(i) and except
that
(i) certain note disclosures required by GAAP are not included
therein; and
(ii) the corporate staff of an Affiliate of Seller supplies
centralized banking and cash management and administrative
services to the Partnership and provides tax, general accounting,
auditing, human resources, and legal services to the Partnership,
none of which have been charged to the Partnership or included in
the Partnership Financial Statements.
The Companies' only asset is their respective investments in the
Partnership. The Companies' only liabilities are for intercompany
indebtedness and deferred taxes which will be zero at Closing.
(j) Transactions with Certain Persons. Except as set forth in
Schedule 3.01(j), since March 31, 1998, neither the Partnership
nor either of the Companies has, directly or indirectly,
purchased, leased or otherwise acquired any material property or
obtained any material services from, or sold, leased or otherwise
disposed of any material property or furnished any material
services to (i) the Seller or any Affiliate of the Seller, except
in the ordinary course of the business; or (ii) any director or
officer of the Seller, whether in the ordinary course of the
business or otherwise, except as remuneration for services
rendered as a director, officer, or employee of the Partnership
or any of the Companies. Except as set forth in Schedule
3.01(j), neither the Partnership nor either of the Companies has
any contract with or commitment to, or owes any amount to, or is
owed any amount by
(i) the Seller or any Affiliate of the Seller; or
(ii) any director or officer of the Seller, except in respect of
services rendered as a director, officer, or employee of the
Partnership or either of the Companies.
(k) Employee Benefit Plans and Arrangements.
(i) Set forth in Schedule 3.01(k) is a complete and correct list of:
(A) Each arrangement (x) that is intended to be a "qualified
plan" within the meaning of Code Section 401 (a), (y) the
principal sponsor of which is the Seller or an Affiliate of
the Seller (other
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than the Partnership or the Companies), and (z) that covers
any employee or former employee of the Partnership (each
such arrangement, a "Retirement Plan"); and
(B) Each arrangement providing for workers' compensation,
disability benefits, medical benefits, dental benefits,
supplemental unemployment benefits, severance pay, vacation
pay, deferred compensation, stock options, post retirement
benefits, or other similar benefits (x) that is not a
Retirement Plan, (y) the principal sponsor of which is the
Seller or an Affiliate of the Seller (other than the
Partnership or the Companies), and (z) that covers any
employee or former employee of the Partnership (each such
arrangement, a "Group Benefit Arrangement").
(ii) Set forth in Schedule 3.01(k) is a complete and correct list of:
(A) Each employment, severance, bonus or other similar agreement
by and between the Partnership and any employee or former
employee of the Partnership; and
(B) Each arrangement providing for workers' compensation,
disability benefits, medical benefits, dental benefits,
supplemental unemployment benefits, severance pay, vacation
pay, deferred compensation, stock options, post retirement
benefits, or other similar benefits, that is not a
Retirement Plan, (y) the principal sponsor of which is the
Partnership, and (z) that covers any employee or former
employee of the Partnership (such agreements, plans, and
arrangements described in this paragraph (ii) hereinafter
referred to collectively as the "Partnership Benefit
Arrangements").
(iii) The Partnership Benefit Arrangements, the Retirement Plan as
written and all other Group Benefit Arrangements, except for
matters for which Seller is providing indemnification under
Section 9.01(d) hereof, are each in substantial compliance with
the applicable provisions of ERISA, and those provisions of the
Code applicable to any of them.
(iv) All contributions to, and payments from, the Retirement Plan, the
Group Benefit Arrangements and the Partnership Benefit
Arrangements which may have been required to be made in
accordance with the terms of the Retirement Plan, the Group
Benefit Arrangements or the Partnership Benefit Arrangements or
applicable law have been duly and timely made or are properly
accrued on the books of the Partnership or the Seller or any
Affiliate of Seller as the case may be.
<PAGE>
13
(l) Employees and Labor Relations.
(i) Except as disclosed in Schedule 3.01(l)(i), no employee of the
Partnership is covered by any collective bargaining agreement or
is a party to any Contract with the Partnership. The Partnership
is in substantial compliance with all Laws relating to the
employment of labor, including, without limitations, those
relating to wages, hours, and payment of social security and
similar Taxes and is not knowingly engaged in any unfair labor
practice or discrimination. Except as disclosed in Schedule
3.01(l)(i), there are no complaints against the Partnership
pending or, to the best knowledge of Seller, threatened before
the National Labor Relations Board or any similar state or local
labor agency by or on behalf of any employee of the Partnership.
The Companies have no employees.
(ii) Schedule 3.01(l)(ii) contains an accurate list of the name,
salary or hourly wage rate and date of hire of each Business
Employee as of the date hereof.
(m) Litigation and Compliance. Except as set forth on Schedule
3.01(m) there is no action, suit, claim, order, judgment, decree,
writ, injunction or proceeding, including any condemnation or
eminent-domain proceeding, or governmental or administrative
investigation, pending, or to the best of the Seller's knowledge
threatened, against the Seller or the Companies or the
Partnership, relating to the Companies, the Partnership, or the
business of the Partnership that has or is likely to (i) result
individually or in the aggregate in a liability of the Companies
or the Partnership in an amount in excess of one hundred thousand
dollars ($100,000), or (ii) limit or affect the ability of the
Seller to execute this Agreement or the Seller Documents to which
the Seller is a party or otherwise to consummate and to perform
the Seller's obligations hereunder and thereunder. Except as
disclosed on Schedule 3.01(m), since December 20, 1996, the
Partnership has conducted and now conducts its business in
substantial compliance with all Laws, regulations, writs,
injunctions, decrees and orders applicable to the Partnership or
its assets (other than those Laws relating to the environment
which are dealt with exclusively in Section 3.01(o) hereof).
(n) Permits. The Partnership or the Companies have obtained all
Permits required in connection with the conduct of the business
of the Partnership. Section 3.01(n) contains a complete list of
all Permits held by or issued in favour of the Partnership as of
the Closing Date. All such Permits are valid and in full force
and effect, and there exists no material default or violation by
the Partnership under any such Permit. No event, act or omission
has occurred which has resulted, or (with or without notice, the
passage of time or the occurrence of any other event) could
result in the revocation or non-renewal of any Permit.
<PAGE>
14
(o) Certain Environmental Matters. Except as set forth in
Schedule 3.01(o), the Partnership's Facilities are not in
violation of any applicable federal or state law, rule,
regulation, order or decree regarding environmental protection,
which violation individually or in the aggregate would have a
Material Adverse Effect. The Partnership is conducting its
business in material compliance with all applicable environmental
laws. There are no material outstanding complaints, orders,
citation, notices, or orders of violation or non-compliance
issued to the Partnership under any applicable environmental
laws. The Company and the Partnership do not and will not have
any liability for any obligation or liability of Intsel
Corporation in respect of the Kin-Buc landfill site or the
Terracorp. superfund site
(p) Operation of the Business. Since March 31, 1998, the
Seller and the Companies (i) have caused the Partnership to
conduct its business in the ordinary course, consistent with past
practices; (ii) have used their commercially reasonable efforts
to maintain and preserve the Partnership's business organization,
assets, licenses, Permits, Contracts and its relationship with
suppliers, customers, and others having business relationships
with the Partnership; (iii) have managed the cash of the
Partnership and the Companies consistent with past practice
(which Buyer acknowledges included the payment of cash not
required in the operation of the Partnership, by dividend or
other distribution, to the Seller or its Affiliates) and the
Partnership has not, save and except as set forth in Schedule
3.01(p),
(i) introduced any new policy or procedure regarding the management,
operations, accounting, payment practices, billing or collection
practices, other than as were in process at March 31, 1998;
(ii) entered into any material transaction other than in the ordinary
course of business, consistent with past practices;
(iii) made any capital expenditures, or commited to make any capital
expenditure, other than (x) expenditures in the ordinary course
of business and individually in any amount less than $250,000 and
in the aggregate in any amounts less than $500,000 or (y)
pursuant to commitments therefor made prior to March 31, 1998,
the particulars of which have been provided to the Buyer;
(iv) increased the salary or commission level of, or paid bonuses
other than those which are normal and customary or committed to
prior to March 31, 1998, or paid any fees or unusual
distributions to any officer, director, employee or agent (other
than in the case of non-executive employees, routine increases in
salary);
<PAGE>
15
(v) entered into any new or amended debt or capital lease instruments
or increased borrowings other than in the ordinary course of
business to finance working capital;
(vi) effected any change in the capital structure of the Partnership;
or
(vii) entered into any agreement with respect to any of the foregoing.
(q) No Material Adverse Change. Except as set forth in Schedule
3.01(q), since March 31, 1998, there has been no change in the
affairs, assets, liabilities, operations or condition of the
Companies, the Partnership, or its business, financial or
otherwise, whether arising as a result of any legislative or
regulatory change, revocation of any license or right to do
business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public
force or otherwise, which individually or in the aggregate have
had a Material Adverse Effect on the Companies or the
Partnership.
(r) Absence of Undisclosed Liabilities. Except as set forth in Schedule
3.01(r), neither of the Companies nor the Partnership has any
liabilities (whether accrued, absolute, contingent or otherwise) in
excess of Five Hundred Thousand Dollars ($500,000) in the aggregate,
other than
(i) in respect of the Partnership, the liabilities and obligations
that are reflected or reserved against in the Partnership
Financial Statements; and
(ii) any liabilities or obligations that are disclosed in this
Agreement, including the Schedules hereto; and
(iii) any obligations or liabilities incurred in the ordinary course
of the business of the Partnership since March 31, 1998, as
reflected in the books and records of the Partnership or the
Companies.
(s) Title to Fixed Assets. At the Closing, the Partnership will
have good and marketable title, free and clear of all Liens other
than Permitted Liens, to all of the fixed assets of the
Partnership having a book value in excess of Fifty Thousand
Dollars ($50,000) that are used in connection with its business
as currently conducted, including land, improvements, buildings,
automobiles, trucks, construction in progress, equipment,
machinery, tools, spare parts, inventory, instruments, and
furniture (other than any and all fixed assets that are leased,
rented, or in respect of which the Partnership has a right of use
which leases are listed in Schedule 3.01(s) hereto).
(t) Taxes and Other Payments. 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
<PAGE>
16
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 terms
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.
(i) All Tax returns ("Returns") required to be filed with respect to
any Tax for which any of the Companies or the Partnership is
liable, have been duly and timely filed with the appropriate
taxing authority, each Tax shown to be payable on each such
Return has been paid, each Tax payable by the Companies or the
Partnership by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the
books of the Companies and the Partnership as appropriate for all
Taxes for which any of the Companies or the Partnership is liable
(other than any taxes arising as a result of the Section
338(h)(10) Election) but the payment of which is not yet due.
Neither the Companies nor the Partnership is, or has ever been
liable for any Tax payable by reason of the income or property of
a Person other than the Companies or the Partnership. Except as
disclosed in Schedule 3.01(t), each of the Companies and the
Partnership have timely filed true, correct, in all material
respects, and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be
filed by it. No liens for Taxes exist upon the assets of the
Companies or the Partnership except liens for Taxes which are not
yet due. Neither the Companies nor the Partnership is currently,
or ever has been, subject to Tax in any jurisdiction outside the
United States. Except as disclosed in Schedule 3.01(t), no
litigation with respect to any Tax for which the Companies or the
Partnership is asserted to be liable is pending or under
discussion with any governmental entity relating to Taxes, or, to
the best knowledge of the Seller, or any Affiliate, threatened,
and no basis which the Companies, the Partnership, the Seller or
its Affiliates believes to be valid exists on which a claim for
any such Tax can be asserted against the Companies or the
Partnership. Except as disclosed in Schedule 3.01(t), there are
no requests for rulings or determinations in respect of any Taxes
pending between the Companies or the Partnership and any
governmental authority relating to Taxes. No extension of any
period during which any Tax may be assessed or collected and for
which the Companies or the Partnership is or may be liable has
been granted to any governmental authority with respect to Taxes.
Neither the Companies nor the Partnership is or has been party to
any tax allocation or sharing agreement. All amounts required to
be withheld by any of the Companies or the Partnership and paid
to governmental agencies for income, social security,
unemployment insurance, sales, excise, use and other Taxes have
been collected or
<PAGE>
17
withheld and accrued or paid to the proper governmental
authority. The Companies and the Partnership have all made all
deposits required by law to be made with respect to employees'
withholding and other employment Taxes. Neither the Companies nor
the Partnership is a "foreign person," as that term is referred
to in Section 1445(f)(3) of the Code. The Companies have not
filed a consent pursuant to Section 341(f) of the Code or any
comparable provision of any other Tax statute and have not agreed
to have Section 341(f)(2) of the Code or any comparable provision
of any other Tax statute apply to any disposition of an asset.
The Companies or the Partnership have not made, are not obligated
to make and are not a party to any agreement that could require
either of them to make any payment that is not deductible under
Section 280G of the Code No accounting method changes of the
Companies or of the Partnership have been made which could give
rise to an adjustment under Section 481 of the Code. The amounts
shown as accruals for taxes on the Partnership Financial
Statements are sufficient for the payment of all Taxes of the
kinds indicated (including penalties and interest) for all
periods shown.
(ii) For purposes of this section, "related tax party" means all
affiliates of the Companies who have joined them in the filing of
a consolidated federal or combined state tax return including any
entities that have been merged liquidated or otherwise legally
combined with the Companies and any Affiliate thereof that have
joined such entities in filing a consolidated federal or combined
state tax return. Neither the Companies nor the Partnership are
or will be liable for taxes of any related tax party, as such
term is defined herein.
(u) Contracts and Commitments. Schedule 3.01(u) sets forth a complete list
of all Contracts except for:
(i) routine purchase orders entered into in the ordinary course of
business consistent with past practice; and
(ii) employment and other Contracts terminable by the Partnership at
will or on sixty (60) days' (or less) notice without penalty; and
(iii) any other Contract involving liabilities or obligations for
future payment by the Companies or the Partnership of not more
than $250,000.
Seller has heretofore delivered to Buyer, or made available for
Buyer's review, copies of all such Contracts listed in Schedule
3.01(u). Except as may be indicated on Schedule 3.01(u) all Contracts
listed in Schedule 3.01(u) are in full force and effect in accordance
with the terms thereof (except to the extent that any courses of
dealing have effected deviations therefrom, none of which are
material), and are enforceable in accordance with their terms, and
there are no
<PAGE>
18
material breaches and no outstanding material defaults by any other
party to the best knowledge of the Seller.
The Partnership is not a party to or otherwise bound by any
distributorship, dealership, sales agency, franchise or similar
arrangement that relates to the sale or distribution of products
manufactured or sold by or on behalf of the Partnership.
(v) Books and Records. The books and records of the Partnership and the
Companies are in all material respects complete and correct, and
fairly reflect the transactions of the Partnership and the Companies,
and the assets and liabilities of the Partnership and the Companies
respectively.
(w) Significant Customers. Schedule 3.01(w) sets forth a list of all
customers representing two percent (2%) or more of the Partnership's
revenues in fiscal 1997. None of such customers have cancelled or
substantially reduced or, to the best knowledge of the Seller, are
currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the
Partnership.
(x) Insurance. The Partnership has been covered since December
20, 1996 by insurance in scope and amount customary and
reasonable for the businesses in which the Partnership has
engaged during such period. Schedule 3.01(x) sets forth a list
of all insurance coverage now covering the Partnership and a list
of all insurance loss runs and workers compensation claims
received since December 20, 1996. Such insurance coverage
evidences all of the insurance that the Partnership is required
to carry pursuant to its Contracts and pursuant to all applicable
Laws. Except as set forth on Schedule 3.01(x), none of such
policies is a "claims made" policy.
(y) Disclosure. No representation or warranty 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 in all
material respects.
(z) Certain Business Practices. Since December 20, 1996 neither
the Partnership nor any person acting on behalf of the
Partnership has given or offered anything of value to any
governmental official, political party or candidate for
governmental office nor has it or any of them otherwise taken any
action which would cause the Partnership to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law
of similar effect.
<PAGE>
19
(aa) Real Property.
(i) The Partnership has good and indefeasible fee simple title in and
to each of the properties listed on Schedule 3.01(aa)
(collectively, the "Real Property"), free and clear of all liens
and encumbrances;
(ii) The Partnership has, during the period of the Partnership's
ownership of the Real Property, been in substantial compliance
with all applicable Laws relating to the Real Property and, to
the best knowledge of Seller, the Real Property and its existing
and prior uses have not violated and do not violate the
provisions of any applicable Laws relating thereto, which
violation individually or in the aggregate would be material to
the Partnership;
(iii) Neither Seller nor the Partnership has granted to any person,
firm or entity, other than Buyer pursuant to this Agreement, any
right to purchase the Real Property or any portion thereof which
remains outstanding as of the date hereof or which shall remain
outstanding as of the Closing Date, and there are no other
parties in possession of any portion of the Real Property;
(iv) Neither Seller nor the Partnership has received notice (and has
knowledge) of any pending or threatened condemnation or similar
proceeding affecting the Real Property; and
(v) Neither Seller nor the Partnership has knowledge of any facts,
restrictions, encumbrances or other circumstances relating to the
Real Property which would prevent or materially interfere with
continued use by Buyer of the Real Property consistent with past
practice.
(bb) Interest-Bearing Indebtedness. At the Closing Date, the Partnership
and the Companies shall have no interest-bearing indebtedness and the
Partnership's working capital shall be adequate to operate the
business consistent with past practice.
3.02. Disclaimer. The Seller makes no representation or warranty and
affirmatively disclaims any representation, warranty or responsibility for any
advice, suggestion, plan or program communicated in any form to the Buyer or its
Affiliates or any of their respective representatives by any officer, employee
or consultant of the Seller, any of the Companies, the Partnership, or any other
Affiliate of the Seller, regarding the conduct, prospects, development or
improvement of either of the Companies, the Partnership, or its business, or of
the business activities to be conducted by the Buyer after the Closing.
<PAGE>
20
3.03. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Seller as follows:
(a) Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and subsisting under the laws of Delaware. The Buyer
is qualified to transact business and is in good standing as a foreign
corporation in any jurisdiction where the failure to be so qualified
would have a Material Adverse Effect on the ability of the Buyer to
execute this Agreement and the Buyer Documents.
(b) Authorization and Binding Effect. All proceedings required
by the Certificate of Incorporation and By-Laws of the Buyer or
otherwise for the execution and delivery by the Buyer of this
Agreement and each of the Buyer Documents to which the Buyer is a
party and for the consummation by the Buyer of the transactions
contemplated hereby and thereby have been duly taken. (i) The
representatives of the Buyer executing this Agreement have the
authority to bind the Buyer to the terms of this Agreement; and
(ii) the Buyer has full legal right, power and authority to
execute, to deliver, and to perform this Agreement and the Buyer
Documents to which the Buyer is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement
constitutes, and when duly executed and delivered the Buyer
Documents to which the Buyer is a party will constitute, the
legal, valid, and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
reorganization, insolvency, and similar laws of general
application relating to or affecting the enforcement of rights of
creditors and, further, except that the availability of equitable
remedies is subject to the discretion of the court, arbitrator or
tribunal before which any proceeding may be brought.
(c) Consents and Approvals. Except as required by the Hart-Scott-Rodino
Act, no consent, approval, authorization, waiver or notice to or from
any Person is required for the execution, delivery, or performance by
the Buyer of this Agreement or any of the Buyer Documents to which the
Buyer is a party, except such as have already been obtained.
(d) No Violation. The execution and delivery by Buyer of this Agreement
and the Buyer Documents and the performance by the Buyer of its
obligations hereunder and thereunder, does not and will not
contravene, conflict or be inconsistent with, result in a breach of,
constitute a violation of or default under, or require or result in
any right of acceleration or create or impose any Lien under (all or
any of the foregoing a "breach"):
(i) the Buyer's articles or certificate of incorporation or by- laws
(or other organization documents);
<PAGE>
21
(ii) any Law applicable or relating to Buyer, its assets or
properties; or
(iii) any contract to which the Buyer is a party except such breach as
will not, alone or in the aggregate, have a Material Adverse
Effect.
(e) Financing. At the date hereof Buyer has, and at all times
through the Closing Buyer will have, sufficient financial
resources (from its own cash flow, existing credit lines and/or
firm underwritten commitments to provide additional debt or
equity financing) to provide to Buyer the moneys necessary to pay
the General Partner Purchase Price and the Limited Partner
Purchase Price at the Closing. Buyer and its Affiliates have
complied with and will comply with all covenants with respect to,
and all conditions within their control to, such financing(s),
and Buyer is not aware of any facts, circumstances or events
reasonably likely to prevail or occur that would grant any such
financing source the right to refuse to fund, or otherwise lead
such financing source to refuse to or be unable to fund, the
financing(s) committed to by such source(s).
(f) Investment Intent. Buyer is acquiring the Shares for investment and
not with a view to a sale or distribution thereof within the meaning
of the Securities Act of 1933, as amended.
ARTICLE IV
COVENANTS
4.01. Access to Books and Records. Between the date of this Agreement and the
Closing, the Seller will afford to the officers and authorized representatives
of Buyer access to all of the Partnership's sites, properties, books and records
and will furnish Buyer with such additional financial and operating data and
other information as to the business and properties of the Partnership as Buyer
may from time to time reasonably request. The Seller and the Buyer will
co-operate with the other party, its 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. All parties
hereto will treat all information obtained in connection with the negotiation
and performance of this Agreement as confidential in accordance with the
provisions of the confidentiality agreement between Buyer and Philip Services
Corp.
4.02. Conduct of Business Pending Closing. Between the date of this Agreement
and the Closing Date, the Partnership will, except as set forth on Schedule
4.02:
(i) carry on its business, consistent with past practice and not
introduce any material new method of management, operation or
accounting, other than were in process on March 31, 1998;
<PAGE>
22
(ii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its
respective assets, properties or rights;
(iii) use reasonable efforts to keep in full force and effect present
insurance policies or other comparable insurance coverage;
(iv) use its commercially reasonable efforts to maintain and preserve
its business organization intact, retain its respective present
key employees and maintain its respective relationship with
suppliers, customers and others having business relations with
the Partnership;
(v) maintain its existing debt and capital lease instruments and not
enter into new or amended debt or lease instruments without the
consent of the Buyer, other than in the ordinary course of the
business of the Partnership to finance working capital; and
(vi) manage its cash consistent with past practice (which Buyer
acknowledges includes payment of cash to Seller or its Affiliates
of cash not required in the operation of the Partnership, by
dividend or otherwise).
4.03. Prohibited Activities. Except as set forth on Schedule 4.03, between the
date hereof and the Closing Date, the Seller will cause the Partnership not to
commit any of the following, without prior written consent of Buyer:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind;
(iii) make any capital expenditures, or commit to make any capital
expenditure, or enter into any agreement with respect thereto
other than (x) expenditures which are in the ordinary course of
business and individually in any amount less than $250,000 and in
the aggregate in any amounts less than $500,000 and (y) pursuant
to commitments therefor made prior to May 26, 1998, the
particulars of which have been provided to the Buyer;
(iv) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business,
consistent with past practice;
(v) negotiate for the acquisition of any business or the start- up of
any new business;
<PAGE>
23
(vi) merge or consolidate or agree to merge or consolidate with or
into any other corporation or other entity;
(vii) waive any material rights or claims of the Partnership, provided
that the Partnership may negotiate and adjust bills in the course
of good faith disputes with customers in a manner consistent with
past practice;
(viii) amend or terminate any material agreement, Permit, license or
other right of the Partnership;
(ix) increase the salary or commission level of, or pay bonuses to
Business Employees other than those which are normal and
customary or committed to prior to May 26, 1998 or pay any fees
or unusual distributions to any officer, director, employee or
agent of the Partnership or the Companies; or
(x) take any other action outside the ordinary course of business.
4.04. No Shop. None of the Partnership, Seller or its Affiliates, nor any agent,
officers, 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 negotiate, or enter into an
agreement with any other party with respect to the sale, transfer or purchase of
any ownership interest in or assets of the Partnership or the Companies (a
Transaction) other than the sale, transfer or purchase of assets in the ordinary
course of the business thereof and shall not enter into any discussions with any
other Person with respect to a Transaction. Notwithstanding the foregoing, the
Buyer acknowledges that prior to May 26, 1998, the business of the Partnership
was marketed to a number of interested parties and that since that date, the
Seller's Affiliates have publicly announced the intention to dispose of all its
metals businesses, including the Partnership. The Seller, its Affiliates or
their representatives, may after the date hereof, receive inquiries from other
interested parties, and the Seller and Buyer agree that the response to such
inquiries by Seller or its Affiliates, limited to advising such other parties of
the fact of this Agreement with the Buyer, will not constitute a breach of the
provisions of this Section 4.04.
4.05. Notices and Consents. The Seller will give any notices to third parties,
and the Seller and the Partnership will use their best efforts to obtain any
third-party consents, that may be necessary to consummate the transactions
contemplated hereby or that Buyer may reasonably request.
4.06. 401(k) Transfer Agreement. Seller and Buyer shall use their best efforts
to negotiate an agreement, prior to the Closing, providing for the transfer of
the account balances of all participants in the Philip 401(k) Plan (the "Philip
Plan") who are Business Employees on the Closing Date from the Philip Plan to a
qualified plan established or maintained by Buyer; provided however, that any
such agreement shall not be effective unless and until approved by U.S. Parent
(hereinafter defined), which approval will not be unreasonably withheld.
<PAGE>
24
4.07. Benefits Agreement. Seller and Buyer shall enter into an Agreement at
Closing in the form of Schedule 4.07, providing for an Affiliate of Seller to
continue coverage of medical, dental, vision, prescription drug, life insurance,
supplemental life insurance, travel accident insurance, long-term disability and
employee assistance plans (collectively, the "Employee Benefits") to the
Business Employees for a period of up to 60 days following the Closing.
4.08. Philip Services Corp.'s Commitment. Philip hereby agrees to cause Seller
and its Affiliates to comply with their obligations under this Agreement and to
use its best efforts to cause the conditions to the Closing to be satisfied.
4.09. Business Employees.
(a) From and after the Closing Date, the Buyer shall indemnify
and save the Seller harmless from any and all claims of Business
Employees in respect of their employment or the termination of
their employment with the Partnership, but only to the extent
that the event giving rise to such claim(s) occurs on or after
the Closing, including without limitation any claim by a Business
Employee in respect of any change in direct compensation and/or
benefits from those provided by Seller and its Affiliates to the
Business Employees prior to the Closing Date.
(b) The Buyer agrees to recognize, and to cause its Affiliates
to recognize, service of a Business Employee with the Partnership
(and also with any Affiliates of the Partnership or the
Companies) for purposes of participation, vesting and accruals
under any benefit plans of either of the Buyer or any Affiliate
of the Buyer under which a benefit vests after an employee has
been employed by either of the Buyer or such Affiliate of the
Buyer for a designated period; provided however, that such
service recognition does not result in a duplication of benefits
accrued under any Retirement Plan Group Benefit Arrangement or
Partnership Benefit Arrangement.
4.10. Corporate Name. The Buyer shall cause the Partnership to execute, at the
Closing, a license agreement granting the Seller a perpetual, irrevocable,
world-wide, royalty-free license (without the right to sublicense) to use the
name "Intsel" solely in connection with references to the business of the Seller
or its Affiliates prior to but not after, the Closing Date.
4.11. Further Action. From time to time, as and when requested by a party
hereto, each party hereto shall, at the cost and expense of the requesting
party, execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further
or other actions as it may reasonably deem necessary or desirable to carry out
the intent and purposes of this Agreement and the Seller Documents to convey,
transfer, assign and deliver to the Buyer, or to their successors and permitted
assigns, the Shares as required by this Agreement, and to consummate the other
transactions contemplated hereby and thereby. Nothing contained in this Section
4.11 shall release any party from liability for any breach or default under any
term or provision of this Agreement or the Seller Documents.
<PAGE>
25
4.12. Stay Bonuses. Philip has an obligation to certain Business Employees to
pay them stay bonuses and other amounts as a result of the sale of the Shares
which bonuses and other amounts are described in a memorandum dated March 20,
1998. Philip shall pay and satisfy all such obligations in full within thirty
(30) days of the Closing Date and, notwithstanding any other provision of this
Agreement including Section 9.03 hereof, neither the Partnership nor the Buyer
will have any liability therefor.
ARTICLE V
EMPLOYEE BENEFIT PLANS AND INSURANCE
5.01. Retirement Plans and Group Benefit Arrangements.
(a) The parties acknowledge and agree that subject to the terms
of a benefits agreement to be entered into between the Buyer and
Affiliate of Seller, as of the Closing Date and except as
required by applicable law, the Business Employees and the former
employees of the Partnership shall no longer be eligible for
participation in, and, except as described in Section 5.01 (b)
hereof, shall no longer be covered by, any of the Retirement
Plans or Group Benefit Arrangements. The parties further
acknowledge and agree that neither the Seller nor any of the
Seller's Affiliates has undertaken any obligation under this
Agreement or otherwise to provide any benefits or credits, by
amendment or otherwise, in respect of any Business Employee or
any former employee of the Partnership under any of the
Retirement Plans or Group Benefit Arrangements in addition to the
benefits and credits currently set forth in such Retirement Plan
or Group Benefit Arrangement. Except pursuant to such benefits
agreement, from and after the Closing Date, neither the Seller
nor any of the Seller's Affiliates shall have any obligation or
liability under any of the Retirement Plans or Group Benefit
Arrangements concerning coverage of the Business Employees in
respect of their services for the Partnership after the Closing
Date or their compensation from the Partnership earned after the
Closing Date. Without limiting the generality of the foregoing,
the parties specifically acknowledge and agree that, except to
the limited extent (if any) required by Code Section 401(k)(10),
no service performed by any Person on or after the Closing Date
for the Partnership, for the Buyer, or for any of the Buyer's
Affiliates (and no compensation earned in respect of such
service) shall be credited or taken into account for any purpose
under any Retirement Plan, and that as of the Closing Date the
Partnership shall cease to be a participating company in and an
employer under the Seller's Retirement Plans.
(b) The parties acknowledge and agree that except as may be
provided in the transfer agreement to be entered into pursuant to
Section 4.06 hereof the Retirement Plans and the Group Benefit
Arrangements remain liable for the provision of benefits to
Business Employees and former employees of the Partnership in
respect of
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26
services performed and compensation earned through the Closing Date to the
extent provided in such Retirement Plans and Group Benefit Arrangements.
5.02. Other Benefits. The Buyer acknowledges and agrees that, from and after the
Closing Date except as provided in the benefits agreement, neither the Seller
nor any of the Affiliates of the Seller shall have any liability or obligation
under or in connection with any Partnership Benefit Arrangement, including any
liability or obligation for
(a) any claim of any of the Business Employees or the former employees of
the Partnership related to the period prior to the Closing Date; or
(b) continuation coverage of such Business Employees or former employees
under any group health plan pursuant to Code Section 4980B in respect
of qualifying events that may have occurred or may occur before, on,
or after the Closing Date.
5.03. Insurance. From and after the Closing Date, neither the Seller nor any of
the Seller's Affiliates shall have any responsibility for obtaining or
maintaining liability, property, workers' compensation, directors' and officers'
liability, errors and omissions, or any other insurance insuring the business,
operations, employees or former employees of the Partnership or the Companies or
affecting or relating to the ownership, use, or operation of any of the assets
or properties of the Partnership or the Companies. Buyer and the Partnership
shall not have any liability or obligation for any event covered by any such
insurance (including self-insurance coverage) and occurring prior to the Closing
Date, provided that the Seller receives notice in writing of any claim relating
thereto within 120 days after the Closing Date.
ARTICLE VI
TAX MATTERS
6.01. Partnership Income Tax Returns. The Seller shall file (or cause to be
filed) all federal and state income tax returns for the Partnership for all
applicable periods through and ending on the Closing Date.. The Buyer shall file
(or cause to be filed) all federal and state income tax returns for the
Partnership for the period beginning on the day immediately following the
Closing Date.
6.02. Federal Income Taxes. The Seller shall include in the Seller's
consolidated federal income tax return the net income of the Companies
(including the net income of the Partnership) for all periods through and ending
on the Closing Date. The Seller shall be responsible for and shall pay all
federal income taxes attributable to such net income, including any federal
income taxes, interest, and penalties resulting from any audit or other
adjustment related thereto for which any of the Companies may be liable. The
Buyer shall file (or cause the Companies to file) federal income tax returns in
respect of the Companies for the period beginning the day immediately following
the Closing Date. The Buyer shall be responsible for and shall pay (or shall
cause the Companies to be responsible for and to pay) all federal income taxes
attributable
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27
to the net income of the Companies for such period, including any federal income
taxes, interest, and penalties resulting from any audit or other adjustment
related thereto for which any of the Companies may be liable.
6.03. State Income and Franchise Taxes. The Seller shall file (or cause to be
filed) all required state and local tax returns for the Companies for the
periods up to and including the Closing Date and the Seller shall be responsible
for and shall pay all required state and local taxes, interest, and penalties
attributable to the income for such period, including any taxes, interest, and
penalties resulting from any audit or other adjustment related thereto for which
any of the Companies may be liable. The Buyer shall file (or cause to be filed)
all required state and local tax returns for the Companies for the period
beginning the day immediately following the Closing Date and the Buyer shall be
responsible for and shall pay (or shall cause the Companies to be responsible
for and to pay) all required state and local taxes, interest, and penalties
attributable to the income for such period, including any taxes, interest, and
penalties resulting from any audit or other adjustment related thereto for which
any of the Companies may be liable. If any taxing authority does not recognize
the change of control of the Companies and does not require the filing of
separate returns for the period before and after the Closing Date, the Buyer
shall file (or cause to be filed) such tax returns for the Companies for the
year 1998, and the Buyer and the Seller shall each pay their proportionate share
of all taxes payable, which taxes shall be apportioned as if prepared on a
separate return basis as set out in this Section 6.03. The Seller shall assist
the Buyer in the preparation of such other required state and local tax returns,
as necessary.
6.04. Tax Refunds. Tax refunds received by the Seller or the Buyer or any
Affiliate of the Buyer, including any of the Companies, in respect of any taxes
paid by the Seller or the Companies for any period prior to the Closing to the
extent not reflected in the partnership Financial Statements or the Company
Financial Statements shall be for the benefit of the Seller and, if received by
the Buyer or any Affiliate of the Buyer, shall be paid to the Seller within
thirty (30) days of receipt. Tax refunds received by the Buyer, Seller or any
Affiliate of the Seller in respect of any taxes paid by the buyer or any
Affiliate of the buyer for any period after Closing shall be for the benefit of
the Buyer and if received by Seller or any Affiliate of Seller shall be paid to
Buyer within thirty (30) days of receipt. For purposes of this Section 6.04, the
determination of each party's tax liability as to before or after Closing shall
be determined in the manner provided in Section 6.02 for federal income taxes
and Section 6.03 for state and local taxes.
6.05. Section 338(h)(10) Election. (i) Seller will join with Buyer in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
under state, local or foreign tax law) (collectively a "Section 338(h)(10)
Election") with respect to the purchase and sale of the Shares. Seller will pay
any liability for tax (including but not limited to any state, local or foreign
tax) attributable solely to the making of the Section 338(h)(10) Election and
will indemnify and save Buyer harmless from any liability therefor. The parties
agree that the aggregate of the Limited Partner Purchase Price and the General
Partner Purchase Price will be allocated to the assets of the Partnership for
all purposes (including financial and tax accounting
<PAGE>
28
purposes) in the manner shown in Schedule 6.05. Buyer and Seller shall file all
tax returns (including amended returns and claims for refunds) in a manner
consistent with such allocation.
(ii) Neither Seller nor any Affiliate thereof, including U.S. Parent
(hereinafter defined) and Canadian parent of U.S. Parent ("Canadian Parent")
shall take any action that would negate such Section 338(h)(10) Election. Seller
shall indemnify Buyer for any tax or loss of benefits arising solely as a result
of any such action by Seller or any Affiliate. The Seller, the Companies and the
Partnership represent and warrant that the parent of the US Consolidated Group
for US Federal Income Tax purposes is Philip Services (Delaware), Inc. ("U.S.
Parent") and that the Canadian Parent is Philip Enterprises Inc..
6.06. Section 754 Election. The Partnership shall have in effect or the Seller
shall cause the Partnership to place in effect an election under Code Section
754 (and any similar state election) to adjust the basis of the Partnership
property for the last Partnership return required to be filed by the Companies
for the periods through the Closing Date.
ARTICLE VII
CONDITIONS OF CLOSING
7.01. Conditions to Obligation of Buyer. The obligations of Buyer to consummate
the purchase and sale of the Shares are subject to the satisfaction of the
following conditions, each of which may be waived by the Buyer:
(a) Representations and Warranties; Performance of Obligations.
The representations and warranties of the Seller set forth in
Section 3.01 hereof shall be true and correct in all material
respects on the Closing Date as though made on and as of the
Closing Date. The Seller and the Companies shall have performed,
in all material respects, the agreements and obligations required
to be respectively performed by them under this Agreement prior
to the Closing Date. The Seller and the Companies shall have
executed and delivered to Buyer a certificate or certificates
certifying to their compliance with the foregoing. If the Buyer
on the one hand or the Seller, on the other hand (the "Knowing
Party") has actual knowledge at the time of Closing that a
representation or warranty made by the other party is false or
the other party has violated a covenant made by it under this
Agreement, the Knowing Party shall promptly notify the other
party of such fact. If the Knowing Party proceeds to the Closing
notwithstanding such knowledge, the Knowing Party shall be deemed
to have waived any rights it may have for indemnification or
damages against the other party to the extent that any damages
result from such breach of representation or warranty or failure
to perform such covenant.
(b) Consents and Notices. All consents and notices which may be
necessary in order to consummate the purchase and sale, or any of
the other transaction contemplated
<PAGE>
29
hereby in accordance with the terms hereof, shall have been obtained
(in the case of consents) or given (in the case of notices) and shall
be in full force and effect. Without limiting the generality of the
foregoing, all waiting periods (including any extensions) shall have
expired or shall have been earlier terminated under the HSR Act.
(c) INTENTIONALLY DELETED.
(d) Legal Restraints. No proceeding by any governmental
authority which seeks to restrain, delay, enjoin or hinder the
consummation of the transactions contemplated hereby shall have
been commenced or shall be threatened and no decree, temporary
restraining order, preliminary or permanent injunction or other
order shall be in effect issued by a court of competent
jurisdiction prohibiting the consummation of the transactions
contemplated hereby .
(e) Delivery of Shares. Seller shall have delivered to Buyer a certificate
or certificates representing the Shares, duly endorsed in blank or
accompanied by a stock power covering such Shares, duly executed in
blank by Seller.
(f) Officers' and Directors' Resignations of the Companies. Each officer
and director of the Companies holding such positions immediately prior
to the Closing Date shall have executed and delivered to the Buyer a
resignation from such positions.
(g) Delivery of Minute Books and Stock Transfer Records. The minute books
and stock transfer records of each of the Companies and their
respective corporate seals shall have been delivered to the Buyer.
(h) Non-Competition Agreement. Seller shall have executed and delivered to
Buyer a non-competition agreement by which Seller and its Affiliates
agree that they shall not compete with the business of the Partnership
for a period of five (5) years following the Closing. Such
non-competition agreement shall be in a form and content acceptable to
Buyer and Seller.
(i) Opinion of Counsel. Buyer shall have received an opinion of general
counsel to Seller, Colin Soule, dated the Closing Date and
substantially in the form and content of Schedule 7.01(i).
7.02. Conditions to Obligations of Seller. The obligations of Seller to
consummate the purchase and sale of the Shares are subject to the satisfaction
of the following conditions, each of which may be waived by the Seller:
(a) Representations and Warranties; Performance of Obligations.
The representations and warranties of the Buyer set forth in
Section 3.03 hereof shall be true and correct in all material
respects on the Closing Date as though made on
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30
and as of the Closing Date. The Buyer shall have performed, in all
material respects, the agreements and obligations required to be
performed by it under this Agreement prior to the Closing Date. The
Buyer have executed and delivered to Seller a certificate or
certificates certifying to their compliance with the foregoing. If the
Buyer on the one hand or the Seller, on the other hand (the "Knowing
Party") has actual knowledge at the time of Closing that a
representation or warranty made by the other party is false or the
other party has violated a covenant made by it under this Agreement,
the Knowing Party shall promptly notify the other party of such fact.
If the Knowing Party proceeds to the Closing notwithstanding such
knowledge, the Knowing Party shall be deemed to have waived any rights
it may have for indemnification or damages against the other party to
the extent that any damages result from such breach of representation
or warranty or failure to perform such covenant.
(b) Consents and Notices. All consents and notices which may be
necessary in order to consummate the purchase and sale, or any of
the other transaction contemplated hereby in accordance with the
terms hereof, shall have been obtained (in the case of consents)
or given (in the case of notices) and shall be in full force and
effect. Without limiting the generality of the foregoing, all
waiting periods (including any extensions) shall have expired or
shall have been earlier terminated under the HSR Act.
(c) Legal Restraints. No proceeding by any governmental
authority which seeks to restrain, delay, enjoin or hinder the
consummation of the transactions contemplated hereby shall have
been commenced or shall be threatened and no decree, temporary
restraining order, preliminary or permanent injunction or other
order shall be in effect issued by a court of competent
jurisdiction prohibiting the consummation of this transactions
contemplated hereby .
(d) Payment of Purchase Price. Buyer shall have delivered to Seller, the
General Partner Purchase Price and the Limited Partner Purchase Price
in the manner provided in Section 2.02
hereof.
(e) Opinion of Counsel. Seller shall have received an opinion of Bracewell
& Patterson, L.L.P., legal counsel to Buyer, dated the Closing Date,
and substantially in the form and content of Schedule 7.02(e).
(f) Corporate Documents. Buyer shall have delivered to Seller (i) a
certified copy of the certificate of incorporation and by-laws of
Buyer and (ii) a certified copy of resolutions of the board of
directors of Buyer authorizing the execution, delivery and performance
of this Agreement and any other document delivered by Buyer hereunder.
(g) Benefits Agreement. Buyer and Seller shall have entered into the
agreement contemplated by Section 4.07 hereof.
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31
(h) Assignment Agreement. Seller shall have assigned to Buyer and Buyer
shall have assumed and shall agree to save Seller harmless from all of
Seller's obligations for the five (5) vehicles leased pursuant to the
Lease Agreement described in paragraph 5 of Schedule 3.01(s) hereto.
ARTICLE VIII
CLOSING/TERMINATION
8.01 Closing. The Closing shall take place at the offices of the Seller, 100
King Street West, Hamilton, Ontario at 10:00 am local time on July 6, 1998,
subject to Section 8.02, or such later date as the parties may agree (the
"Closing Date").
8.02. Termination. This Agreement may be terminated at any time prior to the
Closing Date solely:
(i) by mutual consent of Buyer and Seller; or
(ii) by Buyer or by Seller, if the transaction contemplated by this
Agreement to take place at the Closing shall not have occurred by
July 31, 1998 (the "Termination Date"), unless the failure of
such transactions to be consummated is due to the wilful 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.
ARTICLE IX
INDEMNIFICATION
9.01. Indemnification by the Seller/Philip. Subject to the limitations set forth
in Section 9.03 from and after the Closing Date, the Seller and Philip, jointly
and severally agree to hold harmless, indemnify, reimburse and defend each of
the Buyer and its Affiliates and their respective past, present and future
shareholders, directors, officers, employees, agents and representatives
(collectively, the "Buyer's Indemnified Affiliates"), to the exclusion of any
other remedy under any provision of law or equity, for, from and against any and
all Claims asserted against, imposed on, or incurred or sustained by, the
respective Buyer or any of the Buyer's Indemnified Affiliates resulting from,
arising out of or connected with:
(a) Any breach of any of the representations and warranties made by the
Seller in this Agreement or the Seller Documents to which the Seller
is a party, but only to the extent that any such breach has not been
waived in writing by the Buyer; or
<PAGE>
32
(b) The nonfulfilment or breach of any agreement or covenant made by the
Seller in this Agreement or the Seller Documents to which it is a
party, but only to the extent that any such nonfulfilment or breach
has not been waived in writing by the Buyer; or
(c) Any claim made against Buyer or any of Buyer's Indemnified
Affiliates by or on behalf of a shareholder of Philip (solely in
its capacity as a shareholder of Philip and solely by reason of
any claim arising out of the claimant's shareholdings in Philip)
(x) arising out of or related to the sale to and purchase by
Buyer of the Shares on the terms and conditions contained in this
Agreement, or (y) arising out of the operation of the business of
the Partnership prior to the Closing or the operation of any
other business of Philip or any Affiliate, prior to the Closing
(as to which indemnification the limitation imposed by Section
9.03 shall be inapplicable);or
(c) Any liability resulting from any failure to file or provide or any
delay in filing or providing any document or notice required with
respect to a Retirement Plan (as to which indemnification the
limitations imposed by Section 9.03 shall be inapplicable).
9.02. Indemnification by the Buyer. The Buyer agrees to hold harmless and
indemnify the Seller and its Affiliates and their respective past, present, and
future shareholders, directors, officers, employees, agents, and representatives
(collectively, the "Seller's Indemnified Affiliates"), to the exclusion of any
other remedy under any provision of law or equity, against any and all Claims
asserted against, imposed on, or incurred or sustained by, the Seller or any of
the Seller's Indemnified Affiliates, resulting from, arising out of, or
connected with:
(a) Any breach of any of the representations and warranties made by the
Buyer in this Agreement or the Buyer Documents to which the Buyer is a
party, but only to the extent that any such breach has not been waived
in writing by the Seller; or
(b) The nonfulfilment or breach of any agreement or covenant made by the
Buyer in this Agreement or the Buyer Documents to which the Buyer is a
party, but only to the extent that any such nonfulfilment or breach
has not been waived in writing by the Seller; or
(c) Any obligation or liability arising from any act or omission of the
Buyer or the Partnership or the Companies or any other Affiliate of
the Buyer or any of the officers, employees, agents, consultants or
contractors of any of the foregoing following the Closing, including
environmental matters (as to which indemnification the limitations
imposed by Section 9.03 shall be inapplicable).
<PAGE>
33
9.03. Limitations on Indemnification. The indemnification rights set out above
are subject to the following limitations:
(a) For the purposes of Sections 9.01 and 9.02, all Claims shall be
computed net of:
(i) Any insurance proceeds that are actually received by the
Indemnitee; and
(ii) Any amounts actually received by the Indemnitee from any third
party as a result of or based on any claim that the Indemnitee
may have against such third party arising from or related to the
event or occurrence that gave rise to the Claim, and that would
reduce the damage or loss that otherwise would be sustained by
the Indemnitee.
(b) If Indemnitee claims indemnification under Section 9.01 or Section
9.02 it shall be required, as a condition therefor, to use its best
efforts to pursue any claim or right that it may have against any
third party that would materially reduce the amount of the Claim for
which such party seeks indemnification under Section 9.01 or 9.02, as
the case may be.
(c) The indemnification rights under Section 9.01 and 9.02 shall
expire at the respective times set forth in Section 9.07 and
neither Seller, Philip nor Buyer shall have any liability under
Section 9.01 or 9.02 respectively or otherwise in connection with
the transactions contemplated by this Agreement unless the
Indemnitee gives written notice to the Indemnitor asserting a
Claim, including reasonably detailed specific facts and
circumstances pertaining thereto, before the expiration of the
periods of time that the underlying representations, warranties,
covenants and agreements survive under Section 9.07 hereof.
(d) Indemnification for Claims under Section 9.01 shall be
payable hereunder only if and to the extent that the aggregate
amount of all Claims of the Indemnitee shall exceed $1,500,000
and shall not be payable in any event with respect to the first
$1,500,000 of such claims except for any claim arising out of
Taxes that are payable by the Companies or the Partnership, and
that are solely attributable to Taxes payable by a related tax
party (as such term is defined in Section 3.01(t)(ii)), in which
case there shall be no minimum on Seller, and Philip's liability
for indemnification in respect of such Taxes.
(e) Seller and Philip's liability for all claims under Section
9.01 shall not in any event exceed $50,000,000 except for any
claim arising out of Taxes that are payable by the Companies or
the Partnership, and that are solely attributable to Taxes
payable by a related tax party (as such term is defined in
Section 3.01(t)(ii)), in which case there shall be no maximum cap
on Seller, and Philip's liability for indemnification in respect
of such Taxes.
<PAGE>
34
9.04. Brokerage. The Seller and Philip, on the one hand and the Buyer, on the
other hand agree to indemnify, reimburse, defend, and hold each other harmless
from any and all liability, loss or expense (including counsel fees) incurred by
the Indemnitee as a result of or in connection with any claim by any broker,
finder, investment banker or other Person who claims to have been retained by
the indemnifying party in connection with the transactions contemplated by this
Agreement.
9.05. Notice of Claim. In respect of any Claim, written notice thereof (a
"Notice of Claim") containing reasonably detailed particulars shall be given to
the Indemnitor promptly after such Claim shall have been served upon, or
otherwise become known to, the Indemnitee. However no delay in providing such
Notice of Claim shall affect Indemnitor's obligations to Indemnitee hereunder.
9.06. Defense of Third-Party Claims. Any claim or demand set forth in a Notice
of Claim relating to a Claim by any third party (a "Third-Party Claim") shall be
subject to the following terms and conditions:
(a) Upon receipt of a Notice of Claim, the Indemnitor shall be
entitled, at its own expense, to participate in and, upon notice
to the Indemnitee, to undertake the defense of the respective
Third-Party Claim in good faith by counsel of its own choosing,
which counsel shall be reasonably satisfactory to the Indemnitee;
provided, however, that, if in the Indemnitee's reasonable
judgment, a conflict of interest may exist between the Indemnitee
and the Indemnitor in respect of such Third-Party Claim, each
party shall be entitled to select counsel of its own choosing, in
which event each party shall be obligated to pay the fees and
expenses of its own counsel.
(b) If within thirty (30) days after written notice to the
Indemnitee of the Indemnitor's intention to undertake the defense
of any such Third-Party Claim, the Indemnitor shall fail to
defend the Indemnitee against whom such Third-Party Claim shall
have been asserted, the Indemnitee shall have the right (but not
the obligation) to undertake the defense, compromise or
settlement of such Third-Party Claim on behalf of, and for the
account and at the risk of, the Indemnitor.
(c) Notwithstanding anything in this Section 9.06 to the contrary,
(i) should there be a reasonable probability in the Indemnitee's
judgment that a Third-Party Claim asserted against the Indemnitee
may materially and adversely affect the Indemnitee other than as
a result of the imposition of money damages or other money
payments, the Indemnitee shall have the right, at its sole
option, to take over the defense of such Third-Party Claim (in
which case the Indemnitor and the Indemnitee shall share equally
the cost and expense of such defense) or to co-defend such
Third-Party Claim (in which case the Indemnitee shall bear the
cost and expense of the additional counsel);
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35
(ii) the Indemnitor shall not, without the prior written consent of
the Indemnitee (which consent shall not be unreasonably
withheld), pay, settle or compromise any such Third-Party Claim
or consent to entry of any judgment relating to any such
Third-Party Claim, unless such settlement, compromise or judgment
shall include as an unconditional term thereof that the claimant
or the plaintiff shall release the Indemnitee from all
liabilities in respect of such Third-Party Claim; and
(iii) the Indemnitee shall not, without the prior written consent of
the Indemnitor (which consent shall not be unreasonably withheld)
pay, settle or compromise any Third-Party Claim or consent to
entry of any judgment relating to any Third-Party Claim;
provided, however, that the Indemnitee shall have the right so to
settle, compromise or consent, but in such event the Indemnitee
shall waive any right to indemnification by the Indemnitor in
respect of such Third-Party Claim unless the Indemnitor shall
have unreasonably withheld its consent.
(d) The Indemnitor and the Indemnitee shall each provide the
other and their respective representatives with reasonable access
to all of their respective records and documents relating to any
Third-Party Claim and shall co-operate fully, each with the
other, in the defense of all such claims; provided, however, that
nothing herein stated or otherwise implied shall be deemed to
waive any attorney-client, work-product or joint-defense
privilege.
9.07. Survival After the Closing and Time Limits on
Indemnification.
(a) The Closing shall not affect the validity or effectiveness
of any representation, warranty, covenant or agreement contained
herein, or any Claim of breach, violation or nonfulfilment of any
of the foregoing. Notwithstanding the preceding sentence, none
of the parties shall be liable under this Agreement except in
respect of any Claim for which a Notice of Claim shall have been
received by the other party within the applicable period, as
follows:
(i) The greater of four (4) years from the Closing Date or the
applicable statute of limitations (including any extensions
thereof) in the case of any Claim made for breach of any of the
representations or warranties made therein by the Seller in
respect of tax matters or tax returns;
(ii) Three (3) years from the Closing Date in the case of any Claim
made for breach of any of the representations or warranties made
by the Seller in Section 3.01(a);
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36
(iii) Two (2) years from the Closing Date in the case of any Claim
made for breach of any of the representations or warranties made
by the Seller in Section 3.01(o); or
(iv) One (1) year from the Closing Date in the case of any other Claim
in respect of a breach of representation or warranty.
(b) All covenants and agreements of the parties contained in or
made pursuant to this Agreement and required to be performed on
or prior to the Closing Date shall not survive the Closing and
shall be deemed, on Closing, to have been waived by the party for
whose benefit the covenant or agreement exists. All other
covenants and agreement contained in or made pursuant to this
Agreement (including Section 9.01 and 9.02) shall survive the
Closing for so long as any claim may be made in respect of such
matters under any applicable statute of limitations.
9.08. No Punitive Damages. Notwithstanding anything to the contrary set forth in
this Agreement, no party hereto shall have any liability to any other party
hereto, any of Buyer's Indemnified Persons or any of Seller's Indemnified
Persons for any punitive, consequential or special damages by virtue of any
breach of any representations, warranty, covenant or agreement in or pursuant to
this Agreement, any Seller Document or Buyer Document or any other agreement,
document or instrument executed and delivered pursuant hereto or in connection
herewith or the Closing; provided; that the foregoing shall not be deemed to
limit the obligation of any party hereunder to indemnify for Claims constituting
punitive, consequential or special damages awarded to any third-party claimant.
9.09. Exclusive Remedy. Each party thereto agrees that in the absence of fraud
the sole liability of any other party hereto for any claim with respect to the
transactions contemplated under this Agreement from and after the Closing Date
shall be limited to indemnification under this Article IX; provided; however,
that the foregoing shall not be deemed to prohibit or restrict the availability
of any equitable remedies (including specific performance) in the event of any
violation or threatened violation.
ARTICLE X
MISCELLANEOUS
10.01. Expenses. The Buyer and the Seller shall pay their respective expenses in
connection with the negotiation, execution, delivery and performance of this
Agreement and all documents exchanged pursuant hereto. Without limiting the
generality of the foregoing, each party hereto shall be responsible for the fees
and expenses of its counsel.
10.02. Access to Records. For a period of seven (7) years after the Closing
Date, each party hereto shall give to the other access to the books, files and
records in such party's possession pertaining to the Partnership and the
Companies as the same existed prior to the relevant date;
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37
provided, however, that any right of access pursuant to this Section 10.02 shall
be conducted in such manner as not to interfere unreasonably with the operations
of the business of the party possessing such books, files and records and,
further, that nothing in this Section 10.02 shall be construed as requiring a
party hereto to grant to the other access to any books, files or records in such
party's possession that relate to the subject matter of any action or proceeding
that may arise hereafter to which the Buyer and the Seller are subject. After
expiration of the above-referenced seven- (7)-year period, each party shall be
free to destroy or dispose of such books, files and records, unless prior to
such destruction or disposal such party shall have received notice from another
party of such other party's intent to take possession of all or any portion of
such books, files and records or to make copies thereof, in which case such
other party shall have the right to take possession of such books, files and
records, or such portion thereof, or to make copies thereof, at such other
party's sole cost and expense, prior to such destruction or disposal.
10.03. Transfer Taxes. Etc. Any sales, use, transfer or similar taxes that may
be incurred in connection with the transfer of the Shares shall be paid by the
Buyer in accordance with applicable law.
10.04. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered by registered or certified mail, return receipt requested,
postage prepaid, by facsimile transmission or in hand, addressed as follows:
If to the Seller:
c/o Philip Metals (USA) Inc.
100 King Street West
LCD #1, Box 2440
Hamilton, ON
L8N 4J6 CANADA
Facsimile: (905) 521-9160
Attention: General Counsel
If to the Buyer:
Metals USA, Inc.
Three Riverway, Suite 600
Houston, Texas
Facsimile: (713) 965-0067
Attention: General Counsel
Any party may by notice given pursuant to this Section 10.04 change the party,
address or facsimile number to which notice or other communications to it are to
be thereafter delivered, mailed or sent.
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38
10.05. Assignment. No party hereto shall assign any of its rights or delegate
any of its obligations hereunder to any Person or Persons without the express
prior written consent of the other parties hereto.
10.06. Arbitration. Subject only to the provisions of section 9.06 hereof with
respect to Third Party Claims, any dispute arising out of or in connection with
this Agreement, including any question regarding its existence, validity or
termination, shall be referred to final and binding arbitration, to the
exclusion of any other court, forum or jurisdiction. Such arbitration shall be
conducted under the commercial arbitration rules of the American Arbitration
Association in effect from time to time, which rules are deemed to be
incorporated by reference into this clause. The tribunal shall consist of three
arbitrators. Each party shall appoint one arbitrator, and the two
party-appointed arbitrators shall select a third arbitrator, who shall act as
Chairman. If the party-appointed arbitrators cannot agree on a Chairman, the
Chairman shall be appointed by the American Arbitration Association. The place
of arbitration shall be Chicago, Illinois. Unless the arbitration tribunal shall
determine otherwise, the costs of the arbitration shall be borne by the parties
equally and each party shall bear its other legal costs, including the fees of
its attorneys. In the event that a party shall purport to submit to a court, any
dispute arising out of or in connection with this Agreement, any other party may
plead the provisions of this paragraph as a complete defence to any such claim.
10.06A. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original and all of which,
when taken together, will be deemed to constitute one and the same agreement.
10.07. Nondisclosure of Confidential Information. Seller and Philip recognizes
and acknowledges that they have had access to certain confidential information
of the Partnership relating to its operations prior to the Closing Date, such as
operational policies, pricing and cost policies, and other information, that are
valuable, special and unique assets of the Partnership. Seller and Philip agree
that they will not disclose after the Closing Date such confidential
information, or any confidential information of the Partnership to which they
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 Buyer, (b) to counsel of Seller or its Affiliates and their
other advisers, and (c) to the lenders of Seller and its Affiliates and members
of its banking syndicate and their counsel and other advisers, and provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 10.07 unless (i) such information becomes known to the public
generally through no fault of Seller, or (ii) disclosure is required by law or
the order of any governmental authority, provided, that prior to disclosing any
information pursuant to this clause (ii), Seller shall give prior written notice
thereof to Buyer and to provide Buyer with the opportunity to contest such
disclosure. 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 Buyer would have no other
adequate remedy, Seller agrees that the foregoing covenants may be enforced
against Seller by injunctions, restraining orders and other appropriate
equitable relief. Nothing herein shall be
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39
construed as prohibiting Buyer from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. The obligations
of the parties under this Section 10.07 shall survive the termination of this
Agreement for a period of five (5) years.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PHILIP METALS (USA) INC.
By:_________________________________
Name:
Title:
Witness: ____________________________
METALS USA, INC.
By:_________________________________
Name:
Title:
Witness: ____________________________
PHILIP SERVICES CORP.
By:_________________________________
Name:
Title:
Witness: ____________________________
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40
PHILIP SERVICES (DELAWARE) INC.
in respect of Section 6.05(ii) only
By:_________________________________
Name:
Title:
Witness: ____________________________
PHILIP ENTERPRISES INC.
in respect of Section 6.05(ii) only
By:_________________________________
Name:
Title:
Witness: ____________________________
