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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 15, 1998
SCHUFF STEEL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 000-22715 86-0318760
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1841 WEST BUCHANAN STREET, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (602) 252-7787
Not applicable.
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On October 15, 1998, and pursuant to a Stock Purchase Agreement dated
as of September 30, 1998 (the "Purchase Agreement"), among Schuff Steel Company
("Schuff" or the "Company"); Ted F. Rossin and Connie A. Rossin, John N. Achuff,
II and Mary P. Achuff, Arnold Baumgartner, Ronald Bowers and Tonie L. Bowers,
Jeffrey Clinkscales and Kimberly Clinkscales, Guadalupe Nunez and Graciela Nunez
(collectively the "Sellers"); and Bannister Steel, Inc. (Bannister); the Company
purchased all of the issued and outstanding shares of capital stock of Bannister
from Sellers. Bannister provides structural steel fabrication services for
industrial and commercial projects to the Southern California construction
market.
Information relating to the transaction and Bannister is set forth in a
press release dated October 19, 1998 issued by the Company. A copy of the press
release is filed herewith as Exhibit 99.1 and is hereby incorporated by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- - - - - ------ -----------
2.1 Purchase Agreement described in Item 5 above (1)
99.1 Press Release dated October 19, 1998
(1) Certain information in this exhibit will be omitted and filed
separately with the Securities and Exchange Commission
pursuant to a confidential treatment request under Rule 24b-2
of the Securities and Exchange Act of 1934, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCHUFF STEEL COMPANY
Date: October 26, 1998 By: /s/ Kenneth F. Zylstra
------------------------------------------
Vice President and Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - - - - ------ -----------
2.1 Purchase Agreement described in Item 5 above (1)
99.1 Press Release dated October 19, 1998
(1) Certain information in this exhibit will be omitted and filed
separately with the Securities and Exchange Commission
pursuant to a confidential treatment request under Rule 24b-2
of the Securities and Exchange Act of 1934, as amended.
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Exhibit 2.1
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 24b-2 OF THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 39 AND 45 HAVE
BEEN REPLACED WITH ASTERISKS.
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STOCK PURCHASE AGREEMENT
by and among
Ted F. Rossin and Connie A. Rossin,
Co-Trustees U.T.D.
April 22, 1998,
John N. Achuff, II and Mary P. Achuff,
Co-Trustees U.T.D.
June 11, 1998,
Arnold Baumgartner,
Ronald Bowers and Tonie L. Bowers,
Jeffrey Clinkscales and Kimberly Clinkscales,
Guadalupe Nunez and Graciela Nunez
as "Sellers,"
Schuff Steel Company
as "Buyer,"
and
Bannister Steel Inc.
as the "Company"
as of September 30, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE I DEFINITIONS..................................................... 1
1.1 Defined Terms. ................................................. 1
1.2 Other Defined Terms............................................. 4
ARTICLE II SALE AND TRANSFER OF SHARES.................................... 5
2.1 Transfer of Shares.............................................. 5
2.2 Purchase Price.................................................. 5
2.3 Holdback Note / Escrow Agreement................................ 6
2.4 Purchase Price Adjustments...................................... 6
2.5 Transfer Taxes and Fees......................................... 7
ARTICLE III CLOSING....................................................... 8
3.1 Closing. ....................................................... 8
3.2 Conveyances at Closing.......................................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE COMPANY................................................. 9
4.1 Organization of the Company. ................................... 9
4.2 Subsidiaries. ................................................. 9
4.3 Authorization................................................... 9
4.4 No Violation; Consents.......................................... 9
4.5 Capitalization.................................................. 10
4.6 Financial Statements. .......................................... 10
4.7 No Change in the Assets......................................... 11
4.8 Liabilities..................................................... 11
4.9 Assets; Absence of Encumbrances................................. 11
4.10 Real Property................................................... 12
4.11 Receivables..................................................... 13
4.12 Inventory and Equipment. ....................................... 13
4.13 Contracts and Commitments....................................... 14
4.14 Books and Records............................................... 15
4.15 Litigation. .................................................... 15
4.16 Labor Matters. ................................................. 15
4.17 Compliance with Law. ........................................... 16
4.18 No Brokers. .................................................... 16
4.19 No Other Agreements to Sell the Company. ....................... 16
4.20 Proprietary Rights.............................................. 16
4.21 Tax Matters..................................................... 17
4.22 Employees and Employee Benefits................................. 20
4.23 ERISA Representations........................................... 21
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4.24 Compliance With Environmental Laws.............................. 24
4.25 Insurance....................................................... 27
4.26 Affiliate Transactions.......................................... 28
4.27 Disclosure...................................................... 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER......................... 28
5.1 Representations and Warranties of Buyer. ....................... 28
ARTICLE VI GENERAL COVENANTS OF BUYER, THE COMPANY
AND SELLERS..................................................... 30
6.1 Further Assurances.............................................. 30
6.2 Environmental Matters........................................... 30
6.4 Cash Bonus to Certain Employees................................. 31
ARTICLE VII CONDUCT OF COMPANY AND BUYER PENDING THE CLOSING.............. 31
7.1 Company and Seller Covenants.................................... 31
7.2 Certain Closing Covenants....................................... 33
7.3 No Negotiations................................................. 33
7.4 Public Announcements............................................ 34
7.5 Confidentiality................................................. 34
ARTICLE VIII CONDITIONS TO SELLERS' OBLIGATIONS........................... 34
8.1 Representations, Warranties and Covenants....................... 34
8.2 No Proceedings, Litigation or Laws.............................. 34
8.3 Certificates.................................................... 35
8.4 Ancillary Agreements. .......................................... 35
8.5 Buyer Corporate Documents....................................... 35
ARTICLE IX CONDITIONS TO BUYER'S OBLIGATIONS.............................. 35
9.1 Representations, Warranties and Covenants....................... 35
9.2 Consents. ...................................................... 35
9.3 No Proceedings or Litigation.................................... 35
9.4 Opinions of Counsel............................................. 36
9.5 Certificates. .................................................. 37
9.6 Ancillary Agreements............................................ 37
9.7 Release of Encumbrances......................................... 37
9.8 No Material Changes. ........................................... 38
9.9 Corporate Documents. ........................................... 38
9.10 Financing. ..................................................... 38
9.11 Financial Statement Deliveries.................................. 38
9.12 Affiliate Loans................................................. 38
9.13 Resignations.................................................... 38
9.14 Repayment of Indebtedness....................................... 38
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9.15 Due Diligence................................................... 38
9.16 Board Approval.................................................. 38
9.17 Title to Real Property.......................................... 38
ARTICLE X RISK OF LOSS; CONSENTS TO ASSIGNMENT............................ 39
10.1 Risk of Loss.................................................... 39
ARTICLE XI REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION................ 39
11.1 Survival of Representations, Etc. .............................. 39
11.2 Indemnification................................................. 39
11.3 Sellers Representative.......................................... 41
ARTICLE XII ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING................ 42
12.1 Cooperation and Records Retention............................... 42
ARTICLE XIII MISCELLANEOUS................................................ 42
13.1 Termination..................................................... 42
13.2 In the Event of Termination..................................... 43
13.3 Assignment. .................................................... 43
13.4 Notices. ....................................................... 44
13.5 Choice of Law. ................................................. 45
13.6 Entire Agreement; Amendments and Waivers........................ 45
13.7 Multiple Counterparts. ......................................... 45
13.8 Expenses. ...................................................... 45
13.9 Invalidity. .................................................... 45
13.10 Titles. ........................................................ 46
13.11 Cumulative Remedies............................................. 46
13.12 Arbitration. .................................................. 46
</TABLE>
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EXHIBITS
A HOLDBACK NOTE
B EMPLOYMENT AGREEMENT (JOHN N. ACHUFF, II)
C EMPLOYMENT AGREEMENT (RONALD BOWERS)
D EMPLOYMENT AGREEMENT (JEFFREY CLINKSCALES)
E EMPLOYMENT AGREEMENT (TED F. ROSSIN)
F LEGAL DESCRIPTION OF NATIONAL CITY, CALIFORNIA REAL PROPERTY
G LETTER OF CREDIT
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
September 30, 1998, by and among Schuff Steel Company, a Delaware corporation
("Buyer"), Ted F. Rossin and Connie A. Rossin, Co-Trustees U.T.D. April 22,
1998, John N. Achuff, II and Mary P. Achuff, Co-Trustees U.T.D. June 11, 1998,
Arnold Baumgartner, Ronald Bowers and Tonie L. Bowers, Jeffrey Clinkscales and
Kimberly Clinkscales, Guadalupe Nunez and Graciela Nunez (each a "Seller" and
collectively, the "Sellers"), and Bannister Steel Inc., a California corporation
(the "Company").
RECITALS
A. The Company is engaged in the business of steel fabrication and
subcontracting the erection of steel.
B. Sellers own of record and beneficially all of the issued and
outstanding shares of capital stock of the Company (the "Shares").
C. Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, all of the Shares upon the terms and subject to the conditions of this
Agreement, whereupon Buyer will own all of the capital stock in the Company. As
a result of such purchase, Buyer will acquire indirect ownership of the assets
of the Company held by it at the Closing Date.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
1.1.1 "Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For purposes of this definition,
"control," when used with respect to a specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
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1.1.2 "Agreement" shall have the meaning specified in the first
paragraph of this Agreement.
1.1.3 "Ancillary Agreements" shall mean the Employment Agreements of
John N. Achuff, II, Ronald Bowers, Jeffrey Clinkscales and Ted F. Rossin in the
forms of Exhibits B, C, D and E, respectively.
1.1.4 "Buyer" shall have the meaning specified in the first
paragraph of this Agreement.
1.1.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
1.1.6 "Commission" shall mean the Securities and Exchange
Commission.
1.1.7 "Company" shall have the meaning specified in the first
paragraph of this Agreement.
1.1.8 "Contract" shall mean any agreement, contract, note, bond,
mortgage, indenture, loan, evidence of indebtedness, lease, sublease, purchase
order, letter of credit, franchise arrangement, undertaking, covenant not to
compete, employment agreement, license, instrument, arrangement, obligation or
commitment to which the Company is a party or is bound or to which its assets or
properties are subject, whether oral or written.
1.1.9 "Encumbrance" shall mean any claim, lien, pledge, charge,
easement, security interest, deed of trust, mortgage, option, right of first
refusal, preemptive right, license right, right-of-way, patent reservation,
encroachment, building or use restriction, conditional sales agreement or
encumbrance, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, any agreement to give any of the foregoing in the
future, and any contingent sale or other title retention agreement or lease in
the nature thereof.
1.1.10 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.1.11 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
1.1.12 "Facilities" shall mean the buildings, offices, maintenance
and storage facilities, shops, plants, warehouses, improvements and other
structures, together with all related fixtures, located at or on the Real
Property.
1.1.13 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
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1.1.14 "Including" shall mean including without limitation by reason
of enumeration.
1.1.15 "Knowledge" as used in this Agreement in the phrase "to the
knowledge of the Company," or words of similar import, means the actual
knowledge, after having conducted a reasonable investigation, of the executive
officers of the Company and each of the Sellers.
1.1.16 "Leased Real Property" shall mean all real property and
improvements thereon now or at the Closing leased, subleased or otherwise
occupied under assignment or subassignment of a lease by the Company, including
all rights, easements and privileges appertaining or relating thereto,
including, without limitation, the real property located in National City,
California, more commonly known as 3202 Hoover Avenue, the legal descriptions of
which are attached hereto as Exhibit F.
1.1.17 "Material Adverse Effect" or "Material Adverse Change" shall
mean any material adverse effect or change in the condition (financial),
business, results of operations, assets, liabilities, operations or customer,
supplier or employee relations of the Company or on the ability of the Sellers
or the Company to consummate the transactions contemplated hereby, or any event,
condition or state of facts which could be reasonably expected, with the passage
of time, to constitute a "Material Adverse Effect" or "Material Adverse Change."
1.1.18 "Owned Real Property" shall mean all real property and
improvements thereon now or at the Closing owned by the Company, including all
rights, easements and privileges appertaining or relating thereto, and
specifically including the real property located in National City, California,
more commonly known as 3202 Hoover Avenue, the legal descriptions of which are
attached hereto as Exhibit F.
1.1.19 "Permits" shall mean all licenses, permits, franchises,
approvals, notifications, authorizations, consents or orders of, or filings
(including, without limitation, periodic reports) with (including timely
renewals thereof), any governmental agency or authority, whether foreign,
federal, state or local, or any other person, necessary or desirable for the
conduct of, or relating to the operation of, the Company, its business or
assets.
1.1.20 "Permitted Liens" shall mean: (i) easements, covenants,
rights of way or other restrictions which do not individually or in the
aggregate materially adversely affect the use or value of the property to which
they relate or to the operation of the business thereon; or (ii) liens for
taxes, assessments and other governmental charges which are not due and payable
or which may thereafter be paid without penalty; and (iii) other imperfections
of title or Encumbrances which do not detract from the use or value of the Real
Property of the Company or operation of the business of the Company.
1.1.21 "Person" shall mean any natural person, corporation, general
or limited partnership, limited liability company, trust, sole proprietorship,
or other entity, organization or association of any kind.
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1.1.22 "Real Property" shall mean the Leased Real Property and the
Owned Real Property (as such terms are herein defined).
1.1.23 "Representative" shall mean any officer, director, principal,
partner, manager, member, attorney, agent, employee or other representative.
1.1.24 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.1.25 "Sellers" shall have the meaning specified in the first
paragraph of this Agreement.
1.1.26 "Shares" shall have the meaning specified in Recital B.
1.1.27 "Subsidiary" shall mean any entity or person in which the
Company owns, directly or indirectly, a controlling equity interest.
1.1.28 "Tax or Taxes" shall mean any federal, state, provincial,
local, foreign, or other income, alternative minimum, accumulated earnings,
personal holding company, franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, privilege, sales, use, goods and
services, excise, customs duties, transfer, conveyance, mortgage, registration,
stamp, documentary, recording, premium, severance, environmental (including
taxes under Section 59A of the Code), real property, personal property,
transfer, escheat, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, registration, withholding,
estimated, or other tax, duty, or other governmental charge or assessment or
deficiencies relating thereto (including all interest and penalties thereon and
additions thereto, whether disputed or not).
1.1.29 "Tax Return" shall mean any return, report, declaration,
form, report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
1.2 Other Defined Terms. The following terms shall have the meanings
ascribed to them in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
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Purchase Price.................................. 2.2.1
Holdback Note................................... 2.3
Letter of Credit................................ 2.3.1
Closing Date Balance Sheet...................... 2.4.1
GAAP............................................ 2.4.1
Minimum Net Worth............................... 2.4.1
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<TABLE>
<S> <C>
E&Y............................................. 2.4.2
E&Y Audit....................................... 2.4.2
Adjusted Balance Sheet.......................... 2.4.2
Closing......................................... 3.1
Closing Date.................................... 3.1
Financial Statements............................ 4.6
Leases.......................................... 4.10.3
Action.......................................... 4.15
Proprietary Rights.............................. 4.20.1
Benefit Arrangement............................. 4.22.1
Employee Plans.................................. 4.22.1
ERISA Affiliate................................. 4.22.1
Multiemployer Plan.............................. 4.22.1
PBGC............................................ 4.22.1
Pension Plan.................................... 4.22.1
Welfare Plan.................................... 4.22.1
Title Policy.................................... 6.3.2
Employee Cash Bonus............................. 6.4
SEC............................................. 9.12
Damages......................................... 11.2.1
Claim........................................... 11.2.4
Claim Notice.................................... 11.2.4
</TABLE>
ARTICLE II
SALE AND TRANSFER OF SHARES
2.1 Transfer of Shares. Upon the terms and subject to the conditions
contained herein, at the Closing, Sellers will sell, convey, transfer, assign
and deliver to Buyer, and Buyer will acquire from Sellers, the Shares, free and
clear of all Encumbrances, for the consideration specified in Section 2.2.
2.2 Purchase Price.
2.2.1 Purchase Price. At the Closing, upon the terms and subject to
the conditions set forth herein, Buyer shall pay to Sellers in consideration for
and against delivery of the Shares, the sum of Sixteen Million
Seven-Hundred-Fifty Thousand Dollars ($16,750,000) (the "Purchase Price").
2.2.2 Form of Consideration. The Purchase Price shall be paid to
Sellers in immediately available funds at the Closing by wire transfer to
accounts designated in writing to the Buyer by each Seller, except for $1.0
million, which shall be paid to Sellers in the form of the Holdback Note as
described in Section 2.3.1.
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2.2.3 Allocation. The Purchase Price and the adjustments thereto
shall (subject to Section 2.3) be allocated among the Sellers in accordance with
Schedule 2.2.3.
2.3 Holdback Note / Escrow Agreement.
2.3.1 Holdback Note. Of the Purchase Price, $1.0 million shall be in
the form of a promissory note payable to the Sellers in the form of Exhibit A
hereto (the "Holdback Note"). The Holdback Note shall bear interest at 1% below
the floating prime rate of Wells Fargo Bank, N.A. and shall be secured by an
irrevocable letter of credit in form reasonably acceptable to the parties and to
be attached as Exhibit G hereto (the "Letter of Credit"), which Letter of Credit
shall be renewed annually in the amount of the remaining obligation under the
Holdback Note. Disputes related to the delivery of notices of claims and
instructions pursuant to the Letter of Credit shall be resolved in accordance
with Section 13.12 hereof. The Holdback Note shall be due and payable to the
Sellers as follows: (i) on the first anniversary of the Closing, Buyer shall
make an initial principal payment to the Sellers in an amount equal to Five
Hundred Thousand Dollars ($500,000), plus interest, and (ii) on the second
anniversary of the Closing, Buyer shall make a final principal payment to the
Sellers in an amount equal to Five Hundred Thousand Dollars ($500,000), plus
interest, in each case subject to any unresolved pending claims made by Buyer in
accordance with Article XI hereof, any claims under Article XI ultimately
resolved in favor of Buyer, or any Purchase Price adjustments under Article II
ultimately resolved in favor of Buyer. All accrued and unpaid interest on the
Holdback Note on amounts not subject to claims, pending or resolved, shall be
paid annually on each anniversary of the Closing. Any amounts held back by Buyer
but ultimately paid to the Sellers shall also include interest at the rate
specified in the Holdback Note through the date of payment. No interest shall be
due on the principal of the Holdback Note to the extent the principal is
ultimately reduced pursuant to a claim or purchase price adjustment.
2.4 Purchase Price Adjustments.
2.4.1 Closing Date Balance Sheet Initial Adjustment. Sellers shall
deliver to Buyer at least five (5) days prior to Closing an estimated balance
sheet as of the Closing Date (the Date Balance Sheet"). The Closing Date Balance
Sheet shall be prepared in good faith and in accordance with generally accepted
accounting principles, except for potential adjustments described in this
Section 2.4.1 and Section 2.4.2 ("GAAP"). As of the Closing Date, the Company
shall have a net worth of not less than $2.2 million (the "Minimum Net Worth"),
as shown on the Closing Date Balance Sheet. The Closing Date Balance Sheet will
include adjustments for accruals of estimated environmental remediation
liability of $400,000 and bonuses to certain employees of $250,000. A tax
benefit from these accruals of approximately $260,000 will also be reflected in
the adjustments. The Closing Date Balance Sheet will not reflect any adjustments
for "push-down" accounting described in Section 2.4.2 that may have been
required under GAAP. In the event the Company's net worth as shown on the
Closing Date Balance Sheet is less than the Minimum Net Worth, there shall be a
dollar-for-dollar reduction to the Purchase Price.
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2.4.2 E&Y Audit. Within 90 days after the Closing, Buyer has the
right to cause Ernst & Young LLP ("E&Y") to review or audit the Company's
Closing Date Balance Sheet (the "E&Y Audit") to verify the Minimum Net Worth.
The Company shall assist E&Y in its review or audit procedures, which may
include pre-Closing assistance, such as inventory observation. E&Y shall make
only such adjustments, if any, to the Closing Date Balance Sheet as are
necessary to correct mathematical errors or in the judgment of E&Y to conform
the Closing Date Balance Sheet to GAAP (the"Adjusted Balance Sheet"). Buyer
acknowledges that the Sellers did not use "push-down" accounting as may have
been required under GAAP when Sellers acquired the Company on June 20, 1996. The
Closing Date Balance Sheet will not be adjusted to reflect the impact of
"push-down" accounting, if any. The Closing Date Balance Sheet will also not be
adjusted to reflect any additions that E&Y may deem necessary to the estimated
environmental remediation liability of $400,000. Buyer will promptly deliver to
Sellers the Adjusted Balance Sheet, and the Sellers will have the opportunity to
engage a reputable and independent accounting firm that they may select to
examine the work papers, schedules and other documents prepared by E&Y. The
Adjusted Balance Sheet will become final and binding on the parties unless
within 20 business days following delivery thereof to Sellers, the Sellers
notify Buyer in writing that the Sellers object thereto, which objection shall
be solely on the basis of mathematical errors in the calculation thereof or the
failure to present the Company's financial position on a GAAP basis. If the
Sellers object to the Adjusted Balance Sheet and after good faith consultation
with respect to the objection the parties are unable to reach an agreement
within 15 days, any unresolved disputed items shall be promptly referred to an
independent accounting firm reasonably acceptable to the parties to resolve the
disputed issues. The resolution of the independent accounting firm will be final
and binding on the parties. The fees and expenses of such independent accounting
firm will be borne equally by Buyer and the Sellers. Any payment due shall be
paid by the appropriate party within two (2) business days of final
determination hereunder.
2.4.3 Final Adjustment. In the event the actual net worth of the
Company, as set forth on the Adjusted Balance Sheet, is less than the Minimum
Net Worth, there shall be a dollar for dollar reduction (less any difference
already deducted under Section 2.4.1) in the Holdback Note. If the difference
between the Minimum Net Worth and the actual net worth of the Company as shown
on the Adjusted Balance Sheet is less than the difference between the Minimum
Net Worth and the net worth reflected on the Closing Date Balance Sheet, Buyer
will pay to Sellers, on a dollar for dollar basis, the difference between the
estimated shortfall in net worth as determined by the Closing Date Balance Sheet
and the actual shortfall in net worth as determined by the Adjusted Balance
Sheet. Any payment due shall be paid by the appropriate party within two
business days of final determination hereunder. Any required adjustment to the
Holdback Note shall be deemed to be made as of the date of resolution of any
adjustment and, at Buyer's request, the Sellers shall return the Holdback Note
in exchange for a new note reflecting the adjustment.
2.5 Transfer Taxes and Fees. The parties contemplate that no documentary
or transfer taxes or sales, use, transaction privilege or other similar taxes
will be imposed by reason of the transfer of Shares provided hereunder. If any
such tax is imposed, however, Sellers shall bear the responsibility for such
tax. The Company shall pay the fees and costs of recording or filing all UCC
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termination statements and other releases of Encumbrances, and any fees or costs
in obtaining any necessary consents related thereto, which shall reduce cash
(but not the Purchase Price) at Closing for purposes of this Article II.
ARTICLE III
CLOSING
3.1 Closing. The Closing of the transactions contemplated herein (the
"Closing") shall be held at the offices of Marks & Golia, 3900 Harney Street,
First Floor, San Diego, California 92110, on September 30, 1998, or at a time
and place as the parties shall mutually agree (the "Closing Date").
3.2 Conveyances at Closing.
3.2.1 Sellers' Delivery Obligations. To effect the sale and transfer
of the Shares, Sellers will, at the Closing, execute (or cause to be executed by
any other party thereto other than Buyer) and deliver to Buyer:
3.2.1.1 certificates evidencing the Shares, free and clear of
any Encumbrances, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank;
3.2.1.2 all Ancillary Agreements, including those required to
be executed by any of the Sellers;
3.2.1.3 all certificates, opinions of counsel and other
documents described in Article IX; and
3.2.1.4 all Permits and any other third party consents
required for the valid transfer of the Shares as contemplated by this Agreement,
or for the continued operation of the business of the Company following such
transfer.
3.2.2 Buyer's Delivery Obligations. To effect the sale and transfer
of the Shares, Buyer will, at the Closing, execute and deliver to Sellers:
3.2.2.1 the Purchase Price, including the Holdback Note, and
the Letter of Credit;
3.2.2.2 all Ancillary Agreements required to be executed by
Buyer; and
3.2.2.3 all certificates, opinions of counsel and other
documents described in Article VIII.
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3.2.3 Form of Instruments. To the extent that a form of any document
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the recipient.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
Except as set forth in a letter from Buyer to Sellers and the Company
dated the date hereof, Sellers and the Company hereby, jointly and severally,
represent and warrant to Buyer as follows, which representations and warranties
are, as of the date hereof, true and correct:
4.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Copies of the Articles of Incorporation and Bylaws of the Company,
and all amendments thereto, heretofore delivered to Buyer are accurate and
complete as of the date hereof and are currently in effect without further
amendment thereto, except as set forth therein. The Company is not duly
qualified or licensed to do business as a foreign corporation in good standing
in any other State.
4.2 Subsidiaries. The Company has no Subsidiaries.
4.3 Authorization. Each of the Sellers and the Company has full power and
authority (corporate or other) to enter into this Agreement and the Ancillary
Agreements to which they are a party, as the case may be, and to carry out the
transactions contemplated hereby and thereby, and the board of directors,
trustees, or any governing body or person of the Company and each of the Sellers
has taken all action required by law, its charter or other governing documents,
as the case may be, or otherwise, to be taken by it to authorize the execution,
delivery and performance of this Agreement and the Ancillary Agreements, as the
case may be, and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and the Ancillary Agreements, when executed and
delivered by all parties thereto will be, the legal, valid and binding
obligations of each of the Sellers and the Company, enforceable against each of
them in accordance with their respective terms. A copy of the resolutions of the
Company's board of directors authorizing this Agreement and the related
transactions are attached hereto as Schedule 4.3.
4.4 No Violation; Consents. None of the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby and thereby will (i) violate any
provision of the Articles of Incorporation or Bylaws of the Company or any
governing documents of any Seller, (ii) violate, result in a breach of, conflict
with, or constitute a default (or an event which, with the giving of notice or
lapse of time or both, would constitute a default) or require any consent under,
or give to others any right of termination, amendment, acceleration, suspension,
revocation or cancellation with respect to, any Contract to which any Seller or
the Company is a party or by which any of the Shares or any of the assets or
properties of the Company or any Seller are bound or affected, (iii) result in
the creation or
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imposition of any Encumbrance upon any of the Shares or any property or assets
of the Company or any Seller under any agreement, commitment or other Contract
to which the Company or any Seller is a party or by which the Company or any
Seller is bound or affected, or to which the property of the Company or any
Seller is subject, or (iv) violate, conflict with or result in the breach of any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which any Seller, the Company, or any of their
properties or assets are subject. Except as set forth on Schedule 4.4, no
action, consent, approval or authorization by or filing with any person or
entity, including, without limitation, any governmental authority, is required
in connection with the execution, delivery and performance by each of the
Sellers and the Company of this Agreement and the Ancillary Agreements, as the
case may be, or the consummation by each of the Sellers and the Company of the
transactions contemplated by each of them herein and therein.
4.5 Capitalization.
4.5.1 The authorized equity securities of the Company consist solely
of 750 shares of common stock, par value $100 per share, of which 200 shares are
issued and 100 shares are issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date the only record and beneficial
owners and holders of the Shares, as set forth on Schedule 4.5 (which Schedule
also sets forth the address of each such Seller and the certificate numbers of
the certificates representing the Shares), free and clear of all Encumbrances
(other than a legend indicating only that the Shares have not been registered
under the Securities Act and any applicable state securities laws).
4.5.2 There are no shares of capital stock of the Company issued and
outstanding (other than the Shares) and there are 100 shares of treasury stock.
All Shares are validly issued, fully paid and nonassessable. None of the issued
and outstanding Shares was issued in violation of any preemptive rights. There
are no outstanding (i) securities convertible into or exchangeable or
exercisable for any of the Company's capital stock; (ii) options, warrants,
calls or other rights, including, without limitation, rights to demand
registration or to sell securities in connection with any registration by the
Company under the Securities Act, with respect to the capital stock of the
Company, or to purchase or subscribe to capital stock of the Company or
securities convertible into or exchangeable or exercisable for capital stock of
the Company; (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance, sale, transfer, or assignment
of any capital stock, any convertible or exchangeable securities or any options,
warrants or rights of the Company; or (iv) Shares or other securities of the
Company pledged as collateral to secure any agreement or obligation. Except as
set forth on Schedule 4.5, there are no voting trust agreements or other
contracts, agreements, arrangements, commitments, plans, proxies or
understandings restricting or otherwise relating to conveyance, voting or
dividend rights with respect to the Shares. Upon consummation of the
transactions contemplated by this Agreement Buyer will own all of the issued and
outstanding equity securities of the Company of every sort whatsoever, free and
clear of all Encumbrances.
4.6 Financial Statements. Attached hereto as Schedule 4.6 are the balance
sheet, statement of income, and statement of cash flows for the six months ended
June 30, 1998, and for
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each of the years ended December 31, 1997 and 1996 (collectively the "Financial
Statements"). Except for the potential adjustments described in Sections 2.4.1
and 2.4.2, the Financial Statements (a) are in accordance with the underlying
books and records of the Company and (b) fairly present the assets, liabilities
(including all reserves) and financial position of the Company as of the
respective dates thereof and the results of operations and changes in cash flows
for the periods then ended. The Financial Statements for the years ended
December 31, 1997 and 1996 have been reviewed by Max L. Perlatti & Associates,
independent public accountants. At the respective dates of the Financial
Statements, there were no liabilities of the Company which, in accordance with
GAAP, should have been shown or reflected in the Financial Statements or the
notes thereto, which are not shown or reflected in the Financial Statements or
the notes thereto.
4.7 No Change in the Assets. Except as set forth in Schedule 4.7, since
June 30, 1998:
4.7.1 There has been no Material Adverse Change in the Company;
4.7.2 Except in the ordinary course, there has not been any sale or
other disposition of any assets of the Company, or any Encumbrance placed on its
assets, or any purchase of assets, including inventory or equipment, of the
Company;
4.7.3 The Company has operated its business in the ordinary course
consistent with the Company's past practice so as to preserve its business
intact, to keep available to it the services of its employees, and to otherwise
preserve the Company's goodwill and its relationships with suppliers, customers,
distributors and others having business relations with it;
4.7.4 The Company has not changed its accounting methods or
practices (including any change in depreciation or amortization policies or
rates) or revalued any of its assets.
4.7.5 The Company has not taken any action since June 30, 1998, that
would violate Section 7.1.
4.8 Liabilities. The Company has no liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) liabilities which are reflected on
the Financial Statements or which are not required under GAAP to be reflected on
the Financial Statements as of June 30, 1998; (ii) liabilities incurred or
arising in the ordinary course of business since June 30, 1998, (iii)
liabilities arising in the ordinary course of business under Contracts to which
the Company is a party (excluding specifically any claim for breach of
contract); and (iv) liabilities expressly described in a Schedule hereto.
4.9 Assets; Absence of Encumbrances. The assets reflected on the Financial
Statements and leased or otherwise used by the Company (for which the Company
possesses the necessary rights to use the same) constitute all assets necessary
for the conduct of the Company's business. All of the assets reflected on the
Financial Statements as of June 30, 1998 as owned by the Company and all assets
acquired by the Company since June 30, 1998 (other than assets disposed of in
the
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ordinary course of business since such date) are owned by the Company free and
clear of all Encumbrances, other than (i) Permitted Liens or (ii) Encumbrances
reflected or reserved against on the Company's June 30, 1998 balance sheet
included in the Financial Statements or set forth on Schedule 4.9.
4.10 Real Property.
4.10.1 Description. Schedule 4.10 sets forth complete and accurate
legal descriptions of all Real Property.
4.10.2 Title. Concurrently with Closing, the Company will have good
and marketable title in fee simple to the Real Property free and clear of all
Encumbrances, except as disclosed in Schedule 4.10. Except as set forth on
Schedule 4.10, with respect to any Contracts, covenants, conditions, deeds,
deeds of trust, rights-of-way, easements, mortgages, restrictions, surveys,
title insurance policies, and other documents granting to the Company title to
or an interest in or otherwise affecting the Owned Real Property (copies of
which have been delivered to Buyer), no breach or event of default exists on the
part of the Company or, to the knowledge of the Company, on the part of any
other party, and no condition or event has occurred that with the giving of
notice, the lapse of time, or both would constitute a breach or event of a
default by the Company or, to the Company's knowledge, any other person.
4.10.3 Leases. The Sellers and the Company have delivered to Buyer
an accurate copy of the leases and subleases covering the Leased Real Property,
including all amendments thereto and assignments thereof ("Leases"). All of such
Leases are listed on Schedule 4.10.3. All of the Leases are valid and in full
force and effect. The Company has duly performed all of its obligations under
the Leases to the extent those obligations to perform have accrued, and no
violation of or default or breach under any Leases by the Company or, to the
Company's knowledge, any other party has occurred and neither the Company nor,
to the Company's knowledge, any other party has repudiated any provisions
thereof. All of the Leases will be enforceable by the Company after the Closing
to the same extent as if the transactions contemplated by this Agreement had not
been consummated.
4.10.4 No Unpaid Charges. Except as set forth on Schedule 4.10,
there are no unpaid charges, debts, liabilities, claims, or obligations arising
in the normal course from the construction, occupancy, ownership, use, or
operation of the Real Property and no charges or assessments arising in the
normal course for public improvements or otherwise made against the Real
Property are unpaid, including, without limitation, those for construction of
sewer lines, water lines, storm drainage systems, electric lines, natural gas
lines, streets (including perimeter streets), roads and curbs. No Real Property
is subject to any condition or obligation to any governmental entity or other
person requiring the owner or any transferee thereof to donate land, money or
other property or to make off-site public improvements.
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4.10.5 Compliance with Laws. Except as set forth on Schedule 4.15,
no litigation, arbitration, or similar proceeding is pending or, to the
knowledge of the Company, threatened which affects or is reasonably likely to
affect the Company's use or enjoyment of any of the Real Property. All of the
Real Property is in compliance with all applicable zoning and subdivision
ordinances. The Real Property is zoned (if applicable) to permit operation of
the business presently conducted thereon. No condemnation, eminent domain, or
similar proceeding is pending or, to the knowledge of the Company, is threatened
against the Real Property.
4.10.6 Facilities. Except as listed in Schedule 4.10, based upon
their age and condition, the Facilities and the equipment and other tangible
assets owned or leased by the Company at the Facilities, are (i) adequately
insured, (ii) structurally sound with no known defects, (iii) in good operating
condition and repair, subject to ordinary wear and tear in consideration of
their age, (iv) maintained consistent with past practices and in accordance with
applicable leases or other agreements, and (vi) in conformity with all
applicable laws, ordinances, orders, regulations and other requirements relating
thereto currently in effect. Except as listed in Schedule 4.10, the Facilities
are supplied with utilities and other services necessary for the operation of
the business. Except as listed in Schedule 4.10, none of the Facilities or
equipment thereat is subject to any commitment or other arrangement for their
sale or use by any person. Except as listed in Schedule 4.10, the Company has
not granted to any person any contract or other right to the use of any portion
of the Real Property, or to the use of any Facility or amenity on or relating to
any such property. The Facilities located on each parcel comprising the Real
Property are located within the boundary lines of such parcel, do not encroach
on any easement which may burden the parcel land, and are not in violation of
applicable setback requirements.
4.10.7 No Foreign Owners. Neither the Company nor any Seller is
other than a "United States person" within the meaning of Section 7701 of the
Code.
4.11 Receivables. The accounts receivable, other receivables and all
restricted funds on deposit reflected in the Financial Statements represent
valid obligations or amounts to which the Company is entitled arising from sales
actually made in the ordinary course of business and are due and payable to the
Company, and the accounts receivable, other receivables (and allowance for
doubtful accounts) and restricted funds on deposit reflected on the Company's
financial statements have been established in accordance with GAAP.
4.12 Inventory and Equipment. The inventory of the Company reflected in
the Financial Statements was purchased in the ordinary course of business, and
the inventory (and reserves therefor) reflected in the Financial Statements have
been established in accordance with GAAP. The equipment of the Company reflected
on the Financial Statements is in good working condition and suitable for its
intended use, normal wear and tear excepted. The equipment reflected on the
Company's financial statements has been established in accordance with GAAP.
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4.13 Contracts and Commitments.
4.13.1 Contracts. Schedule 4.13 sets forth a complete and accurate
list of all written Contracts and, to the knowledge of the Company and Sellers,
all oral Contracts, that are not fully performed by all parties thereto, of the
following categories:
4.13.1.1 Contracts not made in the ordinary course of the
Company's conduct of the business;
4.13.1.2 Employment contracts, employment handbooks or
policies, bonus plans, programs and agreements, and severance agreements;
4.13.1.3 Supply, purchase, distribution, franchise, license,
sales or commission contracts related to the Company involving payments made by
or to the Company of $50,000 or more;
4.13.1.4 Contracts involving expenditures or liabilities,
actual or potential, in excess of $200,000 or otherwise material to the Company,
and not cancelable (without liability) within 30 calendar days;
4.13.1.5 Contracts or commitments relating to commission
arrangements with others;
4.13.1.6 Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether the Company shall be the borrower, lender or
guarantor thereunder or whereby any assets are pledged (excluding credit
provided by the Company in the ordinary course of business to its customers);
4.13.1.7 Leases of personal property not cancelable (without
liability) within 30 calendar days;
4.13.1.8 Contracts containing covenants limiting the freedom
of the Company or any officer, director or shareholder of the Company to engage
in any line of business or compete with any person; and
4.13.1.9 Contracts relating to the Shares.
Sellers and Company have delivered to Buyer or have provided Buyer an
opportunity to examine, true, correct and complete copies of all of the
Contracts listed on Schedule 4.13, together with all other material Contracts of
the Company and all contracts and agreements relating to the Shares, including
all amendments and supplements thereto.
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4.13.2 Absence of Breaches or Defaults. All of the Contracts are
valid and in full force and effect. The Company has duly performed all of its
obligations under the Contracts to the extent those obligations to perform have
accrued; no violation of, or default or breach under any Contracts by the
Company or, to its knowledge, any other party has occurred; no condition or
event has occurred that with the giving of notice or lapse of time, or both,
would constitute a breach or default by the Company or, to the Company's
knowledge, any other person; and neither the Company nor, to its knowledge, any
other party has repudiated any provisions thereof. All of the Contracts will be
enforceable by the Company after the Closing to the same extent as if the
transactions contemplated by this Agreement had not been consummated.
4.14 Books and Records. The Company has made and kept (and given Buyer
access to) books and records and accounts, which, in reasonable detail,
accurately and fairly reflect the financial transactions and other material
activities of the Company. The minute books of the Company to be delivered to
Buyer at Closing accurately and adequately reflect all action previously taken
by the shareholders, board of directors and committees of the board of directors
of the Company. The stock book records of the Company previously delivered to
Buyer are true, correct and complete, and accurately reflect all transactions
effected in the Company's stock through and including the date hereof.
4.15 Litigation. Except as set forth on Schedule 4.15, there is no action,
order, writ, injunction, judgment or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, or arbitral action pending (i.e., the
Company has been timely and properly served) or, to the Company's knowledge, any
governmental audit or investigation (collectively, with items listed above, an
"Action") threatened (a) against the Company or its assets; (b) against any
officer, director or employee in their capacity as such, or (c) seeking to
delay, limit, enjoin or obtain damages in respect of the transactions
contemplated by this Agreement. The Company is not in default with respect to or
subject to any judgment, order, writ, injunction or decree of any court or
governmental agency, and there are no unsatisfied judgments against the Company.
4.16 Labor Matters. The Company is not a party to any labor agreement with
respect to its employees with any labor organization, union, group or
association and no employees of the Company are represented by a labor
organization, union, group or association in connection with their employment by
the Company. Within the last seven (7) years, the Company has not experienced
any attempt by organized labor or its representatives to make the Company
conform to demands of organized labor relating to its employees or to enter into
a binding agreement with organized labor that would cover the employees of the
Company. Schedule 4.16 (i) contains a list of all employees of the Company and
their wage rates or salaries as of the date of this Agreement, (ii) sets forth
the dates of employment for such employees and (iii) accurately characterizes
them as exempt or non-exempt. Except as set forth on Schedule 4.16, the
employment of all persons presently employed or retained by the Company is
terminable at will by the Company, as allowed under California law.
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4.17 Compliance with Law. Except as disclosed on Schedule 4.17, the
Company, the conduct of its business and the operation of its Facilities have
not violated (except where such violation has been fully cured as of the date
hereof), and are in compliance with all laws, statutes, ordinances, regulations,
rules and orders of any foreign, federal, state or local government and any
other governmental department or agency, and any judgment, decision, decree or
order of any court or governmental agency, department or authority. Except as
disclosed on Schedule 4.17, the Company and the conduct of its business and the
operation of the Facilities are in conformity with all energy, public utility,
and health codes, regulations and ordinances, the Americans with Disabilities
Act, OSHA and all other foreign, federal, state, and local governmental and
regulatory requirements. Except as disclosed on Schedule 4.17, the Company has
not received any notice to the effect that, or otherwise been advised that, it
is in violation of any such statutes, regulations, rules, judgments, decrees,
orders, ordinances or other laws (except where such violation has been fully
cured as of the date hereof). The Company has all Permits required to conduct
its business. All material Permits are listed on Schedule 4.17. All Permits will
be enforceable by the Company after the Closing to the same extent as if the
transactions contemplated by this Agreement had not been consummated.
4.18 No Brokers. None of the Sellers, the Company or any of the Company's
officers, directors, employees or Affiliates has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in an obligation on the part of the Buyer or, except as set forth in Schedule
4.18, the Company, to pay any finder's fee, brokerage fees or commission or
similar payment in connection with the transactions contemplated hereby.
4.19 No Other Agreements to Sell the Company. Except for stock and
membership interest cross-purchase and related agreements, which will be
terminated by or concurrently with the Closing, and are set forth on Schedule
4.19, neither any Seller nor the Company has any commitment or legal obligation,
absolute or contingent, to any other person or firm other than the Buyer to
sell, assign, transfer or effect a sale of any of the Shares or any other shares
of the Company's capital stock (authorized or unauthorized), or to effect any
merger, consolidation, liquidation, dissolution or other reorganization of the
Company, or to effect any sale of the Company's assets (other than the sale of
inventory of the Company in the ordinary course of business).
4.20 Proprietary Rights.
4.20.1 Proprietary Rights. Schedule 4.20 lists all of the Company's
federal, state and foreign registrations of patents, trademarks, service marks
and trade names, and all pending applications for any such registrations and all
other trademarks and trade names which the Company uses. Such rights, together
with all trade secrets and other proprietary rights, whether or not registered,
and all computer software created by or on behalf of the Company are hereinafter
referred to collectively as "Proprietary Rights".
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4.20.2 Royalties and Licenses. No person has a right to receive a
royalty or similar payment in respect of any Proprietary Rights. Except as set
forth on Schedule 4.20, the Company is not a party to any licenses granted, sold
or otherwise transferred by or to it or other agreements to which it is a party,
relating in whole or in part to any of the Proprietary Rights other than object
code end-user licenses granted to it in the ordinary course of business that
permit use of software products without a right to modify, distribute or
sublicense the same.
4.20.3 Ownership and Protection of Proprietary Rights. The Company
owns or licenses, and has the sole right to use or (if it so elects) to
sublicense each of the Proprietary Rights. None of the Proprietary Rights is
involved in any pending or, to the Company's knowledge, threatened Action. The
Company has not received any notice of invalidity with respect to such
Proprietary Rights. The Company has taken all reasonable and prudent steps to
protect the Proprietary Rights from infringement by any other person. To the
knowledge of the Company, the Company's use of the Proprietary Rights is not
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights. No such infringement has been alleged by any third
party. All of the Proprietary Rights are validly owned by or licensed to the
Company and will not cease to be validly owned or licensed and in full force and
effect by reason of the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated by this Agreement.
4.21 Tax Matters.
4.21.1 Filing of Tax Returns, Payment of Taxes. Except as set forth
in Schedule 4.21.1, the Company has filed all Tax Returns that the Company was
required to file prior to the date hereof. All such Tax Returns were correct and
complete and were prepared and filed in accordance with applicable law. Except
as set forth in Schedule 4.21.1, all Taxes due and payable by or with respect to
the Company (whether or not shown on any Tax Return) with respect to all taxable
periods ending prior to the date hereof have been paid. All other Taxes due and
payable by the Company with respect to periods ending on or before the Closing
Date (whether or not a Tax Return is due on such date) or in respect of
transactions entered into or any state of facts existing as of the Closing Date
have been or will be paid on or before Closing Date or will be accrued as
liabilities on the Closing Date Balance Sheet. For purposes of the preceding
sentence, in determining the amount of Taxes due and payable by the Company with
respect to periods ending on or before the Closing Date or in respect of
transactions entered into or any state of facts existing as of the Closing Date,
the Closing Date shall be deemed to be the last day of any applicable tax
period. Except as set forth in Schedule 4.21.1, all Tax Returns the due date of
which (determined without extensions) is on or after the date hereof but on or
before the Closing Date will be correct and complete and filed in accordance
with applicable law.
4.21.2 Taxing Jurisdictions. Schedule 4.21.2 lists (i) all
countries, states, cities, or other jurisdictions in which the Company is
currently subject to an obligation to file Tax Returns or to collect sales or
use Taxes, (ii) all elections for income Taxes made by the Company that are
currently in force or to which the Company is bound, and (iii) (x) all
countries, states, cities, or other
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jurisdictions in which the Company is a beneficiary of any real or personal
property Tax exemptions or concessions, reduced rates, or Tax credits (y) the
annual benefit of each such item, and (z) the terms governing expiration or
phase-out of each such item.
4.21.3 General Tax Matters. Except as set forth in Schedule 4.21.3,
with respect to each taxable period for the Company ending on or before the
Closing Date (or as of such other date as set forth below), (i) either such
taxable period has been audited by the relevant taxing authority or the time for
assessing or collecting Taxes with respect to each such taxable period has
closed and each taxable period is not subject to review by a relevant taxing
authority; (ii) no deficiency or proposed adjustment that has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
any taxing authority against the Company; (iii) the Company has not consented to
extend the time in which any Taxes may be assessed or collected by any taxing
authority; (iv) the Company has not requested or been granted an extension of
the time for filing any Tax Return; (v) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending, or
threatened against or with respect to the Company regarding Taxes; (vi) the
Company has not made an election or filed a consent under Section 341(f) of the
Code (or any corresponding provision of state, local or foreign law) or agreed
to have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign law) apply to any disposition of subsection (f) assets (as
defined in Section 341(f)(4) of the Code) owned by the Company; (vii) there are
no Encumbrances on the assets of the Company relating or attributable to Taxes
(other than liens for Taxes not yet due and payable) and the Company has no
knowledge of any reasonable basis for the assertion of any claim relating or
attributable to Taxes, which, if adversely determined, would result in any lien,
pledge, charge, claim, security interest, or other Encumbrance on the assets of
the Company; (viii) the Company will not be required (A) as a result of a change
in method of accounting for a taxable period ending on or prior to the Closing
Date, to include any adjustment under Section 481 of the Code (or any
corresponding provision of state, local, or foreign law) in taxable income for
any taxable period (or portion thereof) beginning after the Closing Date or (B)
as a result of any "closing agreement," as described in Section 7121 of the Code
(or any corresponding provision of state, local, or foreign law) to include any
item of income or exclude any item of deduction from any taxable period (or
portion thereof) beginning after the Closing Date; (ix) the Company has not been
a member of an affiliated group (as defined in Section 1504 of the Code) or
filed or been included in a combined, consolidated, or unitary income Tax
Return; (x) the Company is not a party to or bound by any tax allocation or tax
sharing agreement and, has no current or potential contract or other obligation
to indemnify any other person with respect to any Tax or pay the Taxes of any
other person under Treasury Regulations Section 1.1502-6 (or any similar
provisions of state, local, or foreign law) as a transferee or successor, by
contract or otherwise; (xi) to the Company's knowledge, no claim has ever been
made by a taxing authority in a jurisdiction where the Company does not file Tax
Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction; (xii) the Company does not have a permanent establishment in any
foreign country, as defined in the relevant tax treaty between the United States
of America and such foreign country; (xiii) the Company has not been a "U.S.
real property holding corporation" (within the meaning of Code Section
897(c)(2)) during the applicable period specified in Code Section
897(c)(1)(A)(ii); (xiv) the Company has disclosed on each Tax Return filed by
the Company
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all positions taken thereon that could give rise to a substantial understatement
of penalty of federal income Taxes within the meaning of Code Section 6662; (xv)
the Company was not acquired in a qualified stock purchase under Code Section
338(d)(3) and no elections under Code Section 338(g), protective carryover basis
elections, or offset prohibition elections are applicable to the Company; (xvi)
the Company has made no payments, is not obligated to make any payments, and is
not a party to any agreement that under any circumstances could obligate it to
make any payments, that will not be deductible under Code Section 280G or 162;
(xvii) no sales or use tax will be payable by the Company as a result of the
transactions contemplated by this Agreement, and there will be no non-recurring
intangible tax, documentary stamp tax, or other excise tax (or comparable tax
imposed by an governmental entity) imposed upon the Company as a result of the
transactions contemplated by this Agreement; (xviii) Buyer will not be required
to deduct and withhold any amount with respect to Taxes imposed upon the Sellers
upon consummation of the transactions contemplated by this Agreement; (xix) none
of the Company's assets is property required to be treated as being owned by any
other person under the "safe harbor lease" provisions of former Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, or (B) has been
financed with or directly or indirectly secures any bond or debt the interest of
which is tax-exempt under Section 103(a) of the Code; (xx) the Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to an employee, independent contractor,
shareholder, or other third party; (xxi) no income under any arrangement or
understanding to which the Company is a party will be attributed to the Company
which is not represented by income to which the Company is legally entitled; and
(xxii) the Company owns no interest in any "controlled foreign corporation"
(within the meaning of Code Section 957), "passive foreign investment company"
(within the meaning of Code Section 1296) or other entity the income of which is
required to be included in the income of the Company whether or not distributed.
For purposes of clause (xvi) the term "payments" means payments in the nature of
compensation.
4.21.4 Tax Attributes. Set forth in Schedule 4.21.4 is a list
reflecting the following information with respect to the Company as of the date
hereof as well as on an estimated pro forma basis as of the Closing: (i) the
basis of the Company in its assets, (ii) the amount of any net operating loss,
net capital loss, unused investment or other tax credit, unused foreign tax or
tax credit, or excess charitable contribution allocable to the Company assets,
and (iii) with respect to the preceding clause (ii) any limitations on use of
any of such attributes including any limitations arising by reason of the
transactions contemplated by this Agreement.
4.21.5 Copies of Tax Returns. Except as otherwise set forth in
Schedule 4.21.5 the Company has furnished to Buyer copies of all income and
sales Tax Returns filed by or with respect to the Company relating to the period
encompassing the three taxable years of the Company preceding the date hereof.
4.21.6 Retention of Tax Credits, Etc. The Sellers acknowledge and
agree that in connection with the sale of the Shares, all tax attributes of the
Company including but not limited to tax net operating losses, tax credits and
other similar items generated through and subsequent to the Closing Date will
remain as tax attributes of the Company. Accordingly, any refunds or benefits
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obtained from any Tax carryback or carryforward or other realization of such Tax
attributes of Company or its successors shall remain as sole property of the
Company.
4.21.7 Definition. Any reference to the term "the Company" in this
Section 4.21 shall refer to the Company, any predecessor entity, and any
Subsidiary of the Company (whether or not such Subsidiary entity qualifies as a
"qualified subchapter S subsidiary" within the meaning of Code Section
1361(b)(3)(B) or any other entity disregarded or intended to be disregarded for
Tax purposes under the Code or under any provision of state, local, or foreign
law). Further, any reference to any action of "the Company" in this Section 4.21
shall encompass any action or actions taken by or at the direction of the
Company whether or not such actions taken by or at the direction of the Company
were properly authorized.
4.22 Employees and Employee Benefits.
4.22.1 As used in this Section 4.22 and in Section 4.23, the
following terms have the meanings set forth below.
"Benefit Arrangement" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation, profit
sharing bonuses, stock options, stock appreciation rights, stock purchases or
other forms of incentive compensation or postretirement insurance, compensation
or benefits which (A) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(B) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company or an ERISA Affiliate or under which the
Company or any ERISA Affiliate may incur any liability, and (C) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities).
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, the Company as
defined in Section 414(b), (c), (m) or (o) of the Code, or under "common
control" with the Company, within the meaning of Section 4001(b)(1) of ERISA.
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"Multiemployer Plan" shall mean any "multiemployer plan," as defined
in Section 4001(a)(3) of ERISA, under which the Company or any ERISA Affiliate
has or may incur any liability.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (A) the
Company or any ERISA Affiliate has or may incur any liability; (B) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities); and (C) is not a Multiemployer Plan.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (A) the Company or any ERISA Affiliate
has or may incur any liability; (B) covers any employee or former employee of
the Company or any ERISA Affiliate (with respect to their relationship with such
entities); and (C) is not a Multiemployer Plan.
4.22.2 Disclosure; Delivery of Copies of Relevant Documents and
Other Information. Schedule 4.22 contains a complete list of all Employee Plans.
True and complete copies of each of the following documents have been delivered
or made available by the Company to Buyer: (i) each Welfare Plan and Pension
Plan (and, if applicable, related trust agreements) and all amendments thereto,
all written interpretations thereof and written descriptions thereof which have
been distributed to the Company's employees and all annuity contracts or other
funding instruments; (ii) each Benefit Arrangement including written
interpretations thereof and written descriptions thereof which have been
distributed to the Company's employees (including descriptions of the number and
level of employees covered thereby) and a brief description of any Benefit
Arrangement which is not in writing; (iii) the most recent determination or
opinion letter, if any, issued by the Internal Revenue Service with respect to
each Pension Plan; (iv) for the three most recent plan years, Annual Reports on
Form 5500 Series required to be filed with any governmental agency for each
Pension Plan and each Welfare Plan; (v) all actuarial reports prepared for the
last three plan years for each Pension Plan; (vi) all correspondence with the
Internal Revenue Service, the Department of Labor or the PBGC regarding each
Employee Plan; and (xiii) all correspondence regarding any pending or threatened
claim against any Employee Plan or the Company or any ERISA Affiliate regarding
any matter related to any Employee Plan.
4.23 ERISA Representations.
4.23.1 Pension Plans. Except for the money-purchase plan sponsored
by the Company, no Pension Plan is a defined benefits plan as defined in Section
414 of the Code and no Pension Plan is subject to the minimum funding
requirements of Title IV of ERISA or Section 412 of the Code. Each Pension Plan
which is intended to be qualified (and each related trust agreement, annuity
contract or other funding instrument) satisfies in all material respects
requirements for qualified and tax-exempt status under the provisions of Code
Sections 401(a) (or 403(a), as
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appropriate) and 501(a) and has so satisfied such requirement during the period
from its adoption to date.
4.23.2 Multiemployer Plans. Neither the Company nor any ERISA
Affiliate has ever had any obligation to contribute to any Multiemployer Plans.
4.23.3 Welfare Plans. Each Welfare Plan which is a "group health
plan," as defined in Section 607(1) of ERISA, has been operated in compliance in
all material respects with the health care continuation provisions of Part 6 of
Title I, Subtitle B of ERISA and Section 4980B of the Code at all times and, but
for compliance with such provisions, no Welfare Plan provides post-retirement
benefits for employees.
4.23.4 Compliance with Law. Each Employee Plan has been maintained
in all material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan, including, without limitation, ERISA and the
Code.
4.23.5 Unrelated Business Taxable Income. No Employee Plan (or trust
or other funding vehicle pursuant thereto) has any liability for Tax imposed
under Code Section 511.
4.23.6 Deductibility of Payments. There is no contract, agreement,
plan or arrangement covering any employee or former employee of the Company
(with respect to its relationship with such entities) that, individually or
collectively, provides for the payment by the Company of any amount (i) for
which the deduction by the Company would be disallowed under Section 162(m) of
the Code, or (ii) that is or would be an "excess parachute payment" pursuant to
Section 280G of the Code.
4.23.7 Fiduciary Duties and Prohibited Transactions. Neither the
Company nor, to the knowledge of the Company, any plan fiduciary or party in
interest (as such terms are defined in Section 3(21) and 3(14) of ERISA) of any
Welfare Plan or Pension Plan has engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c)(1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA. The Company has not
knowingly participated in a violation of Part 4 of Title I, Subtitle B of ERISA
by any plan fiduciary of any Welfare Plan or Pension Plan (or other employee
benefit plan subject to ERISA) and has not been assessed any civil penalty under
Section 502(i) or Section 502(l) of ERISA.
4.23.8 Validity and Enforceability. Each Welfare Plan, Pension Plan,
related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement is legally valid and binding and in full force and effect.
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4.23.9 Litigation. There is no action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation relating to or seeking benefits
under any Employee Plan have been filed, or to the Company's knowledge,
threatened or anticipated against the Company, any ERISA Affiliate or any
Employee Plan, the sponsor or administrator of any Employee Plan or against any
fiduciary of any of the Employee Plans with respect to the operation of any such
plan.
4.23.10 No Amendments. Neither the Company nor any ERISA Affiliate
has any announced plan or legally binding commitment to create any additional
Employee Plans or to amend or modify any existing Employee Plan, except as
required by the 1996 and 1997 amendments to the Code.
4.23.11 No Other Liability. No event has occurred in connection with
which the Company or any ERISA Affiliate or any Employee Plan, directly or
indirectly, that could be subject to any liability (A) under any statute,
regulation or governmental order relating to any Employee Plans or (B) pursuant
to any obligation of the Company to indemnify any person against liability
incurred under any such statute, regulation or order as they relate to the
Employee Plans.
4.23.12 Unpaid Contributions. Neither the Company nor any ERISA
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Pension Plan or Welfare Plan, other than contributions
accrued but not yet payable under the Company's money-purchase pension plan for
the current plan year.
4.23.13 Insurance Contracts. Neither the Company nor any Employee
Plan holds as an asset of any Employee Plan any interest in any annuity
contract, guaranteed investment contract or any other investment or insurance
contract issued by an insurance company that is the subject of bankruptcy,
conservatorship or rehabilitation proceedings.
4.23.14 No Acceleration or Creation of Rights. Neither the execution
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will result in the acceleration or creation of
any rights of any person to benefits under any Employee Plan (other than the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock or the acceleration or
creation of any rights under any severance, parachute or change in control
agreement).
4.23.15 Termination. Except as set forth on Schedule 4.22, each
Welfare Plan and Benefit Arrangement may be terminated by the Company without
penalty upon 30 days advance notice and without causing the Company to incur any
additional liability.
4.23.16 Funding of Money Purchase Pension Plan. There does not exist
any accumulated funding deficiency within the meaning of either Section 412 of
the Code or Section 302 of ERISA as to the money-purchase pension plan sponsored
by the Company, nor would there exist any such deficiency but for the
application of an alternate minimum funding standard. There has
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not been issued any waiver of the minimum funding standards imposed by the Code
with respect to such plan. All contributions payable to the money-purchase
pension plan sponsored by the Company for any plan year or fiscal year of the
Company ending prior to the Closing have been paid in full, or are fully
reflected on the financial statements of the Company that have been provided to
the Buyer.
4.24 Compliance With Environmental Laws.
4.24.1 Definitions. The following terms, when used in this Section
4.24, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.24.2 "Company" and "Facility" or "Facilities". For purposes of
this Section 4.24 only, the term (i) "Company" shall include (A) the Company and
the Subsidiaries and all of their Affiliates, and the Sellers and their
Affiliates, (B) all partnerships, joint ventures and other entities or
organizations in which the Company was at any time or is a partner, joint
venturer, member or participant and (C) all predecessor or former corporations,
partnerships, joint ventures, organizations, trusts, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Company or to which the Company has succeeded; and (ii) for purposes hereof,
"Facilities" or "Facility" shall mean all facilities and real property, owned,
leased or otherwise used by the Company, now or in the past.
4.24.3 "Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the work place
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.24.4 "Hazardous Substance" shall mean any material, element,
compound, or mixture, whether solid, liquid, or gaseous:
(i) the presence of which requires investigation or remediation under any
Environmental Law or pursuant to the unappealed decision of any governmental
authority; or
(ii) which is defined as "hazardous waste," "hazardous substance," "toxic
substance," "toxic material," "pollutant," or "contaminant" under any
Environmental Law including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601, et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, any laws
regulating the transportation of such materials, any analogous state or local
laws, and any rules, regulations, policies, and guidances promulgated
thereunder; or
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(iii) Which is or is suspected to be, pursuant to the determination of any
governmental authority, toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or is currently subject to regulation by
any governmental authority; or
(iv) the presence of which causes or threatens to cause a nuisance as
defined by an applicable Environmental Law, to property owned, leased,
subleased, operated, managed, occupied or otherwise controlled by Company or a
Subsidiary, or to adjacent or impacted properties; or
(v) which contains or in which has been detected in violation of an
Environmental Law, gasoline, diesel fuel or other petroleum hydrocarbons or
volatile organic compounds; or
(vi) which contains or in which has been detected in violation of an
Environmental Law, PCBs or asbestos or asbestos-containing materials or urea
formaldehyde foam insulation or lead or lead-containing paint; or
(vii) which is radon gas.
4.24.5 Compliance With Environmental Laws. Except as set forth on
Schedule 4.24, the Facilities have been owned, leased, operated and maintained
in compliance with all federal, state, local or foreign laws, statutes,
ordinances, regulations, rules, judgments, orders, notice requirements, court
decisions, agency guidelines or principles of law (including common law),
restrictions or licenses, which (i) regulate or relate to the protection or
clean-up of the environment, the use, treatment, storage, transportation,
handling or disposal of Hazardous Substances or other hazardous, toxic or
otherwise dangerous substances, wastes or materials (whether gas, liquid or
solid), the preservation or protection of waterways, groundwater, drinking
water, air, wildlife, plants or other natural resources, or the health and
safety of persons or property, including without limitation protection of the
health and safety of employees or (ii) impose liability with respect to any of
the foregoing, including without limitation the Federal Water Pollution Control
Act (33 U.S.C. Section 1251 et seq.), Resource Conservation & Recovery Act (42
U.S.C. Section 6901 et seq.) ("RCRA"), Safe Drinking Water Act (21 U.S.C.
Section 349, 42 U.S.C. Sections 201, 300f), Toxic Substances Control Act
(15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601 et seq.) ("CERCLA"), or any other similar federal, state
or local law of similar effect, each as amended (collectively, "Environmental
Laws"). The Real Property does not contain wetlands or a level of radon above
action levels of the U.S. Environmental Protection Agency and it is not located
within a "critical," "preservation," "conservation" or similar type of area.
4.24.6 Permits. Except as set forth on Schedule 4.24, the Company
has, and at all times has had, and has timely renewed, all Permits required
under any Environmental Law and the Facilities are, and at all times have been,
in compliance with all such Permits.
4.24.7 Permits Required. The consummation of any of the transactions
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or
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extension of, or any other administrative action regarding, any Permit required
under any Environmental Law.
4.24.8 Notice of Violation. The Company has not received any notice
at any time that it or the Facilities is or were claimed to be in violation of
the provisions of any Environmental Law or in non-compliance with the conditions
of any Permit, and there is no pending, or to the Company's knowledge,
threatened lawsuit, governmental or other legal action to that effect.
4.24.9 Pending Actions. There is not now pending, or to the
Company's knowledge, threatened, nor is there or has there been any basis for,
nor has there ever been, any Action against the Company under any Environmental
Law or otherwise with respect to any Release or mishandling of any Hazardous
Substance.
4.24.10 Judgments. There are no consent decrees, judgments, judicial
or administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect the Company or the Facilities.
4.24.11 Hazardous Substances. There is not and has not been any
Hazardous Substance used, generated, treated, stored, transported, disposed of,
handled or otherwise existing on, under, about or from any Facility, except for
quantities of any such Hazardous Substances stored or otherwise held on, under
or about any such Facility in full compliance with all Environmental Laws and
necessary for the operation of the business.
4.24.12 Handling of Hazardous Substances. The Company has at all
times used, generated, treated, stored, transported, disposed of or otherwise
handled Hazardous Substances in compliance with all Environmental Laws and in a
manner that will not result in liability of the Company or Buyer under any
Environmental Law.
4.24.13 Environmental Conditions. Except as set forth on Schedule
4.24, there are no present or past Environmental Conditions (as defined below)
in any way relating to Company, its business or the Facilities. "Environmental
Conditions" means the introduction into the soil, groundwater or environment of
or near the Facilities (through leak, spill, release, discharge, escape,
emission, dumping, disposal or otherwise) of any pollution, including without
limitation any contaminant, irritant or pollutant or Hazardous Substance
(whether or not upon the property of the business and whether or not such
pollution constituted at the time thereof a violation of any Environmental Law)
as a result of which either the Company or, after the Closing, Buyer has or may
become liable to any federal, state, or local governmental authority or person
or by reason of which any of the assets may suffer or be subjected to any lien.
4.24.14 CERCLA or RCRA. No current or past use, generation,
treatment, transportation, storage, disposal or handling practice of the Company
with respect to any Hazardous
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Substance has or will result in any liability under the CERCLA or RCRA or any
state or local law of similar effect.
4.24.15 Storage Tank or Pipeline. Except as set forth on Schedule
4.24, there is not now and has not been at any time in the past any underground
or above-ground storage tank or pipeline at any Facility where the installation,
use, maintenance, repair, testing, closure or removal of such tank or pipeline
was not in compliance with all Environmental Laws and there has been no Release
from or rupture of any such tank or pipeline, including without limitation any
Release from or in connection with the filling or emptying of such tank or
pipeline.
4.24.16 Environmental Audits or Assessments. True, complete and
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of the
Company, of all environmental audits or assessments which have been conducted at
any Facility within the past five years, either by the Company or any attorney,
environmental consultant or engineer engaged for such purpose, have been
delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment of which the Company or Sellers
have knowledge is included on Schedule 4.24.
4.24.17 Indemnification Agreements. The Company is not a party,
whether as a direct signatory or as successor, assign or third party
beneficiary, or, to the Company's knowledge, otherwise bound, to any lease or
other Contract under which the Company is obligated by or entitled to the
benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.24.18 Releases or Waivers. The Company has not released any other
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
4.24.19 Notices, Warnings and Records. Except as discussed on
Schedule 4.24.19, the Company has given all notices and warnings, made all
reports, and has kept and maintained all records required by and in compliance
with all Environmental Laws.
4.25 Insurance.
4.25.1 Schedule 4.25 describes all policies of insurance (including
the insurer, type of insurance and period of coverage) to which the Company is a
party or under which the Company or any employee, officer or director of the
Company (in his or her capacity as such) is insured. All such policies, together
with such self-insurance, (i) provide adequate insurance coverage for the
Company, its business, assets and operations for all risks normally insured
against by a person or entity carrying on the same business or businesses as the
Company, (ii) are sufficient for compliance with all legal requirements and
Contracts to which the Company is a party or by which it is bound, and (iii)
will continue in full force and effect following the Closing in accordance with
their terms.
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4.25.2 Schedule 4.25 sets forth, by year, for the current policy
year and each of the three preceding policy years, a summary of the loss
experience under each policy, and a summary of the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims;
4.25.3 Except as set forth on Schedule 4.25, the Company has not
received (i) with respect to any insurance claims made in the past three years,
any denial of coverage or any notice that a defense will be afforded with
reservation of rights, or (ii) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
4.25.4 The Company has paid all premiums due, and has otherwise
performed in all material respects all of its obligations under each insurance
policy described above.
4.26 Affiliate Transactions. Except as set forth on Schedule 4.19, no
officer or director of the Company, or any Seller, or any member of the
immediate family of any such officer, director, or Seller, or any entity in
which any of such persons owns any beneficial interest (other than a publicly
held corporation whose stock is traded on a national securities exchange or in
the over-the-counter market and less than 1% of the stock of which is
beneficially owned by any of such persons) has any agreement with the Company or
any interest in any agreement of the Company or in any property (real, personal,
or mixed, tangible or intangible) owned or used by the Company or otherwise
pertaining to the Company or its business or assets. For purposes of the
preceding sentence, the members of the immediate family of an officer or
director of the Company or Seller shall consist of the spouse, parents,
children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
brothers- and sisters-in-law of such officer, director or Seller.
4.27 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto contains or shall contain when delivered at Closing any untrue
statement of a material fact or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading, and there is no fact which has not been
disclosed in writing to Buyer that has had or is reasonably likely to have a
Material Adverse Effect on the Company. Any projections provided to Buyer on
behalf of the Company were made in good faith and the Company had a reasonable
basis for making such projections.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Sellers as follows, which representations and warranties are, as of
the date hereof, and will be, as of the Closing Date, true and correct:
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5.1.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.1.2 Authorization. Buyer has full power and authority, and has
taken all actions necessary and required by law and its governing instruments,
to execute, enter into, perform and deliver this Agreement and each of the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement and the Ancillary Agreements have been duly
authorized, executed and delivered by Buyer and is (and following their
execution and delivery by Buyer and the other parties thereto and, as
applicable, each of the Ancillary Agreements to which Buyer is a party will be)
a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with their terms. A copy of Buyer's board of directors' resolutions,
certified by Buyer's corporate secretary, authorizing this Agreement, the
Ancillary Agreements and related transactions are attached as Schedule 5.1.2.
5.1.3 No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement or the Ancillary Agreements, nor the consummation
of the transactions contemplated hereby or thereby, nor compliance by Buyer with
any of the provisions hereof or thereof, will (i) violate or conflict with any
provision of the Certificate of Incorporation, Bylaws or any governing
instrument of Buyer, (ii) violate, conflict with or result in the breach of any
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
injunction, decree or award of any court or governmental authority to which
Buyer is subject, or (iii) violate any contract or agreement to which Buyer is a
party, in each case to the extent that such violation or conflict would prevent
Buyer from consummating the transactions contemplated hereby or result in any
liability to Sellers.
5.1.4 Consents and Approvals. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement or the Ancillary Agreements and the
consummation of the transactions contemplated hereby or thereby, except (i) as
may be required by Buyer to operate the Company's business after the Closing,
(ii) as has been obtained on or prior to the date hereof, provided such has been
delivered to Sellers, (iii) as required under the HSR Act, for which all costs,
expenses and filing fees shall be exclusively paid by Buyer without offset
against the Purchase Price or reimbursement from Sellers, or (iv) as required
under the Company's credit facilities, provided such has been delivered to
Sellers prior to the date hereof.
5.1.5 No Brokers. Neither Buyer nor any of its respective officers,
directors, or employees or Affiliates have employed or made any agreement with
any broker, finder or similar agent or any person or firm which will result in
an obligation to pay any finders fees, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby for which
Sellers or the Company will bear any responsibility.
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5.1.6 Litigation. No legal action, governmental audit or
investigation is pending or, to the knowledge of Buyer, threatened against Buyer
which seeks to delay, limit, enjoin or obtain damages with respect to the
transactions contemplated by this Agreement.
ARTICLE VI
GENERAL COVENANTS OF BUYER, THE COMPANY AND SELLERS
Buyer, the Company and Sellers each covenant with the others as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using their respective reasonable
efforts (A) to obtain all necessary waivers, consents and approvals from third
parties; provided, however, that neither party shall be required to make any
material payments, commence litigation or agree to modifications of the terms of
Contracts in order to obtain any such waivers, consents or approvals, (B) to
obtain all necessary Permits as are required to be obtained under any federal,
state, local or foreign law or regulations, (C) to effect all necessary
registrations and filings, including, without limitation, required filings under
the HSR Act and all other submissions of information requested by governmental
authorities, and (D) to fulfill all conditions to this Agreement.
6.2 Environmental Matters. At Closing, Sellers and Buyer shall enter into
an Environmental Agreement in form and substance reasonably acceptable to each
of them.
6.3 Conveyances of Leased Real Property to the Company.
6.3.1. At or prior to the Closing, Company shall acquire good and
marketable title in fee simple to all Leased Real Property, free and clear
of all Encumbrances, except as disclosed in Schedule 4.10, upon such
reasonable terms and conditions as are satisfactory to Buyer. The Leased
Real Property shall be conveyed to Company by a duly executed and
acknowledged grant deed or deeds recorded in the Office of the County
Recorder of San Diego County, California, concurrently with the Closing.
6.3.2. A CLTA owner's policy or policies of title insurance ("Title
Policy") for the Leased Real Property shall be issued at the Closing by
Chicago Title Company together with a letter from Chicago Title Company
acceptable to Buyer stating that the Title Policy may be converted to an
ALTA owner's extended coverage policy or policies provided that a survey
is submitted to Chicago Title Company along with a $750 conversion fee,
which Title
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Policy shall name the Company as insured and shall show fee simple title
to the Leased Real Property as vested on the Closing date in the Company
free and clear of all Encumbrances, except as are customary or disclosed
in Schedule 4.10. The Title Policy shall be issued in an aggregate
coverage amount of $1,500,000.
6.3.3. All escrow fees, Title Policy premiums, recording fees,
transfer taxes and other closing costs and expenses of any kind whatsoever
in connection with the conveyance of the Leased Real Property to the
Company shall be paid by Buyer, and shall not constitute a reduction
against the Purchase Price or in any way be offset against the Purchase
Price.
6.4 Cash Bonus to Certain Employees. Concurrently with the Closing, the
Company shall pay a cash bonus to certain employees in accordance with Schedule
6.4 (the "Employee Cash Bonus"). The aggregate of the Employee Cash Bonus,
including all required withholdings and associated benefits, shall not exceed
$250,000. The Company's payment of the Employee Cash Bonus and any other Company
related taxes or expenses arising therefrom shall not constitute a reduction
against the Purchase Price or in any way be offset against the Purchase Price.
ARTICLE VII
CONDUCT OF COMPANY AND BUYER PENDING THE CLOSING
7.1 Company and Seller Covenants. The Company and Sellers hereby jointly
and severally covenant and agree that from the date hereof to the Closing Date:
7.1.1 Conduct of Business Pending the Closing. Except as
specifically contemplated in this Agreement or as disclosed in any schedule
hereto, the business of the Company shall be conducted only in, and the Company
shall take no action except in, the ordinary course, on an arm's length basis,
and in accordance with past custom and practice and all applicable laws, rules,
and regulations; and the Company shall maintain its Facilities and equipment in
good operating condition, ordinary wear and tear accepted; and the Company will
not, directly or indirectly, and Sellers will not cause or permit the Company
to:
(i) Cancel or terminate or permit to be canceled or
terminated its current insurance (or reinsurance) policies or permit any of the
coverage thereunder to lapse, unless simultaneous with such termination,
cancellation, or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated, or lapsed policies are
in full force and effect;
(ii) Default under any material contract, agreement,
commitment, or undertaking;
(iii) Violate or fail to comply with any laws applicable to
it;
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(iv) Fail to maintain its assets and properties in accordance
with good standards of maintenance and as required in any leases or other
agreements pertaining thereto;
(v) Enter into or modify any employment, severance, or
similar agreements or arrangements with, or grant any bonuses, salary increases,
or severance or termination pay to, any officers, directors, consultants or,
except in the ordinary course of business consistent with historical practices,
employees, or adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment, or other benefit
plan, trust, fund, or group arrangement for the benefit or welfare of any
officers, directors, or employees;
(vi) Directly or indirectly enter into or modify any material
contract, agreement, or understanding or enter into any transaction not in the
ordinary course of business;
(vii) Cancel, without full payment, any note, loan, or other
obligation owing to the Company, or waive or compromise any right or claim
except the write-off of accounts receivable in the ordinary course of business;
(viii) Acquire (by merger, exchange, consolidation,
acquisition of stock or assets, or otherwise) any corporation, partnership,
joint venture, or other business organization or division or assets thereof;
(ix) Issue any shares of its capital stock, issue or create
any warrants, obligations, subscriptions, options, convertible securities, or
other commitments under which any additional shares of capital stock or other
securities may be issued, or effect any transfer of outstanding shares of its
capital stock, including shares of any class that might be directly or
indirectly authorized, issued, or transferred from treasury, or otherwise permit
the transfer of any outstanding shares of capital stock or declare any dividends
or distributions whether in cash, stock or other property;
(x) Incur any indebtedness for borrowed money or issue any
debt securities except the borrowing of working capital in the ordinary course
of business and consistent with past practice;
(xi) Pay any obligation or liability, fixed or contingent,
except in the ordinary course of business;
(xii) Enter into any transactions with any Seller or any
other Affiliate of the Company;
(xiii) Except for sales Tax returns filed in the ordinary
course of business, file any Tax Return without the consent of Buyer;
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(xiv) Commit any act or permit the occurrence of any event or
the existence of any condition of the type described in Section 4.7 hereof;
(xv) Commit or otherwise permit to occur any of the actions
described in the preceding clauses (i) through (xiv).
7.1.2 Business Relationships. The Company will exercise its
reasonable efforts to preserve intact its business organization and goodwill,
keep available the services of its officers and employees as a group, and
maintain satisfactory relationships with suppliers, distributors, customers, and
others having business relationships with it.
7.1.3 Notification of Certain Matters. The Company shall (i) confer
on a regular basis with representatives of Buyer as reasonably requested by
Buyer, (ii) promptly notify Buyer of any Material Adverse Change in the normal
course of its business or in the operation of its properties and of any Actions
or other governmental or third party complaints, investigations, or hearings (or
communications indicating that the same may be contemplated) not previously
disclosed, and (iii) promptly notify Buyer if the Company shall discover that
any representation or warranty made by it or the Sellers in this Agreement was
when made, or has subsequently become, untrue in any material respect or if it
or they have failed to or will fail to satisfy or perform in any material
respect any covenant or agreement of the Company or Sellers contained herein.
7.2 Certain Closing Covenants.
(a) Company and Buyer Covenants. Company shall use its reasonable
efforts to cause the conditions specified in Article IX hereof, and Buyer shall
use its reasonable efforts to cause the conditions specified in Article VIII
hereof, to be satisfied at or prior to the Closing Date.
(b) Sellers' Covenants. Sellers shall use their respective
reasonable efforts to (i) cause the conditions to Closing applicable to them to
be satisfied and (ii) to cause the Company to satisfy the conditions to Closing
applicable to it, in each case on or before the Closing Date.
7.3 No Negotiations. Neither the Company nor any Seller shall, directly or
indirectly, through any officer, director, agent, or otherwise, solicit,
initiate, or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to the
sale or other transfer or disposition of the Shares or any liquidation,
dissolution, recapitalization, merger, consolidation, or acquisition or purchase
of all or a portion of the assets (except sales of inventory in the ordinary
course of business) of, or any equity interest in, the Company or other similar
transaction or business combination involving the Company, or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist, participate in,
facilitate, or encourage, any effort or attempt by any other person or entity to
do or seek any of the foregoing. The Company and Sellers shall promptly notify
Buyer if any such proposal or offer, or any inquiry from or contact with any
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person with respect thereto, is made and shall promptly provide Buyer with such
information regarding such proposal, offer, inquiry, or contact as Buyer may
request.
7.4 Public Announcements. The parties hereto shall not issue any press
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
shall not be withheld unreasonably); provided, however, that Buyer may make any
disclosure or announcement of information it is obligated to make pursuant to
applicable law or regulation, including any applicable law or regulation of the
Nasdaq Stock Market or any other national securities exchange or self regulatory
organization, as applicable; provided, further, however, that the Company will
have the opportunity to review and provide comments on any such disclosure or
announcement prior to its release; and provided further, that Sellers and the
Company acknowledge that Buyer may make disclosures to lenders, investment
bankers, rating agencies and their agents regarding the transaction and the
Company.
7.5 Confidentiality. The parties shall continue to be bound by that
Confidentiality Agreement dated February 4, 1998. Sellers and the Company may
make disclosures to their consultants and representatives regarding this
transaction, the Agreement and the Buyer. Notwithstanding the foregoing, the
Sellers and the Company consent to the dissemination of relevant information
regarding the Company to facilitate financing the transaction contemplated
hereby, provided the recipients thereof are bound by appropriate obligations of
confidentiality. Subject to limitations above, nothing herein or in the
Confidentiality Agreement shall preclude a party from developing or offering
products or services competitive with those of the other party.
ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided for
hereby are subject, in the discretion of Sellers, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Sellers:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Buyer shall have performed and
satisfied in all material respects all agreements and covenants required hereby
to be performed by it prior to or on the Closing Date.
8.2 No Proceedings, Litigation or Laws. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the
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transactions contemplated hereby and which could reasonably be expected to
materially damage Sellers if the transactions contemplated hereunder are
consummated. The waiting period under the HSR Act shall have expired or been
terminated.
8.3 Certificates. Buyer shall furnish Sellers with such certificates of
Buyer to evidence compliance with the conditions set forth in this Article VIII
as may be reasonably requested by Sellers.
8.4 Ancillary Agreements. Buyer shall have executed and delivered the
Ancillary Agreements to which it is a party.
8.5 Buyer Corporate Documents. Buyer shall have delivered to Sellers a
copy of its Certificate of Incorporation certified by the Delaware Secretary of
State, a good standing certificate dated not more than ten days prior to Closing
by the Delaware Secretary of State and a copy of the resolutions adopted by
Buyer in connection with this Agreement, certified by its corporate secretary.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by Buyer:
9.1 Representations, Warranties and Covenants. All representations and
warranties of Sellers and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and Sellers
and the Company shall have performed and satisfied in all material respects all
agreements and covenants required hereby to be performed by them prior to or on
the Closing Date.
9.2 Consents. All Permits and waivers necessary to the consummation of the
transactions contemplated hereby and for the continued operation of the business
after the Closing by Buyer shall have been obtained including, without
limitation (i) all required third party consents, (ii) all required approvals of
Buyer's lenders, and (iii) the waiting period under the HSR Act shall have
expired or been terminated.
9.3 No Proceedings or Litigation. No Action by any governmental authority
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer if the transactions contemplated hereby
are consummated, including, without limitation, any limitation or restriction on
the right or ability of the Buyer to own or transfer the Shares or of the
Company to
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own, possess or transfer its assets after the Closing. There shall not be any
statute, rule or regulation that makes the purchase and sale of the Shares or
the Company contemplated hereby illegal or otherwise prohibited.
9.4 Opinions of Counsel. The Company and the Sellers shall have delivered
to Buyer opinions of Marks & Golia, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer, to the effect that:
9.4.1 Incorporation. The Company has been duly incorporated and is
validly existing and in good standing under the laws of its state of
incorporation and is qualified to do business and is in good standing in each
state in which the ownership or lease of its properties, the employment of its
personnel or character of its business requires it to do so, except where the
failure to be so qualified would not have a Material Adverse Effect.
9.4.2 Corporate Power and Authority. The Company has the necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby and to own, lease and operate its assets and
properties and to conduct its businesses as presently conducted.
9.4.3 Corporate Action. The execution, delivery and performance of
this Agreement and the Ancillary Agreements to which the Company is a party have
been duly authorized by all necessary corporate or other action, and this
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Company or the Sellers, as applicable.
9.4.4 Obligation of the Company or Sellers. This Agreement and each
Ancillary Agreement constitutes a legally valid and binding obligation of the
Company or the Sellers, as applicable, enforceable against the Company or the
Sellers in accordance with its terms, except as limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or by equitable principles (whether considered in an
action at law or in equity), (ii) limitations imposed by federal or applicable
state law or equitable principles upon the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) other customary
exceptions to enforceability.
9.4.5 No Breach. Neither the execution and delivery of this
Agreement or the Ancillary Agreements by the Company or the Sellers, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will (i) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of the Company, or (ii) breach, or cause a default
under, any term or provision of any Contract listed on any Schedule to this
Agreement relating to the Company or any Seller.
9.4.6 No Permits Required. No Permit or filing with or consent of
any governmental authority or any other person is required for the execution and
delivery of this Agreement or the Ancillary Agreements by the Company or the
Sellers, as applicable, or the
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consummation by the Company or the Sellers of the transactions contemplated
hereby or thereby, except such as have been obtained or the failure to obtain
would not materially adversely affect the Company's or the Sellers' ability to
consummate the transactions contemplated hereby or thereby.
9.4.7 No Actions Pending. To the knowledge of such counsel, except
as set forth in the Schedules hereto, no Action is pending or threatened (i)
against the Company, or (ii) against any of the officers or directors of the
Company as such, or (iii) seeks to delay, limit, enjoin or obtain damages in
respect of the transactions contemplated hereby.
9.4.8 No Violation of Law. Neither the execution and delivery of
this Agreement or any Ancillary Agreement by the Company or the Sellers, as
applicable, nor the consummation of the transactions contemplated hereby or
thereby will violate or result in a failure to comply with any statute, law,
ordinance, regulation, rule or, to the knowledge of such counsel, order of any
federal or state government or any other federal or state governmental
department or agency, or any judgment, decree or order of any court known to
such counsel to be applicable to the Company or the Sellers.
9.4.9 Title to Shares. The authorized capital stock of the Company
consists solely of 750 shares of common stock, $100 par value per share, and the
issued and outstanding common stock of the Company consists solely of the
Shares, all of which are owned of record and beneficially by the Sellers free
and clear of all Encumbrances other than restrictions on transfer imposed by the
federal and state securities laws. To the knowledge of such counsel, there are
no outstanding warrants, options or other rights to acquire, or securities
convertible into or exercisable or exchangeable for, shares of capital stock of
the Company, nor any commitments or agreements by the Company to issue any such
rights or securities or shares of capital stock. Upon Closing, Buyer will
acquire good and valid title to all of the Shares, free and clear of all
Encumbrances.
9.4.10 Other Opinions. Such other opinions as any lender to Buyer
may reasonably request and as are customarily provided in transactions of this
nature, and such persons shall be entitled to rely upon the opinions of Sellers'
counsel hereunder.
9.5 Certificates. Sellers and the Company shall furnish Buyer with such
certificates of Sellers, the officers of the Company and others to evidence
compliance with the conditions set forth in this Article IX as may be reasonably
requested by Buyer.
9.6 Ancillary Agreements. Each of the Sellers and the Company, as
appropriate, shall have entered into the Ancillary Agreements.
9.7 Release of Encumbrances. The Company shall have filed or recorded
(where necessary) and delivered to Buyer all documents necessary to release the
Shares and assets of the Company from all Encumbrances (except for Encumbrances
permitted under Section 4.9), which documents shall be in a form reasonably
satisfactory to Buyer's counsel.
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9.8 No Material Changes. Except as otherwise approved by Buyer, there
shall not have been any Material Adverse Change in the Company since the date of
this Agreement, except those having an industry-wide effect.
9.9 Corporate Documents. Buyer shall have received from the Company
resolutions adopted by its board of directors as it reasonably deems appropriate
approving this Agreement and the Ancillary Agreements to which it is a party,
and the transactions contemplated hereby and thereby.
9.10 Financing. Seller, the Company, their counsel and accountants shall
have provided such materials, opinions or certificates as reasonably requested
by Buyer and as are customarily provided in transactions of this nature to
facilitate financing of the transaction contemplated hereby or to facilitate
receipt of any consents of lenders to Buyer reasonably required in connection
with the transactions contemplated hereby.
9.11 Financial Statement Deliveries. The Company shall have provided Buyer
with (a) the Financial Statements, and (b) the Closing Date Balance Sheet. The
Financial Statements shall be subject to the representations and warranties of
Section 4.6 of this Agreement.
9.12 Affiliate Loans. All indebtedness owed to the Company by any Seller,
or Affiliates of the Company or Sellers, shall have been paid and satisfied in
full.
9.13 Resignations. Except as provided in the Ancillary Agreements, the
officers and directors of the Company shall have resigned from such offices.
9.14 Repayment of Indebtedness. All long-term debt of the Company shall
have been repaid and all pledges and guaranties related thereto shall have been
released, or will be repaid and released concurrently with the Closing.
9.15 Due Diligence. Buyer shall have completed a customary due diligence
investigation of the Company and shall be satisfied with the status thereof,
including the status of title to and zoning of the Real Property.
9.16 Board Approval. The Board of Directors of Buyer shall have approved
this Agreement and the transactions contemplated hereby.
9.17 Title to Real Property. Buyer shall receive at Closing a proforma or
other confirmation of the issuance after Closing of the Title Policy, or similar
document, evidencing good and marketable title to the Real Property. The grant
deed or deeds referred to in Section 6.3.1 shall have been recorded concurrently
with the Closing.
9.18 The Company shall have provided evidence of the termination of any
and all stock and membership interest cross-purchase and related agreements set
forth on Schedule 4.19.
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*Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
ARTICLE X
RISK OF LOSS; CONSENTS TO ASSIGNMENT
10.1 Risk of Loss. From the date hereof through the Closing, all risk of
loss or damage to the Company, its business or assets shall be borne by the
Company. If any material portion of the property is destroyed or damaged by fire
or any other cause on or prior to the Closing, other than use, wear or loss in
the ordinary course of business, the Company shall give written notice to Buyer
as soon as practicable after discovery of such damage or destruction, the amount
of insurance, if any, covering such property and the amount, if any, which the
Company is otherwise entitled to receive as a consequence.* If, notwithstanding
such damage or destruction, Buyer acquires the Shares, then after the Closing
any insurance or other proceeds shall belong to the Company.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations, Etc. The representations, warranties,
covenants and agreements of Sellers, the Company, and Buyer contained in this
Agreement and the certificates delivered hereunder shall survive the
consummation of the transactions contemplated hereby and the Closing Date,
without regard to any investigation made by any of the parties hereto; provided,
however, the representations and warranties of the Company shall terminate as of
the Closing.
11.2 Indemnification.
11.2.1 By Sellers. Sellers shall indemnify, defend, save and hold
harmless Buyer, its Affiliates and subsidiaries (including the Company from and
after the Closing Date), and its and their respective Representatives, from and
against any and all claims, damages, costs, losses (including, without
limitation, diminution in value), Taxes, liabilities, judgments, penalties,
fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not
arising out of third-party claims), including, without limitation, interest,
penalties, costs of mitigation, clean-up or remedial action), lost profits and
other losses resulting from any shutdown or curtailment of operations,
attorneys' fees, experts' fees and all amounts paid in investigation, defense,
audit or settlement of any of the foregoing (except those arising from Hazardous
Materials, Environmental Laws, and Environmental Conditions) (as such terms are
defined in the Environmental Agreement referred to in Section 6.2) (herein,
"Damages"), incurred in connection with, arising out of, resulting from or
incident to (i) any breach or inaccuracy of any representation or warranty, made
by the Company or Sellers in this Agreement or in any agreement or certificate
delivered hereunder; (ii) any breach of any covenant or agreement made by the
Company or Sellers in this Agreement or in any agreement or certificate
delivered hereunder; and (iii) any claim or contingent liability disclosed in
Schedule 4.15.
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11.2.2 By Buyer. Buyer and the Company (from and after the Closing)
shall indemnify, defend, save and hold harmless Sellers, their Affiliates (other
than the Company) and their Representatives from and against any and all Damages
incurred in connection with, arising out of, resulting from or incident to (i)
the breach or inaccuracy of any representation or warranty made by Buyer in this
Agreement or in any agreement or certificate delivered hereunder; or (ii) any
breach of any covenant or agreement made by Buyer in this Agreement or any
agreement or certificate delivered hereunder.
11.2.3 Cooperation. In connection with third party Actions, the
indemnified party shall cooperate in all reasonable respects with the
indemnifying party and such attorneys in the investigation, trial and defense of
such Action and any appeal arising therefrom; provided, however, that the
indemnified party may, at its own cost (except as provided in Section 11.2.5
hereof), participate in the investigation, trial and defense of such Action and
any appeal arising therefrom. The parties shall cooperate with each other in any
notifications to insurers.
11.2.4 Defense of Claims. If a claim for Damages (a "Claim") is to
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall give written
notice (a "Claim Notice") to the indemnifying party as soon as practicable after
the party entitled to indemnification becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
here under. The Claim Notice shall include the amounts the indemnified party
believes in good faith are subject to indemnification and a brief basis of the
claim. The indemnified party may revise its estimate of any claim by notice to
the other party.
11.2.5 Third Party Claims. If any Action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within fifteen (15) calendar days after the service of the citation or summons).
The failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After such
notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with Action, then the indemnifying
party shall be entitled, if it so elects, (i) to take control of the defense and
investigation of Action, (ii) to employ and engage attorneys of its own choice
(which shall be reasonably acceptable to the indemnified party) to handle and
defend the same, at the indemnifying party's cost, risk and expense unless the
named parties to such Action include both the indemnifying party and the
indemnified party and the indemnified party has been advised in writing by
counsel that there may be one or more legal defenses available to such
indemnified party that are different from or additional to those available to
the indemnifying party, in which case the indemnified party shall be able to
retain its own counsel at the reasonable expense of the indemnifying party), and
(iii) to compromise or settle such Action, which compromise or settlement shall
be made only with the written consent of the indemnified party, such consent not
to be unreasonably withheld; provided, however, if the remediation or resolution
of any such Action will occur on or at any Facility or is reasonably
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*Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
expected to have a Material Adverse Effect on the indemnified party's business
operations, then, notwithstanding the foregoing, the indemnified party shall be
entitled to control such remediation or resolution, including, without
limitation, to take control of the defense and investigation of such Action, to
employ and engage attorneys of its own choice to handle and defend the same, at
the indemnifying party's cost, risk and expense, and to compromise or settle
such Action. If the indemnifying party fails to assume the defense of such
Action within fifteen (15) calendar days after receipt of the written notice,
the indemnified party against which such Action has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such Action on behalf of and for the account and risk of the
indemnifying party. In the event the indemnified party assumes the defense of
the Action, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. Pursuant
to Sections 11.2.1 or 11.2.2, as applicable, the indemnifying party shall be
liable for any settlement of any Action effected pursuant to and in accordance
with this Section 11.2.5 and for any final judgment (subject to any right of
appeal), and the indemnifying party agrees to indemnify and hold harmless an
indemnified party from and against any Damages by reason of such settlement or
judgement.
11.2.6 Rights of Offset. All Purchase Price adjustments and amounts
as to which the Sellers are obligated to indemnify Buyer shall be satisfied
first by set off against the outstanding principal amount of the Holdback Note.
11.2.7 *
11.3 Sellers Representative.
11.3.1 Appointment. The Sellers irrevocably make, constitute and
appoint Ted R. Rossin as their agent (the "Seller Representative") and authorize
and empower him to fulfill the role of Seller Representative hereunder. In the
event of the resignation, death or incapacity of a Seller Representative, his
successor shall be appointed within 21 days of his death or incapacity by mutual
agreement of the remaining Sellers, and such successor either shall be a Seller
or a Representative of a Seller or shall otherwise be reasonably acceptable to
Buyer. If the Sellers fail to appoint a successor within such 21-day period,
then Buyer shall have the right to appoint the successor from among the Sellers.
The choice of a successor Seller Representative appointed in any manner
permitted above shall be final and binding upon all of the Sellers. The
decisions and actions of any successor Seller Representative shall be, for all
purposes, those of a Seller Representative as if originally named herein.
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11.3.2 Authority. Each Seller has made, constituted and appointed
and by the execution of this Agreement hereby irrevocably makes, constitutes and
appoints the Seller Representative as such person's true and lawful attorney in
fact and agent, for such person and in such person's name, (i) to receive all
notices and communications directed to such Seller under this Agreement and to
take any action (or to determine to take no action) with respect thereto, as he
may deem appropriate as effectively as such Seller could act for himself or
herself, including, without limitation,, the settlement or compromise of any
dispute or controversy, and (ii) to execute and deliver all instruments and
documents of every kind incident to the foregoing to all intents and purposes
and with the same effect as such Seller could do personally, and each such
Seller hereby ratifies and confirms as his or her own act, all that the Seller
Representative shall do or cause to be done pursuant to the provisions hereof.
11.3.3 Death; Incapacity. The death or incapacity of any Seller
shall not terminate the authority and agency of the Seller Representative.
ARTICLE XII
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
12.1 Cooperation and Records Retention. Sellers, the Company and Buyer
shall (i) each provide the other with such assistance as may reasonably be
requested by any of them in connection with the preparation of any Tax Return,
audit, or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) each retain and
provide the other with any records or other information that may be relevant to
any such Tax Return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of any such audit or
examination, proceeding, or determination that affects any amount required to be
shown on any Tax Return of the other for any period.
ARTICLE XIII
MISCELLANEOUS
13.1 Termination. This Agreement may be terminated at any time prior to
Closing:
13.1.1 By mutual written consent of Buyer and the Seller
Representative;
13.1.2 By Buyer or Sellers if the Closing shall not have occurred on
or before October 31, 1998; provided, however, that this provision shall not be
available to Buyer if Sellers have the right to terminate this Agreement under
Section 13.1.4, and this provision shall not be available to Sellers if Buyer
has the right to terminate this Agreement under Section 13.1.3;
13.1.3 By Buyer if there is a material breach of any representation
or warranty of Sellers or the Company of any covenant or agreement to be
complied with or performed by Sellers
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or the Company pursuant to the terms of this Agreement or the failure of a
condition set forth in Article IX to be satisfied (and such condition is not
waived in writing by Buyer) on or prior to the Closing Date, or the occurrence
of any event which results or would result in the failure of a condition set
forth in Article IX to be satisfied on or prior to the Closing Date, provided
that Buyer may not terminate this Agreement prior to the Closing if Sellers or
the Company have not had an adequate opportunity to cure such failure by such
time; or
13.1.4 By Sellers if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Sellers) on or prior
to the Closing Date, or the occurrence of any event which results or would
result in the failure of a condition set forth in Article VIII to be satisfied
on or prior to the Closing Date; provided that Sellers may not terminate this
Agreement prior to the Closing Date if Buyer has not had an adequate opportunity
to cure such failure by such time.
13.2 In the Event of Termination. In the event of termination of this
Agreement:
13.2.1 Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
13.2.2 No party hereto shall have any liability or further
obligation to any other party to this Agreement, except as stated in Sections
7.5 or this Section 13.2.2, and except for any willful breach of this Agreement
occurring prior to the proper termination of this Agreement. The foregoing
provisions shall not limit or restrict the availability of specific performance
or other injunctive or other equitable relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.
13.3 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all such rights to any lender as collateral security, and Buyer may
assign all such rights and obligations to a wholly-owned subsidiary or
subsidiaries of Buyer (or a partnership controlled by Buyer) which shall assume
all obligations and liabilities of Buyer under this Agreement; provided,
however, that any such assignment is subject to Buyer's execution of a guaranty
of payment of the Purchase Price and of the Holdback Note in form and substance
reasonably acceptable to Buyer and Sellers. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and, except pursuant to
Article XI, no other person shall have any right, benefit or obligation under
this Agreement as a third party beneficiary or otherwise.
13.4 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been
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duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to the Company, addressed to:
Bannister Steel Inc.
3202 Hoover Avenue
National City, CA 91950
with a copy to:
Murray M. Helm, Jr.
Marks & Golia, LLP
3900 Harney Street, First Floor
San Diego, CA. 92110
If to Sellers, addressed to:
Mr. Ted F. Rossin
1515 Willow Bend Drive
El Cajon, CA 92019
with a copy to:
Murray M. Helm, Jr.
Marks & Golia, LLP
3900 Harney Street, First Floor
San Diego, Calif. 92110
If to Buyer, addressed to:
Mr. Scott A. Schuff
President and Chief Executive Officer
Schuff Steel Company
420 South 19th Avenue
Phoenix, Arizona 85009
with a copy to:
Steven D. Pidgeon, Esq.
Snell & Wilmer L.L.P.
One Arizona Center
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<PAGE> 51
Phoenix, Arizona 85004
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
13.5 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
California (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal affairs of any person
(other than a natural person) which is a party to or the subject of this
Agreement, and as to those matters the law of the jurisdiction under which the
respective person derives its powers shall govern.
13.6 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto and the Ancillary Agreements, constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
13.7 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Expenses. Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
13.9 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
13.10 Titles. The titles, captions or headings of the Articles, Sections
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
13.11 Cumulative Remedies. Subject to provisions of Section 13.12, all
rights and remedies of either party hereto are cumulative of each other and of
every other right or remedy such party may
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otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies. Nothing herein shall limit a party's rights to seek
equitable relief, including specific performance or injunctive relief.
13.12 Arbitration. Except as specifically provided herein, any controversy
arising after the Closing out of or relating to this Agreement (excluding for
purposes of this Section 13.12, the Employment Agreements, forms of which are
attached as Exhibits hereto), or relating to the breach hereof, shall be settled
by arbitration conducted in San Francisco, California in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise expressly provided in this Agreement). The award
rendered by the arbitrator(s) shall be final and judgment upon the award
rendered by the arbitrator(s) may be entered upon it in any court having
jurisdiction thereof. The arbitrator(s) shall possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise
allocated by the arbitrator(s). The agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. During the continuance of any
arbitration proceedings, the parties shall continue to perform their respective
obligations under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, where appropriate by
their respective officers or fiduciaries thereunto duly authorized, all as of
the day and year first above written.
(the "Company")
Bannister Steel Inc.
By:
---------------------------------------------
Name: Ted F. Rossin
------------------------------------------
Its: President
------------------------------------------
("Buyer")
Schuff Steel Company
By:
---------------------------------------------
Name:
------------------------------------------
Its:
------------------------------------------
("Seller Representative")
------------------------------------------------
Ted F. Rossin
("Sellers")
------------------------------------------------
Ted F. Rossin, as Co-Trustee U.T.D. 4/22/98
------------------------------------------------
Connie A. Rossin, as Co-Trustee U.T.D. 4/22/98
------------------------------------------------
John N. Achuff, II, as Co-Trustee U.T.D. 6/11/98
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------------------------------------------------
Mary P. Achuff, as Co-Trustee U.T.D. 6/11/98
------------------------------------------------
Arnold Baumgartner
------------------------------------------------
Jeffrey Clinkscales
------------------------------------------------
Kimberly Clinkscales
------------------------------------------------
Ronald Bowers
------------------------------------------------
Tonie L. Bowers
------------------------------------------------
Guadalupe Nunez
------------------------------------------------
Graciela Nunez
52
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MONDAY, OCTOBER 19, 1998
SCHUFF STEEL COMPLETES ACQUISITION OF BANNISTER STEEL, INC.
PHOENIX, Arizona, October 19 -- Schuff Steel Company (Nasdaq: SHUF) announced
today that it has completed the acquisition of Bannister Steel, Inc., a
privately held company headquartered in National City, California. Bannister
provides structural steel fabrication services for industrial and commercial
projects in the Southern California construction market.
The aggregate purchase price was $16.8 million, of which $15.8 million was paid
in cash and the balance by a promissory note payable over the next two years.
The transaction was recorded under the purchase method of accounting.
Bannister recorded revenues of $21.4 million in its most recent fiscal year
ended December 31, 1997, compared with $15.6 million in its fiscal year ended
December 31, 1996, according to its financial statements for those periods.
Schuff Steel anticipates that Bannister's revenues will continue to grow in 1998
and 1999 and that the acquisition will be accretive to 1998 earnings.
"This strategic acquisition of Bannister Steel both strengthens and solidifies
our competitive position in the Southern California market. Historically,
Bannister has been one of the dominant players and preferred fabricators in the
San Diego region," said Scott Schuff, President and CEO of Schuff Steel. "We
view Bannister as an opportunistic acquisition that enhances Schuff Steel's
geographic and market diversity, two key goals of our external growth strategy."
The company reported that key Bannister officials -- Ted Rossin, president; John
Achuff, chief financial officer; Ronald Bowers, shop superintendent; and Jeffrey
Clinkscales, general manager -- have entered into employment agreements and will
continue to manage Bannister's day-to-day operations.
The acquisition of Bannister is Schuff Steel's third major transaction thus far
in 1998. In June, the company acquired Albany, Georgia-based Addison Structural
Services, Inc., for an aggregate purchase price of $59.4 million. Addison
provides structural steel fabrication and erection services and manufactures
short- and long-span joists, trusses, and girders for industrial and commercial
projects. Addison's fabrication facilities in Albany, Georgia and Lockhart,
Florida, and a joist manufacturing plant in Quincy, Florida, have broadened
Schuff Steel's existing operations and opened new market areas. Schuff Steel
retained seasoned management with Addison's operations.
In September, Schuff Steel completed the acquisition of Six Industries, Inc.,
for an aggregate purchase price of $17.9 million. Six and its subsidiary,
Aitken, Inc., offer a wide array of steel fabrication services and other related
products to the oil, gas and petrochemical industries. With the addition of Six
and Aitken, Schuff Steel expects to gain immediate access into profitable
industrial equipment markets, add additional fabrication capacity, and position
itself to better serve Sunbelt and international customers.
Schuff Steel Company is a rapidly growing steel fabrication and erection company
providing a fully integrated range of steel construction services, including
design engineering, detailing, joist manufacturing, fabrication and erection,
and the level of project management expertise necessary to accommodate fast
track, "design-as-you-go" projects. Examples of major projects completed by
Schuff include Bank One Ballpark, a state-of-the-art baseball stadium
<PAGE> 2
featuring a fully retractable roof constructed for Major League Baseball's
Arizona Diamondbacks franchise; Agua Fria Siphon Project, an aqueduct system
with more than two miles of specially fabricated, 21-foot diameter pipe; MGM
Grand Hotel & Casino in Las Vegas, the world's largest hotel and casino; and
Bajo de la Alumbrera in Argentina, one of the largest copper and gold mines in
the world.
The company has multi-state operations primarily focused in the United States
Sunbelt.
For further information regarding Schuff Steel free of charge via fax, dial
1-800-PRO-INFO and enter "SHUF."
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements relating
to the Company's expectations that Bannister's revenues will increase and that
the acquisition will be accretive to 1998 earnings. These forward-looking
statements are based on the Company's expectations and are subject to a number
of risks and uncertainties, some of which cannot be predicted or quantified and
are beyond the Company's control. Future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Factors that could cause actual results to differ
materially from the Company's expectations include the ability of the Company
and Bannister Steel to successfully integrate their operations, which could,
among other factors, affect the combined Company's earnings, the ability of the
Company to effectively manage the geographically dispersed operations of the
Company, including Bannister Steel, and other factors identified in documents
filed by the Company with the Securities and Exchange Commission, including the
Company's Quarterly Reports on Form 10-Q, its Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1998, as amended April
30, 1998, and the Company's Prospectus dated July 21, 1998 relating to the
exchange offer of $100 million in aggregate principal amount of its 10-1/2%
Senior Notes due June 1, 2008. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation or assurance by the
Company that the objectives, plans and expectations of the Company will be
achieved.
