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FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Date of Report (Date of earliest event reported): July 1, 1998
RELIANCE STEEL & ALUMINUM CO.
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(Exact name of registrant as specified in its charter)
California 001-13122 95-1142616
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
2550 East 25th Street
Los Angeles, California 90058
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(Address of principal executive offices)
(213) 582-2272
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(Telephone number)
N/A
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
Effective July 1, 1998, the Registrant acquired all of the outstanding
capital stock of Chatham Steel Corporation, a Georgia corporation, ("Chatham").
Chatham is a metals service center company, with facilities in Savannah,
Georgia; Columbia, South Carolina; Durham, North Carolina; Orlando, Florida;
Jacksonville, Florida and Birmingham, Alabama. Revenues of Chatham for the
fiscal year ended December 31, 1997 were approximately $166 million. The
Registrant paid $68 million in cash, a portion of which will be retained in
escrow, and repaid outstanding debt of Chatham in the amount of approximately
$30.2 million. To pay the purchase price, the Registrant drew down on its
syndicated revolving line of credit with five banks of which Bank of America
N.T. & S.A. is the lead lender.
The purchase price was determined by negotiation with the sellers. The
Registrant intends to operate Chatham as a wholly owned subsidiary of the
Registrant. Chatham will continue to engage in the metals service center
business at the same locations as prior to the acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. No financial
statements are required to be filed under applicable rules.
(b) Pro Forma Financial Information. No pro forma financial
information is required under applicable rules.
(c) Exhibits.
2.1 Stock Purchase Agreement dated June 4, 1998 among the
stockholders of Chatham Steel Corporation and the
Registrant
20.1 Press release dated June 24, 1998
20.2 Press release dated July 7, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
RELIANCE STEEL & ALUMINUM CO.
Dated: July 8, 1998 By:/s/ Steven S. Weis
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Steven S. Weis
Chief Financial Officer
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EXHIBIT INDEX
2.1 Stock Purchase Agreement dated June 4, 1998 among the stockholders of
Chatham Steel Corporation and the Registrant
20.1 Press release dated June 24, 1998
20.2 Press release dated July 7, 1998
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
STOCKHOLDERS OF CHATHAM STEEL CORPORATION
AND
RELIANCE STEEL & ALUMINUM CO.
June 4, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions ........................................................... 1
2. Basic Transaction ..................................................... 4
(a) Purchase and Sale of Chatham Shares ......................... 4
(b) Divested Assets ............................................. 6
(c) Chatham Liabilities ......................................... 6
(d) Divested Liabilities ........................................ 7
(e) Purchase Price .............................................. 7
(f) The Closing ................................................. 8
(g) Title to Chatham Shares, Etc ................................ 9
(h) Seller Representatives ...................................... 9
(i) Tax Election ................................................ 10
3. Representations and Warranties of Sellers ............................. 10
(a) Organization and Qualification of Chatham ................... 10
(b) Noncontravention ............................................ 10
(c) Brokers' Fees ............................................... 11
(d) Title to and Condition of Tangible Assets ................... 11
(e) Subsidiaries ................................................ 11
(f) Financial Statements ........................................ 11
(g) Events Subsequent to Most Recent Fiscal Month End ........... 12
(h) Legal Compliance ............................................ 12
(i) Tax Matters ................................................. 12
(j) Real Property ............................................... 13
(k) Intellectual Property ....................................... 13
(1) Contracts ................................................... 13
(m) Powers of Attorney .......................................... 14
(n) Litigation .................................................. 14
(o) Employee Benefits ........................................... 14
(p) Environmental, Health and Safety Matters .................... 15
(q) Certain Business Relationships with Chatham ................. 16
(r) Employment Matters .......................................... 16
(s) Inventory ................................................... 17
(t) Insurance ................................................... 17
(u) Accounts Receivable ......................................... 17
(v) Disclaimer of other Representations and Warranties .......... 17
4. Representations and Warranties of Buyer ............................... 18
(a) Organization of Buyer ....................................... 18
(b) Authorization of Transaction ................................ 18
(c) Noncontravention ............................................ 19
(d) Brokers' Fees ............................................... 19
5. Pre-Closing Covenants ................................................. 19
(a) General ..................................................... 19
(b) Notices and Consents ........................................ 19
(c) Operation of Business ....................................... 19
(d) Full Access ................................................. 21
(e) Notice of Developments ...................................... 21
6. Conditions to Obligation to Close; Closing ............................ 21
</TABLE>
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<TABLE>
<S> <C>
(a) Conditions to Obligation of Buyer ........................... 21
(b) Conditions to Obligation of Sellers ......................... 22
(c) Deliveries by Buyer ......................................... 23
(d) Deliveries by Sellers ....................................... 24
7. Termination ........................................................... 24
(a) Termination of Agreement .................................... 24
(b) Effect of Termination ....................................... 25
8. Indemnification ....................................................... 25
(a) Sellers ..................................................... 25
(b) Buyer ....................................................... 26
(c) Notice of Claim ............................................. 26
(d) Threshold ................................................... 27
(e) Time to Assert Claim ........................................ 27
(f) Sellers Liability ........................................... 27
9. Miscellaneous ......................................................... 27
(a) Press Releases and Public Announcements ..................... 27
(b) No Third-Party Beneficiaries ................................ 28
(c) Entire Agreement ............................................ 28
(d) Succession and Assignment ................................... 28
(e) Counterparts ................................................ 28
(f) Headings .................................................... 28
(g) Notices ..................................................... 28
(h) Governing Law ............................................... 29
(i) Amendments and Waivers ...................................... 29
(j) Severability ................................................ 29
(k) Expenses .................................................... 29
(1) Construction ................................................ 29
(m) Incorporation of Exhibits, Annexes, and Schedules ........... 29
(n) Standstill .................................................. 30
(o) Confidentiality ............................................. 30
(p) Term ........................................................ 30
(q) Termination of Shareholder Agreement; Amendment to Bylaws ... 30
10. Post-Closing Covenants ............................................... 31
(a) General ..................................................... 31
(b) Litigation Support .......................................... 31
(c) Transition .................................................. 31
(d) Short Year Tax Return ....................................... 31
</TABLE>
Exhibit A-Form of Covenant Not to Compete
Exhibit B-Lease Agreements
Exhibit C-Equipment and Inventory
Exhibit D-Permits
Exhibit E-Prepaid Expenses
Exhibit F-Divested Assets
Exhibit G-Holdback Agreement
Exhibit H-Seller's Legal Opinion
Exhibit I-Buyer's Legal Opinion
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<TABLE>
<S> <C>
Disclosure Schedules
Disclosure Schedule 2(g) Stock Ownership
Disclosure Schedule 3(d) Condition of Tangible Assets
Disclosure Schedule 3(i) Income Tax Returns
Disclosure Schedule 3(j)(i) Real Property - Owned and included in Chatham
Assets
Disclosure Schedule 3(j)(ii) Real Property - Leased/Subleased
Disclosure Schedule 3(k) Intellectual Property
Disclosure Schedule 3(l) Major Contracts
Disclosure Schedule 3(n) Litigation
Disclosure Schedule 3(o)(i) Employee Benefit Plan
Disclosure Schedule 3(p) Environmental Health and Safety Matters
Disclosure Schedule 3(q) Stockholder Officers, Directors and Employees
</TABLE>
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STOCK PURCHASE AGREEMENT
Agreement entered into as of June 4, 1998 by and among Reliance Steel &
Aluminum Co., a California corporation ("Buyer"), and the stockholders of
Chatham Steel Corporation, a Georgia corporation ("Chatham") who have executed
this Agreement by signing a counterpart of this Agreement (collectively
"Sellers"). Buyer and Sellers are referred to collectively herein as the
"Parties."
Sellers in the aggregate own all of the outstanding capital stock of
Chatham.
This Agreement contemplates a transaction in which Buyer will purchase
from Sellers, and Sellers will sell to Buyer, all of the outstanding capital
stock of Chatham in return for cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accounts Receivable" has the meaning set forth in Section 2(a)(vii)
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Agreement" means this Stock Purchase Agreement, including the
Disclosure Schedules and Exhibits hereto.
"Affiliate" has the meaning set forth in Rule l2b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Applicable Rate" means seven percent (7%) per annum.
"Business" means the steel service center business and the manufacture
and assembly of component metal parts for original equipment manufacturers.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
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"Chatham Assets" has the meaning set forth in Section 2(a) below.
"Chatham Share" means any share of the issued and outstanding common
stock of Chatham, par value $25 per share.
"Chatham Liabilities" has the meaning set forth in Section 2(c) below.
"Closing" has the meaning set forth in Section 2(f) below.
"Closing Date" has the meaning set forth in Section 2(f) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of Chatham that is not already generally available to the
public.
"Covenants Not to Compete" means the Agreements between Buyer and the
following Sellers: Arnold M. Tenenbaum, Sheldon U. Tenenbaum, Bert M. Tenenbaum,
Samuel J. Tenenbaum and Ronald A. Kronowitz in the form attached hereto as
Exhibit A.
"Disclosure Schedules" has the meaning set forth in Section 3 below.
"Divested Assets" has the meaning set forth in Section 2(b) below.
"Divested Liabilities" has the meaning set forth in Section 2(d)
hereof.
"Equipment and Inventory" has the meaning set forth in Section 2(a)(i)
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee
Welfare Benefit Plan, or (e) material fringe benefit or other retirement, bonus,
or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(l).
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, and ordinances concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, as such requirements are enacted and in effect on or prior to the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Expense Fund" means an amount estimated by the Seller Representatives
as of the Closing Date to pay the costs and expenses of the Sellers and/or
Chatham incurred in connection with the transactions contemplated by this
Agreement which will not be paid or assumed by Buyer and to pay any purchase
price adjustment pursuant to Section 2(e) below.
"Financial Statements" has the meaning set forth in Section 3(f) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Income Tax" or "Income Taxes" means any federal, state, local, or
foreign income, sales, use, property, withholding or other tax or taxes,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"Intellectual Property Rights" has the meaning set forth in
Section 2(a)(ii) below.
"Knowledge" means actual knowledge without independent investigation.
"Leases" shall mean the lease agreements of Chatham, as lessee,
described on Exhibit B hereto.
"Major Contracts" means all contracts to which Chatham is a party other
than (i) Leases and (ii) contracts entered into in the Ordinary Course of
Business with consideration to be provided or received in an amount of less than
One Hundred Thousand Dollars ($100,000).
"Most Recent Financial Statements" has the meaning set forth in
Section 3(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(f) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of the Business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party or Parties" means a Seller, the Sellers and/or Buyer, as the
context may require.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, a limited liability company, or a governmental entity (or any
department, agency, or political subdivision thereof).
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"Prepaid Expenses" has the meaning set forth Section 2(a)(viii)
below.
"Purchase Price" has the meaning set forth in Section 2(e)(1) below.
"Real Property" has the meaning set forth in Section 2(a)(iv) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than liens for taxes not yet due and
payable.
"Seller" means each holder of any Chatham Share.
"Sellers" means the holder of all of the Chatham Shares.
"Seller Representatives" means Arnold M. Tenenbaum, Samuel J.
Tenenbaum, and Sheldon U. Tenenbaum.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SERP" means Chatham's Supplemental Executive Retirement Plan, dated
April 23, 1998, incorporating the 1983 Gender Neutral Group Annuity Mortality
Tables.
"Trade Payables" has the meaning set forth in Section 2(c)(ii) below.
2. Basic Transaction.
(a) Purchase and Sale of Chatham Shares. On the terms and subject to
the conditions set forth in this Agreement and in reliance on the
representations and warranties of Sellers, at the Closing Buyer shall purchase
from Sellers and Sellers shall sell, assign, transfer and deliver to Buyer, all
of the Chatham Shares, free and clear of any and all liabilities, judgments,
pledges, liens, tax liens, claims, charges, security interests, exceptions or
encumbrances whatsoever. On the Closing Date, Chatham shall own or have the
legal right to use all right, title and interest in and to all of the operating
assets, rights and properties related to or used in the Business, of every
nature, kind and description, tangible and intangible, wherever located, on hand
as of the date of this Agreement (except for the Divested Assets and except for
changes resulting from transactions in the Ordinary Course of Business)
(collectively, the "Chatham Assets"), including, without limitation, those
Chatham Assets specified below:
(i) EQUIPMENT AND INVENTORY. All of Chatham's machinery,
equipment, trucks, automobiles and software and all of Chatham's
inventory of carbon and stainless steel, including structural shapes,
plate, bars, tubing, pipe, sheet and other metal products employed in
the conduct of the Business on the date of this Agreement, as changed
by the conduct of the Business in the Ordinary Course of Business after
the date hereof, including without limitation, those items listed on
Exhibit C hereto (the "Equipment and Inventory").
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(ii) PROPRIETARY RIGHTS IN INTELLECTUAL PROPERTY AND SOFTWARE.
All patents, patent applications (including reissued, divisional and
continuation and part applications) and all U.S. or foreign patents or
patent rights, trademarks, licenses, copyrights, proprietary
information, technology, trade secrets, know-how, inventions, drawings,
technical specifications, and manuals, and all proprietary computer
software, including without limitation, those items specified on
Disclosure Schedule 3(k) (the "Intellectual Property Rights").
(iii) NAME. All rights to the name "Chatham Steel" and all
variations thereon, and all logos, designs, phrases and other
identifications of or relating to the Business and the goodwill
associated therewith, and any and all licenses relating to the use of
any of the foregoing.
(iv) REAL PROPERTY. All of Chatham's Real Property located in
Savannah, Georgia, Jacksonville, Florida, Birmingham, Alabama, Orlando,
Florida, Binghamton, New York, Columbia and Charleston, South Carolina
and Raleigh, North Carolina (the "Real Property") as more fully
described on Disclosure Schedule 3(j)(i), which identifies that Real
Property owned in fee simple and Disclosure Schedule 3(j)(ii), which
identifies that Real Property that is leased.
(v) SUPPLIES; BOOKS AND RECORDS; PERMITS. All office supplies,
customer lists, vendor lists, mailing lists, copies of books, accounts,
correspondence, sales records, personnel records, advertising records,
and price lists of and relating to the Business, wherever the same are
located, and all of Chatham's licenses, permits and other public or
private authorizations related to the Business, to the extent
transferable, including without limitation, the items set forth on
Exhibit D hereto (the "Permits").
(vi) CONTRACT AND CERTAIN OTHER RIGHTS OF CHATHAM. (A) All
purchase or sale orders and other contracts entered into in the
Ordinary Course of Business, whether written or oral, and (B) all Major
Contracts ((A) and (B) together referred to as the "Assumed
Contracts"), except for any Assumed Contracts that are completed or
terminated in the Ordinary Course of Business between the date hereof
and the Closing Date.
(vii) ACCOUNTS RECEIVABLE. All of Chatham's unpaid accounts
receivable at the Closing Date arising out of the Ordinary Course of
Business (the "Accounts Receivable").
(viii) PREPAID EXPENSES. All amounts advanced by Chatham for
goods, insurance coverage or services to be received by Chatham after
the Closing Date (the "Prepaid Expenses") as identified on Exhibit E
hereto.
(ix) CLAIMS. All claims against vendors to Chatham or
customers of Chatham.
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(x) SERP. All of the assets related to the SERP.
(b) Divested Assets. Notwithstanding anything to the contrary contained
herein, the Chatham Assets shall not include any of the assets, property,
contracts or rights described on Exhibit F hereto (the "Divested Assets").
(c) Chatham Liabilities. Except for the Divested Liabilities, the
Parties acknowledge that as of the Closing Date the liabilities and other
obligations of Chatham will consist of such liabilities and obligations of
Chatham, as (i) exist on the Closing Date and either (ii)(A) are reflected on
the Most Recent Financial Statements, or (B) were incurred in the Ordinary
Course of Business and accrued on Chatham's books after the date of the Most
Recent Financial Statements (the "Chatham Liabilities"), including but not
limited to the following:
(i) Chatham's outstanding debt payable on the Closing Date,
and the related rate protection obligations, other than notes payable
to any Seller;
(ii) Chatham's unpaid Ordinary Course of Business trade
accounts payable (the "Trade Payables");
(iii) All accrued liabilities to Chatham employees arising
under Chatham's existing Employee Benefit Plans or by operation of law,
including, without limitation those listed on Disclosure Schedule
Section 3(o)(i);
(iv) Other current liabilities and accrued expenses incurred
in the Ordinary Course of Business;
(v) Payroll taxes, unemployment taxes, and similar charges;
(vi) All sales taxes, use taxes and vehicle transfer costs and
taxes pertaining to the transfer of the Chatham Assets;
(vii) Real or personal property taxes with respect to the
Chatham Assets for 1998;
(viii) All accrued liabilities to the qualified retirement
plans which are Employee Benefit Plans;
(ix) All agreements to purchase or sell inventory made in the
Ordinary Course of Business;
(x) All of Chatham's obligations under the Leases; and
(xi) Chatham's obligations under the Construction Contract
regarding facilities in Orlando, Florida, described in a bid letter
dated October 20, 1997 from Advanced Building Constructors in the
amount of $785,200 as disclosed on Disclosure Schedule 3(l).
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The accrued and unpaid Chatham Liabilities as of the Closing Date shall be
reflected on the Closing Financial Statements.
(d) Divested Liabilities. As of the Closing, Chatham shall not have any
liability or obligation for any of the following liabilities and obligations
(the "Divested Liabilities"):
(i) Any liability, obligation or claim for any fees, costs or
expenses incurred by Chatham in connection with the transactions
contemplated hereby, including, without limitation, attorneys'
accountants' and financial adviser's fees, costs and expenses
regardless of when incurred (collectively, the "Transaction Fees"), it
being understood that Buyer shall pay the fee required in connection
with the filing of a Notice under HSR;
(ii) Any liability for S corporation tax distributions or
other distributions to Sellers; or
(iii) Any liability under Chatham's "phantom stock plan."
(e) Purchase Price.
(i) CONSIDERATION; PURCHASE PRICE. The aggregate purchase
price for the Chatham Shares shall be Sixty-Three Million Dollars
($63,000,000), as adjusted in accordance with Section 2(e)(ii) below
(the "Purchase Price"). At Closing, the Purchase Price less the
Holdback and less the Expense Fund shall be transferred in immediately
available funds to accounts for each Seller pro rata to each Seller
according to such Seller's percentage ownership of Chatham Shares times
such amount. The Holdback shall be transferred in immediately available
funds to the Escrow Agent and the Expense Fund in an amount determined
by the Seller Representatives shall be transferred to an account
designated by the Seller Representatives in immediately available
funds. The Parties agree that within five (5) days following
determination of the final Purchase Price, any adjustment required by
Section 2(b)(ii) below shall be paid together with interest thereon at
the Applicable Rate from the Closing Date until payment thereof.
(ii) CLOSING BALANCE SHEET. It is the intention of the Parties
that as of the Closing Date the book value of the Chatham Assets shall
exceed the Chatham Liabilities by at least $20,488,420 (as reflected on
the Closing Financial Statements) (the "Required Equity"). Accordingly,
the Parties agree that to the extent that the book value of the Chatham
Assets less the Chatham Liabilities (as reflected on the Closing
Financial Statements) (i) exceeds the Required Equity, the amount of
such excess shall be paid by Buyer to Sellers, and (ii) is less than
the Required Equity, then such deficit shall be paid to Buyer by
Sellers, in accordance with Section 2(e)(i) above. For purposes of this
calculation, there shall be no change in the LIFO inventory reserve
after December 31, 1997.
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(iii) CLOSING FINANCIAL STATEMENTS. Sellers agree to engage
Arthur Andersen LLP to audit promptly after the Closing, and to issue
and deliver to the Parties within seventy-five (75) days after Closing,
a balance sheet as of the Closing Date with respect to the Chatham
Assets and Chatham Liabilities as of the Closing Date (the "Closing
Financial Statements"). Such Closing Financial Statements shall be
prepared in accordance with generally accepted accounting principles
applied consistently with the Most Current Financial Statements and
shall be subject to review and approval (or audit) by Buyer's
accountants at Buyer's expense. In the event a dispute arises between
Buyer's accountants and Arthur Andersen LLP which cannot be mutually
resolved within twenty (20) business days after issuance and actual
receipt of the Closing Financial Statements by the Parties, Arthur
Andersen LLP and Buyer's accountants shall promptly select a third firm
of independent certified public accountants to resolve the dispute, and
the determination of such third firm shall be binding on the Parties.
The Parties shall use their best efforts to have this process concluded
as soon as practicable in order that the Closing Financial Statements
may become final and payments made as provided herein. In the event of
a dispute, the Parties shall pay one-half of the cost of the third firm
of independent certified public accountants engaged to resolve the
dispute.
(iv) HOLDBACK. On the Closing Date, Buyer shall deposit in an
escrow account held by an escrow holder reasonably acceptable to
Chatham and Sellers Representatives (the "Escrow Holder"), the sum of
Three Million Dollars ($3,000,000) (the "Holdback"), and the Escrow
Holder shall retain the Holdback subject to the terms and conditions of
a holdback agreement in the form attached hereto as Exhibit G (the
"Holdback Agreement") to be entered into on the Closing Date by
Sellers, Buyer and the Escrow Holder. The Holdback Agreement shall be
mutually satisfactory to the Parties and shall set forth the terms and
conditions pursuant to which the Holdback shall be used to satisfy
Sellers indemnification obligations under Section 8 of this Agreement.
The Holdback Agreement shall provide that any balance of the Holdback
(together with any investment earnings thereon) shall be released to
Sellers on that date which is twelve (12) months from the Closing Date,
subject to any amounts retained for pending claims.
(v) NON-COMPETITION AGREEMENTS; CONSIDERATION. At Closing
Buyer shall pay to each of Arnold M. Tenenbaum, Sheldon U. Tenenbaum,
Bert M. Tenenbaum, Samuel J. Tenenbaum and Ronald A. Kronowitz the
amount of $1,000,000 each in immediately available funds in
consideration for and in connection with the execution by each of them
of their respective Covenants Not to Compete.
(f) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hunton & Williams,
Atlanta, Georgia, commencing at 9:00 a.m. local time on the earlier of the
mid-calendar month business day or last calendar month business day following
the satisfaction or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as the Parties
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may mutually determine (the "Closing Date"); provided, however that the Closing
Date shall be no later than July 31, 1998.
(g) Title to Chatham Shares, Etc. Each of Sellers represents and
warrants to Buyer that the statements contained in this Section 2(g) are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 2(g)) with
respect to himself or itself.
(i) AUTHORIZATION OF TRANSACTION. Seller has full power and
authority to execute and deliver this Agreement and to perform his or
her obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Seller, enforceable in accordance with
its terms and conditions. Seller need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement,
(ii) NONCONTRAVENTION. Subject to compliance with HSR, neither
the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which Seller is a party or by which he or she is bound
or to which any of his or her assets is subject.
(iii) BROKERS' FEES. Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
Buyer could become liable or obligated.
(iv) TITLE TO CHATHAM SHARES. Except as set forth in
Disclosure Schedule Section 2(g), Seller holds of record and owns
beneficially the number of Chatham Shares set forth next to his or her
name in Disclosure Schedule Section 2(g), free and clear of any
restrictions on transfer (other than restrictions under federal and
state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require Seller to sell, transfer, or
otherwise dispose of any capital stock of Chatham (other than this
Agreement). Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital
stock of Chatham.
(h) Sellers Representatives. Each of Sellers hereby irrevocably
designates and appoints Sellers Representatives as the agents and
attorneys-in-fact of such Seller to act, agree or consent for such Seller as and
to the extent that such Seller would otherwise be able or required
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to act, agree or consent under Sections 2(e), 6(b), 7, 8 or 9(i) of this
Agreement. Sellers Representatives may act by the written consent of a majority
of Sellers Representatives and Buyer and Escrow Agent shall be entitled to rely
upon the written consent of the majority of Sellers Representatives as the
binding action, agreement or consent of all of Sellers.
(i) Tax Election. Buyer shall have access to all necessary information
to determine whether or not to make an election under Section 338(h)(10) of the
Code. If Buyer determines that such an election would be beneficial to Buyer,
Sellers shall make such an election; provided that, if the election is more
detrimental to Sellers than it is beneficial to Buyer, no party shall be
required to make the election. To the extent that Sellers are required to pay
Taxes in excess of the amount of Taxes that would be due if the election under
Section 338(h)(10) of the Code had not been made ("Excess Taxes"), Buyer shall
reimburse Sellers for such Excess Taxes or shall adjust the Purchase Price by an
amount equal to the Excess Taxes, plus an additional amount equal to the Taxes
imposed on Sellers that are attributable to their receipt of payments under this
Section 2(i). In the event, subsequent to the Closing, a final determination is
made as a result of an audit or otherwise that additional Excess Taxes must be
paid by Sellers, Buyer shall reimburse Sellers for such additional Excess Taxes
by an amount equal to such additional Excess Taxes, plus an additional amount
equal to the Taxes imposed on Sellers that are attributable to their receipt of
such additional payments under this Section 2(i).
3. Representations and Warranties of Sellers. Sellers represent and
warrant to Buyer that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3), except as
set forth in the Disclosure Schedules accompanying this Agreement (the
"Disclosure Schedules"). The Disclosure Schedules will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
3.
(a) Organization and Qualification of Chatham. Chatham is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Georgia. Chatham is qualified to transact business and is in good
standing in Alabama, California, Florida, North Carolina, South Carolina,
Virginia and all other states in which the failure to so qualify has had or is
reasonably likely to have a material adverse effect on Chatham's Business or
financial condition. Chatham does not own, lease or operate Real Property,
maintain an office of employees or otherwise transact business in any state
other than Georgia, Alabama, California, Florida, New York, North Carolina, and
South Carolina. Chatham regularly makes sales of products into the states of
Mississippi and Tennessee and periodically sells into other jurisdictions in
which it is not qualified to transact business.
(b) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Chatham is subject or any provision of
the articles of incorporation or bylaws of Chatham or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify,
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or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Chatham is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the financial condition of Chatham or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
Except as required under HSR, Chatham does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(c) Brokers' Fees. Chatham has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated. Sellers will cause Chatham to pay the fees due First Union Capital
Markets at the Closing.
(d) Title to and Condition of Tangible Assets. Chatham has good and
marketable title to, or a valid leasehold interest in, the tangible assets it
uses in the conduct of the Business. The buildings, plants, structures,
equipment, and other tangible assets and properties of Chatham are sufficient
for the continued conduct of Chatham's Business after the Closing in
substantially the same manner as conducted prior to the Closing, except for
ordinary routine maintenance and repairs and obsolescence. To the Knowledge of
Sellers, and except as disclosed in Disclosure Schedule 3(d), each of the
buildings, plants, structures, equipment and other tangible assets and property
(whether real or personal) of Chatham that are currently used in and are
material to the Business are structurally sound, are in good operating condition
and repair and are adequate for the uses for which they are currently being put,
and none of such buildings, plants, structures, equipment or other tangible
assets and properties that is material to the Business is in need of maintenance
or repair, except for ordinary maintenance and repair that is not material in
cost.
(e) Subsidiaries. Chatham has no Subsidiaries.
(f) Financial Statements. Prior to the date of this Agreement, Sellers
have provided to Buyer copies of the following financial statements
(collectively the "Financial Statements"): (i) audited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1995, December 31, 1996, and
December 31, 1997 for Chatham; and (ii) unaudited consolidated balance sheets
and statements of income, changes in stockholders' equity, and cash flow (the
"Most Recent Financial Statements") as of and for the four months ended April
30, 1998 (the "Most Recent Fiscal Month End") for Chatham. The Financial
Statements (including the notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
present fairly the financial condition of Chatham as of such dates and the
results of operations of Chatham for such periods; provided, however, that the
Most Recent Financial Statements are subject to normal year-end adjustments and
lack footnotes and other presentation items.
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(g) Events Subsequent to Most Recent Fiscal Month End. Since the Most
Recent Financial Statements, there has not been any material adverse change in
the financial condition of Chatham. Without limiting the generality of the
foregoing, since that date, Chatham has not engaged in any practice, taken any
action, or entered into any transaction outside the Ordinary Course of Business
the primary purpose or effect of which has been to generate or preserve Cash.
(h) Legal Compliance. Chatham has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), except where the failure to comply would
not have a material adverse effect upon the financial condition of Chatham.
(i) Tax Matters
(i) Prior to the date of this Agreement, Sellers have provided
to Buyer access to all Income Tax Returns filed by Chatham for periods
ended on or after December 31, 1995. Chatham has filed all Income Tax
Returns that it was required to file, and has paid all Income Taxes
shown thereon as owing, except where the failure to file Income Tax
Returns or to pay Income Taxes would not have a material adverse effect
on the financial condition of Chatham.
(ii) Disclosure Schedule 3(i) lists all Income Tax Returns
filed with respect to Chatham for taxable periods ended on or after
December 31, 1995, that have been audited, and indicates those Income
Tax Returns that currently are the subject of audit. Chatham has
delivered to Buyer correct and complete copies of all federal Income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by Chatham filed or received since
December 31, 1995.
(iii) Chatham has not waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with respect
to an Income Tax assessment or deficiency.
(iv) Chatham is not a party to any Income Tax allocation or
sharing agreement.
(v) Chatham has not been a member of an Affiliated Group
filing a consolidated federal Income Tax Return.
(j) Real Property
(i) Disclosure Schedule 3(j)(i) lists all Real Property that
Chatham owns and is included in the Chatham Assets. With respect to
each such parcel of owned Real Property, and except for matters shown
on Disclosure Schedule 3(j)(i):
(A)Chatham has good and marketable title to the
parcel of Real Property, free and clear of any liens,
encumbrances, security interests,
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easements, covenants, conditions, restrictions or other
exceptions to title other than liens for taxes not yet due and
payable or installments or special assessments not yet due and
payable and recorded easements, covenants and other
restrictions shown on the preliminary title report provided by
Chatham to Buyer which do not have a material adverse affect
on the use of the Real Property;
(B) there are no leases, subleases, licenses,
concessions, or other agreements granting to any party or
parties the right of use or occupancy of any portion of the
parcel of Real Property; and
(C) except as disclosed in Disclosure Schedule
3(j)(ii), there are no outstanding options or rights of first
refusal to purchase the parcel of Real Property, or any
portion thereof or interest therein.
(ii) Disclosure Schedule 3(j)(ii) lists all Real Property
leased or subleased to Chatham. Chatham has delivered to Buyer correct
and complete copies of the Leases listed in Disclosure Schedule
3(j)(ii) (as amended to date). Each Lease listed in Disclosure Schedule
3(j)(ii) is legal, valid, binding, enforceable, and in full force and
effect, except where the illegality, invalidity, nonbinding nature,
unenforceability, or ineffectiveness would not have a material adverse
effect on the financial condition of Chatham.
(k) Intellectual Property. Disclosure Schedule 3(k) identifies each
patent or registration which has been issued to Chatham with respect to any of
its intellectual property, identifies each pending patent application or
application for registration which Chatham has made with respect to any of its
intellectual property, and identifies each license, agreement, or other
permission which Chatham has granted to any third party with respect to any of
its intellectual property.
(l) Contracts. Disclosure Schedule 3(l) lists all Major Contracts.
Except for the Major Contracts identified in Disclosure Schedule 3(l), Chatham
is not a party to or subject to any Major Contract related to the Business or
the Chatham Assets, or to any (i) personal property lease; (ii) contract with
any consultant or employee; (iii) instrument creating any Security Interest or
evidencing or relating to indebtedness for borrowed money; (iv) contract
containing covenants not to enter into or consummate the transactions
contemplated hereby; (v) contract restricting Chatham's ability to compete in
any geographic region or in any line of business; (vi) confidentiality or
similar agreement, pursuant to which Chatham or any employee thereof is
restricted from using or disclosing any information; (vii) franchise,
manufacturer's representative, distributorship or similar agreement, or (viii)
any other contract, agreement or obligation not of the type covered by any of
the other specific items of this Section 3(l) not entered into in the Ordinary
Course of Business. Each of the Major Contracts is valid and in full force and
effect, and a true and complete copy thereof has been or will have been
delivered to Buyer prior to Closing. With respect to all Major Contracts,
Chatham, and to the Knowledge of Sellers, each other party thereto have in all
material respects performed all of the obligations required to be performed by
them to date, have received no notice of default and are not in default, in any
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material respect (with due notice or lapse of time or both), under any Major
Contract now in effect to which Chatham is a party or by which its property may
be bound.
(m) Powers of Attorney. There arc no outstanding powers of attorney
executed on behalf of Chatham.
(n) Litigation. Disclosure Schedule 3(n) sets forth each instance in
which Chatham (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction. To
the Knowledge of Sellers, other than as set forth in Disclosure Schedule 3(n),
there are no actions, suits, proceedings, hearings or investigations threatened
by any Party.
(o) Employee Benefits.
(i) Disclosure Schedule 3(o)(i) lists each Employee Benefit
Plan that Chatham maintains or to which Chatham contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or other funding vehicle) complies
in form and in operation in all respects with the applicable
requirements of ERISA and the Code, except where the failure
to comply would not have a material adverse effect on the
financial condition of Chatham. Chatham has made all payments
and contributions (including employee salary reduction
contributions) due and payable to each Employee Benefit Plan
through the date of this Agreement.
(B) Each such Employee Benefit Plan which is a
qualified retirement plan has received a determination letter
from the Internal Revenue Service to the effect that it meets
the requirements of Code Section 401(a).
(C) For each Employee Benefit Plan, Chatham has
delivered to Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other
funding agreements.
(ii) With respect to each Employee Benefit Plan that Chatham
maintains or has maintained during the prior six years, or to which it
has contributed or has been required to contribute during the prior six
years:
(A) No action, suit, proceeding, hearing, or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending, or, to
the Knowledge of Sellers, threatened.
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(B) Chatham has not incurred any liability to the
PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal liability) with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(p) Environmental, Health and Safety Matters. Except as described in
Disclosure Schedule 3(p):
(i) Chatham is in compliance with Environmental, Health and
Safety Requirements, except for such noncompliance as would not have a
material adverse effect on the financial condition of Chatham.
(ii) Chatham has not received any written notice, report or
other information regarding any actual or alleged material violation of
Environmental, Health and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to Chatham
or its facilities arising under Environmental, Health and Safety
Requirements, the subject of which would have a material adverse effect
on the financial condition of Chatham.
(iii) Neither Chatham nor, to Sellers' Knowledge, any other
Person, has spilled, released, used, stored, leaked, generated,
transported or disposed of any hazardous substances on, under or from
the Real Property that has not been removed, cleaned-up or contained or
otherwise used in accordance with applicable Environmental, Health and
Safety Requirements. To the Knowledge of Sellers, no hazardous
substances are present on the Real Property and nothing on the Real
Property poses a hazardous environmental condition that would
materially and adversely affect the use of the Real Property or that
Environmental, Health and Safety Requirements would require to be
removed, cleaned-up or otherwise remediated. Chatham has provided, or
within ten (10) days hereafter shall provide, to Buyer a complete copy
of any environmental report, audit or survey prepared with respect to
the Real Property that is in its possession. Chatham has obtained all
permits and authorizations that are required by any Environmental,
Health and Safety Requirement for Chatham in the operation of its
Business as currently being conducted and for the current use,
occupancy or condition of any of the Real Property, which are listed in
Disclosure Schedule 3(i).
(iv) To the Knowledge of Sellers, there are no underground
storage tanks (whether or not excluded from regulation under any
Environmental, Health and Safety Requirement) on any of the Real
Property, including, but not limited to, any and all underground
storage tanks that are in use, abandoned, out of service, closed or
decommissioned. To the Knowledge of Sellers, no wastes, including, but
not limited to, garbage and refuse, have been disposed of on any of the
Real Property by Chatham or any other Person. To the Knowledge of
Sellers, and except as disclosed in Disclosure Schedule 3(p), all
wastes generated by Chatham are and have been
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properly transported off site and disposed of in compliance with all
applicable Environmental, Health and Safety Requirements. To the
Knowledge of Sellers, Chatham has not arranged for the disposal or
treatment of any hazardous substance at, and has not transported or
arranged for transportation on behalf of itself or any other Person of
any Hazardous Substance to, any facility, site or property listed or
proposed for listing on the National Priority List or the Comprehensive
Environmental Response, Compensation and Liability Information System
list compiled by the Environmental Protection Agency or, to the
Knowledge of Sellers, on any similar or comparable list compiled or
maintained by any state or local governmental authority. No portion of
any of the Real Property is listed on the National Priority List, the
Comprehensive Environmental Response, Compensation and Liability
Information System list or, to the Knowledge of Sellers, on any similar
list compiled or maintained by any state or local governmental
authority. Chatham has disclosed and made available to Buyer true,
complete and correct copies or results of any and all records, reports,
studies, analyses, tests and monitoring in the possession of or
initiated by Chatham pertaining to the existence of any hazardous
substance in, on, under or affecting Chatham or the Real Property.
(v) This Section 3(p) contains the sole and exclusive
representations and warranties of Sellers with respect to any
environmental, health, or safety matters, including without limitation
any arising under any Environmental, Health and Safety Requirements.
(q) Certain Business Relationships with Chatham. None of Sellers or
their Affiliates has been involved in any material business arrangement or
relationship with Chatham within the past 12 months, and none of Sellers and
their Affiliates owns any material asset, tangible or intangible, which is used
in the business of Chatham, except that certain of Sellers are officers,
directors and/or employees of Chatham as disclosed in Disclosure Schedule 3(q)
and Chatham leases a facility located in Columbia, S.C. from certain Sellers as
disclosed on Disclosure Schedule 3(j)(ii). Except as disclosed in Disclosure
Schedule 3(q), there are no loans or indebtedness from Chatham to any Seller or
any of their affiliates or from any Seller or any of their affiliates to
Chatham.
(r) Employment Matters. Chatham has reasonably good relationships with
its employees and has not had and does not expect any substantial labor
problems. To the Knowledge of Sellers, no employee or any consultant of Chatham
is a party to or is in violation of any term of any employment contract,
confidentiality and non-disclosure agreement or any other contract or agreement
prohibiting or restricting any such employee from being employed by, or such
consultant from consulting with, Chatham, and the continued employment by
Chatham of its present employees and consultants will not result in any such
violations. Chatham is not a party to and is not other-wise bound by any
contract, agreement or collective bargaining agreement with any labor union or
organization. Chatham has complied in all material respects with all applicable
laws relating to the employment of labor, including the provisions thereof
relating to wages, hours, collective bargaining and the payment of taxes, and to
the Knowledge of Sellers is not liable for any arrears of wages or any tax or
any penalty for failure to comply with any of the foregoing. No labor dispute,
strike, work stoppage, employee
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action or labor relations problems of any kind which has affected or may affect
Chatham has occurred, is currently pending or, to the Knowledge of Sellers, is
threatened which could have a material adverse effect on Chatham.
(s) Inventory. All inventory of Chatham reflected in the Most Recent
Financial Statements consists of a quality and quantity usable and salable in
the Ordinary Course of Business. The Most Recent Financial Statements fairly
state the value of the inventory priced at the lower of cost or market on a last
in, first out basis. The inventory does not include a material amount of
obsolete or defective goods or excess stock items (assuming the continuation of
operations as currently conducted).
(t) Insurance. To the Knowledge of Sellers, Chatham maintains all
such general liability, product liability, fire, casualty and workers'
compensation insurance as required by law, and other insurance as is necessary
to adequately insure and protect the property and assets of Chatham. To the
Knowledge of Sellers, all such insurance policies continue to be in full force
and effect, and Chatham is in material compliance with all requirements and
provisions thereof. True and correct copies of all insurance policies relating
to such coverage have been made available by Chatham for Buyer. No notice of
cancellation has been given to or received by Chatham with respect to any of its
insurance policies, and no such policies are subject to any retroactive rate or
audit adjustments or coinsurance arrangements. Chatham has no reason to believe
that any such insurance coverage will not be renewed upon expiration thereof at
premiums substantially equivalent to those currently being paid by Chatham.
(u) Accounts Receivable. The Accounts Receivable arose in the
Ordinary Course of Business, represent charges for goods or services actually
provided and are not subject to any credits or offsets other than in the
Ordinary Course of Business. To the Knowledge of Sellers, the Accounts
Receivable are collectable within a reasonable period of time, subject to the
reserve for bad debt shown on the Most Recent Financial Statements.
(v) Disclaimer of other Representations and Warranties. Sellers
have no Knowledge of any material fact regarding the Chatham Assets, the Chatham
Liabilities or the current vendors and customers of Chatham which has not been
disclosed in this Agreement (including the Exhibits and Disclosure Schedules
hereto) in the documents referred to in the Disclosure Schedules or Exhibits
hereto or in the Confidential Information Memorandum dated Spring 1998 provided
to Buyer. Except as expressly set forth in this Section 3 or in Section 2(g),
Sellers make no representation or warranty, express or implied, at law or in
equity, in respect of any of its assets (including, without limitation, the
Chatham Assets), liabilities or operations, including, without limitation, with
respect to merchantability or fitness for any particular purpose, and any such
other representations or warranties are hereby expressly disclaimed.
(w) Outstanding Capital Stock. Chatham is authorized to issue 10,000
shares of common stock, $25 per share par value, of which 9585.667 shares,
constituting the Shares, are as of the date of this Agreement and will be on the
Closing Date issued and outstanding. Disclosure Schedule 2(g) lists the names
and addresses of all stockholders of Chatham showing the number of shares held
of record by each such person. No other class of capital stock of Chatham is
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authorized or outstanding. All of the Shares are duly authorized, validly
issued, fully paid and nonassessable.
(x) Options. Warrants and Other Rights. There are, and on the
Closing Date there shall be, no authorized, issued or outstanding options,
warrants, convertible securities, subscriptions or other agreements or rights of
any nature (other than pursuant to this Agreement) under which Chatham may be
obligated to issue or transfer any shares of capital stock of Chatham).
(y) S Corporation Election and Status. Except for the states of
California, Georgia and New York, (i) Sellers have made and filed all requisite
federal and state election or consent forms to validly make Chatham an "S
Corporation" under Section 1361 of the Internal Revenue Code and the appropriate
counterparts under applicable state law, (ii) Chatham is, and for all periods
since its taxable year beginning June 1, 1987, has been an "S Corporation" and
will be a validly electing "S Corporation" up to and including the Closing Date,
(iii) Sellers have for all periods reported their allocable portion of all items
of income, loss and other tax attribute of Chatham on their personal federal and
state income tax returns as required by applicable law.
4. Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the Disclosure Schedules. The Disclosure Schedules will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of California.
(b) Authorization of Transaction. Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions.
(c) Noncontravention. Except for the filing of the notification and
report form required under the Hart-Scott-Rodino Anti-Trust Improvements Act and
the early termination or expiration of the applicable waiting period, neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Buyer is
subject or any provision of its charter or bylaws or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Buyer is a party or by which it is bound or to which
any of its assets is subject. Buyer does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or
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approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Chatham could become
liable or obligated.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 6 below).
(b) Notices and Consents. Sellers will cause Chatham to give any
notices to third parties, and cause Chatham to use its reasonable best efforts
to obtain any third party consents, that Buyer reasonably may request in
connection with the matters referred to in Section 3(c) above. Each of the
Parties will (or, in the case of Sellers, cause Chatham to) give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(c) and Section 4(c)
above. Without limiting the generality of the foregoing, each of the Parties
will (or, in the case of Sellers, cause Chatham to) file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, and will make any further
filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith,
(c) Operation of Business. Following the execution of this Agreement
and prior to the Closing Date, Sellers will cause Chatham to operate the
Business, incur Trade Payables and collect Accounts Receivable only in
accordance with the Ordinary Course of Business and further not to enter into
any contract or commitment, increase any expenditures, waive any rights or enter
into any other transaction affecting the Business other than in the Ordinary
Course of Business; provided that Chatham's material contract bids and any
expenditures, to the extent either is outside the Ordinary Course of Business,
will be subject to review and approval of Buyer. Sellers will cause Chatham to
use its best efforts to preserve the goodwill of Chatham's employees, suppliers,
customers and others having business relations therewith.
Between the date of this Agreement and the Closing Date, Sellers agree
that Chatham shall not, except as otherwise contemplated by this Agreement or
except in the Ordinary Course of Business:
(i) Sell, lease, license, transfer or otherwise
dispose of, or agree or commit to sell, lease, license, transfer
or otherwise dispose of, any of its fixed assets;
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(ii) Create, incur, assume, guarantee or allow to
exist, or agree, commit or obligate itself to create, incur,
assume, guarantee or allow to exist, any long-term debt other
than any long-term debt reflected in the balance sheet of
Chatham contained in the Most Recent Financial Statements;
(iii) Create, assume or allow to exist any lien,
encumbrance, security interest, claim or obligation on its
capital stock or any of its Real Property or other assets;
(iv) Increase, or agree to increase the compensation
payable or to become payable to any of its directors, officers,
employees, agents or consultants or pay bonuses or make other
payments or distributions of any kind to any such Person (other
than increases in the compensation of employees who are not
Sellers or increases in fees of third-party consultants if such
increases are made in the Ordinary Course of Business);
(v) Create, make, change or adopt any Employee
Benefit Plan or similar plan or arrangement to or for the
benefit of its directors, officers, employees, agents or
consultants;
(vi) Enter into, make, change or commit itself to
enter into, make or change any agreement or arrangement with any
Person, including, but not limited to, any employment agreement
or arrangement, with any of its directors, officers, employees,
agents or consultants, other than agreements with suppliers,
manufacturers, vendors, or customers in Chatham's Ordinary
Course of Business and; or
(vii) Enter into, make, commit itself to enter into or
agree to any covenant not to compete, non-competition agreement,
exclusive sales or distribution agreement or arrangement,
payment of commissions on sales other than sales made by
Chatham's existing sales representatives or similar arrangements
limiting or prohibiting Chatham's sales of products, sales to or
purchases from any customers or vendors or sales in any market.
(d) Full Access. Sellers will cause Chatham to permit
representatives of Buyer to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of Chatham to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Chatham.
(e) Notice of Developments.
(i) Sellers Representatives shall, within ten
business days, notify Buyer of any development causing a breach
of any of its representations and warranties in Section 3 above.
Unless Buyer has the right to terminate this Agreement pursuant
to Section 7(a)(ii) below by reason of the development and
exercises that right within the period of 1O business days
referred to in Section 7(a)(ii) below, the written notice
pursuant
20
<PAGE> 25
to this Section 5(e)(i) will be deemed to have amended the
Disclosure Schedules and to have qualified the representations
and warranties contained in Section 3 above.
(ii) Each Party will give prompt written notice to
the other Party of any material adverse development causing a
breach of any of its own representations and warranties in
Section 3 and Section 4 above. No disclosure by any Party
pursuant to this Section 5(e)(ii), however, shall be deemed to
amend or supplement the Disclosure Schedules or to prevent or
cure any misrepresentation or breach of warranty.
6. Conditions to Obligation to Close; Closing.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 2(g) and Section 3 above shall be true and correct in
all material respects at and as of the Closing Date;
(ii) Sellers shall have performed and complied with
all of its covenants hereunder in all material respects through
the Closing;
(iii) there shall not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing or
materially affecting consummation of any of the transactions
contemplated by this Agreement;
(iv) Sellers shall have delivered to Buyer a
certificate from the chief executive officer and chief financial
officer of Chatham to the effect that each of the conditions
specified above in Section 6(a)(i)-(iii) is satisfied in all
respects;
(v) all applicable waiting periods (and any
extensions thereof) under HSR shall have expired or otherwise
been terminated and Chatham and Buyer shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(c) and Section
4(c) above;
(vi) Buyer shall have received from counsel to
Sellers an opinion in form and substance as set forth in Exhibit
H attached hereto, addressed to Buyer, and dated as of the
Closing Date;
(vii) Buyer and Arnold M. Tenenbaum, Sheldon U.
Tenenbaum, Bert M. Tenenbaum, Samuel J. Tenenbaum and Ronald A.
Kronowitz shall have entered into the Covenants Not to Compete
and the same shall be in full force and effect;
(viii) Buyer shall have completed its review of the
environmental matters on Disclosure Schedule 3(p) and shall not
have notified Sellers in writing that such matters are
unacceptable to Buyer; and
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<PAGE> 26
(ix) all actions to be taken by Chatham in connection
with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Buyer.
Buyer may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of Sellers
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement;
(iv) Buyer shall have delivered to Chatham a
certificate to the effect that each of the conditions specified
above in Section 6(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under HSR shall have expired or otherwise
been terminated and Chatham and Buyer shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(c) and Section
4(c) above;
(vi) Sellers shall have received from counsel to
Buyer an opinion in form and substance as set forth in Exhibit I
attached hereto, addressed to Sellers, and dated as of the
Closing Date; and
(vii) all actions to be taken by Buyer in connection
with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Sellers
Representatives.
Sellers Representatives may waive any condition specified in this Section 6(b),
except for the HSR condition specified in Section 6(b)(v), if it executes a
writing so stating at or prior to the Closing.
(c) Deliveries by Buyer. At the Closing, Buyer shall deliver or
cause to be delivered to Sellers, or to such other person or persons as required
by this Agreement, the following:
(i) The Purchase Price in the manner provided under
Section 2(e)(i) hereof,
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<PAGE> 27
(ii) Certificate of the Secretary of Buyer showing
the signatures of those officers of Buyer authorized to sign
this Agreement and other agreements and instruments provided for
herein on behalf of Buyer and certifying that said signatures
are the signatures of said authorized officers;
(iii) Restated Articles of Incorporation of Buyer
certified by the Secretary of State of California and By-Laws of
Buyer certified by the Secretary of Buyer as being true and
complete;
(iv) Copy of the resolutions adopted by the directors
of Buyer, certified by the Secretary of Buyer as having been
duly and validly adopted and as being in full force and effect
on the date hereof, authorizing the execution and delivery by
Buyer of this Agreement and other agreements and instruments
executed and delivered by Buyer as provided for herein, and the
performance by Buyer of the transactions contemplated hereby and
thereby;
(v) Certificate, dated as of the Closing Date,
executed by a duly authorized officer of Buyer, certifying that
(i) all of the representations and warranties made by Buyer
under this Agreement and the Disclosure Schedules hereto and
under all other documents given or delivered by Buyer pursuant
hereto are accurate, true and complete, and (ii) all of the
covenants, obligations and conditions to be performed as of the
Closing Date on Buyer's part have been duly performed;
(vi) Certificate of Good Standing of Buyer or any
subsidiary nominated by Buyer issued as of a date recently
preceding the Closing Date; and
(vii) All other documents reasonably necessary or
appropriate to effectuate the purchase and sale of the Chatham
Shares at the Closing.
(d) Deliveries by Sellers At the Closing, Sellers shall deliver or
cause to be delivered to Buyer (unless previously delivered) the following:
(i) Articles of Incorporation of Chatham certified
by the Secretary of State of Georgia and By-Laws of Chatham
certified by the Secretary of Chatham as being true and
complete;
(ii) Certificate, dated as of the Closing Date,
executed by the chief executive officer and chief financial
officer of Chatham, certifying that (i) all of the
representations and warranties made by Sellers in Section 2(g)
or Section 3 of this Agreement and the Disclosure Schedules
hereto are accurate, true and complete in all material respects,
and (ii) all of the covenants, obligations and conditions to be
performed as of the Closing Date on Chatham's part have been
duly performed;
(iii) Certificates of Good Standing of Chatham issued
by the Secretary of State of Georgia, and any other state in
which Chatham is qualified to do business, as of a date within
five (5) days of the Closing Date;
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<PAGE> 28
(iv) Opinion of Hunton & Williams, substantially in
the form of Exhibit H hereto;
(v) Covenants Not to Compete substantially in the
form of Exhibit A hereto duly executed and delivered by Arnold
M. Tenenbaum, Sheldon U. Tenenbaum. Bert M. Tenenbaum, Samuel J.
Tenenbaum and Ronald A. Kronowitz;
(vi) Share certificates representing all of the
Chatham Shares duly endorsed for transfer or the share
certificates and assignments separate from the share certificate
duly endorsed for transfer;
(vii) The Holdback Agreement duly executed and
delivered by each of the Sellers;
(viii) All other documents reasonably necessary or
appropriate to effectuate the purchase and sale of the Chatham
Shares at the Closing; and
(ix) Resignations of the officers and directors of
Chatham effective the Closing Date.
7. Termination.
(a) Termination of Agreement. Sellers Representatives and Buyer may
terminate this Agreement as provided below:
(i) Buyer and Sellers Representatives may terminate
this Agreement by mutual written consent at any time prior to
the Closing;
(ii) Buyer may terminate this Agreement by giving
written notice to Seller Representatives at any time prior to
the Closing in the event (A) Seller Representatives have within
the then previous 10 business days given Buyer any notice
pursuant to Section 5(e)(i) above and (B) the development that
is the subject of the notice has had or reasonably could have a
material adverse effect upon the financial condition of Chatham.
(iii) Buyer may terminate this Agreement by giving
written notice to Sellers Representatives at any time prior to
the Closing (A) in the event that any material representation,
warranty or covenant made by Sellers in this Agreement is
inaccurate or has been breached, Buyer has notified Sellers
Representatives of the inaccuracy or breach, and such inaccuracy
or breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the Closing shall not have
occurred on or before July 31, 1998 by reason of the failure of
any condition precedent under Section 6(a) hereof (unless the
failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
24
<PAGE> 29
(iv) Sellers Representatives may terminate this
Agreement by giving written notice to Buyer at any time prior to
the Closing (A) in the event Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Sellers Representatives have
notified Buyer of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach
or (B) if the Closing shall not have occurred on or before July
31, 1998 by reason of the failure of any condition precedent
under Section 6(b) hereof (unless the failure results primarily
from Sellers themselves breaching any representation, warranty,
or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 9(o) above shall survive
termination.
8. Indemnification.
(a) Sellers.
(i) Indemnity. Sellers shall defend and indemnify
Buyer and hold Buyer wholly harmless from and against any and
all losses, liabilities, damages, costs (including, without
limitation, court costs) and expenses (including, without
limitation, reasonable attorneys' fees) (collectively "Losses")
which Buyer incurs as a result of, or with respect to, any
inaccuracy in or breach of any representation, warranty,
covenant or agreement of Sellers contained in this Agreement.
(ii) Claims. In the event that Buyer shall receive
written notice of any claim or proceeding that, if successful,
might result in a claim under this Section 8 by Buyer, Buyer
shall give Sellers Representatives written notice of such claim
or proceeding and shall permit Sellers Representatives to
participate in the defense of such claim or proceeding by
counsel selected by Sellers Representatives (and reasonably
acceptable to Buyer) and at the expense of Sellers. In addition,
upon written notice to Buyer, Sellers Representatives may assume
the defense of any such claim or proceeding. Sellers shall not
be liable for any settlement of any such claim effected without
Sellers Representatives' prior written consent, which shall not
be unreasonably withheld. Whether or not Sellers Representatives
chooses to assume the defense of any such claim or proceeding,
Sellers Representatives and Buyer shall cooperate in the defense
or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith. Sellers shall be
subrogated to all rights and remedies of Buyer in respect of any
and all losses, liabilities, damages, costs and expenses
suffered by Buyer.
(b) Buyer.
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<PAGE> 30
(i) INDEMNITY. Buyer shall defend and indemnify
Sellers and hold Sellers wholly harmless from and against any
and all Losses. (including court costs) and expenses (including,
without limitation, reasonable attorneys' fees) which Sellers
incur as a result of, or with respect to, any inaccuracy in or
breach of any representation, warranty, covenant or agreement by
or on behalf of Buyer contained in this Agreement.
(ii) CLAIMS. In the event that Sellers shall receive
written notice of any claim or proceeding that, if successful,
might result in a claim under this Section 8 by Sellers, Seller
Representatives shall give Buyer written notice of such claim or
proceeding and shall permit Buyer to participate in the defense
of such claim or proceeding by counsel selected by Buyer and at
the expense of Buyer. In addition, upon written notice to
Sellers Representatives, Buyer may assume the defense of any
such claim or proceeding. Buyer shall not be liable for any
settlement of any such claim effected without its prior written
consent. Whether or not Buyer chooses to assume the defense of
any such claim or proceeding, Sellers Representatives and Buyer
shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested in connection therewith,
Buyer shall be subrogated to all rights and remedies of Sellers
in respect of any and all losses, liabilities, damages, costs
and expenses suffered by Sellers.
(c) Notice of Claim. Buyer or Sellers (with Sellers Representatives
acting on behalf of Sellers), as the case may be (the "Indemnified Party"),
shall promptly notify the other (the "Indemnifying Party") in writing of any
claim for indemnification hereunder, specifying in reasonable detail the basis
of such claim, the facts pertaining thereto, and if known, the amount, or an
estimate of the amount, of the liability arising therefrom. The Indemnified
party shall provide to the Indemnifying Party, as promptly as practicable
thereafter, information and documentation reasonably requested by the
Indemnifying Party to support and verify the claim asserted.
(d) Threshold. The Indemnifying Party shall have no obligation to
indemnify the Indemnified Party under this Section 8 with respect to Losses
until the aggregate amount of any loss, liability, damage, cost or expense
exceeds Two Hundred Fifty Thousand Dollars ($250,000), and then the Indemnifying
Party shall be obligated to indemnify the Indemnified Party for the entire
aggregate amount of such loss, liability, damage, cost or expense.
(e) Time to Assert Claim. Any claim for indemnification under
Section 8(a) or Section 8(b) hereof shall be asserted by written notice to the
Indemnifying Party on or before the date which is twelve (12) months from the
Closing Date (the "Indemnity Deadline"). Any matters as to which a claim has
been asserted under Section 8(a) or Section 8(b) on or before the Indemnity
Deadline, and which are pending or unresolved as of the Indemnity Deadline,
shall continue to be covered by such Section until finally terminated or
resolved. Notwithstanding the provisions of this Section 8(e), a claim based
upon a breach of the representations and warranties set forth in Section
2(g)(iv) (Title to Chatham
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<PAGE> 31
Shares) and Section 3(i) (Tax Matters) shall survive and may be asserted until
the applicable statute of limitations with respect to such claim has expired.
(f) Sellers Liability. Notwithstanding anything in this Agreement to
the contrary, the personal liability of each Seller with respect to any claim by
Buyer under this Agreement shall be limited to the amount of such Seller's
percentage ownership interest in Chatham Shares times Three Million Dollars
($3,000,000). Accordingly, Buyer's sole recourse to recover any Losses from
Sellers shall be limited solely to funds held by the Escrow Holder pursuant to
the Holdback Agreement. Notwithstanding the provisions of this Section 8(f),
each Seller agrees that in the event such Seller shall breach the
representations and warranties set forth in Section 2(g)(iv) with respect to
such Seller's title to such Seller's Chatham Shares, Buyer shall not be limited
to recover Losses against such Seller pursuant to this Section 8(f).
9. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
Buyer and Sellers Representatives; provided, however, that any Party may make
any public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they have related in any way to the
subject matter hereof
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and Sellers Representatives; provided, however, that
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE> 32
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<TABLE>
<S> <C> <C> <C>
If to Sellers: Arnold M. Tenenbaum Copy to: John B. Miller, Jr.
President and CEO Hunton & Williams
Chatham Steel Corporation 4100 NationsBank Plaza
Post Office Box 2567 600 Peachtree Street
Savannah. Georgia 31498 Atlanta, Georgia 30308
If to Buyer: Reliance Steel & Aluminum Co. Copy to: Arter & Hadden LLP
2550 E. 25h Street 700 S. Flower Street
Los Angeles, CA 90058 Suite 3000
Attention: David H. Hannah, President Los Angeles, CA 90017
Attention: Kay Rustand
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Georgia without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Georgia or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Georgia,
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Sellers Representatives and Buyer. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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<PAGE> 33
(k) Expenses. Buyer and Sellers will each bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits and Disclosure Schedules. The Exhibits
and Disclosure Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof
(n) Standstill. Chatham and Sellers shall immediately suspend any
existing discussions or negotiations with any Person other than Buyer regarding
the possibility sale of the outstanding capital stock or substantially all of
the assets of Chatham and shall not enter into or entertain any negotiations or
otherwise discuss with such Person the possible sale of the outstanding capital
stock or substantially all of the assets of Chatham to any other Person. Without
limiting the foregoing, so long as this Agreement is in effect, neither Chatham
nor Sellers shall, directly or indirectly, solicit or engage in discussions or
negotiations with or provide any information to or otherwise cooperate with any
other Person seeking to acquire or expressing an interest in acquiring any of
the shares or any of the assets (other than inventory in the ordinary course of
Chatham's Business consistent with past practices) or Business of Chatham or for
the purpose of otherwise effecting a transaction inconsistent with the
transactions contemplated by this Agreement. Sellers shall cause Chatham to
comply with this Section 9(n).
(o) Confidentiality. Sellers, Chatham and Buyer may receive
confidential information of one or more of the other Parties. Each Party agrees
not to disclose any of that confidential information to any other person, other
than the Party's accountants, attorneys, investment bankers, lenders, officers,
directors, and employees with a need to know such information in connection with
this Agreement and the transactions contemplated hereby, and shall maintain as
confidential information all such information so received. Without limiting the
foregoing, no Party shall disclose the existence or details of the negotiation
of the definitive agreements, the transaction, the terms and conditions of this
Agreement or any information or data relating to the business, operations,
assets, financial conditions, prospects, customers, vendors, policies and
procedures or other information of any other Party unless such information is
otherwise publicly available or the nondisclosing Party consents in writing to
such disclosure. The confidential information shall be used solely for purposes
of this transaction. Sellers shall cause Chatham to comply with this Section
9(o).
(p) Term. After the Closing Date or earlier termination of this
Agreement, Sellers, Chatham and Buyer and their representatives, agents and
employees will continue to hold in strict confidence any documents, data or
information obtained from another party in accordance
29
<PAGE> 34
with the terms of this Agreement. If the transactions provided for herein are
not consummated for any reason, the party receiving such documents, data or
information shall return it upon request to the Person providing it, shall
continue to hold in strict confidence all such documents, data and information
and shall not use any such documents, data or information. This obligation and
covenant shall survive the termination of this Agreement. Sellers shall cause
Chatham to comply with this Section 9(p).
(q) Termination of Shareholder Agreement: Amendment to Bylaws. Each
Seller agrees that effective at the Closing, the Amended and Restated
Shareholder Agreement, dated as of February 10, 1989, among each Seller and
Chatham shall be terminated and the Bylaws of Chatham shall be amended by
deleting therefrom Article Eight Share Transfer Restrictions in its entirety and
that the transactions contemplated by this Agreement shall not violate such
Shareholder Agreement or Bylaw provision.
10. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Chatham, each Party shall cooperate with it and
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest, all at the sole cost and
expense of the contesting or defending Party.
(c) Transition. None of Chatham or Sellers will take any action that
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of Chatham from maintaining the
same business relationships with Buyer after the Closing as it maintained with
Chatham prior to the Closing. Sellers shall cause Chatham to comply with this
Section 10(c).
(d) Short Year Tax Return. Buyer shall cause Arthur Andersen LLP to
prepare and file S Corporation short year tax returns for Chatham for the period
ending on the Closing Date and provide copies thereof to the Sellers
Representatives.
*****
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<PAGE> 35
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
RELIANCE STEEL & ALUMINUM CO.
By:/s/ David H. Hannah
--------------------------------------
David H. Hannah
President
By:/s/ Yvette Schiotis
--------------------------------------
Yvette Schiotis
Secretary
SELLERS:
/s/ Davida M. Deutsch
-----------------------------------------
Davida M. Deutsch
/s/ Barbara M. Hacken
-----------------------------------------
Barbara M. Hacken
/s/ Lawrence M. Hacken
-----------------------------------------
Lawrence M. Hacken
/s/ Lisa Jane Hacken
-----------------------------------------
Lisa Jane Hacken
/s/ Carla L. Hacken
-----------------------------------------
Carla L. Hacken
/s/ Marsha Faye Kessler
-----------------------------------------
Marsha Faye Kessler
/s/ Marsha Faye Kessler /s/ Gena Ann Kessler
- ------------------------------------ -----------------------------------------
Marsha Faye Kessler, Custodian Gena Ann Kessler
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<PAGE> 36
/s/ Marsha Faye Kessler /s/ Lawrence J. Kessler
- ------------------------------------ -----------------------------------------
Marsha Faye Kessler, Custodian Lawrence J. Kessler
/s/ Ronald A. Kronowitz
-----------------------------------------
Ronald A. Kronowitz
/s/ Bailee T. Kronowitz
-----------------------------------------
Bailee T. Kronowitz
/s/ B. Lowell Kronowitz
-----------------------------------------
B. Lowell Kronowitz
/s/ Rachel S. Kronowitz
-----------------------------------------
Rachel S. Kronowitz
/s/ Arnold M. Tenenbaum
-----------------------------------------
Arnold M. Tenenbaum
/s/ Lorlee S. Tenenbaum /s/ Alison C. Tenenbaum
- ------------------------------------ -----------------------------------------
Lorlee S. Tenenbaum, Custodian Alison C. Tenenbaum
/s/ Brian M. Tenenbaum
-----------------------------------------
Brian M. Tenenbaum
/s/ Lorlee S. Tenenbaum
-----------------------------------------
Lorlee S. Tenenbaum
/s/ Margot R. Tenenbaum
-----------------------------------------
Margot R. Tenenbaum
/s/ Ann G. Tenenbaum
-----------------------------------------
Ann G. Tenenbaum
32
<PAGE> 37
/s/ Karen T. Gale
--------------------------------------
Karen T. Gale
/s/ Karen T. Gale
--------------------------------------
Karen T. Gale, as Natural and Legal
Guardian of the Person and Property
and Custodian for Megan Gale
/s/ Samuel J. Tenenbaum
--------------------------------------
Samuel J. Tenenbaum
/s/ Ralph Tenenbaum
--------------------------------------
Ralph Tenenbaum
/s/ Sheldon U. Tenenbaum
--------------------------------------
Sheldon U. Tenenbaum
/s/ Sheldon U. Tenenbaum /s/ Jessica L. Tenenbaum
- --------------------------------------- --------------------------------------
Sheldon U. Tenenbaum, Custodian Jessica L. Tenenbaum
/s/ Bert M. Tenenbaum
--------------------------------------
Bert M. Tenenbaum
/s/ Bert M. Tenenbaum /s/ Jordan A. Tenenbaum
- --------------------------------------- --------------------------------------
Bert M. Tenenbaum, As Natural and Legal Jordan A. Tenenbaum
Guardian of the Person and Property and
Custodian for Jordan A. Tenenbaum
/s/ Bert M. Tenenbaum /s/ Jonathan B. Tenenbaum
- --------------------------------------- --------------------------------------
Bert M. Tenenbaum, As Natural and Legal Jonathan B. Tenenbaum
Guardian of the Person and Property and
Custodian for Jonathan B. Tenenbaum
33
<PAGE> 1
EXHIBIT 20.1
[RELIANCE STEEL & ALUMINUM CO. LETTERHEAD] NEWS RELEASE
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE CONTACT: David H. Hannah
President
(213) 582-2272
Kim P. Feazle
Hill and Knowlton, Inc.
(713) 752-1927
RELIANCE STEEL & ALUMINUM CO. ANNOUNCES
ACQUISITION OF CHATHAM STEEL CORPORATION
Los Angeles, CA -- June 24, 1998 -- Reliance Steel & Aluminum Co.
(NYSE:RS) announced today that it has reached an agreement to acquire Chatham
Steel Corporation, a privately-held metals service center company headquartered
in Savannah, Georgia. The transaction is subject to completion of due diligence
procedures and regulatory approval and is expected to be completed within
approximately 30 days. The agreement calls for Reliance to purchase 100% of the
stock of Chatham Steel Corporation and for current management to remain in
place to operate the business as a wholly-owned subsidiary of Reliance.
Chatham, founded in 1915, has facilities in Savannah, GA; Columbia, SC;
Durham, NC; Orlando, FL; Jacksonville, FL; and Birmingham, AL. The company's
revenues for the year ended December 31, 1997 were approximately $166 million.
(more)
<PAGE> 2
2-2-2
Chatham's products include mainly carbon steel structurals, plate, pipe
and tube, bars, sheet and coil and some stainless steel, and its metals
processing capabilities involve primarily sawing, shearing, leveling, slitting
and pattern burning.
"Our expansion in the Southeast area of the United States will be
strategically strengthened with our acquisition of Chatham," said David H.
Hannah, president of Reliance Steel & Aluminum Co. "We expect Chatham's
strength in the market and their reputation for quality and service to fit
nicely with our existing businesses in the Southeast."
Arnold Tenenbaum, president of Chatham Steel Corporation stated, "We are
excited about the prospect of becoming a member of the Reliance "team." Our
future growth potential in the marketplace will be greatly enhanced as a result
of this acquisition."
When completed, this transaction will represent Reliance's seventh
acquisition over the past 16 months, and the Company's third acquisition in
1998. During the first quarter of 1998, Reliance completed the acquisitions of
Phoenix Corporation and Durrett Sheppard Steel Co., Inc.
Reliance Steel & Aluminum Co., headquartered in Los Angeles, California,
is one of the largest metals service center companies in the United States.
Through a network of 56 processing and distribution centers (including American
Steel, L.L.C.) in 20 states, the Company provides value-added metals processing
services and distributes a full line of over 60,000 metal products. These
products include galvanized, hot-rolled and cold-finished steel; stainless
steel; aluminum; brass; copper and alloy steel to more than 40,000 customers in
various industries.
# # #
<PAGE> 1
EXHIBIT 20.2
[RELIANCE STEEL & ALUMINUM CO. LETTERHEAD]
RELIANCE STEEL & ALUMINUM CO. COMPLETES
ACQUISITION OF CHATHAM STEEL CORP.
LOS ANGELES--July 7, 1998--Reliance Steel & Aluminum Co. (NYSE:RS) Tuesday
announced that it has completed the previously announced acquisition of Chatham
Steel Corp., a privately held metals service-center company with headquarters in
Savannah, Ga., for $68 million in cash.
Chathman will operate as a wholly owned subsidiary of Reliance under its
current management team, led by Arnold Tenenbaum, president.
Chatham has facilities in Columbia, S.C.; Durham, N.C.; Orlando, Fla.;
Jacksonville, Fla.; and Birmingham, Ala., as well as Savannah. The company's
products include primarily carbon-steel structurals, plate, pipe and tube,
bars, sheet and coil and some stainless steel. Chatham reported revenues of
approximately $166 million for the fiscal year ended Dec. 31, 1997.
"Chatham is an excellent example of our continued emphasis on profitable
growth through selective, accretive acquisitions," said David H. Hannah,
president of Reliance Steel & Aluminum Co.
"We look forward to combining our resources with Reliance, which will
enable us to continue to offer our customers the high-quality services that
both Chatham and Reliance are known for," said Tenenbaum.
Reliance Steel & Aluminum Co., with headquarters in Los Angeles, is one of
the largest metals service-center companies in the United States.
Through a network of 62 processing and distribution centers (including
American Steel LLC) in 20 states, the company provides value-added
metals-processing services and distributes a full line of more than 60,000
metal products. These products include galvanized, hot-rolled and cold-finished
steel; stainless steel; aluminum; brass; copper; and alloy steel to more than
40,000 customers in various industries.
--30--
CONTACT: Reliance Steel & Aluminum Co., Los Angeles
David H. Hannah, 213/582-2272
or
Hill and Knowlton Inc.
Kim P. Feazle, 713/752-1927
