<PAGE> SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 23, 1999
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-28238 54-1521616
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(State or other (Commission file number) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
22570 Markey Court, Dulles, Virginia 20166-6901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 444-7931
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OF ASSETS
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On April 23, 1999, Guardian Technologies International, Inc. (the
"Company") consummated the acquisition of a material interest in Structural
Holdings, Inc., a Delaware corporation ("Structural").
The acquisition involved the purchase of approximately 45% of the
total issued and outstanding shares of Common Stock of Structural in
consideration of aggregate cash payments in the amount of $765,000. In
addition, the Company purchased $96,000 of convertible debt of Structural,
convertible into an additional 5.7% of outstanding shares. Structural was
formed and organized for the sole purpose of serving as an intermediary to
acquire H & M Steel, Inc., an Oklahoma corporation ("H & M"). Structural
acquired 100% of the issued and outstanding shares of Common Stock of H & M
in a transaction which was also consummated on April 23, 1999.
The total consideration paid for H & M was $4,500,000 plus net working
capital retained by the sellers,, paid as follows: the sum of $1,700,000
was contributed by Structural in cash at closing; the sum of $2,650,000
was provided by Finova Capital Corporation ("Finova") through a credit
facility extended to Structural, and the balance was financed by the
Seller. The Finova credit facility includes a term loan for acquisition
purposes and also includes a $2,350,000 revolving line of credit.
The other equity investor in Structural was TAIM Investment Company,
Inc. ("TAIM"). TAIM contributed, in the aggregate, $935,000 in
consideration of shares of Common Stock representing the other 55% of the
outstanding Common Stock of Structural. The Board of Directors of
Structural consists of five persons, two designated by the Company, two
designated by TAIM and one designated by the Company with the consent of
TAIM. The executive officers of Structural are David R. Payne, President,
George N. Keaney, Vice President, and Rainey Williams, Secretary/Treasurer.
There are no agreements between or among the shareholders of Structural
with respect to future constituency of its Board of Directors or persons
who will serve as executive officers. As a result, as a majority
shareholder, the Company will control the election of the Board of
Directors of Structural which, in turn, will control the appointment of its
executive officers.
Post closing, the Company intends to convert the debt and increase its
equity investment in Structural by an additional $74,000 which, when
combined with its prior investment of $765,000, will give the Company
ownership of Common Stock of Structural representing 55% of the total
issued and outstanding shares of equity securities of that company.
H & M is engaged in the business of structural steel fabrication.
Through its control of Structural, the Company plans to maintain the
operations of H & M consistent with prior practices.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) Financial Statements
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Pursuant to Item 7(a)(4), the Registrant declares that it is
impracticable to provide the required audited financial statements relative
to the acquired business at the time of this Report. Such audited
financial statements required by Item 7(a) shall be filed not later than
sixty (60) days after the filing of this Current Report on Form 8-K.
(b) Pro Forma Financial Information
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Pursuant to Item 7(b) and Item 7(a)(4), the Registrant declares
it is impracticable to provide the required pro forma financial information
relative to the acquired business at the time of this Report. Such pro
forma financial information required by Item 7(b) shall be filed not later
than sixty (60) days after the filing of this Current Report on Form 8-K.
(c) Exhibits
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Item Title
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1.1 Stock Purchase Agreement between Structural Holdings, Inc.
and H & M Steel Company dated as of April 23, 1999
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Date: May 13, 1999 By: /s/ J. Andrew Moorer
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J. Andrew Moorer, President
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STOCK PURCHASE AND SALE AGREEMENT
This Stock Purchase and Sale Agreement (this "Agreement") is made and
entered into as of the 5th day of April, 1999, by and between John T. Madden
and Patty L. Madden (collectively, "Sellers") and Structural Holdings, Inc.,
and its successors or assigns ("Buyer"), with reference to the following:
(a) Sellers own all of the issued and outstanding capital stock of
H&M Steel, Inc., an Oklahoma corporation (the "Company"), consisting of 50
shares of $1.00 par value common stock (the "Shares"); and
(b) Sellers desire to sell and Buyer desires to purchase all of the
Shares upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the respective
covenants herein contained, Sellers and Buyers agree as follows:
1. SALE AND PURCHASE OF SHARES. At the Closing, upon the terms and
subject to the conditions hereinafter set forth, Sellers shall sell, assign
and deliver to Buyer and Buyer shall purchase and accept from Sellers the
Shares.
2. PURCHASE PRICE. The purchase price to be paid by Buyer to Sellers
for the Shares shall be Three Million Nine Hundred Eleven Thousand and No/100
Dollars ($3,911,000.00), subject to adjustment as provided hereinafter.
3. MANNER OF PAYMENT. At the Closing, Buyer shall pay $3,261,000.00
plus interest at the rate of 6% per annum from March 1, 1999 through the
Closing Date to Sellers by delivering immediately available funds by wire
transfer (in accordance with written instructions delivered to Buyer by
Sellers not less than two (2) days before the Closing). In addition, Buyer
shall execute a secured promissory note, guaranteed by the Company, in the
principal amount of $650,000.00 payable to the order of the Sellers, accruing
interest at six percent (6%) effective March 1, 1999 in the form attached
hereto as Exhibit 3.1 (the "Note") and Exhibit 3.5 (the "Guaranty"). The
Guaranty shall be secured pursuant to the terms of a Security Agreement in the
form attached hereto as Exhibit 3.2 and a Mortgage in the form attached hereto
as Exhibit 3.3. Contemporaneous with the execution of this Agreement, Buyer
and Sellers shall each deliver $250,000 in readily available United States
funds to be held in trust by their respective attorneys pursuant to the terms
of the Escrow Instructions attached hereto as Exhibit 3.4.
4. CLOSING.
4.1 PLACE AND DATE. Subject to the conditions contained in this
Agreement, the closing (the "Closing") of the transactions contemplated by
this Agreement shall be held at Hartzog Conger & Cason, 1600 Bank of Oklahoma
Plaza, Oklahoma City, Oklahoma, or such other location as Buyer and Sellers
may mutually agree, at 10:00 a.m. local time on or before April 15, 1999 (the
"Closing Date"), to be effective March 1, 1999 (the "Effective Date").
4.2 EXPENSES. Each of the parties shall pay its respective
attorneys', accountants' and other consultants' fees and expenses incidental
to this transaction.
4.3 SELLERS' DELIVERIES. At the Closing, Sellers shall deliver to
Buyer: (a) the stock certificate(s) representing the Shares, endorsed in favor
of Buyer or accompanied by executed stock powers; (b) the resignations of all
officers and directors of the Company; (c) the Certificate described in
Section 8.1; (d) the opinion described in Section 8.2; (e) the Consulting
Agreement, in the form attached hereto as Exhibit 7.6, duly executed by
Sellers; and (f) the Agreement to Convey Real Estate, in the form attached
hereto as Exhibit 7.7, duly executed by Sellers.
4.4 BUYER'S DELIVERIES. At the Closing, the Buyer shall deliver
to Sellers: (a) the purchase price in the manner specified in Section 3; (b)
the Secured Promissory Note in the form attached hereto as Exhibit 3.1; (c)
the Security Agreement in the form attached hereto as Exhibit 3.2; (d) the
Mortgage in the form attached hereto as Exhibit 3.3; (e) the Guaranty in the
form attached as Exhibit 3.5; (f) the Certificate described in Section 7.1;
(g) the opinion described in Section 7.2; (h) the Consulting Agreement, in the
form attached hereto as Exhibit 7.6, duly executed by Buyer; and (i) the
Agreement to Convey Real Estate, in the form attached hereto as Exhibit 7.7,
duly executed by Buyer.
4.5 PUBLICITY: DISCLOSURE TO THIRD PARTIES. Neither party to this
Agreement shall disclose or make any press releases, notices or public
announcements of the transactions contemplated by this Agreement prior to
Closing without the prior written consent of the other party, unless required
to make such disclosure or announcement by law, in which event the party
making the disclosure or announcement shall notify the other party at least
twenty-four (24) hours before such disclosure or announcement is expected to
be made. Sellers shall cause the Company to comply with Sellers' obligations
under this section.
4.6 TITLE INSURANCE COMMITMENT. At the Closing, Sellers shall
furnish to Buyer a preliminary commitment ("Commitment") for issuance by
American Guaranty Title Company (the "Title Company") of an ALTA Form B-1970
Owner's Title Insurance Policy (the "Policy"), in the amount of $730,000,
which shall show the Company to be owner of fee simple marketable title to the
land and building located at 18505 E. Highway 66, Luther, Oklahoma (the
"Luther Property") in accordance with the Title Examination Standards of the
Oklahoma Bar Association, free and clear of all liens and encumbrances. The
Commitment shall show the status of the title to the Luther Property, together
with all exceptions, including easements, restrictions, rights-of-way,
covenants, reservations, and other conditions, if any, affecting the Luther
Property. Sellers shall transfer ownership of the abstract to the Luther
Property and any surveys to the Company at the Closing. All abstracting costs
shall be paid by Sellers and all title premiums shall be paid one-half by
Sellers and one-half by Buyer.
4.7 SURVEY. At the Closing, Sellers shall deliver to Buyer a
current survey of the Luther Property certified by a registered professional
engineer or licensed land surveyor conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, showing no encroachments of the building
and improvements across boundary lines or easement lines and showing the
location of all easements identified by book and page of recording. The
survey shall show all improvements, including water, gas, electric and sewer
lines. adjacent streets and other physical matters affecting title and use.
The Survey shall disclose any survey defect or encroachment from or onto the
Luther Property which has not been cured or insured over prior to the Closing.
All survey costs shall be paid one-half by Sellers and one-half by Buyer.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each of the Sellers
jointly and severally represents and warrants to Buyer that the statements
contained in this Section 5 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 5).
5.1 SELLER'S AUTHORITY. Each 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 each Seller, enforceable in accordance with its terms
and conditions, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
Sellers 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.
5.2 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
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 the Company is subject 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 the
Company is a party or by which it is bound or to which any of the Company's
assets is subject.
5.3 BROKERS' FEES. Neither the Company nor the Sellers have any
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 the Buyer could become liable or obligated, except as set forth in
Section 13.
5.4 ORGANIZATION. Qualification and Corporate Power. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Oklahoma. The Company has full corporate power and
authority necessary to carry on the business in which it is engaged and in
which it presently proposes to engage and to own or use the properties owned
and used by it. The Company is qualified or licensed to conduct its business
as a foreign corporation in all jurisdictions in which the nature of its
business or the properties owned and used by it. The Company is qualified or
licensed to conduct its business as a foreign corporation in all jurisdictions
in which the nature of its business, each of which is listed on Schedule 5.4.
The Company has no Subsidiaries and does not own a direct or indirect equity
interest in any corporation, partnership, joint venture, business association
or other entity.
5.5 TITLE TO SHARES. Sellers have good title to the Shares, of
record and beneficially, free and clear of all liens, claims, encumbrances
and restrictions (other than generally applicable restrictions imposed by
state or federal securities laws) of every kind.
5.6 AUTHORITY. The Company has all requisite right, power and
authority to own, lease and operate its properties and to carry on its
business as presently being conducted. All corporate action necessary for
such execution, delivery and performance by Sellers has been duly and validly
taken. This Agreement is a valid and legally binding obligation of Sellers
enforceable against Sellers in accordance with its terms.
5.7 CAPITALIZATION. The authorized capital stock and other
securities of the Company, and the issued and outstanding shares of capital
stock and other securities of the Company are set forth on Schedule 5.7. All
of such issued and outstanding shares of capital stock and other securities
listed on Schedule 5.7 have been duly authorized and validly issued, are fully
paid and nonassessable and are owned of record and beneficially by Sellers.
The Company has no treasury stock. The Company has no other authorized series
or class of capital stock or any other securities of any kind. There are no
outstanding subscriptions, options, contracts, commitments, warrants, calls,
agreements, understandings or other arrangements or rights of any character
affecting or relating in any manner to the issuance of capital stock or other
securities of the Company (whether by subscription, option, exchange, right of
conversion, right of refusal or otherwise) or entitling anyone to acquire
shares of the capital stock of the Company or other securities of any kind of
the Company. The Company is not a party to any voting agreement, proxy or
restriction which affects the voting rights of any of the shares of the
capital stock of the Company.
5.8 FINANCIAL STATEMENTS. Copies of the unaudited (reviewed)
balance sheets of the Company as of February 28, 1995, February 29, 1996,
February 28, 1997, and February 28, 1999, and the related unaudited (reviewed)
income statements for the twelve (12) month periods ended February 28, 1995,
February 29, 1996, February 28, 1997 and February 28, 1999, in each case,
together with schedules of sales by product and sales by customer for each
period, which have been delivered previously to Buyer by Sellers: (a) are
accurate and complete statements of the financial condition of the Company and
fairly present the financial condition of the Company at such dates and the
results of its operations for the periods therein specified; and (b) with
respect to all material contracts and commitments of the Company, reflect
adequate reserves for all reasonably anticipated losses and costs in excess of
anticipated income. Specifically, but not by way of limitation, each balance
sheet discloses all debts, liabilities and obligations of the Company at the
respective balance sheet date, of any nature, whether accrued, absolute, or,
to the knowledge of Sellers, contingent or otherwise and whether currently
payable or to become payable, and includes adequate reserves for all taxes and
other liabilities accrued or due at such dates or to become due but not yet
payable. Since February 28, 1999, the Company has conducted its business only
in the ordinary course and there has been no change in the condition
(financial or otherwise) of the assets, liabilities or operations of the
Company other than changes in the ordinary course of business. Schedule 5.8
contains an accurate and complete list of all accounts and notes receivable
and accounts and notes payable as of February 28, 1999, in each case, showing
amounts due in thirty (30) day aging categories. The physical inventory count
and pricing conducted by Company as of the Effective Date, to be delivered by
Sellers to Buyer at the Closing, shall be accurate and complete in all
material respects. As of the Effective Date: (a) the current assets of the
Company will be equal to or greater that the current liabilities of the
Company; (b) the book value of the non-current assets of the Company will be
equal to or greater than the book value of the non-current assets as of
February 28, 1998 (after appropriate adjustments to reflect the permitted
distributions described on Schedules 5.11(d), 5.11(e) and 5.11(f); and (c )
the Company will have no non-current liabilities.
5.9 BORROWED MONIES. The Company has not incurred any indebtedness
for borrowed monies which is outstanding and the Company is not in default in
any respect under, and is not otherwise in violation re contravention of, any
of the terms and provisions of any agreement for the repayment of borrowed
monies. Copies of all notes and other documents and instruments evidencing or
relating to indebtedness for borrowed monies by the Company have been
delivered previously by Sellers to Buyer and are listed on Schedule 5.9.
5.10 NO UNDISCLOSED LIABILITIES. Except as and to the extent
reflected and adequately reserved against the balance sheet as of December 31,
1998, as of said date the Company had no liabilities or obligations (whether
accrued, absolute or contingent), including without limitation, any
liabilities resulting from failure to comply with any law or any federal,
state or local tax liabilities due or to become due whether: (a) incurred in
respect of or measured by income for any period prior to the close of business
on such date; or (b) arising out of transactions entered into, or any state of
facts existing, prior thereto.
5.11 ABSENCE OF CERTAIN CHANGES. Events or Conditions. Except as
set forth in Schedule 5.11, since February 28, 1998, the Company has not, and
prior to Closing will not have, other than in the ordinary course on a basis
consistent with past practice, (a) conducted its business in a manner
substantially different from the business as conducted prior to February 28,
1998; (b) failed to pay any of its creditors within the time agreed unless the
existence or amount of indebtedness is being contested in good faith; (c)
suffered any labor dispute or material adverse change in its financial
position, results of operations, assets, liabilities, net worth or business;
(d) except as disclosed on Schedule 5.11(d), declared or, directly or
indirectly, paid any dividends or made any other distributions or payments of
any kind with respect to any shares of its capital stock; (e) except as
disclosed on Schedule 5.11(e), made any salary or bonus payments to any
officer, employee or agent at rates exceeding the respective rates of salary
and bonus paid to such officer, employee or agent which were in effect as of
February 28, 1998, except periodic bonuses or increases occurring in the
ordinary course of business consistent with the Company's past practices; (i)
except as disclosed on Schedule 5.11(f) purchased, redeemed, sold or issued
any shares of its capital stock or other securities of any nature or any
rights, options or warrants related thereto; (g) changed or amended its
charter documents or Bylaws; (h) discharged, satisfied, or paid, in whole or
in part, any obligation or liability (contingent or absolute), except in the
ordinary course of business; (i) paid for or agreed to pay for, or otherwise
incurred, any expense with respect to any properties or services which were
delivered or rendered to, or for the benefit of, any person, firm or
corporation, other than the Company; (j) suffered any damage, destruction or
loss, whether or not covered by insurance, having a material adverse effect
upon its properties or business; (k) suffered any termination (except by its
own terms) of any agreement or commitment to which it is a party or by which
it is bound, or canceled, modified or waived any material debts or claims held
by it or waived any rights against any third party; (1) entered into any
contract, commitment or transaction which is not in the ordinary course of its
business; (m) failed to keep its properties and assets insured with adequate
liability and property damage, fire and other casualty coverage; (n)
mortgaged, pledged, assigned or encumbered any of its properties or assets;
(o) sold or otherwise disposed of any asset owned by the Company at the close
of business on February 28, 1998, or acquired by it since that date; or (p)
made any expenditure or commitment for the acquisition of properties or assets
of any kind.
Because the salary and bonus compensation paid to Sellers during
fiscal year ending February 28, 1999 was accrued and paid while the parties
hereto were subject to a letter of intent, and were negotiating and completing
due diligence related to the Agreement, Buyer and Sellers collectively agreed
upon the amount to be paid to Sellers as compensation for services. Buyer
agrees that the amount paid to Sellers as compensation during the fiscal year
ending February 28, 1999 was reasonable in light of all relevant facts and
circumstances; provided, however, that Buyer's agreement to the payment of
such compensation to Sellers shall in no way be deemed to have waived Sellers'
obligation to indemnify Buyer for pre-closing tax liabilities of the Company
under Sections 5.12 and 10 of this Agreement.
5.12 TAX RETURNS AND AUDITS. The Company has: (a) timely filed, for
all fiscal periods ended on or before the date of this Agreement, in
accordance with applicable laws all foreign, federal, state, county, local and
other tax returns required to be filed by it and each such return is accurate
and complete; (b) paid all taxes, assessments and similar charges shown to be
due and payable on each such return; (c) paid all assessments received by the
Company, to the extent such taxes and assessments have become due; and (d)
accrued or created reserves for, on its books, records and financial
statements, all taxes due or to become due by it for all periods ending
before, on or with the date of this Agreement, including, without limitation,
any accumulated earnings tax imposed pursuant to Sections 531-537 of the
Internal Revenue Code of 1986, as amended (the "Code"). The federal income tax
liability of the Company has not been examined by the Internal Revenue
Service. The state income tax liability of the Company for any taxable year
has not been examined by the applicable state agency. The federal and state
income tax liabilities of the Company have been satisfied for all fiscal years
prior to and including the fiscal year ended February 28, 1999. The Company
has not been delinquent in the payment of any tax, assessment or governmental
charge. Except as disclosed on Schedule 5.12, the Company has had no tax
deficiency proposed or assessed against it and the Company has not executed
any waiver of the statute of limitations on the assessment or collection of
any tax. Copies of the federal and state income tax returns of the Company,
including, without limitation, detailed tax depreciation schedules and all
adjustments and amendments to such returns, for each of the three (3) years
ended February 28, 1998, which have been delivered previously to Buyer by
Sellers are accurate and complete and are consistent with the Company's
financial statements (to the extent permissible) for each such period. There
is no tax allocation or sharing agreement in existence to which the Company is
a party. The Company has made no election with respect to its federal income
tax returns except for those indicated in the copies of the tax returns
delivered previously by Sellers to Buyer. The Company has withheld or
otherwise collected all taxes or amounts it is required to withhold or collect
under any applicable foreign, federal, state, county or local law, including,
without limitation, any amounts required to be withheld or collected with
respect to social security, unemployment compensation, sales or use taxes or
workers' compensation, and all such amounts have been timely remitted to the
proper authorities. The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Company has not been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(l)(A)(ii). All receipts have been correctly entered on the books and
records of the Company as taxable or nontaxable items and all payments have
been correctly entered on the books and records of the Company as deductible
or nondeductible payments for federal and state income tax purposes. All such
taxable or nontaxable receipts and deductible or nondeductible payments when
reported on the federal and state income tax returns of the Company for its
taxable year ended February 28, 1999, will be accepted as such in determining
the federal and state income tax liabilities of the Company for such taxable
year by the Internal Revenue Service and the applicable state agency,
respectively.
5.13 PRODUCT WARRANTY. To the best of Seller's knowledge, each
product manufactured, sold, leased or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, (if any) and the Company has no liability (and Sellers are
not aware of any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand giving rise to any
liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth
on the face of the most recent balance sheet as of December 31, 1998 (rather
than in any notes thereto) as adjusted for the passage of time through the
closing date in accordance with the past custom and practice of the Company.
No product manufactured, sold, leased or delivered by the Company is subject
to any guaranty, warranty or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Schedule 5.13 includes copies of the
standard terms and conditions of sale or lease for the company(containing
applicable guaranty, warranty and indemnity provisions).
5.14 PRODUCT LIABILITY. The Company has no liability (and Sellers
are not aware of any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand giving rise to any
liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased or
delivered by the Company.
5.15 EMPLOYMENT AGREEMENTS AND BENEFIT PLANS.
(a) Except as disclosed on Schedule 5.15, the Company has no
agreement, plan, practice or arrangement (verbal or written) in effect with or
with respect to its employees, consultants, sales representatives or
agents, including, without limitation, employment, consulting and sales
representatives agreements (whether or not including "golden parachute"
provisions), collective bargaining agreement, union agreements, pension,
profit sharing or retirement plans or agreements, deferred compensation
agreements, royalty plans, medical, dental, disability, hospitalization, life,
accident, welfare or other benefit plans, stock option or stock purchase
plans, bonus plans, severance pay plans, vacation pay programs, retiree
benefits and employee loan plans. Copies of all such written agreements,
plans, practices and arrangements (and related summary plan descriptions
currently in force) listed in Schedule 5.15 (the "Employee Benefit Plans")
which have been delivered previously to Buyer by Sellers are accurate and
complete. Except as listed on Schedule 5.15, the Company has no employees,
consultants, sales representatives or agents. Schedule 5.15 contains: (i)
an accurate and complete description of the vacation and sick pay policies of
the Company; and (ii) a list of all the Company employees, consultants, sales
representatives and agents and the current position, address, sales territory
and rate of compensation, bonus and fringe benefits (for example, use of an
automobile or payment of an automobile allowance) for each such employee,
consultant, sales representative and agent (including a separate statement of
bonuses and fringe benefits not otherwise disclosed herein) and all other
persons not presently employed by the Company who are receiving compensation
from the Company.
(b) Each of the Employee Benefit Plans is in full force and
effect without amendment or modification and has been operated in accordance
with its terms. Through the Closing Date, there will be no change in the
operations of the Employee Benefit Plans or in the documents constituting or
affecting the Employee Benefit Plans. All required governmental filings have
been made with respect to the Employee Benefit Plans. Seller has not received
any notice of any pending investigations, proceedings or other matters
concerning the Employee Benefit Plans before the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation. There are no
pending or, to Sellers' knowledge, threatened claims by or disputes with any
participants in or beneficiaries of the Employee Benefit Plans, other than
benefit claims by participants and beneficiaries made in the normal course of
operating the Employee Benefit Plans as to which no dispute exists.
( c) Sellers have no knowledge of any facts which could give
rise to claims against the Employee Benefit Plans or against any fiduciary of
any Employee Benefit Plan other than benefit claims by participants or
beneficiaries reasonably expected on the normal course of operating the
Employee Benefit Plans. Neither Sellers nor any other fiduciary of any
Employee Benefit Plan has given notice to its fiduciary liability insurer of
any claims or potential claims against it with respect to any Employee Benefit
Plan. Copies of the annual reports of the Employee Benefit Plans filed with
the Internal Revenue Service for the fiscal years ended February 29, 1996,
February 28, 1997 and February 28, 1998, and all financial statements of the
Employee Benefit Plans for the fiscal years ended February 29, 1996, February
28, 1997 and February 28, 1998, which have been delivered previously to Buyer
by Sellers are accurate and complete. No "prohibited transaction" as defined
in Section 406(a) and (b) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or as defined in Code Section 4975, has occurred
with respect to any Employee Benefit Plan.
(d) No employee of the Company is a participant in any multi-
employer pension plan (as defined by ERISA) and the Company has no current,
contingent or potential liability with respect to any such plan.
(e) The Company has not incurred any "accumulated funding
deficiency" within the meaning of Section 302(a)(2) of ERISA with respect to
any Employee Benefit Plan maintained by or related to the Company, and the
Company has incurred no liability to the Pension Benefit Guaranty Corporation
or otherwise under ERISA in connection with any such plan. No reportable
event described in Section 4042(a) or Section 4043(b) of ERISA with respect to
any such plan has occurred.
(f) No payment made to any employee, officer, director
or independent contractor of the Company (the "Recipient") pursuant to any
employment contract, severance agreement or other arrangement (the "Golden
Parachute Payment") will be nondeductible by the Company because of the
application of Code Sections 280G and 4999 to the Golden Parachute Payment,
nor will the Company be required to compensate any Recipient because of the
imposition of an excise tax (including any interest or penalties related
thereto) on the Recipient by reason of Sections 280G and 4999.
5.16 LITIGATION. The Company is not subject to or bound by any
court, regulatory commission, board or administrative judgment, order or
decree. Except as described at Schedule 5.16 no suit, action, proceeding or
other litigation is pending in any court or before any administrative or
arbitration panel or commission or before or by any governmental department or
agency to which the Company is a party or which affects the business or
properties of the Company. There is no governmental proceeding or
investigation involving the Company; Sellers have no reason to believe that
any such proceeding or investigation is pending or threatened. There are no
facts which might reasonably be believed to be a basis for any other actions,
suit, proceeding, arbitration, claim, or counterclaim against the Company
which would materially and adversely affect either the business of the Company
or its assets. There are no existing violations of foreign, federal, state or
local laws, ordinances, rules, regulations or orders by the Company which
adversely affect the business or property of the Company or the possession,
use, occupancy or operation of any facilities of the Company. The Company has
not engaged in any discriminatory or unfair labor practices at any of its
offices, plants or facilities which have not heretofore been discontinued, and
any such discontinued practices have been disclosed in writing to Buyer by
Sellers. There is no grievance or other labor dispute pending, or, to the
knowledge of Sellers, threatened, against the Company, including unionizing or
organizing activities.
5.17 LICENSES; INTELLECTUAL PROPERTY. The Company Owns or holds all
licenses, permits, franchises, titles (including, without limitation, motor
vehicle titles and registrations), zoning, approvals and other authorizations
(collectively "Authorizations") which are used in or required for the
Company's business, owns or holds all patents, trademarks, trade names, the
name H&M Steel, Inc. and any logos associated with that name or any derivation
thereof, service marks and copyrights, or rights with respect thereto which
are used in or required for the Company's business (collectively "Rights").
Schedule 5.17 contains an accurate and complete list, and includes copies, of
all such Authorizations and Rights, including, without limitation, existing
and/or expired patents. Each such Authorization is valid and sufficient and in
full force and effect. The Company has not registered any other trademarks or
trade names. To Sellers' knowledge, (a) there is no existing or threatened
infringement, misuse or misappropriation by others of any such Rights, (b)
there is no pending or threatened claim by Sellers or the Company against
others for any such infringement, misuse or misappropriation and (c) there is
no pending judicial proceeding involving any claim of and the Company has not
received any written notice or claim of any, infringement, misuse or
misappropriation by the Company of any right owned by any third party, and (d)
there is no pending or existing deficiency in the procedures, policy and
documentation that is required for re-certification by the American Institute
of Steel Construction, Inc., in September 1999. Neither the execution and
delivery nor the consummation of the transactions contemplated hereby will
cause a termination of, or interfere in any respect with, any of the Company's
continued operations under any such Authorization or Right. Copies of all
Authorizations and Rights which have previously been delivered to Buyer are
accurate and complete. Nothing herein shall confer any right to Buyer to any
name or logo of Sellers.
5.18 MATERIAL AGREEMENTS. Except as disclosed on Schedule 5.18,
the Company is not a party to or subject to: (a) any express written or oral
agreement with any employee, shareholder, officer, director, general agent or
sales representative which is not terminable, without liability, upon sixty
(60) days' notice or could render the Company liable in excess of $5,000; (b)
any lease of real or personal property with a remaining term in excess of one
year or requiring annual payments in excess of $5,000, in the aggregate; (c)
any agreement for the purchase, sale or other disposition of any services or
property, tangible or intangible, which provides for the payment or receipt of
more than $5,000, in the aggregate per year, (d) any instrument creating a
lien, pledge, encumbrance or evidencing or related to indebtedness for
borrowed money; (e) any contract containing covenants not to enter into or
consummate the transactions contemplated hereby or which will be terminated or
modified by the carrying out of such transactions; (f) any contract containing
any restrictions on the operations of the Company or its ability to compete in
any geographic region or in any line of business; (g) any agreement which by
its terms extends for a period (including any mandatory or optional renewal or
extension periods) in excess of twelve (12) months and involves annual
payments in excess of $5,000; (h) any agreement entered into other than in the
ordinary course of business; or (i) any other contract, agreement, document or
obligation not of the type described by any of the other specific items of
this Section 5.18 involving payments in excess of $5,000, in the aggregate.
Each of the contracts, instruments and other documents described on Schedule
5.18 is valid and in full force and effect except for defaults affecting such
status by parties to such documents other than the Company, and the copies of
all such documents, which have been delivered previously to Buyer by Sellers
are accurate and complete. The Company is not in default, or, to the knowledge
of Sellers, alleged to be in default, under any of the contracts, instruments
or other documents described on Schedule 5.18 to which it is a party or by
which it is bound. Except to the extent that reserves have been established
therefore in the financial statements described in Section 5.8, to the
knowledge of Sellers, no party to any agreement to which the Company is a
party is in default thereunder. None of such documents require notice to, or
consent or approval of, any third party to any of the transactions
contemplated by this Agreement.
5.19 REAL AND PERSONAL PROPERTIES: OWNED OR LEASED. Schedule 5.19
sets forth (and specifies whether each such item is owned or leased): (a) an
accurate and complete legal description of each real property owned or leased
by the Company; (b) an accurate and complete description of tangible personal
property (including, without limitation, patterns and molds) owned or leased
by the Company as reflected on the balance sheet of the Company dated February
28, 1998, including, without limitation, identification of each vehicle by
description and serial number, identification of each item of machinery and
equipment and general descriptions of parts, supplies and inventory, together
with copies of any appraisals, if any, of the Company's real or personal
properties made during the three (3) year period ended January 31, 1998; and
(c) an accurate and complete listing of all intangible properties owned or
leased by the Company. All of the properties described on Schedule 5.19 are in
good operating condition and state of repair, subject to normal wear and tear,
and suitable and sufficient for the purposes for which they are currently
being used. Schedule 5.19 contains an accurate and complete list of: (i) the
name of each bank in which the Company has accounts or safe deposit boxes;
(ii) the name(s) in which the accounts or boxes are held; (iii) the type of
account; and (iv) the name of each person authorized to draw thereon or have
access thereto.
5.20 INSURANCE. The Company maintains in effect, and since January
1, 1993, has maintained in full force and effect, motor vehicle insurance,
commercial general liability insurance, including product liability insurance,
and workers' compensation insurance policies covering the Company, its
properties and operations, and fire and extended coverage insurance with
respect to the Company's properties as is necessary to insure adequately and
protect its properties and assets. The Company has given Buyer a summary of
its insurance policies and a list of all known claims asserted against the
Company since February 28, 1995. The Company is a named insured on and the
owner of each of the insurance policies. The Company is not subject to any
retroactive rate or premium adjustments, except those mandated by the
Company's workers compensation insurance policies which have previously been
disclosed to Buyer, nor does the Company participate in any deductible
insurance on the primary casualty and excess liability programs. All primary
casualty and excess liability insurance policies have been written on an
occurrence basis. No notice of cancellation or non-renewal of, or disallowance
of any claim under, any such policy has been received.
5.21 BUSINESS RELATIONS. To the best of Sellers' knowledge, no
material customer or supplier intends to cease doing business with the Company
or to alter the amount of business that any such person is presently doing or
will do with the Company. Schedule 5.21 is an accurate and complete list of
the customers as of January 31, 1999, the Company serves on an ongoing basis
and the suppliers from whom the Company makes purchases on an ongoing basis,
including the address and telephone number of each such customer and supplier.
5.22 TITLE TO PROPERTIES: NO LIENS. The Company has good and valid
title to (or, in the case of the oxygen tank described on Schedule 5.18, the
right to use of) all properties and assets, real, personal and mixed, tangible
and intangible, actually used or necessary for the conduct of its business,
free of any encumbrances or charge of any kind. Since July 31, 1998, and
except (i) in the ordinary course of business, or (ii) as described in
Schedule 5.1 ltd), 5.1 l(e) and 5.11(f) the Company has not acquired or sold
or otherwise disposed of any properties or assets which, singly or in the
aggregate, have a value in excess of $5,000 or which are material to the
operation of the Company's business as presently conducted.
5.23 COMPLIANCE WITH LAWS. The Company has materially complied
with, and the Company is presently in material compliance with, federal, state
and local laws, ordinances, codes, rules, regulations, governmental permits,
orders, judgments, awards, decrees, consent judgments, consent orders and
requirements applicable to it (collectively, "Laws"), including, but not
limited to, Laws relating to the public health, safety or protection of the
environment (collectively, "Environmental Laws"). Except as disclosed on
Schedule 5.23, there has been no assertion by any party that the Company is in
material violation of any Laws. Specifically and without limiting the
generality of the foregoing, except as disclosed on Schedule 5.23:
(a) Except as permitted under applicable laws and
regulations, including, without limitation, the federal Resource Conservation
Recovery Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Company has not accepted,
processed, handled, transferred, generated, treated, stored or disposed of any
Hazardous Material (as defined in Section 5.23(e) below), nor has it accepted,
processed, handled, transferred, generated, treated, stored or disposed of
asbestos, medical waste, radioactive waste or municipal waste, except in
compliance with Environmental Laws.
(b) During the Company's ownership or leasing of any property
owned or leased by it and, to the knowledge of Sellers, prior to the Company's
ownership or leasing of such property, no Hazardous Material, other than that
allowed under Environmental Laws, including, without limitation, RCRA, has
been disposed of, or otherwise released on any such property.
(c) During the Company's ownership or leasing of any property
owned or leased by it and, to the knowledge of Sellers, prior to the Company's
ownership or leasing of such property, no such property has ever been subject
to or received any notice of any private, administrative or judicial action,
or notice of any intended private, administrative or judicial action relating
to the presence or alleged presence of Hazardous Material in, under, upon or
emanating from any such property or any real property now or previously owned
by the Company. There are no pending and, to Sellers' knowledge, no threatened
actions or proceedings from any governmental agency or any other entity
involving remediation of any condition of such property, including, without
limitation, petroleum contamination, pursuant to Environmental Laws.
(d) Except as allowed under Environmental Laws, the Company
has not knowingly sent, transported or arranged for the transportation or
disposal of any known Hazardous Material, to any site, location or facility.
(e) As used in this Agreement, "Hazardous Material" shall mean
the substances: (i) defined as "Hazardous Waste" in 40 C.F.R. 261, and
substances defined in any comparable Oklahoma statute or regulation; and (ii)
any substance disposed of in a manner not in compliance with Environmental
Laws.
(f) Sellers have delivered to Buyer: (i) all known
records, notifications, reports, permit and license applications, engineering
and geologic studies, and environmental impact reports, tests or assessments
(collectively, "Records, Notifications and Reports") that (A) are material to
the operation of the business of the Company, or (B) relate to the discharge
or release of materials into the environment and/or the handling or
transportation of waste materials or hazardous or toxic substances, or
otherwise relate to the protection of the public health or the environment, or
(C) were filed with or submitted to appropriate governmental agencies during
the past twenty-four (24) months by the Company or its agents; and (ii) all
material notifications from such governmental agencies to the Company or its
agents in response to or relating to any of such Records, Notifications and
Reports.
(g) If there are any disclosures identified on Schedule 5.23,
Buyer, at its option, may require Sellers to obtain a Phase I environmental
audit of the Company prior to the Closing.
5.24 UNDERGROUND STORAGE TANKS. To Sellers' knowledge, (i) except as
set forth on Schedule 5.24, no underground storage tanks containing petroleum
products or wastes or other hazardous substances regulated by 40 C.F.R. 280 or
Environmental Laws are currently or have been located on any of the Company's
property and (ii) except as set forth on Schedule 5.24, the Company has never
owned or leased any real property having any underground storage tanks
containing petroleum products or wastes or other hazardous substances
regulated by 40 CFR 280. As to each such underground storage tank ("UST")
identified on Schedule 5.24, Sellers have provided to Buyer, on Schedule 5.24:
(a) the location of the UST, information and material,
including any available drawings and photographs, showing the location, and
whether the Company currently owns or leases the property on which the UST is
located (and if the Company does not currently own or lease such property, the
dates on which it did and the current owner or lessee of such property);
(b) the date of installation and specific use or uses of the
UST;
(c) copies of tank and piping tightness tests and cathodic
protection tests ans similar studies or reports for each UST;
(d) a copy of each notice to or from a governmental body or
agency relating to the UST;
(e) other material records with regard to the UST, including,
without limitation, repair records, financial assurance compliance
records and records of ownership;
(f) to the extent not otherwise set forth pursuant to the
above, a summary description of instances, past or present, in which, to
Sellers' knowledge, the UST failed to meet applicable standards and
regulations for tightness or otherwise and the extent of such failure, and any
other operational or environmental problems with regard to the UST, including,
without limitation, spills, including spills in connection with delivery of
materials to the UST, releases from the UST and soil contamination; and
(g) If there are any disclosures identified on Schedule 5.24,
Buyer, as its option may require Sellers to obtain a Phase I environmental
audit of the Company prior to Closing. Except to the extent set forth on
Schedule 5.24, to Sellers' knowledge, the Company has complied with
Environmental Laws regarding the installation, use, testing, monitoring,
operation and closure of any UST described on Schedule 5.24.
5.25 POWERS OF ATTORNEY. The Company has not granted any power of
attorney (except routine powers of attorney relating to representation before
governmental agencies) or entered into any agency or similar agreement whereby
a third party may bind or commit the Company in any manner.
5.26 CONDEMNATION. No property owned or leased by the Company is
the subject of, or would be affected by, any pending condemnation or eminent
domain proceedings, and, to the knowledge of Sellers, no such proceedings are
threatened.
5.27 ABSENCE OF CERTAIN BUSINESS PRACTICES. The Company has not
directly or indirectly within the past five (5) years given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee
or other person who is or may be in a position to help or hinder the business
of the Company in connection with any actual or proposed transaction which:
(a) might subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceedings; (b) if not given in the past, might
have had an adverse effect on the financial condition, business or results of
operations of the Company; or (c) if not continued in the future, might
adversely affect the financial condition, business or operations of the
Company or which might subject the Company to suit or penalty in any private
or governmental litigation or proceeding.
5.28 CHARTER DOCUMENTS AND BYLAWS. Copies of the charter documents
and Bylaws of the Company, which shall be delivered to Buyer by Sellers prior
to the Closing, are true, accurate and complete.
5.29 MINUTE BOOKS AND STOCK RECORD BOOKS. All material corporate
action which has heretofore been taken by the shareholders or Board of
Directors of the Company, or by any committee of the Company, has been duly
authorized, approved and/or ratified. All records available to Sellers and the
Company with respect to the issuance, transfer, redemptions and cancellations
of shares of capital stock of the Company are contained in the minute books
and stock record books of the Company. Copies of such minute books and stock
record books shall be delivered to Buyer by Sellers at the Closing.
5.30 NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the performance by Sellers or by the Company of each party's
respective obligations hereunder will: (a) violate, conflict with, or result
in a breach of any provisions of, or constitute a material default (or an
event which, with notice or lapse of time or both would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Sellers or the Company under, any of the terms,
conditions or provisions of (i) their respective charter documents or Bylaws;
or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation, to which Sellers or the Company
is a party or to which Sellers or the Company or any of their respective
properties or assets may be subject; or (b) violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to
Sellers or the Company or any of their respective properties or assets.
5.31 CONSENTS. No notice to, filing with, or authorization, consent
or approval of, any federal, state, local or other public body, agency or
authority or any other third party is necessary for the consummation by
Sellers of the transactions contemplated by this Agreement.
5.32 RELATED PARTY TRANSACTIONS. Except as disclosed in Schedule
5.32, the Company is not, and has not been since January 1, 1993, a party to
any transaction with (a) any current or former officer, director or
shareholder; (b) any parent, spouse, child, brother, sister or other family
relation of any such officer, director ord shareholder; (c) any corporation or
partnership of which any such officer, director or shareholder or any such
family relation is an officer, director, partner or greater than 10%
shareholder (based on percentage ownership of voting stock); (d) any trust
with respect to which any such officer, director, shareholder, family
relation, corporation or partnership is a trustee or beneficiary; (e) Sellers;
or (f) any "affiliate" or "associate" of any such persons or entities (as such
terms are defined in the rules and regulations promulgated under the
Securities Act of 1933, as amended); including, without limitation, any
transaction involving a contract, agreement or other arrangement providing for
the employment of, furnishing of materials, products or services by, rental of
real or personal property from, the loan of funds to or otherwise requiring
payments to, any such person or entity.
5.33 NO PENDING TRANSACTIONS. Except for the transactions
contemplated by this Agreement, the Company is not a party to, bound by or the
subject of any agreement, undertaking or commitment: (a) to merge or
consolidate with, or acquire all or substantially all of the property and
assets of, any other corporation or person; (or (b) to sell, lease or exchange
all or substantially all of its property and assets to any other corporation
or person.
5.34 BOOKS, FILES AND RECORDS. The books, files and records of the
Company reflect all of the material transactions entered into by the Company
or to which the Company is a party. All books, files, records or any other
documents which have been provided to potential buyers of the Company for due
diligence or any other purposes have been returned to the Company by the
potential buyers, or such potential buyers or their counsel have confirmed in
writing that such information has been destroyed.
5.35 DISCLOSURE. No representation or warranty made by Sellers in
this Agreement and no statement by Sellers contained in a certificate,
schedule, list or other instrument or document specified in or delivered
pursuant to this Agreement, whether heretofore furnmished to Buyer or
hereafter required to be furnished to Buyer, contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein or therein not
misleading. All information requested by Buyer relating to the financial
position, results of operations, assets and business of the Company which is
or which be material to the sale to Buyer for value of the Shares has been
provided by Sellers or the Company to Buyer.
5.36 SURVIVAL. All representations and warranties of Sellers shall
be deemed made as of the date of this Agreement and again as of the Closing
Date and shall survive the Closing for twelve (12) months except ford the
representations and warranties contained in Sections 5.5, 5.12 and 5.22 which,
in each case, shall survive the Closing until expiration of any applicable
statutes of limitation. None of the representations and warranties of Sellers
shall merge into any closing document.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 6 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 through the Closing Date
were submitted for the date of this Agreement throughout this Section 6).
6.1 CORPORATE EXISTENCE: QUALIFICATION. Buyer or its assigns is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and Oklahoma and other states where it may be
organized or doing business.
6.2 AUTHORITY. Buyer has all requisite right, power and authority
to own, lease and operate its properties, to carry on its business as
presently being conducted and to perform its obligations under this Agreement.
Buyer has been duly authorized and empowered by its Board of Directors to
execute, deliver and perform its obligations under this Agreement. All
corporate action necessary for such execution, delivery and performance has
been duly and validly taken. This Agreement is a valid and legally binding
obligation of Buyer enforceable against Buyer in accordance with its terms.
6.3 NO CONFLICT. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby by
Buyer will: (a) violate or conflict with any of the provisions of its charter
document or Bylaws; or (b) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any of
its properties or assets.
6.4 CONSENTS. Except in connection with or in compliance with the
provisions of applicable corporate law, no notice to, filing with, or
authorization, consent or approval of, any federal, state, local or other
public body, agency or authority or any other third party is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement.
6.5 SURVIVAL. All representations and warranties of Buyer shall be
deemed made as of the date of this Agreement and again as of the Closing Date
and shall survive the Closing for twelve (12) months, and none shall merge
into any closing document.
6.6 INVESTMENT. The Shares to be acquired by the Buyer, its
successors, assigns or participants pursuant to this Agreement are being
acquired for its own account for investment purposes and not for or with a
view to the distribution or resale thereof (except in compliance with the
Securities Act of 1933, as amended, and any comparable state act). The Buyer
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended, or the securities laws of any state, on the grounds that
no distribution or public offering of the Shares is presently contemplated,
and that, in this connection, the Company is relying on the Buyer's
representations set forth in this Section.
6.7 ACCREDITED INVESTOR. The Buyer (a) is an "accredited investor"
as defined in Rule 501(a) promulgated by the Securities Exchange Commission
pursuant to the Securities Act of 1933, as amended, and (b) by reason of its
business and financial experience, and the business and financial experience
of those persons retained by it to advise it together with such advisors, has
such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment and, at the present time, is able to afford a complete
loss of such investment.
6.8 ILLIQUID INVESTMENT. The Buyer understands that it must bear
the economic risk of its investment for an indefinite period of time because
the Shares have not been registered under the Securities Act of 1933, as
amended, or any applicable states act, and therefore, cannot be offered, sold,
pledged or otherwise disposed of without an exemption from the registration
requirements thereunder.
6.9 OPPORTUNITY TO INVESTIGATE. The Buyer has had an opportunity
to ask questions of and receive answers from duly designated representatives
of the Company concerning its financial condition, products, properties,
assets, business and prospects and the terms and conditions of this Agreement.
The Buyer has also been afforded an opportunity to examine all documents and
other information which the Buyer has requested for the purpose of verifying
the information set forth in this Agreement and the exhibits and disclosure
schedule attached to the Agreement and for the purpose of answering any
questions the Buyer may have concerning the business and affairs of the
Company. The Buyer has engaged its own experts and has received due diligence
reports on the Company, its management and the industry. After thoroughly
considering all the information received by the Buyer, the Buyer has
determined that its investment in the Shares is suitable in the light of all
circumstances.
6.10 APPROVAL OF PAST COMPENSATION. Buyer was aware of and
consented to the bonus paid to Sellers in February, 1999 during the pendency
of this transaction, and in the letter of intent executed by Buyer and Sellers
on January 4, 1999.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. Unless waived, in
whole or in part, in writing by Sellers, the obligations of Sellers hereunder
are subject to the following conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Buyer contained herein shall be true at and as of the
Closing Date, shall be deemed made again at and as of such date and shall be
true as so made again (regardless of whether any confirmatory certificate is
delivered at the Closing); Buyer shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date; and Sellers shall have
received from Buyer a certificate or certificates in such reasonable detail as
Sellers may reasonably request, signed by a director or officer of Buyer and
dated the Closing Date, to the foregoing effect (the "Buyer Certificate").
7.2 OPINION OF COUNSEL TO BUYER. Buyer shall have delivered to
Sellers a favorable opinion of its counsel, Phillips McFall McCaffrey, McVay &
Murray, P.C. dated the Closing Date, in form and substance satisfactory to
Sellers and its counsel in substantially the form set forth in Exhibit 7.2.
7.3 NO ADVERSE PROCEEDINGS OR EVENTS. No suit, action or other
proceeding shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit any of the transactions contemplated by
this Agreement or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
7.4 CONSENTS AND ACTIONS. All requisite consents of any third
parties and other actions which Buyer has covenanted to use its best efforts
to obtain and take under this Agreement shall have been obtained and
completed.
7.5 APPROVALS OF GOVERNMENT AUTHORITIES. All government approvals
necessary or advisable in the opinion of Sellers' counsel to consummate the
transactions contemplated by this Agreement shall have been received.
7.6 CONSULTING AGREEMENT. Sellers and Buyer shall have entered
into a Consulting Agreement substantially in the form of Consulting Agreement
attached hereto as Exhibit 7.6.
7.7 AGREEMENT TO CONVEY REAL ESTATE. Sellers and Buyer shall have
entered into an Agreement to Convey Real Estate substantially in the form of
the Agreement to Convey Real Estate attached hereto as Exhibit 7.7.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. Unless waived, in
whole or in part, in writing by Buyer, in its discretion, all obligations of
Buyer hereunder are subject to fulfillment prior to or at the Closing of each
of the following conditions:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Sellers contained herein shall be true at
and as of the Closing Date, shall be deemed made again at and as of such date
and shall be true as so made again (regardless of whether any confirmatory
certificate is delivered at the Closing); Sellers shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by Sellers on or prior to the Closing Date;
and Buyer shall have received from Sellers a certificate or certificates in
such reasonable detail as Buyer may reasonably request, signed by the
President or the Vice President of Sellers and dated the Closing Date, to the
foregoing effect (the "Sellers Certificate").
8.2 OPINION OF COUNSEL. Sellers shall have delivered to Buyer a
favorable opinion of their counsel, Hartzog Conger & Cason, dated the Closing
Date, in form and substance satisfactory to Buyer and its counsel, in
substantially the form set forth in Exhibit 8.2.
8.3 NO ADVERSE PROCEEDINGS OR EVENTS. No suit, action or other
proceeding shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit any of the transactions contemplated by
this Agreement or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
8.4 DAMAGE. The Company shall not have been materially affected in
any adverse way by any act of God, fire, flood, war, labor disturbance,
legislation (proposed or enacted) or other event or occurrence, and there
shall have been no change in the Company, its financial condition or prospects
which would have a material adverse effect thereon.
8.5 CONSENTS AND ACTIONS. All requisite consents of any third
parties and other actions which Sellers have covenanted to use its best
efforts to obtain and take under this Agreement shall have been obtained and
completed.
8.6 CONTRACTS. All material contracts and agreements of the
Company, including, without limitation, all material contracts and agreements
listed on Schedule 5.18, shall be in full force and effect and shall not be
materially affected by the consummation of the transactions contemplated
hereby.
8.7 APPROVALS OF GOVERNMENTAL AUTHORITIES. All governmental
approvals necessary or advisable in the opinion of Buyer's counsel to
consummate the transactions contemplated by this Agreement shall have been
received and shall not contain any provision which, in the reasonable business
judgment of Buyer, is unduly burdensome.
8.8 CONSULTING AGREEMENT. Sellers and Buyer shall have entered into
a Consulting Agreement substantially in the form of Consulting Agreement
attached hereto as Exhibit 7.6.
8.9 AGREEMENT TO CONVEY REAL ESTATE. Sellers and Buyer shall have
entered into an Agreement to Convey Real Estate substantially in the form of
the Agreement to Convey Real Estate attached hereto as Exhibit 7.7.
9. POST-CLOSING COVENANTS OF SELLERS.
9.1 RESTRICTIVE COVENANTS. Sellers acknowledge that: (i) Buyer,
as the purchaser of the Shares, will acquire the goodwill of the Company's
steel fabrication business ("the Company's Business"), and is and will be
engaged in the same business as previously conducted by the Company; (ii)
Sellers are intimately familiar with the Company's Business; (iii) Sellers
have had access to trade secrets of, and confidential information concerning,
the Company's Business; and (iv) the agreements and covenants contained in
this Section 9.1 are essential to protect the business and the goodwill being
acquired by Buyer. After the Closing Date, Sellers covenant and agree as set
forth in (b)-(d) below with respect to the Company's Business as it has been
conducted during the five (5) year preceding the date of this Agreement.
(a) PAYMENT. The Company agrees to pay to Sellers the sum of
$368,000.00 in consideration for the non-compete agreement, to be paid in
equal quarterly installments as set forth in Schedule ii I(a), beginning June
1, 1999 and each quarter thereafter until paid in full.
(b) NON-COMPETE. For a period commencing on the Closing Date
and terminating four (4) years thereafter (the "Restricted Period"), Sellers
shall not, anywhere in the geographic area being serviced by the Company as of
the date of this Agreement, directly or indirectly, acting individually or as
the owner, shareholder or partner of any entity: (i) engage in the steel
fabrication business similar to that heretofore conducted by the Company; (ii)
render any services to or for the benefit of, or assist in or facilitate the
solicitation of customers for, or receive remuneration in the form of salary,
commissions or otherwise from, any business engaged in such activities; or
(iii) receive or purchase a financial interest in, make a loan to, or make a
gift in support of, any such business in any capacity, including, without
limitation, as a sole proprietor, partner, shareholder, principal, agent,
trustee or lender.
(c) CONFIDENTIAL INFORMATION. During the Restricted Period
and thereafter, Sellers shall keep secret and retain in strictest confidence,
and shall not use for the benefit of itself or others, all data and
information relating to the Company's Business as heretofore conducted
("Confidential Information"), including, without limitation, know-how, trade
secrets, customer lists, supplier lists, details of contracts, pricing
policies, operational methods, marketing plans or strategies, bidding
practices and policies, product development techniques or plans, and technical
processes; provided that the term "Confidential Information" shall not include
information that: (i) is or becomes generally available to the public other
than as a result of disclosure by Sellers; (ii) is general knowledge in the
steel fabrication business and not specifically related to the Company's
Business; or (iii) as may be required to be disclosed by any administrative or
judicial tribunal.
(d) PROPERTY OF THE COMPANY'S BUSINESS. All memoranda,
notes, lists, records and other documents or papers (and all copies thereof)
relating to the Company's Business, including such items stored in computer
memories, on microfiche or by any other means, made or compiled by or on
behalf of Sellers or the Company or made available to them relating to the
Company's Business are and shall be the property of Buyer and have been
delivered or will be delivered or made available to Buyer at the Closing, and
Sellers shall be entitled to keep a copy of all financial memoranda, notes,
records or other documents.
(e) NON-SOLICITATION. Without the consent of Buyer, which may
be granted or withheld by Buyer in its discretion, Sellers shall not, for a
period of four (4) years from the Closing Date, solicit any employees of the
Company to leave the employ of the Company and join Sellers in any business
endeavor owned or pursued by Sellers. Sellers may employ any employee of the
Company after the employment relationship between any such employee and the
Company has been terminated provided that Sellers have not solicited such
termination or encouraged such termination.
Notwithstanding the foregoing, no covenant contained in this Section 9.1
shall prohibit Sellers from (i) performing Sellers' obligations under the
Consulting Agreement attached as Exhibit 8.8, (ii) making investments in any
public company which engages in activities similar to the Company Business, or
(iii) investing in any mutual fund or similar investment vehicle which invest
in public or private entities which engage in activities similar to the
Company Business.
9.2 RIGHTS AND REMEDIES UPON BREACH. If Sellers breach or threaten
to commit a breach of, any of the provisions of Section 9.1 herein (the
"Restrictive Covenants"), Buyer shall have the following rights and remedies,
each of which rights and remedies shall be independent of the others and
severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to Buyer at law or in equity:
(a) DISCONTINUATION OF PAYMENTS. The right and remedy to
cease making any further payments to Sellers under Section 9.l(a) during the
period that Sellers breach or threaten to commit a breach of any of the
Restrictive Covenants.
(b) SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach of the Restrictive Covenants
would cause irreparable injury to Buyer and that money damages would not
provide an adequate remedy to Buyer. Accordingly, in addition to any other
rights or remedies, Buyer shall be entitled to injunctive relief to enforce
the terms of the Restrictive Covenants and to restrain Sellers from any
violation thereof.
( c) ACCOUNTING. The right and remedy to require Sellers to
account for and pay over to Buyer all compensation, profits, monies, accruals,
increments or other benefits derived or received by Sellers as the result of
any transactions constituting a breach of the Restrictive Covenants.
(d) SEVERABILITY OF COVENANTS. Sellers acknowledge and agree
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
(e) BLUE-PENCILING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall reduce the
duration or scope of such provision, as the case may be, to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
(f) ENFORCEABILITV IN JURISDICTION. Sellers intend to and
hereby confer jurisdiction to enforce the Restrictive Covenants upon the
courts of any jurisdiction within the geographic scope of the Restrictive
Covenants. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of Buyer and Sellers that such determination
not bar or in any way affect Buyer's right to the relief provided above in the
courts of any other jurisdiction within the geographic scope of the
Restrictive Covenants as to breaches of such covenants in such other
respective jurisdictions, such covenants as they relate to each jurisdiction
being, for this purpose, severable into diverse and independent covenants.
10. INDEMNIFICATION BY SELLERS. Sellers shall indemnify and hold
harmless Buyer, at all times from and after the Closing Date, against and in
respect to any Damages. For the purposes of this Section 10, the term
"Damages" means the cost of any claims, actions, demands, deficiencies,
lawsuits, losses, expenses, liabilities, penalties and damages (including,
without limitation, attorneys' and accountants' fees incidental thereto or
incidental to the enforcement by Buyer of this Agreement) resulting to Buyer,
net of any insurance proceeds received by Buyer or the Company in
reimbursement of such Damages, from: (a) any material inaccurate
representation made to Buyer in or pursuant to this Agreement or in any
certificate, schedule or other instrument or document delivered to Buyer
pursuant to this Agreement; (b) any material breach of any of the warranties
made to Buyer in or pursuant to this Agreement or in any certificate, schedule
or other instrument or document delivered to Buyer pursuant to this Agreement;
(c) any material breach or default in the performance by Sellers of any of its
covenants or obligations under this Agreement or in any certificate, schedule
or other instrument or document delivered to Buyer pursuant to this Agreement;
(d) any material omission from any certificate, schedule or other instrument
delivered to Buyer pursuant to this Agreement; or (e) any material litigation
involving the Company relating to or arising from acts, events or omissions
prior to the Closing Date. Sellers shall reimburse Buyer on demand for any
payment made by Buyer at any time after the Closing, based upon the judgment
of any court of competent jurisdiction or pursuant to a bona fide compromise
or settlement of claims, demands or actions, in respect of any Damages to
which the foregoing indemnity relates; provided that, (i) Sellers shall have
had the opportunity to be involved in the negotiation and defense of same;
(ii) Buyer shall have given prompt notice of all facts relating thereto and
shall have fully cooperated with Sellers with respect thereto; and, (iii) all
applicable appeal periods have expired.
11. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless
Sellers, at all times from and after the Closing Date, against and in respect
to any Damages. For the purposes of this Section 11, the term "Damages" means
the cost of any claims, actions, demands, deficiencies, lawsuits, losses,
expenses, liabilities, penalties and damages (including without limitation,
attorneys' and accountants' fees incidental to the enforcement by Sellers of
this Agreement) resulting to Sellers, net of any insurance proceeds received
by Sellers in reimbursement of such Damages, from: (a) any material
inaccurate representation made to Sellers in or pursuant to this Agreement or
any certificate, schedule or other instrument or document delivered to Sellers
pursuant to this Agreement; (b) any material breach of any of the warranties
made to Sellers in or pursuant to this Agreement or any certificate, schedule
or other instrument or document delivered to Sellers pursuant to this
Agreement; (c) any material breach or default in the performance by Buyer of
any of its covenants or obligations under this Agreement or any certificate,
schedule or other instrument or document delivered to Sellers pursuant to this
Agreement; (d) any material omission from any certificate, schedule or other
instrument delivered to Sellers by Buyer pursuant to this Agreement; or (e)
any material litigation involving the Company relating to or arising from
acts, events or omissions arising after the Closing Date. Buyer shall
reimburse Sellers on demand for any payment made by Sellers at any time after
the Closing, based upon the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of claims, demands or
actions, in respect of any Damages to which the foregoing indemnity relates;
provided that Buyer shall have had the opportunity to be involved in the
negotiation and defense of same and provided Sellers shall have given prompt
notice of all facts relating thereto and shall have fully cooperated with
Buyer with respect thereto.
12. INDEMNIFICATION. No party hereto shall be liable for any Damages
under this Agreement (whether under the indemnification provisions or
otherwise) until the aggregate amount for which it would otherwise (but for
this provision) be liable exceeds Twenty-Five Thousand Dollars ($25,000.00),
in which case such party shall be liable to the other for all such Damages
incurred. Furthermore, no party shall be liable to the other party hereunder
(whether under the indemnification provisions or otherwise) to the extent that
Damages exceed One Million Dollars ($1,000,000.00) in the aggregate, except
for any claim arising from any representations and warranties of Sellers in
Section 5.12, which shall not be subject to the 51,000,000 limitation provided
herein.
13. BROKERAGE. Pursuant to the letter agreements dated August 21, 1998
and August 28, 1998 between Sellers and Larry L. Perdue, d/b/a "Asset
Management," copies of which are attached as Exhibit 13 hereto (the "Perdue
Agreement") pursuant to which certain broker's or finder's fees are owed by
Sellers to Larry L. Perdue with respect to the transaction described herein.
All such amounts due under the Perdue Agreement shall be paid by Sellers.
Sellers shall indemnify Buyer against all loss, cost, damage, or expense,
including attorney's fees, incurred by Buyer in any action based upon a claim
by Mr. Perdue or any broker or other person that Sellers or the Company may
have employed or otherwise engaged in connection with the transaction
contemplated by this Agreement. Buyer shall indemnify Sellers against ail
loss, cost, damage or expense, including attorney's fees, incurred by Sellers
in any action based upon the claim of a broker or other person that Buyer has
employed or otherwise engaged in connection with the transaction contemplated
by this Agreement.
14. GENERAL.
14.1 NOTICES. All notices required or permitted herein must be in
writing and shall be deemed to have been duly given on the date of service if
served personally or by telecopier, telex or other similar communication to
the party or parties to whom notice is to be given or on the third business
day after mailing if mailed to the party or parties to whom notice is to be
given by registered or certified mail, return receipt requested, postage
prepaid, to the party to whom notice is to be given at the address set forth
below:
Sellers: John T. Madden and Patty L. Madden
13701 E. 2nd
Arcadia, Oklahoma 73007
With a copy to: Hartzog Conger & Cason
Attn: Steven C. Davis
201 Robert S. Kerr Ave., Suite 1600
Oklahoma City, Oklahoma 73102
Telecopier No.. (405) 235-7329
Buyer: Structural Holdings, Inc.
c/o David Payne
3000 Bane One Tower
100 N. Broadway
Oklahoma City, Oklahoma 73102
With a copy to: Phillips, McFall McCaffrey McVay &
Murrah, P.C.
Attn: Mel McVay/Robert O'Bannon
14th Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102
Telecopier No.: (405) 235-4100
or to such other addresses as either party hereto may designate to the other
from time to time for this purpose. Any communication which is mailed shall be
confirmed immediately by telecopier, but failure to so confirm shall not
affect the effectiveness of such notice from and after the date on which such
notice is actually received.
14.2 INTEGRATED AGREEMENT. This instrument contains and constitutes
the entire agreement between the parties herein and supersedes all prior
agreements and understandings between the parties hereto relating to the
subject matter hereof. There are no agreements, understandings, restrictions,
warranties or representations among the parties relating to the subject matter
hereof other than those set forth herein. All exhibits and all schedules
attached hereto or delivered pursuant hereto are hereby incorporated herein
and made a part of this Agreement. This instrument is not intended to have any
legal effect whatsoever, or to be a legally binding agreement, or any evidence
thereof, until it has been signed by both parties hereto.
14.3 CONSTRUCTION. This Agreement shall be construed, enforced and
governed in accordance with the laws of the State of Oklahoma. All pronouns
and any variations thereof shall be deemed to refer to the masculine, feminine
or neuter gender thereof or to the plurals of each, as the identity of the
person or persons or the context may require. The descriptive headings
contained in this Agreement are for reference purposes only and are not
intended to describe, interpret, define or limit the scope, extent or intent
of this Agreement or any provision contained herein.
14.4 INVALIDITY. If any provision contained in this Agreement shall
for any reason be held to be invalid, illegal, void or unenforceable in any
respect, such provision shall be deemed modified so as to constitute a
provision conforming as nearly as possible to such invalid, illegal, void or
unenforceable provision while still remaining valid and enforceable, and the
remaining terms or provisions contained herein shall not be affected thereby.
14.5 BINDING EFFECT. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
14.6 LITIGATION EXPENSE. In any action brought by a party hereto to
enforce the obligations of any other party hereto, the prevailing party shall
be entitled to collect from the other parties to such action such party's
reasonable attorneys' fees, court costs and other expenses incidental to such
litigation.
14.7 COUNTERPART EXECUTION. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.8 AMENDMENT AND WAIVER. This Agreement may be amended at any
time, but only by an instrument in writing executed by both parties hereto. A
party hereto may waive any requirement to be performed by the other party,
provided that such waiver shall be in writing and executed by the party
waiving the requirement.
14.9 FEES AND EXPENSES. Whether or not the transactions contemplated
by this Agreement shall be consummated, each party hereto shall pay its own
fees, expenses and disbursements incurred in connection herewith and all other
costs and expenses incurred in the performance and compliance with all
conditions to be performed hereunder.
14.10 TIME OF ESSENCE. Time shall be of the essence with
respect to the performance by the parties hereto of their respective
obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
Sellers:
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JOHN T. MADDEN
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PATTY L. MADDEN
Buyer: STRUCTURAL HOLDINGS, INC.,
a Delaware Corporation
By:
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David Payne, President
