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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Citation Corporation
______________________________________________________
(Name of Issuer)
Common Stock, $.01 par value
______________________________________________________
(Title of Class of Securities)
172895104
______________________________________________________
(CUSIP Number)
William B. Long
Drummond Company, Inc.
530 Beacon Parkway West
Birmingham, Alabama 35209
(205) 945-6525
With a copy to:
Gregory S. Curran
Maynard, Cooper & Gale, P.C.
1901 6th Avenue North
Suite 2400
Birmingham, Alabama 35203
(205) 254-1098
________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 6, 1998
_______________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1 (b) (3) or (4), check the following
box / /.
Check the following box if a fee is being paid with this statement /X/. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
See Rule 13d-7.)
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SCHEDULE 13D
CUSIP NO. 172895104
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(1) Name of Reporting Person.
Drummond Company, Inc.
S.S. or I.R.S. Identification Nos. of Above Person.
63-0653224
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(2)Check the Appropriate Box if a Member of a Group
(a) / /
(b) /X/
- --------------------------------------------------------------------------------
(3) SEC Use Only
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(4) Source of Funds
WC, BK
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
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(6) Citizenship or Place of Organization
AL
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Number of Shares Beneficially (7) Sole Voting Power
Owned by Each Reporting 5,336,400 (Includes 4,000,000 shares of
Person With common stock which Drummond has an option
to purchase and 1,336,400 shares of common
stock which Drummond has agreed to
purchase.)
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(8) Shared Voting Power
-0-
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(9) Sole Dispositive Power
5,336,400 (Includes 4,000,000 shares of
common stock which Drummond has an option
to purchase and 1,336,400 shares of common
stock which Drummond has agreed to
purchase.)
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(10) Shared Dispositive Power
-0-
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
5,336,400
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares /X/
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
29.6%
- --------------------------------------------------------------------------------
(14) Type of Reporting Person
CO
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ITEM 1. SECURITY AND ISSUER
This statement relates to the common stock, $.01 par value per share (the
"Shares"), of Citation Corporation, a Delaware corporation ("Citation"). The
address of the principal executive offices of Citation is:
Citation Corporation
2 Office Park Circle, Suite 204
Birmingham, AL 35223
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed by Drummond Company, Inc., an Alabama corporation
("Drummond"), as the beneficial owner of 29.6% of the common stock of Citation.
The principal executive offices of Drummond are located at 530 Beacon Parkway
West, Birmingham, Alabama 35209.
Drummond owns three surface coal mines and one underground coal mine in Alabama
and operates a surface coal mine in Columbia, South America through an
affiliate, Drummond Company, Ltd. Drummond also operates ABC Coke, a foundry
coke producer, and owns real estate developments in Alabama, California and
Florida.
Neither Drummond, nor, to the best of its knowledge, any director or executive
officer of Drummond, has been, during the last five years, (a) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(b) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Schedule A hereto sets forth, for each executive officer and director of
Drummond, their name, residence or business address, present principal
occupation or employment, citizenship and the information described in the
immediately preceding paragraph.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The 5,336,400 shares of Citation common stock beneficially owned by Drummond are
comprised of 4,000,000 shares which Drummond has the option to purchase from T.
Morris Hackney ("Hackney") for a purchase price of $80 million, and 1,336,400
shares of Citation common stock which Drummond has agreed to purchase from Hugh
G. Weeks for a purchase price of $20,146,000. In the event Drummond exercises
its option to purchase the shares from Hackney, it will pay a total of
$100,146,000 for the shares of Citation common stock to be acquired in these
transactions. The source of funds for these transactions will be general
working capital, although Drummond may borrow funds under its bank line of
credit with Citibank to pay all or a portion of the purchase price for such
shares.
ITEM 4. PURPOSE OF TRANSACTION
Drummond has entered into a Call Option Agreement with Hackney, dated November
6, 1998 (the "Call Option Agreement"), pursuant to which Drummond has the option
to purchase 4 million shares of Citation common stock from Hackney, who
currently serves as the Chairman of the Board of Directors of Citation. Under
the Call Option Agreement, Drummond has until March 6, 1999 to exercise its
option. The Call Option Agreement also provides that Drummond will have a right
of first refusal with respect to the approximately 1,005,800 shares of Citation
common stock held by Hackney that are not subject to Drummond's option to
purchase; provided that such right of first refusal is subject to the receipt by
Hackney or Citation of a consent or acknowledgment from Citation's lenders that
the granting of such right would not constitute an event of default under
Citation's bank credit facility.
Drummond has agreed to purchase 1,336,400 shares of Citation common stock from
Hugh G. Weeks, a former employee and a member of the Board of Directors of
Citation.
Upon the completion of these transactions, assuming Drummond exercises its
option, Drummond will hold 5,336,400 shares, or approximately 29.6%, of the
outstanding common stock of Citation.
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Prior to exercising its option, Drummond plans, subject to the approval of
Citation's Board of Directors, to conduct a due diligence investigation of
Citation's business and operations. Assuming that such investigation is
satisfactory, Drummond anticipates that it would exercise its option to acquire
the shares of Citation common stock from Hackney. At this time, Drummond
believes that its purchase of Citation common stock presents an attractive
investment opportunity.
Drummond has agreed, pursuant to the terms of the Call Option Agreement, not to
acquire additional shares of Citation common stock if such additional
acquisition would constitute an event of default under Citation's bank credit
facility. Subject to this agreement, Drummond may consider making additional
purchases of Citation common stock either in the open market or in private
transactions depending on Drummond's evaluation of Citation's business,
prospects and financial condition, the market for Citation's common stock, other
opportunities available to Drummond, prospects for Drummond's own business,
general economic conditions, money and stock market conditions and other future
developments. Depending on the same factors, Drummond may decide to sell all or
part of its investment in Citation's common stock, although it has no current
intention to do so.
Although Drummond has no immediate plans beyond its consideration of its current
option, Drummond believes that a combination of its existing operations with
those of Citation may be an attractive opportunity for the shareholders and
employees of both companies. Accordingly, Drummond will continue to evaluate
the possibility of a merger or similar transaction with Citation.
Except as set forth in this Item 4, neither Drummond nor, to the best of its
knowledge, any of its executive officers or directors, has any plans or
proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Drummond is the beneficial owner of 5,336,400 shares of Citation common stock,
constituting 29.6% of the issued and outstanding common stock of Citation. Of
these shares, 4,000,000 shares are beneficially owned by Drummond as a result of
Drummond's option to purchase from T. Morris Hackney in accordance with the
terms of the Call Option Agreement. The remaining 1,336,400 shares are
beneficially owned by Drummond as a result of its agreement to purchase such
shares form Hugh G. Weeks in accordance with the terms of a Stock Purchase
Agreement with Mr. Weeks.
In addition to the 5,336,400 shares of common stock beneficially owned by
Drummond, the Call Option Agreement provides that Drummond will have a right of
first refusal with respect to the purchase and sale of an additional
1,005,800 shares of Citation common stock held by Hackney upon the receipt
by Hackney or the Company of a consent or acknowledgment from Citation's lenders
that the granting of such right would not constitute an event of default under
Citation's existing bank credit facility. This right provides that if Hackney
receives an offer from a third party for the purchase of the shares of Citation
common stock not subject to Drummond's option, and Hackney desires to accept
such offer, he must first give Drummond the right to purchase such shares on the
same terms as contained in such offer. Until the receipt by Hackney or the
Company of a consent or acknowledgment from its lenders that the granting of
such right does not constitute an event of default under Citation's bank credit
facility, this right of first refusal is not effective, and Drummond therefore
disclaims beneficial ownership of the shares subject to such right of first
refusal in accordance with Securities and Exchange Commission Rule 13d-4.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Drummond has entered into a Call Option Agreement with Hackney pursuant to which
Drummond has the option to
<PAGE>
purchase 4,000,000 shares of Citation common stock currently held by Hackney.
Drummond's option expires on March 6, 1999, and may be exercised at any time on
or prior to such date. In the event Drummond exercises its option, the closing
of Drummond's purchase of these shares will take place on or prior to the later
of (i) thirty days after the exercise of the option and (ii) five days after the
satisfaction of all conditions to closing in the agreement, including the
termination or expiration of the waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR"). The Call Option Agreement also
provides that Drummond will have a right of first refusal with respect to an
additional 1,005,800 shares of Citation common stock held by Hackney; provided
that such right of first refusal is subject to the receipt by Hackney or
Citation of a consent or acknowledgment from Citation's lenders that the
granting of such right would not constitute an event of default under Citation's
bank credit facility. Prior to exercising its option under the Call Option
Agreement, Drummond plans, subject to the approval of Citation's Board of
Directors, to conduct a due diligence investigation of Citation's business and
operations.
In addition, Drummond has entered into a Stock Purchase Agreement, dated
November 9, 1998, with Hugh G. Weeks pursuant to which Drummond has agreed to
purchase from Mr. Weeks 1,336,400 shares of Citation common stock. The closing
of the purchase and sale provided for in this agreement will be completed on or
prior to the later of (i) twenty days after the date of the Stock Purchase
Agreement and (ii) three days after the satisfaction of all conditions to
closing in such agreement, including the termination or expiration of the
waiting periods under HSR, if applicable.
No other contracts, arrangements, understandings or relationships (legal or
otherwise) exist among the persons named in Item 2 above, or between such
persons and any other person with respect to any securities of Citation,
including, but not limited to, transfer or voting of such securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 99.1 - Call Option Agreement, dated as of November 6, 1998, by
and between Drummond Company, Inc. and T. Morris
Hackney.
Exhibit 99.2 - Stock Purchase Agreement, dated as of November 9, 1998,
by and between Drummond Company, Inc. and Hugh G.
Weeks.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DATE: November 16, 1998.
DRUMMOND COMPANY, INC.
By: /s/ Guy K. Mitchell, Jr.
-----------------------
Guy K. Mitchell, Jr.
President
<PAGE>
EXHIBIT 99.1
CALL OPTION AGREEMENT
THIS CALL OPTION AGREEMENT (this "Agreement") is made and entered into as of
November 6, 1998, by and between Drummond Company, Inc., an Alabama corporation
("Drummond"), and T. Morris Hackney, an individual ("Hackney").
R E C I T A L S:
WHEREAS, Hackney currently is the record owner of 5,005,800 shares of common
stock of Citation Corporation, a Delaware corporation; and
WHEREAS, Drummond desires to acquire from Hackney the right and option to
purchase certain of the shares of common stock of the Company held by Hackney,
and Hackney desires to grant to Drummond such option in consideration of the
Option Price (defined below).
NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual
covenants, agreements, undertakings, representations and warranties contained
herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement,
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(a) "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning set
forth in Rule 13d-3(a) promulgated by the Securities and Exchange Commission.
(b) "CLOSING" shall have the meaning set forth in Section 6(d) hereof.
(c) "COMPANY" means Citation Corporation, a Delaware corporation.
(d) "DRUMMOND" means Drummond Company, Inc., an Alabama corporation, or an
affiliate to which Drummond may assign its rights hereunder.
(e) "EXERCISE PRICE" shall have the meaning set forth in Section 6(a).
(f) "HART-SCOTT-RODINO" shall have the meaning set forth in Section 10(a).
(g) "INFORMATION" shall have the meaning set forth in Section 10(c).
(h) "LIENS" shall mean any mortgage, lien, pledge, adverse claim, interest,
encumbrance, option, warrant, call, preemptive right, restriction or other
agreement or right of a similar nature.
(i) "NOTICE" shall have the meaning set forth in Section 9(d).
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(j) "OFFER" shall have the meaning set forth in Section 9(d).
(k) "OPTION" shall have the meaning set forth in Section 2 hereof.
(l) "OPTION PRICE" shall have the meaning set forth in Section 3.
(m) "OPTION TERM" shall mean the period beginning on the date hereof, and
ending on March 6, 1999.
(n) "REMAINING SHARES" shall have the meaning set forth in Section 9(d).
(o) "SHARES" shall mean 4,000,000 shares of the common stock of the Company,
currently owned by Hackney.
(p) "TRANSFER" shall mean to sell, exchange, give, assign, pledge, devise,
bequeath, or otherwise transfer, grant any interest in or encumber in any way.
2. Grant of Option. In consideration of the payment of the Option Price
---------------
by Drummond, Hackney does hereby give and grant to Drummond the exclusive right,
privilege and option (but not the duty) to purchase all, but not less than all,
of the Shares during the Option Term (the "Option").
3. Option Price. Drummond agrees to pay to Hackney, in cash or
------------
immediately available funds simultaneously with the execution of this Agreement,
the sum of One Hundred Thousand and No/100 Dollars ($100,000.00) as
consideration for the Option (the "Option Price"). The Option Price shall be
non-refundable, but shall be applied toward the Exercise Price in the event
Drummond exercises the Option.
4. Exercise of Option. Drummond may (but is not required to) exercise
------------------
its Option by giving written notice of its exercise of the Option to Hackney, in
accordance with the provisions of Section 10 hereof, at any time during the
Option Term.
5. Failure to Exercise Option. If the Option is not exercised prior to
--------------------------
the expiration of the Option Term, the Option shall become null and void and of
no further force and effect.
6. Contract of Sale and Purchase. Upon exercise of the Option by
-----------------------------
Drummond, this Agreement shall become a contract of sale and purchase whereby
Hackney agrees to sell, transfer and convey to Drummond and Drummond agrees to
purchase from Hackney the Shares, for the following purchase price and on the
following terms and conditions:
(a) Purchase Price. The total purchase price to be paid by Drummond to
--------------
Hackney for the Shares if the Option shall have been exercised (the "Exercise
Price") shall be an amount equal to Eighty Million and No/100 Dollars
($80,000,000.00), representing a price per share of $20.00.
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<PAGE>
(b) Payment of Purchase Price. The Exercise Price (less the amount of the
-------------------------
Option Price) shall be paid by Drummond to Hackney in cash or other immediately
available funds at the Closing.
(c) Title. At the Closing, Hackney shall deliver to Drummond good and
-----
marketable title to the Shares, free and clear of any Liens or other
restrictions, except for applicable restrictions on transfer under federal and
state securities laws.
(d) Closing. The closing shall take place at a mutually agreeable time and
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location in Birmingham, Alabama (the "Closing"), provided that the Closing shall
take place on or prior to the later of (i) thirty (30) days following the
exercise of the Option and (ii) five (5) business days following the
satisfaction, termination or waiver of all conditions to such Closing, including
but not limited to, the termination or expiration of the waiting periods under
Hart-Scott-Rodino. At Closing, Hackney shall deliver to Drummond one or more
stock certificates representing the Shares, together with duly executed stock
powers, and take such other actions and deliver such other documents as are
necessary to transfer title to the Shares to Drummond.
7. General Restrictions on Transfer of Common Stock. During the Option
------------------------------------------------
Term, Hackney agrees that he will not Transfer all or any portion of the Shares
except in accordance with the terms of this Agreement. Any Transfer or
attempted Transfer of any Shares by Hackney which is not in accordance with the
terms of this Agreement shall be null and void, ab initio, shall not be
reflected on the Company's books, and may be enjoined by a court of competent
jurisdiction by Drummond. Hackney agrees that if he breaches the restrictions
on Transfers in this Agreement, he shall indemnify and hold Drummond harmless
from and against any claims, losses, damages, expenses, costs, demands, suits,
actions or other liabilities (including without limitation attorneys' fees and
court costs) caused by, resulting from, or arising out of or in any way
connected with the breach of this Agreement.
8. Representations, Warranties and Agreements.
------------------------------------------
(a) By Hackney. Hackney hereby represents and warrants to Drummond as
----------
follows:
(i) Hackney is the record and beneficial owner of all of the
Shares;
(ii) Hackney has full power, right and authority to make and enter
into this Agreement and to sell, assign, transfer and deliver
the Shares to Drummond;
(iii) Hackney has good and valid title to the Shares, free and clear
of all Liens;
(iv) upon the consummation of the transactions provided for in this
Agreement in accordance with the terms hereof, Drummond shall
acquire good and marketable title to the Shares, free and clear
of all Liens;
(v) this Agreement constitutes the valid and binding obligation of
Hackney;
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<PAGE>
(vi) Except as provided in this Agreement, Hackney is not required
by any provision of federal, state, or local law to take any
further action or to seek any governmental approval of any
nature prior to the sale by him of the Shares;
(vii) There are no outstanding or existing provisions of the
Company's Certificate of Incorporation or Bylaws that would
prevent, limit, or condition the sale and transfer of the
Shares to Drummond or the exercise by Drummond of its rights as
a stockholder of the Company;
(viii) Assuming the representations and warranties of Drummond are
true and correct and will be true and correct as of the
Closing, there are no provisions of any contract, indenture, or
other instrument to which Hackney is a party or to which the
Shares are subject which would prevent limit, or condition the
sale and transfer of the Shares to Drummond; and
(ix) The representation and warranties of Hackney in this Agreement
are true, complete, and correct, and no such representation or
warranty contains any untrue statement of material fact or
omits to state any material fact necessary to make the
statements made not misleading.
(b) By Drummond. Drummond hereby represents and warrants to Hackney as
-----------
follows:
(i) Drummond is a corporation duly organized, validly existing and
in good standing under the laws of the State of Alabama;
(ii) Drummond has all requisite power and authority to execute and
deliver this Agreement and to perform the provisions hereof;
(iii) this Agreement has been approved by all requisite action on its
part, and constitutes the valid and binding obligation of
Drummond;
(iv) upon exercise of the Option, Drummond will acquire the Shares
for its own account for investment purposes only and not with a
view toward, or for resale in connection with, any distribution
or Transfer to any other person or entity;
(v) Drummond acknowledges its understanding that (i) the Shares
have not been registered under the Securities Act of 1933, as
amended, or any state securities laws, and must therefore be
held indefinitely unless subsequently registered under such
laws or unless, in the opinion of counsel satisfactory to the
Company, a transfer may be effected without registration
thereunder; (ii) the Company may, upon transfer of the Shares
to Drummond, instruct its transfer agent to place a restrictive
legend on the
4
<PAGE>
certificates evidencing the Shares; (iii) the Shares are not
subject to any registration rights or similar rights or
obligations, and the Company is not required to effect any
registration statement relating to all or any part of the
Shares; and (iv) the certificates evidencing the Shares
currently bear a restrictive legend and, accordingly, the
Company may rely upon the representations and warranties of
Drummond set forth herein in authorizing the transfer of the
Shares from Hackney to Drummond.
(vi) Drummond will not have, as a result of the execution of this
Agreement, and will not acquire, through the exercise of the
Option or otherwise as of the Closing, beneficial ownership of
30% or more of the outstanding shares of common stock of the
Company, if any such acquisition would constitute an event of
default under the Company's existing bank credit facility; and
(vii) The representations and warranties of Drummond in this
Agreement are true, complete and correct, and no such
representation or warranty contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements not misleading.
9. Additional Covenants and Conditions.
-----------------------------------
(a) Hart-Scott-Rodino. As promptly as practicable, but no later than
-----------------
fifteen (15) days following the exercise of the Option, Drummond and Hackney
shall complete any filing that may be required pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("Hart-Scott-Rodino") (each an
"HSR Filing"), or shall mutually agree that no such filing is required.
Drummond and Hackney shall diligently take, or fully cooperate in the taking of,
all necessary and proper steps, and provide any additional information
reasonably requested in order to comply with, the requirements of Hart-Scott-
Rodino. The parties hereto shall use their reasonable best efforts to resolve
objections, if any, that may be asserted under Hart-Scott-Rodino in connection
with the transactions provided for in this Agreement.
(b) Publicity. Hackney and Drummond shall make a joint press release
---------
announcing the execution of this Agreement and the transactions contemplated
hereby that shall be reviewed by and be acceptable to the Company. No other
publicity release or announcement concerning the transactions contemplated
hereby shall be issued by either party without the advance written consent of
the other party and the Company, except any such release or announcement as may
be required by applicable law.
(c) Reasonable Access; Confidentiality.
----------------------------------
(i) From the date hereof until Closing, Hackney shall use his best
efforts to cause the Company and its subsidiaries to give
Drummond and its representatives, upon reasonable notice to the
Company, full and complete access to the assets, properties,
books, records, agreements and employees and advisors of the
Company and its subsidiaries (the "Information") and
5
<PAGE>
shall use his best efforts to cause the Company and its
subsidiaries to permit Drummond to make such inspections as it
may reasonably require and to furnish Drummond during such period
with all such information relating to the Company and its
subsidiaries as Drummond may from time to time reasonably
request. Drummond's access to and use of any such Information
shall be subject to a confidentiality agreement satisfactory to,
and other restrictions imposed by, the Company.
(ii) Drummond agrees to use the Information solely for the purpose of
evaluating its proposed investment in the Company. Should
Drummond choose not to exercise the Option, Drummond agrees not
to use the Information in any manner, and to return all copies of
written Information to the Company or Hackney upon Hackney's
request.
(iii) Drummond further agrees to keep all such Information
confidential, provided Drummond may disclose the Information to
its directors, officers, employees, accountants, attorneys and
other advisers who need to know such Information for the purpose
of evaluating its proposed investment in the Company (it being
understood that all such persons will be advised of the
obligation to keep such Information confidential). The foregoing
restrictions shall not apply to any Information (a) which is or
was generally available to the public from sources other than
Drummond or its representatives, (b) is or becomes available to
Drummond from a third party which is not known by Drummond to be
subject to a confidentiality agreement with Hackney or the
Company, (c) is already in the possession of Drummond or
developed by Drummond without reference to any Information, or
(d) which Drummond becomes obligated to disclose by any law,
regulation or judicial process.
(d) Right of First Refusal. Hackney hereby agrees to grant to Drummond a
----------------------
right of first refusal with respect to the Remaining Shares (defined below) on
the terms set forth in this Section 9(d); provided, however, that the grant of
such right to Drummond, as set forth in this Section 9(d), is subject to the
receipt by Hackney of a consent or acknowledgement from the Company's lenders
that the granting of such right would not constitute an event of default under
the Company's existing bank credit facility. Hackney further agrees to use his
best efforts to obtain such consent or acknowledgement as soon as possible
following the date hereof, it being understood that the granting of such consent
or acknowledgment will be subject to the discretion of the Company's lender.
(i) If, at any time after the date hereof, Hackney receives a bona
fide offer from a third party (the "Offer") for the purchase of
all or any portion of the shares of common stock of the Company
owned by Hackney other than the Shares (the "Remaining Shares")
and Hackney desires to sell the same, Drummond shall have the
right and option to purchase such Remaining Shares at the same
price and upon the same terms and conditions as are contained in
the Offer. If Hackney wishes to
6
<PAGE>
sell pursuant to the Offer, Hackney shall give written notice to
Drummond of his desire to sell (the "Notice"). The Notice shall
specify the Remaining Shares which Hackney owns and proposes to
sell, the name and address of the proposed buyer, and the price
and other terms of the sale contained in the proposed buyer's
offer.
(ii) If Drummond desires to buy the Remaining Shares subject to the
Offer, Drummond shall notify Hackney in writing within ten (10)
days after the receipt of Notice. If Drummond exercises its
option pursuant to Section 9(d), the transaction shall be
consummated at a "closing" which shall take place at a mutually
agreeable time and place within thirty (30) days after such
exercise.
(iii) If Drummond shall fail or refuse to exercise its option to
purchase such Remaining Shares pursuant to Section 9(d) within
the ten (10) day period allowed therefor, Hackney shall
thereafter be free to dispose of the Remaining Shares upon the
terms and conditions set forth in the Notice for a period of
thirty (30) days following the expiration of all of the rights of
Drummond. If such disposition is not effected by Hackney within
thirty (30) days, the Remaining Shares shall remain subject to
all terms and provisions of this Section 9(d).
(e) Additional Conditions to Closing. In addition to the other conditions
--------------------------------
set forth herein, the Closing of the transactions contemplated hereby shall be
subject to the following conditions: (i) the representations and warranties of
the parties hereto shall be true and correct in all material respects on and as
of the date hereof and as of the Closing with the same effect as though such
representations and warranties had been made or given as of the Closing; (ii)
the parties shall have performed and complied with all agreements and conditions
required by this Agreement to be performed and complied with by them prior to or
at the Closing in all material respects; and (iii) no court of competent
jurisdiction or governmental agency shall have rendered a judgment or issued an
order prohibiting or preventing the transactions provided for herein, it being
understood that the mere filing of a claim or lawsuit by a third party shall not
affect the obligations of the parties hereunder.
10. Notices. All notices or other communications provided for herein
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shall be validly given, made or served if in writing and delivered personally or
sent by certified or registered mail, return receipt requested, postage prepaid
or transmitted by facsimile transmission, as set forth below:
(a) if to Drummond, addressed to:
Drummond Company, Inc.
530 Beacon Parkway West
Birmingham, Alabama 35209
Attention: Guy K. Mitchell, Jr.
Facsimile: (205)917-3160
7
<PAGE>
With a copy to:
William B. Long
Drummond Company, Inc.
530 Beacon Parkway West
Birmingham, Alabama 35209
Facsimile: (205) 945-6521
(b) if to Hackney, addressed to:
T. Morris Hackney
Citation Corporation
2 Office Park Circle
Suite 204
Birmingham, Alabama 35233
Facsimile: (205) 870-8211
With a copy to:
Thomas A. Ritchie
Ritchie and Rediker
312 23rd Street North
Birmingham, Alabama 35203-3878
Facsimile: (205) 324-7832
11. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be interpreted, construed and
-------------
enforced according to the laws of the State of Delaware.
(b) Captions. The captions or headings in this Agreement are made for
--------
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
(c) Binding Effect. This Agreement shall be binding upon the parties
--------------
hereto, their heirs, legal representatives, successors, assigns, and legatees;
provided, however, that Drummond agrees not to transfer or assign its rights
under this Agreement, except to an affiliated entity, without the prior written
consent of Hackney.
(d) Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties, and may not be revoked, modified or amended in any manner without the
prior written consent of the parties hereto.
(e) Further Acts. Each party hereby agrees to perform any acts and to
------------
execute and deliver any documents which may be reasonably necessary to carry out
the provisions of this Agreement.
8
<PAGE>
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall for all purposes be deemed to be an original,
but each of which, when so executed, shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement or caused
this Agreement to be executed on their behalf as of the date and year first
above written.
DRUMMOND COMPANY, INC.
an Alabama corporation
By /s/ Guy K. Mitchell, Jr.
_____________________________
GUY K. MITCHELL, JR.
Its President
/s/ T. Morris Hackney
________________________________
T. MORRIS HACKNEY, an individual
9
<PAGE>
EXHIBIT 99.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of November 10, 1998, by and between Drummond Company, Inc., an Alabama
corporation ("Drummond"), and Hugh G. Weeks, an individual ("Weeks").
R E C I T A L S:
WHEREAS, Weeks currently is the record owner of 1,336,400 shares of common
stock of Citation Corporation, a Delaware corporation; and
WHEREAS, Drummond desires to purchase from Weeks and Weeks desires to sell
to Drummond certain of the shares of common stock of the Company held by Weeks
on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual
covenants, agreements, undertakings, representations and warranties contained
herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement,
-----------
(a) "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning set
forth in Rule 13d-3(a) promulgated by the Securities and Exchange Commission.
(b) "CLOSING" shall have the meaning set forth in Section 2(d) hereof.
(c) "COMPANY" means Citation Corporation, a Delaware corporation.
(d) "DRUMMOND" means Drummond Company, Inc., an Alabama corporation, or an
affiliate to which Drummond may assign its rights hereunder.
(e) "HART-SCOTT-RODINO" shall have the meaning set forth in Section 4(a).
(f) "LIENS" shall mean any mortgage, lien, pledge, adverse claim, interest,
encumbrance, option, warrant, call, preemptive right, restriction or other
agreement or right of a similar nature.
(f) "PURCHASE PRICE" shall have the meaning set forth in Section 2(a)
hereof.
(g) "SHARES" shall mean 1,336,400 shares of the common stock of the Company,
currently owned by Weeks.
<PAGE>
(h) "TRANSFER" shall mean to sell, exchange, give, assign, pledge, devise,
bequeath, or otherwise transfer, grant any interest in or encumber in any way.
2. Sale and Purchase of Shares. At the Closing, Weeks shall sell,
---------------------------
transfer and convey to Drummond and Drummond shall purchase from Weeks the
Shares, for the following purchase price and on the following terms and
conditions:
(a) Purchase Price. The total purchase price to be paid by Drummond to
--------------
Weeks for the Shares (the "Purchase Price") shall be an amount equal to Twenty
Million Forty-Six Thousand and No/100 Dollars ($20,046,000.00), representing a
price per share of $15.00.
(b) Payment of Purchase Price. The Purchase Price shall be paid by Drummond
-------------------------
to Weeks in cash or other immediately available funds at the Closing.
(c) Title. At the Closing, Weeks shall deliver to Drummond good and
-----
marketable title to the Shares, free and clear of any Liens or other
restrictions, except for applicable restrictions on transfer under federal and
state securities laws.
(d) Closing. The closing shall take place at a mutually agreeable time and
-------
location in Birmingham, Alabama (the "Closing"), provided that the Closing shall
take place on or prior to the later of (i) twenty (20) days following the date
hereof and (ii) three (3) business days following the satisfaction, termination
or waiver of all conditions to such Closing, including but not limited to, the
termination or expiration of the waiting periods under Hart-Scott-Rodino, if
applicable. At Closing, Weeks shall deliver to Drummond one or more stock
certificates representing the Shares, together with duly executed stock powers,
and take such other actions and deliver such other documents as are necessary to
transfer title to the Shares to Drummond.
3. Representations, Warranties and Agreements.
------------------------------------------
(a) By Weeks. Weeks hereby represents and warrants to Drummond as follows:
--------
(i) Weeks is the record and beneficial owner of all of the Shares;
(ii) Weeks has full power, right and authority to make and enter into
this Agreement and to sell, assign, transfer and deliver the
Shares to Drummond;
(iii) Weeks has good and valid title to the Shares, free and clear of
all Liens;
(iv) upon the consummation of the transactions provided for in this
Agreement in accordance with the terms hereof, Drummond shall
acquire good and marketable title to the Shares, free and clear
of all Liens;
(v) this Agreement constitutes the valid and binding obligation of
Weeks;
2
<PAGE>
(vi) Except as provided in this Agreement, Weeks is not required by
any provision of federal, state, or local law to take any further
action or to seek any governmental approval of any nature prior
to the sale by him of the Shares;
(vii) There are no outstanding or existing provisions of the
Company's Certificate of Incorporation or Bylaws that would
prevent, limit, or condition the sale and transfer of the Shares
to Drummond or the exercise by Drummond of its rights as a
stockholder of the Company;
(viii) Assuming the representations and warranties of Drummond are
true and correct and will be true and correct as of the Closing,
there are no provisions of any contract, indenture, or other
instrument to which Weeks is a party or to which the Shares are
subject which would prevent limit, or condition the sale and
transfer of the Shares to Drummond;
(ix) Weeks is aware that Drummond has entered into an agreement with
T. Morris Hackney ("Hackney") pursuant to which it has the right
and option to purchase from Hackney certain shares of the
Company's common stock held by Hackney on terms which are not
identical to the terms of this Agreement, including the purchase
price to be paid by Drummond, which, in Hackney's case, is $20.00
per share;
(x) Weeks has knowledge and experience in financial and business
matters, is capable of evaluating the merits and risks of selling
the Shares to Drummond, is familiar with the Company and its
prospects and has determined to sell the Shares on the terms set
forth herein based upon such knowledge; and
(xi) The representation and warranties of Weeks in this Agreement are
true, complete, and correct, and no such representation or
warranty contains any untrue statement of material fact or omits
to state any material fact necessary to make the statements made
not misleading.
(b) By Drummond. Drummond hereby represents and warrants to Weeks as
-----------
follows:
(i) Drummond is a corporation duly organized, validly existing and in
good standing under the laws of the State of Alabama;
(ii) Drummond has all requisite power and authority to execute and
deliver this Agreement and to perform the provisions hereof;
(iii) this Agreement has been approved by all requisite action on its
part, and constitutes the valid and binding obligation of
Drummond;
3
<PAGE>
(iv) upon consummation of the transactions provided for herein,
Drummond will acquire the Shares for its own account for
investment purposes only and not with a view toward, or for
resale in connection with, any distribution or Transfer to any
other person or entity;
(v) Drummond acknowledges its understanding that (i) the Shares have
not been registered under the Securities Act of 1933, as amended,
or any state securities laws, and must therefore be held
indefinitely unless subsequently registered under such laws or
unless, in the opinion of counsel satisfactory to the Company, a
transfer may be effected without registration thereunder; (ii)
the Company may, upon transfer of the Shares to Drummond,
instruct its transfer agent to place a restrictive legend on the
certificates evidencing the Shares; (iii) the Shares are not
subject to any registration rights or similar rights or
obligations, and the Company is not required to effect any
registration statement relating to all or any part of the Shares;
and (iv) the certificates evidencing the Shares currently bear a
restrictive legend and, accordingly, the Company may rely upon
the representations and warranties of Drummond set forth herein
in authorizing the transfer of the Shares from Weeks to Drummond.
(vi) Drummond will not have, as a result of the execution of this
Agreement, and will not acquire as of the Closing, Beneficial
Ownership of 30% or more of the outstanding shares of common
stock of the Company, if any such acquisition would constitute an
event of default under the Company's existing bank credit
facility;
(vii) Drummond has knowledge and experience in financial and business
matters, is capable of evaluating the merits and risks of
purchasing the Shares from Weeks, is familiar with the Company
and its prospects and has had the right and opportunity to
receive and review all relevant information as it has deemed
necessary, advisable or prudent in evaluating the Company and the
purchase of the Shares and, based upon its analysis of such
information and without reliance upon any representations by
Weeks as to the status of the Company, has determined to purchase
the Shares on the terms set forth herein; and
(viii) The representations and warranties of Drummond in this
Agreement are true, complete and correct, and no such
representation or warranty contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements not misleading.
4
<PAGE>
4. Additional Covenants and Conditions.
-----------------------------------
(a) Hart-Scott-Rodino. As promptly as practicable, but no later than
-----------------
fifteen (15) days following the date hereof, Drummond and Weeks shall complete
any filing that may be required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("Hart-Scott-Rodino"), or shall mutually
agree that no such filing is required. Drummond and Weeks shall diligently
take, or fully cooperate in the taking of, all necessary and proper steps, and
provide any additional information reasonably requested in order to comply with,
the requirements of Hart-Scott-Rodino. The parties hereto shall use their
reasonable best efforts to resolve objections, if any, that may be asserted
under Hart-Scott-Rodino in connection with the transactions provided for in this
Agreement. If the parties determine that a Hart-Scott-Rodino filing is
necessary, then they shall cooperate in making such filing as soon as reasonably
practicable and, in connection with such filing, request an early termination of
the waiting period. Drummond will pay for any and all filing fees incurred in
connection with any filing required pursuant to Hart-Scott-Rodino.
(b) Publicity. Weeks and Drummond shall make a joint press release
---------
announcing the execution of this Agreement and the transactions contemplated
hereby that shall be reviewed by and be acceptable to the Company. No other
publicity release or announcement concerning the transactions contemplated
hereby shall be issued by either party without the advance written consent of
the other party and the Company, except any such release or announcement as may
be required by applicable law.
(c) Additional Conditions to Closing. In addition to the other
--------------------------------
conditions set forth herein, the Closing of the transactions contemplated hereby
shall be subject to the following conditions: (i) the representations and
warranties of the parties hereto shall be true and correct in all material
respects on and as of the date hereof and as of the Closing with the same effect
as though such representations and warranties had been made or given as of the
Closing; (ii) the parties shall have performed and complied with all agreements
and conditions required by this Agreement to be performed and complied with by
them prior to or at the Closing in all material respects; and (iii) no court of
competent jurisdiction or governmental agency shall have rendered a judgment or
issued an order prohibiting or preventing the transactions provided for herein,
it being understood that the mere filing of a claim or lawsuit by a third party
shall not affect the obligations of the parties hereunder.
5. Notices. All notices or other communications provided for herein
-------
shall be validly given, made or served if in writing and delivered personally or
sent by certified or registered mail, return receipt requested, postage prepaid
or transmitted by facsimile transmission, as set forth below:
5
<PAGE>
(a) if to Drummond, addressed to:
Drummond Company, Inc.
530 Beacon Parkway West
Birmingham, Alabama 35209
Attention: Guy K. Mitchell, Jr.
Facsimile: (205)917-3160
With a copy to:
William B. Long
Drummond Company, Inc.
530 Beacon Parkway West
Birmingham, Alabama 35209
Facsimile: (205) 945-6521
(b) if to Weeks, addressed to:
Hugh G. Weeks
2 Office Park Circle
Suite 1
Birmingham, Alabama 35233
Facsimile: (205) 870-5146
With a copy to:
Harold B. Kushner
Berkowitz, Lefkovits, Isom & Kushner
1600 SouthTurst Tower
420 20th Street North
Birmingham, Alabama 35203-3204
Facsimile: (205) 322-8007
6. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be interpreted, construed and
-------------
enforced according to the laws of the State of Delaware.
(b) Captions. The captions or headings in this Agreement are made for
--------
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
(c) Binding Effect. This Agreement shall be binding upon the parties
--------------
hereto, their heirs, legal representatives, successors, assigns, and legatees;
provided, however, that
6
<PAGE>
Drummond agrees not to transfer or assign its rights under this Agreement,
except to an affiliated entity, without the prior written consent of Weeks.
(d) Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties, and may not be revoked, modified or amended in any manner without the
prior written consent of the parties hereto.
(e) Further Acts. Each party hereby agrees to perform any acts and to
------------
execute and deliver any documents which may be reasonably necessary to carry out
the provisions of this Agreement.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall for all purposes be deemed to be an original,
but each of which, when so executed, shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement or caused
this Agreement to be executed on their behalf as of the date and year first
above written.
DRUMMOND COMPANY, INC.
an Alabama corporation
By /s/ Guy K. Mitchell, Jr.
___________________________
GUY K. MITCHELL, JR.
Its President
/s/ Hugh G. Weeks
______________________________
HUGH G. WEEKS, an individual
7
