EXHIBIT 10
AGREEMENT AND PLAN OF MERGER
dated as of February 16, 1998
by and among
METALS USA, INC.
PMC ACQUISITION CORP.
(a subsidiary of Metals USA, Inc.)
PACIFIC METAL COMPANY
and
the Stockholders named herein
February 16, 1998 (6:05PM))
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 THE MERGER.......................................................1
1.2 EFFECTIVE TIME...................................................2
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS
OF SURVIVING CORPORATION.........................................2
1.4 EFFECT OF MERGER.................................................2
1.5 NAME CHANGE......................................................3
2. CONVERSION OF STOCK; OPTIONS AND SARS; CLOSING.........................3
2.1 MANNER OF CONVERSION.............................................3
2.2 OPTIONS..........................................................4
2.3 SARS.............................................................4
2.4 CLOSING..........................................................4
2.5 DISSENTERS' RIGHTS...............................................4
2.6 SHAREHOLDER APPROVAL AND DISCLOSURE..............................4
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................5
3.1 DUE ORGANIZATION.................................................5
3.2 AUTHORIZATION....................................................5
3.3 CAPITAL STOCK OF THE COMPANY.....................................5
3.4 SUBSIDIARIES.....................................................6
3.5 FINANCIAL STATEMENTS.............................................6
3.6 LIABILITIES AND OBLIGATIONS......................................6
3.7 ACCOUNTS AND NOTES RECEIVABLE....................................6
3.8 PERMITS AND INTANGIBLES..........................................7
3.9 ENVIRONMENTAL MATTERS............................................7
3.10 PERSONAL PROPERTY................................................8
3.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........8
3.12 REAL PROPERTY....................................................9
3.13 INSURANCE........................................................9
3.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....9
3.15 EMPLOYEE BENEFIT PLANS..........................................10
3.16 CONFORMITY WITH LAW; LITIGATION.................................11
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3.17 TAXES...........................................................11
3.18 NO VIOLATIONS; NO CONSENTS REQUIRED.............................13
3.19 ABSENCE OF CHANGES..............................................13
3.20 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY............................15
3.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........15
3.22 DISCLOSURE......................................................15
3.23 PREEMPTIVE RIGHTS...............................................15
3.24 CERTAIN BUSINESS PRACTICES......................................15
3.25 NOTICES AND CONSENTS............................................16
3.26 ESOP AUTHORIZATION..............................................16
3.27 ESOP APPRAISAL AND FAIRNESS OPINION.............................16
3.28 ESOP OWNERSHIP OF CAPITAL STOCK OF THE COMPANY..................16
4. REPRESENTATIONS OF METALS.............................................17
4.1 DUE ORGANIZATION................................................17
4.2 AUTHORIZATION...................................................17
4.3 NO VIOLATIONS...................................................17
4.4 VALIDITY OF OBLIGATIONS.........................................17
4.5 METALS STOCK....................................................17
4.6 ABSENCE OF CHANGES..............................................18
4.7 CAPITALIZATION..................................................18
4.8 CONSENTS AND APPROVALS..........................................18
4.9 SUBSIDIARY STATUS...............................................18
5. COVENANTS PRIOR TO CLOSING............................................18
5.1 COOPERATION.....................................................18
5.2 CONDUCT OF BUSINESS PENDING CLOSING.............................19
5.3 PROHIBITED ACTIVITIES...........................................19
5.4 NO SHOP.........................................................19
5.5 FURTHER ASSURANCES..............................................20
5.6 NOTICES AND CONSENTS............................................20
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY..............................................20
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS......20
6.2 SATISFACTION....................................................20
6.3 CONSENTS AND APPROVALS..........................................20
6.4 NO MATERIAL ADVERSE EFFECT......................................20
6.5 TAX MATTERS.....................................................21
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6.6 STOCKHOLDER APPROVAL............................................21
6.7 DELIVERY OF PROSPECTUS; REGISTRATION STATEMENT..................21
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS
AND NEWCO.............................................................21
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS......21
7.2 NO MATERIAL ADVERSE EFFECT; DISSENTING STOCKHOLDERS LIMITATION..21
7.3 SATISFACTION....................................................21
7.4 CONSENTS AND APPROVALS..........................................21
8. DELIVERIES............................................................22
8.1 EMPLOYMENT AGREEMENTS...........................................22
8.2 OPINION OF COUNSEL TO THE COMPANY...............................22
8.3 OPINION OF COUNSEL TO METALS....................................22
8.4 GOOD STANDING CERTIFICATES......................................22
8.5 FIRPTA CERTIFICATE..............................................22
8.6 RELATED PARTY TRANSACTIONS......................................22
8.7 TAX MATTERS.....................................................22
8.8 STOCKHOLDERS' RELEASE...........................................23
8.9 ESOP............................................................23
8.10 STOCK OPTIONS...................................................23
9. POST-CLOSING COVENANTS................................................23
9.1 PREPARATION AND FILING OF TAX RETURNS...........................23
9.2 FURTHER ASSURANCES..............................................24
10. INDEMNIFICATION.......................................................24
10.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES. .....24
10.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.....................24
10.3 INDEMNIFICATION BY METALS.......................................25
10.4 SPECIFIC INDEMNIFICATION........................................25
10.5 THIRD PERSON CLAIMS.............................................25
10.6 METHOD OF PAYMENT...............................................26
10.7 LIMITATIONS ON INDEMNIFICATION..................................26
11. NONCOMPETITION........................................................26
11.1 PROHIBITED ACTIVITIES...........................................26
11.2 EQUITABLE RELIEF................................................27
11.3 REASONABLE RESTRAINT............................................27
11.4 SEVERABILITY; REFORMATION.......................................27
11.5 INDEPENDENT COVENANT............................................27
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12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................28
12.1 GENERAL.........................................................28
12.2 EQUITABLE RELIEF................................................28
12.3 SURVIVAL........................................................28
13. INTENDED TAX TREATMENT................................................28
13.1 TAX-FREE REORGANIZATION.........................................28
14. SECURITIES LAW MATTERS................................................29
14.1 ECONOMIC RISK; SOPHISTICATION...................................29
14.2 COMPLIANCE WITH LAW.............................................29
14.3 CONTRACTUAL RESTRICTIONS........................................30
15. GENERAL...............................................................30
15.1 COOPERATION.....................................................30
15.2 SUCCESSORS AND ASSIGNS..........................................30
15.3 ENTIRE AGREEMENT................................................30
15.4 COUNTERPARTS....................................................31
15.5 BROKERS AND AGENTS..............................................31
15.6 EXPENSES........................................................31
15.7 NOTICES.........................................................31
15.8 GOVERNING LAW...................................................33
15.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................33
15.10 EFFECT OF INVESTIGATION; KNOWLEDGE..............................33
15.11 EXERCISE OF RIGHTS AND REMEDIES.................................33
15.12 TIME............................................................33
15.13 REFORMATION AND SEVERABILITY....................................34
15.14 REMEDIES CUMULATIVE.............................................34
15.15 CAPTIONS........................................................34
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SCHEDULES
SCHEDULE 2.1. Manner of Conversion
SCHEDULE 2.2. Outstanding Options
SCHEDULE 2.3. Outstanding SARs
SCHEDULE 2.6. Shareholder Approval and Disclosure
SCHEDULE 3.1. Due Organization
SCHEDULE 3.2. Authorization
SCHEDULE 3.3. Capital Stock of the Company
SCHEDULE 3.4. Subsidiaries
SCHEDULE 3.5. Financial Statements
SCHEDULE 3.6. Liabilities and Obligations
SCHEDULE 3.7. Accounts and Notes Receivable
SCHEDULE 3.8. Permits and Intangibles
SCHEDULE 3.9. Environmental Matters
SCHEDULE 3.10. Personal Property
SCHEDULE 3.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 3.12. Real Property
SCHEDULE 3.13. Insurance
SCHEDULE 3.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 3.15. Employee Benefit Plans
SCHEDULE 3.16. Conformity with Law; Litigation
SCHEDULE 3.18. No Violations; No Consents Required
SCHEDULE 3.19. Absence of Change
SCHEDULE 3.20. Deposit Accounts; Powers of Attorney
SCHEDULE 3.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 3.26. ESOP Authorization
SCHEDULE 4.8 Consents and Approvals
SCHEDULE 5.3. Prohibited Activities
SCHEDULE 8.1. Employment Agreement
SCHEDULE 8.10. Stock Options
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ANNEXES
ANNEX I - FORM OF EMPLOYMENT AGREEMENT
ANNEX II - FORM OF OPINION OF COUNSEL TO COMPANY AND
STOCKHOLDERS
ANNEX III - FORM OF OPINION OF COUNSEL TO METALS
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of
February 16, 1998, by and among METALS USA, Inc., a Delaware corporation
("Metals"), PMC ACQUISITION CORP., an Oregon corporation and wholly-owned
subsidiary of Metals ("Newco"), PACIFIC METAL COMPANY, an Oregon corporation
(the "Company"), and the stockholders identified on the signature pages hereto
(the "Stockholders").
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco pursuant to this
Agreement and the applicable provisions of the laws of the State Oregon (the
"State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Stockholders include the Trustees (the "ESOP Trustees") of
the Company's Employee Stock Ownership Plan and Trust (the "ESOP"), acting on
behalf of the ESOP, who join in this Agreement to evidence their approval, on
behalf of the ESOP, of the transactions contemplated hereby, but who make only
limited representations and warranties herein concerning their ownership of
Company Stock (as defined below), approval of the transactions contemplated
hereby, and related matters, and none of such Trustees, the ESOP or any of the
beneficiaries of the ESOP are intended to make any representations concerning
the business of the Company or related matters; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties hereto are consummating the transactions described herein;
NOW, THEREFORE, in consideration of the mutual agreements, representations
and warranties herein contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Newco (the
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"Merger") and the separate existence of the Company shall cease, all in
accordance with the provisions of the law of the State of Incorporation. Newco
shall be the surviving corporation in the Merger and is sometimes hereinafter
called the "Surviving Corporation".
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as articles or certificates of merger, in form appropriate for
filing, are filed with the Secretary of State (or other appropriate authorities)
of the State of Incorporation (the "Merger Filings"). The Merger Filings shall
be made as soon as practicable after the approval of the Merger by the
Stockholders and the sole shareholder of Newco.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time:
(i) the Certificate of Incorporation of Newco then in effect shall
be the Certificate of Incorporation of the Surviving Corporation until they
shall thereafter be duly amended;
(ii) the By-laws of Newco then in effect shall be the By-laws of the
Surviving Corporation until they shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of (a) the persons who were directors of the Company immediately prior
to the Effective Time, and (b) J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, who shall be appointed to the
Board of Directors of the Surviving Corporation effective immediately after the
Effective Time (and, if necessary, the size of the Board of Directors of the
Surviving Corporation shall be expanded so as to accommodate such appointments);
and
(iv)the officers of the Company immediately prior to the Effective
Time shall become officers of the Surviving Corporation in the same capacity or
capacities, and J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be appointed as an additional Vice
President, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be appointed as an additional Vice
President and Assistant Treasurer, and ▇▇▇▇▇ St. Clair shall be appointed as an
Assistant Treasurer and Assistant Secretary, and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be
appointed as an Assistant Secretary, of the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of Newco shall continue unaffected
and unimpaired by the Merger and the corporate franchises, existence and rights
of the Company shall be merged with and into Newco, and Newco, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time, the
separate existence of the Company shall cease and, in accordance with the terms
of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in
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action, and all and every other interest of or belonging to or due to the
Company and Newco shall be taken and deemed to be transferred to, and vested in
and assumed by, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Company and Newco; and the title to any real
estate, or interest therein, whether by deed or otherwise, under the laws of the
state of Incorporation vested in the Company and Newco, shall not revert or be
in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the Company and Newco and any claim
existing, or action or proceeding pending, by or against the Company or Newco
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the Company or Newco shall be impaired by the
Merger, and all debts, liabilities and duties of the Company and Newco shall
attach to the Surviving Corporation, and may be enforced against the Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
1.5 NAME CHANGE. After the Effective Time, or as a part of the Merger,
Metals shall have the right to elect to cause the Surviving Corporation to
change its name to "Pacific Metal Company".
2. CONVERSION OF STOCK; OPTIONS AND SARS; CLOSING
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) Newco Stock,
issued and outstanding immediately prior to the Effective Time, respectively,
into shares of (x) Metals Stock (as defined below) and (y) common stock of the
Surviving Corporation, respectively, shall be as follows:
As of the Effective Time:
(i) as set forth on SCHEDULE 2.1, each share of Company Stock issued
and outstanding immediately prior to the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, automatically shall be
converted into the right to receive its pro rata interest in the aggregate
consideration payable to all holders of Company Stock, which consideration shall
consist of (a) xxx,xxx shares of common stock, par value $.01 per share, of
Metals ("Metals Stock"), plus (b) $ x,xxx,xxx in cash (payable by wire transfer
of immediately available funds) and which consideration shall be allocated among
each share of Company Stock in the amounts set forth in SCHEDULE 2.1 which
schedule shall be completed and agreed upon by the parties between the date
hereof and the Closing;
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(ii) all shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired and no shares of Metals
Stock or other consideration shall be delivered or paid in exchange therefor;
and
(iii) each share of Newco Stock issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall continue to be
owned by Metals immediately after the Effective Time.
2.2 OPTIONS. All outstanding options and other rights of any nature
whatsoever to acquire shares of capital stock of the Company or any instrument
convertible into or exchangeable for shares of capital stock of the Company
shall be canceled at the Effective Time. Metals shall issue to the holders of
such options or other rights (the names of which holders and a description of
the options or other rights held by each is set forth on SCHEDULE 2.2 hereto)
188,514 shares of Metals Stock to be allocated to such holders as set forth on
such SCHEDULE 2.2.
2.3 SARS. The Company's Stock Appreciation Rights Plan (the "SAR Plan")
shall be terminated at the Effective Time, and Metals shall provide the Company
$x,xxx,xxx to be distributed as described in the following sentence. Immediately
before the Effective Time, Metals shall cause the Company to pay to the holders
of the outstanding stock appreciation rights ("SARs") issued pursuant to the SAR
Plan (the names of which holders and the number of share equivalents covered by
such SARs held by each is set forth on SCHEDULE 2.3 hereto) the amount in cash
(totaling $x,xxx,xxx) shown opposite each such holder's name on such SCHEDULE
2.3.
2.4 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place by exchange among the parties of
facsimiles of executed documents to be delivered at the Closing (with executed
originals to be exchanged by overnight courier service or other means acceptable
to the parties) on the date (the "Closing Date") on which the conditions set
forth herein to the obligations of the parties to consummate the transactions
described herein are satisfied or waived or on such other date and place as the
parties may mutually determine but in no event later than April 1, 1998. At the
Closing the Stockholders are delivering to Metals the certificates representing
the Company Stock, duly endorsed in blank by the Stockholders, or accompanied by
blank stock powers, and with all necessary transfer tax and other revenue
stamps, acquired at the Stockholders' expense, affixed and canceled. The
Stockholders agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such Company Stock or with respect to the stock powers accompanying
any Company Stock.
2.5 DISSENTERS' RIGHTS. Metals, Newco and/or the Surviving Corporation
shall be responsible for payment of amounts required to be paid, if any, as a
result of any shareholder of the Company or any participant in the ESOP
exercising his or her right to dissent from, and obtain
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payment of the fair value of his or her shares in the event of, the consummation
of the Merger. Metals and Newco acknowledge and agree that the ESOP Trustees
intend to exercise dissenters' rights to the extent and in the proportion that
the ESOP participants instruct them to do so.
2.6 SHAREHOLDER APPROVAL AND DISCLOSURE. The Stockholders and the ESOP
Trustees of the Company hereby agree to the exercise of the options and payment
of the SARs as more fully described on SCHEDULE 2.6 attached hereto. The
Stockholders and the ESOP Trustees acknowledge that they are fully aware of all
material facts related to the exercise of the options and payment of the SARs.
Information relating to such exercise and payment is included on SCHEDULE 2.6.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders (other than the ESOP Trustees, who make only the limited
representations and warranties set forth in Sections 3.26 - 3.28 hereof and
other than the ESOP and its participants and their beneficiaries in their
capacity as such) jointly and severally represent and warrant that all of the
following representations and warranties are true at the date of this Agreement.
3.1 DUE ORGANIZATION. The Company is a corporation duly organized and
validly existing under the laws of the State of Incorporation, and has all
requisite power and authority to carry on its business as it is now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not be reasonably likely to have
a material adverse effect on the business, operations, properties, assets or
financial condition of the Company taken as a whole (as used herein with respect
to the Company, or with respect to any other person, a "Material Adverse
Effect"). SCHEDULE 3.1 sets forth a list of all jurisdictions in which the
Company is authorized or qualified to do business. True, complete and correct
copies of the Articles of Incorporation and Bylaws, each as amended, of the
Company (the "Charter Documents") are all attached to SCHEDULE 3.1. The stock
records of the Company, a copy of which is attached to SCHEDULE 3.1, are correct
and complete in all material respects. There are no minutes that have not been
made available to Metals, and all of such minutes are correct and complete in
all material respects.
3.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement, which has been approved by the Board of
Directors of the Company. Prior to consummating the Merger, and as a condition
precedent thereto, the Company is required to obtain the approval of a majority
of the Stockholders. A copy of the resolution adopted by the Board of Directors
of the Company approving this Agreement and recommending the Merger to the
Stockholders, certified by the
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Secretary or an Assistant Secretary of the Company, is attached hereto as
SCHEDULE 3.2. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them enforceable in accordance with its terms, including
the conditions precedent set forth in Article 7.
3.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of (i) 500,000 shares of common stock, par value $1.00
per share, of which 177,250 shares are issued and outstanding. The Company Stock
is owned of record and beneficially by the Stockholders in the amounts set forth
on SCHEDULE 3.3 and, except as set forth on SCHEDULE 3.3, all of such shares are
owned free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the issued
and outstanding shares of the capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws concerning the issuance of securities. None of
such shares were issued in violation of any preemptive rights or similar rights
of any person. Except as set forth on SCHEDULES 2.2 AND 2.3, no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
Company to issue any shares of its capital stock or obligates any Stockholder to
transfer any shares of Company Stock to any person except pursuant to this
Agreement, and no stock appreciation right or other similar right or other right
of any nature whatsoever exists that entitles or could in the future entitle any
person to any amount of cash or other property from the Company based on the
value of the Company Stock.
3.4 SUBSIDIARIES. Except as set forth on SCHEDULE 3.4, the Company has no
subsidiaries and has not conducted business under any name except its exact
legal name set forth on its certificate or articles of incorporation. Except as
set forth in SCHEDULE 3.4, the Company does not own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
3.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 3.5: balance sheets of the Company
as of December 31, 1997 and 1996, and any related statements of operations,
stockholder's equity and cash flows for the two-year period ended December 31,
1997, together with any related notes and schedules (the "Financial
Statements"). December 31, 1997 is herein called the "Balance Sheet Date". The
Financial Statements have been prepared from the books and records of the
Company in conformity with generally accepted accounting principles ("GAAP")
applied on a basis consistent with preceding years, with the exception of the
accounting for SARs which has been reported as a correction of an error, and
present fairly in all material respects the financial position and results of
operations of the
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Company as of the dates of such statements and for the periods covered thereby.
The books of account of the Company have been kept accurately in the ordinary
course of business, the transactions entered therein represent bona fide
transactions, and the revenues, expenses, assets and liabilities of the Company
have been properly recorded therein in all material respects.
3.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements and except for trade
payables incurred in the ordinary course of business or as otherwise set forth
on SCHEDULE 3.6 hereto, the Company has no liabilities or obligations of any
kind, whether accrued, absolute, secured or unsecured, contingent or otherwise.
3.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 3.7 sets forth an accurate
summary of the accounts, by branch, and notes receivable of the Company as of
January 30, 1998. Receivables from and advances to employees and the
Stockholders and any entities or persons related to or affiliated with the
Stockholders are separately identified on SCHEDULE 3.7. SCHEDULE 3.7 also sets
forth an accurate aging analysis of all accounts by branch, notes and other
receivables as of the Balance Sheet Date, showing amounts due in 30, 60 and
90-day aging categories. Except to the extent reflected on SCHEDULE 3.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 3.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
3.8 PERMITS AND INTANGIBLES. To the best of the Company's knowledge, the
Company holds all material licenses, franchises, permits and other governmental
authorizations required in connection with the conduct of the Company's
business. SCHEDULE 3.8 sets forth an accurate list and summary description of
all such material licenses, franchises, permits and other governmental
authorizations, including permits, titles (including licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by the Company or any of its employees (including
interests in software or other technology systems, programs and intellectual
property) (it being understood and agreed that a list of all environmental
permits and other environmental approvals is set forth on SCHEDULE 3.9). To the
best of the Company's knowledge, the licenses, franchises, permits and other
governmental authorizations listed on SCHEDULES 3.8 and 3.9 are valid, and the
Company has not received any notice that any person intends to cancel, terminate
or not renew any such license, franchise, permit or other governmental
authorization. To the best of the Company's knowledge, the Company has conducted
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in the licenses, franchises, permits and other
governmental authorizations listed on SCHEDULES 3.8 and 3.9 and is not in
violation of any of the foregoing. Except as specifically set forth on SCHEDULE
3.8 or 3.9, the transactions contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company by, any such licenses, franchises, permits or
government authorizations.
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3.9 ENVIRONMENTAL MATTERS. To the best of the Company's knowledge and
except as set forth on SCHEDULE 3.9, the Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances including petroleum and petroleum
products (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, (i) has not had and is not reasonably likely to have a
Material Adverse Effect on the Company or any of its businesses, and (ii) will
not necessitate any material expenditure by or on behalf of the Company. To the
best of the Company's knowledge, the Company has obtained and adhered to all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Wastes, Hazardous Materials and
Hazardous Substances, a list of all of which permits and approvals is set forth
on SCHEDULE 3.9, and have reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes, Hazardous Materials or Hazardous
Substances have been treated, stored, disposed of or otherwise handled. To the
best of the Company's knowledge, there have been no releases of Hazardous
Wastes, Hazardous Materials or Hazardous Substances (as defined in Environmental
Laws) at, from, in or on any property owned or operated by the Company except as
permitted by Environmental Laws. To the best of the Company's knowledge, there
is no on-site or off-site location to which the Company has transported or
disposed of Hazardous Wastes, Hazardous Materials or Hazardous Substances or
arranged for the transportation of Hazardous Wastes, Hazardous Materials or
Hazardous Substances which is the subject of any federal, state, local or
foreign enforcement action or any other investigation which is reasonably likely
to lead to any claim against the Company, Metals or Newco for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, (iii) the Hazardous Materials
Transportation Act or (iv) comparable state or local statutes and regulations.
To the best of the Company's knowledge, the Company has no contingent liability
in connection with any release of any Hazardous Waste, Hazardous Material or
Hazardous Substance into the environment.
3.10 PERSONAL PROPERTY. SCHEDULE 3.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" on the balance
sheet of the Company, (b) all other personal property owned by the Company with
an individual value in excess of $10,000 (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date and (c) all leases and agreements in
respect of personal property, including, in the case of each of (a), (b) and
(c), an
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indication as to which assets are currently owned, by the Stockholders,
relatives of the Stockholders, or Affiliates of the Company or the Stockholders.
Except as noted on SCHEDULE 3.10, true, correct and complete copies of all of
the documents listed on SCHEDULE 3.10 have been delivered to Metals. Except as
set forth and specifically described on SCHEDULE 3.10, (i) all material personal
property used by the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on SCHEDULE 3.10, (ii) all of
the personal property listed on SCHEDULE 3.10 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on SCHEDULE 3.10 are in full force and effect and constitute valid and
binding agreements of the other parties (and their successors) thereto in
accordance with their respective terms.
3.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
3.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues for the year ended December 31, 1997, and (ii) all material
contracts, commitments and similar agreements to which the Company is a party or
by which it or any of its properties are bound (limited to contracts with
significant customers, significant vendors, joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land). Except as noted on SCHEDULE 3.11, true, complete and
correct copies of such agreements have been provided to Metals. Except as
described on SCHEDULE 3.11, (i) none of the Company's customers identified on
SCHEDULE 3.11 have canceled or substantially reduced or, to the knowledge of the
Company, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company, and
(ii) the Company has complied with all material commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on SCHEDULE 3.11 and no notice of default under any such contract or agreement
has been received. SCHEDULE 3.11 also includes a summary description of all
plans or projects involving the opening of new operations, expansion of existing
operations, the acquisition of any property, business or assets requiring, in
any event, the payment in the aggregate of more than $200,000 by the Company.
3.12 REAL PROPERTY. SCHEDULE 3.12 includes a list of all real property
owned or leased by the Company at the date hereof, and all other real property,
if any, used by the Company in the conduct of its business. The Company has good
and marketable title in fee simple to the real property it purports to own,
subject to no encumbrances except encumbrances that do not interfere with the
use of such property, none of which encumbrances secures liability for borrowed
money and has good and valid leasehold interests in the real property it
purports to lease. True, complete and correct copies of all leases and
agreements in respect of real property leased by the Company have been delivered
to Metals. Except as set forth on SCHEDULE 3.12, all of such leases listed on
SCHEDULE 3.12 are in full force and effect and constitute valid and binding
agreements of the other parties (and their successors) thereto in accordance
with their respective terms.
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3.13 INSURANCE. SCHEDULE 3.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or workers compensation claims received
for the past three policy years. True, complete and correct copies of all
insurance policies currently in effect, together with certificates of insurance
showing such policies to be in effect, have been made available to Metals. Such
insurance policies evidence all of the insurance that the Company is required to
carry pursuant to all of its contracts and other agreements and pursuant to all
applicable laws, and provide adequate coverage against the risks involved in the
Company's business. None of such policies is a "claims made" policy.
3.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 3.14 sets forth an accurate list showing all officers, directors and
key employees (as determined by the Company in its sole discretion) of the
Company, listing all employment agreements with such officers, directors and key
employees and the rate of compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of each of such persons as
of (i) the Balance Sheet Date and (ii) the date hereof. True, complete and
correct copies of any employment agreements for the persons listed on SCHEDULE
3.14 and all other employment and other agreements of any nature containing any
provision that could require the Company to make any payment to any person as a
result of the transactions contemplated by this Agreement have been delivered to
Metals. Except as set forth on SCHEDULE 3.14, since the Balance Sheet Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices.
Except as described in Note 1 to the Financial Statements or as set forth
on SCHEDULE 3.14, (i) the Company is not bound by or subject to (and none of its
assets or properties is bound by or subject to) any arrangement with any labor
union, (ii) no employees of the Company are represented by any labor union or
covered by any collective bargaining agreement, (iii) to the knowledge of the
Company, no campaign to establish such representation is in progress and (iv)
there is no pending or, to the best of the Company's knowledge, threatened,
labor dispute involving the Company and any group of its employees. The Company
has not experienced any labor interruptions over the past five years. The
Company's relationship with its employees is good.
3.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.15 sets forth an accurate schedule
showing all employee benefit plans of the Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 3.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements. True, complete and correct copies of such plans,
agreements and any trusts related thereto have been delivered to Metals. A
classification of employees covered thereby as of the Balance Sheet Date is set
forth on SCHEDULE 3.15. Except for the employee benefit plans, if any, described
on SCHEDULE 3.15, the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee
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pension benefit plan," nor does the Company have any obligation to contribute to
or accrue or pay any benefits under any deferred compensation or retirement
funding arrangement on behalf of any employee or employees (such as, for
example, and without limitation, any individual retirement account or annuity,
any "excess benefit plan" (within the meaning of Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans set forth on SCHEDULE 3.15, and is not required to contribute to any
retirement plan, except as set forth on SCHEDULE 3.15, pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
The Company is not now, and cannot as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation or to any
multiemployer employee pension benefit plan under the provisions of Title IV of
ERISA. To the best of the Company's knowledge, all employee benefit plans listed
on SCHEDULE 3.15 and the administration thereof are in compliance in all
material respects with their terms and all applicable provisions of ERISA and
the regulations issued thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. All accrued contribution
obligations of Company with respect to any plan listed on SCHEDULE 3.15 have
either been fulfilled in their entirety or are fully reflected on the balance
sheet of the Company as of the Balance Sheet Date. All plans listed on SCHEDULE
3.15 that are intended to qualify (the "Qualified Plans") under Section 401(a)
of the Code are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of the determination
letters relating thereto are included as part of SCHEDULE 3.15. Except as
disclosed on SCHEDULE 3.15, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof have been
made available to Metals. To the best of the Company's knowledge, neither the
Stockholders, any plan listed in SCHEDULE 3.15 nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No plan listed in SCHEDULE 3.15 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service or any liability to
the Pension Benefit Guaranty Corporation. There have been no terminations,
partial terminations or discontinuance of contributions to any such Qualified
Plan intended to qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service; no plan listed in SCHEDULE 3.15
subject to the provisions of Title IV of ERISA has been terminated; there have
been no "reportable events" (as that phrase is defined in Section 4043 of ERISA)
with respect to any such plan listed in SCHEDULE 3.15; the Company has not
incurred liability under Section 4062 of ERISA; and to the best of the Company's
knowledge, no circumstances exist pursuant to which the Company could have any
direct or indirect liability
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whatsoever (including, but not limited to, any liability to any multiemployer
plan or the PBGC under Title IV of ERISA or to the Internal Revenue Service for
any excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
3.16 CONFORMITY WITH LAW; LITIGATION. To the best of the Company's
knowledge and except as set forth on SCHEDULE 3.16, there are no claims,
actions, suits or proceedings, pending or threatened against or affecting the
Company, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over the Company. Except as set forth on
SCHEDULE 3.16, no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company during the last five
years and there is no basis therefor. To the best of the Company's knowledge and
except as set forth on SCHEDULE 3.16, the Company has conducted for the past
five years and now conducts its business in compliance with all material laws,
regulations, writs, injunctions, decrees and orders applicable to the Company or
its assets. To the best of the Company's knowledge, the Company is not in
violation of any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them.
3.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest, fines, penalties or additional amounts
attributable to or imposed with respect to any such taxes, charges, fees, levies
or other assessments.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a Person other
than the Company or a Company Subsidiary. Each of the Company and the Company
Subsidiaries has timely filed true, correct and complete declarations of
estimated
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Tax in each jurisdiction in which any such declaration is required to be filed
by it. No Liens for Taxes exist upon the assets of the Company or any Company
Subsidiary except Liens for Taxes which are not yet due. Neither the Company nor
any Company Subsidiary is, or ever has been, subject to Tax in any jurisdiction
outside the United States. No Litigation with respect to any Tax for which the
Company or any Company Subsidiary is asserted to be liable is pending or, to the
knowledge of the Company or any Stockholder (other than the ESOP Trustees),
threatened, and no basis which the Company or any Stockholder (other than the
ESOP Trustees) believes to be valid exists on which any claim for any such Tax
can be asserted against the Company or any Company Subsidiary. There are no
requests for rulings or determinations in respect of any Taxes pending between
the Company or any Company Subsidiary and any Taxing Authority. No extension of
any period during which any Tax may be assessed or collected and for which the
Company or any Company Subsidiary is or may be liable has been granted to any
Taxing Authority. Neither the Company nor any Company Subsidiary is or has been
party to any tax allocation or sharing agreement. All amounts required to be
withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization in respect of that asset below the allowance generally available to
an asset of its type. No accounting method changes of the Company or of any
Company Subsidiary exist or are proposed or threatened which could give rise to
an adjustment under Section 481 of the Code.
3.18 NO VIOLATIONS; NO CONSENTS REQUIRED. The Company is not in violation
of any of its Charter Documents. Neither the Company nor, to the knowledge of
the Company, any other party thereto, is in default under any lease, instrument,
license, permit or material agreement to which the Company is a party or by
which its properties are bound (the "Material Documents") that would have a
Material Adverse Effect on the Company. Except as set forth on SCHEDULE 3.18,
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the terms
or provisions of the Material Documents or the Charter Documents, and the rights
and benefits of the Company under the Material Documents will not be adversely
affected by the transactions contemplated hereby. Except as set forth on
SCHEDULE
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3.18, none of the Material Documents requires notice to, or any consent or
approval that has not been obtained of, any governmental agency or other third
party with respect to any of the transactions contemplated hereby in order to
remain in full force and effect. Except as set forth on SCHEDULE 3.18,
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material right
or benefit. None of the Material Documents prohibits or restricts the Company
from freely providing services to any other person. The Company will use its
best efforts to obtain all necessary consents and approvals prior to the Merger
and shall direct its appropriate employees to cooperate with and assist Newco in
obtaining such consents and approvals after the Merger which have not been
obtained prior thereto.
3.19 ABSENCE OF CHANGES. Except as contemplated by this Agreement and
except for the transactions necessary to consummate the Merger, since the
Balance Sheet Date, the Company has conducted its operations in the ordinary
course of business and, except as set forth on SCHEDULE 3.19, there has not
been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting the
business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Company to any person, including,
without limitation, the Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company,
provided, however, that this shall not be deemed to apply to ordinary
adjustments of bills with customers consistent with past practice;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any distribution of property or assets by the Company other
than in the ordinary course of business.
(xvi) any change in the Company's Articles of Incorporation or
By-laws;
(xvii) any contract, commitment or liability entered into or
incurred or any capital expenditures made except in the normal course of
business consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $200,000;
(xviii) any mortgage, pledge or other lien or encumbrance upon any
assets or properties created, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate cost
not in excess of $10,000 necessary or desirable for the conduct of the business
of the Company, (2) (A) liens for taxes either not yet due or being contested in
good faith and by appropriate proceedings (and for which contested taxes
adequate reserves have been established and are being maintained) or (B)
materialmen's, mechanics', workers', repairmen's, employees' or other like liens
arising in the ordinary course of business;
(xix) any transfer or disposition of any property or equipment
except in the normal course of business;
(xx) any other transaction outside the ordinary course of its
business or prohibited hereunder; or
(xii) any increase or commitment to any increase in the salary,
bonus, commission or other compensation of any officer, director, employee or
agent of the Company.
3.20 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.20 sets forth a
schedule as of the date of this Agreement of: (i) the name of each financial
institution in which the Company has accounts or safe deposit boxes, (ii) the
names in which the accounts or boxes are held, (iii) the type of account, (iv)
the account number, (v) the amount of cash, cash equivalents and securities held
in such account as of January 31, 1998, and (vi) the name of each person
authorized to draw thereon or have access thereto. SCHEDULE 3.20 also sets forth
the name of each person, corporation, firm or other entity holding any general
or special power of attorney from the Company and a description of the terms of
each such power.
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3.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 3.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company, except for ownership of less than 1% of the outstanding stock of any
publicly traded company in which such person has no management or other similar
position. Except as set forth on SCHEDULE 3.21, no officer, director or
stockholder of the Company has, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
3.22 DISCLOSURE. The Company has provided Metals or its representatives
with all the information that Metals has requested in analyzing whether to
consummate the transactions described herein. None of the information so
provided nor any representation or warranty contained in this Agreement contains
any untrue statement or omits to state a material fact necessary in order to
make the statements herein or therein, in light of the circumstances under which
they were made, not misleading. There is no fact not disclosed in this Agreement
or the schedules hereto that to any Stockholder's (other than the ESOP Trustees)
actual knowledge has specific application to the Company (other than general
economic or industry conditions) which materially adversely affects or, so far
as the Stockholders (other than the ESOP Trustees) can reasonably foresee,
materially threatens, the assets, business, or condition (financial or
otherwise), results of operations or prospects of the Company.
3.23 PREEMPTIVE RIGHTS. The Stockholders do not have, and hereby waive,
any preemptive or other right to acquire shares of the Company's capital stock
that the Stockholders have or may have had. No other person has any preemptive
or other right to acquire any shares of the Company's capital stock.
3.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor, to the knowledge
of the Company or the Stockholders, any person acting on behalf of the Company,
has given or offered anything of value to any governmental official, political
party or candidate for government office nor has it or any of them otherwise
taken any action which would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
3.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties (including bargaining agents, if any) and has obtained any third party
consents that may be necessary to consummate the transactions contemplated
hereby.
The ESOP Trustees jointly and severally represent and warrant that all of
the following representations and warranties are true at the date of this
Agreement.
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3.26 ESOP AUTHORIZATION. (i) The ESOP Trustees have the authority to enter
into and bind the ESOP to the terms of this Agreement (subject to the condition
precedent of statutory approval of the Merger) and (ii) the ESOP has the full
legal right, power and authority to enter this Agreement, which has been
approved by the ESOP Trustees. Prior to consummating the Merger, and as a
condition precedent thereto, the Company is required to obtain the approval of a
majority of the Stockholders. The ESOP Trustees shall ask each participant in
the ESOP to vote the Company Stock allocated to his or her ESOP account for or
against the Merger. The ESOP Trustees intend to vote the Company Stock owned by
the ESOP Trustees for or against the Merger in the same percentage as voted by
the participants of the ESOP. A copy of the resolution adopted by the ESOP
Trustees approving this Agreement and recommending the Merger is attached hereto
as SCHEDULE 3.26. This Agreement has been validly executed and delivered by the
ESOP Trustees and constitutes a legal, valid and binding obligation of the ESOP
Trustees on behalf of the ESOP enforceable in accordance with its terms,
including the conditions precedent set forth in Article 6.
3.27 ESOP APPRAISAL AND FAIRNESS OPINION. The ESOP Trustees have received
(i) an appraisal (the "ESOP Appraisal") from a qualified independent appraisal
firm of the value of the shares of Company Stock held by the ESOP immediately
prior to the date hereof, which confirms that the value of such shares of
Company Stock is not more than the per share consideration to be received by the
ESOP in the Merger, and (ii) an opinion (the "ESOP Fairness Opinion") from a
qualified independent investment advisor to the effect that, as of the Closing
Date, the transactions contemplated hereby are fair to the ESOP and the
beneficiaries thereof from a financial point of view. Copies of the ESOP
Appraisal and of the ESOP Fairness Opinion have been delivered to Metals.
3.28 ESOP OWNERSHIP OF CAPITAL STOCK OF THE COMPANY. The ESOP (or the ESOP
Trustees, on behalf of the ESOP) is the record owner of the number of shares of
Company Stock set forth on SCHEDULE 3.3 and, except as set forth on SCHEDULE
3.3, all of such shares are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. The participants in the ESOP are the beneficial owners of
the allocated shares of such Company Stock, and no person has any beneficial
interest in any unallocated shares of such Company Stock.
4. REPRESENTATIONS OF METALS
Metals represents and warrants that all of the following representations
and warranties in this Section 4 are true at the date of this Agreement.
4.1 DUE ORGANIZATION. Metals and Newco are each corporations duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware, and each has the requisite power and authority to carry on its
business as it is now being conducted. Metals and
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Newco are each qualified to do business and are each in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
4.2 AUTHORIZATION. (i) The respective representatives of Metals and Newco
executing this Agreement have the authority to enter into and bind Metals and
Newco to the terms of this Agreement and (ii) Metals and Newco have the full
legal right, power and authority to enter into this Agreement and the Merger.
4.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not: (i) result in any violation or breach or constitute a default
under any of the terms or provisions of the Restated Certificate of
Incorporation, as amended, of Metals or the Amended and Restated Bylaws of
Metals or the Certificate of Incorporation or Bylaws of Newco; (ii) violate, or
be in conflict with, or constitute a 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 under, or cause the
acceleration of the maturity of any material debt or obligation pursuant to
which Metals is bound; or (iii) violate any order of any governmental or
regulatory authority, judgment, decree, order or award of any court, arbitrator,
administrative agency or governmental authority or any material license,
consent, permit, order, approval or other authorization of any governmental or
regulatory authority, or any material statute, law, ordinance, rule or
regulation.
4.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Metals and Newco and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
Metals and Newco and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of
Metals and Newco, enforceable in accordance with its terms.
4.5 METALS STOCK. At the time of issuance thereof, the Metals Stock to be
delivered to the Stockholders pursuant to this Agreement will constitute valid
and legally issued, fully paid and nonassessable shares of Metals. The offer and
sale of the Metals Stock to be delivered to the Stockholders pursuant to this
Agreement have been registered on Metals' Registration Statement on Form S-1
originally filed with the Securities and Exchange Commission on September 12,
1997 (Registration No. 333-35575) (such Registration Statement, as amended at
the time of the delivery of the Metals Stock to the Stockholders pursuant to
this Agreement, being herein called the "Registration Statement"; and the
Prospectus contained therein being herein called the "Prospectus").
4.6 ABSENCE OF CHANGES. The financial condition of Metals is as disclosed
in the Registration Statement. There has not been any material adverse change in
the financial condition, assets, liabilities (contingent or otherwise), income
or business of Metals since the date thereof, nor
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has there been any purchase or acquisition of, or agreement, plan of arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of Metals' business.
4.7 CAPITALIZATION. Metals' capital structure is as disclosed in the
Registration Statement and, since the date thereof, there has not been:
(i) any change in the authorized capital of Metals or its
outstanding securities or any grant of any options, warrants, calls, conversion
rights or commitments;
(ii) any declaration or payment of any dividend or distribution in
respect to the capital stock or any direct or indirect redemption, purchase or
acquisition of any capital stock of Metals;
(iii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of Metals; or
(iv) any distribution of property or assets of Metals other than in
the ordinary course of business.
4.8 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 4.8 hereto,
and other than the filing of articles or certificates of merger in accordance
with Section 1.2 hereto, no approval, consent, waiver, order or authorization
of, or registration, qualification, declaration, or filing with, nor notice to,
any governmental authority or other third party is required on the part of
Metals or Newco in connection with the execution of the Agreement, the related
agreements, or the consummation of the transaction contemplated hereby or
thereby, including, but not limited to the Merger.
4.9 SUBSIDIARY STATUS. Metals, Newco and/or the Surviving Corporation
hereby represent and warrant that there is no present intention and/or plan to
merge the Surviving Corporation into Metals. The present plan of all the parties
hereto is to continuously operate in the future the Surviving Corporation as a
wholly owned subsidiary of Metals.
5. COVENANTS PRIOR TO CLOSING
5.1 COOPERATION. Between the date of this Agreement and the Closing Date,
the Company and Metals will cooperate with one another and their respective
auditors and counsel in the preparation of any documents or other material which
may be required in connection with this Agreement. Except as contemplated by
this Agreement, Metals, Newco, the Stockholders and the Company will treat all
information obtained in connection with the negotiation and performance of
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this Agreement as confidential in accordance with the confidentiality agreements
previously executed by the parties.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company and Metals will use commercially
reasonable efforts to carry on their respective businesses in substantially the
same manner as they had heretofore and not introduce any material new method of
management, operation or accounting.
5.3 PROHIBITED ACTIVITIES. Except as set forth on SCHEDULE 5.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of Metals, which will not be unreasonably withheld:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(iv) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(v) negotiate for the acquisition of any business or the start-up of
any new business;
(vi) merge or consolidate or agree to merge or consolidate with or
into any other corporation or other entity;
(vii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder; or
(viii) increase or commit to any increase in the salary, bonus,
commission or other compensation of any officer, director, employee or agent of
the Company outside of the ordinary course of business.
5.4 NO SHOP. Neither the Stockholders, the Company, nor any agent,
officer, director, trustee (including the ESOP Trustees) or any representative
of any of the foregoing will, during the period commencing on the date of this
Agreement and ending with the earlier to occur of the Closing Date or the
termination of this Agreement in accordance with its terms, directly or
indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Metals or its
authorized agents relating to, any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, the Company or a merger,
consolidation or business combination involving the Company.
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5.5 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
5.6 NOTICES AND CONSENTS. The Company will use commercially reasonable
best efforts to give any notices to third parties, and obtain any third party
consents, that may be necessary to consummate the transactions contemplated
hereby.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions.
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Metals contained in Article 4 shall be true
and correct in all material respects as of the Closing Date as though such
representations and warranties had been made as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and performed by
Metals and Newco on or before the Closing Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Closing Date and signed by the President or any Vice President
of Metals shall have been delivered to the Stockholders.
6.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Company and its counsel.
6.3 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein (including the expiration or termination of the waiting
period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976) as set
forth on SCHEDULE 4.8 shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of the Company as a result of which the Company deems it
inadvisable to proceed with the transactions hereunder.
6.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to Metals that would constitute a Material Adverse Effect.
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6.5 TAX MATTERS. Counsel to the ESOP Trustees shall have delivered a third
party opinion to the Stockholders (other than the ESOP Trustees) that the Merger
will constitute a reorganization under Sections 368(a)(1)(A) and (a)(2)(D) of
the Code.
6.6 STOCKHOLDER APPROVAL. The requisite majority of the stockholders of
the Company and Newco shall have approved the Merger.
6.7 DELIVERY OF PROSPECTUS; REGISTRATION STATEMENT. Metals shall have
delivered to the Stockholders, ESOP Trustees and the Company a sufficient number
of Prospectuses for delivery to the Stockholders and ESOP participants of the
Company at least seven days prior to the Closing Date. Metals shall have
distributed a copy of the Registration Statement to Company's counsel at least
seven days prior to the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS AND NEWCO
The obligations of Metals and Newco with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; all of the terms, covenants and conditions
of this Agreement to be complied with or performed by the Stockholders and the
Company on or before the Closing Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the Stockholders shall
have delivered to Metals certificates dated the Closing Date to such effect.
7.2 NO MATERIAL ADVERSE EFFECT; DISSENTING STOCKHOLDERS LIMITATION. Since
the date of this Agreement, no event or circumstance shall have occurred with
respect to the Company which would constitute a Material Adverse Effect.
Stockholder's owning no more than forty (40%) percent of the Company Stock shall
have perfected their dissenting shareholder rights under the applicable
corporate laws.
7.3 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall be reasonably
satisfactory to Metals and its counsel.
7.4 CONSENTS AND APPROVALS. As of the Closing Date, the Company shall have
delivered all material consents as set forth on SCHEDULE 3.18. All necessary
consents of and filings with any
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governmental authority or agency relating to the consummation of the
transactions contemplated herein (including the expiration or termination of the
waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976)
shall have been obtained and made shall have been obtained; and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of Metals as a result of which Metals deems it inadvisable to
proceed with the transactions hereunder.
8. DELIVERIES
8.1 EMPLOYMENT AGREEMENTS. The persons listed on SCHEDULE 8.1 are entering
into Employment Agreements with the Surviving Corporation, and guaranteed by
Metals, in the form of ANNEX I hereto, and the Surviving Corporation is
implementing an incentive bonus plan in form and substance satisfactory to
Metals pursuant to which such persons will have the opportunity to earn bonuses
of at least 25% of their respective base salaries upon attainment of the
operating income and other performance targets set forth therein.
8.2 OPINION OF COUNSEL TO THE COMPANY. Counsel to the Company and the
Stockholders (other than the ESOP Trustees) is delivering to Metals an opinion
dated the date hereof in the form of ANNEX II.
8.3 OPINION OF COUNSEL TO METALS. Counsel to Metals is delivering to the
Company and the Stockholders an opinion dated the date hereof in the form of
ANNEX III.
8.4 GOOD STANDING CERTIFICATES. The Company is delivering to Metals a
certificate, dated as of a date no earlier than twenty days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company is in existence and authorized to do business.
8.5 FIRPTA CERTIFICATE. Each Stockholder is delivering to Metals a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
8.6 RELATED PARTY TRANSACTIONS. All existing leases, agreements and
arrangements between the Company and any Stockholder or any affiliate of any
Stockholder (including without limitation any stockholders agreements, voting
agreements, voting trusts, options, warrants and employment agreements between
the Company and any employee except as specifically approved in writing by
Metals) are either being canceled (including cancellation by payment) or the
terms thereof are being renegotiated on an arm's length basis satisfactory to
Metals.
8.7 TAX MATTERS. Counsel to the ESOP Trustees is delivering a third-party
opinion to the Stockholders (other than the ESOP Trustees) to the effect that
the receipt of Metals Stock by the
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Stockholders who are not ESOP Trustees pursuant to this Agreement and the Merger
will not be taxable to such Stockholders and that such Stockholders will not
recognize gain to the extent they exchange shares of Company Stock for shares of
Metals Stock (but not other cash or property) pursuant to this Agreement and the
Merger.
8.8 STOCKHOLDERS' RELEASE. The Stockholders are delivering to Metals an
instrument dated the date hereof releasing the Company from (i) any and all
claims of the Stockholders against the Company and (ii) obligations of the
Company to the Stockholders, except for (x) items specifically identified on
SCHEDULE 3.6 or 3.12 as being claims of or obligations to the Stockholders, (y)
continuing obligations to Stockholders relating to employment by the Company and
(z) obligations arising under this Agreement. The release described in this
Section shall not bind individual participants or beneficiaries of the ESOP.
8.9 ESOP. The Company is delivering to Metals copies of the ESOP Appraisal
and ESOP Fairness Opinion contemplated by Section 3.27.
8.10 STOCK OPTIONS. Metals will grant to some or all of the key employees
of the Company identified on SCHEDULE 8.10 hereto options to purchase an
aggregate of 111,678 shares of Metals Stock at the closing price of the Metals
Stock on the New York Stock Exchange on the business date prior to the Effective
Time. Such options shall vest ratably (annually) over a five-year period.
Following the Effective Time, the unallocated options, if any, may be allocated
to such individuals as may be mutually agreed upon by the CEOs of the Surviving
Corporation and Metals.
9. POST-CLOSING COVENANTS
9.1 PREPARATION AND FILING OF TAX RETURNS.
(i) The Stockholders (other than the ESOP Trustees) shall file or
cause to be filed all tax returns for the Company for the taxable periods that
end on or before the Closing Date, but in each case only after Metals has
reviewed such filings and consented thereto.
(ii) Metals shall file or cause to be filed all tax returns for all
taxable periods ending after the Closing Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any tax returns,
amended tax returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant tax returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each
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party shall make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided. Subject to the preceding sentence, each party required to file tax
returns pursuant to this Agreement shall bear all costs of filing such tax
returns.
9.2 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
10. INDEMNIFICATION
The Stockholders, Metals and Newco each make the following covenants that
are applicable to them, respectively (provided that Section 10.2 shall apply to
the ESOP Trustees, in their capacities as such, only to the extent of their
representations and warranties set forth in Sections 3.26-3.28, and that Section
10.4 shall not apply to the ESOP Trustees, in their capacities as such, at all)
make the following covenants:
10.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
this Agreement and in the documents and certificates delivered in connection
herewith shall survive the Merger for a period of one year after the date
hereof, except that the representations and warranties relating to tax matters
shall survive until the expiration of the applicable statutes of limitation, and
the specific indemnification provided in Section 10.4 hereof shall survive for a
period of three years after the Closing Date; provided, however, that
representations and warranties and indemnification obligations with respect to
which a claim is made within the applicable survival period shall survive until
such claim is finally determined and paid.
(b) The representations and warranties of Metals and Newco made in
this Agreement and in the certificates delivered in connection herewith shall
survive the Merger for a period of one year after the date hereof, provided,
however, that representations and warranties (and related indemnification
obligations) with respect to which a claim is made within such period shall
survive until such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
10.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders (as
qualified above) and limited to the amount of value that each Stockholder
received in the Merger, covenant
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and agree to indemnify, defend, protect, and hold harmless Metals and the
Surviving Corporation and their respective subsidiaries and officers, directors,
employees, stockholders, agents, representatives and affiliates at all times
from and after the date of this Agreement until the Expiration Date from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such indemnified person as a result of or incident to (i)
any breach of any representation or warranty of the Stockholders set forth
herein or in the certificates or other documents delivered in connection
herewith, and (ii) any breach or nonfulfillment of any covenant or agreement by
the Company or the Stockholders under this Agreement, provided, however, that
the payment of any amount of Damages shall be reduced by any tax or insurance
benefit accruing to the Indemnified Party as a result of the event giving rise
to such Damages, even though such benefit may arise after the Expiration Date.
10.3 INDEMNIFICATION BY METALS. Metals covenants and agrees that it will
indemnify, defend, protect and hold harmless the Stockholders at all times from
and after the date of this Agreement until the Expiration Date from and against
all Damages incurred by the Stockholders as a result of (i) any breach of any
representation or warranty of Metals or Newco set forth herein or in the
certificates delivered in connection herewith; or (ii) any breach or
nonfulfillment of any covenant or agreement by Metals or Newco under this
Agreement.
10.4 SPECIFIC INDEMNIFICATION. In addition to the indemnification provided
for in Section 10.1, the Stockholders (as qualified above) and limited to the
amount of value that each Stockholder received in the Merger, (i) covenant and
agree to indemnify, defend, protect and hold harmless each of Metals and the
Surviving Corporation from all Damages resulting from any breach of the
representations and warranties set forth in Sections 3.6 or 3.9, and (ii) hereby
assume and agree to pay when due any and all liabilities (the "Assumed
Liabilities") consisting of or relating to (a) severance or similar obligations
to executive and management or other employees of the Company and (b) any
unfunded employee benefit plan obligations of the Company, other than the
Company's deferred compensation plan obligations of $34,000 per year, copies of
the documentation relating to which have been delivered to Metals. The
Stockholders shall pay all Assumed Liabilities directly within ten days after
notice from the Surviving Corporation from time to time of the amount of any
such Assumed Liabilities, without deducting the amount of the Indemnification
Threshold or any other amount, and hereby indemnify and agree to hold harmless
Metals and the Surviving Corporation from and against all of the Assumed
Liabilities.
10.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or proceeding by a Third Person that may give rise to a right of
indemnification hereunder, such Indemnified Party shall give to the party
obligated to provide indemnification hereunder (an "Indemnifying Party") written
notice of such claim or the
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commencement of such action or proceeding; provided, however, that the failure
to give such notice will not relieve such Indemnifying Party from liability
under this Section with respect to such claim, action or proceeding, except to
the extent that the Indemnifying Party has been actually prejudiced as a result
of such failure. The Indemnifying Party (at its own expense) shall have the
right and shall be given the opportunity to associate with the Indemnified Party
in the defense of such claim, suit or proceedings, provided that counsel for the
Indemnified Party shall act as lead counsel in all matters pertaining to the
defense or settlement of such claims, suit or proceedings. The Indemnified Party
shall not, except at its own cost, make any settlement with respect to any such
claim, suit or proceeding without the prior consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed. It is understood
and agreed that in situations where failure of the Indemnified Party to settle a
claim expeditiously could have an adverse effect on the Indemnified Party, the
failure of the Indemnifying Party to act upon the Indemnified Party's request
for consent to such settlement within ten business days of the Indemnifying
Party's receipt of notice thereof from the Indemnified Party shall be deemed to
constitute consent by the Indemnifying Party of such settlement for purposes of
this Section.
10.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. Any indemnification payment under this Section 10 will be treated as an
adjustment to the exchange consideration for tax purposes unless a final
determination with respect to the Indemnified Party or any of its affiliates
causes such payment not to be treated as an adjustment to the exchange
consideration for United States federal income tax purposes.
10.7 LIMITATIONS ON INDEMNIFICATION. Metals and the other persons
indemnified pursuant to this Section 10 shall not assert any claim for
indemnification hereunder against the Stockholders until such time as, and
solely to the extent that, the aggregate of all claims such persons may have
against the Stockholders shall exceed $300,000 (the "Indemnification
Threshold"). The Stockholders shall not assert any claim for indemnification
hereunder until such time as, and solely to the extent that, the aggregate of
all claims the Stockholders may have hereunder shall exceed the Indemnification
Threshold. No person shall be entitled to indemnification under this Article 10
if and to the extent that such person's claim for indemnification is directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth is this Agreement.
11. NONCOMPETITION
11.1 PROHIBITED ACTIVITIES. The Stockholders set forth on the signature
page (excluding the ESOP Trustees, in their capacities as such) will not, for a
period of five (5) years following the Closing Date, for any reason whatsoever,
directly or indirectly, individually or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
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(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
offering services or products in direct competition with the Company or Metals
or any of its subsidiaries within 200 miles of where the Company, Metals or any
of its subsidiaries conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company, Metals or any of its subsidiaries for the
purpose or with the intent of enticing such employee away from or out of the
employ of the Company, Metals or any of its subsidiaries;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to the Closing Date, a customer of the
Company, Metals or any of its subsidiaries within the Territory for the purpose
of soliciting or selling products or services in direct competition with the
Company, Metals or any of its subsidiaries within the Territory.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business the stock of which is
publicly traded on a national securities exchange or over-the-counter market.
11.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to Metals as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to Metals for which
it would have no other adequate remedy, the Stockholders agree that the
foregoing covenant may be enforced by Metals in the event of breach by any
Stockholder, by injunctions, restraining orders and other equitable actions.
11.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders in light of the activities and business of Metals and its
subsidiaries on the date of the execution of this Agreement and the current
plans of Metals; but it is also the intent of Metals and the Stockholders that
such covenants be construed and enforced in accordance with the changing
locations of Metals and its subsidiaries throughout the term of this covenant.
During the term of this covenant, if Metals or one of its subsidiaries
establishes new locations for its current activities or business in addition to
or other than the locations currently established therefor, then the
Stockholders (other than the ESOP Trustees) will be precluded from soliciting
the customers or employees from such new location and from directly competing
within 200 miles of its then-established operating location(s) through the term
of this covenant.
11.4 SEVERABILITY; REFORMATION. The covenants in this Section are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope,
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time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
11.5 INDEPENDENT COVENANT. The Stockholders acknowledge that the covenants
set forth in this Section are material conditions to Metals' willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholders against Metals or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Metals of such covenants. It is
specifically agreed that the period of five (5) years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholders
(other than the ESOP Trustees) made in this Section shall be effective, shall be
computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section. The covenants
contained in this Section shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 GENERAL. The Stockholders recognize and acknowledge that they may
have had in the past, may currently have, and in the future may possibly have,
access to certain confidential information of the Company and/or Metals, such as
operational policies, pricing and cost policies, and other information, that are
valuable, special and unique assets of the Company and/or Metals. The
Stockholders agree not to disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of Metals, (b) following
the Closing, such information may be disclosed by the Stockholders as is
required in the course of performing duties for Metals or the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholders, or (ii) disclosure is required by law or the order of
any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholders shall,
if possible, give prior written notice thereof to Metals and provide Metals with
the opportunity to contest such disclosure. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Section, Metals
shall be entitled to injunctive or other equitable relief restraining the
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Metals from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
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12.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which Metals would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced by injunctions, restraining orders and other
appropriate equitable relief.
12.3 SURVIVAL. The obligations of the parties under Section 12 shall
survive the termination of this Agreement for a period of five years.
13. INTENDED TAX TREATMENT
13.1 TAX-FREE REORGANIZATION. (a) Metals and the Stockholders are entering
into this Agreement with the intention that the Merger qualify as a tax-free
reorganization for federal income tax purposes, except to the extent of any
"boot" received, and the Stockholders will not take any actions that disqualify
the Merger for such treatment. The Stockholders represent, warrant and covenant
that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code;
(ii) the Stockholders have no present plan, intention or arrangement
to dispose of any of the Metals Stock to be received in the Merger in a manner
that would cause the Merger to violate the continuity of shareholder interest
requirements set forth in Reg. Section 1.368-1 under the Code; and
(iii) In the Merger, Metals and Newco will acquire "substantially
all of the properties" of the Company within the meaning of Section 368(a)(2)(D)
of the Code (that is, in the Merger, Metals and Newco will acquire at least 90%
of the fair market value of the net assets and at least 70% of the gross assets
held by the Company immediately prior to the Effective Time). For purposes of
the preceding sentence, amounts paid by the Company to dissenters, amounts paid
by the Company to shareholders who receive cash or other property and the
Company assets used to pay its reorganization expenses and all redemptions and
distributions (except for regular, normal dividends) made by the Company
immediately preceding the Effective Time, pursuant to this Agreement or
otherwise as part of the plan of the Merger provided for herein, will be
included as assets of the Company held immediately prior to the Merger.
(b) Metals and Newco covenant and agree as follows:
(i) The Surviving Corporation will continue at least one significant
historic business line of the Company, or use at least a significant portion of
the Company's historic business assets in a business, in each case within the
meaning of Reg. Section 1.368-(1)(d) of the Code.
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(ii) Neither Metals nor the Surviving Corporation shall take or
cause to be taken any action which would disqualify the Merger as a
reorganization under Sections 368(a)(1)(A) and (a)(2)(D) of the Code.
14. SECURITIES LAW MATTERS
14.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder acknowledges and
confirms that he or she has received and reviewed a Prospectus from Metals
relating to his or her acquisition of shares of Metals Stock hereunder. Each
Stockholder (A) has such knowledge, sophistication and experience in business
and financial matters that he is capable of evaluating the merits and risks of
an investment in the shares of Metals Stock, (B) fully understands the nature,
scope and duration of any limitations on transfer described in this Agreement
and (C) can bear the economic risk of an investment in the shares of Metals
Stock.
14.2 COMPLIANCE WITH LAW. Each Stockholder covenants that none of the
Metals Stock will be offered, sold, assigned, hypothecated, transferred or
otherwise disposed of by such Stockholder except after full compliance with all
of the applicable provisions of the Securities Act of 1933, as amended (the
"Act") and the rules and regulations of the Securities and Exchange Commission.
14.3 CONTRACTUAL RESTRICTIONS Each Stockholder agrees that he or she will
not offer, sell, assign, pledge, hypothecate, transfer or otherwise dispose of
or reduce his or her risk with respect to any of the shares of Metals Stock
issued to such Stockholder pursuant to this Agreement prior to the date one year
after the date hereof, except that the ESOP shall be permitted to distribute
and/or dispose of shares of Metals Stock to the extent necessary to satisfy any
distribution obligations to individuals who terminate employment with the
Surviving Corporation or to comply with any diversification obligation that
applies as a result of elections provided to participants pursuant to I.R.C.
Section 401(a)(28). Such shares of Metals Stock that are in the possession of
distributees of the ESOP shall not carry any element of any transfer restriction
referred to in the first sentence of this Section 14.3 Certificates representing
the Metals Stock issued to the Stockholders shall, if applicable, bear a legend
or legends reflecting the foregoing restriction as well as the restrictions
referred to in Section 14.2 hereof. Certificates representing Metals Stock
issued to option holders (as listed on SCHEDULE 2.2) of the Company in exchange
for cancellation of their Company stock options shall not have any contractual
restrictions, however, such option holders agree to coordinate any transfer of
such Metals Stock through Metals.
15. GENERAL
15.1 COOPERATION. The Company, the Stockholders, Metals and Newco shall
each deliver or cause to be delivered to the other after the date hereof such
additional instruments as the other
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may reasonably request for the purpose of carrying out this Agreement. The
Company will cooperate and use its reasonable efforts to have the present
officers, directors and employees of the Company cooperate with Metals on and
after the date hereof in furnishing information, evidence, testimony and other
assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the date hereof.
15.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Metals, and the heirs and legal representatives of the Stockholders.
15.3 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company, Newco and Metals and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company, Newco and
Metals, acting through their respective officers, duly authorized by their
respective Boards of Directors.
15.4 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.5 BROKERS AND AGENTS. The Stockholders agree to pay all fees and other
amounts, if any, due to any broker, if any, engaged by the Stockholders or the
Company, and agree to indemnify the other parties hereto against all loss, cost,
damages or expense arising out of claims for fees or commission of brokers
employed or alleged to have been employed by the Stockholders or the Company.
15.6 EXPENSES. Except as otherwise provided herein, whether or not the
transactions herein contemplated shall be consummated, Metals will pay the fees
and expenses of Metals' representatives, accountants and counsel incurred in
connection herewith, and the Stockholders will pay the fees and expenses of the
Stockholders' and the Company's representatives, accountants and counsel
incurred in connection herewith. The Stockholders shall pay any sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger.
The Stockholders shall file all necessary documentation and Returns with respect
to such Transfer Taxes. In addition, the Stockholders acknowledge that
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the Stockholders, and not the Company or Metals, will pay all taxes, if any, due
upon receipt of the consideration payable pursuant to this Agreement.
15.7 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or by facsimile to an officer or agent of such party, as follows:
(a) If to Metals or Newco, addressed to it at:
Metals USA, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company or the Stockholders, addressed to it or them
at:
Pacific Metal Company
▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ & Associates
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
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and:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section from time to time.
15.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Oregon other than its principles governing conflicts of
laws.
15.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein or in writing
delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the applicable Expiration Date.
15.10 EFFECT OF INVESTIGATION; KNOWLEDGE.
(a) No investigation by the parties hereto in connection with this
Agreement or otherwise shall affect the representations and warranties of the
parties contained herein or in any certificate or other document delivered in
connection herewith and each such representation and warranty shall survive such
investigation, except the actual knowledge of a fact or circumstance learned by,
or known to, Metals (without the need of any further investigation or inquiry)
prior to the Merger shall be deemed to be a fact or circumstance disclosed to
Metals for all purposes to the same extent as if included in a representation or
warranty of the Company or the Stockholders.
(b) When a representation or warranty contained herein or in any
certificate or other document delivered in connection herewith is made to the
"knowledge" of a party, such party shall be deemed to know all facts and
circumstances that a reasonable investigation of the subject matter of such
representation or warranty would have revealed, except that "reasonable
investigation" with respect to environmental representations shall not include
the requirement that the Stockholders cause a third party to conduct any
environmental study upon any existing or previously owned or leased properties.
15.11 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or
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remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
15.12 TIME. Time is of the essence with respect to this Agreement.
15.13 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
15.14 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
15.15 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
METALS USA, INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & Chief Executive Officer
PMC ACQUISITION CORP.
By:/s/J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
PACIFIC METAL COMPANY
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman and Chief Executive Officer
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Stockholders:
▇▇▇▇▇▇ ▇. ▇▇▇▇ TRUST
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇,Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/▇▇▇▇▇▇ ▇. COMFORT
▇▇▇▇▇▇ ▇. Comfort
/s/▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
/s/▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇
PACIFIC METAL COMPANY EMPLOYEE
STOCK OWNERSHIP TRUST, by its Trustees:
/s/▇▇▇▇▇▇ ▇. COMFORT
▇▇▇▇▇▇ ▇. Comfort, Trustee
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/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
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