EXHIBIT 10.33
AGREEMENT
dated as of the 26th day of September, 1997
by and among
METALS USA, INC.
XXXXXXXX STEEL COMPANY, INC.
and
the STOCKHOLDERS named herein
TABLE OF CONTENTS
Page
1. THE EXCHANGE...........................................................2
1.1 Effective Time of the Exchange...................................2
1.2 Articles of Incorporation, Bylaws and Board of Directors.........2
1.3 Certain Information With Respect to the Capital Stock
of the Company and Metals........................................2
2. EXCHANGE OF STOCK......................................................3
2.1 Manner of Exchange...............................................3
2.2 Rights of Exchanged Metals Stock.................................3
2.3 Voluntary Share Exchange.........................................3
3. DELIVERY OF EXCHANGE CONSIDERATION.....................................3
3.1 Delivery of Metals Stock; Escrow.................................3
3.2 Delivery of Company Stock........................................4
4. CLOSING................................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................4
5.1 Due Organization.................................................4
5.2 Authorization....................................................5
5.3 Capital Stock of the Company.....................................5
5.4 Subsidiaries.....................................................5
5.5 Financial Statements.............................................6
5.6 Liabilities and Obligations......................................6
5.7 Accounts and Notes Receivable....................................6
5.8 Permits and Intangibles..........................................7
5.9 Environmental Matters............................................7
5.10 Personal Property................................................8
5.11 Significant Customers; Material Contracts and Commitments........9
5.12 Real Property....................................................9
5.13 Insurance........................................................9
5.14 Compensation; Employment Agreements; Organized Labor Matters....10
-i-
5.15 Employee Benefit Plans..........................................10
5.16 Conformity with Law; Litigation.................................12
5.17 Taxes...........................................................12
5.18 No Violations; No Consents Required.............................13
5.19 Government Contracts............................................14
5.20 Absence of Changes..............................................14
5.21 Deposit Accounts; Powers of Attorney............................15
5.22 Competing Lines of Business; Related-party Transactions.........15
5.23 Disclosure......................................................16
5.24 Prohibited Activities...........................................16
5.25 Preemptive Rights...............................................16
5.26 Certain Business Practices......................................16
5.27 Pooling-of-Interests Accounting.................................16
6. REPRESENTATIONS OF METALS.............................................17
6.1 Due Organization................................................17
6.2 Authorization...................................................17
6.3 No Violations...................................................17
6.4 Validity of Obligations.........................................17
6.5 Metals Stock....................................................17
6.6 Metals' Financial Statements....................................18
6.7 Liabilities.....................................................18
6.8 No Material Adverse Change......................................18
6.9 No Litigation...................................................18
6.10. Taxes...........................................................18
7. COVENANTS PRIOR TO CLOSING............................................18
7.1 Access and Cooperation; Due Diligence...........................18
7.2 Notice to Bargaining Agents.....................................18
7.3 Agreements......................................................19
7.4 Notification of Certain Matters.................................19
7.5 Amendment of Schedules..........................................19
7.6 Further Assurances..............................................19
7.7 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 (the "Xxxx-Xxxxx Act").................19
-ii-
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF
STOCKHOLDERS AND COMPANY..............................................20
8.1 Representations and Warranties; Performance of Obligations......20
8.2 Satisfaction....................................................20
8.3 Opinion of Counsel..............................................20
8.4 Consents and Approvals..........................................20
8.5 Employment Agreement............................................21
8.6 ESOP Opinion....................................................21
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS.........................21
9.1 Representations and Warranties; Performance of Obligations......21
9.2 No Material Adverse Effect......................................21
9.3 Stockholders' Release...........................................22
9.4 Satisfaction....................................................22
9.5 Opinion of Counsel..............................................22
9.6 Consents and Approvals..........................................22
9.7 Good Standing Certificates......................................22
9.8 FIRPTA Certificate..............................................22
9.9 Related Party Transactions......................................23
9.10 Employment Agreement............................................23
9.11 Pooling Treatment...............................................23
9.12 Escrow Agreement................................................23
10. COVENANTS AFTER CLOSING...............................................23
10.1 Release From Guarantees.........................................23
10.2 ESOP Loan.......................................................23
11. INDEMNIFICATION.......................................................23
11.1 Survival of Stockholders' Representations and Warranties........24
11.2 General Indemnification by the Stockholders.....................24
11.3 Indemnification by Metals.......................................24
11.4 Specific Indemnification........................................25
11.5 Third Person Claims.............................................25
11.6 Limitations on Indemnification..................................25
11.7 Indemnification by ESOP.........................................26
-iii-
12. NONCOMPETITION........................................................26
12.1 Prohibited Activities...........................................26
12.2 Equitable Relief................................................27
12.3 Reasonable Restraint............................................27
12.4 Severability; Reformation.......................................27
12.5 Independent Covenant............................................27
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................28
13.1 General.........................................................28
13.2 Equitable Relief................................................28
13.3 Survival........................................................28
14. INTENDED TAX TREATMENT AND POOLING-OF-INTERESTS
ACCOUNTING............................................................28
14.1 Tax-Free Reorganization.........................................28
14.2 Restrictions on Resale..........................................29
15. SECURITIES LAW MATTERS................................................29
15.1 Economic Risk; Sophistication...................................29
15.2 Private Placement...............................................30
16. REGISTRATION RIGHTS...................................................30
16.1 Piggyback Registration Rights...................................30
16.2 Demand Registration Rights......................................31
16.3 Registration Procedures.........................................32
16.4 Indemnification.................................................33
16.5 Underwriting Agreement..........................................34
16.6 Rule 144 Reporting..............................................35
16.7 Assignment of Registration Rights...............................35
16.8 Allocation of Registration Opportunities........................35
17. GENERAL...............................................................36
17.1 Cooperation.....................................................36
17.2 Successors and Assigns..........................................36
17.3 Entire Agreement................................................36
17.4 Counterparts....................................................36
17.5 Brokers and Agents..............................................36
-iv-
17.6 Expenses........................................................37
17.7 Notices.........................................................37
17.8 Governing Law...................................................37
17.9 Survival of Representations and Warranties......................38
17.10 Effect of Investigation; Knowledge..............................38
17.11 Exercise of Rights and Remedies.................................38
17.12 Time............................................................38
17.13 Reformation and Severability....................................38
17.14 Remedies Cumulative.............................................38
17.15 Captions........................................................38
-v-
ANNEXES
ANNEX I - FORM OF LEASE
ANNEX II - FORM OF OPINION OF COUNSEL TO METALS
ANNEX III - FORM OF EMPLOYMENT AGREEMENT
ANNEX IV -A- FORM OF OPINION OF XXXXX, XXXXX & XXXXXXXXXXX
ANNEX IV -B- FORM OF OPINION OF XXXXX, PIPES & XXXX
ANNEX V - FORM OF ESCROW AGREEMENT
-vi-
AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 26th day of September,
1997, by and among Metals USA, Inc., a Delaware corporation ("Metals"), Xxxxxxxx
Steel Company, Inc., an Alabama corporation (the "Company"), (a) Xxxx X.
Xxxxxxxx, individually, (b) Xxxx X. Xxxxxxxx, as Trustee of the A. Xxxx Xxxxxxxx
Qualified Annuity Trust, (c) Xxxx X. Xxxxxxxx, as Trustee of the Xxxx Xxxxx Xxxx
Xxxxxxxx Qualified Annuity Trust, (d) Xxxx X. Xxxxxxxx, as General Partner of
the Xxxxxxxx Family Limited Partnership, and (e) South Trust Bank, N.A., as
Trustee (the "ESOP Trustee") of the Xxxxxxxx Steel Company, Inc. Employee Profit
Sharing Pension Stock Ownership Plan and Trust (the "ESOP") (the individuals and
trustees identified in the foregoing clauses (a), (b), (c) and (d) acting in
their respective capacities as such, being hereinafter called the
"Stockholders"). The Stockholders and the ESOP are all the stockholders of the
Company.
WHEREAS, the Stockholders and the ESOP desire to exchange all of the
outstanding capital stock of the Company ("Company Stock") for the
consideration described herein;
WHEREAS, Metals desires to acquire all of the outstanding shares of
Company Stock in exchange for the consideration described herein;
WHEREAS, the Board of Directors of the Company desires to evidence
its approval of the transactions contemplated hereby and to obligate the
Company to perform its obligations hereunder;
WHEREAS, the Stockholders and the ESOP desire to transfer the
capital stock of the Company to Metals in exchange for the consideration
described herein (the "Exchange");
WHEREAS, concurrently with the execution and delivery hereof, a
wholly owned subsidiary of Metals (or, at Metal's election, a wholly owned
subsidiary of the Company) is purchasing certain real estate from the
Xxxxxxxx Family Limited Partnership;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
-1-
1. THE EXCHANGE
1.1 EFFECTIVE TIME OF THE EXCHANGE. The Exchange shall become effective at
such time (the "Effective Time") as Metals and the Stockholders have completed
their obligations pursuant to Section 4 hereof (the "Closing"). At the Effective
Time of the Exchange, the Company shall become a wholly owned subsidiary of
Metals, and the Stockholders and the ESOP shall be entitled to receive the
consideration described herein, subject to the provisions hereof and as set
forth herein.
1.2 ARTICLES OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS. At the
Effective Time of the Exchange:
(i) the Articles of Incorporation of the Company then in effect
shall remain the Articles of Incorporation of the Company until changed as
provided by law;
(ii) the Board of Directors of the Company shall consist of the
persons who are on the Board of Directors of the Company immediately prior
to the Effective Time of the Exchange, provided that Xxxxxxx X. Xxxxxxx
shall be elected as a director of the Company effective as of the
Effective Time of the Exchange; the Board of Directors of the Company
shall hold office subject to the provisions of the laws of the State of
Alabama and of the Articles of Incorporation and Bylaws of the Company;
and
(iii) the officers of the Company immediately prior to the Effective
Time of the Exchange shall continue as the officers of the Company in the
same capacity or capacities, and effective upon the Effective Time of the
Exchange Xxxxxxx X. Xxxxxxx shall be appointed as a vice president of the
Company, Xxxxx St. Clair shall be appointed as an Assistant Treasurer and
Xxxx X. Xxxxxxx shall be appointed as an Assistant Secretary of the
Company, each of such officers to serve, subject to the provisions of the
Articles of Incorporation and Bylaws of the Company, until his or her
successor is duly elected and qualified.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY
AND METALS. The respective designations and numbers of outstanding shares and
voting rights of each class of outstanding capital stock of the Company and
Metals as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the Company is as set forth on Schedule 1.3 hereto; and
-2-
(ii) immediately prior to the Closing, the authorized capital stock
of Metals will consist of 50,000,000 shares of common stock, $.01 par
value ("Metals Stock"), of which the number of issued and outstanding
shares will be 18,544,109, and 5,000,000 shares of preferred stock, $.01
par value, of which no shares will be issued and outstanding, and
3,122,914 shares of Restricted Voting Common Stock, $.01 par value, all of
which will be issued and outstanding.
2. EXCHANGE OF STOCK
2.1 MANNER OF EXCHANGE. The manner of exchanging (i) all of the
outstanding shares of capital stock of the Company ("Company Stock") for (ii)
shares of Metals Stock shall be as follows:
As of the Effective Time of the Exchange, all of the shares of Company
Stock issued and outstanding immediately prior to the Effective Time of the
Exchange, shall be exchanged by the Stockholders and the ESOP for the number of
shares of Metals Stock set forth on Schedule 3.1 hereto with respect to each
Stockholder and the ESOP.
2.2 RIGHTS OF EXCHANGED METALS STOCK. All Metals Stock received by the
Stockholders and the ESOP pursuant to this Agreement shall, except for
restrictions on resale or transfer described in Sections 16 and 17 hereof, have
the same rights as all the other shares of outstanding Metals Stock by reason of
the provisions of the Certificate of Incorporation of Metals or as otherwise
provided by the Delaware General Corporation Law. All voting rights of such
Metals Stock received by the Stockholders and the ESOP shall be fully
exercisable by the Stockholders and the ESOP and the Stockholders and the ESOP
shall be neither deprived nor restricted in exercising those rights. At the
Effective Time of the Exchange, Metals shall have no class of capital stock
issued and outstanding other than the Metals Stock.
2.3 VOLUNTARY SHARE EXCHANGE. The parties agree that the Exchange is
intended to qualify as a voluntary share exchange pursuant to Code of Alabama
ss. 10-2B-11.02(d) and not as a compulsory share exchange.
3. DELIVERY OF EXCHANGE CONSIDERATION
3.1 DELIVERY OF METALS STOCK; ESCROW. At the Closing the Stockholders and
the ESOP, who are the holders of all outstanding certificates representing
shares of Company Stock, shall, upon surrender of such certificates, receive the
respective number of shares of Metals Stock set forth on Schedule 3.1; provided
that the number of shares shown on Schedule 3.1 as being subject to the
-3-
Escrow Agreement described herein (including a portion of the shares otherwise
deliverable to the ESOP pursuant to this Agreement) shall be deposited directly
into escrow and shall be held, administered and distributed by the Escrow Agent
identified in the Escrow Agreement in accordance with the terms of the Escrow
Agreement.
3.2 DELIVERY OF COMPANY STOCK. The Stockholders and the ESOP shall deliver
to Metals at the Closing the certificates representing Company Stock, duly
endorsed in blank by the Stockholders and the ESOP, or accompanied by blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the expense of the Stockholders and the ESOP, affixed and canceled.
Each Stockholder and the ESOP agrees to promptly 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.
4. CLOSING
At or prior to the Closing, the parties shall take all actions necessary
to prepare to (i) effect the Exchange and (ii) effect the delivery of shares
referred to in Section 3 hereof. The closing of the transactions contemplated by
this Agreement shall take place at the offices of Xxxxx, Xxxxx & Xxxxxxxxxxx,
00-X Xxxxx Xxxxxx, Xxxxxx, Xxxxxxx 00000, following the satisfaction or waiver
of all conditions set forth herein to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions to be
satisfied at or concurrently with the Closing) or on such other date as Metals
and the Company may mutually determine (the "Closing Date").
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders (specifically excluding the ESOP and its participants and
their beneficiaries in their capacities as such) jointly and severally represent
and warrant that all of the following representations and warranties are true at
the date of this Agreement.
5.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Alabama (the "State
of Incorporation"), and has all requisite corporate 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 have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise), 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 5.1 sets forth a list of
all jurisdictions in which
-4-
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 5.1. The
stock records of the Company, a copy of which is attached to Schedule 5.1, are
correct and complete in all material respects. There are no minutes in the
possession of the Company or the Stockholders which have not been made available
to Metals, and all of such minutes are correct and complete in all respects.
5.2 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, corporate power
and authority to enter into this Agreement. This Agreement has been approved by
the Board of Directors of the Company, and copies of resolutions unanimously
adopted by the Board of Directors of the Company approving this Agreement,
certified by the Secretary or an Assistant Secretary of the Company, are
attached hereto as Schedule 5.2. 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.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $0.415 per
share, of which 100,000 shares are issued and outstanding and represent all of
the Company Stock. Each of the Stockholders and the ESOP represents and
warrants, severally, that each such Stockholder and the ESOP owns, of record
and, except for the beneficial interests of the participants and beneficiaries
in the shares held of record by the ESOP, beneficially, the number of issued and
outstanding shares of the capital stock of the Company set forth on Schedule 5.3
and, except as set forth on Schedule 5.3, thatsuch 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 Schedule 5.3, 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 of the Stockholders or the ESOP to
transfer any shares of the Company Stock to any person except pursuant to this
Agreement.
5.4 SUBSIDIARIES. Except as set forth on Schedule 5.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name on its certificate or articles of incorporation. Except as
set forth in Schedule 5.4, the Company does not
-5-
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.
5.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 5.5: the balance sheets of the
Company as of July 31, 1997 (the "Balance Sheet Date") and July 31, 1996 and the
related statements of operations, stockholder's equity and cash flows for the
two-year period ended July 31, 1997, together with the related notes and
schedules (such balance sheets, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules are
referred to herein as the "Financial Statements"). The Financial Statements have
been prepared from the books and records of the Company in conformity with
generally accepted accounting principles applied on a basis consistent with
preceding years and throughout the periods involved ("GAAP") (except as
otherwise indicated in the notes thereto) and present fairly in all material
respects the financial position and results of operations of the 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 all material respects 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.
5.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on Schedule 5.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on Schedule 5.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on Schedule 5.6, all of the liabilities of the Company
listed on Schedule 5.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
Schedule 5.6 contains a reasonable estimate by the Stockholders of the maximum
amount which may be payable with respect to liabilities which are not fixed. For
each such liability for which the amount is not fixed, the Stockholders have
provided a summary description of the liability together with copies of all
relevant documentation relating thereto.
5.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date and generated subsequent to the Balance Sheet Date, including any
such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date. Receivables from and advances to employees and the
-6-
Stockholders and any entities or persons related to or affiliated with any of
the Stockholders are separately identified on Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging analysis of all accounts, notes and other
receivables as of the Balance Sheet Date, showing amounts due in 30-day aging
categories. Except to the extent reflected on Schedule 5.7, 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 5.7, net of reserves reflected in the balance sheet as of the Balance
Sheet Date.
5.8 PERMITS AND INTANGIBLES. To the best knowledge of the Stockholders,
the Company and its employees hold all material licenses, franchises, permits
and other governmental authorizations required in connection with the conduct of
the Company's business as it is now being conducted. Schedule 5.8 sets forth an
accurate list and summary description of all such 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
5.9). To the best knowledge of the Stockholders, the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.8 and 5.9
are valid. 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. The Company has conducted for the past five years
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 5.8 and 5.9 and is not in
violation of any of the foregoing, except where any such violation has not had
and will not have a Material Adverse Effect. Except as specifically set forth on
Schedule 5.8 or 5.9, 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.
5.9 ENVIRONMENTAL MATTERS. To the best knowledge of the Stockholders and
except as set forth on Schedule 5.9, 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 it or any of its 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
-7-
Laws, either singly or in the aggregate, (i) has not had and will not 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. The
parties acknowledge that Metals has caused the reports attached to Schedule 5.9
to be prepared and the Stockholders have reviewed the same. 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 5.9, 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 knowledge of the Stockholders, there have
been no releases or threats of releases (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 knowledge of the Stockholders, 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 could lead to any claim
against the Company, or Metals 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
knowledge of the Stockholders, the Company has no contingent liability in
connection with any release or threatened release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment except as set
forth in Schedule 5.9.
5.10 PERSONAL PROPERTY. Schedule 5.10 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), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company or the
Stockholders. Except as set forth on Schedule 5.10, (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 5.10, (ii) all of
the personal property listed on Schedule 5.10 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 5.10 are in full force and effect and constitute valid and
-8-
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
5.11 sets forth a list of (i) all customers representing 5% or more of the
Company's revenues in any of the periods covered by the Financial Statements,
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 (including,
but not limited to, contracts with significant customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements are attached to Schedule 5.11. Except as described on Schedule
5.11, (i) none of the Company's significant customers (including those
identified on Schedule 5.11) 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) to the best knowledge of the Stockholders, 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 5.11 which
would cause a Material Adverse Effect and no notice of default under any such
contract or agreement has been received. Schedule 5.11 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 of more than $10,000 by the Company.
5.12 REAL PROPERTY. Schedule 5.12 includes a list of all real property
owned or leased by the Company at the date hereof, and all other real property,
if any, currently used by the Company in the conduct of its business. True,
complete and correct copies of all leases and agreements in respect of real
property leased by the Company are attached to Schedule 5.12, and all other real
estate used by the Company and owned by the Stockholders or entities controlled
by the Stockholders is being transferred to a wholly owned subsidiary of Metals
on the date hereof. An indication as to which such properties, if any, are
currently owned, or were formerly owned, by Stockholders or affiliates of the
Company or Stockholders is included in Schedule 5.12. Except as set forth on
Schedule 5.12, all of such leases included on Schedule 5.12 are in full force
and effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
5.13 INSURANCE. Schedule 5.13 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 five policy years. True, complete and correct copies of all
insurance policies currently in effect are attached to Schedule 5.13. Such
insurance policies evidence all of the insurance that the Company is required to
carry pursuant to all of its
-9-
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. All of such insurance policies are
currently in full force and effect and shall remain in full force and effect
through the Closing Date.
5.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 5.14 sets forth an accurate list showing all officers, directors and
key employees 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. Attached to Schedule 5.14 are true, complete and correct copies
of any employment agreements for the persons listed on Schedule 5.14 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, which provisions are
specifically identified on Schedule 5.14. 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 set forth on Schedule 5.14, (i) the Company is not bound by or
subject to (and none of its respective 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 best knowledge of the Stockholders, no
campaign to establish such representation is in progress and (iv) there is no
pending or, to the best knowledge of the Stockholders, 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.
5.15 EMPLOYEE BENEFIT PLANS. Schedule 5.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 5.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 5.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee 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
-10-
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 5.15, and the Company is not required to contribute to any
retirement plan 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 to the best knowledge of the Stockholders,
cannot as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multi employer employee pension benefit plan
under the provisions of Title IV of ERISA. To the best knowledge of the
Stockholders, all employee benefit plans listed on Schedule 5.15 and the
administration thereof are in substantial compliance 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 the Company with respect to
any plan listed on Schedule 5.15 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 5.15 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 5.15. To the best knowledge of the Stockholders, except as
disclosed on Schedule 5.15, 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 are included
as part of Schedule 5.15. Neither the Stockholders, any plan listed in Schedule
5.15 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 5.15 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 5.15 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 5.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC
-11-
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.
5.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
5.16, 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 5.16, 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, to the best knowledge of the Stockholders, there
is no basis therefor. Except as set forth on Schedule 5.16, and except for any
failures to comply or violations that have not had and will not have a Material
Adverse Effect or require any material expenditure by the Company, the Company
has conducted for the past five years and now conducts its business in
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets, and 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. The Company has conducted for the past
five years and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedules 5.8 and
5.9.
5.17 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. The Company (including any subsidiaries) has timely filed
all requisite federal, state and other tax returns or extension requests for all
fiscal periods ended on or before the Balance Sheet Date. Except as set forth on
Schedule 5.17, there are no examinations in progress or claims against the
Company for federal, state or other taxes (including penalties and interest) for
any period or periods prior to or on the Balance Sheet Date and no notice of any
claim for taxes, whether pending or threatened, has been received. All Taxes,
including interest and
-12-
penalties (whether or not shown on any tax return) owed by the Company, any of
the Company's subsidiaries, any member of an affiliated or consolidated group
which includes or included the Company or any of the Company's subsidiaries,
have been paid. The amounts shown as accruals for taxes on the Financial
Statements are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all periods shown. Copies of (i) any tax
examinations, (ii) extensions of time for filing and (iii) the federal and local
income tax returns and franchise tax returns of Company (including any
subsidiaries) for the last three fiscal years, or such shorter period of time as
any of them shall have existed, are attached hereto as Schedule 5.17. The
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code. No liens for Taxes exist upon any asset of the Company except for Taxes
not yet due. The Company is not and has not been a party to any tax sharing
agreement. All amounts required to be withheld by the Company 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 authority. The Company has made all deposits required by law to be
made with respect to employees' withholding and other employment Taxes. 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.
5.18 NO VIOLATIONS; NO CONSENTS REQUIRED. The Company is not in violation
of its Articles of Incorporation or Bylaws, each as amended to date ("Charter
Documents") . Neither the Company nor, to the best knowledge of the
Stockholders, any other party thereto, is in material 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"). Except as
set forth in Schedule 5.18, (a) 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 violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) 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 5.18, none of
the Material Documents requires notice to, or the consent or approval 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 and consummation
of the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
Except as set forth on Schedule 5.18, none of the Material Documents prohibits
the use or publication by the Company or Metals of the name of any other party
to such Material Document, and none of the Material Documents prohibits or
restricts the Company from freely providing services to any other customer or
potential customer of the Company or Metals.
-13-
5.19 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.19, the
Company is not a party to any governmental contracts subject to price
redetermination or renegotiation.
5.20 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 5.20, 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
-14-
requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(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;
(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.
5.21 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 5.21 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 and
account number, (iv) the type of account and the amount of cash, cash
equivalents and securities held in such account, and (v) the name of each person
authorized to draw thereon or have access thereto. Schedule 5.21 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.
5.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 5.22, neither any of 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 as set forth on Schedule 5.22, no officer, director or
Stockholder of the Company has, nor during the period beginning January 1, 1990
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
-15-
5.23 DISCLOSURE. The Stockholders have provided Metals with all the
information that Metals has requested in analyzing whether to consummate the
Exchange. Neither the information so provided nor any representation or warranty
of the Stockholders 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 known to the Stockholders which has specific
application to the Company (other than general economic or industry conditions)
which materially adversely affects or, so far as the Stockholders can reasonably
foresee, materially threatens, the assets, business, condition (financial or
otherwise), results of operations or prospects of the Company, which has not
been described in this Agreement or the Schedules hereto. The disclosures in the
Schedules, and those in any supplement thereto, shall relate only to the
representations and warranties in the Section of this Agreement to which each
Schedule expressly relates, and to no other representation or warranty in this
Agreement.
5.24 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.24, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
5.25 PREEMPTIVE RIGHTS. Neither the ESOP nor any Stockholder has, and the
ESOP and each Stockholder hereby waives, any preemptive or other right to
acquire shares of Company Stock or Metals Stock that such Stockholder has or may
have had other than rights of any Stockholder to acquire Metals Stock pursuant
to (i) this Agreement or (ii) any option granted by Metals.
5.26 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on its behalf 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.
5.27 POOLING-OF-INTERESTS ACCOUNTING. The Company has never been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded and, within the past two years, there has not been any sale
or spin-off of a significant amount of assets of the Company or any affiliate of
the Company other than in the ordinary course of business. Except as set forth
on Schedule 5.27, the Company owns no capital stock of Metals. The Company has
not acquired any of its capital stock during the past two years. Except as set
forth on Schedule 5.27, the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of the Company Stock or any
interest therein or to pay any dividend or make any distribution in respect
thereof. Neither the voting stock structure of the Company nor the relative
ownership of
-16-
shares among any of the Company's stockholders has been altered or changed
within the last two years in contemplation of the Exchange. There has been no
transaction or action taken with respect to the equity ownership of the Company
in contemplation of the Exchange which would prevent Metals from accounting for
the Exchange under the pooling-of-interests method of accounting in accordance
with Opinion No. 16 of the Accounting Principles Board ("Opinion No. 16"). If
required, the Stockholders and the President or Chief Financial Officer of the
Company will execute any documentation reasonably required by Metals'
independent public accountants to enable Metals to account for the Exchange as a
pooling-of-interests.
6. REPRESENTATIONS OF METALS
Metals represents and warrants that all of the following representations
and warranties in this Section 6 are true at the date of this Agreement and
shall be true at the time of Closing.
6.1 DUE ORGANIZATION. Metals is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of Delaware, and has
the requisite power and authority to carry on its business as it is now being
conducted. Metals is qualified to do business and is 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.
6.2 AUTHORIZATION. (i) The representatives of Metals executing this
Agreement have the authority to enter into and bind Metals to the terms of this
Agreement and (ii) Metals has the full legal right, power and authority to enter
into this Agreement and the Exchange.
6.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not 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.
6.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Metals and the performance of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of Metals and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of Metals.
6.5 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.
-17-
6.6 METALS' FINANCIAL STATEMENTS. Prior to the execution and delivery
hereof, Metals had delivered to the Company for delivery to the Stockholders and
the ESOP copies of Metals' Prospectus contained in its Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on September 12, 1997
(the "Public Reports"). The financial statements of Metals contained in the
Public Reports have been prepared from and in accordance with the books and
records of Metals in accordance with GAAP, except to the extent otherwise
disclosed therein.
6.7 LIABILITIES.Metals has no material liabilities of any kind, whether
absolute or contingent, which are not reflected in the financial statements or
other information contained in the Public Reports.
6.8 NO MATERIAL ADVERSE CHANGE. No material adverse change has occurred in
Metals' business since the date of the most recent balance sheet contained in
the Public Reports.
6.9 NO LITIGATION. There is no litigation pending or, to the knowledge of
Metals, threatened, against Metals that would have a Material Adverse Effect on
Metals.
6.10. TAXES. Metals has filed all required federal and state income tax
returns due through the date hereof and has paid, or made adequate provision for
the payment of, all taxes shown thereon to be due.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. The Company will afford to the
officers and authorized representatives of Metals access to all of the Company's
sites, properties, books and records and will furnish Metals with such
additional financial and operating data and other information as to the business
and properties of the Company as Metals may from time to time reasonably
request. The Company will cooperate with Metals, its representatives, auditors
and counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. Metals, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 16 hereof.
7.2 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Metals with proof that any required notice has been sent.
-18-
7.3 AGREEMENTS. The Stockholders and the Company shall terminate (i) 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 and (ii) any existing agreement
between the Company and any Stockholder except as specifically approved in
writing by Metals, on or prior to the Closing Date. Copies of such termination
agreements shall be delivered to Metals at the Closing or prior thereto. The
parties acknowledge and agree that no employee benefit plans, including the
ESOP, will be terminated on the Closing Date, except as otherwise listed on
Schedule 7.3.
7.4 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to Metals of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any Stockholder or the Company to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder at or prior to the Closing. Metals shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of Metals contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing and (ii) any material failure
of Metals to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder at or prior to the Closing. The
delivery of any notice pursuant to this Section 7.4 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions to Closing set forth herein, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving such
notice.
7.5 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing occurs to
notify the other parties hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules.
7.6 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.
7.7 COMPLIANCE WITH THE XXXX-XXXXX-XXXXXX ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "XXXX-XXXXX ACT"). All parties to this Agreement hereby recognize that
one or more filings under the Xxxx-Xxxxx Act may be required in connection with
the transactions contemplated herein.
-19-
If it is determined by the parties to this Agreement that filings under the
Xxxx-Xxxxx Act are required, then: (i) each of the parties hereto agrees to
cooperate and use its best efforts to comply with the Xxxx-Xxxxx Act, (ii) such
filings and expiration or termination of the applicable waiting period
thereunder shall be deemed a condition precedent in addition to the conditions
precedent set forth elsewhere in this Agreement, and (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
Xxxx-Xxxxx Act to be made. If filings under the Xxxx-Xxxxx Act are required, the
costs and expenses thereof (including filing fees) shall be borne by Metals.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of 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. If any such
conditions has not been satisfied, the Stockholders (acting in unison) shall
have the right to terminate this Agreement, or in the alternative, waive any
condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering certificates representing Company Stock
as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties and indemnification obligations of Metals
contained herein.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Metals contained in Section 6 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 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.
8.2 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.
8.3 OPINION OF COUNSEL. The Company shall have received an opinion from
counsel for Metals, dated the Closing Date, in the form annexed hereto as Annex
II.
8.4 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated
-20-
herein shall have been obtained and made and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the Exchange 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.
8.5 EMPLOYMENT AGREEMENT. A. Xxxx Xxxxxxxx, Xxxx X. Xxxxxxxx and Xxx
Xxxxxx shall have been afforded an opportunity to enter into an Employment
Agreement with the Company in the form of Annex III hereto.
8.6 ESOP OPINION. The ESOP shall have received in form and substance
acceptable to the ESOP (i) an opinion from Shareholder Strategies, Inc. to the
effect that as of the Closing Date, the value of each share of Company Stock
held by the ESOP immediately prior to the Closing is not more than the
consideration per share received by the ESOP (the "Appraisal") and (ii) an
opinion from Shareholder Strategies, Inc. to the effect that as of the Closing
Date, the transactions contemplated hereby are fair to the ESOP from a financial
point of view (the "Fairness Opinion").
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF METALS
The obligations of Metals 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. If any such conditions has not
been satisfied, Metals shall have the right to terminate this Agreement, or in
the alternative, waive any condition not so satisfied. Any act or action of
Metals in consummating the Closing shall constitute a waiver of any conditions
not so satisfied. However, no such waiver shall be deemed to affect the survival
of the representations and warranties of the Stockholders contained herein or of
the indemnification obligations of the Stockholders contained herein.
9.1 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 and signed by them
to such effect.
9.2 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not
-21-
covered by insurance, which change, loss or damage could affect or impair the
ability of the Company to conduct its business.
9.3 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to Metals
an instrument dated the Closing Date releasing the Company from (i) any and all
claims of the Stockholders against the Company and Metals and (ii) obligations
of the Company and Metals to the Stockholders, except for (a) items specifically
identified on Schedule 5.6 or 5.12 as being claims of or obligations to the
Stockholders, (b) continuing obligations to Stockholders relating to their
employment by the Company, (c) obligations arising under this Agreement or the
transactions contemplated hereby, and (d) obligations of the Company to the
ESOP.
9.4 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 have been approved
by counsel to Metals.
9.5 OPINION OF COUNSEL. Metals shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, in the forms
annexed hereto as Annexes IV-A and IV-B.
9.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.18 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Exchange 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.
9.7 GOOD STANDING CERTIFICATES. The Company shall have delivered to Metals
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, 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 good standing and authorized to do business
and that all state franchise and/or income tax returns and taxes for the Company
for all periods prior to the Closing have been filed and paid.
9.8 FIRPTA CERTIFICATE. Each Stockholder shall have delivered 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.
-22-
9.9 RELATED PARTY TRANSACTIONS. All existing leases, agreements and
arrangements between the Company and the Stockholder or any affiliate of the
Stockholder shall either have been canceled or the terms thereof shall have been
renegotiated on an arm's length basis satisfactory to Metals.
9.10 EMPLOYMENT AGREEMENT. The persons identified in Section 8.5 shall
have entered into the Employment Agreement referred to therein.
9.11 POOLING TREATMENT. Metals shall have received advice in form and
substance satisfactory to Metals from an accounting firm satisfactory to Metals
to the effect that the Exchange will qualify for pooling-of-interests accounting
under Opinion No. 16.
9.12 ESCROW AGREEMENT. The Stockholders and the ESOP and the other parties
identified in the form of Escrow Agreement attached hereto as Annex V shall have
entered into an Escrow Agreement in the form of Annex V.
10. COVENANTS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES. Metals shall use all reasonable efforts to
have the Stockholders released from any and all guarantees of the Company's
indebtedness identified on Schedule 10.1. In the event that Metals cannot obtain
such releases on or prior to the date 120 days subsequent to the Closing Date,
Metals shall pay off or otherwise refinance or retire such indebtedness.
10.2 ESOP LOAN. The ESOP Trustee hereby agrees to effect the repayment of
the existing loan to the ESOP with funds to be generated by the sale of a
portion of the Metals Stock to be received by the ESOP pursuant to this
Agreement; such sale and repayment to be effected reasonably promptly after such
shares may be sold publicly by the ESOP Trustee pursuant to Rule 144 under the
Securities Act of 1933, as amended, or otherwise. The Company shall pay interest
accruing on such loan until the loan is repaid as described above.
11. INDEMNIFICATION
The Stockholders (specifically excluding the ESOP and its participants and
their beneficiaries in their capacities as such) and Metals each make the
following covenants that are applicable to them, respectively:
-23-
11.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders (and the
representation and warranty of the ESOP in Section 5.3 regarding its ownership
of shares of Company Stock) made in this Agreement and in the documents and
certificates delivered in accordance herewith shall survive the Exchange for a
period of one year from the Closing Date, except that the specific
indemnification provided in Section 11.4 hereof shall survive for a period of
ten 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 made in this
Agreement and in the certificates delivered in connection herewith shall survive
the Exchange for a period of one year following the Closing Date, provided,
however, that representations and warranties with respect to which a claim is
made within such one-year 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.
11.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
(specifically excluding the ESOP and its participants and their beneficiaries,
in their capacities as such) covenant and agree that they will jointly and
severally indemnify, defend, protect, and hold harmless the Company and Metals
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 any Stockholder
set forth herein or in the certificates or other documents delivered in
accordance 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 the amount of any Damages shall be reduced by any
tax benefit accruing to the Indemnified Party (as defined below) and any
insurance proceeds paid 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.
11.3 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
-24-
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 set forth herein or in the certificates or other documents delivered in
accordance with this Agreement; (ii) any breach or nonfulfillment of any
covenant or agreement by Metals under this Agreement, and (iii) any Damages
incurred by the Stockholders as a result of violations by Metals of
Environmental Laws after the Closing Date.
11.4 SPECIFIC INDEMNIFICATION. In addition to the indemnification provided
for in Section 11.1, each Stockholder (specifically excluding the ESOP and its
participants and their beneficiaries, in their capacities as such) covenants and
agrees that he will jointly and severally indemnify, defend, protect and hold
harmless the Company and Metals from and against all Damages incurred by any of
them as a result of any condition of the properties owned or operated by the
Company at any time prior to the Closing Date and described in the report or
reports of ENSR, copies of which are attached hereto.
11.5 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 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.
11.6 LIMITATIONS ON INDEMNIFICATION. Metals and the other persons or
entities indemnified pursuant to this Section 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 which such persons may
have against such the Stockholders shall exceed $375,000 (the "Indemnification
Threshold"). The Stockholders shall not assert any claim for indemnification
hereunder against Metals until such time as, and solely to the extent that the
aggregate of all claims which Stockholders may have against Metals shall exceed
the Indemnification Threshold.
-25-
No person shall be entitled to indemnification under this Section 11 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.
11.7 INDEMNIFICATION BY ESOP. Notwithstanding anything else set forth in
this Agreement, no benefit which shall be payable out of the ESOP to any person
(including a participant or his or her beneficiary) shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge the same shall be void.
12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. A. Xxxx Xxxxxxxx and Xxxx X. Xxxxxxxx will
not, for a period of five (5) years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(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 Metals or any of its subsidiaries within 200 miles of
where the Company and 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 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 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
Metals or any of its subsidiaries within the Territory for the purpose of
soliciting or selling products or services in direct competition with
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 whose stock is
publicly traded on a national securities exchange or over-the-counter market.
-26-
12.2 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, each Stockholder agrees that the
foregoing covenant may be enforced by Metals in the event of breach by such
Stockholder, by injunctions, restraining orders and other equitable actions.
12.3 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
activities; business and 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 engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business it is currently conducting in the
locations currently established therefor, then the Stockholders will be
precluded from soliciting the customers or employees of such new activities or
business or from such new location and from directly competing with such new
activities or business within 100 miles of its then-established operating
location(s) through the term of this covenant.
12.4 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, 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.
12.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section 12 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 12 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 any Stockholder
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 12, during which the agreements and
covenants of each Stockholder made in this Section 12 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 12. The covenants
contained in this Section 12 shall not be affected by any breach of any other
-27-
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 GENERAL. The Stockholders recognize and acknowledge that they had in
the past, 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
that they will not 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 their duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 13.1, 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 any of the
Stockholders of the provisions of this Section, Metals shall be entitled to
injunctive or other equitable relief restraining such 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.
13.2 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 against them by injunctions, restraining orders and
other appropriate equitable relief.
13.3 SURVIVAL. The obligations of the parties under this Section 13 shall
survive the termination of this Agreement for a period of five years.
14. INTENDED TAX TREATMENT AND POOLING-OF-INTERESTS ACCOUNTING
14.1 TAX-FREE REORGANIZATION. Metals and the Stockholders are entering
into this Agreement with the intention that the Exchange qualify as a tax-free
reorganization for federal
-28-
income tax purposes, and the Stockholders will not take any actions that
disqualify the Exchange 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; and
(ii) none of the Stockholders has any present plan, intention or
arrangement to dispose of any of the Metals Stock to be received in the
Exchange that would reduce the fair value of the Metals Stock (measured as
of the Effective Time) retained by such Stockholder to an amount less than
50% of the fair value of the Company Stock held by such Stockholder
immediately prior to the Effective Time.
14.2 RESTRICTIONS ON RESALE. Metals has informed the Stockholders that
Metals intends to account for the Exchange as a pooling-of-interests under
Opinion No. 16. Metals has also informed the Stockholders that its ability to
account for the Exchange as a pooling-of-interests was a material factor
considered by Metals in Metals' decision to enter into this Agreement.
Therefore, pursuant to Opinion No. 16, prior to the publication and
dissemination by Metals of consolidated financial results which include results
of the combined operations of the Company and Metals for at least thirty days on
a consolidated basis following the Effective time, the Stockholders shall not
sell, offer to sell, or otherwise transfer or dispose of, any shares of the
Metals Common Stock received by Stockholders, engage in put, call, short-sale,
straddle or similar transactions, or in any other way reduce the Stockholders'
risk of owning shares of Metals. The certificates evidencing the Metals Common
Stock to be received by the Stockholders will bear a legend substantially in the
form set forth below:
The shares represented by this certificate have not been registered and
may not be sold, transferred or assigned, and the issuer shall not be
required to give effect to any attempted sale, transfer or assignment,
except pursuant to an exemption from federal registration requirements
(such as the exemption provided by Rule 144) and all applicable state
registration requirements.
15. SECURITIES LAW MATTERS
15.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder represents and
warrants that such Stockholder has not relied on any purchaser representative,
or on the Company or any other Stockholder, in connection with the acquisition
of shares of Metals Stock hereunder. The Stockholders each (A) have such
knowledge, sophistication and experience in business and financial
-29-
matters that they are capable of evaluating the merits and risks of an
investment in the shares of Metals Stock, (B) fully understand 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 and
can afford a complete loss of such investment. The Stockholders have each had an
adequate opportunity to ask questions and receive answers from the officers of
Metals concerning any and all matters relating to the transactions described
herein including without limitation the background and experience of the
officers and directors of Metals, the plans for the operations of the business
of Metals, the business, operations and financial condition of Metals, and any
plans for additional acquisitions and the like. The Stockholders have each asked
any and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
15.2 PRIVATE PLACEMENT. The Stockholders understand that the issuance of
the shares of Metals Stock to be issued hereunder has not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be sold as
transferred in the absence of registration thereunder or an exemption from the
registration requirements of the Act.
16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. For purposes of this Section 16, the
term "Stockholders" shall include the ESOP. At any time following the Closing,
whenever Metals proposes to register any Metals Stock for its own or others
account under the 1933 Act for a public offering, other than (i) any
registration of shares to be used as consideration for the acquisition of
businesses or (ii) registrations relating to employee benefit plans, Metals
shall give each of the Stockholders prompt written notice of its intent to do
so. Upon the written request of any of the Stockholders given within 30 days
after receipt of such notice, Metals shall cause to be included in such
registration the number of shares of Stockholders' Metals Stock (including any
stock issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by Metals as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Metals Stock) specified in such written request by such
Stockholder, provided that (i) Metals shall not be required to register more
than 30% of the Stockholders' Metals Stock in any such registration, and (ii) if
Metals is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered that the number of shares
to be sold by persons other than Metals is greater than the number of such
shares which can be offered without adversely affecting the offering, Metals may
reduce pro rata the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter.
-30-
16.2 DEMAND REGISTRATION RIGHTS.
(a) At any time after the date one year after the Closing and prior
to the date three years after the Closing, the holders of twenty percent or more
of the shares of Metals Stock issued to the Stockholders pursuant to this
Agreement which have not been previously registered or sold and which are not
entitled to be sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act may request in writing that Metals file a
registration statement under the 1933 Act covering the registration of all or
any part of the shares of Metals Stock issued to the Stockholders pursuant to
this Agreement (including any stock issued as (or issuable upon the conversion
or exchange of any convertible security, warrant, right or other security which
is issued by Metals as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Metals Stock) then held by such
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
such request, Metals shall give written notice of such request to all
Stockholders. As soon as practicable but in no event later than 45 days after
the initial written request of Stockholders regarding such registration, Metals
shall file and use its best efforts to cause to become effective a registration
statement covering (i) all of the shares requested to be included in such
registration pursuant to the initial written request and (ii) of all of the
shares of other Stockholders joining in such request within 20 days following
Metals' notice. Metals shall be obligated to effect only one Demand Registration
hereunder, and will keep such Demand Registration current and effective for not
less than 120 days (or such shorter period as is required to complete the
distribution of the shares registered thereby).
(b) Notwithstanding the foregoing paragraph, following any such a
demand, a majority of Metals' disinterested directors (i.e. directors who have
not demanded or elected to sell shares in any such public offering) may defer
the filing of the registration statement for up to a 30 day period after the
date on which Metals would otherwise be required to make such filing pursuant to
the foregoing paragraph.
If at the time of any request by the Stockholders for a Demand
Registration Metals has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, Metals may so inform the Stockholders requesting
registration and no registration of the Stockholders' Metals Stock shall be
initiated under this Section 16.2 until 90 days after the effective date of such
registration unless Metals is no longer proceeding diligently to effect such
registration; provided that Metals shall provide the Stockholders the right to
participate in such public offering pursuant to, and subject to, Section 16.1
hereof. If, pursuant to this paragraph, Metals does not effect the requested
Demand Registration (and some or all of the Stockholders do not sell all of
their shares of Metals Stock pursuant to any offering effected pursuant to
Section 16.1), such Stockholders shall be entitled to a second Demand
Registration.
-31-
16.3 REGISTRATION PROCEDURES. Whenever Metals is required to register
shares of Metals Stock pursuant to Sections 16.1 and 16.2, Metals will, as
expeditiously as possible:
(a) Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements or term sheets thereto,
Metals will furnish a representative of the Stockholders with copies of all such
documents proposed to be filed) as promptly as practical;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Securities Act and to keep
such registration statement effective for a period of not less than 120 days;
(c) Furnish to each Stockholder who so requests such number of
copies of such registration statement, each amendment and supplement thereto and
the prospectus included in such registration statement (including each
preliminary prospectus and any term sheet associated therewith), and such other
documents as such Stockholder may reasonably request in order to facilitate the
disposition of the relevant shares;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Stockholders,
and to keep such registration or qualification effective during the period such
registration statement is to be kept effective, provided that Metals shall not
be required to become subject to taxation, to qualify to do business or to file
a general consent to service of process in any such states or jurisdictions;
(e) Cause all such shares of Metals Stock to be listed or included
on any securities exchanges or trading systems on which similar securities
issued by Metals are then listed or included;
(f) Notify each Stockholder at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act within the period that
Metals is required to keep the registration statement effective of the happening
of any event as a result of which the prospectus included in such registration
statement, together with any associated term sheet, contains an untrue statement
of a material fact or omits any fact necessary to make the statement therein not
misleading, and, at the request of any such Stockholder, Metals will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus
-32-
will not contain an untrue statement of material fact or omit to state any fact
necessary to make the statements therein not misleading.
All expenses incurred in connection with the registration under this
Section 16 (including all registration, filing, qualification, legal, printer
and accounting fees, but excluding underwriting commissions and discounts),
shall be borne by Metals.
16.4 INDEMNIFICATION.
(a) In connection with any demand registration, Metals shall
indemnify, to the extent permitted by law, each Stockholder (an "Indemnified
Party") against all losses, claims, damages, liabilities and expenses arising
out of or resulting from any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
associated term sheet or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading except insofar as the same are caused by or contained in
or omitted from any information furnished in writing to Metals by such
Indemnified Party expressly for use therein or by any Indemnified Parties'
failure to deliver a copy of the registration statement or prospectus or any
amendment or supplements thereto after Metals has furnished such Indemnified
Party with a sufficient number of copies of the same.
(b) In connection with any demand registration, each Stockholder
shall furnish to Metals in writing such information as is reasonably requested
by Metals for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, Metals, its directors and officers
and each person who controls Metals (within the meaning of the 0000 Xxx) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement or material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in information so furnished in writing by
such Stockholder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this Section
16.4 shall be limited to an amount equal to the net proceeds actually received
by such Stockholder from the sale of the relevant shares covered by the
registration statement.
(c) Any person entitled to indemnification hereunder will (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified
-33-
and indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely effected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) If the indemnification provided for in this Section 16.4 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of as a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
16.5 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 16.1 and 16.2 covering an underwritten registered offering, Metals
and each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of Metals's size and investment stature,
including indemnification.
-34-
16.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Metals
stock to the public without registration, Metals agrees to use its best efforts
to:
(i) make and keep public information regarding Metals available as
those terms are defined in Rule 144 under the 1933 Act, for a period of
four years beginning on the Closing Date;
(ii) file with the SEC in a timely manner all reports and other
documents required of Metals under the 1933 Act and the 1934 Act; and
(iii) so long as a Stockholder owns any restricted Metals Common
Stock, furnish to each Stockholder forthwith upon written request a
written statement by Metals as to its compliance with the reporting
requirements of Rule 144 and of the 1933 Act and the 1934 Act, a copy of
the most recent annual or quarterly report of Metals, and such other
reports and documents so filed as a Stockholder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
16.7 ASSIGNMENT OF REGISTRATION RIGHTS. A Stockholder or any person to
which such rights under this Agreement have been transferred may transfer the
rights granted by this Section 16 only to a transferee or assignee of Metals
Stock representing no less than 10% of the aggregate number of shares of Metals
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares) issued pursuant to this Agreement (or, if less, 100% of the
Metals Stock originally issued to such Stockholder or transferred to such other
person). Any transfer or assignment of the registration rights granted under
this Agreement shall be conditioned upon (i) the Company's being given written
notice at the time of or within 10 days after said transfer or assignment,
stating the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned and (ii) the assumption in writing by the transferee or assignee of
the obligations of a Stockholder under this Section 16.
16.8 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Metals Stock requested to be included in a registration on
behalf of the Stockholders cannot be so included as a result of limitations of
the aggregate number of shares of Metals Stock that may be so included, the
number of shares of Metals Stock that may be so included by the Stockholders
shall be allocated among the Stockholders requesting inclusion of shares pro
rata on the basis of the number of shares of Metals Stock held by such
Stockholders. The Company shall not limit the number of shares of Metals Stock
to be included in a registration pursuant to this Section 16 in order
-35-
to include shares held by stockholders with no registration rights or, with
respect to registrations under Section 16.2 hereof, in order to include in such
registration securities registered for the Company's own account or securities
held by persons other than the Stockholders.
17. GENERAL
17.1 COOPERATION. The Company, Stockholders and Metals shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the other 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 Closing Date 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 Closing Date.
17.2 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.
17.3 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 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 and Metals, acting through
their respective officers, duly authorized by their respective Boards of
Directors.
17.4 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.
17.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees 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 such indemnifying party.
-36-
17.6 EXPENSES. 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'
representatives, accountants and counsel incurred in connection herewith. Each
Stockholder shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Exchange. Each Stockholder shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company or Metals,
will pay all taxes due upon receipt of the consideration payable pursuant to
this Agreement.
17.7 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 to an officer or agent of such party, as follows:
(a) If to Metals, addressed to it at:
Metals USA, Inc.
0000 Xxxxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
(b) If to the Company, addressed to it at:
Xxxxxxxx Steel Company, Inc.
0000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxx 00000
Attn: President
(c) If to the Stockholders, addressed to them at their addresses
set forth Schedule 1.3 hereto;
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Alabama other than its principles governing conflicts
of laws.
-37-
17.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing 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.
17.10 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.
(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.
17.11 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 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.
17.12 TIME. Time is of the essence with respect to this Agreement.
17.13 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.
17.14 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.
17.15 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.
-38-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
METALS USA, INC.
By: /s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
XXXXXXXX STEEL COMPANY, INC.
By:/s/ XXXX XXXXXXXX
Name: Xxxx Xxxxxxxx
Title: President and CEO
STOCKHOLDERS:
/s/ XXXX X. XXXXXXXX
Xxxx X. Xxxxxxxx, Individually
/s/ XXXX X. XXXXXXXX
Xxxx X. Xxxxxxxx, as Trustee of Xxxx
Xxxxxxxx Qualified Annuity Trust
/s/ XXXX X. XXXXXXXX
Xxxx X. Xxxxxxxx, as Trustee of the Xxxx
Xxxxx Xxxx Xxxxxxxx Qualified Annuity
Trust
The Xxxxxxxx Family Limited Partnership
By: /s/ XXXX X. XXXXXXXX
Xxxx X. Xxxxxxxx
General Partner
The Xxxxxxxx Steel Company, Inc. Employee
Profit Sharing Pension Stock Ownership
Plan and Trust
By: South Trust Bank, N.A., Trustee
By: /s/ XXXXXX X. XXXX
Name: Xxxxxx X. Xxxx
Title: VP and Trust Officer
