1
Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
METAL MANAGEMENT, INC.
PROLER ACQUISITION, INC.
PROLER SOUTHWEST INC.
AND
THE SHAREHOLDERS OF PROLER SOUTHWEST INC.
DATED AUGUST __, 1997
================================================================================
2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is dated as of August
__, 1997, by and among Metal Management, Inc., a Delaware corporation ("MTLM"),
Proler Acquisition, Inc., a Texas corporation ("Acquisition"), Proler Southwest
Inc., a Texas corporation (the "Company"), and the shareholders of the Company
set forth on the signature page hereof (collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are holders of all of the issued and outstanding
common stock of the Company ("Company Common Stock");
WHEREAS, MTLM proposes to acquire the Company through a merger of the
Company with and into Acquisition (the "Merger") pursuant to which the shares
of Common Stock of the Company would be converted into cash, promissory notes
("Purchase Notes"), Warrants ("Warrants") and Common Stock of MTLM ("Common
Stock"), on the terms and conditions set forth herein;
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which a merger (the "Merger") of
the Company with and into Acquisition will occur; and
WHEREAS, the parties intend for the Merger to be a tax-free reorganization
under Section 368(a)(2)(D) of the Code.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 MERGER.
(a) Upon the terms and subject to the conditions of this
Agreement, the Company shall be merged with and into Acquisition in
accordance with the Texas Business Corporation Act ("TBCA"). Acquisition
shall be the surviving corporation in the Merger (the "Surviving
Corporation"). The Surviving Corporation shall continue its corporate
existence under and be organized under and be governed by the TBCA and
possess all the rights and assets of Acquisition and the Company and be
subject to all of the liabilities and obligations of Acquisition and the
Company in accordance with the provisions of the TBCA.
3
(b) The Articles of Incorporation and the Bylaws of Acquisition,
as in effect immediately prior to the date and time when the Merger shall
become effective (the "Effective Time"), shall be the Articles of
Incorporation and Bylaws, respectively, of the Surviving Corporation
until thereafter amended, except that Article One of the Articles of
Incorporation of Acquisition shall be amended to change the name of
Acquisition to "Proler Southwest Inc."
(c) The directors of Acquisition immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and
the officers of the Company immediately prior to the Effective Date shall
be the officers of the Surviving Corporation, each to hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Bylaws of the
Surviving Corporation, or as otherwise provided by law.
(d) The Merger shall have the effects set forth in the TBCA. If
at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law
or otherwise are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, all rights, title and
interests in all real estate and other property and all privileges,
powers and franchises of the Company and Acquisition, the Surviving
Corporation and its proper officers and directors, in the name and on
behalf of the Company and Acquisition, shall execute and deliver all such
proper deeds, assignments and assurances in law and do all things
necessary and proper to vest, perfect or confirm title to such property
or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement, and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
1.2 CLOSING AND EFFECTIVE TIME. Subject to the provisions of Article
VI and Article VII hereof, the closing (the "Closing") of the Merger shall take
place at 9:00 a.m., Houston time, on August __, 1997, at the offices of Xxxxxx
& Xxxxxx L.L.P., 0000 Xxxxxx, Xxxxxxx, Xxxxx, or if any of the conditions set
forth in Article VI or Article VII hereof have not been satisfied, then as soon
as practicable thereafter, or at such other time and place or such other date
as MTLM and the Company shall agree (the "Effective Time"). The Merger shall
be effective when properly executed Articles of Merger (together with any other
documents required by law to effectuate the Merger) shall have been filed with
the Secretary of State of the State of Texas in accordance with the provisions
of the TBCA, which filing shall be made as soon as practical on or after the
Effective Time.
1.3 CONVERSION OF STOCK.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any shares of Company Common Stock,
the 10,000 shares of Company Common Stock outstanding immediately prior
to the Effective Time shall be converted into
2
4
the right of the Shareholders to receive in the manner allocated on
Annex A hereto, upon the surrender of the certificates formerly
representing such shares the following (the "Merger Consideration"):
(i) 1,750,000 shares of MTLM Common Stock, of which 250,000
shares shall be placed in escrow pursuant to an Escrow
Agreement (the "Escrow Shares"), the form of which
Escrow Agreement is attached hereto as Exhibit A and
made a part hereof;
(ii) $2,000,000 principal amount of purchase notes
("Purchase Notes") in the form of Exhibit B attached
hereto and made a part hereof;
(iii) Warrants in the forms of Exhibits C, D and E,
respectively, to purchase 100,000 shares of MTLM Common
Stock (the "Conversion Warrant"), 225,000 shares of
MTLM Common Stock (the "Cash Warrant") and 50,000
shares of MTLM Common Stock (the "Employee Warrant");
(iv) $7,500,000 principal amount of 180-day promissory notes
(the "180-day Notes") in the form of Exhibit F attached
hereto and made a part hereof;
(v) $600,000 principal amount of notes reflecting the
post-tax earnings of the Company from January 1, 1997
to March 18, 1997 (the "Earnings Notes") in the form of
Exhibit G attached hereto and made a part hereof; and;
(vi) $5,500,000 in cash.
(b) No fractional shares of MTLM Common Stock shall be issued to
any holder of Company Common Stock in the Merger. To the extent the
application of the conversion rate to all shares of Company Common Stock
held by a Shareholder would result in a fractional number of shares of
MTLM Common Stock being issued to such holder in the Merger, the number
of shares of MTLM Common Stock issuable to such holder in respect of all
such shares in the Merger shall be rounded up to the next whole number of
shares of MTLM Common Stock.
(c) Each share of Acquisition Common Stock outstanding immediately
prior to the Effective Time shall continue to be one share of stock in the
Surviving Corporation.
(d) As of and after the Effective Time, no holder of any
certificate that immediately prior to the Effective Time represented
shares of Company Common Stock shall have any rights as a holder of
Company Common Stock other than to receive the Merger Consideration
issuable to such holder pursuant to the Merger.
3
5
1.4 ESCROW.
The Escrow Shares will be held under the Escrow Agreement for a period of
one year for the purposes of satisfying the amount, if any, due the Company or
MTLM as a result of any breaches of the Company's representations and
warranties that occur within said one year period. At the end of such one year
period shares not deducted from the escrow, as provided above, shall be
delivered by the Escrow Agent to the Shareholders.
1.5 EXCHANGE.
At the Closing, each Shareholder shall surrender to MTLM the certificates
for Company Common Stock owned by such Shareholder. Until so surrendered,
certificates for shares of Company Common Stock shall represent, after the
Effective Time, solely the right to receive the Merger Consideration issuable
in respect of such shares determined pursuant to Section 1.3 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF MTLM
As a material inducement to the Company and the Shareholders to enter into
this Agreement and to consummate the transactions contemplated hereby, MTLM
makes the following representations and warranties to the Company and the
Shareholders:
2.1 CORPORATE STATUS. MTLM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2.2 CORPORATE POWER AND AUTHORITY. MTLM has, or will have at the time of
Closing, the corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. MTLM has, or will have at the time of
Closing, taken all action necessary to authorize its execution and delivery of
this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been, or will have been at the
time of Closing, duly executed and delivered by MTLM and constitutes a legal,
valid and binding obligation of MTLM, enforceable against MTLM in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
4
6
2.4 NO COMMISSIONS. MTLM has incurred no obligation for any finder's or
broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
2.5 SEC FILINGS AND FINANCIAL INFORMATION. To the best of its
knowledge, MTLM has timely made all filings required to be made by it with the
SEC. To the best of its knowledge, none of such filings contains any untrue
statement of material fact or omits to state a material fact necessary to make
the statements therein not misleading in light of the circumstances in which
they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS AND THE COMPANY
As a material inducement to MTLM to enter into this Agreement and to
consummate the transactions contemplated hereby, each of the Shareholders and
the Company hereby jointly and severally make the following representations and
warranties to MTLM; provided, however, that with respect to the representations
and warranties set forth in Sections 3.6 through 3.18 (except Sections
3.14(a)(i) and 3.15(a)) and Sections 3.20, 3.21 and 3.23 through 3.34 such
representations and warranties are made only to the extent of the Shareholders'
and the Company's Knowledge.
3.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
The Company has the requisite power and authority to own or lease its property
and to carry on its business as now being conducted. The Company is legally
qualified to transact business in all jurisdictions where the nature of its
property and the conduct of its business requires such qualification (all of
which jurisdictions are listed on Schedule 3.1) and is in good standing in each
of the jurisdictions in which it is so qualified, except where the failure to
be so qualified would not have a Material Adverse Effect on the Company. There
is no pending or threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of the Company.
3.2 POWER AND AUTHORITY. The Company and each of the Shareholders has
the power and authority to execute and deliver this Agreement, to perform its
and their respective obligations hereunder and to consummate the transactions
contemplated hereby. The Company has taken all action necessary to authorize
the execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby. Each of the Shareholders is a resident of the State of Texas and has
the requisite competence to execute and deliver this Agreement and to perform
his obligations hereunder and to consummate the transactions contemplated
hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Company and each of the Shareholders and constitutes the legal, valid
and binding obligation of
5
7
each of them, enforceable against them in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, with respect to the
Company: (i) the number of authorized shares of each class of its capital
stock, (ii) the number of issued and outstanding shares of each class of its
capital stock, and (iii) the number of shares of each class of its capital
stock which are held in treasury. All of the issued and outstanding shares of
capital stock of the Company (i) have been duly authorized and validly issued
and are fully paid and non-assessable, (ii) were issued in compliance with all
applicable state and federal securities laws, and (iii) were not issued in
violation of any preemptive rights or rights of first refusal. No preemptive
rights or rights of first refusal exist with respect to the shares of capital
stock of the Company and no such rights arise by virtue of or in connection
with the transactions contemplated hereby. There are no outstanding or
authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments
of any kind that could require the Company to issue or sell any shares of its
capital stock (or securities convertible into or exchangeable for shares of its
capital stock). There are no outstanding stock appreciation, phantom stock,
profit participation or other similar rights with respect to the Company.
There are no proxies, voting rights or other agreements or understandings with
respect to the voting or transfer of the capital stock of the Company. The
Company is not obligated to redeem or otherwise acquire any of its outstanding
shares of capital stock.
3.5 SHAREHOLDERS OF THE COMPANY. Schedule 3.5 sets forth, with respect
to the Company, (i) the name, address and federal taxpayer identification
number of, and the number of outstanding shares of each class of its capital
stock owned by each shareholder of record as of the close of business on the
date of this Agreement; and (ii) the name, address and federal taxpayer
identification number of, and number of shares of each class of its capital
stock beneficially owned by, each beneficial owner of outstanding shares of
capital stock (to the extent that record and beneficial ownership is
different). The Shareholders are the holders of all issued and outstanding
shares of capital stock of the Company and the Shareholders own such shares as
set forth on Schedule 3.5, free and clear of all Liens, restrictions and claims
of any kind, except as set forth on Schedule 3.5. Such shares are not subject
to any voting trust agreement, proxy or other Contract.
3.6 NO VIOLATION. Except as set forth on Schedule 3.6 and any applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and
the rules and regulations promulgated thereunder (the "HSR Act"), the execution
and delivery of this Agreement by the Company and the Shareholders, the
performance by each of them of their respective obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will
not (i) contravene any provision of the articles of incorporation or bylaws of
the Company, (ii) violate any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any Governmental Authority or of
any arbitration award which is either applicable to, binding upon or
enforceable against the Company or the Shareholders; (iii) result
6
8
in any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
or give rise to a right to terminate, amend, modify, abandon or accelerate, any
Contract which is applicable to, binding upon or enforceable against the
Company or the Shareholders, (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the property or assets of
the Company, or (v) require the consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except any SEC and other filings required to be
made by MTLM.
3.7 RECORDS. The copies of the respective articles of incorporation and
bylaws of the Company which were or will be provided to MTLM are true and
complete and reflect all amendments made through the date of this Agreement.
The minute books for the Company made available to MTLM for review were true
and complete as of the date of such review, no further entries have been made
through the date of this Agreement, such minute books contain the true
signatures of the persons purporting to have signed them, and such minute books
contain an accurate record of all corporate actions of the shareholders and
directors (and any committees thereof) of the Company taken by written consent
or at a meeting since incorporation. All material corporate actions taken by
the Company have been duly authorized or ratified. All accounts, books,
ledgers and official and other records of the Company have been fully, properly
and accurately kept and completed in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained therein. The
stock ledgers of the Company, as previously made available to MTLM, contain
accurate and complete records of all issuances, transfers and cancellations of
shares of the capital stock of the Company.
3.8 SUBSIDIARIES. Except as set forth on Schedule 3.8, the Company does
not own, directly or indirectly, any outstanding voting securities of or other
interests in, or control, any other corporation, partnership, joint venture or
other business entity. Except as set forth on Schedule 3.8, the Company does
not have any liabilities or obligations, whether accrued, absolute, contingent
or otherwise, arising from its interest in the entities set forth on such
schedule.
3.9 FINANCIAL STATEMENTS. The Shareholders have delivered to MTLM (i)
the consolidated financial statements of the Company as of December 31, 1996,
including the notes thereto, audited by Price Waterhouse LLP and (ii) the March
31, 1997 unaudited consolidated financial statements without footnotes of the
Company, which are subject to year-end adjustment, (collectively, the
"Financial Statements"), copies of which are attached as Schedule 3.9 hereto.
The balance sheet dated as of March 31, 1997 included in the Financial
Statements is referred to herein as the "Current Balance Sheet". The Financial
Statements fairly present the consolidated financial condition of the Company
at each of the balance sheet dates and the results of operations for the
periods covered thereby, and have been prepared in accordance with GAAP
consistently applied for the periods indicated. The Financial Statements of
the Company fairly reflect the transactions, properties, assets and liabilities
of the Company. There are no material special or non-recurring items of income
or expense during the periods covered by the Financial Statements, and the
balance sheets included in the Financial Statements do not reflect any writeup
or revaluation increasing the book value of any assets, except as specifically
disclosed in the notes
7
9
thereto in accordance with GAAP consistently applied throughout the periods
indicated. The Financial Statements reflect all adjustments necessary for a
fair presentation of the financial information contained therein.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as disclosed
in Schedule 3.10, since the date of the Current Balance Sheet, the Company has
not (i) issued any capital stock or other securities; (ii) made any
distribution of or with respect to its capital stock or other securities or
purchased or redeemed any of its securities; (iii) paid any bonus to or
increased the rate of compensation of any of its officers or salaried employees
or amended any other terms of employment of such persons; (iv) sold, leased or
transferred any of its properties or assets other than in the ordinary course
of business consistent with past practice; (v) made or obligated itself to make
capital expenditures out of the ordinary course of business consistent with
past practice; (vi) made any payment in respect of its liabilities other than
in the ordinary course of business consistent with past practice; (vii)
incurred any obligations or liabilities (including any indebtedness) or entered
into any transaction or series of transactions involving in excess of $25,000
in the aggregate out of the ordinary course of business, except for this
Agreement and the transactions contemplated hereby; (viii) suffered any theft,
damage, destruction or casualty loss, not covered by insurance and for which a
timely claim was filed, in excess of $25,000 in the aggregate; (ix) suffered
any extraordinary losses (whether or not covered by insurance); (x) waived,
canceled, compromised or released any rights having a value in excess of
$25,000 in the aggregate; (xi) made or adopted any change in its accounting
practice or policies; (xii) made any adjustment to its books and records other
than in respect of the conduct of its business activities in the ordinary
course consistent with past practice; (xiii) entered into any transaction with
any Affiliate other than intercompany transactions in the ordinary course of
business consistent with past practice; (xiv) entered into any employment
agreement; (xv) terminated, amended or modified any agreement involving an
amount in excess of $25,000; (xvi) imposed any security interest or other Lien
on any of its assets other than in the ordinary course of business consistent
with past practice; (xvii) delayed paying any accounts payable which is due and
payable except to the extent being contested in good faith and except in the
ordinary course of its business; (xviii) made or pledged any charitable
contribution other than in the ordinary course of business consistent with past
practice; (xix) entered into any other transaction or been subject to any event
which has or may have a Material Adverse Effect on the Company; or (xx) agreed
to do any of the foregoing.
3.11 LIABILITIES. Except as set forth on Schedule 3.11, the Company does
not have any liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (i) to the extent reflected or taken into account in the
Current Balance Sheet or any notes thereto and not heretofore paid, discharged
or otherwise satisfied, (ii) to the extent specifically set forth in or
incorporated by express reference in any of the Schedules attached hereto,
(iii) liabilities incurred in the ordinary course of business consistent with
past practice since the date of the Current Balance Sheet (none of which
relates to a breach of contract, breach of warranty, tort, infringement or
violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding), (iv) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which would not be material in the aggregate, and (v)
liabilities incurred in the ordinary course of business prior to the date of
the Current Balance Sheet which, in accordance
8
10
with GAAP consistently applied, were not recorded thereon. The consolidated
combined net worth of the Company and Proler Steelworks, L.L.C. will be no less
than $1,000,000 as of the Closing Date.
3.12 LITIGATION. Except as set forth on Schedule 3.12, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation, pending or, to the Knowledge of the Company, threatened against,
by or affecting the Company or any of its properties or assets, or the
Shareholders, or which question the validity or enforceability of this
Agreement or the transactions contemplated hereby, and there is no reasonable
basis for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
the Company is or was a party which have not been complied with in full or
which continue to impose any material obligations on the Company.
3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13 to the
Knowledge of the Company and the Shareholders:
(a) The Company is in material compliance with all Environmental,
Health and Safety Laws, including, without limitation, Environmental,
Health and Safety Laws with respect to discharges into the ground water,
surface water and soil, emissions into the ambient air, and generation,
accumulation, storage, treatment, transportation, transfer, labeling,
handling, manufacturing, use, spilling, leaking, dumping, discharging,
release or disposal of Hazardous Substances (as defined herein), or other
Waste. The Company is not currently liable for any penalties, fines or
forfeitures for failure to comply with any Environmental, Health and
Safety Laws. The Company is in material compliance with all required
notice, record keeping and reporting requirements of all Environmental,
Health and Safety Laws, and has complied with all informational requests
or demands arising under the Environmental, Health and Safety Laws.
(b) The Company has obtained, or caused to be obtained, and, is in
material compliance with, all licenses, certificates, permits, approvals
and registrations (collectively "Licenses") required by the
Environmental, Health and Safety Laws for the ownership of its properties
and assets and the operation of its business as presently conducted,
including, without limitation, all air emission, water discharge, water
use and solid waste, hazardous waste and other Waste generation,
transportation, transfer, storage, treatment or disposal Licenses, and
the Company is in material compliance with all the terms, conditions and
requirements of such Licenses, and copies of such Licenses have been made
available to MTLM. There are no administrative or judicial
investigations, notices, claims or other proceedings pending or
threatened by any Governmental Authority or third parties against the
Company, its business, operations, properties, or assets, which question
the validity or entitlement of the Company to any License required by the
Environmental, Health and Safety Laws for the ownership of each of the
respective properties and assets of the Company and the operation of its
business or wherein an unfavorable decision, ruling or finding would have
a Material Adverse Effect on the Company.
9
11
(c) The Company has not received and is not aware of any
non-compliance order, warning letter, investigation, notice of violation,
claim, suit, action, judgment, or administrative or judicial proceeding
pending or threatened against or involving the Company, its business,
operations, properties, or assets, issued by any Governmental Authority
or third party with respect to any Environmental, Health and Safety Laws
in connection with the ownership of its properties or assets or the
operation of its business, which has not been resolved to the
satisfaction of the issuing Governmental Authority or third party, or
which could have a Material Adverse Effect on the Company.
(d) The Company is in compliance with, and is not in breach of or
default under any applicable writ, order, judgment, injunction,
governmental communication or decree issued pursuant to the
Environmental, Health and Safety Laws and no event has occurred or is
continuing which, with the passage of time or the giving of notice or
both, would constitute such non-compliance, breach or default thereunder,
or affect the Owned Properties or Leased Premises.
(d) The Company has not generated, manufactured, used, transported,
transferred, stored, handled, treated, spilled, leaked, dumped,
discharged, released or disposed, nor has it arranged for any third
parties to generate, manufacture, use, transport, transfer, store,
handle, treat, spill, leak, dump, discharge, release or dispose of,
Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it performed,
arranged for or allowed by any method or procedure such generation,
manufacture, use, transportation, transfer, storage, treatment, spillage,
leakage, dumping, discharge, release or disposal in material
contravention of any Environmental, Health and Safety Laws. The Company
has not generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for any
third parties to generate, manufacture, use, store, handle, treat, spill,
leak, dump, discharge, release or dispose of, any material quantities of
Hazardous Substances or other waste upon property currently or previously
owned or leased by it, except in compliance with Environmental, Health
and Safety Laws. For purposes of this Section 3.13, the term "Hazardous
Substances" shall include any toxic or hazardous substance, material, or
waste, and any other contaminant, pollutant or constituent thereof,
whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products,
pesticides, asbestos containing materials, petroleum or petroleum
products, and polychlorinated biphenyls, the presence of which requires
remediation under any Environmental, Health and Safety Laws in effect on
the Closing Date, including, without limitation, the United States
Department of Transportation Table (49 CFR 172, 101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302)
and any amendments thereto; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et
seq. (hereinafter collectively "CERCLA"); the Solid Waste Disposal Act,
as amended by the Resource Conversation and Recovery Act of 1976 and
subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
Section 6901 et seq. (hereinafter, collectively "RCRA");
10
12
the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
Section 1801, et seq.; the Clean Water Act, as amended, 33 U.S.C. Section
1311, et seq.; the Clean Air Act, as amended (42 U.S.C. Section
7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001,
et seq. (Title III of XXXX) ("EPCRA"); the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any
similar state statute or regulations implementing such statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees, or
which has been or shall be determined or interpreted at any time by any
Governmental Authority to be a hazardous or toxic substance regulated
under any other statute, law, regulation, order, code, rule, order, or
decree. For purposes of this Section 3.13, the term "Waste" shall
include toxic agricultural wastes, biomedical wastes, biological wastes,
bulky wastes, construction and demolition debris, garbage, household
wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard
trash; provided, however, the term "Waste" shall not include scrap metal.
(f) The Company has not caused a Release or Discharge of any
material quantity of Hazardous Substance on, into or beneath the surface
of any parcel of the Owned Properties or the Leased Premises or to any
properties adjacent thereto except in compliance with the Environmental,
Health and Safety Laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge, of
any Hazardous Substance on, into or beneath the surface of any parcel of
the Owned Properties or the Leased Premises or to any properties adjacent
thereto. For purposes of this Section, the terms "Release" and
"Discharge" shall have the meanings given them in the Environmental,
Health and Safety Laws.
(g) The Company has not generated, handled, manufactured, treated,
stored, used, shipped, transported, transferred, or disposed of, nor has
it allowed or arranged, by contract, agreement or otherwise, for any
third parties to generate, handle, manufacture, treat, store, use, ship,
transport, transfer or dispose of, any material quantity of Hazardous
Substance or other Waste to or at a site which, pursuant to CERCLA or any
similar state law (i) has been placed on the National Priorities List or
its state equivalent; or (ii) the Environmental Protection Agency or the
relevant state agency has notified the Company that it has proposed or is
proposing to place on the National Priorities List or its state
equivalent. Neither the Company nor the Shareholders have received
notice or have Knowledge of any facts which could give rise to any
notice, that the Company is a potentially responsible party for a federal
or state environmental cleanup site or for corrective action under
CERCLA, RCRA or any other applicable Environmental Health and Safety
Laws. The Company has not submitted or was required to submit any notice
pursuant to Section 103(c) of CERCLA with respect to the Leased Premises
or the Owned Properties. The Company has not received any written or, to
the Knowledge of the Company, oral request for information in connection
with any federal or state environmental cleanup site, or in connection
with any of the real property or premises where the Company has
transported, transferred or disposed of other Wastes. The
11
13
Company has not been required to and has not undertaken any response or
remedial actions or clean-up actions at the request of any Governmental
Authorities or at the request of any other third party. The Company does
not have any material liability under any Environmental, Health and
Safety Laws for personal injury, property damage, natural resource
damage, or clean up obligations.
(h) Except as set forth on Schedule 3.13, the Company does not have
any Aboveground Storage Tanks or Underground Storage Tanks. For purposes
of this Section 3.13, the terms "Aboveground Storage Tanks" and
"Underground Storage Tanks" shall have the meanings given them in Section
6901 et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree,
as in effect as of the Closing Date, governing Aboveground Storage Tanks
or Underground Storage Tanks.
(i) The following have been made available to MTLM regardless of
their materiality, (i) all environmental audits, assessments or
occupational health studies of which the Company is aware undertaken by
the Company or their agents, or by the Shareholders, or by any
Governmental Authority, or by any third party, relating to the Company or
any of the Leased Premises or the Owned Properties; (ii) the results of
which the Company is aware of any ground, water, soil, air or asbestos
monitoring undertaken by the Company or its agents, or by the
Shareholders, or by any Governmental Authority, or by any third party,
relating to the Company or any of the Leased Premises or the Owned
Properties; (iii) all written communications between the Company and any
Governmental Authority arising under or related to Environmental, Health
and Safety Laws; and (iv) all citations issued under OSHA, or similar
state or local statutes, laws, ordinances, codes, rules, regulations,
orders, rulings, or decrees, relating to or affecting the Company or any
of the Leased Premises or the Owned Properties.
(j) Schedule 3.13 contains a list of the assets of the Company
which contain "asbestos" or "asbestos-containing material" (as such
terms are identified under the Environmental, Health and Safety Laws).
Except as set forth in Schedule 3.13, the Company has operated and
continues to operate in material compliance with all Environmental,
Health and Safety Laws governing the handling, use and exposure to and
disposal of asbestos or asbestos-containing materials. Except as set
forth in Schedule 3.13, there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or third
party pending, or threatened against or directly affecting the Company or
any of its assets or operations relating to the use, handling or exposure
to and disposal of asbestos or asbestos-containing materials in
connection with their assets and operations.
(k) As used in this Agreement, "Environmental, Health and Safety
Laws" means all federal, state, regional or local statutes, laws, rules,
regulations, codes, orders, plans, injunctions, decrees, rulings, and
changes or ordinances or judicial or administrative interpretations
thereof, as in effect on the Closing Date, any of which govern or relate
to pollution, protection of the environment, public health and safety,
air emissions, water
12
14
discharges, hazardous or toxic substances, solid or hazardous waste or
occupational health and safety, as any of these terms are in such
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act,
the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
(l) Schedule 3.13 identifies the operations and activities, and
locations thereof, which have been conducted and are being conducted by
the Company on any of the Owned Properties or the Leased Premises which
have involved the generation, accumulation, storage, treatment,
transportation, labeling, handling, manufacturing, use, spilling,
leaking, dumping, discharging, release or disposal of any material
quantities of Hazardous Substances.
(m) Schedule 3.13 identifies the locations to which the Company has
transferred, transported, hauled, moved, or disposed of Waste over the
past five years and the types and volumes of Hazardous Substances
transferred, transported, hauled, moved, or disposed of to each such
location.
(n) None of the Owned Properties or Leased Properties presently
includes, or has been constructed upon, any "wetlands" as defined under
applicable Environmental, Health and Safety Laws.
(o) As used in this Section 3.13, the term "Company" is deemed to
refer to the Company or any of its subsidiaries, predecessors-in-interest
and other entities in which the Company has an ownership interest.
(p) As used in Section 3.13(f) and (l), the terms "Owned
Properties" and "Leased Properties" are deemed to also refer to any
properties previously owned or leased by the Company.
3.14 REAL ESTATE.
(a) The Company does not own any real property or any interest the
rein except as set forth on Schedule 3.14(a) (the "Owned Properties"),
which Schedule sets forth the location and size of, and principal
improvements and buildings on, the Owned Properties. Except as set forth
on Schedule 3.14(a), with respect to each such parcel of Owned Property:
(i) the Company has good and indefeasible title to each
parcel of its Owned Property, free and clear of any
Lien other than (x) liens for real estate taxes not yet
due and payable; (y) recorded easements, covenants, and
other restrictions which do not impair the current use,
occupancy or value of the property subject thereto, and
(z) encumbrances and restrictions described in the
title insurance policies
13
15
and/or survey listed on Schedule 3.14(a), all of which
policies have been previously delivered to MTLM;
(ii) there are no pending or, to the Knowledge of the
Company, threatened condemnation proceedings, suits or
administrative actions relating to the Owned Properties
or other matters affecting adversely the current use,
occupancy or value thereof;
(iii) except as set forth on Schedule 3.14(a), the legal
descriptions for the parcels of Owned Property
contained in the deeds thereof describe such parcels
fully and adequately; the buildings and improvements
are located within the boundary lines of the described
parcels of land, are not in violation of applicable
setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building
code requirements, permits, licenses or other forms of
approval by any Governmental Authority, and do not
encroach on any easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and
permits) required in connection with the ownership or
operation thereof and have been operated and maintained
in material compliance with applicable laws,
ordinances, rules and regulations;
(v) there are no Contracts granting to any party or parties
the right of use or occupancy of any portion of the
parcels of Owned Property, except as set forth on
Schedule 3.14(a);
(vi) there are no outstanding options or rights of first
refusal to purchase the parcels of Owned Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company) in
possession of the parcels of Owned Property, other than
tenants under any leases disclosed in Schedule 3.14(a)
who are in possession of space to which they are
entitled;
(viii) all facilities located on the parcels of Owned Property
are supplied with utilities and other services
necessary for the operation of such facilities;
14
16
(ix) each parcel of Owned Property abuts on and has direct
vehicular access to a public road, or has access to a
public road;
(x) all improvements and buildings on the Owned Property
are in good repair and adequate for the use of such
Owned Property in the manner in which presently used;
and
(xi) there are no material service contracts, management
agreements or similar agreements which affect the
parcels of Owned Property, except as set forth on
Schedule 3.14(a).
(b) Except as set forth on Schedule 3.14(b), there are no material
leases, licenses or similar agreements ("Leases") to which the Company is
a party.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Except as set forth on Schedule 3.15, the Company has good and
marketable title to all of its Assets, free and clear of any Liens or
restrictions on use. For purposes of this Agreement, the term "Assets"
means all of the properties and assets owned by the Company, other than
the Owned Properties and the Leased Premises, whether personal or mixed,
tangible or intangible, wherever located.
(b) The Fixed Assets currently in use for the business and
operations of the Company are in good operating condition, normal wear
and tear excepted and have been maintained in accordance with sound
industry practices. For purposes of this Agreement, the term "Fixed
Assets" means all vehicles, machinery, equipment, tools, supplies,
leasehold improvements, furniture and fixtures owned by the Company or
set forth on the Current Balance Sheet or acquired by the Company since
the date of the Current Balance Sheet.
3.16 COMPLIANCE WITH LAWS.
(a) The Company is in material compliance with all laws,
regulations and orders applicable to it, its respective business and
operations (as conducted by it now and in the past), the Assets, the
Owned Properties and the Leased Premises and any other properties and
assets (in each case owned or used by it now or in the past). Except as
set forth on Schedule 3.16, the Company has not been cited, fined or
otherwise notified of any asserted past or current material failure to
comply with any laws, regulations or orders and no proceeding with
respect to any such material violation is pending or, to the Company's
Knowledge, threatened.
(b) The Company has not made any payment of funds in connection
with its business which is prohibited by law, and no funds have been set
aside to be used in connection with its business for any payment
prohibited by law.
15
17
(c) The Company has complied with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended (the "Immigration
Act"). With respect to each Employee (as defined in 8 C.F.R. 274a.1(f))
of the Company for whom compliance with the Immigration Act as employer
is required, the Company has on file a true, accurate and complete copy
of (i) each Employee's Form I-9 (Employment Eligibility Verification
Form) and (ii) all other records, documents or other papers prepared,
procured and/or retained by the Company pursuant to the Immigration Act.
The Company has not been cited, fined, served with a Notice of Intent to
Fine or with a Cease and Desist Order, nor has any action or
administrative proceeding been initiated or, to the Knowledge of the
Company, threatened against it, by the Immigration and Naturalization
Service by reason of any actual or alleged failure to comply with the
Immigration Act.
(d) Except as fully described on Schedule 3.16, the Company is not
subject to any Contract, decree or injunction which restricts the
continued operation of any business or the expansion thereof to other
geographical areas, customers and suppliers or lines of business.
3.17 LABOR AND EMPLOYMENT MATTERS. Schedule 3.17 sets forth the name,
address, social security number and current rate of compensation of each of the
employees of the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there have been no efforts by any labor union during the 24 months prior to the
date hereof to organize any employees of the Company into one or more
collective bargaining units. There is no pending or, to the Company's
Knowledge, threatened labor dispute, strike or work stoppage which affects or
which may affect the business of the Company which may interfere with its
continued operations. The Company has not within the last 24 months committed
any unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or, to the Company's Knowledge, threatened
charge or complaint against the Company by or with the National Labor Relations
Board or any representative thereof. There has been no strike, walkout or work
stoppage involving any of the employees of the Company during the 24 months
prior to the date hereof. The Shareholders have no Knowledge that any
executive or key employee or group of employees has any plans to terminate his,
her or their employment with the Company as a result of this Agreement or
otherwise. There are no contracts, agreements or plans of the following
nature, whether formal or informal, and whether or not in writing, to which the
Company is a party or under which it has an obligation: (i) employment
agreements, (ii) noncompetition agreements, and (iii) consulting agreements.
The Company has complied in all material respects with applicable laws, rules
and regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act and the Worker Adjustment and Retraining Notification
Act of 1988, as in effect on the Closing Date.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 3.18 contains a list setting
forth each employee benefit plan or arrangement of the Company, including
but not limited to employee pension benefit plans, as defined in Section
3(2) of the Employee Retirement
16
18
Income Security Act of 1974, as amended ("ERISA"), multiemployer plans,
as defined in Section 3(37) of ERISA, employee welfare benefit plans, as
defined in Section 3(1) of ERISA, deferred compensation plans, stock
option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans
and policies, whether or not described in Section 3(3) of ERISA, in which
employees, their spouses or dependents, of the Company participate
("Employee Benefit Plans") (true and accurate copies of which, together
with the most recent annual reports on Form 5500 and summary plan
descriptions with respect thereto, were made available to MTLM).
(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in all material respects in
compliance with its terms and with all applicable laws, including, but
not limited to, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"); (ii) no actions, suits, claims or disputes are pending, or
threatened; (iii) no audits, inquiries, reviews, proceedings, claims, or
demands are pending with any governmental or regulatory agency; (iv) to
the Knowledge of the Company, there are no facts which could give rise to
any material liability in the event of any such investigation, claim,
action, suit, audit, review, or other proceeding; (v) all material
reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly
or timely filed or distributed; and (vi) no "prohibited transaction" has
occurred within the meaning of the applicable provisions of ERISA or the
Code.
(c) Qualified Plans. With respect to each Employee Benefit Plan
intended to qualify under Code Section 401(a) or 403(a) (i) the Internal
Revenue Service has issued a favorable determination opinion letter, true
and correct copies of which have been made available to MTLM, that such
plans are qualified and exempt from federal income taxes; (ii) no such
determination letter has been revoked nor has revocation been threatened,
nor has any amendment or other action or omission occurred with respect
to any such plan since the date of its most recent determination letter
or application therefor in any respect which would adversely affect its
qualification or materially increase its costs; (iii) all such
contributions to the plans, and all payments under the plans (except
those to be made from a trust qualified under Section 401(a) of the Code)
and all payments with respect to the plans (including, without
limitation, PBGC and insurance premiums) for any period ending before the
Closing Date that are not yet, but will be, required to be made are
properly accrued and reflected on the Current Balance Sheet or are
disclosed on Schedule 3.18; and (iv) no such plan is subject to Code
Sections 312 or 302 of Title IV of ERISA.
(d) Welfare Plans. Other than as disclosed in Schedule 3.18, (i)
the Company is not obligated under any employee welfare benefit plan as
described in Section 3(1) of ERISA ("Welfare Plan"), whether or not
disclosed in Schedule 3.18, to provide medical or death benefits with
respect to any employee or former employee of the Company, or its
predecessors after termination of employment; (ii) each of the Company
has complied with the notice and continuation coverage requirements of
Section 4980B of the Code and the regulations thereunder with respect to
each Welfare Plan that is, or was during any taxable
17
19
year for which the statute of limitations on the assessment of federal
income taxes remains open by consent or otherwise, a group health plan
within the meaning of Section 5000(b)(1) of the Code, and (iii) there are
no reserves, assets, surplus or prepaid premiums under any Welfare Plan
which is an Employee Benefit Plan. The consummation of the transactions
contemplated by this Agreement will not entitle any individual to
severance pay, and, will not accelerate the time of payment or vesting,
or increase the amount of compensation, due to any individual.
(e) Controlled Group Liability. Neither the Company, nor any
entity that would be aggregated with it under Code Section 414(b), (c),
(m) or (o): (i) has ever terminated or withdrawn from an employee
benefit plan under circumstances resulting (or expected to result) in
liability to the Pension Benefit Guaranty Corporation ("PBGC"), the fund
by which the employee benefit plan is funded, or any employee or
beneficiary for whose benefit the plan is or was maintained (other than
routine claims for benefits); (ii) has any assets subject to (or expected
to be subject to) a lien for unpaid contributions to any employee benefit
plan; (iii) has failed to pay premiums to the PBGC when due; (iv) is
subject to (or expected to be subject to) an excise tax under Code
Section 4971; or (v) has engaged in any transaction which would give rise
to liability under Section 4069 or Section 4212(c) of ERISA.
(f) Other Liabilities. Except as set forth on Schedule 3.18 for
the listed plans, (i) none of the Employee Benefit Plans obligates the
Company to pay separation, severance, termination or similar benefits
solely as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" (as such term is defined in
Section 280G of the Code), (ii) all required or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of the
Closing Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of the
Company as of the Closing Date, and (iii) none of the Employee Benefit
Plans has any unfunded liabilities which are not reflected on the Current
Balance Sheet or the books and records of the Company.
3.19 TAX MATTERS. There are no Tax Returns required to be filed prior
to the date hereof with respect to the Company, or any of its income,
properties, franchises or operations have been filed, each such Tax Return has
been prepared in compliance with all applicable laws and regulations, and all
such Tax Returns are true and complete in all respects. All Taxes due and
payable by or with respect to the Company, whether or not reflected on the Tax
Returns, have been paid or accrued on the Current Balance Sheet or will be
accrued on its books and records as of the Closing. With respect to any open
tax year: (i) no taxable period has been audited by the relevant taxing
authority; (ii) no deficiency or proposed adjustment which has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
any taxing authority; (iii) the Company has not consented to extend the time in
which any Taxes may be assessed or collected by any taxing authority; (iv) the
Company has not requested or been granted an extension of the time for filing
any Tax Return to a date later than the Closing Date; (v) there is no action,
suit, taxing authority proceeding, or audit or claim for refund now in
progress, pending or, to the Knowledge
18
20
of the Company, threatened against or with respect to the Company regarding
Taxes; (vi) the Company has not made an election or filed a consent under
Section 341(f) of the Code (or any corresponding provision of state, local or
foreign law) on or prior to the Closing Date; (vii) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
the Company, (viii) the Company will not be required (A) as a result of a
change in method of accounting for a taxable period ending on or prior to the
Closing Date, to include any adjustment under Section 481(c) of the Code (or
any corresponding provision of state, local or foreign law) in taxable income
for any taxable period (or portion thereof) beginning after the Closing Date or
(B) as a result of any "closing agreement," as described in Section 7121 of the
Code (or any corresponding provision of state, local or foreign law), to
include any item of income or exclude any item of deduction from any taxable
period (or portion thereof) beginning after the Closing Date; (ix) the Company
is not a party to or bound by any tax allocation or tax sharing agreement or
has any current or potential contractual obligation to indemnify any other
Person with respect to Taxes; (x) there is no basis for any assessment,
deficiency notice, 30-day letter or similar notice with respect to any Tax to
be issued to the Company with respect to any period on or before the Closing
Date; (xi) the Company has not made any payments, and is or will not become
obligated (under any contract entered into on or before the Closing Date) to
make any payments, that will be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local or foreign law); (xii) the
Company has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code (or any corresponding provision of
state, local or foreign law) during the applicable period specified in Section
897(c)(1)(a)(ii) of the Code (or any corresponding provision of state, local or
foreign law); (xiii) no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that is or may be
subject to Taxes assessed by such jurisdiction; and (xiv) the Company does not
have any permanent establishment in any foreign country, as defined in the
relevant tax treaty between the United States of America and such foreign
country; (xv) true and complete copies of all income and sales Tax Returns
filed by or with respect to the Company for the past two years has been made
available to MTLM; (xvi) the Company will not be subject to any Taxes for the
period ending at the Closing Date for any period for which a Tax Return has not
been filed imposed pursuant to Section 1374 or Section 1375 of the Code (or any
corresponding provision of state, local or foreign law); and (xvii) to the
Knowledge of the Company, no sales or use tax or property transfer tax (other
than sales tax on aircraft, boats, mobile homes and motor vehicles),
non-recurring intangibles tax, documentary stamp tax or other excise tax (or
comparable tax imposed by any Governmental Authority) will be payable by the
Company by virtue of the transactions contemplated in this Agreement.
A valid Subchapter S election, as described in Internal Revenue Code
Section 1362(a) of the Code was in effect for the Company for the tax period
August 17, 1992 to December 31, 1995 (the "S Period"). No event occurred, nor
was any action taken by the Company or the Shareholders during the S Period
which would terminate the Company's status as a Subchapter S corporation,
including, but not limited to, the termination events and/or actions described
in Section 1362(d) of the Code.
3.20 INSURANCE. The Company is covered by valid, outstanding and
enforceable policies of insurance issued to it by insurers covering its
properties, assets and business (the "Insurance
19
21
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. As of the Closing Date each of the
Insurance Policies will be in full force and effect and the Company will cause
comparable coverage to be in place for the Surviving Corporation. The Company
has complied with the provisions of such Insurance Policies. Schedule 3.20
contains (i) a complete and correct list of all Insurance Policies and all
amendments and riders thereto (copies of which have been made available to
MTLM) and (ii) a detailed description of each pending claim under any of the
Insurance Policies for an amount in excess of $5,000 that relates to loss or
damage to the properties, assets or business of the Company. The Company has
not failed to give, in a timely manner, any notice required under any of the
Insurance Policies to preserve its rights thereunder.
3.21 RECEIVABLES. All of the Receivables represent bona fide
transactions and arose in the ordinary course of business of the Company. All
of the Receivables are good and collectible receivables, and will be collected
in full in accordance with the terms of such receivables (and in any event
within six months following the Closing), without set off or counterclaims,
subject to the allowance for doubtful accounts, if any, set forth on the
Current Balance Sheet as reasonably adjusted since the date of the Current
Balance Sheet in the ordinary course of business consistent with past practice.
For purposes of this Agreement, the term "Receivables" means all receivables of
the Company, including all trade account receivables arising from the provision
of services or sale of inventory, notes receivable, and insurance proceeds
receivable.
3.22 LICENSES AND PERMITS. The Company possesses all material licenses
and required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its business and operations, including the
operation of the Owned Properties and Leased Premises, which Permits are listed
on Schedule 3.22. All such Permits are valid and in full force and effect, the
Company is in material compliance with the requirements thereof, and no
proceeding is pending or, to the Knowledge of the Company, threatened to revoke
or amend any of them. Schedule 3.22 specifies (i) all Permits that Acquisition,
as the Surviving Corporation, will acquire by operation of law and (ii) all
Permits that will have to be newly applied for by the Surviving Corporation and
obtained by the Surviving Corporation (the "New Permits"). Except for the New
Permits, none of such Permits is or will be impaired or in any way affected by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS;
AFFILIATED TRANSACTIONS. The Assets, Owned Properties and Leased Premises
constitute, in the aggregate, all of the assets and properties necessary for
the conduct of the business of the Company in the manner in which and to the
extent to which such business is currently being conducted. No current
supplier to the Company of items essential to the conduct of its business will
or, to the Knowledge of the Company, has threatened to terminate its respective
business relationship with it for any reason. The Company does not have any
direct or indirect interest in any customer, supplier or competitor of the
Company, or in any person from whom or to whom the Company leases real or
personal property. Except for purchases from X.X. Xxxxxx Iron & Metal Company,
no officer, director or Shareholder of the Company, nor any person related by
blood or marriage to any such person, nor any entity in
20
22
which any such person owns any beneficial interest, is a party to any Contract
or transaction with the Company or has any interest in any property used by the
Company.
3.24 INTELLECTUAL PROPERTY. The Company has full legal right, title and
interest in and to all trademarks, service marks, trade names, copyrights,
know-how, patents, trade secrets, licenses (including licenses for the use of
computer software programs), and other intellectual property used in the
conduct of its business (the "Intellectual Property"). The conduct of the
business of the Company as currently conducted, and the unrestricted conduct
and the unrestricted use and exploitation of the Intellectual Property, does
not infringe or misappropriate any rights held or asserted by any Person, and
no Person is infringing on the Intellectual Property. No payments are required
for the continued use of the Intellectual Property. None of the Intellectual
Property has ever been declared invalid or unenforceable, or is the subject of
any pending or, to the Knowledge of the Company, threatened action for
opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
3.25 CONTRACTS. Schedule 3.25 sets forth a list of each Contract to
which the Company is a party or by which its properties and assets are bound
and which is material to its business, assets, properties or prospects (the
"Designated Contracts"), true and correct copies of which have been made
available to MTLM. The copy of each Designated Contract made available to MTLM
is a true and complete copy of the document it purports to represent and
reflects all amendments thereto made through the date of this Agreement.
Except as set forth on Schedule 3.25, the Company has not violated any of the
material terms or conditions of any Designated Contract or any term or
condition which would permit termination or material modification of any
Designated Contract, and, to the Knowledge of the Company, all of the covenants
to be performed by any other party thereto have been fully performed and there
are no asserted claims for breach or indemnification or notice of default or
termination under any Designated Contract. Except as set forth on Schedule
3.25, no event has occurred which constitutes, or after notice or the passage
of time, or both, would constitute, a material default by the Company under any
Designated Contract, and, to the Knowledge of the Company, no such event has
occurred which constitutes or would constitute a material default by any other
party. The Company is not subject to any material liability or payment
resulting from renegotiation of amounts paid to them under any Designated
Contract. As used in this Section, Designated Contracts shall include, without
limitation, (a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention agreements,
security agreements, equipment financing obligations or guaranties, or other
sources of contingent liability in respect of any indebtedness or obligations
to any other Person, or letters of intent or commitment letters with respect to
same; (b) contracts obligating the Company to purchase or sell products or
services; (c) leases of real property, and leases of personal property not
cancelable without penalty on notice of 60 days or less or calling for payment
of an annual gross rental exceeding $10,000.00; (d) distribution, sales agency
or franchise or similar agreements, or agreements providing for an independent
contractor's services, or letters of intent with respect to same; (e)
employment agreements, management service agreements, consulting agreements,
confidentiality agreements, noncompetition agreements and any other agreements
relating to any employee, officer or director of the Company; (f) licenses,
assignments or transfers of trademarks, trade names, service marks, patents,
copyrights, trade secrets or know how, or other agreements regarding
proprietary rights or
21
23
intellectual property; (g) any Contract relating to pending capital
expenditures in excess of $10,000 by the Company; and (h) other material
Contracts or understandings, irrespective of subject matter and whether or not
in writing, not entered into in the ordinary course of business by the Company
and not otherwise disclosed on the Schedules.
3.26 CUSTOMER LISTS AND RECURRING REVENUE. At least two (2) business
days prior to the Closing Date, the Company will make available to MTLM a true,
correct and complete list of its 20 largest customers ("Material Customers")
and suppliers together with the applicable percentage of total sales or
purchases, as applicable. At least two (2) business days prior to the Closing
Date, true, correct and complete copies of any agreements with such customers
or suppliers which are anticipated to endure beyond the Closing will be
furnished by the Shareholders to MTLM. Other than Material Customers, no
customer of the Company as of the date of this Agreement accounts for more than
1% of its combined annual revenue. At least two (2) business days prior to the
Closing Date, the Company will make available to MTLM each Material Customer's
name, address, account number, term of franchise or agreement, billing cycle,
type of service and rates charged.
3.27 ACCURACY OF INFORMATION FURNISHED BY THE SHAREHOLDERS. No
representation, statement or information made or furnished by the Shareholders
to MTLM or any of MTLM's representatives including those contained in this
Agreement and the various Schedules attached hereto and the other information
and statements referred to herein and previously furnished by the Company and
the Shareholders, contains or shall contain any untrue statement of a material
fact or omits or shall omit any material fact necessary to make the information
contained therein not misleading. The Shareholders have provided MTLM with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto.
3.28 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS; SECURITIES DOCUMENTS.
Each of the Shareholders is acquiring his interest in MTLM securities for
his own account for investment and not with a view to, or for the sale in
connection with, any distribution of his interest, except in compliance with
applicable state and federal securities laws. Each of the Shareholders has
been provided, to his satisfaction, the opportunity to discuss the transactions
contemplated hereby with MTLM and has had the opportunity to obtain such
information pertaining to MTLM as has been requested, including but not limited
to filings made by MTLM with the SEC under the Exchange Act. Each of the
Shareholders is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act. Each of the Shareholders has such
knowledge and experience in business and financial matters that he is capable
of evaluating the merits and risks of an investment in MTLM securities, and is
capable of bearing the economic risks of such investment and is able to bear a
complete loss of his investment in MTLM securities. Each of the Shareholders
acknowledges that MTLM securities have not been registered under the Securities
Act and understands that MTLM securities must be held indefinitely unless they
are subsequently registered under the Securities Act or such sale is permitted
to an available exemption from such registration requirement.
22
24
3.29 BUSINESS LOCATIONS. As of the date hereof, the Company does not
have any office or place of business other than as identified on Schedule
3.14(a) and all locations where the equipment, inventory, chattel paper and
books and records of the Company are located as of the date hereof are fully
identified on Schedule 3.14(a).
3.30 NAMES; PRIOR ACQUISITIONS. All of the names under which the Company
does business as of the date hereof are specified on Schedule 3.30. Except as
set forth on Schedule 3.30, the Company has not changed its name or used any
assumed or fictitious name, or been the surviving entity in a merger, acquired
any business or changed its principal place of business or chief executive
office, within the past 10 years.
3.31 NO COMMISSIONS. Neither the Company nor the Shareholders have
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
3.32 INVENTORY. All Assets that consist of inventory (including raw
materials and work-in-progress): (i) were acquired in the ordinary course of
business consistent with past practice; (ii) are of a quality, quantity, and
condition useable or saleable in the ordinary course of business within the
Company's normal inventory turnover experience; and (iii) are valued in
accordance with GAAP. The Company does not have any material liability with
respect to the return or repurchase of any goods in the possession of any
customer outside the ordinary course of business.
3.33 IDENTIFICATION, ACQUISITION AND DISPOSITION OF ASSETS AND
LIABILITIES. Schedule 3.33(a) sets forth a listing of all of the material
depreciable and amortizable assets and properties (including real, personal and
mixed) owned by the Company as of March 31, 1997.
3.34 RESTRICTIONS. There are no non-competition, non-solicitation,
confidentiality and other restrictive covenants to which the Company and/or
Shareholders is a party or otherwise bound. There are no contracts or other
conditions, circumstances, events or agreements which would in any way limit or
restrict the rights or MTLM, or the Company from engaging in any business
anywhere in the world.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE CLOSING. The Company
covenants and agrees that, between the date of this Agreement and the Closing
Date, the business of the Company shall be conducted only in, and the Company
shall not take any action except in, the ordinary course of business,
consistent with past practice and in material compliance with all rules,
regulations and laws. The Company shall use commercially reasonable efforts to
preserve and keep intact its business organization, to keep available the
services of its current officers, employees and consultants, and to preserve
its present relationships with customers, suppliers and other persons
23
25
with which it has significant business relations. By way of amplification and
not limitation, except as contemplated by this Agreement, or in the ordinary
course of business, the Company shall not, between the date of this Agreement
and the Closing Date, directly or indirectly, do or propose or agree to do any
of the following without the prior written consent of MTLM:
(a) amend or otherwise change its articles of incorporation or
bylaws;
(b) issue, sell, pledge, dispose of, encumber, or, authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any
shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares
of such capital stock, or, (ii) any of their respective assets, tangible
or intangible, except in the ordinary course of business consistent with
past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or shares
of stock, by merger, consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or other business
organization or division thereof or any assets, or make any investment
either by purchase of stock or securities, contributions of capital or
property transfer, or, except in the ordinary course of business,
consistent with past practice, purchase any property or assets of any
other Person, (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person, or
make any loans or advances, or (iii) enter into any Contract other than
in the ordinary course of business, consistent with past practice;
(f) increase the compensation payable or to become payable to its
respective officers or directors, or, except as presently bound to do,
grant any severance or termination pay to, or enter into any employment
or severance agreement with, any of its respective directors or officers,
or establish, adopt, enter into or amend or take any action to accelerate
any rights or benefits under any collective bargaining, bonus, profit
sharing, trust, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(g) sell, pledge or otherwise dispose of any asset or the stock of
any subsidiary or take any other action other than in the ordinary
course of business and in a manner consistent with past practice with
respect to accounting policies or procedures;
24
26
(h) pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date hereof
in the ordinary course of business and consistent with past practice;
(i) increase or decrease prices charged to its respective
customers, except for previously announced price changes or except in the
ordinary course of business, or take any other action which might
reasonably result in any material increase in the loss of customers
through non-renewal or termination of contracts or other causes; or
(j) agree, in writing or otherwise, to take or authorize any of the
foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect.
4.2 CONDUCT OF BUSINESS OF MTLM PENDING THE CLOSING. MTLM covenants and
agrees that, between the date of this Agreement and the Closing Date, the
business of MTLM shall be conducted only in the ordinary and usual course,
consistent with past practices, and MTLM will notify the Company of any
material developments. Notwithstanding the foregoing, the Company acknowledges
that the nature of the ordinary and usual course of MTLM's business includes
acquisitions in the line of business in which MTLM is engaged and related
businesses hereafter acquired. MTLM shall promptly provide the Company with a
copy of any of MTLM's press releases. Furthermore, MTLM shall not declare a
stock split, stock dividend or similar transaction. In addition, MTLM will use
commercially reasonable efforts to preserve and keep intact its business
organization, to keep available to MTLM the services of its current employees,
including officers, and to preserve the goodwill of the customers, suppliers,
creditors and others having business relations with MTLM.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Shareholders shall cause the Company
to comply with all of the respective covenants of the Company under this
Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or
25
27
reasonably deemed advisable pursuant to any law, rule or regulation or the
rules of any exchange on which the MTLM Common Stock is listed (the Nasdaq
National Market) in connection with the transactions contemplated by this
Agreement and to use their respective best efforts to agree jointly on a method
to overcome any objections by any Governmental Authority to any such
transactions.
5.4 ACCESS TO INFORMATION. From the date hereof to the Closing Date, the
Company and MTLM shall (and shall cause its respective directors, officers,
employees, auditors, counsel and agents to) afford each other and their
officers, employees, auditors, counsel and agents reasonable access at all
reasonable times to its properties, offices, and other facilities, to its
officers and employees and to all books and records, and shall furnish such
persons with all financial, operating and other data and information as may be
requested.
5.5 NOTIFICATION OF CERTAIN MATTERS. The Shareholders and MTLM shall
give prompt notice to the other of the occurrence or non-occurrence of any
event which would likely cause any representation or warranty contained herein
to be untrue or inaccurate, or any covenant, condition, or agreement contained
herein not to be complied with or satisfied.
5.6 TAX TREATMENT. Each party to this Agreement has sought and received
its own advice as to the tax treatment of the transactions covered by this
Agreement and is not relying on any representations of the other parties or
their respective advisers with respect thereto. All parties hereto agree to
fully and completely comply with the reporting requirements of the Internal
Revenue Service.
5.7 CONFIDENTIALITY; PUBLICITY. Before the Closing, none of the parties
hereto shall make any public release of information regarding the matters
contemplated herein except (i) that a joint press release in agreed form may be
issued by the parties after the execution of this Agreement and the Closing,
(ii) that the parties may each continue their own communications with their
respective employees, customers, suppliers, franchises, lenders, lessors,
stockholders and other particular groups as may be legally required or
necessary or appropriate and not inconsistent with the best interests of the
other parties or the prompt consummation of this Agreement, and (iii) as
required by law.
5.8 NO OTHER DISCUSSIONS. Prior to September 1, 1997, the Company shall
not, nor shall it permit any of its subsidiaries or affiliates to, nor shall it
authorize or permit any officer, director, employee, investment banker,
attorney or other advisor or representative of the Company or any of its
subsidiaries to, (a) solicit, initiate or encourage the submission of any
merger proposal with respect to the Company, (b) enter into any agreement with
respect to any such proposal, or (c) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any merger
proposal with respect to the Company. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any executive officer of the Company or any of its subsidiaries or
affiliates or any investment banker or other advisor to any representative of
the Company, whether or not such person is purporting to act on behalf of the
Company or otherwise, shall be
26
28
deemed to be a breach of this Section by the Company. For this Agreement, "a
merger proposal" means any proposal, other than a proposal by MTLM or any of
its affiliates, for a merger or other business combination involving the
Company or any proposal or offer, other than a proposal or offer by MTLM or any
of its affiliates, to acquire in any manner, directly or indirectly, an equity
interest in the Company, any voting securities of the Company or a substantial
portion of the assets of the Company, taken as a whole.
5.9 TRADING IN MTLM'S COMMON STOCK. Except as otherwise expressly
consented to by MTLM, from the date of this Agreement until the Closing Date,
none of the Company, nor the Shareholders (nor any Affiliates thereof) will
directly or indirectly purchase or sell (including short sales) any shares of
the Common Stock of MTLM in any transactions effected on the Nasdaq National
Market or otherwise.
5.10 OTHER AGREEMENTS. Upon the Closing, each party hereto that is a
signatory to any Exhibits (the "Other Agreements") agrees to execute and
deliver such Other Agreements, as appropriate, to the other parties to such
Other Agreements, and each party who is a married individual shall cause his
spouse to execute all consents requested by MTLM to consummate the transactions
set forth herein.
5.11 HSR ACT COMPLIANCE. If required, the Company, the Shareholders and
MTLM will as promptly as practicable, but in no event later than 10 business
days following the execution and delivery of this Agreement, file or cause to
be filed with the United States Federal Trade Commission (the "FTC") and the
United State Department of Justice (the "DOJ") the notification and report form
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any
such notification and report form and supplemental information will be in
substantial compliance with the requirements of the HSR Act. Each of MTLM, the
Company and the Shareholders will furnish to the others such necessary
information and reasonable assistance as the others may request in connection
with the preparation of any filing or submission which is necessary under the
HSR Act. Each of the Company, the Shareholders and MTLM will keep each other
apprised of the status of any communications with, and inquiries or requests
for additional information addressed to the entity that filed a notification
and report form as an acquired or acquiring person from, the FTC or the DOJ and
shall comply or cause its respective filing person to comply promptly with any
such inquiry or request. Each of the Company, the Shareholders and MTLM will
use commercially reasonable efforts to obtain any clearance required under the
HSR Act for the purchase and sale of the Purchased Securities.
5.12 CORPORATE AUTHORITY. MTLM, the Company and the Shareholders agree
to use their respective best efforts to obtain the authorizations required for
each to execute and deliver this Agreement and to perform each of their
respective obligations hereunder and to consummate the transactions
contemplated hereby.
5.13 EMPLOYMENT AGREEMENTS. Each of the Shareholders agrees to enter in
to an Employment Agreement substantially in the form of Exhibit H attached
hereto and made a part hereof.
27
29
5.14 VOTING AGREEMENT AND DIRECTOR. The Shareholders and T. Xxxxxxxx
Xxxxxxxx ("Xxxxxxxx") agree to enter into a shareholders agreement (the
"Shareholders Agreement") in the form of Exhibit I attached hereto and made a
part hereof providing in part that, for a term expiring on the second
anniversary of the Closing Date, the Shareholders and Xxxxxxxx will vote their
shares of MTLM in favor of Xxxxxxx X. Xxxxxx or, in the event of his inability
to serve, another of the Shareholders as a director of MTLM.
5.15 NO SOLICITATION OF EMPLOYEES. MTLM agrees that for the three-year
period after the date of this Agreement, MTLM will not, and will cause its
affiliates to not, directly or indirectly, (i) solicit for employment by any
such person, its affiliates or anyone else, any employee or then currently
active independent contractor of the Company or its affiliates, or any person
who was an employee or then currently active independent contractor of the
Company or its affiliates, within the six-month period immediately preceding
such solicitation of employment, other than such person (a) whose employment or
independent contractor relationship was terminated by either of the Company or
any affiliate, or (b) who independently responded to a general solicitation for
employment by MTLM or its affiliates; or (c) induce or attempt to induce, any
employee or independent contractor of the Company or its affiliates, to
terminate such employee's employment or independent contractor's active
contractual relationship; provided, however, the foregoing shall not apply if
the foregoing does not occur due to a breach of this Agreement by the Company
or the Shareholders.
The Company agrees that for the three-year period after the date of this
Agreement, the Company will not, and will cause its affiliates to not, directly
or indirectly, (i) solicit for employment by any such person, its affiliates or
anyone else, any employee or then currently active independent contract of MTLM
or its affiliates, or any person who was an employee or then currently active
independent contractor of MTLM or its affiliates, within the six-month period
immediately preceding such solicitation of employment, other than such person
(a) whose employment or independent contractor relationship was terminated by
MTLM or its affiliate, or (b) who independently responded to a general
solicitation for employment by the Company, or (ii) induce or attempt to
induce, any employee or independent contractor of MTLM or its affiliates, to
terminate such employee's employment or independent contractor's active
contractual relationship.
5.16 ATTENDING MEETINGS. MTLM agrees that so long as the Shareholders
collectively own at least 50% of the Common Stock of MTLM acquired pursuant to
this Agreement then any two of the Shareholders shall be entitled to attend all
meetings of MTLM's "Office of the President." The Shareholders shall designate
by notice to MTLM the two designees to attend such meetings and MTLM shall
advise such designees of the date, time and place of each meeting and furnish
them all information sent to the other persons attending the meeting at the
same time as such information is furnished to such other persons.
28
30
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF MTLM
The obligations of MTLM hereunder shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, any or all of which
may be waived in whole or in part by MTLM:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct at and as of
the Closing Date with the same force and effect as though made at and as of
that time except (i) for changes specifically permitted by or disclosed
pursuant to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. The Company and the Shareholders shall have performed
and complied with all of their respective obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date.
The Company and the Shareholders shall have delivered to MTLM a certificate,
dated as of the Closing Date, duly signed (in the case of the Company by its
chief executive officer and chief financial officer) stating that such
representations and warranties are true and correct and that all such
obligations have been performed and complied with.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change or Effect to the Company, (ii) there shall have been no adverse federal,
state or local legislative or regulatory change affecting in any material
respect the services, products or business of the Company, and (iii) none of
the properties and assets of the Company shall have been damaged by fire,
flood, casualty, act of God or the public enemy or other cause (regardless of
insurance coverage for such damage) which damages may have a Material Adverse
Change or Effect thereon, and there shall have been delivered to MTLM a
certificate to that effect, dated the Closing Date and signed by or on behalf
of the Company.
6.3 CORPORATE CERTIFICATE. The Shareholders shall have delivered to MTLM
(i) copies of resolutions adopted by the Board of Directors of the Company and
the Shareholders authorizing the transactions contemplated by this Agreement,
and (ii) certificate of good standing of the Company issued by the State of
Texas and each other state in which the Company is qualified to do business as
of a date not more than ten days prior to the Closing Date, certified in each
case as of the Closing Date by the Secretary as being true, correct and
complete.
6.4 OPINION OF COUNSEL. MTLM shall have received an opinion dated as of
the Closing Date from counsel for the Company and the Shareholders, in form and
substance acceptable to MTLM, to the effect that:
29
31
(i) the Company is validly existing and in good standing under the
laws of its state of incorporation, and is authorized to carry on the
business now conducted by it and to own or lease the properties now owned
or leased by it;
(ii) the Company has obtained all necessary authorizations and
consents of its directors and Shareholders to effect the transactions
contemplated in this Agreement;
(iii) all issued and outstanding shares of capital stock of the
Company are owned as set forth on Schedule 3.5 hereto;
(iv) except as set forth in Schedule 3.12, such counsel has no
actual knowledge (without any independent investigation of any sort) of
any litigation, proceeding or investigation pending or threatened which
would result in any material adverse change in the properties, or
business or in the condition of the Company, or which questions the
validity of this Agreement; and
(v) each of this Agreement, the Escrow Agreement, the Shareholders
Agreement and the Pledge and Security Agreement and is a valid and
binding obligation of each of the Company and the Shareholders, as the
case may be, and enforceable against each of them in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally; and
(vi) the Company possesses all Permits for its business and
operations, including the operation of the Owned Properties and Leased
Premises. All Permits are valid and in full force and effect, the
Company is in material compliance with the requirements thereof, and no
proceeding is pending or, to such counsel's actual knowledge, threatened
to revoke or amend any of them. Except for the New Permits, none of the
Permits is or will be impaired or in any way affected by the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
6.5 CONSENTS. MTLM shall have received written consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Company from any Person from whom
such consent or waiver is required under any Designated Contract or instrument
as of a date not more than ten days prior to the Closing Date, or who, as a
result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of law.
6.6 GOVERNMENTAL APPROVALS. All consents, authorizations and approvals
from, and all declarations, filings and registrations with any governmental
authority required to consummate the transactions contemplated by this
Agreement, including those set forth on Schedule 3.6, shall have
30
32
been obtained or made without the imposition of any material conditions, and
all applicable waiting periods, if any, under the HSR Act shall have expired or
terminated.
6.7 SECURITIES LAWS. MTLM shall have received all necessary consents and
otherwise complied with any state Blue Sky or securities laws applicable to the
issuance of MTLM securities, in connection with the transactions contemplated
hereby.
6.8 COMPANY SECURITIES. At the Closing, the Shareholders shall have
delivered all certificates evidencing the Common Stock of the Company held by
them, together with stock powers duly executed in blank, with signatures
guaranteed, and otherwise in form acceptable to MTLM.
6.9 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Agreement or any other transaction contemplated hereby, and which, in the
judgment of MTLM, makes it inadvisable to proceed with the Agreement and other
transactions contemplated hereby.
6.10 OTHER CLOSING DELIVERIES. At Closing, MTLM shall have received:
(a) a current title policy insuring title to the real property
owned or leased by the Company as set forth on Schedule 3.14 (a) which
shows no Liens other than Liens disclosed on such Schedule 3.14(a),
together with appropriate surveys and estoppel letters from the lessors
of any leased real property;
(b) each Other Agreement executed by the Company and/or the
Shareholders, as the case may be, who is a party thereto;
(c) the stock books, stock ledgers, minute books, corporate seal
and other books and records of the Company; and
(d) all other previously undelivered agreements, certificates,
documents, instruments or writings required to be delivered by the
Company and/or the Shareholders at or prior to the Closing pursuant to
this Agreement or otherwise in connection herewith, duly executed by each
of the Company and/or the Shareholders, as the case may be, who is a
party thereto.
6.11 LICENSES AND PERMITS. The Company shall have caused the Surviving
Corporation to have received an Occupation License from the City of Houston to
operate as a scrap metal processor. In addition, the Shareholders shall cause
the Surviving Corporation to obtain a Certificate of Occupancy from the City of
Houston, together with the other New Permits, on or prior to December 31, 1997.
31
33
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company and each of the Shareholders hereunder
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part by
the Company and the Shareholders:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of MTLM contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date except (i) for changes specifically permitted by or disclosed
pursuant to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. MTLM shall have performed and complied with all of
its obligations required by this Agreement to be performed or complied in all
material respects with at or prior to the Closing Date. MTLM shall have
delivered to the Shareholders a certificate, dated as of the Closing Date, and
signed by an executive officer, certifying that such representations and
warranties are true and correct in all material respects and that all such
obligations have been performed and complied with.
7.2 MTLM PURCHASE PRICE. At the Closing, MTLM shall have delivered to
the Shareholders the Merger Consideration.
7.3 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Agreement or any of the transactions contemplated hereby, and which in the
judgment of the Shareholders makes it inadvisable to proceed with the Agreement
or any other transaction contemplated hereby.
7.4 OPINION OF COUNSEL. The Shareholders shall have received an opinion
dated as of the Closing Date from counsel for MTLM, in form and substance
acceptable to the Shareholders, to the effect that:
(i) MTLM is a corporation validly existing and in good
standing under the laws of the State of Delaware and is authorized
to carry on the business now conducted by it and to own or lease
the properties now owned or leased by it;
(ii) MTLM has obtained all necessary authorizations and
consents of its Board of Directors to effect the transactions
contemplated in this Agreement;
(iii) such counsel has no actual knowledge (without any
independent investigation of any sort) of any litigation,
proceeding or investigation pending or threatened which would
result in any material adverse change in the
32
34
properties, or business or in the condition of MTLM, or which
questions the validity of this Agreement;
(iv) this Agreement, the Escrow Agreement, the Shareholders
Agreement, the Purchase Notes, the 180-day Notes, the Earnings
Notes, the Warrants, the Pledge and Security Agreement and the
Employment Agreements are valid and binding obligations of MTLM,
and enforceable against it in accordance with their terms, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally;
(v) the Common Stock (including the Escrow Shares) is duly
authorized and validly issued and is listed for trading on The
Nasdaq National Market System;
(vi) such counsel has no actual knowledge (without any
independent investigation of any sort) that any event has occurred
or state of facts exist which would constitute a breach of any of
the representations and warranties made by MTLM pursuant to
Article II of this Agreement;
(vii) no approval, consent or withholding of the objection on
the part of, or filing, registration or qualification with, any
governmental body, federal, state or local, is necessary in
connection with the execution and delivery of the Purchase Notes,
Conversion Warrants, Cash Warrants or Employee Warrants, or the
performance by MTLM of any matter required of MTLM thereunder;
(viii) based on the accuracy of the representations of the
Shareholders set forth in Section 3.28 hereof, the issuance, sale
and delivery of each of the Purchase Notes, Conversion Warrants,
Cash Warrants, and Employee Warrants is an exempt transaction
under the Securities Act of 1933, as amended (the "Act"), and does
not require the registration thereof under the Act or the
qualification of an indenture in respect thereof under the Trust
Indenture Act of 1939, as amended; and
(ix) no preemptive rights of shareholders exist with respect
to any of the MTLM Common Stock (including the Escrowed Shares)
under applicable law, MTLM's Articles of Incorporation or Bylaws,
or any agreement or instrument to which MTLM is a party.
7.5 OTHER CLOSING DELIVERIES. At Closing, the Company and the
Shareholders shall have received each Other Agreement to which MTLM is a party,
duly executed by MTLM.
7.6 NO MATERIAL ADVERSE CHANGE OR EFFECT. MTLM shall not have suffered
any Material Adverse Change or Effect.
33
35
ARTICLE VIII
INDEMNIFICATION
8.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. The Shareholders agree
to severally indemnify, defend and hold MTLM harmless (with each Shareholder's
liability to MTLM being equal to such Shareholder's proportionate share, as set
forth in Schedule 3.1 hereto, of any Indemnifiable Damages, subject to the
limitations set forth in Section 8.1(e) below) from and against the aggregate
of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable Damages" means,
without duplication, the aggregate of all actual expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by
MTLM, on a pre-tax consolidated basis to the extent (i) resulting from
any breach or inaccuracy of a representation or warranty made by the
Company or the Shareholders in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by the
Company or the Shareholders pursuant to this Agreement, (iii) resulting
from any inaccuracy in any certificate or environmental report delivered
by the Company or any Shareholders pursuant to this Agreement, or (iv)
resulting from, arising out of, relating to, in the nature of, or caused
by any liability of the Company (x) for any Taxes of the Company with
respect to any tax year or portion thereof ending on or before the
Closing Date to the extent such Taxes are not reflected in the reserve
for tax liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and tax income) shown on the
face of the Current Balance Sheet (rather than any notes thereto) and (y)
for the unpaid Taxes of any Person (other than the Company) as a
transferee or successor by contract, or otherwise.
(b) Without limiting the generality of the foregoing, with respect
to the measurement of Indemnifiable Damages, MTLM shall have the right to
be put in the same pre-tax consolidated financial position as MTLM would
have been in had each of the representations and warranties of the
Shareholders hereunder been true and correct and had the covenants and
agreements of the Company and the Shareholders hereunder been performed
in full.
(c) Each of the representations and warranties made by the
Shareholders in this Agreement or pursuant hereto shall survive for a
period of 12 months after the Closing Date except as follows: (i) the
representations and warranties of the Shareholders contained in Section
3.19, to the extent relating to tax attributes or liabilities with
respect to Taxes of the Company, shall expire at the time the period of
limitations (including any extensions thereof pursuant to the delivery of
waivers (agreed to by the Shareholders) of the applicable period of
limitations) expires for the assessment by the taxing authority of
additional Taxes with respect to which the representations and warranties
relate; (ii) the representations and
34
36
warranties of the Shareholders contained in Sections 3.13 and 3.18 shall
survive for a period of 24 months after the Closing Date; and (iii) the
representations and warranties of the Shareholders contained in Sections
3.1, 3.2, 3.3, 3.4, and 3.5 shall not expire, but shall continue
indefinitely. No claim for the recovery of Indemnifiable Damages may be
asserted by MTLM against the Shareholders after such representations and
warranties shall thus expire, provided, however, that claims for
Indemnifiable Damages first asserted within the applicable period shall
not thereafter be barred. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation, each party
shall have the right to fully rely on the representations, warranties,
covenants and agreements of the other parties contained in this Agreement
or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other representation,
warranty, covenant and agreement.
(d) If MTLM believes it is entitled to a claim for any
Indemnifiable Damages hereunder, MTLM shall promptly give written notice
to the Shareholders of such claim and the amount or the estimated amount
of such claim, and the basis for such claim. If the Shareholders do not
pay the amount of the claim for Indemnifiable Damages to MTLM within 10
days, then MTLM may exercise its respective rights under Section 8.4
and/or take any action or exercise any remedy available to it by
appropriate legal proceedings to collect the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in this
Section 8.1, the Shareholders' liability for Indemnifiable Damages shall
be limited as follows:
(i) MTLM shall have no claim for Indemnifiable Damages
unless and until all Indemnifiable Damages incurred by
MTLM exceed an aggregate of $250,000, in which event
the Shareholders shall be liable for only such
Indemnifiable Damages in excess of $250,000; provided,
however, that the $250,000 deductible provided above
shall not be applicable for any Indemnifiable Damages
relating to Taxes; and
(ii) the total amount of Indemnifiable Damages for which the
Shareholders shall be liable to MTLM shall not exceed
the principal and interest due on the Purchase Notes
and the value of the Escrow Shares, which shall be
valued as provided in Section 8.4(a)(iv).
(f) The remedies set forth in this Section 8.1 shall be the
exclusive remedies of MTLM under this Agreement.
8.2 AGREEMENT BY MTLM TO INDEMNIFY. MTLM agrees to indemnify, defend and
hold the Shareholders harmless from and against the aggregate of all
Indemnifiable Damages (as defined below).
35
37
(a) For purposes of this Agreement, "Shareholders Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including, without
limitation, reasonable related counsel and paralegal fees and expenses)
incurred or suffered by the Shareholders, on a pre-tax consolidated
basis, to the extent (i) resulting from any breach of a representation or
warranty made by MTLM in or pursuant to this Agreement, (ii) resulting
from any breach of the covenants or agreements made by MTLM in or
pursuant to this Agreement, or (iii) resulting from any inaccuracy in any
certificate delivered by MTLM pursuant to this Agreement.
(b) Without limiting the generality of the foregoing, with respect
to the measurement of Shareholders Indemnifiable Damages, the
Shareholders have the right to be put in the same pre-tax consolidated
financial position as he, she or it would have been in had each of the
representations and warranties of MTLM hereunder been true and correct
and had the covenants and agreements of MTLM hereunder been performed in
full.
(c) Each of the representations and warranties made by MTLM in this
Agreement or pursuant hereto shall survive for a period of one year after
the Closing Date, notwithstanding any investigation at any time made by
or on behalf of the Shareholders, and upon expiration of such one year
period, such representations and warranties shall expire, except for the
representations contained in Sections 2.1, 2.2, 2.3 and 2.4 shall not
expire, but shall continue indefinitely. No claim for the recovery of
Shareholders Indemnifiable Damages may be asserted by the Shareholders
against MTLM after such representations and warranties shall thus expire,
provided, however, that claims for Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by any
party by investigation, each party shall have the right to fully rely on
the representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or papers
delivered in connection herewith. Each representation, warranty,
covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and
agreement.
(d) In the event that the Shareholders believe they are entitled
to a claim for any Indemnifiable Damages hereunder, the Shareholders
shall promptly give written notice to MTLM of such claim and the amount
or the estimated amount of such claim, and the basis for such claim.
(e) Notwithstanding anything to the contrary contained in this
Section 8.2, the Shareholders shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable Damages incurred by the
Shareholders shall exceed an aggregate of $250,000, in which event MTLM
shall be liable for only such Indemnifiable Damages in excess of
$250,000.
36
38
(f) The remedies set forth in this Section 8.2 shall be the
exclusive remedies of the Shareholders under this Agreement.
8.3 CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of
the Shareholders and MTLM hereunder with respect to their respective
indemnities pursuant to this Article VIII resulting from any claim or other
assertion of liabilities by third parties (hereinafter called collectively
"Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified Party")
must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof;
(b) the Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of such
Claim; provided, however, if a Claim is made against MTLM, then MTLM
shall have the right to control the defense of the Claim;
(c) if the Indemnifying Party shall elect not to undertake such
defense, or within a reasonable time after notice of any such Claim from
the Indemnified Party shall fail to defend, the Indemnified Party (upon
further written notice to the Indemnifying Party) shall have the right to
undertake the defense, compromise or settlement of such Claim, by counsel
or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Claim at any time prior to
settlement, compromise or final determination thereof);
(d) anything in this Section 8.3 to the contrary notwithstanding,
(A) the Indemnified Party shall have the right, at its own cost and
expense, to have its own counsel to protect its own interests and
participate in the defense, compromise or settlement of the Claim, (B)
the Indemnifying Party shall not, without the Indemnified Party's written
consent, settle or compromise any Claim or consent to entry of any
judgement which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim, and (C) the
Indemnified Party, by counsel or other representatives of its own
choosing and at its sole cost and expense, shall have the right to
consult with the Indemnifying Party and its counsel or other
representatives concerning such Claim, and the Indemnifying Party and the
Indemnified Party and their respective counsel shall cooperate with
respect to such Claim.
8.4 ESCROW SHARES AND RIGHTS OF SETOFF TO SECURE THE SHAREHOLDERS'
INDEMNIFICATION OBLIGATION. As security for the agreement by the Shareholders
to indemnify and hold MTLM harmless as described in Section 8.1, at the
Closing, MTLM shall cause the certificates representing the Escrow Shares to be
held under the Escrow Agreement.
(a) MTLM may set off against the Purchase Notes and thereafter the
Escrow Shares (provided, however, the Shareholders may elect to satisfy
any indemnification
37
39
obligation payable in Escrow Shares by a payment in cash) for any loss,
damage, cost or expense for which the Shareholders may be responsible
pursuant to this Agreement (including without limitation, any
Indemnifiable Damages for which the shareholders may be responsible
pursuant to this Agreement) whether or not indemnified pursuant to
Section 8.1 of this Agreement, subject, however, to the following terms
and conditions:
(i) MTLM shall give written notice to the Shareholders of
any claim for Indemnifiable Damages hereunder, which
notice shall set forth (i) the amount of Indemnifiable
Damages or other loss, damage, cost or expense which
MTLM claims to have sustained by reason thereof, and
(ii) the basis of such claim;
(ii) Such set off shall be effected on the later to occur of
the expiration of 10 business days from the date of
such notice (the "Notice of Contest Period") or, if
such claim is contested, the date the dispute is
resolved, and such set off shall be charged
proportionally against the Purchase Notes and
thereafter the Escrow Shares;
(iii) If, prior to the expiration of the Notice of Contest
Period, the Shareholders shall notify MTLM in writing
of an intention to dispute the claim and if such
dispute is not resolved within 30 days after expiration
of such period (the "Resolution Period"), then MTLM may
elect that such dispute shall be resolved by a
committee of three arbitrators (one appointed by the
Shareholders, one appointed by MTLM and one appointed
by the two arbitrators so appointed), which shall be
appointed within 30 days after the expiration of the
Resolution Period. The arbitrators shall abide by the
rules of the American Arbitration Association and their
decision shall be made within 45 days of being
appointed and shall be final and binding on all
parties;
(iv) For purposes of this Section 8.4, the value for
purposes of set off of the Escrow Shares shall be the
average of the closing bid and asked prices of MTLM's
common stock on The Nasdaq National Market System for
the 20 business days prior to the date of MTLM's claim
for indemnification.
(b) Except with respect to shares transferred pursuant to the
foregoing right of set off (and in the case of such shares, until the
same are transferred), all Escrow Shares shall be deemed to be owned by
the Shareholders and the Shareholders shall be entitled to vote the same;
provided, however, that there shall also be deposited with the Escrow
Agreement subject to the terms of this Section 8.4, all shares of MTLM
Common Stock issued to the Shareholders as a result of any stock dividend
or stock split and all cash issuable to the Shareholders as a result of
any cash dividend, with respect to the Escrow Shares. All stock
38
40
and cash issued or paid upon Escrow Shares shall be distributed to the
person or entity entitled to receive such Escrow Shares together with
such Escrow Shares.
8.5 TERMINATION OF AGREEMENT OF SHAREHOLDERS TO INDEMNIFY.
Notwithstanding the provisions of Section 8.1, the obligation of the
Shareholders to indemnify MTLM shall terminate if at any time after the Closing
Date T. Xxxxxxxx Xxxxxxxx for any reason is not the Chairman of the Board of
MTLM or Xxxxxx Xxxxxx for any reason is not the Chief Executive Officer of MTLM.
ARTICLE IX
SECURITIES LAW MATTERS
The Parties agree as follows with respect to the sale or other disposition
after the Closing Date of MTLM securities:
9.1 DISPOSITION OF MTLM SECURITIES. Each of the Shareholders represents
and warrants that each of the MTLM Securities being acquired by him hereunder
is being acquired and will be acquired for his own account and will not be sold
or otherwise disposed of, except pursuant to (i) an exemption from the
registration requirements under the Securities Act, which does not require the
filing by MTLM with the SEC of any registration statement, offering circular or
other document, in which case the Shareholders shall first supply to MTLM an
opinion of counsel (which counsel and opinions shall be satisfactory to MTLM)
that such exception is available, or (ii) an effective registration statement
filed by MTLM with the SEC under the Securities Act.
9.2 LEGEND. Each of the MTLM securities shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF
1933, AS AMENDED WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
MTLM may, unless a registration statement is in effect covering MTLM
Securities, place stop transfer orders with its transfer agents with respect to
such certificates in accordance with federal securities laws.
39
41
ARTICLE X
DEFAULTS
10.1 DEFAULT BY MTLM. If MTLM defaults in the payment of the 180-day
Notes or the Earnings Notes, then the Shareholders shall have the right to
foreclose on and acquire the stock of the Surviving Corporation, as well as the
Membership Interests of Proler Steelworks L.L.C. acquired by MTLM, provided
such Shareholders return to MTLM all of the Merger Consideration and all of the
purchase price for the Membership Interests of Proler Steelworks L.L.C., less
$2.0 million.
10.2 DEFAULT BY SHAREHOLDERS. If the Shareholders do not cause the
Surviving Corporation to have received the Certificate of Occupancy and the
other New Permits referred to in Section 6.11 hereof on or before December 31,
1997, MTLM shall have the right, exercisable in its sole discretion, to return
to the Shareholders the stock of the Surviving Corporation, as well as the
Membership Interests of Proler Steelworks L.L.C. acquired by MTLM, whereupon
the Shareholders shall simultaneously return to MTLM all of the Merger
Consideration and all of the purchase price for the Membership Interests of
Proler Steelworks L.L.C.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Aboveground Storage Tanks" defined in Section 3.13 (h).
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act,
as in effect on the date hereof.
"Asbestos" or "Asbestos-containing material" defined in Section
3.13 (j).
"Assets" defined in Section 3.15 (a).
"CERCLA" defined in Section 3.13 (e).
"Claims" defined in Section 8.3.
"Closing" defined in Section 1.3.
40
42
"Code" defined in Section 3.18 (b).
"Common Stock" means shares of MTLM's common stock, $.01 par value.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation or other contract, agreement or instrument,
whether written or oral.
"Current Balance Sheet" defined in Section 3.9.
"Designated Contracts" defined in Section 3.25.
"Discharge" defined in Section 3.13 (f).
"Employee Benefit Plans" defined in Section 3.18 (a).
"Environmental Assessment" defined in Section 5.9.
"Environmental, Health and Safety Laws" defined in Section 3.13 (k).
"EPCRA" defined in Section 3.13 (e).
"ERISA" defined in Section 3.18 (a).
"Escrow Agreement" referred to in Section 1(a)(i) and attached as
Exhibit A.
"Escrow Shares" defined in Section 1(a)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FIFRA" defined in Section 3.13 (e).
"Financial Statements" defined in Section 3.9.
"Fixed Assets" defined in Section 3.15 (b).
"GAAP" means generally accepted accounting principles in effect in
the United States of America for the period indicated.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
41
43
"Hazardous Substances" defined in Section 3.13 (e).
"Immigration Act" defined in Section 3.16 (c).
"Indemnifiable Damages" defined in Section 8.1 (a).
"Indemnified Party" defined in Section 8.3 (a).
"Insurance Policies" defined in Section 3.20.
"Intellectual Property" defined in Section 3.24.
"Knowledge" means (a) in the case of an individual, actual,
conscious knowledge of information by such individual or (b) in the case
of a corporation, limited liability company or similar entity, actual,
conscious knowledge by a current officer or key employee thereof who
devotes substantive attention to matters of such nature in the ordinary
course of his employment with such corporation, limited liability company
or other entity.
"Leased Premises" defined in Section 3.14 (b).
"Leases" defined in Section 3.14 (b).
"Licenses" defined in Section 3.13 (b).
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any
conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law or any
jurisdiction in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect),
in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects which
change (or effect) individually or in the aggregate, is materially
adverse to such condition, properties, assets, liabilities, rights,
obligations, operations, business or prospects.
"Material Customers" defined in Section 3.26.
"MPPA Plan" defined in Section 3.18 (d).
"Other Agreements" defined in Section 5.12.
42
44
"OSHA" defined in Section 3.13 (e).
"Owned Properties" defined in Section 3.14 (a).
"Permits" defined in Section 3.22.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever
nature.
"PBGC" defined in Section 3.18 (f).
"RCRA" defined in Section 3.13 (e).
"Receivables" defined in Section 3.21.
"Register", "registered" and "registration" refer to a
registration of the offering and sale of securities effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of
such registration statement.
"Release" defined in Section 3.13 (f).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shareholders" defined in the introductory paragraph of this
Agreement.
"Shareholders Indemnifiable Damages" defined in Section 8.2 (a).
"Tax Return" means any federal, state or local tax return, filing
or information statement required to be filed in connection with or with
respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any
federal, state, local or foreign governmental agency, and any interest or
penalties related thereto.
"Underground Storage Tanks" defined in Section 3.13 (h).
"Waste" defined in Section 3.13 (e).
43
45
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise
requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this
agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods,
where applicable.
As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine,
where the context so permits.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) at any time prior to the Closing Date, by mutual written
consent of all of the parties hereto at any time prior to the Closing;
(b) at any time prior to the Closing Date, by MTLM in the event of
a material breach by the Company or the Shareholders of any provision of
this Agreement;
(c) at any time prior to the Closing Date, by the Shareholders in
the event of a material breach by MTLM of any provision of this
Agreement;
(d) at any time prior to the Closing Date, by any of MTLM or the
Shareholders if the Closing shall not have occurred by September 1, 1997;
provided, however, that neither MTLM, nor the Shareholders shall be
entitled to terminate this Agreement pursuant to this Section 12.1(d), if
such party's knowing or willful breach of this Agreement has prevented
the consummation of the transactions contemplated hereby.
44
46
12.2 EFFECT OF TERMINATION. Except as provided in Article VI, in the
event of termination of this Agreement pursuant to Section 12.1, this Agreement
shall forthwith become void; provided, however, that nothing herein shall
relieve any party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by
certified or registered mail (first class postage prepaid), guaranteed
overnight delivery, or facsimile transmission if such transmission is confirmed
by delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
designate in writing to the other party):
(a) IF TO MTLM TO:
Metal Management, Inc.
000 X. Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
WITH A COPY TO:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Xx.
Telecopy No.: (000) 000-0000
(b) IF TO THE COMPANY OR THE SHAREHOLDERS TO:
Proler Southwest Inc.
X.X. Xxx 00000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
45
47
WITH A COPY TO:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
1900 Pennzoil Place - South Tower
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
13.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto), the other documents delivered at the Closing
pursuant hereto, and the Confidentiality Agreement between the parties dated
March 18, 1997, as amended, contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter. The Exhibits and Schedules constitute a part hereof as
though set forth in full above.
13.3 EXPENSES. Except as otherwise provided herein, MTLM shall pay its
own fees and expenses, including its own counsel fees, incurred in connection
with this Agreement or any transaction contemplated hereby, and the Company
shall pay all reasonable fees and expenses, including counsel fees for one law
firm to represent the Company, in connection with this Agreement or any
transaction contemplated hereby; provided, however, all filing fees in
connection with the HSR Act shall be paid by MTLM.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time
for performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. Except as otherwise provided herein, the
rights and remedies of the parties under this Agreement are in addition to all
other rights and remedies, at law or equity, that they may have against each
other.
13.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall
be construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by any of the Shareholders without the prior
written consent of MTLM or by MTLM without the prior written consent of the
Shareholders.
46
48
13.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
13.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the Schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
Schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
13.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Texas applicable to contracts executed and to be wholly performed within such
State.
13.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties Hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party
has had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
47
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
METAL MANAGEMENT, INC.
By: ______________________________
Xxxxxx X. Xxxxxx
President
PROLER SOUTHWEST INC.
By: ______________________________
Xxxxxxx X. Xxxxxx, Trustee
THE XXXXXXX X. XXXXXX AND
XXXXX XXXXXX MANAGEMENT TRUST
By: ______________________________
Xxxxxxx X. Xxxxxx, Trustee
_____________________________________
Xxxxxx X. Xxxxxx
_____________________________________
Xxxxx X. Xxxxxxx
_____________________________________
Xxxx X. Xxxxxx
_____________________________________
Xxxxxx X. Xxxxxxx
48
50
INDEX OF SCHEDULES
Schedule 3.1 Jurisdictions in which Qualified to do Business
Schedule 3.4 Capitalization
Schedule 3.5 Shareholders of the Company
Schedule 3.6 Violations; Conflicts; etc.
Schedule 3.8 Subsidiaries
Schedule 3.10 Changes since the Current Balance Sheet Date
Schedule 3.11 Liabilities
Schedule 3.12 Litigation
Schedule 3.13 Environmental Matters
Schedule 3.14(a) Owned Real Estate
Schedule 3.14(b) Leases
Schedule 3.15 Title to and Condition of Assets
Schedule 3.16 Compliance with Laws
Schedule 3.17 Labor and Employment Matters
Schedule 3.18 Employee Benefit Plans
Schedule 3.20 Insurance
Schedule 3.22 Licenses and Permits
Schedule 3.25 Contracts
Schedule 3.33(a) Asset Update Schedule
51
INDEX OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Purchase Notes
Exhibit C Form of Conversion Warrant
Exhibit D Form of Cash Warrant
Exhibit E Form of Employee Warrant
Exhibit F Form of 180-day Notes
Exhibit G Form of Earnings Note
Exhibit H Form of Employment Agreement
Exhibit I Form of Shareholders' Agreement
