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EXHIBIT 2.1
MERGER AGREEMENT
BY AND AMONG
METAL MANAGEMENT, INC.,
MTLM MERGER INC.
AND
HOUTEX METALS COMPANY, INC.
AND ITS SHAREHOLDERS
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TABLE OF CONTENTS
ARTICLE I
THE MERGER.......................................................... 1
1.1 The Merger................................................. 1
1.2 The Closing................................................ 2
1.3 Plan of Merger............................................. 2
1.4 Post Closing Adjustment to Merger Consideration............ 3
1.5 Determination of Exercise Price for Warrants............... 4
1.6 [Intentionally Omitted].................................... 5
1.7 Filing of Articles of Merger............................... 5
1.8 Issuance of MTLM Shares.................................... 5
1.9 Delivery of Certificates; Held Back Shares................. 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE MTLM COMPANIES............................................... 6
2.1 Corporate Status........................................... 6
2.2 Corporate Power and Authority.............................. 6
2.3 Enforceability............................................. 6
2.4 MTLM Common Stock.......................................... 6
2.5 No Commissions............................................. 7
2.6 Capitalization............................................. 7
2.7 SEC Reports and NASDAQ Compliance.......................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE HOUTEX SHAREHOLDERS............................................. 8
3.1 Corporate Status........................................... 8
3.2 Power and Authority........................................ 8
3.3 Enforceability............................................. 8
3.4 Capitalization............................................. 8
3.5 Shareholders of the Company................................ 9
3.6 No Violation............................................... 9
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3.7 Records of the Company......................................................................... 10
3.8 Subsidiaries................................................................................... 10
3.9 Financial Statements........................................................................... 10
3.10 Changes Since the Current Balance Sheet Date................................................... 11
3.11 Liabilities of the Company..................................................................... 11
3.12 Litigation..................................................................................... 12
3.13 Environmental Matters.......................................................................... 12
3.14 Real Estate.................................................................................... 17
3.15 Good Title to and Condition of Assets.......................................................... 20
3.16 Compliance with Laws........................................................................... 21
3.17 Labor and Employment Matters................................................................... 21
3.18 Employee Benefit Plans......................................................................... 22
3.19 Tax Matters.................................................................................... 24
3.20 Insurance...................................................................................... 26
3.21 Receivables.................................................................................... 26
3.22 Licenses and Permits........................................................................... 27
3.23 Adequacy of the Assets; Relationships with
Customers and Suppliers; Affiliated Transactions............................................... 27
3.24 Intellectual Property.......................................................................... 27
3.25 Contracts...................................................................................... 27
3.26 Customer Lists and Recurring Revenue........................................................... 28
3.27 Accuracy of Information Furnished by the Shareholders.......................................... 29
3.28 Investment Intent; Accredited Investor Status; Securities Documents............................ 29
3.29 Business Locations............................................................................. 29
3.30 Names; Prior Acquisitions...................................................................... 30
3.31 No Commissions................................................................................. 30
3.32 Inventory...................................................................................... 30
3.33 Identification, Acquisition and Disposition of Assets and Liabilities.......................... 30
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER.................................................................. 31
4.1 Conduct of Business by HouTex Pending the Merger............................................... 31
ARTICLE V
ADDITIONAL AGREEMENTS................................................................................... 32
5.1 Further Assurances............................................................................. 32
5.2 Compliance with Covenants...................................................................... 33
5.3 Cooperation.................................................................................... 33
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5.4 Access to Information.......................................................................... 33
5.5 Notification of Certain Matters................................................................ 33
5.6 Tax Treatment.................................................................................. 33
5.7 Confidentiality; Publicity..................................................................... 33
5.8 No Other Discussions........................................................................... 34
5.9 Restrictive Covenants.......................................................................... 34
5.10 Environmental Assessment....................................................................... 35
(a) Scope of Prompt Immediate Japhet Property Remediation..................................... 36
(b) Costs of Agreed Remediation............................................................... 36
(c) Future Remediation Costs.................................................................. 36
5.11 Trading in MTLM Common Stock................................................................... 37
5.12 Election of New Director....................................................................... 37
5.13 Employment Agreements.......................................................................... 37
5.14 Lease of Real Property......................................................................... 37
5.15 Post Closing Minimum Net Income................................................................ 38
5.16 Houston Compressed Steel Finders Fee........................................................... 38
5.17 Preclosing Audit of HouTex..................................................................... 38
5.18 Corporate Authority............................................................................ 38
5.19 Certification of Tax Status.................................................................... 38
5.20 NationsBank Financing; Release of Guarantors................................................... 39
5.21 Extraneous Assets.............................................................................. 39
5.22 Possible Issuance of Additional Three Year Warrants............................................ 39
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
THE MTLM COMPANIES...................................................................................... 40
6.1 Accuracy of Representations and Warranties and
Compliance with Obligations.................................................................... 40
6.2 No Material Adverse Change or Destruction of Property.......................................... 41
6.3 Corporate Certificate.......................................................................... 41
6.4 Opinion of Counsel............................................................................. 41
6.5 Consents....................................................................................... 42
6.6 Securities Laws................................................................................ 42
6.7 HouTex Stock................................................................................... 42
6.8 No Adverse Litigation.......................................................................... 42
6.9 Board Approval................................................................................. 43
6.10 Shareholder Approval........................................................................... 43
6.11 Employment Agreements.......................................................................... 43
6.12 Lease Agreement................................................................................ 43
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6.13 Due Diligence.................................................................................. 43
6.14 Fairness Opinion............................................................................... 43
6.15 Completion of Audit............................................................................ 43
6.16 Extraneous Assets.............................................................................. 43
6.17 Receipt of Tax Certifications.................................................................. 43
6.18 Consent of NationsBank......................................................................... 44
6.19 Title Commitment............................................................................... 44
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
HOUTEX AND THE HOUTEX SHAREHOLDERS...................................................................... 44
7.1 Accuracy of Representations and Warranties
and Compliance with Obligations................................................................ 44
7.2 Merger Consideration........................................................................... 44
7.3 No Adverse Litigation.......................................................................... 44
7.4 Opinion of Counsel............................................................................. 45
7.5 Employment Agreements.......................................................................... 45
7.6 Lease Agreement................................................................................ 45
7.7 Registration Rights............................................................................ 46
ARTICLE VIII
INDEMNIFICATION......................................................................................... 46
8.1 Agreement by the HouTex Shareholders to Indemnify.............................................. 46
8.2 Agreement by the MTLM Companies to Indemnify................................................... 48
8.3 Conditions of Indemnification.................................................................. 49
8.4 Held Back Shares and Rights of Setoff to Secure the
HouTex Shareholders' Indemnification Obligation................................................ 50
8.5 Adjustment to Merger Consideration............................................................. 52
ARTICLE IX
SECURITIES LAW MATTERS
9.1 Disposition of Shares.......................................................................... 52
9.2 Legend......................................................................................... 53
9.3 Registration Rights............................................................................ 53
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ARTICLE X
DEFINITIONS............................................................................................. 53
10.1 Defined Terms.................................................................................. 53
10.2 Other Definitional Provisions.................................................................. 55
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER....................................................................... 56
11.1 Termination.................................................................................... 56
11.2 Effect of Termination.......................................................................... 56
ARTICLE XII
GENERAL PROVISIONS...................................................................................... 56
12.1 Notices........................................................................................ 56
12.2 Entire Agreement.............................................................................. 57
12.3 Expenses....................................................................................... 58
12.4 Amendment; Waiver.............................................................................. 58
12.5 Binding Effect; Assignment..................................................................... 58
12.6 Counterparts................................................................................... 58
12.7 Interpretation................................................................................. 58
12.8 Governing Law; Interpretation.................................................................. 58
12.9 Arm's Length Negotiations...................................................................... 59
12.10 Facsimile Signatures........................................................................... 59
ARTICLE XIII
POST CLOSING COVENANTS OF MTLM.......................................................................... 60
13.1 Post Closing Covenants of MTLM................................................................. 60
13.2 Covenant Regarding Financial Statements........................................................ 61
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EXHIBITS
Exhibit A -- Plan of Merger
Exhibit B-1 -- Form of Five Year Warrants
Exhibit B-2 -- Form of Limited Warrants
Exhibit B-3 -- Form of Xxxxxx Notes
Exhibit B-4 -- Form of Clend Note
Exhibit B-5 -- Form of Stock Pledge and Security Agreement
Exhibit B-6 -- Form of Escrow Agreement
Exhibit C -- Form of Employment Agreement (Xxxx Xxxxxx)
Exhibit D -- Form of Employment Agreement (Xxx Xxxxxx)
Exhibit E -- Legal Description of Xxxxxx County Texas Real Property
Exhibit F -- Adjustments to GAAP to Determine Postclosing Minimum Net Income
Exhibit G -- Form of Registration Rights Agreement
Exhibit H -- Extraneous Assets
Exhibit I -- Form of Lease Agreement (with Purchase Option)
Exhibit J -- Price Waterhouse Letter
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MERGER AGREEMENT
This Merger Agreement (this "Agreement") is entered into as of December
10, 1996, by and among METAL MANAGEMENT, INC., a Delaware corporation ("MTLM");
MTLM MERGER, INC., a Texas corporation and wholly-owned subsidiary of MTLM (the
"MTLM Merger Sub", and together with MTLM, the "MTLM Companies"); HOUTEX METALS
COMPANY, INC., a Texas corporation, ("HouTex"), XXXX XXXXXX,, and ZALMAN (SOL)
XXXXXX, and CLEND INVESTMENT HOLDINGS LTD., a British Virgin Islands
corporation, who or which constitute all of the shareholders of HouTex
(collectively, the "HouTex Shareholders"). Certain other capitalized terms used
herein are defined in Article X or elsewhere throughout this Agreement.
RECITALS
The Boards of Directors of the MTLM Companies and HouTex have
determined that it is in the best interests of their respective shareholders for
MTLM to acquire HouTex upon the terms and subject to the conditions set forth in
this Agreement. In order to effectuate the transaction, MTLM has organized MTLM
Merger Sub as a wholly-owned subsidiary, and the parties have agreed, subject to
the terms and conditions set forth in this Agreement, to merge MTLM Merger Sub
with and into HouTex with HouTex as the surviving corporation, so that each of
the HouTex Shareholders will be issued certain shares of common stock of MTLM.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined below), and pursuant to the terms and
conditions set forth in the Plan of Merger and Reorganization annexed hereto as
Exhibit A (the "Plan of Merger"), MTLM Merger Sub will be merged into and with
HouTex. The terms and conditions of the Plan of Merger are incorporated herein
by reference as if fully set forth herein. As a result of the Merger, the
separate corporate existence of MTLM Merger Sub shall cease and HouTex shall
continue as the surviving corporation and wholly-owned subsidiary of MTLM.
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1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the purchase and Merger (the "Closing") shall take place as
promptly as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in Articles VI and VII, at
the offices of Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx, 0000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, or such other place as the parties may
otherwise agree. The parties will attempt to perform all of their respective
obligations hereunder so that Closing may occur on or before December 6, 1996;
but in no event may Closing occur later than December 31, 1996, unless all
parties have agreed in writing to a later date.
1.3 PLAN OF MERGER. At the Closing, MTLM shall deliver to the HouTex
Shareholders (a) an aggregate of Four Hundred Seventy-Five Thousand (475,000)
shares of common stock, $0.01 par value per share (the "Share Consideration"),
of MTLM ("MTLM Common Stock"); (b) warrants of MTLM which entitle the holders to
purchase One Hundred Thousand (100,000) shares of MTLM for a period of five (5)
years at a price to be set at Closing as provided in Section 1.5 hereof, in the
form attached hereto as Exhibit "B-1" (the "Five Year Warrants"); (c) warrants
of MTLM which entitle the holders to purchase One Hundred Fifty Thousand
(150,000) shares of MTLM for a limited period of up to five(5) years at a price
to be set at Closing as provided in Section 1.5 hereof in the form attached
hereto as Exhibit "B-2" (the "Limited Warrants"); (d) Five Hundred Thousand
Dollars ($500,000.00) in cash or immediately available funds (the "Cash
Consideration"); (e) two promissory notes in the form attached hereto as Exhibit
"B-3" payable to Xxxx and Xxx Xxxxxx (the "Xxxxxx Notes") in the aggregate
amount of One Million Four Hundred Thousand Dollars ($1,405,268.00) allocated
between Xxxx and Xxx Xxxxxx as set forth below and secured by a Stock Pledge and
Security Agreement in the form attached hereto as Exhibit "B-5" with related
Escrow Agreement in the form of Exhibit B-6 attached hereto (collectively the
"Stock Pledge Agreement"); and (f) a promissory note in the form attached hereto
as Exhibit "B-4" payable to Clend Investment Holdings Limited (the "Clend Note")
in the amount of Five Million Five Hundred Thousand Dollars ($5,500,000.00)
which will also be secured by the Stock Pledge Agreement all in exchange for all
the issued and outstanding shares of capital stock of HouTex. The above
referenced purchase price shall be allocated (subject to adjustments) among the
HouTex Shareholders as follows:
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Held Back
MTLM Common Stock Shares Five Year Limited Cash
Delivered at Closing Under Section 1.9 Warrants Warrants Consideration Xxxxxx Notes Clend Note
-------------------- ----------------- --------- -------- ------------- ----- ----------
Xxxx Xxxxxx 27,077 32,212 87,000 $435,000 $ 960,055 --
Xxx Xxxxxx 19,590 23,343 63,000 315,000 695,213 --
Clend
Investments 372,778 -- 100,000 -- -- -- $5,000,000
------- ------ ------- ------- -------- ---------- ----------
Totals 419,445 55,555 100,000 150,000 $750,000 $1,655,268 $5,000,000
======= ====== ======= ======= ======== ========== ==========
The Share Consideration, the Warrants, the Cash Consideration, the Xxxxxx Notes
and the Clend Note, as adjusted in accordance with this Agreement, shall be
collectively referred to as the "Merger Consideration".
1.4 POST CLOSING ADJUSTMENT TO MERGER CONSIDERATION.
(a) Within 30 days after the Closing Date, MTLM will prepare
and deliver to the HouTex Shareholders a draft balance sheet (the
"Closing Date Balance Sheet") for HouTex as of the opening of business
on the Closing Date. MTLM will prepare the Draft Closing Date Balance
Sheet in accordance with GAAP. If the HouTex Shareholders have any
objections to the Draft Closing Date Balance Sheet, they will deliver a
detailed written statement describing their objections to MTLM within
15 days after receiving the Draft Closing Date Balance Sheet. MTLM and
the HouTex Shareholders will use reasonable efforts to resolve any such
objections themselves. However, if MTLM and the HouTex Shareholders do
not obtain a final resolution within 10 days after MTLM has received
the written statement of objections from the HouTex Shareholders, MTLM
and the HouTex Shareholders will select an accounting firm, mutually
acceptable to them to resolve any remaining objections. If MTLM and the
HouTex Shareholders are unable to agree on the choice of an accounting
firm, they will select a "Big Six" accounting firm by lot (after
excluding their respective outside accounting firms). The determination
of any accounting firm so selected will be set forth in writing and
will be conclusive and binding upon the parties. MTLM will revise the
Draft Closing Date Balance Sheet as appropriate to reflect the
resolution of any objections thereto pursuant to this Section 1.4. The
"Closing Date Balance Sheet" shall mean the Draft Closing Date Balance
Sheet together with any revisions thereto pursuant to this Section 1.4.
In the event the parties submit any unresolved objections to an
accounting firm for resolution as provided in this Section 1.4, MTLM
and the HouTex Shareholders will share equally the responsibility for
the fees and expenses of the accounting firm selected. MTLM will make
the work papers
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and back-up materials used in preparing the Draft Closing Date Balance
Sheet, and the books and records of HouTex, available to the HouTex
Shareholders and their accountants and representatives at reasonable
times upon reasonable notice at any time during (i) the preparation of
the Draft Closing Date Balance Sheet by MTLM; (ii) the review by the
HouTex Shareholders of the Draft Closing Date Balance Sheet, and (iii)
the resolution by the parties of any objections thereto.
(b) Pursuant to Section 5.15 hereof, the HouTex Shareholders
have covenanted that HouTex shall have an after tax net income
determined in accordance with Section 5.15 for the twelve month period
ending on the Minimum Net Income Determination Date (as defined in
Section 5.15) of not less than the Minimum Net Income (as defined in
Section 5.15). In the event the actual after tax net income of HouTex
determined in accordance with Section 5.15 for the twelve month period
ending on the Minimum Net Income Determination Date is less than the
Minimum Net Income, the HouTex Shareholders will pay MTLM an amount
equal to such deficiency (plus interest thereon at the Applicable Rate)
by the wire transfer or delivery of other immediately available funds
within three (3) business days after notification by MTLM in writing of
the actual after tax net income of HouTex determined in accordance with
Section 5.15 for the twelve (12) month period ending on the Minimum Net
Income Determination Date. MTLM shall have the option of recouping all
or any part of any amount the HouTex Shareholders owe MTLM pursuant to
this 1.4 (b) by notifying the HouTex Shareholders that MTLM is reducing
(in accordance with Article VIII) pro rata the Held Back Shares or
setting off such amount owed by the HouTex Shareholders against: (a)
amounts due to Xxxx and Xxx Xxxxxx or any entity which they form to
hold title to the Japhet Property (as such property is defined in
Section 5.14 hereof), or their or its respective successors in interest
under the Lease (such person, persons or entity being hereafter
referred to as the "Lessor"), or (b) amounts due under the Xxxxxx
Notes, or (c) amounts due under the Clend Note. Any dispute arising
between MTLM and the HouTex Shareholders with regard to the accuracy of
MTLM's determination of HouTex's actual net income determined in
accordance with Section 5.15 hereof for the period ending on the
Minimum Net Income Determination Date shall be resolved in the same
manner as a dispute arising under Section 1.4 (a) hereof.
1.5 DETERMINATION OF EXERCISE PRICE FOR WARRANTS. The exercise
price per share for the Five Year Warrants and Limited Warrants shall be fixed
at Closing in an amount equal to the average of the closing bid and asked prices
(the "Closing Stock Price") of MTLM's common stock on the Nasdaq National Market
System on the last business day preceding the Closing Date.
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1.6 [INTENTIONALLY OMITTED].
1.7 FILING OF ARTICLES OF MERGER. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing duly executed
Articles of Merger (with the Plan of Merger annexed thereto) with the Secretary
of State of the State of Texas, in such form attached hereto as Exhibit "A" with
such modifications, if any, as MTLM determines are required by the relevant
provisions of the Texas Business Corporation Act (the "Act") (the date and time
of such filing is referred to herein as the "Effective Date" or "Effective
Time").
1.8 ISSUANCE OF MTLM SHARES. At the Effective Time, by virtue of
the Merger and without any further action on the part of the parties hereto,
MTLM shall issue to the HouTex Shareholders duly executed certificates, in valid
form registered in each such Shareholder's name, evidencing that number of
shares of MTLM Common Stock determined, to the nearest whole share, in
accordance with the Plan of Merger. Any HouTex Shareholders who wish to have
their allocable shares of MTLM Common Stock issued in multiple certificates
shall deliver a certificate to MTLM at least 10 days prior to Closing pursuant
to this Section 1.8 setting forth the manner in which they wish to have their
share certificates issued.
1.9 DELIVERY OF CERTIFICATES; HELD BACK SHARES. At the Closing,
the HouTex Shareholders shall deliver the certificates representing all of the
issued and outstanding shares of capital stock of HouTex to MTLM for
cancellation, and MTLM shall deliver the certificates representing the shares of
MTLM Common Stock issued pursuant to Section 1.8 in the following manner: (i)
MTLM shall deliver to each holder one or more certificates evidencing the
Adjusted Share Consideration (less the Held Back Shares) of MTLM Common Stock
(rounded to the nearest whole share), and (ii) MTLM shall set aside and hold in
accordance with Article VIII certificates evidencing a number of Shares of MTLM
Common Stock equal in Section 1.3 under the column headed "Held Back Shares
under Section 1.9" (the "Held Back
[remainder of page intentionally left blank]
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Shares"). The shares of MTLM Common Stock, including the Held Back Shares,
issuable by MTLM in the Merger are sometimes referred to herein as the "MTLM
Shares". At the Closing, MTLM shall also deliver the cash portion of the Merger
Consideration, the Five Year Warrants, the Limited Warrants, the Xxxxxx Notes
and the Clend Note.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE MTLM COMPANIES
As a material inducement to each of the HouTex Shareholders to enter
into this Agreement and to consummate the transactions contemplated hereby, MTLM
makes the following representations and warranties to the HouTex 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. The MTLM
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. The MTLM Merger Sub is a
wholly-owned subsidiary of MTLM.
2.2 CORPORATE POWER AND AUTHORITY. Each of the MTLM Companies has the
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the MTLM Companies will take all action necessary
to authorize its execution and delivery of this Agreement, the performance of
its respective obligations hereunder and the consummation of the transactions
contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by each of the MTLM Companies and constitutes a legal, valid and binding
obligation of each of the MTLM Companies, enforceable against each of the MTLM
Companies 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.
2.4 MTLM COMMON STOCK. Upon consummation of the Mergers and the
issuance and delivery of certificates representing the MTLM Shares to the HouTex
Shareholders, the MTLM Shares will be validly issued, fully paid and
non-assessable shares of MTLM Common Stock.
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2.5 NO COMMISSIONS. None of the MTLM Companies has 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.
2.6 CAPITALIZATION. The authorized capital stock of MTLM consists of
42,000,000 shares, 40,000,000 of which are shares of MTLM Common Stock and
2,000,000 of which are Preferred Stock. As of the date hereof, 8,922,000 shares
of MTLM Common Stock are validly issued and outstanding, fully paid, and
non-assessable and there are no outstanding shares of Preferred Stock. Not more
than 2,400,000 shares of MTLM Common Stock have been reserved for issuance as of
the date hereof pursuant to various stock option plans, warrants, and pending
contracts for business acquisitions, and no other shares of MTLM Common Stock or
Preferred Stock, or any rights options, warrants, convertible securities,
subscription rights or other agreements or commitments of any kind obligating
MTLM to issue or sell any other shares of MTLM Common Stock or Preferred Stock,
are outstanding or have been authorized, as of the date hereof. All issued and
outstanding shares of capital stock of the MTLM Merger Sub are owned
beneficially and of record by MTLM. No other shares of capital stock of the MTLM
Merger Sub or any rights, options, warrants, convertible securities,
subscription rights or other agreements or commitments of any kind obligating
any of the MTLM Merger Sub to issue or sell other such shares are outstanding or
have been authorized.
2.7 SEC REPORTS AND NASDAQ COMPLIANCE. Since at least January 1, 1995,
MTLM has made all filings (the "SEC Reports") required to be made by it under
the Securities Act, the Exchange Act and the securities laws of any state, and
any rules and regulations promulgated thereunder and pursuant to any
requirements of law. The SEC Reports, when filed, complied in all material
respects with all applicable requirements of the Securities Act , the Exchange
Act and other requirements of law. To the knowledge of MTLM, none of the SEC
Reports, at the time of filing, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading in light of the
circumstances in which they were made. MTLM has, or will, deliver or make
accessible to the HouTex Shareholders true, accurate and complete copies of the
SEC Reports, as amended, which were filed with the SEC since January 1, 1995,
and as in effect as of the date hereof. MTLM has taken all necessary actions to
ensure its continued inclusion in, and the continued eligibility of the MTLM
Common Stock for trading on the Nasdaq Stock Market under all currently
effective and currently proposed inclusion requirements.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE HOUTEX SHAREHOLDERS
As a material inducement to each of the MTLM Companies to enter into
this Agreement and to consummate the transactions contemplated hereby, each of
the HouTex Shareholders, jointly and severally, makes the following
representations and warranties to the MTLM Companies:
3.1 CORPORATE STATUS. HouTex is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has the
requisite power and authority to own or lease its properties and to carry on its
business as now being conducted. HouTex is legally qualified to transact
business as a foreign corporation in all jurisdictions where the nature of its
properties 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. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of HouTex.
3.2 POWER AND AUTHORITY. HouTex and the HouTex Shareholders each have
the power and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby. HouTex, and the HouTex Shareholders will each take all action necessary
to authorize the execution and delivery of this Agreement, the performance of
their respective obligations hereunder and the consummation of the transactions
contemplated hereby. Each of the HouTex Shareholders is an individual residing
in the State of Texas, except for Clend Investments Holdings Ltd. which is a
corporation organized under the laws of the British Virgin Islands. Each HouTex
Shareholder has the requisite competence and authority to execute and deliver
this Agreement, to perform his, her, or its respective obligations hereunder and
to consummate the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by HouTex and the HouTex Shareholders, and constitutes the legal, valid and
binding obligation of 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 HouTex,
(a) the number of authorized shares of each class of its capital stock, (b) the
number of issued and
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outstanding shares of each class of its capital stock, and (c) 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 HouTex (a) have been duly
authorized and validly issued and are fully paid and non-assessable, (b) were
issued in compliance with all applicable state and federal securities laws, and
(c) 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 HouTex, 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 HouTex 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 HouTex. There are
no proxies, voting rights or other agreements or understandings with respect to
the voting or transfer of the capital stock of HouTex. HouTex 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 HouTex, (a) 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 (b) 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 of any such shares are different). The
HouTex Shareholders constitute all of the holders of all issued and outstanding
shares of capital stock of HouTex, and each of the HouTex Shareholders owns such
shares as is 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, and
all Liens noted on Schedule 3.5 shall be released at or prior to the Closing
(other than as is specifically disclosed on Schedule 3.5).
3.6 NO VIOLATION. Except as set forth on Schedule 3.6, the execution
and delivery of this Agreement by HouTex and the HouTex Shareholders, the
performance by 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
HouTex, (ii) violate or conflict with 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 HouTex or any of the HouTex Shareholders; (iii)
conflict with, result 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,
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17
abandon or accelerate, any Contract which is applicable to, binding upon or
enforceable against HouTex or any of the HouTex 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 HouTex, 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 to the extent of
filings necessary to consummate the Merger or to the extent failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not result in a Material Adverse Effect, or would not
preclude the Merger from being consummated in accordance with this Agreement.
3.7 RECORDS OF THE COMPANY. The copies of the articles of incorporation
and bylaws of HouTex which were provided to MTLM are true, accurate and complete
and reflect all amendments made through the date of this Agreement. The minute
books for HouTex contain an accurate record of all material corporate actions of
the shareholders and directors (and any committees thereof) of HouTex taken
since incorporation. All material corporate actions taken by HouTex have been
duly authorized or ratified. The stock ledgers of HouTex contain accurate and
complete records of all issuances, transfers and cancellations of shares of the
capital stock of the HouTex.
3.8 SUBSIDIARIES. Except as set forth on Schedule 3.8, HouTex 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. HouTex has no liabilities or obligations, whether
accrued, absolute, contingent or otherwise, arising from its interest in the
entities set forth on Schedule 3.8, except as may be disclosed on Schedule 3.8.
3.9 FINANCIAL STATEMENTS. The HouTex Shareholders have delivered to
MTLM the financial statements as of September 30, 1993, September 30, 1994,
September 30, 1995, and for the period ending June 30, 1996, including the
notes, if any, thereto, (collectively, the "Financial Statements"), copies of
which are attached to Schedule 3.9 hereto. The balance sheet dated as of June
30, 1996 included in the Financial Statements is referred to herein as the
"Current Balance Sheet". Except as disclosed in Schedule 3.9, the Financial
Statements fairly present the financial position of HouTex 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
throughout the periods indicated. The books and records of HouTex fully and
fairly reflect its transactions, properties, assets and liabilities. 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
thereto. The Financial Statements
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18
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, and except as contemplated by Section 6.16 hereof, between the
date of the Current Balance Sheet and the date hereof HouTex 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 $10,000 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 $10,000 in the aggregate; (ix) suffered any extraordinary losses (whether or
not covered by insurance); (x) waived, cancelled, compromised or released any
rights having a value in excess of $10,000 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 $10,000; (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; (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 HouTex; or (xx) agreed to do or
authorized any of the foregoing.
3.11 LIABILITIES OF THE COMPANY. Except as set forth on Schedule 3.11,
HouTex does not have any liabilities or obligations, whether accrued, absolute,
contingent or otherwise, except (a) to the extent reflected or taken into
account in the Current Balance Sheet and not heretofore paid or discharged, (b)
to the extent specifically set forth in or incorporated by express reference in
any of the Schedules attached hereto, (c) liabilities
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19
incurred in the ordinary course of business consistent with past practice since
the date of the Current Balance Sheet (none of which relates to 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), (d) 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 (e) liabilities incurred in the ordinary course
of business prior to the date of the Current Balance Sheet which, in accordance
with GAAP consistently applied, were not recorded thereon.
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, overtly threatened, or to the knowledge of the HouTex
Shareholders anticipated or contemplated against, by or affecting HouTex or any
of its properties or assets, or the HouTex Shareholders, or which question the
validity or enforceability of this Agreement or the transactions contemplated
hereby, and there is no basis for any of the foregoing. There are no outstanding
orders, decrees or stipulations issued by any Governmental Authority in any
proceeding to which HouTex is or was a party which have not been complied with
in full or which continue to impose any material obligations on HouTex.
3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.13:
(a) HouTex is and has at all times been in material compliance
with all Environmental, Health and Safety Laws (as defined herein) governing its
business, operations, properties and assets, 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 (as described
herein). HouTex is not currently liable for any penalties, fines or forfeitures
for failure to comply with any Environmental, Health and Safety Laws. HouTex is
in material compliance with all 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) HouTex 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
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20
Licenses, and HouTex is in full compliance with all the terms, conditions and
requirements of such Licenses, and copies of such Licenses have been provided to
MTLM. There are no administrative or judicial investigations, notices, claims or
other proceedings pending or overtly threatened, or to the knowledge of the
HouTex Shareholders anticipated or contemplated by any Governmental Authority or
third parties against HouTex, its businesses, operations, properties, or assets,
which question the validity or entitlement of HouTex to any License required by
the Environmental, Health and Safety Laws for the ownership of each of the
properties and assets of HouTex and the operation of its business or wherein an
unfavorable decision, ruling or finding could have a Material Adverse Effect on
HouTex, or which would impose any liability upon the MTLM Companies in the event
that the merger contemplated by this Agreement closes.
(c) HouTex has not received and is not aware of any non-compliance
order, warning letter, notice of violation, claim, suit, action, judgment, or
administrative or judicial proceeding pending against or involving HouTex, 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 by HouTex 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 in a manner that would not
impose any obligation, burden or continuing liability on the MTLM Companies in
the event that the merger contemplated by this Agreement closes, or which could
have a Material Adverse Effect on HouTex.
(d) HouTex is in material 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.
(e) Except as permitted by all Environmental, Health and Safety
Laws, HouTex has not generated, manufactured, used, transported, transferred,
stored, handled, treated, spilled, leaked, dumped, discharged, released or
disposed, nor has it allowed or 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 to or at
any location other than a site lawfully permitted to receive such Hazardous
Substances or other waste for such purposes, 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 contravention of any Environmental, Health and
Safety Laws. HouTex has not generated, manufactured,
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used, stored, handled, treated, spilled, leaked, dumped, discharged, released or
disposed of, or allowed or arranged for any third parties to generate,
manufacture, use, store, handle, treat, spill, leak, dump, discharge, release or
dispose of, Hazardous Substances or other waste upon property owned or leased by
it, except as permitted by law. For purposes of this Section 3.13, the term
"Hazardous Substances" shall be construed broadly to 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, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires investigation or
remediation under any Environmental, Health and Safety Laws or which are or
become regulated, listed or controlled by, under or pursuant to any
Environmental Health and Safety Laws, 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"); 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 any future amendments to,
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 be construed broadly to include 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.
(f) HouTex has not caused, or allowed to be caused or permitted,
either by action or inaction, 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. There has not occurred,
nor is there presently occurring, a Release
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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. For purposes of this Section, the terms "Release" and "Discharge"
shall have the meanings given them in the Environmental, Health and Safety Laws.
(g) HouTex 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 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 HouTex that it has proposed or
is proposing to place on the National Priorities List or its state equivalent.
Neither HouTex nor the HouTex Shareholders has received notice, and neither
HouTex nor the HouTex Shareholders have knowledge of any facts which could give
rise to any notice, that HouTex 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. HouTex has not
submitted nor was required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to the Leased Premises or the Owned Properties. HouTex has
not received any written or 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 HouTex has transported, transferred or disposed
of other Wastes. HouTex has not been required to and has not undertaken any
response or remedial actions or clean-up actions of any kind at the request of
any Governmental Authorities or at the request of any other third party. HouTex
has no liability under any Environmental, Health and Safety Laws for personal
injury, property damage, natural resource damage, or clean up obligations.
(h) HouTex does not use, nor has it used, any Aboveground Storage
Tanks or Underground Storage Tanks, and there are not now nor have there ever
been any Aboveground Storage Tanks or Underground Storage Tanks on the Leased or
Owned Properties. 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
governing Aboveground Storage Tanks or Underground Storage Tanks.
(i) Schedule 3.13 identifies, regardless of their materiality, (i)
all environmental audits, assessments or occupational health studies undertaken
by HouTex or its agents or, to the knowledge of HouTex or the HouTex
Shareholders, undertaken by any Governmental Authority, or any third party,
relating to or affecting HouTex or any of the
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Leased Premises or the Owned Properties; (ii) the results of any ground, water,
soil, air or asbestos monitoring undertaken by HouTex or its agents or, to the
knowledge of HouTex or the HouTex Shareholders, undertaken by any Governmental
Authority or any third party, relating to or affecting HouTex or any of the
Leased Premises or the Owned Properties; (iii) all written communications
between HouTex 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 either of HouTex or any of
the Leased Premises or the Owned Properties.
(j) Schedule 3.13 contains a list of the assets of HouTex which
contain "asbestos" or "asbestos-containing material" (as such terms are
identified under the Environmental, Health and Safety Laws). Schedule 3.13 also
identifies (i) the degree of friability of all existing asbestos and
asbestos-containing material and (ii) all actions taken by HouTex, directly or
indirectly, or by any of their agents, employees, representatives or contractors
with respect to asbestos or asbestos-containing materials, including but not
limited to all methods and manner of abatement, removal, containment,
encapsulation, repair, maintenance, renovation, demolition, salvage,
installation, storage, transportation, disposal, monitoring, spill/emergency
clean-up, protective health and safety measures and training of personnel
(whether employees or independent contractors or otherwise). Except as set forth
in Schedule 3.13, HouTex has operated and continues to operate in compliance
with all Environmental, Health & 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 HouTex, 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, whether
currently in existence or hereafter enacted or promulgated, any of which govern
(or purport to govern) or relate to pollution, protection of the environment,
public health and safety, air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste or occupational health and safety, as any
of these terms are or may be defined 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
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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 HouTex
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 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 (5) years and the types and volumes of Waste transferred, transported,
hauled, moved, or disposed of to each such location.
(n) As used in this Section 3.13, the term "HouTex" is deemed to
refer to HouTex, any of its subsidiaries, predecessors, Affiliates, successors
or assigns, and shall specifically include any affiliated person, persons or
entity which owns real property leased, occupied, or used by HouTex.
3.14 REAL ESTATE.
(a) HouTex does not own any real property or any interest therein
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) HouTex has good and indefeasible title to the parcel of
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
listed on Schedule 3.14(a), all of which policies have been previously
delivered to MTLM.
(ii) there are no pending or, 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) the legal descriptions for the parcels of Owned
Property contained in the deeds thereof describe such parcels fully and
adequately; the
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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; the land does not serve any adjoining property for any purpose
inconsistent with the use of the land; and the Owned Properties are not
located within any flood plain (such that a mortgagee would require a
mortgagor to obtain flood insurance) or subject to any similar type
restriction for which any permits or licenses necessary to the use
thereof have not been obtained;
(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 accordance 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) except as may be contemplated by the Lease, 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 HouTex and its
subsidiaries) 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, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules and
regulations, and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcels of Owned
Property;
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(ix) each parcel of Owned Property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
Owned Property; access to the property is provided by paved public
right-of-way with adequate curb cuts available; and there is no pending
or threatened termination of the foregoing access rights;
(x) All improvements and buildings on the Owned Property are
in good repair and are safe for occupancy and use, free from termites
or other wood-destroying organisms; the roofs thereof are watertight;
and the structural components and systems (including plumbing,
electrical, air conditioning/heating, and sprinklers) are in good
working order and adequate for the use of such Owned Property in the
manner in which presently used; and
(xi) there are no service contracts, management agreements or
similar agreements which affect the parcels of Owned Property, except
as set forth on Schedule 3.14(a).
(b) Schedule 3.14(b) sets forth a list of all leases, licenses or
similar agreements ("Leases") to which HouTex is a party (copies of which have
previously been furnished to MTLM), in each case, setting forth (A) the lessor
and lessee thereof and the date and term of each of the Leases, (B) the legal
description, including street address, of each property covered thereby, and (C)
a brief description (including size and function) of the principal improvements
and buildings thereon (the "Leased Premises"), all of which are within the
property set-back and building lines of the respective property. The Leases are
in full force and effect and have not been amended except as set forth on
Schedule 3.14(b), and no party thereto is in default or breach under any such
Lease. No event has occurred which, with the passage of time or the giving of
notice or both, would cause a material breach of or default under any of such
Leases. There is no breach or anticipated breach by any other party to such
Leases. Except as set forth on Schedule 3.14(b), with respect to each such
Leased Premises:
(i) HouTex has valid leasehold interests in the Leased
Premises, free and clear of any Liens, covenants and easements or title
defects of any nature whatsoever;
(ii) The portions of the buildings located on the Leased
Premises that are used in the business of HouTex are each in good
repair and condition, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy
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HouTex's current and reasonably anticipated normal business activities
as conducted thereat;
(iii) Each of the Leased Premises (a) has direct access to
public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current and
reasonably anticipated normal transportation requirements of HouTex's
business as presently conducted at such parcel; and (b) is served by
all utilities in such quantity and quality as are sufficient to satisfy
the current normal business activities as conducted at such parcel; and
(iv) HouTex has not received notice of (a) any condemnation
proceeding with respect to any portion of the Leased Premises or any
access thereto, and no such proceeding is contemplated by any
Governmental Authority; or (b) any special assessment which may affect
any of the Leased Premises, and no such special assessment is
contemplated by any Governmental Authority.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS. Except as set forth in
Schedule 3.15:
(a) HouTex has good and marketable title to all of its Assets (as
hereinafter defined), 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 of HouTex, other than the Owned Properties and the Leased Premises,
whether personal or mixed, tangible or intangible, wherever located.
(b) The Fixed Assets (as hereinafter defined) currently in use or
necessary for the business and operations of HouTex are in good operating
condition, normal wear and tear excepted, and have been maintained materially 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 used by or located on the
premises of HouTex or set forth on the Current Balance Sheet or acquired by
HouTex since the date of the Current Balance Sheet. Schedule 3.15 lists the
vehicles owned, leased or used by HouTex, setting forth the make, model,
description of body and chassis, vehicle identification number, and year of
manufacture, and for each vehicle, whether it is owned or leased, and if owned,
the name of any lienholder and the amount of the lien, and if leased, the name
of the lessor and the general terms of the lease, and, whether owned or leased,
if it is used to transport, transfer, handle, dispose or haul Waste materials.
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3.16 COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.16:
(a) HouTex is and has been in compliance with all laws,
regulations and orders applicable to it, its 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). HouTex has not been cited, fined or otherwise
notified of any asserted past or present failure to comply with any laws,
regulations or orders and no proceeding with respect to any such violation is
pending or threatened.
(b) Neither HouTex nor any of its employees or agents, has made
any payment of funds in connection with their business which is prohibited by
law, and no funds have been set aside to be used in connection with their
business for any payment prohibited by law.
(c) HouTex is and at all times has been in full compliance 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 HouTex for whom compliance with the Immigration Act as
employer is required, HouTex 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 HouTex pursuant to the Immigration Act. HouTex 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 threatened against it,
by the Immigration and Naturalization Service by reason of any actual or alleged
failure to comply with the Immigration Act.
(d) HouTex 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 HouTex. HouTex is not a party to or bound by any collective
bargaining agreement or any other agreement with a labor union, and there has
been no effort by any labor union during the 24 months prior to the date hereof
to organize any employees of HouTex into one or more collective bargaining
units. There is no pending or threatened labor dispute, strike or work stoppage
which affects or which may affect the business of HouTex which may interfere
with its continued operations. Neither HouTex nor any agent, representative or
employee thereof has within the last 24 months committed any unfair labor
practice as
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defined in the National Labor Relations Act, as amended, and there is no pending
or threatened charge or complaint against HouTex 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 HouTex during the 24 months
prior to the date hereof. None of the HouTex Shareholders is aware that any
executive or key employee or group of employees has any plans to terminate his,
her or their employment with HouTex as a result of this Agreement or otherwise.
Schedule 3.17 contains detailed information about each contract, agreement or
plan of the following nature, whether formal or informal, and whether or not in
writing, to which HouTex is a party or under which it has an obligation: (i)
employment agreements, (ii) employee handbooks, policy statements and similar
plans, (iii) noncompetition agreements, and (iv) consulting agreements. HouTex
has complied 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 Americans
with Disabilities Act, as amended.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 3.18 contains a list setting
forth each employee benefit plan or arrangement of HouTex, including but not
limited to employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
multi-employer 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 HouTex 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 furnished
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) 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.
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(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 letter, true and correct copies of
which have been furnished 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) no
such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code; (v) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred, other than one
for which the 30-day notice requirement has been waived; and (v) as of the
Effective Date, the present value of all liabilities that would be "benefit
liabilities" under Section 4001(a)(16) of ERISA if benefits described in Code
Section 411(d)(6)(B) were included will not exceed the then current fair market
value of the assets of such plan (determined using the actuarial assumptions
used for the most recent actuarial valuation for such plan); (vi) except as
disclosed on Schedule 3.18, all contributions to, and payments from and with
respect to such plans, which may have been required to be made in accordance
with such plans and, when applicable, Section 302 of ERISA or Section 412 of the
Code, have been timely made; (vii) 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.
(d) Multi-employer Plans. With respect to any multi-employer plan,
as described in Section 4001(a)(3) of ERISA ("MPPA Plan") (i) all contributions
required to be made with respect to employees of HouTex have been timely paid;
(ii) HouTex has not incurred or is expected to incur, directly or indirectly,
any withdrawal liability under ERISA with respect to any such plan (whether by
reason of the transactions contemplated by the Agreement or otherwise); (iii)
Schedule 3.18 sets forth (A) the withdrawal liability under ERISA to each MPPA
Plan, (B) the date as of which such amount was calculated, and (C) the method
for determining the withdrawal liability; and (iv) no such plan is (or is
expected to be) insolvent or in reorganization and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists or is expected to exist with respect to any such
plan.
(e) Welfare Plans. Other than as disclosed in Schedule 3.18, (i)
HouTex 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
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death benefits with respect to any employee or former employee of HouTex or its
predecessors after termination of employment; (ii) HouTex 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 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.
(f) Controlled Group Liability. HouTex 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;
(v) has engaged in any transaction which would give rise to liability under
Section 4069 or Section 4212(c) of ERISA; or (vi) has violated Code Section
4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. Except as set forth on Schedule 3.18, (i)
none of the Employee Benefit Plans obligates HouTex 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 Effective Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of HouTex as
of the Effective 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 HouTex.
3.19 TAX MATTERS. Except as set forth in Schedule 3.19 hereto, all Tax
Returns required to be filed prior to the date hereof with respect to HouTex or
any of its income, properties, franchises or operations have been timely filed,
each such Tax Return has been prepared in compliance with all applicable laws
and regulations, and all such Tax Returns are true and accurate in all respects.
All Taxes due and payable by or with respect to
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HouTex have been paid or accrued on the Current Balance Sheet or will be accrued
on its books and records as of the Closing. Except as set forth in Schedule 3.19
hereto: (i) with respect to each taxable period of HouTex, either such taxable
period has been audited by the relevant taxing authority or the time for
assessing or collecting Taxes with respect to each such taxable period has
closed and such taxable period is not subject to review by any 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 against HouTex; (iii) HouTex has not consented to extend
the time in which any Taxes may be assessed or collected by any taxing
authority; (iv) HouTex has not requested or been granted an extension of the
time for filing any Tax Return to a date later than the Effective Time; (v)
there is no action, suit, taxing authority proceeding, or audit or claim for
refund now in progress, pending or threatened against or with respect to HouTex
regarding Taxes; (vi) HouTex 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 Effective Time; (vii) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
HouTex; (viii) HouTex 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 Effective 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 Effective Time 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 Effective Time; (ix) HouTex has not been a member
of an affiliated group (as defined in Section 1504 of the Code) or filed or been
included in a combined, consolidated or unitary income Tax Return; (x) HouTex 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; (xi) no taxing authority will claim or assess any
additional Taxes against HouTex for any period for which Tax Returns have been
filed; (xii) HouTex has not made any payments, and is or will not become
obligated (under any contract entered into on or before the Effective 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); (xiii) HouTex
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); (xiv) no claim has ever been made by a taxing authority in a
jurisdiction where HouTex does not file Tax Returns that is or may be subject to
Taxes assessed by such jurisdiction; and (xv) HouTex 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; (xvi) true,
correct and complete copies of all
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income and sales Tax Returns filed by or with respect to HouTex for the past
three years have been furnished or made available to MTLM; (xvii) HouTex will
not be subject to any Taxes for the period ending at the Effective Time 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 (xviii) no sales or use 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 entity) will be payable by HouTex or MTLM by virtue of the
transactions completed in this Agreement. The purchase of the Extraneous Assets
listed on Exhibit "H" hereto by Xxxx and Xxx Xxxxxx as described in Section 6.16
hereof will create no liability to HouTex for Taxes.
3.20 INSURANCE. HouTex is covered by valid, outstanding and enforceable
policies of insurance issued to it by reputable insurers covering its
properties, assets and businesses against risks of the nature normally insured
against by corporations in the same or similar lines of business and in coverage
amounts typically and reasonably carried by such corporations (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. As of the Effective Time, each of the
Insurance Policies will be in full force and effect. None of the Insurance
Policies will lapse or terminate as a result of the transactions contemplated by
this Agreement. HouTex 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 provided 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 businesses of HouTex.
HouTex 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 (as hereinafter defined) are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of HouTex. 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 HouTex, including all trade account
receivables arising from the provision of services or sale of inventory, notes
receivable and insurance proceeds receivable, except for those receivables
listed on Exhibit H hereto.
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3.22 LICENSES AND PERMITS. HouTex possesses all licenses and required
governmental or official approvals, permits or authorizations (collectively, the
"Permits") for its businesses 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, HouTex is in full
compliance with the requirements thereof, and no proceeding is pending or
threatened to revoke or amend any of them. 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 HouTex in the manner in which and
to the extent to which such business is currently being conducted. No current
supplier to HouTex of items essential to the conduct of its business will or has
threatened to terminate its business relationship with it for any reason. Except
as set forth on Schedule 3.23, HouTex does not have any direct or indirect
interest in any customer, supplier or competitor of HouTex, or in any person
from whom or to whom HouTex leases real or personal property. Except as set
forth on Schedule 3.23, no officer, director or shareholder of HouTex, nor any
person related by blood or marriage to any such person, nor any entity in which
any such person owns any beneficial interest, is a party to any Contract or
transaction with HouTex or has any interest in any property used by HouTex.
3.24 INTELLECTUAL PROPERTY. HouTex 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
HouTex as presently 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 threatened action for opposition, cancellation, declaration,
infringement, or invalidity, unenforceability or misappropriation or like claim,
action or proceeding.
3.25 CONTRACTS. Within twenty (20) days from execution of this
Agreement, HouTex will supply MTLM with a list which sets forth each Contract to
which HouTex 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"), HouTex will also supply MTLM
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with true and correct copies of such Designated Contracts. The copy of each
Designated Contract furnished to MTLM will be a true and complete copy of the
document it purports to represent and will reflect all amendments thereto made
through the date of delivery. Except as set forth on Schedule 3.25, HouTex 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 all of the covenants to be performed by any
other party thereto have been fully performed and there are no 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 HouTex under any Designated Contract, and no such event
has occurred which constitutes or would constitute a material default by any
other party. HouTex is not subject to any liability or payment resulting from
renegotiation of amounts paid it 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
HouTex to purchase or sell products or services; (c) leases of real property,
and leases of personal property not cancelable without penalty on notice of
sixty (60) days or less or calling for payment of an annual gross rental
exceeding Ten Thousand Dollars ($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 HouTex; (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 intellectual property; (g) any Contract relating to pending capital
expenditures by HouTex; 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 HouTex and not otherwise disclosed on the
Schedules.
3.26 CUSTOMER LISTS AND RECURRING REVENUE. Within twenty (20) days
after execution of this Agreement, HouTex will supply MTLM with a true, correct
and complete list of HouTex's twenty largest customers ("Material Customers")
and suppliers. True, correct and complete copies of any agreements with such
customers or suppliers which are anticipated to endure beyond the Closing will
also be furnished by the HouTex Shareholders to MTLM. Other than the Material
Customers, no customer of HouTex as of the date of this Agreement accounts for
more than 1% of its combined annual revenue. The HouTex
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Shareholders will also deliver 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. To the
knowledge of the MTLM Shareholders, no representation, statement or information
made or furnished by the HouTex 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 either previously furnished or to be furnished in the future by
HouTex and HouTex 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 HouTex 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 HouTex Shareholders is acquiring the MTLM Shares
hereunder for his, her or its own account for investment and not with a view to,
or for the sale in connection with, any distribution of any of the MTLM Shares,
except in compliance with applicable state and federal securities laws. Each of
the HouTex Shareholders has been provided, to its or his satisfaction, the
opportunity to discuss the transactions contemplated hereby with MTLM and has
had the opportunity to obtain such information pertaining to the MTLM Companies
as has been requested, including but not limited to filings made by MTLM with
the SEC under the Exchange Act. Each of the HouTex Shareholders is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act, and has such knowledge and experience in business or financial
matters that he, she or it is capable of evaluating the merits and risks of an
investment in the MTLM Shares, and is capable of bearing the economic risks of
such investment and is able to bear a complete loss of his or its investment in
the MTLM Shares. The HouTex Shareholders acknowledge that the MTLM Shares have
not been registered under the Securities Act and understand that the MTLM Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or such sale is permitted pursuant to an available exemption from
such registration requirement.
3.29 BUSINESS LOCATIONS. As of the date hereof, HouTex has no office or
place of business other than as identified on Schedules 3.14(a) and 3.14(b) and
HouTex's principal place of business and chief executive office (as such terms
are used in subsection 9-401 of the Uniform Commercial Code as enacted in the
State of Texas as of the date hereof) are indicated on Schedule 3.14(a) or
3.14(b), and, all locations where the equipment, inventory, chattel paper and
books and records of HouTex are located as of the date hereof are fully
identified on Schedules 3.14(a) and 3.14(b).
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3.30 NAMES; PRIOR ACQUISITIONS. All names under which HouTex does
business as of the date hereof are specified on Schedule 3.30. Except as set
forth on Schedule 3.30, HouTex 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 ten years.
3.31 NO COMMISSIONS. Neither HouTex nor the HouTex 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 (a) were acquired
in the ordinary course of business consistent with past practice; (b) are of a
quality, quantity, and condition useable or saleable in the ordinary course of
business within HouTex's normal inventory turnover experience; and (c) are
valued at the lower of cost or net realizable market value. All Assets that
consist of inventory are fit for the purposes for which such Assets were
procured. HouTex has no liability with respect to the return or repurchase of
any goods in the possession of any customer.
3.33 IDENTIFICATION, ACQUISITION AND DISPOSITION OF ASSETS AND
LIABILITIES. Schedule 3.33(a) sets forth a listing of all of the assets and
properties (including real, personal and mixed) owned by HouTex as of June 30,
1996. Not more than ten (10) days prior to the Closing, the HouTex Shareholders
shall deliver to MTLM a schedule reflecting any additions or deletions to
Schedule 3.33(a) as of such date relating to items which individually have a
value (defined as the higher of book value or fair market value) of $10,000.00
or more (the "Asset Update Schedule"). Schedule 3.33(b) sets forth a listing of
all of the liabilities of HouTex as of June 30, 1996. Not more than ten (10)
days prior to the Closing, the HouTex Shareholders shall deliver to MTLM a
schedule reflecting any additions or deletions to Schedule 3.33(b) as of such
date relating to items which individually have a value (defined as the higher of
book value or fair market value) of $10,000.00 or more (the "Liability Update
Schedule"). All additions or deletions reflected in the Asset Update Schedule
and the Liability Update Schedule shall be the result of transactions occurring
in the ordinary course of business or transactions contemplated by Section 6.16
following June 30, 1996 and no such additions or deletions will violate the
covenants contained in Section 4.1 hereof, nor would such additions or deletions
have violated the covenants contained in Section 4.1 hereof if such addition or
deletion had occurred after the date of this Agreement.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS BY HOUTEX PENDING THE MERGER. Except as set
forth on Schedule 4.1, HouTex covenants and agrees that, between the date of
this Agreement and the Effective Time, the business of HouTex shall be conducted
only in, and HouTex shall not take any action except in, the ordinary course of
business, consistent with past practice. HouTex shall use its best efforts to
preserve 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 with which it has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, HouTex shall not, between the date of
this Agreement and the Effective Time, 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 any
other ownership interest, of it or (ii) any of its 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) except with respect to the disposition of
the Extraneous Assets listed on
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Exhibit H, enter into any Contract other than in the ordinary course of
business, consistent with past practice;
(f) except in the ordinary course of business consistent with past
practice, increase the compensation payable or to become payable to its officers
or employees, 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 directors, officers or other employees, 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) take any action other than in the ordinary course of business
and in a manner consistent with past practice with respect to accounting
policies or procedures;
(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) except in the ordinary course of business consistent with past
practice, increase or decrease prices charged to its customers, except for
previously announced price changes, 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.
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.
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5.2 COMPLIANCE WITH COVENANTS. The HouTex Shareholders shall cause
HouTex to comply with all of the respective covenants of HouTex 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 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 Stock 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 Effective Time,
HouTex and HouTex Shareholders shall (and shall cause the directors, officers,
employees, auditors, counsel and agents of HouTex to) afford MTLM and MTLM's
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. No information provided to or obtained by MTLM shall affect any
representation or warranty in this Agreement. MTLM agrees to provide Xxxx Xxxxxx
and Xxx Xxxxxx access to senior executive officers and directors of both MTLM
and any of its operating subsidiaries, as well as the right to investigate MTLM,
its business and assets.
5.5 NOTIFICATION OF CERTAIN MATTERS. The HouTex Shareholders shall give
prompt notice to MTLM 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. MTLM will use its reasonable best efforts to
advise HouTex of any breach of any of HouTex's representations, warranties,
covenants or agreements contained herein which become known to MTLM.
5.6 TAX TREATMENT. MTLM, HouTex, and the HouTex Shareholders
acknowledge that the Merger does not qualify as a tax free reorganization under
the provisions of Section 368(a) of the Code and is therefore taxable. All
parties hereto agree to fully and completely comply with the reporting
requirements of the Internal Revenue Service.
5.7 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the
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other parties, except that MTLM may make such public disclosure which it
believes in good faith to be required by law or by the terms of any listing
agreement with or requirements of a securities exchange (in which case MTLM will
consult with Xxxx or Xxx Xxxxxx prior to making such disclosure).
5.8 NO OTHER DISCUSSIONS. HouTex, the HouTex Shareholders, and their
respective Affiliates, employees, agents and representatives will not (i)
initiate, encourage the initiation by others of discussions or negotiations with
third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of HouTex (whether by merger, consolidation, sale of
stock or otherwise) or (ii) enter into any agreement or commitment (whether or
not binding) with respect to any of the foregoing transactions. The HouTex
Shareholders will immediately notify MTLM if any third party attempts to
initiate any solicitation, discussion or negotiation with respect to any of the
foregoing transactions.
5.9 RESTRICTIVE COVENANTS. In order to assure that MTLM will realize
the benefits of this Agreement and in consideration of the transactions set
forth in this Agreement, Xxxx and Xxx Xxxxxx jointly and severally, each agree
with MTLM that they will not for a period of three years from the later of the
Effective Time or the date they cease to be an employee, officer or director of
the MTLM Companies:
(a) directly or indirectly, alone or as a partner, joint venturer,
officer, director, employee, consultant, agent, independent contractor or
stockholder of any company or business, engage in any business activity in the
State of Texas which is directly or indirectly in competition with the business
conducted by HouTex at the Effective Time; provided, however, that, the
beneficial ownership of less than five percent (5%) of the shares of stock of
any corporation having a class of equity securities actively traded on a
national securities exchange or over-the-counter market shall not be deemed, in
and of itself, to violate the prohibitions of this Section;
(b) directly or indirectly (i) induce any Person which is a
customer of HouTex at the Effective Time to patronize any business directly or
indirectly in competition with the business conducted by HouTex; (ii) canvass,
solicit or accept from any Person which is a customer of HouTex, any such
competitive business, or (iii) request or advise any Person which is a customer
of HouTex at the Effective Time to withdraw, curtail or cancel any such
customer's business with HouTex;
(c) directly or indirectly employ, or knowingly permit any company
or business directly or indirectly controlled by him, to employ, any person who
was employed by HouTex at or within six months prior to the Effective Time, or
in any manner seek to induce any such Person to leave his or her employment;
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(d) directly or indirectly, at any time following the Effective
Time, in any way utilize, disclose, copy, reproduce or retain in his possession
any of HouTex's proprietary rights or records, including, but not limited to,
any of their customer lists.
Xxxx Xxxxxx and Xxx Xxxxxx agree and acknowledge that the restrictions contained
in this Section 5.9 are reasonable in scope and duration and are necessary to
protect MTLM Companies after the Effective Time. If any provision of this
Section as applied to any party or to any circumstance is adjudged by a court to
be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section will
cause irreparable damage to the MTLM Companies and upon breach of any provision
of this Section, the MTLM Companies shall be entitled to injunctive relief,
specific performance or other equitable relief; provided, however, that, this
shall in no way limit any other remedies which the MTLM Companies may have
(including, without limitation, the right to seek monetary damages).
5.10 ENVIRONMENTAL ASSESSMENT. MTLM shall be entitled to have conducted
prior to Closing an environmental assessment of the Owned Properties and Leased
Premises (hereinafter referred to as "Environmental Assessment"). The
Environmental Assessment may include, but not be limited to, a physical
examination of the Owned Property or Leased Premises, and any structures,
facilities, or equipment located thereon, soil samples, ground and surface water
samples, storage tank testing, review of pertinent records, documents, and
Licenses of HouTex. The HouTex Shareholders shall provide MTLM or its designated
agents or consultants with the access to such property which MTLM, its agents or
consultants require to conduct the Environmental Assessment. Notwithstanding any
other provision of this Agreement, the HouTex Shareholders agree that if the
results of the Environmental Assessment are not satisfactory to MTLM in its sole
discretion, then MTLM may elect not to close the transactions contemplated by
this Agreement.
Prior to the date hereof, MTLM retained ENVIRON Corporation, Emeryville,
California ("ENVIRON") to conduct a Phase I Environmental Audit of certain Owned
Property of HouTex located in Houston, Texas. A draft of ENVIRON's written
report dated September 13, 1996 has been furnished to the HouTex Shareholders
(the "ENVIRON Report"). The ENVIRON Report identifies certain environmental
issues concerning HouTex's Owned Property located at (i) 00 Xxxxxx Xxxxxx and 00
Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx (the "Japhet Property"), (ii) 00000 Xxxxxx Xxxx,
Xxxxxxx, Xxxxx (the "Xxxxxx Property"), and (iii) 000 Xxxxx Xxxxxx, Xxxxxxx,
Xxxxx (the
- 00 -
00
"Xxxxx Xxxxxxxx"). After consultation with their respective attorneys and
consultants, MTLM and the HouTex Shareholders agree that certain specified
conditions at the Japhet Property should be promptly remediated as set forth
below and that the HouTex Shareholders should indemnify the MTLM Companies under
Section 8.1(f) hereof (in lieu of the general indemnification provisions in
Section 8.1(a)-(e)) from any further liabilities or obligations arising from, or
related to the Xxxxxx Property or the Emile Property. Remedies available to the
MTLM Companies in the event of liabilities or obligations related to the Xxxxxx
Property or the Emile Property shall include the rights of setoff subject to the
terms and conditions described in Article 8 hereof. The specified conditions to
be promptly remediated at the Japhet Property, and the method of sharing the
costs of remediation shall be as follows:
(a) Scope of Prompt Japhet Property Remediation. The ENVIRON
Report identifies on page five certain recommended remedial work
concerning chemical use and storage on the Japhet Property. The HouTex
Shareholders and MTLM agree that following the Closing MTLM will cause
HouTex to develop and implement a Spill Prevention Control and
Countermeasure (SPCC) Plan and to provide secondary containment for the
diesel fuel and oily wastewater storage tanks, in order to comply with
federal regulations. The cost estimated by ENVIRON to develop the SPCC
Plan is $5,000 to $10,000 and the costs of providing secondary
containment for the diesel fuel and oily wastewater storage tanks were
estimated by ENVIRON to be in the range of $60,000 to $90,000. The
parties agree that all of the work described above should be performed
as promptly as practicable following Closing, such work being hereafter
referred to as the "Agreed Remediation."
(b) Costs of Agreed Remediation. The actual costs of all
Agreed Remediation shall be allocated and paid as follows:
Party Bearing Expense Amount
--------------------- ------
HouTex first $75,000
HouTex Shareholders next $75,000
HouTex all amounts over $150,000;
In the event the HouTex Shareholders fail to pay their allocable share
of the actual costs of Agreed Remediation within ten (10) days
following delivery of an invoice for such actual costs, MTLM is
authorized to setoff the HouTex Shareholders' allocable share of such
actual costs against the Held Back Shares or the payments owed by
HouTex or MTLM under the Lease.
(c) Future Remediation Costs. All future costs of, and
liabilities associated with, undertaking and completing the evaluation
and remediation of contamination present on the Japhet Property as of
the Closing Date, other than the costs of undertaking and
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44
completing the Agreed Remediation which shall be allocated and paid by
HouTex and the HouTex Shareholders as described in clause (a) above,
shall be borne by the HouTex Shareholders under and pursuant to the
indemnification procedures specified in Article VIII hereof, regardless
of whether or not such other contamination was referenced, discussed or
otherwise identified in the Environmental Assessment or any other part
of MTLM's due diligence investigation of HouTex. In any event, the
ENVIRON Report and the other environmental due diligence investigations
of HouTex by MTLM shall not affect any representation or warranty of
the HouTex Shareholders under this Agreement.
5.11 TRADING IN MTLM COMMON STOCK. Except as otherwise expressly
consented to by MTLM, from the date of this Agreement until the Effective Time,
neither HouTex nor the HouTex Shareholders (nor any Affiliates thereof) will
directly or indirectly purchase or sell (including short sales) any shares of
MTLM Common Stock in any transactions effected on the Nasdaq Stock Market or
otherwise.
5.12 ELECTION OF NEW DIRECTOR. Immediately following the Closing, Xxxx
Xxxxxx will be added to MTLM's Board of Directors in accordance with the terms
and conditions of a resolution of the MTLM Board of Directors adopted prior to
the Closing which elects Xxxx Xxxxxx to the Board of MTLM, contingent only upon
(i) the Closing having occurred and (ii) Xxxx Xxxxxx having agreed in writing
following the Closing to serve as a director of MTLM.
5.13 EMPLOYMENT AGREEMENTS. MTLM and Xxxx Xxxxxx agree that Xxxx Xxxxxx
will sign, at Closing, an employment agreement in the form of Exhibit "C"
hereto. MTLM and Xxx Xxxxxx agree that Xxx Xxxxxx will sign, at Closing, an
employment agreement in the form of Exhibit "D" hereto. The parties agree that
the noncompetition covenants contained in the Employment Agreements for Xxxx and
Xxx Xxxxxx are an integral part of this Agreement.
5.14 LEASE OF REAL PROPERTY. At the Closing, HouTex will enter into a
lease with an option to purchase (the "Lease") in the form attached hereto as
Exhibit "I" concerning the approximately forty-seven (47) acre tract of real
property (the "Japhet Property") located in Xxxxxx County, Texas which is
described in Exhibit "E" hereto with the Lessor (as defined in Section 1.4
hereof) who will be the record and beneficial owner of the Japhet Property on
the date of Closing. Xxxx and Xxx Xxxxxx acknowledge and agree that during the
period following Closing in which they serve as senior officers and/or directors
of HouTex, there will be potential conflicts of interest between their roles as
officers and directors of HouTex and their roles as controlling persons of the
Lessor under the Lease. Xxxx and Xxx Xxxxxx further acknowledge and agree that
no event of default under the Lease may be caused, directly or indirectly, by
the actions or failures to act, of Xxxx or Xxx Xxxxxx, while serving as officers
and/or directors of HouTex following the Closing. Also, none of the rights
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45
granted to Xxxx and Xxx Xxxxxx, either directly or indirectly, as controlling
persons of the Lessor under the Lease are meant to relieve Xxxx and Xxx Xxxxxx
of the duties imposed upon officers and directors of corporations by the laws of
the State of Texas. In this regard, Xxxx and Xxx Xxxxxx shall not have the right
on behalf of HouTex to waive any default by Lessor under the Lease nor to agree
on behalf of HouTex to any modification of the Lease or its terms, without the
written consent of a majority of the disinterested members of the Board of
Directors of HouTex.
5.15 POST CLOSING MINIMUM NET INCOME. The HouTex Shareholders hereby
covenant and agree with MTLM that HouTex shall have after tax net income of Nine
Hundred Thousand Dollars ($900,000), determined in accordance with GAAP as
adjusted in accordance with Exhibit "F" (the "Minimum Net Income") during the
period beginning on the first day of October, 1996 and ending on September 30,
1997 (the "Minimum Net Income Determination Date").
5.16 HOUSTON COMPRESSED STEEL FINDERS FEE. In the event MTLM, or any of
its subsidiaries or affiliates merges with, or otherwise acquires all of the
stock or assets of Houston Compressed Steel within two years of the Closing
Date, MTLM shall pay a one time, aggregate lump sum finders fee of no more than
$600,000 and no less than $300,000 to Xxxx and Xxx Xxxxxx, jointly, and an
amount of up to $150,000 to Xxxxxx Xxxxxx (in the event HouTex is legally
obligated to pay a finder's fee to Xxxxxx Xxxxxx) on the date the stock or
assets of Houston Compressed Steel are acquired by MTLM.
5.17 PRECLOSING AUDIT OF HOUTEX. MTLM agrees to retain Price Waterhouse
L.L.P. for the purposes of auditing HouTex's financial statements for the fiscal
year ending September 30, 1993, September 30, 1994 and September 30, 1995, as
well as for the period ending June 30, 1996. HouTex consents to cooperate fully
in connection with the planning, conduct and completion of the audits of HouTex
for such periods. HouTex agrees that it will provide all information, documents
and other materials requested by Price Waterhouse L.L.P. in connection with
these audits, and MTLM agrees to allow HouTex access to all work papers of Price
Waterhouse L.L.P. and access to a copy of the draft opinion of Price Waterhouse
together with all back-up materials which document the adjusting entries, if
any, proposed by Price Waterhouse. The Parties will negotiate in good faith any
disputes in connection with the issuance of the draft opinion.
5.18 CORPORATE AUTHORITY. The MTLM Companies, HouTex and the HouTex
Shareholders agree to use their individual 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.
5.19 CERTIFICATION OF TAX STATUS. Each of the HouTex Shareholders shall
deliver to MTLM either: (i) a Certificate of Nonforeign Status under Treasury
Regulation Section
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46
1.1445-2(b)(1), or (ii) a Certificate meeting the requirements of Treasury
Regulation Sections 1.897-2(g) and 1.897-2(h)(2) that the HouTex shares do not
constitute a U.S. real property interest.
5.20 NATIONSBANK FINANCING; RELEASE OF GUARANTORS. Xxxx Xxxxxx and Xxx
Xxxxxx covenant and agree that prior to Closing they will use their individual
best efforts to cause NationsBank to consent to the Merger and agree that the
existing line of credit from NationsBank to HouTex (the "NationsBank Loan") will
remain in full force and effect at least through June 30, 1997 and that Xxxx and
Xxx Xxxxxx agree to remain as guarantors on the NationsBank Loan through no
later than June 30, 1997. MTLM covenants and agrees that it will pay off or
refinance the NationsBank Loan and obtain the release of Xxxx and Xxx Xxxxxx'x
personal guarantees of the NationsBank Loan no later than June 30, 1997.
5.21 EXTRANEOUS ASSETS. Xxxx Xxxxxx and Xxx Xxxxxx covenant and agree
that prior to Closing they will purchase the Extraneous Assets described on
Exhibit "H". The purchase price for the Extraneous Assets shall consist of the
assumption of all debt related to the Extraneous Assets and the delivery to
HouTex of a $405,268 promissory note from Xxxx and Xxx Xxxxxx bearing interest
at the rate of 6% per annum due on April 30, 1997 (the "Extraneous Assets
Note"). Xxxx and Xxx Xxxxxx further covenant and agree that HouTex shall have no
liability for Taxes associated with the purchase of Extraneous Assets by Xxxx
and Xxx Xxxxxx and that the purchase price of the Extraneous Assets described in
Exhibit"H" hereto equals or exceeds the aggregate fair market value of the
Extraneous Assets. In the event the Extraneous Assets Note is not paid in full
at its maturity, MTLM shall have the right to cause HouTex to setoff the entire
balance of principal and interest due under the Extraneous Assets Note against
the principal and interest then due under the Xxxxxx Notes.
5.22 POSSIBLE ISSUANCE OF ADDITIONAL LIMITED WARRANTS. In the event the
Clend Note is not paid in full by the dates set forth in column (a) below, MTLM
will issue to Clend Investment Holdings Ltd. additional Limited Warrants in the
amounts set forth in column (b) below up to the cumulative totals set forth in
column (c) below:
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47
(a) (b) (c)
Payment of Clend Note No. of Additional Cumulative
on or Before the Limited Warrants Additional Limited
Period Ending to be Issued Warrants to be Issued
------------- ------------ ---------------------
February 28, 1997 None None
March 31, 1997 60,000 60,000
April 30, 1997 60,000 120,000
May 30, 1997 60,000 180,000
June 30, 1997 70,000 250,000
For example, if the Clend Note is paid in full on March 1, 1997, then MTLM shall
issue to Clend Investment Holdings Limited 60,000 additional Limited Warrants;
if the Clend Note is paid in full on or any time after June 1, 1997, then MTLM
will issue to Clend Investment Holdings Limited a total of 250,000 additional
Limited Warrants.
As set forth above, the cumulative additional Limited Warrants which may be
issued to Clend Investment Holdings Ltd. after Closing shall not exceed 250,000
and the total number of Limited Warrants and Five Year Warrants issued to Xxxx
Xxxxxx, Xxx Xxxxxx and Clend Investments Holdings Limited, both at or following
Closing, may not exceed 500,000 in the aggregate.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE MTLM COMPANIES
The obligations of the MTLM Companies hereunder shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by the MTLM Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the HouTex Shareholders
contained in this Agreement shall be true and correct at and as of the Effective
Time 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. Each of HouTex and the HouTex Shareholders shall have performed and
complied
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48
with all of their respective obligations required by this Agreement to be
performed or complied with at or prior to the Effective Time. Each of HouTex and
the HouTex Shareholders shall have delivered to MTLM a certificate, dated as of
the Effective Time, duly signed (in the case of HouTex, by its Chief Executive
Officer and Chief Financial Officer), certifying 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 Effective Time, (i) there shall have been no Material
Adverse Change to HouTex, (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 HouTex, and (iii) none of the properties and
assets of HouTex 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 Effect thereon, and there
shall have been delivered to MTLM a certificate to that effect, dated the
Effective Time and signed by or on behalf of HouTex.
6.3 CORPORATE CERTIFICATE. The HouTex Shareholders shall have delivered
to MTLM (i) copies of the articles of incorporation and bylaws of HouTex as in
effect immediately prior to the Effective Time, (ii) copies of resolutions
adopted by the Board of Directors and shareholders of HouTex authorizing the
transactions contemplated by this Agreement, and (iii) a certificate of good
standing of HouTex issued by the State of Texas and each other state in which it
is qualified to do business as of a date not more than thirty days prior to the
Effective Time, certified in each case as of the Effective Time by the Secretary
of each such company as being true, correct and complete.
6.4 OPINION OF COUNSEL. MTLM shall have received an opinion dated as of
the Effective Time from counsel for HouTex and the HouTex Shareholders, in form
and substance acceptable to MTLM, to the effect that:
(a) HouTex is a corporation duly organized and existing and in
good standing under the laws of the State of Texas 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;
(b) HouTex has obtained all necessary authorizations and consents
of its Board of Directors and the Shareholders to effect the transactions
contemplated in this Agreement, including the merger of HouTex into the MTLM
Merger Sub;
(c) All issued and outstanding shares of capital stock of HouTex
are owned as set forth on Schedule 3.5 hereto;
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49
(d) Except as set forth in Schedule 3.12, such counsel does not
know or have reason to believe that there is any litigation, proceeding or
investigation pending or threatened which might result in any material adverse
change in the properties, business or prospects or in the condition of HouTex,
or which questions the validity of this Agreement;
(e) Such counsel does not know or have reason to believe that any
event has occurred or state of facts exists which would constitute a breach of
any of the representations and warranties made by the HouTex Shareholders
pursuant to Article III of this Agreement;
(f) Clend Investment Holdings, Ltd. is a corporation duly
organized and existing and in good standing under the laws of the British Virgin
Islands 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;
(g) This Agreement is a valid and binding obligation of HouTex and
the HouTex Shareholders, 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;
(h) The Stock Pledge Agreement is a valid and binding obligation
of the HouTex Shareholders 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;
(i) The Lease executed by Lessor is a valid and binding obligation
of Lessor, and is enforceable against Lessor in accordance with its terms and
conditions, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally;
(j) Xxxx Xxxxxx'x and Xxx Xxxxxx'x guaranty of the Lease is a
valid and binding obligation of Xxxx Xxxxxx and Xxx Xxxxxx, 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 creditor's rights generally; and
(k) No portion of the payment by MTLM to the HouTex Shareholders
is subject to U.S. federal withholding tax obligations on the part of MTLM.
6.5 CONSENTS. HouTex shall have received consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any material
rights or obligations of HouTex from any person from whom such consent or waiver
is required under
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any Designated Contract or instrument as of a date not more than ten days prior
to the Effective Time, 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 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 the MTLM Shares, in connection with the transactions
contemplated hereby.
6.7 HOUTEX STOCK. At the Closing, each of the HouTex Shareholders shall
have delivered to MTLM all certificates evidencing the shares of capital stock
of HouTex held by him, her or it.
6.8 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 Merger or any other transaction contemplated hereby, and which,
in the judgment of MTLM, makes it inadvisable to proceed with the Agreement and
Merger and other transactions contemplated hereby.
6.9 BOARD APPROVAL. The Board of Directors of the MTLM Companies shall
have authorized and approved this Agreement, the Merger and transactions
contemplated hereby.
6.10 SHAREHOLDER APPROVAL. If required by applicable law, the
shareholders of MTLM shall have authorized and approved this Agreement, the
Merger and the transactions contemplated thereby.
6.11 EMPLOYMENT AGREEMENTS. At or prior to the Closing, HouTex shall
have entered into employment agreements (the forms of which are attached hereto
as Exhibit "C" and "D") with Xxxx Xxxxxx and Xxx Xxxxxx.
6.12 LEASE AGREEMENT. At or prior to the Closing, HouTex and Lessor
shall have entered into a Lease Agreement conforming to the terms of Section
5.14.
6.13 DUE DILIGENCE. MTLM shall have completed its due diligence review
of HouTex and HouTex's assets, liabilities, businesses and prospects and the
results of such due diligence review will have been judged satisfactory in all
respects by MTLM.
6.14 FAIRNESS OPINION. MTLM shall have received a fairness opinion, in
form and content acceptable to MTLM in its sole discretion, as to the fairness
of the Merger to MTLM and its shareholders and such opinion shall not have been
withdrawn prior to Closing.
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6.15 COMPLETION OF AUDIT. As contemplated by Section 5.17 hereof, Price
Waterhouse L.L.P. shall have completed and delivered audited financial
statements for HouTex's fiscal years ending September 30, 1993, September 30,
1994, September 30, 1995, and for the period ending June 30, 1996, and such
audited financial statements shall have been determined to be acceptable in form
and content to MTLM.
6.16 EXTRANEOUS ASSETS. Prior to the Closing, the assets of HouTex
described on Exhibit "H" shall have been sold to Xxxx and Xxx Xxxxxx at a
purchase price equal the to the adjusted tax basis of HouTex in such assets;
NationsBank shall have executed the Nondisturbance Agreement in the form
specified in the Lease; and HouTex and its assets shall have been released from
all liabilities, liens, claims and encumbrances related to such Extraneous
Assets and Xxxx and Xxx Xxxxxx shall have delivered to HouTex a promissory note
in the amount set forth in Exhibit "H" hereto, in a form satisfactory to MTLM.
6.17 RECEIPT OF TAX CERTIFICATIONS. At or prior to Closing, MTLM shall
have received the certification of tax status referred to in Section 5.19.
6.18 CONSENT OF NATIONSBANK. At or prior to Closing, Xxxx and Xxx
Xxxxxx shall have obtained the consent of NationsBank that the NationsBank Loan
will remain in full force and effect at least through June 30, 1997, on terms
which are acceptable to MTLM.
6.19 TITLE COMMITMENT. At or prior to Closing, MTLM shall have received
a commitment from a title insurance company doing business in Xxxxxx County,
Texas to issue a title policy insuring that the rights of MTLM and HouTex under
the Lease are inferior only to such liens, claims and encumbrances as are
Permitted Exceptions under the Lease, and Lessor shall have received a
commitment from a title insurance company doing business in Xxxxxx County, Texas
to issue a title policy insuring title to the real property that is the subject
of the Lease Agreement. MTLM and Lessor shall each pay one-half the total cost
of the two title policies.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
HOUTEX AND THE HOUTEX SHAREHOLDERS
The obligations of HouTex and the HouTex Shareholders to effect the
Merger and sale shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions, any or all of which may be waived in whole or
in part by HouTex and the HouTex Shareholders:
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7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the MTLM Companies contained
in this Agreement shall be true and correct at and as of the Effective Time 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. Each of the
MTLM Companies shall have performed and complied with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Effective Time. Each of the MTLM Companies shall have delivered to the HouTex
Shareholders a certificate, dated as of the Effective Time, and signed by an
executive officer, certifying that such representations and warranties are true
and correct and that all such obligations have been performed and complied with.
7.2 MERGER CONSIDERATION. At the Closing, MTLM shall have delivered to
the HouTex Shareholders the Merger Consideration due to be received by the
HouTex Shareholders under Section 1.3 hereof.
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 Merger or any other transaction contemplated hereby, and which
in the judgment of the HouTex Shareholders makes it inadvisable to proceed with
the Agreement or Merger and other transactions.
7.4 OPINION OF COUNSEL. The HouTex Shareholders shall have received an
opinion of counsel for MTLM as of the Effective Time, in form and substance
acceptable to the HouTex Shareholders, to the effect that:
(a) MTLM and MTLM Merger Sub are each a corporation duly organized
and in good standing under the laws of the State of Delaware and State of Texas,
respectively;
(b) MTLM and MTLM Merger Sub have obtained all necessary
authorizations and consents of their respective Boards of Directors to effect
the Merger;
(c) This Agreement, the Xxxxxx Notes, the Clend Note, the Stock
Pledge and Security Agreement, the Declaration of Registration Rights and MTLM's
guaranty of the Lease are valid and binding obligations of MTLM, and enforceable
against MTLM in accordance with their respective terms, except as enforcement
may be limited by general equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally;
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(d) The Lease executed by HouTex is a valid and binding obligation
of HouTex, and is enforceable against HouTex in accordance with its terms,
except as enforcement may be limited by general equitable principles or by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally;
(e) The MTLM Shares are validly issued, fully paid and
non-assessable shares of MTLM;
(f) The Five Year Warrants and the Limited Warrants issued at
Closing have been validly issued by MTLM;
(g) Except as may be disclosed in the SEC Reports, such counsel
does not know or have reason to believe that there is any litigation, proceeding
or investigation pending or threatened which might result in any material
adverse change in the properties, business or prospects or in the condition of
MTLM, or which questions the validity of this Agreement; and
(h) Such counsel does not know or have reason to believe that any
event has occurred or state of facts exists which would constitute a breach of
any of the representations and warranties made by MTLM pursuant to Article II of
this Agreement.
7.5 EMPLOYMENT AGREEMENTS. At or prior to Closing, MTLM shall have
entered into employment agreements with Xxxx Xxxxxx and Xxx Xxxxxx in the forms
attached hereto as Exhibits "C" and "D".
7.6 LEASE AGREEMENT. At or prior to Closing, HouTex and MTLM shall have
entered into the Lease in the form of Exhibit "I" attached hereto concerning the
Property.
7.7 REGISTRATION RIGHTS. At or prior to Closing, MTLM shall have
confirmed in writing to the HouTex Shareholders that the MTLM Common Stock
issued to them at Closing shall be subject to the Registration Rights described
in Exhibit "G" hereto.
ARTICLE VIII
INDEMNIFICATION
8.1 AGREEMENT BY THE HOUTEX SHAREHOLDERS TO INDEMNIFY. The HouTex
Shareholders, jointly and severally, agree to indemnify and hold MTLM and HouTex
harmless from and against the aggregate of all Indemnifiable Damages (as defined
below).
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(a) For purposes of this Agreement, "Indemnifiable Damages" means,
without duplication, the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, related counsel and
paralegal fees and expenses) incurred or suffered by MTLM or HouTex, on a
pre-tax basis, to the extent (i) resulting from any breach of a representation
or warranty made by the HouTex Shareholders in or pursuant to this Agreement,
(ii) resulting from any breach of the covenants or agreements made by any HouTex
Shareholder in or pursuant to this Agreement, (iii) resulting from any breach by
Lessor under the Lease, or (iv) resulting from any inaccuracy in any certificate
delivered by any HouTex Shareholder pursuant to this Agreement.
(b) Without limiting the generality of the foregoing, with respect
to the measurement of Indemnifiable Damages, MTLM and HouTex shall have the
right to be put in the same pre-tax financial position as each would have been
in had each of the representations and warranties of the HouTex Shareholders
hereunder been true and correct and had the covenants and agreements of the
HouTex Shareholders hereunder been performed in full.
(c) Except as provided in paragraph 8.1(f) below, each of the
representations and warranties made by the HouTex Shareholders in this Agreement
or pursuant hereto shall survive for a period of fourteen (14) months after the
Effective Time, notwithstanding any investigation at any time made by or on
behalf of MTLM or HouTex and upon expiration of such fourteen (14) month period,
such representations and warranties shall expire except as follows: (i) the
representations and warranties of the HouTex Shareholders contained in Section
3.19, and to the extent relating to tax attributes or liabilities with respect
to Taxes of HouTex, shall expire at the time the period of limitations
(including any extensions thereof pursuant to the delivery of waivers 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 warranties of the HouTex
Shareholders contained in Sections 3.13 and 3.16 shall expire at the time the
latest period of limitations expires for the enforcement by an applicable
Governmental Authority of any remedy with respect to which the particular
representations and warranties of the HouTex Shareholders relates and if there
is no such period of limitations, then the representations and warranties shall
continue indefinitely; and (iii) the representations and warranties of the
HouTex 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 and/or HouTex against the HouTex
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
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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. Anything to the contrary herein notwithstanding, all
representations and warranties of the HouTex Shareholders shall not survive a
"change in control" of MTLM which occurs at any time after the Closing. Solely
for purposes of this Section 8.1(c), a "change in control" shall be deemed to
have occurred at any point in time that neither T. Xxxxxxxx Xxxxxxxx or Xxxxxx
X. Xxxxxx serves as Chief Executive Officer of MTLM.
(d) In the event that either MTLM or HouTex believe they are
entitled to a claim for any Indemnifiable Damages hereunder, MTLM and/or HouTex
shall promptly give written notice to the HouTex Shareholders of such claim and
the amount or the estimated amount of such claim, and the basis for such claim.
If the HouTex Shareholders do not pay the amount of the claim for Indemnifiable
Damages to MTLM or HouTex within ten (10) days, then MTLM may set off the amount
of such claim by selling some or all of the Held Back Shares and retaining the
net proceeds thereof as a set off against the claim in accordance with the
procedures, and subject to the HouTex Shareholders' right to contest such claim,
as set forth in Sections 8.3 and 8.4 below. Alternatively, MTLM may retain some
or all of the Held Back Shares as a direct set off against such claims in
accordance with the procedures, and subject to the HouTex Shareholders' right to
contest such claims, as set forth in sections 8.3 and 8.4 below. If the Held
Back Shares are insufficient to set off the claim (or have been delivered to the
HouTex Shareholders prior to the making or resolution of such claim), MTLM
and/or HouTex may take any action or exercise any remedy available to MTLM or
HouTex by appropriate legal proceedings to collect the Indemnifiable Damages,
including setting off the Indemnifiable Damages against either: (a) the Xxxxxx
Notes, (b) the Clend Note, (c) rental or other payments due to Lessor from
HouTex (and guaranteed by MTLM) under the Lease, or (d) against the purchase
price to be paid to Lessor for the Premises by HouTex (payment of which is
guaranteed by MTLM) under the Lease.
(e) Notwithstanding anything to the contrary in this Section 8.1,
except as set forth in 8.1(f) below, the HouTex Shareholders shall not be liable
to MTLM or HouTex with respect to any claim for Indemnifiable Damages unless all
Indemnifiable Damages incurred by MTLM and HouTex exceed an aggregate of
$50,000, in which case the HouTex Shareholders shall be liable for the full
amount of such Indemnifiable Damages in excess of $50,000; provided however, in
the event the Indemnifiable Damage arises from a breach of a representation or
warranty contained in Section 3.13 hereof relating to the Japhet Property (the
"Japhet Environmental Indemnifiable Damages"), the HouTex Shareholders shall not
be liable to MTLM or HouTex with respect to any claim for Japhet Environmental
Indemnifiable Damages unless all such Japhet Environmental Indemnifiable Damages
incurred by MTLM or HouTex exceed an aggregate of $75,000 in which case the
HouTex Shareholders shall be liable for the full amount of such Japhet
Environmental Indemnifiable Damages in excess of $75,000.
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(f) Notwithstanding anything to the contrary in this Section 8.1,
the HouTex Shareholders shall be liable for all Indemnifiable Damages (including
engineering, consulting, and legal fees) incurred by MTLM and HouTex arising
from, or related in any way to, the Xxxxxx Property or the Emile Property. The
$50,000 and $75,000 monetary thresholds of liability for collection of
Indemnifiable Damages set forth in subparagraph 8.1(e) above shall not apply to
Indemnifiable Damages related to the Xxxxxx Property and the Emile Property.
Similarly, the survival periods for certain representations and warranties set
forth in subparagraph 8.1(c) above shall not apply to the representations and
warranties herein with regard to the Emile Property and the Xxxxxx Property; the
representations and warranties of the HouTex Shareholders herein shall survive
Closing and shall not expire as they relate to the Emile Property or the Xxxxxx
Property.
8.2 AGREEMENT BY THE MTLM COMPANIES TO INDEMNIFY. MTLM agrees to
indemnify and hold the HouTex Shareholders harmless from and against the
aggregate of all HouTex Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "HouTex Indemnifiable Damages"
means, without duplication, the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation, related
counsel and paralegal fees and expenses) incurred or suffered by the HouTex
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 breach by
HouTex of the Lease; or (iv) 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 HouTex Indemnifiable Damages, each HouTex Shareholder
shall 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 Effective Time, notwithstanding any investigation at any time made by or on
behalf of the HouTex Shareholders, and upon expiration of such one year period,
such representations and warranties shall expire. No claim for the recovery of
HouTex Indemnifiable Damages may be asserted by the HouTex Shareholder 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
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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 HouTex Shareholders believe they are
entitled to a claim for any Indemnifiable Damages hereunder, the HouTex
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 in this Section 8.2,
MTLM shall not be liable to the HouTex Shareholders with respect to any claim
for Indemnifiable Damages unless all Indemnifiable Damages incurred by the
HouTex Shareholders exceed an aggregate of $50,000, in which case the MTLM
Companies shall be liable for the full amount of such Indemnifiable Damages.
8.3 CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of
the HouTex Shareholders, MTLM and HouTex 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 promptly after the Indemnified Party receives
notice thereof;
(b) the Indemnifying Party shall have the right to undertake, by
counsel or other representatives of it own choosing, the defense of such claim;
(c) in the event that 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
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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 HELD BACK SHARES AND RIGHTS OF SETOFF TO SECURE THE HOUTEX
SHAREHOLDERS' INDEMNIFICATION OBLIGATION. As security for the agreement by the
HouTex Shareholders to indemnify and hold MTLM and HouTex harmless as described
in Section 8.1, at the Closing, MTLM shall set aside and hold the certificates
representing the Held Back Shares issued pursuant to this Agreement.
(a) MTLM may set off against the Held Back Shares any
loss, damage, cost or expense for which the HouTex Shareholders may be
responsible pursuant to this Agreement (including without limitation,
any Indemnifiable Damages for which the HouTex 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:
(1) MTLM shall give written notice to the HouTex
Shareholders of any claim for Indemnifiable Damages or any
other 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;
(2) Such set off shall be effected on the later to
occur of the expiration of 10 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 shares set aside;
(3) If, prior to the expiration of the Notice of
Contest Period, the HouTex 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
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arbitrators (one appointed by the HouTex Shareholders, one
appointed by MTLM and one appointed by the two arbitrators so
appointed), which shall be appointed within 60 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;
(4) As soon as the Held Back Shares are registered
and any restrictions on sale imposed under Rule 145 of the
Securities Act are terminated, the HouTex Shareholder may
instruct MTLM to sell some or all of the Held Back Shares and
the net proceeds thereof shall be substituted for such Held
Back Shares in any set off to be made by MTLM pursuant to any
claim hereunder subject to continued compliance with any
applicable securities and other regulations; and
(5) For purposes of this Section 8.4, the value for
purposes of set off of the shares of MTLM Common Stock not
sold as provided in clause (4) of this Section 8.4 shall be
valued at the average of the closing bid and asked prices of
MTLM's common stock on the Nasdaq National Market System on
the business day preceding the date of set off.
(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 Held Back Shares shall be deemed to be
owned by the HouTex Shareholders and the HouTex Shareholders shall be
entitled to vote the same; provided, however, that, there shall also be
deposited with MTLM subject to the terms of this Section 8.4, all
shares of MTLM Common Stock issued to the HouTex Shareholders as a
result of any stock dividend or stock split and all cash issuable to
the HouTex Shareholders as a result of any cash dividend, with respect
to the Held Back Shares. All stock and cash issued or paid upon Held
Back Shares shall be distributed to the person or entity entitled to
receive such Held Back Shares together with such Held Back Shares.
(c) MTLM agrees to deliver to the HouTex Shareholders no
later than 90 days after the Effective Time any Held Back Shares then
held by it (or proceeds from the Held Back Shares) unless there then
remains unresolved any claim for Indemnifiable Damages or other damages
hereunder as to which notice has been given, in which event any Held
Back Shares remaining on deposit (or proceeds from the sale of Held
Back Shares) after such claim shall have been satisfied shall be
returned to the HouTex Shareholders promptly after the time of
satisfaction.
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In addition to the Held Back Shares, MTLM and/or HouTex may set off all
Indemnifiable Damages owed by the HouTex Shareholders hereunder against either:
(a) the monthly payments of base or additional rent or against the purchase
payments for the Property due under the Lease to Xxxx and Xxx Xxxxxx or to their
respective successors in interest under the Lease, (b) amounts due under the
Xxxxxx Notes, or (c) amounts due under the Clend Note; the determination of
whether to setoff first against the payments due under the Lease, the Xxxxxx
Notes or the Clend Note shall be left to MTLM's sole discretion.
8.5 ADJUSTMENT TO MERGER CONSIDERATION. All payments for Indemnifiable
Damages made pursuant to this Article VIII shall be treated as adjustments to
the consideration paid in the Merger under Section 1.3.
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Effective Time of the MTLM Shares:
9.1 DISPOSITION OF SHARES. The HouTex Shareholders represent and
warrant that the shares of MTLM Common Stock being acquired by them hereunder
are being acquired and will be acquired for their own respective accounts and
will not be sold or otherwise disposed of, except pursuant to (a) an exemption
from the registration requirements under the Securities Act, which does not
require the filing by the MTLM Companies with the SEC of any registration
statement, offering circular or other document, in which case the HouTex
Shareholders shall first supply to the MTLM Companies an opinion of counsel
(which counsel and opinions shall be satisfactory to the MTLM Companies) that
such exception is available, or (ii) an effective registration statement filed
by MTLM with the SEC under the Securities Act.
9.2 LEGEND. The certificates representing the MTLM Shares shall bear
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF RULE 145(D) PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE ACT WITH RESPECT THERETO OR IN ACCORDANCE
WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
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ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
MTLM may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
9.3 REGISTRATION RIGHTS. The HouTex Shareholders shall have the
securities registration rights set forth in the Declaration of Registration
Rights attached hereto as Exhibit "G". The HouTex Shareholders acknowledge,
agree and understand that other individuals and entities possess either
identical or similar registration rights with regard to other presently issued
MTLM Common Stock. Also, MTLM may after the date hereof issue additional shares
of Common Stock which are also subject to similar registration rights. The
existence of such registration rights may have the effect of limiting the number
of shares of MTLM Common Stock issued to HouTex Shareholders eligible for
registration under certain provisions of the Declaration of Registration Rights.
ARTICLE X
DEFINITIONS
10.1 DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"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.
"Applicable Rate" means the prime rate of interest publicly
announced from time to time by NationsBank of Texas N.A., plus 1% per
annum.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
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"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.
"MTLM Shares" means the shares of MTLM Common Stock which the
HouTex Shareholders will receive in connection with the Merger.
"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.
"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.
"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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any 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,
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social security and unemployment taxes imposed by any federal, state,
local or foreign governmental agency, and any interest or penalties
related thereto.
10.2 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) Except as provided in Section 5.15 hereof with regard to
determination of Minimum Net Income, 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.
(d) 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 XI
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or
(b) by MTLM in the event of a material breach by HouTex or any
of the HouTex Shareholders of any provision of this Agreement; or
(c) if the Closing shall not have occurred by December 6,
1996, unless the parties have agreed in writing to extend the time for Closing.
11.2 EFFECT OF TERMINATION. Except as provided in Article VI, in
the event of termination of this Agreement pursuant to Section 11.1, this
Agreement and the Plan of Merger shall forthwith become void; provided, however,
that nothing herein shall relieve any
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party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 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 ANY OF THE MTLM COMPANIES TO:
Metal Management, Inc.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Chief Executive Officer
Telecopy No.: (000) 000-0000
WITH A COPY TO:
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
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(b) IF TO HOUTEX OR THE HOUTEX SHAREHOLDERS TO:
HouTex Metals Company, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxx or Xxx Xxxxxx
Telecopy No.: (000) 000-0000
WITH A COPY TO:
Chamberlain, Hrdlicka, White, Xxxxxxxx to Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
12.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, 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.
12.3 EXPENSES. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
12.4 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. 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.
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12.5 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 HouTex or any HouTex Shareholders without the
prior written consent of MTLM.
12.6 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.
12.7 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.
12.8 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.
12.9 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.
12.10 FACSIMILE SIGNATURES. Each of the parties to this Agreement
agrees that a facsimile copy of this Agreement signed by a party (or any other
document required to be in writing and signed by a party) shall be considered as
equivalent to an original executed counterpart of this Agreement (or an original
signed document as the case may be).
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ARTICLE XIII
POST CLOSING COVENANTS OF MTLM
13.1 POST CLOSING COVENANTS OF MTLM. Except with the consent of the
HouTex Shareholders, MTLM covenants and agrees that from the date of this
Agreement until each of the Xxxxxx Notes and the Clend Note are paid in full,
MTLM will, and will use its best efforts to cause HouTex to:
(a) Maintain HouTex's net worth, as determined in accordance
with GAAP, in an amount equal to or greater than the net worth set
forth on the Closing Date Balance Sheet;
(b) Maintain HouTex's respective corporate existence and not
enter into any merger, consolidation or plan of liquidation of HouTex;
(c) Not amend MTLM's or HouTex's Articles of Incorporation to
change in any manner the rights of their respective stock;
(d) Not enter into, assume or make any contract, loan,
license, designation, loan commitment, purchase or sale, or disposition
of assets of HouTex involving proceeds, expenditures or liabilities
aggregating in excess of $50,000.00, except in the ordinary course of
business or as may be approved in writing by the HouTex Shareholders.
(e) Promptly advise the HouTex Shareholders in writing of any
adverse material change in MTLM's or HouTex's financial condition or
business affairs;
(f) Operate MTLM's or HouTex's businesses only in the usual,
regular or ordinary manner in which MTLM or HouTex operated their
businesses prior to the execution of this Agreement and, to the extent
consistent with such operations, use all reasonable efforts to preserve
intact their present business organizations, keep available the
services of their present Boards of Directors, officers and employees,
and preserve the relationships with persons having business dealings
with them;
(g) Comply in all material respects with all applicable local,
state and federal rules, laws and regulations, including those relative
to the payment of income, franchise and other taxes, fees and other
charges due to be paid on or after the Closing Date;
(h) Maintain MTLM's and HouTex's books, accounts and records
in the usual, regular and ordinary manner, on a basis consistent with
prior years;
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(i) Not take any action which would cause, or fail to take any
reasonable action with would prevent, any material adverse change to be
made in MTLM's or HouTex's financial condition, or extend any tax or
other liability by waiver of the statute of limitations;
(j) Not issue or sell options, warrants or rights to subscribe
to, or enter into any contract or commitment to issue or sell, or
subdivide or in any way reclassify or acquire or agree to acquire any
shares of HouTex's capital stock without the consent of the HouTex
Shareholders;
(k) Afford access at all reasonable times to representatives,
employees, counsel and accountants for the HouTex Shareholders to the
properties and all books, accounts, financial and other records and
contracts of every kind of MTLM and HouTex;
(l) Comply in every respect with the terms and provisions of
the Stock Pledge Agreement;
(m) Not directly or indirectly make any dividends,
distributions, loans or sales from HouTex to MTLM or any party related
to or controlled by MTLM or any of the shareholders of MTLM;
(n) Not enter into any contract, purchase or sale with, and
not mortgage, pledge or otherwise subject any of HouTex's assets to any
lien, charge or other encumbrance in favor of, MTLM or any party
related to or controlled by MTLM or any of the shareholders of MTLM;
and
(o) From time to time at the request of the HouTex
Shareholders and without further consideration execute and deliver such
instruments of transfer and assignment and take such other reasonable
actions as the HouTex Shareholders may require to more effectively
evidence, complete or perfect the pledge of the stock of HouTex to the
HouTex Shareholders, pursuant to the Stock Pledge Agreement.
(p) MTLM shall not charge any amounts to HouTex and HouTex
shall not pay any monies to MTLM for any reason, including but not
limited to, charges or payments for corporate overhead allocations,
legal or accounting expenses, taxes, interest or administrative costs.
13.2 COVENANT REGARDING FINANCIAL STATEMENTS. MTLM covenants and
agrees to use its reasonable best efforts to obtain a letter from Price
Waterhouse permitting HouTex, in the event the Notes are not paid, to use the
financial statements prepared by Price Waterhouse to the same extent and subject
to the same restrictions, as MTLM, within forty-five (45) days after the Closing
Date.
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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., A DELAWARE
CORPORATION
Date: December 10, 1996 By: /s/ Xxxxxx X. Xxxxxx
----------------- ---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
MTLM MERGER, INC. A TEXAS CORPORATION
Date: December 10, 1996 By: /s/ Xxxxxx X. Xxxxxx
----------------- ----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
HOUTEX METALS COMPANY INC.,
A TEXAS CORPORATION
Date: December 10, 1996 By: /s/ Xxxx Xxxxxx
----------------- -----------------------------------
Name: Xxxx Xxxxxx
Title: President
CLEND INVESTMENTS HOLDINGS LTD.,
A BRITISH VIRGIN ISLANDS CORPORATION
Date:------------------ By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Director
Date: December 10, 1996 /s/ Xxxx Xxxxxx
----------------- ----------------------------------------
XXXX XXXXXX
Date: December 10, 1996 /s/ Xxx Xxxxxx
----------------- ----------------------------------------
ZALMAN (SOL) XXXXXX
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SPOUSAL ACKNOWLEDGMENT AND CONSENT
By my signature below, I hereby acknowledge that the foregoing
agreement contains specific terms, provisions and conditions pertaining to the
sale or transfer of certain shares of Common Stock of HouTex Metals Company,
Inc. in which I own, or may own, a community property interest. I hereby
specifically acknowledge (i) the terms, provisions and conditions of the
foregoing agreement, (ii) that I have read, understand, and agree to such terms,
provisions and conditions, and (iii) I further agree that my community property
interest, if any, in the Common Stock of HouTex Metals Company, Inc. shall be
bound by and subject to all of the terms, provisions and conditions of the
foregoing agreement.
Dated: December 10, 1996 /s/ Xxx Xxxxxx
------------------ ------------------
XXX XXXXXX
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