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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 1, 1998
METAL MANAGEMENT, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-14836 94-2835068
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(Commission File Number) (I.R.S. Employer Identification No.)
500 N. Dearborn Street, Suite 405 Chicago, IL 60610
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(Address of Principal Executive Offices) (Zip Code)
(312) 645-0700
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 1, 1998 (the "Closing Date"), Metal Management, Inc. ("MTLM") completed
the acquisition (the "Acquisition") of Naporano Iron & Metal Co. ("Naporano"), a
New Jersey corporation and Nimco Shredding Co. ("NIMCO"), a New Jersey
corporation (collectively, the "Companies"). Pursuant to a Stock Purchase
Agreement ("Agreement") dated May 24 ,1998 by and among MTLM and the
shareholders of the Companies (the "Sellers"), MTLM purchased all of the issued
and outstanding shares of common stock of Naporano and NIMCO (collectively, the
"Shares"). Aggregate consideration paid by MTLM was $84,000,000 cash and
1,938,879 shares of MTLM common stock. MTLM funded the cash portion of the
consideration through $75,000,000 of borrowings under MTLM's senior credit
facility with BT Commercial Corporation, as agent and $9,000,000 from existing
working capital.
In connection with the Acquisition, Joseph F. Naporano entered into an
initial one-year employment agreement with MTLM and will be nominated to serve
on the Board of Directors of MTLM. MTLM and the Sellers entered into a
Registration Rights Agreement with the Sellers under which MTLM is required to
prepare and file a registration statement on Form S-3 covering the resale of up
to one-half of the Shares issued by MTLM as part of the Acquisition within 30
days of the Closing Date.
Copies of the Agreement, the Registration Rights Agreement and the
press release issued by MTLM in connection with the Acquisition are attached as
exhibits hereto and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Financial Statements
(a) Financial Statements. To be filed by amendment to this Form 8-K
within 60 days.
(c) Exhibits.
Exhibit 2.1 Stock Purchase Agreement.
Exhibit 10.1 Registration Rights Agreement.
Exhibit 99.1 Press Release dated July 6, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
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David A. Carpenter
Vice President
Date: July 6, 1998
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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
METAL MANAGEMENT, INC.,
JOSEPH F. NAPORANO
AND
ANDREW J. NAPORANO, JR.
DATED AS OF MAY 24, 1998
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TABLE OF CONTENTS
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ARTICLE I
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DEFINITIONS.....................................................................................1
1.1 Defined Terms......................................................................1
1.2 Interpretation. ..................................................................9
ARTICLE II
PURCHASE AND SALE OF SHARES.....................................................................9
2.1 Sale and Purchase..................................................................9
2.2 Payment of Purchase Price..........................................................9
2.3 ..................................................................................10
2.4 Purchase Price Adjustment.........................................................10
2.5 Further Action....................................................................12
ARTICLE III
ESCROW.........................................................................................12
3.1 Escrow Shares.....................................................................12
3.2 Escrow Claims.....................................................................13
3.3 Release of Escrow.................................................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS.................................................................................15
4.1 Due Organization..................................................................15
4.2 Due Authorization.................................................................15
4.3 Consents and Approvals; No Conflicts..............................................15
4.4 Title to Capital Stock; Capitalization............................................16
4.5 Financial Statements..............................................................16
4.6 No Undisclosed Liabilities........................................................17
4.7 No Adverse Effect or Changes......................................................17
4.8 Permits...........................................................................19
4.9 Real Property.....................................................................20
4.10 Personal Property.................................................................22
4.11 Title to Properties...............................................................22
4.12 Condition of Assets...............................................................22
4.13 [Not Used.].......................................................................22
4.14 Intellectual Property.............................................................22
4.15 Accounts Receivable and Advances..................................................23
4.16 Inventory.........................................................................23
4.17 Contracts.........................................................................23
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4.18 [Not Used.] ......................................................................25
4.19 Litigation........................................................................25
4.20 Customers and Suppliers...........................................................26
4.21 Environmental Matters.............................................................26
4.22 Tax Matters.......................................................................29
4.23 Employee Benefit Plans............................................................31
4.24 Employment and Labor Matters......................................................33
4.25 Insurance.........................................................................34
4.26 Brokerage.........................................................................34
4.27 Capital Improvements..............................................................34
4.28 Computer System...................................................................35
4.29 [Not Used.].......................................................................35
4.30 No Conflict of Interest...........................................................35
4.31 [Not Used.].......................................................................35
4.32 Records...........................................................................35
4.33 Accuracy of Statements............................................................35
4.34 Investment Intent.................................................................35
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF MTLM........................................................................................36
5.1 Due Organization..................................................................36
5.2 Due Authorization.................................................................36
5.3 Consents and Approvals of Governmental Agencies
and Other Persons.................................................................36
5.4 Brokerage.........................................................................36
5.5 MTLM Common Stock.................................................................37
5.6 SEC Filings.......................................................................37
5.7 SEC Filings Correct and Complete..................................................37
ARTICLE VI
COVENANTS OF THE SELLERS.......................................................................37
6.1 Implementing Agreement............................................................37
6.2 Consents and Approvals............................................................38
6.3 Conduct of the Companies..........................................................38
6.4 Access to Information.............................................................39
6.5 Resignation of Officers and Directors.............................................39
6.6 Exclusivity.......................................................................40
6.7 Interim Financial Statements......................................................40
6.8 Trading in MTLM Common Stock......................................................40
6.9 Tax Indemnity.....................................................................40
6.10 Supplemental Information..........................................................41
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6.11 Environmental Expenses............................................................41
6.12 [Not Used.].......................................................................43
6.13 [Not Used.].......................................................................43
6.14 Indemnified Litigation Matters....................................................43
6.15 Port Authority Capital Expenditures...............................................43
6.16 Pension Withdrawal Liability......................................................44
ARTICLE VII
COVENANTS OF MTLM..............................................................................44
7.1 Implementing Agreement............................................................44
7.2 Consents and Approvals............................................................44
7.3 Board Appointment.................................................................44
7.4 Guarantee Releases................................................................44
7.5 Office of the President...........................................................44
7.6 Disclosure to Sellers.............................................................44
7.7 Conduct of the Business...........................................................45
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OFTHE SELLERS...................................................45
8.1 Truth of Representations and Warranties...........................................45
8.2 Performance of Covenants..........................................................45
8.3 No Governmental or Other Proceeding or Litigation.................................45
8.4 Necessary Consents................................................................45
8.5 Closing Deliveries................................................................46
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
MTLM...........................................................................................46
9.1 Truth of Representations and Warranties...........................................46
9.2 Performance of Covenants..........................................................46
9.3 No Governmental or Other Proceeding or Litigation.................................46
9.4 Necessary Consents................................................................46
9.5 Absence of Material Adverse Change in the Companies...............................46
9.6 Audit of Financial Statements.....................................................47
9.7 Previous Title Insurance Policies and Surveys.....................................47
9.8 Closing Deliveries................................................................47
9.9 Updated Title Insurance...........................................................47
9.10 Updated Surveys...................................................................47
9.11 Estoppel Certificates.............................................................47
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ARTICLE X
CLOSING; CLOSING DATE; CLOSING DELIVERIES......................................................47
10.1 Time and Place....................................................................47
10.2 Closing Deliveries of the Sellers.................................................48
10.3 Closing Deliveries of MTLM........................................................49
ARTICLE XI
TERMINATION AND ABANDONMENT....................................................................51
11.1 Methods of Termination............................................................51
11.2 Requirements and Effect of Termination............................................51
ARTICLE XII
INDEMNIFICATION.........................................................................................51
12.1 Survival..........................................................................51
12.2 Indemnification by Sellers........................................................51
12.3 Indemnification by MTLM...........................................................52
12.4 Claims............................................................................53
12.5 Notice of Third Party Claims; Assumption of Defense...............................53
12.6 Settlement or Compromise..........................................................54
12.7 Failure of Indemnifying Person to Act.............................................54
12.8 Minimum Indemnification Threshold and Limits......................................54
12.9 Net Losses........................................................................55
12.10 Arbitration.......................................................................55
ARTICLE XIII
MISCELLANEOUS PROVISIONS.......................................................................56
13.1 HSR Act Compliance................................................................56
13.2 Amendment and Modification........................................................56
13.3 Knowledge.........................................................................56
13.4 Further Assurances................................................................57
13.5 Third Party Claims................................................................57
13.6 Waiver of Compliance..............................................................57
13.7 Expenses..........................................................................57
13.8 Interest..........................................................................57
13.9 Notices...........................................................................57
13.10 Public Statements.................................................................58
13.11 Confidentiality...................................................................59
13.12 Section 338 Elections.............................................................59
13.13 Preparation and Filing of Tax Returns.............................................59
13.14 Financial Statements..............................................................60
13.15 Assignment........................................................................60
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13.16 Governing Law.....................................................................60
13.17 Counterparts......................................................................60
13.18 Entire Agreement..................................................................60
13.19 Severability......................................................................61
13.20 No Third Party Beneficiaries......................................................61
13.21 Filings and Applications..........................................................61
13.22 Remedies Cumulative...............................................................61
13.23 Stock Legend......................................................................61
13.24 Jurisdiction of Disputes; Waiver of Jury Trial....................................61
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EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B-1 Form of Employment Agreement for Joseph Naporano
Exhibit B-2 Form of Employment Agreement for Andrew Naporano, Jr.
Exhibit B-3 Form of Employment Agreement for John Naporano
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Opinion of MTLM's Counsel
Exhibit E Form of Opinion of Sellers' Counsel
Exhibit F Unaudited Financial Statements
Exhibit G Form of Registration Rights Agreement
Exhibit H Option to Lease
Exhibit I Estoppel Certificate
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SCHEDULES
Schedule 2.2 Allocation of Purchase Price Consideration
Schedule 2.5 Personal Guarantees
Schedule 4.1 Due Organization
Schedule 4.3 Consents and Approvals; No Conflicts
Schedule 4.4 Title to Stock; Capitalization
Schedule 4.6 Undisclosed Liabilities
Schedule 4.7 No Adverse Effect or Changes
Schedule 4.8 Permits
Schedule 4.9 Real Property
Schedule 4.10 Personal Property
Schedule 4.11 Title to Properties
Schedule 4.12 Condition of Assets
Schedule 4.14 Intellectual Property
Schedule 4.15 Accounts Receivable and Advances
Schedule 4.16 Inventory
Schedule 4.17 Contracts
Schedule 4.19 Litigation
Schedule 4.20 Customers and Suppliers
Schedule 4.21 Environmental Matters
Schedule 4.22 Tax Matters
Schedule 4.23 Employee Benefit Plans
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Schedule 4.24 Employment and Labor Matters
Schedule 4.25 Insurance
Schedule 4.27 Capital Improvements
Schedule 4.28 Computer System
Schedule 4.30 No Conflict of Interest
Schedule 6.3 Distributions of Certain Assets
Schedule 6.14 Indemnified Litigation Matters
Schedule 8.4 Necessary Consents of Sellers
Schedule 9.4 Necessary Consents of MTLM
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of May 24, 1998, by and among
METAL MANAGEMENT, INC., a Delaware corporation ("MTLM"), Andrew J. Naporano, Jr.
and Joseph F. Naporano (Andrew J. Naporano, Jr. and Joseph F. Naporano are
sometimes referred to individually as a "Seller," and collectively as
"Sellers").
RECITALS
WHEREAS, the Companies collectively carry on the business relating to
the purchase of prepared and unprepared metallic scrap, the processing of such
scrap into forms suitable for consumption, and the transport, handling and
brokerage of such material (the "Business");
WHEREAS, the Sellers collectively own all the issued and outstanding
shares of common stock no par value per share ("Naporano Iron Common Stock") of
Naporano Iron & Metal Co., a New Jersey corporation ("Naporano Iron") and all
the issued and outstanding shares of common stock $100 par value per share
("Nimco Common Stock" and collectively with Naporano Iron Common Stock, the
"Shares") of Nimco Shredding Co., a New Jersey corporation ("Nimco");
WHEREAS, on the terms and subject to the conditions contained herein
the Sellers desire to sell and MTLM desires to purchase all of Sellers' right,
title and interest in the Shares; and
WHEREAS, the parties desire to make an election under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended ("Code");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings herein ascribed to them:
"Accounts Receivable" is defined in Section 4.15.
"Adjustment Statement" is defined in Section 2.4(b).
"Advances" is defined in Section 4.15.
"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.
"Agreement" means this Stock Purchase Agreement and all schedules and
exhibits attached hereto.
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"Allocations" is defined in Section 13.12 (b).
"Alternative Proposal" is defined in Section 6.11(c).
"BCA" means the New Jersey Business Corporation Act, as amended.
"Benefit Plans" is defined in Section 4.23(a).
"Business" is defined in the Recitals.
"Business Day" means any day of the year other than: (i) any Saturday
or Sunday, or (ii) any other day on which banks located in Chicago, Illinois or
Newark, New Jersey generally are closed for business.
"Capital Expenditure Budget" is defined in Section 4.27.
"Cash Amount" is defined in Section 2.2.
"Cash Claim Notice" is defined in the Escrow Agreement.
"CERCLA" is defined in the definition of "Environmental Law."
"Cleanup Criteria" is defined in Section 6.11(c).
"Closing" is defined in Section 10.1.
"Closing Date" is defined in Section 10.1.
"Closing Date Balance Sheet" is defined in Section 2.4(a).
"Closing Date Stockholder's Equity" is defined in Section 2.4(c).
"COBRA" is defined in Section 4.23(a).
"Code" is defined in the Recitals.
"Companies" means Naporano Iron and Nimco collectively.
"Companies Accountant" means J.H. Cohn LLP.
"Company" means either Naporano Iron or Nimco.
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"Company Intellectual Property" means the Owned Intellectual Property
and the Third Party Intellectual Property.
"Confidential Information" means all secrets, confidential information,
customer lists, supplier information, and all other data of, or pertaining to,
the Business that is not and has not become ascertainable or obtainable from
public or published information.
"Contested Adjustment" is defined in Section 2.4(b).
"Contested Adjustment Notice" is defined in Section 2.4(b).
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, restriction, commitment, obligation or other
contract, agreement or instrument, whether written or oral.
"DOJ" is defined in Section 13.1.
"Easements" means all easements, rights-of-way and similar interests of
the Companies that are used or held for use in, or relate to, in whole or in
part, the Business.
"Elections" is defined in Section 13.12(a).
"Employment Agreements" means the Employment Agreements by and between
MTLM (or a subsidiary of MTLM) and each of the Sellers substantially in the
forms set forth in Exhibits B-1 and B-2, respectively and the Employment
Agreement by and between MTLM (or a subsidiary of MTLM) and John Naporano
substantially in the form of Exhibit B-3.
"Environmental Law" means any law, statute, regulation, rule, order,
consent decree, settlement agreement or written governmental requirement, which
imposes liability or standards of conduct concerning discharges, releases or
threatened releases of noises, odors or any Hazardous Substances into ambient
air, water or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of such Hazardous Substances, including (but not limited to) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended, any other so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act, or any other similar federal, state or local statutes.
"Environmental Permit" means any permit required by or pursuant to any
applicable Environmental Law.
"ERISA" is defined in Section 4.23(a).
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"ERISA Affiliate" means, with respect to any Person, and corporation,
trade or business which, together with such Person, is a member of a controlled
group of corporations or a group of trades or business under common control
within the meaning of Sections 414(b) or (c) of the Code.
"Escrow" is defined in Section 3.1.
"Escrow Agent" means LaSalle National Bank N.A.
"Escrow Agreement" means the Escrow Agreement, substantially in the
form attached hereto as Exhibit A, to be executed by MTLM, the Sellers and
Escrow Agent on or prior to the Closing Date.
"Escrow Cash" is defined in the Escrow Agreement.
"Escrow Claims" is defined in Section 3.2.
"Escrow Claims Notice" is defined in the Escrow Agreement.
"Escrow Items" is defined in the Escrow Agreement.
"Escrow Shares" means that number of shares of MTLM Common Stock
(rounded to the nearest whole share) equal to $8,000,000 divided by the Signing
Date Stock Price issued in the names of the respective Sellers and delivered to
the Escrow Agent as provided in Article III.
"Exchange Act" means the Exchange Act of 1934, as amended.
"Fleet Loan Agreement" means the Loan and Security Agreement by and
between Naporano Iron, Nimco, and National Westminster Bank dated September 25,
1990, as amended as of September 21, 1993, by the First Amendment and
Modification Agreement by and among Naporano Iron and Nimco as Co-Borrowers and
Joseph F. Naporano and Andrew J. Naporano, Jr. as Individual Guarantors and
National Westminster Bank, NJ as lender, as amended on July 30, 1996 by the
Second Amendment and Modification Agreement by and among Naporano Iron and Nimco
as Co- Borrowers and Joseph F. Naporano and Andrew J. Naporano, Jr. as
Individual Guarantors and Fleet Bank National Association f/k/a National
Westminster Bank, NJ as lender.
"FTC" is defined in Section 13.1.
"GAAP" means generally accepted accounting principles consistently
applied.
"Governmental Agency" 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 thereof.
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"Hazardous Substances" means any material or substance that is
regulated or controlled as a hazardous substance, toxic substance, pollutant or
other regulated or controlled material, substance or matter pursuant to any
Environmental Law (including petroleum and any fraction thereof and asbestos).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Imminent Action" is defined in Section 6.11(c).
"Indemnified Environmental Work" is defined in Section 6.11(b).
"Indemnified Person" means the Person or Persons entitled to, or
claiming a right to, indemnification under Article XII.
"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article XII.
"Identified Environmental Work" is defined in Section 6.11.
"Independent Accountant" is defined in Section 2.4(b).
"Intellectual Property" means all United States and foreign patents
(including continuations, continuations-in-part, reissues and re-examinations
thereof) and patent applications; registered and unregistered trade names,
trademarks, service names and service marks (and applications for registration
of the same); copyrights and copyright registrations (and applications for the
same); trade secrets, computer data (including formulations and analyses),
computer software (in source code and object code form) and all related
programming, user and systems documentation; inventions, processes and designs
(whether or not patentable or reduced to practice); know-how and formulae; and
all other intangible assets, properties and rights.
"Interim Adjustment" is defined in Section 2.4(c).
"Inventory" is defined in Section 4.16.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Agency.
"Leased Personal Property" is defined in Section 4.10.
"Leased Real Property" is defined in Section 4.9(a).
"Lien" means any mortgage, lien, charge, restriction, pledge, security
interest, lease or sublease, claim, right of any third party, easement,
encroachment or encumbrance.
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"Loss" or "Losses" means any and all liabilities, losses, costs,
claims, damages (including consequential damages), penalties and expenses
(including reasonable attorneys' fees and expenses and costs of investigation
and litigation). In the event any of the foregoing are indemnifiable hereunder,
the terms "Loss" and "Losses" shall include any and all such attorneys' fees and
expenses and costs of investigation and litigation incurred by the Indemnified
Person in enforcing such indemnity.
"Major Customers" is defined in Section 4.20(a).
"Major Suppliers" is defined in Section 4.20(a).
"Material Adverse Effect" means an effect on the business, operations,
assets, liabilities, results of operations or cash flows or financial condition
of the Business which is materially adverse to the Companies taken as a whole
excluding general market conditions or conditions affecting the scrap metal
business generally.
"McDonald" is defined in Section 4.26.
"Minimum Indemnification Threshold" is defined in Section 12.8.
"MTLM" is defined in the Preamble.
"MTLM Common Stock" means the common stock of MTLM, $.01 par value per
share.
"MTLM Indemnified Parties" is defined in Section 12.2.
"MTLM SEC Reports" means all forms, reports and documents required to
be filed by MTLM with the SEC.
"Naporano Common Stock" is defined in the Recitals.
"Naporano Entities" is defined in Section 12.3(d).
"Naporano Iron" is defined in the Preamble.
"NASDAQ" means the NASDAQ National Market Systems.
"Nimco" is defined in the Preamble.
"Nimco Common Stock" is defined in the Recitals.
"Non-competition Agreements" means the Non-competition Agreements to be
executed by and between MTLM (or a subsidiary of MTLM) and each of the Sellers
in the form set forth as Exhibit C.
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"Offset Notice" is defined in Section 3.2.
"Opinion of Purchasers' Counsel" means the opinions of MTLM's General
Counsel and Mayer, Brown & Platt substantially in the form of Exhibit D.
"Opinion of Sellers' Counsel" means the opinion of Sellers' counsel,
substantially in the form attached hereto as Exhibit E.
"Option to Lease" means the option of Naporano Iron to lease the
property located at 295 Doremus, Newark, New Jersey substantially in the form of
Exhibit H.
"OSHA" means the Occupational Safety and Health Act of 1970, as
amended.
"Owned Intellectual Property" means all Intellectual Property that is
owned by either of the Companies and that is used to conduct the Business as
presently conducted or as planned to be conducted.
"Owned Personal Property" is defined in Section 4.10.
"Owned Real Property" is defined in Section 4.9(a).
"Permitted Liens" means (i) Liens for Taxes, assessments and other
charges by Government Agencies which are not yet due and payable, (ii) other
Liens incidental to the conduct of the Business or the ownership of the
Companies' property and assets that were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and that do not
materially detract from the value of the Companies' property or assets or
materially impair the use thereof the in operation of the Business; (iii) Liens
imposed by either Company upon the other; and (iv) any Lien renewing, extending
or refunding any Permitted Lien so long as the principal amount is not increased
and the Lien is not extended to other property of the Companies.
"Permits" is defined in Section 4.8(a).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Agency or other entity,
of whatever nature.
"Personal Property Leases" is defined in Section 4.10.
"Purchase Price" is defined in Section 2.1.
"Port Authority" is defined in Section 6.11(a).
"Real Property" is defined in Section 4.9(a).
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"Real Property Leases" is defined in Section 4.9(a).
"Registration Rights Agreement" means that certain Registration Rights
Agreement substantially in the form of Exhibit G.
"Related Agreements" means any Contract that is to be entered into at
the Closing pursuant to this Agreement. The Related Agreements executed by a
specified Person shall be referred to as "such Person's Related Agreements,"
"its Related Agreements" or another similar expression. The Related Agreements
shall include without limitation, the Employment Agreements the Non- competition
Agreements and any Contract that is to be entered into at the Closing pursuant
to this Agreement.
"S Corporation Return" is defined in Section 13.13.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" and "Sellers" are defined in the Preamble.
"Sellers Guarantees" is defined in Section 2.5.
"Shares" is defined in the Recitals.
"Signing Date Stock Price" means the average of the closing bid and ask
prices of the MTLM Common Stock on NASDAQ on the five (5) consecutive trading
days immediately preceding the date hereof.
"Taxes" means all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, license, payroll, environmental, capital stock, disability,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Agency, and such
term shall include any interest, penalties or additions to tax attributable
thereto.
"Tax Indemnification Period" is defined in Section 6.9(a).
"Tax Return" means any report, return or other information required to
be supplied to a Governmental Agency in connection with any Taxes.
"Third Party Intellectual Property" means all Intellectual Property
that is not Owned Intellectual Property and that is used to conduct the Business
as presently conducted.
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"Unaudited Balance Sheet" means the unaudited combined balance sheet of
the Companies as at December 31, 1997 set forth in the Unaudited Financial
Statements.
"Unaudited Financial Statements" is defined in Section 4.5.
"Upland Berths" is defined in Section 6.11(a).
1.2 Interpretation. The headings preceding the text of articles and
sections included in this Agreement and the headings to schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender or the singular or plural form of words
herein shall not limit any provision of this Agreement. Unless otherwise
indicated, the use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. Unless otherwise indicated, reference to any Law means as amended,
modified, codified, replaced or re-enacted, in whole or in part, and in effect
on the date hereof, including rules, regulations, enforcement procedures and any
interpretations promulgated thereunder. Underscored references to articles,
sections, clauses, exhibits or schedules shall refer to those portions of this
Agreement, and any underscored references to a clause shall refer to the
appropriate clause within the same Section. The use of the terms "hereunder",
"hereof", "hereto" and words of similar import shall refer to this Agreement as
a whole and not to any particular article, section or clause of, or exhibit or
schedule to, this Agreement.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Sale and Purchase. Sellers hereby agree to sell, assign and deliver
to MTLM all of the Shares, free and clear of all Liens, and MTLM hereby agrees
to purchase all such Shares, on the terms and subject to the conditions of this
Agreement. The total purchase price to be paid by MTLM to Sellers in
consideration for the Shares and the Non-competition Agreements including the
consideration deposited in the Escrow shall be $105,000,000, subject to the
adjustments set forth in Section 2.4 (the "Purchase Price").
2.2 Payment of Purchase Price.
On the Closing Date, MTLM shall: (i) pay to the Sellers in the
aggregate $84,000,000 in cash (the "Cash Amount") by means of a wire transfer of
immediately available funds to a bank account or accounts designated by Sellers;
(ii) issue and deliver to Sellers and to McDonald and such employees of the
Companies as directed by Sellers in the aggregate that number of shares of MTLM
Common Stock (rounded to the nearest whole share) equal to $13,000,000, divided
by the Signing Date Stock Price and (iii) issue to Sellers and deliver to the
Escrow Agent that number of shares of MTLM Common Stock (rounded to the nearest
whole share) equal to $8,000,000 divided by the Signing Date Stock Price. The
allocation of the foregoing consideration payable to each Seller is set forth on
Schedule 2.2. Such directions of the Sellers to issue and deliver shares of MTLM
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Common Stock to McDonald and certain employees of the Companies shall be in
writing and delivered to MTLM no later than three (3) Business Days prior to the
Closing Date; provided, however, that no such shares shall be issued any
employee of the Company included in such directions unless such issuance
complies with applicable securities Laws. Such written directions shall in no
event include more than twenty five employees of the Companies. Sellers hereby
acknowledge that except as otherwise provided in the Registration Rights
Agreement, the MTLM Common Stock issued pursuant to this Agreement shall not be
registered under the Securities Act.
2.3 Delivery of Stock. At the Closing, each Seller shall deliver to
MTLM: (i) one or more stock certificates representing in the aggregate the
number of shares of Naporano Iron Common Stock set forth opposite his name on
Schedule 4.4; (ii) one or more stock certificates representing in the aggregate
the number of shares of Nimco Common Stock set forth opposite his name on
Schedule 4.4; and (iii) one or more stock certificates representing in the
aggregate any additional Shares acquired prior to Closing as a result of the
exercise of any stock option. Such certificates shall be either duly endorsed in
blank for transfer or accompanied by duly executed stock powers, signatures
guaranteed, in form reasonably acceptable to MTLM and its counsel and, in each
case, accompanied by a duly executed IRS Form W-9 in form reasonably acceptable
to MTLM and its counsel.
2.4 Purchase Price Adjustment.
(a) MTLM and Price Waterhouse LLP shall prepare and deliver to
Sellers an audited combined balance sheet for the Companies as of the
close of business on June 30, 1998, if the Closing Date is prior to
June 30, 1998, or on the closest month end if the Closing Date is after
June 30, 1998 (as it may be adjusted pursuant to Section 2.4(b), the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be
delivered as soon as practicable after the date of the Closing Date
Balance Sheet but within seventy five (75) days of the date of such
Closing Date Balance Sheet. The Closing Date Balance Sheet shall be
prepared by MTLM and Price Waterhouse in accordance with GAAP and the
accounting practices of the Company (to the extent consistent with
GAAP) used in the preparation of the Unaudited Financial Statements, it
being understood that items which have been previously expensed in
accordance with the past practice of the Companies shall not be
capitalized for purposes of the Closing Date Balance Sheet. The Closing
Date Balance Sheet shall assume that any portion of the fees and
expenses payable by the Companies to McDonald shall have been paid. In
connection with the preparation of the Closing Date Balance Sheet, MTLM
and Price Waterhouse LLP shall take a physical inventory of all the
Inventory as of the close of business on the day prior to the Closing
Date, and Sellers and Sellers' accountants shall be given at least two
(2) Business Days prior notice of the time and location of, and shall
be entitled to observe, such physical Inventory at each location at
which it is conducted. Following delivery of the Closing Balance Sheet
and after execution by Sellers of a representation letter which Price
Waterhouse LLP customarily requires in such circumstances, Price
Waterhouse LLP and MTLM shall permit Sellers' accountants to
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review, at the Sellers' accountants' request, all of Price Waterhouse's
work papers, schedules and calculations related to the Closing Date
Balance Sheet and shall meet with Sellers' accountants to discuss the
same at such time and place reasonably requested by Sellers'
accountants.
(b) Sellers shall have until thirty (30) days after the
delivery of the Closing Date Balance Sheet to review the Closing Date
Balance Sheet and propose any adjustments thereto. All adjustments
proposed by Sellers shall be set out in detail in a written statement
delivered to MTLM ("Adjustment Statement") and shall be incorporated
into the Closing Date Balance Sheet, except for such proposed
adjustments to which MTLM objects in writing within thirty (30) days of
delivery to MTLM of the Adjustment Statement. If MTLM does object in
writing within thirty (30) days to any such proposed adjustment (the
adjustments to which MTLM objects are referred to herein as the
"Contested Adjustments" and MTLM's objection notice is referred to
herein as the "Contested Adjustment Notice"), MTLM and Sellers shall
use reasonable efforts to resolve their dispute regarding the Contested
Adjustments. If a final resolution of any such dispute is not obtained
within ten (10) days after MTLM delivers to Sellers said Contested
Adjustment Notice, then MTLM and Sellers shall promptly retain Arthur
Andersen LLP or another nationally recognized independent accounting
firm acceptable to both Sellers and MTLM ("Independent Accountant") to
resolve any remaining disputes concerning the Contested Adjustments.
Either Sellers or MTLM may retain the Independent Accountant upon the
expiration of such 10-day period, except that if the Independent
Accountant is other than Arthur Andersen LLP, the written agreement of
both the Sellers and MTLM shall be required to retain the Independent
Accountant. If the Sellers and MTLM are unable to agree on an
Independent Accountant then Price Waterhouse LLP and Sellers'
accountants shall promptly select the Independent Accountant which
shall not be the Companies' Accountant. If an Independent Accountant is
retained, then Sellers and MTLM shall each submit to the Independent
Accountant in writing not later than fifteen (15) days after the
Independent Accountant is retained, their respective positions with
respect to the Contested Adjustments, together with such supporting
documentation as they deem necessary or as the Independent Accountant
requests. The Independent Accountant shall, within thirty (30) days
after receiving the positions of both Sellers and MTLM and all
supplementary supporting documentation requested by the Independent
Accountant, render its decision as to the Contested Adjustments. Such
decision shall be final and binding on, and shall not be subject to
appeal by, Sellers and MTLM. The Closing Date Balance Sheet shall be
adjusted to incorporate the decision of the Independent Accountant in
resolving the Contested Adjustments. The fees and expenses of the
Independent Accountant shall be borne equally between MTLM, on the one
hand, and the Sellers, on the other hand.
(c) The Purchase Price shall be increased on a
dollar-for-dollar basis by the amount, if any, that the combined net
book value of all assets of the Companies less all combined liabilities
of the Companies reflected on the Closing Date Balance Sheet (the
"Closing Date Stockholder's Equity") as finally determined in
accordance with Section 2.4(b), is more than $30,235,825 and MTLM shall
pay to the Sellers the amount of such
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excess (less the amount of any Interim Adjustment previously
paid) plus interest from the Closing Date determined in accordance with
Section 13.5 in cash within five (5) Business Days after the Closing
Date Balance Sheet is finally determined. The Purchase Price shall be
decreased on a dollar-for-dollar basis by the amount, if any, that the
Closing Date Stockholder's Equity, as finally determined in accordance
with Section 2.4(b), is less than $30,235,825, and the Sellers shall be
jointly and severally obligated to pay to MTLM the amount of such
deficiency (less the amount of any Interim Adjustment previously paid)
plus interest from the Closing Date determined in accordance with
Section 13.5 in cash within five (5) Business Days after the Closing
Date Balance Sheet is finally determined. If there are Contested
Adjustments and either MTLM or the Sellers would be entitled to a
payment under this Section 2.4(c) regardless of the resolution of such
Contested Adjustment, then such party shall nevertheless be entitled to
recover within five (5) Business Days after delivery of the Adjustment
Statement the undisputed portion of the adjustment to the Purchase
Price plus interest from the Closing Date determined in accordance with
Section 13.5 (an "Interim Adjustment"). All payments under this Section
2.4(c) shall be made by wire transfer in immediately available funds to
the account or accounts designated by the recipient of such payment.
2.5 Further Action. MTLM shall use commercially reasonable efforts to
obtain the unconditional release and discharge of the Sellers and their
Affiliates as of Closing from any obligation any of them may have under any
guarantee, indemnity or bond supporting any obligation of any of the Companies
which are set forth on Schedule 2.5 ("Sellers Guarantees"). To the extent that
Sellers and their Affiliates are not so released and discharged from such
obligations as of Closing, MTLM shall indemnify the Sellers and their Affiliates
against any Losses arising therefrom and shall use commercially reasonable
efforts to obtain the unconditional release and discharge of the Sellers and
their Affiliates from and after the Closing from Sellers Guarantees.
ARTICLE III
ESCROW
3.1 Escrow Shares. On the Closing Date, MTLM shall deliver to the
Escrow Agent certificates representing the Escrow Shares pursuant to the terms
of the Escrow Agreement. The Escrow Shares and any Escrow Cash deposited with
the Escrow Agent in accordance with Section 3.4 shall be held in escrow (the
"Escrow") as collateral to indemnify MTLM for any and all Losses relating to
breaches of Sellers' representations and warranties under Article IV or failures
to perform any covenants required to be performed under Articles VI or XIII and
corresponding indemnification obligations under Article XII. Nothing contained
in this Article or in Articles IV, VI or XIII, shall limit MTLM's remedies in
the event of fraud. For all purposes of the Escrow, MTLM Common Stock shall be
valued at the Signing Date Stock Price. In lieu of delivery of fractional shares
of MTLM Common Stock, the number of shares of MTLM Common Stock deliverable
under the Escrow shall be rounded to the nearest whole share. For purposes of
this Article III or Section 12.10, if a portion of the Escrow is to be disbursed
or retained, and Escrow Cash is in the Escrow, the proportion of Escrow Cash
comprising the amount to be disbursed or retained shall be made at
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the sole election of Sellers provided that if no such election is made
within two Business Days after a written request therefor by MTLM, the amount of
Escrow Cash so retained shall be equal to the lesser of (i) the amount of Escrow
Cash in the Escrow and (ii) amount obtained by multiplying the amount to be
retained or disbursed by a fraction the numerator of which is the amount of
Escrow Cash then in the Escrow and the denominator of which is the then total
value of the Escrow.
3.2 Escrow Claims. As soon as reasonably practicable after becoming
aware of a claim for indemnification through the second anniversary of the
Closing Date, MTLM shall deliver to Sellers a certificate signed by any officer
of MTLM (a "Offset Notice"), stating that Losses exist or are asserted, and
specifying in reasonable detail the individual items of such Losses, and the
nature of the misrepresentation, breach of warranty or covenant to which such
item is related provided that the failure of MTLM to give prompt notice shall
not relieve Sellers of their obligations under Article XII except (i) to the
extent that Sellers shall actually and materially have been prejudiced thereby
or (ii) if such notice shall be first given after the second anniversary of the
Closing Date. Except as otherwise provided herein, any claim by any MTLM
Indemnified Party against the Escrow described in an Offset Notice shall be
referred to herein as an "Escrow Claim" or, if multiple, "Escrow Claims." Within
thirty (30) calendar days after receipt of the Offset Notice, the Sellers shall
either (x) execute and deliver to MTLM a certificate to be countersigned by MTLM
to direct jointly the Escrow Agent to disburse promptly to MTLM, Escrow Shares
and/or Escrow Cash valued at the amount of such Losses, (y) agree to pay MTLM in
cash the amount of the Losses set forth in such Offset Notice in accordance with
the next sentence and execute and deliver to MTLM a certificate to be
countersigned by MTLM jointly directing the Escrow Agent to disburse promptly to
Sellers, Escrow Shares valued at the amount of such Losses or (z) notify MTLM,
with contemporaneous delivery to the Escrow Agent, in writing of an intention to
dispute the Escrow Claim(s) and the basis of such dispute. If Sellers elect to
act in accordance with clause (y) of the immediately preceding sentence (i) MTLM
shall promptly execute the certificate received from Sellers and deliver such
certificate to the Escrow Agent and (ii) Sellers shall pay MTLM in cash (by
check or wire transfer) the amount of such Losses set forth in the applicable
Offset Notice against receipt of such
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Escrow Shares from the Escrow Agent. If Sellers do not take any action
within thirty (30) calendar days of receiving the Offset Notice, such Escrow
Claim shall be resolved in accordance with Article XII and Escrow Shares and
Escrow Cash collectively valued at the amount of the Losses set forth in the
applicable Offset Notice shall be retained in the Escrow until such matter is
finally resolved. If the Sellers agree that they have an indemnification
obligation but object in writing on the basis that they are obligated to pay
only a lesser amount, then within two Business Days after of MTLM's receipt of
the Sellers written objection, and without prejudice to MTLM's claim for the
difference, Sellers shall either (x) execute and deliver to MTLM a certificate
to be countersigned by MTLM, to direct jointly the Escrow Agent to promptly
disburse to MTLM, Escrow Shares and/or Escrow Cash which collectively have a
value equal to the lesser amount or (y) agree to pay in cash MTLM the lesser
amount in accordance with the next sentence and execute and deliver to MTLM a
certificate to be countersigned by MTLM to direct jointly the Escrow Agent to
promptly disburse to Sellers, a number of Escrow Shares which have a value equal
to the lesser amount. If Sellers elect to act in accordance with clause (y) of
the immediately preceding sentence (i) MTLM shall promptly execute the
certificate received from Sellers and deliver such certificate to the Escrow
Agent and (ii) Seller shall pay MTLM in cash (by check or wire transfer) such
lesser amount against receipt of such Escrow Shares from the Escrow Agent. If
the Sellers elect to dispute any Escrow Claims in writing, MTLM and Sellers
shall attempt in good faith until thirty (30) days after receipt of any Escrow
Claims Notice to agree upon the rights of the respective parties with respect to
each Escrow Claims. If MTLM and Sellers should so agree, a memorandum setting
forth such agreement shall be prepared and signed by the Sellers and MTLM and
MTLM and Sellers shall also execute a certificate jointly directing the Escrow
Agent to disburse promptly such Escrow Shares and/or Escrow Cash in the manner
set forth in such certificate which shall be consistent with the terms of such
memorandum. If MTLM and Sellers are unable to agree within such thirty (30) day
period, then Escrow Shares and Escrow Cash collectively valued at the amount in
dispute shall be retained in the Escrow until such dispute shall be resolved in
accordance with Article XII. Promptly after such resolution, MTLM and the
Sellers shall execute and deliver to the Escrow Agent a memorandum which directs
the Escrow Agent to disburse such Escrow Shares and/or Escrow Cash in accordance
with such resolution and the terms of the Escrow Agreement.
3.3 Release of Escrow. On the first anniversary of the Closing Date,
the Sellers on the one hand, and any officer of MTLM on the other hand, shall
jointly execute a certificate directing the Escrow Agent to disburse to the
Sellers, in accordance with the terms of the Escrow Agreement, Escrow Shares and
Escrow Cash having a collective value equal to one half of the Escrow Shares
deposited with the Escrow Agent on the Closing Date less the sum of (i) the
value of Escrow Shares and Escrow Cash that shall have been disbursed to satisfy
any Losses of MTLM Indemnified Parties in accordance with Article III, (ii) the
value of Escrow Shares previously disbursed to Sellers (other than pursuant to
Section 3.4) which required a cash payment to MTLM as a result of such
disbursement and (iii) the value of the Retained Escrow (defined below). On the
second anniversary of the Closing Date, the Sellers on the one hand, and any
officer of MTLM on the other hand, shall jointly execute a certificate jointly
directing the Escrow Agent to disburse to the Sellers the balance of the Escrow
Shares and Escrow Cash less any Retained Escrow. In the event that there are any
Escrow Claims which have been disputed by Sellers and which are unresolved on
the first or second anniversary of the Closing Date, subject to this Section 3.3
and Article XII, Escrow Shares and Escrow Cash which in the reasonable judgment
of MTLM, are necessary to satisfy any such unsatisfied Escrow Claims shall
remain in the Escrow until such Escrow Claims have been fully and finally
resolved ("Retained Escrow"). If Sellers dispute the retention of all or a
portion of the Retained Escrow, MTLM and Sellers shall attempt in good faith
within 30 days after the first or second anniversary of the Closing Date, as the
case may be (the "Retention Resolution Period"), to agree upon the Retained
Escrow. If MTLM and Sellers should so agree, a memorandum shall be prepared and
signed by the Sellers and MTLM and delivered to the Escrow Agent directing the
Escrow Agent to disburse such Escrow Shares and/or Escrow Cash in accordance
with such agreement and the terms of the Escrow Agreement. If MTLM and Sellers
cannot agree within the Retention Resolution Period, the Retained Escrow shall
be determined in accordance with Article XII.
3.4 Escrow Cash. At any time, and from time to time, while Escrow
Shares remain in the Escrow, the Sellers may substitute cash for Escrow Shares
in the Escrow by delivering a certificate to the Escrow Agent directing the
Escrow Agent to promptly disburse to the Sellers in accordance with the terms of
the Escrow Agreement that number of whole Escrow Shares set forth
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in such certificate against receipt by the Escrow Agent of an amount of
cash equal to that number of Escrow Shares set forth in such certificate
multiplied by the Signing Date Stock Price (the "Escrow Cash"). Such Escrow Cash
shall be held in the Escrow subject to the terms of the Escrow Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
Each of the Sellers hereby jointly and severally represent and warrant
to MTLM as follows:
4.1 Due Organization. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New Jersey, with all requisite corporate power and authority under the laws of
such state to own, lease and operate its properties and to conduct its affairs
as now owned, leased and operated. Each of the Companies is licensed or
qualified to do business and is in good standing in each other jurisdiction
where the nature of the properties owned, leased or operated by it and the
businesses transacted by such Company require such licensing or qualification
except where the failure to be so licensed or qualified does not have a Material
Adverse Effect. Except as set forth in Schedule 4.1, the Companies do not own
any capital stock or other equity interest in any Person.
4.2 Due Authorization. Each of the Sellers has full requisite power and
authority to execute, deliver and perform his obligations under this Agreement
and the Related Agreements to which he is a party. No other actions or
proceedings on the part of the Sellers are necessary to authorize the execution,
delivery and performance by the Sellers of this Agreement, or the transactions
contemplated hereby. No other actions or proceedings on the part of the Sellers
are necessary to authorize the execution, delivery and performance by the
Sellers of the Related Agreements to which they are a party or the transactions
contemplated thereby. Each of the Sellers has duly and validly executed and
delivered this Agreement. Each of the Sellers prior to or at the Closing will
have duly and validly executed and delivered the Related Agreements to which he
is a party. This Agreement constitutes legal, valid and binding obligations of
the Sellers, in each case, enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally, by equitable limitations on the
availability of specific remedies, and by principles of equity. The Related
Agreements to which Sellers are party, upon execution and delivery by Sellers
will constitute legal, valid and binding obligations of the Sellers, in each
case enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement of
creditors' rights generally, by equitable limitations on the availability of
specific remedies, and by principles of equity.
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4.3 Consents and Approvals; No Conflicts.
(a) Except for the consents set forth on Schedule 4.3 ("Seller
Consents"), no consent, authorization or approval of, filing or
registration with, waiver of any right of first refusal or first offer
from, any Governmental Agency or any other Person not a party to this
Agreement or the Related Agreements is necessary in connection with the
execution, delivery and performance by the Sellers of their obligations
under this Agreement, the Related Agreements, or the consummation by
the Sellers of the transactions contemplated hereby or thereby.
(b) Except as set forth on Schedule 4.3, the execution, delivery
and performance by the Sellers of their obligations under this
Agreement and the Related Agreements, and the consummation by the
Sellers of the transactions contemplated hereby and thereby, do not and
shall not: (i) violate any Law applicable to the Companies or Sellers,
their businesses or affairs, or any of the assets of the Sellers or the
Companies; (ii) violate or conflict with, result in a breach or
termination of, constitute a default or give any third party any
additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon the Shares or
any of the assets of the Companies under, or result in or constitute a
circumstance which, with or without notice or lapse of time or both,
would constitute any of the foregoing under, any Contract to which
either Seller or either Company is a party or by which either Seller or
either Company or any of their assets are bound; (iii) permit the
acceleration of the maturity of any indebtedness of the Companies or
indebtedness secured by any of the Shares or assets of the Companies;
or (iv) violate or conflict with any provision of any of the articles
of incorporation or by-laws of the Companies.
4.4 Title to Capital Stock; Capitalization. Schedule 4.4 sets forth a
true, complete and accurate summary of all the authorized, issued and
outstanding capital stock of both Companies and their subsidiaries (if any) and
the amount of such capital stock owned by each Seller. The Sellers collectively
have good and marketable title to all of the authorized and issued capital stock
of each of the Companies as set forth in Schedule 4.4, free and clear of any and
all Liens. Except as set forth on Schedule 4.4, the Companies do not have any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreement of any character obligating such Companies to issue any shares
of their capital stock, or any securities convertible into, or evidencing the
right to purchase any such shares, or any agreements or obligations with respect
to the voting, sale or transfer of shares of capital stock of the Companies,
other than this Agreement. All of the presently issued and outstanding shares
have been duly authorized and validly issued, are fully paid and nonassessable
and free of preemptive rights.
4.5 Financial Statements. The Companies have delivered to MTLM the
unaudited, combined balance sheets and unaudited, combined income statements of
the Companies as of and for the years ending December 31, 1997 and December 31,
1996, copies of which are attached hereto as Exhibit F (collectively, "Unaudited
Financial Statements"). The Unaudited Financial Statements: (i) were prepared
from the books and records of the Companies; and (ii) were prepared in
accordance with GAAP, applied on a basis consistent with the past practices of
the Companies
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(except for footnote disclosures and subject to customary year end
adjustments). The Unaudited Financial Statements present fairly, in all material
respects, in accordance with GAAP, the financial position, results of operation,
of the Companies as of the dates reported therein and for the periods covered
thereby (except for footnote disclosures and subject to customary year end
adjustments).
4.6 No Undisclosed Liabilities. Except as set forth on Schedule 4.6,
the Companies are not subject to any liability of any nature whatsoever,
absolute or contingent, which is or could be materially in excess of amounts
shown or reserved in the Unaudited Financial Statements, other than liabilities
of the same nature as those set forth in the Unaudited Balance Sheet and
incurred after the date of the Unaudited Financial Statements in the ordinary
course of business consistent with past practice.
4.7 No Adverse Effect or Changes. Except as set forth on Schedule 4.7,
since December 31, 1997, the Companies have conducted the Business in all
respects only in the ordinary course and consistent with past practices, and
since December 31, 1997, the Companies have not, either individually or
collectively:
(a) suffered any Material Adverse Effect;
(b) suffered any damage, destruction or Loss to any of their
assets or properties (whether or not covered by insurance) which has
not been repaired and, in the aggregate, exceed $50,000;
(c) incurred any obligation or entered into any Contract other
than for the purchase and sale of inventory in the ordinary course of
business which either: (i) required a payment by any party in excess
of, or a series of payments which in the aggregate exceeded, $75,000
(during any one year), or provided for the delivery of goods or
performance of services, or any combination thereof, having a value
(during any one year) in excess of $75,000; or (ii) has a term, or
requires the performance of any obligations by the Companies over a
period in excess, of one year;
(d) entered into or authorized any Contract or transaction
other than in the ordinary course of business and consistent with past
practice which is not covered by any other clause of this Section 4.7;
(e) sold, transferred, conveyed, assigned or otherwise
disposed of any of their assets or properties, except sales and
brokerage of inventory in the ordinary course of business and
consistent with past practice;
(f) waived, released or canceled actions against any third
parties or any debts owing to them, or any rights which have a value in
excess of $75,000;
(g) made any changes in their accounting systems, policies,
principles or practices;
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(h) entered into, authorized, or permitted any transaction
with any Affiliate (other than transactions between the Companies)
except for transactions disclosed in Schedule 4.17;
(i) authorized for issuance, issued, sold, delivered or agreed
or committed to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares
of their capital stock or any other securities, or amended any of the
terms of any such securities;
(j) split, combined, or reclassified any shares of their
capital stock, declared, set aside or paid any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of their capital stock redeemed or otherwise
acquired any securities of the Companies except for distributions to
the Sellers which do not exceed $4,000,000 in the aggregate;
(k) made any borrowing, incurred any indebtedness for borrowed
money (other than trade payables in the ordinary course of business and
consistent with past practice), or assumed, guaranteed, endorsed
(except for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business and consistent with
past practice) or otherwise become liable (whether directly,
contingently or otherwise) for the obligations of any other Person, or
made any payment or repayment in respect of any indebtedness (other
than trade payables and accrued expenses in the ordinary course of
business and consistent with past practice);
(l) made any loans, advances or capital contributions to, or
investments in, any Person which exceed $100,000 in the aggregate other
than loans or advances to suppliers of inventory in the ordinary course
of business or loans, advances or capital contributions to or
investments in Nap-Key Stainless a New Jersey general partnership;
(m) except in the ordinary course of business consistent with
past practice, entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any director, officer, consultant or
employee, or increased in any manner the compensation or fringe
benefits of any director, officer, consultant or employee or paid any
benefit not required or permitted by any existing plan and arrangement,
or entered into any contract, agreement, commitment or arrangement to
do any of the foregoing;
(n) except for capital expenditures contemplated by clause
(o), acquired, leased or encumbered any assets outside the ordinary
course of business;
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(o) authorized or made any capital expenditures not included
in the Capital Expenditure Budget and which individually exceed $50,000
or in aggregate are in excess of $100,000;
(p) made any Tax election or settled or compromised any
federal, state, local or foreign Tax liability, or waived or extended
the statute of limitations with respect to any such Taxes;
(q) taken or caused or permitted to be taken any action which
could cause the termination of either Company's election to be treated
as an "S" corporation under the Code;
(r) paid any amount, performed any obligation or agreed to pay
any amount or perform any obligation, in settlement or compromise of
any suits or claims of liability against the Companies in litigation or
any of their respective directors, officers, employees or agents;
(s) terminated, modified, amended or otherwise altered or
changed any of the terms or provisions of any Contract other than for
the purchase and sale of inventory in the ordinary course of business
which requires a payment by any party in excess of, or a series of
payments that in the aggregate exceed $50,000 (during any one year), or
provides for the delivery of goods or performance of services, or
combination thereof, having a value (during any one year) in excess of
$50,000, or paid any amount not required by Law or by any such
Contract; or
(t) except as set forth on Schedule 4.7, initiated or been
made a party to any lawsuits, proceedings or governmental
investigations pending or, to the knowledge of the Sellers threatened,
against the Companies, or their officers or directors, or their
properties, operations or business; and there has been no action, suit
or proceeding by any Governmental Agency pending or, to the knowledge
of the Sellers, threatened overtly in writing, which questions the
legality or propriety of this Agreement.
4.8 Permits.
(a) Schedule 4.8(a) sets forth a list of each Permit held by
the Companies as of the date hereof. Except as set forth on Schedule
4.8(a), the Companies own, hold or possess all material governmental
licenses, permits, franchises, approvals and other authorizations that
are necessary to entitle them to own, lease, operate and use their
assets and properties and to conduct their business as currently owned,
leased, operated, used, and conducted (collectively, "Permits").
(b) The Companies have fulfilled and performed in all material
respects its obligations under each Permit, and, no event, condition or
state of facts has occurred or exists which constitutes a breach or
default by the Companies under any material Permit. No written notice
of cancellation, default or any dispute concerning any Permit, or of
any
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event, condition or state of facts described in the preceding
sentence, has been received by the Companies. Except as set forth on
Schedule 4.8(b), each Permit is valid and in full force and effect. No
material Permit will be impaired or adversely affected by the execution
and delivery of this Agreement the Related Agreements, or the
consummation of the transactions contemplated hereby or thereby.
4.9 Real Property. This section does not extend to or cover any matter
or thing that is the subject of the representations and warranties made in
Section 4.21 hereof, which is intended to be the exclusive provision of this
Article IV relating to the subject matter thereof.
(a) Schedule 4.9(a) sets forth: (i) true, accurate, complete
and insurable (subject to Permitted Liens and any Liens described in
Schedule 4.11) legal descriptions of all of the parcels of land owned
by the Companies and used or held for use in, or related to, in whole
or in part, the Business ("Owned Real Property"); (ii) true, accurate,
complete and insurable (subject to Permitted Liens and any Liens
described in Schedule 4.11) legal descriptions of all Easements,
rights-of-way and similar interests of the Companies; (iii) a true,
accurate and complete list of all of the leases of real property to
which the Companies are a party and that provide for the lease to or by
the Companies of any real property (all such real property leased to or
by the Companies shall be collectively referred to as the "Leased Real
Property"); and (iv) the street addresses and current use of all of the
Leased Real Property. Except for the oral arrangement referred to in
Section 4.9(b) below, the Owned Real Property, the Easements and the
Leased Real Property (collectively, "Real Property") constitute all of
the land, other real property and real property interests that are used
or held for use by the Companies. The Companies have delivered to MTLM
the most recent title insurance policies and surveys (if any) for the
Owned Real Property that are in Sellers' possession or custody and that
were prepared or dated within the past six years, and true, accurate
and complete copies of the Easements and leases pursuant to which the
Leased Real Property, is leased by or to the Companies ("Real Property
Leases"), together with copies of all material reports (if any) of any
insurance companies, engineers, environmental consultants, insurance
consultants or other consultants in the possession of the Companies
relating to any of the Real Property during the past five (5) years.
The location and character of the improvements located on the Real
Property and the Business conducted by the Companies thereon comply
with all applicable zoning Laws.
(b) To the knowledge of the Sellers the Companies have not
received written notice from any Governmental Agency or any other
Person that the Companies are, in violation of, or in conflict with,
any applicable zoning, building, or health regulation or ordinance or
any other similar Law. Schedule 4.9(b) describes all variances,
unrecorded use restrictions set forth in any Contract or special
permits issued to the Companies applicable to the Real Property. The
Companies have delivered to MTLM or made available for inspection all
material agreements, documents or other writings, and, except for an
oral arrangement regarding parking (of which MTLM is aware) the Sellers
have no knowledge of any oral arrangement, pertaining to any such
variance, use restriction or other special permit.
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(c) INTENTIONALLY DELETED.
(d) To the knowledge of the Sellers, the Real Property has
adequate parking (including the property covered by the oral
arrangement described in Section 4.9(b)) and is adequately serviced by
all utilities necessary for the current operation of the Business. The
Real Property has not, since December 31, 1995, experienced any
material interruption in the delivery of adequate quantities of any
utilities (including electricity, natural gas, potable water, water for
cooling or similar purposes and fuel oil) or other public services
(including sanitary and storm sewer services) required by the Companies
to operate the Business.
(e) No parcel of land included in the Real Property relies on,
or regularly makes use of, access to the nearest public road or
right-of-way over land owned by others, except where such access is by
means of one or more valid recorded easements not subject to
divestiture, the terms of which have been disclosed in writing to MTLM
on or prior to the date hereof. Except as indicated on the applicable
flood insurance rate map, all Real Property is located in whole or in
part within an area identified by any Governmental Agency as a flood
hazard area.
(f) To the Sellers' knowledge none of the Owned Real Property
or Leased Real Property is subject to any Easement, right-of-way,
building or use restriction, exception, variance, reservation or
limitation which has, in any material respect, caused an interference
with or impairment of the use thereof in the usual and normal conduct
of the Business or has adversely affected the ability of the Companies
to rebuild or repair improvements to the Real Property if such
improvements are damaged or destroyed.
(g) The Companies have not received written notice of any, and
to the knowledge of the Sellers there is no pending, threatened
(overtly in writing) or proposed (overtly in writing) proceeding or
governmental action to modify the zoning classification of, or to
condemn or take by the power of eminent domain (or to purchase in lieu
thereof), or to classify as a landmark, or to impose special
assessments on, or otherwise to take or restrict in any way the right
to use, develop or alter, all or any part of the Real Property. No
special assessment imposed on the Real Property which is due and
payable remains unpaid.
(h) Except as set forth on Schedule 4.9(a) or (b), no written
commitment has been made by the Companies to any Governmental Agency,
utility company or any other Person that imposes upon the Companies an
obligation to make any contribution or dedication of land or to
construct, install, pay for or maintain any improvements of a public or
private nature on the Real Property.
(i) The Companies have not received any written notice of any
default and to the Sellers' knowledge there exists no, dispute, claim,
event of default, or event that constitutes or would constitute (with
notice or lapse of time or both) a default by the Companies under any
Easement.
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(j) The Companies have not received any written notice of any
default under the Real Property Leases the termination of which would
have a material adverse effect on the Company's operations, and, to the
knowledge of Sellers, such Real Property Leases are in full force and
effect, and are valid and enforceable in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors'
rights generally, by equitable limitations on the availability of
specific remedies and by principles of equity.
(k) The Companies have not received any written notice of any,
and to the Sellers' knowledge, there exists no, dispute, claim, event
of default or event which constitutes or would constitute (with notice
or lapse of time or both) a default under any Real Property Lease.
4.10 Personal Property. Schedule 4.10(a) sets forth a true, accurate
and complete list of all of the personal property owned by the Companies as of
April 30, 1998 ("Owned Personal Property") having an original acquisition cost
in excess of $5,000, other than items acquired by the Companies in the ordinary
course of business from the date hereof through the Closing Date. Schedule
4.10(b) sets forth a true, accurate and complete list of all of the personal
property leased by or to the Companies as of April 30, 1998 which have lease or
rental payments in excess of $10,000 annually ("Leased Personal Property"). The
Leased Personal Property leased to the Companies is presently utilized by the
Companies in the ordinary course of business in all material respects in
accordance with all applicable Laws. The Companies have delivered to MTLM true,
accurate and complete copies of all personal property leases relating to Leased
Personal Property, as amended or modified as of the date hereof ("Personal
Property Leases").
4.11 Title to Properties. Except as set forth on Schedule 4.11, the
Companies have good, marketable, and valid record and equitable title to, and
are the lawful owners of, all assets used in its business operations and
affairs, other than the Leased Real Property and Leased Personal Property that
is owned by the Companies and leased to a third party, free and clear of all
Liens other than Permitted Liens.
4.12 Condition of Assets. Except as set forth on Schedule 4.12, all of
the material Owned Personal Property and Leased Personal Property used in its
business operations and affairs, whether owned or leased, have been maintained
in good operating condition and repair (with the exception of normal wear and
tear).
4.13 [Not Used.]
4.14 Intellectual Property. Schedule 4.14 sets forth a true, accurate
and complete list of all Intellectual Property owned or used by the Companies
("Company Intellectual Property").
Except as set forth on Schedule 4.14:
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(a) all of the Owned Intellectual Property is owned by the
Companies free and clear of all Liens other than Permitted Liens, and
is not subject to any license, royalty or other agreement, and the
Companies have not granted any license or agreed to pay or receive any
royalty with respect to any of the Owned Intellectual Property;
(b) none of the Owned Intellectual Property has been or is the
subject of any pending or, to the knowledge of the Sellers, threatened
litigation or claim of infringement and to the knowledge of the Sellers
none of the Third Party Intellectual Property has been or is the
subject of any pending litigation or claims of infringement or
litigation or claims of infringement overtly threatened in writing;
(c) no material license or royalty agreement to which any of
the Companies is party is in breach or default by the Companies or to
knowledge of the Sellers by any other party thereto or the subject of
any notice of termination given or to the knowledge of the Sellers
threatened overtly in writing; and
(d) to the knowledge of the Sellers, all Owned Intellectual
Property and the marketing and use by the Companies of any such Owned
Intellectual Property, in each case, does not infringe any Intellectual
Property or confidential or proprietary rights of another Person, and
the Companies have not received any written notice contesting their
right to use any such Intellectual Property.
4.15 Accounts Receivable and Advances. Schedule 4.15 contains a true
and accurate aging schedule of all accounts receivable of the Companies as of
April 30, 1998 ("Accounts Receivable") and all loans and advances to third
parties reflected on the Unaudited Balance Sheet ("Advances"). Except as
disclosed on Schedule 4.15, each Account Receivable represents a sale made in a
bona fide transaction in the ordinary course of business and the Companies have
performed all of their obligations to produce the goods or perform the services
to which such Account Receivable relates.
4.16 Inventory. Schedule 4.16 sets forth a true, accurate and complete
description of the nature, amount and location of the inventory (including raw
materials and work in process) of the Companies ("Inventory") as of April 30,
1998. All Inventory: (i) was acquired in the ordinary course of business
consistent with past practice; (ii) is of a quality, quantity and condition
useable or saleable in the ordinary course of business within each Company's
normal inventory turnover experience; and (iii) are valued in accordance with
GAAP. Except as reflected on Schedule 4.16, none of the Companies has any
material liability with respect to the return or repurchase of any goods in the
possession of any customer.
4.17 Contracts. Schedule 4.17 sets forth a true, accurate and complete
list of all Contracts of the following types to which the Companies are a party
or by which the Companies are bound, and that relate to, in whole or in part,
the Business:
(a) any collective bargaining agreement;
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(b) any Contract of any kind with any director, officer,
shareholder or employee of the Companies (other than those set forth on
Schedule 4.24) or any of the respective Affiliates of such individuals;
(c) any Contract pursuant to which the Companies grant or are
granted any license or other rights to use any of the assets of the
Companies or any rights of joint use with respect to any of the assets
(other than any Real Property Lease, Personal Property Lease, Owned
Intellectual Property and Third Party Intellectual Property);
(d) any Contract (other than for the purchase or sale of
inventory in the ordinary course of business) that either: (i) requires
a payment by any party in excess of, or a series of payments that in
aggregate exceed, $75,000 (during the course of one year), or provides
for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of $75,000 (during the
course of one year); or (ii) has a term, or requires the performance of
any obligations by the Companies over a period, in excess of one (1)
year;
(e) any Contract other than any Contract relating to the
purchase and sale of inventory in the ordinary course of business with
a sales representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or
promotional activities, or any Contract to act as one of the foregoing
on behalf of any Person which requires a payment by any party in excess
of, or a series of payments that in the aggregate exceed, $75,000
during any one year;
(f) any Contract pursuant to which the Companies have made or
will make loans or advances, or have or will have incurred debts or
become a guarantor or surety or pledged its credit, or otherwise become
responsible with respect to any undertaking of another Person (except
for any Contract to provide loans or advances to Nap-Key Stainless, a
New Jersey general partnership or a supplier of inventory in the
ordinary course of business or the negotiation or collection of
negotiable instruments in transactions in the ordinary course of
business);
(g) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, loan commitment or other Contract
relating to the borrowing of funds, an extension of credit or financing
other than any Contract relating to the purchase and sale of inventory
in the ordinary course of business;
(h) any Contract involving an investment by either of the
Companies in any partnership, limited liability company or
joint-venture;
(i) any Contract involving any restriction with respect to the
geographical area of operations or scope or type of business of the
Companies;
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(j) any power of attorney or agency agreement with any Person
pursuant to which such Person is granted the authority to act for or on
behalf of the Companies, or the Companies are granted the authority to
act for or on behalf of any Person;
(k) any Contract, whether or not fully performed, relating to
any acquisition or disposition of any capital stock of, or any material
portion of the assets (other than the purchase and sale of inventory in
the ordinary course of business) of, the Companies, or any acquisition
or disposition of any subsidiary, division, line of business or real
property of the Companies;
(l) any Contract not made in the ordinary course of business
and consistent with past practice which requires a payment by any party
in excess of, or a series of payments that in the aggregate exceed
$75,000 (during any one year), or provides for the delivery of goods or
performance of services, or combination thereof, having a value in
excess of $75,000 (during any one year) and that is to be performed in
whole or in part at or after the date of this Agreement; and
(m) any Contract not specified above that is material to the
Business taken as a whole except for any Contract relating to the
purchase and sale of inventory in the ordinary course of business.
The Companies have delivered to MTLM: (i) true, accurate and complete
copies of each document as amended or modified set forth on Schedule 4.17; and
(ii) a written description of each oral arrangement so listed on Schedule 4.17.
No event has occurred which constitutes, or after notice or the passage of time,
or both, would constitute a default by the Companies under any material
Contract, and to the knowledge of the Sellers no such event has occurred which
constitutes or would constitute a default by any other party other than claims
with respect to the purchase and sale of inventory in the ordinary course of
business.
4.18 [Not Used.]
4.19 Litigation.
(a) Except as set forth on Schedule 4.19, there are no
actions, suits, mediations, arbitrations, regulatory proceedings or
other litigation, proceedings or governmental investigations pending or
to the knowledge of the Sellers overtly threatened in writing against
or affecting the Companies or any of their officers, directors,
employees, agents or shareholders or any of the assets of the
Companies.
(b) Except as set forth on Schedule 4.19, all of the
proceedings pending or threatened against the Companies or any of the
assets of the Companies are fully covered by insurance policies (or
other indemnification agreements with third parties) and are being
defended by the insurers (or such third parties), subject to such
deductibles as are set forth on Schedule 4.19. Except as set forth on
Schedule 4.19, the Companies are not subject to
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any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other Governmental Agency. The
Companies have not entered into any agreement to settle or compromise
any proceeding pending or to the knowledge of the Sellers threatened
against them with respect to the Business or any of the assets of the
Companies that has involved any obligation other than the payment of
money or for which the Companies have any continuing obligation.
(c) There are no claims, actions, suits, proceedings or
investigations pending or to the knowledge of the Sellers threatened by
or against the Companies with respect to this Agreement, any of the
Related Agreements, or in connection with the transactions contemplated
hereby or thereby, and the Companies have no reason to believe there is
a valid basis for any such claim, action, suit, proceeding, or
investigation.
4.20 Customers and Suppliers.
(a) Schedule 4.20(a) sets forth a true, accurate and complete
list:
(i) of the twenty-five (25) largest customers of the
Companies in terms of revenues during each of the two (2) most
recently completed fiscal years and the four months ended
April 30, 1998 (collectively, "Major Customers"), and such
Schedule 4.20(a) shows, the total revenues in each such period
from each such customer; and
(ii) of the twenty-five (25) largest suppliers of the
Companies in terms of purchases during the two (2) most
recently completed fiscal years and the portion of current
fiscal year prior to the date of this Agreement (collectively,
"Major Suppliers"), and such Schedule 4.20(a) shows the total
purchases in each such period from each such supplier.
(b) Since December 31, 1996, except as set forth on Schedule
4.20(b), there has not been any material adverse change in the business
relationship, and there has been no material dispute, between the
Companies and any Major Customer or Major Supplier, and neither Company
has received any written notice that any Major Customer or Major
Supplier intends to reduce its purchases from, or sales to, the
Companies.
4.21 Environmental Matters. This section is intended to be the
exclusive provision of this Article IV relating to the subject matter hereof,
notwithstanding any other provision relating to Real Property, legal matters or
otherwise.
(a) Except as set forth on Schedule 4.21:
(i) The Companies are in material compliance with all
applicable Environmental Laws, and no condition exists or
event has occurred which, with or without notice or the
passage of time or both, is reasonably likely to constitute a
violation of any Environmental Law or is reasonably likely to
give rise to any suit
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or proceeding, or any Lien on any of the assets of the
Companies under any Environmental Law, that would result in a
Material Adverse Effect;
(ii) The Companies are in possession of all
Environmental Permits (copies of which have been provided to
MTLM) required for the operation of the Business, and the
Companies are in material compliance with all of the material
requirements and limitations included in such Environmental
Permits;
(iii) Except as does not result in a Material Adverse
Effect, the Companies have never generated, manufactured,
used, transported, transferred, stored, handled, treated,
discharged, released or disposed of, nor have the Companies
allowed or arranged for any third parties to generate,
manufacture, use, transport, transfer, store, handle, treat,
discharge, release or dispose of, Hazardous Substances to or
at any location other than a site lawfully permitted to
receive such Hazardous Substances for such purposes, nor have
the Companies 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 Laws. Except as does not
result in a Material Adverse Effect, the Companies have not
generated, manufactured, used, stored, handled, treated,
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, any Hazardous Substances upon property currently
or previously owned or leased by them, except in material
compliance with all applicable Environmental Laws and
Environmental Permits, for the past five (5) years;
(iv) For the past five (5) years, the Companies have
not at any time received any written notice from any
Governmental Agency or any other person that any aspect of the
Business or any of the assets of the Companies are, or have
been, in material violation of any Environmental Law or
Environmental Permit, or that the Companies are or have been
responsible (or potentially responsible) for the cleanup or
remediation of any Hazardous Substances at any location that
remain outstanding or unresolved in any manner;
(v) For the past five (5) years, the Companies have
not at any time been subject to any, and the Companies are
currently not subject to any, pending or, to the knowledge of
the Seller, threatened litigation or proceedings in any forum,
judicial or administrative, involving a demand for damages,
injunctive relief, penalties, or other potential liability
with respect to violation of any Environmental Law or
Environmental Permit;
(vi) The Companies have at all times timely filed all
material reports and notifications required to be filed with
respect to all of the assets and the Business,
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and have generated and maintained all required material
records and data concerning the Business under all applicable
Environmental Laws;
(vii) No condition has ever existed and no event has
ever occurred with respect to any property used in the
Business, or by any direct or indirect subsidiary that was at
any time owned by the Companies, any predecessor to the
Companies or any person that is or was an Affiliate of the
Companies (including any property or subsidiary that has been
sold, transferred or disposed of or for which any lease has
terminated) that in any case is reasonably likely, with or
without notice, passage of time or both, to give rise to any
present or future material liability of the Companies pursuant
to any Environmental Law, or to have a Material Adverse
Effect;
(viii) The Companies have not for the past three (3)
years generated, handled, manufactured, treated, stored, used,
shipped, transported, transferred, or disposed of, nor have
the Companies 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 Substances to or at a site which,
pursuant to CERCLA or any similar state law, has been placed
or been proposed for placement on the National Priorities List
or its state equivalent. The Companies have never received
notice, and the Sellers have no knowledge of any facts that
could give rise to any notice, that the Companies are a
potentially or actually responsible party for a federal or
state environmental cleanup site or for corrective action
under any Environmental Law. The Companies have never
submitted or been required to and have failed to so submit any
such notice pursuant to Section 103(c) of CERCLA with respect
to any property ever owned, leased or used by the Companies.
The Companies have never received any written request for
information in connection with any federal or state
environmental cleanup site, or in connection with any of the
real property or premises where the Companies have
transported, transferred or disposed of Hazardous Substances
or other wastes; and
(ix) There are no above-ground storage tanks on, or
underground storage tanks under, the Real Property.
(b) Schedule 4.21 identifies: (i) all material environmental
audits, assessments or occupational health studies, of which the
Companies are aware, undertaken by the Companies, or their agents, or
by any Governmental Agency, or by any third party, relating to or
affecting the Companies or any of the Real Property that are in Sellers
possession or custody, and that were prepared or dated within the past
six (6) years; and (ii) all material outstanding or unresolved
citations issued under OSHA or the Environmental Laws, relating to or
affecting the Companies or any of the Real Property.
(c) Schedule 4.21 contains a list of the assets of the
Companies that are known to Sellers to contain asbestos or material
amounts of asbestos-containing material. The Companies have operated,
and continue to operate, in material compliance with all
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Environmental Laws governing the handling, use and exposure
to, and disposal of, friable asbestos or friable asbestos-containing
materials. There are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Agency or third
party pending or, to Seller's knowledge, threatened against or directly
affecting the Companies, or any of their assets or operations relating
to the use, handling or exposure to, and disposal of, asbestos or
friable asbestos-containing materials in connection with their assets
and operations.
4.22 Tax Matters.
(a) All federal, and all material state, local and foreign
income, corporation and other Tax Returns have been filed for the
Companies, for all periods through and including the Closing Date as
required by applicable Law. All Taxes shown as due and owing on all
such Tax Returns have been paid. Each such Tax Return is accurate and
complete in all material respects, and the Companies have or will have
no additional liability for Taxes with respect to any Tax Return
heretofore filed or which was required by Law to be filed, other than
as reflected as liabilities on the Unaudited Financial Statements. The
amounts provided as a liability on the Unaudited Financial Statements
for all Taxes are adequate to cover all unpaid liabilities for all
Taxes, whether or not disputed, that have accrued with respect to or
are applicable to the period ended on and including the Closing Date or
to any years and periods prior thereto and for which the Companies may
be directly or contingently liable in their own right or as a
transferee of the assets of, or successor to, any Person. Except as set
forth in Schedule 4.22(a), none of the Tax Returns that include the
operations of the Companies are being audited or investigated by any
Governmental Agency. No written position has been taken on any Tax
Return with respect to the business or operations of the Companies for
a taxable year for which the statute of limitations for the assessment
of any Taxes with respect thereto has not expired that is contrary to
any publicly announced position of a Governmental Agency or, to the
knowledge of the Sellers, that is substantially similar to any position
which a Governmental Agency has successfully challenged in the course
of an examination of a Tax Return of the Companies.
(b) All Taxes that the Companies are required by Law to
withhold or collect, including without limitation, sales and use taxes,
and amounts required to be withheld for Taxes of employees and other
withholding taxes, have been duly withheld or collected and, to the
extent required, have been paid over to the proper Governmental
Agencies or are held in separate bank accounts for such purpose. All
information returns required to be filed by the Companies prior to the
Closing Date have been filed, and all statements required to be
furnished to payees by the Companies prior to the Closing Date have
been furnished to such payees, and the information set forth on such
information returns and statements is accurate and complete in all
material respects.
(c) There are no Tax Liens upon the properties or assets of
the Companies. Except as set forth on Schedule 4.22(c), the Companies
have not granted or been requested to grant any waiver of any statutes
of limitations applicable to any claim for Taxes.
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(d) None of the Sellers is a "foreign person" as defined in
Section 1445(f)(3) of the Code.
(e) Except as set forth in Schedule 4.22(e), the Companies are
not party, or otherwise subject, to any arrangement having the effect
of or giving rise to the recognition of a deduction or loss in a
taxable period ending on or before the Closing Date, and a
corresponding recognition of taxable income or gain in a taxable period
ending after the Closing Date, or any other arrangement that would have
the effect of or give rise to the recognition of taxable income or gain
in a taxable period ending after the Closing Date without the receipt
of, or entitlement to, a corresponding amount of cash (other than a
financing arrangement in the ordinary course of business).
(f) Except as set forth in Schedule 4.22(f), the Companies are
not a member of or party to any joint venture, limited liability
company, partnership or other arrangement or contract which is treated
as a partnership for federal income Tax purposes. The Companies are not
party to any tax sharing agreement.
(g) None of the assets of the Companies constitutes tax-exempt
bond financed property or tax-exempt use property within the meaning of
Section 168 of the Code, and none of the assets reflected on the
Unaudited Financial Statements is subject to a lease, safe harbor lease
or other arrangement as a result of which the Companies are not treated
as the owner for federal income Tax purposes.
(h) The Companies have not made or become obligated to make,
and will not as a result of any event connected with any transaction
contemplated herein become obligated to make, any payments that could
be nondeductible by reason of Section 280G or 162(m) of the Code.
(i) The Companies are not required to include in income any
adjustment pursuant to Section 481(a) of the Code, for any period after
the Closing Date, by reason of any voluntary or involuntary change in
accounting method (nor has any taxing authority proposed in writing any
such adjustment or change of accounting method).
(j) The Companies do not have any liability for Taxes of any
person other than itself under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign law).
(k) The Companies have not filed a consent pursuant to Section
341(f) of the Code (or any predecessor provision) or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Companies.
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(l) The Companies have not requested or received a ruling from
any taxing authority or signed a closing or other agreement with any
taxing authority that would affect any taxable period after the Closing
Date.
(m) Each of the Companies is a small business corporation as
defined in Section 1361 of the Code and since the taxable year
beginning January 1, 1987 has had in effect a valid election to be
treated as an "S" corporation for federal income Tax purposes under the
Code and in the State of New Jersey. Nimco files a state income Tax
Return only in New Jersey. Naporano Iron files state income tax returns
only in New York and New Jersey and files an income tax return with the
City of New York, New York.
(n) None of the assets of the Companies are subject to the
built-in gains tax under Section 1374 of the Code.
4.23 Employee Benefit Plans.
(a) Except as set forth on Schedule 4.23(a), none of the
Companies nor any of their respective ERISA Affiliates maintains, is a
party to, participates in, or has any liability or contingent liability
with respect to any of the following to the extent it covers employees
of the Companies: (i) "employee welfare benefit plan" or "employee
pension benefit plan" (as those terms are defined in Sections 3(1) and
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), respectively) other than a multi-employer plan (as defined
in Section 3(37) of ERISA); (ii) retirement or deferred compensation
plan, incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe
benefit arrangements for any current or former employee, director,
consultant, officers, members, managers or agent, whether pursuant to
contract, arrangement, custom or informal understanding, which does not
constitute an employee benefit plan (as defined in Section 3(3) of
ERISA); or (iii) employment agreement or consulting agreement. Except
as set forth on Schedule 4.23(a), none of the plans described on such
schedule 4.23(a) (the "Benefit Plans") is subject to Title IV of ERISA.
Each of the Benefit Plans complies and has been administered in form
and operation in all material respects with all applicable requirements
of applicable Law, and to the knowledge of the Sellers no event has
occurred which will or could cause any such Benefit Plan to fail to
comply with such requirements, and no notice has been issued by any
Governmental Agency questioning or challenging such compliance. Each
Benefit Plan which constitutes a "group health plan" (as defined in
Section 607(i) of ERISA or Section 4980B(g)(2) of the Code), has been
operated in compliance with the health care continuation requirements
of Section 601, et. seq., of ERISA or Section 4980B of the Code and the
regulations thereunder ("COBRA") and the portability and
nondiscrimination requirements of Sections 9801 and 9802 of the Code
and Section 701, et. seq. of ERISA, to the extent such requirements are
applicable.
(b) The Companies have delivered to MTLM, with respect to each
Benefit Plan, to the extent applicable, correct and complete copies of:
(i) the document establishing or
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embodying the plan and all trust agreements relating thereto
or the funding thereof, each as in effect on the date hereof; (ii) the
most recent Annual Report (Form 5500 Series) and accompanying
schedules; (iii) the most recent Internal Revenue Service determination
letter; (iv) the most recent summary plan description; (v) the most
recent accountant's opinion of the plan's financial statements; (vi) to
the extent reasonably requested by MTLM with respect to any Benefit
Plan sponsored by the Companies any contracts relating to any Benefit
Plan or the funding thereof, including all insurance contracts,
administration contracts, investment management agreements,
subscription and participation agreements, and record keeping
agreements, as in effect on the date hereof; and (vii) in the case of
any Benefit Plan which is not in written form, an accurate description
of such Benefit Plan as in effect on the date hereof, and there have
been no material changes in the financial condition in the respective
Benefit Plans from that stated in the annual reports and actuarial
reports supplied.
(c) None of the Companies nor any of their respective ERISA
Affiliates have any obligations under any Benefit Plans or otherwise to
provide post-employment medical or life benefits, except as
specifically required by COBRA or other applicable law.
(d) None of the Companies nor any of their respective ERISA
Affiliates has engaged in any "prohibited transaction" (within the
meaning of Section 4975 of the Code or Section 406 of ERISA) with
respect to any Benefit Plan, nor to the knowledge of the Sellers has
there otherwise been any prohibited transaction with respect to any
Benefit Plan.
(e) Other than routine claims for benefits, there are no
pending or, to the knowledge of the Sellers and their respective ERISA
Affiliates, threatened, actions, suits or claims against any Benefit
Plan or the assets thereof or by any Benefit Plan against any Person,
and, to the knowledge of the Sellers, no facts exist which could give
rise to any such actions, suits or claims.
(f) With respect to any Benefit Plan which is intended to be
qualified under Section 401(a) of the Code: (i) each such plan has
received a favorable determination letter issued with respect thereto
by the Internal Revenue Service and there have not been any material
amendments to any such plan which are not the subject of a favorable
determination letter; and (ii) to the knowledge of the Sellers no event
has occurred that would or could give rise to disqualification of any
such plan under such sections or to a tax under Section 511 of the
Code.
(g) None of the assets of any Benefit Plan are invested in
employer securities or employer real property.
(h) There have been no acts or omissions by the Companies or
any of their respective ERISA Affiliates which have given rise to or
may give rise to material fines, penalties, taxes or related charges
under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code
for which the Companies or any of their respective ERISA Affiliates may
be liable.
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(i) None of the payments contemplated by the Benefit Plans
would, in the aggregate, constitute excess parachute payments (as
defined in Section 280G of the Code (without regard to subsection
(b)(4) thereof)).
(j) None of the Companies nor any of their ERISA Affiliates
maintains, is a party to, participates in or has any liability or
contingent liability with respect to any employee benefit plan,
program, policy or arrangement, other than multiemployer plans and the
Benefit Plans.
(k) There has been no act or omission that would impair the
ability of the Companies or any of their ERISA Affiliates (or any
successor thereto) to unilaterally amend or terminate any Benefit Plan.
(l) Each employee pension benefit plan which is a
multiemployer plan with respect to which, to the knowledge of the
Sellers, the Companies or any of its ERISA Affiliates may have any
liability or contingent liability (including liabilities that may be
incurred in the future as a result of the terms of collective
bargaining agreements that have been entered into as of the date
hereof) is listed on Schedule 4.23(b).
4.24 Employment and Labor Matters.
(a) Schedule 4.24 sets forth a true, accurate and complete
list of the names and hourly rates as of April 30, 1998 of all hourly
employees and the names, titles and annual compensation for all
salaried employees for calendar years 1996 and 1997. The Companies have
at all times conducted and are currently conducting their respective
businesses in compliance in all material respects with all applicable
Laws relating to employment and employment practices, terms and
conditions of employment, wages and hours and nondiscrimination in
employment.
(b) Except as set forth on Schedule 4.24, there is, and during
the past five (5) years there has been, no labor strike, dispute,
slow-down, work stoppage or other labor difficulty actually pending or
to the knowledge of the Sellers threatened against or involving the
Companies. No grievance or arbitration proceeding arising out of or
under any collective bargaining agreement between the Companies and
their respective employees is pending and no claim therefor has been
asserted. Except as set forth on Schedule 4.24, none of the employees
of the Companies are covered by any collective bargaining agreement, no
collective bargaining agreement is currently being negotiated, and no
attempt is currently being made or during the past three (3) years has
been made to organize any employees of the Companies to form or enter a
labor union or similar organization.
(c) Except as set forth on Schedule 4.24 and to the knowledge
of the Sellers, no executive, key employee, or group of employees has
any plans to terminate its employment with the Companies as a result of
this Agreement or otherwise. Schedule 4.24 contains a list
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of contracts, agreements or plans of the following nature,
whether formal or informal, and whether or not in writing, to which the
Companies are party or under which it has an obligation: (i) employment
agreements; (ii) employee handbooks; (iii) non-competition agreements;
and (iv) consulting agreements.
4.25 Insurance.
(a) Schedule 4.25(a) sets forth a true, accurate and complete
list of all policies of fire and casualty, liability, workmen's
compensation, title and other forms of insurance held by the Companies
and applicable to the Business or any asset of the Companies. All such
policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the Closing Date have
been paid (or will be paid by the Companies prior to the due dates
therefor), and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient
for compliance with: (i) all requirements of Law; and (ii) all
Contracts to which the Companies are a party. Except as set forth on
Schedule 4.25(a), the Companies have not been refused any insurance
with respect to its assets or the operations of the Business, and its
coverage with respect thereto has not been limited by any insurance
carrier to which it has applied for any such insurance or with which it
has carried insurance, during the last three (3) years. To the
knowledge of Sellers and the Supervisor of Environmental Safety of the
Companies and except as set forth on Schedule 4.25(a), there are no
outstanding requirements or written recommendations made by, or on
behalf of, any insurance company that issued a policy with respect to
the assets or the operations of the Business requiring or recommending
the taking of any action with respect to the assets or the operations
of the Business.
(b) Schedule 4.25(b) sets forth a true, accurate and complete
list of all claims that have been made by the Companies within the past
three (3) years under any workmen's compensation, general liability,
property or other insurance policy held by the Companies with respect
to the assets or the operations of the Business. Except as set forth on
Schedule 4.25(b), there are no pending or to the knowledge of the
Sellers threatened claims under any insurance policy with respect
thereto. The claim information set forth on Schedule 4.25(b) includes
the following information with respect to each accident, loss, or other
event: (i) the identity of the claimant; (ii) the date of the
occurrence; (iii) the status as of the report date; and (iv) the
amounts paid or expected to be paid or reserved.
4.26 Brokerage. Except for McDonald & Company Securities, Inc.
("McDonald") no broker or finder has acted directly or indirectly for the
Companies in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect thereof based in any way on agreements, arrangements
or understandings made by, or on behalf of, the Sellers or the Companies.
4.27 Capital Improvements. Schedule 4.27 sets forth a true, accurate
and complete list of all of the capital improvements and purchases and other
capital expenditures in excess of $50,000 to which the Companies have committed
with respect to the Business or for which it has contracted
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with respect to the Business, and which have not been completed prior to the
date hereof the cost and expense reasonably estimated to complete such work and
purchases (the "Capital Expenditure Budget").
4.28 Computer System. Except as set forth on Schedule 4.28, since
December 31, 1997 the Companies have not experienced any significant
interruption or downtime that has materially affected the Company's ability to
maintain its books and records or generate the financial reports customarily
generated by the Company in the ordinary course of business.
4.29 [Not Used.]
4.30 No Conflict of Interest. Except as set forth on Schedule 4.30,
neither the Companies nor any of their Affiliates has any direct or indirect
interest in any other Person which conducts a business similar to, or in
competition with, the Business.
4.31 [Not Used.]
4.32 Records. The copies of the articles of incorporation and by-laws
of the Companies that were provided to MTLM are true, accurate and complete and
reflect all amendments made through the date of this Agreement. The minute books
for the Companies provided to MTLM for review contain the true signatures of the
persons purporting to have signed them, and such minute books contain an
accurate record of all corporate actions of the shareholders and directors (and
any committees thereof) of the Companies taken by written consent or at a
meeting since January 1, 1993. All material corporate actions taken by the
Companies have been duly authorized or ratified. The stock ledgers of the
Companies, as previously provided to MTLM, contain accurate and complete records
of all issuances, transfers and cancellations of shares of the capital stock of
the Companies.
4.33 Accuracy of Statements. The representations and warranties by the
Sellers, and as each has been amended or supplemented in accordance herewith or
therewith, in this Agreement, and any Related Agreement, taken as a whole do not
contain or will not contain any untrue statement of a material fact or omit or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading, taken as a whole, and as each has been amended or supplemented in
accordance herewith or therewith.
4.34 Investment Intent. The Sellers represent that: (i) the Sellers are
acquiring the MTLM Common Stock pursuant to this Agreement solely for the
account of the Sellers for investment purposes and not with a view to the
distribution thereof within the meaning and in violation of the Securities Act;
(ii) the Sellers are accredited with knowledge and experience in business and
financial matters; and (iii) the Sellers have had access to all MTLM SEC Reports
filed by MTLM during the last two (2) fiscal years, and have had the opportunity
to obtain additional information as desired to evaluate the merits and risks
inherent in holding the MTLM Common Stock.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF MTLM
MTLM hereby represents and warrants to the Sellers as follows:
5.1 Due Organization. MTLM is a corporation duly organized, validly
existing and in good standing under the laws of the state of Illinois, with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its respective businesses as now owned, leased and operated.
MTLM is licensed or qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the nature of the properties
owned, leased or operated by it and the businesses transacted by it require such
licensing or qualification.
5.2 Due Authorization. MTLM has full requisite power and authority to
execute, deliver and perform this Agreement, the Related Agreements, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by MTLM of this Agreement, the Related Agreements, and
the consummation by MTLM of the transactions contemplated hereby and thereby
have been duly and validly approved by the board of directors (or its executive
committee) of MTLM, and no other actions or proceedings on the part of MTLM are
necessary to authorize the execution, delivery and performance by MTLM of this
Agreement, the Related Agreements, or the transactions contemplated hereby and
thereby. MTLM has duly and validly executed and delivered this Agreement and has
duly and validly executed and delivered (or prior to or at the Closing will duly
and validly execute and deliver) the Related Agreements. This Agreement
constitutes and the Related Agreements upon their execution and delivery will
constitute legal, valid and binding obligations of MTLM enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally, by equitable limitations on the availability of specific remedies and
by principles of equity.
5.3 Consents and Approvals of Governmental Agencies and Other Persons.
Neither the execution or delivery of this Agreement or any Related Agreement by
MTLM, nor the consummation by MTLM of the transactions contemplated hereby or
thereby or compliance by MTLM with, or fulfillment by, MTLM of the terms and
provisions hereof or thereof, requires any consent, approval or authorization
of, or declaration, filing or registration with, or permit, license or order
from, any Governmental Agency, or any other Person or entity.
5.4 Brokerage. No broker or finder has acted directly or indirectly for
MTLM in connection with this Agreement or the transactions contemplated hereby,
and no broker or finder is entitled to any brokerage or finder's fee or other
commission in respect thereof based in any way on agreements, arrangements or
understandings made by, or on behalf of, MTLM.
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5.5 MTLM Common Stock. MTLM has taken all action necessary to authorize
and approve the issuance of the MTLM Common Stock at the Closing Date. The MTLM
Common Stock will, when issued in accordance with this Agreement, be validly
issued, fully paid and nonassessable. There are no statutory or contractual
shareholders' preemptive rights or rights of refusal with respect to the
issuance of the MTLM Common Stock upon execution of this Agreement or
consummation of the transactions contemplated hereby.
5.6 SEC Filings. MTLM has filed and made available to the Sellers all
MTLM SEC Reports for the past two (2) years. The MTLM SEC Reports: (i) at the
time filed, complied in all material respects with the applicable requirements
of the Exchange Act; and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such MTLM SEC Reports or necessary in
order to make the statements in such MTLM SEC Reports, in the light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of MTLM included in the MTLM SEC Reports ("MTLM
Financial Statements") complied when filed as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC and NASDAQ with respect thereto, and were, when filed, in
accordance with the books and records of MTLM, complete and accurate in all
material respects, and present fairly the consolidated financial position and
the consolidated results of operations, changes in stockholders' equity and cash
flows of MTLM and its subsidiaries as of the dates and for the periods
indicated, in accordance with GAAP, subject in the case of interim financial
statements to normal year-end adjustments and the absence of certain footnote
information.
5.7 SEC Filings Correct and Complete. As of the date hereof, the MTLM
SEC Reports (taken as a whole, and as each has been supplemented or amended by
subsequent filings), do not contain any untrue statement of a material fact or
omit to state a material fact necessary, in light of the circumstances under
which they were made, to make the statements made in the MTLM SEC Reports not
misleading (taken as a whole, and as each has been supplemented or amended by
subsequent filings). Except as otherwise disclosed in the MTLM SEC Reports,
there are no actions, suits, mediations, arbitrations, regulatory proceedings or
other litigation, proceedings or governmental investigations pending or to the
knowledge of MTLM threatened against MTLM or other events which would have a
material adverse effect on the business, operating assets, liabilities, results
of operation, cash flows or financial condition of MTLM taken as a whole.
ARTICLE VI
COVENANTS OF THE SELLERS
6.1 Implementing Agreement. Subject to the terms and conditions hereof,
the Sellers shall take all actions reasonably required of them to fulfill their
obligations under the terms of this Agreement and shall otherwise use
commercially reasonable efforts to facilitate the consummation of the
transactions contemplated hereby. Except as otherwise expressly permitted
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hereby, the Sellers shall not take any action that would have the effect of
preventing or impairing the performance of their obligations under this
Agreement.
6.2 Consents and Approvals. The Sellers shall use commercially
reasonable efforts to obtain all consents, approvals, certificates and other
documents required in connection with the performance by them of this Agreement
and the consummation of the transactions contemplated hereby, including, but not
limited to, all such consents and approvals by each party to any of the
Contracts; provided that MTLM shall be consulted prior to any contact being made
by either Company (or any representative of the Companies) with any third party
to obtain any such consent or approval. The Sellers shall cause the Companies
and their Affiliates to, make all filings, applications, statements and reports
to all Governmental Agencies and other Persons which are required to be made
prior to the Closing Date, by or on behalf of, the Companies, or any of their
respective Affiliates pursuant to any applicable Law or Contract in connection
with this Agreement and the transactions contemplated hereby, including prompt
filings (within two Business Days after execution hereof) under the HSR Act and
expedited submission of all materials required by any Governmental Agency in
connection with such filings.
6.3 Conduct of the Companies. The Sellers covenant and agree that,
except as otherwise approved by MTLM in writing after date hereof and prior to
the Closing, and except as otherwise permitted by this Agreement, the Sellers
shall cause the Companies to:
(a) conduct the Business only in the ordinary course of
business consistent with past practice;
(b) use reasonable efforts to preserve its assets, businesses
and relationships with customers, suppliers and others having business
relationships with each of them, and to retain the services of present
officers, employees and agents;
(c) not sell, lease, mortgage, pledge or otherwise acquire or
dispose of any properties or assets, except in the ordinary course of
business consistent with past practice, and not grant any security
interest in any of its assets other than for purchase money security
interests or under the Fleet Loan Agreement;
(d) except for increases or changes in the ordinary course of
business consistent with past practice and except as required by Law,
not increase or otherwise change the rate or nature of the compensation
(including wages, salaries, bonuses and other benefits) paid or payable
to any of its respective employees;
(e) not: (i) amend its Articles of Incorporation or By-Laws;
(ii) issue or sell any shares of its capital stock of any class, or
issue or sell any securities convertible into, or options with respect
to, or warrants to purchase or rights to subscribe to, any shares of
its capital stock, or enter into any agreement obligating it to do any
of the foregoing; or (iii) authorize or pay any dividend, distribution
or split, combine or reclassify any common stock of the Companies or
redeem, purchase, acquire or offer to acquire any outstanding shares of
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common stock of the Companies, except for distributions to the Sellers
of certain assets of the Companies described in Schedule 6.3;
(f) not make any changes in its accounting principles or
practices;
(g) other than as contemplated by the Capital Expenditure
Budget not make any capital expenditures (or commitments therefor) in
excess of $75,000;
(h) not enter into any contract involving the payment of an
aggregate amount in excess of $75,000 or involving obligations that
extend beyond one year, except in the ordinary course of business
consistent with past practice or as otherwise contemplated by the
Capital Expenditure Budget;
(i) not loan or advance funds to, or forgive any debt of, any
person, except in the ordinary course of business;
(j) incur any indebtedness for borrowed monies other than
borrowings in the ordinary course of business under the Fleet Loan
Agreement and indebtedness borrowed from MTLM and incurred in the
ordinary course of business and consistent with such practice;
(k) not make any Tax election or settle or compromise any
federal, state, local or foreign income Tax liability, or waive or
extend the statute of limitation in respect of any such Taxes; or
(l) not take or cause or permit to be taken any action which
could cause the termination of either the Companies' elections to be
treated as an "S" corporation under the Code;
(m) not enter into any commitment to do any of the foregoing.
6.4 Access to Information. The Sellers shall cause the officers,
directors, employees and agents of the Companies to afford the officers,
employees, attorneys, accountants, environmental consultants and other agents of
MTLM reasonable access during normal business hours which does not interfere
with the operations of the Companies, from the date hereof to the Closing, to
the officers, employees, agents, properties, books and records of the Companies.
The Sellers shall, or shall cause the Companies to, furnish MTLM all financial,
tax, operating and other data and information relating to the Companies as MTLM
through its officers, employees, attorneys, accountants, environmental
consultants or agents, may reasonably request.
6.5 Resignation of Officers and Directors. The Sellers shall, or shall
cause the Companies to deliver at closing to MTLM, the resignation of the
current officers and directors of the Companies from such offices (other than
William Schmeidel and such other officers and
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directors identified in writing to the Sellers no later than two (2) Business
Days prior to the Closing Date).
6.6 Exclusivity. The Sellers shall not, and shall not permit the
Companies or any of the officers, directors or employees or any financial
advisors, brokers, shareholders of the Companies or any Person acting on behalf
of the Companies, to consider, solicit or negotiate, or cause to be considered,
solicited or negotiated on behalf of the Companies, or provide or cause to be
provided information to any third party in connection with, any proposal or
offer from a third party with respect to the acquisition of any or all of the
Companies or the Shares, or all or substantially all of its assets, until the
date, if any, that the transactions contemplated by this Agreement have been
terminated by the parties in accordance with the terms of this Agreement.
6.7 Interim Financial Statements. The Sellers shall or shall cause the
Companies to provide to MTLM as soon as practicable after the end of each
calender month prior to the Closing Date, combined financial statements of the
Companies, consisting of a balance sheet as of the end of such month and an
income statement and statement of cash flows for that month and for the portion
of the year then ended (the "Interim Financial Statements"). Each set of Interim
Financial Statements, when delivered to MTLM, shall be accompanied by a
certificate of the Chief Financial Officers of the Companies certifying that
such Interim Financial Statements were prepared from the books and records of
the Companies and were prepared on a basis consistent with past practices of the
Companies (except for footnote disclosure and subject to customary year end
adjustments).
6.8 Trading in MTLM Common Stock. Except as otherwise expressly
consented to by MTLM, from the date hereof until the Closing Date, none of the
Sellers (individually or collectively), the Companies or any Affiliate thereof
shall directly or indirectly purchase or sell (including short sales) any shares
of MTLM Common Stock or puts, calls, options or other derivative securities
relating to MTLM in any transactions effected on NASDAQ or otherwise.
6.9 Tax Indemnity.
(a) For purposes of this Agreement, "Tax Indemnification
Period" means the period (including all prior taxable years) ending on
and including the Closing Date. For any taxable year of the Companies
that does not end on, and would otherwise extend beyond, the Closing
Date, there shall be a deemed short taxable year ending on and
including such date and a second deemed short taxable year beginning on
and including the day after such date. For purposes of allocating gross
income and deductions between deemed short taxable years, all amounts
of income and deduction shall be deemed to have accrued pro rata during
the actual taxable years of the Companies, except for items of income
or loss arising from an extraordinary event, which shall be reflected
in the period in which such event occurred.
(b) The Sellers agree to jointly and severally indemnify the
MTLM Indemnified Parties against, and agrees to hold each of them
harmless from, (i) any and all Taxes with respect to the Companies for
any period included in the Tax Indemnification Period and that have not
been paid prior to the Closing Date or reserved on the Closing Date
Balance Sheet
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and (ii) any and all Taxes with respect to the Companies arising under
Sections 1374 and 1375 of the Code in connection with the Election. Any
Taxes attributable to the operations of the Companies payable as a
result of an audit of any Tax Return shall be deemed to have accrued in
the period to which such Taxes are attributable.
(c) Each party shall have the right, at its own expense, to
control and defend any audit or proposed assessment or determination by
an Governmental Authority, to initiate any claim for refund, to file
any amended return, and to contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed
adjustment of Taxes (including the right to agree to any assessment,
deficiency or settlement thereof) for any taxable period for which that
party is charged with responsibility for filing a Tax Return; provided,
however, that in the event that a party not charged with responsibility
for filing a Tax Return under this agreement is paid a refund, such
party shall pay such refund to the party so charged within seven days
of receipt of such refund. MTLM shall as promptly as practicable and in
any event within 20 days following receipt thereof forward to Sellers
all written notifications and other written communications from any
Governmental Authority relating to any audit, examination, assessment
or other proceeding regarding a liability for Taxes for any taxable
period, for which Sellers are charged with payment or indemnity
responsibility under this Agreement (a "Proceeding"), and MTLM shall
execute or cause to be executed any powers of attorney or other
documents requested by Sellers to enable Sellers to take any and all
actions desired by Sellers with respect to any Proceedings for any such
period.
6.10 Supplemental Information. From time to time prior to the Closing,
the Sellers shall, or shall cause the Companies to, disclose promptly in writing
to MTLM any matter hereafter arising which, if existing, occurring or known at
the date of this Agreement would have been required to be disclosed to MTLM or
which would render inaccurate any of the representations, warranties or
statements set forth in Article IV hereof. If MTLM consummates the transactions
contemplated by this Agreement despite a breach of any representation or
warranty disclosed pursuant to this Section 6.10, then such disclosure shall be
deemed to cure such breach of such representation or warranty to the extent of
such disclosure.
6.11 Environmental Expenses.
(a) Environmental Work. The Sellers shall be responsible for
and liable to pay all costs and expenses whatsoever relating to
conducting the following work to correct certain environmental
conditions (the "Identified Environmental Work"):
(i) at the Companies' Nimco Shredding site, Sellers
shall construct and install all appropriate equipment and
infrastructure so that any stormwater that is discharged or
emitted from that facility will receive, before it is
discharged, appropriate processing and/or treatment through an
oil water separator, so that any oil or petroleum substances
that may be discharged with the stormwater are
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consistent with the facility's NJPDES/DSW General Permit for
Stormwater Discharges; and
(ii) at the Companies' Foot of Hawkins Street site,
Sellers shall construct a shed appropriate for storing in a
safe and appropriate manner all of the aluminum dross that is
generated or stored at that facility.
The Companies, under the direct supervision and control of Sellers,
shall complete the Identified Environmental Work as quickly as is practicable.
Sellers may use their own consultants or contractors of their own choosing, to
be retained by the Companies at Sellers' sole cost and expense to accomplish the
Identified Environmental Work, but MTLM and/or consultants retained by MTLM
shall have the right at MTLM's sole cost and expense, to review and inspect the
plans for and implement the Identified Environmental Work, and before causing
the conduct of any and all material phases of the Identified Environmental Work,
Sellers must obtain the approval of MTLM, which approval shall not be
unreasonably withheld.
With respect to the portion of the Leased Real Property known as Upland
of Berths 61 and 63 at Port Newark (the premises currently being vacated at Port
Newark) (the "Upland Berths"), Sellers shall promptly reimburse the Companies
for all costs and expenses for any and all environmental site investigations or
remediations that may be necessary to comply with the applicable requirements
contained in the lease agreements between Naporano Iron and the Port Authority
of New York and New Jersey (the "Port Authority") applicable to Naporano Iron's
vacating and surrendering the Upland Berths to the Port Authority.
(b) Indemnity. The Sellers shall indemnify, defend and hold
harmless MTLM and the Companies from any and all Losses that arise in connection
with any site investigation or remediation that may be reasonably necessary to
comply with applicable Environmental Laws and that are reasonably likely to be
required by a Governmental Agency with jurisdiction as a result of environmental
conditions which existed or activities which occurred at or are related to the
Companies' operations prior to Closing other than the Identified Environmental
Work (the "Indemnified Environmental Work"). Sellers' obligations under this
Section 6.11(b) shall terminate on the fifth anniversary of the Closing Date,
with the exception of those Losses associated with activities contemplated
thereunder that had already been commenced or for which Sellers have been
provided notice in accordance with Section 13.9 of this Agreement, as of the
fifth anniversary of the Closing. Losses occurring under this Section 6.11(b)
are subject to the provisions of Article XXII including counting toward the
$1,000,000 threshold and the $8,000,000 indemnification limitation specified in
Section 12.8.
(c) Consultants and Approvals. With respect to actions
undertaken in accordance with the last paragraph of Section 6.11(a) and Section
6.11(b), MTLM shall select the environmental consultant(s) to perform such
actions, who shall perform the work at MTLM's direction. MTLM shall instruct
such environmental consultant(s) to develop a course of action or remediation
plan which meets all of the following criteria (collectively, the "Cleanup
Criteria"): (i) such course of action or remediation plan is the lowest cost
practicable response to such environmental condition,
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(ii) such course of action or remediation plan complies with applicable
Environmental Law in the opinion of local environmental counsel and (iii) such
course of action or remediation plan does not in the good faith opinion of any
of the Sellers or Albert A. Cozzi, President and Chief Operating Officer, or his
successor, materially interfere with the operations of the Business. Sellers
shall be afforded a reasonable time to review and comment on any course of
action or remediation plans prepared by said environmental consultant(s) for any
environmental work proposed in connection with such activities and MTLM shall
provide Sellers with reasonable notice of any implementation date of such course
of action or remediation plan; provided however, that the foregoing shall not
restrict MTLM from taking any course of action or implementing any remediation
plan (an "Imminent Action") with respect to any environmental condition which
presents an imminent health risk or imminent risk to the environment. If Sellers
disagree that any proposed course of action or remediation plan (other than an
Imminent Action) meets the Cleanup Criteria then the Sellers shall notify MTLM
of such disagreement in writing prior to the implementation date of such
proposed course of action or remediation plan and within five Business Days
after such notice, submit to MTLM a written alternative proposal to such
proposed course of action or remediation plan which describes in reasonable
detail how such alternative proposal better meets the Cleanup Criteria (the
"Alternative Proposal"). If MTLM does not agree with the Alternative Proposal
then MTLM, Sellers and their respective engineers, consultants and legal
advisers shall negotiate in good faith to develop a proposed course of action or
remediation plan which best meets the Cleanup Criteria. If the parties are
unable to agree within thirty (30) days, MTLM may nonetheless proceed with its
proposed course of action or remediation plan and the liability for Losses
relating to such course of action or remediation plan shall be submitted to
binding arbitration in accordance with Section 12.10. If Sellers disagree that
an Imminent Action complied with, or will comply with, the Cleanup Criteria
taking into consideration the facts available to MTLM at the time of
implementation of the Imminent Action and the time in which MTLM had to
implement such Imminent Action, then Sellers shall notify MTLM of such
disagreement and submit to MTLM a written alternative proposal to such Imminent
Action within thirty (30) days of implementation of such Imminent Action which
describes in reasonable detail how such alternative proposal better meets the
Cleanup Criteria taking into consideration the facts available to MTLM at the
time of the implementation of the Imminent Action and the time in which MTLM had
to implement such Imminent Action. If MTLM, on the one hand, and Sellers, on the
other hand, do not agree as to the others proposal regarding an Imminent Action,
then the parties shall negotiate in good faith to resolve their differences and
allocate liability for the Losses relating to such Imminent Action. If the
parties are unable to agree within thirty (30) days with respect to the disputed
Imminent Actions, such matters shall be submitted to binding arbitration
pursuant to Section 12.10. Any such activities shall be conducted in such a
manner so as to minimize disruption of the Business. MTLM shall provide Sellers
and their representatives access at all reasonable times after the Closing Date
to the relevant portions of the Companies' properties to monitor Indemnified
Environmental Work and any environmental work at the Upland Berths.
6.12 [Not Used.]
6.13 [Not Used.]
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6.14 Indemnified Litigation Matters. Sellers shall indemnify and hold
harmless the Companies and their Affiliates from and after Closing with respect
to any Losses incurred with respect to the litigation matters set forth on
Schedule 6.14 net of any insurance proceeds received by the Companies prior to
or after the date hereof. If the Companies' recoveries from any insurance
proceeds with respect to any such Loss exceeds the amount of such Loss, MTLM
shall cause the Companies to promptly pay the amount of such excess to the
Sellers.
6.15 Port Authority Capital Expenditures. Sellers shall indemnify and
hold harmless the Companies and their Affiliates from and after Closing Date
from any costs and expenses incurred by the Companies which are necessary to
complete the capital expenditures referred to in the Capital Expenditure Budget
with respect to the Leased Real Property leased from the Port Authority to the
extent that such costs and expenses payable by the Companies under the
applicable lease agreement with the Port Authority exceed $1,000,000.
6.16 Pension Withdrawal Liability. In the event that the Companies
withdraw from the Local 734 Pension Fund on or before August 1, 2000 (other than
in violation of the applicable collective bargaining agreement), which
withdrawal results in withdrawal liability under Title IV of ERISA to the
Companies, Sellers will indemnify and hold the Companies harmless from any
Losses constituting such withdrawal liability and attributable to periods prior
to the Closing Date. Prior to the Closing, the Sellers will use commercially
reasonable efforts to obtain a withdrawal liability estimate from the Trustees
of the Local 734 Pension Fund with respect to any withdrawal liability relating
to periods prior to the Closing Date. If such estimate has not been obtained
prior to Closing, MTLM shall use commercially reasonable efforts to obtain such
estimate thereafter.
ARTICLE VII
COVENANTS OF MTLM
7.1 Implementing Agreement. Subject to the terms and conditions hereof,
MTLM shall take all actions reasonably required of it to fulfill its obligations
under this Agreement and shall use commercially reasonable efforts to facilitate
the consummation of the transactions contemplated hereby.
7.2 Consents and Approvals. MTLM shall use commercially reasonable
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the perform ance of its obligations under this
Agreement and the consummation of the transactions contemplated hereby. MTLM
shall make all filings, applications, statements and reports to all Governmental
Agencies and other Persons which are required to be made prior to the Closing
Date by, or on behalf of, MTLM or any of its Affiliates pursuant to any
applicable Law or Contract in connection with this Agreement and the
transactions contemplated hereby, including prompt filings under the HSR Act and
expedited submission of all materials required by any Governmental Agency in
connection with such filings.
7.3 Board Appointment. Subject to the approval of MTLM's shareholders,
MTLM shall promptly cause Joseph F. Naporano or Andrew J. Naporano, Jr. (as MTLM
and the Sellers shall
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mutually agree) to be appointed to the board of directors of MTLM until the
earlier of: (i) the third anniversary of the Closing Date; and (ii) the date
upon which the Sellers collectively own less than 50% of the MTLM Common Stock
issued to them pursuant to the terms of this Agreement (inclusive of the Escrow
Shares).
7.4 Guarantee Releases. To the extent that Sellers and their Affiliates
are not unconditionally released and discharged as of Closing from any
obligations any of them may have under any Sellers Guarantees, MTLM shall
indemnify and hold harmless the Sellers and their Affiliates against any Losses
arising therefrom and shall use from and after Closing commercially reasonable
efforts to obtain the unconditional release and discharge of the Sellers and
their Affiliates from the Sellers Guarantees.
7.5 Office of the President. Following the Closing Date, MTLM shall
invite Andrew J. Naporano, Jr. to join and attend all the meetings of the Office
of the President of MTLM.
7.6 Disclosure to Sellers. MTLM hereby covenants and agrees to provide
promptly Sellers with all MTLM SEC Reports and press releases from the date
hereof to the Closing Date. Prior to Closing, MTLM shall cause its officers,
directors and employees to be reasonably available to Sellers during normal
business hours to ask questions of, and receive answers from such individuals on
matters pertaining to MTLM and its Affiliates reasonably necessary for Sellers
to make an informed investment decision regarding the MTLM Common Stock.
7.7 Conduct of the Business. If the Closing Date occurs prior to the
date of the Closing Date Balance Sheet, MTLM agrees that, except as otherwise
approved by the Sellers in writing, it shall cause the Companies to comply with
Sections 6.3(a)-(k) and 6.3(m) hereof (other than with respect to obtaining the
consent of MTLM) from the Closing Date until the date of such Closing Date
Balance Sheet; provided, however, that if the Fleet Loan Agreement is
terminated, the Companies may incur indebtedness for borrowed money in the
ordinary course of business consistent with past practice under any credit
facility up to the amount that may be borrowed under the Fleet Loan Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE SELLERS
Each and every obligation of the Sellers under this Agreement to be
performed at the Closing, shall be subject to the satisfaction of the following
conditions at or before the Closing:
8.1 Truth of Representations and Warranties. The representations and
warranties of MTLM contained in Article V shall be, in all material respects,
true and accurate as of the date when made and as of the Closing Date.
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8.2 Performance of Covenants. MTLM shall have, in all material
respects, performed and complied with each and every covenant, agreement and
condition required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
8.3 No Governmental or Other Proceeding or Litigation. No order of any
Governmental Agency shall be in effect that restrains or prohibits the
transactions contemplated hereby, and no suit, action, or other proceeding by
any Governmental Agency shall have been instituted or threatened by any
Governmental Agency which seeks to restrain or prohibit the transactions
contemplated hereby. The applicable waiting period under the HSR Act shall have
expired or been earlier terminated without action by the Justice Department or
the Federal Trade Commission to prevent consummation of the transactions
contemplated by this Agreement.
8.4 Necessary Consents. The Companies and the Sellers shall have
received consents, in form and substance reasonably satisfactory to them, to the
transactions contemplated hereby from all appropriate Governmental Agencies and
from the other parties to all contracts, leases, agreements and permits set
forth on Schedule 8.4. In addition, the Companies shall have received evidence
(satisfactory to the Companies) that all necessary governmental filings have
been made by the parties, and that all related governmental waiting periods
(other than the HSR Act waiting period) have expired or have been terminated or
waived early.
8.5 Closing Deliveries. MTLM shall have furnished to the Sellers all of
the agreements, documents and items specified in Section 10.3.
8.6 Material Adverse Change in MTLM. Since the date of this Agreement,
there has been no change in MTLM's business, operating assets, liabilities,
results of operation, cash flows or financial condition which are material and
adverse to MTLM's business taken as a whole.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
MTLM
Each and every obligation of MTLM under this Agreement to be performed
at the Closing shall be subject to the satisfaction of the following conditions
at or before the Closing:
9.1 Truth of Representations and Warranties. The representations and
warranties of the Sellers contained in Article IV shall be, in all material
respects, true, accurate, and complete as of the date when made and at and as of
the Closing Date.
9.2 Performance of Covenants. The Sellers shall have, in all material
respects, performed and complied with each and every covenant, agreement and
condition required by this Agreement to be performed or complied with by them
prior to or on the Closing Date.
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9.3 No Governmental or Other Proceeding or Litigation. No order of any
Governmental Agency shall be in effect that restrains or prohibits the
transactions contemplated hereby, and no suit, action, or other proceeding by
any Governmental Agency shall have been instituted or threatened by any
Governmental Agency which seeks to restrain or prohibit the transactions
contemplated hereby. The applicable waiting period under the HSR Act shall have
expired or have been earlier terminated without action by the Justice Department
or the Federal Trade Commission to prevent consummation of this Agreement.
9.4 Necessary Consents. MTLM shall have received consents, in form and
substance reasonably satisfactory to MTLM to the transactions contemplated
hereby from all appropriate Governmental Agencies and from the other parties to
all contracts, leases, agreements and permits set forth on Schedule 9.4. In
addition, MTLM shall have received evidence (satisfactory to MTLM) that all
necessary governmental filings have been made by the parties and that all
related governmental waiting periods (other than the HSR Act waiting period)
have expired or have been terminated or waived early.
9.5 Absence of Material Adverse Change in the Companies. There shall
have been no changes in the business, properties or financial condition of the
Companies during the period from December 31, 1997 to the Closing Date which
would have a Material Adverse Effect.
9.6 Audit of Financial Statements. MTLM shall have received the results
of a completed audit of the financial statements of the Companies from Price
Waterhouse LLP including the related audit report of Price Waterhouse LLP,
satisfying all accounting and auditing procedures necessary for MTLM to report
the existence of this Agreement, the Related Agreements, and the transactions
contemplated hereby and thereby, immediately following their consummation in
accordance with all applicable rules and regulations under the Securities Act
and Exchange Act and all related interpretations of the SEC.
9.7 Previous Title Insurance Policies and Surveys. The Sellers shall
have procured and delivered to MTLM, copies of all existing title insurance
policies and copies (or originals) of surveys (amended as of March 5, 1998)
performed by a professional land surveyor.
9.8 Closing Deliveries. The Sellers shall have furnished MTLM all of
the agreements, documents and items specified in Section 10.2.
9.9 Updated Title Insurance. MTLM shall have received ALTA 1992 Owner's
title insurance policies insuring the Companies with respect to the Owned Real
Properties in each case in amounts reasonably determined by MTLM to be the fair
market values of such Owned Real Properties. Such insurance policies shall
insure that the Companies have the title to the Owned Real Property described in
Section 4.11. The cost of such title insurance policies will be borne solely by
MTLM.
9.10 Updated Surveys. MTLM shall have received current ALTA surveys of
the Owned Real Property and of the Leased Real Property leased from the Port
Authority which surveys shall
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be acceptable to the title insurance company issuing the title insurance
policies referred to in Section 9.9 to delete the general exceptions for survey
matters.
9.11 Estoppel Certificates. MTLM shall have received estoppel
certificates from the owners of the Leased Real Property which are Affiliates of
the Companies certifying to MTLM that the lease is in full force and effect, the
lease has not been amended except as stated on the certificate, that there are
no defaults by the Companies under the lease, that rent under the lease is
current and that a copy of the lease is attached as Exhibit I.
ARTICLE X
CLOSING; CLOSING DATE; CLOSING DELIVERIES
10.1 Time and Place. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to a
provision of Article XII, a closing ("Closing") will be held five (5) Business
Days after the conditions set forth in Articles VIII and IX have been satisfied
or otherwise waived at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois, 60603, at 10:00 A.M. Chicago time (or at such other
place and time as shall be agreed upon by the parties hereto) (the "Closing
Date").
10.2 Closing Deliveries of the Sellers. At Closing, in addition to any
other documents or agreements required under this Agreement, the Sellers shall
deliver to MTLM each of the following:
(a) The long-form articles of incorporation for each of the
Companies, certified by the Secretary of State of New Jersey, and dated
no more than thirty (30) calendar days prior to the Closing Date;
(b) A Certificate of Good Standing for the Companies issued by
the appropriate Governmental Agency in the State of New Jersey and in
each jurisdiction in which the Companies are qualified to conduct
business as a foreign corporation, and dated not more than thirty (30)
calendar days prior to the Closing Date;
(c) Certificates of the Secretary or an Assistant Secretary
from each of the Companies, dated the Closing Date, in form and
substance reasonably satisfactory to the Companies, certifying: (i) the
by-laws and Articles of Incorporation of the Companies; (ii) the
resolutions of the board of directors of the Companies, authorizing and
approving the execution, delivery, and performance of this Agreement,
and the transactions contemplated hereby; and (iii) incumbency and
signatures of the officers of executing this Agreement;
(d) A certificate, dated the Closing Date, of an executive
officer of the Companies certifying the compliance by the Companies
with Sections 9.1 and 9.2;
(e) The resignations of the officers and directors of the
Companies as set forth in Section 6.5;
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(f) The Employment Agreement between MTLM and Joseph Naporano,
duly executed by Joseph Naporano;
(g) The Employment Agreement between MTLM and Andrew Naporano,
Jr., duly executed by Andrew Naporano, Jr.;
(h) The Employment Agreement between MTLM and John Naporano,
duly executed by John Naporano;
(i) The Non-competition Agreement between MTLM and Joseph
Naporano;
(j) The Non-competition Agreement between MTLM and Andrew
Naporano, Jr. duly executed by Andrew Naporano, Jr.;
(k) The Escrow Agreement, duly executed by the Sellers, and
the Escrow Agent;
(l) A duly executed Opinion of Seller's Counsel;
(m) The Registration Rights Agreement, duly executed by the
Sellers and MTLM;
(n) Evidence of all consents, waivers or approvals required in
this Agreement to be obtained by the Sellers or the Companies pursuant
to Section 8.4 with respect to the consummation of the transactions
contemplated by this Agreement have been obtained;
(o) Stock certificates evidencing all of the Shares held by
the Sellers immediately prior to Closing, and such certificates shall
be either duly endorsed in blank or accompanied by duly executed stock
powers endorsed in blank and duly executed W-9 forms;
(p) Each Seller shall have delivered an affidavit stating,
under penalties of perjury, such Seller's U.S. taxpayer identification
number and that such Seller is not a "foreign person" as defined in
Section 1445 of the Code;
(q) A Certificate from McDonald in form and substance
reasonably satisfactory to MTLM acknowledging receipt of the
consideration payable to McDonald pursuant to Section 2.2 and fully
releasing and discharging the Companies from any and all liabilities,
obligations and other Losses relating to McDonald as a result of the
transactions contemplated hereby.
(r) The Option to Lease duly executed by the parties thereto;
(s) Executed certificates from the employees of the Companies
being issued shares of MTLM Common Stock pursuant to Section 2.2
acknowledging receipt of such shares and in each case accompanied by a
representation letter relating to Regulation D of
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the Securities Act in a form reasonably acceptable to MTLM and its
counsel and by a duly executed IRS Form W-9 in a form reasonably
acceptable to MTLM and its counsel; and
(t) Such other instruments, agreements, and documents as MTLM
may reasona bly request or as may be otherwise necessary to evidence
and effect the transactions contemplated by this Agreement.
10.3 Closing Deliveries of MTLM. At the Closing, in addition to any
other documents or agreements required under this Agreement, MTLM shall deliver
to the Companies the following:
(a) Certificates of the Secretary or an Assistant Secretary of
MTLM, dated the Closing Date, in form and substance reasonably
satisfactory to the Companies certifying: (i) the by-laws and Articles
of Incorporation of MTLM; (ii) the resolutions of the board of
directors of MTLM (or executive committee thereof), authorizing and
approving the execution, delivery, and performance of this Agreement,
and the transactions contemplated hereby; and (iii) incumbency and
signatures of the officers of MTLM executing this Agreement;
(b) Long-form certificates of incorporation or similar
instruments of MTLM certified by the Secretary of State of the State of
Illinois, and dated no more than ten (10) days prior to the Closing
Date;
(c) Certificates, dated the Closing Date, of an executive
officer of MTLM certifying the compliance by MTLM with Sections 7.1 and
7.2;
(d) Certificates of Good Standing for MTLM, issued by the
Secretary of State of Illinois and dated no earlier than ten (10)
calendar days prior to the Closing Date;
(e) Stock certificates representing that number of shares of
MTLM Common Stock required in Section 2.2(a);
(f) Stock certificates representing the Escrow Shares;
(g) The Employment Agreement between MTLM and Joseph Naporano,
duly executed by MTLM;
(h) The Consulting Agreement between MTLM and Joseph Naporano,
duly executed by MTLM;
(i) The Employment Agreement between MTLM and Andrew Naporano,
Jr., duly executed by MTLM;
(j) The Employment Agreement between MTLM and John Naporano,
duly executed by MTLM;
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(k) The Non-competition Agreement by and between MTLM and
Joseph Naporano, duly executed by MTLM;
(l) The Non-competition Agreement by and between MTLM and
Andrew Naporano, Jr., duly executed by MTLM;
(m) The Escrow Agreement, duly executed by MTLM;
(n) A duly executed Opinion of Purchaser's Counsel;
(o) The Registration Rights Agreement, duly executed by the
Sellers and MTLM;
(p) Such other instruments, agreements, and documents as the
Companies may reasonably request or as may be otherwise necessary to
evidence and effect the transaction, contemplated by this Agreement;
and
(q) Evidence of all consents, waivers or approvals required in
this Agreement to be obtained by the Sellers or the Companies pursuant
to Section 9.4 with respect to the consummation of the transactions
contemplated by this Agreement have been obtained.
ARTICLE XI
TERMINATION AND ABANDONMENT
11.1 Methods of Termination. Notwithstanding anything herein to the
contrary, this Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time:
(a) by mutual consent of MTLM and the Sellers;
(b) by MTLM or the Sellers, if the Closing has not occurred on
or before October 31, 1998, unless (i) such date is extended beyond
October 31, 1998 by Section 13.14 or (ii) the absence of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement (or an Affiliate of such party) to perform any
of its obligations under this Agreement required to be performed by it
or them, as the case may be, at or prior to the Closing pursuant to the
terms hereof.
11.2 Requirements and Effect of Termination. In the event of the
termination and abandonment of this Agreement by any party to this Agreement,
pursuant to Section 11.1, written notice thereof shall forthwith be given to the
other parties to this Agreement. Notwithstanding any such termination: (i) the
provisions of Sections 13.7, 13.9, 13.10 and 13.11 hereof shall continue in full
force and effect; and (ii) nothing herein shall relieve any party from liability
for any willful breach hereof.
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ARTICLE XII
INDEMNIFICATION
12.1 Survival. The representations and warranties of the parties
contained in Articles IV and V shall survive the Closing for two (2) years
except that the representations and warranties set forth in: (i) Section 4.22
shall survive the Closing until ninety days after the applicable statute of
limitations, (ii) Section 4.21 shall survive the Closing for five (5) years,
(iii) Sections 4.11 and 4.14(a) with respect to title matters shall survive the
Closing Date forty two (42) months and (iv) Section 4.2 and in the second
sentence of Section 4.4 shall survive the Closing forever. No claim for
indemnification may first be asserted after the applicable survival period.
Notwithstanding the foregoing, nothing contained in this Agreement shall limit
MTLM's remedies in the event of fraud.
12.2 Indemnification by Sellers. Sellers jointly and severally agree to
indemnify MTLM and its Affiliates and respective officers, directors, employees,
agents, and representatives (the "MTLM Indemnified Parties") against, and agree
to hold the MTLM Indemnified Parties harmless from, any and all Losses incurred
or suffered by any of them relating to, arising out of, or in connection with
any of the following:
(a) any breach of, or any inaccuracy in, any representation or
warranty made by the Sellers or the Companies in this Agreement or any
Related Agreement or any document delivered at the Closing;
(b) any breach of, or failure by, the Sellers to perform any
covenant or obligation of Sellers set out or contemplated in this
Agreement or any Related Agreement or any other document delivered at
the Closing;
(c) any indemnity of Sellers described in Section 6.9; or
(d) the Severance Agreements dated November 2, 1978 between
Aniello Naporano and the Companies and any payments due Ronald Weiszman
under the Employment Agreement dated August 21, 1997 from and after
closing.
12.3 Indemnification by MTLM. MTLM agrees to indemnify the Sellers and
their Affiliates and their respective officers, directors, employees, agents and
representatives ("Seller Indemnified Parties") against, and agrees to hold each
of them harmless from, any and all Losses incurred or suffered by them relating
to, arising out of, or in connection with, any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by MTLM in this Agreement, or any Related Agreement or
any other document delivered at the Closing;
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(b) any breach of, or failure by, MTLM to perform any covenant
or obligation of MTLM set out or contemplated in this Agreement, or any
Related Agreement or any other document delivered at the Closing;
(c) any indemnity of MTLM described in Sections 2.5 and 7.4;
(d) a claim of a third party with respect to the Companies or
any of their subsidiaries, former subsidiaries or any predecessor(s)
thereof (the "Naporano Entities"), regardless of when such Losses arose
or arise (including before, on or after the Closing Date) and
regardless of by whom or when such Losses are asserted, except to the
extent, and by the amount, that the Sellers would have at anytime been
obligated to indemnify the MTLM Indemnified Parties pursuant to Section
12.2 hereof; or
(e) the fact that such Seller Indemnified Party was a
director, officer, agent or employee of the Naporano Entities,
regardless of when such Losses arose or arise (including before, on or
after the Closing Date) and regardless of by whom or when such Losses
are asserted, except to the extent that such Seller Indemnified Party
is found, by a final, non-appealable order of a court of competent
jurisdiction or by the arbitrator in accordance with Section 12.10
below, to have acted, or omitted to take action, which act or omission
is determined to have constituted actual fraud or a breach of fiduciary
duty owed to the Naporano Entities, or any of them.
12.4 Claims. The provisions of this section shall be subject to Section
12.5. As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement, the party claiming indemnification from
the other party (the "Indemnified Person") shall promptly give notice to the
party from whom indemnification is requested (the "Indemnifying Person") (and,
if a MTLM Indemnified Party is the Indemnified Person and the Escrow continues
to be held by the Escrow Agent) of such claim and the amount the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person;
provided that the failure of the Indemnified Person to give prompt notice shall
not relieve the Indemnifying Person of its obligations under this Article XII,
except to the extent (if any) that the Indemnifying Person shall actually and
materially have been prejudiced thereby or except if such notice shall be first
given after the expiration of the applicable survival period provided herein. If
the Indemnifying Person does not object in writing to such indemnification claim
within thirty (30) calendar days of receiving notice thereof, the Indemnified
Person shall be entitled to recover promptly from the Indemnifying Person (and,
if a MTLM Indemnified Party is the Indemnified Person and the Escrow continues
to be held by the Escrow Agent) the amount of such claim (but such recovery
shall not limit the amount of any additional indemnification to which the
Indemnified Person may be entitled pursuant to Article VI, Section 12.2 or
12.3), and no later objection by the Indemnifying Person shall be permitted. If
the Indemnifying Person agrees that it has an indemnification obligation, but
objects on the basis that it is obligated to pay only a lesser amount, the
Indemnified Person shall nevertheless be entitled to recover promptly from the
Indemnifying Person (and, if a MTLM Indemnified Party is the Indemnified Person
and the Escrow continues to be held by the Escrow Agent, the Escrow Agent) the
lesser amount, without prejudice to the Indemnified Person's claim for the
difference.
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12.5 Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person (and, if the Indemnified Person is a MTLM Indemnified
Party and the Escrow continues to be held by the Escrow Agent, the Escrow Agent)
of the assertion of any claim, or the commencement of any suit, action or
proceeding, by any person not a party hereto in respect of which indemnity may
be sought under this Agreement; provided that the failure of the Indemnified
Person to give prompt notice shall not relieve the Indemnifying Person of its
obligations under this Article XII, except to the extent (if any) that the
Indemnifying Person shall have been actually and materially prejudiced thereby
or except if such notice shall be first given after the expiration of the
applicable survival period provided herein. The Indemnifying Person may, at its
own expense: (a) participate in the defense of any claim, suit, action or
proceeding; and (b) upon notice to the Indemnified Person and the Indemnifying
Person's delivering to the Indemnified Person a written agreement that the
Indemnified Person is entitled to indemnification pursuant to Section 12.2 or
12.3 for all Losses arising out of such claim, suit, action or proceeding and
that the Indemnifying Person shall be liable for the entire amount of any Loss,
at any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof; provided that: (i) the Indemnifying Person's counsel
is reasonably satisfactory to the Indemnified Person; and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the
obligation) to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Person. If,
however, the Indemnified Person reasonably determines in its judgment that
representation by the Indemnifying Person's counsel of both the Indemnifying
Person and the Indemnified Person would present such counsel with a conflict of
interest, then such Indemnified Person may employ separate counsel to represent
or defend it in any such claim, action, suit or proceeding, and the Indemnifying
Person shall pay the fees and disbursements of such separate counsel. Whether or
not the Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
12.6 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 12.5 shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided that no obligation,
restriction or Loss not paid or satisfied entirely by the Indemnifying Party
shall be imposed on the Indemnified Person as a result of such settlement
without its prior written consent. The Indemnified Person shall give the
Indemnifying Person at least thirty (30) calendar days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time the Indemnifying Person may reject such proposed
settlement or compromise; provided that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or proceeding
and any and all Losses in connection
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therewith in excess of the amount of unindemnifiable Losses which the
Indemnified Person would have been obligated to pay under the proposed
settlement or compromise.
12.7 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
12.8 Minimum Indemnification Threshold and Limits. An Indemnified
Person shall be entitled to indemnification from an Indemnifying Person under
Sections 12.2(a) and 6.11(b) only to the extent that the aggregate amount of all
Losses (except Losses relating to Taxes) exceeds $1,000,000 (the "Minimum
Indemnification Threshold"). In no event shall Sellers' cumulative liability to
indemnify for Losses under Sections 12.2(a) and 6.11(b) (other than Losses
relating to breaches of Section 4.2 and the second sentence of Section 4.4)
exceed $8,000,000. The indemnifications provided in this Agreement shall be the
sole and exclusive remedy of the parties hereto; provided, however, that in no
event shall this sentence limit any party's remedies for specific performance,
injunctive relief or any other equitable remedies otherwise available to such
party. In no event shall any MTLM Indemnified Party be entitled to recover for
any Losses under Section 12.2(a) to the extent that such Losses have been
reflected in Closing Date Balance Sheet.
12.9 Net Losses. Any indemnification pursuant to this Article XII shall
be net of: (i) any actual federal or state income Tax benefit, specifically
arising from the facts and circumstances giving rise to the Loss, realizable by
the Indemnified Person (or any of its Affiliates) by a reduction in Taxes
payable, or by the receipt of a refund of Taxes, by the Indemnified Person (or
such Affiliate) so that the Indemnified Person, on an after-tax basis, shall be
placed in the same position as though the facts and circumstances giving rise to
the Loss had never occurred or existed; and (ii) any net insurance proceeds
received by the Indemnified Person (or its Affiliates) with respect to the Loss.
Each Indemnified Person shall use commercially reasonable efforts to pursue
insurance claims with respect to indemnified Losses; provided, however, that in
no event shall such Indemnified Party be required to obtain additional insurance
coverage other than the title insurance described in Section 9.9. The
Indemnified Person shall treat the Loss in a good faith manner that causes any
federal or state income Tax benefit to apply in the earliest year reasonably
permissible. An Indemnifying Person shall not be obligated to pay any
indemnification to the extent that such indemnification may be covered by
insurance until it is finally determined that such amount is not covered by
insurance. In no event shall a Seller be liable for any breach of Section 4.11
with respect to any Owned Real Property except to the extent that the Losses
incurred by the MTLM Indemnified Party exceed the face amount of the applicable
title insurance policies. In the event that an Indemnified Party's recoveries
with respect to any Loss from insurance proceeds and indemnification hereunder
exceed the amount of any Loss (net of any actual federal or state income Tax
benefits described in the first sentence hereof), such Indemnified Party shall
promptly reimburse the amount of such excess to the Indemnifying Party.
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12.10 Arbitration. In the event of any dispute between the parties with
respect to any matters set forth in Articles III, VI and XII, either MTLM, on
the one hand, or the Sellers, on the other hand, may demand that the dispute be
submitted to binding arbitration. The demand for arbitration shall be in
writing, shall be served on the other party in the manner prescribed in Section
13.9 for giving notices, and shall set forth the matter or matters to be
arbitrated and the name of the arbitrator chosen by the party making such
demand. Within 15 days after receipt of such demand, the other party to the
dispute shall appoint an arbitrator and given written notice of such appointment
to the other party and shall specify the name and address of such arbitrator. If
such party shall fail to appoint an arbitrator and notify the other party as
herein provided within such fifteen day period, the party making the demand
shall have the right to apply to the Chief Judge of the United States District
Court located in the Borough of Manhattan, City and State of New York, for an
appointment of an arbitrator. The two arbitrators appointed or selected as set
forth above shall promptly appoint a third arbitrator as soon as practicable, or
if they do not do so within thirty days after notice is given to the parties of
the appointment of the second arbitrator, either party may apply to the Chief
Judge of the United States District Court located in the Borough of Manhattan,
City and State of New York for an appointment of a third arbitrator. Any
arbitration pursuant hereto shall be in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as then in effect,
except to the extent such rules are in conflict with the provisions of this
Section 12.10; provided, however, if such Association is not then functioning or
such rules are not then in effect, arbitration shall be conducted in accordance
with the requirements of the Uniform Arbitration Act. All such arbitration
proceedings shall take place in New York, New York. The arbitrators shall meet
as soon as practicable after the third arbitrator is appointed. Both the
foregoing agreement of the parties to arbitrate any and all claims, and the
results, determination, finding, judgment and/or award rendered such
arbitration, shall be final and binding on the parties hereto and may be
specifically enforced by legal proceedings. If the dispute relates to the
retention or delivery of Escrow Items the arbitrators' decision shall
specifically state the amount due. Escrow Shares shall be valued at the Signing
Date Stock Price for purposes of this Section 12.10. MTLM, on the one hand, and
the Sellers, on the other hand, shall each be responsible for one half of all
fees and costs of the arbitrators.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 HSR Act Compliance. The parties to this Agreement shall, as
promptly as practicable, but in no event later than ten (10) Business Days
following the execution and delivery of this Agreement, file or cause to be
filed with the United States Federal Trade Commission (the "FTC") and the United
State Department of Justice (the "DOJ") the notification and report form
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information shall be in
substantial compliance with the requirements of the HSR Act. Each of the parties
to this Agreement shall cooperate fully with the other parties and furnish to
the other parties such necessary information and reasonable assistance as the
other parties may request in connection with the preparation of any filing or
submission which is necessary under the HSR
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Act. Each of the parties to this Agreement shall keep each other party apprised
of the status of any communications with, and inquiries or requests for
additional information addressed to the entity that filed a notification and
report form as an acquired or acquiring person from, the FTC and DOJ, and shall
comply or cause its respective filing person to comply promptly with any such
inquiry or request. Each of the parties to this Agreement shall use commercially
reasonable efforts to obtain any clearance required under the HSR Act for the
transactions contemplated herein.
13.2 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by mutual written agreement of the parties. Any
such amendment may be made at any time before or after adoption of this
Agreement by MTLM and Sellers, but after any such adoption, no amendment shall
be made which would not be permitted.
13.3 Knowledge. When used in this Agreement, the phrase "to the
knowledge of the Sellers" and similar words and phrases shall mean the actual,
direct and personal knowledge of the Sellers and the officers and directors of
the Companies including John J. Naporano and Ronald F. Weiszman.
13.4 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using reasonable efforts to remove any legal impediment to the
consummation or effectiveness of such transactions and to obtain any consents
and approvals required under this Agreement. At any time after the Closing Date,
Sellers on the one hand, and MTLM, on the other hand, shall promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by MTLM or the Sellers, as the case may be, and necessary for it or them to
satisfy its or their respective obligations hereunder or obtain the benefits
contemplated hereby.
13.5 Third Party Claims. From and after the Closing, the parties shall
cooperate with each other with respect to the defense of any claims or
litigation made or commenced by third parties subsequent to the Closing Date;
provided, however, that the party requesting cooperation shall reimburse the
other party for the other party's reasonable out-of-pocket costs and expenses
(other than attorneys' fees and disbursements) of furnishing such cooperation.
13.6 Waiver of Compliance. Any failure of MTLM or the Sellers to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived, in writing, and in no other manner. Such waiver or a failure to insist
upon strict compliance with any such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
13.7 Expenses. Except as provided in this section or elsewhere in this
Agreement, each party will bear its own expenses and costs of the transactions
contemplated hereby, including, but not limited to, the fees of attorneys,
financial advisors, and other professionals. The Sellers shall, or shall cause
the Companies to, pay all costs related to any governmental filings made by the
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Sellers or the Companies in connection with the transactions contemplated
hereby. Any transfer taxes (other than federal, state, or local income Taxes
resulting from the purchase and sale of the Shares) shall be paid equally by
MTLM on the one hand, and the Sellers on the other hand. MTLM shall pay all
costs related to any governmental or regulatory filings made by it including
filings under the HSR Act, the SEC and Nasdaq.
13.8 Interest. Except as otherwise specifically provided herein, all
sums payable pursuant to this Agreement that are not paid when due shall bear
interest at the rate of nine percent (9%) per annum, which interest shall accrue
from the date such sums are due until paid.
13.9 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given: (a) when received if given in person; (b) on the date of
confirmed transmission if sent by telex, facsimile or other wire transmission;
or (c) upon receipt after being deposited in the U.S. mail, certified or
registered mail, postage prepaid, at or to the following addresses:
If to the Sellers:
Mr. Joseph F. Naporano
Mr. Andrew J. Naporano, Jr.
c/o JANX Partners L.P.
One Gateway Center
7-45 Raymond Boulevard
9th Floor
Newark, New Jersey 07102
Facsimile No.: (973) 242-0345
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Attention: Michael E. Feldman, Esq.
Facsimile: (212) 969-2900
If to MTLM:
Metal Management, Inc.
500 North Dearborn Street
Suite 400
Chicago, Illinois 60610
Attention: Chief Executive Officer
and General Counsel
Facsimile: (312) 645-0714
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with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Paul W. Theiss, Esq.
Facsimile: (312) 701-7711
or, in each case, to such other address as any party shall designate in writing,
delivered to the other parties in the manner provided in this Section 13.9.
13.10 Public Statements. Prior to the Closing Date, except as required
by law, no public announcement or other publicity regarding the transactions
referred to herein shall be made by MTLM or the Sellers or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the express prior agreement of MTLM and Sellers as to content,
form, timing and manner of distribution or publication.
13.11 Confidentiality. The terms of the letter agreement dated February
18, 1998 between MTLM and McDonald as agent for the Companies, remain in full
force and effect.
13.12 Section 338 Elections.
(a) The Sellers and MTLM shall jointly make the elections
provided for by Sections 338(g) and 338(h)(10) of the Code and Treasury
Regulation Section 1.338(h)(10)-1 (and any comparable election under
state or local tax Law) with respect to the purchase of the Shares by
MTLM (each, an "Election"). At the Closing, the Sellers shall deliver
Forms 8023-A to MTLM, with Sections 2a through 6h completed and signed
by each Seller. Also, Sellers and MTLM shall cooperate with each other
to take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other documents as
may be required to effect and preserve a timely Election in accordance
with the provisions of Treasury Regulation Section 1.338(h)(10)-1 (or
any comparable provisions of state or local tax Law) or any successor
provisions. The Sellers and MTLM shall report the purchase by MTLM of
the Shares pursuant to this Agreement consistent with the Elections
(and any comparable elections under state or local tax laws) and shall
take no position inconsistent therewith in any Tax Return, any
proceeding before any taxing authority or otherwise.
(b) In connection with the Elections, not later than the
Closing, the Sellers and MTLM shall act together in good faith to (i)
determine and agree upon the "Modified Aggregate Deemed Sale Price" of
each of the Companies' assets (within the meaning of, and in accordance
with, Treasury Regulation Section 1.338(h)(10)-1(f)) and (ii) determine
and agree upon the proper allocations (the "Allocations") of the
"Modified Aggregate Deemed Sale Price" among the assets of each of
Naporano and Nimco (in accordance with Section 338(b)(5) of the Code
and the Treasury Regulations promulgated thereunder). The Sellers
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and MTLM shall (i) be bound by such determinations and such Allocations
for purposes of determining any Taxes, (ii) prepare and file their Tax
Returns on a basis consistent with such determinations and such
Allocations and (iii) take no position inconsistent with such
determinations and Allocations on any applicable Tax Return, in any
proceeding before any Taxing authority or otherwise. In the event that
any such Allocation is disputed by any Taxing authority, the party
receiving notice of the dispute shall promptly notify the other party
hereto concerning resolution of the dispute. Any liability for Taxes
arising from the Elections shall be borne by the Sellers.
13.13 Preparation and Filing of Tax Returns. The Sellers shall cause
Companies' Accountant to prepare the federal and state S corporation income Tax
Returns required to be filed by the Companies for the taxable years beginning on
or after January 1, 1997 and ending on the day before the Closing Date
(individually, an "S Corporation Return" and collectively, the "S Corporation
Returns"). Each S Corporation Return shall be prepared using accounting methods
and other practices that are consistent with those used by the Companies in
their prior returns and items to be taken into account in the S Corporation
Returns for the period ending on the date before the Closing Date shall be
determined under the "closing-the-books" method as described in Section
1362(e)(3) of the Code, and the regulations thereunder, and the parties agree to
make an election, if necessary, under Section 1362(e)(3) of the Code. To the
extent that the S Corporation Return for 1998 or for any pre-Closing period
needs to be amended post-Closing, the Sellers shall cause Companies' Accountant
to prepare such amendments. All fees and expenses of Companies' Accountant in
preparing the S Corporation Returns and amendments shall be paid by the Sellers.
MTLM agrees to make available to Companies' Accountant all books and records of
the Companies needed for the preparation of the S Corporation Returns, to the
extent delivered to MTLM at Closing. If MTLM receives a Tax refund attributable
to a taxable period ending on or prior to the Closing Date relating to an S
Corporation Return, MTLM shall remit such Tax refund to the Sellers.
13.14 Financial Statements. If the Closing does not occur by October
31, 1998 solely because Price Waterhouse LLP does not complete the audit of the
financial statements of the Companies by October 31, 1998 and issue its audit
report in the manner and form described in Section 9.6, the Closing shall be
delayed until such time as such audit is completed and audit report issued in
the manner and form described in Section 9.6 provided that Price Waterhouse LLP
reasonably believes that such audit can be completed and such audit report can
be issued. In no event shall the Closing be delayed beyond December 31, 1998.
The parties hereto shall, and the Sellers shall, cause the Companies to, use
their best efforts to facilitate Price Waterhouse LLP's completion of such audit
and its issuance of such audit report in the manner and form described in
Section 9.6. MTLM shall use its best efforts to cause Price Waterhouse LLP to
keep the Sellers reasonably informed about the status and timing of the audit.
MTLM shall be solely responsible for the fees and expenses of Price Waterhouse
LLP in connection with such audit.
13.15 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any party hereto
without prior written consent of the other parties; provided however, that MTLM
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may assign any or all of its rights hereunder without such consent to any
Affiliate of MTLM so long as MTLM shall remain directly and primarily
responsible for all obligations of it and the Affiliate and shall continue to be
bound in all respects by the provisions hereof.
13.16 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to the principles
of conflicts of laws thereof.
13.17 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.18 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
13.19 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid and enforceable provision
as similar as possible to the provision at issue.
13.20 No Third Party Beneficiaries. Except as expressly indicated to
the contrary in this Agreement, this Agreement is solely for the benefit of the
parties hereto, and no provision of this Agreement shall be deemed to confer
upon third parties any remedy, claim, liability, cause of action or other right
in excess of those existing without reference to this Agreement.
13.21 Filings and Applications. Each party to this Agreement shall
cooperate fully with the other parties to the Agreement in furnishing any
necessary information required in connection with the preparation, distribution
and filing of any filings, applications and notices which may be required by
federal, state and local governmental or regulatory agencies (other than the HSR
Act compliance discussed in Section 13.1) NASDAQ or stock exchanges in any
jurisdiction in connection with the transactions contemplated hereby.
13.22 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion or exercise of any
other rights or remedies available by law, in equity or otherwise principles of
conflicts of law thereof.
13.23 Stock Legend. Each of the certificates of MTLM Common Stock
issued to the Sellers pursuant to the transactions hereunder, shall bear the
following legend:
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THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT THERETO OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
13.24 Jurisdiction of Disputes; Waiver of Jury Trial. Except as
otherwise provided in Sections 2.4 and 12.10, in the event any party to this
Agreement commences any litigation, proceeding or other legal action in
connection with or relating to this Agreement, any Related Agreement, or any
matters described or contemplated herein or therein, with respect to any of the
matters described or contemplated herein or therein, the parties to this
Agreement hereby agree: (a) agree under all circumstances absolutely and
irrevocably to institute any litigation, proceeding or other legal action in a
court of competent jurisdiction located within the Borough of Manhattan, City
and State of New York, whether a state or federal court; (b) that in the event
of any such litigation, proceeding or action, such parties will consent and
submit to personal jurisdiction in any such court described in clause (a) and to
service of process upon them in accordance with the rules and statutes governing
service of process (it being understood that nothing in this Section 13.24 shall
be deemed to prevent any party from seeking to remove any action to a federal
court in the Borough of Manhattan, City and State of New York; (c) to waive to
the fullest extent permitted by law any objection that they may now or hereafter
have to the venue of any such litigation, proceeding or action in any such court
or that any such litigation, proceeding or action was brought in an inconvenient
forum; (d) to service of process in any legal proceeding by mailing copies
thereof to such party at its address set forth in Section 13.9 for
communications to such party; (e) that any service made as provided herein shall
be effective and binding service in every respect; and (f) that nothing herein
shall affect the rights of any party to effect service of process in any other
manner permitted by Law. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY
IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED
AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREES
TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
---------------------------------------------
T. Benjamin Jennings
Chairman and Chief Development Officer
JOSEPH F. NAPORANO
By: /s/ Joseph F. Naporano
---------------------------------------------
Joseph F. Naporano
ANDREW J. NAPORANO, JR.
By: /s/ Andrew J. Naporano, Jr.
---------------------------------------------
Andrew J. Naporano, Jr.
<PAGE> 1
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of the 1st day of July, 1998, by and between Metal Management,
Inc., a Delaware corporation (the "COMPANY"), McDonald & Company Securities,
Inc., Joseph F. Naporano and Andrew J.
Naporano, Jr. (the "SHAREHOLDERS").
RECITALS:
A. Pursuant to the Stock Purchase Agreement dated as of May 24, 1998,
by and among the Company and the Shareholders (the "STOCK PURCHASE AGREEMENT"),
Shareholders received from the Company 1,938,879 shares of the Company's common
stock, par value $.01 per share (the "COMMON STOCK").
B. Pursuant to the terms of this Agreement, the Company has agreed to
register 18,855 shares of the Common Stock issued to McDonald & Company
Securities, Inc., 621,682 shares of Common Stock issued to Joseph F. Naporano
and 328,903 shares of Common Stock issued to Andrew J. Naporano, Jr. to the
extent that such shares (collectively, the "REGISTRABLE SECURITIES") have not
been previously sold pursuant to a registration statement or Rule 144 (or any
similar provision then in force) under the Securities Act of 1933, as amended
(the "SECURITIES ACT") or any other exemption from registration thereunder.
C. All terms which are capitalized and used without definition herein
shall have the meanings ascribed to such terms in the Stock Purchase Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Mandatory Registration.
(a) The Company shall as promptly as practicable, but in any
event within 30 days from the date hereof, prepare and file at the Company's
sole cost and expense (other than the fees and disbursements of counsel for the
Shareholders and the underwriting discounts, if any, payable in respect of the
Registrable Securities sold by the Shareholders) one "shelf" registration
statement with the Securities and Exchange Commission (the "COMMISSION") on the
appropriate form pursuant to Rule 415 of the Securities Act covering the resale
of the Registrable Securities. In no event shall the Company be required to file
more than one registration statement on the appropriate form. The Company will
use commercially reasonable efforts through its officers, directors, auditors,
and counsel to cause such registration statement to become effective as promptly
as practicable following the filing thereof.
<PAGE> 2
(b) In the event of a registration pursuant to Section 1(a),
the Company shall use commercially reasonable efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such states as the Shareholders may reasonably
request to permit the resale of the Registrable Securities in such states; and
do such other reasonable acts and things as may be required of it to enable such
holder to consummate the disposition in such states; provided, however, that the
Company shall not be required to qualify to do business in any state by reason
of this Section 1(b) in which it is not otherwise required to qualify to do
business.
(c) The Company shall keep effective any registration or
qualification contemplated by this Section 1 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Shareholders to complete the offer and
sale of the Registrable Securities covered thereby. The Company shall keep such
registration or qualification in effect until the earlier of (i) the second
anniversary of the date that the registration statement was declared effective,
(ii) the first date upon which all Shareholders are free to sell such
Registrable Securities under Rule 144 of the Securities Act or (iii) the date
that the Shareholders have sold or otherwise transferred all the Registrable
Securities under a registration statement, pursuant to Rule 144 under the
Securities Act or otherwise.
(d) In the event of a registration pursuant to Section 1(a),
the Company shall furnish to each Shareholders such reasonable number of copies
of the registration statement and of each amendment and supplement thereto (in
each case, including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement or
amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Securities Act and the rules and regulations
thereunder, and such other documents, as any Shareholders may reasonably request
to facilitate the disposition of the Registrable Securities included in such
registration.
(e) In the event of a registration pursuant to Section 1(a),
the Company shall furnish each Shareholder so registered with an opinion of its
counsel (in form and substance reasonably acceptable to the Shareholders) to the
effect that (i) the registration statement has become effective under the
Securities Act and no order suspending the effectiveness of the registration
statement, preventing or suspending the use of the registration statement, any
preliminary prospectus, any final prospectus, or any amendment or supplement
thereto has been issued, nor has the Commission or any securities or blue sky
authority of any jurisdiction instituted or to the knowledge of such counsel
threatened to institute any proceedings with respect to such an order, (ii) the
registration statement and each prospectus forming a part thereof (including
each preliminary prospectus), and any amendment or supplement thereto, comply as
to form with the Securities Act and the rules and regulations thereunder, and
(iii) such counsel has no knowledge of any material misstatement or omission in
such registration statement or any prospectus, as amended or supplemented. Such
opinion shall also state the jurisdictions in which the Registrable Securities
have been registered or qualified for sale pursuant to Section 1(b).
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<PAGE> 3
(f) The Company agrees that until all the Registrable
Securities have been sold under a registration statement or pursuant to Rule 144
under the Securities Act, it will keep current in filing all reports, statements
and other materials required to be filed with the Commission to permit holders
of the Registrable Securities to sell such securities under Rule 144 of the
Securities Act.
(g) The Company shall notify the Shareholders promptly when
such registration statement and any amendments and supplements thereto have
become effective or any supplements to any prospectus forming a part of such
registration statement have been filed. The Company shall notify the
Shareholders promptly of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and use commercially
reasonable efforts to update and/or correct such prospectus as promptly as
practicable by preparing a supplemental or post effective amendment to a
registration statement or a supplement to the related prospectus or any document
incorporated or deemed incorporated by reference and filing the same with the
Commission. Each Shareholder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in this Section 1(g)
such Shareholder will forthwith discontinue disposition of such Registrable
Securities covered by such registration statement or prospectus until such
Shareholder (i) receives copies of the supplemented or amended prospectus and
has been advised in writing by the Company that such supplemented or amended
prospectus may be used, or (ii) is advised in writing by the Company that the
use of the applicable prospectus may be resumed. If so directed by the Company,
each Shareholder will deliver to the Company all copies, other than permanent
file copies, then in such Shareholder's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of the notice
referred to in the immediately preceding sentence.
(h) The Company shall notify the Shareholders promptly of the
issuance by the Commission of any stop or other order suspending the
effectiveness of the registration statement. If at any time the Company shall
receive any such order, the Company shall use commercially reasonable efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
Each Shareholder agrees that upon receipt of any notice from the Company of the
happening of any event of the kind described in this Section 1(h), such
Shareholder will forthwith discontinue disposition of such Registrable
Securities covered by any registration statement or prospectus until such order
has been withdrawn or lifted.
(i) If requested by the underwriter for any underwritten
offering of Registrable Securities on behalf of the Shareholders pursuant to a
registration requested under Section 1(a), the Company and the Shareholders will
enter into an underwriting agreement with such underwriter for such offering,
which shall be reasonably satisfactory in substance and form to the Company and
the Company's counsel, the Shareholders and the underwriter, and such agreement
shall contain such representations and warranties by the Company and the
Shareholders and such other terms and provisions as are customarily contained in
an underwriting agreement with respect to secondary
3
<PAGE> 4
distributions solely by the Shareholders, including, without limitation,
indemnities substantially to the effect and to the extent provided in Section 2
hereof.
(j) The Company shall use commercially reasonable efforts to
have the Registrable Securities included for quotation on the Nasdaq National
Market.
(k) In connection with the registration of Registrable
Securities pursuant to a registration statement, each Shareholder shall furnish
to the Company such information regarding himself or itself and the intended
method of disposition of Registrable Securities as the Company shall reasonably
request in order to effect the registration thereof .
2. Indemnification. (a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each Shareholder, his employees,
agents, and counsel, and each person, if any, who controls any such person
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 2, but not be
limited to, reasonable attorneys' fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of any material fact contained (A) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Registrable Securities or (B) in any application or other
document or communication (in this Section 2 collectively called an
"APPLICATION") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Registrable Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading, (x) unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company with respect to any Shareholder by or on behalf of such person expressly
for inclusion in any registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (y) only to the extent that such loss, liability, charge
claim, damage or expense arises directly out of such Shareholder's failure to
comply with the terms and provisions of this Agreement, or (ii) any breach of
any representation, warranty, covenant, or agreement of the Company contained in
this Agreement. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Agreement. The indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Shareholders their employees,
agents and counsel and shall survive the transfer of the Registrable Securities.
If any action is brought against any Shareholders or any of their
employees, agents, or counsel, or any controlling persons of such person (an
"INDEMNIFIED PARTY") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such
4
<PAGE> 5
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 2(a) except to
the extent that the Company shall have been prejudiced thereby) and the Company
shall promptly assume the defense of such action, including the employment of
counsel (reasonably satisfactory to such indemnified party or parties), provided
that the indemnified party shall have the right to employ his or its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or parties, or such
indemnified party or parties shall have reasonably concluded that there may be
one or more legal defenses available to him or it or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section 2
to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
The Company agrees promptly to notify Shareholders of the commencement of any
litigation or proceedings against the Company or any of it officers or directors
in connection with the sale of any Registrable Securities or any preliminary
prospectus, prospectus, registration statement, or amendment or supplement
thereto, or any application relating to any sale of any Registrable Securities.
(b) Each Shareholder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Registrable Securities held by
such Shareholders, each other person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, and its or their respective counsel, to the same extent as the foregoing
indemnity from the Company to such Shareholders in Section 2(a), but only with
respect to statements or omissions, if any, made in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to the
Company with respect to such Shareholders by or on behalf of such Shareholders,
expressly for inclusion in any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on any such registration
statement, preliminary prospectus, or final prospectus or any amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against such Shareholders pursuant to this Section 2(b), such
Shareholders shall have the rights and duties given to the
5
<PAGE> 6
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
2(a).
In no event shall the foregoing be construed to include any
indemnification by the Shareholders for any untrue statement in or omission from
the registration statement, preliminary prospectus, or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
relating to (x) descriptions or summaries of the Stock Purchase Agreement or
Related Agreements; (y) the analysis and discussion contained in the section
entitled "Risk Factors", including, without limitation, any information
contained therein and the omission of any information therefrom (but excluding,
however, the factual accuracy of information contained in such section); or (z)
information that was presented in the registration statement, preliminary
prospectus, or final prospectus (as from time to time amended and supplemented),
or any amendment or supplement thereto, in a manner that it could not be
verified by the Shareholders without knowledge of information that is not
information provided to the Company by the Shareholders.
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 2(a) or
2(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such cases, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), on the one hand, and the Shareholders (including for this
purpose any contribution by or on behalf of an indemnified party), on the other
hand, shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, on the basis of relevant
equitable considerations such as the relative fault of the Company and such
Shareholders in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses. The relative fault, in the case of
an untrue statement, alleged untrue statement, omission, or alleged omission
shall be determined by, among other things, whether such statement, alleged
statement, omission, or alleged omission relates to information supplied by the
Company or by such Shareholders, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement,
alleged statement, omission, or alleged omission and whether such information is
a Section 2(b) exception which the parties have agreed is not the responsibility
of the Shareholders. The Company and Shareholders agree that it would be unjust
and inequitable if the respective obligations of the Company and the
Shareholders for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and expenses
(even if each Shareholders and the other indemnified parties were treated as one
entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 2(c). In no
case shall any Shareholders be responsible for a portion of the contribution
obligation imposed on all Shareholders in excess of his or its pro rata share
based on the number of shares of Common Stock owned by him or it and included in
such registration as compared to the number of shares of Common Stock owned by
the other Shareholder.
6
<PAGE> 7
No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 2(c), each person, if any, who controls any Shareholders within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each employee, agent, and counsel of Shareholders or control person shall
have the same rights to contribution as such Shareholders or control person and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed any such registration statement, each director of
the Company, and its or their respective counsel shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 2(c). Anything in this Section 2(c) to the contrary notwithstanding, no
party shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 2(c) is
intended to supersede any right to contribution under the Securities Act, the
Exchange Act or otherwise. The amount paid by an indemnified party as a result
of the losses, liabilities, claims, damages, or expenses referred to above shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim which is the subject of this Section 2. Each party entitled to
contribution agrees that upon the service of a summons or other initial legal
process upon it in any action instituted against it in respect to which
contribution may be sought, it shall promptly give written notice of such
service to the party or parties from whom contribution may be sought, but the
omission to so notify such party or parties of any such service shall not
relieve the party from whom contribution may be sought for any obligation it may
have hereunder, unless such party shall have been actually and materially
prejudiced thereby.
3. Shareholder Representations.
(a) Restricted Securities. Each Shareholder understands that:
(i) the Registrable Securities have not been registered under the Securities Act
or under any state securities laws; (ii) the Registrable Securities are being
offered and issued in reliance upon federal and state exemptions for
transactions not involving any public offering; (iii) a "stop transfer" order
will be placed against the certificates representing shares of Common Stock
issued pursuant to the Stock Purchase Agreement; and (iv) certificates shall
bear on their face the following legend:
"The shares evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended, or any applicable state securities laws, and
any transfer hereof is subject to compliance with all applicable federal and
state securities laws and regulations."
(b) Transfer of Registrable Securities The Shareholders hereby
agree that the Registrable Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 of the
Securities Act (or any similar rule or rules then in force) if such rule is
available, and (c) subject to the conditions specified in this Section 3(b), any
other legally available means of transfer. In connection with the transfer of
any of the Registrable
7
<PAGE> 8
Securities (other than a transfer pursuant to a registered public offering of
shares of Common Stock described herein), the Shareholder thereof shall deliver
written notice to the Company describing in reasonable detail the transfer or
proposed transfer, together with an opinion of securities counsel (with such
opinion and such counsel being reasonably satisfactory to the Company and its
counsel) to the effect that such transfer of Registrable Securities may be
effected without registration of such Registrable Securities under the
Securities Act. Janx Partners L.P. may become a party to this Agreement
contemporaneous with any transfer of Registrable Securities in compliance with
the immediately preceding sentence by execution of an agreement agreeing to be
bound by the provisions hereof. For purposes of representation of the
Shareholders, Proskauer Rose LLP shall be deemed satisfactory counsel. In
addition, if the Shareholder delivers to the Company such an opinion that
concludes that no subsequent transfer of such Registrable Securities will
require registration under the Securities Act, the Company shall promptly upon
such contemplated transfer deliver new certificates for such Common Stock which
do not bear the restrictive legend set forth in Section 3(a).
4. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, Shareholders, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
(b) Agreements and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, unless such amendment, modification or supplement is in writing
and signed by the parties hereto.
(c) Consent of the Shareholders. Any decisions, agreements or
actions on the part of the Shareholders under this Agreement which are required
to be made collectively by the Shareholders shall be made by the consent of the
Shareholders holding at least a majority of the then outstanding Registrable
Securities.
(d) Notices. All notices and other communications provided for
or permitted hereunder to Joseph F. Naporano or Andrew J. Naporano, Jr. shall be
made in accordance with the provision of the Stock Purchase Agreement. All
notices and other communications to McDonald & Company Securities, Inc. shall be
made to:
McDonald Investment Center
800 Superior Avenue, Suite 2100
Cleveland, Ohio 44114-2603
Attention: Mr. Ralph Della Ratta
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and
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<PAGE> 9
without the need for an express assignment, subsequent holders of the
Registrable Securities subject to the terms hereof.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of references only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to its conflicts of law provisions.
(i) Jurisdiction of Disputes; Waiver of Jury Trial. Waiver of
Jury Trial. In the event any party to this Agreement commences any litigation,
proceeding or other legal action in connection with or relating to this
Agreement, or any matters described or contemplated herein, the parties to this
Agreement hereby (a) agree under all circumstances absolutely and irrevocably to
institute any litigation, proceeding or other legal action in a court of
competent jurisdiction located within the Borough of Manhattan, City and State
of New York, whether a state or federal court; (b) agree that in the event of
any such litigation, proceeding or action, such parties will consent and submit
to personal jurisdiction in any such court described in clause (a) and to
service of process upon them in accordance with the rules and statutes governing
service of process (it being understood that nothing in this Section 4 shall be
deemed to prevent any party from seeking to remove any action to a federal court
in New York, New York; (c) agree to waive to the fullest extent permitted by law
any objection that they may now or hereafter have to the venue of any such
litigation, proceeding or action in any such court or that any such litigation,
proceeding or action was brought in an inconvenient forum; (d) agree to service
of process in any legal proceeding by mailing of copies thereof to such party at
its address set forth in Section 8 hereof for communications to such party; (e)
agree that any service made as provided herein shall be effective and binding
service in every respect; and (f) agree that nothing herein shall affect the
rights of any party to effect service of process in any other manner permitted
by law. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREES TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
(j) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remainder of this Agreement shall remain
operative and in full force and effect.
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<PAGE> 10
(k) Entire Agreement. This Agreement constitutes the full and
complete understanding and agreement of the parties hereto and supersedes all
prior understandings and agreements of the parties hereto, whether oral or
written, as to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
------------------------------
Name: David A. Carpenter
Title: Vice President
/s/ Joseph F. Naporano
---------------------------------
Joseph F. Naporano
/s/ Andrew J. Naporano, Jr.
---------------------------------
Andrew J. Naporano, Jr.
MCDONALD & COMPANY SECURITIES,
INC.
By: /s/ David L. Stickler
------------------------------
Name: David L. Stickler
----------------------------
Its: Managing Director
-----------------------------
10
<PAGE> 1
[METAL MANAGEMENT LOGO]
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION CONTACT:
Xavier Hermosillo, Vice President of Investor Relations
& Corporate Communications
Midwest/East - Call (312)645-0445 - West Coast - Call (310)832-2999
METAL MANAGEMENT COMPLETES ACQUISITION
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
Chicago, IL -- July 6, 1998 - Metal Management, Inc. (NASDAQ symbol - MTLM)
("Metal Management" or "MTLM") today announced that it has closed its previously
announced acquisition of all the outstanding capital stock of Naporano Iron &
Metal Co. ("Naporano") and NIMCO Shredding Co. ("NIMCO" of Newark, New Jersey
and the assets of Michael Schiavone & Sons, Inc. ("Schiavone") of North Haven,
Connecticut. The Company also announced the completion of the acquisitions of
the assets of Torrington Scrap, Inc. and certain related companies in
Torrington, Connecticut. The combined purchase price for the three acquisitions
consisted of approximately $105-million and 2,374,437 shares of restricted
Metal Management common stock.
The Naporano operations have estimated annualized gross revenues of more than
$150-million and are one of the largest scrap metal recycling operations on the
East Coast. Naporano and NIMCO have more than 2,000 active suppliers and last
year handled more than 800,000 gross tons of ferrous scrap metal, 27,000 gross
tons of non-ferrous scrap metal, and 390,000 gross tons of stevedoring.
<PAGE> 2
METAL MANAGEMENT COMPLETES ACQUISITION PAGE 2
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
Founded in 1907, the companies are run by President Joseph Naporano, who has 35
years of scrap industry experience, and Senior Vice President Andrew Naporano,
a 25-year industry veteran. Both will continue in their present positions under
multi-year employment agreements.
Michael Schiavone & Sons, Inc. has estimated annualized gross revenues of more
than $60-million and is one of the largest scrap metal recycling operations in
the New England region.
Founded 100 years ago by Michael Schiavone, grandfather of the present owner,
the company is involved in all types of industrial scrap and shredding and has
a large non-ferrous operation including high temperature alloys and stainless
steel. The company's deep water port enables it to transport its products by
ship-load and barge-load to domestic mills, as well as world-wide exporting to
India, Turkey and the Pacific Rim. It has a 25-acre processing facility and a
5-acre loading operation on the water.
The transaction includes both the Naporanos' and Schiavones' real estate
interests. The Naporanos have four facilities in the Newark area, collecting,
processing and selling scrap metal.
Naporano Iron & Metal's Hawkins Street plant sits on 27 acres two-and-one-half
miles north of Newark International Airport. Their facility includes a
one-thousand ton shear, a triple compression baler, an aluminum sweat furnace,
a turnings crusher, and one of the premier railcar handling systems in the
industry.
The Port Newark Terminal has a 19-acre plant facility and a deep-water scrap
terminal with 900 feet of dock which is considered to be one of the finest on
the East Coast. The Naporanos recently signed a 21-year lease with exclusive
rights to the 900-foot berth at the dock and can service 80 rail cars per day
at the port facility.
NIMCO's shredding facility is on an 8-acre site with access to Newark Bay. It
has a 4,000 horsepower auto shredder with a sophisticated non-ferrous Eddy
Current separating system. The Naporanos also run a separate
<PAGE> 3
METAL MANAGEMENT COMPLETES ACQUISITION PAGE 3
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
6-acre plant site which dismantles buses and recycles buses for saleable parts
and scrap metal. It has the capacity to process 1,500 buses per year.
As a result of the transaction, Joseph Naporano is joining Metal Management's
Board of Directors and will continue to serve as President of Naporano Iron &
Metal Co., and Michael Schiavone, Vice President of Michael Schiavone & Sons,
Inc. is joining Metal Management's Office of the President.
Joseph Naporano said, "Metal Management is run by a hard-working, smart group of
people with a clear vision of what is possible in consolidating the scrap metal
industry. We look forward to integrating ourselves and advancing that vision
through additional acquisitions, operational synergies, and new business
development. Joining Metal Management is the best way to continue the growth of
our business, and to ensure the best possible future for our customers,
suppliers, and 300 employees."
Andrew Naporano, Senior Vice President, said, "We are excited to join the Metal
Management family. This merger is an excellent opportunity for us to share best
management practices across the country, and among the best operators in the
scrap industry. There is a lot of potential to improve efficiencies across the
country in all areas of our business, from material and supply procurement, to
transportation and freight logistics, to sales and customer service."
Michael Schiavone, said, "We're delighted to be included in such a
distinguished group of American scrap processors. Our people are excited about
access to the best available markets as well as the most up-to-date processing
methods. We're looking forward to the cost savings and other benefits of
becoming part of Metal Management. We just celebrated our 100-year anniversary
and we look forward to spending the next 100 years with the Metal Management
family."
T. Benjamin Jennings, Chairman of the Board and Chief Development Officer of
Metal Management, said, "The Naporano and Schiavone mergers represent a
significant complement to our existing presence in the
<PAGE> 4
METAL MANAGEMENT COMPLETES ACQUISITION PAGE 4
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
Northeast Regional marketplace for Metal Management. We are most excited about
the opportunities these companies provide us to service our domestic and
international customers, but are more importantly impressed and enthusiastic
about the tremendous management expertise and knowledge that the individuals
who make up these companies bring to our team."
Gerard M. Jacobs, Chief Executive Officer of Metal Management, said, "If
anyone had any doubts about Metal Management's commitment to becoming the
premier scrap metal recycling force in North America, the Naporano and Schiavone
transactions should put those doubts to rest. North, South, East and West --
we're there."
Albert A. Cozzi, Metal Management's President and Chief Operating Officer,
said, "These two acquisitions really solidify our position in the New England
market and give us our first entry into the export market off either coast
where we can move entire shiploads to world markets. The Naporano and Schiavone
operations are well managed, profitable, very sophisticated, efficient,
environmentally and technologically advanced, and the premier companies in
their markets.
"This is a great deal for Metal Management, our customers and our scrap
suppliers. These acquisitions help us to execute our strategy of one-stop
shopping for our suppliers and consumers across the entire country. These
operations are a very strong complement to our philosophy of continually
increasing our volumes and levels of service to our domestic customers,
particularly those located along the waterways. The Naporanos and Schiavones
are the kinds of companies we want to be affiliated with and we're glad to have
them as part of the Metal Management family," he added.
Metal Management is one of the largest and fastest-growing full service metals
recyclers in the United States, with more than 60 recycling facilities in 15
states. Metal Management is primarily engaged in the collection and processing
of ferrous and non-ferrous metals for resale to metals brokers, steel
producers, and producers and processors of other metals.
<PAGE> 5
METAL MANAGEMENT COMPLETES ACQUISITION PAGE 5
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
In addition to Naporano Iron & Metal Co. and Michael Schiavone & Sons, Inc., the
MTLM family of companies includes: Cozzi Iron & Metal, Inc. of Chicago, one of
the largest scrap metal operations in the U.S.; three recycling companies in
Houston, Texas - Proler Southwest, Inc., a leading recycler of industrial
ferrous scrap on the Houston Ship Channel, HouTex Metals Company, Inc., a
significant supplier of ferrous metals to minimills, which is also located on
the Houston Ship Channel, as well as Houston Compressed Steel Corp., a ferrous
scrap recycler; The Isaac Group of Companies of Toledo, one of the world's
largest briquetting operations; Reserve Iron & Metal L.P. of Cleveland and
Chicago, a major ferrous metal-breaking operation; The MacLeod Group of
Companies in Los Angeles, a major wire chopper and processor; Aerospace Metals,
Inc. of Hartford, Connecticut, one of the world's leading recyclers of high
temperature nickel and cobalt alloys and titanium; Metal Management Arizona,
Inc., of Phoenix, Arizona, the largest scrap metal processor in Arizona;
Superior Forge, Inc., of Huntington Beach, California, a significant generator
and processor of aluminum and aluminum scrap; Charles Bluestone Company of
Elizabeth, Pennsylvania, near Pittsburgh, one of the leading processors of
stainless steel, nickel and cobalt alloys, and titanium in the United States;
Metal Management Gulf Coast, Inc., which is principally involved in the
dismantling of barges, oil drilling rigs, and tug boats and has three barge
terminals located on prominent waterways leading to the Gulf of Mexico; and
Newell Recycling West, Inc., one of the largest scrap metal recycling
operations in the Rocky Mountain region with operations in Denver, Colorado
Springs and Salt Lake City.
All of the statements in this release, other than historical facts, are
forward-looking statements made in reliance upon the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995. As such, they involve
risks and uncertainties and are subject to change at any time. These statements
reflect the Company's current expectations regarding the future profitability
of the Company and its subsidiaries and the benefits to be derived from the
Company's execution of its industry consolidation strategy. As discussed in the
Company's current annual report on Form 10-K, filed June 23, 1998, some of the
factors which could affect the Company's performance include, among other
things: the effects of leverage on the Company,
<PAGE> 6
METAL MANAGEMENT COMPLETES ACQUISITION PAGE 6
OF THREE EAST COAST RECYCLING COMPANIES
WITH COMBINED REVENUES OF $210-MILLION
immediate and future capital requirements, risk of dilution to existing
shareholders, potential inability to control growth or to successfully
integrate acquired businesses, limited operating history, cyclicality of
the metals recycling industry, potential inability to complete pending
acquisitions, commodity price fluctuations, compliance with environmental,
health and safety and other regulatory requirements applicable to the Company,
potential environmental liability, risk of deterioration in relations with
labor unions, control by principal stockholders and dependence on key
management, dependence on suppliers of scrap metals, concentration of customer
risk, competition in the scrap metals industry, availability of scrap
alternatives, stock market volatility and year 2000 compliance.
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