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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: December 1, 1997
(Date of earliest event reported)
METAL MANAGEMENT, INC.
(Exact name of registrant as specified in the charter)
Delaware 0-14836 94-2835068
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
500 Dearborn Street, Suite 405
Chicago, Illinois 60610
(Address of Principal Executive Offices)
(312) 645-0700
Registrant's telephone number including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 1, 1997, the Company completed the acquisition of Cozzi Iron &
Metal, Inc. ("Cozzi") through a merger in which a wholly-owned subsidiary of
the Company merged with and into Cozzi, with Cozzi the surviving entity, thus
becoming a wholly-owned subsidiary of the Company (the "Merger"). As a result
of the Merger, all the issued and outstanding shares of Cozzi were converted
into 11,499,986 newly-issued shares of the Company's Common Stock, and $6
million in cash (the "Merger Consideration"). The Company funded the cash
portion of the Merger Consideration from the proceeds of the sale of Series B
Convertible Preferred Stock. See Item 5 below. Cozzi was founded in 1945 and
has a network of processing facilities located in Chicago, Illinois; East
Chicago, Indiana and the Pittsburgh, Pennsylvania area, with joint ventures
operating in Memphis, Tennessee and Phoenix, Arizona.
Upon closing of the Merger, each of Albert A. Cozzi, Frank J. Cozzi and
Gregory P. Cozzi became directors of the Company. In addition, Albert A. Cozzi
was elected President and Chief Operating Officer of the Company and entered
into a five-year employment agreement with the Company under which he will be
paid an annual salary of $275,000, and an annual guaranteed bonus equal to a
minimum of $68,500. Mr. Cozzi was also granted warrants, exercisable until
December 1, 2002, to purchase 377,586 shares of the Company's common stock at
an exercise price of $5.91 per share and 377,586 shares of common stock at an
exercise price of $15.84 per share.
Also, Frank J. Cozzi was elected Vice President of the Company and entered
into a five-year employment agreement with the Company under which he will be
paid an annual salary of $275,000, and an annual guaranteed bonus equal to a
minimum of $68,500. Mr. Cozzi was also granted warrants, exercisable until
December 1, 2002, to purchase 291,380 shares of the Company's common stock at
an exercise price of $5.91 per share and 291,380 shares of common stock at an
exercise price of $15.84 per share.
Finally, Gregory P. Cozzi entered into a five-year employment agreement
with Cozzi under which he will be paid an annual salary of $135,000. Mr. Cozzi
was also granted warrants, exercisable until December 1, 2002, to purchase
81,035 shares of the Company's common stock at an exercise price of $5.91 per
share and 81,035 shares of common stock at an exercise price of $15.84 per
share.
Also upon closing of the Merger, T. Benjamin Jennings, the Company's
Chairman of the Board and Chief Development Officer, and Gerard M. Jacobs, a
Director and the Company's Chief Executive Officer, each entered into new
five-year employment agreements with the Company under which each will be paid
an annual salary of $275,000, and an annual guaranteed bonus equal to a minimum
of $68,500. Each individual was also granted warrants, exercisable until
December 1, 2002, to purchase 375,000 shares of the Company's common stock at
an exercise price of $5.91 per share and 350,000 shares of common stock at an
exercise price of $12.00 per share.
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Copies of all the employment agreements and the warrants described above
are attached as exhibits to this Report.
In connection with the Merger, Albert A. Cozzi, Frank J. Cozzi and Gregory
P. Cozzi (collectively, the "Cozzi Stockholders") and Messrs. Jacobs and
Jennings (collectively, the "MTLM Stockholders") entered into a stockholders
agreement dated as of December 1, 1997 and having a term of ten years, unless
renewed or extended (the "Stockholders Agreement"). Under the Stockholders
Agreement, the Cozzi Stockholders and the MTLM Stockholders have agreed that
each group will act in a manner to cause the nomination of one-half of the
total number of directors slated for election at each annual meeting of the
Company, provided that each group has agreed to nominate one individual,
independent and unaffiliated from each group or the Company, as part of its
slate. The Stockholders Agreement further requires each group to vote for the
other group's nominees for election to the Board and to vote for proposals, if
and when presented by the Company, to amend the Company's organizational
documents to require the approval of at least two-thirds of the Board of
Directors to, among other things: (i) amend the Company's certificate of
incorporation or bylaws; (ii) liquidate or merge the Company; (iii) sell
substantially all of the Company's assets; (iv) elect or remove officers; (v)
adopt an annual budget; (vi) borrow funds, sell assets or make capital
expenditures exceeding $5 million; (vii) issue or register the Company's
securities; or (viii) declare or pay any dividends or distributions. The
Stockholders Agreement is attached as an exhibit to this Report.
In addition, if any of the Cozzi Stockholders or the MTLM Stockholders
desire to sell their respective shares of common stock, the individual who
desires to sell his shares must generally offer the shares first to members of
his own stockholder group, second to members of the other stockholder group,
and third to the Company, in that order, before selling to a third party.
Also, if either group receives an offer to buy its shares from a third party,
the members of the group must generally offer the other group's members the
right to participate in the offer on the same terms and conditions.
ITEM 5. OTHER EVENTS
Annual Meeting. On November 29, 1997, the Company held its Annual Meeting
of stockholders. At the Annual Meeting, T. Benjamin Jennings, Gerard M.
Jacobs, Donald F. Moorehead, Jr., Albert A. Cozzi, Frank J. Cozzi, Gregory P.
Cozzi, George A. Isaac, III, William T. Proler, Harold Rubenstein and
Christopher G. Knowles were elected to the Company's Board of Directors. In
addition, the stockholders approved amendments to the Company's Certificate of
Incorporation to increase the number of authorized shares of common stock from
40,000,000 to 80,000,000 and to increase the number of authorized shares of the
Company's "blank check" preferred stock from 2,000,000 to 4,000,000. The
stockholders also approved: (i) an amendment to the Company's 1995 Stock Plan
for Employees and Consultants to increase the number of shares of Common Stock
authorized for issuance under the plan from 1,300,000 to 2,600,000; (ii) an
amendment to the Company's 1996 Director Option Plan to increase the number of
shares authorized for issuance under the plan from 100,000 to 200,000; and
(iii) the issuance of common stock upon conversion of the Company's Series A
and Series B Convertible Preferred
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Stock. The Certificate of Amendment of Certificate of Incorporation setting
forth the increases in the number of common shares authorized under the
Company's option plans is attached as an exhibit to this Report.
Series B Preferred Stock. On November 20, 1997, the Company designated
23,000 shares of its preferred stock as Series B Convertible Preferred Stock,
par value $.01 per share (stated value $1,000 per share) (the "Series B
Stock"). On December 1, 1997, the Company issued an aggregate of 20,000 shares
of the Series B Stock to Proprietary Convertible Investment Group, Inc. (10,000
Shares) and Capital Ventures International (10,000 Shares) for consideration
totaling $20.0 million, of which the Company received net proceeds of $19.1
million. The shares of Series B Stock are convertible into shares of the
Company's common stock at a conversion ratio equal to the least of three
different conversion formulas. The holders of the Series B Stock were also
granted rights to register the shares of common stock issuable on conversion.
The Certificate of Designations for the Series B Stock, the Securities Purchase
Agreement and Registration Rights Agreement executed by the Company in
connection with the sale of the Series B Stock, are attached as exhibits to
this Report.
Other. The Company and George O. Moorehead, a former Director and former
Executive Vice President of the Company, have entered into three agreements,
each dated as of November 7, 1997, a Separation Agreement, a Stock Warrant
Settlement Agreement, and a Non-Compete, Non-Solicitation and Confidentiality
Covenant and Agreement (each of which is attached as an exhibit to this Report)
resolving all outstanding issues between the Company and Mr. Moorehead.
Pursuant to the Separation Agreement: (i) Mr. Moorehead has resigned as an
employee of the Company and EMCO Recycling Corp. ("EMCO"), and from his
directorship of EMCO; and (ii) the Company (a) paid Mr. Moorehead $250,000, (b)
agreed to provide Mr. Moorehead certain insurance and other benefits for a
five-year period; (c) paid certain legal fees to Mr. Moorehead's counsel, and
(d) permitted Mr. Moorehead to exercise any options or warrants to acquire
common stock previously granted to him, on a "net cashless" basis, subject to
the Company's right to refuse "net cashless" exercises under certain
circumstances. Pursuant to the Stock Warrant Settlement Agreement, the Company
agreed: (i) to issue to Mr. Moorehead warrants to purchase 200,000 shares of
common stock at an exercise price equal to $12.00 per share, exercisable for a
period of five years; and (ii) to pay to Mr. Moorehead $207,500 by December 31,
1997 and $457,500 by April 15, 1998. Mr. Moorehead would be permitted to
exercise the warrants issued under this Agreement on a "net cashless" basis
subject to the Company's right to refuse "net cashless" exercises under certain
circumstances.
All of the statements herein, 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.
There can be no assurance that the Company's actual future performance or that
of its subsidiaries will meet the Company's expectations for growth and
profitability. The statements in this Form 8-K involve known and unknown
risks, uncertainties, and other factors which may cause actual results,
performance, or achievements to be materially different from any future
results, performance, or achievements expressed or implied by these
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forward-looking statements. As discussed in the Company's annual report for
the period ended March 31, 1997, its quarterly reports for the periods ended
June 30, 1997 and September 30, 1997 and its proxy statement, dated November
20, 1997, some of the factors which could affect the Company's performance
include, among other things, cyclicality of the scrap metal recycling industry,
price fluctuations in commodity markets, adverse economic conditions, inability
to successfully access capital, unavailability of suitable acquisition
opportunities, the cost of complying with environmental laws and regulations,
the risk that announced mergers are not consummated, the risk of challenges by
the Company's competition, and the risk that the Company will face difficulties
in consolidating and controlling operations in diverse geographic locations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The following financial statements of Cozzi Iron & Metal, Inc. are
incorporated by reference to the Company's Proxy Statement dated November 20,
1997:
Independent Auditors' Report
Consolidated Balance Sheets for the years ended December 31, 1995
and 1996 and the nine months ended September 30, 1997 (unaudited)
Consolidated Statements of Income for the years ended December 31,
1994, 1995 and 1996 and the nine months ended September 30, 1996 and 1997
(unaudited)
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995, and 1996 and the nine months ended September 30,
1997 (unaudited)
Consolidated Statements of Cash Flows for the years ended December
31, 1994, 1995, and 1996 and the nine months ended September 30, 1996 and
1997 (unaudited)
Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1995, and 1996 and the nine months ended September 30,
1996 and 1997 (unaudited)
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Financial Data of Metal Management, Inc. as
of and for the six months ended September 30, 1997 and the twelve months ended
March 31, 1997 (incorporated by reference to pages 39-51 of the Company's Proxy
Statement dated November 20, 1997).
(c) Exhibits
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2.1 Agreement and Plan of Merger dated May 16, 1997 (as amended) among
Cozzi and its shareholders, the Company and CIM Acquisition, Co. (incorporated
by reference to Annex A to the Company's Proxy Statement dated November 20,
1997).
3.1 Certificate of Amendment of Certificate of Incorporation of the
Company, dated December 2, 1997 and filed with the Secretary of State of
Delaware on December 3, 1997.
3.2 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of the Company dated November 20, 1997 and filed
with the Secretary of State of Delaware on November 20, 1997.
10.1 Form of Stock Warrant Settlement Agreement, dated as of November 7,
1997, by and among the Company, EMCO Recycling Corp., a wholly-owned subsidiary
of the Company, and George O. Moorehead.
10.2 Form of Letter regarding Separation Agreement dated as of November
7, 1997 between the Company and George O. Moorehead.
10.3. Form of Non-Compete, Non-Solicitation and Confidentiality Covenant
and Agreement, dated as of November 7, 1997, by and between the Company and
George O. Moorehead.
10.4. Securities Purchase Agreement, dated as of November 20, 1997, by and
among the Company, Proprietary Convertible Investment Group, Inc., and Capital
Ventures International.
10.5 Registration Rights Agreement, dated as of November 20, 1997, by and
among the Company, Proprietary Convertible Investment Group, Inc., and Capital
Ventures International.
10.6 Employment Agreement, dated December 1, 1997, by and between T.
Benjamin Jennings and the Company.
10.7 Warrant to purchase 350,000 shares of Common Stock at an exercise
price of $12.00 per share, dated December 1, 1997, issued by the Company to T.
Benjamin Jennings.
10.8 Warrant to purchase 375,000 shares of Common Stock at an exercise
price of $5.91 per share, dated December 1, 1997, issued by the Company to T.
Benjamin Jennings.
10.9 Employment Agreement, dated December 1, 1997, by and between Gerard
M. Jacobs and the Company.
10.10 Warrant to purchase 350,000 shares of Common Stock at an exercise
price of $12.00 per share, dated December 1, 1997 issued by the Company to
Gerard M. Jacobs.
10.11 Warrant to purchase 375,000 shares of Common Stock at an exercise
price of $5.91 per share, dated December 1, 1997, issued by the Company to
Gerard M. Jacobs.
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10.12 Employment Agreement, dated December 1, 1997, by and between Albert
A. Cozzi and the Company.
10.13 Warrant to purchase 377,586 shares of Common Stock at an exercise
price of $5.91 per share, dated December 1, 1997, issued by the Company to
Albert A. Cozzi.
10.14 Warrant to purchase 377,586 shares of Common Stock at an exercise
price of $15.84 per share, dated December 1, 1997, issued by the Company to
Albert A. Cozzi.
10.15 Employment Agreement, dated December 1, 1997, by and between Frank
J. Cozzi and the Company.
10.16 Warrant to purchase 291,380 shares of Common Stock at an exercise
price of $5.91 per share, dated December 1, 1997, issued by the Company to
Frank J. Cozzi.
10.17 Warrant to purchase 291,380 shares of Common Stock at an exercise
price of $15.84 per share, dated December 1, 1997, issued by the Company to
Frank J. Cozzi.
10.18 Employment Agreement, dated December 1, 1997, by and between Gregory
P. Cozzi and Cozzi Iron & Metal, Inc.
10.19 Warrant to purchase 81,035 shares of Common Stock at an exercise
price of $5.91 per share, dated December 1, 1997, issued by the Company to
Gregory P. Cozzi.
10.20 Warrant to purchase 81,035 shares of Common Stock at an exercise
price of $15.84 per share, dated December 1, 1997, issued by the Company to
Gregory P. Cozzi.
10.21 Stockholders Agreement dated as of December 1, 1997 by and among the
Company, T. Benjamin Jennings, Gerard M. Jacobs, Albert A. Cozzi, Frank J.
Cozzi and Gregory P. Cozzi.
23.1 Consent of Deloitte & Touche LLP.
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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.
Dated: December 15, 1997 By: /s/ Gerard M. Jacobs
------------------------
Gerard M. Jacobs,
Chief Executive Officer
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
METAL MANAGEMENT, INC.
METAL MANAGEMENT, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware (the "Secretary of State") on
June 5, 1986.
2. Subparagraph (a) of Paragraph 4 of the Certificate of Incorporation is
hereby amended to read as follows:
4. (a) The Corporation is authorized to issue two
classes of shares to be designated, respectively,
"Preferred Stock" and "Common Stock". The number of
shares of Preferred Stock authorized to be issued is
Four Million (4,000,000) and the number of shares of
Common Stock authorized to be issued is Eighty Million
(80,000,000). The Preferred Stock and Common Stock
shall each have a par value of $0.01 per share.
3. Paragraph 10 of the Certificate of Incorporation is hereby deleted
in its entirety and replaced by the following: "In voting for the
election of directors of the Corporation, holders of stock shall not have
the right to accumulate their votes."
4. The Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock filed on August 7, 1997, and corrected by a
Certificate of Correction thereto filed on October 17, 1997, shall be and
it hereby is amended by deleting in their entirety Sections 4(g)(ii)(1),
4(g)(ii)(2), 4(g)(ii)(3), 6(d)(v) and 6(d)(vii).
5. In accordance with Section 242 of the Delaware General Corporation
Law, the above statement of amendment has been duly approved by the
board of directors of Metal Management, Inc. at a meeting duly called and
held on September 7, 1997, and by the stockholders of Metal Management,
Inc. at the Annual Meeting of Stockholders duly called and held on
November 29, 1997. At the Annual Meeting, which was held upon notice duly
given in accordance with Section 222 of the General Corporation Law of the
State of Delaware, at least a majority of the shares issued and
outstanding on the record date for the meeting constituting the requisite
vote as required by statute were voted in favor of the amendment.
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IN WITNESS WHEREOF, said METAL MANAGEMENT, INC. has caused this
Certificate to be signed by Gerard M. Jacobs, its Chief Executive Officer, who
does make this certificate and declare and certify under penalty of perjury
that this is the act and deed of the Corporation, and that the facts stated
herein are true, and accordingly has set his hand hereto this 2nd day of
December, 1997.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
----------------------------
Name: Gerard M. Jacobs
Title: Chief Executive Officer
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EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
METAL MANAGEMENT, INC.
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
Metal Management, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Company
pursuant to the authority of the Board of Directors as required by Section 151
of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to the Board of Directors
in accordance with the provisions of the Company's Certificate of
Incorporation, the Board of Directors hereby authorizes a series of the
Company's previously authorized Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, privileges and restrictions thereof as
follows:
1. DESIGNATION AND AMOUNT.
The designation of this series, which consists of 23,000 shares (the
"Preferred Shares") of Preferred Stock, is the Series B Convertible Preferred
Stock (the "Series B Preferred Stock") and the face amount shall be One
Thousand Dollars ($1,000) per share (the "Stated Value").
2. DIVIDENDS.
(a) Payment of Dividends. The holders of shares of Series B Preferred
Stock (each, a "Holder" and collectively, the "Holders") shall be entitled to
receive cumulative dividends ("Dividends") on the Series B Preferred Stock
accruing on each share thereof at an annual rate of four and one-half percent
(4.5%) times the Stated Value per share (such rate subject to ratable
adjustment in the event of any stock split or combination and to equitable
adjustment in the event of a reclassification or other similar event).
Dividends shall accrue, whether or not declared, on each share of Series B
Preferred Stock from the date of original issuance thereof (the "Purchase
Date") through the date on which such Dividends are paid. Accrued but unpaid
Dividends shall be payable in cash or, at the option of the Company (the "Stock
Payment Option") and upon satisfaction of the conditions set forth in paragraph
2(c) below, in shares (the "Dividend Payment Shares") of Series B Preferred
Stock, on each Conversion Date and Mandatory Redemption Date and on the
Maturity Date (each as defined below, a "Dividend Payment Date").
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(b) Delivery of Dividend Payment Shares. If the Company elects to
exercise the Stock Payment Option upon a conversion by a Holder, the Company
shall deliver to such Holder, on or before the third business day following the
applicable Dividend Payment Date, one or more certificates representing the
aggregate number of whole Dividend Payment Shares that is determined by
dividing (x) the amount of the Dividend which has accrued with respect to all
of the Preferred Shares held by such Holder and would otherwise be payable in
cash on the applicable Dividend Payment Date by (y) one thousand dollars
($1,000). No fractional Dividend Payment Shares shall be issued; the Company
shall, in lieu thereof, either issue a number of Dividend Payment Shares which
reflects a rounding up to the next whole number of shares or pay such amount in
cash. The Dividend Payment Shares shall be fully paid and non-assessable, free
and clear of any liens, claims, preemptive rights or encumbrances imposed by or
through the Company, entitled to all of the rights, preferences and privileges
set forth herein, and shall be issued and delivered to the Holder on or before
the third business day following the applicable Dividend Payment Date. The
Company agrees to inform the Holder at least five (5) Trading Days prior to the
first day of each calendar quarter in which the Company intends to exercise the
Stock Payment Option.
(c) Conditions to Stock Payment Option. If the Company wishes to
exercise the Stock Payment Option with respect to Dividends payable to a
Holder, it may do so only if each of the following conditions has been
satisfied as of the applicable Dividend Payment Date:
(i) the number of shares of Series B Preferred Stock authorized,
unissued and unreserved for all other purposes, or held in the Company's
treasury, is sufficient to pay such Dividends in Dividend Payment Shares;
(ii) the Company's common stock, par value $.01 per share (the
"Common Stock"), is authorized for quotation on the Nasdaq National Market or
for listing or quotation on the New York Stock Exchange or any other national
securities exchange;
(iii) (x) the registration statement required to be maintained by
the Company (the "Registration Statement") pursuant to a registration rights
agreement by and among the Company and the Purchasers named therein (the
"Registration Rights Agreement") is effective and available for the sale of all
of the Conversion Shares issuable upon conversion of the Dividend Payment
Shares issuable pursuant to such exercise and of all Conversion Shares (as
defined below) then held by or issuable to the Holders, or (y) sales of such
Dividend Payment Shares may be made pursuant to Rule 144(k); provided, however,
that the Registration Statement will not be deemed unavailable during a
Standstill Period (as defined in the Registration Rights Agreement).
(iv) after giving effect to the issuance of the Dividend Payment
Shares issuable pursuant to such exercise, the Company shall have reserved and
available out of its authorized but unissued Common Stock, free from any
preemptive rights, solely for the purpose of effecting Conversions, at least
125% of the number of shares issuable upon conversion of all outstanding shares
of Series B Preferred Stock.
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(v) a Mandatory Redemption Event or a Liquidation Event (each as
defined herein) has not occurred and is continuing; and
(vi) the Company has delivered to the Holder a certificate,
signed by an executive officer of the Company, setting forth:
* the amount of the Dividend to which the Holder is
entitled;
* the number of Dividend Payment Shares to be
delivered in payment of such Dividend, and the
calculation therefor; and
* a statement to the effect that all of the conditions
set forth in paragraphs 2(c)(i) - (v) have been
satisfied.
3. PRIORITY.
(a) Payment upon Dissolution, Etc. Upon the occurrence and
continuance of (x) any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, commenced by the Company or by its creditors, as such, or
relating to its assets or (y) the dissolution or other winding up of the
Company whether total or partial, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy proceedings, or (z) any assignment
for the benefit of creditors or any marshaling of the material assets or
material liabilities of the Company (a "Liquidation Event"), no distribution
shall be made to the holders of any shares of capital stock (other than capital
stock that ranks pari passu with the Series B Preferred Stock) of the Company
unless prior thereto each Holder shall have received the Liquidation Preference
(as defined below) with respect to each share of Series B Preferred Stock then
held by such Holder. In the event that upon the occurrence of a Liquidation
Event, the assets available for distribution to the Holders of the Series B
Preferred Stock and to the holders of such pari passu securities are
insufficient to pay the Liquidation Preference with respect to all of the
outstanding shares of Series B Preferred Stock and of such pari passu
securities, such assets shall be distributed ratably among such shares in
proportion to the ratio that the liquidation preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
(b) Liquidation Preference. The "Liquidation Preference" with
respect to a share of Series B Preferred Stock shall mean an amount equal to
the Stated Value of such share plus any accrued and unpaid Dividends thereon.
(c) Ranking. In the event of the liquidation, dissolution or other
winding up of the Company, the Holders of the Series B Preferred Stock shall be
treated pari passu with the holders of the Company's Series A Preferred Stock.
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4. CONVERSION.
(a) Right to Convert. Subject to the limitations contained in
paragraph 4(h) below, each Holder shall have the right to convert at any time
and from time to time after the earlier to occur of (i) the ninetieth (90th)
day following the date on which the Series B Preferred Stock is issued and (ii)
the effectiveness of the Registration Statement, each of its shares of Series B
Preferred Stock into such number of fully paid and non-assessable shares of
Common Stock, free and clear of any liens, claims, preemptive rights or
encumbrances imposed by or through the Company (the "Conversion Shares"), as is
computed in accordance with the terms hereof (a "Conversion"); provided,
however, that the right of such Holder to convert the Series B Preferred Stock
into Conversion Shares shall not become effective unless and until the Company
has obtained the approval of the transactions contemplated hereby, including
without limitation the conversion of the Preferred Stock into shares of Common
Stock in accordance with the terms hereof, by a majority of the holders of
shares of its Common Stock entitled to vote thereon ("Stockholder Approval").
(b) Reservation of Common Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, free from any preemptive rights, solely for
the purpose of effecting Conversions hereunder, such number of its shares of
Common Stock (the "Reserved Amount") as shall from time to time be sufficient
to effect the Conversion of the Series B Preferred Stock. If at any time the
Reserved Amount is less than 125% of the number of shares of Common Stock
issuable upon Conversion of the then outstanding shares of Series B Preferred
Stock, the Company shall take immediate action (including seeking shareholder
authorization of additional shares of Common Stock) to increase the Reserved
Amount to 175% of the number of shares of Common Stock into which the
outstanding shares of Series B Preferred Stock are then convertible. If the
Company shall issue any securities or make any change in its capital structure
which would change the number of Conversion Shares deliverable upon the
Conversion of the outstanding shares of Series B Preferred Stock, the Company
shall at the same time also make proper provision so that thereafter there
shall be a sufficient number of shares of Common Stock authorized and reserved,
free from any preemptive rights, for such Conversion.
(c) Conversion Notice. In order to convert shares of Series B
Preferred Stock, or any portion thereof, the Holder shall send by facsimile
transmission (with a hard copy to follow by first class mail), at any time
prior to 11:59 p.m., eastern time, on the date on which the Holder wishes to
effect such Conversion (the "Conversion Date"), (i) a notice of conversion to
the Company and to its designated transfer agent for the Common Stock (the
"Transfer Agent") stating the number of shares of Series B Preferred Stock to
be converted, the amount of Dividends accrued on the shares of Series B
Preferred Stock then held by the Holder up to and including the Conversion
Date, the applicable Conversion Price and a calculation of the number of shares
of Common Stock issuable upon such Conversion (a "Conversion Notice") and (ii)
a copy of the certificate or certificates representing the Series B Preferred
Stock being converted. The Holder shall thereafter send the original of such
certificate or certificates by overnight mail to the Company. In the case of a
dispute as to the calculation of the Conversion Price or the number of
Conversion Shares issuable upon a Conversion, the Company shall promptly issue
to the Holder the number of Conversion Shares that are not disputed and shall
submit the disputed
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<PAGE> 5
calculations to its independent accountants within one (1) business day of
receipt of the Holder's Conversion Notice. The Company shall cause such
accountant to calculate the Conversion Price as provided herein and to notify
the Company and the Holder of the results in writing no later than two business
days following the day on which it received the disputed calculations. Such
accountant's calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the Company.
(d) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Company pursuant to a Conversion shall
be determined by dividing the Stated Value of the Series B Preferred Stock to
be converted by the Conversion Price (as defined herein) in effect on the
Conversion Date. The "Conversion Price" shall be the lesser of (A) the price
determined by multiplying (x) the average of the Closing Bid Prices (as defined
below) for the Common Stock on the five (5) Trading Days (as defined below)
occurring immediately prior to (but not including) the Conversion Date times
(y) 92.5% (the "Floating Conversion Price"); (B) the price determined by
multiplying (x) the Closing Bid Price for the Common Stock on the Purchase Date
times (y) 120% (the "Fixed Conversion Price") and (C) the price equal to the
lowest traded price of a share of Common Stock during any period in which the
Common Stock is no longer listed for quotation on the Nasdaq National Market or
listed on the New York Stock Exchange or other national securities exchange.
"Trading Day" shall mean any day on which the Common Stock is traded for any
period on the Nasdaq National Market or on the principal securities exchange or
market on which the Common Stock is then traded. "Closing Bid Price" means,
with respect to a security, the closing bid price of such security on the
principal securities exchange or trading market where such security is listed
or traded as reported by Bloomberg Financial Markets or a comparable reporting
service of national reputation selected by the Company and reasonably
acceptable to holders of a majority of the then outstanding shares of Series B
Preferred Stock if Bloomberg Financial Markets is not then reporting closing
bid prices of such security (collectively, "Bloomberg"), or if the foregoing
does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as reasonably determined by an independent investment
banking firm selected by the Holders of a majority of the then outstanding
shares of Series B Preferred Stock, and reasonably acceptable to the Company,
with the costs of such appraisal to be borne by the Company.
(e) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice pursuant to paragraph 4(c) above, the Company shall, no later
than the close of business on the later to occur of (i) the third (3rd)
business day following the Conversion Date set forth in such Conversion Notice
and (ii) the business day following the day on which the original certificate or
certificates representing the shares of Series B Preferred Stock being
converted are received by the Company (the "Delivery Date"), issue and deliver
or caused to be delivered to the Holder the number of Conversion Shares as
shall be determined as provided herein. Conversion Shares delivered to the
Holder shall not contain any restrictive legend as long as the sale of such
Conversion Shares is covered by an effective
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<PAGE> 6
Registration Statement or may be made pursuant to Rule 144(k) under the
Securities Act of 1933, as amended (the "Securities Act") or any successor rule
or provision.
(f) Failure to Deliver Conversion Shares.
(i) In the event that the Company fails for any reason to deliver
to the Holder certificates representing the number of Conversion Shares
specified in the applicable Conversion Notice on or before the Delivery Date
therefor (a "Conversion Default"), the Company shall pay to the Holder payments
("Conversion Default Payments") in the amount of (i) (N/365) multiplied by (ii)
the aggregate Stated Value of the shares of Series B Preferred Stock
represented by the Conversion Shares which remain the subject of such
Conversion Default multiplied by (iii) the lower of twenty-four percent (24%)
and the maximum interest rate permitted by applicable law, where "N" equals the
number of days elapsed between the original Delivery Date of such Conversion
Shares and the earlier to occur of (A) the date on which all of such Conversion
Shares are issued and delivered to the Holder and (B) the date on which such
shares are redeemed pursuant to the terms of this Certificate of Designations.
Cash amounts payable hereunder shall be paid on or before the fifth (5th)
business day of the calendar month following the calendar month in which such
amount has accrued. In the event that the Company fails to make any Conversion
Default Payment in accordance with this paragraph 4(f)(i), a Holder may elect
to receive such Conversion Default Payment in cash or to convert all or any
portion of such Conversion Default Payment, at any time, into Common Stock at
the Conversion Price in effect on the date such Holder delivers a notice to the
Company of its election to convert such Conversion Default Payment into Common
Stock. In the event that there occurs a dispute between the Company and a
Holder as to the number of Conversion Shares issuable pursuant to a Conversion
as described in paragraph 4(c) above, and it is finally determined that such
Holder is not entitled to receive certain Conversion Shares, the Company shall
not owe Conversion Default Payments to such Holder with respect to such
Conversion Shares.
(ii) Nothing herein shall limit the Holder's right to pursue
actual damages for the Company's failure to issue and deliver Conversion Shares
on the applicable Delivery Date (including, without limitation, damages
relating to any purchase of shares of Common Stock by the Holder to make
delivery on a sale effected in anticipation of receiving Conversion Shares upon
Conversion, such damages to be in an amount equal to the difference between (A)
the aggregate purchase price for the shares of Common Stock so purchased and
(B) the aggregate number of net proceeds received by the Holder from the sale
of the Conversion Shares issued by the Company pursuant to such Conversion),
and the Holder shall have the right to pursue all other remedies available to
it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief).
(g) Conversion at Maturity.
(i) On the date which is three years from the Purchase Date (the
"Maturity Date"), and assuming the satisfaction of the Mandatory Conversion
Conditions (as defined below) the remaining shares of Series B Preferred Stock
then held by each Holder shall be automatically converted into the number of
shares of Common Stock equal to the Liquidation Preference of such shares
divided
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<PAGE> 7
by the then applicable Conversion Price (a "Mandatory Conversion"), and the
Maturity Date shall be deemed to be the Conversion Date with respect to such
Mandatory Conversion. If a Mandatory Conversion occurs, the Company and the
Holder shall follow the procedures for Conversion set forth in this Section 4;
provided, however, that the Holder shall not be required to send the Conversion
Notice contemplated by paragraph 4(c). In the event that the Mandatory
Conversion Conditions are not satisfied as of the Maturity Date, the Company
shall, within five (5) business days of the Maturity Date, pay an amount in
cash to each Holder equal to the Liquidation Preference for the shares of
Series B Preferred Stock then held by such Holder.
(ii) The "Mandatory Conversion Conditions" are as follows:
(1) a Registration Statement covering the resale of all of the
Conversion Shares issuable pursuant to such Mandatory Conversion shall be
effective, or such resale may be made pursuant to Rule 144(k).
(h) Limitations on Right to Convert.
(i) In the event that the number of Preferred Shares to be
converted by a Holder pursuant to a Conversion Notice exceeds that number of
Preferred Shares (the "Preferred Share Conversion Limit") which, if converted
in full, would result in the issuance of a number of Conversion Shares that
would equal such Holder's Cap Amount (as defined below), the Company shall have
the option, in lieu of converting the Preferred Shares which would exceed such
Holder's Preferred Share Conversion Limit, to redeem such Preferred Shares at
the Optional Redemption Price (as defined below)(an "Optional Redemption"). In
order to effect an Optional Redemption, the Company shall, within two (2)
business days of receiving a Conversion Notice from a Holder pursuant to which
the Preferred Shares to be converted thereby exceeds such Holder's Preferred
Share Conversion Limit, deliver a written notice to such Holder that the
Company intends to redeem such excess Preferred Shares (an "Optional Redemption
Notice"). In the event that the Company does not deliver an Optional Redemption
Notice within such two business day period, the Company will convert the
Preferred Shares represented by such Conversion Notice in accordance with the
terms of this Certificate. A Holder shall have the right, upon converting
Preferred Shares in a number that equals or exceeds 99% of such Holder's
Preferred Share Conversion Limit, to deliver a written notice to the Company
requesting whether the Company intends to redeem such Holder's Preferred Shares
in excess of such Holder's Preferred Share Conversion Limit. If the Company
fails to deliver an Optional Redemption Notice within five (5) business days of
its receipt of such request, the Company will not be entitled thereafter to
exercise its right to an Optional Redemption with respect to the Preferred
Shares held by such Holder. A Holder's "Cap Amount" at any given time shall be
the number of shares of Common Stock equal to, (A) for a Holder which purchased
Preferred Shares from the Company, (i) the aggregate Stated Value of all of
the Preferred Shares purchased by such Holder on or before such date, divided
by (ii) ten dollars ($10), and (B) for a Holder which purchased Preferred
Shares from another Holder, a pro rata portion of such other Holder's Cap
Amount, in which case such other Holder's Cap Amount shall be appropriately
reduced. In the event that a Holder converts all of such Holder's Preferred
Shares into a number of shares of Common Stock which, in the aggregate, is less
than such Holder's Cap Amount,
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<PAGE> 8
then the difference between such Holder's Cap Amount and the number of shares
of Common Stock actually issued to such Holder shall be allocated pro rata to
the Cap Amounts of the other Holders based on the number of Preferred Shares
then held by such Holders. The Optional Redemption Price for each Preferred
Share redeemed pursuant to an Optional Redemption shall be equal to (x) the
Stated Value of such Preferred Share times 117.5% plus (y) the amount of all
Dividends accrued (and any other amounts payable pursuant to this Certificate
of Designations) on such Preferred Shares up to and including the date on which
the Company pays the Optional Redemption Price to the applicable Holder. Upon
delivering an Optional Redemption Notice to a Holder, the Company shall pay the
Optional Redemption Price to such Holder within ninety (90) days of such
delivery (such ninetieth day being referred to as the "Optional Redemption
Date"). If the Optional Redemption Price is not paid to such Holder on or
before the Optional Redemption Date, interest shall accrue thereon in the
amount of (i) (N/365) multiplied by (ii) the Optional Redemption Price
multiplied by (iii) the lower of twenty-four percent (24%) and the maximum
interest rate permitted by applicable law, where "N" equals the number of days
elapsed between the Optional Redemption Date and the date on which such payment
is made in full.
(ii) In no event shall a Holder be permitted to convert any shares of
Series B Preferred Stock in excess of that number of such shares upon the
Conversion of which (x) the number of shares of Common Stock beneficially owned
by such Holder (other than shares of Common Stock issuable upon conversion of
the Series B Preferred Stock and shares of Common Stock which may be deemed
beneficially owned except for being subject to a limitation on conversion or
exercise analogous to the limitation contained in this subparagraph (ii)) plus
(y) the number of shares of Common Stock issuable upon the Conversion of such
shares, is equal to or exceeds (z) 4.99% of the number of shares of Common
Stock then issued and outstanding. Delivery by a Holder of a Conversion Notice
shall be deemed to represent the determination by such Holder that the
Conversion represented thereby will not violate the provisions of this
subparagraph (ii), and the Company shall have neither the right nor the
obligation to confirm such determination. Nothing contained herein shall be
deemed to restrict the right of a Holder to convert such shares of Series B
Preferred Stock at such time as such Conversion will not violate the provisions
of this subparagraph (ii).
5. ADJUSTMENTS TO CONVERSION PRICE.
(a) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If (A) the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, reclassification, the distribution
to holders of Common Stock of rights or warrants entitling them to subscribe
for or purchase Common Stock at less than the then current market price thereof
or other similar event, the Fixed Conversion Price shall be proportionately
reduced, or (B) the number of outstanding shares of Common Stock is decreased
by a reverse stock split, combination or reclassification of shares or other
similar event, the Fixed Conversion Price shall be proportionately increased.
In such event, the Company shall notify the Transfer Agent of such change on or
before the effective date thereof. For purposes hereof, the market price per
share of Common Stock on any date shall be the average of the closing sale
prices for the Common Stock as reported by Nasdaq, or by the principal
securities market on which the Common Stock is then traded, on the five (5)
consecutive
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<PAGE> 9
Trading Days (as defined below) selected by the Company not later than,
the earlier of the date in question and the Trading Day before the "ex" date,
if any, with respect to the issuance or distribution requiring such
computation. The term "'ex' date", when used with respect to any issuance or
distribution, means the first Trading Day on which the Common Stock trades
regular way in the market from which such average closing price is then to be
determined without the right to receive such issuance or distribution. In the
absence of one or more such quotations, the Company shall determine the current
market price on the basis of such quotations as it considers appropriate.
(b) Adjustment to Conversion Price. If, prior to the Conversion of all
of the shares of Series B Preferred Stock, the number of outstanding shares of
Common Stock is increased or decreased by a stock split, stock dividend,
combination, reclassification or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any Conversion thereof, the Conversion Price shall be calculated
giving appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event for all Trading Days immediately
preceding the Conversion Date.
(c) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
Conversion of all of the shares of Series B Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
redemption or other similar event (an "Organic Change"), as a result of which
shares of Common Stock shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity or there is a sale of all or substantially all the
Company's assets or there is a change of control transaction with respect to
which, in any such case, a Holder does not exercise its right to a Mandatory
Redemption (as defined below) of the Series B Preferred Stock, then such Holder
shall thereafter have the right to receive upon Conversion of the shares of
Series B Preferred Stock, upon the terms and conditions specified herein and in
lieu of the shares of Common Stock which theretofore would have been issuable
upon Conversion had such Organic Change not occurred, such stock, securities
and/or other assets, if any, which such Holder would have been entitled to
receive in such Organic Change with respect to or in exchange for the number of
shares of Common Stock which would have been issuable upon conversion of such
Holder's Series B Preferred Stock had such Organic Change not taken place, and
in any such case appropriate provisions shall be made with respect to the
rights and interests of such Holder to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Conversion
Price and of the number of shares issuable upon a Conversion, and if the
Company is not the surviving entity in such transaction, to adjust the
Conversion Price to be based upon the Closing Bid Prices of the surviving
entity) shall thereafter be applicable as nearly as may be practicable in
relation to any securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection 5(c)
unless (i) it first gives to each Holder prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganization, redemption
or other similar event, and makes a public announcement of such event at the
same time that it gives such notice and (ii) the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligations of the Company under this Certificate of Designation, including the
terms of this subsection 5(c).
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<PAGE> 10
(d) Distribution of Assets. If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or
otherwise, including any dividend or distribution in shares of capital stock of
a subsidiary of the Company (collectively, a "Distribution"), then, upon a
Conversion by a Holder occurring after the record date for determining
shareholders entitled to such Distribution but prior to the effective date of
such Distribution, the Holder shall be entitled to receive the amount of such
assets which would have been payable to such Holder had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution. The Fixed Conversion Price for
shares of Series B Preferred Stock not converted prior to the effective date of
a Distribution shall be reduced to a price determined by decreasing the Fixed
Conversion Price in effect immediately prior to the record date of the
Distribution by an amount equal to the fair market value of the assets so
distributed, as determined by mutual agreement of the Company and each Holder.
(e) No Fractional Shares. If any adjustment under this Section 5
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares of Common Stock issuable upon Conversion shall be the
next higher number of shares or, at the option of the Company, shall be paid in
cash in an amount calculated by multiplying the amount of the fractional share
times the Closing Bid Price used to calculate the Conversion Price for such
Conversion.
6. MANDATORY REDEMPTION.
(a) Mandatory Redemption. In the event that a Mandatory Redemption
Event (as defined below) occurs, each Holder shall have the right, upon written
notice to the Company, to have all or any portion of the shares of Series B
Preferred Stock held by such Holder redeemed by the Company (a "Mandatory
Redemption") at the Mandatory Redemption Price (as defined herein) in same day
funds. Such notice shall specify the effective date of such Mandatory
Redemption (the "Mandatory Redemption Date") and the number of such shares to
be redeemed.
(b) Mandatory Redemption Price. The "Mandatory Redemption Price" shall
be equal to the Liquidation Preference of the shares of Series B Preferred Stock
being redeemed multiplied by one hundred and twenty percent (120%).
(c) Payment of Mandatory Redemption Price.
(i) The Company shall pay the Mandatory Redemption Price to the
Holder exercising its right to redemption within five (5) business days of the
Mandatory Redemption Date. Upon redemption of a share of Series B Preferred
Stock, the Holder will return such share to the Company for cancellation
against payment of the Mandatory Redemption Price.
(ii) If Company fails to pay the Mandatory Redemption Price to the
Holder within five (5) business days of the Mandatory Redemption Date, the
Holder shall be entitled to interest thereon at an annual rate equal to the
lower of (x) the "prime" rate (as published in the Wall Street
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Journal) on such fifth business day plus three percent (3%) and (y) the highest
rate permitted by applicable law from the Mandatory Redemption Date until the
Mandatory Redemption Price has been paid in full.
(d) Mandatory Redemption Event. Each of the following events shall be
deemed a "Mandatory Redemption Event":
(i) the Company fails for any reason (other than as a result of
not having a sufficient number of shares of Common Stock authorized and
reserved for issuance) to issue shares of Common Stock and to transfer
certificates representing such shares to the Holder in accordance with the
provisions of this Certificate of Designations upon Conversion of any shares of
Series B Preferred Stock, and such failure continues for fifteen (15) business
days following written notice thereof by the Holder to the Company and to
counsel designated by the Company;
(ii) the Company is unable to issue shares of Common Stock upon
Conversion of any shares of Series B Preferred Stock as a result of not having
a sufficient number of shares of Common Stock authorized and reserved for
issuance, and such inability continues for a period of thirty (30) days
thereafter;
(iii) the Company breaches, in a material respect, any covenant or
other material term or condition of the Securities Purchase Agreement between
the Company and the Purchasers named therein pursuant to which the Series B
Preferred Stock may be issued and sold (the "Securities Purchase Agreement"),
the Registration Rights Agreement or any other Transaction Document (as defined
in the Securities Purchase Agreement) and such breach continues for a period of
ten (10) business days after written notice thereof to the Company from the
Holder; provided that, if the Company is then using its best efforts to cure
any such breach, such ten business day period shall be extended for another ten
(10) business days;
(iv) the Registration Statement is not declared effective by the
Registration Deadline (as defined in the Registration Rights Agreement) or, if
the Registration Statement has been declared effective by such date, and the
effectiveness of the Registration Statement lapses for any reason (including
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of Conversion Shares in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of ten (10) business days; provided that the Registration Statement will
not be considered unavailable for the number of days occurring during a
Standstill Period (as defined in the Registration Rights Agreement); and
(v) the sale, conveyance or disposition of all or substantially
all of the assets of the Company, the effectuation of a transaction or series
of related transactions, in which more than 50% of the voting power of the
Company is disposed of, or the consolidation, merger or other business
combination of the Company with or into any other entity (other than the
Company's merger transaction with Cozzi Iron & Metal, Inc.), immediately
following which the prior stockholders of the Company fail to own, directly or
indirectly, at least fifty percent (50%) of the surviving entity.
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<PAGE> 12
(e) Redemption Defaults. If the Company fails to pay any Holder the
Mandatory Redemption Price with respect to any share of Series B Preferred
Stock within five (5) business days after its receipt of a notice requiring
such redemption ("Redemption Notice"), then the Holder of Series B Preferred
Stock delivering such Redemption Notice shall have, in addition to all other
remedies available at law or equity, the right, at any time and from time to
time until the Company's payment of such Mandatory Redemption Price, to require
the Company, upon written notice, to immediately convert (in accordance with
the terms of Subparagraph (a) of Paragraph IV) all or any portion of the
Mandatory Redemption Price, plus interest as aforesaid, into shares of Common
Stock at the Conversion Price in effect on the date such Holder delivers notice
to the Company of its election to convert such Mandatory Redemption Price into
Common Stock. In the event the Corporation is not able to redeem all of the
shares of Series B Preferred Stock subject to Redemption Notices delivered
prior to the date upon which such redemption is to be effected, the Corporation
shall redeem shares of Series B Preferred Stock from each holder pro rata,
based on the total number of shares of Series B Preferred Stock outstanding at
the time of redemption included by such Holder in all Redemption Notices
delivered prior to the date upon which such redemption is to be effected
relative to the total number of shares of Series B Preferred Stock outstanding
at the time of redemption included in all of the Redemption Notices delivered
prior to the date upon which such redemption is to be effected.
7. MISCELLANEOUS.
(a) Transfer of Series B Preferred Stock. A Holder may sell, transfer
or otherwise dispose of all or any portion of the shares of Series B Preferred
Stock to any person or entity as long as such sale, transfer or disposition is
the subject of an effective registration statement under the Securities Act or
such Holder delivers an opinion of counsel to the effect that such sale,
transfer or disposition is exempt from registration thereunder; provided that
no such opinion shall be required in the event of a sale by such Holder to an
affiliate thereof or pursuant to Rule 144 under the Securities Act. From and
after the date of such sale, transfer or disposition, the transferee hereof
shall be deemed to be a Holder. Upon any such sale, transfer or disposition,
the Company shall, promptly following the return of the certificate or
certificates representing the shares of Series B Preferred Stock that are the
subject of such sale, transfer or disposition, issue and deliver to such
transferee a new Certificate in the name of such transferee.
(b) Lost or Stolen Certificate. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of a certificate
representing shares of Series B Preferred Stock, and (in the case of loss,
theft or destruction) of indemnity or security reasonably satisfactory to the
Company, and upon surrender and cancellation of such certificate if mutilated,
the Company shall execute and deliver to the Holder a new certificate
identical in all respects to the original certificate.
(c) No Voting Rights. The Holders of the Series B Preferred Stock
shall have no voting rights with respect to the business, management or affairs
of the Company; provided that the Company shall provide each Holder with prior
notification of each meeting of shareholders (and copies of proxy statements
and other information sent to such shareholders).
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<PAGE> 13
(d) Cancellation of Preferred Shares. Upon the conversion or
redemption of a Preferred Share, the Company shall immediately cancel such
Preferred Share and shall not reissue such Preferred Share.
(e) Notices. Except as otherwise specified herein, any notice, demand
or request required or permitted to be given pursuant to the terms of this
Certificate of Designations shall be in writing and shall be deemed given (i)
when delivered personally or by verifiable facsimile transmission (with a hard
copy to follow) on or before 5:00 p.m., eastern time, on a business day or, if
such day is not a business day, on the next succeeding business day, (ii) on
the next business day after timely delivery to an overnight courier and (iii)
on the third business day after deposit in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed as
follows:
If to the Company:
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
Attn: Gerard M. Jacobs
Fax: 312-645-0714
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, Illinois 60611
Attn: Stuart M. Savitz, Esq.
Fax: 312-527-5921
and if to any Holder, to such address as shall be designated by such Holder in
writing to the Company.
(f) Protective Provisions
So long as shares of Series B Preferred Stock are outstanding, the Company
shall not, without first obtaining the approval of the Holders of at least a
majority of the then outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series B Preferred Stock or any other capital stock of the Company so as to
affect adversely the Series B Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series B Preferred Stock as to distribution of assets upon a
Liquidation Event or any other liquidation, dissolution or winding up of the
Company;
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<PAGE> 14
(c) increase the authorized number of shares of Series B Preferred
Stock; or
(d) issue any Series B Preferred Stock other than pursuant to the
Securities Purchase Agreement;
provided, however, that such approval shall not be required with respect to any
action described in clause (b) or clause (c) above in the event that the
average Closing Bid Price of the Common Stock on the five (5) trading days
immediately preceding the effective date of such action is equal to or exceeds
one hundred and fifty percent (150%) of the Fixed Conversion Price.
In the event that Holders of at least a majority of the then outstanding
shares of Series B Preferred Stock agree to allow the Company to alter or
change the rights, preferences or privileges of the shares of Series B
Preferred Stock, pursuant to the terms hereof, so as to affect the Series B
Preferred Stock, then the Company will deliver notice of such approved change
to the holders of the Series B Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and the Dissenting Holders
shall have the right for a period of thirty (30) days to convert their shares
of Series B Preferred Stock into Conversion Shares pursuant to the terms of
this Certificate of Designations as they existed prior to such alteration or
change and without regard to the limitations on Conversion contained in
paragraph 4(h)(i) hereof, or continue to hold their shares of Series B
Preferred Stock.
IN WITNESS WHEREOF, the Company has executed this Certificate of
Designations as of the 20th day of November, 1997.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
----------------------------
Gerard M. Jacobs, President
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Exhibit 10.1
Stock Warrant Settlement Agreement
This Stock Warrant Settlement Agreement ("Agreement") is entered into with
the effective date of November 7, 1997, by and among METAL MANAGEMENT, INC., a
Delaware corporation ("MTLM"), EMCO RECYCLING CORP., MTLM's wholly owned
subsidiary ("EMCO"), and GEORGE O. MOOREHEAD ("Mr. Moorehead").
RECITALS
A. On April 11, 1996, MTLM, then operating under the corporate name of
GENERAL PARAMETRICS CORPORATION ("GPC"), and Mr. Moorehead entered into an
Employment Agreement ("Employment Agreement") whereby GPC employed Mr.
Moorehead to serve as Executive Vice President of GPC and President of EMCO.
B. Section 2(b) of the Employment Agreement states that Mr. Moorehead
shall be entitled to participate in certain compensation plans.
C. MTLM has stated its intention to issue stock warrants to certain of its
executive officers without issuing Mr. Moorehead any stock warrants and/or
options at the time.
D. Mr. Moorehead claims that, pursuant to Section 2(b) of the Employment
Agreement, he is entitled to have stock warrants issued to him as a part of his
Employment Agreement rights ("Warrants") and that MTLM's failure to issue such
Warrants to him constitutes a breach of the Employment Agreement.
E. MTLM denies that its failure to issue Warrants to Mr. Moorehead
constitutes a breach of the Employment Agreement.
F. The parties wish to settle their dispute regarding Mr. Moorehead's
entitlement to the Warrants under the Employment Agreement as set forth in this
Agreement.
G. In consequence of their dispute regarding the Warrants, the parties
have further engaged in negotiations regarding the consensual termination of
their employment relationship.
COVENANTS
In consideration of the foregoing Recitals and the mutual promises and
provisions contained in this Agreement, as well as other consideration, receipt
of which is herewith confirmed, the parties agree as follows:
<PAGE> 2
1. In full and complete satisfaction of Mr. Moorehead's claims to receive
Warrants under Section 2(b) of the Employment Agreement, Mr. Moorehead shall
receive the following:
(a) Warrants ("Settlement Warrants"), subject to paragraph 3 below,
to purchase 200,000 shares of MTLM common stock at TWELVE DOLLARS ($12)
per share, exercisable for a period of five (5) years from the Issuance Date
(as defined below). These Settlement Warrants shall be vested on the Issuance
Date and shall not be transferable, except upon death.
(b) A payment of $207,500, subject to all applicable taxes, if any,
by December 31, 1997, or the Issuance Date as defined in paragraph 3 below,
whichever is later.
(c) A payment of $457,500, subject to all applicable taxes, if any, by
April 15, 1998, or the Issuance Date as defined in paragraph 3 below, whichever
is later.
2. Mr. Moorehead shall have the continuing right to "net exercise" (i.e.,
cashless exercise) the Settlement Warrants; provided, however, that MTLM may
refuse to "net exercise" any of the Settlement Warrants due to restrictions
imposed by the rules and regulations of the Securities Exchange Commission or
the national securities exchange upon which the stock of MTLM is then traded
("Restrictions"). In the event MTLM is unable to "net exercise" the Settlement
Warrants because of Restrictions, Mr. Moorehead may again request the "net
exercise" of the Settlement Warrants at such later time as he shall select
subject to the above refusal rights of MTLM during periods which Restrictions
exist.
3. The executed Settlement Warrants and the payments due pursuant to
paragraphs 1(b) and 1(c) above shall be delivered to Mr. Donald F. Moorehead,
Jr. who shall hold such on behalf of MTLM. Mr. Donald F. Moorehead, Jr. shall
deliver the Settlement Warrants to Mr. George O. Moorehead on the date (the
"Issuance Date") which is the earlier of: (i) the date on which T. Benjamin
Jennings or Gerard M. Jacobs enter into new employment agreements as 9 below;
or (ii) the date on which T. Benjamin Jennings or Gerard M. Jacobs receive a
substantial warrant package which, in the sole and absolute discretion of
Donald F. Moorehead, Jr., is intended by the Board of Directors of MTLM to be
provided to T. Benjamin Jennings and Gerard M. Jacobs in lieu of such new
employment agreements. Mr. Donald F. Moorehead, Jr. is hereby authorized to
insert the Issuance Date in the Settlement Warrants. Mr. Donald F. Moorehead,
Jr. shall deliver the payments due pursuant to paragraphs 1(b) and 1(c) above
to Mr. George O. Moorehead on the dates as provided in paragraphs 1(b) and
1(c) above.
4. Mr. Moorehead hereby releases and forever discharges MTLM and EMCO,
their officers, directors, shareholders, employees, agents, affiliates, and
successors and assigns, from any and all claims, liabilities, debts, contracts,
covenants, actions or causes of action arising on or before the date of this
Agreement with regard to Mr. Moorehead's claims under Section 2(b) of the
Employment Agreement and his
<PAGE> 3
claims of MTLM's breach of the Employment Agreement due to MTLM's failure
to issue Warrants under Section 2(b) of the Employment Agreement (other than
the obligations undertaken by MTLM and/or EMCO in this Agreement), including
but not limited to any claims, liabilities, debts, contracts, covenants,
actions or causes of action arising out of or in connection with Section 2(b)
of the Employment Agreement.
5. MTLM and EMCO, their officers, directors, employees, agents,
affiliates, successors and assigns, hereby release and forever discharge Mr.
Moorehead from any and all claims, liabilities, debts, contracts, covenants,
actions or causes of action arising on or before the date of this Agreement
under Section 2(b) of the Employment Agreement and his claims of MTLM's breach
of the Employment Agreement due to MTLM's failure to issue Warrants under
Section 2(b) of the Employment Agreement (other than the obligations undertaken
by Mr. Moorehead to in this Agreement), including but not limited to any
claims, liabilities, debts, contracts, covenants, actions or causes of action
arising out of or in connection with Section 2(b) of the Employment Agreement.
6. The parties agree that this Agreement is not to be construed as an
admission, by either, of any wrongdoing or liability by any party.
7. MTLM shall make such disclosure of the terms and conditions of this
Agreement as is deemed necessary by MTLM's securities counsel. Mr. Moorehead
will have a reasonable opportunity to provide comments to MTLM about any such
disclosure, but no right to approve or restrain any such disclosure.
8. Mr. Moorehead agrees to refrain from making any press release, any
other public disclosure or any statements, disparaging or otherwise, regarding
this Agreement, MTLM, EMCO or any other affiliates, without the express prior
written consent of MTLM except as may be required by law.
9. Mr. Moorehead acknowledges that Gerard M. Jacobs and T. Benjamin
Jennings will terminate their existing employment agreements with MTLM, and
will enter into new employment agreements with MTLM, and that as an inducement
to enter into such new employment agreements they will receive significant
warrants and/or options to acquire MTLM common stock. Mr. Moorehead further
acknowledges that Donald F. Moorehead, Jr. may also receive significant
warrants and/or options to acquire MTLM common stock in recognition for his
role as Vice-Chairman of MTLM.
10. MTLM shall pay all reasonable legal fees and expenses incurred by Mr.
Moorehead with respect to the preparation, analysis and negotiation of this
matter and shall pay all such reasonable fees and expenses, if any, incurred in
the enforcement of any right or benefit provided by this Agreement. MTLM
authorizes Mr. Moorehead to release the $9,000 EMCO retainer check to Jones,
Skelton & Hochuli for this matter upon execution of this Letter Agreement.
<PAGE> 4
11. Each party executing this Agreement warrants to the other that they
have the full power and authority to enter into this Agreement and to bind the
applicable party thereto and that each party has been represented and advised
by his or its own legal counsel.
12. Donald F. Moorehead, Jr., shall not be responsible or liable to any
person or entity, whether or not a party to this Agreement, for any act or
omission of any kind so long as he has acted in good faith pursuant to the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties have set their names as of the date set
forth below.
METAL MANAGEMENT, INC. EMCO RECYCLING CORP.
By: By:
-------------------- --------------------
Its: President Its:
Dated: November ___, 1997 Dated: November ___, 1997
- ----------------------
GEORGE O. MOOREHEAD
Dated: November ___, 1997
I hereby agree to act on behalf of MTLM in accordance with terms and
provisions of this Agreement.
- ----------------------
DONALD F. MOOREHEAD, JR.
Dated: November ___, 1997
<PAGE> 1
EXHIBIT 10.2
November 7, 1997
Mr. George O. Moorehead
5339 East LaFayette Boulevard
Phoenix, Arizona 85018
RE: SEPARATION AGREEMENT
Dear Mr. Moorehead:
This letter (the "Letter Agreement") will confirm our understanding with
respect to your separation, in each and every capacity, from Metal Management,
Inc. ("MTLM") and its wholly-owned subsidiary, EMCO Recycling Corporation
("EMCO"). We each acknowledge that this Letter Agreement is intended to
resolve all matters between you, MTLM and EMCO. This letter Agreement is not
an admission of fault or liability on your part, or on the part of MTLM and/or
EMCO. Subject to each party's continuing to comply with the terms of this
Letter Agreement, you, MTLM and EMCO agree as follows:
1. Effective immediately, you will allow MTLM to make any and all changes
to the business and operations of EMCO that MTLM, in its sole discretion, deems
appropriate. You will not be asked to implement any such changes. You will
not have any mandatory office hours or duties between the date of this Letter
Agreement and the date of your resignation. Your present duties will be
delegated by MTLM to other parties.
2. Contingent upon the closing of the merger of CIM Acquisition Co., an
Illinois corporation and a wholly-owned subsidiary of MTLM, with Cozzi Iron &
Metal, Inc. (the "Cozzi Merger"), the following actions shall occur:
(a) You acknowledge that you have not been nominated for re-election
to the board of directors of MTLM at the upcoming annual meeting of
stockholders of MTLM. MTLM, however, will reimburse you for your
reasonable
<PAGE> 2
Mr. George O. Moorehead
November 26, 1997
Page 2
expenses of attending such annual meeting. Also, effective
upon the closing of the Cozzi Merger, you hereby resign from the board of
directors of EMCO and as an officer and employee of EMCO and MTLM.
(b) Upon closing of the Cozzi Merger you will receive a payment of
$250,000, subject to all applicable taxes, as a termination payment;
(c) You shall have the continuing right to "net exercise" (i.e.,
cashless exercise) the MTLM options and/or warrants previously granted to
you; provided, however, that MTLM may refuse to "net exercise" any
warrants and/or options due to restrictions imposed by the rules and
regulations of the Securities Exchange Commission or the national
securities exchange upon which the stock of MTLM is then traded
("Restrictions"). In the event MTLM is unable to "net exercise" the
warrants and/or options because of Restrictions, you may again request
the "net exercise" of the warrants and/or options at such later times as
you shall select subject to the above refusal rights of MTLM during
periods which Restrictions exist.
(d) You will additionally receive the following fringe benefits for
a period of five (5) years from the date of this Letter Agreement,
subject, however, to off-set or elimination if the same or similar fringe
benefits are provided by another employer during such five (5) year
period:
(i) Medical Insurance consistent with that received by MTLM
Executive Committee members;
(ii) Dental Insurance consistent with that received by any
MTLM Executive Committee members (if any is provided);
(iii) $1,000-per-month car allowance, plus reimbursement for
reasonable gasoline, oil, repair and maintenance expanses; and
(iv) Reasonable reimbursement for your home office, home
office fax line, and cellular phone.
<PAGE> 3
Mr. George O. Moorehead
November 26, 1997
Page 3
(e) You will receive the following fringe benefits for twenty-four
(24) months from the date of this Letter Agreement subject to offset or
elimination if the same or similar benefits are provided by another
employer during such twenty-four (24) month period:
(i) Whole life insurance in the amount of $750,000 to be
owned by you with all such beneficiary designations subject to
your control;
(ii) Term life insurance in the amount of $750,000 to be
owned by you with all such beneficiary designations subject to
your control;
(f) Title to the furniture in your office at 3700 West Lower Buckeye
Road, Phoenix, Arizona, and title to your home office phone, home office
fax machine, and home office computer.
(i) You acknowledge that the consideration you are receiving
pursuant to this Letter Agreement is in addition to that to which
you might otherwise be entitled.
4. Simultaneous with the closing of the Cozzi Merger, you will deliver to
MTLM a fully-executed original of the Non-Compete, Non-Solicitation and
Confidentiality Covenant and Agreement attached hereto as Exhibit A. The terms
and provisions of the Non-Compete, Non-Solicitation and Confidentiality
Covenant and Agreement are incorporated herein by reference as though fully set
forth herein.
5. MTLM shall make such disclosure of the terms and conditions of this
Letter Agreement as is deemed necessary by MTLM's securities counsel. You will
have a reasonable opportunity to provide comments to MTLM about any such
disclosure, but no right to approve or restrain any such disclosure.
6. You agree to refrain from making any press release, any other public
disclosure or any statements, disparaging or otherwise, regarding this Letter
Agreement, MTLM, EMCO or any of their affiliates, without the express prior
written consent of MTLM except as may be required by law.
7. You acknowledge that on or about the closing of the Cozzi Merger,
Gerard M. Jacobs and T. Benjamin Jennings will terminate their existing
employment agreements
<PAGE> 4
Mr. George O. Moorehead
November 26, 1997
Page 4
with MTLM, and will enter into new employment agreements with MTLM, and that as
an inducement to enter into such new employment agreements they will receive
significant warrants and/or options to acquire MTLM common stock. You further
acknowledge that Donald F. Moorehead, Jr. may also receive significant warrants
and/or options to acquire MTLM common stock in recognition for his role as
Vice-Chairman of MTLM.
8. Effective immediately upon the closing of the Cozzi Merger set forth in
paragraph 2 above, and payment of the obligation required by sub-paragraph 2(b)
above, your employment agreement (the "Employment Agreement") dated April 11,
1996, by and between General Parametric Corporation (n/k/a MTLM) and you shall
terminate and shall thereafter be of no force or effect and neither party shall
have any further or continuing obligations thereunder except for the
obligations of indemnity to you contractually provided, if any, and as
otherwise are provided by MTLM or EMCO currently pursuant to its Articles of
Incorporation, Bylaws and policies adopted by the Board of Directors or statute
to officers and directors of MTLM and/or EMCO.
9. You hereby release and forever discharge MTLM and EMCO, their officers,
directors, shareholders, employees, agents, affiliates, and successors and
assigns, from any and all claims, liabilities, debts, contracts, covenants,
actions or causes of action arising on or before the date of execution of this
Letter Agreement (other than the obligations undertaken by MTLM and /or EMCO in
this Letter Agreement), including but not limited to any claims, liabilities,
debts, contracts, covenants. actions or causes of action arising out of or in
connection with your Employment Agreement, any claim you may have under the Age
Discrimination in Employment Act of 1967, as amended, your employment
relationship with MTLM or your position as an officer and/or director of EMCO
and/or MTLM.
10. MTLM and EMCO, their officers, directors, employees, agents,
affiliates, successors and assigns, hereby release and forever discharge you
from any and all claims, liabilities, debts, contracts, covenants, actions or
causes of action arising on or before the date of execution of this Letter
Agreement (other than the obligations undertaken by you in this Letter
Agreement).
11. Each party executing this Letter Agreement warrants to the other that
they have the full power and authority to enter into this Letter Agreement and
to bind the applicable party thereto and that each party has been represented
and advised by his or its own legal counsel.
<PAGE> 5
Mr. George O. Moorehead
November 26, 1997
Page 5
12. MTLM shall pay all reasonable legal fees and expenses incurred by you
with respect to the preparation, analysis and negotiation of this matter and
shall pay all such reasonable fees and expenses, if any, incurred in the
enforcement of any right or benefit provided by this Letter Agreement. MTLM
authorizes Mr. Moorehead to release the $9,000 EMCO retainer check to Jones,
Skelton & Hochuli for this matter upon execution of this Letter Agreement.
13. If you choose, you have up to twenty-one (21) days to consider whether
to sign this Letter Agreement and seven (7) days after signing the Letter
Agreement to revoke your acceptance. Any such revocation must be in writing
and delivered to MTLM in care of T. Benjamin Jennings.
14. MTLM shall deliver to Donald F. Moorehead, Jr., the signed checks
which make up the payment described in paragraph 2(b) above to be held by
Donald F. Moorehead, Jr., on behalf of MTLM and to be distributed by him
pursuant to the terms of this Letter Agreement.
15. Donald F. Moorehead, Jr., shall not be responsible or liable to any
person or entity, whether or not a party to this Letter Agreement, for any act
or omission of any kind so long as he has acted in good faith pursuant to the
provisions of this Letter Agreement.
<PAGE> 6
Mr. George O. Moorehead
November 26, 1997
Page 6
This Letter Agreement sets forth all the terms of your separation from
MTLM and EMCO. Each party expressly acknowledges, by executing below, that the
obligations of the non-defaulting party shall terminate in the event a party
breaches his or its obligations under this Letter Agreement or the Non-Compete,
Non-Solicitation and Confidentiality Covenant and Agreement.
Very truly yours,
METAL MANAGEMENT, INC.
By:
Gerard M. Jacobs, President
EMCO RECYCLING CORPORATION
By:
Its:
The undersigned has accepted and discussed with his legal counsel and
executed this Letter Agreement intending to be legally bound as of the day and
year first above written.
George O. Moorehead
The undersigned hereby agrees to act on behalf of MTLM in accordance with
terms and provisions of this Agreement.
Donald F. Moorehead, Jr.
<PAGE> 7
Mr. George O. Moorehead
November 26, 1997
Page 7
<PAGE> 1
EXHIBIT 10.3
NON-COMPETE, NON-SOLICITATION AND
CONFIDENTIALITY COVENANT AND AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of the 7th day of
November, 1997, by and between George O. Moorehead ("Moorehead") and Metal
Management, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, Moorehead and the Company have entered into a certain Letter
Agreement dated November 7, 1997 (the "Letter Agreement"), which memorializes
the terms and conditions of Moorehead's separation from the Company and from
EMCO Recycling Corporation ("EMCO");
WHEREAS, as a material inducement to the Company to enter into the Letter
Agreement, Moorehead has agreed to execute and abide by the terms of this
Agreement, as well as the terms and conditions of the Letter Agreement.
NOW, THEREFORE, in consideration of the promises, covenants and agreements
contained herein, and in consideration for the promises, covenants and
agreements contained in the Letter Agreement, the receipt and sufficiency of
which are hereby acknowledged, Moorehead and the Company agree as follows:
1. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Moorehead hereby
acknowledges and agrees that by reason of and/or as of a result of his
employment by the Company and/or EMCO, Moorehead has acquired, made use of and/
or added to confidential information of a special and unique nature and value
relating to certain records, secrets, processes, documentation, software
programs, ledgers and general information, mailing lists, suppliers, customer
lists, customer profiles, prospective customer lists, accounts receivable and
payable ledgers, financial and other records of and/or with respect to the
Company and EMCO, their subsidiaries, affiliates,
<PAGE> 2
customers and other similar matters (all such information, together with that
certain information described herein, being hereinafter referred to as
"Confidential Information"). Moorehead further acknowledges and agrees that
the Confidential Information is of great value to the Company, EMCO and/or
their subsidiaries or affiliates and that it is reasonably necessary to
protect the Confidential Information and the goodwill of the Company, EMCO and/
or their subsidiaries or affiliates. Accordingly, Moorehead hereby agrees that:
(a) Moorehead will not, at any time, directly or indirectly,
except as authorized by the Company for the benefit of the Company:
(i) divulge to any person, firm or corporation other than the
Company (hereinafter referred to as "Third Parties"), or use or
cause or authorize any Third Parties to use, the Confidential
Information or any other information relating to the business or
interests of the Company, EMCO and/or their subsidiaries or
affiliates which Moorehead knows or should know is regarded as
confidential and valuable by the Company, EMCO and/or their
subsidiaries or affiliates (whether or not any of the foregoing
information is actually novel or unique or is actually known to
others), except as required by law; or
(ii) solicit, cause or authorize to be solicited, or hire,
directly or indirectly, for employment for or on behalf of himself
or any Third Parties, any persons who are, at any time within one
(1) year prior to the date of this Agreement, employees of the
Company, EMCO or their subsidiaries and affiliates.
-2-
<PAGE> 3
(b) Moorehead shall forthwith deliver or cause to be delivered to
the Company any and all Confidential Information, including notebooks,
keys, customer lists, customer profiles, mailing lists, rolodex or other
telephone lists, data and other documents and materials belonging to the
Company, EMCO and/or their subsidiaries or affiliates which is in his
possession or under his control relating to the Company, EMCO and/or
their subsidiaries or affiliates, or the Business, regardless of the
medium upon which it is stored, and will deliver to the Company upon such
termination of employment any other property of the Company, EMCO and/or
their subsidiaries or affiliates which is in his possession or under his
control.
2. NON-SOLICITATION. Moorehead agrees that for a period of five (5) years
from and after the date of this Agreement he will not, directly or indirectly,
on behalf of himself or as a partner or as an officer, director, employee,
member, manager, agent, consultant, owner or shareholder of any other entity or
person, or as a trustee, fiduciary or other representative of any other person
or entity, contact any persons or companies which are manufacturers, suppliers
or customers of the Company, EMCO or any of their subsidiaries or affiliates,
for the purpose of soliciting the manufacturers, suppliers or customers in
competition with the Company, EMCO or their subsidiaries or affiliates, nor
will he in any way, directly or indirectly, for himself, or as a partner or as
an officer, director, employee, member, manager, agent, consultant or
shareholder of any other entity or person, or as a trustee, fiduciary or other
representative of any other person or entity, solicit or divert, or cause
anyone to solicit or divert, any such manufacturers, suppliers or customers
from the Company, EMCO or their subsidiaries or affiliates. For purposes of
this Agreement, a "customer" shall mean any person or entity who has purchased
from or sold goods
-3-
<PAGE> 4
to the Company, EMCO or their subsidiaries or affiliates within the twelve-
month period immediately preceding such determination.
3. NON-COMPETITION COVENANT. As a necessary condition of this Agreement,
Moorehead represents and acknowledges, and agrees to the restrictions, set
forth in this paragraph. Moorehead acknowledges that the covenant set forth in
this paragraph is reasonable in scope and essential to the preservation of the
goodwill and other business interests of the Company and its Business, and that
Moorehead's willingness to agree to the restrictions set forth in this
paragraph were a material inducement to the Company's willingness to enter into
the Letter Agreement. Moorehead also acknowledges that the enforcement of the
covenant set forth in this paragraph will not preclude Moorehead from being
gainfully employed in such manner and to such extent as to provide a standard
of living for himself, the members of his family and others dependent upon him,
of at least the fashion to which he and they have become accustomed and may
expect. In addition, Moorehead acknowledges that the Company and EMCO have
obtained an advantage over their competitors as a result of their names,
locations and reputations that is characterized, among other things, by
personal relationships and customer contacts which EMCO and the Company have
developed over time and at great expense to EMCO and the Company. Furthermore,
Moorehead acknowledges that competition by Moorehead would impair the operation
of the Company and EMCO beyond that which would arise from the competition of
an unrelated third party with similar skills, and that the Company has chosen
to enter into the Letter Agreement in large part based upon Moorehead's
agreement not to compete with the Business in any state in which the Company,
EMCO, their subsidiaries or affiliates or any other entities that the Company
has announced its intention to acquire own a scrap iron and/or metal
-4-
<PAGE> 5
yard or processing facility on the date of this Agreement (the "RESTRICTED
TERRITORY"). Moorehead hereby acknowledges that the Company shall give valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, to
conduct the Business free of competition, direct or indirect, from Moorehead.
Moorehead hereby agrees that he shall not, directly or indirectly, alone or as
a partner, joint venturer, member, manager, officer, director, employee,
consultant, agent, independent contractor, stockholder or in any other capacity
of any company or business, for a period of five (5) years from and after the
date of this Agreement, engage in any business activity in the Restricted
Territory which business activity is directly or indirectly in competition with
the Business; provided however, that the beneficial ownership of less than five
percent (5%) of the shares of stock of any corporation having a class of equity
securities actively traded on a national securities exchange or over the
counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section.
4. REMEDIES. Moorehead hereby acknowledges and agrees that the services
to be rendered by him to the Company hereunder are of a special and unique
nature and that it would be very difficult or impossible to measure the damages
resulting from a breach of this Agreement. Moorehead hereby further
acknowledges and agrees that the restrictions herein are reasonable and
necessary for the protection of the Business and the goodwill of the Company,
EMCO and their subsidiaries and affiliates, and that a violation by Moorehead
of any such covenants will cause irreparable damage to the Company, EMCO and/or
their subsidiaries or affiliates. Moorehead therefore agrees that any breach
or threatened breach by him of any of the covenants or provisions of this
Agreement shall entitle the Company, in addition to any other legal remedy
available to them, to apply to any court of competent jurisdiction for a
temporary and permanent
-5-
<PAGE> 6
injunction or any other applicable decree of specific performance, without any
bond or security being required thereof, in order to enjoin such breach or
threatened breach.
5. ENFORCEMENT . It is the desire of the parties that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies in each jurisdiction in which enforcement might be sought.
Accordingly, if any particular portion of this Agreement shall ever be
adjudicated as invalid or unenforceable, or if the application thereof to any
party or circumstance shall be adjudicated to be prohibited by or invalidated
by such laws or public policies, such Section or Sections shall be deemed
amended to delete therefrom such portions so adjudicated, such deletions to
apply only with respect to the operation of such Section or Sections in the
particular jurisdictions so adjudicating on the parties and under the
circumstances as to which so adjudicated.
6. ATTORNEY'S FEES. The prevailing party in any action to enforce the
terms and provisions of this Agreement, or to enforce the terms and provisions
of the Letter Agreement, shall be awarded reasonable attorney's fees, costs and
expenses in connection therewith.
7. GENERAL PROVISIONS.
(a) Goodwill. The Company has invested substantial time and money in
the development of its products, services, territories, advertising and
marketing thereof, soliciting clients and creating goodwill. As a
consequence of his affiliation with EMCO and the Company, Moorehead
acknowledges that the customers are the customers of the Company, and that
any goodwill created by Moorehead belongs to and shall inure to the
benefit of the Company.
-6-
<PAGE> 7
(b) Notice. Any notice or demand required or permitted hereunder shall be
made in writing (i) either by actual delivery of the notice or demand into the
hands of the party thereunder entitled, or (ii) by the mailing of the notice or
demand in the United States mail, certified or registered mail, return receipt
requested, all postage prepaid and addressed to the party to whom the notice or
demand is to be given at the party's respective address set forth below, or
such other address as the parties may from time to time designate by written
notice as herein provided.
As addressed to the Company:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chief Executive Officer
With a copy to:
Erhard R. Chorle, Esq.
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
As addressed to the Executive
Mr. George O. Moorehead
5339 East LaFayette Blvd.
Phoenix, Arizona 85018
With a copy to:
Scott W. Gray, Esq.
Jones, Skelton & Huckuli
2901 North Central Avenue
Suite 800
Phoenix, Arizona 85012
-7-
<PAGE> 8
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement or the Letter Agreement shall be valid or binding upon the
Company unless made in writing and signed by an officer of the Company
duly authorized by the Board of Directors or upon Moorehead unless made
in writing and signed by him. The waiver by either party hereto of the
breach of any provision of this Agreement or the Letter Agreement shall
not operate or be construed as a waiver of any subsequent breach by such
party.
(d) Entire Agreement. This Agreement and the Letter Agreement
constitutes the entire agreement between the parties with respect to the
subject matter described therein and shall supersede any and all prior
agreements or understandings between the parties hereto.
(c) Choice of Law and Venue. The validity of this Agreement and/
or the Letter Agreement, its construction, interpretation, and
enforcement, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of
the State of Illinois, without regard to conflicts of law principles. To
the maximum extent permitted by law, the parties hereto hereby agree that
all actions or proceedings arising in connection with this Agreement and/
or the Letter Agreement shall be tried and determined only in the state
courts located in the County of Cook, State of Illinois. To the maximum
extent permitted by law, the parties hereto expressly waive any right
they may have to assert the doctrine of forum non conveniens or to
object to venue to the extent any proceeding is brought relating or
referring to this Agreement and/or the Letter Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
METAL MANAGEMENT, INC.
By:
-----------------------------------
Its:
----------------------------------
EXECUTIVE:
----------------------------------------
GEORGE O. MOOREHEAD
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<PAGE> 1
EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of November 20,
1997, by and among Metal Management, Inc., a Delaware corporation (the
"Company"), Proprietary Convertible Investment Group, Inc., a Delaware
corporation ("PCIG"), and Capital Ventures International, a Cayman Islands
unlimited liability company ("CVI"). PCIG and CVI are each referred to herein
as a "Purchaser" and, together, as the "Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser wishes to
buy, on the terms and subject to the conditions set forth in this Agreement,
the number of shares (the "Preferred Shares") of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock") set forth below
such Purchaser's name on the signature pages hereof. The Preferred Shares are
convertible into shares (the "Conversion Shares") of the Company's Common
Stock, $.01 par value per share (the "Common Stock"). The Company has agreed to
effect the registration of the Conversion Shares under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Rights
Agreement of even date herewith among the Company and the Purchasers (the
"Registration Rights Agreement").
The rights, preferences and privileges of the Series B Preferred Stock,
including the terms upon which the Series B Preferred Stock is convertible into
Conversion Shares, are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the "Certificate of
Designation"). The Preferred Shares and the Conversion Shares are collectively
referred to herein as the "Securities" and each as a "Security".
The sale of the Preferred Shares by the Company to the Purchasers will be
effected in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act.
The Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction of the conditions set forth herein, the Company agrees to sell at
the Closing (as defined below), and each Purchaser agrees to purchase, the
number of Preferred Shares set forth below such Purchaser's name on the
signature page hereof at a purchase price equal to one thousand dollars
($1,000) per share (the "Purchase Price").
1.2 Closing. Subject to the satisfaction of the conditions set forth
herein, the closing of the purchase and sale of the Preferred Shares shall
occur when this Agreement and the other Transaction Documents (as defined
below), have been executed and delivered by the Company and each Purchaser, all
of the conditions to Closing set forth in Article 5 have been satisfied or
waived and full payment of the Purchase Price has been made by each Purchaser
by wire transfer of immediately available funds to an account designated by the
Company against delivery by the
<PAGE> 2
Company of duly executed certificates to each Purchaser representing the
Preferred Shares purchased by such Purchaser hereunder (the "Closing"). The
date on which the Closing is deemed to take place is referred to herein as the
"Closing Date". The aggregate Purchase Price for all of the Preferred Shares to
be purchased by the Purchasers at the Closing (assuming the satisfaction of the
conditions described in Section 5 below) shall be twenty million dollars
($20,000,000).
1.3 Certain Definitions. When used herein, (A) "business day" shall mean
any day on which the New York Stock Exchange and commercial banks in the city of
New York are open for business, (B) an "affiliate" of a party shall mean any
person or entity controlling, controlled by or under common control with that
party and (C) "control" shall mean, with respect to an entity, the ability to
direct the business, operations or management of such entity, whether through
an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, solely with respect to it, hereby makes the following
representations and warranties to the Company (which shall be true as of the
date hereof and as of the Closing Date) and agrees with the Company that:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing as an entity under the laws of
the state of its organization with full power and authority to purchase the
Preferred Shares and to execute and deliver this Agreement. This Agreement
constitutes such Purchaser's valid and legally binding obligation, enforceable
in accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. Such Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares solely for its own account for investment
purposes as a principal and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, such Purchaser does not agree to hold the Securities for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Securities at any time in accordance with the provisions of this
Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition.
2.3 Information. The Company has provided such Purchaser with, and such
Purchaser has reviewed, the written information regarding the Company set
forth on Schedule 2.3, and has granted to such Purchaser the opportunity to ask
questions of and receive answers from representatives of the Company, its
officers, directors, employees and agents concerning the business, operations
and financial condition of the Company and materials relating to the terms
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<PAGE> 3
and conditions of the purchase and sale of the Preferred Shares hereunder.
Neither such information nor any other investigation conducted by such
Purchaser or any of its representatives shall modify, amend or otherwise affect
such Purchaser's right to rely on the Company's representations and warranties
contained in this Agreement.
2.4 Limitations on Disposition. Such Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Securities have
not been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom. Such Purchaser agrees not to sell, transfer
or otherwise dispose of the Securities unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) (i) such Purchaser shall have notified the Company in advance
of the proposed disposition, and (ii) if reasonably requested by the
Company, such Purchaser shall have furnished the Company with an opinion
of counsel (the cost of which shall be borne by the Purchaser),
reasonably satisfactory to the Company, that such disposition will not
require registration under the Securities Act. It is agreed that no
opinion of counsel will be required for the transfer of the Securities to
an affiliate of such Purchaser or with respect to a sale thereof made
pursuant to Rule 144 under the Securities Act ("Rule 144").
2.5 Legend. Such Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws, and may not be
sold, transferred or assigned in the absence of an effective
registration statement under the Securities Act and any such state
law or an exemption from the registration requirements thereunder."
Notwithstanding the foregoing, it is agreed that, as long as the
sale of the Conversion Shares is registered pursuant to an effective
registration statement or such shares are eligible for resale under Rule
144(k), the Conversion Shares shall be issued upon a conversion of the
Preferred Shares pursuant to the terms of the Certificate of Designation, or in
payment of a dividend thereon, without any legend or other restrictive
language. The legend set forth above shall be removed and the Company shall
issue a new certificate without such legend to the holder of any Security upon
which it is stamped if (i) the sale of such Security is registered under the
Securities Act, (ii) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions (the cost of which shall be borne by the Purchaser) to
the effect that such Security can be sold publicly without registration under
the Securities Act or (iii) such holder provides the Company with
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<PAGE> 4
reasonable assurances that such Security can be sold pursuant to Rule 144
without any restriction as to the number of shares of such Security that can
then be immediately resold.
2.6 No Reliance by Purchaser. Such Purchaser acknowledges that (i) it has
such knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents (as defined below)
and the transactions contemplated hereby and thereby, (ii) it is not relying on
any advice or representation of the Company in connection with entering into
this Agreement, the other Transaction Documents or such transactions (other
than the representations made by the Company in this Agreement and the other
Transaction Documents, and in the written information described in paragraph
2.3 above), (iii) it has not received from the Company any assurance or
guarantee as to the merits (whether legal, regulatory, tax, financial or
otherwise) of entering into this Agreement or the other Transaction Documents
or the performance of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisors to the extent that it has deemed necessary, and has
entered into this Agreement and the other Transaction Documents based on its
own independent judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral) expressed by the
Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
each Purchaser (which shall be true as the date hereof and as of the Closing
Date, provided that the representations and warranties made by the Company in
paragraph 3.18 hereof shall be true as of the date specified therein) and
agrees with such Purchaser that:
3.1 Organization, Good Standing and Qualification. Each of the Company
and its subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority, corporate and
otherwise, to carry on its business as now conducted. Each of the Company and
its subsidiaries is duly qualified to transact business and is in good standing
in each jurisdiction in which the failure so to qualify would have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole. For purposes of this Agreement,
the term "subsidiaries" shall mean entities in which the Company has an equity
interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, to issue and sell the Preferred Shares to such
Purchaser in accordance with the terms hereof, and to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation. All corporate action on the part of the Company by
its officers, directors and stockholders necessary for (A) the authorization,
execution and delivery of, and the performance by the Company of its
obligations under, (i) this Agreement, (ii) the Registration Rights Agreement
and (iii) all other agreements, documents, certificates or other instruments
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<PAGE> 5
delivered by the Company at the Closing (the instruments described in (i), (ii)
and (iii) being collectively referred to herein as the "Transaction
Documents"), and (B) the authorization, execution and filing of, and the
performance by the Company of its obligations under, the Certificate of
Designation, has been obtained and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required (other than the
Stockholder Approval (as defined in paragraph 4.1.10 below)).
3.3 Enforcement. The Transaction Documents and the Certificate of
Designation constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) general principles of
equity. Except as otherwise provided in the Transaction Documents, the Company
has obtained all governmental or regulatory consents and approvals required for
it to execute, deliver and perform its obligations under the Transaction
Documents and under the Certificate of Designation. The Management Proxies,
when executed and delivered to the Purchasers, will be valid and binding.
3.4 Disclosure Documents; Material Agreements; Other Information. The
Company has filed with the Commission: (i) the Company's Annual Report on Form
10-K for the year ended March 31, 1997, (ii) Quarterly Reports on Form 10-Q and
10-Q/A for the quarters ended January 31, 1996, March 31, 1996, June 30, 1996,
September 30, 1996, December 31, 1996, June 30, 1997 and September 30, 1997,
(iii) all Current Reports on Form 8-K required to be filed with the Commission
since January 31, 1996, (iv) the Company's definitive Proxy Statement for its
1995 Annual Meeting of Shareholders, (v) the Company's Preliminary Proxy
Statement (the "Proxy Statement"), dated as of November 20, 1997, pertaining
to, among other things, the Company's proposed acquisition of Cozzi Iron &
Metal, Inc., (vi) any amendments to the foregoing and (vii) all schedules and
exhibits attached thereto (collectively, the "Disclosure Documents"). The
Purchasers acknowledge that the Preliminary Proxy Statement described in (v)
above has not been approved by the Securities and Exchange Commission and
remains subject to modification and amendment. Except as set forth on Schedule
3.4 hereto, and except for the transactions contemplated hereby, the Company is
not aware of any event that would require the filing of a Form 8-K or with
respect to which the Company intends to file a Form 8-K within fifteen (15)
days following the Closing Date. Each Disclosure Document, as of the date of
the filing thereof with the Commission, conformed in all material respects to
the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder and, as of the date
of such filing or, if such Disclosure Document was subsequently amended, as of
the date of the filing of any amendment thereto with the Commission, such
Disclosure Document did not contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. All material agreements required to be filed as
exhibits to the Disclosure Documents have been filed as required. The written
information provided to such Purchaser as described in paragraph 2.3 above does
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which
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<PAGE> 6
they were made, not misleading. Except as set forth in the financial
statements of the Company included in the Disclosure Documents, the Company has
no liabilities, contingent or otherwise, other than liabilities incurred in the
ordinary course of business which, under generally accepted accounting
principles, are not required to be reflected in such financial statements and
which, individually or in the aggregate, are not material to the business,
operations or financial condition of the Company and its subsidiaries taken as
a whole.
3.5 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant
to the Company's stock option plans, the number of shares issuable and reserved
for issuance pursuant to securities (other than the Preferred Stock)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares initially to be reserved for issuance upon
conversion of the Preferred Shares is set forth on Schedule 3.5 hereto. All of
such outstanding shares of capital stock have been, or upon issuance will be,
validly issued, fully paid and non-assessable. No shares of the capital stock
of the Company are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances created by or
through the Company. Except as disclosed on Schedule 3.5, or as contemplated
herein, as of the date of this Agreement and as of the Closing Date, there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its subsidiaries.
3.6 Valid Issuance. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be
duly and validly issued, fully paid and nonassessable, free and clear of any
taxes, liens, claims, preemptive or similar rights or encumbrances imposed by
or through the Company, (ii) based in part upon the representations of such
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be
entitled to all of the rights, preferences and privileges set forth in the
Certificate of Designation. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company.
3.7 No Conflict with Other Instruments. Neither the Company nor any of
its subsidiaries is in violation of any provisions of its Certificate of
Incorporation or Bylaws as amended and in effect on and as of the date hereof;
the Company is not in default (and no event has occurred which, with notice or
lapse of time or both, would constitute a default) under any provision of any
instrument or contract to which it is a party or by which it is bound, or of
any provision of any Federal or state judgment, writ, decree, order, statute,
rule or governmental regulation applicable to the Company, which would have a
material adverse effect on the business, operations or financial condition of
the Company and its subsidiaries taken as a whole. The execution, delivery and
performance of this Agreement and the other Transaction Documents,
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and the consummation of the transactions contemplated hereby and thereby
(including without limitation the issuance and reservation for issuance of the
Conversion Shares) will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument or contract or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the triggering of any anti-dilution rights on the part of
holders of the Company's securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the Company. Except as otherwise described in
the Disclosure Documents, as of the date hereof and as of the Closing there has
been no material adverse change to the Company's business, operations,
properties, financial condition or results of operations since the date of the
Company's most recent audited financial statements contained in the Disclosure
Documents.
3.8.2 The Company has filed all tax returns required to be filed by
it and paid all taxes which are due, except for taxes which it reasonably
disputes and which could not reasonably be expected to have a material adverse
effect on the consolidated business or financial condition of the Company.
3.8.3 Except as set forth on Schedule 3.8.3, the Company is not the
subject of any pending or, to its knowledge, threatened investigation or
administrative or legal proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, the Commission or any state
securities commission or other governmental entity which could reasonably be
expected to have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole.
3.8.4 Except as set forth on Schedule 3.8.4, there is no material
claim, litigation or administrative proceeding pending, or, to the best of the
Company's knowledge, threatened, against the Company or against any officer,
director or employee of the Company in connection with such person's employment
therewith. The Company is not a party to or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality which could reasonably be expected to have a material
adverse effect on the business, operations or financial condition of the
Company and its subsidiaries taken as a whole.
3.9 Reporting Company; Form S-3. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required thereby. The
Company is eligible to register for resale shares of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
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3.10 No Reliance by Company. The Company acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of such Purchaser in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made by such Purchaser in this Agreement and the other
Transaction Documents), (iii) it has not received from such Purchaser any
assurance or guarantee as to the merits (whether legal, regulatory, tax,
financial or otherwise) of entering into this Agreement or the other
Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice
of its advisors as it has deemed necessary, and not on any view (whether
written or oral) expressed by such Purchaser.
3.11 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with the terms of the Certificate of Designation is
unconditional and absolute regardless of the effect of any such dilution.
3.12 Registration Rights; Rights of Participation. Except as described on
Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any
person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority and (B) no person or entity, including, but not limited
to, current or former shareholders of the Company, underwriters, brokers,
agents or other third parties, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction Document
which has not been waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not
been suspended as of the date hereof and as of the Closing Date.
3.14 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
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3.15 Fees. The Company is not obligated to pay any compensation or other
fee, cost or related expenditure to any underwriter, broker, agent or other
representative, other than Wharton Capital Partners, Ltd., in connection with
the transactions contemplated hereby.
3.16 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee, (iii)
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
3.17 Pending Acquisitions. With respect to any acquisition of assets or
securities by the Company or any of its subsidiaries, the agreement for which
has been executed as of the date of this Agreement, the closing of such
acquisition, and the obligations of the parties thereunder, are not conditioned
in any respect on the maintenance at any given level of the closing bid, ask or
sale price of the Common Stock as quoted by Nasdaq.
3.18 Environmental Matters. Except as set forth in the Disclosure
Documents or on Schedule 3.18 hereof, the following representations and
warranties shall be true with respect to the Company and its subsidiaries (and
only those subsidiaries owned by the Company as of May 16, 1997) as of May 16,
1997:
3.18.1 To the best of the Company's knowledge, the Company and each
of its subsidiaries is in material compliance with all Environmental, Health
and Safety Laws (as defined below) governing its business, operations,
properties and assets. Neither the Company nor any of its subsidiaries is
currently liable for any penalties, fines or forfeitures for failure to comply
with any Environmental, Health and Safety Laws.
3.18.2 The Company and each of its subsidiaries has obtained, or
caused to be obtained, and to the best of the Company's knowledge, is in
material compliance with, all applicable and material licenses, certificates,
permits, approvals and registrations required by the Environmental, Health and
Safety Laws (collectively, "Licenses"). There are no administrative or
judicial investigations, notices, claims or other proceedings pending or
threatened by any governmental authority or third parties against the Company
or any of its subsidiaries, their respective businesses, operations, properties
or assets, which question the validity or entitlement of the Company or any of
its subsidiaries to any License wherein an unfavorable decision, ruling or
finding could have a material adverse effect on the Company or any of its
subsidiaries.
3.18.3 Neither the Company nor any of its subsidiaries has received
or is aware of any non-compliance order, warning letter, investigation, notice
of violation, claim, suit, action, judgment or administrative or judicial
proceeding pending or threatened against or involving the Company or any of its
subsidiaries, issued by any governmental authority or third party with
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<PAGE> 10
respect to any Environmental, Health and Safety Laws, which has not been
resolved to the satisfaction of the issuing governmental authority or third
party and which could have a material adverse effect on the Company or any of
its subsidiaries.
3.18.4 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has generated, manufactured, used, transported,
transferred, stored, handled, treated, Discharged, Released or disposed of, nor
has it allowed or arranged for any third parties to generate, manufacture, use,
transport, transfer, store, handle, treat, Discharge, Release or dispose of,
Hazardous Substances or other Waste (as defined below) to or at any location
other than a site lawfully permitted to receive such Hazardous Substances or
other waste for such purposes, nor has it performed, arranged for or allowed by
any method or procedure such generation, manufacture, use, transportation,
transfer, storage, treatment, spillage, leakage, dumping, Discharge, Release or
disposal in material contravention of any Environmental, Health and Safety
Laws. To the best of the Company's knowledge, neither the Company nor any of
its subsidiaries has 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 material quantities of Hazardous
Substances or other waste upon property currently or previously owned or leased
by it, except as permitted by law. For purposes of this Agreement, the term
"Hazardous Substances" means any toxic or hazardous substance, material, or
waste, any other contaminant, pollutant or constituent thereof, whether liquid,
solid, semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, metals, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated biphenyls, the
presence of which requires investigation or remediation under any
Environmental, Health and Safety Laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Health and Safety
Laws. For purposes of this Agreement, the term "Waste" means agricultural
wastes, biomedical wastes, biological wastes, bulky wastes, construction and
demolition debris, garbage, household wastes, industrial solid wastes, liquid
wastes, recyclable materials, sludge, solid wastes, special wastes, used oils,
white goods, and yard trash.
3.18.5 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has caused, nor allowed to be caused or permitted,
either by action or inaction, a Release or Discharge, or threatened Release or
Discharge, of any material quantity of Hazardous Substances on, into or beneath
the surface of any parcel of the Owned Properties or the Leased Premises or to
any properties adjacent thereto which would have a material adverse effect on
the Company or its subsidiaries. To the best of the Company's knowledge, there
has not occurred, nor is there presently occurring, a Release or Discharge, or,
threatened Release or Discharge, of any material quantity of Hazardous
Substances on, into or beneath the surface of any parcel of the Owned
Properties or the Leased Premises or to any properties adjacent thereto which
would have a material adverse effect on the Company or its subsidiaries. For
purposes of this Agreement, the terms "Release" and "Discharge" shall have the
meanings given them in the Environmental, Health and Safety Laws.
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3.18.6 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has generated, handled, manufactured, treated,
stored, used, shipped, transported, transferred or disposed of, nor has it
allowed or arranged, by contract, agreement or otherwise, for any third parties
to generate, handle, manufacture, treat, store, use, ship, transport, transfer
or dispose of, any Hazardous Substances or other Waste 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. Neither
the Company nor any of its subsidiaries has received notice, and neither the
Company nor any of its subsidiaries has knowledge of any facts which could give
rise to any notice, that the Company or any of its subsidiaries is a
potentially responsible party for a federal or state environmental cleanup site
or for corrective action under Environmental Health and Safety Laws. Neither
the Company nor any of its subsidiaries has submitted or was required to submit
any notice pursuant to Section 103(c) of CERCLA with respect to the Leased
Premises or the Owned Properties. Neither the Company nor any of its
subsidiaries has 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 Company or any of its subsidiaries
has transported, transferred or disposed of other Wastes. Neither the Company
nor any of its subsidiaries has been required to or has undertaken any response
or remedial actions or clean-up actions of any kind at the request of any
governmental authorities or at the request of any other third party. To the
best of the Company's knowledge, neither the Company nor any of its
subsidiaries has any material liability under any Environmental, Health and
Safety Laws for personal injury, property damage, natural resource damage, or
clean up obligations.
3.18.7 To the best of the Company's knowledge, there are no
Aboveground Storage Tanks or Underground Storage Tanks on the Owned Properties
or the Leased Premises. For purposes of this Agreement, the terms "Aboveground
Storage Tanks" and "Underground Storage Tanks" shall have the meanings given
them in Section 6901 et seq., as amended, of RCRA, or any applicable state or
local statute, law, ordinance, code, rule, regulation, order, ruling or decree
governing Aboveground Storage Tanks or Underground Storage Tanks.
3.18.8 Schedule 3.18 identifies (i) all material environmental audits,
assessments or occupational health studies, of which the Company is aware,
undertaken by the Company, its subsidiaries or their agents, or by any
governmental authority, or by any third party, relating to or affecting the
Company, its subsidiaries or any of the Leased Premises or the Owned
Properties; and (ii) all material citations issued under OSHA, or similar
state or local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings or decrees, relating to or affecting the Company or any of its
subsidiaries or any of the Leased Premises or the Owned Properties.
3.18.9 Schedule 3.18 contains a list of the assets of the Company
and its subsidiaries which have been confirmed to contain "Asbestos" or
"Asbestos-Containing Material" (as such terms are identified under the
Environmental, Health and Safety Laws). The Company and each of its
subsidiaries has operated and continues to operate in material compliance with
all Environmental, Health and Safety Laws governing the handling, use and
exposure to and disposal of asbestos or asbestos-containing materials. There
are no claims, actions, suits, governmental
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investigations or proceedings before any governmental authority or third party
pending, or threatened against or directly affecting the Company, any of its
subsidiaries, or any of their respective assets or operations relating to the
use, handling or exposure to and disposal of asbestos or asbestos-containing
materials in connection with their assets and operations.
3.18.10 As used in this Agreement, "Environmental Health and Safety
Laws" means all federal, state, regional or local statutes, laws, rules,
regulations, codes, orders, plans, injunctions, decrees, rulings, and changes
or ordinances or judicial or administrative interpretations thereof, any of
which govern (or purport to govern) or relate to pollution, protection of the
environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings and
changes or ordinances, or judicial or administrative interpretations thereof,
including, without limitation, the United States Department of Transportation
Table (49 CFR 172, 101) or by the Environmental Protection Agency as hazardous
substances (40 CFR Part 302) and any amendments thereto; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. Section
9601, et seq. (collectively, "CERCLA"); the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. section 6901 et seq.
(collectively "RCRA"); the Hazardous Materials Transportation Act, as amended,
49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended, 33 U.S.C.
Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C. Section
7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et
seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et seq. (Title
III of SARA) ("EPCRA"); the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state statute, or
regulations implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any governmental authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
3.18.11 Schedule 3.18 identifies the operations and activities, and
locations thereof, which have been conducted and are being conducted by the
Company or any of its subsidiaries on any of the Owned Properties or the Leased
Premises which have involved the generation, accumulation, storage, treatment,
transportation, labeling, handling, manufacturing, use, spilling, leaking,
dumping, discharging, release or disposal of any material quantities of
Hazardous Substances.
3.18.12 To the best of the Company's knowledge, none of the Owned
Properties or Leased Premises presently includes, or has been constructed upon,
any "Wetlands" as defined under applicable Environmental, Health and Safety
Laws.
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<PAGE> 13
3.18.13 As used in Section 3.18, the terms "Owned Properties" and
"Leased Premises" are deemed to refer only to the properties currently owned or
leased by the Company.
3.18.14 As of the date of this Agreement, the Company is not aware
of any material adverse change in the compliance by the Company and its
subsidiaries with any Environmental, Health and Safety Laws since May 16, 1997.
4. COVENANTS.
4.1 Covenants of the Company. The Company hereby agrees and covenants
with each Purchaser as follows:
4.1.1 Corporate Existence. The Company shall, so long as a Purchaser
beneficially owns any Securities (but in no event longer than three (3) years
from the Closing Date), maintain its corporate existence in good standing and
shall pay all its taxes when due except for taxes which the Company reasonably
disputes or which could not reasonably be expected to have a material adverse
effect on the business, operations or financial condition of the Company and
its subsidiaries taken as a whole.
4.1.2 Form D; Blue-Sky Qualification. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The
Company shall, on or before the Closing, take such action as is necessary to
qualify the Preferred Shares for sale under applicable state or "blue-sky" laws
or obtain an exemption therefrom, and shall provide evidence of any such action
to the Purchasers at or prior to the Closing.
4.1.3 Reporting Status. As long as either Purchaser or any
affiliate of such Purchaser beneficially owns any Securities and until the date
on which any of the foregoing may be sold to the public pursuant to Rule 144(k)
(or any successor rule or regulation), (i) the Company shall timely file with
the Commission all reports required to be so filed pursuant to the Exchange Act
and (ii) the Company shall not terminate its status as an issuer required by
the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination. The Company will
issue a press release describing the transactions contemplated by this
Agreement no later than the business day following the Closing Date.
4.1.4 Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares for general corporate purposes and shall not
use such proceeds to make a loan to or an investment in any other corporation,
partnership or other entity, provided that the Company may use such proceeds as
full or partial consideration for the purchase of more than 50% of the voting
equity or substantially all of the assets of any corporation, partnership or
other entity.
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<PAGE> 14
4.1.5 Quotation on Nasdaq. The Company shall promptly secure the
designation and quotation of the Conversion Shares on the Nasdaq National
Market and shall use its best efforts to maintain the designation and
quotation, or listing, of the shares of Common Stock on the Nasdaq National
Market or, if not quoted on such market, the New York Stock Exchange or other
national securities exchange.
4.1.6 Use of Purchaser Name. The Company shall not use, directly or
indirectly, either Purchaser's name in any advertisement, announcement, press
release or other similar communication unless it has received the prior written
consent of such Purchaser for the specific use contemplated, or except as it
may be required to do so, in the reasonable opinion of counsel to the Company,
pursuant to applicable law or regulation.
4.1.7 Additional Equity Capital; Right of First Offer. The Company
agrees that, during the period from the Closing Date through May 5, 1998, the
Company will not issue or agree to issue any securities that are convertible
into or exercisable or exchangeable for, directly or indirectly, Common Stock
if such securities provide for a conversion, exercise or exchange price less
than the market price for the Common Stock on the date of such conversion,
exercise or exchange (the "Capital Raising Limitation"). The Capital Raising
Limitation will not apply to (i) an offering that is registered under the
Securities Act, (ii) any transaction involving the issuance of securities in
connection with a merger, consolidation, acquisition or sale of assets, or in
connection with any strategic partnership or joint venture formed for a bona
fide commercial purpose (the primary purpose of which is not to raise equity
capital), (iii) the granting of options, warrants or other rights to acquire
Common Stock to employees, consultants or directors of the Company not in
connection with a public or private offering of securities, or the exercise
thereof by any such individual or (iv) granting of options or warrants in
connection with the sale and issuance of up to $25 million of Common Stock to
an institutional investor on or before January 1, 1998.
4.1.8 Company's Instructions to Transfer Agent. On or prior to the
Closing, the Company shall execute and deliver a letter to its transfer agent
(the "Transfer Agent"), thereby appointing the Transfer Agent as the Company's
conversion agent and irrevocably instructing the Transfer Agent (i) to issue
certificates representing the Conversion Shares upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of Designation
upon receipt of a valid Conversion Notice (as defined in the Certificate of
Designation) from a Purchaser, (ii) to issue certificates representing the
number of Conversion Shares specified in such Conversion Notice, free of any
restrictive legend, in the name of such Purchaser or its nominee as long as the
sale of the Conversion Shares is registered pursuant to an effective
registration statement or such shares are eligible for resale under Rule 144(k)
and (iii) to deliver such certificates to such Purchaser no later than the
close of business on the later to occur of (i) the third (3rd) business day
following the Conversion Date (as defined in the Certificate of Designation)
and (ii) the business day following the day on which the original certificate
or certificates representing the shares of Series B Preferred Stock being
converted are received by the Company. As long as purchases and sales of shares
of Common Stock are eligible for settlement at the Depository Trust Company
("DTC"), the Company may instruct the Transfer Agent that, in lieu of
delivering
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<PAGE> 15
physical certificates to a Purchaser upon conversion of the Preferred Shares,
the Transfer Agent may effect delivery of Conversion Shares by crediting the
account of such Purchaser or its nominee at DTC for the number of shares for
which delivery is required hereunder within the time frame specified above for
delivery of certificates. The Company represents to and agrees with each
Purchaser that it will not give any instruction to the Transfer Agent that will
conflict with the foregoing instruction or otherwise restrict such Purchaser's
right to convert the Preferred Shares or receive Conversion Shares in
accordance with the terms of the Certificate of Designation, the Registration
Rights Agreement and this Agreement, respectively. In the event the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Transfer Agent shall continue acting as transfer agent pursuant to the terms
hereof until such time that a successor transfer agent is appointed by the
Company and agrees to be bound by the terms hereof.
4.1.9 Stockholder Meeting. The Company will cause, pursuant to
Section 211 of the Delaware General Corporation Law, a meeting of stockholders
to be held on or prior to the date which is two (2) months following the
Closing Date (the "Meeting Date") and will submit to the vote of its
stockholders at its first meeting of stockholders after the date hereof
proposals to approve the Company's proposed acquisition of Cozzi Iron & Metal,
Inc. and to approve (in accordance with the applicable provisions of the
Company's Certificate of Incorporation) the transactions contemplated by the
Transaction Documents and the Certificate of Designation, including without
limitation the conversion of Preferred Shares into Conversion Shares
("Stockholder Approval"). The Company will deliver proxy materials and other
information with respect to such meeting of stockholders to each Purchaser at
the same time that the Company delivers such materials and information to the
holders of its Common Stock.
4.2 Covenant of Each Purchaser.
4.2.1 Short Sales. Each Purchaser hereby agrees and covenants with the
Company that neither such Purchaser, nor any affiliate of such Purchaser, will
engage in any short sales of shares of Common Stock during the period from the
date of this Agreement until the first date on which such Purchaser no longer
owns any Preferred Shares. Notwithstanding the foregoing, nothing contained
herein will be deemed to limit (i) the right of an affiliate of a Purchaser to
engage in short sales resulting from customer orders or which are effected on a
proprietary basis by trading personnel of such affiliate who are not acting at
the direction of a Purchaser or any employee of a Purchaser or (ii) the right
of such Purchaser to engage in bona fide hedging transactions that are effected
otherwise than through short sales of shares of Common Stock. As used herein,
the term "short sale" shall have the meaning specified in Rule 3b-3 under the
Exchange Act; provided, however, that such term shall not include any such sale
(x) effected as a result of a failure by the Company to issue Conversion Shares
or to deliver certificates representing such shares in accordance with the
terms of the Certificate of Designation or (y) which involves a number of
shares of Common Stock not to exceed the number of Conversion Shares for which
a Conversion Notice (as defined in the Certificate of Designation) has been, or
will be on the day on which such short sales are effected, submitted to the
Company.
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<PAGE> 16
4.2.2 Agreement to Vote Shares. Each of the Purchasers agrees to
attend (in person or by delivering its proxy) the meeting described in
paragraph 4.1.9 and to vote the shares of Common Stock which it is entitled to
vote pursuant to the Management Proxies (as defined in paragraph 5.1.10 below)
in favor of the proposal described in paragraph 4.1.9.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at Closing. Each
Purchaser's obligations at the Closing, including without limitation its
obligation to purchase the Preferred Shares, are conditioned upon the
fulfillment of each of the following events:
5.1.1 the representations and warranties of the Company set forth
in this Agreement shall be true and correct in all material
respects as of the date of the Closing as if made on such
date; provided that the representations and warranties made
by the Company in paragraph 3.18 shall be true and correct
in all material respects as of the date specified therein;
5.1.2 the Company shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed
by the Company on or before the Closing;
5.1.3 the Company shall have delivered to such Purchaser a
certificate, signed by an officer of the Company, certifying
that the conditions specified in paragraphs 5.1.1 and 5.1.2
above have been fulfilled;
5.1.4 the Company shall have filed the Certificate of Designation
with the Secretary of State of the State of Delaware, and
shall have furnished such Purchaser with a file-stamped copy
thereof;
5.1.5 the Company shall have delivered to such Purchaser an
opinion of counsel for the Company, dated as of the date of
the Closing, in the form attached as Exhibit 5.1.5 hereto;
5.1.6 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.7 the Common Stock shall be designated for quotation and
actively traded on the Nasdaq National Market;
5.1.8 there shall have been no material adverse changes in the
consolidated business or financial condition of the Company
and its subsidiaries taken as a whole since the date of the
Company's most recent audited financial statements contained
in the Disclosure Documents;
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<PAGE> 17
5.1.9 the Company shall have authorized and reserved for issuance
upon conversion of the Preferred Shares the number of shares
of Common Stock specified in the Registration Rights
Agreement;
5.1.10 the Purchasers shall have received executed irrevocable
proxies, in substantially the form of Exhibit 5.1.10 hereto
(each, a "Management Proxy" and collectively, the "Management
Proxies"), from not more than ten (10) stockholders of the
Company who own, in the aggregate, not less than 47% of the
outstanding shares of Common Stock as of the Closing Date;
5.1.11 the Company shall have received notice from the Securities
and Exchange Commission (the "SEC") that the SEC has no
further comments with respect to the Company's Proxy
Statement no later than November 21, 1997; and
5.1.12 the Company shall have obtained Stockholder Approval.
5.2 Conditions to Company's Obligations at Closing. The Company's
obligations at the Closing are conditioned upon the fulfillment of each of the
following events:
5.2.1 the representations and warranties of each Purchaser shall be
true and correct in all material respects as of the date of
the Closing as if made on such date;
5.2.2 each Purchaser shall have complied with or performed all
of the agreements, obligations and conditions set forth in
this Agreement that are required to be complied with or
performed by such Purchaser on or before the Closing; and
5.2.3 each Purchaser shall have delivered to the Company a
certificate, signed by an officer of such Purchaser,
certifying that the conditions specified in paragraphs 5.2.1
and 5.2.2 above have been fulfilled.
6. INDEMNIFICATION.
The Company agrees to indemnify and hold harmless each Purchaser and its
officers, directors, employees and agents, and each person who controls such
Purchaser within the meaning of the Securities Act or the Exchange Act (each, a
"Purchaser Indemnified Party") against any losses, claims, damages, liabilities
or reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) as incurred, joint or several, to which it, they or
any of them, may become subject and not otherwise reimbursed, arising out of or
in connection with the breach by the Company of any of its representations,
warranties or covenants made herein.
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<PAGE> 18
Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company and its officers, directors, employees and agents, and
each person who controls the Company within the meaning of the Securities Act
or the Exchange Act (each, a "Company Indemnified Party") (a Purchaser
Indemnified Party and a Company Indemnified Party are each hereinafter referred
to as an "Indemnified Party") against any losses, claims, damages, liabilities
or expenses (including the fees and disbursements of counsel) as incurred,
joint or several, to which it, they or any of them, may become subject and not
otherwise reimbursed, arising out of or in connection with the breach by such
Purchaser of any of its representations, warranties or covenants made herein.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought
hereunder, such Indemnified Party will, if a claim in respect thereof is to be
made against the other party (the "Indemnifying Party"), deliver to the
Indemnifying Party a written notice of the commencement thereof and the
Indemnifying Party shall have the right to participate in and to assume the
defense thereof with counsel reasonably selected by the Indemnifying Party,
provided, however, that an Indemnified Party shall have the right to retain its
own counsel, with the reasonably incurred fees and expenses of such counsel to
be paid by the Company, if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential conflicts of interest under applicable standards of professional
conduct between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnifying Party within a reasonable time of the commencement of any such
action will not relieve the Indemnifying Party of any of its obligations
hereunder with respect to such action except to the extent such failure is
prejudicial to the Indemnifying Party's ability to defend any such action.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of pending or threatened action in
respect of which an Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on any claims that are the subject matter of such action.
An Indemnifying Party will not be liable for any settlement of any action or
claim effected without its written consent.
7. MISCELLANEOUS.
7.1 Survival; Severability. The representations and warranties made by
the parties herein shall survive the Closing until the sooner to occur of the
date which is (i) eighteen (18) months from the date hereof or (ii) the first
date on which none of the Purchasers owns any Preferred Shares, notwithstanding
any due diligence investigation made by or on behalf of the party seeking to
rely thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to either party.
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<PAGE> 19
7.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. The Purchaser may assign its rights hereunder, in
connection with any private sale or transfer of the Preferred Shares, as long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto.
7.3 Injunctive Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser and that
the remedy or remedies at law for any such breach will be inadequate and
agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
7.4 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of Delaware without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the jurisdiction of the state and federal courts sitting in the City of
Wilmington, Delaware for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.6 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
7.7 Notices. Any notice, demand or request required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with a hard copy to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is
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<PAGE> 20
not a business day, on the next succeeding business day, (ii) on the next
business day after timely delivery to an overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
If to the Company:
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
Attn: Gerard M. Jacobs
Fax: 312-645-0714
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, Illinois 60611
Attn: Stuart M. Savitz. Esq.
Fax: 312-527-5921
If to PCIG:
Proprietary Convertible Investment Group, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue - Third Floor
New York, New York 10010
Attn: Allan Weine/John McAvoy
Fax: 212-325-6519
With a copy to:
Solomon, Zauderer, Ellenhorn, Frischer & Sharp
45 Rockefeller Plaza
New York, New York 10111
Attn: Richard T. Sharp, Esq.
Fax: 212-956-4068
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If to CVI:
Capital Ventures International
c/o Heights Capital Management
425 California Street
Suite 1100
San Francisco, California 94104
Attn: Michael Spolan
Fax: 415-403-6525
or to such other address or fax number as any party shall specify in writing to
the other parties.
7.8 Expenses. Except as otherwise specified herein, each of the Company
and each Purchaser shall pay all costs and expenses that it incurs in connection
with the negotiation, execution, delivery and performance of this Agreement;
provided, however, that the Company shall reimburse the Purchasers for fifty
percent (50%) of the Purchasers' legal fees incurred in connection with the
negotiation, execution, delivery and performance of this Agreement, such
reimbursement not to exceed $10,000 in the aggregate.
7.9 Entire Agreement; Amendments. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and both Purchasers, and no provision hereof may be waived other
than by a written instrument signed by the party against whom enforcement of
any such waiver is sought.
7.10 Issuance of Enhanced Securities. In the event that, during the
period from the Closing Date until the earlier to occur of (i) one year from
the Closing Date and (ii) ninety (90) Trading Days (as such term is defined in
the Certificate of Designation) from the effectiveness of the Registration
Statement (the "Limitation Period"), the Company issues any securities
convertible or exercisable into Common Stock, which securities either (i)
provide a conversion or exercise price which is lower than the Conversion
Price, or (ii) allow the holder thereof, without being subject to a redemption
provision substantially similar to that provided by paragraph 4(h)(i) of the
Certificate of Designation, to convert or exercise such securities into a
number of shares of Common Stock that is greater on an aggregate basis than the
number of shares of Common Stock into which such securities would be
convertible or exercisable at a conversion or exercise price of ten dollars
($10) (the "Enhanced Securities"), the Company shall, in either such case,
promptly (but in no event later than thirty (30) days following the issuance of
such Enhanced Securities) take such action as may be necessary in order to
amend the Certificate of Designation to conform the terms thereof with those of
the instrument governing the Enhanced Securities to the extent necessary to
confer the benefit of the provisions of such Enhanced Securities relating to
the matters set forth in (i) and/or (ii) above on the holders of the Series B
Preferred Stock, and the provisions of the Certificate of Designation as so
amended shall
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apply to the Series B Preferred Stock from and after the date on which such
Enhanced Securities are issued. In addition, if the Company issues any
convertible securities during the Limitation Period and, in connection
therewith, the Company issues any warrants, options or similar securities for
little or no consideration to the purchasers of such convertible securities in
connection with such issuance, the Company shall at the same time issue to each
holder such warrants, options or similar securities in an amount which is
proportional to the Purchase Price of the Series B Preferred Stock purchased by
such Purchaser at the Closing relative to the aggregate purchase price of such
convertible securities purchased by such purchasers. The provisions of this
subparagraph 7.10 shall not apply to (i) any transaction involving the issuance
of securities in connection with a merger, consolidation, acquisition or sale
or purchase of assets, or in connection with any strategic partnership or joint
venture formed for a bona fide commercial purpose (the primary purpose of which
is not to raise equity capital), (ii) the granting of options, warrants or
other rights to acquire Common Stock to employees, consultants or directors of
the Company not in connection with a public or private offering of securities,
or the exercise thereof by any such individual, or (iii) the granting of
options or warrants in connection with the sale and issuance of up to $25
million of Common Stock to an institutional investor on or before January
1, 1998. The Company further agrees that, in the event of a Stock split,
reverse Stock split, reclassification or other similar event with respect to
the Common Stock, it will amend the Certificate of Designation so that the Cap
Amount (as defined in the Certificate of Designation) will be proportionately
increased or reduced, as the case may be.
-22-
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
METAL MANAGEMENT, INC.
By:
-----------------------------------
Gerard M. Jacobs, President
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By:
-----------------------------------
Name:
Title:
Number of Shares of Preferred Stock to be Purchased: __________
CAPITAL VENTURES INTERNATIONAL
By:
-----------------------------------
Name:
Title:
Number of Shares of Preferred Stock to be Purchased: _____________
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
______________, 1997, by and among Metal Management, Inc., a Delaware
corporation (the "Company"), Proprietary Convertible Investment Group, Inc.
("PCIG") and Capital Ventures International, a Cayman Islands unlimited
liability company ("CVI"). PCIG and CVI are each referred to herein as a
"Purchaser" and, together, as the "Purchasers".
The Company has agreed, on the terms and subject to the conditions set
forth in the Securities Purchase Agreement of even date herewith (the
"Securities Purchase Agreement"), to issue and sell to each Purchaser the
number of shares (the "Preferred Shares") of Preferred Stock (the "Preferred
Stock") specified therein. The Preferred Shares are convertible into shares of
the Company's Common Stock, $.01 par value per share (the "Common Stock"),
pursuant to the Certificate of Designations, Rights and Privileges establishing
the Preferred Stock (the "Certificate of Designation"). In order to induce the
Purchasers to enter into the Securities Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended (the "Securities Act"), and under applicable state securities laws.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Securities Purchase Agreement.
In consideration of each Purchaser entering into the Securities Purchase
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings specified:
(a) "Closing" shall have the meaning specified in the Securities
Purchase Agreement;
(b) "Closing Bid Price" shall have the meaning specified in the
Certificate of Designation;
(c) "Conversion Price" shall have the meaning specified in the
Certificate of Designation;
(d) "Filing Deadline" means the date which is thirty (30) days
following the date on which Stockholder Approval is obtained in
accordance with the terms of the Securities Purchase Agreement;
(e) "Registration Deadline" means the date which is one hundred and
twenty (120) days following the date on which Stockholder Approval
is obtained in accordance with the terms of the Securities Purchase
Agreement;
<PAGE> 2
(f) "Holder" means any person owning or having the right to acquire,
through conversion of Preferred Shares, Registrable Securities,
including initially each Purchaser and thereafter any permitted
assignee thereof;
(g) "Register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration
statement or statements in compliance with the Securities Act and
pursuant to Rule 415 under the Securities Act ("Rule 415") or any
successor rule providing for the offering of securities on a
continuous basis ("Registration Statement"), and the declaration or
ordering of effectiveness of the Registration Statement by the
Securities and Exchange Commission (the "Commission");
(h) "Registrable Securities" means (i) the shares of Common
Stock issued or issuable either upon conversion of the Preferred
Stock (including Dividend Payment Shares issuable with respect to the
Preferred Stock) or otherwise in accordance with the Certificate of
Designation, and (ii) any shares of capital Stock issued or issuable
from time to time (with any adjustments) in replacement of, in
exchange for or otherwise in respect of such shares;
(i) "Stockholder Approval" shall have the meaning specified in
the Securities Purchase Agreement; and
(j) "Trading Days" shall have the meaning specified in the
Certificate of Designation.
2. MANDATORY REGISTRATION.
(a) On or before Filing Deadline, the Company shall prepare and file
a Registration Statement on Form S-3 (or, if Form S-3 is not available, on such
form of Registration Statement as is then available to effect a registration of
the Registrable Securities as a "shelf" registration statement under Rule 415)
covering the resale of at least 175% of the number of shares of Common Stock
which would be issuable if the Preferred Shares were converted into shares of
Common Stock at a Conversion Price equal to (A) the average Closing Bid Price
over the five Trading Days immediately preceding, but not including the Closing
Date times (B) 85%. The Registration Statement shall state, to the extent
permitted by Rule 416 under the Securities Act, that it also covers such
indeterminate number of shares of Common Stock as may be required to effect
conversion of the Preferred Shares to prevent dilution resulting from Stock
splits, Stock dividends or similar events, or by reason of changes in the
Conversion Price in accordance with the terms of the Certificate of
Designation.
(b) The Company shall cause the Registration Statement to become
effective as soon as practicable following the filing thereof but in no event
later than the Registration Deadline, and shall submit to the Commission,
within five (5) business days after the Company learns that no review of the
Registration Statement will be made by the staff of the Commission or that the
staff of the Commission has no further comments on the Registration Statement,
as the case may be, a request for acceleration
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<PAGE> 3
of the effectiveness of the Registration Statement to a time and date not later
than forty-eight (48) hours after the submission of such request, and maintain
the effectiveness of the Registration Statement until the earlier to occur of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which all of the remaining Registrable Securities (in the
reasonable opinion of counsel to the Purchaser) may be immediately sold to the
public without registration and without regard to the amount of Registrable
Securities which may be sold by a Holder thereof at a given time (the
"Registration Period").
(c) The Filing Deadline and the Registration Deadline shall be
extended by the number of days (not exceeding an aggregate for both such dates,
when taken together, of thirty (30) days) during (i) any period in which the
Company has been advised by its outside counsel that the Registration Statement
will not be accepted for filing by the Commission as a result of the Company
then having on file a registration statement which has not yet gone effective
or a proxy statement that is then being reviewed by the Commission (a "Filing
Delay Period"), and (ii) any period in which the Board of Directors of the
Company determines in good faith (A) that an amendment or supplement to the
Registration Statement or prospectus contained therein is necessary in order to
correct a material misstatement made therein or to include information the
absence of which would render the Registration Statement or such prospectus
materially misleading and (B) that the disclosure of such information at such
time would be detrimental to the business or prospects of the Company; provided
that no such period specified in this clause (ii) may exceed ten (10) days
unless, prior to the end of such ten day period, the Company obtains the
written advice of its outside legal counsel that an amendment or supplement to
the Registration Statement or prospectus contained therein is necessary in
order to correct a material misstatement made therein or to include information
the absence of which would render the Registration Statement or such prospectus
materially misleading (a "Standstill Period").
(d) If (A) the Registration Statement (i) is not filed by the Filing
Deadline or (ii) is not declared effective by the Commission on or before the
Registration Deadline, (B) after the Registration Statement has been declared
effective by the Commission, sales of Registrable Securities cannot be made by
a Holder under the Registration Statement for any reason not within the
exclusive control of such Holder, or (C) the Common Stock is not included for
quotation on the Nasdaq National Market ("Nasdaq") or listed on the New York
Stock Exchange (the "NYSE") or other national securities exchange at any time
after the Registration Deadline, the Company shall pay to such Holder an amount
equal to the lesser of (x) two percent (2%) per month and (y) the highest rate
permitted by applicable law, times the aggregate purchase price of the
Preferred Shares held by such Holder, accruing daily and compounded monthly,
(I) from the Filing Deadline until the date on which the Registration Statement
is filed with the Commission, (II) from the Registration Deadline until the
date on which the Registration Statement is declared effective, (III) from the
date on which the Registration Statement is unavailable for sales of
Registrable Securities by a Holder until the Registration Statement becomes
available for sales of Registrable Securities; provided that the Registration
Statement will not be considered unavailable for the number of days occurring
during a Standstill Period which takes place after the effectiveness of the
Registration Statement, or (IV) from the date on which the Common Stock is no
longer quoted or listed on Nasdaq, the NYSE or such other exchange until the
date on which the Common Stock becomes so listed or quoted, as the case may be.
The amounts paid or payable by the Company hereunder shall be in addition to
any other remedies available to the Purchaser at law or in
3
<PAGE> 4
equity or pursuant to the terms of any other Transaction Document. Payments of
cash pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, payments shall be made at the end of
each thirty-day period. If such payment is not made to the Purchaser during
such five (5) business day period, the Purchaser may elect to convert such
payment amount into Common Stock at the "Conversion Price" (as defined in the
Certificate of Designation). Any shares of Common Stock issued upon conversion
of such amounts shall be Registrable Securities. If the Purchaser desires to
convert the amounts due hereunder into Registrable Securities it shall so
notify the Company in writing within two (2) business days after the date on
which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article IV of the
Certificate of Designation), beginning on the last day upon which the cash
amount would otherwise be due.
3. PIGGYBACK REGISTRATION.
If at any time prior to the expiration of the Registration Period, (i)
the Company proposes to register shares of Common Stock under the Securities
Act in connection with the public offering of such shares for cash (other than
a registration relating solely to the sale of securities to participants in a
Company Stock plan or a registration on Form S-4 under the Securities Act or
any successor or similar form registering Stock issuable upon a
reclassification, a business combination involving an exchange of securities or
an exchange offer for securities of the issuer or another entity) (a "Proposed
Registration") and (ii) a registration statement covering the sale of all of
the Registrable Securities is not then effective and available for sales
thereof by the Holders, the Company shall, at such time, promptly give each
Holder written notice of such Proposed Registration. Each Holder shall have
thirty (30) days from its receipt of such notice to deliver to the Company a
written request specifying the amount of Registrable Securities that such
Holder intends to sell and such Holder's intended method of distribution. Upon
receipt of such request, the Company shall use its best efforts to cause all
Registrable Securities which the Company has been requested to register to be
registered under the Securities Act to the extent necessary to permit their
sale or other disposition in accordance with the intended methods of
distribution specified in the request of such Holder; provided, however, that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 3 without obligation to the Holder.
4. OBLIGATIONS OF THE COMPANY.
In addition to performing its obligations under paragraphs 2(a) and
(b) above, the Company shall:
(a) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to comply with
the provisions of the Securities Act or to maintain the effectiveness of the
Registration Statement during the Registration Period, or as may be reasonably
requested by a Holder in order to incorporate information concerning such
Holder or such Holder's intended method of distribution;
4
<PAGE> 5
(b) in the event that the number of shares available under the
Registration Statement filed by the Company hereunder is insufficient during
any period of three consecutive trading days to cover 125% of the Registrable
Securities then issued or issuable, the Company shall promptly amend the
Registration Statement, or file a new Registration Statement, or both, so as to
cover 175% of such Registrable Securities, in any event as soon as practicable,
but not later than the tenth business day following the last day of such three
day period. Any Registration Statement filed pursuant to this Section 4 shall
state that, to the extent permitted by Rule 416 under the Securities Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Shares. Unless and until such amendment or new Registration Statement becomes
effective, each Holder shall have the rights described in Section 2(d) above;
(c) secure the designation and quotation of the Registrable
Securities on the Nasdaq National Market;
(d) furnish to each Holder such number of copies of the prospectus
included in such Registration Statement, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Holder may reasonably request in order to facilitate the
disposition of such Holder's Registrable Securities;
(e) use its best efforts to register or qualify the Registrable
Securities under the securities or "blue sky" laws of such jurisdictions within
the United States as shall be reasonably requested from time to time by a
Holder, and do any and all other acts or things which may be necessary or
advisable to enable such Holder to consummate the public sale or other
disposition of the Registrable Securities in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction;
(f) in the event of an underwritten public offering of the
Registrable Securities, enter into and perform its obligations under an
underwriting agreement, in usual and customary form reasonably acceptable to
the Company, with the managing underwriter of such offering;
(g) notify each Holder immediately upon the occurrence of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, contains an untrue statement of 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 as promptly as practicable, prepare, file and furnish to each Holder a
reasonable number of copies of a supplement or an amendment to such prospectus
as may be necessary so that such prospectus does not contain an untrue
statement of material fact or omit 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;
(h) use its best efforts to prevent the issuance of any stop order or
other order suspending the effectiveness of such Registration Statement and, if
such an order is issued, to obtain
5
<PAGE> 6
the withdrawal thereof at the earliest possible time and to notify each Holder
of the issuance of such order and the resolution thereof;
(i) furnish to each Holder, on the date that such Registration
Statement becomes effective, (x) an opinion, dated such date, of outside
counsel representing the Company addressed to such Holder and in form and
substance as is customarily given to underwriters in an underwritten public
offering, and (y) in the case of an underwriting, a letter, dated such date,
from the Company's independent certified public accountants, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to each Holder; and
(j) permit counsel for each Holder to review such Registration
Statement and all amendments and supplements thereto, and provide such counsel
with the opportunity to conduct a reasonable inquiry of the Company's financial
and other records during normal business hours and make available its officers,
directors and employees for questions regarding information contained in such
Registration Statement, amendments or supplements, a reasonable period of time
prior to the filing thereof with the Commission.
5. OBLIGATIONS OF EACH HOLDER.
In connection with the registration of the Registrable Securities pursuant
to the Registration Statement, each Holder shall:
(a) furnish to the Company such information regarding itself and the
intended method of disposition of Registrable Securities as the Company shall
reasonably request in order to effect the registration thereof; and
(b) upon receipt of any notice from the Company of the happening of
any event of the kind described in paragraph 4(g) or 4(h) above, immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement until the Registration has been amended in accordance with paragraph
4(g) or until withdrawal of the stop order referred to in paragraph 4(h), as
the case may be.
6. INDEMNIFICATION.
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company shall indemnify and
hold harmless each Holder, the officers, directors, employees, agents and
representatives of such Holder, and each person, if any, who controls such
Holder within the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), against any losses, claims, damages,
liabilities or reasonable out-of-pocket expenses (whether joint or several)
(collectively, including legal or other expenses reasonably incurred in
connection with investigating or defending same, "Losses"), insofar
6
<PAGE> 7
as any such Losses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (collectively,
"Violations"). The Company will reimburse such Holder, and each such officer,
director, employee, agent, representative or controlling person for any legal
or other expenses as reasonably incurred by any such entity or person in
connection with investigating or defending any Loss; provided, however, that
the foregoing indemnity shall not apply to amounts paid in settlement of any
Loss if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be obligated
to indemnify any person for any Loss to the extent that such Loss arises out of
or is based upon and in conformity with written information furnished by such
person expressly for use in such Registration Statement; and provided, further,
that the Company shall not be required to indemnify any person to the extent
that any Loss results from such person selling Registrable Securities (i) to a
person to whom there was not sent or given, at or prior to the written
confirmation of the sale of such shares, a copy of the prospectus, as most
recently amended or supplemented, if the Company has previously furnished or
made available copies thereof or (ii) during any period following written
notice by the Company to such Holder of an event described in Section 4(g) or
4(h).
(b) To the extent permitted by law, each Holder, acting severally and
not jointly, shall indemnify and hold harmless the Company, the officers,
directors, employees, agents and representatives of the Company, and each
person, if any, who controls the Company within the meaning of the Securities
Act or the 1934 Act, against any Losses to the extent (and only to the extent)
that any such Losses arise out of or are based upon and in conformity with
written information furnished by such Holder expressly for use in such
Registration Statement; and such Holder will reimburse any legal or other
expenses as reasonably incurred by the Company and any such officer, director,
employee, agent, representative, or controlling person, in connection with
investigating or defending any such Loss; provided, however, that the foregoing
indemnity shall not apply to amounts paid in settlement of any such Loss if
such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 6(b) exceed the net purchase price of
securities sold by such Holder under the Registration Statement.
(c) Promptly after receipt by an indemnified party under this
6 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable
7
<PAGE> 8
time of the commencement of any such action, to the extent prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 6 with respect to such
action, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 6 or with respect to any other action.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company and each Holder agree, severally and not
jointly, to contribute to the aggregate Losses to which the Company or such
Holder may be subject in such proportion as is appropriate to reflect the
relative fault of the Company and such Holder in connection with the statements
or omissions which resulted in such Losses; provided, however, that in no case
shall such Holder be responsible for any amount in excess of the net purchase
price of securities sold by it under the Registration Statement. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or by such Holder.
The Company and each Holder agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of 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
6, each person who controls a Holder within the meaning of either the
Securities Act or the 1934 Act and each officer, director, employee, agent or
representative of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the meaning of
either the Securities Act or the Exchange Act and each officer, director,
employee, agent or representative of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The obligations of the Company and each Holder under this
Section 6 shall survive the conversion or redemption, if any, of the Preferred
Shares, the completion of any offering of Registrable Securities pursuant to a
Registration Statement under this Agreement, or otherwise.
7. REPORTS.
With a view to making available to each Holder the benefits of Rule 144
under the Securities Act ("Rule 144") and any other rule or regulation of the
Commission that may at any time permit such Holder to sell securities of the
Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act;
and
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<PAGE> 9
(c) furnish to such Holder, so long as such Holder owns any
Registrable Securities, and until such Registrable Securities are eligible for
sale pursuant to Rule 144(k), forthwith upon request (i) a written statement
by the Company, if true, that it has complied with the reporting requirements
of Rule 144, the Securities Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing such Holder of any rule or regulation of the
Commission which permits the selling of any such securities without
registration.
8. MISCELLANEOUS.
(a) Expenses of Registration. All expenses, other than underwriting
discounts and commissions and fees and expenses of counsel to each Holder,
incurred in connection with the registrations, filings or qualifications
described herein, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, the fees and disbursements
of counsel for the Company, and the fees and disbursements incurred in
connection with the opinion and letter described in paragraph 4(i) hereof,
shall be borne by the Company.
(b) Amendment; Waiver. Any provision of this Agreement may be
amended only pursuant to a written instrument executed by the Company and each
Holder. Any waiver of the provisions of this Agreement may be made only
pursuant to a written instrument executed by the party against whom enforcement
is sought. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder, each future Holder, and the Company.
(c) Notices. Any notice, demand or request required or permitted to
be given by the Company or a Holder pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
when sent by verifiable facsimile transmission (with a hard copy to follow),
(ii) on the next business day after timely delivery to an overnight courier and
(iii) on the third business day after deposit in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed to the
parties as follows:
If to the Company:
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
Attn: Gerard M. Jacobs
Fax: 312-645-0714
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<PAGE> 10
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Chicago, Illinois 60611
Attn: Stuart M. Savitz. Esq.
Fax: 312-527-5921
If to PCIG:
Proprietary Convertible Investment Group, Inc.
Eleven Madison Avenue
New York, New York 10010
Attn: Allan Weine/John McAvoy
Fax: 212-325-6519
With a copy to:
Solomon, Zauderer, Ellenhorn, Frischer & Sharp
45 Rockefeller Plaza
New York, New York 10111
Attn: Richard T. Sharp, Esq.
If to CVI:
Capital Ventures International
c/o Heights Capital Management
425 California Street
Suite 1100
San Francisco, California 94104
Attn: Michael Spolan
Fax: 415-403-6525
or to such other address or fax number as any party shall notify the others in
accordance herewith.
(d) Termination. This Agreement shall terminate on the earlier to
occur of (a) the end of the Registration Period and (b) the date on which all
of the Registrable Securities have been publicly distributed; but any such
termination shall be without prejudice to (i) the parties' rights and
obligations arising from breaches of this Agreement occurring prior to such
termination and (ii) the indemnification obligations under this Agreement.
(e) Assignment. The rights of a Holder hereunder shall be assigned
automatically to any transferee of the Preferred Shares or Registrable
Securities from such Holder as long as: (i) the Company is, within a reasonable
period of time following such transfer, furnished with written notice
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<PAGE> 11
of the name and address of such transferee, (ii) the transferee agrees in
writing with the Company to be bound by all of the provisions hereof and (iii)
such transfer is made in accordance with the applicable requirements of the
Securities Purchase Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
METAL MANAGEMENT, INC.
By:
------------------------------
Gerard M. Jacobs, President
PROPRIETARY CONVERTIBLE INVESTMENT GROUP, INC.
By:
------------------------------
Name:
Title:
CAPITAL VENTURES INTERNATIONAL
By:
------------------------------
Name:
Title:
11
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 1st day of
December, 1997, by and between T. BENJAMIN JENNINGS (the "Executive") and METAL
MANAGEMENT, INC., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, the Company and the Executive do hereby agree as
follows:
1. Employment and Duties.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to employ the Executive as the Chairman of the
Board and Chief Development Officer of the Company to perform such duties and
responsibilities as are consistent with such positions.
(b) Directorship. The Executive is currently a member of the
Company's Board of Directors (the "Board of Directors"), and throughout the
Employment Period (as hereafter defined) the Company shall cause the Executive
to be nominated for election to the Board of Directors. Failure of the Company
to so nominate the Executive, or the failure of the stockholders of the Company
to elect the Executive to the Board of Directors following nomination, shall
constitute "Good Reason" for the Executive to resign pursuant to Section 14(e)
below and any such resignation shall be deemed a termination by the Company
pursuant to Section 14(a) below.
(c) Executive Committee. Reference is hereby made to that
certain Stockholders' Agreement for Metal Management, Inc. dated December 1,
1997 by and among Albert A. Cozzi, Gerard M. Jacobs, the Executive, Frank J.
Cozzi, Gregory P. Cozzi and the Company (the "Stockholders' Agreement"). The
Board of Directors has amended the Bylaws of the Company in order to create an
Executive Committee (the "Executive Committee") of the Board of Directors,
which Executive Committee is authorized to act on behalf of and in the name of
the Board of Directors during the periods between meetings of the full Board of
Directors, including in regard to certain actions specified in Section 1.2 of
the Stockholders' Agreement. The Executive Committee shall consist of the
Chairman of the Board of Directors, the President and Chief Operating Officer
of the Company, and the Chief Executive Officer of the Company, and one or more
other senior company executives chosen by the Executive Committee. As the
Chairman of the Board of Directors of the Company, the Executive shall be a
member of the Executive Committee during the Employment Period, and as such the
Executive shall participate in all decision-making by the Executive Committee.
All actions by the Executive Committee shall be by majority vote, excepting,
however, that no action may be taken by the Executive Committee without the
unanimous consent of (i) Albert A. Cozzi or his successor on the
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Executive Committee, Frank J. Cozzi, (ii) T. Benjamin Jennings for so long as
he is employed by the Company, and (iii) Gerard M. Jacobs for so long as he is
employed by the Company.
2. Performance. The Executive accepts the employment described in
Section 1 above, and agrees to faithfully and diligently perform the duties and
responsibilities described therein. The Executive shall devote time and
attention to matters of the Company such that the Executive's services to the
Company constitute his primary business activity. The Company acknowledges
that the Executive may (i) engage in charitable and community affairs
(including serving on the board of directors or similar management body of any
charitable or community organization), (ii) serve on the board of directors of
or act as a consultant to other companies which are not engaged in a business
that directly or indirectly competes with the Company Business (as defined in
Section 18 below), and (iii) make personal investments. The Company further
acknowledges and agrees that Executive will devote a portion of his time and
energies to the entities set forth on Exhibit A attached hereto.
3. Term. The term of employment under this Agreement shall commence
on the date of this Agreement (the "Commencement Date") and shall continue for
a period of five (5) years thereafter (the "Employment Period"); provided,
however, that on each anniversary of the Commencement Date, the Employment
Period shall be automatically extended for an additional year unless at least
sixty (60) days before any such anniversary, either the Executive or the
Company, as the case may be, notifies the other of its desire not to further
extend the Employment Period; and provided, further, that the Employment Period
shall terminate upon the earliest to occur of the events described in Section
14 hereunder. For purposes of this Agreement, "Balance of the Term" shall mean
the period beginning on the date of termination and ending on the date that the
Employment Period would have ended pursuant to this Section 3 due to lapse of
time (assuming no further extensions of the Employment Period beyond those
already approved as of the date of termination), without regard to Section 14.
4. Salary. For all the services to be rendered by the Executive
hereunder, the Company agrees to pay, during the Employment Period, a base
salary ("Salary") at an initial rate of Two Hundred and Seventy-Five Thousand
Dollars ($275,000.00) per Contract Year, payable in the manner and frequency in
which the Company's payroll is customarily handled. For purposes of this
Agreement, "Contract Year" shall mean a one-year period commencing on the
Commencement Date or on any anniversary of the Commencement Date. The Company
may increase the Executive's Salary at any time, or from time to time, during
the Employment Period, provided, however, that the Company may not at any time
reduce the Salary from its then-current level. In no event shall the Salary
paid hereunder with respect to any Contract Year be less than the base salary
paid to Frank J. Cozzi, Albert A. Cozzi and Gerard M. Jacobs with respect to
such Contract Year, so long as they are then employed by the Company.
5. Incentive Compensation. In addition to the Executive's Salary,
the Company shall pay to the Executive, during the Employment Period,
additional compensation ("Incentive Compensation") calculated as follows:
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(a) Stock Warrants. On the Commencement Date, the Company shall
grant the Executive warrants to purchase three hundred seventy-five thousand
(375,000) shares of common stock of the Company at an exercise price of Five
Dollars and 91/100 ($5.91) per share and warrants to purchase three hundred
fifty thousand (350,000) shares of common stock of the Company at an exercise
price equal to the lesser of (a) seventy-five percent (75%) of the closing
price per share of the Company's common stock on the last trading date prior to
the Closing, and (b) $12.00 per share, subject to all federal and state
securities and other laws. All warrants issued pursuant to this Section 5(a)
shall be governed by and subject to all conditions, terms and restrictions in
the actual warrant which is attached hereto as Attachment A and hereby
incorporated by reference.
(b) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(c) Other Stock Terms.
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) The Company represents and warrants to the Executive that
the grant of warrants to purchase shares of common stock of
the Company hereunder shall be an exempt acquisition under
Section 16(b) of the Securities Exchange Act of 1934.
iii) The Executive acknowledges that the Company's common
stock is publicly traded and is subject to various
federal and state securities laws and that the shares
acquired upon the exercise of the warrants (collectively
the "Shares") are being issued pursuant to such laws and
agrees that he will comply with any and all applicable laws
and regulations governing the Shares.
iv) The Company shall use its best efforts to file as soon as
practicable, and shall use its best efforts to cause to
remain effective, a registration statement(s) as may be
necessary to permit the Executive to sell in the public
market any and all Shares acquired hereunder upon exercise
in the case of the Shares received on exercise of the
warrants, provided, that Executive understands and agrees
that this Section 5(c)iv) shall be subject to any
restrictions on transfer contained in that certain
Stockholders' Agreement by and among the Company, Executive,
Frank J. Cozzi, Gregory P. Cozzi, Albert A. Cozzi and Gerard
M. Jacobs, and nothing contained in this Section 5(c)(iv)
shall be deemed to impose any obligation upon the Company to
take any action whatsoever that, in the opinion of the
Executive Committee, would or might delay or hinder any
material transaction involving the Company, including but
not limited to any of the Company's acquisitions or any of
the Company's debt or equity financings, or that would or
might be deemed to be a default or violation of any of the
Company's contracts in regard to any of such transactions or
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financings, including but not limited to any "blackout"
periods imposed by the Company's underwriters.
(d) Stock-Based Plans. The Executive shall be eligible to
participate in and receive awards under any other stock-based plans of the
Company pursuant to Section 12 below.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
6. Cash Bonus Compensation. The Executive shall be entitled to the
following bonus compensation:
(a) Annual Cash Bonus. On each anniversary of the
Commencement Date,the Executive shall be entitled to a minimum annual cash
bonus (the "Annual Cash Bonus") in an amount equal to twenty-five percent (25%)
of his Salary for the Contract Year then ended, or, in the event the
Employment Period is terminated for any reason during a Contract Year, a
prorated amount equal to twenty-five percent (25%) of the Executive's Salary
in such Contract Year multiplied by a fraction, the numerator of which is the
number of calendar days in which the Executive was employed by the Company
during such Contract Year and the denominator of which is 365. The Company
shall pay the Annual Cash Bonus to the Executive no later than thirty (30)
days after the end of such Contract Year or, in the event the Employment
Period is terminated during the Contract Year, five (5) days after the date
the Employment Period is terminated. In no event shall the Annual Cash Bonus
percentage used to calculate the Executive's Annual Cash Bonus with respect to
any Contract Year be less than the guaranteed annual cash bonus percentage used
to calculate any guaranteed annual cash bonus paid to Frank J. Cozzi, Albert A.
Cozzi and Gerard M. Jacobs with respect to such Contract Year, so long as they
are then employed by the Company.
(b) Additional Bonus. The Executive shall be eligible to
receive additional cash bonuses pursuant to Section 12 below.
7. Vacation. In accordance with the policies and rules governing
the vacation of other members of the Executive Committee, the Executive shall be
entitled to take vacations with pay, during each year of service under this
Agreement, to be taken during the year at such time or times as may be approved
by the Company. Such vacation shall be at least six (6) weeks, but no less than
the vacation granted Frank J. Cozzi, Albert A. Cozzi and Gerard M. Jacobs, so
long as they are then employed by the Company. Unless otherwise established for
members of the Executive Committee, unused vacation days shall not be
accumulated from one year to the next.
8. Sick Leave. In accordance with the policies and rules
governing the sick leave of Frank J. Cozzi, Albert A. Cozzi and Gerard M.
Jacobs, the Executive shall be allowed paid sick leave during each year of
service under this Agreement. Unless otherwise established for members of the
Executive Committee, unused sick leave shall not be accumulated from one year
to the next.
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9. Disability Benefit. If at any time during the Employment Period
the Executive is unable to perform fully his duties hereunder for a period of
six (6) consecutive months by reason of illness, accident, or other physical or
mental disability (as confirmed by competent medical evidence) and such
condition may reasonably be expected to be permanent ("Total Disability"), the
Executive shall be entitled to receive (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)), and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all disability benefits then available to Frank
J. Cozzi, Albert A. Cozzi and Gerard M. Jacobs, so long as they are then
employed by the Company. In the event there is then no established policy
regarding disability benefits afforded to Frank J. Cozzi, Albert A. Cozzi and
Gerard M. Jacobs or such benefits afforded to Frank J. Cozzi, Albert A. Cozzi
and Gerard M. Jacobs are less than seventy percent (70%) of the Executive's
then-current Salary and Annual Cash Bonus for the Balance of the Term, then the
Executive shall be entitled to receive periodic payments of seventy percent
(70%) of his then-current Salary and Annual Cash Bonus (determined pursuant to
Section 4 of this Agreement) for the Balance of the Term. If any dispute
regarding the existence of the Executive's Total Disability arises, each party
shall appoint a physician and such physicians shall jointly appoint a third
physician, the decision of any two (2) of such physicians regarding the
existence of Total Disability shall be binding upon the parties.
Notwithstanding the foregoing provision, the amounts payable to the Executive
pursuant to this Section 9 shall be reduced by any amounts received by the
Executive with respect to any such incapacity pursuant to any insurance policy,
plan, or other employee benefit provided to the Executive by the Company.
10. Death Benefit. In the event of the death of the Executive during
the Employment Period, the Company shall pay (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all death benefits then available to Frank J.
Cozzi, Albert A. Cozzi and Gerard M. Jacobs. In the event there is then no
established policy regarding death benefits afforded to Frank J. Cozzi, Albert
A. Cozzi and Gerard M. Jacobs or such benefits afforded Frank J. Cozzi, T.
Albert A. Cozzi and Gerard M. Jacobs are less than a lump-sum payment equal to
the Executive's then-current Salary and Annual Cash Bonus otherwise payable to
the Executive for the one-year period immediately following the Executive's
death, then the Company shall pay as a survivor's benefit a lump-sum amount
equal to the Executive's then-current Salary and Annual Cash Bonus that would
otherwise be payable to the Executive pursuant to Section 4 of this Agreement
for the one-year period immediately following the Executive's death. The
benefits payable under this Section 10 shall be paid to the person or persons
designated by the Executive on the form provided by the Company or, in the
absence of such a designation, as follows: (i) to the Executive's spouse if she
survives him; (ii) if the Executive's spouse fails to survive the Executive,
then in equal shares to the Executive's children who survive him; or (iii) if
neither Executive's spouse nor any child survives the Executive, then all to
the Executive's estate.
11. Insurance. During the Employment Period, the Company shall apply
for, procure and pay for, in the Executive's name and for the Executive's
benefit, with the Executive's designee as the beneficiary, life insurance owned
by the Executive in the following
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<PAGE> 6
amounts: $1,000,000 through a term life policy and $1,000,000 through a whole
life policy. The Executive shall submit to any medical or other examination
and execute and deliver any application or other instrument in writing
reasonably necessary to effectuate such insurance.
12. Other Compensation, Benefits and Perquisites. The Executive's
Salary shall be as described in Section 4 above; his stock Incentive
Compensation shall be as described in Section 5 above; his Annual Cash Bonus
shall be as described in Section 6(a) above; his vacation shall be as described
in Section 7 above; and his sick leave, disability benefit, death benefit and
insurance shall be as described in Sections 8, 9, 10 and 11 above,
respectively. In addition to the aforesaid types of compensation, benefits and
perquisites, the Executive shall be entitled to participate in all other types
of compensation, benefits and perquisites then available to Frank J. Cozzi,
Albert A. Cozzi and Gerard M. Jacobs, such as, but not limited to: cash
bonuses in addition to guaranteed cash bonuses; stock option plans; 401-K
plans; welfare plans; business travel policies; car allowance; medical
insurance; dental insurance; dues, fees and costs (including travel) associated
with membership and participation in professional, educational and other clubs
and organizations, and attendance at professional, educational and other
programs, presentations, workshops, seminars and conventions. The Executive's
participation in all such other types of compensation, benefits and perquisites
shall be identical to those of Frank J. Cozzi and Albert A. Cozzi, excepting
only that the amount of the Executive's cash bonus (if any) in addition to his
Annual Cash Bonus, and also the level of the Executive's participation in stock
option grants and stock option plans (if any), shall be determined and granted
by the Board of Directors from time to time based upon the Executive's
responsibilities and performance, and shall not necessarily be in the same
amounts or levels as are received by Frank J. Cozzi and Albert A. Cozzi.
Notwithstanding anything to the contrary, however, for so long as both
Executive and Gerard M. Jacobs are employed by the Company, Executive's
compensation, benefits and perquisites (including, but not limited to: Salary;
Incentive Compensation; Annual Cash Bonus; additional cash bonus; vacation;
sick leave; disability benefit; death benefit; insurance; warrants; stock
option grants and plans; 401(k) plans; welfare plans; business travel policies;
car allowance; medical insurance; dental insurance; dues, fees and costs
(including travel) associated with membership and participation in
professional, educational and other clubs and organizations, and attendance at
professional, educational and other programs, presentations, workshops,
seminars and conventions; and Company auto and other reimbursement policies)
shall be identical in all respects to those of Gerard M. Jacobs. Without
limiting the generality of the foregoing, it is expressly agreed: that the
Executive's car allowance from the Company shall never be less than One
Thousand Dollars ($1,000) per month, provided that any portion of such car
allowance that is not being used to pay for the Executive's car shall be paid
by the Company to the Executive as additional compensation in regard to such
month; that the Executive shall also be fully reimbursed by the Company for all
gas, oil, repairs, maintenance and insurance in regard to such car; and that
the Company shall supply and pay all of the costs, fees and charges in regard
to a Company phone at the Executive's home office (if any), a car phone, and a
cellular phone. The Executive understands and agrees that the Executive
Committee shall be permitted from time to time to establish an annual dollar
limitation upon the Company's expenditures in regard to dues, fees and costs
(including travel) associated with membership and participation in
professional, educational and other clubs and organizations, and attendance at
professional, educational and other programs, presentations, workshops,
seminars and conventions, other than the Institute of
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<PAGE> 7
Scrap Recycling Industries (ISRI), incurred by any member of the Executive
Committee, which limitation shall be identical with respect to each member of
the Executive Committee: provided that so long as the Company's common stock as
of the first trading day of each fiscal year of the Company is trading at or
above Ten Dollars ($10.00) per share, such annual limitation for such year
shall not be less than Twenty Thousand Dollars ($20,000.00) per member of the
Executive Committee.
13. Business Expense Reimbursement. The Company shall reimburse the
Executive for the reasonable, ordinary, and necessary business expenses
incurred by him in connection with the performance of his duties hereunder,
including, but not limited to, ordinary and necessary travel, entertainment and
phone expenses. The Executive shall provide the Company with an accounting of
his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Company. The Executive shall provide the Company with such
other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service regulations or other
requirements. All such reimbursements shall be payable by the Company to the
Executive within a reasonable time after receipt by the Company of appropriate
documentation thereof; provided, however, the Company shall have no obligation
to reimburse any expenses for which appropriate and customary back-up
documentation is not provided within ninety (90) days following accrual of the
obligation in question.
14. Termination.
(a) Unilateral Termination. The Employment Period may be
terminated by either party at any time by written notice of termination given
to the other party at least ninety (90) days in advance of the termination date
stated in such notice.
(b) Termination for Just Cause. The Company shall have the
option to terminate the Employment Period, effective upon written notice of such
termination to the Executive, for Just Cause as determined by the Executive
Committee. For purposes of this Agreement, the term "Just Cause" shall mean
the occurrence of any one or more of the following events:
i) The willful and continued failure by the Executive to
substantially perform his duties with the Company (other than any
such failure resulting from termination by the Company pursuant
to Section 14(a), Total Disability, retirement or death) after
a demand for substantial performance is delivered to the
Executive that specifically identifies the manner in which
the Company believes that the Executive has not substantially
performed his duties, and the Executive fails to resume
substantial performance of his duties on a continuous basis
within fourteen (14) days of receiving such demand;
provided, that if it is not reasonably possible for the
Executive to resume such substantial performance within such
fourteen (14) days, then such fourteen (14) day time period
shall be extended to that minimum period of time during which it
is reasonably possible for the Executive to resume such
substantial performance;
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ii) The willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company,
monetarily or otherwise and the Executive's failure to cease
engaging in such conduct within fourteen (14) days after a
demand for such cessation is delivered to the Executive by the
Company that specifically identifies such conduct; provided,
however, that if it is not reasonably possible for the Executive
to cease such conduct within such fourteen (14) days, then such
fourteen (14) day time period shall be extended to that minimum
period of time during which it is reasonably possible for the
Executive to cease such conduct; or
iii) The Executive's conviction of a felony or a misdemeanor
which materially impairs the Executive's ability substantially
to perform his duties with the Company.
For purposes of this subsection (b), an act, or failure to act, on the
Executive's part, shall not be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interest of the Company.
(c) Termination Upon Death. The Employment Period shall
automatically terminate upon the death of the Executive, without further action
by the Company.
(d) Termination Upon Disability. The Employment Period shall
terminate thirty days after the Company notifies the Executive of a
determination of Total Disability (as defined above) of the Executive, provided
the Executive does not dispute such determination as provided in Section 9
hereof, in which case the date of termination for Total Disability shall be the
date the Executive is determined to have a Total Disability pursuant to Section
9 hereof.
(e) Termination for Good Reason. The Executive shall have the right
to resign for Good Reason (as defined below) and any such resignation shall be
deemed a termination by the Company pursuant to Section 14(a). For purposes of
this Agreement, "Good Reason" shall mean (i) any material breach by the Company
of its obligations hereunder, including without limitation any material breach
of the Company's obligations under Sections 1(b) or 1(c) above, which is not
cured within fourteen (14) days of written notice from the Executive to the
Company describing such breach, (ii) any transfer of the Executive's principal
work location to a location outside the downtown business district of Chicago,
Illinois, (iii) the termination of the Employment Period by the Executive for
any reason or no reason at all at any time during the one-year period
immediately following the date of a Change in Control, or (iv) the termination
of the Employment Period by the Executive for any reason or no reason at all at
any time during the one-year period immediately following the date the
Executive receives notice of non-renewal from the Company pursuant to Section 3
herein. For purposes of this Agreement, a "Change in Control" of the Company
shall mean:
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i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) [THIS SECTION INTENTIONALLY LEFT BLANK.]
iii) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting
requirement, that was not approved by the Executive
Committee, provided that, without limitation, a Change in
Control shall be deemed to have occurred if the following
events occur without the affirmative vote of the Executive
Committee:
a) any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act), other than Albert A. Cozzi, Frank J. Cozzi and
Gregory P. Cozzi and their respective heirs, trusts, estates,
personal representatives, legatees and assigns, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing thirty percent (30%) or more of the
combined voting power of the Company's then outstanding
securities computed on a fully diluted basis (assuming the
conversion of all outstanding convertible securities of the
Company and the exercise of all options and warrants which, at
the time of determination, are vested and are exercisable at a
price less than the then market price of the Company's Common
Stock),
b) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement),
there shall cease to be a majority of the Board of Directors of
the Company comprised as follows: individuals who at the
beginning of the Employment Period constitute the Board of
Directors and any new director(s) whose election by the Board of
Directors or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors
at the beginning of the Employment Period or whose election or
nomination for election was previously so approved, or
c) the shareholders of the Company (a) approve a merger or
consolidation of the Company or a subsidiary of the Company with
any other corporation, other than a merger with Cozzi Iron &
Metal, Inc., and other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent
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(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (b) approve a
plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all the Company's assets.
15. Surrender of Properties. Upon termination of the Executive's
employment with the Company, regardless of the reason therefor, the Executive
shall promptly surrender to the Company all property provided him by the
Company for use in relation to his employment and, in addition, the Executive
shall surrender to the Company any and all sales materials, lists of customers
and prospective customers, price lists, files, records, models, or other
materials and information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations of the Company.
16. Chicago Headquarters. The Company acknowledges that the
Executive shall be based within the City limits of Chicago, Illinois, during the
Employment Period.
17. Severance Pay.
(a) Notwithstanding any other provision of this Agreement, if
the Employment Period is terminated by the Company pursuant to Section 14(a),
the Company shall pay the Executive (i) any accrued but unpaid Salary, prorated
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) a lump-sum severance payment equal to the greater of (A)
the Executive's then-current Salary and Annual Cash Bonus for the Balance of
the Term, or (B) the product of 5.00 multiplied by the Executive's highest
total annual cash compensation (as reported by the Company on Internal Revenue
Service Form W-2) earned by the Executive in any one of the three (3) calendar
years immediately preceding the calendar year in which the termination occurs.
In addition, (i) the Company shall continue all medical, dental and life
insurance benefits at no cost to the Executive for the greater of (A) twelve
(12) months, commencing on the date of termination of the Employment Period, or
(B) the Balance of the Term (the provision by the Company of any such group
health benefits shall not be considered continuation coverage pursuant to
Section 4980B of the Internal Revenue Code of 1986, as amended, and such
continuation coverage shall commence on the date that benefits provided
hereunder cease), and (ii) the ownership of all warrants and options granted to
the Executive by the Company under this Agreement shall be immediately and
fully vested in the Executive and shall remain outstanding and exercisable
until the expiration date of such warrants and options (without regard to any
early termination of such options or warrants resulting from the Executive's
termination of employment). Other than as provided herein, if the Employment
Period is terminated by the Executive pursuant to Section 14(a) or by the
Company as provided in Section 14(b) of this Agreement, the Company shall pay
to the Executive any accrued but unpaid Salary, prorated Annual Cash Bonus
(determined in accordance with Section 6(a)) and prorated vacation, and any
other amounts accrued but unpaid as of the date of termination. Any
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benefit payable pursuant to this Section 17 shall be paid to the Executive in a
lump-sum within five (5) days after the termination of the Employment Period.
(b) In the event that the Executive becomes entitled to the
severance payments as provided herein, if it is determined that any of such
payments will be subject to the tax or any other similar state or local excise
taxes (the "Excise Tax") imposed by Section 4999 of the Code (or any similar
tax that may hereafter be imposed), the Company shall "gross-up" such severance
payments so that the amount received by the Executive after payment of such
Excise Tax shall be equal to the amount to which the Executive was entitled
prior to application of such Excise Tax.
18. Restrictive Covenants. In addition to any other obligation of
the Executive under any other agreement with the Company, in order to assure
that the Company will realize the benefits of this Agreement and in
consideration of the employment set forth in this Agreement, the Executive
agrees that he shall not during the Employment Period and for a period of
thirty-six (36) months from the termination of the Employment Period; provided,
that, in the event the Employment Period is terminated by the Company pursuant
to Section 14(a) on or before the second anniversary of the Commencement Date,
the thirty-six (36) month period provided herein shall be reduced to a twelve
(12) month period; and provided further, that, in the event the Employment
Period is terminated by the Company pursuant to Section 14(a) after the second
anniversary of the Commencement Date, the thirty-six (36) month period provided
herein shall be reduced to a thirty (30) month period:
(a) directly or indirectly, alone or as a partner, joint
venturer, member, officer, director, employee, consultant, agent, independent
contractor, stockholder or in any other capacity of any company or business,
engage in any business activity in any state in which the Company owns a scrap
metal yard or scrap metal processing facility on the date of termination of
such Employment Period which is directly or indirectly in competition with the
Company Business; provided, however, that, the beneficial ownership of less
than 5% of the shares of stock of any corporation having a class of equity
securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section;
(b) directly or indirectly (i) induce any person which is a
customer of the Company or any subsidiary or affiliate of the Company on the
date of the termination of such Employment Period to patronize any business
directly or indirectly in competition with the Company Business; (ii) canvass,
solicit or accept from any person that is a customer of the Company or any
subsidiary or affiliate of the Company on the date of the termination of the
Employment Period, any such competitive business, or (iii) request or advise
any person that is a customer of the Company Business on the date of the
termination of the Employment Period to withdraw, curtail, or cancel any such
customer's business with the Company or any affiliate or subsidiary of the
Company;
(c) directly or indirectly employ, or knowingly permit any
company or business directly or indirectly controlled by him, to employ, any
person who was employed by
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the Company or any subsidiary or affiliate of the Company on the date of the
termination of the Employment Period or within six months prior to the date of
termination of the Employment Period, or in any manner seek to induce any such
person to leave his or her employment;
(d) For purposes of this Agreement, "Company Business" shall
mean scrap iron or scrap metal recycling and/or processing conducted by the
Company or its subsidiaries or affiliates and any other business that the
Company or its subsidiaries or affiliates may be engaged in (other than real
estate development) at the time of the termination of the Employment Period.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(f) The Executive agrees and acknowledges that the restrictions
contained in this Section 18 are reasonable in scope and duration and are
necessary to protect the Company after the Commencement Date. If any provision
of this Section 18 as applied to any party or to any circumstance is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section
will cause irreparable damage to the Company and upon breach of any provision
of this Section, the Company shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the Company may have (including, without
limitation, the right to seek monetary damages).
(g) [THIS SECTION INTENTIONALLY LEFT BLANK.]
19. Confidentiality of Information: Duty of Non-Disclosure. The
Executive acknowledges and agrees that his employment by the Company under this
agreement necessarily involves his understanding of and access to certain trade
secrets and confidential information pertaining to the business of the Company.
Accordingly, the Executive agrees that after the date of this Agreement at all
times, whether during or after the termination of the Employment Period, he
will not, directly or indirectly, without the prior written consent of the
Company, disclose to or use for the benefit of any person, corporation or other
entity, or for himself any and all files, trade secrets or other confidential
information concerning the internal affairs of the Company or its subsidiaries
or affiliates, including, but not limited to, information pertaining to its
clients, services, products, earnings, finances, operations, methods or other
activities; provided, however, that the foregoing shall not apply to
information which is of public record or is generally known, disclosed or
available to the general public or the industry generally. Further, the
Executive agrees that he shall not, directly or indirectly, remove or retain,
without the express prior written consent of the Company, and upon termination
of this Agreement for any reason shall return to the Company, any figures,
calculations, letters, papers, records, computer disks, computer print-outs,
customer lists, price lists, other lists, contracts, business plans, forms,
manuals, other
12
<PAGE> 13
documents, instruments, drawings, designs, programs, brochures, sales
literature, or any copies or reproductions thereof, or any information or
instruments derived therefrom, or any other similar information of any type or
description, however such information might be obtained or recorded, arising
out of or in any way relating to the business of the Company or obtained as a
result of his employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the exclusive property of
the Company.
20. Enforcement.
(a) Upon presentation of a claim or claims (collectively,
"Claims") arising out of or relating to this Agreement, or the breach hereof,
by an aggrieved party, the other party shall have thirty (30) days in which to
make such inquiries of the aggrieved party and conduct such investigations as
it believes reasonably necessary to determine the validity of the Claims. At
the end of such period of investigation, the complained of party shall either
pay the amount of the Claims or the arbitration proceeding described
immediately below shall be invoked.
(b) In the event that the Claims are not settled by the
procedure set forth immediately above, the Claims shall be submitted to
arbitration conducted in accordance with the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA") except as amplified
or otherwise varied hereby.
(c) The parties shall submit the dispute to the Chicago regional
office of the AAA and the situs of the arbitration shall be Cook County,
Illinois.
(d) The arbitration shall be conducted by a single arbitrator.
The parties shall appoint the single arbitrator to arbitrate the dispute within
ten (10) business days of the submission of the dispute. In the absence of
agreement as to the identity of the single arbitrator to arbitrate the dispute
within such time, the AAA is authorized to appoint an arbitrator in accordance
with the Rules, except that the arbitrator shall have as his principal place of
business the Chicago metropolitan area.
(e) The single arbitrator selected by the AAA shall be an
attorney, accountant or other professional licensed to practice by the State of
Illinois.
(f) Notwithstanding anything in the Rules to the contrary, the
arbitration award shall be made in accordance with the following procedure.
Each party shall, at the commencement of the arbitration hearing, submit an
initial statement of the amount each party proposes be selected by the
arbitrator as the arbitration award ("Settlement Amount"). During the course of
the arbitration, each party may vary its proposed Settlement Amount. At the end
of the arbitration hearing, each party shall submit to the arbitrator its final
Settlement Amount ("Final Settlement Amount"), and the arbitrator shall be
required to select either one or the other Final Settlement Amounts as the
arbitration award without discretion to select any other amount as the award.
The arbitration award shall be paid within ten (10) business days after the
award has been made, together with interest from the date of award at the rate
of six percent (6%).
13
<PAGE> 14
Judgment upon the award may be entered in any federal or state court having
jurisdiction over the parties and shall be final and binding.
21. Costs of Enforcement. The Company shall reimburse the
Executive for reasonable attorneys' fees and costs incurred by the Executive in
connection with any claim by the Executive brought hereunder (including but not
limited to all reasonable attorneys' fees and costs incurred by the Executive in
contesting or disputing any termination of the Employment Period, or in seeking
to obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to any
payment or benefit provided hereunder), so long as such claim is brought in good
faith.
22. Competing Interest. During the Employment Period, the
Executive shall not, without the prior written consent of the Company, (i)
engage in any other business activity for gain, profit, or other pecuniary
advantage or (ii) engage in or in any manner be connected or concerned, directly
or indirectly, whether as an officer, director, stockholder, partner, owner,
executive, creditor, or otherwise, with the operation, management, or conduct of
any business, in either case which directly or indirectly competes with the
Company Business. Provided, however, that this Section 22 shall not prohibit the
Executive from owning up to five (5) percent of the publicly traded shares of
any entity.
23. No Duty to Mitigate or Offset. The Executive shall not be
required to mitigate or offset the amount of any payments that the Executive may
receive from the Company as a result of the termination of the Employment
Period. The amounts payable hereunder by the Company as a result of the
termination of the Employment Period shall be considered liquidated damages and
shall not be reduced by any amounts that the Executive earns through other
employment or otherwise, except that the Company's obligation to continue
medical, dental and life insurance benefits pursuant to Section 17 herein, shall
be reduced by the amount of any such benefits provided to the Executive by any
other employer.
24. Indemnification. The Company hereby agrees to indemnify the
Executive against all liabilities, costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any threatened,
pending or completed action, suit or proceeding to which the Executive may be
made a party or may be threatened to be made a party by reason of the
Executive's being or having been a director, officer, employee, or agent of the
Company or serving or having served at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise to the fullest extent permitted by applicable law.
The Company shall advance all costs, charges and expenses, including legal
fees, incurred by the Executive in connection with the Executive's defense of
any claim for which the foregoing indemnity may apply. If it is subsequently
determined that the Executive was not entitled to such indemnification, the
Executive will reimburse the Company any amounts advanced pursuant to the
foregoing sentence.
25. Directors and Officers Insurance. The Executive shall be
entitled to the protection of any insurance policies the Company or any of its
affiliates from time to time maintains for the benefit of its senior executive
officers and directors (or substantially similar
14
<PAGE> 15
policies) respecting liabilities, costs, charges, and expenses of any type
whatsoever incurred or sustained by the Executive in connection with any
action, suit or proceeding to which the Executive may be made a party or may be
threatened to be made a party by reason of the Executive's being or having been
a director, officer, employee or agent of the Company or serving or having
served at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
26. General Provisions.
(a) Goodwill. The Company has invested substantial time and
money in the development of its products, services, territories, advertising and
marketing thereof, soliciting clients and creating goodwill. By accepting
employment with the Company, the Executive acknowledges that the customers are
the customers of the Company, and that any goodwill created by the Executive
belongs to and shall inure to the benefit of the Company.
(b) Notice. Any notice or demand required or permitted
hereunder shall be made in writing (i) either by actual delivery of the notice
or demand into the hands of the party thereunder entitled, or (ii) by the
mailing of the notice or demand in the United States mail, certified or
registered mail, return receipt requested, all postage prepaid and addressed to
the party to whom the notice or demand is to be given at the party's respective
address set forth below, or such other address as the parties may from time to
time designate by written notice as herein provided.
As addressed to the Company:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chief Executive Officer
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Erhard R. Chorle
As addressed to the Executive:
Mr. T. Benjamin Jennings
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
15
<PAGE> 16
With a copy to:
Thomas V. Skinner, Esq.
Winston & Strawn
33 West Wacker Drive
Chicago, Illinois 60601
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Company unless made in writing and
signed by an officer of the Company duly authorized by the Board of Directors
or upon the Executive unless made in writing and signed by him. The waiver by
either party hereto of the breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by such party.
(d) Entire Agreement. This Agreement constitutes the entire
Agreement between the parties with respect to the Executive's duties and
compensation as an executive of the Company and shall supersede any and all
prior agreements or understandings between the parties hereto; there are no
representations, warranties, agreements or commitments between the parties
hereto with respect to his employment except as set forth herein. The parties
do hereby terminate that certain Employment Agreement by and between the
Company (formerly known as General Parametrics Corporation) and Executive dated
April 9, 1996.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Illinois.
(f) Severability. If any provision of this Agreement shall,
for any reason, be held unenforceable by a court of competent jurisdiction, such
provision shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the parties. If
the Agreement continues to reflect the basic intent of the parties, then the
invalidity of such specific provision shall not affect the enforceability of
any other provision herein, and the remaining provisions shall remain in full
force and effect.
(g) Assignment. The Executive may not under any circumstances
delegate any of his rights and obligations hereunder without first obtaining
the prior written consent of the Company. The Company shall cause this
Agreement and all of the Company's rights and obligations hereunder, including
without limitation the obligations of the Company in the event of a termination
of employment by the Company pursuant to Section 14(a), to be assigned and
expressly assumed by any successor to all or substantially all of the business
and/or assets of the Company, whether direct or indirect, by purchase, merger,
consolidation or otherwise, including upon a Change in Control (as defined in
Section 14(e)); provided, however, that any such
16
<PAGE> 17
assignment shall not relieve the Company of its obligations hereunder to the
extent that an assignee does not fulfill such obligations.
(h) Heirs. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designees or, if there is no such
designee, to the Executive's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
------------------------------------
Gerard M. Jacobs, Chief Executive
Officer
By: /s/ Albert A. Cozzi
------------------------------------
Albert A. Cozzi, President and Chief
Operating Officer
EXECUTIVE:
/s/ T. Benjamin Jennings
---------------------------------------
T. Benjamin Jennings
17
<PAGE> 18
EXHIBIT "A"
1. Crown Group, Inc.
2. Miss Mimi Corporation
3. GMJ Holdings, Inc.
4. Environmental Waste Funding Corporation and affiliated entities
5. Trailside Capital Corporation
6. North-South Partners
7. Entrepreneurial Capital Management
8. Lonesome Dove Ventures
9. J&J Investment Partnership and affiliated entities
10. Outright Industries and affiliated entities
<PAGE> 1
EXHIBIT 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
APPLICABLE STATE SECURITIES LAWS.
No. Cozzi-9 WARRANT December 1, 1997
To Purchase 350,000 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between T. Benjamin Jennings (the "Employee") and the Company, Employee
is entitled, upon the terms and subject to the conditions hereinafter set
forth, at any time after the date hereof and at or prior to 11:59 p.m. Central
Time, on December 1, 2002 (the "Expiration Time"), but not thereafter, to
acquire from the Company, in whole or in part, from time to time, up to 350,000
fully paid and nonassessable shares (the "Shares") of common stock, $.01 par
value of the Company ("Common Stock"), at an initial exercise price as adjusted
pursuant to Section 10 hereof (the "Exercise Price") of $12.00 per Share. The
number of Shares, type of security and Exercise Price are subject to adjustment
as provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant
are exercisable by the Employee or his successors and assigns, in whole or in
part, at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on
which this Warrant shall have been exercised in accordance with the terms
hereof. All Shares that may be issued upon the exercise of this Warrant shall,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger
or a consolidation of the Company with or into another corporation when the
Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
17. Transfer. This Warrant and the rights granted hereby are freely
transferable by Employee or any successors or assigns provided that such
transfer is pursuant to an effective registration statement in accordance with
the Securities Act of 1933, as amended (the "Act"), or Employee in connection
with such transfer delivers to the Company an opinion of counsel, in form and
substance satisfactory to the Company, that registration is not required under
the Act or any applicable state securities laws.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
--------------------------------
Gerard M. Jacobs, President and
Chief Executive Officer
By: /s/ Albert A. Cozzi
--------------------------------
Albert A. Cozzi, Chief
Operating Officer
Address: 500 North Dearborn Street.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
------------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
------------------------------------
[Name]
- ---------------- ------------------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.8
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
APPLICABLE STATE SECURITIES LAWS.
No. Cozzi-10 WARRANT December 1, 1997
To Purchase 375,000 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between T. Benjamin Jennings (the "Employee") and the Company, Employee
is entitled, upon the terms and subject to the conditions hereinafter set
forth, at any time after the date hereof and at or prior to 11:59 p.m. Central
Time, on December 1, 2002 (the "Expiration Time"), but not thereafter, to
acquire from the Company, in whole or in part, from time to time, up to 375,000
fully paid and nonassessable shares (the "Shares") of common stock, $.01 par
value of the Company ("Common Stock"), at a purchase price of $5.91 per Share,
as adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number
of Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant
are exercisable by the Employee or his successors and assigns, in whole or in
part, at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Employee within a reasonable time after the date on
which this Warrant shall have been exercised in accordance with the terms
hereof. All Shares that may be issued upon the exercise of this Warrant shall,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger
or a consolidation of the Company with or into another corporation when the
Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
--------------------------------
Gerard M. Jacobs, President and
Chief Executive Officer
By: /s/ Albert A. Cozzi
-------------------------------
Albert A. Cozzi, Chief
Operating Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
------------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
------------------------------------
[Name]
- ---------------- ------------------------------------
[Date] [Signature]
2
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 1st day of
December, 1997, by and between GERARD M. JACOBS (the "Executive") and METAL
MANAGEMENT, INC., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, the Company and the Executive do hereby agree as
follows:
1. Employment and Duties.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to employ the Executive as the Chief Executive
Officer of the Company to perform such duties and responsibilities as are
consistent with such positions.
(b) Directorship. The Executive is currently a member of the
Company's Board of Directors (the "Board of Directors"), and throughout
the Employment Period (as hereafter defined) the Company shall cause the
Executive to be nominated for election to the Board of Directors. Failure of
the Company to so nominate the Executive, or the failure of the stockholders of
the Company to elect the Executive to the Board of Directors following
nomination, shall constitute "Good Reason" for the Executive to resign pursuant
to Section 14(e) below and any such resignation shall be deemed a termination
by the Company pursuant to Section 14(a) below.
(c) Executive Committee. Reference is hereby made to that certain
Stockholders' Agreement for Metal Management, Inc. dated December 1, 1997 by
and among Albert A. Cozzi, T. Benjamin Jennings, the Executive, Frank J. Cozzi,
Gregory P. Cozzi and the Company (the "Stockholders' Agreement"). The Board of
Directors has amended the Bylaws of the Company in order to create an Executive
Committee (the "Executive Committee") of the Board of Directors, which
Executive Committee is authorized to act on behalf of and in the name of the
Board of Directors during the periods between meetings of the full Board of
Directors, including in regard to certain actions specified in Section 1.2 of
the Stockholders' Agreement. The Executive Committee shall consist of the
Chairman of the Board of Directors, the President and Chief Operating Officer
of the Company, and the Chief Executive Officer of the Company, and one or more
other senior company executives chosen by the Executive Committee. As the
Chief Executive Officer of the Company, the Executive shall be a member of the
Executive Committee during the Employment Period, and as such the Executive
shall participate in all decision-making by the Executive Committee. All
actions by the Executive Committee shall be by majority vote, excepting,
however, that no action may be taken by the Executive Committee without the
unanimous consent of (i) Albert A. Cozzi or his successor on the Executive
1
<PAGE> 2
Committee, Frank J. Cozzi, (ii) T. Benjamin Jennings for so long as he is
employed by the Company, and (iii) Gerard M. Jacobs for so long as he is
employed by the Company.
2. Performance. The Executive accepts the employment described in
Section 1 above, and agrees to faithfully and diligently perform the duties and
responsibilities described therein. The Executive shall devote time and
attention to matters of the Company such that the Executive's services to the
Company constitute his primary business activity. The Company acknowledges
that the Executive may (i) engage in charitable and community affairs
(including serving on the board of directors or similar management body of any
charitable or community organization), (ii) serve on the board of directors of
or act as a consultant to other companies which are not engaged in a business
that directly or indirectly competes with the Company Business (as defined in
Section 18 below), and (iii) make personal investments. The Company further
acknowledges and agrees that Executive will devote a portion of his time and
energies to the entities set forth on Exhibit A attached hereto.
3. Term. The term of employment under this Agreement shall commence on
the date of this Agreement (the "Commencement Date") and shall continue for a
period of five (5) years thereafter (the "Employment Period"); provided,
however, that on each anniversary of the Commencement Date, the Employment
Period shall be automatically extended for an additional year unless at least
sixty (60) days before any such anniversary, either the Executive or the
Company, as the case may be, notifies the other of its desire not to further
extend the Employment Period; and provided, further, that the Employment Period
shall terminate upon the earliest to occur of the events described in Section
14 hereunder. For purposes of this Agreement, "Balance of the Term" shall mean
the period beginning on the date of termination and ending on the date that the
Employment Period would have ended pursuant to this Section 3 due to lapse of
time (assuming no further extensions of the Employment Period beyond those
already approved as of the date of termination), without regard to Section 14.
4. Salary. For all the services to be rendered by the Executive
hereunder, the Company agrees to pay, during the Employment Period, a base
salary ("Salary") at an initial rate of Two Hundred and Seventy-Five Thousand
Dollars ($275,000.00) per Contract Year, payable in the manner and frequency in
which the Company's payroll is customarily handled. For purposes of this
Agreement, "Contract Year" shall mean a one-year period commencing on the
Commencement Date or on any anniversary of the Commencement Date. The Company
may increase the Executive's Salary at any time, or from time to time, during
the Employment Period, provided, however, that the Company may not at any time
reduce the Salary from its then-current level. In no event shall the Salary
paid hereunder with respect to any Contract Year be less than the base salary
paid to Frank J. Cozzi, Albert A. Cozzi and T. Benjamin Jennings with respect
to such Contract Year, so long as they are then employed by the Company.
5. Incentive Compensation. In addition to the Executive's Salary,
the Company shall pay to the Executive, during the Employment Period, additional
compensation ("Incentive Compensation") calculated as follows:
2
<PAGE> 3
(a) Stock Warrants. On the Commencement Date, the Company shall
grant the Executive warrants to purchase three hundred seventy-five
thousand (375,000) shares of common stock of the Company at an exercise price
of Five Dollars and 91/100 ($5.91) per share and warrants to purchase three
hundred fifty thousand (350,000) shares of common stock of the Company at an
exercise price equal to the lesser of (a) seventy-five percent (75%) of the
closing price per share of the Company's common stock on the last trading date
prior to the Closing, and (b) $12.00 per share, subject to all federal and
state securities and other laws. All warrants issued pursuant to this Section
5(a) shall be governed by and subject to all conditions, terms and restrictions
in the actual warrant which is attached hereto as Attachment A and hereby
incorporated by reference.
(b) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(c) Other Stock Terms.
------------------
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) The Company represents and warrants to the Executive
that the grant of warrants to purchase shares of common stock
of the Company hereunder shall be an exempt acquisition under
Section 16(b) of the Securities Exchange Act of 1934.
iii) The Executive acknowledges that the Company's
common stock is publicly traded and is subject to various federal
and state securities laws and that the shares acquired upon the
exercise of the warrants (collectively the "Shares") are being
issued pursuant to such laws and agrees that he will comply with
any and all applicable laws and regulations governing the Shares.
iv) The Company shall use its best efforts to file as
soon as practicable, and shall use its best efforts to cause
to remain effective, a registration statement(s) as may be
necessary to permit the Executive to sell in the public market any
and all Shares acquired hereunder upon exercise in the case of the
Shares received on exercise of the warrants, provided, that
Executive understands and agrees that this Section 5(c)iv) shall be
subject to any restrictions on transfer contained in that certain
Stockholders' Agreement by and among the Company, Executive,
Frank J. Cozzi, Gregory P. Cozzi, Albert A. Cozzi and T.
Benjamin Jennings, and nothing contained in this Section 5(c)(iv)
shall be deemed to impose any obligation upon the Company to take
any action whatsoever that, in the opinion of the Executive
Committee, would or might delay or hinder any material transaction
involving the Company, including but not limited to any of the
Company's acquisitions or any of the Company's debt or equity
financings, or that would or might be deemed to be a default or
violation of any of the Company's contracts in regard to any of
such
3
<PAGE> 4
transactions or financings, including but not limited to any
"blackout" periods imposed by the Company's underwriters.
(d) Stock-Based Plans. The Executive shall be eligible to
participate in and receive awards under any other stock-based plans of the
Company pursuant to Section 12 below.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
6. Cash Bonus Compensation. The Executive shall be entitled to the
following bonus compensation:
(a) Annual Cash Bonus. On each anniversary of the Commencement
Date, the Executive shall be entitled to a minimum annual cash bonus (the
"Annual Cash Bonus") in an amount equal to twenty-five percent (25%) of his
Salary for the Contract Year then ended, or, in the event the Employment Period
is terminated for any reason during a Contract Year, a prorated amount equal to
twenty-five percent (25%) of the Executive's Salary in such Contract Year
multiplied by a fraction, the numerator of which is the number of calendar days
in which the Executive was employed by the Company during such Contract Year
and the denominator of which is 365. The Company shall pay the Annual Cash
Bonus to the Executive no later than thirty (30) days after the end of such
Contract Year or, in the event the Employment Period is terminated during the
Contract Year, five (5) days after the date the Employment Period is
terminated. In no event shall the Annual Cash Bonus percentage used to
calculate the Executive's Annual Cash Bonus with respect to any Contract Year
be less than the guaranteed annual cash bonus percentage used to calculate any
guaranteed annual cash bonus paid to Frank J. Cozzi, Albert A. Cozzi and T.
Benjamin Jennings with respect to such Contract Year, so long as they are then
employed by the Company.
(b) Additional Bonus. The Executive shall be eligible to receive
additional cash bonuses pursuant to Section 12 below.
7. Vacation. In accordance with the policies and rules governing the
vacation of other members of the Executive Committee, the Executive shall be
entitled to take vacations with pay, during each year of service under this
Agreement, to be taken during the year at such time or times as may be approved
by the Company. Such vacation shall be at least six (6) weeks, but no less
than the vacation granted Frank J. Cozzi, Albert A. Cozzi and T. Benjamin
Jennings, so long as they are then employed by the Company. Unless otherwise
established for members of the Executive Committee, unused vacation days shall
not be accumulated from one year to the next.
8. Sick Leave. In accordance with the policies and rules governing the
sick leave of Frank J. Cozzi, Albert A. Cozzi and T. Benjamin Jennings, the
Executive shall be allowed paid sick leave during each year of service under
this Agreement. Unless otherwise established for members of the Executive
Committee, unused sick leave shall not be accumulated from one year to the
next.
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<PAGE> 5
9. Disability Benefit. If at any time during the Employment Period
the Executive is unable to perform fully his duties hereunder for a period
of six (6) consecutive months by reason of illness, accident, or other physical
or mental disability (as confirmed by competent medical evidence) and such
condition may reasonably be expected to be permanent ("Total Disability"), the
Executive shall be entitled to receive (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)), and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all disability benefits then available to Frank
J. Cozzi, Albert A. Cozzi and T. Benjamin Jennings, so long as they are then
employed by the Company. In the event there is then no established policy
regarding disability benefits afforded to Frank J. Cozzi, Albert A. Cozzi and
T. Benjamin Jennings or such benefits afforded to Frank J. Cozzi, Albert A.
Cozzi and T. Benjamin Jennings are less than seventy percent (70%) of the
Executive's then-current Salary and Annual Cash Bonus for the Balance of the
Term, then the Executive shall be entitled to receive periodic payments of
seventy percent (70%) of his then-current Salary and Annual Cash Bonus
(determined pursuant to Section 4 of this Agreement) for the Balance of the
Term. If any dispute regarding the existence of the Executive's Total
Disability arises, each party shall appoint a physician and such physicians
shall jointly appoint a third physician, the decision of any two (2) of such
physicians regarding the existence of Total Disability shall be binding upon
the parties. Notwithstanding the foregoing provision, the amounts payable to
the Executive pursuant to this Section 9 shall be reduced by any amounts
received by the Executive with respect to any such incapacity pursuant to any
insurance policy, plan, or other employee benefit provided to the Executive by
the Company.
10. Death Benefit. In the event of the death of the Executive during
the Employment Period, the Company shall pay (i) any accrued but unpaid
Salary, Annual Cash Bonus (determined in accordance with Section 6(a)) and
prorated vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all death benefits then available to Frank J.
Cozzi, Albert A. Cozzi and T. Benjamin Jennings. In the event there is then no
established policy regarding death benefits afforded to Frank J. Cozzi, Albert
A. Cozzi and T. Benjamin Jennings or such benefits afforded Frank J. Cozzi, T.
Albert A. Cozzi and T. Benjamin Jennings are less than a lump-sum payment equal
to the Executive's then-current Salary and Annual Cash Bonus otherwise payable
to the Executive for the one-year period immediately following the Executive's
death, then the Company shall pay as a survivor's benefit a lump-sum amount
equal to the Executive's then-current Salary and Annual Cash Bonus that would
otherwise be payable to the Executive pursuant to Section 4 of this Agreement
for the one-year period immediately following the Executive's death. The
benefits payable under this Section 10 shall be paid to the person or persons
designated by the Executive on the form provided by the Company or, in the
absence of such a designation, as follows: (i) to the Executive's spouse if she
survives him; (ii) if the Executive's spouse fails to survive the Executive,
then in equal shares to the Executive's children who survive him; or (iii) if
neither Executive's spouse nor any child survives the Executive, then all to
the Executive's estate.
11. Insurance. During the Employment Period, the Company shall apply
for, procure and pay for, in the Executive's name and for the Executive's
benefit, with the
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Executive's designee as the beneficiary, life insurance owned by the Executive
in the following amounts: $1,000,000 through a term life policy and $1,000,000
through a whole life policy. The Executive shall submit to any medical or
other examination and execute and deliver any application or other instrument
in writing reasonably necessary to effectuate such insurance.
12. Other Compensation, Benefits and Perquisites. The Executive's
Salary shall be as described in Section 4 above; his stock Incentive
Compensation shall be as described in Section 5 above; his Annual Cash Bonus
shall be as described in Section 6(a) above; his vacation shall be as described
in Section 7 above; and his sick leave, disability benefit, death benefit and
insurance shall be as described in Sections 8, 9, 10 and 11 above,
respectively. In addition to the aforesaid types of compensation, benefits and
perquisites, the Executive shall be entitled to participate in all other types
of compensation, benefits and perquisites then available to Frank J. Cozzi,
Albert A. Cozzi and T. Benjamin Jennings, such as, but not limited to: cash
bonuses in addition to guaranteed cash bonuses; stock option plans; 401-K
plans; welfare plans; business travel policies; car allowance; medical
insurance; dental insurance; dues, fees and costs (including travel) associated
with membership and participation in professional, educational and other clubs
and organizations, and attendance at professional, educational and other
programs, presentations, workshops, seminars and conventions. The Executive's
participation in all such other types of compensation, benefits and perquisites
shall be identical to those of Frank J. Cozzi and Albert A. Cozzi, excepting
only that the amount of the Executive's cash bonus (if any) in addition to his
Annual Cash Bonus, and also the level of the Executive's participation in stock
option grants and stock option plans (if any), shall be determined and granted
by the Board of Directors from time to time based upon the Executive's
responsibilities and performance, and shall not necessarily be in the same
amounts or levels as are received by Frank J. Cozzi and Albert A. Cozzi.
Notwithstanding anything to the contrary, however, for so long as both
Executive and T. Benjamin Jennings are employed by the Company, Executive's
compensation, benefits and perquisites (including, but not limited to: Salary;
Incentive Compensation; Annual Cash Bonus; additional cash bonus; vacation;
sick leave; disability benefit; death benefit; insurance; warrants; stock
option grants and plans; 401(k) plans; welfare plans; business travel policies;
car allowance; medical insurance; dental insurance; dues, fees and costs
(including travel) associated with membership and participation in
professional, educational and other clubs and organizations, and attendance at
professional, educational and other programs, presentations, workshops,
seminars and conventions; and Company auto and other reimbursement policies)
shall be identical in all respects to those of T. Benjamin Jennings. Without
limiting the generality of the foregoing, it is expressly agreed: that
Executive's car allowance from the Company shall never be less than One
Thousand Dollars ($1,000) per month, provided that any portion of such car
allowance that is not being used to pay for the Executive's car shall be paid
by the Company to the Executive as additional compensation in regard to such
month; that the Executive shall also be fully reimbursed by the Company for all
gas, oil, repairs, maintenance and insurance in regard to such car; and that
the Company shall supply and pay all of the costs, fees and charges in regard
to a Company phone at the Executive's home office (if any), a car phone, and a
cellular phone. The Executive understands and agrees that the Executive
Committee shall be permitted from time to time to establish an annual dollar
limitation upon the Company's expenditures in regard to dues, fees and costs
(including travel) associated with membership and participation in
professional, educational and other clubs and organizations, and attendance at
professional,
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educational and other programs, presentations, workshops, seminars and
conventions, other than the Institute of Scrap Recycling Industries (ISRI),
incurred by any member of the Executive Committee, which limitation shall be
identical with respect to each member of the Executive Committee: provided that
so long as the Company's common stock as of the first trading day of each
fiscal year of the Company is trading at or above Ten Dollars ($10.00) per
share, such annual limitation for such year shall not be less than Twenty
Thousand Dollars ($20,000.00) per member of the Executive Committee.
13. Business Expense Reimbursement. The Company shall reimburse the
Executive for the reasonable, ordinary, and necessary business expenses
incurred by him in connection with the performance of his duties hereunder,
including, but not limited to, ordinary and necessary travel, entertainment and
phone expenses. The Executive shall provide the Company with an accounting of
his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Company. The Executive shall provide the Company with such
other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service regulations or other
requirements. All such reimbursements shall be payable by the Company to the
Executive within a reasonable time after receipt by the Company of appropriate
documentation thereof; provided, however, the Company shall have no obligation
to reimburse any expenses for which appropriate and customary back-up
documentation is not provided within ninety (90) days following accrual of the
obligation in question.
14. Termination.
(a) Unilateral Termination. The Employment Period may be
terminated by either party at any time by written notice of termination given
to the other party at least ninety (90) days in advance of the termination date
stated in such notice.
(b) Termination for Just Cause. The Company shall have the
option to terminate the Employment Period, effective upon written notice
of such termination to the Executive, for Just Cause as determined by the
Executive Committee. For purposes of this Agreement, the term "Just Cause"
shall mean the occurrence of any one or more of the following events:
i) The willful and continued failure by the Executive to
substantially perform his duties with the Company (other than
any such failure resulting from termination by the Company
pursuant to Section 14(a), Total Disability, retirement or death)
after a demand for substantial performance is delivered to the
Executive that specifically identifies the manner in which the
Company believes that the Executive has not substantially
performed his duties, and the Executive fails to resume
substantial performance of his duties on a continuous basis within
fourteen (14) days of receiving such demand; provided, that if it
is not reasonably possible for the Executive to resume such
substantial performance within such fourteen (14) days, then such
fourteen (14) day time period shall be
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extended to that minimum period of time during which it is
reasonably possible for the Executive to resume such substantial
performance;
ii) The willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company,
monetarily or otherwise and the Executive's failure to cease
engaging in such conduct within fourteen (14) days after a demand
for such cessation is delivered to the Executive by the Company
that specifically identifies such conduct; provided, however, that
if it is not reasonably possible for the Executive to cease such
conduct within such fourteen (14) days, then such fourteen (14)
day time period shall be extended to that minimum period of time
during which it is reasonably possible for the Executive to cease
such conduct; or
iii) The Executive's conviction of a felony or a misdemeanor
which materially impairs the Executive's ability substantially to
perform his duties with the Company.
For purposes of this subsection (b), an act, or failure to act, on the
Executive's part, shall not be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interest of the Company.
(c) Termination Upon Death. The Employment Period shall
automatically terminate upon the death of the Executive, without further
action by the Company.
(d) Termination Upon Disability. The Employment Period shall
terminate thirty days after the Company notifies the Executive of a
determination of Total Disability (as defined above) of the Executive, provided
the Executive does not dispute such determination as provided in Section 9
hereof, in which case the date of termination for Total Disability shall be the
date the Executive is determined to have a Total Disability pursuant to Section
9 hereof.
(e) Termination for Good Reason. The Executive shall have the
right to resign for Good Reason (as defined below) and any such
resignation shall be deemed a termination by the Company pursuant to Section
14(a). For purposes of this Agreement, "Good Reason" shall mean (i) any
material breach by the Company of its obligations hereunder, including without
limitation any material breach of the Company's obligations under Sections
1(b) or 1(c) above, which is not cured within fourteen (14) days of written
notice from the Executive to the Company describing such breach, (ii) any
transfer of the Executive's principal work location to a location outside the
downtown business district of Chicago, Illinois, (iii) the termination of the
Employment Period by the Executive for any reason or no reason at all at any
time during the one-year period immediately following the date of a Change in
Control, or (iv) the termination of the Employment Period by the Executive for
any reason or no reason at all at any time during the one-year period
immediately following the date the Executive receives notice
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of non-renewal from the Company pursuant to Section 3 herein. For purposes of
this Agreement, a "Change in Control" of the Company shall mean:
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) [THIS SECTION INTENTIONALLY LEFT BLANK.]
iii) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, that was not
approved by the Executive Committee, provided that, without
limitation, a Change in Control shall be deemed to have occurred
if the following events occur without the affirmative vote of the
Executive Committee:
a) any "person" (as defined in Sections 13(d) and 14(d)
of the Exchange Act), other than Albert A. Cozzi, Frank
J. Cozzi and Gregory P. Cozzi and their respective heirs,
trusts, estates, personal representatives, legatees and
assigns, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company's then
outstanding securities computed on a fully diluted basis
(assuming the conversion of all outstanding convertible
securities of the Company and the exercise of all options and
warrants which, at the time of determination, are vested and
are exercisable at a price less than the then market price of
the Company's Common Stock),
b) during any period of two (2) consecutive years (not
including any period prior to the execution of this
Agreement), there shall cease to be a majority of the Board of
Directors of the Company comprised as follows: individuals who
at the beginning of the Employment Period constitute the Board
of Directors and any new director(s) whose election by the
Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the Employment Period or whose
election or nomination for election was previously so
approved, or
c) the shareholders of the Company (a) approve a merger
or consolidation of the Company or a subsidiary of the
Company with any other corporation, other than a merger with
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Cozzi Iron & Metal, Inc., and other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or
(b) approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
15. Surrender of Properties. Upon termination of the Executive's
employment with the Company, regardless of the reason therefor, the Executive
shall promptly surrender to the Company all property provided him by the
Company for use in relation to his employment and, in addition, the Executive
shall surrender to the Company any and all sales materials, lists of customers
and prospective customers, price lists, files, records, models, or other
materials and information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations of the Company.
16. Chicago Headquarters. The Company acknowledges that the Executive
shall be based within the City limits of Chicago, Illinois, during the
Employment Period.
17. Severance Pay.
(a) Notwithstanding any other provision of this Agreement, if the
Employment Period is terminated by the Company pursuant to Section 14(a), the
Company shall pay the Executive (i) any accrued but unpaid Salary, prorated
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) a lump-sum severance payment equal to the greater of (A)
the Executive's then-current Salary and Annual Cash Bonus for the Balance of
the Term, or (B) the product of 5.00 multiplied by the Executive's highest
total annual cash compensation (as reported by the Company on Internal Revenue
Service Form W-2) earned by the Executive in any one of the three (3) calendar
years immediately preceding the calendar year in which the termination occurs.
In addition, (i) the Company shall continue all medical, dental and life
insurance benefits at no cost to the Executive for the greater of (A) twelve
(12) months, commencing on the date of termination of the Employment Period, or
(B) the Balance of the Term (the provision by the Company of any such group
health benefits shall not be considered continuation coverage pursuant to
Section 4980B of the Internal Revenue Code of 1986, as amended, and such
continuation coverage shall commence on the date that benefits provided
hereunder cease), and (ii) the ownership of all warrants and options granted to
the Executive by the Company under this Agreement shall be immediately and
fully vested in the Executive and shall remain outstanding and exercisable
until the expiration date of such warrants and options (without regard to any
early termination of such options or warrants resulting from the Executive's
termination of employment). Other than as provided herein, if the Employment
Period is terminated by the Executive pursuant to Section 14(a) or by the
Company as provided
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in Section 14(b) of this Agreement, the Company shall pay to the Executive any
accrued but unpaid Salary, prorated Annual Cash Bonus (determined in accordance
with Section 6(a)) and prorated vacation, and any other amounts accrued but
unpaid as of the date of termination. Any benefit payable pursuant to this
Section 17 shall be paid to the Executive in a lump-sum within five (5) days
after the termination of the Employment Period.
(b) In the event that the Executive becomes entitled to the
severance payments as provided herein, if it is determined that any of
such payments will be subject to the tax or any other similar state or local
excise taxes (the "Excise Tax") imposed by Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the Company shall "gross-up" such
severance payments so that the amount received by the Executive after payment
of such Excise Tax shall be equal to the amount to which the Executive was
entitled prior to application of such Excise Tax.
18. Restrictive Covenants. In addition to any other obligation of the
Executive under any other agreement with the Company, in order to assure that
the Company will realize the benefits of this Agreement and in consideration of
the employment set forth in this Agreement, the Executive agrees that he shall
not during the Employment Period and for a period of thirty-six (36) months
from the termination of the Employment Period; provided, that, in the event the
Employment Period is terminated by the Company pursuant to Section 14(a) on or
before the second anniversary of the Commencement Date, the thirty-six (36)
month period provided herein shall be reduced to a twelve (12) month period;
and provided further, that, in the event the Employment Period is terminated by
the Company pursuant to Section 14(a) after the second anniversary of the
Commencement Date, the thirty-six (36) month period provided herein shall be
reduced to a thirty (30) month period:
(a) directly or indirectly, alone or as a partner, joint venturer,
member, officer, director, employee, consultant, agent, independent contractor,
stockholder or in any other capacity of any company or business, engage in any
business activity in any state in which the Company owns a scrap metal yard or
scrap metal processing facility on the date of termination of such Employment
Period which is directly or indirectly in competition with the Company
Business; provided, however, that, the beneficial ownership of less than 5% of
the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section;
(b) directly or indirectly (i) induce any person which is a
customer of the Company or any subsidiary or affiliate of the Company on
the date of the termination of such Employment Period to patronize any business
directly or indirectly in competition with the Company Business; (ii) canvass,
solicit or accept from any person that is a customer of the Company or any
subsidiary or affiliate of the Company on the date of the termination of the
Employment Period, any such competitive business, or (iii) request or advise
any person that is a customer of the Company Business on the date of the
termination of the Employment Period to withdraw, curtail, or cancel any such
customer's business with the Company or any affiliate or subsidiary of the
Company;
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(c) directly or indirectly employ, or knowingly permit any
company or business directly or indirectly controlled by him, to employ,
any person who was employed by the Company or any subsidiary or affiliate of
the Company on the date of the termination of the Employment Period or within
six months prior to the date of termination of the Employment Period, or in any
manner seek to induce any such person to leave his or her employment;
(d) For purposes of this Agreement, "Company Business" shall mean
scrap iron or scrap metal recycling and/or processing conducted by the
Company or its subsidiaries or affiliates and any other business that the
Company or its subsidiaries or affiliates may be engaged in (other than real
estate development) at the time of the termination of the Employment Period.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(f) The Executive agrees and acknowledges that the restrictions
contained in this Section 18 are reasonable in scope and duration and are
necessary to protect the Company after the Commencement Date. If any provision
of this Section 18 as applied to any party or to any circumstance is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section
will cause irreparable damage to the Company and upon breach of any provision
of this Section, the Company shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the Company may have (including, without
limitation, the right to seek monetary damages).
(g) [THIS SECTION INTENTIONALLY LEFT BLANK.]
19. Confidentiality of Information: Duty of Non-Disclosure. The
Executive acknowledges and agrees that his employment by the Company under this
agreement necessarily involves his understanding of and access to certain trade
secrets and confidential information pertaining to the business of the Company.
Accordingly, the Executive agrees that after the date of this Agreement at all
times, whether during or after the termination of the Employment Period, he
will not, directly or indirectly, without the prior written consent of the
Company, disclose to or use for the benefit of any person, corporation or other
entity, or for himself any and all files, trade secrets or other confidential
information concerning the internal affairs of the Company or its subsidiaries
or affiliates, including, but not limited to, information pertaining to its
clients, services, products, earnings, finances, operations, methods or other
activities; provided, however, that the foregoing shall not apply to
information which is of public record or is generally known, disclosed or
available to the general public or the industry generally. Further, the
Executive agrees that he shall not, directly or indirectly, remove or retain,
without the express prior written
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consent of the Company, and upon termination of this Agreement for any reason
shall return to the Company, any figures, calculations, letters, papers,
records, computer disks, computer print-outs, customer lists, price lists,
other lists, contracts, business plans, forms, manuals, other documents,
instruments, drawings, designs, programs, brochures, sales literature, or any
copies or reproductions thereof, or any information or instruments derived
therefrom, or any other similar information of any type or description, however
such information might be obtained or recorded, arising out of or in any way
relating to the business of the Company or obtained as a result of his
employment by the Company. The Executive acknowledges that all of the
foregoing are proprietary information, and are the exclusive property of the
Company.
20. Enforcement.
(a) Upon presentation of a claim or claims (collectively, "Claims")
arising out of or relating to this Agreement, or the breach hereof, by an
aggrieved party, the other party shall have thirty (30) days in which to make
such inquiries of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine the validity of the Claims. At the
end of such period of investigation, the complained of party shall either pay
the amount of the Claims or the arbitration proceeding described immediately
below shall be invoked.
(b) In the event that the Claims are not settled by the procedure
set forth immediately above, the Claims shall be submitted to arbitration
conducted in accordance with the Commercial Arbitration Rules ("Rules") of the
American Arbitration Association ("AAA") except as amplified or otherwise
varied hereby.
(c) The parties shall submit the dispute to the Chicago regional
office of the AAA and the situs of the arbitration shall be Cook County,
Illinois.
(d) The arbitration shall be conducted by a single arbitrator. The
parties shall appoint the single arbitrator to arbitrate the dispute within ten
(10) business days of the submission of the dispute. In the absence of
agreement as to the identity of the single arbitrator to arbitrate the dispute
within such time, the AAA is authorized to appoint an arbitrator in accordance
with the Rules, except that the arbitrator shall have as his principal place of
business the Chicago metropolitan area.
(e) The single arbitrator selected by the AAA shall be an attorney,
accountant or other professional licensed to practice by the State of Illinois.
(f) Notwithstanding anything in the Rules to the contrary, the
arbitration award shall be made in accordance with the following procedure.
Each party shall, at the commencement of the arbitration hearing, submit an
initial statement of the amount each party proposes be selected by the
arbitrator as the arbitration award ("Settlement Amount"). During the course
of the arbitration, each party may vary its proposed Settlement Amount. At the
end of the arbitration hearing, each party shall submit to the arbitrator its
final Settlement Amount ("Final Settlement Amount"), and the arbitrator shall
be required to select either one or the other Final Settlement Amounts as the
arbitration award without discretion to select any other amount
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as the award. The arbitration award shall be paid within ten (10) business
days after the award has been made, together with interest from the date of
award at the rate of six percent (6%). Judgment upon the award may be entered
in any federal or state court having jurisdiction over the parties and shall be
final and binding.
21. Costs of Enforcement. The Company shall reimburse the Executive
for reasonable attorneys' fees and costs incurred by the Executive in connection
with any claim by the Executive brought hereunder (including but not limited to
all reasonable attorneys' fees and costs incurred by the Executive in
contesting or disputing any termination of the Employment Period, or in seeking
to obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to any
payment or benefit provided hereunder), so long as such claim is brought in
good faith.
22. Competing Interest. During the Employment Period, the Executive
shall not, without the prior written consent of the Company, (i) engage in
any other business activity for gain, profit, or other pecuniary advantage or
(ii) engage in or in any manner be connected or concerned, directly or
indirectly, whether as an officer, director, stockholder, partner, owner,
executive, creditor, or otherwise, with the operation, management, or conduct
of any business, in either case which directly or indirectly competes with the
Company Business. Provided, however, that this Section 22 shall not prohibit
the Executive from owning up to five (5) percent of the publicly traded shares
of any entity.
23. No Duty to Mitigate or Offset. The Executive shall not be
required to mitigate or offset the amount of any payments that the
Executive may receive from the Company as a result of the termination of the
Employment Period. The amounts payable hereunder by the Company as a result of
the termination of the Employment Period shall be considered liquidated damages
and shall not be reduced by any amounts that the Executive earns through other
employment or otherwise, except that the Company's obligation to continue
medical, dental and life insurance benefits pursuant to Section 17 herein,
shall be reduced by the amount of any such benefits provided to the Executive
by any other employer.
24. Indemnification. The Company hereby agrees to indemnify the
Executive against all liabilities, costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any threatened,
pending or completed action, suit or proceeding to which the Executive may be
made a party or may be threatened to be made a party by reason of the
Executive's being or having been a director, officer, employee, or agent of
the Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the fullest extent permitted by
applicable law. The Company shall advance all costs, charges and expenses,
including legal fees, incurred by the Executive in connection with the
Executive's defense of any claim for which the foregoing indemnity may apply.
If it is subsequently determined that the Executive was not entitled to such
indemnification, the Executive will reimburse the Company any amounts advanced
pursuant to the foregoing sentence.
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25. Directors and Officers Insurance. The Executive shall be
entitled to the protection of any insurance policies the Company or any of
its affiliates from time to time maintains for the benefit of its senior
executive officers and directors (or substantially similar policies) respecting
liabilities, costs, charges, and expenses of any type whatsoever incurred or
sustained by the Executive in connection with any action, suit or proceeding to
which the Executive may be made a party or may be threatened to be made a party
by reason of the Executive's being or having been a director, officer, employee
or agent of the Company or serving or having served at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
26. General Provisions.
(a) Goodwill. The Company has invested substantial time and
money in the development of its products, services, territories, advertising
and marketing thereof, soliciting clients and creating goodwill. By accepting
employment with the Company, the Executive acknowledges that the customers are
the customers of the Company, and that any goodwill created by the Executive
belongs to and shall inure to the benefit of the Company.
(b) Notice. Any notice or demand required or permitted hereunder
shall be made in writing (i) either by actual delivery of the notice or
demand into the hands of the party thereunder entitled, or (ii) by the mailing
of the notice or demand in the United States mail, certified or registered
mail, return receipt requested, all postage prepaid and addressed to the party
to whom the notice or demand is to be given at the party's respective address
set forth below, or such other address as the parties may from time to time
designate by written notice as herein provided.
As addressed to the Company:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chairman
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Erhard R. Chorle
15
<PAGE> 16
As addressed to the Executive:
Mr. Gerard M. Jacobs
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
With a copy to:
Thomas V. Skinner, Esq.
Winston & Strawn
33 West Wacker Drive
Chicago, Illinois 60601
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Company unless made in
writing and signed by an officer of the Company duly authorized by the Board of
Directors or upon the Executive unless made in writing and signed by him. The
waiver by either party hereto of the breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by such
party.
(d) Entire Agreement. This Agreement constitutes the entire
Agreement between the parties with respect to the Executive's duties and
compensation as an executive of the Company and shall supersede any and all
prior agreements or understandings between the parties hereto; there are no
representations, warranties, agreements or commitments between the parties
hereto with respect to his employment except as set forth herein. The parties
do hereby terminate that certain Employment Agreement by and between the
Company (formerly known as General Parametrics Corporation) and the Executive
dated April 9, 1996.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Illinois.
(f) Severability. If any provision of this Agreement shall, for
any reason, be held unenforceable by a court of competent jurisdiction, such
provision shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the parties. If
the Agreement continues to reflect the basic intent of the parties, then the
invalidity of such specific provision shall not affect the enforceability of
any other provision herein, and the remaining provisions shall remain in full
force and effect.
(g) Assignment. The Executive may not under any circumstances
delegate any of his rights and obligations hereunder without first
obtaining the prior written consent of the Company. The Company shall cause
this Agreement and all of the Company's rights and
16
<PAGE> 17
obligations hereunder, including without limitation the obligations of the
Company in the event of a termination of employment by the Company pursuant to
Section 14(a), to be assigned and expressly assumed by any successor to all or
substantially all of the business and/or assets of the Company, whether direct
or indirect, by purchase, merger, consolidation or otherwise, including upon a
Change in Control (as defined in Section 14(e)); provided, however, that any
such assignment shall not relieve the Company of its obligations hereunder to
the extent that an assignee does not fulfill such obligations.
(h) Heirs. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designees or, if there is no such
designee, to the Executive's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement 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
By: /s/ Albert A. Cozzi
-----------------------------------
Albert A. Cozzi, Chief Operating
Officer
EXECUTIVE:
/s/ Gerard M. Jacobs
--------------------------------------
Gerard M. Jacobs
17
<PAGE> 18
EXHIBIT "A"
1. Crown Group, Inc.
2. Miss Mimi Corporation
3. GMJ Holdings, Inc.
4. Environmental Waste Funding Corporation and affiliated entities
5. Trailside Capital Corporation
6. North-South Partners
7. Entrepreneurial Capital Management
8. Lonesome Dove Ventures
9. J&J Investment Partnership and affiliated entities
10. Outright Industries and affiliated entities
<PAGE> 1
EXHIBIT 10.10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
APPLICABLE STATE SECURITIES LAWS.
No. Cozzi-7 WARRANT December 1, 1997
To Purchase 350,000 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Gerard M. Jacobs (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 350,000 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $12.00 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant
are exercisable by the Employee or his successors and assigns, in whole or in
part, at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Employee within a reasonable time after the date on
which this Warrant shall have been exercised in accordance with the terms
hereof. All Shares that may be issued upon the exercise of this Warrant shall,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger
or a consolidation of the Company with or into another corporation when the
Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
-----------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
By: /s/ Albert A. Cozzi
-----------------------------------
Albert A. Cozzi, Chief Operating
Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
------------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
------------------------------------
[Name]
- ----------------- ------------------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.11
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-8 WARRANT December 1, 1997
To Purchase 375,000 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Gerard M. Jacobs (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 375,000 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $5.91 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant are
exercisable by the Employee or his successors and assigns, in whole or in part,
at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on which
this Warrant shall have been exercised in accordance with the terms hereof.
All Shares that may be issued upon the exercise of this Warrant shall, upon
such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger or
a consolidation of the Company with or into another corporation when the
Company is not the
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surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
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11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
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IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By:
----------------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
By:
----------------------------------------
Albert A. Cozzi, Chief Operating Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
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NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
----------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
----------------------------
[Name]
- ------------------ ----------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 1st day of
December, 1997, by and between ALBERT A. COZZI (the "Executive") and METAL
MANAGEMENT, INC., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, the Company and the Executive do hereby agree as
follows:
1. Employment and Duties.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to employ the Executive as the President and
Chief Operating Officer of the Company to perform such duties and
responsibilities as are consistent with such positions.
(b) Directorship. Effective upon the closing of the merger of a
subsidiary of the Company and Cozzi Iron & Metal, Inc. (the "Closing"), the
Executive shall become a member of the Company's Board of Directors (the "Board
of Directors"), and thereafter throughout the Employment Period (as hereafter
defined) the Company shall cause the Executive to be nominated for election to
the Board of Directors. Failure of the Company to so nominate the Executive,
or the failure of the stockholders of the Company to elect the Executive to the
Board of Directors following nomination, shall constitute "Good Reason" for the
Executive to resign pursuant to Section 14(e) below and any such resignation
shall be deemed a termination by the Company pursuant to Section 14(a) below.
(c) Executive Committee. Reference is hereby made to that certain
Stockholders' Agreement for Metal Management, Inc. dated December 1, 1997 by
and among T. Benjamin Jennings, Gerard M. Jacobs, the Executive, Frank J.
Cozzi, Gregory P. Cozzi and the Company (the "Stockholders' Agreement"). The
Board of Directors has amended the Bylaws of the Company in order to create an
Executive Committee (the "Executive Committee") of the Board of Directors,
which Executive Committee is authorized to act on behalf of and in the name of
the Board of Directors during the periods between meetings of the full Board of
Directors, including in regard to certain actions specified in Section 1.2 of
the Stockholders' Agreement. The Executive Committee shall consist of the
Chairman of the Board of Directors, the President and Chief Operating Officer
of the Company, and the Chief Executive Officer of the Company, and one or more
other senior company executives chosen by the Executive Committee. As the
President and Chief Operating Officer of the Company, the Executive shall be a
member of the Executive Committee during the Employment Period, and as such the
Executive shall participate
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in all decision-making by the Executive Committee. If for any reason (including
death or disability) the Executive is unable to serve on the Executive
Committee, then Frank J. Cozzi shall be a member of the Executive Committee.
All actions by the Executive Committee shall be by majority vote, excepting,
however, that no action may be taken by the Executive Committee without the
unanimous consent of (i) Albert A. Cozzi or his successor on the Executive
Committee, Frank J. Cozzi, (ii) T. Benjamin Jennings for so long as he is
employed by the Company, and (iii) Gerard M. Jacobs for so long as he is
employed by the Company.
2. Performance. The Executive accepts the employment described in Section
1 above, and agrees to faithfully and diligently perform the duties and
responsibilities described therein. The Executive shall devote time and
attention to matters of the Company such that the Executive's services to the
Company constitute his primary business activity. The Company acknowledges
that the Executive may (i) engage in charitable and community affairs
(including serving on the board of directors or similar management body of any
charitable or community organization), (ii) serve on the board of directors of
or act as a consultant to other companies which are not engaged in a business
that directly or indirectly competes with the Company Business (as defined in
Section 18 below), and (iii) make personal investments.
3. Term. The term of employment under this Agreement shall commence on
the date of the Closing (the "Commencement Date") and shall continue for a
period of five (5) years thereafter (the "Employment Period"); provided,
however, that on each anniversary of the Commencement Date, the Employment
Period shall be automatically extended for an additional year unless at least
sixty (60) days before any such anniversary, either the Executive or the
Company, as the case may be, notifies the other of its desire not to further
extend the Employment Period; and provided, further, that the Employment Period
shall terminate upon the earliest to occur of the events described in Section
14 hereunder. For purposes of this Agreement, "Balance of the Term" shall mean
the period beginning on the date of termination and ending on the date that the
Employment Period would have ended pursuant to this Section 3 due to lapse of
time (assuming no further extensions of the Employment Period beyond those
already approved as of the date of termination), without regard to Section 14.
4. Salary. For all the services to be rendered by the Executive
hereunder, the Company agrees to pay, during the Employment Period, a base
salary ("Salary") at an initial rate of Two Hundred and Seventy-Five Thousand
Dollars ($275,000.00) per Contract Year, payable in the manner and frequency in
which the Company's payroll is customarily handled. For purposes of this
Agreement, "Contract Year" shall mean a one-year period commencing on the
Commencement Date or on any anniversary of the Commencement Date. The Company
may increase the Executive's Salary at any time, or from time to time, during
the Employment Period, provided, however, that the Company may not at any time
reduce the Salary from its then-current level. In no event shall the Salary
paid hereunder with respect to any Contract Year be less than the base salary
paid to Frank J. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs with respect
to such Contract Year, so long as they are then employed by the Company.
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<PAGE> 3
5. Incentive Compensation. In addition to the Executive's Salary, the
Company shall pay to the Executive, during the Employment Period, additional
compensation ("Incentive Compensation") calculated as follows:
(a) Stock Warrants. On the Commencement Date, the Company shall grant
the Executive warrants to purchase three hundred seventy-seven thousand five
hundred eighty-six (377,586) shares of common stock of the Company at an
exercise price of Five Dollars and 91/100 ($5.91) per share and warrants to
purchase three hundred seventy-seven thousand five hundred eighty-six (377,586)
shares of common stock of the Company at an exercise price equal to
seventy-five percent (75%) of the closing price per share of the Company's
common stock on the last trading date prior to the Closing, subject to all
federal and state securities and other laws. All warrants issued pursuant to
this Section 5(a) shall be governed by and subject to all conditions, terms and
restrictions in the actual warrant which is attached hereto as Attachment A and
hereby incorporated by reference.
(b) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(c) Other Stock Terms.
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) The Company represents and warrants to the Executive that the
grant of warrants to purchase shares of common stock of the Company
hereunder shall be an exempt acquisition under Section 16(b) of the
Securities Exchange Act of 1934.
iii) The Executive acknowledges that the Company's common stock is
publicly traded and is subject to various federal and state securities
laws and that the shares acquired upon the exercise of the warrants
(collectively the "Shares") are being issued pursuant to such laws and
agrees that he will comply with any and all applicable laws and
regulations governing the Shares.
iv) The Company shall use its best efforts to file as soon as
practicable, and shall use its best efforts to cause to remain
effective, a registration statement(s) as may be necessary to permit
the Executive to sell in the public market any and all Shares acquired
hereunder upon exercise in the case of the Shares received on exercise
of the warrants, provided, that Executive understands and agrees that
this Section 5(c)iv) shall be subject to any restrictions on transfer
contained in that certain Stockholders' Agreement by and among the
Company, Executive, Frank J. Cozzi, Gregory P. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs, and nothing contained in this Section
5(c)(iv) shall be deemed to impose any obligation upon the Company to
take any action whatsoever that, in
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<PAGE> 4
the opinion of the Executive Committee, would or might delay or hinder
any material transaction involving the Company, including but not
limited to any of the Company's acquisitions or any of the Company's
debt or equity financings, or that would or might be deemed to be a
default or violation of any of the Company's contracts in regard to any
of such transactions or financings, including but not limited to any
"blackout" periods imposed by the Company's underwriters.
(d) Stock-Based Plans. The Executive shall be eligible to participate
in and receive awards under any other stock-based plans of the Company pursuant
to Section 12 below.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
6. Cash Bonus Compensation. The Executive shall be entitled to the
following bonus compensation:
(a) Annual Cash Bonus. On each anniversary of the Commencement Date,
the Executive shall be entitled to a minimum annual cash bonus (the "Annual
Cash Bonus") in an amount equal to twenty-five percent (25%) of his Salary for
the Contract Year then ended, or, in the event the Employment Period is
terminated for any reason during a Contract Year, a prorated amount equal to
twenty-five percent (25%) of the Executive's Salary in such Contract Year
multiplied by a fraction, the numerator of which is the number of calendar days
in which the Executive was employed by the Company during such Contract Year
and the denominator of which is 365. The Company shall pay the Annual Cash
Bonus to the Executive no later than thirty (30) days after the end of such
Contract Year or, in the event the Employment Period is terminated during the
Contract Year, five (5) days after the date the Employment Period is
terminated. In no event shall the Annual Cash Bonus percentage used to
calculate the Executive's Annual Cash Bonus with respect to any Contract Year
be less than the guaranteed annual cash bonus percentage used to calculate any
guaranteed annual cash bonus paid to Frank J. Cozzi, T. Benjamin Jennings and
Gerard M. Jacobs with respect to such Contract Year, so long as they are then
employed by the Company.
(b) Additional Bonus. The Executive shall be eligible to receive
additional cash bonuses pursuant to Section 12 below.
7. Vacation. In accordance with the policies and rules governing the
vacation of other members of the Executive Committee, the Executive shall be
entitled to take vacations with pay, during each year of service under this
Agreement, to be taken during the year at such time or times as may be approved
by the Company. Such vacation shall be at least six (6) weeks, but no less
than the vacation granted Frank J. Cozzi, T. Benjamin Jennings and Gerard M.
Jacobs, so long as they are then employed by the Company. Unless otherwise
established for members of the Executive Committee, unused vacation days shall
not be accumulated from one year to the next.
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<PAGE> 5
8. Sick Leave. In accordance with the policies and rules governing the
sick leave of Frank J. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs, the
Executive shall be allowed paid sick leave during each year of service under
this Agreement. Unless otherwise established for members of the Executive
Committee, unused sick leave shall not be accumulated from one year to the
next.
9. Disability Benefit. If at any time during the Employment Period the
Executive is unable to perform fully his duties hereunder for a period of six
(6) consecutive months by reason of illness, accident, or other physical or
mental disability (as confirmed by competent medical evidence) and such
condition may reasonably be expected to be permanent ("Total Disability"), the
Executive shall be entitled to receive (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)), and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all disability benefits then available to Frank
J. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs, so long as they are then
employed by the Company. In the event there is then no established policy
regarding disability benefits afforded to Frank J. Cozzi, T. Benjamin Jennings
and Gerard M. Jacobs or such benefits afforded to Frank J. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs are less than seventy percent (70%) of the
Executive's then-current Salary and Annual Cash Bonus for the Balance of the
Term, then the Executive shall be entitled to receive periodic payments of
seventy percent (70%) of his then-current Salary and Annual Cash Bonus
(determined pursuant to Section 4 of this Agreement) for the Balance of the
Term. If any dispute regarding the existence of the Executive's Total
Disability arises, each party shall appoint a physician and such physicians
shall jointly appoint a third physician, the decision of any two (2) of such
physicians regarding the existence of Total Disability shall be binding upon
the parties. Notwithstanding the foregoing provision, the amounts payable to
the Executive pursuant to this Section 9 shall be reduced by any amounts
received by the Executive with respect to any such incapacity pursuant to any
insurance policy, plan, or other employee benefit provided to the Executive by
the Company.
10. Death Benefit. In the event of the death of the Executive during the
Employment Period, the Company shall pay (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all death benefits then available to Frank J.
Cozzi, T. Benjamin Jennings and Gerard M. Jacobs. In the event there is then
no established policy regarding death benefits afforded to Frank J. Cozzi, T.
Benjamin Jennings and Gerard M. Jacobs or such benefits afforded Frank J.
Cozzi, T. Benjamin Jennings and Gerard M. Jacobs are less than a lump-sum
payment equal to the Executive's then-current Salary and Annual Cash Bonus
otherwise payable to the Executive for the one-year period immediately
following the Executive's death, then the Company shall pay as a survivor's
benefit a lump-sum amount equal to the Executive's then-current Salary and
Annual Cash Bonus that would otherwise be payable to the Executive pursuant to
Section 4 of this Agreement for the one-year period immediately following the
Executive's death. The benefits payable under this Section 10 shall be paid to
the person or persons designated by the Executive on the form provided by the
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<PAGE> 6
Company or, in the absence of such a designation, as follows: (i) to the
Executive's spouse if she survives him; (ii) if the Executive's spouse fails to
survive the Executive, then in equal shares to the Executive's children who
survive him; or (iii) if neither Executive's spouse nor any child survives the
Executive, then all to the Executive's estate.
11. Insurance. During the Employment Period, the Company shall apply for,
procure and pay for, in the Executive's name and for the Executive's benefit,
with the Executive's designee as the beneficiary, life insurance owned by the
Executive in the following amounts: $1,000,000 through a term life policy and
$1,000,000 through a whole life policy. The Executive shall submit to any
medical or other examination and execute and deliver any application or other
instrument in writing reasonably necessary to effectuate such insurance.
12. Other Compensation, Benefits and Perquisites. The Executive's Salary
shall be as described in Section 4 above; his stock Incentive Compensation
shall be as described in Section 5 above; his Annual Cash Bonus shall be as
described in Section 6(a) above; his vacation shall be as described in Section
7 above; and his sick leave, disability benefit, death benefit and insurance
shall be as described in Sections 8, 9, 10 and 11 above, respectively. In
addition to the aforesaid types of compensation, benefits and perquisites, the
Executive shall be entitled to participate in all other types of compensation,
benefits and perquisites then available to Frank J. Cozzi, T. Benjamin Jennings
and Gerard M. Jacobs, such as, but not limited to: cash bonuses in addition to
guaranteed cash bonuses; stock option plans; 401-K plans; welfare plans;
business travel policies; car allowance; medical insurance; dental insurance;
dues, fees and costs (including travel) associated with membership and
participation in professional, educational and other clubs and organizations,
and attendance at professional, educational and other programs, presentations,
workshops, seminars and conventions. The Executive's participation in all such
other types of compensation, benefits and perquisites shall be identical to
those of Frank J. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs, excepting
only that the amount of the Executive's cash bonus (if any) in addition to his
Annual Cash Bonus, and also the level of the Executive's participation in stock
option grants and stock option plans (if any), shall be determined and granted
by the Board of Directors from time to time based upon the Executive's
responsibilities and performance, and shall not necessarily be in the same
amounts or levels as are received by Frank J. Cozzi, T. Benjamin Jennings and
Gerard M. Jacobs. Without limiting the generality of the foregoing, it is
expressly agreed: that the Executive's car allowance from the Company shall
never be less than One Thousand Dollars ($1,000) per month, provided that any
portion of such car allowance that is not being used to pay for the Executive's
car shall be paid by the Company to the Executive as additional compensation in
regard to such month; that the Executive shall also be fully reimbursed by the
Company for all gas, oil, repairs, maintenance and insurance in regard to such
car; and that the Company shall supply and pay all of the costs, fees and
charges in regard to a Company phone at the Executive's home office (if any), a
car phone, and a cellular phone. The Executive understands and agrees that the
Executive Committee shall be permitted from time to time to establish an annual
dollar limitation upon the Company's expenditures in regard to dues, fees and
costs (including travel) associated with membership and participation in
professional, educational and other clubs and organizations, and attendance at
professional, educational and other programs, presentations, workshops,
seminars and conventions, other than
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<PAGE> 7
the Institute of Scrap Recycling Industries (ISRI), incurred by any member of
the Executive Committee, which limitation shall be identical with respect to
each member of the Executive Committee: provided that so long as the Company's
common stock as of the first trading day of each fiscal year of the Company is
trading at or above Ten Dollars ($10.00) per share, such annual limitation for
such year shall not be less than Twenty Thousand Dollars ($20,000.00) per
member of the Executive Committee.
13. Business Expense Reimbursement. The Company shall reimburse the
Executive for the reasonable, ordinary, and necessary business expenses
incurred by him in connection with the performance of his duties hereunder,
including, but not limited to, ordinary and necessary travel, entertainment and
phone expenses. The Executive shall provide the Company with an accounting of
his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Company. The Executive shall provide the Company with such
other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service regulations or other
requirements. All such reimbursements shall be payable by the Company to the
Executive within a reasonable time after receipt by the Company of appropriate
documentation thereof; provided, however, the Company shall have no obligation
to reimburse any expenses for which appropriate and customary back-up
documentation is not provided within ninety (90) days following accrual of the
obligation in question.
14. Termination.
(a) Unilateral Termination. The Employment Period may be terminated by
either party at any time by written notice of termination given to the other
party at least ninety (90) days in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Company shall have the option to
terminate the Employment Period, effective upon written notice of such
termination to the Executive, for Just Cause as determined by the Executive
Committee. For purposes of this Agreement, the term "Just Cause" shall mean
the occurrence of any one or more of the following events:
i) The willful and continued failure by the Executive to
substantially perform his duties with the Company (other than any such
failure resulting from termination by the Company pursuant to Section
14(a), Total Disability, retirement or death) after a demand for
substantial performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the Executive
has not substantially performed his duties, and the Executive fails to
resume substantial performance of his duties on a continuous basis
within fourteen (14) days of receiving such demand; provided, that if
it is not reasonably possible for the Executive to resume such
substantial performance within such fourteen (14) days, then such
fourteen (14) day time period shall be
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extended to that minimum period of time during which it is reasonably
possible for the Executive to resume such substantial performance;
ii) The willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise and the Executive's failure to cease engaging in such conduct
within fourteen (14) days after a demand for such cessation is
delivered to the Executive by the Company that specifically identifies
such conduct; provided, however, that if it is not reasonably possible
for the Executive to cease such conduct within such fourteen (14) days,
then such fourteen (14) day time period shall be extended to that
minimum period of time during which it is reasonably possible for the
Executive to cease such conduct; or
iii) The Executive's conviction of a felony or a misdemeanor which
materially impairs the Executive's ability substantially to perform his
duties with the Company.
For purposes of this subsection (b), an act, or failure to act, on the
Executive's part, shall not be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interest of the Company.
(c) Termination Upon Death. The Employment Period shall automatically
terminate upon the death of the Executive, without further action by the
Company.
(d) Termination Upon Disability. The Employment Period shall terminate
thirty days after the Company notifies the Executive of a determination of
Total Disability (as defined above) of the Executive, provided the Executive
does not dispute such determination as provided in Section 9 hereof, in which
case the date of termination for Total Disability shall be the date the
Executive is determined to have a Total Disability pursuant to Section 9
hereof.
(e) Termination for Good Reason. The Executive shall have the right to
resign for Good Reason (as defined below) and any such resignation shall be
deemed a termination by the Company pursuant to Section 14(a). For purposes of
this Agreement, "Good Reason" shall mean (i) any material breach by the Company
of its obligations hereunder, including without limitation any material breach
of the Company's obligations under Sections 1(b) or 1(c) above, which is not
cured within fourteen (14) days of written notice from the Executive to the
Company describing such breach, (ii) any transfer of the Executive's principal
work location to a location outside the City limits of Chicago, Illinois, (iii)
the termination of the Employment Period by the Executive for any reason or no
reason at all at any time during the one-year period immediately following the
date of a Change in Control, or (iv) the termination of the Employment Period
by the Executive for any reason or no reason at all at any time during the
one-year period immediately following the date the Executive receives notice of
non-renewal
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<PAGE> 9
from the Company pursuant to Section 3 herein. For purposes of this Agreement,
a "Change in Control" of the Company shall mean:
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) [THIS SECTION INTENTIONALLY LEFT BLANK.]
iii) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting
requirement, that was not approved by the Executive
Committee, provided that, without limitation, a Change in
Control shall be deemed to have occurred if the following
events occur without the affirmative vote of the Executive
Committee:
a) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act), other than Albert A. Cozzi,
Frank J. Cozzi and Gregory P. Cozzi and their
respective heirs, trusts, estates, personal
representatives, legatees and assigns, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent
(30%) or more of the combined voting power of the
Company's then outstanding securities computed on a
fully diluted basis (assuming the conversion of all
outstanding convertible securities of the Company and
the exercise of all options and warrants which, at the
time of determination, are vested and are exercisable
at a price less than the then market price of the
Company's Common Stock),
b) during any period of two (2) consecutive years
(not including any period prior to the execution of
this Agreement), there shall cease to be a majority of
the Board of Directors of the Company comprised as
follows: individuals who at the beginning of the
Employment Period constitute the Board of Directors and
any new director(s) whose election by the Board of
Directors or nomination for election by the Company's
shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the
Employment Period or whose election or nomination for
election was previously so approved, or
c) the shareholders of the Company (a) approve a
merger or consolidation of the Company or a subsidiary
of the
9
<PAGE> 10
Company with any other corporation, other than a merger
with Cozzi Iron & Metal, Inc., and other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the
voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or (b) approve a plan of complete
liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially
all the Company's assets.
15. Surrender of Properties. Upon termination of the Executive's
employment with the Company, regardless of the reason therefor, the Executive
shall promptly surrender to the Company all property provided him by the
Company for use in relation to his employment and, in addition, the Executive
shall surrender to the Company any and all sales materials, lists of customers
and prospective customers, price lists, files, records, models, or other
materials and information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations of the Company.
16. Chicago Headquarters. The Company acknowledges that the Executive
shall be based within the City limits of Chicago, Illinois, during the
Employment Period.
17. Severance Pay.
(a) Notwithstanding any other provision of this Agreement, if the
Employment Period is terminated by the Company pursuant to Section 14(a), the
Company shall pay the Executive (i) any accrued but unpaid Salary, prorated
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) a lump-sum severance payment equal to the greater of (A)
the Executive's then-current Salary and Annual Cash Bonus for the Balance of
the Term, or (B) the product of 5.00 multiplied by the Executive's highest
total annual cash compensation (as reported by the Company on Internal Revenue
Service Form W-2) earned by the Executive in any one of the three (3) calendar
years immediately preceding the calendar year in which the termination occurs.
In addition, (i) the Company shall continue all medical, dental and life
insurance benefits at no cost to the Executive for the greater of (A) twelve
(12) months, commencing on the date of termination of the Employment Period, or
(B) the Balance of the Term (the provision by the Company of any such group
health benefits shall not be considered continuation coverage pursuant to
Section 4980B of the Internal Revenue Code of 1986, as amended, and such
continuation coverage shall commence on the date that benefits provided
hereunder cease), and (ii) the ownership of all warrants and options granted to
the Executive by the Company under this Agreement shall be immediately and
fully vested in the Executive and shall remain outstanding and exercisable
until the expiration date of such warrants and options (without regard to any
early termination of such options or warrants resulting from the
10
<PAGE> 11
Executive's termination of employment). Other than as provided herein, if the
Employment Period is terminated by the Executive pursuant to Section 14(a) or
by the Company as provided in Section 14(b) of this Agreement, the Company
shall pay to the Executive any accrued but unpaid Salary, prorated Annual Cash
Bonus (determined in accordance with Section 6(a)) and prorated vacation, and
any other amounts accrued but unpaid as of the date of termination. Any
benefit payable pursuant to this Section 17 shall be paid to the Executive in a
lump-sum within five (5) days after the termination of the Employment Period.
(b) In the event that the Executive becomes entitled to the severance
payments as provided herein, if it is determined that any of such payments will
be subject to the tax or any other similar state or local excise taxes (the
"Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the Company shall "gross-up" such severance payments so
that the amount received by the Executive after payment of such Excise Tax
shall be equal to the amount to which the Executive was entitled prior to
application of such Excise Tax.
18. Restrictive Covenants. In addition to any other obligation of the
Executive under any other agreement with the Company, in order to assure that
the Company will realize the benefits of this Agreement and in consideration of
the employment set forth in this Agreement, the Executive agrees that he shall
not during the Employment Period and for a period of thirty-six (36) months
from the termination of the Employment Period; provided, that, in the event the
Employment Period is terminated by the Company pursuant to Section 14(a) on or
before the second anniversary of the Commencement Date, the thirty-six (36)
month period provided herein shall be reduced to a twelve (12) month period;
and provided further, that, in the event the Employment Period is terminated by
the Company pursuant to Section 14(a) after the second anniversary of the
Commencement Date, the thirty-six (36) month period provided herein shall be
reduced to a thirty (30) month period:
(a) directly or indirectly, alone or as a partner, joint venturer,
member, officer, director, employee, consultant, agent, independent contractor,
stockholder or in any other capacity of any company or business, engage in any
business activity in any state in which the Company owns a scrap metal yard or
scrap metal processing facility on the date of termination of such Employment
Period which is directly or indirectly in competition with the Company
Business; provided, however, that, the beneficial ownership of less than 5% of
the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section;
(b) directly or indirectly (i) induce any person which is a customer of
the Company or any subsidiary or affiliate of the Company on the date of the
termination of such Employment Period to patronize any business directly or
indirectly in competition with the Company Business; (ii) canvass, solicit or
accept from any person that is a customer of the Company or any subsidiary or
affiliate of the Company on the date of the termination of the Employment
Period, any such competitive business, or (iii) request or advise any person
that is
11
<PAGE> 12
a customer of the Company Business on the date of the termination of the
Employment Period to withdraw, curtail, or cancel any such customer's business
with the Company or any affiliate or subsidiary of the Company;
(c) directly or indirectly employ, or knowingly permit any company or
business directly or indirectly controlled by him, to employ, any person who
was employed by the Company or any subsidiary or affiliate of the Company on
the date of the termination of the Employment Period or within six months prior
to the date of termination of the Employment Period, or in any manner seek to
induce any such person to leave his or her employment;
(d) For purposes of this Agreement, "Company Business" shall mean scrap
iron or scrap metal recycling and/or processing conducted by the Company or its
subsidiaries or affiliates and any other business that the Company or its
subsidiaries or affiliates may be engaged in (other than real estate
development) at the time of the termination of the Employment Period.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(f) The Executive agrees and acknowledges that the restrictions
contained in this Section 18 are reasonable in scope and duration and are
necessary to protect the Company after the Commencement Date. If any provision
of this Section 18 as applied to any party or to any circumstance is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section
will cause irreparable damage to the Company and upon breach of any provision
of this Section, the Company shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the Company may have (including, without
limitation, the right to seek monetary damages).
(g) [THIS SECTION INTENTIONALLY LEFT BLANK.]
19. Confidentiality of Information: Duty of Non-Disclosure. The
Executive acknowledges and agrees that his employment by the Company under this
agreement necessarily involves his understanding of and access to certain trade
secrets and confidential information pertaining to the business of the Company.
Accordingly, the Executive agrees that after the date of this Agreement at all
times, whether during or after the termination of the Employment Period, he
will not, directly or indirectly, without the prior written consent of the
Company, disclose to or use for the benefit of any person, corporation or other
entity, or for himself any and all files, trade secrets or other confidential
information concerning the internal affairs of the Company or its subsidiaries
or affiliates, including, but not limited to, information pertaining to its
clients,
12
<PAGE> 13
services, products, earnings, finances, operations, methods or other
activities; provided, however, that the foregoing shall not apply to
information which is of public record or is generally known, disclosed or
available to the general public or the industry generally. Further, the
Executive agrees that he shall not, directly or indirectly, remove or retain,
without the express prior written consent of the Company, and upon termination
of this Agreement for any reason shall return to the Company, any figures,
calculations, letters, papers, records, computer disks, computer print-outs,
customer lists, price lists, other lists, contracts, business plans, forms,
manuals, other documents, instruments, drawings, designs, programs, brochures,
sales literature, or any copies or reproductions thereof, or any information or
instruments derived therefrom, or any other similar information of any type or
description, however such information might be obtained or recorded, arising
out of or in any way relating to the business of the Company or obtained as a
result of his employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the exclusive property of
the Company.
20. Enforcement.
(a) Upon presentation of a claim or claims (collectively, "Claims")
arising out of or relating to this Agreement, or the breach hereof, by an
aggrieved party, the other party shall have thirty (30) days in which to make
such inquiries of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine the validity of the Claims. At the
end of such period of investigation, the complained of party shall either pay
the amount of the Claims or the arbitration proceeding described immediately
below shall be invoked.
(b) In the event that the Claims are not settled by the procedure set
forth immediately above, the Claims shall be submitted to arbitration conducted
in accordance with the Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise varied hereby.
(c) The parties shall submit the dispute to the Chicago regional office
of the AAA and the situs of the arbitration shall be Cook County, Illinois.
(d) The arbitration shall be conducted by a single arbitrator. The
parties shall appoint the single arbitrator to arbitrate the dispute within ten
(10) business days of the submission of the dispute. In the absence of
agreement as to the identity of the single arbitrator to arbitrate the dispute
within such time, the AAA is authorized to appoint an arbitrator in accordance
with the Rules, except that the arbitrator shall have as his principal place of
business the Chicago metropolitan area.
(e) The single arbitrator selected by the AAA shall be an attorney,
accountant or other professional licensed to practice by the State of Illinois.
(f) Notwithstanding anything in the Rules to the contrary, the
arbitration award shall be made in accordance with the following procedure.
Each party shall, at the commencement of the arbitration hearing, submit an
initial statement of the amount each party
13
<PAGE> 14
proposes be selected by the arbitrator as the arbitration award ("Settlement
Amount"). During the course of the arbitration, each party may vary its
proposed Settlement Amount. At the end of the arbitration hearing, each party
shall submit to the arbitrator its final Settlement Amount ("Final Settlement
Amount"), and the arbitrator shall be required to select either one or the
other Final Settlement Amounts as the arbitration award without discretion to
select any other amount as the award. The arbitration award shall be paid
within ten (10) business days after the award has been made, together with
interest from the date of award at the rate of six percent (6%). Judgment upon
the award may be entered in any federal or state court having jurisdiction over
the parties and shall be final and binding.
21. Costs of Enforcement. The Company shall reimburse the Executive for
reasonable attorneys' fees and costs incurred by the Executive in connection
with any claim by the Executive brought hereunder (including but not limited to
all reasonable attorneys' fees and costs incurred by the Executive in
contesting or disputing any termination of the Employment Period, or in seeking
to obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to any
payment or benefit provided hereunder), so long as such claim is brought in
good faith.
22. Competing Interest. During the Employment Period, the Executive shall
not, without the prior written consent of the Company, (i) engage in any other
business activity for gain, profit, or other pecuniary advantage or (ii) engage
in or in any manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive, creditor, or
otherwise, with the operation, management, or conduct of any business, in
either case which directly or indirectly competes with the Company Business.
Provided, however, that this Section 22 shall not prohibit the Executive from
owning up to five (5) percent of the publicly traded shares of any entity.
23. No Duty to Mitigate or Offset. The Executive shall not be required to
mitigate or offset the amount of any payments that the Executive may receive
from the Company as a result of the termination of the Employment Period. The
amounts payable hereunder by the Company as a result of the termination of the
Employment Period shall be considered liquidated damages and shall not be
reduced by any amounts that the Executive earns through other employment or
otherwise, except that the Company's obligation to continue medical, dental and
life insurance benefits pursuant to Section 17 herein, shall be reduced by the
amount of any such benefits provided to the Executive by any other employer.
24. Indemnification. The Company hereby agrees to indemnify the
Executive against all liabilities, costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any threatened,
pending or completed action, suit or proceeding to which the Executive may be
made a party or may be threatened to be made a party by reason of the
Executive's being or having been a director, officer, employee, or agent of the
Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the fullest extent permitted by
applicable law. The Company shall advance all costs, charges and expenses,
14
<PAGE> 15
including legal fees, incurred by the Executive in connection with the
Executive's defense of any claim for which the foregoing indemnity may apply.
If it is subsequently determined that the Executive was not entitled to such
indemnification, the Executive will reimburse the Company any amounts advanced
pursuant to the foregoing sentence.
25. Directors and Officers Insurance. The Executive shall be entitled to
the protection of any insurance policies the Company or any of its affiliates
from time to time maintains for the benefit of its senior executive officers
and directors (or substantially similar policies) respecting liabilities,
costs, charges, and expenses of any type whatsoever incurred or sustained by
the Executive in connection with any action, suit or proceeding to which the
Executive may be made a party or may be threatened to be made a party by reason
of the Executive's being or having been a director, officer, employee or agent
of the Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
26. General Provisions.
(a) Goodwill. The Company has invested substantial time and money in
the development of its products, services, territories, advertising and
marketing thereof, soliciting clients and creating goodwill. By accepting
employment with the Company, the Executive acknowledges that the customers are
the customers of the Company, and that any goodwill created by the Executive
belongs to and shall inure to the benefit of the Company.
(b) Notice. Any notice or demand required or permitted hereunder shall
be made in writing (i) either by actual delivery of the notice or demand into
the hands of the party thereunder entitled, or (ii) by the mailing of the
notice or demand in the United States mail, certified or registered mail,
return receipt requested, all postage prepaid and addressed to the party to
whom the notice or demand is to be given at the party's respective address set
forth below, or such other address as the parties may from time to time
designate by written notice as herein provided.
As addressed to the Company:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chief Executive Officer
15
<PAGE> 16
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Erhard R. Chorle
As addressed to the Executive:
Mr. Albert A. Cozzi
2232 South Blue Island Avenue
Chicago, Illinois 60608
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: M. Finley Maxson
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Company unless made in writing and
signed by an officer of the Company duly authorized by the Board of Directors
or upon the Executive unless made in writing and signed by him. The waiver by
either party hereto of the breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by such party.
(d) Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the Executive's duties and compensation as
an executive of the Company and shall supersede any and all prior agreements or
understandings between the parties hereto; there are no representations,
warranties, agreements or commitments between the parties hereto with respect
to his employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.
(f) Severability. If any provision of this Agreement shall, for any
reason, be held unenforceable by a court of competent jurisdiction, such
provision shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the parties. If
the Agreement continues to reflect the basic intent of the parties, then the
16
<PAGE> 17
invalidity of such specific provision shall not affect the enforceability of
any other provision herein, and the remaining provisions shall remain in full
force and effect.
(g) Assignment. The Executive may not under any circumstances delegate
any of his rights and obligations hereunder without first obtaining the prior
written consent of the Company. The Company shall cause this Agreement and all
of the Company's rights and obligations hereunder, including without limitation
the obligations of the Company in the event of a termination of employment by
the Company pursuant to Section 14(a), to be assigned and expressly assumed by
any successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation or
otherwise, including upon a Change in Control (as defined in Section 14(e));
provided, however, that any such assignment shall not relieve the Company of
its obligations hereunder to the extent that an assignee does not fulfill such
obligations.
(h) Heirs. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designees or, if there is no such
designee, to the Executive's estate.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
----------------------------------------
Gerard M. Jacobs, President and Chief
Executive Officer
By: /s/ T. Benjamin Jennings
----------------------------------------
T. Benjamin Jennings, Chairman and Chief
Development Officer
EXECUTIVE:
/s/ ALBERT A. COZZI
---------------------------------------------
ALBERT A. COZZI
18
<PAGE> 1
EXHIBIT 10.13
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-1 WARRANT December 1, 1997
To Purchase 377,586 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Albert A. Cozzi (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 377,586 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $5.91 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant are
exercisable by the Employee or his successors and assigns, in whole or in part,
at any time, or from time to time, prior to the Expiration Time by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on which
this Warrant shall have been exercised in accordance with the terms hereof.
All Shares that may be issued upon the exercise of this Warrant shall, upon
such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger or
a consolidation of the Company with or into another corporation when the
Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
------------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
-------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
-------------------------
[Name]
- ----------------- -------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.14
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-4 WARRANT December 1, 1997
To Purchase 377,586 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Albert A. Cozzi (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 377,586 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $15.84 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant are
exercisable by the Employee or his successors and assigns, in whole or in part,
at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on which
this Warrant shall have been exercised in accordance with the terms hereof.
All Shares that may be issued upon the exercise of this Warrant shall, upon
such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger or
a consolidation of the Company with or into another corporation when the
Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
------------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
-------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
-------------------------
[Name]
- ------------------ -------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 1st day of
December, 1997, by and between FRANK J. COZZI (the "Executive") and METAL
MANAGEMENT, INC., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, the Company and the Executive do hereby agree as
follows:
1. Employment and Duties.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to employ the Executive as a Vice-President of
the Company to perform such duties and responsibilities as are consistent with
such positions.
(b) Directorship. Effective upon the closing of the merger of a
subsidiary of the Company and Cozzi Iron & Metal, Inc. (the "Closing"), the
Executive shall become a member of the Company's Board of Directors (the "Board
of Directors"), and thereafter throughout the Employment Period (as hereafter
defined) the Company shall cause the Executive to be nominated for election to
the Board of Directors. Failure of the Company to so nominate the Executive,
or the failure of the stockholders of the Company to elect the Executive to the
Board of Directors following nomination, shall constitute "Good Reason" for the
Executive to resign pursuant to Section 14(e) below and any such resignation
shall be deemed a termination by the Company pursuant to Section 14(a) below.
(c) Executive Committee. Reference is hereby made to that certain
Stockholders' Agreement for Metal Management, Inc. dated December 1, 1997 by
and among T. Benjamin Jennings, Gerard M. Jacobs, the Executive, Albert A.
Cozzi, Gregory P. Cozzi and the Company (the "Stockholders' Agreement"). The
Board of Directors has amended the Bylaws of the Company in order to create an
Executive Committee (the "Executive Committee") of the Board of Directors,
which Executive Committee is authorized to act on behalf of and in the name of
the Board of Directors during the periods between meetings of the full Board of
Directors, including in regard to certain actions specified in Section 1.2 of
the Stockholders' Agreement. The Executive Committee shall consist of the
Chairman of the Board of Directors, the President and Chief Operating Officer
of the Company, and the Chief Executive Officer of the Company, and one or more
other senior company executives chosen by the Executive Committee. If for any
reason (including death or disability) Albert A. Cozzi, as the President and
Chief Operating Officer of the Company, is unable to serve on the Executive
Committee, then the Executive shall be a member of the Executive Committee. All
actions by the Executive Committee shall be by majority vote, excepting,
however, that no action may be taken by the Executive Committee
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without the unanimous consent of (i) Albert A. Cozzi or his successor on the
Executive Committee, Frank J. Cozzi, (ii) T. Benjamin Jennings for so long as
he is employed by the Company, and (iii) Gerard M. Jacobs for so long as he is
employed by the Company.
2. Performance. The Executive accepts the employment described in Section
1 above, and agrees to faithfully and diligently perform the duties and
responsibilities described therein. The Executive shall devote time and
attention to matters of the Company such that the Executive's services to the
Company constitute his primary business activity. The Company acknowledges
that the Executive may (i) engage in charitable and community affairs
(including serving on the board of directors or similar management body of any
charitable or community organization), (ii) serve on the board of directors of
or act as a consultant to other companies which are not engaged in a business
that directly or indirectly competes with the Company Business (as defined in
Section 18 below), and (iii) make personal investments. In addition, the
Company and the Executive acknowledge that Executive is a shareholder, officer
and director of F&A Enterprises, Inc., which is involved in the printing
business, and that such shall not violate the terms of this Section, provided
that it does not in any way interfere with the performance of his duties and
responsibilities hereunder.
3. Term. The term of employment under this Agreement shall commence on
the date of the Closing (the "Commencement Date") and shall continue for a
period of five (5) years thereafter (the "Employment Period"); provided,
however, that on each anniversary of the Commencement Date, the Employment
Period shall be automatically extended for an additional year unless at least
sixty (60) days before any such anniversary, either the Executive or the
Company, as the case may be, notifies the other of its desire not to further
extend the Employment Period; and provided, further, that the Employment Period
shall terminate upon the earliest to occur of the events described in Section
14 hereunder. For purposes of this Agreement, "Balance of the Term" shall mean
the period beginning on the date of termination and ending on the date that the
Employment Period would have ended pursuant to this Section 3 due to lapse of
time (assuming no further extensions of the Employment Period beyond those
already approved as of the date of termination), without regard to Section 14.
4. Salary. For all the services to be rendered by the Executive
hereunder, the Company agrees to pay, during the Employment Period, a base
salary ("Salary") at an initial rate of Two Hundred and Seventy-Five Thousand
Dollars ($275,000.00) per Contract Year, payable in the manner and frequency in
which the Company's payroll is customarily handled. For purposes of this
Agreement, "Contract Year" shall mean a one-year period commencing on the
Commencement Date or on any anniversary of the Commencement Date. The Company
may increase the Executive's Salary at any time, or from time to time, during
the Employment Period, provided, however, that the Company may not at any time
reduce the Salary from its then-current level. In no event shall the Salary
paid hereunder with respect to any Contract Year be less than the base salary
paid to Albert A. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs with respect
to such Contract Year, so long as they are then employed by the Company.
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5. Incentive Compensation. In addition to the Executive's Salary, the
Company shall pay to the Executive, during the Employment Period, additional
compensation ("Incentive Compensation") calculated as follows:
(a) Stock Warrants. On the Commencement Date, the Company shall grant
the Executive warrants to purchase two hundred ninety-one thousand three
hundred eighty (291,380) shares of common stock of the Company at an exercise
price of Five Dollars and 91/100 ($5.91) per share and warrants to purchase two
hundred ninety-one thousand three hundred eighty (291,380) shares of common
stock of the Company at an exercise price equal to seventy-five percent (75%)
of the closing price per share of the Company's common stock on the last
trading date prior to the Closing, subject to all federal and state securities
and other laws. All warrants issued pursuant to this Section 5(a) shall be
governed by and subject to all conditions, terms and restrictions in the actual
warrant which is attached hereto as Attachment A and hereby incorporated by
reference.
(b) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(c) Other Stock Terms.
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) The Company represents and warrants to the Executive that
the grant of warrants to purchase shares of common stock of the Company
hereunder shall be an exempt acquisition under Section 16(b) of the
Securities Exchange Act of 1934.
iii) The Executive acknowledges that the Company's common stock
is publicly traded and is subject to various federal and state
securities laws and that the shares acquired upon the exercise of the
warrants (collectively the "Shares") are being issued pursuant to such
laws and agrees that he will comply with any and all applicable laws
and regulations governing the Shares.
iv) The Company shall use its best efforts to file as soon as
practicable, and shall use its best efforts to cause to remain
effective, a registration statement(s) as may be necessary to permit
the Executive to sell in the public market any and all Shares acquired
hereunder upon exercise in the case of the Shares received on exercise
of the warrants, provided, that Executive understands and agrees that
this Section 5(c)iv) shall be subject to any restrictions on transfer
contained in that certain Stockholders' Agreement by and among the
Company, Executive, Albert A. Cozzi, Gregory P. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs, and nothing contained in this Section
5(c)(iv) shall be deemed to impose any obligation upon the Company to
take any action whatsoever
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that, in the opinion of the Executive Committee, would or might delay
or hinder any material transaction involving the Company, including but
not limited to any of the Company's acquisitions or any of the
Company's debt or equity financings, or that would or might be deemed
to be a default or violation of any of the Company's contracts in
regard to any of such transactions or financings, including but not
limited to any "blackout" periods imposed by the Company's
underwriters.
(d) Stock-Based Plans. The Executive shall be eligible to participate
in and receive awards under any other stock-based plans of the Company pursuant
to Section 12 below.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
6. Cash Bonus Compensation. The Executive shall be entitled to the
following bonus compensation:
(a) Annual Cash Bonus. On each anniversary of the Commencement Date,
the Executive shall be entitled to a minimum annual cash bonus (the "Annual Cash
Bonus") in an amount equal to twenty-five percent (25%) of his Salary for the
Contract Year then ended, or, in the event the Employment Period is terminated
for any reason during a Contract Year, a prorated amount equal to twenty-five
percent (25%) of the Executive's Salary in such Contract Year multiplied by a
fraction, the numerator of which is the number of calendar days in which the
Executive was employed by the Company during such Contract Year and the
denominator of which is 365. The Company shall pay the Annual Cash Bonus to
the Executive no later than thirty (30) days after the end of such Contract
Year or, in the event the Employment Period is terminated during the Contract
Year, five (5) days after the date the Employment Period is terminated. In no
event shall the Annual Cash Bonus percentage used to calculate the Executive's
Annual Cash Bonus with respect to any Contract Year be less than the guaranteed
annual cash bonus percentage used to calculate any guaranteed annual cash bonus
paid to Albert A. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs with respect
to such Contract Year, so long as they are then employed by the Company.
(b) Additional Bonus. The Executive shall be eligible to receive
additional cash bonuses pursuant to Section 12 below.
7. Vacation. In accordance with the policies and rules governing the
vacation of other members of the Executive Committee, the Executive shall be
entitled to take vacations with pay, during each year of service under this
Agreement, to be taken during the year at such time or times as may be approved
by the Company. Such vacation shall be at least six (6) weeks, but no less
than the vacation granted Albert A. Cozzi, T. Benjamin Jennings and Gerard M.
Jacobs, so long as they are then employed by the Company. Unless otherwise
established for members of the Executive Committee, unused vacation days shall
not be accumulated from one year to the next.
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8. Sick Leave. In accordance with the policies and rules governing the
sick leave of Albert A. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs, the
Executive shall be allowed paid sick leave during each year of service under
this Agreement. Unless otherwise established for members of the Executive
Committee, unused sick leave shall not be accumulated from one year to the
next.
9. Disability Benefit. If at any time during the Employment Period the
Executive is unable to perform fully his duties hereunder for a period of six
(6) consecutive months by reason of illness, accident, or other physical or
mental disability (as confirmed by competent medical evidence) and such
condition may reasonably be expected to be permanent ("Total Disability"), the
Executive shall be entitled to receive (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)), and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all disability benefits then available to Albert
A. Cozzi, T. Benjamin Jennings and Gerard M. Jacobs, so long as they are then
employed by the Company. In the event there is then no established policy
regarding disability benefits afforded to Albert A. Cozzi, T. Benjamin Jennings
and Gerard M. Jacobs or such benefits afforded to Albert A. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs are less than seventy percent (70%) of the
Executive's then-current Salary and Annual Cash Bonus for the Balance of the
Term, then the Executive shall be entitled to receive periodic payments of
seventy percent (70%) of his then-current Salary and Annual Cash Bonus
(determined pursuant to Section 4 of this Agreement) for the Balance of the
Term. If any dispute regarding the existence of the Executive's Total
Disability arises, each party shall appoint a physician and such physicians
shall jointly appoint a third physician, the decision of any two (2) of such
physicians regarding the existence of Total Disability shall be binding upon
the parties. Notwithstanding the foregoing provision, the amounts payable to
the Executive pursuant to this Section 9 shall be reduced by any amounts
received by the Executive with respect to any such incapacity pursuant to any
insurance policy, plan, or other employee benefit provided to the Executive by
the Company.
10. Death Benefit. In the event of the death of the Executive during the
Employment Period, the Company shall pay (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all death benefits then available to Albert A.
Cozzi, T. Benjamin Jennings and Gerard M. Jacobs. In the event there is then
no established policy regarding death benefits afforded to Albert A. Cozzi, T.
Benjamin Jennings and Gerard M. Jacobs or such benefits afforded Albert A.
Cozzi, T. Benjamin Jennings and Gerard M. Jacobs are less than a lump-sum
payment equal to the Executive's then-current Salary and Annual Cash Bonus
otherwise payable to the Executive for the one-year period immediately
following the Executive's death, then the Company shall pay as a survivor's
benefit a lump-sum amount equal to the Executive's then-current Salary and
Annual Cash Bonus that would otherwise be payable to the Executive pursuant to
Section 4 of this Agreement for the one-year period immediately following the
Executive's death. The benefits payable under this Section 10 shall be paid to
the person or persons designated by the Executive on the form provided by the
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Company or, in the absence of such a designation, as follows: (i) to the
Executive's spouse if she survives him; (ii) if the Executive's spouse fails to
survive the Executive, then in equal shares to the Executive's children who
survive him; or (iii) if neither Executive's spouse nor any child survives the
Executive, then all to the Executive's estate.
11. Insurance. During the Employment Period, the Company shall apply for,
procure and pay for, in the Executive's name and for the Executive's benefit,
with the Executive's designee as the beneficiary, life insurance owned by the
Executive in the following amounts: $1,000,000 through a term life policy and
$1,000,000 through a whole life policy. The Executive shall submit to any
medical or other examination and execute and deliver any application or other
instrument in writing reasonably necessary to effectuate such insurance.
12. Other Compensation, Benefits and Perquisites. The Executive's Salary
shall be as described in Section 4 above; his stock Incentive Compensation
shall be as described in Section 5 above; his Annual Cash Bonus shall be as
described in Section 6(a) above; his vacation shall be as described in Section
7 above; and his sick leave, disability benefit, death benefit and insurance
shall be as described in Sections 8, 9, 10 and 11 above, respectively. In
addition to the aforesaid types of compensation, benefits and perquisites, the
Executive shall be entitled to participate in all other types of compensation,
benefits and perquisites then available to Albert A. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs, such as, but not limited to: cash bonuses in
addition to guaranteed cash bonuses; stock option plans; 401-K plans; welfare
plans; business travel policies; car allowance; medical insurance; dental
insurance; dues, fees and costs (including travel) associated with membership
and participation in professional, educational and other clubs and
organizations, and attendance at professional, educational and other programs,
presentations, workshops, seminars and conventions. The Executive's
participation in all such other types of compensation, benefits and perquisites
shall be identical to those of Albert A. Cozzi, T. Benjamin Jennings and Gerard
M. Jacobs, excepting only that the amount of the Executive's cash bonus (if
any) in addition to his Annual Cash Bonus, and also the level of the
Executive's participation in stock option grants and stock option plans (if
any), shall be determined and granted by the Board of Directors from time to
time based upon the Executive's responsibilities and performance, and shall not
necessarily be in the same amounts or levels as are received by Albert A.
Cozzi, T. Benjamin Jennings and Gerard M. Jacobs. Without limiting the
generality of the foregoing, it is expressly agreed: that the Executive's car
allowance from the Company shall never be less than One Thousand Dollars
($1,000) per month, provided that any portion of such car allowance that is not
being used to pay for the Executive's car shall be paid by the Company to the
Executive as additional compensation in regard to such month; that the
Executive shall also be fully reimbursed by the Company for all gas, oil,
repairs, maintenance and insurance in regard to such car; and that the Company
shall supply and pay all of the costs, fees and charges in regard to a Company
phone at the Executive's home office (if any), a car phone, and a cellular
phone. The Executive understands and agrees that the Executive Committee shall
be permitted from time to time to establish an annual dollar limitation upon
the Company's expenditures in regard to dues, fees and costs (including travel)
associated with membership and participation in professional, educational and
other clubs and organizations, and attendance at professional, educational and
other programs, presentations, workshops, seminars and conventions, other than
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the Institute of Scrap Recycling Industries (ISRI), incurred by any member of
the Executive Committee, which limitation shall be identical with respect to
each member of the Executive Committee and the Executive: provided that so long
as the Company's common stock as of the first trading day of each fiscal year
of the Company is trading at or above Ten Dollars ($10.00) per share, such
annual limitation for such year shall not be less than Twenty Thousand Dollars
($20,000.00) per member of the Executive Committee and for the Executive.
13. Business Expense Reimbursement. The Company shall reimburse the
Executive for the reasonable, ordinary, and necessary business expenses
incurred by him in connection with the performance of his duties hereunder,
including, but not limited to, ordinary and necessary travel, entertainment and
phone expenses. The Executive shall provide the Company with an accounting of
his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Company. The Executive shall provide the Company with such
other supporting documentation and other substantiation of reimbursable
expenses as will conform to Internal Revenue Service regulations or other
requirements. All such reimbursements shall be payable by the Company to the
Executive within a reasonable time after receipt by the Company of appropriate
documentation thereof; provided, however, the Company shall have no obligation
to reimburse any expenses for which appropriate and customary back-up
documentation is not provided within ninety (90) days following accrual of the
obligation in question.
14. Termination.
(a) Unilateral Termination. The Employment Period may be terminated by
either party at any time by written notice of termination given to the other
party at least ninety (90) days in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Company shall have the option to
terminate the Employment Period, effective upon written notice of such
termination to the Executive, for Just Cause as determined by the Executive
Committee. For purposes of this Agreement, the term "Just Cause" shall mean
the occurrence of any one or more of the following events:
i) The willful and continued failure by the Executive to
substantially perform his duties with the Company (other than any such
failure resulting from termination by the Company pursuant to Section
14(a), Total Disability, retirement or death) after a demand for
substantial performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the Executive
has not substantially performed his duties, and the Executive fails to
resume substantial performance of his duties on a continuous basis
within fourteen (14) days of receiving such demand; provided, that if
it is not reasonably possible for the Executive to resume such
substantial performance within such fourteen (14) days, then such
fourteen (14) day time period shall be
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extended to that minimum period of time during which it is reasonably
possible for the Executive to resume such substantial performance;
ii) The willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise and the Executive's failure to cease engaging in such conduct
within fourteen (14) days after a demand for such cessation is
delivered to the Executive by the Company that specifically identifies
such conduct; provided, however, that if it is not reasonably possible
for the Executive to cease such conduct within such fourteen (14) days,
then such fourteen (14) day time period shall be extended to that
minimum period of time during which it is reasonably possible for the
Executive to cease such conduct; or
iii) The Executive's conviction of a felony or a misdemeanor which
materially impairs the Executive's ability substantially to perform
his duties with the Company.
For purposes of this subsection (b), an act, or failure to act, on the
Executive's part, shall not be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interest of the Company.
(c) Termination Upon Death. The Employment Period shall automatically
terminate upon the death of the Executive, without further action by the
Company.
(d) Termination Upon Disability. The Employment Period shall terminate
thirty days after the Company notifies the Executive of a determination of
Total Disability (as defined above) of the Executive, provided the Executive
does not dispute such determination as provided in Section 9 hereof, in which
case the date of termination for Total Disability shall be the date the
Executive is determined to have a Total Disability pursuant to Section 9
hereof.
(e) Termination for Good Reason. The Executive shall have the right to
resign for Good Reason (as defined below) and any such resignation shall be
deemed a termination by the Company pursuant to Section 14(a). For purposes of
this Agreement, "Good Reason" shall mean (i) any material breach by the Company
of its obligations hereunder, including without limitation any material breach
of the Company's obligations under Sections 1(b) or 1(c) above, which is not
cured within fourteen (14) days of written notice from the Executive to the
Company describing such breach, (ii) any transfer of the Executive's principal
work location to a location outside the City limits of Chicago, Illinois, (iii)
the termination of the Employment Period by the Executive for any reason or no
reason at all at any time during the one-year period immediately following the
date of a Change in Control, or (iv) the termination of the Employment Period
by the Executive for any reason or no reason at all at any time during the
one-year period immediately following the date the Executive receives notice of
non-renewal
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from the Company pursuant to Section 3 herein. For purposes of this Agreement,
a "Change in Control" of the Company shall mean:
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) [THIS SECTION INTENTIONALLY LEFT BLANK.]
iii) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting
requirement, that was not approved by the Executive
Committee, provided that, without limitation, a Change in
Control shall be deemed to have occurred if the following
events occur without the affirmative vote of the Executive
Committee:
a) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act), other than Albert A. Cozzi,
Frank J. Cozzi and Gregory P. Cozzi and their
respective heirs, trusts, estates, personal
representatives, legatees and assigns, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent
(30%) or more of the combined voting power of the
Company's then outstanding securities computed on a
fully diluted basis (assuming the conversion of all
outstanding convertible securities of the Company and
the exercise of all options and warrants which, at the
time of determination, are vested and are exercisable
at a price less than the then market price of the
Company's Common Stock),
b) during any period of two (2) consecutive years
(not including any period prior to the execution of
this Agreement), there shall cease to be a majority of
the Board of Directors of the Company comprised as
follows: individuals who at the beginning of the
Employment Period constitute the Board of Directors and
any new director(s) whose election by the Board of
Directors or nomination for election by the Company's
shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the
Employment Period or whose election or nomination for
election was previously so approved, or
c) the shareholders of the Company (a) approve a
merger or consolidation of the Company or a subsidiary
of the
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Company with any other corporation, other than a merger
with Cozzi Iron & Metal, Inc., and other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the
voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or (b) approve a plan of complete
liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially
all the Company's assets.
15. Surrender of Properties. Upon termination of the Executive's
employment with the Company, regardless of the reason therefor, the Executive
shall promptly surrender to the Company all property provided him by the
Company for use in relation to his employment and, in addition, the Executive
shall surrender to the Company any and all sales materials, lists of customers
and prospective customers, price lists, files, records, models, or other
materials and information of or pertaining to the Company or its customers or
prospective customers or the products, business, and operations of the Company.
16. Chicago Headquarters. The Company acknowledges that the Executive
shall be based within the City limits of Chicago, Illinois, during the
Employment Period.
17. Severance Pay.
(a) Notwithstanding any other provision of this Agreement, if the
Employment Period is terminated by the Company pursuant to Section 14(a), the
Company shall pay the Executive (i) any accrued but unpaid Salary, prorated
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) a lump-sum severance payment equal to the greater of (A)
the Executive's then-current Salary and Annual Cash Bonus for the Balance of
the Term, or (B) the product of 5.00 multiplied by the Executive's highest
total annual cash compensation (as reported by the Company on Internal Revenue
Service Form W-2) earned by the Executive in any one of the three (3) calendar
years immediately preceding the calendar year in which the termination occurs.
In addition, (i) the Company shall continue all medical, dental and life
insurance benefits at no cost to the Executive for the greater of (A) twelve
(12) months, commencing on the date of termination of the Employment Period, or
(B) the Balance of the Term (the provision by the Company of any such group
health benefits shall not be considered continuation coverage pursuant to
Section 4980B of the Internal Revenue Code of 1986, as amended, and such
continuation coverage shall commence on the date that benefits provided
hereunder cease), and (ii) the ownership of all warrants and options granted to
the Executive by the Company under this Agreement shall be immediately and
fully vested in the Executive and shall remain outstanding and exercisable
until the expiration date of such warrants and options (without regard to any
early termination of such options or warrants resulting from the
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Executive's termination of employment). Other than as provided herein, if the
Employment Period is terminated by the Executive pursuant to Section 14(a) or
by the Company as provided in Section 14(b) of this Agreement, the Company
shall pay to the Executive any accrued but unpaid Salary, prorated Annual Cash
Bonus (determined in accordance with Section 6(a)) and prorated vacation, and
any other amounts accrued but unpaid as of the date of termination. Any
benefit payable pursuant to this Section 17 shall be paid to the Executive in a
lump-sum within five (5) days after the termination of the Employment Period.
(b) In the event that the Executive becomes entitled to the severance
payments as provided herein, if it is determined that any of such payments will
be subject to the tax or any other similar state or local excise taxes (the
"Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the Company shall "gross-up" such severance payments so
that the amount received by the Executive after payment of such Excise Tax
shall be equal to the amount to which the Executive was entitled prior to
application of such Excise Tax.
18. Restrictive Covenants. In addition to any other obligation of the
Executive under any other agreement with the Company, in order to assure that
the Company will realize the benefits of this Agreement and in consideration of
the employment set forth in this Agreement, the Executive agrees that he shall
not during the Employment Period and for a period of thirty-six (36) months
from the termination of the Employment Period; provided, that, in the event the
Employment Period is terminated by the Company pursuant to Section 14(a) on or
before the second anniversary of the Commencement Date, the thirty-six (36)
month period provided herein shall be reduced to a twelve (12) month period;
and provided further, that, in the event the Employment Period is terminated by
the Company pursuant to Section 14(a) after the second anniversary of the
Commencement Date, the thirty-six (36) month period provided herein shall be
reduced to a thirty (30) month period:
(a) directly or indirectly, alone or as a partner, joint venturer,
member, officer, director, employee, consultant, agent, independent contractor,
stockholder or in any other capacity of any company or business, engage in any
business activity in any state in which the Company owns a scrap metal yard or
scrap metal processing facility on the date of termination of such Employment
Period which is directly or indirectly in competition with the Company
Business; provided, however, that, the beneficial ownership of less than 5% of
the shares of stock of any corporation having a class of equity securities
actively traded on a national securities exchange or over-the-counter market
shall not be deemed, in and of itself, to violate the prohibitions of this
Section;
(b) directly or indirectly (i) induce any person which is a customer of
the Company or any subsidiary or affiliate of the Company on the date of the
termination of such Employment Period to patronize any business directly or
indirectly in competition with the Company Business; (ii) canvass, solicit or
accept from any person that is a customer of the Company or any subsidiary or
affiliate of the Company on the date of the termination of the Employment
Period, any such competitive business, or (iii) request or advise any person
that is
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a customer of the Company Business on the date of the termination of
the Employment Period to withdraw, curtail, or cancel any such customer's
business with the Company or any affiliate or subsidiary of the Company;
(c) directly or indirectly employ, or knowingly permit any company or
business directly or indirectly controlled by him, to employ, any person who
was employed by the Company or any subsidiary or affiliate of the Company on
the date of the termination of the Employment Period or within six months prior
to the date of termination of the Employment Period, or in any manner seek to
induce any such person to leave his or her employment;
(d) For purposes of this Agreement, "Company Business" shall mean scrap
iron or scrap metal recycling and/or processing conducted by the Company or its
subsidiaries or affiliates and any other business that the Company or its
subsidiaries or affiliates may be engaged in (other than real estate
development) at the time of the termination of the Employment Period.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(f) The Executive agrees and acknowledges that the restrictions
contained in this Section 18 are reasonable in scope and duration and are
necessary to protect the Company after the Commencement Date. If any provision
of this Section 18 as applied to any party or to any circumstance is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section
will cause irreparable damage to the Company and upon breach of any provision
of this Section, the Company shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the Company may have (including, without
limitation, the right to seek monetary damages).
(g) [THIS SECTION INTENTIONALLY LEFT BLANK.]
19. Confidentiality of Information: Duty of Non-Disclosure. The
Executive acknowledges and agrees that his employment by the Company under this
agreement necessarily involves his understanding of and access to certain trade
secrets and confidential information pertaining to the business of the Company.
Accordingly, the Executive agrees that after the date of this Agreement at all
times, whether during or after the termination of the Employment Period, he
will not, directly or indirectly, without the prior written consent of the
Company, disclose to or use for the benefit of any person, corporation or other
entity, or for himself any and all files, trade secrets or other confidential
information concerning the internal affairs of the Company or its subsidiaries
or affiliates, including, but not limited to, information pertaining to its
clients,
12
<PAGE> 13
services, products, earnings, finances, operations, methods or other
activities; provided, however, that the foregoing shall not apply to
information which is of public record or is generally known, disclosed or
available to the general public or the industry generally. Further, the
Executive agrees that he shall not, directly or indirectly, remove or retain,
without the express prior written consent of the Company, and upon termination
of this Agreement for any reason shall return to the Company, any figures,
calculations, letters, papers, records, computer disks, computer print-outs,
customer lists, price lists, other lists, contracts, business plans, forms,
manuals, other documents, instruments, drawings, designs, programs, brochures,
sales literature, or any copies or reproductions thereof, or any information or
instruments derived therefrom, or any other similar information of any type or
description, however such information might be obtained or recorded, arising
out of or in any way relating to the business of the Company or obtained as a
result of his employment by the Company. The Executive acknowledges that all
of the foregoing are proprietary information, and are the exclusive property of
the Company.
20. Enforcement.
(a) Upon presentation of a claim or claims (collectively, "Claims")
arising out of or relating to this Agreement, or the breach hereof, by an
aggrieved party, the other party shall have thirty (30) days in which to make
such inquiries of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine the validity of the Claims. At the
end of such period of investigation, the complained of party shall either pay
the amount of the Claims or the arbitration proceeding described immediately
below shall be invoked.
(b) In the event that the Claims are not settled by the procedure set
forth immediately above, the Claims shall be submitted to arbitration conducted
in accordance with the Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise varied hereby.
(c) The parties shall submit the dispute to the Chicago regional office
of the AAA and the situs of the arbitration shall be Cook County, Illinois.
(d) The arbitration shall be conducted by a single arbitrator. The
parties shall appoint the single arbitrator to arbitrate the dispute within ten
(10) business days of the submission of the dispute. In the absence of
agreement as to the identity of the single arbitrator to arbitrate the dispute
within such time, the AAA is authorized to appoint an arbitrator in accordance
with the Rules, except that the arbitrator shall have as his principal place of
business the Chicago metropolitan area.
(e) The single arbitrator selected by the AAA shall be an attorney,
accountant or other professional licensed to practice by the State of Illinois.
(f) Notwithstanding anything in the Rules to the contrary, the
arbitration award shall be made in accordance with the following procedure.
Each party shall, at the commencement of the arbitration hearing, submit an
initial statement of the amount each party
13
<PAGE> 14
proposes be selected by the arbitrator as the arbitration award ("Settlement
Amount"). During the course of the arbitration, each party may vary its
proposed Settlement Amount. At the end of the arbitration hearing, each party
shall submit to the arbitrator its final Settlement Amount ("Final Settlement
Amount"), and the arbitrator shall be required to select either one or the
other Final Settlement Amounts as the arbitration award without discretion to
select any other amount as the award. The arbitration award shall be paid
within ten (10) business days after the award has been made, together with
interest from the date of award at the rate of six percent (6%). Judgment upon
the award may be entered in any federal or state court having jurisdiction over
the parties and shall be final and binding.
21. Costs of Enforcement. The Company shall reimburse the Executive for
reasonable attorneys' fees and costs incurred by the Executive in connection
with any claim by the Executive brought hereunder (including but not limited to
all reasonable attorneys' fees and costs incurred by the Executive in
contesting or disputing any termination of the Employment Period, or in seeking
to obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to any
payment or benefit provided hereunder), so long as such claim is brought in
good faith.
22. Competing Interest. During the Employment Period, the Executive shall
not, without the prior written consent of the Company, (i) engage in any other
business activity for gain, profit, or other pecuniary advantage or (ii) engage
in or in any manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive, creditor, or
otherwise, with the operation, management, or conduct of any business, in
either case which directly or indirectly competes with the Company Business.
Provided, however, that this Section 22 shall not prohibit the Executive from
owning up to five (5) percent of the publicly traded shares of any entity.
23. No Duty to Mitigate or Offset. The Executive shall not be required to
mitigate or offset the amount of any payments that the Executive may receive
from the Company as a result of the termination of the Employment Period. The
amounts payable hereunder by the Company as a result of the termination of the
Employment Period shall be considered liquidated damages and shall not be
reduced by any amounts that the Executive earns through other employment or
otherwise, except that the Company's obligation to continue medical, dental and
life insurance benefits pursuant to Section 17 herein, shall be reduced by the
amount of any such benefits provided to the Executive by any other employer.
24. Indemnification. The Company hereby agrees to indemnify the
Executive against all liabilities, costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any threatened,
pending or completed action, suit or proceeding to which the Executive may be
made a party or may be threatened to be made a party by reason of the
Executive's being or having been a director, officer, employee, or agent of the
Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the fullest extent permitted by
applicable law. The Company shall advance all costs, charges and expenses,
14
<PAGE> 15
including legal fees, incurred by the Executive in connection with the
Executive's defense of any claim for which the foregoing indemnity may apply.
If it is subsequently determined that the Executive was not entitled to such
indemnification, the Executive will reimburse the Company any amounts advanced
pursuant to the foregoing sentence.
25. Directors and Officers Insurance. The Executive shall be entitled to
the protection of any insurance policies the Company or any of its affiliates
from time to time maintains for the benefit of its senior executive officers
and directors (or substantially similar policies) respecting liabilities,
costs, charges, and expenses of any type whatsoever incurred or sustained by
the Executive in connection with any action, suit or proceeding to which the
Executive may be made a party or may be threatened to be made a party by reason
of the Executive's being or having been a director, officer, employee or agent
of the Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
26. General Provisions.
(a) Goodwill. The Company has invested substantial time and money in
the development of its products, services, territories, advertising and
marketing thereof, soliciting clients and creating goodwill. By accepting
employment with the Company, the Executive acknowledges that the customers are
the customers of the Company, and that any goodwill created by the Executive
belongs to and shall inure to the benefit of the Company.
(b) Notice. Any notice or demand required or permitted hereunder shall
be made in writing (i) either by actual delivery of the notice or demand into
the hands of the party thereunder entitled, or (ii) by the mailing of the
notice or demand in the United States mail, certified or registered mail,
return receipt requested, all postage prepaid and addressed to the party to
whom the notice or demand is to be given at the party's respective address set
forth below, or such other address as the parties may from time to time
designate by written notice as herein provided.
As addressed to the Company:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chief Executive Officer
15
<PAGE> 16
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Erhard R. Chorle
As addressed to the Executive:
Mr. Frank J. Cozzi
2232 South Blue Island Avenue
Chicago, Illinois 60608
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: M. Finley Maxson
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Company unless made in writing and
signed by an officer of the Company duly authorized by the Board of Directors
or upon the Executive unless made in writing and signed by him. The waiver by
either party hereto of the breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by such party.
(d) Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the Executive's duties and compensation as
an executive of the Company and shall supersede any and all prior agreements or
understandings between the parties hereto; there are no representations,
warranties, agreements or commitments between the parties hereto with respect
to his employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.
(f) Severability. If any provision of this Agreement shall, for any
reason, be held unenforceable by a court of competent jurisdiction, such
provision shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the parties. If
the Agreement continues to reflect the basic intent of the parties, then
16
<PAGE> 17
the invalidity of such specific provision shall not affect the enforceability of
any other provision herein, and the remaining provisions shall remain in full
force and effect.
(g) Assignment. The Executive may not under any circumstances delegate
any of his rights and obligations hereunder without first obtaining the prior
written consent of the Company. The Company shall cause this Agreement and all
of the Company's rights and obligations hereunder, including without limitation
the obligations of the Company in the event of a termination of employment by
the Company pursuant to Section 14(a), to be assigned and expressly assumed by
any successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation or
otherwise, including upon a Change in Control (as defined in Section 14(e));
provided, however, that any such assignment shall not relieve the Company of
its obligations hereunder to the extent that an assignee does not fulfill such
obligations.
(h) Heirs. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designees or, if there is no such
designee, to the Executive's estate.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
------------------------------------------
Gerard M. Jacobs, President and Chief
Executive Officer
By: /s/ T. Benjamin Jennings
------------------------------------------
T. Benjamin Jennings, Chairman and Chief
Development Officer
EXECUTIVE:
/s/ Frank J. Cozzi
---------------------------------------------
FRANK J. COZZI
18
<PAGE> 1
Exhibit 10.16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-2 WARRANT December 1, 1997
To Purchase 291,380 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Frank J. Cozzi (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 291,380 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $5.91 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant
are exercisable by the Employee or his successors and assigns, in whole or in
part, at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
<PAGE> 2
purchase of that number of Shares equal to the difference, if any,
between the number of Shares subject hereto and the number of Shares as to
which this Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior
to surrender. As used herein, the phrase "the Fair Market Value of the
Share(s)" shall mean the average closing bid price of the Common Stock on
NASDAQ (or such other national securities exchange upon which the Common Stock
is then traded) for the five trading days immediately preceding the Exchange
Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on which
this Warrant shall have been exercised in accordance with the terms hereof.
All Shares that may be issued upon the exercise of this Warrant shall, upon
such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
2
<PAGE> 3
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office
or agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a
merger or a consolidation of the Company with or into another corporation when
the Company is not the
3
<PAGE> 4
surviving corporation, then, as part of such merger or consolidation,
lawful provision shall be made so that the Employee as the holder of this
Warrant shall thereafter be entitled to receive upon exercise of this Warrant,
during the period specified herein and upon payment of the aggregate Exercise
Price then in effect, the number of shares of stock or other securities or
property (including cash) of the successor corporation resulting from such
merger or consolidation, to which the Employee as the holder of the stock
deliverable upon exercise of this Warrant would have been entitled in such
merger or consolidation if this Warrant had been exercised immediately before
such merger or consolidation. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Warrant with respect to
the rights and interests of the Employee as the holder of this Warrant after
the merger or consolidation. This provision shall apply to successive mergers
or consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any time
shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the Exercise
Price pursuant to 10(c) or 10(d) hereof, the number of Shares purchasable
hereunder shall be adjusted, to the nearest whole Share, to the product
obtained by multiplying the number of Shares purchasable immediately prior to
such adjustment in the Exercise Price by a fraction (i) the numerator of which
shall be the Exercise Price immediately prior to such adjustment, and (ii) the
denominator of which shall be the Exercise Price immediately after such
adjustment.
4
<PAGE> 5
11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to
Section 10 hereof, the Company shall issue and provide to the Employee as the
holder of this Warrant a certificate signed by an officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price and number of Shares purchasable hereunder after giving
effect to such adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
----------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
--------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
--------------------------------
[Name]
- ------------------ --------------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.17
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-5 WARRANT December 1, 1997
To Purchase 291,380 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Frank J. Cozzi (the "Employee") and the Company, Employee is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time after the date hereof and at or prior to 11:59 p.m. Central Time,
on December 1, 2002 (the "Expiration Time"), but not thereafter, to acquire
from the Company, in whole or in part, from time to time, up to 291,380 fully
paid and nonassessable shares (the "Shares") of common stock, $.01 par value of
the Company ("Common Stock"), at a purchase price of $15.84 per Share, as
adjusted pursuant to Section 10 hereof (the "Exercise Price"). The number of
Shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Common Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this Warrant are
exercisable by the Employee or his successors and assigns, in whole or in part,
at any time, or from time to time, prior to the Expiration Time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto, all duly
completed and executed on behalf of the Employee, at the office of the Company
in Chicago, Illinois (or such other office or agency of the Company as it may
designate by notice in writing to the Employee at the address of the Employee
appearing on the books of the Company), and upon payment of the Exercise Price
for the Shares thereby purchased (by cash, certified or cashier's check, or
wire transfer payable to the order of the Company, at the time of exercise in
an amount equal to the purchase price of the Shares thereby purchased).
Thereupon, the Employee as the holder of this Warrant, shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of Shares so purchased, and a new Warrant in substantially identical
form and dated as of such exercise for the
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purchase of that number of Shares equal to the difference, if any, between the
number of Shares subject hereto and the number of Shares as to which this
Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall
be delivered to the Employee within a reasonable time after the date on which
this Warrant shall have been exercised in accordance with the terms hereof.
All Shares that may be issued upon the exercise of this Warrant shall, upon
such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
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4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Employee as the registered holder at the office or
agency of the Company referenced in Section 2 above, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the office or agency referenced in Section 2 above, a registry
showing the name and address of the Employee as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) Merger or Consolidation. If at any time there shall be a merger or
a consolidation of the Company with or into another corporation when the
Company is not the
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surviving corporation, then, as part of such merger or consolidation, lawful
provision shall be made so that the Employee as the holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the aggregate Exercise Price
then in effect, the number of shares of stock or other securities or property
(including cash) of the successor corporation resulting from such merger or
consolidation, to which the Employee as the holder of the stock deliverable
upon exercise of this Warrant would have been entitled in such merger or
consolidation if this Warrant had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Employee as the holder of this Warrant after the merger or
consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction (i) the numerator
of which shall be the Exercise Price immediately prior to such adjustment, and
(ii) the denominator of which shall be the Exercise Price immediately after
such adjustment.
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11. Notice of Adjustments; Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
10 hereof, the Company shall issue and provide to the Employee as the holder of
this Warrant a certificate signed by an officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price and number of Shares purchasable hereunder after giving effect to such
adjustment.
12. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state, without giving effect to the conflict of
laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Employee as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees
and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of any
term of this Warrant may be waived only with the written consent of the Company
and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
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IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
------------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
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NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
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5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
-------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
-------------------------
[Name]
- ------------------ -------------------------
[Date] [Signature]
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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 1st day of
December, 1997, by and between GREGORY P. COZZI (the "Executive") and COZZI
IRON & METAL, INC., an Illinois corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, the Company and the Executive do hereby agree as
follows:
1. Employment and Duties.
(a) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to employ the Executive as a Vice-President of
the Company to perform such duties and responsibilities as are consistent with
such positions.
(b) Intentionally Omitted.
(c) Intentionally omitted.
2. Performance. The Executive accepts the employment described in Section
1 above, and agrees to faithfully and diligently perform the duties and
responsibilities described therein. The Executive shall devote time and
attention to matters of the Company such that the Executive's services to the
Company constitute his primary business activity. The Company acknowledges
that the Executive may (i) engage in charitable and community affairs
(including serving on the board of directors or similar management body of any
charitable or community organization), (ii) serve on the board of directors of
or act as a consultant to other companies which are not engaged in a business
that directly or indirectly competes with the Company Business (as defined in
Section 18 below), and (iii) make personal investments.
3. Term. The term of employment under this Agreement shall commence on
the date of the Closing (the "Commencement Date") and shall continue for a
period of five (5) years thereafter (the "Employment Period"); provided,
however, that on each anniversary of the Commencement Date, the Employment
Period shall be automatically extended for an additional year unless at least
sixty (60) days before any such anniversary, either the Executive or the
Company, as the case may be, notifies the other of its desire not to further
extend the Employment Period; and provided, further, that the Employment Period
shall terminate upon the earliest to occur of the events described in Section
14 hereunder. For purposes of this Agreement, "Balance of the Term" shall mean
the period beginning on the date of termination and ending on the date that the
Employment Period would have ended pursuant to this Section
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3 due to lapse of time (assuming no further extensions of the Employment Period
beyond those already approved as of the date of termination), without regard to
Section 14.
4. Salary. For all the services to be rendered by the Executive
hereunder, the Company agrees to pay, during the Employment Period, a base
salary ("Salary") at an initial rate of One Hundred and Thirty-Five Thousand
Dollars ($135,000.00) per Contract Year, payable in the manner and frequency in
which the Company's payroll is customarily handled. For purposes of this
Agreement, "Contract Year" shall mean a one-year period commencing on the
Commencement Date or on any anniversary of the Commencement Date. The Company
may increase the Executive's Salary at any time, or from time to time, during
the Employment Period.
5. Incentive Compensation. In addition to the Executive's Salary, the
Company shall pay to the Executive, during the Employment Period, additional
compensation ("Incentive Compensation") calculated as follows:
(a) Stock Warrants. On the Commencement Date, the Company shall grant
the Executive warrants to purchase eighty-one thousand and thirty-five (81,035)
shares of common stock of the Company at an exercise price of Five Dollars and
91/100 ($5.91) per share and warrants to purchase eighty-one thousand and
thirty-five (81,035) shares of common stock of the Company at an exercise price
equal to seventy-five percent (75%) of the closing price per share of the
Company's common stock on the last trading date prior to the Closing, subject
to all federal and state securities and other laws. All warrants issued
pursuant to this Section 5(a) shall be governed by and subject to all
conditions, terms and restrictions in the actual warrant which is attached
hereto as Attachment A and hereby incorporated by reference.
(b) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(c) Other Stock Terms.
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) The Company represents and warrants to the Executive that the
grant of warrants to purchase shares of common stock of the Company
hereunder shall be an exempt acquisition under Section 16(b) of the
Securities Exchange Act of 1934.
iii) The Executive acknowledges that the Company's common stock
is publicly traded and is subject to various federal and state
securities laws and that the shares acquired upon the exercise of the
warrants (collectively the "Shares") are being issued pursuant to such
laws and agrees that he will comply with any and all applicable laws
and regulations governing the Shares.
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iv) The Company shall use its best efforts to file as soon as
practicable, and shall use its best efforts to cause to remain
effective, a registration statement(s) as may be necessary to permit
the Executive to sell in the public market any and all Shares acquired
hereunder upon exercise in the case of the Shares received on exercise
of the warrants, provided, that Executive understands and agrees that
this Section 5(c)iv) shall be subject to any restrictions on transfer
contained in that certain Stockholders' Agreement by and among the
Company, Executive, Frank J. Cozzi, Albert P. Cozzi, T. Benjamin
Jennings and Gerard M. Jacobs, and nothing contained in this Section
5(c)(iv) shall be deemed to impose any obligation upon the Company to
take any action whatsoever that, in the opinion of the Executive
Committee, would or might delay or hinder any material transaction
involving the Company, including but not limited to any of the
Company's acquisitions or any of the Company's debt or equity
financings, or that would or might be deemed to be a default or
violation of any of the Company's contracts in regard to any of such
transactions or financings, including but not limited to any "blackout"
periods imposed by the Company's underwriters.
(d) Intentionally Omitted.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
6. Cash Bonus Compensation. The Executive shall be entitled to the
following bonus compensation:
(a) Cash Bonus. The Executive shall be entitled to such cash bonuses,
if any, as are determined by the Board of Directors of the Company.
(b) Intentionally Omitted.
7. Vacation. In accordance with the policies and rules governing the
vacation of other members of the senior management of the Company, the
Executive shall be entitled to take four (4) week vacations with pay, during
each year of service under this Agreement, to be taken during the year at such
time or times as may be approved by the Company. Unused vacation days shall
not be accumulated from one year to the next.
8. Sick Leave. In accordance with the policies and rules governing the
sick leave of other members of senior management of the Company, the Executive
shall be allowed paid sick leave during each year of service under this
Agreement. Unused sick leave shall not be accumulated from one year to the
next.
9. Disability Benefit. If at any time during the Employment Period the
Executive is unable to perform fully his duties hereunder for a period of six
(6) consecutive
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months by reason of illness, accident, or other physical or mental disability
(as confirmed by competent medical evidence) and such condition may reasonably
be expected to be permanent ("Total Disability"), the Executive shall be
entitled to receive (i) any accrued but unpaid Salary, Annual Cash Bonus
(determined in accordance with Section 6(a)), and prorated vacation, and any
other amounts accrued but unpaid as of the date of termination, and (ii) any
and all disability benefits then available to other members of the senior
management of the Company. If any dispute regarding the existence of the
Executive's Total Disability arises, each party shall appoint a physician and
such physicians shall jointly appoint a third physician, the decision of any
two (2) of such physicians regarding the existence of Total Disability shall be
binding upon the parties. Notwithstanding the foregoing provision, the amounts
payable to the Executive pursuant to this Section 9 shall be reduced by any
amounts received by the Executive with respect to any such incapacity pursuant
to any insurance policy, plan, or other employee benefit provided to the
Executive by the Company.
10. Death Benefit. In the event of the death of the Executive during the
Employment Period, the Company shall pay (i) any accrued but unpaid Salary,
Annual Cash Bonus (determined in accordance with Section 6(a)) and prorated
vacation, and any other amounts accrued but unpaid as of the date of
termination, and (ii) any and all death benefits then available to other member
of the senior management of the Company. The benefits payable under this
Section 10, if any, shall be paid to the person or persons designated by the
Executive on the form provided by the Company or, in the absence of such a
designation, as follows: (i) to the Executive's spouse if she survives him;
(ii) if the Executive's spouse fails to survive the Executive, then in equal
shares to the Executive's children who survive him; or (iii) if neither
Executive's spouse nor any child survives the Executive, then all to the
Executive's estate.
11. Insurance. During the Employment Period, the Company shall apply for,
procure and pay for, in the Executive's name and for the Executive's benefit,
with the Executive's designee as the beneficiary, life insurance owned by the
Executive in the following amounts: $500,000 through a term life policy. The
Executive shall submit to any medical or other examination and execute and
deliver any application or other instrument in writing reasonably necessary to
effectuate such insurance.
12. Other Compensation, Benefits and Perquisites. The Executive's Salary
shall be as described in Section 4 above; his stock Incentive Compensation
shall be as described in Section 5 above; his Cash Bonus shall be as described
in Section 6(a) above; his vacation shall be as described in Section 7 above;
and his sick leave, disability benefit, death benefit and insurance shall be as
described in Sections 8, 9, 10 and 11 above, respectively. Executive shall,
during the Employment Period, receive a car allowance of $750.00 per month.
13. Business Expense Reimbursement. The Company shall reimburse the
Executive for the reasonable, ordinary, and necessary business expenses
incurred by him in connection with the performance of his duties hereunder,
including, but not limited to, ordinary and necessary travel, entertainment and
phone expenses. The Executive shall provide the Company with an accounting of
his expenses, which accounting shall clearly reflect which
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expenses are reimbursable by the Company. The Executive shall provide the
Company with such other supporting documentation and other substantiation of
reimbursable expenses as will conform to Internal Revenue Service regulations
or other requirements. All such reimbursements shall be payable by the Company
to the Executive within a reasonable time after receipt by the Company of
appropriate documentation thereof; provided, however, the Company shall have no
obligation to reimburse any expenses for which appropriate and customary
back-up documentation is not provided within ninety (90) days following accrual
of the obligation in question.
14. Termination.
(a) Unilateral Termination. The Employment Period may be terminated by
either party at any time by written notice of termination given to the other
party at least ninety (90) days in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Company shall have the option to
terminate the Employment Period, effective upon written notice of such
termination to the Executive, for Just Cause (as determined by the Executive
Committee of Metal Management, Inc.). For purposes of this Agreement, the term
"Just Cause" shall mean the occurrence of any one or more of the following
events:
i) The willful and continued failure by the Executive to
substantially perform his duties with the Company (other than any such
failure resulting from termination by the Company pursuant to Section
14(a), Total Disability, retirement or death) after a demand for
substantial performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the Executive
has not substantially performed his duties, and the Executive fails to
resume substantial performance of his duties on a continuous basis
within fourteen (14) days of receiving such demand; provided, that if
it is not reasonably possible for the Executive to resume such
substantial performance within such fourteen (14) days, then such
fourteen (14) day time period shall be extended to that minimum period
of time during which it is reasonably possible for the Executive to
resume such substantial performance;
ii) The willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise and the Executive's failure to cease engaging in such conduct
within fourteen (14) days after a demand for such cessation is
delivered to the Executive by the Company that specifically identifies
such conduct; provided, however, that if it is not reasonably possible
for the Executive to cease such conduct within such fourteen (14) days,
then such fourteen (14) day time period shall be extended to that
minimum period of time during which it is reasonably possible for the
Executive to cease such conduct; or
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iii) The Executive's conviction of a felony or a misdemeanor which
materially impairs the Executive's ability substantially to perform his
duties with the Company.
For purposes of this subsection (b), an act, or failure to act, on the
Executive's part, shall not be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without a reasonable belief that
his action or omission was in the best interest of the Company.
(c) Termination Upon Death. The Employment Period shall automatically
terminate upon the death of the Executive, without further action by the
Company.
(d) Termination Upon Disability. The Employment Period shall terminate
thirty days after the Company notifies the Executive of a determination of
Total Disability (as defined above) of the Executive, provided the Executive
does not dispute such determination as provided in Section 9 hereof, in which
case the date of termination for Total Disability shall be the date the
Executive is determined to have a Total Disability pursuant to Section 9
hereof.
(e) Termination for Good Reason. The Executive shall have the right to
resign for Good Reason (as defined below) and any such resignation shall be
deemed a termination by the Company pursuant to Section 14(a). For purposes of
this Agreement, "Good Reason" shall mean (i) any material breach by the Company
of its obligations hereunder, including without limitation any material breach
of the Company's obligations under Sections 1(b) or 1(c) above, which is not
cured within fourteen (14) days of written notice from the Executive to the
Company describing such breach, (ii) any transfer of the Executive's principal
work location to a location outside the City limits of Chicago, Illinois, (iii)
the termination of the Employment Period by the Executive for any reason or no
reason at all at any time during the one-year period immediately following the
date of a Change in Control of Metal Management, Inc., the Company's parent
("MTLM"), or (iv) the termination of the Employment Period by the Executive for
any reason or no reason at all at any time during the one-year period
immediately following the date the Executive receives notice of non-renewal
from the Company pursuant to Section 3 herein. For purposes of this Agreement,
a "Change in Control" of MTLM shall mean:
i) [THIS SECTION INTENTIONALLY LEFT BLANK.]
ii) [THIS SECTION INTENTIONALLY LEFT BLANK.]
iii) A change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not MTLM is then subject to such reporting
requirement, that was not approved by the Executive Committee of MTLM,
provided that, without limitation, a Change in Control shall be
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<PAGE> 7
deemed to have occurred if the following events occur without the
affirmative vote of the Executive Committee of MTLM:
a) any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act), other than Albert A. Cozzi, Frank J. Cozzi
and Gregory P. Cozzi and their respective heirs, trusts,
estates, personal representatives, legatees and assigns, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
MTLM representing thirty percent (30%) or more of the combined
voting power of MTLM's then outstanding securities computed on
a fully diluted basis (assuming the conversion of all
outstanding convertible securities of MTLM and the exercise of
all options and warrants which, at the time of determination,
are vested and are exercisable at a price less than the then
market price of MTLM's Common Stock),
b) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement),
there shall cease to be a majority of the Board of Directors of
MTLM comprised as follows: individuals who at the beginning of
the Employment Period constitute the Board of Directors of MTLM
and any new director(s) whose election by the Board of
Directors of MTLM or nomination for election by MTLM's
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the Employment Period or whose
election or nomination for election was previously so approved,
or
c) the shareholders of MTLM (a) approve a merger or
consolidation of MTLM or a subsidiary of MTLM with any other
corporation, other than a merger with the Company, and other
than a merger or consolidation which would result in the voting
securities of MTLM outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent (80%) of the combined voting power of
the voting securities of MTLM or such surviving entity
outstanding immediately after such merger or consolidation; or
(b) approve a plan of complete liquidation of MTLM or an
agreement for the sale or disposition by MTLM of all or
substantially all MTLM's assets.
15. Surrender of Properties. Upon termination of the Executive's
employment with the Company, regardless of the reason therefor, the Executive
shall promptly surrender to
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<PAGE> 8
the Company all property provided him by the Company for use in relation to
his employment and, in addition, the Executive shall surrender to the Company
any and all sales materials, lists of customers and prospective customers,
price lists, files, records, models, or other materials and information of or
pertaining to the Company or its customers or prospective customers or the
products, business, and operations of the Company.
16. Chicago Headquarters. The Company acknowledges that the Executive
shall be based within the City limits of Chicago, Illinois, during the
Employment Period.
17. Intentionally Omitted.
18. Restrictive Covenants. In addition to any other obligation of the
Executive under any other agreement with the Company, in order to assure that
the Company will realize the benefits of this Agreement and in consideration of
the employment set forth in this Agreement, the Executive agrees that he shall
not during the Employment Period and for a period of thirty-six (36) months
from the termination of the Employment Period; provided, that, in the event the
Employment Period is terminated by the Company pursuant to Section 14(a) on or
before the second anniversary of the Commencement Date, the thirty-six (36)
month period provided herein shall be reduced to a twelve (12) month period;
and provided further, that, in the event the Employment Period is terminated by
the Company pursuant to Section 14(a) after the second anniversary of the
Commencement Date, the thirty-six (36) month period provided herein shall be
reduced to a thirty (30) month period:
(a) directly or indirectly, alone or as a partner, joint venturer,
member, officer, director, employee, consultant, agent, independent contractor,
stockholder or in any other capacity of any company or business, engage in any
business activity in any state in which the Company or any subsidiary of the
Company owns a scrap metal yard or scrap metal processing facility on the date
of termination of such Employment Period which is directly or indirectly in
competition with the Company Business; provided, however, that, the beneficial
ownership of less than 5% of the shares of stock of any corporation having a
class of equity securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section;
(b) directly or indirectly (i) induce any person which is a customer of
the Company or any subsidiary or affiliate of the Company on the date of the
termination of such Employment Period to patronize any business directly or
indirectly in competition with the Company Business; (ii) canvass, solicit or
accept from any person that is a customer of the Company or any subsidiary or
affiliate of the Company on the date of the termination of the Employment
Period, any such competitive business, or (iii) request or advise any person
that is a customer of the Company Business on the date of the termination of
the Employment Period to withdraw, curtail, or cancel any such customer's
business with the Company or any affiliate or subsidiary of the Company;
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<PAGE> 9
(c) directly or indirectly employ, or knowingly permit any company or
business directly or indirectly controlled by him, to employ, any person who
was employed by the Company or any subsidiary or affiliate of the Company on
the date of the termination of the Employment Period or within six months prior
to the date of termination of the Employment Period, or in any manner seek to
induce any such person to leave his or her employment;
(d) For purposes of this Agreement, "Company Business" shall mean scrap
iron or scrap metal recycling and/or processing conducted by the Company or its
subsidiaries or affiliates and any other business that the Company or its
subsidiaries or affiliates may be engaged in (other than real estate
development) at the time of the termination of the Employment Period.
(e) [THIS SECTION INTENTIONALLY LEFT BLANK.]
(f) The Executive agrees and acknowledges that the restrictions
contained in this Section 18 are reasonable in scope and duration and are
necessary to protect the Company after the Commencement Date. If any provision
of this Section 18 as applied to any party or to any circumstance is adjudged
by a court to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the breach of this Section
will cause irreparable damage to the Company and upon breach of any provision
of this Section, the Company shall be entitled to injunctive relief, specific
performance or other equitable relief; provided, however, that this shall in no
way limit any other remedies which the Company may have (including, without
limitation, the right to seek monetary damages).
(g) [THIS SECTION INTENTIONALLY LEFT BLANK.]
19. Confidentiality of Information: Duty of Non-Disclosure. The
Executive acknowledges and agrees that his employment by the Company under this
agreement necessarily involves his understanding of and access to certain trade
secrets and confidential information pertaining to the business of the Company.
Accordingly, the Executive agrees that after the date of this Agreement at all
times, whether during or after the termination of the Employment Period, he
will not, directly or indirectly, without the prior written consent of the
Company, disclose to or use for the benefit of any person, corporation or other
entity, or for himself any and all files, trade secrets or other confidential
information concerning the internal affairs of the Company or its subsidiaries
or affiliates, including, but not limited to, information pertaining to its
clients, services, products, earnings, finances, operations, methods or other
activities; provided, however, that the foregoing shall not apply to
information which is of public record or is generally known, disclosed or
available to the general public or the industry generally. Further, the
Executive agrees that he shall not, directly or indirectly, remove or retain,
without the express prior written
9
<PAGE> 10
consent of the Company, and upon termination of this Agreement for any reason
shall return to the Company, any figures, calculations, letters, papers,
records, computer disks, computer print-outs, customer lists, price lists,
other lists, contracts, business plans, forms, manuals, other documents,
instruments, drawings, designs, programs, brochures, sales literature, or any
copies or reproductions thereof, or any information or instruments derived
therefrom, or any other similar information of any type or description, however
such information might be obtained or recorded, arising out of or in any way
relating to the business of the Company or obtained as a result of his
employment by the Company. The Executive acknowledges that all of the
foregoing are proprietary information, and are the exclusive property of the
Company.
20. Enforcement.
(a) Upon presentation of a claim or claims (collectively, "Claims")
arising out of or relating to this Agreement, or the breach hereof, by an
aggrieved party, the other party shall have thirty (30) days in which to make
such inquiries of the aggrieved party and conduct such investigations as it
believes reasonably necessary to determine the validity of the Claims. At the
end of such period of investigation, the complained of party shall either pay
the amount of the Claims or the arbitration proceeding described immediately
below shall be invoked.
(b) In the event that the Claims are not settled by the procedure set
forth immediately above, the Claims shall be submitted to arbitration conducted
in accordance with the Commercial Arbitration Rules ("Rules") of the American
Arbitration Association ("AAA") except as amplified or otherwise varied hereby.
(c) The parties shall submit the dispute to the Chicago regional office
of the AAA and the situs of the arbitration shall be Cook County, Illinois.
(d) The arbitration shall be conducted by a single arbitrator. The
parties shall appoint the single arbitrator to arbitrate the dispute within ten
(10) business days of the submission of the dispute. In the absence of
agreement as to the identity of the single arbitrator to arbitrate the dispute
within such time, the AAA is authorized to appoint an arbitrator in accordance
with the Rules, except that the arbitrator shall have as his principal place of
business the Chicago metropolitan area.
(e) The single arbitrator selected by the AAA shall be an attorney,
accountant or other professional licensed to practice by the State of Illinois.
(f) Notwithstanding anything in the Rules to the contrary, the
arbitration award shall be made in accordance with the following procedure.
Each party shall, at the commencement of the arbitration hearing, submit an
initial statement of the amount each party proposes be selected by the
arbitrator as the arbitration award ("Settlement Amount"). During the course
of the arbitration, each party may vary its proposed Settlement Amount. At the
end of the arbitration hearing, each party shall submit to the arbitrator its
final Settlement Amount ("Final Settlement Amount"), and the arbitrator shall
be required to select either one or the other
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<PAGE> 11
Final Settlement Amounts as the arbitration award without discretion to select
any other amount as the award. The arbitration award shall be paid within ten
(10) business days after the award has been made, together with interest from
the date of award at the rate of six percent (6%). Judgment upon the award may
be entered in any federal or state court having jurisdiction over the parties
and shall be final and binding.
21. Costs of Enforcement. The Company shall reimburse the Executive for
reasonable attorneys' fees and costs incurred by the Executive in connection
with any claim by the Executive brought hereunder (including but not limited to
all reasonable attorneys' fees and costs incurred by the Executive in
contesting or disputing any termination of the Employment Period, or in seeking
to obtain or enforce any right or benefit provided by this Agreement, or in
connection with any tax audit or proceeding to the extent attributable to any
payment or benefit provided hereunder), so long as such claim is brought in
good faith.
22. Competing Interest. During the Employment Period, the Executive shall
not, without the prior written consent of the Company, (i) engage in any other
business activity for gain, profit, or other pecuniary advantage or (ii) engage
in or in any manner be connected or concerned, directly or indirectly, whether
as an officer, director, stockholder, partner, owner, executive, creditor, or
otherwise, with the operation, management, or conduct of any business, in
either case which directly or indirectly competes with the Company Business.
Provided, however, that this Section 22 shall not prohibit the Executive from
owning up to five (5) percent of the publicly traded shares of any entity.
23. No Duty to Mitigate or Offset. The Executive shall not be required to
mitigate or offset the amount of any payments that the Executive may receive
from the Company as a result of the termination of the Employment Period. The
amounts payable hereunder by the Company as a result of the termination of the
Employment Period shall be considered liquidated damages and shall not be
reduced by any amounts that the Executive earns through other employment or
otherwise, except that the Company's obligation to continue medical, dental and
life insurance benefits pursuant to Section 17 herein, shall be reduced by the
amount of any such benefits provided to the Executive by any other employer.
24. Indemnification. The Company hereby agrees to indemnify the
Executive against all liabilities, costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any threatened,
pending or completed action, suit or proceeding to which the Executive may be
made a party or may be threatened to be made a party by reason of the
Executive's being or having been a director, officer, employee, or agent of the
Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the fullest extent permitted by
applicable law. The Company shall advance all costs, charges and expenses,
including legal fees, incurred by the Executive in connection with the
Executive's defense of any claim for which the foregoing indemnity may apply.
If it is subsequently determined that the Executive was not entitled to such
indemnification, the Executive will reimburse the Company any amounts advanced
pursuant to the foregoing sentence.
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<PAGE> 12
25. Directors and Officers Insurance. The Executive shall be entitled to
the protection of any insurance policies the Company or any of its affiliates
from time to time maintains for the benefit of its senior executive officers
and directors (or substantially similar policies) respecting liabilities,
costs, charges, and expenses of any type whatsoever incurred or sustained by
the Executive in connection with any action, suit or proceeding to which the
Executive may be made a party or may be threatened to be made a party by reason
of the Executive's being or having been a director, officer, employee or agent
of the Company or serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
26. General Provisions.
(a) Goodwill. The Company has invested substantial time and money in
the development of its products, services, territories, advertising and
marketing thereof, soliciting clients and creating goodwill. By accepting
employment with the Company, the Executive acknowledges that the customers are
the customers of the Company, and that any goodwill created by the Executive
belongs to and shall inure to the benefit of the Company.
(b) Notice. Any notice or demand required or permitted hereunder shall
be made in writing (i) either by actual delivery of the notice or demand into
the hands of the party thereunder entitled, or (ii) by the mailing of the
notice or demand in the United States mail, certified or registered mail,
return receipt requested, all postage prepaid and addressed to the party to
whom the notice or demand is to be given at the party's respective address set
forth below, or such other address as the parties may from time to time
designate by written notice as herein provided.
As addressed to the Company:
Cozzi Iron & Metal, Inc.
2232 South Blue Island Avenue
Chicago, Illinois 60608
With copies to:
Metal Management, Inc.
500 North Dearborn Avenue
Suite 405
Chicago, Illinois 60610
Attention: Chief Financial Officer
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<PAGE> 13
and
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Erhard R. Chorle
As addressed to the Executive:
Mr. Gregory P. Cozzi
2232 South Blue Island Avenue
Chicago, Illinois 60608
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Finley Maxson
The notice or demand shall be deemed to be received in case (i) on the date of
its actual receipt by the party entitled thereto and in case (ii) on the date
of its mailing.
(c) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Company unless made in writing and
signed by an officer of the Company or upon the Executive unless made in
writing and signed by him. The waiver by either party hereto of the breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by such party.
(d) Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the Executive's duties and compensation as
an executive of the Company and shall supersede any and all prior agreements or
understandings between the parties hereto; there are no representations,
warranties, agreements or commitments between the parties hereto with respect
to his employment except as set forth herein.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.
(f) Severability. If any provision of this Agreement shall, for any
reason, be held unenforceable by a court of competent jurisdiction, such
provision shall be severed from this Agreement unless, as a result of such
severance, the Agreement fails to reflect the basic intent of the parties. If
the Agreement continues to reflect the basic intent of the parties, then
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<PAGE> 14
the invalidity of such specific provision shall not affect the enforceability of
any other provision herein, and the remaining provisions shall remain in full
force and effect.
(g) Assignment. The Executive may not under any circumstances delegate
any of his rights and obligations hereunder without first obtaining the prior
written consent of the Company.
(h) Heirs. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him hereunder
if he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designees or, if there is no such
designee, to the Executive's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
COZZI IRON & METAL, INC.
By: /s/ Frank J. Cozzi
-----------------------------
Frank J. Cozzi, President
EXECUTIVE:
/s/ Gregory P. Cozzi
--------------------------------
GREGORY P. COZZI
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<PAGE> 1
Exhibit 10.19
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-3 WARRANT December 1, 1997
To Purchase 81,035 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Gregory P. Cozzi (the "Employee") and Cozzi Iron & Metal, Inc.,
a wholly owned subsidiary of the Company, Employee is entitled, upon the terms
and subject to the conditions hereinafter set forth, at any time after the date
hereof and at or prior to 11:59 p.m. Central Time, on December 1, 2002 (the
"Expiration Time"), but not thereafter, to acquire from the Company, in whole
or in part, from time to time, up to 81,035 fully paid and nonassessable shares
(the "Shares") of common stock, $.01 par value of the Company ("Common Stock"),
at a purchase price of $5.91 per Share, as adjusted pursuant to Section 10
hereof (the "Exercise Price"). The number of Shares, type of security and
Exercise Price are subject to adjustment as provided herein, and all references
to "Common Stock" and "Exercise Price" herein shall be deemed to include any
such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the
Employee pursuant to this Warrant shall be exercisable in accordance with
paragraphs 2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this
Warrant are exercisable by the Employee or his successors and assigns, in
whole or in part, at any time, or from time to time, prior to the Expiration
Time, by the surrender of this Warrant and the Notice of Exercise annexed
hereto, all duly completed and executed on behalf of the Employee, at the
office of the Company in Chicago, Illinois (or such other office or agency of
the Company as it may designate by notice in writing to the Employee at the
address of the Employee appearing on the books of the Company), and upon
payment of the Exercise Price for the Shares thereby purchased (by cash,
certified or cashier's check, or wire transfer payable to the order of the
Company, at the time of exercise in an amount equal to the purchase price of
the Shares thereby purchased). Thereupon, the Employee as the holder of this
Warrant, shall be entitled to receive from the Company a stock certificate in
proper form representing the number of Shares so
<PAGE> 2
Purchased, and a new Warrant in substantially identical form and dated
as of such exercise for the purchase of that number of Shares equal to the
difference, if any, between the number of Shares subject hereto and the number
of Shares as to which this Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to time,
prior to the Expiration Time and in the absence of Restrictions (as defined
below), the Employee or his successors and assigns may exchange this Warrant,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 2(b) by surrendering this Warrant at
the office of the Company in Chicago, Illinois (or at such other office or
agency of the Company as it may designate by notice in writing to the Employee
at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper form
representing the number of Shares which the Employee is entitled to receive
pursuant to such Warrant Exchange, and a new Warrant representing the portion
of the Shares, if any, for which this Warrant has then not been exchanged or
exercised. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Shares equal to
the quotient obtained by dividing (i) the value of the portion of this Warrant
being surrendered (determined by subtracting the aggregate Warrant Price for
such portion immediately prior to surrender from the aggregate Fair Market
Value (as hereinafter defined) of the Shares for which this Warrant is being
surrendered) by (ii) the Fair Market Value of one Share immediately prior to
surrender. As used herein, the phrase "the Fair Market Value of the Share(s)"
shall mean the average closing bid price of the Common Stock on NASDAQ (or such
other national securities exchange upon which the Common Stock is then traded)
for the five trading days immediately preceding the Exchange Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Employee within a reasonable time after the date on
which this Warrant shall have been exercised in accordance with the terms
hereof. All Shares that may be issued upon the exercise of this Warrant shall,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the
2
<PAGE> 3
date on which this Warrant shall have been exercised or converted in
accordance with the terms hereof.
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the
Employee as a holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable,
upon the surrender hereof by the Employee as the registered holder at the
office or agency of the Company referenced in Section 2 above, for a new
Warrant on substantially identical form and dated as of such exchange. The
Company shall maintain at the office or agency referenced in Section 2 above, a
registry showing the name and address of the Employee as the registered holder
of this Warrant. This Warrant may be surrendered for exchange or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or a Sunday or shall be a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the
number of Shares purchasable hereunder are subject to adjustment from time to
time as follows:
3
<PAGE> 4
(a) Merger or Consolidation. If at any time there shall be a
merger or a consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Employee as the
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
aggregate Exercise Price then in effect, the number of shares of stock or other
securities or property (including cash) of the successor corporation resulting
from such merger or consolidation, to which the Employee as the holder of the
stock deliverable upon exercise of this Warrant would have been entitled in
such merger or consolidation if this Warrant had been exercised immediately
before such merger or consolidation. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Employee as the holder of this Warrant after
the merger or consolidation. This provision shall apply to successive mergers
or consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to
Common Stock payable in Shares, or make any other distribution with respect to
Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares
4
<PAGE> 5
purchasable immediately prior to such adjustment in the Exercise Price
by a fraction (i) the numerator of which shall be the Exercise Price
immediately prior to such adjustment, and (ii) the denominator of which shall
be the Exercise Price immediately after such adjustment.
11. Notice of Adjustments; Notices. Whenever the Exercise Price or
number or type of securities issuable hereunder shall be adjusted pursuant to
Section 10 hereof, the Company shall issue and provide to the Employee as the
holder of this Warrant a certificate signed by an officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price and number of Shares purchasable hereunder after giving
effect to such adjustment.
12. Governing Law. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of Delaware and for all purposes shall be construed in
accordance with and governed by the laws of said state, without giving effect
to the conflict of laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court
proceeding between the Company and the Employee as the holder of this
Warrant relating hereto, the prevailing party shall be entitled to reasonable
attorneys' fees and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance of
any term of this Warrant may be waived only with the written consent of the
Company and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
undertakings with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/T. Benjamin Jennings
----------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares (the
"Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
-------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
-------------------------------
[Name]
- -------------------- -------------------------------
[Date] [Signature]
2
<PAGE> 1
Exhibit 10.20
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS.
No. Cozzi-6 WARRANT December 1, 1997
To Purchase 81,035 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares; Exercise Price; Term. This certifies that, in
consideration of entering into the Employment Agreement dated December 1, 1997,
by and between Gregory P. Cozzi (the "Employee") and Cozzi Iron & Metal, Inc.,
a wholly owned subsidiary of the Company, Employee is entitled, upon the terms
and subject to the conditions hereinafter set forth, at any time after the date
hereof and at or prior to 11:59 p.m. Central Time, on December 1, 2002 (the
"Expiration Time"), but not thereafter, to acquire from the Company, in whole
or in part, from time to time, up to 81,035 fully paid and nonassessable shares
(the "Shares") of common stock, $.01 par value of the Company ("Common Stock"),
at a purchase price of $15.84 per Share, as adjusted pursuant to Section 10
hereof (the "Exercise Price"). The number of Shares, type of security and
Exercise Price are subject to adjustment as provided herein, and all references
to "Common Stock" and "Exercise Price" herein shall be deemed to include any
such adjustment or series of adjustments.
2. Exercise of Warrant. The purchase rights exercisable by the Employee
pursuant to this Warrant shall be exercisable in accordance with paragraphs
2(a) or 2(b) below, as the case may be.
a. Cash Exercise. The purchase rights represented by this
Warrant are exercisable by the Employee or his successors and
assigns, in whole or in part, at any time, or from time to time, prior to
the Expiration Time, by the surrender of this Warrant and the Notice of
Exercise annexed hereto, all duly completed and executed on behalf of the
Employee, at the office of the Company in Chicago, Illinois (or such other
office or agency of the Company as it may designate by notice in writing to
the Employee at the address of the Employee appearing on the books of the
Company), and upon payment of the Exercise Price for the Shares thereby
purchased (by cash, certified or cashier's check, or wire transfer payable to
the order of the Company, at the time of exercise in an amount equal to the
purchase price of the Shares thereby purchased). Thereupon, the Employee as
the holder of this Warrant, shall be entitled to receive from the Company a
stock certificate in proper form representing the number of Shares so
<PAGE> 2
purchased, and a new Warrant in substantially identical form and dated as of
such exercise for the purchase of that number of Shares equal to the
difference, if any, between the number of Shares subject hereto and the number
of Shares as to which this Warrant is so exercised.
b. Cashless Exercise of Warrant. At any time, or from time to
time, prior to the Expiration Time and in the absence of Restrictions
(as defined below), the Employee or his successors and assigns may exchange
this Warrant, in whole or in part (a "Warrant Exchange"), into the number of
Shares determined in accordance with this Section 2(b) by surrendering this
Warrant at the office of the Company in Chicago, Illinois (or at such other
office or agency of the Company as it may designate by notice in writing to the
Employee at the address of the Employee appearing on the books of the Company)
accompanied by a notice stating: (i) such Employee's intent to effect such
exchange; (ii) the portion of this Warrant being surrendered in the Warrant
Exchange; and (iii) the date on which the Employee requests that such Warrant
Exchange occur (the "Exchange Notice"); provided, however, that in no event
shall the Exchange Notice specify a date for the Warrant Exchange which is
later than the Expiration Time. The Warrant Exchange shall take place on the
date specified in the Exchange Notice (the "Exchange Date"). Notwithstanding
anything to the contrary set forth herein, the Company may refuse to allow the
Employee to effect a Warrant Exchange at any time in the event that there are
restrictions prohibiting such Warrant Exchange imposed by the rules and
regulations of the Securities and Exchange Commission or the national
securities exchange upon which the Common Stock of the Company is then traded
("Restrictions"). Thereupon, the Employee as the holder of this Warrant shall
be entitled to receive from the Company a stock certificate in proper
form representing the number of Shares which the Employee is entitled to
receive pursuant to such Warrant Exchange, and a new Warrant representing the
portion of the Shares, if any, for which this Warrant has then not been
exchanged or exercised. In connection with any Warrant Exchange, this Warrant
shall represent the right to subscribe for and acquire the number of Shares
equal to the quotient obtained by dividing (i) the value of the portion of this
Warrant being surrendered (determined by subtracting the aggregate Warrant
Price for such portion immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of the Shares for which this Warrant is
being surrendered) by (ii) the Fair Market Value of one Share immediately prior
to surrender. As used herein, the phrase "the Fair Market Value of the
Share(s)" shall mean the average closing bid price of the Common Stock on
NASDAQ (or such other national securities exchange upon which the Common Stock
is then traded) for the five trading days immediately preceding the Exchange
Date.
3. Issuance of Shares. Certificates for Shares purchased hereunder
shall be delivered to the Employee within a reasonable time after the date on
which this Warrant shall have been exercised in accordance with the terms
hereof. All Shares that may be issued upon the exercise of this Warrant shall,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Employee as the holder of the Warrant or taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that the Shares so issued shall be and shall for all purposes be deemed to have
been issued to the Employee as the record owner of such Shares as of the close
of business on the
2
<PAGE> 3
date on which this Warrant shall have been exercised or converted in
accordance with the terms hereof.
4. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional Share to which the Employee as the holder
would otherwise be entitled, the Employee shall be entitled, at his option, to
receive either (i) a cash payment equal to the excess of fair market value for
such fractional Share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole Share if the Employee
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Employee
as a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges, Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Employee as the
holder of this Warrant. Issuance of certificates for Shares upon the exercise
of this Warrant shall be made without charge to the Employee for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company.
7. Exchange and Registry of Warrant. This Warrant is exchangeable,
upon the surrender hereof by the Employee as the registered holder at the
office or agency of the Company referenced in Section 2 above, for a new
Warrant on substantially identical form and dated as of such exchange. The
Company shall shall maintain at the office or agency referenced in Section 2
above, a registry showing the name and address of the Employee as the
registered holder of this Warrant. This Warrant may be surrendered for
exchange or exercise, in accordance with its terms, at the office of the
Company, and the Company shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Adjustments of Rights. The purchase price per Share and the number of
Shares purchasable hereunder are subject to adjustment from time to time as
follows:
3
<PAGE> 4
(a) Merger or Consolidation. If at any time there shall be a
merger or a consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Employee as the
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified herein and upon payment of the
aggregate Exercise Price then in effect, the number of shares of stock or other
securities or property (including cash) of the successor corporation resulting
from such merger or consolidation, to which the Employee as the holder of the
stock deliverable upon exercise of this Warrant would have been entitled in
such merger or consolidation if this Warrant had been exercised immediately
before such merger or consolidation. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Employee as the holder of this Warrant after
the merger or consolidation. This provision shall apply to successive mergers
or consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change.
(c) Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect
to Common Stock payable in Shares, or make any other distribution with respect
to Common Stock, then the Exercise Price shall be adjusted, from and after the
date of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Shares outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of Shares outstanding immediately after such dividend or
distribution. This paragraph shall apply only if and to the extent that, at
the time of such event, this Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 10(c) or 10(d) hereof, the number of Shares
purchasable hereunder shall be adjusted, to the nearest whole Share, to the
product obtained by multiplying the number of Shares
4
<PAGE> 5
purchasable immediately prior to such adjustment in the Exercise Price
by a fraction (i) the numerator of which shall be the Exercise Price
immediately prior to such adjustment, and (ii) the denominator of which shall
be the Exercise Price immediately after such adjustment.
11. Notice of Adjustments; Notices. Whenever the Exercise Price or
number or type of securities issuable hereunder shall be adjusted pursuant to
Section 10 hereof, the Company shall issue and provide to the Employee as the
holder of this Warrant a certificate signed by an officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price and number of Shares purchasable hereunder after giving
effect to such adjustment.
12. Governing Law. This Warrant shall be binding upon any
successor or assigns of the Company. This Warrant shall constitute a contract
under the laws of Delaware and for all purposes shall be construed in
accordance with and governed by the laws of said state, without giving effect
to the conflict of laws principles.
13. Attorneys' Fees. In any litigation, arbitration or court
proceeding between the Company and the Employee as the holder of this
Warrant relating hereto, the prevailing party shall be entitled to reasonable
attorneys' fees and expenses incurred in enforcing this Warrant.
14. Amendments. This Warrant may be amended and the observance
of any term of this Warrant may be waived only with the written consent of the
Company and the Employee as the holder hereof.
15. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b)
one business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid,
in the U.S. mail, sent by certified or registered mail, return receipt
requested, and addressed to the party to be notified at the address indicated
below for the Company, or at the address for the Employee as the holder set
forth in the registry maintained by the Company pursuant to Section 7, or at
such other address and/or telecopy or telex number and/or to the attention of
such other person as the Company or the Employee as the holder may designate by
ten-day advance written notice.
16. Entire Agreement. This Warrant and the form attached hereto
contain the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
undertakings with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: December 1, 1997
METAL MANAGEMENT, INC.
By: /s/ T. Benjamin Jennings
---------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
Address: 500 N. Dearborn St.
Suite 405
Chicago, Illinois 60610
6
<PAGE> 7
NOTICE OF EXERCISE
To: Metal Management, Inc.
1. The undersigned hereby elects to purchase ________________ shares
(the "Shares") of common stock $.01 par value of Metal Management, Inc. (the
"Company") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price and any transfer taxes payable pursuant to the
terms of the Warrant, together with an investment Representation Statement in
form and substance satisfactory to legal counsel to the Company.
2. The Shares to be received by the undersigned upon exercise of the
Warrant are being acquired for its own account, not as a nominee or agent, and
not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same, except in compliance with applicable
federal and state securities laws. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Shares. The undersigned believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
3. The undersigned understands that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in transactions not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with Rule 144 of the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
4. The undersigned understands the certificates evidencing the Shares
may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
<PAGE> 8
5. Please issue a certificate or certificates representing said Shares in
the name of the undersigned.
--------------------------------
[Name]
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned.
--------------------------------
[Name]
- ---------------- --------------------------------
[Date] [Signature]
2
<PAGE> 1
EXHIBIT 10.21
- --------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
for
METAL MANAGEMENT, INC
Dated: December 1, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
CORPORATE STRUCTURE AND OPERATION............................. 1
1.1 Board of Directors..................................... 1
(a) Board Size........................................ 1
(b) Election of Directors............................. 1
(c) Removal........................................... 2
(d) Vacancies......................................... 2
(e) Selection of Nominees............................. 2
1.2 Management Provisions.................................. 2
1.3 Committees............................................. 4
1.4 Election of Officers................................... 4
1.5 Agreement to Vote Shares............................... 4
ARTICLE II
RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO
DISPOSITION OF SHARES......................................... 5
2.1 Certain Definitions.................................... 5
2.2 General Restriction.................................... 5
2.3 First Refusal Options.................................. 5
(a) Receipt of Offer ................................. 5
(b) Order of First Refusal Options.................... 6
(c) Place of Closing.................................. 7
(d) Date of Closing................................... 7
(e) Deliveries at Closing............................. 7
(f) Right to Accept................................... 8
2.4 Tag Along Rights....................................... 8
2.5 Effect of Giving of Notice............................. 8
2.6 Restrictive Legend on Securities....................... 9
2.7 Permitted Transfers.................................... 9
2.8 Requirements for Transfer.............................. 10
2.9 Rights and Obligations of Transferor................... 10
ARTICLE III
GENERAL PROVISIONS........................................... 10
3.1 Term of This Agreement................................. 11
3.2 Remedies............................................... 11
3.3 Notices................................................ 11
3.4 Legal Fees............................................. 13
3.5 Successors and Assigns................................. 13
3.6 Governing Law.......................................... 13
3.7 Further Assurances..................................... 13
3.8 Counterparts........................................... 13
3.9 Headings............................................... 13
3.10 Entire Agreement....................................... 13
3.11 Severability........................................... 13
3.12 Waivers................................................ 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13 Gender References...................................... 14
</TABLE>
<PAGE> 4
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT ("AGREEMENT"), made and entered into as of
the 1st day of December, 1997, by and among T. Benjamin Jennings ("TBJ"),
Gerard M. Jacobs ("GMJ"), Albert A. Cozzi ("AAC"), Frank J. Cozzi ("FJC") and
Gregory P. Cozzi ("GPC") (each a "STOCKHOLDER" and collectively the
"STOCKHOLDERS") and Metal Management, Inc., a Delaware corporation (the
"CORPORATION").
R E C I T A L S
A. Pursuant to that certain Agreement and Plan of Merger dated May 16,
1997 (the "MERGER AGREEMENT") among the Corporation, CIM Acquisition, Co.,
Cozzi Iron & Metal, Inc., AAC, FJC and GPC (AAC, FJC and GPC being sometimes
hereinafter referred to collectively as the "COZZI STOCKHOLDERS"), the Cozzi
Stockholders will receive 11,404,748 shares of common stock, $.01 par value per
share, of the Corporation (the "COMMON STOCK").
B. TBJ and GMJ (the "JJ STOCKHOLDERS") currently own an aggregate of
1,020,000 shares of the Common Stock of the Corporation.
C. The Stockholders desire to provide for the manner in which they will
vote their shares of Common Stock as to the management of the Corporation and
for the imposition of certain restrictions upon the disposition of shares of
Common Stock of the Corporation held by the Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and provisions
herein set forth, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, IT IS HEREBY AGREED as
follows:
ARTICLE I
CORPORATE STRUCTURE AND OPERATION
1.1 BOARD OF DIRECTORS.
(a) BOARD SIZE. The Board of Directors of the Corporation shall at
all times consist of an even number of directors, which shall be not less
than eight (8) nor more than sixteen (16).
(b) ELECTION OF DIRECTORS. At all meetings (and written actions in
lieu of meetings) of stockholders of the Corporation at which directors
are to be elected, each Stockholder shall vote all of such Stockholder's
shares of Common Stock to elect as directors of the Corporation the
persons nominated in accordance with the following provisions:
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<PAGE> 5
(i) The JJ Stockholders shall have the right to nominate that
number of persons (each, a "JJ DIRECTOR") constituting one-half of
the total number of directors of the Corporation; provided, that
one of such nominees shall be an Independent Director (as defined
below), who shall be reasonably acceptable to the Cozzi
Stockholders; and
(ii) The Cozzi Stockholders shall have the right to nominate
that number of persons (each, a "COZZI DIRECTOR") constituting
one-half of the total number of directors of the Corporation;
provided, that one of such nominees shall be an Independent
Director (as defined below), who shall be reasonably acceptable to
the JJ Stockholders.
For purposes of this Agreement, an "INDEPENDENT DIRECTOR" shall mean a
director who is not an employee, officer or director of the Corporation
or any of its subsidiaries or a relative or an Associate of any of the
Stockholders. "ASSOCIATE" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations of the Securities Exchange Act
of 1934, as amended.
(c) REMOVAL. Each Stockholder agrees to vote such Stockholder's
shares of Common Stock to remove a JJ Director upon request at any time
by the unanimous consent of the JJ Stockholders, and to remove a Cozzi
Director upon request at any time by the holders of a majority of the
shares of Common Stock held by the Cozzi Stockholders, provided, that the
Stockholders making such request shall simultaneously designate a
replacement to fill any vacancy so created, which replacement, if such
replacement is an Independent Director, shall be reasonably acceptable to
the other group.
(d) VACANCIES. Each Stockholder agrees to vote such Stockholder's
shares of Common Stock to fill any vacancy on the Board of Directors
caused by the death, disability, resignation or removal of any JJ
Director or Cozzi Director, with a nominee selected by the JJ
Stockholders or the Cozzi Stockholders, respectively; provided, that if
such nominee is to fill the vacancy of an Independent Director, such
nominee shall be reasonably acceptable to the other group.
(e) SELECTION OF NOMINEES. Any person nominated by the holders of a
majority of the shares of Common Stock held by the Cozzi Stockholders, as
to the Cozzi Directors, and by the unanimous approval of the JJ
Stockholders, as to the JJ Directors, shall be deemed to be the nominee
of such group. Each group shall notify the Corporation of its nominees
not less than forty-five (45) days prior to the Corporation's annual
meeting, and not less than forty-five (45) days prior to any special
meeting at which directors are to be elected.
1.2 MANAGEMENT PROVISIONS. Without limiting the actions that may be
required, by applicable law or otherwise, to be approved by the Board of
Directors, the parties expressly agree
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<PAGE> 6
that, unless approved by a two-thirds vote of the Board of Directors, neither
the Corporation nor any of its subsidiaries may take or agree to take, and no
Stockholder shall cause the Corporation or any subsidiary to take or agree to
take, any of the following actions:
(i) amend the Certificate of Incorporation or By-laws of the
Corporation;
(ii) wind-up, liquidate, dissolve or reorganize the
Corporation or adopt a plan or proposal contemplating any of the
foregoing;
(iii) approve the annual budget of the Corporation for any
fiscal year or approve any course of action which would cause the
Corporation to materially deviate from its budget;
(iv) elect or remove Officers;
(v) change the level of compensation of or modify or terminate
any written agreement with AAC, FJC, GPC, GMJ or TBJ;
(vi) issue securities of the Corporation including debt or
equity securities, options, rights or warrants, or any other
securities which are convertible into or exchangeable for shares of
Common Stock of the Corporation;
(vii) register any securities of the Corporation;
(viii) borrow funds in excess of $5,000,000 or provide a
guarantee in respect of the obligations of another person or
request any waiver from a lender to the Corporation;
(ix) merge, consolidate or combine the Corporation with any
person or sell substantially all of its assets;
(x) purchase, sell, lease, acquire or dispose of assets valued
at $5,000,000 or more, including acquiring another company,
division or line of business (other than matters provided for in
the Corporation's annual budget approved in accordance with this
Agreement);
(xi) declare or pay any dividends or any other distribution in
respect of any securities of the Corporation or redeem, acquire or
retire any securities of the Corporation;
(xii) make or commit to make during any fiscal year capital
expenditures (other than capital expenditures provided for in the
Corporation's annual budget
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<PAGE> 7
approved in accordance with this Agreement) which, in the
aggregate, exceed $5,000,000;
(xiii) create any committee of the Board of Directors or
change a committee of the Board of Directors; and
(xiv) make any decision involving a matter referred to in (i)
through (xiii), inclusive, relating to any subsidiary of the
Corporation.
Notwithstanding the foregoing, no further action or approval of the Board of
Directors shall be required for, and the provisions of this Section 1.2 shall
not apply to, the matters set forth on Schedule 1.2, which matters have been
approved by the Board of Directors prior to the date of this Agreement and
which shall be acted upon by the Chairman and Chief Executive Officer of the
Corporation in their sole discretion.
1.3 COMMITTEES. The Board of Directors shall establish and at all times
maintain an Executive Committee consisting of at least the Chairman of the
Board, the President, and the Chief Executive Officer; provided, that in the
event of the death or disability of Albert A. Cozzi, Frank J. Cozzi shall
assume Albert A. Cozzi's position on such Executive Committee. The Board of
Directors shall delegate to the Executive Committee all the power and authority
of the Board of Directors, including those matters set forth in Section 1.2,
relating to the management of the business and affairs of the Corporation to
the extent permitted under Section 141 (c) (i) of the General Corporation Law
of the State of Delaware. Any action to be taken by the Executive Committee
shall require the unanimous consent of Albert A. Cozzi, Gerard M. Jacobs and T.
Benjamin Jennings.
1.4 ELECTION OF OFFICERS. The Stockholders shall cause their designees on
the Board of Directors to elect the following persons to the offices set forth
opposite their names:
<TABLE>
<S> <C> <C>
(a) Albert A. Cozzi President, Chief Operating Officer
(b) Gerard M. Jacobs Chief Executive Officer
(c) T. Benjamin Jennings Chairman of the Board and Chief
Development Officer
(d) Frank J. Cozzi Vice President and President of
Cozzi Iron & Metal, Inc.
</TABLE>
1.5 AGREEMENT TO VOTE SHARES. Each Stockholder shall vote all of his
shares of Common Stock (or such other securities of the Corporation which
entitle such Stockholder to vote on such matters), execute and deliver such
further documents, take such further action and cause his designees on the
Board of Directors to vote in such a manner as may be necessary or desirable to
carry out the purposes and intent of this Agreement, including, without
limitation, any amendments to the Certificate of Incorporation or By-Laws which
are required by law or prudent business practices in order to make the terms of
this Agreement effective and binding on
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<PAGE> 8
the Corporation and all of its stockholders or otherwise to effectuate any of
the terms, conditions, provisions or purposes hereof.
ARTICLE II
RESTRICTIONS UPON AND OBLIGATIONS WITH
RESPECT TO DISPOSITION OF SHARES
2.1 CERTAIN DEFINITIONS. The term "CORPORATION SECURITIES" as used
herein shall mean any shares of capital stock of the Corporation at any time
owned or subscribed for by any party hereto, and any subscriptions, options,
warrants, calls, commitments, or rights of any kind whatsoever to purchase or
otherwise acquire any shares of capital stock of the Corporation.
2.2 GENERAL RESTRICTION. During the term of this Agreement, each
Stockholder covenants and agrees that such Stockholder will not, directly or
indirectly, voluntarily or involuntarily, sell, assign, transfer, pledge,
hypothecate, encumber or otherwise dispose (each, a "TRANSFER") of the
Corporation Securities at any time owned by such Stockholder, or any interest
therein, except for (i) Transfers of up to that amount of Corporation
Securities that such Stockholder is permitted (or would be permitted) to sell
in reliance upon Rule 144 of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), as specified in paragraph (c) of such Rule 144, (ii)
Transfers to Permitted Transferees (as hereinafter defined), (iii) Transfers in
accordance with the terms and conditions of the provisions of Section 2.3 or
2.4, (iv) Transfers of Corporation Securities registered under the Securities
Act, or (v) Transfers between the Escrow Agent (as such term is defined in that
certain Escrow Agreement by and among the Corporation, the Stockholders and
Chicago Title & Trust Company) and the Stockholders or the Corporation pursuant
to the terms of the Escrow Agreement. Any attempted Transfer not in accordance
with the terms and conditions of this Agreement shall be void and of no force
or effect.
2.3 FIRST REFUSAL OPTIONS.
(a) RECEIPT OF OFFER. If at any time after the date hereof any
Stockholder shall at any time desire to sell all or a portion of the
Corporation Securities owned by such Stockholder (the "OFFERED
CORPORATION SECURITIES"), other than a Transfer of up to that number of
Corporation Securities that such Stockholder is permitted (or would be
permitted) to sell in reliance upon Rule 144 of the Securities Act
pursuant to Section 2.2(i) of this Agreement, a Transfer to a Permitted
Transferee pursuant to Section 2.2 (ii) of this Agreement, or a Transfer
of Corporation Securities registered under the Securities Act, and shall
have received a bona fide written offer for the purchase thereof, with a
proposed closing required within a reasonable time (an "OFFER"), which
such Stockholder desires to accept, such Stockholder (the "SELLING
STOCKHOLDER") shall within five (5) days thereafter transmit executed or
true and correct photostatic copies of the Offer to each of the other
Stockholders (the "REMAINING STOCKHOLDERS") and to the Corporation. For
purposes of this Section 2.3, if any portion of the purchase price for
the Offered Corporation Securities is payable in property other than in
cash or a promissory note (the
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<PAGE> 9
"NON-CASH PORTION") the Non-Cash Portion shall be valued at its fair
market value on the date of the Offer, and shall be payable by the
Remaining Stockholders in cash in accordance with the payment terms set
forth in the Offer. The fair market value of the Non-Cash Portion shall
be mutually determined by the Selling Stockholder on the one hand, and
the Remaining Stockholders, on the other. If the two sides cannot agree
on the fair market value of the Non-Cash Portion within a fifteen (15)
day period, the two sides shall mutually select an appraiser to value
such property. The option periods set forth in Section 2.3(b) and (c),
and 2.4 shall not begin to run until the parties have assigned a value to
the Non-Cash Portion.
(b) ORDER OF FIRST REFUSAL OPTIONS. All of the Offered Corporation
Securities shall thereupon be subject to the following options to
purchase from the Selling Stockholder at the price and terms set forth in
the Offer, in the following order of priority:
(i) In the event that the Selling Stockholder is a Cozzi
Stockholder, each of the remaining Cozzi Stockholders shall have
the first option to purchase any Offered Corporation Securities
on a pro rata basis (determined by reference to the remaining
Cozzi Stockholders only) or in such proportions as is otherwise
agreed upon by the remaining Cozzi Stockholders. The remaining
Cozzi Stockholders shall exercise this option by giving notice to
the Corporation and the Selling Stockholder not later than
fifteen (15) days after the giving of the notice of Offer. If
the Cozzi Stockholders exercise the first options with respect to
less than all of the Offered Corporation Securities or fail to
exercise the options within such fifteen (15) day period, each of
the JJ Stockholders shall have the second option to purchase any
remaining Offered Corporation Securities on a pro rata basis
(determined by reference to the JJ Stockholders only) or in such
proportions as is otherwise agreed upon by the remaining JJ
Stockholders. The JJ Stockholders shall exercise their option by
giving notice to the Selling Stockholder and the Corporation not
later than fifteen (15) days after notice from the Cozzi
Stockholders, or if the Cozzi Stockholders fail to give notice,
fifteen (15) days after the expiration of the first option
period. If the remaining Cozzi Stockholders and the JJ
Stockholders have in the aggregate exercised their respective
options with respect to less than all of the Offered Corporation
Securities, then the Corporation shall have a third option to
purchase any remaining Offered Corporation Securities. The
Corporation shall exercise its option by giving notice to the
Selling Stockholder not later than five (5) days after notice
from the JJ Stockholders, or if the JJ Stockholders fail to give
notice, five (5) days after the expiration of the second option
period. If after the exercise or expiration of the foregoing
options there remain any Offered Corporation Securities for sale,
then no Offered Corporation Securities may be purchased pursuant
to such options and such options shall be deemed to have expired
without exercise.
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<PAGE> 10
(ii) In the event that the Selling Stockholder is a JJ
Stockholder, each of the remaining JJ Stockholders shall have the
first option to purchase any Offered Corporation Securities on a
pro rata basis (determined by reference to the remaining JJ
Stockholders only) or in such proportions as is otherwise agreed
upon by the remaining JJ Stockholders. The remaining JJ
Stockholders shall exercise this option by giving notice to the
Corporation and the Selling Stockholder not later than fifteen
(15) days after the giving of the notice of Offer. If the JJ
Stockholders exercise the first options with respect to less than
all of the Offered Corporation Securities or fail to exercise the
options within such fifteen (15) day period, each of the Cozzi
Stockholders shall have the second option to purchase any
remaining Offered Corporation Securities on a pro rata basis
(determined by reference to the Cozzi Stockholders only) or in
such proportions as is otherwise agreed upon by the remaining
Cozzi Stockholders. The Cozzi Stockholders shall exercise their
option by giving notice to the Selling Stockholder and the
Corporation not later than fifteen (15) days after notice from
the JJ Stockholders, or if the JJ Stockholders fail to give
notice, fifteen (15) days after the expiration of the first
option period. If the remaining JJ Stockholders and the Cozzi
Stockholders have in the aggregate exercised their respective
options with respect to less than all of the Offered Corporation
Securities, then the Corporation shall have a third option to
purchase any remaining Offered Corporation Securities. The
Corporation shall exercise its option by giving notice to the
Selling Stockholder not later than five (5) days after notice
from the Cozzi Stockholders, or if the Cozzi Stockholders fail to
give notice, five (5) days after the expiration of the second
option period. If after the exercise or expiration of the
foregoing options there remain any Offered Corporation Securities
for sale, then no Offered Corporation Securities may be purchased
pursuant to such options and such options shall be deemed to have
expired without exercise.
(c) PLACE OF CLOSING. Unless otherwise agreed by the parties, all
purchases pursuant to exercise of any options hereunder shall be
consummated at the offices of the Corporation, and the date of Closing
shall be as provided in Section 2.3 (d) below.
(d) DATE OF CLOSING. The purchase of Offered Corporation Securities
pursuant to the exercise of one or more of the options provided for in
this Section 2.3 shall be consummated on the date specified in the Offer
or sixty (60) days after the exercise or expiration of the last such
option, whichever is later (an "OPTION CLOSING DATE").
(e) DELIVERIES AT CLOSING. The cash portion of the purchase price
of any Corporation Securities purchased hereunder shall be paid on the
Option Closing Date by certified or bank cashier's check or by wire
transfer as designated by the Selling Stockholder. Simultaneously with
such payment, the Selling Stockholder shall deliver to the purchaser a
certificate or certificates representing all of the Corporation
Securities so purchased, duly endorsed in blank, or with separate
assignments attached duly executed in blank, in either case with
signatures guaranteed and appropriate tax stamps, if any,
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<PAGE> 11
affixed, in form satisfactory to transfer such Corporation Securities to
the order of such purchaser, free and clear of any liens, claims or
encumbrances thereon. Each Selling Stockholder shall furnish to each
purchaser such additional evidence and executed documents as such
purchaser may reasonably request to establish that the transfer of such
shares is valid and free and clear of any liens, claims or encumbrances.
(f) RIGHT TO ACCEPT. In the event that the options provided for in
Section 2.3 (b) hereof expire without exercise or the Offered Corporation
Securities are not purchased pursuant to exercise thereof, then within
sixty (60) days after all rights to make such purchase shall have
expired, the Selling Stockholder, subject to the provisions of Section
2.4, shall have the right to consummate the sale of all of the Offered
Corporation Securities, upon terms and conditions no less favorable than
those contained in the Offer, to the offeror thereunder. If for any
reason the sale is not consummated within the period provided for herein,
the Selling Stockholder shall not thereafter dispose of the Offered
Corporation Securities unless and until it has again complied with all of
the provisions hereof.
2.4 TAG ALONG RIGHTS. In addition to the options set forth in Section
2.3, if a Selling Stockholder has given notice of an Offer to sell more than
that number of Corporation Securities that such Stockholder is permitted (or
would be permitted) to sell in reliance upon Rule 144 of the Securities Act
pursuant to Section 2.2(i) of this Agreement to any person other than the
Corporation or a Permitted Transferee (the "PROPOSED TRANSFEREE") other than an
offer of Corporation Securities registered under the Securities Act, the
Remaining Stockholders shall have the right to elect to participate in the
contemplated transaction by delivering a notice to the Selling Stockholder
within five (5) days of the expiration of all of the options set forth in
Section 2.3. If any Remaining Stockholder elects to participate in the
proposed sale, he shall have the right to sell, at the same price and on the
same terms as set forth on the Offer, that number of shares of Corporation
Securities equal to the product of (i) the number obtained by dividing (A) the
number of shares of Corporation Securities owned by such Remaining Stockholder,
by (B) the aggregate number of shares owned by the Selling Stockholder and all
Remaining Stockholders electing to participate in the sale, and (ii) the number
of shares of Corporation Securities to be sold to the Proposed Transferee
pursuant to the Offer (the "TAG-ALONG SHARES"). The Tag-Along Shares shall
either (i) be purchased by the Proposed Transferee in addition to the Selling
Stockholder's shares, or (ii) be purchased by the Proposed Transferee in lieu
(and reduction) of the number of shares being sold by the Selling Stockholder.
The Selling Stockholder will use his best efforts to obtain the agreement of
the Proposed Transferee to the participation of the Remaining Stockholders in
such sale. The Selling Stockholder will be prohibited from transferring any of
his shares of Corporation Securities to the Proposed Transferee if the Proposed
Transferee declines to allow the participation of the Remaining Stockholders
electing to participate.
2.5 EFFECT OF GIVING OF NOTICE. The giving of any notice of exercise of
any option to purchase, or to require any other party to sell, any Corporation
Securities shall, subject to revocation of such as herein expressly permitted,
create a binding contract for the sale and
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<PAGE> 12
purchase of such Corporation Securities on the Option Closing Date in
accordance with the provisions hereof.
2.6 RESTRICTIVE LEGEND ON SECURITIES. Each stock certificate or
instrument representing any Corporation Securities shall be endorsed with the
following legend:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "ACT") or
any state securities law. This Certificate may not be
transferred or otherwise disposed of unless an effective
registration statement under the Act and all applicable
state securities laws is then in effect or, in the opinion
of counsel for the Corporation, such registration is not
necessary. The transfer or other disposition of the shares
represented by this Certificate is also restricted under the
terms of a Stockholders' Agreement dated December 1, 1997 by
and among T. Benjamin Jennings, Gerard M. Jacobs, Albert A.
Cozzi, Frank J. Cozzi and Gregory P. Cozzi, a copy of which
is available in the office of the Corporation."
2.7 PERMITTED TRANSFERS.
(a) Notwithstanding anything contained in Section 2.2 to the
contrary, a Stockholder may transfer any or all of his Corporation
Securities to a Permitted Transferee, as defined below, subject to the
terms and conditions contained in this Section 2.7.
(b) A "PERMITTED TRANSFEREE" of a Stockholder is hereby defined as
and construed to mean any one or more of the following:
(i) With respect to a Cozzi Stockholder, to any other Cozzi
Stockholder;
(ii) With respect to a JJ Stockholder, to any other JJ
Stockholder;
(iii) An executor(s), administrator(s) or conservator(s) of
the Stockholder;
(iv) A beneficiary of a deceased Stockholder's will or trust;
(v) A trustee or trustees of a trust or a beneficiary or
beneficiaries of a trust created by a Stockholder, but only if (A)
the beneficiary or beneficiaries of such trust are one or more of a
group consisting of the Stockholder, the spouse of the Stockholder
and the descendants and/or the adopted children of the Stockholder
or the Stockholder's parents, and (B) the trustee or other person
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<PAGE> 13
exercising dominion or control over such trust is a Stockholder or
former Stockholder; and
(vi) A Transferee of a Permitted Transferee if the transfer
would have been permissible under the provisions hereof if made by
the Stockholder who originally transferred the Corporation
Securities to the Permitted Transferee.
(c) All Permitted Transferees shall execute an appropriate
supplement to this Agreement pursuant to which the Permitted Transferee
agrees to assume and become subject to all of the rights and obligations
hereunder of the party whose Corporation Securities it has acquired and
upon such execution shall be deemed a Stockholder hereunder; provided,
however, that with respect to a Permitted Transferee under Section
2.7(b)(iii) and (iv), the Permitted Transferee shall further execute a
proxy granting to the Remaining Stockholders of the deceased
Stockholder's group the right to vote the transferred Corporation
Securities with respect to the designation, nomination and/or election of
directors. The proxy shall be in a form acceptable to the Remaining
Stockholders. The Permitted Transferee shall assume and become subject
to all of the rights and obligations hereunder of the Stockholder whose
Corporation Securities it has acquired. Until a Permitted Transferee
shall execute such a supplement to this Agreement, and a proxy, if
necessary, the transfer and conveyance of the Corporation Securities to
such Permitted Transferee shall be void and of no effect and he or she
shall not be deemed a Stockholder hereunder and shall have none of the
rights and benefits of a Stockholder hereunder.
2.8 REQUIREMENTS FOR TRANSFER. Other than Transfers permitted pursuant
to Section 2.2(i), (iii) and (iv) of this Agreement, no Corporation Securities
shall be transferred upon the books of the Corporation, nor shall any sale or
transfer or any other disposition thereof be effective, unless and until (a)
all of the terms and conditions of this Agreement and applicable law have been
first complied with and, with respect to compliance with applicable law, the
Corporation has been provided with an opinion of counsel in form and substance
satisfactory to the Corporation's counsel, and (b) the transferees shall have
executed an agreement in form and substance satisfactory to counsel for the
Corporation to assume and become subject to all of the rights and obligations
hereunder of the party whose Corporation Securities it has acquired, including,
without limitation, the obligation to make payment for any unpaid stock
subscriptions and the obligations and restrictions under Article II hereof with
respect to disposition of the Corporation Securities with the same full force
and effect as if originally a signatory hereto.
2.9 RIGHTS AND OBLIGATIONS OF TRANSFEROR. Following disposition of all
of his Corporation Securities in compliance with this Agreement, a party hereto
shall have no further rights or obligations hereunder.
ARTICLE III
GENERAL PROVISIONS
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<PAGE> 14
3.1 TERM OF THIS AGREEMENT. This Agreement shall continue in full force
and effect for a period of ten (10) years unless sooner terminated by the
unanimous consent of the Stockholders. No termination of this Agreement, by
lapse of time or otherwise shall affect any rights or obligations created by
exercise of any option to purchase or sell the Corporation Securities in
accordance with any of the provisions of Article II hereof.
3.2 REMEDIES. Each of the parties to this Agreement acknowledges that
(a) the rights of the Stockholders concerning the restrictions on the transfer
of the Corporation Securities, and in the management and affairs of the
Corporation are unique, and (b) any failure of any Stockholder to perform any
of such party's obligations under this Agreement will cause irreparable harm
for which any remedies at law would be inadequate. Accordingly, each of the
parties agrees that, in the event of any actual or threatened or attempted
failure of any party to perform any of his obligations hereunder, each of the
other parties shall, in addition to all other remedies, be entitled to a decree
for specific performance of the provisions of this Agreement and to temporary
and permanent injunctions restraining such failure or commanding performance of
such obligations, without being required to show actual damage or to furnish
any bond or other security.
3.3 NOTICES. All notices required or permitted hereunder shall be in
writing, signed by the party giving notice or an officer thereof, and shall be
deemed to have been given when delivered by personal delivery, by Federal
Express or similar courier service, by facsimile or three (3) days after
deposit in the United States mail, registered or certified, with postage
prepaid, addressed as follows:
(A) If to AAC, FJC or GPC at:
Cozzi Iron & Metal, Inc.
2232 South Blue Island Avenue
Chicago, Illinois 60608
Tel.: (773) 254-1200
Fax: (773) 254-8201
(B) If to TBJ, at:
12 Country Lane
Northfield, Illinois 60093
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<PAGE> 15
with a copy to:
Thomas V. Skinner, Esq.
Winston & Strawn
33 West Wacker Drive
Chicago, Illinois 60601
Tel.: (312) 558-5578
Fax: (312) 558-5700
(C) If to GMJ, at:
7600 Augusta
River Forest, Illinois 60305
with a copy to:
Thomas V. Skinner, Esq.
Winston & Strawn
33 West Wacker Drive
Chicago, Illinois 60601
Tel.: (312) 558-5578
Fax: (312) 558-5700
(D) If to the Corporation, at:
500 North Dearborn Street
Suite 405
Chicago, Illinois 60610
Attn:Chief Financial Officer
Fax: (312) 645-0714
With a copy to:
SHEFSKY & FROELICH LTD.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attn: Erhard R. Chorle
Fax: (312) 527-5921
or such other address as any party may designate for himself or itself by
notice given to the other parties from time to time in accordance with the
provisions hereof.
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<PAGE> 16
3.4 LEGAL FEES. In the event that any action is filed to enforce any of
the terms, covenants or provisions of this Agreement, the prevailing party in
such action shall be entitled to payment from the other party of all costs and
expenses, including reasonable attorney fees, court costs and ancillary
expenses incurred by such prevailing party in connection with such action.
3.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, successors and assigns.
3.6 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive laws of the United States and the
State of Illinois, notwithstanding any conflict of law principles.
3.7 FURTHER ASSURANCES. Each party agrees to cooperate with the others,
and to execute and deliver, or cause to be executed and delivered, all such
other instruments, and to take all such other actions as he may be reasonably
required to take, from time to time, in order to effect the provisions and
purposes hereof.
3.8 COUNTERPARTS. This Agreement may be executed in any one or more
counterparts, each of which shall constitute an original, no other counterpart
needing to be produced and all of which, when taken together, shall constitute
but one and the same instrument.
3.9 HEADINGS. The headings of Articles and subdivisions herein are
merely for convenience of reference and shall not affect the interpretation of
any of the provisions hereof.
3.10 ENTIRE AGREEMENT. This Agreement and the Merger Agreement contain
the entire understanding among the parties with respect to the subject matter
of this Agreement. Any modification hereof may be made only by an instrument
in writing signed by all of the parties hereto.
3.11 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be construed and interpreted in such a manner as to be effective and
valid under applicable law. If any provision of this Agreement or the
application thereof to any party or circumstance shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition without invalidating the remainder of such provision or any
other provision of this Agreement or the application of such provision to other
parties or circumstances.
3.12 WAIVERS. No delay on the part of any party in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any party or any remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
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<PAGE> 17
3.13 GENDER REFERENCES. Whenever appropriate, the singular form of a
word shall be interpreted in the plural and vice versa. All words and phrases
shall be construed as masculine, feminine or neuter gender, according to the
context.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
METAL MANAGEMENT, INC.,
a Delaware corporation
By: /s/ T. Benjamin Jennings
----------------------------------------
T. Benjamin Jennings, Chairman and
Chief Development Officer
/s/ T. Benjamin Jennings
----------------------------------------
T. Benjamin Jennings
/s/ Gerard M. Jacobs
----------------------------------------
Gerard M. Jacobs
/s/ Albert A. Cozzi
----------------------------------------
Albert A. Cozzi
/s/ Frank J. Cozzi
----------------------------------------
Frank J. Cozzi
/s/ Gregory P. Cozzi
----------------------------------------
Gregory P. Cozzi
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SCHEDULE 1.2
1. THE BOARD OF DIRECTORS OF MTLM HAS AUTHORIZED THE CHAIRMAN AND THE CEO OF
MTLM TO NEGOTIATE AN ARRANGEMENT WITH DONALD MOOREHEAD WHEREBY DONALD
MOOREHEAD WOULD BECOME VICE-CHAIRMAN OF MTLM AND DONALD MOOREHEAD AND/OR
HIS DESIGNEES WOULD RECEIVE A PACKAGE OF 150,000 WARRANTS TO PURCHASE
COMMON STOCK OF MTLM IN CONNECTION THEREWITH.
2. THE BOARD OF DIRECTORS OF MTLM HAS AUTHORIZED THE CHAIRMAN AND THE
CEO OF MTLM TO NEGOTIATE AND GRANT 30,000 WARRANTS TO PURCHASE SHARES OF
COMMON STOCK OF MTLM TO DAN BURGESS, 25,000 WARRANTS AND 15,000 OPTIONS
TO PURCHASE SHARES OF COMMON STOCK OF MTLM TO XAVIER HERMOSILLO, AND
25,000 OPTIONS TO PURCHASE SHARES OF COMMON STOCK OF MTLM TO ROBERT
LARRY. ADDITIONALLY, THE BOARD OF DIRECTORS AUTHORIZED THE CHAIRMAN AND
CEO TO ISSUE OPTIONS TO PURCHASE 20,000 SHARES OF COMMON STOCK TO
EMPLOYEES OF THE COMPANY THAT ARE NOT OFFICERS OR DIRECTORS.
3. THE BOARD OF DIRECTORS OF MTLM HAS AUTHORIZED THE CHAIRMAN AND THE
CEO OF MTLM TO NEGOTIATE AND GRANT INCREASES IN THE COMPENSATION OF
XAVIER HERMOSILLO AND ROBERT LARRY. THE ADJUSTMENT TO ANNUAL
COMPENSATION FOR MR. LARRY AND MR. HERMOSILLO INCREASED THEIR ANNUAL BASE
PAY TO $135,000 AND $100,000 RESPECTIVELY.
4. THE COMPENSATION COMMITTEE APPROVED INCREASES IN ANNUAL BASE SALARY
FOR MR. JACOBS AND MR. JENNINGS EFFECTIVE FROM AND AFTER JUNE 1, 1997.
MR. JENNINGS' ADJUSTED ANNUAL SALARY IS EQUAL TO THE AMOUNT OF $275,000
AND MR. JACOBS' ADJUSTED ANNUAL SALARY IS EQUAL TO THE AMOUNT OF
$287,000. IN ADDITION, MR. JENNINGS RECEIVES A TRAVEL ALLOWANCE EQUAL TO
$12,000 PER YEAR.
5. THE BOARD OF DIRECTORS OF MTLM HAS AUTHORIZED THE CHAIRMAN AND CEO
TO GRANT BONUSES FOR MR. JENNINGS, MR. JACOBS, AND MR. LARRY. ON JULY
31, 1997, MR. JACOBS AND MR. JENNINGS EACH RECEIVED A BONUS IN THE AMOUNT
OF $50,000. ON JULY 15, 1997, MR. LARRY RECEIVED A BONUS IN THE AMOUNT
OF $25,000.
6. THE COMPANY PLANS TO PAY AGGREGATE BONUSES TO MR. HERMOSILLO IN AN
AMOUNT EQUAL TO $102,332.
7. MTLM PLANS TO ISSUE 50,000 WARRANTS TO PURCHASE COMMON STOCK OF MTLM
TO A FINANCIAL ADVISOR OF MTLM ON TERMS AND CONDITIONS BEING NEGOTIATED
BY THE CHAIRMAN AND THE CEO OF MTLM.
8. MTLM PLANS TO ISSUES 70,000 WARRANTS TO PURCHASE COMMON STOCK OF
MTLM TO A GOVERNMENTAL AFFAIRS ADVISOR OF MTLM ON TERMS AND CONDITIONS
BEING NEGOTIATED BY THE CHAIRMAN AND CEO OF MTLM.
9. THE BOARD OF DIRECTORS OF MTLM HAS AUTHORIZED THE CHAIRMAN AND THE
CEO TO NEGOTIATE CERTAIN AGREEMENTS WITH GEORGE MOOREHEAD AS MORE FULLY
DESCRIBED IN MTLM'S DEFINITIVE PROXY STATEMENT DATED NOVEMBER 20, 1997.
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (No. 333-10487) and on Form S-3 (No. 333-07581) of Metal Management,
Inc. of our report on the Cozzi Iron & Metal, Inc. financial statements dated
April 22, 1997, appearing in the Proxy Statement of Metal Management, Inc.
dated November 20, 1997 and incorporated by reference in this Form 8-K of Metal
Management, Inc. dated December 15, 1997.
Deloitte & Touche LLP
December 15, 1997
