<PAGE> 1
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- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-14836
METAL MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2835068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
500 N. DEARBORN ST., SUITE 405,
CHICAGO, IL 60610
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (312) 645-0700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
As of October 31, 1998, the Registrant had 41,077,983 shares of Common
Stock outstanding.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets -- September 30, 1998
(unaudited) and March 31, 1998............................ 1
Condensed Consolidated Statements of Operations -- three
months and six months ended September 30, 1998 and 1997
(unaudited)............................................... 2
Condensed Consolidated Statements of Cash Flows -- six
months ended September 30, 1998 and 1997 (unaudited)...... 3
Condensed Consolidated Statements of Stockholders'
Equity -- March 31, 1998 and September 30, 1998
(unaudited)............................................... 4
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... 5
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
PART II: OTHER INFORMATION
ITEM 1: Legal Proceedings........................................... 22
ITEM 2: Changes in Securities....................................... 22
ITEM 5: Other Information........................................... 23
ITEM 6: Exhibits and Reports on Form 8-K............................ 23
SIGNATURES.................................................. 24
Exhibit Index............................................... 25
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,610 $ 4,464
Accounts receivable, net.................................. 124,378 122,404
Inventories............................................... 82,644 61,942
Prepaid expenses and other assets......................... 8,609 8,569
-------- --------
Total current assets................................... 219,241 197,379
Property and equipment, net................................. 182,387 109,886
Goodwill, net............................................... 305,717 181,219
Deferred financing costs and other intangibles, net......... 13,383 5,284
Investments in joint ventures............................... 8,255 7,496
Other assets................................................ 967 1,162
-------- --------
Total assets........................................... $729,950 $502,426
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 70,681 $ 66,845
Other accrued liabilities................................. 27,205 17,076
Current portion of notes payable to related parties....... 11,580 10,830
Current portion of long-term debt......................... 1,413 1,047
-------- --------
Total current liabilities.............................. 110,879 95,798
Long-term notes payable to related parties, less current
portion................................................... 10,830 31,762
Long-term debt, less current portion........................ 323,616 107,827
Deferred taxes.............................................. 5,800 11,922
Other liabilities........................................... 2,306 2,339
-------- --------
Total liabilities...................................... 453,431 249,648
Stockholders' equity:
Convertible preferred stock -- Series A................... 10,806 13,981
Convertible preferred stock -- Series B................... 18,679 19,027
Common stock.............................................. 396 341
Warrants.................................................. 46,120 45,870
Additional paid-in-capital and other...................... 247,026 200,150
Accumulated deficit....................................... (46,508) (26,591)
-------- --------
Total stockholders' equity............................. 276,519 252,778
-------- --------
Total liabilities and stockholders' equity............. $729,950 $502,426
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE> 4
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales....................................... $217,256 $127,254 $432,207 $209,359
Cost of sales................................... 207,369 115,990 402,571 190,721
-------- -------- -------- --------
Gross profit.................................... 9,887 11,264 29,636 18,638
Operating expenses:
General and administrative.................... 16,092 6,114 27,637 10,324
Depreciation and amortization................. 6,286 2,465 10,675 3,779
Non-recurring expenses........................ 2,482 0 3,414 0
-------- -------- -------- --------
Total operating expenses............... 24,860 8,579 41,726 14,103
-------- -------- -------- --------
Operating income (loss) from continuing
operations.................................... (14,973) 2,685 (12,090) 4,535
Income (loss) from joint ventures............... (771) 59 (931) 189
Interest expense................................ 8,658 2,585 13,591 4,105
Interest and other income, net.................. 747 390 1,316 485
-------- -------- -------- --------
Income (loss) from continuing operations before
income taxes, discontinued operations and
extraordinary charge.......................... (23,655) 549 (25,296) 1,104
Provision (benefit) for income taxes............ (6,534) 320 (7,023) 589
-------- -------- -------- --------
Income (loss) from continuing operations before
discontinued operations and extraordinary
charge........................................ (17,121) 229 (18,273) 515
Discontinued operations:
Gain on sale of discontinued operations, net
of taxes.................................... 27 107 74 208
-------- -------- -------- --------
Income (loss) before extraordinary charge....... (17,094) 336 (18,199) 723
Extraordinary charge for early retirement of
debt, net of taxes............................ 0 0 862 0
-------- -------- -------- --------
Net income (loss)............................... (17,094) 336 (19,061) 723
Accretion of preferred stock to redemption
value......................................... 0 57 0 57
Preferred stock dividends....................... 415 315 856 315
-------- -------- -------- --------
Net income (loss) applicable to Common Stock.... $(17,509) $ (36) $(19,917) $ 351
======== ======== ======== ========
Basic earnings (loss) per common share for:
Continuing operations applicable to common
stock....................................... $ (0.45) $ (0.01) $ (0.52) $ 0.01
Gain on sale of discontinued operations....... $ 0.00 $ 0.01 $ 0.00 $ 0.01
Extraordinary charge.......................... $ 0.00 $ 0.00 $ (0.02) $ 0.00
-------- -------- -------- --------
Net income (loss) applicable to common
stock....................................... $ (0.45) $ 0.00 $ (0.54) $ 0.02
======== ======== ======== ========
Weighted average shares outstanding............. 38,991 16,501 36,647 14,738
Diluted earnings (loss) per share for:
Continuing operations applicable to common
stock....................................... $ (0.45) $ (0.01) $ (0.52) $ 0.01
Gain on sale of discontinued operations....... $ 0.00 $ 0.01 $ 0.00 $ 0.01
Extraordinary charge.......................... $ 0.00 $ 0.00 $ (0.02) $ 0.00
-------- -------- -------- --------
Net income (loss) applicable to common
stock....................................... $ (0.45) $ 0.00 $ (0.54) $ 0.02
======== ======== ======== ========
Weighted average diluted shares outstanding..... 38,991 16,501 36,647 17,498
</TABLE>
The accompanying notes are an integral part of these financial statements
2
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METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS:
Net income (loss) from continuing operations................ $ (18,273) $ 515
Adjustments to reconcile net income (loss) from continuing
operations to cash flows from continuing operations:
Discontinued operations................................... 135 208
Extraordinary charge on retirement of debt................ (862) 0
Depreciation and amortization............................. 10,675 3,779
Deferred taxes............................................ (6,148) (202)
Amortization of debt issuance costs....................... 935 0
Other..................................................... (681) (302)
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable, net.................................. 27,553 783
Inventories............................................... 2,392 11,966
Accounts payable.......................................... (1,904) (16,489)
Other..................................................... 6,915 (3,002)
--------- --------
Cash flows from continuing operations....................... 20,737 (2,744)
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment....................... (11,281) (1,809)
Costs of operating lease buyouts.......................... (10,623) 0
Acquisitions, net of cash acquired........................ (182,631) (14,092)
Other..................................................... 3,412 602
--------- --------
Net cash used by investing activities....................... (201,123) (15,299)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net borrowings on lines-of-credit......................... 0 1,318
Issuances of long-term debt............................... 975,547 1,774
Repayments of long-term debt.............................. (785,124) (18,073)
Fees paid to issue long-term debt......................... (10,715) 0
Penalties paid on early retirement of debt................ (973) 0
Issuances of convertible preferred stock.................. 0 23,950
Issuances of Common Stock................................. 797 15,294
--------- --------
Net cash provided by financing activities................... 179,532 24,263
--------- --------
Net increase (decrease) in cash and cash equivalents........ (854) 6,220
Cash and cash equivalents at beginning of period............ 4,464 5,768
--------- --------
Cash and cash equivalents at end of period.................. $ 3,610 $ 11,988
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................... $ 5,889 $ 3,266
Income taxes paid........................................... $ 1,449 $ 842
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 6
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED, IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK
PREFERRED STOCK ------------------- ADDITIONAL
------------------- NUMBER OF PAID-IN- ACCUMULATED
SERIES A SERIES B SHARES AMOUNT WARRANTS CAPITAL DEFICIT TOTAL
-------- -------- --------- ------ -------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998...... $13,981 $19,027 34,080,830 $341 $45,870 $200,150 $(26,591) $252,778
Conversion of preferred
stock........................ (3,175) (348) 869,332 8 0 4,514 0 999
Equity issued for
acquisitions................. 0 0 4,492,851 45 699 41,718 0 42,462
Preferred stock dividends...... 0 0 0 0 0 0 (856) (856)
Exercise of options/warrants... 0 0 186,741 2 (449) 1,130 0 683
Other.......................... 0 0 18,294 0 0 (486) 0 (486)
Net loss....................... 0 0 0 0 0 0 (19,061) (19,061)
------- ------- ---------- ---- ------- -------- -------- --------
Balance at September 30,
1998......................... $10,806 $18,679 39,648,048 $396 $46,120 $247,026 $(46,508) $276,519
======= ======= ========== ==== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 7
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of Metal Management, Inc. and its subsidiaries (herein
referred to as "MTLM" or the "Company") and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
All significant intercompany accounts, transactions and profits have been
eliminated. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed
consolidated financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to fairly state the financial position and the results of operations for the
periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended March 31, 1998
and in the Company's Current Report on Form 8-K dated October 5, 1998.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
NOTE 2 -- MERGERS AND ACQUISITIONS
Mergers accounted for as Pooling-of-Interests
On May 28, 1998, a subsidiary of the Company merged with R&P Holdings,
Inc., the parent of Charles Bluestone Company and R&P Real Estate, Inc.
(hereinafter, "Bluestone") through a tax-free stock-for-stock exchange. In
connection with the merger, the Company issued 1,034,826 shares of common stock,
par value $.01 per share ("Common Stock") in exchange for all the outstanding
common stock of Bluestone. The merger is accounted for as a pooling-of-interests
under Accounting Principles Board (APB) Opinion No. 16, "Business Combinations."
All financial data of the Company, including the Company's previously issued
financial statements presented in this Form 10-Q, have been restated to include
the historical financial information of Bluestone. Certain reclassifications
were made to Bluestone's financial statements to conform to the Company's
presentation.
5
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METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The following table presents net sales and net income (loss) applicable to
Common Stock for the six months ended September 30. The only conforming
accounting adjustment reflected is to change Bluestone's inventory valuation
methodology from a LIFO basis to an average cost basis (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
NET SALES:
The Company -- historical................................. $402,906 $157,346
Bluestone................................................. 29,301 52,013
-------- --------
Combined.................................................. $432,207 $209,359
======== ========
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK:
The Company -- historical................................. $(17,386) $ 154
Bluestone................................................. (1,743) 234
Conforming accounting adjustments, net of tax............. 0 (245)
-------- --------
Net income (loss) from continuing operations.............. (19,129) 143
Net income from discontinued operations................... 74 208
Extraordinary charge on early retirement of debt.......... (862) 0
-------- --------
Combined.................................................. $(19,917) $ 351
======== ========
</TABLE>
In connection with the Bluestone merger, the Company recognized merger
expenses of $1.7 million (see Note 3 -- Non-recurring expenses).
Acquisitions completed during the six months ended September 30, 1998
- In April 1998, the Company, through its Cozzi Iron & Metal, Inc.
("Cozzi") subsidiary, acquired certain assets of Midwest Industrial
Metals Corp., located in Chicago, Illinois.
- In May 1998, the Company acquired substantially all of the assets of 138
Scrap, Inc. and Katrick, Inc., located in Riverdale, Illinois.
- In June 1998, the Company acquired certain assets related to the scrap
metal businesses of Goldin Industries, Inc., Goldin of Alabama, Inc., and
Goldin of Louisiana, Inc. (collectively "Goldin"). Goldin's operations
(now operated under the name Metal Management Gulf Coast, Inc.) are
located in Gulfport, Mississippi, Mobile, Alabama and Harvey, Louisiana.
- In June 1998, a wholly owned subsidiary of the Company merged with and
into Newell Recycling of Denver, Inc., which subsequently changed its
name to Newell Recycling West, Inc. ("Newell"). Newell operates
facilities in Denver and Colorado Springs, Colorado. In June 1998, Newell
acquired substantially all of the assets of Newell Recycling of Utah,
LLC, in a related transaction.
- In July 1998, the Company acquired the common stock of Naporano Iron &
Metal Co. and Nimco Shredding Co. (collectively "Naporano"), located in
Newark, New Jersey.
- In July 1998, the Company acquired substantially all of the assets of
Michael Schiavone & Sons, Inc. and related entities, located in North
Haven and Torrington, Connecticut.
- In July 1998, the Company acquired substantially all of the assets of M.
Kimerling & Sons, Inc., located in Birmingham, Alabama.
- In July 1998, the Company acquired substantially all of the assets of
Nicroloy Company, located in Heidelberg, Pennsylvania.
6
<PAGE> 9
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
- In July 1998, the Company, through its Cozzi subsidiary, acquired certain
assets of Midwest Metallics, L.P., located in Chicago, Illinois.
The purchase consideration for the above acquisitions was as follows (in
thousands):
<TABLE>
<CAPTION>
NAPORANO OTHERS TOTAL
-------- ------ -----
<S> <C> <C> <C>
Shares of restricted Common Stock issued.................... 1,939 2,554 4,493
Warrants issued to purchase Common Stock.................... 0 150 150
Cash paid, including transaction costs...................... $ 86,552 $ 99,679 $186,231
Value of Common Stock issued................................ 18,497 23,266 41,763
Value of warrants issued.................................... 0 699 699
Promissory notes issued..................................... 0 750 750
-------- -------- --------
Total purchase consideration...................... $105,049 $124,394 $229,443
======== ======== ========
</TABLE>
The preliminary allocation of purchase consideration was as follows at
September 30, 1998 (in thousands):
<TABLE>
<S> <C>
Fair value of tangible assets acquired...................... $120,287
Goodwill.................................................... 126,672
Liabilities assumed......................................... (17,916)
Stock and warrants issued................................... (42,462)
Promissory notes issued..................................... (750)
--------
Cash paid................................................... 185,831
Less: cash acquired....................................... (3,200)
--------
Net cash paid for acquisitions.............................. $182,631
========
</TABLE>
The above transactions have been accounted for by the purchase method of
accounting and are included in the Company's results of operations from the
effective date of each respective acquisition. The purchase price was allocated
based on estimates of the fair value of assets acquired and liabilities assumed.
These estimates are revised during the allocation period as necessary when
information regarding contingencies becomes available to define and quantify
assets acquired and liabilities assumed. The allocation period varies by
acquisition but does not usually exceed one year. It is not expected that the
finalization of purchase accounting will have any significant effect on the
financial position or results of operations of the Company.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company, Reserve Iron & Metal L.P.
("Reserve"), the Isaac Corporation and Ferrex Trading Corporation (collectively
"Isaac"), Proler Southwest Inc. and Proler Steelworks L.L.C. (collectively
"Proler"), Cozzi, Aerospace Metals, Inc. ("Aerospace") and Naporano
(collectively, the "Pro Forma Acquisitions") as if these acquisitions had
occurred on April 1, 1997. The Reserve, Isaac, Proler, Cozzi and Aerospace
acquisitions were completed by the Company during fiscal 1998. The unaudited pro
forma results have been prepared for comparative purposes only and include
certain adjustments, such as additional depreciation expense as a result of a
step-up in basis of the fixed assets acquired, additional amortization expense
as a result of goodwill and interest expense related to cash portions of
purchase consideration and assumed debt. The pro forma statement of operations
includes non-recurring expenses of $6.2 million for the six months ended
September 30, 1998 and $33.7 million for the twelve months ended March 31, 1998.
The pro forma statement of operations for the twelve months ended March 31, 1998
also includes a charge for a $5.6 million non-cash dividend on the beneficial
conversion feature of convertible preferred stock. The pro
7
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METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
forma results do not purport to be indicative of the financial results which
actually would have occurred had the Pro Forma Acquisitions taken effect on
April 1, 1997 (in thousands, except share data).
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
ENDED ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS
Net sales................................................. $472,363 $1,020,030
Net loss from continuing operations applicable to Common
Stock.................................................. $(21,954) $ (38,781)
Basic and diluted net loss per share from continuing
operations............................................. $ (0.55) $ (1.04)
</TABLE>
Acquisitions completed subsequent to September 30, 1998
- In November 1998, a wholly owned subsidiary of the Company merged with
FPX, Inc. The sole asset of FPX, Inc. is a 50% joint venture interest in
PerlCo, L.L.C. ("PerlCo"). The Company's Cozzi subsidiary owns the other
50% of PerlCo. PerlCo is a scrap metal recycling operation located in
Memphis, Tennessee.
NOTE 3 -- NON-RECURRING EXPENSES
During the three and six months ended September 30, 1998, the Company
recorded the following expenses which have been classified as non-recurring
elements of total operating expenses (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED 9/30/98 ENDED 9/30/98
------------- -------------
<S> <C> <C>
Bluestone merger expenses................................... $ 753 $1,685
Terminated merger expenses.................................. 1,082 1,082
Severance and other benefits................................ 107 107
Integration/facility closure charges........................ 540 540
------ ------
$2,482 $3,414
====== ======
</TABLE>
In connection with the Company's merger with Bluestone, the Company
recognized merger expenses consisting primarily of fees and expenses for
accountants, attorneys, and investment bankers. The merger expenses also
included a charge of $750,000 related to the buy-out of existing contracts at
Bluestone.
During the quarter ended September 30, 1998, the Company elected, due to
adverse scrap metals market conditions, to terminate all negotiations and
related due diligence processes with potential acquisition candidates. The
terminated merger expenses recognized represent all incurred transaction costs
associated with acquisitions that the Company was pursuing.
During the quarter ended September 30, 1998, and as a result of the adverse
market conditions, the Company closed certain facilities resulting in the
write-off of equipment which became impaired and the recording of severance
accruals for employee termination. The Company will continue its ongoing review
of all of its facilities during the third quarter of fiscal 1999 and will take
actions as required in response to market conditions.
8
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METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 4 -- INVENTORIES
Inventories for all periods presented are stated at the lower of cost or
market. Cost is determined principally on the average cost method. Inventories
consisted of the following categories at (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
<S> <C> <C>
Ferrous metals.................................. $48,660 $35,934
Non-ferrous metals.............................. 31,393 25,222
Other........................................... 2,591 786
------- -------
$82,644 $61,942
======= =======
</TABLE>
NOTE 5 -- DEBT
Senior Credit Facility
On March 31, 1998, the Company and its subsidiaries entered into a
three-year credit facility (the "Senior Credit Facility") with BT Commercial
Corporation, as agent for the lenders (the "Agent"), and certain commercial
lending institutions. The Senior Credit Facility, as amended, provides for a
revolving credit and letter of credit facility of $250.0 million, subject to
borrowing base limitations as described below. The Senior Credit Facility bears
interest at a floating rate per annum equal to (at the Company's option): (i)
1.75% over LIBOR or (ii) 0.5% over Bankers Trust Company's prime rate as in
effect from time to time. Pursuant to the Senior Credit Facility, the Company
also pays a fee of .375% on the undrawn portion of the facility. The Senior
Credit Facility also contains certain financial covenants, including an interest
coverage ratio (subsequently amended as described below), and imposes certain
limitations on the Company's ability to make capital expenditures. The Senior
Credit Facility is available for working capital and general corporate purposes,
including acquisitions.
The obligations of the Company and its subsidiaries under the Senior Credit
Facility are secured by a security interest in substantially all of the assets
and properties of the Company and its subsidiaries, including pledges of the
capital stock of the Company's subsidiaries. Availability of loans and letters
of credit under the Senior Credit Facility is generally limited to a borrowing
base of 85% of eligible accounts receivable, 70% of eligible inventory and a
fixed asset sublimit ($55.6 million as of September 30, 1998) that amortizes on
a quarterly basis. At September 30, 1998, the Company had borrowings of $141.0
million outstanding and letters of credit aggregating $25.1 million under the
Senior Credit Facility.
During April 1998, the Company borrowed under the Senior Credit Facility to
refinance existing secured debt, buyout certain operating leases and pay
prepayment penalties associated with the early retirement of debt. In connection
with the refinancing of debt, the Company recognized an extraordinary charge of
$862,000 consisting of the following (in thousands):
<TABLE>
<S> <C>
Prepayment penalties........................................ $ 973
Write-off of related unamortized financing costs............ 487
------
Extraordinary charge before income tax benefit.............. $1,460
Income tax benefit.......................................... 598
------
Net extraordinary charge.................................... $ 862
======
</TABLE>
As a result of adverse market conditions in the steel and scrap metals
sectors and the effect of such conditions on the Company's results of
operations, effective as of September 30, 1998, the Company and its bank group
amended the Company's Senior Credit Facility to, among other things, modify the
Company's minimum interest coverage test. Pursuant to the amendment, the
Company's interest coverage ratio tests
9
<PAGE> 12
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(i) for the quarters ending September 30, 1998 and December 31, 1998 were
replaced with tests of minimum aggregate six- and nine-month EBITDA amounts of
$1.5 million and $6.0 million respectively, and (ii) for the quarters ending
March 31, 1999 and June 30, 1999 were amended to apply to only the respective
six- and nine-month periods then ended. The Company was in compliance with the
financial covenants at September 30, 1998.
Senior Subordinated Notes
On May 13, 1998, the Company issued $180.0 million of 10.0% Senior
Subordinated Notes due on May 15, 2008 (the "Notes") in a private placement
under Rule 144A of the Securities Act (the "Subordinated Debt Placement").
Interest on the Notes is payable semi-annually, beginning November 15, 1998. The
Company received net proceeds of $174.6 million in the Subordinated Debt
Placement. The Notes are general unsecured obligations of the Company and are
subordinated in right to payment to all senior debt of the Company, including
the indebtedness of the Company under the Senior Credit Facility. The Company's
payment obligations are jointly and severally guaranteed by all of the Company's
current and certain future subsidiaries. The proceeds of the Notes were used to
repay approximately $119.0 million then outstanding under the Company's Senior
Credit Facility and approximately $19.1 million of notes payable to related
parties.
Except as described below, the Notes are not redeemable at the Company's
option prior to May 15, 2003. After May 15, 2003, the Notes are redeemable by
the Company at the redemption prices (expressed as a percentage of the principal
amount and rounded to the nearest whole percentage) plus accrued and unpaid
interest, if redeemed during the twelve-month period beginning on May 15 of each
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- - ---- ----------
<S> <C>
2003................................................. 105%
2004................................................. 103%
2005................................................. 102%
2006 and thereafter.................................. 100%
</TABLE>
Also, prior to May 15, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Notes at a redemption price of 110% of the
principal amount of the Notes, plus accrued and unpaid interest from the
proceeds of one or more sales of Common Stock. The Notes are also redeemable at
the option of the holder thereof at a repurchase price of 101% of the principal
amount thereof, plus accrued and unpaid interest in the event of certain change
of control events with respect to the Company.
The Indenture governing the Notes (the "Indenture") contains certain
covenants that limit, among other things, the ability of the Company and its
subsidiaries to (i) incur additional indebtedness (including by way of
guarantee), subject to certain exceptions, unless the Company meets a fixed
charge coverage ratio of 2 to 1 or certain other conditions apply; (ii) issue
certain types of securities containing mandatory redemption rights or which
otherwise are redeemable at the option of the holder thereof prior to the
maturity of the Notes; (iii) pay dividends or distributions, or make certain
types of investments or other restricted payments, unless the Company meets a
fixed charge coverage ratio of 2 to 1 and the amount of the dividend or
distribution, investment or other payment (together with all such other
dividend, distributions, investments or other payments made through the date
thereof) is less than 50% of the consolidated net income of the Company from the
beginning of the fiscal quarter immediately following the date of the Indenture
through the most recently ended fiscal quarter plus the aggregate amount of net
equity proceeds received by the Company in such period, subject to certain
exceptions; (iv) enter into certain transactions with affiliates; (v) dispose of
10
<PAGE> 13
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
certain assets; (vi) incur liens securing pari passu or subordinated
indebtedness of the Company; or (vii) engage in certain mergers and
consolidations.
NOTE 6 -- CONVERTIBLE PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation allows the
issuance of up to 4,000,000 shares of preferred stock. During fiscal 1998, the
Company issued 25,000 shares of Series A Convertible Preferred Stock, par value
$.01 per share, stated value $1,000 per share (the "Series A Preferred Stock"),
and 20,000 shares of Series B Convertible Preferred Stock, par value $.01 per
share, stated value $1,000 per share (the "Series B Preferred Stock").
Dividends on the Series A Preferred Stock and Series B Preferred Stock
accrue, whether or not declared by the Board of Directors, at an annual rate of
6.0% and 4.5%, respectively, of the stated value of each outstanding share of
Series A Preferred Stock and Series B Preferred Stock. Dividends are payable in
cash, or at the Company's option, in additional shares of preferred stock.
The holders of Series A Preferred Stock are able to convert the shares into
Common Stock at a price equal to the lower of: (i) $18.30; or (ii) 85% of the
average closing bid price for the Common Stock for the five trading days prior
to the date of the conversion notice. The holders of Series B Preferred Stock
are able to convert the shares into Common Stock at a price equal to the lower
of: (i) 120% of the closing bid price for the Common Stock on the date of
purchase of the Series B Preferred Stock; (ii) 92.5% of the average closing bid
price for the Common Stock for the five trading days prior to the date of the
conversion notice; or (iii) if applicable, the lowest traded price of the Common
Stock during the time when the Common Stock is not listed on a national
securities exchange.
The following presents a summary of the Series A Preferred Stock and Series
B Preferred Stock issued and converted during the six months ended September 30,
1998:
<TABLE>
<CAPTION>
SERIES A SERIES B
-------- --------
<S> <C> <C>
Shares outstanding at March 31, 1998........................ 15,094 20,000
Shares converted into Common Stock.......................... (3,394) (710)
Shares issued for dividends................................. 228 366
------ ------
Shares outstanding at September 30, 1998.................... 11,928 19,656
====== ======
</TABLE>
NOTE 7 -- RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued by the FASB in
September 1998 and is effective for fiscal years beginning after September 15,
1999. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company is
evaluating SFAS No. 133 to determine its impact on the consolidated financial
statements.
NOTE 8 -- INCOME (LOSS) PER COMMON SHARE
In fiscal 1998, the Company adopted SFAS No. 128, "Earnings Per Share." Per
share amounts for the three and six months ended September 30, 1997 have been
restated to conform to the requirements of SFAS
11
<PAGE> 14
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
No. 128. The following table presents the calculation of income (loss) per
common share from continuing operations (in thousands except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME (NUMERATOR):
Net income (loss) from continuing operations.......... $(17,121) $ 229 $(18,273) $ 515
Dividends on convertible preferred stock.............. 415 372 856 372
-------- ------- -------- -------
Net income (loss) applicable to Common Stock.......... $(17,536) $ (143) $(19,129) $ 143
======== ======= ======== =======
SHARES (DENOMINATOR):
Weighted average number of shares outstanding during
the period.......................................... 38,991 16,501 36,647 14,738
Incremental common shares attributable to dilutive
stock options and warrants.......................... 0 0 0 2,760
-------- ------- -------- -------
Diluted number of shares outstanding during the
period.............................................. 38,991 16,501 36,647 17,498
======== ======= ======== =======
Basic earnings (loss) per common share................ $ (0.45) $ (0.01) $ (0.52) $ 0.01
======== ======= ======== =======
Diluted earnings (loss) per common share.............. $ (0.45) $ (0.01) $ (0.52) $ 0.01
======== ======= ======== =======
</TABLE>
For the periods in which the Company recognized a net loss applicable to
Common Stock, the effect of dilutive stock options and warrants were not
included as their effect would have been anti-dilutive. However, if the Company
would have reported net earnings, the incremental shares attributable to
dilutive stock options and warrants would have been approximately 747,000 and
1,864,000 for the three and six months ended September 30, 1998, respectively,
and 3,543,000 for the three months ended September 30, 1997. Also, the
potentially dilutive effect of the Company's convertible preferred stock were
not used in the diluted earnings per share calculation as its effect was
anti-dilutive.
12
<PAGE> 15
This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future acquisitions
(including the amount and nature thereof), business strategy, expansion and
growth of the Company's business and operations and other such matters are
forward-looking statements. Although the Company believes the expectations
expressed in such forward-looking statements are based on reasonable assumptions
within the bounds of its knowledge of its business, a number of factors could
cause actual results to differ materially from those expressed in any
forward-looking statements, whether oral or written, made by or on behalf of the
Company. These factors are set forth under the caption "Investment
Considerations" appearing in the Company's Annual Report on Form 10-K for the
year ended March 31, 1998, as the same may be amended time to time. Some of the
factors which could affect the Company's performance include, among other
things: the effects of leverage on the Company, immediate and future capital
requirements, risk of dilution to existing shareholders, potential inability to
control growth or to successfully integrate acquired businesses, limited
operating history, cyclicality of the metals recycling industry, potential
inability to complete pending acquisitions, commodity price fluctuations,
compliance with environmental, health and safety and other regulatory
requirements applicable to the Company, potential environmental liability, risk
of deterioration in relations with labor unions, control by principal
stockholders and dependence on key management, dependence on suppliers of scrap
metals, concentration of customer risk, competition in the scrap metals
industry, availability of scrap alternatives, stock market volatility and year
2000 compliance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included under
Item 1. In addition, reference should be made to the audited consolidated
financial statements and notes thereto and related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1998 and in
the Company's Current Report on Form 8-K dated October 5, 1998.
GENERAL OVERVIEW
Metal Management is one of the largest and fastest-growing full service
metals recyclers in the United States, with 57 recycling facilities in 15
states. The Company is a leading consolidator in the metals recycling industry
and has achieved this position primarily through the implementation of its
national strategy of completing and integrating regional acquisitions. The
Company believes that its consolidation strategy will enhance the competitive
position and profitability of the operations that it acquires through improved
managerial and financial resources and increased economies of scale.
Metal Management is primarily engaged in the collection and processing of
ferrous and non-ferrous metals for resale to metals brokers, steel producers,
and producers and processors of other metals. The Company collects industrial
scrap and obsolete scrap, processes it into reusable forms, and supplies the
recycled metals to its customers, including mini-mills, integrated steel mills,
foundries and metals brokers. The Company believes that it provides one of the
most comprehensive offerings of both ferrous and non-ferrous scrap metals in the
industry. The Company's ferrous products primarily include shredded, sheared,
hot briquetted, cold briquetted and bundled scrap and broken furnace iron. The
Company also processes non-ferrous metals, including aluminum, copper, stainless
steel, brass, titanium and high-temperature alloys, using similar techniques and
through application of the Company's proprietary technologies.
The Company's predecessor was incorporated on September 24, 1981 as a
California corporation under the name General Parametrics Corporation, and was
re-incorporated as a Delaware corporation in September 1986 under the same
name. Prior to April 1996, the Company manufactured and marketed color thermal
and dye sublimation printers and related consumables, including ribbons,
transparencies and paper. The Company sold that business in two separate
transactions in July and December of 1996 for $1.3 million in cash
13
<PAGE> 16
and future royalty streams which the Company does not anticipate will result in
material payments to the Company. On April 12, 1996, the Company changed its
name to "Metal Management, Inc."
The Company's Common Stock, is traded on the NASDAQ Stock Market under the
trading symbol "MTLM". The Company's principal executive offices are located at
500 North Dearborn Street, Suite 405, Chicago, Illinois 60610, and its telephone
number is (312) 645-0700.
ACQUISITION STRATEGY
In pursuing its acquisition strategy, the Company seeks to identify
companies that (i) have a successful operating history; (ii) are located in
major metropolitan or regional markets (population of 1,000,000 or more) and
present synergies with existing or planned acquisition candidates in a
particular region; (iii) offer strong management which can be retained following
an acquisition; (iv) complement the Company's regional and national customer
base; (v) have a history of high integrity in their management and operations;
(vi) have convenient access to water or rail transportation facilities; (vii) do
not present serious environmental or regulatory issues; and (viii) either have
existing shredder operations or the ability to support the installation of such
equipment. While a target company does not have to meet all of the acquisition
criteria, it is important that a metropolitan or regional "hub" company meet
most of the criteria and that other acquisition candidates that can complement
the operations of the "hub" company are identified within a region.
Once an acquisition candidate has been identified, the Company conducts
financial, legal and operational due diligence investigations of the target
company. This due diligence investigation will generally include an
environmental site assessment and a review of the target company's environmental
compliance procedures and practices, a review of the legal and regulatory
affairs of the target, and a review of the target company's financial books and
records, including an independent audit of its financial statements, in certain
cases.
The Company generally enters into multi-year employment contracts with
certain senior managers of the acquired company which often provide for
incentive compensation in the form of stock options and warrants. In addition, a
significant portion of the purchase price for an acquired company is often paid
in restricted Common Stock. The Company believes that these arrangements provide
strong incentives for the management of the regional operations to maximize the
operating performance of the Company's subsidiaries.
During the quarter ended September 30, 1998, the Company terminated all
acquisitions that were under a letter of intent, other than the acquisition of a
50% membership interest in PerlCo which was completed on November 2, 1998. In
connection with the termination of such mergers, the Company recognized a $1.1
million pre-tax charge to continuing operations relating to acquisition and
transaction costs. The Company's decision to terminate its proposed acquisitions
was primarily due to adverse and unprecedented market conditions.
Set forth below is a table identifying the recycling operations (the
"Acquired Operations") acquired by the Company since April 1996:
<TABLE>
<CAPTION>
LOCATION OF
PRINCIPAL PROCESSING DATE OF
NAME FACILITIES ACQUISITION
- - ---- -------------------- -----------
<S> <C> <C>
Metal Management Arizona, Inc. ("MTLM
Arizona").................................... Phoenix, Arizona April 1996
California Metals Recycling, Inc., Firma, Inc.
Firma Plastic Co. Inc., MacLeod Metals Co and
Trojan Trading Co. (collectively,
"MacLeod")................................... Los Angeles County, California January 1997
HouTex Metals Company, Inc. ("HouTex")......... Houston, Texas January 1997
Reserve Iron & Metal Limited Partnership
("Reserve")(1)............................... Cleveland, Ohio May 1997
Chicago, Illinois
Attalla, Alabama
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
LOCATION OF
PRINCIPAL PROCESSING DATE OF
NAME FACILITIES ACQUISITION
- - ---- -------------------- -----------
<S> <C> <C>
Briquetting Corporation of America, Ferrex
Trading Corporation, The Isaac Corporation
and Paulding Recycling, Inc. (collectively,
"Isaac")..................................... Bryan, Ohio June 1997
Cleveland, Ohio
Dayton, Ohio
Defiance, Ohio
Proler Southwest Inc. and Proler Steelworks
L.L.C. (collectively, "Proler").............. Houston, Texas August 1997
Jackson, Mississippi
Cozzi Iron & Metal, Inc. ("Cozzi")............. Chicago, Illinois December 1997
East Chicago, Indiana
Pittsburgh, Pennsylvania
Kankakee Scrap Corporation..................... Kankakee, Illinois December 1997
Houston Compressed Steel Corp.................. Houston, Texas January 1998
Aerospace Metals, Inc. ("Aerospace")........... Hartford, Connecticut January 1998
Salt River Recycling L.L.C. ("Salt
River")(2)................................... Phoenix, Arizona January 1998
Accurate Iron & Metal Co.(3)................... Franklin Park, Illinois February 1998
Superior Forge, Inc. ("Superior").............. Huntington Beach, California March 1998
Ellis Metals, Inc.............................. Tucson, Arizona March 1998
Midwest Industrial Metals Corp.(3)............. Chicago, Illinois April 1998
138 Scrap, Inc. and Katrick, Inc............... Riverdale, Illinois May 1998
R&P Holdings, Inc., Charles Bluestone Company,
and R&P Real Estate, Inc.(4) (collectively,
"Bluestone")................................. Elizabeth, Pennsylvania May 1998
Sharon, Pennsylvania
Goldin Industries, Inc., Goldin Industries
Louisiana, Inc. and Goldin of Alabama,
Inc.(5) (collectively, "Goldin")............. Gulfport, Mississippi June 1998
Mobile, Alabama
Harvey, Louisiana
Newell Recycling of Denver, Inc. and Newell
Recycling of Utah, L.L.C.(6)................. Denver, Colorado June 1998
Colorado Springs, Colorado
Naporano Iron & Metal Co. and Nimco Shredding
Co. (collectively "Naporano")................ Newark, New Jersey July 1998
Michael Schiavone & Sons, Inc. and related
entities ("Schiavone")....................... North Haven, Connecticut July 1998
Torrington, Connecticut
M. Kimerling & Sons, Inc. ("Kimerling")........ Birmingham, Alabama July 1998
Nicroloy Company ("Nicroloy").................. Heidelberg, Pennsylvania July 1998
Midwest Metallics L.P.(3)...................... Chicago, Illinois July 1998
PerlCo, L.L.C. ("PerlCo")(7)................... Memphis, Tennessee November 1998
</TABLE>
- - -------------------------
(1) The Attalla, Alabama recycling facility is operated through a joint venture
in which the Company's subsidiary, Reserve, holds a 50% interest.
15
<PAGE> 18
(2) At the time it was acquired by the Company, Cozzi held a 50% joint venture
interest in Salt River.
(3) The Company purchased substantially all of the assets of Accurate Iron &
Metal Co. and certain of the assets of Midwest Industrial Metals Corp. and
Midwest Metallics L.P., all of which have been integrated into the Company's
Cozzi operations.
(4) The Sharon, Pennsylvania recycling facility is operated through a joint
venture in which the Company's subsidiary, Bluestone, holds a 50% interest.
(5) A new subsidiary, Metal Management Gulf Coast, Inc. was formed with which
the Company purchased substantially all of the scrap metal assets of Goldin.
(6) A new subsidiary, Newell Recycling West, Inc. was formed and merged with
Newell Recycling of Denver, Inc. (with Newell Recycling West, Inc. surviving
the merger). Concurrently therewith, Newell Recycling West, Inc. purchased
substantially all of the scrap metal assets of Newell Recycling of Utah,
L.L.C.
(7) At the time the PerlCo acquisition was completed, the Company's Cozzi
subsidiary held a 50% joint venture interest in PerlCo.
RESULTS OF OPERATIONS
On May 28, 1998, the Company merged with Bluestone through a tax-free,
stock-for-stock exchange. The merger is accounted for as a pooling-of-interests.
All information set forth below includes the historical information of the
Company and Bluestone on a pooled basis for all periods presented.
Consolidated net sales for the three months ended September 30, 1998 and
1997 in broad product categories were as follows (in thousands):
<TABLE>
<CAPTION>
9/30/98 9/30/97
----------------------------- ----------------------------
COMMODITY WEIGHT NET SALES % WEIGHT NET SALES %
--------- ------ --------- - ------ --------- -
<S> <C> <C> <C> <C> <C> <C>
Ferrous metals (tons)................... 1,023 $114,300 52.6 458 $ 54,708 43.0
Non-ferrous metals (lbs)................ 128,523 64,036 29.5 76,919 37,637 29.6
Brokerage -- ferrous (tons)............. 293 29,123 13.4 246 28,674 22.5
Brokerage -- non ferrous(lbs)........... 28,107 7,452 3.4 15,288 5,029 4.0
Other................................... -- 2,345 1.1 -- 1,206 0.9
-------- ----- -------- -----
$217,256 100.0 $127,254 100.0
======== ===== ======== =====
</TABLE>
Consolidated net sales for the six months ended September 30, 1998 and 1997
in broad product categories were as follows (in thousands):
<TABLE>
<CAPTION>
9/30/98 9/30/97
----------------------------- -----------------------------
COMMODITY WEIGHT NET SALES % WEIGHT NET SALES %
--------- ------ --------- - ------ --------- -
<S> <C> <C> <C> <C> <C> <C>
Ferrous metals (tons)................... 1,916 $224,472 52.0 675 $ 82,062 39.2
Non-ferrous metals (lbs)................ 255,577 130,182 30.1 144,120 74,463 35.6
Brokerage -- ferrous (tons)............. 544 61,447 14.2 389 37,785 18.0
Brokerage -- non ferrous (lbs).......... 39,353 13,051 3.0 36,405 13,503 6.4
Other................................... -- 3,055 0.7 -- 1,546 0.8
-------- ----- -------- -----
$432,207 100.0 $209,359 100.0
======== ===== ======== =====
</TABLE>
Consolidated net sales for the three and six months ended September 30,
1998 were $217.3 million and $432.2 million, respectively, compared with
consolidated net sales of $127.3 million and $209.4 million for the three and
six months ended September 30, 1997, respectively. Since September 1997, the
Company has acquired 18 companies, including Cozzi, Naporano and Schiavone. The
acquisitions have mainly contributed to the increase in sales from the prior
year period. However, as a result of adverse market conditions in the scrap
metal industry during the quarter, the Company's consolidated net sales were
significantly lower than expected.
16
<PAGE> 19
The results for the three and six months ended September 30, 1998 reflect
the continued adverse impact on the Company of certain adverse changes in market
fundamentals in the scrap metal industry. Management believes these difficult
market conditions are characterized by unusually high levels of supply due to,
among other things, the disruption in the scrap metal export market arising from
the international financial and currency devaluation crisis coupled with a
strong supply of scrap metal from high levels of manufacturing in the U.S. In
addition, domestic steel mills significantly reduced their purchases of scrap
metal during the three months ended September 30, 1998 as record imports of low
priced steel into the U.S. curtailed domestic production at integrated steel
producers and mini-mills.
Ferrous sales of processed materials represented 52.6% and 52.0% of
consolidated net sales for the three and six months ended September 30, 1998,
respectively, compared to 43.0% and 39.2% of consolidated net sales for the
three and six months ended September 30, 1997, respectively. The increase in
ferrous sales is primarily due to the inclusion of sales by Cozzi, Naporano and
Schiavone from their respective dates of acquisition. Each of these subsidiaries
sales are primarily derived from ferrous metals.
Non-ferrous sales of processed materials represented 29.5% and 30.1% of
consolidated net sales for the three and six months ended September 30, 1998,
respectively, compared to 29.6% and 35.6% of consolidated net sales for the
three and six months ended September 30, 1997, respectively. While the sale of
non-ferrous metals increased during the three and six months ended September 30,
1998 in absolute dollar terms as a result of the inclusion of the sales of
Aerospace, Superior and Kimerling, they decreased as a percentage of overall
sales as a result of the acquisition of companies with significant ferrous
sales.
Brokerage ferrous sales represented 13.4% and 14.2% of consolidated net
sales for the three and six months ended September 30, 1998, respectively,
compared to 22.5% and 18.0% of consolidated net sales for the three and six
months ended September 30, 1997, respectively. The increase in brokerage ferrous
sales is due to the acquisitions of Cozzi and Isaac.
Brokerage non-ferrous sales represented 3.4% and 3.0% of consolidated net
sales for the three and six months ended September 30, 1998, respectively,
compared to 4.0% and 6.4% of consolidated net sales for the three months and six
months ended September 30, 1997, respectively. The Company's brokerage
non-ferrous sales are generated primarily by Bluestone.
Consolidated gross profit was $9.9 million (4.6% of consolidated net sales)
and $29.6 million (6.9% of consolidated net sales) for the three and six months
ended September 30, 1998, respectively, compared with consolidated gross profit
of $11.3 million (8.9% of consolidated net sales) and $18.6 million (8.9% of
consolidated net sales) for the three and six months ended September 30, 1997,
respectively. The decrease in consolidated gross profit as a percentage of
consolidated net sales for the three and six months ended September 30, 1998
resulted primarily from adverse market conditions which caused sales and metal
margins to decline significantly.
Consolidated general and administrative expenses were $16.1 million (7.4%
of consolidated net sales) and $27.6 million (6.4% of consolidated net sales)
for the three and six months ended September 30, 1998, respectively, compared
with $6.1 million (4.8% of consolidated net sales) and $10.3 million (4.9% of
consolidated net sales) for the three and six months ended September 30, 1997,
respectively. The increase in general and administrative expenses over the prior
year period is due to the inclusion of general and administrative expenses of
those operations acquired by the Company since September 1997. The increase in
consolidated general and administrative expenses as a percentage of consolidated
net sales for the periods presented primarily reflects the decrease in the
Company's consolidated net sales from expected levels due to adverse market
conditions.
Depreciation and amortization expense was $6.3 million (2.9% of
consolidated net sales) and $10.7 million (2.5% of consolidated net sales) for
the three and six months ended September 30, 1998, respectively, compared with
$2.5 million (1.9% of consolidated net sales) and $3.8 million (1.8% of
consolidated net sales) for the three and six months ended September 30, 1997,
respectively. The increase is attributed to the inclusion of goodwill
amortization and depreciation of fixed assets of those operations acquired by
the
17
<PAGE> 20
Company since September 1997. The increase in depreciation and amortization
expense as a percentage of consolidated net sales is primarily due to the
reduced sales volumes resulting from adverse market conditions.
During the six months ended September 30, 1998, the Company recorded
non-recurring expenses of $3.4 million. See Note 3 to the Condensed Consolidated
Financial Statements.
Interest expense was $8.7 million (4.0% of consolidated net sales) and
$13.6 million (3.1% of consolidated net sales) for the three and six months
ended September 30, 1998, respectively, compared to $2.6 million (2.0% of
consolidated net sales) and $4.1 million (2.0% of consolidated net sales) for
the three and six months ended September 30, 1997, respectively. The increase is
primarily due to the issuance of the Notes and additional borrowings made by the
Company under the Senior Credit Facility to fund acquisitions.
Net loss from continuing operations, after preferred stock dividends, was
$17.5 million ($0.45 per share) and $19.1 million ($0.52 per share) for the
three and six months ended September 30, 1998, respectively. The net loss was
primarily due to unprecedented weakness in the scrap metal industry during the
period, which resulted in lower than anticipated sales volumes and lower
realized scrap prices during the quarter, and the recognition of pre-tax
non-recurring expenses of $3.4 million.
Income tax benefit for the six months ended September 30, 1998 was $7.0
million, which yields an effective tax rate of 28%. The effective tax rate
differs from the statutory rate primarily due to the permanent differences
represented by non-deductible goodwill amortization, other non-deductible
expenses, and the reversal of $1.5 million of tax benefits previously
established for warrant compensation expense resulting from the decline in the
quoted market value of the Company's Common Stock.
During the six months ended September 30, 1998, the Company recognized an
extraordinary charge of $0.9 million, net of taxes, related to the early
retirement of debt and other costs incurred in connection with the closing of
the Senior Credit Facility. See Note 5 to the Condensed Consolidated Financial
Statements.
OUTLOOK
As a result of the adverse scrap market conditions during the quarter ended
September 30, 1998, the Company has initiated a number of cost cutting measures
and accelerated the integration of its businesses in an effort to reduce annual
operating costs by at least $30.0 million.
The cost cutting efforts include an overall reduction in labor costs due in
large part to a reduction of more than 350 employees or approximately 15% of the
Company's workforce. The Company is currently evaluating the operations at each
of its facilities in response to market conditions. The Company also continues
to consolidate its insurance, retirement plan administration, purchasing,
freight and logistics and telecommunications programs in order to take advantage
of economies of scale, with further cost savings to be achieved through
consolidation.
While the Company has seen some indications of firming in scrap prices in
certain regions of the U.S. and for certain grades of scrap metal, the Company
cannot predict when the scrap metals markets will stabilize. Any further
decreases in scrap metal prices could cause the Company to adjust downward the
value of its inventory, thereby reducing margins and sales and would put the
Company at risk of violating the covenants in the Senior Credit Facility. Once
the scrap metals markets do stabilize, the Company expects that its current
efforts to reduce costs and improve operating controls at the Company's
operations will allow it to expand profit margins.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash are derived from its operations and
from borrowings under the Senior Credit Facility. The Company has financed its
operations, acquisitions and capital expenditures primarily from the issuance of
the Notes and from borrowings under the Senior Credit Facility. At September 30,
1998, the Company had $3.6 million in cash and cash equivalents, compared with
cash and cash equivalents of $4.5 million at March 31, 1998. As of October 31,
1998, the Company had undrawn availability of $29.9 million under the Senior
Credit Facility.
18
<PAGE> 21
The Company believes that its Senior Credit Facility, along with internally
generated cash and financing capacity, are adequate to meet its near term
anticipated operating and capital requirements, including a $9.1 million
interest payment due on the Notes on November 16, 1998. However, there can be no
assurance that if scrap metal markets do not stabilize, that the Company would
not violate the Senior Credit Facility loan covenants.
The Company is currently continuing to evaluate the prospects to raise
capital from the issuance of equity as well as the potential sale of assets or
businesses as well as the potential for sale and leaseback of certain assets. No
assurance can be made that the Company will be able to raise capital from equity
issuances, the sale of assets or businesses or from the sale and leaseback of
assets.
Six Months Ended September 30, 1998 compared to Six Months Ended September 30,
1997
Cash Flows from Continuing Operations. The Company generated $20.7 million
of cash from continuing operations during the six months ended September 30,
1998 versus $2.7 million of cash which was utilized by continuing operations
during the six months ended September 30, 1997. The Company generated cash flows
from continuing operations mainly from the collection of accounts receivable and
reduced inventory carrying values.
Cash Flows from Investing Activities. During the six months ended September
30, 1998, the Company purchased $11.3 million of property and equipment and
utilized cash of $10.6 million to buyout operating leases. The Company also used
cash of $182.6 million for the acquisitions of and transaction costs related to
acquisitions completed during the six months ended September 30, 1998. During
the six months ended September 30, 1997, the Company purchased $1.8 million of
property and equipment and utilized cash of $14.1 million for acquisitions. The
increase in cash used for investing activities during the period is a result of
acquisitions completed during the six months ended September 30, 1998.
Management anticipates the Company will continue to make capital expenditures
for new equipment, and upgrade and expand existing equipment and facilities,
although the Company is presently limiting such investments by delaying and
deferring discretionary capital investments due to adverse market conditions.
Cash Flows from Financing Activities. During the six months ended September
30, 1998, the Company borrowed under its Senior Credit Facility to refinance
substantially all existing secured debt. The Company also issued $180.0 million
of Notes and received net proceeds of approximately $174.4 million. In
connection with the debt issuances, the Company incurred approximately $10.7
million in fees and $1.0 million of pre-payment penalties. The Company
anticipates that it will require additional capital to fund future operating and
capital investment requirements.
FINANCIAL CONDITION
Significant Transactions
During the six months ended September 30, 1998, the Company completed
certain significant debt transactions. The Company entered into a $250.0 million
Senior Credit Facility, which refinanced substantially all of the Company's
existing indebtedness. On May 13, 1998, the Company sold, in a Rule 144A private
placement and pursuant to Regulation S under the Securities Act, $180.0 million
of Notes. The Notes mature on May 15, 2008 and bear interest at the rate of 10%
per annum. The net proceeds of the Notes were used, in part, to repay
indebtedness of the Company, with the remainder used for acquisitions.
During the six months ended September 30, 1998, the Company utilized cash
of $182.6 million in connection with acquisitions.
Cash Requirements for Maturing Debt Obligations and Interest Payments
In connection with the acquisition of Isaac, the Company issued and assumed
notes payable. Such notes, which are secured by a letter of credit under the
Senior Credit Facility, require quarterly interest payments and require
principal payments of $10.8 million on February 15, 1999 and $10.8 million on
February 15, 2000. The Company expects to make these payments with borrowings
under the Senior Credit Facility. Because the
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<PAGE> 22
principal repayment of these notes is secured by a letter of credit under the
Senior Credit Facility, its repayment would have a neutral effect on the
Company's availability under the Senior Credit Facility.
On November 16, 1998, the Company is required to make a semi-annual
interest payment on the Notes. The interest payment of $9.1 million will be
funded from borrowings under the Senior Credit Facility.
Working Capital Availability and Requirements
Accounts receivable balances increased from $122.4 million at March 31,
1998 to $124.4 million at September 30, 1998. Approximately $30.0 million of
accounts receivable were acquired in connection with acquisitions completed
during the current fiscal year. The Company generated approximately $27.6
million of cash from the collection of accounts receivable during the six months
ended September 30, 1998. Accounts payable increased from $66.8 million at March
31, 1998 to $70.7 million at September 30, 1998 principally as a result of the
assumption of accounts payable of companies acquired since March 31, 1998.
Inventory levels can vary significantly among the Company's operations.
Inventory on hand at September 30, 1998 and March 31, 1998, respectively,
consisted of the following categories and amounts (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------
<S> <C> <C>
Ferrous metals.................................. $48,660 $35,934
Non-ferrous metals.............................. 31,393 25,222
Other........................................... 2,591 786
------- -------
$82,644 $61,942
======= =======
</TABLE>
The Company acquired approximately $23.0 million of inventory in connection
with the acquisitions completed during the current fiscal year. The adverse
market conditions prevalent in the most recent quarter have slowed the Company's
inventory turns. During the six months ended September 30, 1998, the Company
recorded significant inventory adjustments principally as a result of adverse
market conditions. The Company's inventory at September 30, 1998 is stated at
the lower of average cost or market.
Property and equipment increased from $109.9 million at March 31, 1998 to
$182.4 million at September 30, 1998. During the six months ended September 30,
1998, the Company made capital expenditures of $11.3 million, bought-out certain
operating leases for $10.6 million, and acquired $59.0 million of property and
equipment in connection with the acquisitions completed during the current
fiscal year. Although discretionary spending has been significantly curtailed
pending an improvement in current market conditions, the Company expects to
continue to make investments in additional equipment and property for expansion
and for replacement of assets.
At September 30, 1998, the Company had outstanding borrowings under its
Senior Credit Facility of approximately $141.0 million. Borrowings outstanding
on the Senior Credit Facility bore interest at a weighted average interest rate
of 7.4%. Amounts outstanding under the Senior Credit Facility ranged from $0.0
to $154.0 million during the six months ended September 30, 1998.
As a result of recent adverse market conditions and the effect of such
conditions on the Company's results of operations, effective as of September 30,
1998, the Company and its bank group amended the Company's Senior Credit
Facility to, among other things, modify the Company's minimum interest coverage
test. Pursuant to the amendment, the Company's interest coverage ratio tests (i)
for the quarters ending September 30, 1998 and December 31, 1998 were replaced
with tests of minimum aggregate six- and nine-month EBITDA amounts of $1.5
million and $6.0 million, respectively, and (ii) for the quarters ending March
31, 1999 and June 30, 1999 were amended to apply to only the respective six- and
nine-month periods then ended. If the scrap metal markets do not stabilize, the
Company may be required to pursue amendments to the Senior Credit Facility, or
waiver of defaults thereunder, prospectively. No assurance can be provided that
there will be accommodations from the banks should such amendments be requested
by the Company. To
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<PAGE> 23
the extent a default were to occur under the Senior Credit Facility and such
default was not cured timely or otherwise waived, the Company would be adversely
impacted.
YEAR 2000 LIABILITY
A year 2000 problem arises because some existing computer programs only
recognize the last two digits rather than four digits to define the applicable
year. Use of non-year 2000 compliant programs can result in system failures,
miscalculations or errors causing disruptions of operations or other business
failures, including, among other things, a potential inability to process
invoices or transactions or engage in other normal business activities.
The Company has experienced tremendous growth as a result of having
completed 25 acquisitions since April 1996. Essentially all of the Acquired
Operations operated on separate computer hardware, software, systems and
processes ("Information Systems"). In order to address the potential year 2000
problem, among other Information Systems challenges faced by the Company, in
fiscal 1998, the Company created an MIS Steering Committee. The MIS Steering
Committee has developed a plan for year 2000 compliance which includes four
major phases -- assessment, remediation, testing and implementation.
The Company has substantially completed its assessment of the impact of the
year 2000 problem on its Information Systems. Based on this assessment, the
Company does not expect the cost of making the Company's Information Systems
year 2000 compliant to have a material adverse impact on the Company's financial
position or results of operations in future periods. The Company has completed
approximately 88% of its remediation phase for all of its significant
Information Systems, and estimates that it will complete software upgrades
and/or replacement by the end of the current fiscal year. To date, the Company
has completed approximately 26% of its testing and has implemented approximately
26% of the required remediation for such Information Systems. The testing and
implementation phases are targeted to be substantially complete by the end of
the second quarter of next fiscal year.
The Company has begun its assessment of the impact of year 2000 problems on
its non-information technology systems (such as telephones, processing equipment
or other equipment containing embedded technology such as microcontrollers)
("Non-IT Systems"). As part of the assessment, the Company has created an
equipment inventory database of Non-IT Systems to help with the assessment. The
Company believes assessment will be completed before the end of the current
fiscal year, and that remediation, testing and implementation will be completed
by the end of the second quarter of next fiscal year.
The Company is in the process of identifying third parties (i.e., suppliers
and service providers) with whom it has significant relationships that, in the
event of a year 2000 failure by any of the third parties, could have a material
adverse impact on the Company's financial position or results of operations. The
Company expects that this process will be on-going throughout the current and
next fiscal year.
The Company believes that, as a result of these efforts, any year 2000
problem that it may become subject to will not be material. However, there can
be no assurance that this will be the case. The Company is unable at this time
to state its "worst case" year 2000 scenario. A contingency plan in the event of
noncompliance is currently being developed.
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<PAGE> 24
PART II -- OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On July 24, 1998, the City of Chicago served Cozzi with a lawsuit that
alleges violations of various municipal ordinance provisions relating to
facility operations and waste handling. (City of Chicago v. Cozzi Iron & Metal,
Inc., 98 CH 9810). Cozzi is negotiating with the City to reach an appropriate
resolution of this matter. At this time, Cozzi cannot estimate the costs, if
any, that may result from this lawsuit. Based on its analysis of the situation,
the management of the Company does not believe such costs would have a material
adverse effect on the Company's business or financial condition; however, there
can be no assurance that this will be the case.
On August 25, 1998, a federal grand jury indicted Newell Recycling of
Denver, Inc. (now Newell Recycling West) in connection with an allegation Newell
Recycling of Denver, Inc. knowingly endangered employees by illegally storing
and disposing gasoline in violation of the Resource Conversation and Recovery
Act. Two former employees and one current employee of Newell Recycling West were
charged with illegal storage and disposal of hazardous waste. The allegations
relate to a fire that occurred at Newell Recycling West's Denver facility on
October 30, 1995, before Newell Recycling West was purchased by the Company. The
Company has received an indemnity from the previous owner for all costs and
expenses related to the fire. However, there can be no assurance that the
pending proceeding will not materially adversely affect the Company.
By letter dated September 22, 1998, the Indiana Department of Environmental
Management ("IDEM") issued Cozzi a notice of violation that alleges
noncompliance with provisions primarily related to stormwater management at
Cozzi's East Chicago, Indiana facility. The notice of violation requests that
certain actions be taken and that Cozzi agree to the entry of an order imposing
a $252,500 penalty. The notice of violation relates in part to a July 4, 1998
fire at the facility. Cozzi has begun to negotiate a resolution of this matter
with IDEM. At this time, Cozzi cannot estimate the costs, if any, that may
result from this notice of violation, although such costs are expected to be
significantly less than the proposed penalty. Based on its analysis of the
situation, the management of the Company does not believe such costs will have a
material adverse effect on the Company's business or financial condition;
however, there can be no assurance that this will be the case.
ITEM 2: CHANGES IN SECURITIES
(c) Sales and/or Issuances of unregistered shares during the three months
ended September 30, 1998:
The following discusses all unregistered sales of the Company's Common
Stock during the three months ended September 30, 1998. Each of the private
placements described below was made to a limited number of investors,
including accredited investors, in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.
On July 1, 1998, the Company issued 1,938,879 shares of Common Stock
to the former shareholders of Naporano as partial consideration for all the
outstanding common stock of Naporano. The shares were valued at $18.5
million for financial reporting purposes.
On July 1, 1998, the Company issued 435,558 shares of Common Stock to
the former shareholders of Schiavone as partial consideration for certain
assets of Schiavone. The shares were valued at $4.3 million for financial
reporting purposes.
On July 7, 1998, the Company issued 650,000 shares of Common Stock to
the former shareholders of Kimerling as partial consideration for certain
assets of Kimerling. The shares were valued at $5.4 million for financial
reporting purposes. The Company also issued warrants to purchase an
aggregate of 100,000 shares of Common Stock at $13.00 per share in
consideration for services rendered or to be rendered.
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<PAGE> 25
On July 8, 1998, the Company issued 203,692 shares of Common Stock to
the former shareholder of Nicroloy as partial consideration for certain
assets of Nicroloy. The shares were valued at $1.9 million for financial
reporting purposes.
On July 15, 1998, the Company issued 362,088 shares of Common Stock to
the Midwest Metallics, L.P. as partial consideration for certain assets of
Midwest Metallics, L.P. the shares were valued at $3.1 million for
financial reporting purposes.
ITEM 5: OTHER INFORMATION
Effective August 27, 1998, Joseph Naporano was appointed a director of the
Company and as the Vice-Chairman of the Board of Directors.
Effective September 1, 1998, Harold Rubenstein resigned as a director of
the Company.
Effective November 2, 1998, Kenneth A. Merlau was appointed an Executive
Vice-President of the Company. Mr. Merlau currently serves on the Company's
Board of Directors.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended
September 30, 1998:
(1) Form 8-K dated July 1, 1998, filed July 2, 1998 (providing
supplementary consolidated financial statements of the Company that
give effect to the Company's merger with Bluestone, accounted for as a
pooling of interests).
(2) Form 8-K dated July 1, 1998, filed July 7, 1998, and amendment thereto
on Form 8-K/A, filed July 10, 1998 (relating to the acquisition of
Naporano and including historical and pro forma financial statements).
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
METAL MANAGEMENT, INC.
By: /s/ ALBERT A. COZZI
-----------------------------------
Albert A. Cozzi
Director, President and
Chief Operating Officer
By: /s/ GERARD M. JACOBS
-----------------------------------
Gerard M. Jacobs
Director and
Chief Executive Officer
By: /s/ T. BENJAMIN JENNINGS
-----------------------------------
T. Benjamin Jennings
Director, Chairman of the Board
and Chief Development Officer
By: /s/ ROBERT C. LARRY
-----------------------------------
Robert C. Larry
Vice President of Finance,
Treasurer, Chief Financial Officer
and Assistant Secretary
Date: November 13, 1998
24
<PAGE> 27
METAL MANAGEMENT, INC.
EXHIBIT INDEX
NUMBER AND DESCRIPTION OF EXHIBIT
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State
of Delaware on November 2, 1998.
3.2 Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock of the Company, as
filed with the Secretary of State of the State of Delaware
on November 2, 1998.
3.3 Restated By-Laws of the Company, as amended through August
27, 1998.
4.1 Sixth Supplemental Indenture, dated as of July 7, 1998,
executed by Kimerling Acquisition Corp., amending Indenture,
dated as of May 13, 1998, among the Company, the Guarantors
and LaSalle National Bank, as Trustee (incorporated by
reference to Exhibit 4.17 of the Company's Amendment No. 1
to Registration Statement on Form S-4 filed October 6,
1998).
4.2 Seventh Supplemental Indenture, dated as of July 9, 1998,
executed by Nicroloy Acquisition Corp., amending Indenture,
dated as of May 13, 1998, among the Company, the Guarantors
and LaSalle National Bank, as Trustee (incorporated by
reference to Exhibit 4.18 of the Company's Amendment No. 1
to the Registration Statement on Form S-4 filed October 6,
1998).
4.3 Eighth Supplemental Indenture, dated as of November 3, 1998,
executed by FPX, Inc., amending Indenture, dated as of May
13, 1998, among the Company, the Guarantors and LaSalle
National Bank, as Trustee.
4.4 Ninth Supplemental Indenture, dated as of November 3, 1998,
executed by PerlCo, L.L.C., amending Indenture, dated as of
May 13, 1998, among the Company, the Guarantors and LaSalle
National Bank, as Trustee.
4.5 Registration Rights Agreement, dated as of July 1, 1998,
between the Company, McDonald & Company Securities, Inc.,
Joseph F. Naporano and Andrew J. Naporano (incorporated by
reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated July 1, 1998).
4.6 Registration Rights Agreement, dated as of July 7, 1998,
between the Company and M. Kimerling & Sons, Inc.
(incorporated by reference to Exhibit 4.25 of the Company's
Amendment No. 1 to Registration Statement on Form S-3 filed
July 31, 1998).
4.7 Registration Rights Agreement, dated as of July 9, 1998,
between the Company and Nicroloy Company (incorporated by
reference to Exhibit 4.24 of the Company's Amendment No. 1
to Registration Statement on Form S-3 filed July 31, 1998).
4.8 Registration Rights Agreement, dated as of July 14, 1998,
between the Company and Midwest Metallics, L.P.
(incorporated by reference to Exhibit 4.26 of the Company's
Amendment No. 1 to Registration Statement on Form S-3 filed
July 31, 1998).
4.9 Metal Management, Inc. 1995 Stock Plan.
4.10 Metal Management, Inc. 1998 Director Compensation Plan.
4.11 Metal Management, Inc. 1998 Employee Stock Purchase Plan.
10.1 Amendment No. 3A to Credit Agreement, dated as of September
30, 1998, by and among the Company and its subsidiaries
named therein and BT Commercial Corporation (incorporated by
reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated October 5, 1998).
10.2 Secured Promissory Note, dated July 22, 1998, executed by T.
Benjamin Jennings in favor of the Company.
10.3 Pledge Agreement, dated as of July 22, 1998, between T.
Benjamin Jennings and the Company.
10.4 Secured Promissory Note, dated July 22, 1998, executed by
Gerard M. Jacobs in favor of the Company.
10.5 Pledge Agreement, dated as of July 22, 1998, between Gerard
M. Jacobs and the Company.
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C>
10.6 Employment Agreement, dated July 1, 1998, between Naporano
Iron & Metal Co., Nimco Shredding Co., the Company and
Joseph F. Naporano.
11.1 Computation of net income (loss) per share.
27.1 Financial Data Schedule.
</TABLE>
26
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
METAL MANAGEMENT, INC.
This Amended and Restated Certificate of Incorporation was duly adopted
by the Board of Directors of Metal Management, Inc., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 242 and Section 245
of The General Corporation Law of the State of Delaware. At the annual meeting
of stockholders of the Corporation, 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 Amended and Restated Certificate of Incorporation.
1. The name under which the Corporation was originally incorporated on
June 5, 1986 was General Parametrics Corporation.
2. The text of the Corporation's certificate of incorporation is hereby
amended and restated in its entirety to read as set forth below:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
METAL MANAGEMENT, INC.
FIRST: The name of the corporation is Metal Management, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801; and the name of the registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under The General Corporation Law of Delaware.
FOURTH: (a) The Corporation is authorized to issue two classes of shares to be
designated, respectively, Preferred Stock ("Preferred Stock") and Common Stock
("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 One Hundred Forty Million (140,000,000). The
Preferred Stock and Common Stock shall each have a par value of $0.01 per share.
1
<PAGE> 2
(b) The Preferred Stock shall be divided into series. The first series
shall consist of 36,000 shares of Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and the face amount shall be One Thousand Dollars
($1,000) per share. The second series shall consist of 23,000 shares of Series B
Convertible Preferred Stock (the "Series B Preferred Stock") and the face amount
shall be One Thousand Dollars ($1,000) per share. The remaining shares of
Preferred Stock may be issued from time to time in one or more series. The Board
of Directors of the Corporation is authorized, by filing a certificate pursuant
to the applicable law of the State of Delaware, to: (i) establish from time to
time the number of shares to be included in each such series; (ii) fix the
voting powers, designations, powers, preferences and relative, participating,
optional or other rights of the shares of each such series and the
qualifications, limitations or restrictions thereof, including but not limited
to the fixing or alteration of the dividend rights, dividend rate, conversion
rights, conversion rate, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares of Preferred
Stock; and (iii) increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the number of shares constituting such decrease
shall resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
(c) The voting powers, designations, powers, preferences and relative,
participating optional or other rights of the Series A Preferred Stock and the
Series B Preferred Stock are as follows:
SERIES A PREFERRED STOCK
1. DIVIDENDS.
(a) Payment of Dividends. The holders of shares of Series A Preferred
Stock (each, a "Holder" and collectively, the "Holders") shall be entitled to
receive cumulative dividends ("Dividends") on the Series A Preferred Stock
accruing on each share thereof at an annual rate of (A) prior to the date (the
"Approval Date") on which Stockholder Approval (as defined below) is obtained,
nine percent (9%) and (B) on or after the Approval Date, six percent (6%), in
each such case, 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 A 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 Corporation (the "Stock Payment
Option") and upon satisfaction of the conditions set forth in paragraph 1(c)
below, in shares (the "Dividend Payment Shares") of Series A Preferred Stock, on
each Conversion Date and Mandatory Redemption Date and on the Maturity Date
(each as defined below, a "Dividend Payment Date").
2
<PAGE> 3
(b) Delivery of Dividend Payment Shares. If the Corporation elects to
exercise the Stock Payment Option upon a conversion by a Holder, the Corporation
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 Corporation 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 Corporation, 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
Corporation agrees to inform the Holder at least five (5) Trading Days prior to
the first day of each calendar quarter in which the Corporation intends to
exercise the Stock Payment Option.
(c) Conditions to Stock Payment Option. If the Corporation 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 A Preferred Stock
authorized, unissued and unreserved for all other purposes, or held in the
Corporation's treasury, is sufficient to pay such Dividends in Dividend Payment
Shares;
(ii) the Corporation'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 Corporation (the "Registration Statement") pursuant to a
registration rights agreement by and among the Corporation and the Purchasers
named therein (the "Registration Rights Agreement") is effective and available
for the sale 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) a Mandatory Redemption Event or a Liquidation Event
(each as defined herein) has not occurred and is continuing; and
3
<PAGE> 4
(v) the Corporation has delivered to the Holder a
certificate, signed by an executive officer of the Corporation, 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 1(c)(i) - (iv) have been
satisfied.
2. 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 Corporation or by its creditors, as such, or
relating to its assets or (y) the dissolution or other winding up of the
Corporation 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 Corporation (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 A Preferred Stock) of
the Corporation unless prior thereto each Holder shall have received the
Liquidation Preference (as defined below) with respect to each share of Series A
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 A 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 A 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 A Preferred Stock shall mean an amount equal to the Stated
Value of such share plus any accrued and unpaid Dividends thereon.
3. CONVERSION.
(a) Right to Convert. Subject to the limitations contained in paragraph
3(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 A Preferred Stock is issued and (ii) the
effectiveness of the Registration Statement, each of its shares of Series A
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 Corporation (the "Conversion Shares"), as
is computed in accordance with the terms hereof (a "Conversion");
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provided, however, that the right of such Holder to convert the Series A
Preferred Stock into Conversion Shares shall not become effective unless and
until the Corporation 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
Corporation 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 A 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 A Preferred
Stock, the Corporation 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 A Preferred Stock are then convertible. If the
Corporation 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 A Preferred Stock, the
Corporation 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 A 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
Corporation and to its designated transfer agent for the Common Stock (the
"Transfer Agent") stating the number of shares of Series A Preferred Stock to be
converted, the amount of Dividends accrued on the shares of Series A 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 A Preferred Stock being
converted. The Holder shall thereafter send the original of such certificate or
certificates by overnight mail to the Corporation. 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 Corporation shall promptly issue to the Holder
the number of Conversion Shares that are not disputed and shall submit the
disputed calculations to its independent accountants within one (1) business day
of receipt of the Holder's Conversion Notice. The Corporation shall cause such
accountant to calculate the Conversion Price as provided herein and to notify
the Corporation 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 Corporation.
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(d) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Corporation pursuant to a Conversion
shall be determined by dividing the Stated Value of the Series A 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)
85% (the "Floating Conversion Price") and (B) $18.30 (the "Fixed Conversion
Price"). "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 Corporation and reasonably
acceptable to holders of a majority of the then outstanding shares of Series A
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 A Preferred Stock, and reasonably acceptable to the
Corporation, with the costs of such appraisal to be borne by the Corporation.
(e) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice pursuant to paragraph 3(c) above, the Corporation 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 A Preferred Stock being converted
are received by the Corporation (the "Delivery Date"), issue and deliver or
cause 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 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 Corporation 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 Corporation shall pay to the Holder
payments ("Conversion Default Payments") in the amount of
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<PAGE> 7
(i) (N/365) multiplied by (ii) the aggregate Stated Value of the shares of
Series A 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 Amended and
Restated Certificate of Incorporation. 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 there
occurs a dispute between the Corporation and a Holder as to the number of
Conversion Shares issuable pursuant to a Conversion as described in paragraph
3(c) above, and it is finally determined that such Holder is not entitled to
receive certain Conversion Shares, the Corporation 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 Corporation'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 Corporation 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 A 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 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 Corporation and the
Holder shall follow the procedures for Conversion set forth in this Section 3;
provided, however, that the Holder shall not be required to send the Conversion
Notice contemplated by paragraph 3(c). In the event that the Mandatory
Conversion Conditions are not satisfied as of the Maturity Date, the Corporation
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 A
Preferred Stock then held by such Holder.
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<PAGE> 8
(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 Corporation 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 Corporation 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
Corporation intends to redeem such excess Preferred Shares (an "Optional
Redemption Notice"). In the event that the Corporation does not deliver an
Optional Redemption Notice within such two business day period, the Corporation
will convert the Preferred Shares represented by such Conversion Notice in
accordance with the terms of this Amended and Restated Certificate of
Incorporation. 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 Corporation requesting
whether the Corporation intends to redeem such Holder's Preferred Shares in
excess of such Holder's Preferred Share Conversion Limit. If the Corporation
fails to deliver an Optional Redemption Notice within five (5) business days of
its receipt of such request, the Corporation 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 Corporation, (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, 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 Amended
and Restated Certificate of Incorporation) on such Preferred Shares up to and
including the date on which the Corporation pays the Optional
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<PAGE> 9
Redemption Price to the applicable Holder. Upon delivering an Optional
Redemption Notice to a Holder, the Corporation 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 A 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 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 Corporation 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 A Preferred Stock at such
time as such Conversion will not violate the provisions of this subparagraph
(ii).
4. 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 Corporation 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 Trading Days (as defined below) selected by the Corporation 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
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issuance or distribution. In the absence of one or more such quotations, the
Corporation 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 A 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 A Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
redemption or other similar event, 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 Corporation or another
entity or there is a sale of all or substantially all the Corporation'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 A Preferred Stock, then such Holder shall thereafter have
the right to receive upon Conversion of the shares of Series A Preferred Stock,
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon Conversion, such stock,
securities and/or other assets, if any, which such Holder would have been
entitled to receive in such transaction had such shares been converted
immediately prior to such transaction, 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) shall thereafter be applicable as nearly as may be
practicable in relation to any securities thereafter deliverable upon the
exercise hereof. The Corporation shall not effect any transaction described in
this subsection 4(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 Corporation) assumes by
written instrument the obligations of the Corporation under this Amended and
Restated Certificate of Incorporation, including the terms of this subsection
4(c).
(d) Distribution of Assets. If the Corporation 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 Corporation (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
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determination of shareholders entitled to such Distribution. The Fixed
Conversion Price for shares of Series A 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 Corporation and
each Holder.
(e) No Fractional Shares. If any adjustment under this Section 4 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 Corporation, 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.
5. 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 Corporation, to have all or any portion of the shares of Series A
Preferred Stock held by such Holder redeemed by the Corporation (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 A Preferred Stock
being redeemed multiplied by one hundred and twenty percent (120%).
(c) Payment of Mandatory Redemption Price.
(i) The Corporation 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 A Preferred
Stock, the Holder will return such share to the Corporation for cancellation
against payment of the Mandatory Redemption Price.
(ii) If the Corporation 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 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.
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(d) Mandatory Redemption Event. Each of the following events shall be
deemed a "Mandatory Redemption Event":
(i) the Corporation 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
Amended and Restated Certificate of Incorporation upon Conversion of any shares
of Series A Preferred Stock, and such failure continues for fifteen (15)
business days following written notice thereof by the Holder to the Corporation
and to counsel designated by the Corporation;
(ii) the Corporation is unable to issue shares of Common Stock upon
Conversion of any shares of Series A 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 Corporation breaches, in a material respect, any covenant
or other material term or condition of the Securities Purchase Agreement between
the Corporation and the Purchasers named therein pursuant to which the Series A
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 Corporation from the
Holder; provided that, if the Corporation 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 Corporation, the effectuation of a transaction or series of
related transactions, in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other entity (other than the
Corporation's merger transaction with Cozzi Iron & Metal, Inc.), immediately
following which the prior stockholders of the Corporation fail to own, directly
or indirectly, at least fifty percent (50%) of the surviving entity.
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6. MISCELLANEOUS.
(a) Transfer of Series A Preferred Stock. A Holder may sell, transfer
or otherwise dispose of all or any portion of the shares of Series A 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
Corporation shall, promptly following the return of the certificate or
certificates representing the shares of Series A 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 Corporation of
evidence of the loss, theft, destruction or mutilation of a certificate
representing shares of Series A Preferred Stock, and (in the case of loss, theft
or destruction) of indemnity or security reasonably satisfactory to the
Corporation, and upon surrender and cancellation of such certificate if
mutilated, the Corporation 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 A Preferred Stock shall
have no voting rights with respect to the business, management or affairs of the
Corporation; provided that the Corporation shall provide each Holder with prior
notification of each meeting of shareholders (and copies of proxy statements and
other information sent to such shareholders).
(d) Cancellation of Preferred Shares. Upon the conversion or redemption
of a Preferred Share, the Corporation 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
Amended and Restated Certificate of Incorporation 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:
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If to the Corporation:
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
Attn: Gerard M. Jacobs
Fax: 312-645-0714
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: Paul W. Theiss
Fax: 312-701-7711
and if to any Holder, to such address as shall be designated by such Holder in
writing to the Corporation.
(f) Protective Provisions.
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the Holders
of at least a majority of the then outstanding shares of Series A Preferred
Stock:
(a) alter or change the rights, preferences or privileges of the
Series A Preferred Stock or any other capital stock of the Corporation so as to
affect adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to distribution of assets upon a
Liquidation Event or any other liquidation, dissolution or winding up of the
Corporation; or
(c) increase the authorized number of shares of Series A
Preferred Stock;
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 A Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series A
Preferred Stock, pursuant to the terms hereof, so as to affect the Series A
Preferred Stock, then the Corporation will deliver notice of such approved
change to
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the holders of the Series A 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 A Preferred Stock into Conversion Shares pursuant to the terms of this
Amended and Restated Certificate of Incorporation as they existed prior to such
alteration or change and without regard to the limitations on Conversion
contained in paragraph 3(h)(i) hereof, or continue to hold their shares of
Series A Preferred Stock.
SERIES B PREFERRED STOCK
1. 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 Corporation (the "Stock Payment Option") and upon
satisfaction of the conditions set forth in paragraph 1(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").
(b) Delivery of Dividend Payment Shares. If the Corporation elects to
exercise the Stock Payment Option upon a conversion by a Holder, the Corporation
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 Corporation 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 Corporation, 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
Corporation agrees to inform the Holder at least five (5) Trading Days prior to
the first day of each calendar quarter in which the Corporation intends to
exercise the Stock Payment Option.
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<PAGE> 16
(c) Conditions to Stock Payment Option. If the Corporation 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
Corporation's treasury, is sufficient to pay such Dividends in Dividend Payment
Shares;
(ii) the Corporation'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 Corporation (the "Registration Statement") pursuant to a
registration rights agreement by and among the Corporation 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 Corporation 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;
(v) a Mandatory Redemption Event or a Liquidation Event
(each as defined herein) has not occurred and is continuing; and
(vi) the Corporation has delivered to the Holder a
certificate, signed by an executive officer of the Corporation, 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 1(c)(i) - (v) have been satisfied.
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2. 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 Corporation or by its creditors, as such, or
relating to its assets or (y) the dissolution or other winding up of the
Corporation 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 Corporation (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 Corporation 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 Corporation, the Holders of the Series B Preferred Stock shall
be treated pari passu with the holders of the Corporation's Series A Preferred
Stock.
3. CONVERSION.
(a) Right to Convert. Subject to the limitations contained in paragraph
3(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 Corporation (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
Corporation 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").
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<PAGE> 18
(b) Reservation of Common Stock Issuable Upon Conversion. The
Corporation 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 Corporation shall take immediate action (including seeking
shareholder authorization of additional shares of Common Stock) to increase the
Reserved Amount of 175% of the number of shares of Common Stock into which the
outstanding shares of Series B Preferred Stock are then convertible. If the
Corporation 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
Corporation 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
Corporation 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 Corporation. 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 Corporation shall promptly issue to the Holder
the number of Conversion Shares that are not disputed and shall submit the
disputed calculations to its independent accountants within one (1) business day
of receipt of the Holder's Conversion Notice. The Corporation shall cause such
accountant to calculate the Conversion Price as provided herein and to notify
the Corporation 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 Corporation.
(d) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Corporation 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");
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(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 Corporation
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
Corporation, with the costs of such appraisal to be borne by the Corporation.
(e) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice pursuant to paragraph 3(c) above, the Corporation 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 Corporation (the "Delivery Date"), issue and deliver or
cause 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 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 Corporation 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 Corporation 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
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<PAGE> 20
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 Amended and Restated Certificate of Incorporation. 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 Corporation fails to make any Conversion Default Payment in
accordance with this paragraph 3(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 Corporation of
its election to convert such Conversion Default Payment into Common Stock. In
the event that there occurs a dispute between the Corporation and a Holder as to
the number of Conversion Shares issuable pursuant to a Conversion as described
in paragraph 3(c) above, and it is finally determined that such Holder is not
entitled to receive certain Conversion Shares, the Corporation 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 Corporation'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 Corporation 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 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 Corporation and the
Holder shall follow the procedures for Conversion set forth in this Section 3;
provided, however, that the Holder shall not be required to send the Conversion
Notice contemplated by paragraph 3(c). In the event that the Mandatory
Conversion Conditions are not satisfied as of the Maturity Date, the Corporation
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.
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(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 Corporation 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 Option Redemption Price (as defined below) (an "Optional Redemption"). In
order to effect an Optional Redemption, the Corporation 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
Corporation intends to redeem such excess Preferred Shares (an "Optional
Redemption Notice"). In the event that the Corporation does not deliver an
Optional Redemption Notice within such two business day period, the Corporation
will convert the Preferred Shares represented by such Conversion Notice in
accordance with the terms of this Amended and Restated Certificate of
Incorporation. 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 Corporation requesting
whether the Corporation intends to redeem such Holder's Preferred Shares in
excess of such Holder's Preferred Share Conversion Limit. If the Corporation
fails to deliver an Optional Redemption Notice within five (5) business days of
its receipt of such request, the Corporation 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 Corporation, (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, 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 Amended
and Restated Certificate of Incorporation) on such Preferred Shares up to and
including the date on which the Corporation pays the Optional Redemption Price
to the
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<PAGE> 22
applicable Holder. Upon delivering an Optional Redemption Notice to a Holder,
the Corporation 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 Corporation 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).
4. 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 Corporation 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 Trading Days (as defined below) selected by the Corporation 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
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<PAGE> 23
issuance or distribution. In the absence of one or more such quotations, the
Corporation 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
Corporation or another entity or there is a sale of all or substantially all the
Corporation'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 Corporation 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 Corporation shall not
effect any transaction described in this subsection 4(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
Corporation) assumes by written instrument the obligations of the Corporation
under this Amended and Restated Certificate of Incorporation, including the
terms of this subsection 4(c).
(d) Distribution of Assets. If the Corporation 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 Corporation (collectively, a "Distribution"), then,
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<PAGE> 24
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 Corporation and each
Holder.
(e) No Fractional Shares. If any adjustment under this Section 4 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 Corporation, 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.
5. 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 Corporation, to have all or any portion of the shares of Series B
Preferred Stock held by such Holder redeemed by the Corporation (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 Corporation 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 Corporation for
cancellation against payment of the Mandatory Redemption Price.
(ii) If the Corporation 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
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.
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(d) Mandatory Redemption Event. Each of the following events shall be
deemed a "Mandatory Redemption Event":
(i) the Corporation 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 Amended and Restated Certificate of Incorporation 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 Corporation and to counsel designated by the Corporation;
(ii) the Corporation 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 Corporation breaches, in a material respect, any
covenant or other material term or condition of the Securities Purchase
Agreement between the Corporation 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 Corporation from the Holder; provided that, if the Corporation 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 Corporation, the effectuation of a transaction or
series of related transactions, in which more than 50% of the voting power of
the Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other entity (other than the
Corporation's merger transaction with Cozzi Iron & Metal, Inc.), immediately
following which the prior stockholders of the Corporation fail to own, directly
or indirectly, at least fifty percent (50%) of the surviving entity.
(e) Redemption Defaults. If the Corporation fails to pay any Holder the
Mandatory Redemption Price with respect to any share of Series B Preferred Stock
within five (5) business
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<PAGE> 26
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 Corporation's payment of
such Mandatory Redemption Price, to require the Corporation, upon written
notice, to immediately convert (in accordance with the terms of subparagraph (a)
of paragraph 3) 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 Corporation 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.
6. 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
Corporation 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 Corporation 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
Corporation, and upon surrender and cancellation of such certificate if
mutilated, the Corporation 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
Corporation; provided that the Corporation 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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(d) Cancellation of Preferred Shares. Upon the conversion or redemption
of a Preferred Share, the Corporation 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
Amended and Restated Certificate of Incorporation 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 Corporation:
Metal Management, Inc.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
Attn: Gerard M. Jacobs
Fax: 312-645-0714
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: Paul W. Theiss, Esq.
Fax: 312-701-7711
and if to any Holder, to such address as shall be designated by such Holder in
writing to the Corporation.
(f) Protective Provisions.
So long as shares of Series B Preferred Stock are outstanding,
the Corporation 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 Corporation so as to
affect adversely the Series B Preferred Stock;
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<PAGE> 28
(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
Corporation;
(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 agreed to allow the Corporation
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 Corporation 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
Amended and Restated Certificate of Incorporation as they existed prior to such
alteration or change and without regard to the limitations on Conversion
contained in paragraph 3(h)(i) hereof, or continue to hold their shares of
Series B Preferred Stock.
FIFTH: Except as otherwise provided in the resolutions of the Board of Directors
designating any series of Preferred Stock, any action required or permitted to
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders and may not be effected by a
consent in writing by any such stockholders.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the By-Laws of the Corporation.
EIGHTH: The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the By-Laws of the
Corporation.
NINTH: The election of directors need not be written ballot unless the By-Laws
of the Corporation shall so provide.
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TENTH: In voting for the election of directors of the Corporation, holders of
stock shall not have the right to accumulate their votes.
ELEVENTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
TWELFTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
THIRTEENTH: (a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, has
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the
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<PAGE> 30
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subparagraphs (a) and (b), or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subparagraphs (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subparagraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article 13.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subparagraphs of this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article 13.
(h) For purposes of this Article 13, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or
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<PAGE> 31
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article 13 with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this Article 13, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article 13.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 13 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation 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 November, 1998.
METAL MANAGEMENT, INC.
By:/s/Gerard M. Jacobs
----------------------------------------------
Name: Gerard M. Jacobs
Title:Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C 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 Amended and
Restated 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 6,000 shares (the
"Preferred Shares") of Preferred Stock, is the Series C Convertible Preferred
Stock (the "Series C 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 C Preferred
Stock (each, a "Holder" and collectively, the "Holders") shall be entitled to
receive cumulative dividends ("Dividends") on the Series C Preferred Stock
accruing on the Stated Value of each share thereof at an annual rate of six and
nine-tenths percent (6.9%). Dividends shall be payable in cash or, at the option
of the Company (the "Stock Payment Option"), in shares (the "Dividend Payment
Shares") of common stock (the "Common Stock"), $.01 par value per share, of the
Company. All Dividends paid in cash shall be payable semi-annually on October 31
and April 30 of each year while the Preferred Shares are outstanding, and on
each Conversion Date (each as defined below, a "Dividend Payment Date"). In the
event that the Company elects to exercise the Stock Payment Option with respect
to any Dividends, the Company shall deliver to the Holders, on the applicable
Dividend Payment Date, a notice advising the Holders that the Company has
elected to pay such Dividends in Common Stock.
(b) Delivery of Dividend Payment Shares. If the Company elects to
exercise the Stock Payment Option upon a Dividend Payment Date, the Company
shall deliver to each Holder, on or before the tenth business day following the
applicable Dividend Payment Date, one or more certificates
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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) 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 applicable Dividend Payment Date. 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 tenth business day following
the applicable Dividend Payment Date. "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 C 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 C Preferred Stock, and reasonably acceptable
to the Company, with the costs of such appraisal to be borne by the Company.
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
senior to or pari passu with the Series C 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 C 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 C Preferred
Stock and to the holders of any pari passu securities are insufficient to pay
the Liquidation Preference with respect to all of the outstanding shares
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of Series C 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 C 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 C Preferred Stock shall be
treated pari passu with the holders of the Company's Series A Preferred Stock
and Series B Preferred Stock.
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) one (1) year following the date
on which the Series C Preferred Stock is issued and (ii) the effectiveness of a
registration statement filed by the Company pursuant to the terms of the
Registration Rights Agreement between the Company and the Holders, all or any
part of the shares of Series C Preferred Stock held by it 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").
(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 C Preferred Stock.
(c) Conversion Notice. In order to convert shares of Series C 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 C Preferred Stock to be converted, the
amount of Dividends accrued on the shares of Series C 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 C 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
calculations to its independent accountants within three (3) business days of
receipt
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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 C Preferred Stock to be
converted by the Conversion Price (as defined herein) in effect on the
Conversion Date. The "Conversion Price" shall be Nine Dollars ($9.00) per share;
provided, however, that the Conversion Price for any shares of Series C
Preferred Stock which have not been converted or redeemed prior to the fifth
(5th) anniversary of the issuance of such Preferred Shares shall be equal to the
average of the Closing Bid Prices for the Common Stock on the five (5) Trading
Days occurring immediately prior to (but not including) the applicable
Conversion Date.
(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 tenth (10th)
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 C 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
contain a restrictive legend to the extent deemed necessary or appropriate by
counsel to the Company.
(f) No Fractional Shares. If any Conversion under this Section 4 or any
adjustment under 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.
(g) Mandatory Conversion. If at any time prior to Conversion of all of
the Series C Preferred Stock, the Closing Bid Price for the Common Stock is in
excess of Nine Dollars ($9.00) per share for forty-five (45) consecutive Trading
Days, the Company shall have the right to require all of the remaining Holders
of Series C Preferred Stock to convert all or any portion of such Series C
Preferred Stock into Conversion Shares by delivering written notice to such
Holders (the "Mandatory Conversion Notice"), provided, however, that the Company
may not deliver a Mandatory Conversion Notice prior to the date of effectiveness
of the registration statement to be filed by the Company with respect to the
Conversion Shares in accordance with the Registration Rights Agreement by and
among the Company and the initial Holders. Upon delivery of a Mandatory
Conversion Notice, the Company and the Holders 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).
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5. ADJUSTMENTS TO CONVERSION PRICE.
(a) Adjustment to 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 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 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 Trading Days (as herein
defined) 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 C 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 an
effective date 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 C Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
redemption or other similar event, 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, then such
Holder shall thereafter have the right to receive upon Conversion of the shares
of Series C Preferred Stock, upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore issuable upon
Conversion, such stock, securities and/or other assets, if any, which such
Holder would have been entitled to receive in such transaction had such shares
been converted immediately prior to such transaction (provided that nothing
contained herein is intended to fix the Conversion Price as of the date
immediately prior to such transaction, and the Conversion Price, as equitably
adjusted pursuant to the provisions of this Section 5, shall continue to be
governed by the terms of Section 4(d)), 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
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<PAGE> 6
of shares issuable upon a Conversion) 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 consummate 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 prior to, or 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).
(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 Conversion Price for shares
of Series C Preferred Stock not converted prior to the effective date of a
Distribution shall be reduced to a price determined by decreasing the 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.
6. REDEMPTION.
(a) Redemption. (i) Optional Redemption. At any time, and from time to
time, following the third (3rd) anniversary of the issuance of the Series C
Preferred Stock, the Company shall have the right and option to redeem (an
"Optional Redemption") all or any portion of the Series C Preferred Stock upon
not less than thirty (30) days' prior written notice to the Holders (the
"Redemption Notice"). The Redemption Notice shall indicate the number of
Preferred Shares to be redeemed and the effective date (the "Redemption Date")
of such redemption. Any Holder may elect to convert his or her Preferred Shares
into Conversion Shares in accordance with the terms and conditions of this
Certificate of Designations at any time prior to the expiration of the thirty
(30) day period specified in the Conversion Notice, in which case the provisions
of Section 4 shall apply to such Conversion.
(ii) Redemption Upon Conversion. Upon the receipt of a
Conversion Notice at any time following the fifth (5th) anniversary of the
issuance of the Series C Preferred Stock, the Company shall have the right and
option, in lieu of converting the Preferred Shares into Conversion Shares, to
redeem for cash all or any portion of the Series C Preferred Stock which is
subject to such Conversion Notice (the "Conversion Redemption"). The Company
shall exercise its right to redeem such Series C Preferred Stock by delivering
written notice thereof to the Holders who delivered the subject Conversion
Notice within five (5) business days after receipt by the Company of the
applicable Conversion Notice (also, a "Redemption Notice"). The Redemption
Notice shall indicate the number of Preferred Shares to be redeemed and the
effective date of such redemption (also, a "Redemption Date"), which shall be no
later than thirty (30) days following the date of the Redemption Notice.
-6-
<PAGE> 7
(b) Redemption Price. The "Redemption Price" shall be equal to the
Liquidation Preference of the shares of Series C Preferred Stock being redeemed.
(c) Payment of Redemption Price. The Company shall pay the applicable
Redemption Price for each Preferred Share being redeemed to each Holder within
five (5) business days of the applicable Redemption Date. Upon redemption of a
share of Series C Preferred Stock, the Holder shall deliver such share to the
Company for cancellation against payment of the Redemption Price.
7. MISCELLANEOUS.
(a) Transfer of Series C Preferred Stock. Prior to the first
anniversary of the issuance of the Series C Preferred Stock, a Holder may not
sell, transfer or otherwise dispose of all or any portion of the shares of
Series C Preferred Stock, except to another Holder, and then only pursuant to an
appropriate exemption from the registration requirements of the Securities Act.
Following the first anniversary of the issuance of the Series C Preferred Stock,
a Holder may sell, transfer or otherwise dispose of all or any portion of the
shares of Series C 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 C 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 C 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 C Preferred Stock shall
have no voting rights with respect to the business, management or affairs of the
Company.
(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. All Series C Preferred Stock which
shall have been issued and reacquired in any manner by the Company shall be
restored to the status of authorized but unissued shares of preferred stock of
the Company, without designation as to class or series.
(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
-7-
<PAGE> 8
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: Secretary
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 or if no such designation is made, to:
F. Perlman & Company, Inc.
475 North Dunlap
P.O. Box 582
Memphis, Tennessee 38101
(f) Protective Provisions.
So long as shares of Series C 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 C Preferred Stock
alter or change the rights, preferences or privileges of the Series C Preferred
Stock or any other capital stock of the Company so as to affect adversely the
Series C Preferred Stock (provided that the Company may issue classes of stock
senior to the Series C Preferred Stock without in any way violating the
provisions of this paragraph).
In the event that Holders of at least a majority of the then
outstanding shares of Series C Preferred Stock agree to allow the Company to
alter or change the rights, preferences or privileges of the shares of Series C
Preferred Stock, pursuant to the terms hereof, so as to affect the Series C
Preferred Stock, then the Company will deliver notice of such approved change to
the holders of the Series C Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and
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<PAGE> 9
the Dissenting Holders shall have the right for a period of thirty (30) days to
convert their shares of Series C Preferred Stock into Conversion Shares pursuant
to the terms of this Certificate of Designations as they existed prior to such
alteration or change or continue to hold their shares of Series C Preferred
Stock.
(g) Fractional Shares. The shares of Series C Preferred Stock may be
issued by the Company in whole units or in fractional shares, as determined by
the Company.
IN WITNESS WHEREOF, the Company has executed this Certificate of
Designations as of the 2nd day of November, 1998.
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
-------------------------------------
Name: David A. Carpenter
Title: Vice President, General Counsel and Secretary
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<PAGE> 1
EXHIBIT 3.3
Reflecting Amendments
Adopted Through August 27, 1998
RESTATED BY-LAWS
OF
METAL MANAGEMENT, INC.
<PAGE> 2
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE I CORPORATE OFFICES...........................................................................2
1.1 REGISTERED OFFICE...........................................................................2
1.2 OTHER OFFICES...............................................................................2
ARTICLE II MEETINGS OF STOCKHOLDERS....................................................................2
2.1 PLACE OF MEETINGS...........................................................................2
2.2 ANNUAL MEETING..............................................................................2
2.3 SPECIAL DELIVERY............................................................................3
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................................................3
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................................................3
2.6 QUORUM......................................................................................4
2.7 ADJOURNED MEETING; NOTICE...................................................................4
2.8 VOTING......................................................................................4
2.9 WAIVER OF NOTICE............................................................................5
2.10 INTENTIONALLY OMITTED.......................................................................5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING..................................................5
2.12 PROXIES.....................................................................................6
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.......................................................6
2.14 ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS
FOR DIRECTORS AND OTHER PROPOSALS...........................................................6
ARTICLE III DIRECTORS...................................................................................8
3.1 POWERS......................................................................................8
3.2 NUMBER OF DIRECTORS.........................................................................8
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS...................................................................................8
3.4 RESIGNATION AND VACANCIES...................................................................8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE....................................................9
3.6 FIRST MEETINGS..............................................................................9
3.7 REGULAR MEETINGS...........................................................................10
3.8 SPECIAL MEETINGS; NOTICE...................................................................10
3.9 QUORUM.....................................................................................10
3.10 WAIVER OF NOTICE...........................................................................11
3.11 ADJOURNED MEETING; NOTICE..................................................................11
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING....................................................................................11
3.13 FEES AND COMPENSATION OF DIRECTORS.........................................................11
</TABLE>
<PAGE> 3
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
<TABLE>
<S> <C> <C> <C>
3.14 APPROVAL OF LOANS TO OFFICERS..............................................................12
3.15 REMOVAL OF DIRECTORS.......................................................................12
ARTICLE IV COMMITTEES.................................................................................12
4.1 COMMITTEES OF DIRECTORS....................................................................12
4.2 COMMITTEE MINUTES..........................................................................13
4.3 MEETINGS AND ACTION OF COMMITTEES..........................................................13
4.4 EXECUTIVE COMMITTEE........................................................................14
ARTICLE V OFFICERS...................................................................................14
5.1 OFFICERS...................................................................................14
5.2 ELECTION OF OFFICERS.......................................................................14
5.3 SUBORDINATE APPOINTED OFFICERS.............................................................15
5.4 REMOVAL AND RESIGNATION OF OFFICERS........................................................15
5.5 VACANCIES IN OFFICES.......................................................................16
5.6 CHAIRMAN OF THE BOARD; CHIEF EXECUTIVE OFFICER.............................................16
5.7 PRESIDENT..................................................................................16
5.8 VICE PRESIDENTS............................................................................16
5.9 SECRETARY..................................................................................17
5.10 CHIEF FINANCIAL OFFICER....................................................................17
5.11 AUTHORITY AND DUTIES OF OFFICERS...........................................................18
ARTICLE VI INDEMNITY..................................................................................18
6.1 THIRD PARTY ACTIONS........................................................................18
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION..............................................18
6.3 SUCCESSFUL DEFENSE.........................................................................19
6.4 DETERMINATION OF CONDUCT...................................................................19
6.5 PAYMENT OF EXPENSES IN ADVANCE.............................................................19
6.6 INDEMNITY NOT EXCLUSIVE....................................................................20
6.7 INSURANCE INDEMNIFICATION..................................................................20
6.8 THE CORPORATION............................................................................20
6.9 EMPLOYEE BENEFIT PLANS.....................................................................20
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES................................................................................21
ARTICLE VII RECORDS AND REPORTS........................................................................21
7.1 MAINTENANCE AND INSPECTION OF RECORDS......................................................21
7.2 INSPECTION BY DIRECTORS....................................................................22
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...........................................................22
7.4 REPRESENTATION OF SHARES OF OTHER
CORPORATIONS...............................................................................22
</TABLE>
<PAGE> 4
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
<TABLE>
<S> <C> <C> <C>
ARTICLE VIII GENERAL MATTERS............................................................................23
8.1 CHECKS.....................................................................................23
8.2 EXECUTION OF CORPORATE CONTRACTS AND
INSTRUMENTS................................................................................23
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.....................................................23
8.4 SPECIAL DESIGNATION ON CERTIFICATES........................................................24
8.5 LOST CERTIFICATES..........................................................................24
8.6 CONSTRUCTION; DEFINITIONS..................................................................25
8.7 DIVIDENDS..................................................................................25
8.8 FISCAL YEAR................................................................................25
8.9 SEAL.......................................................................................25
8.10 TRANSFER OF STOCK..........................................................................25
8.11 STOCK TRANSFER AGREEMENTS..................................................................26
8.12 REGISTERED STOCKHOLDERS....................................................................26
ARTICLE IX AMENDMENTS.................................................................................26
ARTICLE X CUSTODIAN..................................................................................26
10.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................................................26
10.2 DUTIES OF CUSTODIAN........................................................................27
</TABLE>
<PAGE> 5
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
RESTATED BY-LAWS
OF
METAL MANAGEMENT, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices,
including a principal executive office, at any place or places within or outside
of the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
2
<PAGE> 6
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
2.3 SPECIAL DELIVERY
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president or
chief executive officer
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, the
chief executive officer, or the secretary of the corporation. Any of such
officers receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons who called the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these by-laws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
3
<PAGE> 7
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
by-laws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
by-laws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the certificate of incorporation, each
stockholder shall be entitled to one vote for each share of capital stock held
by such stockholder. In voting for the election of Directors of the corporation,
stockholders shall be entitled to cumulate votes.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast).
4
<PAGE> 8
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need to be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
2.10 INTENTIONALLY OMITTED
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of director does not so fix a record date:
(i) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the date next preceding the day on
which the meeting is held.
(ii) [Intentionally Omitted.]
(iii) The record date for determining stockholders for any
other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to vote at a meeting
of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
5
<PAGE> 9
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
2.12 PROXIES
Each stockholder entitled to vote at a meeting may authorize another
person or persons to act for him by a written proxy, signed by the stockholder
and filed with the secretary of the corporation, but no such proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.14 ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS FOR
DIRECTORS AND OTHER PROPOSALS
No stockholder may propose to nominate persons for election tot he
Board of Directors at an annual meeting of the stockholders of the corporation
or to bring other business before an annual meeting of the stockholders of the
corporation, unless such stockholder gives timely notice thereof to the
Secretary of the corporation. To be timely, a stockholder's notice must be
addressed to the Secretary of the corporation and received at the principal
executive offices of the corporation not more than one hundred twenty (120)
daays and not less than ninety (90) days prior to the first anniversary date of
the immediately preceding annual meeting; provided, however, that in the event
the annual meeting is calledd for a date which is not within sixty (60) days
before or after such anniversary date, notice by the stockholder, to be timely,
must be received no later than the close of business on the fifteenth (15th) day
following the day on which notice of the date of the annual meeting was mailed
or public disclosure of the date of the annual meeting
6
<PAGE> 10
REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
was made, whichever occurs first.
Such stockholder's notice shall set forth: (a) as to each person whoom
the stockholder proposes to nominate at the annual meeting for election to the
Board of Directors, (i) the name, age, business address and residential address
of such person, (ii) the principal occupatioon or employment of such person,
(iii) the class and number of shares of the corporatioon which are beneficially
owned by such person, (iv) a description of all arrangements or understandings
between such stockholder and such person, (v) all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, and any other rules of
the Securities and Exchange Commission, (vi) such other information as may be
reasonaly required by the corporatioon the eligibility of such person to serve
as a director of the corporation, and (vii) any such person's written consent to
serve as a director if so elected; (b) as to any other business that such
stockholder proposes to bring before the annual meeting, (i) a description of
the business desired to be brought before the meeting in sufficient detail for
such business to be summarized in the agenda for the meeting, (ii) the reasons
for conducting such business at the meeting, and (iii) any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, whose behalf the nomination or proposal is made,
(i) the name and address of such stockholder, as it appears on the corporation's
books, and of any such beneficial owner. Notwithstanding compliance with the
foregoing requirements, no person proposed to be nominated to the Board of
Directors by a stockholder pursuant to this procedure shall become a nominee for
election to the Board of Directors and no other business shall be considered at
the annual meeting unless the stockholder who has provided the notice, or his
proxy, nominates such person or introduces such business at the meeting, as the
case may be. The presiding officer of the annual meeting shall, if the facts
warrant, refuse to acknowledge a nomination or the consideration of business
which was not made in compliance with the foregoing requirements."
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these by-laws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under
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the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of no less than four (4) and no
greater than twelve (12) persons. The exaact number of directors shall be
established from time to time by resolutioon of the Board of Directors or by the
stockholders.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these by-laws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these by-laws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
by-laws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock
or series thereof
are entitled to elect one or more directors by the provisions of the certificate
of incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected.
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(iii) Vacancies and newly created directorships resulting
from an increase in the authorized number of directors due to the amendment of
Section 3.2 of these ByLaws by a vote of the Board of Directors pursuant to
Article VII of the Certificate of Incorporation may be filled by a majority of
the directors then in office.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these by-laws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
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3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, the chief
executive officer, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone or telecopy to each director or sent by electronic
mail, first-class mail or telegram, charges prepaid, addressed to each director
at that director's address as it is shown on the records of the corporation. If
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy, electronic mail or telegram, it
shall be delivered personally or by telephone or transmitted via telecopy or
electronic mail or delivered to the telegraph company, as the case may be, at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated (i) to the
director or (ii) to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director or
(iii) to the director's voice message box. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjournment the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.
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3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these by-laws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these by-laws, the board of directors shall have the authority to fix the
compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation.
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Nothing in this section contained shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of the corporation at common law or under any
statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these by-laws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the by-laws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the general
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or
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exchange of all or substantially all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the by-laws of the corporation; and,
unless the board resolution establishing the committee, the by-laws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these by-laws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those by-laws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
by-laws.
4.4 EXECUTIVE COMMITTEE
An Executive Committee of the Board of Directors shall be 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 those
certain actions(which actions include, as contemplated by Section 141 (c) (1) of
the Delaware General Corporation Law, the authorization of the issuance of stock
and the adoption of a certificate of ownership and merger pursuant to Section
253 of such law) to be specified in Section 1.2 of the stockholders' agreement
for the corporation to be dated as of the closing of the merger of a subsidiary
of the Corporation with and into Cozzi Iron & Metal, Inc. By and among T.
Benjamin Jennings, Gerard M. Jacobs, Albert A. Cozzi, Frank J. Cozzi, Gregory P.
Cozzi and the Corporation. The Executive Committee shall consist of the Chairman
of the Board of Directors, the President and Chief Operating Officer of the
Corporation or his successor
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on the Executive Committee, Frank J. Cozzi, and the Chief Executive Officer of
the Corporation, and one or more other senior company executives chosen 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 Committee, Frank J. Cozzi, (ii) T. Benjamin Jennings, so long as he is
then employed by the Corporation, and (iii) Gerard M. Jacobs, so long as he is
then employed by the Corporation.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a treasurer. The corporation may also have, at the discretion of the board of
directors, a chairman of the board, a chief executive officer, a chief financial
officer, one or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these by-laws. Any number of
offices may be held by the same person. Two persons may hold the same office as
co-officers if so specified by the board of directors.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
by-laws, shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment. An officer of the
corporation elected pursuant to this Section 5.2 may also serve as an appointed
officer pursuant to Section 5.3 hereof.
5.3 SUBORDINATE APPOINTED OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require. Each of such appointed officers shall hold office for such period, have
such authority, and perform such duties as are provided in these by-laws (if
any) or as the board of directors or the president, as the case may be, may from
time to time determine. Such appointed officers may have titles such as vice
president of the corporation or a division of the corporation or president of a
division of the corporation, or similar such titles, subject to such limits in
appointment power as the board may determine. An appointed officer, absent
specific election by the board of directors as an elected corporate officer: (a)
shall not be considered an officer
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elected by the board of directors pursuant to Section 5.2 of these bylaws and
shall not have the executive powers or policy-making authority of officers
elected by the board of directors pursuant to Section 5.2 hereof; (b) shall not
be considered an "officer" within the meaning of Rule 3b-2 or Rule 16a-1(f)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or an "executive officer" of the corporation within the meaning of Rule
3b-7 promulgated under the Exchange Act, and such a person shall not be given
the access to inside information of the corporation enjoyed by elected officers
of the corporation; (c) shall not be considered a "corporate officer" within the
meaning of Section 312 of the California Corporations Code, except in any such
case as is otherwise required by law; and (d) shall be empowered to represent
himself or herself to third parties as an appointed officer only, and shall only
be empowered to execute documents, bind the corporation or otherwise act on
behalf of the corporation as authorized by the president of the corporation or
by resolution of the board of directors.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer elected by the
board of directors, by an officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice, and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation mayl be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD; CHIEF EXECUTIVE OFFICER
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these by-laws. The chief executive
officer of the corporation, if such an officer be elected, and shall have
general supervision, direction, and control of the business
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and the officers of the corporation. He or she shall preside at all meetings of
the stockholders and at all meetings of the board of directors.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief operating officer of the corporation and shall,
subject to the control of the board of directors, have the general powers and
duties of management usually vested in the office of president of a corporation
and shall have such other powers and duties as may be prescribed by the board of
directors or these by-laws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, elected pursuant to this Section 5.8 and not those appointed pursuant to
Section 5.3, in order of their rank as fixed by the board of directors or, if
not ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the president. Such vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these
by-laws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall how the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the
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stockholders and of the board of directors required to be given by law or by
these by-laws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these by-laws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He or she shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all his transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the board of directors or the by-laws.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and
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amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonable believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be
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made by only as authorized in the specific case upon a determination that the
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the Board
of Directors or the Executive Committee by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding
or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he or she is not entitled to be indemnified
by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had
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continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under and subject to the provisions
of this Article VI (including, without limitation the provisions of Section 6.4)
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these by-laws as amended to date,
accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
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7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these by-laws,
may authorize any officer or officers, or agent or agents to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the
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REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
president or vice-president, and by the chief financial officer or an assistant
treasurer, or the secretary or an assistant secretary of such corporation
representing the number of shares registered in certificate form. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertified partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, bout only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen
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REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these by-laws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolutions of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation shall adopt a corporate seal, which may be altered at
pleasure, and use the same by causing it or a facsimile thereof, to be impressed
or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate or shares duly endorsed or accompanied by proper
evidence of succession,
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ADOPTED THROUGH AUGUST 27, 1998
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other by-laws of the corporation may be adopted,
amended, or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal by-laws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor the limit their power to adopt, amend or repeal by-laws.
ARTICLE X
CUSTODIAN
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REFLECTING AMENDMENTS
ADOPTED THROUGH AUGUST 27, 1998
10.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
10.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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EXHIBIT 4.3
EIGHTH SUPPLEMENTAL INDENTURE
THIS EIGHTH SUPPLEMENTAL INDENTURE, dated as of November 3, 1998, is
executed by FPX, INC., a Tennessee corporation ("FPX"), a wholly-owned
subsidiary of METAL MANAGEMENT, INC., a Delaware corporation (the "Company"),
for the sole purpose of granting a guarantee under the Indenture (as amended
from time to time, the "Indenture"), dated as of May 13, 1998, with respect to
the Company's 10% Senior Subordinated Notes due 2008 (the "Notes"), entered into
among the Company, the Guarantors (as defined therein) and LASALLE NATIONAL
BANK, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Company, the Guarantors and the Trustee have entered into the
Indenture. Capitalized terms used herein, not otherwise defined herein, shall
have the meanings given them in the Indenture.
Section 4.18 of the Indenture expressly provides that any Restricted
Subsidiary (i) that has assets or revenues in any fiscal year in excess of
$200,000 or (ii) that is not a Guarantor and is a borrower under the Senior
Credit Facility shall execute a supplemental indenture to become a Guarantor of
the Company's Notes. Pursuant to Section 4.18 of the Indenture, FPX executes
this Eighth Supplemental Indenture to a become Guarantor of the Company's Notes.
FPX has, by Board Resolution, authorized this Eighth Supplemental Indenture. The
Trustee has determined that this Eighth Supplemental Indenture is in form
satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Eighth Supplemental Indenture, as follows:
Section 1. Guarantee on the Notes.
FPX hereby subjects itself to the provisions of the Indenture as a
Guarantor in accordance with Article 11 of the Indenture.
Section 2. Counterparts
This Eighth Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties, notwithstanding that all parties have not signed the same
counterpart.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Eighth
Supplemental Indenture to be duly executed by its respective officers as of the
day and year first above written.
FPX, INC.
By: /s/ David A. Carpenter
-------------------------------------
Name: David A. Carpenter
-----------------------------------
Its: Vice President
------------------------------------
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EXHIBIT 4.4
NINTH SUPPLEMENTAL INDENTURE
THIS NINTH SUPPLEMENTAL INDENTURE, dated as of November 3, 1998, is
executed by PERLCO, L.L.C., a Tennessee limited liability company ("PerlCo"), a
wholly-owned subsidiary of METAL MANAGEMENT, INC., a Delaware corporation (the
"Company"), for the sole purpose of granting a guarantee under the Indenture (as
amended from time to time, the "Indenture"), dated as of May 13, 1998, with
respect to the Company's 10% Senior Subordinated Notes due 2008 (the "Notes"),
entered into among the Company, the Guarantors (as defined therein) and LASALLE
NATIONAL BANK, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Company, the Guarantors and the Trustee have entered into the
Indenture. Capitalized terms used herein, not otherwise defined herein, shall
have the meanings given them in the Indenture.
Section 4.18 of the Indenture expressly provides that any Restricted
Subsidiary (i) that has assets or revenues in any fiscal year in excess of
$200,000 or (ii) that is not a Guarantor and is a borrower under the Senior
Credit Facility shall execute a supplemental indenture to become a Guarantor of
the Company's Notes. Pursuant to Section 4.18 of the Indenture, PerlCo executes
this Ninth Supplemental Indenture to a become Guarantor of the Company's Notes.
PerlCo has, by Board Resolution, authorized this Ninth Supplemental Indenture.
The Trustee has determined that this Ninth Supplemental Indenture is in form
satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Ninth Supplemental Indenture, as follows:
Section 1. Guarantee on the Notes.
PerlCo hereby subjects itself to the provisions of the Indenture as a
Guarantor in accordance with Article 11 of the Indenture.
Section 2. Counterparts
This Ninth Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties, notwithstanding that all parties have not signed the same
counterpart.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Ninth Supplemental
Indenture to be duly executed by its respective officers as of the day and year
first above written.
PERLCO, L.L.C.
By: /s/ David A. Carpenter
----------------------------------------
Name: David A. Carpenter
--------------------------------------
Its: Vice President
---------------------------------------
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EXHIBIT 4.9
METAL MANAGEMENT, INC.
1995 STOCK PLAN
------------------------
1. Purposes of the Plan. The purposes of this Stock Plan are:
(a) to attract and retain the best available personnel for positions
of substantial responsibility,
(b) to provide additional incentive to Employees and Consultants, and
(c) to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time
of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities
laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in accordance
with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Metal Management, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of
(i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company
shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
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(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share
of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Common
Stock) on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems
reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain terms
and conditions of an individual Option. The Notice of Grant is part of the
Option Agreement.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise
price.
(v) "Optioned Stock" means the Common Stock subject to an Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1995 Stock Option Plan.
(z) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect
to the Plan.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(bb) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 5,200,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan, whether upon
exercise of an Option, shall not be returned to the Plan and shall not become
available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase
price, and the original purchaser of such Shares did not receive any benefits of
ownership of such Shares, such Shares shall become available for future grant
under the Plan. For purposes of the preceding sentence, voting rights shall not
be considered a benefit of Share Ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to Directors,
Officers who are not Directors, and Employees who are neither Directors
nor Officers.
(ii) Administration With Respect to Directors and Officers Subject
to Section 16(b). With respect to Option grants made to Employees who
are also Officers or Directors subject to Section 16(b) of the Exchange
Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3; provided,
however, that the Board may grant Options to Employees who are also
Officers or Directors subject to Section 16(b) of the Exchange Act if
the Board is unable to administer the Plan in compliance with the rules
governing a plan intended to qualify as a discretionary plan under Rule
16b-3 (provided, however, that in such a case, the grant of Options to
Employees who are Officers or Directors subject to Section 16(b) of the
Exchange Act will constitute a non-exempt purchase under Section 16(b)),
or (B) a committee designated by the Board to administer the Plan, which
committee shall be constituted to comply with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect to
Option grants made to Employees or Consultants who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such
Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee
and appoint additional members, remove members (with or without cause)
and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
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(ii) to select the Consultants and Employees to whom Options may be
granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time
or times when Options may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
the shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option (subject to Section 14(c) of the
Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Consultant who has been granted an Option may
be granted additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value:
(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, and Parent or Subsidiary, which
(ii) become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock Options
shall be taken into account in the order in which they were granted, and
the Fair Market Value of the shares shall be determined as of the time
of grant.
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(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described
in Section 12.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 12), the canceled Option will be
counted against the limit set forth in Section 6(c)(i). For this
purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new
Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 18 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice of
Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option.
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied
before the Option may be exercised. In so doing, the Administrator may
specify that an Option may not be exercised until the completion of a
service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option,
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the Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(v) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised. Full payment may
consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the stock certificate evidencing such Shares is
issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or
Consultant, other than upon the Optionee's death or Disability, the
Optionee may exercise his or her Option, but only within such period of
time as is specified in the Notice of Grant, and only to the extent that
the Optionee was entitled to exercise it at the date of termination (but in
no event later than the expiration of the term of such Option as set forth
in the Notice of Grant). In the absence of a specified time in the Notice
of Grant, the Option shall remain exercisable for 90 days following the
Optionee's termination of Continuous Status as an Employee or Consultant.
In the case of
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an Incentive Stock Option, such period of time shall not exceed ninety (90)
days from the date of termination. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event that an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any
time with twelve (12) months from the date of such termination, but only to
the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant). If, at the date of
termination, the Optionee is not entitled to exercise his or her entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert
to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does
not exercise the Option with the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section 16
of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option may be assumed or an equivalent
option may be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. The Administrator may, in lieu of
such assumption or substitution, provide for the Optionee to have the right
to exercise the Option as to all or a portion of the Optioned Stock,
including Shares as to which it would not otherwise be exercisable. If the
Administrator makes an Option exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger
or sale of assets, the option confers the right to purchase, for each Share
of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise
of the Option, for each Share of Optioned Stock subject to the Option, to
be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Rule 16b-3 or with Section 422 of the Code (or any successor
rule or statute or other applicable law, rule or regulation, including the
requirements of any exchange or quotation system on which the Common Stock
is listed or quoted). Such shareholder approval, if required, shall be
obtained in such a manner and to such a degree as is required by the
applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with all relevant provisions of
the law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated
thereunder, Applicable Laws, and the requirements of any
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stock exchange or quotation system upon which the Shares may then be listed
or quoted, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by
an Option exceeds, as of the date of grant, the number of Shares which may
be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section
14(b) of the Plan.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirement of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
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EXHIBIT 4.10
METAL MANAGEMENT, INC.
1998 DIRECTOR COMPENSATION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Compensation
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentives to the Outside Directors of the Company to serve as Directors and to
encourage the continued service of Outside Directors on the Board while, at the
same time, aligning the interests of the Outside Directors with the interests of
the Company's stockholders.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Metal Management, Inc., a Delaware corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g)"Employee" means any person, including officers and Directors, who
is employed by or provides consulting services to the Company or any Parent
or Subsidiary of the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Exercise Value" means the average of Fair Market Value of the
Company's Common Stock for the ten (10) business day period preceding the
date on which the Option is granted pursuant to Section 6.
(j) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including, without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share
of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Common
Stock on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination,
as reported in The Wall Street Journal or such other source as the Board
deems reliable, or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means an Outside Director who receives an Option.
(n) "Outside Director" means a Director who is not an Employee.
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(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this Metal Management, Inc. 1998 Directors
Compensation Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 9 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 9 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option expires or
becomes unexercisable without having been exercised in full, the unpurchased
Shares which were subject thereto shall become available for future grant or
sale under the Plan (unless the Plan has terminated); provided, however, that
Shares that have actually been issued under the Plan shall not be returned to
the Plan and shall not become available for future distribution under the Plan.
4. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 15 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
5. ELIGIBILITY. Only Outside Directors shall be eligible to receive the
grant of Options and other payments hereunder. All Options shall be
automatically granted in accordance with the terms set forth in Section 6
hereof. Participation in the Plan shall not confer upon any Outside Director any
right with respect to continuation of service as a Director or nomination to
serve as a Director, nor shall it interfere in any way with any rights which the
Director or the Company may have to terminate his or her directorship at any
time.
6. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN. All grants of
Options under the Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions. No Option shall be granted
hereunder until the first fiscal year of the Company beginning after December
31, 1998.
(a) Grants to Current Directors. Each person who was an Outside
Director on the first day of the Company's fiscal year and who is an
Outside Director on the date of the first Board meeting in such fiscal year
of the Company or, if no Board meeting has occurred by the last day of the
first quarter of such fiscal year, the last day of the first quarter of
such fiscal year, shall be automatically granted an Option to purchase that
number of Shares having a value, determined using the Black-Scholes
valuation method, equal to $30,000.
(b) Grants to New Directors. If a person is not an Outside Director on
the first day of the Company's fiscal year but becomes an Outside Director
during the course of the Company's fiscal year, such person shall be
automatically granted an Option to purchase that number of Shares having a
value, determined using the Black-Scholes valuation method, value equal to
$30,000 multiplied by a fraction, the denominator of which is 365 and the
numerator of which is 365 less the number of days during such fiscal year
that the person was not an Outside Director. Any grant under this paragraph
(b) shall be made on the later of (A) the date of the first Board meeting
in the fiscal year of the Company in which the person becomes an Outside
Director or, if no Board meeting has occurred by the last day of the first
quarter of such fiscal year, the last day of the first quarter of such
fiscal year, or (B) the date on which such person becomes an Outside
Director.
(c) Determination of Value. The determination of the value of an
Option using the Black-Scholes valuation method shall be made by the
Company's independent public accountants.
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(d) Material Terms. The material terms of an Option granted hereunder
shall be as follows:
(i) The term of the Option shall be ten (10) years.
(ii) The Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Section 7 hereof.
(iii) The exercise price per Share shall be the Exercise Value per
Share on the date the Option is granted.
(iv) The Option shall be fully vested and exercisable as of the
date it is granted.
(e) Restrictions on Shares. In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options
plus the number of Shares previously purchased under Options to exceed the
Pool, then the remaining Shares available for Option grants to the Outside
Directors on a pro rata basis. No further grants shall be made until such
time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the stockholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
(f) Nonstatutory Options. All options granted hereunder shall be
nonstatutory stock options.
7. EXERCISE OF OPTIONS.
(a) Procedure for Exercise. Except as otherwise expressly provided in
the Plan, an Outside Director may exercise any outstanding Option, in whole
or in part (but for whole Shares only), by filing a written exercise notice
with the Company prior to the date on which the Option expires or otherwise
ceases to be exercisable in accordance with the terms of the Plan;
provided, however, that no Options shall be exercisable until stockholder
approval of the Plan in accordance with Section 15 hereof has been
obtained. The exercise notice shall specify the number of Shares which the
Outside Director elects to purchase and must be accompanied by payment of
the Exercise Value for the Shares. Payment of the Exercise Value shall be
by cash or check payable to the Company; provided, however, that, to the
extent approved by the Board, an Outside Director may elect to pay the
Exercise Value through a cashless exercise arrangement.
(b) Rights as a Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of the Plan. Exercise of an
Option in any manner shall result in a decrease in the number of Shares
which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(c) Rule 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act
or any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions,
and other transactions by Outside Directors that otherwise could be matched
with Plan transactions, for the maximum exemption from Section 16 of the
Exchange Act.
(d) Termination of Continuous Status as a Director. In the event an
Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(d)(3) of the Code), the Optionee may exercise his or her Option, but
only within six (6) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of
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such termination, and to the extent that the Optionee does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Disability of Optionee. In the event an Optionee's Continuous
Status as a Director terminates as a result of total and permanent
disability (as defined in Section 22(d)(3) of the Code), the Optionee may
exercise his or her Option, but only within twelve (12) months following
the date of such termination, and only to the extent that the Optionee was
entitled to exercise it on the date of such termination (but in no event
later than the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option on the date of
termination, or if he or she does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
(f) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option on the date of death,
and to the extent that the Optionee's estate or a person who acquired the
right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET
SALE OR CHANGE OF CONTROL.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the exercise price of such outstanding Option, and the
number of Shares issuable pursuant to the automatic grant provisions of
Section 6 hereof shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option may be assumed or an equivalent
option may be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an
equivalent option, each outstanding Option shall continue to be exercisable
(subject to expiration of its ten (10) year term) and shall terminate upon
consummation of the transaction if not then exercised. For purposes of this
paragraph, the Option shall be considered assumed if, following the merger
or sale of assets, the Option confers the right to purchase, for each Share
of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of
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assets by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding Shares).
(d) Special Rules for Pooling. Notwithstanding the foregoing or any
other provision of the Plan or agreement to the contrary, the Board may
amend the Plan or the terms of any Option to the extent it deems necessary
to preserve pooling-of-interest accounting treatment for any transaction
which is intended to be accounted for through such accounting method.
10. OTHER COMPENSATION AND BENEFITS. Each Outside Director shall be paid
such retainers, meeting fees and committee fees in such amounts and subject to
such terms and conditions as may be determined from time to time by the Board.
Each Outside Director shall also be reimbursed by the Company for all
reasonable, documented, lawful expenses incurred by the Outside Director in the
performance of the Outside Director's duties for the Company, including
attendance at Board and committee meetings.
11. AMENDMENT AND TERMINATION OF THE PLAN. Except as set forth in Section
10, the Board may at any time amend, alter, suspend, or discontinue the Plan,
but no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any Optionee under any grant theretofore made,
without his or her consent.
12. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. As a condition to the
exercise of an Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares, if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law. The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
13. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
14. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
15. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the adoption of the Plan by the
Board. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law.
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EXHIBIT 4.11
METAL MANAGEMENT, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. This Metal Management, Inc. 1998 Employee Stock
Purchase Plan (the "Plan") is adopted by Metal Management, Inc., a Delaware
corporation (the "Company"), to encourage stock ownership by all eligible
employees of the Company and its subsidiaries so that they may share in the
fortunes of the Company by acquiring or increasing their proprietary interest in
the Company. The Plan is designed to encourage eligible employees to remain in
the employ of the Company. It is intended that options issued pursuant to this
Plan shall constitute options issued pursuant to an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. Definitions.
2.1 "Account" means the record of the funds accumulated with respect
to an individual employee as a result of deductions from his or her
paycheck for the purpose of purchasing stock under the Plan.
2.2 "Base Pay" means regular straight time earnings or draw, but
excludes compensation for overtime, commissions, bonuses, amounts paid as
reimbursement of expenses and other additional compensation.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Closing Price" for any day in an offering period shall mean the
closing price for a Common Stock as reported for such day in The Wall
Street Journal or in any successor to The Wall Street Journal, or, if there
is no such successor, in any publication selected by the Board or, if no
such closing price is so reported for such day, the closing price which is
so reported for the closest day before or after such day which is during
the offering period and within the two (2) week period before or after such
day (provided that if a day before and after are both closest to such day,
the earlier day for which a closing price is reported shall be utilized),
or, if no such closing price is so reported, the fair market value of
Common Stock as determined by the Board.
2.5 "Common Stock" means the Company's Common Stock, $.01 par value.
2.6 "Fair Market Value" means the average of the Closing Prices of the
Common Stock for the five (5) consecutive trading days preceding the
valuation date.
2.7 "Offering Date" means the commencement date of the offering if
such date is a regular business day or the first business day following
such commencement date.
2.8 "Parent" means any corporation, other than the employer
corporation, in the unbroken chain of corporations ending with the employer
corporation if each of the corporations other than the employer corporation
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
2.9 "Pay Day" means the day as of which Base Pay is paid to an
eligible employee.
2.10 "Plan Administrator" means the Board or the Committee described
in Section 19.
2.11 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the employer corporation in an unbroken chain of
corporations beginning with the employer corporation if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
3. Employees Eligible to Participate. Except as provided in the next
sentence, any person who is an employee of the Company or a Designated Affiliate
(as described below) on the first day of each offering is eligible to receive
options under the Plan for such offering and shall be referred to herein as an
"eligible
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employee." Notwithstanding the foregoing, a person shall not be an eligible
employee if (i) his or her customary employment is 20 hours or less per week;
(ii) his or her customary employment is for not more than five months in the
calendar year; or (iii) immediately after the grant of options hereunder he or
she would own shares (including all shares which may be purchased under
outstanding options) possessing 5% or more of the total combined voting power or
value of all classes of shares of the Company, or, if applicable, any Subsidiary
or, if applicable, a Parent. For this purpose, the rules of Section 424(d) of
the Code shall apply in determining share ownership.
4. Offerings.
4.1 The first offering period under the Plan shall commence on January
1, 1999, and terminate on March 31, 1999. Thereafter, offerings shall
commence on the first day and terminate on the last day of each calendar
quarter until the Plan is terminated by the Board or no additional shares
of Common Stock of the Company are available for purchase under the Plan.
4.2 Any corporation which is either a Parent or a Subsidiary of the
Company may be designated by the Plan Administrator as a "Designated
Affiliate" and such designation shall remain in effect unless and until
revoked by the Plan Administrator.
5. Price. The purchase price per share for each offering shall be 85% of
the Fair Market Value of the Common Stock on the last business day of the
offering.
6. Stock Subject to the Plan. The aggregate number of shares of Common
Stock available for grant as options shall not exceed 1,368,493, subject to
adjustment pursuant to Section 7 hereof. Shares of Common Stock granted pursuant
to the Plan may be either authorized but unissued shares or shares now or
hereafter held in the treasury of the Company. In the event that any option
granted under the Plan expires unexercised or is terminated, surrendered or
canceled without being exercised, in whole or in part, for any reason, the
number of shares of Common Stock theretofore subject to such option shall again
be available for grant as an option pursuant to the Plan and shall not reduce
the aggregate number of shares of Common Stock available for grant as such
options as set forth in this Section.
7. Changes in Capital Structure.
7.1 In the event that the outstanding shares of Common Stock of the
Company are hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company
or of another corporation, by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividend payable in shares, appropriate
adjustment shall be made by the Board in the number or kind of shares as to
which an option granted under this Plan shall be exercisable, to the end
that the option holder's proportionate interest shall be maintained as
before the occurrence of such event. Any such adjustment made by the Board
shall be consistent with Section 424(a) of the Code and shall be
conclusive.
7.2 If the Company is not the surviving or resulting corporation in
any reorganization, merger, consolidation or recapitalization, each
outstanding option shall be assumed by the surviving or resulting
corporation and each option shall continue in full force and effect, and
shall apply to the same number and class of securities of the surviving
corporation as a holder of the number of shares of Common Stock subject to
consolidation or recapitalization.
8. Participation. An eligible employee may become a participant by
completing, signing and filing an enrollment agreement ("Enrollment Agreement")
and any other necessary papers with the Company prior to the commencement of the
particular offering in which he or she wishes to participate. Base Pay
deductions for a participant shall commence on the Offering Date and shall end
on the termination date of such offering unless earlier terminated by the
employee as provided in Section 14. Participation in one offering under the Plan
shall neither limit, or require, participation in any other offering.
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<PAGE> 3
9. Base Pay Deductions.
9.1 At the time a participant files his or her Enrollment Agreement,
he or she shall elect to have deductions made from his or her Base Pay on
each Pay Day during the time he or she is a participant in an offering at
not less than $10 or more than 20% of his or her Base Pay.
9.2 All Base Pay deductions made for a participant shall be credited
to his or her Account under the Plan. A participant may not make any
separate cash payment into such Account nor may payment for shares be made
other than by Base Pay deduction.
9.3 A participant may discontinue his or her Base Pay deductions or
participation in the Plan as provided in Section 14, but no other change
can be made during an offering and, specifically, except as provided in
Section 14, a participant may not alter the rate of his or her Base Pay
deductions for that offering.
10. Granting of Option.
10.1 On each Offering Date, this Plan shall be deemed to have granted
to the participant an option for as many full and fractional shares as he
or she will be able to purchase with the Base Pay deductions credited to
his or her Account during his or her participation in that offering.
10.2 Notwithstanding the foregoing, no employee shall be granted an
option which permits his or her rights to purchase Common Stock under the
Plan and any similar employee stock purchase plans of the Company and, if
applicable, a Subsidiary and, if applicable, a Parent, to accrue at a rate
which exceeds $25,000 of Fair Market Value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time. The purpose of the limitation in the preceding
sentence is to comply with Section 423(b)(8) of the Code.
10.3 Except as specifically provided herein, all eligible employees
shall have the same rights and privileges under the Plan. All rules and
determinations of the Board in the administration of the Plan shall be
uniformly and consistently applied to all persons in similar circumstances.
10.4 If the total number of shares for which options are to be granted
on any date in accordance with Paragraph 10.1 exceeds the number of shares
then available under the Plan (after deduction of all shares for which
options have been exercised or are then outstanding), the Company shall
make a pro rata allocation of the shares remaining available in as nearly a
uniform manner as shall be practical and as it shall determine to be
equitable.
11. Exercise of Option. Each employee who continues to be a participant in
an offering on the last business day of that offering shall be deemed to have
exercised his or her option on such date and shall be deemed to have purchased
from the Company such number of full shares of Common Stock reserved for the
purpose of the Plan as his or her accumulated Base Pay deductions on such date
will pay for the purchase price.
12. Restrictions on Dispositions.
12.1 Disposition Within One Year of Purchase. Except as provided in
paragraph (b) below of this Paragraph 12, no sale, transfer or other
disposition may be made of any Common Stock purchased under the Plan until
the first anniversary of such purchase. If a Participant transfers or
disposes of any Common Stock during the first year after it is purchased,
he or she shall remit to the Company an amount of cash equal to:
(a) the difference between the Closing Price of such Common Stock
on the date they were purchased and the amount the Participant paid for
such Common Stock.
(b) the excess (if any) of the amount the Participant paid for such
Common Stock over the Closing Price of such Common Stock on the date of
the sale, transfer or disposition.
12.2 Financial Need. Notwithstanding the foregoing, if a participant
who owns Common Stock subject to the foregoing restriction is determined by
the Board in its discretion to have a serious financial
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need for the proceeds of the sale of such Common Stock, then upon
application made by the participant, the Board shall consent to a sale of
such Common Stock to the extent necessary to satisfy the serious financial
need, and the participant will not be required to remit to the Company the
amounts described in paragraph 12.1 above.
13. Employee's Rights as a Stockholder.
13.1 No participating employee shall have any right as a stockholder
with respect to any shares under the Plan until the shares have been
purchased in accordance with Section 11 above and the purchase has been
evidenced on the ownership records of the Company.
13.2 Shares purchased in an offering shall be reflected by means of a
book entry record maintained by the Company or its designated agent, unless
you request the certificate be delivered with such shares, according to
procedures established by the Company.
13.3 The obligations of the Company to sell and deliver Common Stock
under the Plan shall be subject to all applicable laws, regulations, rules
and approvals, including, but not by way of limitation, the effectiveness
of a registration statement under the Securities Act of 1993 if deemed
necessary or appropriate by the Company. Certificates for shares of Common
Stock issued hereunder may be legended as the Board shall deem appropriate.
14. Withdrawal.
14.1 An employee may withdraw from the Plan, in whole but not in part,
at any time prior to the last business day of each offering by delivering a
withdrawal notice ("Withdrawal Notice") to the Company at least 15 business
days prior to the end of such offering, in which event the Company will
refund the entire balance of his or her Account as soon as practicable
thereafter.
14.2 To re-enter the Plan, an employee who has previously withdrawn
must file a new Enrollment Agreement in accordance with Section 8. His or
her re-entry into the Plan cannot, however, become effective before the
beginning of the next offering following his or her withdrawal.
14.3 An employee may elect to discontinue his or her Base Pay
deductions during the course of a particular offering, at any time prior to
the last business day preceding the final Pay Day during such offering by
delivering an election to discontinue deductions to the Company, and such
election shall not constitute a withdrawal for the purpose of this Section
14. In the event that an employee elects to discontinue his or her Base Pay
deductions pursuant to this Paragraph 14.3, the employee shall remain a
participant in such offering and shall be entitled to purchase from the
Company such number of full shares of Common Stock as set forth in and in
accordance with Section 11 of the Plan.
15. No Carryover of Account. Unless a participating employee elects not to
carryover the balance of his or her Account to the next offering, the Company
shall carryover the balance of his or her Account to the next offering; provided
that only amounts less than the price of a single share in an offering may be
carried over from the offering to the next offering. Upon termination of the
Plan, the balance of each employee" Account shall be returned to him or her.
16. Interest. No interest will be paid or allowed on any money in the
Accounts of participating employees.
17. Rights Not Transferable. No participant shall be permitted to sell,
assign, transfer, pledge or otherwise dispose of or encumber either the Base Pay
deductions credited to his or her Account or any rights with regard to the
exercise of an option or to receive shares under the Plan other than by will or
the laws of descent and distribution, and such right and interest shall not be
liable for, or subject to, the debts, contracts, or liabilities of the employee.
If any such action is taken by the participant, or any claim is asserted by any
other party in respect of such right and interest whether by garnishment, levy,
attachment or otherwise, such action or claim will be treated as an election to
withdraw funds in accordance with Section 14.
18. Termination of Employee's Rights. An employee's rights under the Plan
will terminate when he or she ceases to be an employee because of resignation,
layoff, or discharge. A Withdrawal Notice will be
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considered as having been received from the employee on the day his or her
employment ceases, and all Base Pay deductions not used will be refunded.
If an employee's employment shall be terminated by reason of retirement,
death, or disability prior to the end of an offering, he or she (or his or her
designated beneficiary, in the event of his or her death, or if none, his or her
legal representative) shall have the right, within 90 days thereafter, to elect
to have the balance of his or her Account either paid to him or her in cash or
applied at the end of the current offering toward the purchase of Common Stock.
19. Administration of the Plan. The Plan shall be administered by the
Board, which, to the extent it shall determine, may delegate its powers with
respect to administration of the Plan (except its powers under Section 20 of the
Plan) to the an individual or committee of individuals. If the Board chooses to
appoint an individual or administrative committee, references hereinafter to the
Board (except in Section 20) should be deemed to refer to such individual or
committee. Subject to the express provisions of the Plan, the Board may
interpret the Plan, proscribe, amend and rescind rules and regulations relating
to it, determine the terms and provisions of the Common Stock purchase rights
granted hereunder and make all other determinations necessary or advisable for
administration of the Plan. The determination of the Board on all matters
regarding the Plan shall be conclusive. A member of the Board shall only be
liable for any action taken or determination made in bad faith.
20. Termination and Amendments to Plan. The Plan may be terminated at any
time by the Board. It will terminate in any case on the date on which all or
substantially all of the unissued shares of Common Stock reserved for the
purpose of the Plan have been purchased. Upon such termination or any other
termination of the Plan, all Base Pay deductions not used to purchase shares
will be refunded.
The Board also reserves the right to amend the Plan from time to time in
any respect, provided, however, that no amendment shall be effective without
prior approval of the stockholders (a) which would, except as provided in
Sections 6 and 7, increase the aggregate number of shares of Common Stock to be
issued under the Plan, (b) which would change the class of employees eligible to
receive options under the Plan or (c) if such amendment requires stockholder
approval for any other reason in order for the Plan to be eligible or continue
to qualify for the benefits conferred by Securities and Exchange Commission Rule
16b-3, as amended from time to time, or any successor rule or regulatory
requirements. No amendment may adversely affect an outstanding option without
the consent of the holder thereof unless such amendment is required by law.
21. Approval of Stockholders. The Plan shall be approved by the holders of
a majority of the outstanding shares of Common Stock of the Company within the
period beginning twelve months before and ending twelve months after the date
the Plan is adopted by the Board of Directors. The Plan was approved by the
Board on August 27, 1998.
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EXHBIIT 10.2
SECURED PROMISSORY NOTE
July 22, 1998 $500,000
For value received, the undersigned, T. BENJAMIN JENNINGS (the
"Payor"), promises to pay to METAL MANAGEMENT, INC., a Delaware corporation (the
"Payee"), Five Hundred Thousand Dollars ($500,000) upon the terms and conditions
set forth herein.
Interest shall accrue upon the unpaid principal amount hereof at the
rate of ten percent (10%) per annum. Notwithstanding the foregoing, during the
continuance of any Event of Default interest shall accrue on the unpaid
principal amount hereof at the rate of twelve percent (12%) per annum and be
payable upon demand.
The principal amount hereof and interest thereon shall be payable on
July 22, 1999.
This Secured Promissory Note is secured pursuant to a Pledge Agreement
as of even date herewith, by and between the Payee and the Payor (as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with their terms, the "Pledge Agreement").
This Note may be prepaid at any time, without premium or penalty. All
payments received by the Payee shall be applied first to any attorneys' fees,
costs or other charges then due pursuant to the terms of this Note, next to
accrued and unpaid interest and the balance, if any, to principal. Payments of
principal and interest are to be made in the lawful money of the United States
of America at the office of the Payee, 500 N. Dearborn Street, Chicago, Illinois
60610, Attention: Treasurer.
If any of the following events shall occur (each, an "Event of
Default"):
(a) failure by Payor to pay any principal or interest on this
Note when the same shall become due and payable;
(b) any representation or warranty by Payor in the Pledge Agreement is
incorrect in any material respect as of the date made;
(c) Payor fails to perform any term, covenant or agreement in
the Pledge Agreement;
(d) a final judgment or order for the payment of money in excess of
$50,000 shall be rendered against Payor and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
<PAGE> 2
(e) Payor becomes insolvent or generally fails to pay, or admits in
writing his inability to pay his debts as they become due; Payor
applies for a trustee, receiver or other custodian for him or a
substantial part of his property; a trustee, receiver or other
custodian is appointed for Payor; any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or
insolvency law, is commenced in respect of Payor; or Payor shall die or
be judged incompetent;
then, in the case of any Event of Default under clause (e) above, all
indebtedness evidenced hereby, all interest thereon and all other amounts
payable hereunder (or any other document or instrument delivered in connection
herewith) shall automatically be and become immediately due and payable, and in
the case of any other Event of Default, the Payee may, by notice to the Payor,
declare all indebtedness evidenced hereby, all interest thereon and all other
amounts payable hereunder (or any other document or instrument delivered in
connection herewith) to be forthwith due and payable, whereupon all indebtedness
evidenced hereby, all such interest and all such amounts will become and be
forthwith due and payable, all without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Payor.
In addition to, and not in limitation of, the foregoing, the
undersigned further agrees, subject only to any limitation imposed by applicable
law, to pay all losses, costs, expenses, and charges including reasonable
attorneys' fees and expenses, incurred by the holder of this Note in seeking to
collect any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise. The Payee may assign all or any portion of this Note.
If the Payee does assign all or any portion of this Note, the Payor agrees to
reissue simultaneously, upon surrender of this Note at the principal offices of
the Payor for new Note(s), new Note(s) of like tenor representing in the
aggregate all amounts owing hereunder and each of such new Note(s) shall
represent such portion of such amounts as may be designated by the Payee at the
time of such surrender.
If any day upon which any principal or interest due and owing hereunder
falls on a day other than a business day (a day other than a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are authorized or
required to close (a "Business Day"), then any payments due hereunder on such
day shall be made the next succeeding Business Day and interest shall accrue and
be payable for such additional period.
Both parties hereto severally waive presentment for payment, demand,
protest and notice of dishonor and nonpayment.
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This Note may not be changed or modified except in a writing signed by
the Payee and shall be governed by the internal laws of the State of Illinois.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE PAYOR SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS
LOCATED IN COOK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE PAYEE'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE PAYOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF ILLINOIS LOCATED IN COOK COUNTY AND OF THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF
SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PAYOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
PAYOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH HE MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE PAYOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS HE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT
RELATED HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE PAYOR OR THE PAYEE.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first above written.
/s/ T. Benjamin Jennings
--------------------------------------
T. Benjamin Jennings
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EXHIBIT 10.3
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement"), dated as of July 22, 1998, is
between T. BENJAMIN JENNINGS (the "Pledgor"), and METAL MANAGEMENT, INC., a
Delaware corporation ("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to a Secured Promissory Note dated as of even date
herewith (as amended, supplemented or otherwise modified from time to time, the
"Note") between the Pledgor and the Lender, the Lender has made a loan to the
Pledgor;
WHEREAS, the obligations of the Pledgor are to be secured
pursuant to this Agreement;
WHEREAS, it is a condition precedent to the making of the loan
described above that the Pledgor execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Pledgor under or in
connection with the Note, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. When used herein, the following terms have the
following meanings (such meanings to be applicable to both the singular and
plural forms of such terms):
Collateral - see Section 2.
Default means the occurrence of any Event of Default.
Liabilities means all obligations (monetary or otherwise) of the
Pledgor under the Note.
Terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Note.
2. Pledge. As security for the payment of all Liabilities, the Pledgor
hereby pledges to the Lender and grants to the Lender a continuing security
interest in Pledgor's option to purchase 200,000 shares of common stock of the
Lender at a price of $4.00 per share, represented by Lender's stock option grant
no. 1995-2; all of the shares of common stock of the Lender issuable upon
exercise thereof; all of the certificates and/or instruments representing such
option and shares of stock; and all cash, interest, securities, dividends,
distributions, rights and other property at any time and from time to time
received, receivable or
<PAGE> 2
otherwise distributed in respect of or in exchange for any or all
of such option and shares.
All of the foregoing are herein collectively called the "Collateral".
The Pledgor agrees to deliver to the Lender, promptly upon receipt and
in due form for transfer (i.e., duly endorsed in blank or accompanied by stock
powers duly executed in blank), all Collateral which may at any time or from
time to time be in or come into the possession or control of the Pledgor.
3. Warranties; Further Assurances. The Pledgor warrants to the Lender
that: (a) the Pledgor is (or at the time of any future delivery, pledge,
assignment or transfer thereof will be) the legal, beneficial and equitable
owner of the Collateral free and clear of all Liens of every description
whatsoever other than the security interest created hereunder; (b) the pledge
and delivery of the Collateral pursuant to this Agreement will create a valid,
perfected, first priority security interest in the Collateral in favor of the
Lender, free of any adverse claims; (c) all shares of stock issuable upon
exercise of the option referred to in Section 2 are duly authorized, validly
issued, fully paid and non-assessable; and (d) the proceeds of the loan made by
Lender under the Note will not be used by Pledgor in violation of Regulation U
promulgated by the Federal Reserve Board.
So long as any of the Liabilities shall be outstanding, the Pledgor:
(i) shall not, without the express prior written consent of the Lender sell,
assign, exchange, pledge or otherwise transfer, encumber, or grant any option,
warrant or other right to purchase, or otherwise diminish or impair any of its
rights in, to or under any of the Collateral; and (ii) shall execute such
Uniform Commercial Code financing statements and other documents (and pay the
costs of filing and recording or re-filing and re-recording the same in all
public offices deemed necessary or appropriate by the Lender) and do such other
acts and things, all as the Lender may from time to time reasonably request, to
establish and maintain a valid, perfected, first priority security interest in
the Collateral (free of all other liens, claims and rights of third parties
whatsoever) to secure the performance and payment of the Liabilities.
Pledgor additionally represents and warrants to the Lender that this
Agreement constitutes the legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
-2-
<PAGE> 3
4. Holding in Name of Lender. The Lender may from time to time after
the occurrence and during the continuance of an Event of Default under the Note
(an "Event of Default"), without notice to the Pledgor, take all or any of the
following actions: (a) transfer all or any part of the Collateral into the name
of the Lender, with or without disclosing that such Collateral is subject to the
lien and security interest hereunder, (b) appoint one or more sub-agents or
nominees for the purpose of retaining physical possession of the Collateral, (c)
notify the parties obligated on any of the Collateral to make payment to the
Lender of any amounts due or to become due thereunder, (d) endorse any checks,
drafts or other writings in the name of the Pledgor to allow collection of the
Collateral, (e) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with respect thereto and (f)
take control of any proceeds of the Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Lender has not given the notice
referred to in paragraph (b) below:
A. The Pledgor shall be entitled to exercise any and all voting or
consensual rights and powers (including exercise rights) and stock
purchase or subscription rights (but any such exercise by the Pledgor
of stock purchase or subscription rights may be made only from funds of
the Pledgor not constituting part of the Collateral) relating or
pertaining to the Collateral or any part thereof for any purpose;
provided, however, that the Pledgor agrees that it will not exercise
any such right or power in any manner which would materially adversely
impair the value of the Collateral or any part thereof or violate any
provision of the Note.
B. The Pledgor shall be entitled to receive and retain any and all
dividends, interest and other cash payments payable in respect of the
Collateral which are paid in cash by the Lender, but all dividends and
distributions in respect of the Collateral or any part thereof made in
shares of stock or other property or representing any return of
capital, whether resulting from a subdivision, combination or
reclassification of Collateral or any part thereof or received in
exchange for Collateral or any part thereof or as a result of any
merger, consolidation, acquisition or other exchange of assets to which
the Lender may be a party or otherwise or as a result of any exercise
of any stock purchase or subscription right, shall be and become part
of the Collateral hereunder and, if received by the Pledgor, shall be
forthwith delivered to the Lender in due form for transfer (i.e.,
endorsed in blank or
-3-
<PAGE> 4
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Lender shall execute and deliver, or cause to be executed and
delivered, to the Pledgor, all such proxies, powers of attorney,
dividend orders and other instruments as the Pledgor may request for
the purpose of enabling the Pledgor to exercise the rights and powers
which it is entitled to exercise pursuant to clause (A) above and to
receive the dividends, interest and payments which it is authorized to
retain pursuant to clause (B) above.
(b) Upon notice from the Lender after the occurrence and during the
continuance of an Event of Default, and so long as the same shall be continuing,
all rights and powers which the Pledgor is entitled to exercise pursuant to
Section 5(a)(A) hereof, and all rights of the Pledgor to receive and retain
dividends, interest and payments pursuant to Section 5(a)(B) hereof, shall
forthwith cease, and all such rights and powers shall thereupon become vested in
the Lender which shall have, during the continuance of such Event of Default,
the sole and exclusive authority to exercise such rights and powers and to
receive such dividends, interest and payments. Any and all money and other
property paid over to or received by the Lender pursuant to this paragraph (b)
shall be retained by the Lender as additional Collateral hereunder and applied
in accordance with the provisions hereof.
6. Remedies. Whenever an Event of Default shall exist, the Lender may
exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code as in effect in Illinois or otherwise available to it,
as well as any other rights and remedies provided for herein or otherwise
available to it. Without limiting the foregoing, whenever an Event of Default
shall have occurred and be continuing the Lender (a) may, to the fullest extent
permitted by applicable law, without notice, advertisement, hearing or process
of law of any kind, (i) sell any or all of the Collateral, free of all rights
and claims of the Pledgor therein and thereto, at any public or private sale or
brokers' board and (ii) bid for and purchase any or all of the Collateral at any
such public sale and (b) shall have the right, for and in the name, place and
stead of the Pledgor, to execute endorsements, assignments, stock powers and
other instruments of conveyance or transfer with respect to all or any of the
Collateral. The Pledgor hereby expressly waives, to the fullest extent permitted
by applicable law, any and all notices, advertisements, hearings or process of
law in connection with the exercise by the Lender of any of its rights and
remedies during the continuance of an Event of Default. Any notification of
intended disposition of any of the Collateral shall be deemed reasonably and
properly given if given at least ten (10) days before such disposition. Any
proceeds of any of the Collateral may be applied by the Lender to the payment
-4-
<PAGE> 5
of expenses in connection with the Collateral, including, without limitation,
attorney costs, and any balance of such proceeds may be applied by the Lender
toward the payment of such of the Liabilities, and in such order of application,
as the Lender may from time to time elect (and, after payment in full of all
Liabilities, any surplus shall be delivered to the Pledgor or as a court of
competent jurisdiction shall direct).
7. General. No delay on the part of the Lender in exercising any right,
power or remedy shall operate as a waiver thereof, and no single or partial
exercise of any such right, power or remedy shall preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement shall be effective unless the same shall be in writing and
signed and delivered by the Lender and then such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Illinois, except to the extent that the
validity or perfection of the security interest hereunder, or any remedy
hereunder, in respect of any particular Collateral is governed by the laws of a
jurisdiction other than the State of Illinois.
This Agreement shall be binding upon the Pledgor and the Lender and
their respective successors and assigns, and shall inure to the benefit of the
Pledgor, the Lender and each of their successors and assigns of the
Administrative Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
/s/ T. Benjamin Jennings
-----------------------------------
T. BENJAMIN JENNINGS
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
-------------------------------------
Title: Vice President, General Counsel
----------------------------------
and Secretary
----------------------------------
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<PAGE> 1
EXHIBIT 10.4
SECURED PROMISSORY NOTE
July 22, 1998 $500,000
For value received, the undersigned, GERARD M. JACOBS (the "Payor"),
promises to pay to METAL MANAGEMENT, INC., a Delaware corporation (the "Payee"),
Five Hundred Thousand Dollars ($500,000) upon the terms and conditions set forth
herein.
Interest shall accrue upon the unpaid principal amount hereof at the
rate of ten percent (10%) per annum. Notwithstanding the foregoing, during the
continuance of any Event of Default interest shall accrue on the unpaid
principal amount hereof at the rate of twelve percent (12%) per annum and be
payable upon demand.
The principal amount hereof and interest thereon shall be payable on
July 22, 1999.
This Secured Promissory Note is secured pursuant to a Pledge Agreement
as of even date herewith, by and between the Payee and the Payor (as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with their terms, the "Pledge Agreement").
This Note may be prepaid at any time, without premium or penalty. All
payments received by the Payee shall be applied first to any attorneys' fees,
costs or other charges then due pursuant to the terms of this Note, next to
accrued and unpaid interest and the balance, if any, to principal. Payments of
principal and interest are to be made in the lawful money of the United States
of America at the office of the Payee, 500 N. Dearborn Street, Chicago, Illinois
60610, Attention: Treasurer.
If any of the following events shall occur (each, an "Event of
Default"):
(a) failure by Payor to pay any principal or interest on this
Note when the same shall become due and payable;
(b) any representation or warranty by Payor in the Pledge Agreement is
incorrect in any material respect as of the date made;
(c) Payor fails to perform any term, covenant or agreement in
the Pledge Agreement;
(d) a final judgment or order for the payment of money in excess
of $50,000 shall be rendered against Payor and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
<PAGE> 2
(e) Payor becomes insolvent or generally fails to pay, or admits
in writing his inability to pay his debts as they become due; Payor
applies for a trustee, receiver or other custodian for him or a
substantial part of his property; a trustee, receiver or other
custodian is appointed for Payor; any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or
insolvency law, is commenced in respect of Payor; or Payor
shall die or be judged incompetent;
then, in the case of any Event of Default under clause (e) above, all
indebtedness evidenced hereby, all interest thereon and all other amounts
payable hereunder (or any other document or instrument delivered in connection
herewith) shall automatically be and become immediately due and payable, and in
the case of any other Event of Default, the Payee may, by notice to the Payor,
declare all indebtedness evidenced hereby, all interest thereon and all other
amounts payable hereunder (or any other document or instrument delivered in
connection herewith) to be forthwith due and payable, whereupon all indebtedness
evidenced hereby, all such interest and all such amounts will become and be
forthwith due and payable, all without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Payor.
In addition to, and not in limitation of, the foregoing, the
undersigned further agrees, subject only to any limitation imposed by applicable
law, to pay all losses, costs, expenses, and charges including reasonable
attorneys' fees and expenses, incurred by the holder of this Note in seeking to
collect any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise. The Payee may assign all or any portion of this Note.
If the Payee does assign all or any portion of this Note, the Payor agrees to
reissue simultaneously, upon surrender of this Note at the principal offices of
the Payor for new Note(s), new Note(s) of like tenor representing in the
aggregate all amounts owing hereunder and each of such new Note(s) shall
represent such portion of such amounts as may be designated by the Payee at the
time of such surrender.
If any day upon which any principal or interest due and owing hereunder
falls on a day other than a business day (a day other than a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are authorized or
required to close (a "Business Day"), then any payments due hereunder on such
day shall be made the next succeeding Business Day and interest shall accrue and
be payable for such additional period.
Both parties hereto severally waive presentment for payment, demand,
protest and notice of dishonor and nonpayment.
2
<PAGE> 3
This Note may not be changed or modified except in a writing signed by
the Payee and shall be governed by the internal laws of the State of Illinois.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE PAYOR SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS
LOCATED IN COOK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE PAYEE'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE PAYOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF ILLINOIS LOCATED IN COOK COUNTY AND OF THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF
SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PAYOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
PAYOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH HE MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE PAYOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS HE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT
RELATED HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE PAYOR OR THE PAYEE.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first above written.
/s/ Gerard M. Jacobs
-------------------------
Gerard M. Jacobs
3
<PAGE> 1
EXHIBIT 10.5
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement"), dated as of July 22, 1998, is
between GERARD M. JACOBS (the "Pledgor"), and METAL MANAGEMENT, INC., a Delaware
corporation ("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to a Secured Promissory Note dated as of even date
herewith (as amended, supplemented or otherwise modified from time to time, the
"Note") between the Pledgor and the Lender, the Lender has made a loan to the
Pledgor;
WHEREAS, the obligations of the Pledgor are to be secured pursuant to
this Agreement;
WHEREAS, it is a condition precedent to the making of the loan
described above that the Pledgor execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of any loan, advance or other
financial accommodation heretofore or hereafter made to the Pledgor under or in
connection with the Note, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. When used herein, the following terms have the
following meanings (such meanings to be applicable to both the singular and
plural forms of such terms):
Collateral - see Section 2.
Default means the occurrence of any Event of Default.
Liabilities means all obligations (monetary or otherwise) of the
Pledgor under the Note.
Terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Note.
2. Pledge. As security for the payment of all Liabilities, the Pledgor
hereby pledges to the Lender and grants to the Lender a continuing security
interest in Pledgor's option to purchase 200,000 shares of common stock of the
Lender at a price of $4.00 per share, represented by Lender's stock option grant
no. 1; all of the shares of common stock of the Lender issuable upon exercise
thereof; all of the certificates and/or instruments representing such option and
shares of stock; and all cash, interest, securities, dividends, distributions,
rights and other property at any time and from time to time received, receivable
or otherwise
<PAGE> 2
distributed in respect of or in exchange for any or all of such option and
shares.
All of the foregoing are herein collectively called the "Collateral".
The Pledgor agrees to deliver to the Lender, promptly upon receipt and
in due form for transfer (i.e., duly endorsed in blank or accompanied by stock
powers duly executed in blank), all Collateral which may at any time or from
time to time be in or come into the possession or control of the Pledgor.
3. Warranties; Further Assurances. The Pledgor warrants to the Lender
that: (a) the Pledgor is (or at the time of any future delivery, pledge,
assignment or transfer thereof will be) the legal, beneficial and equitable
owner of the Collateral free and clear of all Liens of every description
whatsoever other than the security interest created hereunder; (b) the pledge
and delivery of the Collateral pursuant to this Agreement will create a valid,
perfected, first priority security interest in the Collateral in favor of the
Lender, free of any adverse claims; (c) all shares of stock issuable upon
exercise of the option referred to in Section 2 are duly authorized, validly
issued, fully paid and non-assessable; and (d) the proceeds of the loan made by
Lender under the Note will not be used by Pledgor in violation of Regulation U
promulgated by the Federal Reserve Board.
So long as any of the Liabilities shall be outstanding, the Pledgor:
(i) shall not, without the express prior written consent of the Lender sell,
assign, exchange, pledge or otherwise transfer, encumber, or grant any option,
warrant or other right to purchase, or otherwise diminish or impair any of its
rights in, to or under any of the Collateral; and (ii) shall execute such
Uniform Commercial Code financing statements and other documents (and pay the
costs of filing and recording or re-filing and re-recording the same in all
public offices deemed necessary or appropriate by the Lender) and do such other
acts and things, all as the Lender may from time to time reasonably request, to
establish and maintain a valid, perfected, first priority security interest in
the Collateral (free of all other liens, claims and rights of third parties
whatsoever) to secure the performance and payment of the Liabilities.
Pledgor additionally represents and warrants to the Lender that this
Agreement constitutes the legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
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<PAGE> 3
4. Holding in Name of Lender. The Lender may from time to time after
the occurrence and during the continuance of an Event of Default under the Note
(an "Event of Default"), without notice to the Pledgor, take all or any of the
following actions: (a) transfer all or any part of the Collateral into the name
of the Lender, with or without disclosing that such Collateral is subject to the
lien and security interest hereunder, (b) appoint one or more sub-agents or
nominees for the purpose of retaining physical possession of the Collateral, (c)
notify the parties obligated on any of the Collateral to make payment to the
Lender of any amounts due or to become due thereunder, (d) endorse any checks,
drafts or other writings in the name of the Pledgor to allow collection of the
Collateral, (e) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with respect thereto and (f)
take control of any proceeds of the Collateral.
5. Voting Rights, Dividends, etc. (a) Notwithstanding certain
provisions of Section 4 hereof, so long as the Lender has not given the notice
referred to in paragraph (b) below:
A. The Pledgor shall be entitled to exercise any and all voting or
consensual rights and powers (including exercise rights) and stock
purchase or subscription rights (but any such exercise by the Pledgor
of stock purchase or subscription rights may be made only from funds of
the Pledgor not constituting part of the Collateral) relating or
pertaining to the Collateral or any part thereof for any purpose;
provided, however, that the Pledgor agrees that it will not exercise
any such right or power in any manner which would materially adversely
impair the value of the Collateral or any part thereof or violate any
provision of the Note.
B. The Pledgor shall be entitled to receive and retain any and all
dividends, interest and other cash payments payable in respect of the
Collateral which are paid in cash by the Lender, but all dividends and
distributions in respect of the Collateral or any part thereof made in
shares of stock or other property or representing any return of
capital, whether resulting from a subdivision, combination or
reclassification of Collateral or any part thereof or received in
exchange for Collateral or any part thereof or as a result of any
merger, consolidation, acquisition or other exchange of assets to which
the Lender may be a party or otherwise or as a result of any exercise
of any stock purchase or subscription right, shall be and become part
of the Collateral hereunder and, if received by the Pledgor, shall be
forthwith delivered to the Lender in due form for transfer (i.e.,
endorsed in blank or
-3-
<PAGE> 4
accompanied by stock or bond powers executed in blank) to be held for
the purposes of this Agreement.
C. The Lender shall execute and deliver, or cause to be executed and
delivered, to the Pledgor, all such proxies, powers of attorney,
dividend orders and other instruments as the Pledgor may request for
the purpose of enabling the Pledgor to exercise the rights and powers
which it is entitled to exercise pursuant to clause (A) above and to
receive the dividends, interest and payments which it is authorized to
retain pursuant to clause (B) above.
(b) Upon notice from the Lender after the occurrence and during the
continuance of an Event of Default, and so long as the same shall be continuing,
all rights and powers which the Pledgor is entitled to exercise pursuant to
Section 5(a)(A) hereof, and all rights of the Pledgor to receive and retain
dividends, interest and payments pursuant to Section 5(a)(B) hereof, shall
forthwith cease, and all such rights and powers shall thereupon become vested in
the Lender which shall have, during the continuance of such Event of Default,
the sole and exclusive authority to exercise such rights and powers and to
receive such dividends, interest and payments. Any and all money and other
property paid over to or received by the Lender pursuant to this paragraph (b)
shall be retained by the Lender as additional Collateral hereunder and applied
in accordance with the provisions hereof.
6. Remedies. Whenever an Event of Default shall exist, the Lender may
exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code as in effect in Illinois or otherwise available to it,
as well as any other rights and remedies provided for herein or otherwise
available to it. Without limiting the foregoing, whenever an Event of Default
shall have occurred and be continuing the Lender (a) may, to the fullest extent
permitted by applicable law, without notice, advertisement, hearing or process
of law of any kind, (i) sell any or all of the Collateral, free of all rights
and claims of the Pledgor therein and thereto, at any public or private sale or
brokers' board and (ii) bid for and purchase any or all of the Collateral at any
such public sale and (b) shall have the right, for and in the name, place and
stead of the Pledgor, to execute endorsements, assignments, stock powers and
other instruments of conveyance or transfer with respect to all or any of the
Collateral. The Pledgor hereby expressly waives, to the fullest extent permitted
by applicable law, any and all notices, advertisements, hearings or process of
law in connection with the exercise by the Lender of any of its rights and
remedies during the continuance of an Event of Default. Any notification of
intended disposition of any of the Collateral shall be deemed reasonably and
properly given if given at least ten (10) days before such disposition. Any
proceeds of any of the Collateral may be applied by the Lender to the payment
-4-
<PAGE> 5
of expenses in connection with the Collateral, including, without limitation,
attorney costs, and any balance of such proceeds may be applied by the Lender
toward the payment of such of the Liabilities, and in such order of application,
as the Lender may from time to time elect (and, after payment in full of all
Liabilities, any surplus shall be delivered to the Pledgor or as a court of
competent jurisdiction shall direct).
7. General. No delay on the part of the Lender in exercising any right,
power or remedy shall operate as a waiver thereof, and no single or partial
exercise of any such right, power or remedy shall preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement shall be effective unless the same shall be in writing and
signed and delivered by the Lender and then such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Illinois, except to the extent that the
validity or perfection of the security interest hereunder, or any remedy
hereunder, in respect of any particular Collateral is governed by the laws of a
jurisdiction other than the State of Illinois.
This Agreement shall be binding upon the Pledgor and the Lender and
their respective successors and assigns, and shall inure to the benefit of the
Pledgor, the Lender and each of their successors and assigns of the
Administrative Agent.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and each such counterpart
shall be deemed an original but all such counterparts shall together constitute
but one and the same Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first written above.
/s/ Gerard M. Jacobs
----------------------------------------
GERARD M. JACOBS
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
------------------------------------
Title: Vice President, General Counsel
and Secretary
-6-
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the ____ day of June, 1998 (the "Effective Date") by and between Naporano Iron &
Metal Co., a New Jersey corporation and Nimco Shredding Co., a New Jersey
corporation (collectively, the "Employer"), Metal Management, Inc., a Delaware
corporation ("MTLM") and Joseph F. Naporano (the "Employee").
RECITALS
WHEREAS, the Employer, together with Nimco Shredding Co. ("Nimco"),
carries on a business relating to the purchase of prepared and unprepared
metallic scrap, the processing of such scrap into forms suitable for consumption
and the transport, handling and brokerage of such material (the "Business");
WHEREAS, pursuant to the Stock Purchase Agreement by and among MTLM and
the shareholders (including the Employee) of the Employer and Nimco dated May
25, 1998 (the "Stock Purchase Agreement), MTLM purchased all of the stock of the
Employer and Nimco;
WHEREAS, upon consummation of the transactions contemplated by the
Stock Purchase Agreement, the Employer will be a wholly owned subsidiary of
MTLM; and
WHEREAS, the Employer desires that the Employee continue to be employed
as a senior executive of the Employer, and the Employee has agreed to continue
his employment with the Employer, subject to and upon the terms and conditions
set forth below;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and provisions hereinafter set forth, the Employer and the Employee
agree as follows:
1. EMPLOYMENT.
1.1. NATURE OF EMPLOYMENT. The Employer hereby agrees to continue
to employ the Employee and the Employee hereby agrees to
continue to be employed by the Employer, subject to and upon
the terms and conditions hereinafter set forth.
1.2. EMPLOYMENT TERM. Subject to the terms and conditions of this
Agreement, the "Initial Employment Term" of this Agreement
shall commence on the Effective Date and shall continue until
the first anniversary thereof. The "Continuing
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<PAGE> 2
Employment Term" shall be the period commencing on the first
anniversary of the Effective Date and ending on the third
anniversary thereof. The Initial Employment Term and the
Continuing Employment Term are referred to herein collectively
as the "Employment Period".
2. DUTIES AND RESPONSIBILITIES OF THE EMPLOYEE.
2.1. DUTIES AND RESPONSIBILITIES. During the Initial
Employment Term, while he is employed by the Employer, the
Employee shall serve as the President and Chief Executive
Officer of the Employer and shall faithfully and diligently
render such services and perform such related duties and
responsibilities as are customarily performed by a person
holding such position(s) including the management of the day
to day operations of Employer and as otherwise may from time
to time be reasonably assigned to him consistent therewith by
the Board of Directors of the Employer. Such duties and
responsibilities shall include providing strategic advice and
counsel to the Employer and its Affiliates relating to the
operations of the Business and the acquisitions of related
business in the United States. The Employee shall not be
authorized to enter into any agreement or contract on behalf
of the Employer, or to commit the Employer to any obligation,
other than in the normal, usual and ordinary course of the
Employer's business, and consistent with past practice,
without the prior approval of MTLM's President and Chief
Operating Officer. During the Continuing Employment Term,
while he is employed by the Employer, Employee shall provide
advice and counsel regarding strategic planning and the
acquisition of related businesses for the Employer and its
Affiliates and perform such services for the Employer as the
Employer may reasonably request from time to time consistent
with the foregoing.
2.2. EFFORTS OF THE EMPLOYEE. During the Initial Employment
Term, while he is employed by the Employer, the Employee shall
devote his full business time and efforts during the Initial
Employment Term, one-half of his business time and efforts
during the first year of the Continuing Employment Term and
twenty-five percent of his business time and efforts during
the last year of the Continuing Employment Term to the
performance of his duties and responsibilities hereunder and
to the promotion and development of the business of the
Employer, including without limitation, the development and
enhancement of new and existing sources of materials for the
Employer. The Employee shall exert his best efforts to
preserving existing beneficial relationships with customers,
suppliers, prospective accounts, referral sources, employees
and others having business dealings with the Employer. During
the Continuing Employment Term, while he is employed by the
Employer, the Employee shall devote his efforts to the
performance of his duties and responsibilities hereunder as
are necessary to carry out his duties hereunder, subject to
the provisions of Section 2.1 and the first sentence of this
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<PAGE> 3
Section 2.2. Nothing in this Section 2.2 shall prohibit
Employee from participating in the activities of NAP Realty or
Janx Partners, L.P.
3. COMPENSATION.
3.1. SALARY. During the Employment Period, while he is employed by
the Employer, the Employer shall pay to the Employee:
(A) for the Initial Employment Term, an annual salary
("Salary-I") at the rate of two hundred and fifty
thousand dollars ($250,000), payable in accordance
with the Employer's normal payroll practices;
(B) for the first year of the Continuing Employment Term,
an aggregate salary ("Salary-II") equal to one
hundred and twenty five-thousand dollars ($125,000),
payable in substantially equal semi-monthly
installments during the first year of the Continuing
Employment Term; and
(C) for the last year of the Continuing Employment Term,
an aggregate salary ("Salary III") equal to sixty-two
thousand five hundred dollars ($62,500) payable in
substantially equal semi-monthly installments for the
last year of the Continuing Employment Term.
3.2. BENEFIT PLANS. During the Employment Period, while he is
employed by the Employer, the Employee shall be eligible to
participate in all such retirement and profit sharing plans,
welfare benefit plans and fringe benefit plans, policies and
programs maintained from time to time by the Employer for the
general benefit of other senior management employees of the
Employer upon the terms and conditions contained in such
plans.
3.3. VACATIONS. During the Employment Period, while he is employed
by the Employer, the Employee shall be entitled to a minimum
of three (3) weeks paid vacation per year or such other amount
determined under the vacation plan of the Employer. Employee
may take vacation at such times as Employee may elect given
the requirements of his responsibilities.
3.4. REIMBURSEMENT OF EXPENSES. During the Employment Period, while
he is employed by the Employer, the Employee shall be entitled
to be reimbursed for all reasonable, documented, lawful
expenses incurred by him in the performance of his duties
hereunder, including expenses for entertainment, travel and
similar items, within a reasonable time following the
presentation by the Employee of appropriate invoices to the
Employer in accordance with the Employer's normal practices
with respect to expense reimbursements.
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<PAGE> 4
3.5. BONUSES. In addition to Salary, during the Initial Employment
Term, the Employee shall be entitled to such quarterly,
semi-annual or annual bonuses as MTLM's President and Chief
Operating Officer shall determine in his sole discretion.
3.6. LIFE & DISABILITY INSURANCE. During the Employment Period,
while he is employed by the Employer, the Employer shall
provide to the Employee an amount determined from time to time
by the Employer to pay premiums for a life & disability
insurance policy selected by the Employer for the Employee.
Proof of insurance statements must be submitted to the
Employer for verification before payment is made.
3.7. SEVERANCE FOR TERMINATION DURING INITIAL TERM. In the
event that, during the Initial Employment Term, this Agreement
is terminated by the Employer other than For Cause (as defined
in Section 4.1 below) or is terminated by the Employee for
Good Reason (as defined in Section 4.3 below), then the
Employee shall be entitled to severance by continuing payment
of his Salary-I (as in effect on the date of termination)
through the Employer's existing payroll practices for the
following twenty-four (24) month period. No severance shall be
paid in accordance with this Section 3.8 in the event that (or
for periods after):
(A) the Initial Employment Term expires on the first
anniversary of the Effective Date;
(B) this Agreement is terminated for any reason after the
Initial Employment Term except as provided in Section
3.8;
(C) this Agreement is terminated by the Employer For
Cause;
(D) this Agreement is terminated by the death or
Permanent Disability of the Employee (as defined in
Section 4.2 below);
(E) this Agreement is terminated by the Employee during
the Initial Employment Term other than for Good
Reason; or
(F) the Employee violates the terms of Section 5 below.
3.8. SEVERANCE FOR TERMINATION DURING CONTINUING EMPLOYMENT TERM.
In the event that, during the Continuing Employment Term, this
Agreement is terminated by the Employer other than For Cause
or is terminated by the Employee for Good Reason, then the
Employee shall be entitled to payment of the Salary-II and/or
Salary-III to which he would have been entitled for the
remainder of the Continuing Employment Term. The Salary-II
and/or Salary-III shall continue to be paid in accordance with
paragraph 3.1(B). No severance
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<PAGE> 5
shall be payable in accordance with this Section 3.8 in the
event that (or for periods after):
(A) the Continuing Employment Term expires on the third
anniversary of the Effective Date;
(B) severance is payable under Section 3.7;
(C) this Agreement is terminated by the Employer For
Cause;
(D) this Agreement is terminated by the death or
Permanent Disability of the Employee;
(E) this Agreement is terminated by the Employee other
than for Good Reason; or
(F) the Employee violates the terms of Section 5 below.
3.9. NEW COMPENSATION AND BENEFITS PACKAGE. The Employee
acknowledges: (a) that MTLM is currently reviewing its
employee compensation and benefits packages at MTLM corporate
headquarters and each of its subsidiaries, including the
Employer; (b) that such review is being conducted by the
Executive Committee of MTLM with the advice of MTLM's Office
of the President and an outside consultant; (c) that such
review is expected to conclude during 1998; (d) that such
review is likely to result in the implementation by MTLM of
various plans, programs and decisions regarding employee
salaries, bonuses, stock options, benefits and/or other
incentives at MTLM corporate headquarters and at each of its
subsidiaries, including the Employer; and (e) that such plans,
programs and decisions will likely change, modify, adjust,
substitute, increase and/or decrease the Employee's
compensation and benefits package under this Agreement, all in
MTLM's and the Employer's discretion, provided that it is the
intention of MTLM and the Employer that until such review is
completed, the Employee's compensation and benefits package
shall remain, in all material respects, the same as that
provided to the Employee by the Employer immediately preceding
the execution of this Agreement, and provided further,
however, that nothing contained in this Section 3.8 shall
permit MTLM or the Employer to reduce either (A) the
Employee's Salary-I as provided in paragraph 3.1(A) hereof, or
(B) the Employee's severance as provided in Section 3.6 or 3.7
hereof, as applicable.
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<PAGE> 6
4. EARLY TERMINATION.
4.1. "FOR CAUSE". The Employer may terminate this Agreement
prior to the expiration of the Employment Period "For Cause".
For purposes of this Agreement, "For Cause" shall mean:
(A) final and non-appealable conviction of the Employee
for a felony;
(B) final and non-appealable conviction of the Employee
for misappropriation by the Employee of funds or
property of the Employer or the commission of other
acts of dishonesty;
(C) willful breach or material neglect by the Employee of
any of his material duties hereunder which continues
unabated or uncured to the reasonable satisfaction of
the Employer after expiration of 10 days following
receipt of written notice by Employee from the
Employer; or
(D) conduct on the part of the Employee which is
materially adverse to any known interest of the
Employer that continues unabated, or uncured to the
reasonable satisfaction of the Employer, after the
expiration of 10 days following receipt of written
notice by the Employee from the Employer.
Any termination by reason of the foregoing shall not limit or
preclude any other right or remedy the Employer may have under
this Agreement or otherwise. In the event of termination of
this Agreement by the Employer pursuant to this Section 4.1,
the Employee shall be entitled to no Salary-I, Salary-II or
Salary-III additional compensation or other benefits under
this Agreement for periods thereafter.
4.2. DEATH OR DISABILITY. In the event of the Employee's death
or Permanent Disability (as hereinafter defined) occurring
during the Employment Period, this Agreement shall be deemed
terminated as of such date and the Employee or his estate, as
the case may be, shall be entitled to no Salary-I, Salary-II,
Salary-III, other compensation or other privileges or benefits
hereunder for periods thereafter. The Employee shall be deemed
to have incurred a "Permanent Disability" after one hundred
and eighty (180) days in the aggregate or after one hundred
and twenty (120) consecutive days, in either case occurring in
any consecutive twelve (12) month period, during which one
hundred and eighty (180) or one hundred and twenty (120) days,
as the case may be, the Employee, by reason of his physical or
mental disability or illness, shall have been unable to
discharge fully his duties under this Agreement. In the event
the Employee suffers a physical or mental disability which
results in his being unable to discharge fully his duties
under this Agreement, but such disability is not of a duration
sufficient to be considered a Permanent Disability, any
obligation of the
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<PAGE> 7
Employer to make payments to the Employee pursuant to this
Agreement shall be offset by the amount of any payments that
the Employee receives pursuant to any short-term disability
plan of the Employer, including, but not limited to, any
payments received under a disability policy.
4.3. TERMINATION FOR GOOD REASON. The Employee shall have the
right to terminate this Agreement prior to the expiration of
the Employment Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean the willful and continued
failure by the Employer to substantially perform its material
obligations hereunder after a demand for substantial
performance is delivered by the Employee to the Employer that
specifically identifies the manner in which the Employee
believes that the Employer has not substantially performed its
material obligations hereunder, and the Employer fails to
resume substantial performance of its material obligations on
a continuous basis within fourteen (14) days of receiving such
demand; provided, that if it is not reasonably possible for
the Employer to resume such substantial performance within
such fourteen (14) day time period, then such time period
shall be extended to that minimum period of time during which
it is reasonably possible for the Employer to resume such
substantial performance. Good reason shall also include the
Employer's requirement that he move his personal residence or
perform his principal executive functions outside the
metropolitan area of New York, New York or Newark, New Jersey.
5. NON-COMPETITION AND TRADE SECRETS.
5.1. NON-COMPETITION. The Employee hereby covenants and agrees
that, during while he is employed by the Employer pursuant to
this Agreement and during a period of thirty six (36) months
following the date on which his employment terminates for any
reason (the "Covenant Period"), the Employee shall not,
directly or indirectly: (a) alone, together or in association
with others, either as a principal, agent, owner, shareholder,
officer, director, partner, employee, lender, investor or in
any other capacity, engage in, have any financial interest in
or be in any way connected or affiliated with, or render
advice or services to, any business engaged in the Business or
any new businesses or lines of business which the Employer,
MTLM or any affiliate of MTLM may enter into prior to the date
on which the Employee's employment terminates hereunder, in
any State in which the Employer or its affiliates now or
hereafter owns a scrap metal yard or scrap metal processing
facility on the date on which his employment terminates or
such other business as may be permitted by the Employer in
writing; (b) divert, take away, solicit, interfere with or
attempt to divert, take away, solicit, or interfere with any
present or future customer, referral source or account of the
Employer, or offer to provide, sell or lease to any such
customer, referral source or account of the Employer, at any
location, goods or services of the type provided by the
Employer during the period that the Employee was employed by
the Employer,
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<PAGE> 8
except on behalf of the Employer as an employee thereof; or
(c) solicit, induce, influence or attempt to solicit, induce
or influence any present employee or agent of the Employer to
leave his employment or engagement with the Employer; or offer
employment or engagement to or employ or engage any such
employee of the Employer, or assist or attempt to assist any
such employee of the Employer in seeking other employment. The
Employee hereby acknowledges that the nature of the Employer's
business is such that it may become engaged in such business
in metropolitan areas throughout the United States. The
restrictions imposed by paragraph 5.1(a) hereof shall not
apply to the ownership of one percent (1%) or less of all of
the outstanding securities of any entity whose securities are
listed on a national securities exchange.
5.2. TRADE SECRETS. The Employee acknowledges that he has
knowledge of and access to information of a confidential or
proprietary nature concerning the business and affairs of the
Employer and its affiliates, including without limitation,
information relating to customers, accounts, referral sources,
contract prices, books and records, sales, confidential
methods, processes, techniques, information and other trade
secrets, all of which are hereinafter collectively referred to
as "Trade Secrets." The Employee recognizes and agrees that
the disclosure or improper use of such Trade Secrets will
cause serious and irreparable injury to the Employer.
Accordingly, the Employee hereby further covenants and agrees
that, during the Covenant Period and thereafter until such
Trade Secrets shall become general public knowledge through no
fault of the Employee, the Employee shall not: (a)
communicate, disclose or divulge to any person, firm or other
party, or use, directly or indirectly, for his benefit or the
benefit of others, any Trade Secrets which the Employee may
know now or hereafter come to know; or (b) except as required
in the normal course of the employment of the Employee, copy,
remove from the premises of the Employer or retain, without
the prior written consent of the Employer, any written Trade
Secrets (or Trade Secrets that are capable of being reduced to
written form, including, but not limited to, Trade Secrets
stored in electronic form), including, but not limited to,
financial data, customer lists, pricing schedules or
information, memoranda or copies or extracts of any of the
foregoing. Upon termination of the Employee's employment with
the Employer, the Employee shall deliver to the Employer all
Trade Secrets and other confidential information then in the
Employee's possession or under the Employee's control.
5.3. PROPRIETARY MATTERS. The Employee hereby covenants and agrees
that: (a) so long as the Employee is employed by the Employer,
the Employee shall keep the Employer informed of any and all
discoveries, improvements, trade secrets, secret processes and
other know-how (all of which are hereinafter collectively
referred to as "Proprietary Items") made or developed by the
Employee, in whole or in part, or conceived of by the
Employee, alone or with others, which result from any work the
Employee may do for or at the request of the Employer, or
which
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<PAGE> 9
relate to the business, operations or activities of the
Employer or any present or future affiliate of the Employer,
and (b) during the course of the Employee's employment, the
Employee shall disclose in writing promptly to such persons as
the Employer may from time to time designate, all Proprietary
Items that relate in any way to the business, operations or
activities of the Employer, and that are made or conceived by
the Employee alone or in collaboration with others during the
period of the Employee's employment, whether so made during
working hours or otherwise. The Employee understands that all
Proprietary Items shall become and remain the sole property of
the Employer, unless expressly released in writing by the
Employer, and the Employer shall have all ownership rights in
all the Proprietary Items. The Employee agrees to execute
appropriate instruments documenting such ownership rights.
5.4. TIME FIXED AS TO RESTRICTION. As used in Sections 5.1,
5.2 and 5.3 with respect to the Employee's obligations
following termination of employment with the Employer, the
terms "customer", "account", "referral source", "employee",
"trade secrets", and "proprietary item" shall mean only the
firm, firms, person, persons, trade secrets and proprietary
items existing as such on the Employee's termination date; or
in the case of a customer, account, referral source or
employee, at any time during the twenty-four (24) month period
immediately preceding the Employee's termination of
employment. In no event are any of these items to be construed
so as to include any future firm, firms, person or persons,
trade secrets or proprietary items arising after the
Employee's termination of employment unless otherwise included
under the 24-month provision previously stated.
5.5. REMEDIES. The Employee expressly agrees and understands
that the remedy at law for any breach by him of this Section 5
will be inadequate and that the damages flowing from such
breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that upon
adequate proof of the Employee's violation of any legally
enforceable provision of this Section 5, the Employer shall be
entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach.
Nothing in this Section 5 shall be deemed to limit the
Employer's remedies at law or in equity for any breach by the
Employee of any of the provisions of this Section 5 which may
be pursued or availed of by the Employer.
5.6. TIME. In the event the Employee shall violate any legally
enforceable provision of this Section 5 as to which there is a
specific time period during which he is prohibited from taking
certain actions or from engaging in certain activities, as set
forth in such provision, then in such event, such violation
shall toll the running of such time period from the date of
such violation until such violation shall cease.
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<PAGE> 10
5.7. ACKNOWLEDGMENT. The Employee has carefully considered the
nature and extent of the restrictions upon him and the rights
and remedies of the Employer under this Section 5 and hereby
acknowledges and agrees that the same (a) are reasonable in
time and territory, (b) are designed to eliminate competition
which otherwise would be unfair to the Employer, (c) are not
to stifle the inherent skill and experience of the Employee,
(d) would not operate as a bar to the Employee's sole means of
support, (e) are fully required to protect a legitimate
interest of the Employer and (f) do not confer a benefit upon
the Employer disproportionate to the detriment to the
Employee. The Employee further recognizes the benefits he is
receiving including (1) employment rights under this
Agreement, and (2) severance in certain circumstances, all as
significant consideration for agreeing to and accepting the
terms, conditions, and restrictions outlined in this
Agreement.
5.8. AFFILIATES. For purposes of the restrictions contained in this
Section 5, all references to the Employer shall include the
Employer, MTLM and all other organizations or entities that
are more than 50% owned, directly or indirectly, by any of
such corporations.
6. GENERAL PROVISIONS.
6.1. GUARANTY BY MTLM. To the extent that the Employer fails, for
any reason, to make any payment required to be made to the
Employee or perform any obligations then due pursuant to the
terms of this Agreement, MTLM shall have full responsibility
and liability for such payment as though MTLM were substituted
for the Employer hereunder.
6.2. INVALIDITY OF PROVISIONS. In the event that any term or
provision of this Agreement, including any provision of
Section 5 hereof, shall be declared by any court of competent
jurisdiction to be unreasonable or invalid, any such
unreasonable term or provisions shall be modified and
enforceable to the extent deemed reasonable by such court; and
any such invalidity shall not affect any other term or
provision of this Agreement, all of which remaining terms and
provisions shall continue in full force and effect.
6.3. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed
to the conflicts of law provisions) of the State of New York.
6.4. JURISDICTION OF DISPUTES; WAIVER JURY TRIAL. In the event any
party to this Agreement commences any litigation, proceeding
or other legal action in connection with or relating to this
Agreement, or any matters described or contemplated herein,
with respect to any of the matters described or contemplated
herein or therein, the parties to this Agreement hereby (a)
agree under all circumstances absolutely and irrevocably to
institute any litigation,
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<PAGE> 11
proceeding or other legal action in a court of competent
jurisdiction located within the Borough of Manhattan, City of
New York, State of New York, whether a state or federal court;
(b) agree that in the event of any such litigation, proceeding
or action, such parties will consent and submit to personal
jurisdiction in any such court described in clause (a) and to
service of process upon them in accordance with the rules and
statutes governing service of process (it being understood
that nothing in this Section 6.4 shall be deemed to prevent
any party from seeking to remove any action to a federal court
in Borough of Manhattan, City of New York, State of New York;
(c) agree to waive to the fullest extent permitted by law any
objection that they may now or hereafter have to the venue of
any such litigation, proceeding or action in any such court or
that any such litigation, proceeding or action was brought in
an inconvenient forum; (d) agree to service of process in any
legal proceeding by mailing of copies thereof to such party at
its address set forth in Section 6.7 for communications to
such party; (e) agree that any service made as provided herein
shall be effective and binding service in every respect; and
(f) agree that nothing herein shall affect the rights of any
party to effect service of process in any other manner
permitted by Law. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO
THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED
OR CONTEMPLATED HEREIN OR THEREIN, AND AGREES TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
6.5. WAIVER OF BREACH. The waiver by a party of any breach of a
provision of this Agreement by the other party shall not
operate or be construed as a waiver of any subsequent breach
thereby.
6.6. SOLE REMEDY. The Employee expressly acknowledges and agrees
that his sole remedy for breach of this Agreement by the
Employer shall be limited to recovery of the Salary-I,
Salary-II, Salary III bonus and benefits set forth in Section
3 of this Agreement as provided in Sections 3.7 and 3.8.
6.7. NOTICE. Any notice or other communication required or
permitted to be given to a party pursuant to this Agreement
shall be in writing and shall be determined to have been duly
given when delivered personally or sent by Unites States
certified or registered mail, return receipt requested,
postage prepaid, as follows:
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<PAGE> 12
As to the Employer and MTLM:
Metal Management, Inc.
c/o Gerard M. Jacobs
Chief Executive Officer and General Counsel
500 N. Dearborn St., Suite 405
Chicago IL 60610
As to the Employee:
c/o JANX Partners, L.P.
One Gateway Center
7-45 Raymond Boulevard, 9th Floor
Newark, New Jersey 07102
Either party may change his or its address for the purpose of
this Section 6.7 by written notice given in the manner herein
provided. In the event of notice by certified or registered
mail, such notice shall be effective upon receipt or refusal
to receive.
6.8. AMENDMENT. This Agreement may not be altered, amended or
modified except in writing signed by each of the parties.
6.9. BENEFITS OF PARTIES. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective
heirs, personal representatives, successors and assigns;
provided that this Agreement is personal to the Employer and
the Employee, and neither party may assign its or his rights
or delegate its or his obligations hereunder without the prior
written consent of the other party hereunder.
6.10. PRIOR AGREEMENTS. This Agreement supersedes all prior
agreements, whether in writing or oral, relating to the
subject matter of this Agreement.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date first above written.
NAPORANO IRON & METAL CO.
By: /s/ David A. Carpenter
-----------------------------------
Name: David A. Carpenter
Title: Vice President
NIMCO SHREDDING CO.
By: /s/ David A. Carpenter
-----------------------------------
Name: David A. Carpenter
Title: Vice President
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
-----------------------------------
Name: David A. Carpenter
Title: Vice President
/s/ Joseph F. Naporano
-----------------------------------
JOSEPH F. NAPORANO
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<PAGE> 1
EXHIBIT 11.1
METAL MANAGEMENT, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings:
Net income (loss) from continuing
operations applicable to Common
Stock................................. $(17,536) $ (143) $(19,129) $ 143
Gain on sale of discontinued operations,
net................................... 27 107 74 208
Extraordinary charge, net................ 0 0 (862) 0
-------- ------- -------- -------
Net income (loss) applicable to Common
Stock................................. $(17,509) $ (36) $(19,917) $ 351
======== ======= ======== =======
Basic earnings per share:
Weighted average common shares
outstanding........................... 38,991 16,501 36,647 14,738
======== ======= ======== =======
Per share amounts:
Net income (loss) from continuing
operations applicable to Common
Stock................................. $ (0.45) $ (0.01) $ (0.52) $ 0.01
Gain on sale of discontinued
operations............................ 0.00 0.01 0.00 0.01
Extraordinary charge, net................ 0.00 0.00 (0.02) 0.00
-------- ------- -------- -------
Net income (loss) applicable to Common
Stock................................. $ (0.45) $ 0.00 $ (0.54) $ 0.02
======== ======= ======== =======
Diluted earnings per share:
Weighted average common shares
outstanding........................... 38,991 16,501 36,647 14,738
Common stock equivalents(1).............. 0 0 0 2,760
-------- ------- -------- -------
Total............................... 38,991 16,501 36,647 17,498
======== ======= ======== =======
Per share amounts:
Net income (loss) from continuing
operations applicable to Common
Stock................................. $ (0.45) $ (0.01) $ (0.52) $ 0.01
Gain on sale of discontinued
operations............................ 0.00 0.01 0.00 0.01
Extraordinary charge, net................ 0.00 0.00 (0.02) 0.00
-------- ------- -------- -------
Net income (loss) applicable to Common
Stock................................. $ (0.45) $ 0.00 $ (0.54) $ 0.02
======== ======= ======== =======
</TABLE>
- - -------------------------
(1) For the three months ended September 30, 1998 and 1997 and the six months
ended September 30, 1998, common stock equivalents were not added to the
weighted average shares outstanding as the result would have been
anti-dilutive.
<TABLE> <S> <C>
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<S> <C>
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0
29,485,000
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<EPS-PRIMARY> (0.54)
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</TABLE>
