<PAGE> 1
EXHIBIT 10.37
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY
APPLICABLE STATE SECURITIES LAWS.
KM-1 WARRANTS November 3, 1998
To Purchase 75,000 Shares of Common Stock of
Metal Management, Inc. (the "Company")
1. Number of Shares: Exercise Price: Term. This certifies that Kenneth A.
Merlau ("Holder"), in consideration for, among other things, agreeing to serve
as the Executive Vice President, Finance and Operations, pursuant to that
certain letter agreement, dated October 27, 1998 (the "Letter Agreement")
between the Holder and the Company, is entitled, upon the terms and subject to
the vesting requirements and other conditions set forth herein, to acquire from
the Company, in whole or in part, from time to time, up to 75,000 fully paid and
non-assessable shares (the "Shares") of Common Stock, $.01 par value per share,
of the Company ("Common Stock") at a purchase price per share equal to $4.00 per
share. The right to purchase the shares of Common Stock shall vest in six equal
monthly installments beginning on November 3, 1998 and ending on April 3, 1999,
so long as as of each vesting date the Holder continues to be employed by the
Company. Notwithstanding the foregoing, if the Holder is involuntarily
terminated by the Company prior to April 3, 1999 for any reason other than (x)
substantial dereliction of duties of the Holder to the Company or (y) knowing
participation in any act of fraud, embezzlement or theft, or conviction of a
felony by the Holder, the warrant with respect to all shares of Common Stock
covered hereby shall become immediately vested and exerciseable by the Holder as
of the date of termination. The Holder shall have the right to purchase Common
Stock that has become vested hereunder until 11:59 p.m. Central Time on November
3, 2001.
2. Exercise of Warrant. Subject to the vesting conditions set forth in
paragraph 1 above, the purchase rights represented by this Warrant are
exercisable by the Holder, in whole or in part, at any time prior to the
Expiration Time by the surrender of this Warrant and the Notice of Exercise
annexed hereto, all duly completed and executed on behalf of the Holder, at the
office of the Company in Chicago, Illinois (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the
address of the Holder appearing on the books of the Company). Payment of the
Exercise Price for the Shares thereby purchased shall be made by cash, certified
or cashier's check or wire transfer payable to the order of the Company, at
10:00 a.m., Central Standard Time, on the day following surrender of this
Warrant and the Notice of Exercise, in an amount equal to the purchase price of
the Shares thereby purchased. Thereupon, the Holder as the holder of this
Warrant, shall be entitled to receive from the Company a stock certificate in
proper form representing the number of Shares so purchased, and a new Warrant in
substantially identical form and dated as of such exercise for the purchase of
that number of Shares equal to the difference, if any, between the number of
Shares subject hereto and the number of Shares as to which this Warrant is so
exercised.
3. Issuance of Shares. Certificates for Shares purchased hereunder shall be
delivered to the Holder promptly after the date on which this Warrant shall have
been exercised in accordance with the terms hereof. The Company hereby
represents and warrants that all Shares that may be issued upon the exercise of
this Warrant will, upon such exercise, be duly and validly authorized and
issued, fully paid and nonassessable and free from all taxes, liens and charges
in respect of the issuance thereof (other than liens or charges created by or
imposed upon the Holder as the holder of the Warrant or taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein). The Company
agrees that the Shares so issued shall be and shall for all purposes be deemed
to have been issued to the Holder as the record owner of such Shares as of the
close of business on the date on which this Warrant shall have been exercised or
converted in accordance with the terms hereof.
<PAGE> 2
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder as the holder would
otherwise be entitled, the Holder shall be entitled, at his option, to receive
either (i) a cash payment equal to the excess of fair market value for such
fractional share above the Exercise Price for such fractional share (as
determined in good faith by the Company) or (ii) a whole share if the Holder
tenders the Exercise Price for one whole share.
5. No Rights as Shareholders. This Warrant does not entitle the Holder as
a holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
6. Charges. Taxes and Expenses. Certificates for Shares issued upon
exercise of this Warrant shall be issued in the name of the Holder as the holder
of this Warrant. Issuance of certificates for Shares upon the exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company.
7. No Transfer. This Warrant and any rights hereunder are not
transferable by the Holder as the holder hereof, in whole or in part except to
the Holder's spouse or to a trust or other entity for estate planning purposes,
for the benefit of the Holder, the Holder's spouse and their descendants.
8. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder as the registered holder at the
above-mentioned office or agency of the Company, for a new Warrant on
substantially identical form and dated as of such exchange. The Company shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the Holder as the registered holder of this Warrant. This Warrant may
be surrendered for exchange or exercise, in accordance with its terms, at the
office of the Company, and the Company shall be entitled to rely in all
respects, prior to written notice to the contrary, upon such registry.
9. Loss. Theft. Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
and reissuance, in lieu of this Warrant.
10. Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance, sale and delivery upon the exercise of this
Warrant, such number of Shares, equal to the number of such Shares purchasable
upon the exercise of this Warrant. All such Shares shall be duly authorized and,
when issued upon exercise of this Warrant in accordance with the terms hereof,
will be validly issued and fully paid and nonassessable, with no liability on
the part of the Holder. Such Shares will not be subject to any preemptive
rights.
11. Listing on Securities Exchanges, Etc. The Company will maintain the
listing of all Shares issuable or issued from time to time upon exercise of this
Warrant on each securities exchange or market or trading system on which any
shares of Common Stock are then or at any time thereafter listed or traded, but
only to the extent and for such period of time as such shares of Common Stock
are so listed.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then
2
<PAGE> 3
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday or a Sunday or a legal holiday.
13. Adjustments and Termination of Rights. The purchase price per Share and
the number of Shares purchasable hereunder are subject to adjustment from time
to time as follows:
(a) Merger or Consolidation. If at any time there shall be a merger
or a consolidation of the Company with or into another corporation when the
Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Holder as the holder
of this Warrant shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the aggregate
Exercise Price then in effect, the number of shares of stock or other securities
or property (including cash) of the successor corporation resulting from such
merger or consolidation, to which the Holder as the holder of the stock
deliverable upon exercise of this Warrant would have been entitled in such
merger or consolidation if this Warrant had been exercised immediately before
such merger or consolidation. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Warrant with respect to the
rights and interests of the Holder as the holder of this Warrant after the
merger or consolidation. This provision shall apply to successive mergers or
consolidations.
(b) Reclassification, Recapitalization, etc. If the Company at any
time shall, by subdivision, combination or reclassification of securities,
recapitalization, automatic conversion, or other similar event affecting the
number or character of outstanding Shares, or otherwise, change any of the
securities as to which purchase rights under this Warrant exist into the same or
a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change.
(c) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist, the Exercise Price shall be proportionately decreased in the case
of a split or subdivision or proportionately increased in the case of a
combination.
(d) Common Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to Common
Stock payable in Common Stock, or make any other distribution with respect to
shares of Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. This paragraph
shall apply only if and to the extent that, at the time of such event, this
Warrant is then exercisable for Common Stock.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to 13(c) or 13(d) hereof, the number of shares of Common
Stock purchasable hereunder shall be adjusted, to the nearest whole Share, to
the product obtained by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment in the Exercise Price by a
fraction (i) the numerator of which shall be the Exercise Price immediately
prior to such adjustment, and (ii) the denominator of which shall be the
Exercise Price immediately after such adjustment.
14. Notice of Adjustments: Notices. Whenever the Exercise Price or number
or type of securities issuable hereunder shall be adjusted pursuant to Section
13 hereof, the Company shall issue and provide to the Holder as the holder of
this Warrant a certificate signed by an officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment
3
<PAGE> 4
was calculated and the Exercise Price and number of shares of Common Stock
purchasable hereunder after giving effect to such adjustment.
15. Governing Law. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the laws
of Delaware and for all purposes shall be construed in accordance with and
governed by the laws of said state without giving effect to the conflict of laws
principles.
16. Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Holder as the holder of this Warrant relating
hereto, the prevailing party shall be entitled to reasonable attorneys' fees and
expenses incurred in enforcing this Warrant.
17. Amendments. This Warrant may be amended and the observance of any term
of this Warrant may be waived only with the written consent of the Company and
the Holder as the holder hereof.
18. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of receipt, (b) one
business day after the date on which the same is delivered to a nationally
recognized overnight courier service with evidence of receipt, or (c) five
business days after the date on which the same is deposited, postage prepaid, in
the U.S. mail, sent by certified or registered mail, return receipt requested,
and addressed to the party to be notified at the address indicated below for the
Company, or at the address for the Holder as the holder set forth in the
registry maintained by the Company pursuant to Section 8, or at such other
address and/or telecopy or telex number and/or to the attention of such other
person as the Company or the Holder as the holder may designate by ten-day
advance written notice.
19. Entire Agreement. This Warrant and the forms attached hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or undertakings
with respect thereto.
IN WITNESS WHEREOF, Metal Management, Inc. has caused this Warrant to be
executed by its duly authorized officer.
Dated: November 3, 1998
METAL MANAGEMENT, INC.
By: /s/ David A. Carpenter
------------------------------------------------
Name: David A. Carpenter
Title: Vice President, General Counsel & Secretary
Address: 500 N. Dearborn Street
Suite 405
Chicago, IL 60610
4
