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EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of November 20,
1997, by and among Metal Management, Inc., a Delaware corporation (the
"Company"), Proprietary Convertible Investment Group, Inc., a Delaware
corporation ("PCIG"), and Capital Ventures International, a Cayman Islands
unlimited liability company ("CVI"). PCIG and CVI are each referred to herein
as a "Purchaser" and, together, as the "Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser wishes to
buy, on the terms and subject to the conditions set forth in this Agreement,
the number of shares (the "Preferred Shares") of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock") set forth below
such Purchaser's name on the signature pages hereof. The Preferred Shares are
convertible into shares (the "Conversion Shares") of the Company's Common
Stock, $.01 par value per share (the "Common Stock"). The Company has agreed to
effect the registration of the Conversion Shares under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Rights
Agreement of even date herewith among the Company and the Purchasers (the
"Registration Rights Agreement").
The rights, preferences and privileges of the Series B Preferred Stock,
including the terms upon which the Series B Preferred Stock is convertible into
Conversion Shares, are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the "Certificate of
Designation"). The Preferred Shares and the Conversion Shares are collectively
referred to herein as the "Securities" and each as a "Security".
The sale of the Preferred Shares by the Company to the Purchasers will be
effected in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act.
The Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction of the conditions set forth herein, the Company agrees to sell at
the Closing (as defined below), and each Purchaser agrees to purchase, the
number of Preferred Shares set forth below such Purchaser's name on the
signature page hereof at a purchase price equal to one thousand dollars
($1,000) per share (the "Purchase Price").
1.2 Closing. Subject to the satisfaction of the conditions set forth
herein, the closing of the purchase and sale of the Preferred Shares shall
occur when this Agreement and the other Transaction Documents (as defined
below), have been executed and delivered by the Company and each Purchaser, all
of the conditions to Closing set forth in Article 5 have been satisfied or
waived and full payment of the Purchase Price has been made by each Purchaser
by wire transfer of immediately available funds to an account designated by the
Company against delivery by the
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Company of duly executed certificates to each Purchaser representing the
Preferred Shares purchased by such Purchaser hereunder (the "Closing"). The
date on which the Closing is deemed to take place is referred to herein as the
"Closing Date". The aggregate Purchase Price for all of the Preferred Shares to
be purchased by the Purchasers at the Closing (assuming the satisfaction of the
conditions described in Section 5 below) shall be twenty million dollars
($20,000,000).
1.3 Certain Definitions. When used herein, (A) "business day" shall mean
any day on which the New York Stock Exchange and commercial banks in the city of
New York are open for business, (B) an "affiliate" of a party shall mean any
person or entity controlling, controlled by or under common control with that
party and (C) "control" shall mean, with respect to an entity, the ability to
direct the business, operations or management of such entity, whether through
an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, solely with respect to it, hereby makes the following
representations and warranties to the Company (which shall be true as of the
date hereof and as of the Closing Date) and agrees with the Company that:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing as an entity under the laws of
the state of its organization with full power and authority to purchase the
Preferred Shares and to execute and deliver this Agreement. This Agreement
constitutes such Purchaser's valid and legally binding obligation, enforceable
in accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. Such Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares solely for its own account for investment
purposes as a principal and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, such Purchaser does not agree to hold the Securities for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Securities at any time in accordance with the provisions of this
Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition.
2.3 Information. The Company has provided such Purchaser with, and such
Purchaser has reviewed, the written information regarding the Company set
forth on Schedule 2.3, and has granted to such Purchaser the opportunity to ask
questions of and receive answers from representatives of the Company, its
officers, directors, employees and agents concerning the business, operations
and financial condition of the Company and materials relating to the terms
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and conditions of the purchase and sale of the Preferred Shares hereunder.
Neither such information nor any other investigation conducted by such
Purchaser or any of its representatives shall modify, amend or otherwise affect
such Purchaser's right to rely on the Company's representations and warranties
contained in this Agreement.
2.4 Limitations on Disposition. Such Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Securities have
not been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom. Such Purchaser agrees not to sell, transfer
or otherwise dispose of the Securities unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) (i) such Purchaser shall have notified the Company in advance
of the proposed disposition, and (ii) if reasonably requested by the
Company, such Purchaser shall have furnished the Company with an opinion
of counsel (the cost of which shall be borne by the Purchaser),
reasonably satisfactory to the Company, that such disposition will not
require registration under the Securities Act. It is agreed that no
opinion of counsel will be required for the transfer of the Securities to
an affiliate of such Purchaser or with respect to a sale thereof made
pursuant to Rule 144 under the Securities Act ("Rule 144").
2.5 Legend. Such Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws, and may not be
sold, transferred or assigned in the absence of an effective
registration statement under the Securities Act and any such state
law or an exemption from the registration requirements thereunder."
Notwithstanding the foregoing, it is agreed that, as long as the
sale of the Conversion Shares is registered pursuant to an effective
registration statement or such shares are eligible for resale under Rule
144(k), the Conversion Shares shall be issued upon a conversion of the
Preferred Shares pursuant to the terms of the Certificate of Designation, or in
payment of a dividend thereon, without any legend or other restrictive
language. The legend set forth above shall be removed and the Company shall
issue a new certificate without such legend to the holder of any Security upon
which it is stamped if (i) the sale of such Security is registered under the
Securities Act, (ii) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions (the cost of which shall be borne by the Purchaser) to
the effect that such Security can be sold publicly without registration under
the Securities Act or (iii) such holder provides the Company with
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reasonable assurances that such Security can be sold pursuant to Rule 144
without any restriction as to the number of shares of such Security that can
then be immediately resold.
2.6 No Reliance by Purchaser. Such Purchaser acknowledges that (i) it has
such knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents (as defined below)
and the transactions contemplated hereby and thereby, (ii) it is not relying on
any advice or representation of the Company in connection with entering into
this Agreement, the other Transaction Documents or such transactions (other
than the representations made by the Company in this Agreement and the other
Transaction Documents, and in the written information described in paragraph
2.3 above), (iii) it has not received from the Company any assurance or
guarantee as to the merits (whether legal, regulatory, tax, financial or
otherwise) of entering into this Agreement or the other Transaction Documents
or the performance of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisors to the extent that it has deemed necessary, and has
entered into this Agreement and the other Transaction Documents based on its
own independent judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral) expressed by the
Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to
each Purchaser (which shall be true as the date hereof and as of the Closing
Date, provided that the representations and warranties made by the Company in
paragraph 3.18 hereof shall be true as of the date specified therein) and
agrees with such Purchaser that:
3.1 Organization, Good Standing and Qualification. Each of the Company
and its subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority, corporate and
otherwise, to carry on its business as now conducted. Each of the Company and
its subsidiaries is duly qualified to transact business and is in good standing
in each jurisdiction in which the failure so to qualify would have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole. For purposes of this Agreement,
the term "subsidiaries" shall mean entities in which the Company has an equity
interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, to issue and sell the Preferred Shares to such
Purchaser in accordance with the terms hereof, and to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation. All corporate action on the part of the Company by
its officers, directors and stockholders necessary for (A) the authorization,
execution and delivery of, and the performance by the Company of its
obligations under, (i) this Agreement, (ii) the Registration Rights Agreement
and (iii) all other agreements, documents, certificates or other instruments
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delivered by the Company at the Closing (the instruments described in (i), (ii)
and (iii) being collectively referred to herein as the "Transaction
Documents"), and (B) the authorization, execution and filing of, and the
performance by the Company of its obligations under, the Certificate of
Designation, has been obtained and no further consent or authorization of the
Company, its Board of Directors or its stockholders is required (other than the
Stockholder Approval (as defined in paragraph 4.1.10 below)).
3.3 Enforcement. The Transaction Documents and the Certificate of
Designation constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) general principles of
equity. Except as otherwise provided in the Transaction Documents, the Company
has obtained all governmental or regulatory consents and approvals required for
it to execute, deliver and perform its obligations under the Transaction
Documents and under the Certificate of Designation. The Management Proxies,
when executed and delivered to the Purchasers, will be valid and binding.
3.4 Disclosure Documents; Material Agreements; Other Information. The
Company has filed with the Commission: (i) the Company's Annual Report on Form
10-K for the year ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) Quarterly Reports on Form 10-Q and
10-Q/A for the quarters ended January 31, 1996, March 31, 1996, June 30, 1996,
September 30, 1996, December 31, 1996, June 30, 1997 and September 30, 1997,
(iii) all Current Reports on Form 8-K required to be filed with the Commission
since January 31, 1996, (iv) the Company's definitive Proxy Statement for its
1995 Annual Meeting of Shareholders, (v) the Company's Preliminary Proxy
Statement (the "Proxy Statement"), dated as of November 20, 1997, pertaining
to, among other things, the Company's proposed acquisition of ▇▇▇▇▇ Iron &
Metal, Inc., (vi) any amendments to the foregoing and (vii) all schedules and
exhibits attached thereto (collectively, the "Disclosure Documents"). The
Purchasers acknowledge that the Preliminary Proxy Statement described in (v)
above has not been approved by the Securities and Exchange Commission and
remains subject to modification and amendment. Except as set forth on Schedule
3.4 hereto, and except for the transactions contemplated hereby, the Company is
not aware of any event that would require the filing of a Form 8-K or with
respect to which the Company intends to file a Form 8-K within fifteen (15)
days following the Closing Date. Each Disclosure Document, as of the date of
the filing thereof with the Commission, conformed in all material respects to
the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder and, as of the date
of such filing or, if such Disclosure Document was subsequently amended, as of
the date of the filing of any amendment thereto with the Commission, such
Disclosure Document did not contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. All material agreements required to be filed as
exhibits to the Disclosure Documents have been filed as required. The written
information provided to such Purchaser as described in paragraph 2.3 above does
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which
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they were made, not misleading. Except as set forth in the financial
statements of the Company included in the Disclosure Documents, the Company has
no liabilities, contingent or otherwise, other than liabilities incurred in the
ordinary course of business which, under generally accepted accounting
principles, are not required to be reflected in such financial statements and
which, individually or in the aggregate, are not material to the business,
operations or financial condition of the Company and its subsidiaries taken as
a whole.
3.5 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant
to the Company's stock option plans, the number of shares issuable and reserved
for issuance pursuant to securities (other than the Preferred Stock)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares initially to be reserved for issuance upon
conversion of the Preferred Shares is set forth on Schedule 3.5 hereto. All of
such outstanding shares of capital stock have been, or upon issuance will be,
validly issued, fully paid and non-assessable. No shares of the capital stock
of the Company are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances created by or
through the Company. Except as disclosed on Schedule 3.5, or as contemplated
herein, as of the date of this Agreement and as of the Closing Date, there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its subsidiaries.
3.6 Valid Issuance. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be
duly and validly issued, fully paid and nonassessable, free and clear of any
taxes, liens, claims, preemptive or similar rights or encumbrances imposed by
or through the Company, (ii) based in part upon the representations of such
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be
entitled to all of the rights, preferences and privileges set forth in the
Certificate of Designation. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company.
3.7 No Conflict with Other Instruments. Neither the Company nor any of
its subsidiaries is in violation of any provisions of its Certificate of
Incorporation or Bylaws as amended and in effect on and as of the date hereof;
the Company is not in default (and no event has occurred which, with notice or
lapse of time or both, would constitute a default) under any provision of any
instrument or contract to which it is a party or by which it is bound, or of
any provision of any Federal or state judgment, writ, decree, order, statute,
rule or governmental regulation applicable to the Company, which would have a
material adverse effect on the business, operations or financial condition of
the Company and its subsidiaries taken as a whole. The execution, delivery and
performance of this Agreement and the other Transaction Documents,
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and the consummation of the transactions contemplated hereby and thereby
(including without limitation the issuance and reservation for issuance of the
Conversion Shares) will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument or contract or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the triggering of any anti-dilution rights on the part of
holders of the Company's securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the Company. Except as otherwise described in
the Disclosure Documents, as of the date hereof and as of the Closing there has
been no material adverse change to the Company's business, operations,
properties, financial condition or results of operations since the date of the
Company's most recent audited financial statements contained in the Disclosure
Documents.
3.8.2 The Company has filed all tax returns required to be filed by
it and paid all taxes which are due, except for taxes which it reasonably
disputes and which could not reasonably be expected to have a material adverse
effect on the consolidated business or financial condition of the Company.
3.8.3 Except as set forth on Schedule 3.8.3, the Company is not the
subject of any pending or, to its knowledge, threatened investigation or
administrative or legal proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, the Commission or any state
securities commission or other governmental entity which could reasonably be
expected to have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole.
3.8.4 Except as set forth on Schedule 3.8.4, there is no material
claim, litigation or administrative proceeding pending, or, to the best of the
Company's knowledge, threatened, against the Company or against any officer,
director or employee of the Company in connection with such person's employment
therewith. The Company is not a party to or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality which could reasonably be expected to have a material
adverse effect on the business, operations or financial condition of the
Company and its subsidiaries taken as a whole.
3.9 Reporting Company; Form S-3. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required thereby. The
Company is eligible to register for resale shares of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
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3.10 No Reliance by Company. The Company acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of such Purchaser in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made by such Purchaser in this Agreement and the other
Transaction Documents), (iii) it has not received from such Purchaser any
assurance or guarantee as to the merits (whether legal, regulatory, tax,
financial or otherwise) of entering into this Agreement or the other
Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice
of its advisors as it has deemed necessary, and not on any view (whether
written or oral) expressed by such Purchaser.
3.11 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with the terms of the Certificate of Designation is
unconditional and absolute regardless of the effect of any such dilution.
3.12 Registration Rights; Rights of Participation. Except as described on
Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any
person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority and (B) no person or entity, including, but not limited
to, current or former shareholders of the Company, underwriters, brokers,
agents or other third parties, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction Document
which has not been waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not
been suspended as of the date hereof and as of the Closing Date.
3.14 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
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3.15 Fees. The Company is not obligated to pay any compensation or other
fee, cost or related expenditure to any underwriter, broker, agent or other
representative, other than ▇▇▇▇▇▇▇ Capital Partners, Ltd., in connection with
the transactions contemplated hereby.
3.16 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee, (iii)
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
3.17 Pending Acquisitions. With respect to any acquisition of assets or
securities by the Company or any of its subsidiaries, the agreement for which
has been executed as of the date of this Agreement, the closing of such
acquisition, and the obligations of the parties thereunder, are not conditioned
in any respect on the maintenance at any given level of the closing bid, ask or
sale price of the Common Stock as quoted by Nasdaq.
3.18 Environmental Matters. Except as set forth in the Disclosure
Documents or on Schedule 3.18 hereof, the following representations and
warranties shall be true with respect to the Company and its subsidiaries (and
only those subsidiaries owned by the Company as of May 16, 1997) as of May 16,
1997:
3.18.1 To the best of the Company's knowledge, the Company and each
of its subsidiaries is in material compliance with all Environmental, Health
and Safety Laws (as defined below) governing its business, operations,
properties and assets. Neither the Company nor any of its subsidiaries is
currently liable for any penalties, fines or forfeitures for failure to comply
with any Environmental, Health and Safety Laws.
3.18.2 The Company and each of its subsidiaries has obtained, or
caused to be obtained, and to the best of the Company's knowledge, is in
material compliance with, all applicable and material licenses, certificates,
permits, approvals and registrations required by the Environmental, Health and
Safety Laws (collectively, "Licenses"). There are no administrative or
judicial investigations, notices, claims or other proceedings pending or
threatened by any governmental authority or third parties against the Company
or any of its subsidiaries, their respective businesses, operations, properties
or assets, which question the validity or entitlement of the Company or any of
its subsidiaries to any License wherein an unfavorable decision, ruling or
finding could have a material adverse effect on the Company or any of its
subsidiaries.
3.18.3 Neither the Company nor any of its subsidiaries has received
or is aware of any non-compliance order, warning letter, investigation, notice
of violation, claim, suit, action, judgment or administrative or judicial
proceeding pending or threatened against or involving the Company or any of its
subsidiaries, issued by any governmental authority or third party with
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respect to any Environmental, Health and Safety Laws, which has not been
resolved to the satisfaction of the issuing governmental authority or third
party and which could have a material adverse effect on the Company or any of
its subsidiaries.
3.18.4 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has generated, manufactured, used, transported,
transferred, stored, handled, treated, Discharged, Released or disposed of, nor
has it allowed or arranged for any third parties to generate, manufacture, use,
transport, transfer, store, handle, treat, Discharge, Release or dispose of,
Hazardous Substances or other Waste (as defined below) to or at any location
other than a site lawfully permitted to receive such Hazardous Substances or
other waste for such purposes, nor has it performed, arranged for or allowed by
any method or procedure such generation, manufacture, use, transportation,
transfer, storage, treatment, spillage, leakage, dumping, Discharge, Release or
disposal in material contravention of any Environmental, Health and Safety
Laws. To the best of the Company's knowledge, neither the Company nor any of
its subsidiaries has generated, manufactured, used, stored, handled, treated,
Discharged, Released or disposed of, or allowed or arranged for any third
parties to generate, manufacture, use, store, handle, treat, spill, leak, dump,
discharge, release or dispose of, any material quantities of Hazardous
Substances or other waste upon property currently or previously owned or leased
by it, except as permitted by law. For purposes of this Agreement, the term
"Hazardous Substances" means any toxic or hazardous substance, material, or
waste, any other contaminant, pollutant or constituent thereof, whether liquid,
solid, semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, metals, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated biphenyls, the
presence of which requires investigation or remediation under any
Environmental, Health and Safety Laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Health and Safety
Laws. For purposes of this Agreement, the term "Waste" means agricultural
wastes, biomedical wastes, biological wastes, bulky wastes, construction and
demolition debris, garbage, household wastes, industrial solid wastes, liquid
wastes, recyclable materials, sludge, solid wastes, special wastes, used oils,
white goods, and yard trash.
3.18.5 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has caused, nor allowed to be caused or permitted,
either by action or inaction, a Release or Discharge, or threatened Release or
Discharge, of any material quantity of Hazardous Substances on, into or beneath
the surface of any parcel of the Owned Properties or the Leased Premises or to
any properties adjacent thereto which would have a material adverse effect on
the Company or its subsidiaries. To the best of the Company's knowledge, there
has not occurred, nor is there presently occurring, a Release or Discharge, or,
threatened Release or Discharge, of any material quantity of Hazardous
Substances on, into or beneath the surface of any parcel of the Owned
Properties or the Leased Premises or to any properties adjacent thereto which
would have a material adverse effect on the Company or its subsidiaries. For
purposes of this Agreement, the terms "Release" and "Discharge" shall have the
meanings given them in the Environmental, Health and Safety Laws.
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3.18.6 To the best of the Company's knowledge, neither the Company
nor any of its subsidiaries has generated, handled, manufactured, treated,
stored, used, shipped, transported, transferred or disposed of, nor has it
allowed or arranged, by contract, agreement or otherwise, for any third parties
to generate, handle, manufacture, treat, store, use, ship, transport, transfer
or dispose of, any Hazardous Substances or other Waste to or at a site which,
pursuant to CERCLA or any similar state law, has been placed or been proposed
for placement on the National Priorities List or its state equivalent. Neither
the Company nor any of its subsidiaries has received notice, and neither the
Company nor any of its subsidiaries has knowledge of any facts which could give
rise to any notice, that the Company or any of its subsidiaries is a
potentially responsible party for a federal or state environmental cleanup site
or for corrective action under Environmental Health and Safety Laws. Neither
the Company nor any of its subsidiaries has submitted or was required to submit
any notice pursuant to Section 103(c) of CERCLA with respect to the Leased
Premises or the Owned Properties. Neither the Company nor any of its
subsidiaries has received any written request for information in connection
with any federal or state environmental cleanup site, or in connection with any
of the real property or premises where the Company or any of its subsidiaries
has transported, transferred or disposed of other Wastes. Neither the Company
nor any of its subsidiaries has been required to or has undertaken any response
or remedial actions or clean-up actions of any kind at the request of any
governmental authorities or at the request of any other third party. To the
best of the Company's knowledge, neither the Company nor any of its
subsidiaries has any material liability under any Environmental, Health and
Safety Laws for personal injury, property damage, natural resource damage, or
clean up obligations.
3.18.7 To the best of the Company's knowledge, there are no
Aboveground Storage Tanks or Underground Storage Tanks on the Owned Properties
or the Leased Premises. For purposes of this Agreement, the terms "Aboveground
Storage Tanks" and "Underground Storage Tanks" shall have the meanings given
them in Section 6901 et seq., as amended, of RCRA, or any applicable state or
local statute, law, ordinance, code, rule, regulation, order, ruling or decree
governing Aboveground Storage Tanks or Underground Storage Tanks.
3.18.8 Schedule 3.18 identifies (i) all material environmental audits,
assessments or occupational health studies, of which the Company is aware,
undertaken by the Company, its subsidiaries or their agents, or by any
governmental authority, or by any third party, relating to or affecting the
Company, its subsidiaries or any of the Leased Premises or the Owned
Properties; and (ii) all material citations issued under OSHA, or similar
state or local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings or decrees, relating to or affecting the Company or any of its
subsidiaries or any of the Leased Premises or the Owned Properties.
3.18.9 Schedule 3.18 contains a list of the assets of the Company
and its subsidiaries which have been confirmed to contain "Asbestos" or
"Asbestos-Containing Material" (as such terms are identified under the
Environmental, Health and Safety Laws). The Company and each of its
subsidiaries has operated and continues to operate in material compliance with
all Environmental, Health and Safety Laws governing the handling, use and
exposure to and disposal of asbestos or asbestos-containing materials. There
are no claims, actions, suits, governmental
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investigations or proceedings before any governmental authority or third party
pending, or threatened against or directly affecting the Company, any of its
subsidiaries, or any of their respective assets or operations relating to the
use, handling or exposure to and disposal of asbestos or asbestos-containing
materials in connection with their assets and operations.
3.18.10 As used in this Agreement, "Environmental Health and Safety
Laws" means all federal, state, regional or local statutes, laws, rules,
regulations, codes, orders, plans, injunctions, decrees, rulings, and changes
or ordinances or judicial or administrative interpretations thereof, any of
which govern (or purport to govern) or relate to pollution, protection of the
environment, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings and
changes or ordinances, or judicial or administrative interpretations thereof,
including, without limitation, the United States Department of Transportation
Table (49 CFR 172, 101) or by the Environmental Protection Agency as hazardous
substances (40 CFR Part 302) and any amendments thereto; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. Section
9601, et seq. (collectively, "CERCLA"); the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and subsequent
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. section 6901 et seq.
(collectively "RCRA"); the Hazardous Materials Transportation Act, as amended,
49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended, 33 U.S.C.
Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C. Section
7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et
seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et seq. (Title
III of ▇▇▇▇) ("EPCRA"); the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state statute, or
regulations implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any governmental authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
3.18.11 Schedule 3.18 identifies the operations and activities, and
locations thereof, which have been conducted and are being conducted by the
Company or any of its subsidiaries on any of the Owned Properties or the Leased
Premises which have involved the generation, accumulation, storage, treatment,
transportation, labeling, handling, manufacturing, use, spilling, leaking,
dumping, discharging, release or disposal of any material quantities of
Hazardous Substances.
3.18.12 To the best of the Company's knowledge, none of the Owned
Properties or Leased Premises presently includes, or has been constructed upon,
any "Wetlands" as defined under applicable Environmental, Health and Safety
Laws.
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3.18.13 As used in Section 3.18, the terms "Owned Properties" and
"Leased Premises" are deemed to refer only to the properties currently owned or
leased by the Company.
3.18.14 As of the date of this Agreement, the Company is not aware
of any material adverse change in the compliance by the Company and its
subsidiaries with any Environmental, Health and Safety Laws since May 16, 1997.
4. COVENANTS.
4.1 Covenants of the Company. The Company hereby agrees and covenants
with each Purchaser as follows:
4.1.1 Corporate Existence. The Company shall, so long as a Purchaser
beneficially owns any Securities (but in no event longer than three (3) years
from the Closing Date), maintain its corporate existence in good standing and
shall pay all its taxes when due except for taxes which the Company reasonably
disputes or which could not reasonably be expected to have a material adverse
effect on the business, operations or financial condition of the Company and
its subsidiaries taken as a whole.
4.1.2 Form D; Blue-Sky Qualification. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The
Company shall, on or before the Closing, take such action as is necessary to
qualify the Preferred Shares for sale under applicable state or "blue-sky" laws
or obtain an exemption therefrom, and shall provide evidence of any such action
to the Purchasers at or prior to the Closing.
4.1.3 Reporting Status. As long as either Purchaser or any
affiliate of such Purchaser beneficially owns any Securities and until the date
on which any of the foregoing may be sold to the public pursuant to Rule 144(k)
(or any successor rule or regulation), (i) the Company shall timely file with
the Commission all reports required to be so filed pursuant to the Exchange Act
and (ii) the Company shall not terminate its status as an issuer required by
the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination. The Company will
issue a press release describing the transactions contemplated by this
Agreement no later than the business day following the Closing Date.
4.1.4 Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares for general corporate purposes and shall not
use such proceeds to make a loan to or an investment in any other corporation,
partnership or other entity, provided that the Company may use such proceeds as
full or partial consideration for the purchase of more than 50% of the voting
equity or substantially all of the assets of any corporation, partnership or
other entity.
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4.1.5 Quotation on Nasdaq. The Company shall promptly secure the
designation and quotation of the Conversion Shares on the Nasdaq National
Market and shall use its best efforts to maintain the designation and
quotation, or listing, of the shares of Common Stock on the Nasdaq National
Market or, if not quoted on such market, the New York Stock Exchange or other
national securities exchange.
4.1.6 Use of Purchaser Name. The Company shall not use, directly or
indirectly, either Purchaser's name in any advertisement, announcement, press
release or other similar communication unless it has received the prior written
consent of such Purchaser for the specific use contemplated, or except as it
may be required to do so, in the reasonable opinion of counsel to the Company,
pursuant to applicable law or regulation.
4.1.7 Additional Equity Capital; Right of First Offer. The Company
agrees that, during the period from the Closing Date through May 5, 1998, the
Company will not issue or agree to issue any securities that are convertible
into or exercisable or exchangeable for, directly or indirectly, Common Stock
if such securities provide for a conversion, exercise or exchange price less
than the market price for the Common Stock on the date of such conversion,
exercise or exchange (the "Capital Raising Limitation"). The Capital Raising
Limitation will not apply to (i) an offering that is registered under the
Securities Act, (ii) any transaction involving the issuance of securities in
connection with a merger, consolidation, acquisition or sale of assets, or in
connection with any strategic partnership or joint venture formed for a bona
fide commercial purpose (the primary purpose of which is not to raise equity
capital), (iii) the granting of options, warrants or other rights to acquire
Common Stock to employees, consultants or directors of the Company not in
connection with a public or private offering of securities, or the exercise
thereof by any such individual or (iv) granting of options or warrants in
connection with the sale and issuance of up to $25 million of Common Stock to
an institutional investor on or before January 1, 1998.
4.1.8 Company's Instructions to Transfer Agent. On or prior to the
Closing, the Company shall execute and deliver a letter to its transfer agent
(the "Transfer Agent"), thereby appointing the Transfer Agent as the Company's
conversion agent and irrevocably instructing the Transfer Agent (i) to issue
certificates representing the Conversion Shares upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of Designation
upon receipt of a valid Conversion Notice (as defined in the Certificate of
Designation) from a Purchaser, (ii) to issue certificates representing the
number of Conversion Shares specified in such Conversion Notice, free of any
restrictive legend, in the name of such Purchaser or its nominee as long as the
sale of the Conversion Shares is registered pursuant to an effective
registration statement or such shares are eligible for resale under Rule 144(k)
and (iii) to deliver such certificates to such Purchaser no later than the
close of business on the later to occur of (i) the third (3rd) business day
following the Conversion Date (as defined in the Certificate of Designation)
and (ii) the business day following the day on which the original certificate
or certificates representing the shares of Series B Preferred Stock being
converted are received by the Company. As long as purchases and sales of shares
of Common Stock are eligible for settlement at the Depository Trust Company
("DTC"), the Company may instruct the Transfer Agent that, in lieu of
delivering
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physical certificates to a Purchaser upon conversion of the Preferred Shares,
the Transfer Agent may effect delivery of Conversion Shares by crediting the
account of such Purchaser or its nominee at DTC for the number of shares for
which delivery is required hereunder within the time frame specified above for
delivery of certificates. The Company represents to and agrees with each
Purchaser that it will not give any instruction to the Transfer Agent that will
conflict with the foregoing instruction or otherwise restrict such Purchaser's
right to convert the Preferred Shares or receive Conversion Shares in
accordance with the terms of the Certificate of Designation, the Registration
Rights Agreement and this Agreement, respectively. In the event the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Transfer Agent shall continue acting as transfer agent pursuant to the terms
hereof until such time that a successor transfer agent is appointed by the
Company and agrees to be bound by the terms hereof.
4.1.9 Stockholder Meeting. The Company will cause, pursuant to
Section 211 of the Delaware General Corporation Law, a meeting of stockholders
to be held on or prior to the date which is two (2) months following the
Closing Date (the "Meeting Date") and will submit to the vote of its
stockholders at its first meeting of stockholders after the date hereof
proposals to approve the Company's proposed acquisition of ▇▇▇▇▇ Iron & Metal,
Inc. and to approve (in accordance with the applicable provisions of the
Company's Certificate of Incorporation) the transactions contemplated by the
Transaction Documents and the Certificate of Designation, including without
limitation the conversion of Preferred Shares into Conversion Shares
("Stockholder Approval"). The Company will deliver proxy materials and other
information with respect to such meeting of stockholders to each Purchaser at
the same time that the Company delivers such materials and information to the
holders of its Common Stock.
4.2 Covenant of Each Purchaser.
4.2.1 Short Sales. Each Purchaser hereby agrees and covenants with the
Company that neither such Purchaser, nor any affiliate of such Purchaser, will
engage in any short sales of shares of Common Stock during the period from the
date of this Agreement until the first date on which such Purchaser no longer
owns any Preferred Shares. Notwithstanding the foregoing, nothing contained
herein will be deemed to limit (i) the right of an affiliate of a Purchaser to
engage in short sales resulting from customer orders or which are effected on a
proprietary basis by trading personnel of such affiliate who are not acting at
the direction of a Purchaser or any employee of a Purchaser or (ii) the right
of such Purchaser to engage in bona fide hedging transactions that are effected
otherwise than through short sales of shares of Common Stock. As used herein,
the term "short sale" shall have the meaning specified in Rule 3b-3 under the
Exchange Act; provided, however, that such term shall not include any such sale
(x) effected as a result of a failure by the Company to issue Conversion Shares
or to deliver certificates representing such shares in accordance with the
terms of the Certificate of Designation or (y) which involves a number of
shares of Common Stock not to exceed the number of Conversion Shares for which
a Conversion Notice (as defined in the Certificate of Designation) has been, or
will be on the day on which such short sales are effected, submitted to the
Company.
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4.2.2 Agreement to Vote Shares. Each of the Purchasers agrees to
attend (in person or by delivering its proxy) the meeting described in
paragraph 4.1.9 and to vote the shares of Common Stock which it is entitled to
vote pursuant to the Management Proxies (as defined in paragraph 5.1.10 below)
in favor of the proposal described in paragraph 4.1.9.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at Closing. Each
Purchaser's obligations at the Closing, including without limitation its
obligation to purchase the Preferred Shares, are conditioned upon the
fulfillment of each of the following events:
5.1.1 the representations and warranties of the Company set forth
in this Agreement shall be true and correct in all material
respects as of the date of the Closing as if made on such
date; provided that the representations and warranties made
by the Company in paragraph 3.18 shall be true and correct
in all material respects as of the date specified therein;
5.1.2 the Company shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed
by the Company on or before the Closing;
5.1.3 the Company shall have delivered to such Purchaser a
certificate, signed by an officer of the Company, certifying
that the conditions specified in paragraphs 5.1.1 and 5.1.2
above have been fulfilled;
5.1.4 the Company shall have filed the Certificate of Designation
with the Secretary of State of the State of Delaware, and
shall have furnished such Purchaser with a file-stamped copy
thereof;
5.1.5 the Company shall have delivered to such Purchaser an
opinion of counsel for the Company, dated as of the date of
the Closing, in the form attached as Exhibit 5.1.5 hereto;
5.1.6 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.7 the Common Stock shall be designated for quotation and
actively traded on the Nasdaq National Market;
5.1.8 there shall have been no material adverse changes in the
consolidated business or financial condition of the Company
and its subsidiaries taken as a whole since the date of the
Company's most recent audited financial statements contained
in the Disclosure Documents;
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5.1.9 the Company shall have authorized and reserved for issuance
upon conversion of the Preferred Shares the number of shares
of Common Stock specified in the Registration Rights
Agreement;
5.1.10 the Purchasers shall have received executed irrevocable
proxies, in substantially the form of Exhibit 5.1.10 hereto
(each, a "Management Proxy" and collectively, the "Management
Proxies"), from not more than ten (10) stockholders of the
Company who own, in the aggregate, not less than 47% of the
outstanding shares of Common Stock as of the Closing Date;
5.1.11 the Company shall have received notice from the Securities
and Exchange Commission (the "SEC") that the SEC has no
further comments with respect to the Company's Proxy
Statement no later than November 21, 1997; and
5.1.12 the Company shall have obtained Stockholder Approval.
5.2 Conditions to Company's Obligations at Closing. The Company's
obligations at the Closing are conditioned upon the fulfillment of each of the
following events:
5.2.1 the representations and warranties of each Purchaser shall be
true and correct in all material respects as of the date of
the Closing as if made on such date;
5.2.2 each Purchaser shall have complied with or performed all
of the agreements, obligations and conditions set forth in
this Agreement that are required to be complied with or
performed by such Purchaser on or before the Closing; and
5.2.3 each Purchaser shall have delivered to the Company a
certificate, signed by an officer of such Purchaser,
certifying that the conditions specified in paragraphs 5.2.1
and 5.2.2 above have been fulfilled.
6. INDEMNIFICATION.
The Company agrees to indemnify and hold harmless each Purchaser and its
officers, directors, employees and agents, and each person who controls such
Purchaser within the meaning of the Securities Act or the Exchange Act (each, a
"Purchaser Indemnified Party") against any losses, claims, damages, liabilities
or reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) as incurred, joint or several, to which it, they or
any of them, may become subject and not otherwise reimbursed, arising out of or
in connection with the breach by the Company of any of its representations,
warranties or covenants made herein.
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Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company and its officers, directors, employees and agents, and
each person who controls the Company within the meaning of the Securities Act
or the Exchange Act (each, a "Company Indemnified Party") (a Purchaser
Indemnified Party and a Company Indemnified Party are each hereinafter referred
to as an "Indemnified Party") against any losses, claims, damages, liabilities
or expenses (including the fees and disbursements of counsel) as incurred,
joint or several, to which it, they or any of them, may become subject and not
otherwise reimbursed, arising out of or in connection with the breach by such
Purchaser of any of its representations, warranties or covenants made herein.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought
hereunder, such Indemnified Party will, if a claim in respect thereof is to be
made against the other party (the "Indemnifying Party"), deliver to the
Indemnifying Party a written notice of the commencement thereof and the
Indemnifying Party shall have the right to participate in and to assume the
defense thereof with counsel reasonably selected by the Indemnifying Party,
provided, however, that an Indemnified Party shall have the right to retain its
own counsel, with the reasonably incurred fees and expenses of such counsel to
be paid by the Company, if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential conflicts of interest under applicable standards of professional
conduct between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnifying Party within a reasonable time of the commencement of any such
action will not relieve the Indemnifying Party of any of its obligations
hereunder with respect to such action except to the extent such failure is
prejudicial to the Indemnifying Party's ability to defend any such action.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of pending or threatened action in
respect of which an Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on any claims that are the subject matter of such action.
An Indemnifying Party will not be liable for any settlement of any action or
claim effected without its written consent.
7. MISCELLANEOUS.
7.1 Survival; Severability. The representations and warranties made by
the parties herein shall survive the Closing until the sooner to occur of the
date which is (i) eighteen (18) months from the date hereof or (ii) the first
date on which none of the Purchasers owns any Preferred Shares, notwithstanding
any due diligence investigation made by or on behalf of the party seeking to
rely thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to either party.
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7.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. The Purchaser may assign its rights hereunder, in
connection with any private sale or transfer of the Preferred Shares, as long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto.
7.3 Injunctive Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Purchaser and that
the remedy or remedies at law for any such breach will be inadequate and
agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
7.4 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of Delaware without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the jurisdiction of the state and federal courts sitting in the City of
Wilmington, Delaware for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.6 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
7.7 Notices. Any notice, demand or request required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with a hard copy to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is
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not a business day, on the next succeeding business day, (ii) on the next
business day after timely delivery to an overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
If to the Company:
Metal Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to PCIG:
Proprietary Convertible Investment Group, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue - Third Floor
New York, New York 10010
Attn: ▇▇▇▇▇ ▇▇▇▇▇/▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Solomon, Zauderer, Ellenhorn, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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If to CVI:
Capital Ventures International
c/o Heights Capital Management
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or fax number as any party shall specify in writing to
the other parties.
7.8 Expenses. Except as otherwise specified herein, each of the Company
and each Purchaser shall pay all costs and expenses that it incurs in connection
with the negotiation, execution, delivery and performance of this Agreement;
provided, however, that the Company shall reimburse the Purchasers for fifty
percent (50%) of the Purchasers' legal fees incurred in connection with the
negotiation, execution, delivery and performance of this Agreement, such
reimbursement not to exceed $10,000 in the aggregate.
7.9 Entire Agreement; Amendments. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and both Purchasers, and no provision hereof may be waived other
than by a written instrument signed by the party against whom enforcement of
any such waiver is sought.
7.10 Issuance of Enhanced Securities. In the event that, during the
period from the Closing Date until the earlier to occur of (i) one year from
the Closing Date and (ii) ninety (90) Trading Days (as such term is defined in
the Certificate of Designation) from the effectiveness of the Registration
Statement (the "Limitation Period"), the Company issues any securities
convertible or exercisable into Common Stock, which securities either (i)
provide a conversion or exercise price which is lower than the Conversion
Price, or (ii) allow the holder thereof, without being subject to a redemption
provision substantially similar to that provided by paragraph 4(h)(i) of the
Certificate of Designation, to convert or exercise such securities into a
number of shares of Common Stock that is greater on an aggregate basis than the
number of shares of Common Stock into which such securities would be
convertible or exercisable at a conversion or exercise price of ten dollars
($10) (the "Enhanced Securities"), the Company shall, in either such case,
promptly (but in no event later than thirty (30) days following the issuance of
such Enhanced Securities) take such action as may be necessary in order to
amend the Certificate of Designation to conform the terms thereof with those of
the instrument governing the Enhanced Securities to the extent necessary to
confer the benefit of the provisions of such Enhanced Securities relating to
the matters set forth in (i) and/or (ii) above on the holders of the Series B
Preferred Stock, and the provisions of the Certificate of Designation as so
amended shall
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apply to the Series B Preferred Stock from and after the date on which such
Enhanced Securities are issued. In addition, if the Company issues any
convertible securities during the Limitation Period and, in connection
therewith, the Company issues any warrants, options or similar securities for
little or no consideration to the purchasers of such convertible securities in
connection with such issuance, the Company shall at the same time issue to each
holder such warrants, options or similar securities in an amount which is
proportional to the Purchase Price of the Series B Preferred Stock purchased by
such Purchaser at the Closing relative to the aggregate purchase price of such
convertible securities purchased by such purchasers. The provisions of this
subparagraph 7.10 shall not apply to (i) any transaction involving the issuance
of securities in connection with a merger, consolidation, acquisition or sale
or purchase of assets, or in connection with any strategic partnership or joint
venture formed for a bona fide commercial purpose (the primary purpose of which
is not to raise equity capital), (ii) the granting of options, warrants or
other rights to acquire Common Stock to employees, consultants or directors of
the Company not in connection with a public or private offering of securities,
or the exercise thereof by any such individual, or (iii) the granting of
options or warrants in connection with the sale and issuance of up to $25
million of Common Stock to an institutional investor on or before January
1, 1998. The Company further agrees that, in the event of a Stock split,
reverse Stock split, reclassification or other similar event with respect to
the Common Stock, it will amend the Certificate of Designation so that the Cap
Amount (as defined in the Certificate of Designation) will be proportionately
increased or reduced, as the case may be.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
METAL MANAGEMENT, INC.
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By:
-----------------------------------
Name:
Title:
Number of Shares of Preferred Stock to be Purchased: __________
CAPITAL VENTURES INTERNATIONAL
By:
-----------------------------------
Name:
Title:
Number of Shares of Preferred Stock to be Purchased: _____________