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EXHIBIT 10.1
September 24, 1999
Metal Management, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Re: Series A and Series B Convertible Preferred Stock
Dear Xxxxx:
This letter confirms the understanding by and between Metal Management,
Inc. (the "Company") and Xxxxxxxx Capital Management, Inc. ("MCM") regarding the
Company's Series A Convertible Preferred Stock (the "Series A Stock") and Series
B Convertible Preferred Stock (the "Series B Stock")(the Series A Stock and the
Series B Stock being collectively referred to herein as the "Preferred Stock").
The date on which this Agreement is executed on behalf of both parties is
referred to herein as the "Effective Date". Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the
Certificates of Designation (each a "Certificate of Designation" and together
the "Certificates of Designation") relating to the Series A Stock and the Series
B Stock, respectively.
1. Repurchase of Series A Preferred Stock by Company. On or before the
third (3rd) Business Day following the Effective Date (the "Repurchase Date"),
the Company will repurchase all of the outstanding shares of the Series A Stock
then held by MCM. The price to be paid by the Company to MCM for such Series A
Stock will be equal to 125% of the aggregate Stated Value thereof plus all
unpaid dividends accrued thereon (the "Repurchase Price"), and will be paid by
the Company to MCM by wire transfer of immediately available funds on or before
5:00 p.m. (eastern time) on the Repurchase Date against delivery of the
certificates representing such Series A Stock. In the event that the Company
fails to pay to MCM, on or before 5:00 p.m. (eastern time) on the Repurchase
Date, the full amount of the Repurchase Price for all of the shares of Series A
Stock held by MCM on the Repurchase Date, (i) the repurchase of the Series A
Stock shall be deemed cancelled, (ii) the Company shall immediately return to
MCM any certificates representing Series A Stock that were delivered to the
Company (it being understood that, notwithstanding any failure by the Company to
return such certificates, MCM shall have all rights, benefits and privileges
under the Certificate of Designation relating to the Series A Stock, including
without limitation the right to convert or otherwise exercise its rights with
respect to the Series A Stock, from and after the Repurchase Date) and (iii) the
Company shall have no further right of repurchase under this paragraph 1.
2. Trading Restrictions. From and after the Effective Date until the
earlier to occur of (i) the one hundred and twentieth (120th)day following the
Effective Date and (ii) the first date on which any Termination Event (as
defined below) occurs (the "Restricted Period"), MCM agrees that it will refrain
from selling a number of Conversion Shares on any trading day that exceeds the
greater of (A) 30,000 shares and (B) a number of shares equal to the Trading
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Volume (as defined below) for such trading day times ten percent (10%). For
purposes hereof, "Trading Volume" on a given trading day shall mean the
aggregate trading volume on such trading day for the Common Stock as reported by
the exchanges or markets on which the Common Stock is then traded. Nothing
contained herein will be deemed to limit in any way MCM's right to convert
Preferred Stock during the Restricted Period (or at any other time) in
accordance with the related Certificate of Designation; provided, however, that
during the period beginning on the Effective Date and ending on the earlier to
occur of (i) October 31, 1999 and (ii) the first date on which any Termination
Event (as defined below) occurs, MCM shall not convert any shares of Preferred
Stock if, immediately following such conversion, MCM would own a number of
shares of Preferred Stock equal to or less than 2,500 shares.
3. Termination Events. Each event described below will constitute a "Termination
Event" upon written notice thereof from MCM to the Company:
(a) the Company fails to pay to MCM, on or before 5:00 p.m. (eastern
time) on the Repurchase Date, the full amount of the Repurchase Price
for the Series A Stock as required by paragraph 1 above;
(b) a Liquidation Event (as defined in either Certificate of Designation)
occurs (in which case the written notice specified above shall not be
required);
(c) a Mandatory Redemption Event (as defined in either Certificate of
Designation) occurs;
(d) there occurs (i) the sale, conveyance or disposition of all or
substantially all of the assets of the Company, (ii) a transaction or
series of transactions, in which more than 50% of the voting power of
the Company is disposed of, or following which the Common Stock is no
longer traded on either the Nasdaq National Market or the Nasdaq
SmallCap Market, (iii) the consolidation, merger or other business
combination of the Company with or into any other entity, following
which (x) the prior stockholders of the Company fail to own, directly
or indirectly, at least fifty percent (50%) of the surviving entity
or (y) the Common Stock is no longer traded on either the Nasdaq
National Market, the Nasdaq SmallCap Market, the American Stock
Exchange or the New York Stock Exchange or (iv) an announcement by
the Company or its management that members of its management intend
to purchase twenty percent (20%) or more of the publicly-traded
Common Stock of the Company in a single transaction or series of
transactions;
(e) the Company fails to comply with (i) its obligation to make payments
on its 10% Senior Subordinated Notes (the "Notes") on each date on
which any such payment becomes due and payable pursuant to the terms
of the Notes (each such date being referred to as a "Due Date") or is
unable prior to a Due Date to obtain an extension of such Due Date of
at least thirty days and to make the payment(s) relating to such Due
Date on or before the expiration of such extension or (ii) any
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of its obligations hereunder or under any Certificate of Designation
within the respective time frames specified herein or therein;
(f) the Company fails to meet any of the designation criteria or other
requirements necessary for the continued listing of the Common Stock
on the Nasdaq SmallCap Market or on any other market or exchange on
which the Common Stock is listed or traded; or
(g) (i) the NASD or other applicable regulatory authority or exchange
institutes proceedings, or notifies the Company that it intends to
institute proceedings, to terminate or suspend the listing of the
Common Stock on the Nasdaq SmallCap Market or on any other market or
exchange on which the Common Stock is listed or traded, (ii) each of
BT Securities Corporation, Xxxxxxx Sachs & Co. and Xxxxxxx Xxxxx
Barney Inc. ceases or announces that it will cease to act as a
registered market maker in the Common Stock on such market, or (iii)
the average daily trading volume for the Common Stock is less than
100,000 shares during any period of fifteen consecutive trading days.
4. Optional Repurchase by the Company. During the period beginning on
the Effective Date and ending on the 180th day following the Effective Date (the
"Optional Repurchase Period"), the Company shall have an option to repurchase up
to $2.5 million aggregate Stated Value of the outstanding Series B Stock held by
MCM (an "Optional Repurchase") on the date on which the Company delivers written
notice of such Optional Repurchase (an "Optional Repurchase Notice") to MCM. The
repurchase price for the Series B Stock (the "Optional Repurchase Price") shall
be equal to (A)(i) the aggregate Stated Value of the Series B Stock being
repurchased times (ii) 125% plus (B) all unpaid dividends accrued thereon. The
Company may exercise its right to declare an Optional Repurchase by delivering
to MCM an Optional Repurchase Notice on or before 5:00 p.m. (eastern time) on
the last Business Day to occur during the Optional Repurchase Period; provided,
however, that the Company may not deliver an Optional Repurchase Notice unless
(i) the Company has in its possession at the time of such delivery the full
amount of the Optional Repurchase Price in the form of cash, (ii) no limitations
or conditions (contractual or otherwise) then exist with respect to the payment
of the Optional Repurchase Price to MCM, (iii) the Company has complied fully
with all of its obligations hereunder and under the Certificates of Designation
and (iv) the Termination Event specified in paragraph 3(a) has not occurred
(each of (i), (ii), (iii) and (iv) being referred to as an "Optional Repurchase
Condition"). The Company shall deliver the Optional Repurchase Price to MCM in
immediately available funds on the third (3rd) Business Day following delivery
of the Optional Repurchase Notice. In no event shall the Company have the right
to declare more than one Optional Repurchase. In the event that the Company
fails to deliver either an Optional Repurchase Notice (upon the satisfaction, or
waiver by MCM, of each of the Optional Repurchase Conditions) or the Optional
Repurchase Price, in either such case within the time frames required hereby,
the Series B Stock shall no longer be subject to Optional Repurchase or
Conversion Optional Repurchase (as defined below), and any Optional Repurchase
already declared shall, immediately upon such failure, be void and of no further
effect (an "Optional Repurchase Default"). Upon delivery of an Optional
Repurchase Notice by the Company in accordance with the terms hereof, MCM shall
forfeit its right to submit to the Company a notice
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of conversion with respect to the Series B Stock covered by such Optional
Repurchase Notice unless and until an Optional Repurchase Default occurs;
provided, however, that MCM shall have the right to submit a notice of
conversion with respect to the Series B Stock at all times prior to delivery of
an Optional Repurchase Notice by the Company in accordance with the terms
hereof. Notwithstanding the foregoing, in the event that MCM delivers a notice
of conversion (x) during the Optional Repurchase Period, (y) prior to delivery
of an Optional Repurchase Notice by the Company, and (z) on a date on which MCM
owns (or immediately following conversion of the Preferred Stock covered by such
notice of conversion, would own) a number of shares of Preferred Stock equal to
or less than 2,500 shares, the Company may exercise its right to effect an
Optional Repurchase and repurchase at the Optional Repurchase Price all or any
part of the shares of Preferred Stock then outstanding (including the shares of
Preferred Stock to which such notice of conversion relates) in accordance with
the terms of this paragraph 4 (a "Conversion Optional Repurchase"). In order to
effect a Conversion Optional Repurchase, (A) the Company must deliver an
Optional Repurchase Notice to MCM on or before 5:00 p.m. (eastern time) on the
second Business Day immediately following the date on which a notice of
conversion is delivered to the Company and (B) each Optional Repurchase
Condition must be satisfied on the date of such delivery. In the event that the
Company effects an Conversion Optional Repurchase, the Company shall not have
the right to effect an Optional Repurchase or Conversion Optional Repurchase
thereafter. Notwithstanding anything contained herein, MCM shall have the right,
at any time when it owns a number of shares of Preferred Stock equal to or less
than 2,500 shares, to deliver a written notice (a "Conversion Request Notice")
to the Company requesting whether the Company intends to exercise its right to
effect a Conversion Optional Repurchase after the date of such notice. If, on or
before 5:00 p.m. (eastern time) on the second Business Day following delivery of
a Conversion Request Notice (the "Conversion Request Deadline"), the Company
either responds to MCM in writing (which response shall be binding and
irrevocable) that it will not exercise its right to effect a Conversion Optional
Repurchase or fails to respond to such Conversion Request Notice, the Company
will forfeit its right to effect a Conversion Optional Repurchase thereafter.
If, on or before the Conversion Request Deadline, the Company responds to MCM in
writing (which response shall be binding and irrevocable) that it will exercise
its right to effect a Conversion Optional Repurchase, the Company must, upon the
first submission of a conversion notice thereafter, repurchase the number of
shares of Preferred Stock set forth in such response in accordance with the
terms of this paragraph 4 (including without limitation those relating to the
calculation and delivery of the Optional Repurchase Price and the consequences
of an Optional Repurchase Default) except that the Company must deliver the
Optional Repurchase Price on or before the third (3rd) Business Day following
the date on which such conversion notice is submitted.
5. Miscellaneous. Upon the execution of this letter agreement by the
Company and MCM (i) this letter agreement will constitute the entire agreement
between the parties with regard to the matters specifically described herein,
superseding all prior agreements or understandings, whether written or oral,
between the parties with respect thereto; (ii) this letter agreement is intended
for the benefit of the parties hereto and their respective successors, and does
not create any rights for, is not for the benefit of, and may not be enforced
by, any other person; (iii) no amendment, modification or other change may be
made to this letter agreement unless such amendment, modification or change is
set forth in writing and is signed by both the Company and MCM; and (iv) the
terms of this letter agreement will be governed by and
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construed under the laws of the State of New York without regard to the conflict
of laws provisions thereof.
6. Notices. Any notice, demand or request required or permitted to be
delivered by either party to the other party pursuant to the terms of this
agreement shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission (with an original 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 or (ii) on the next Business
Day after timely delivery to a nationally-recognized overnight courier,
addressed to the parties as follows:
If to the Company:
Metal Management, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx
Tel: (312)
Fax: (312)
If to MCM:
Xxxxxxxx Capital Management, Inc.
000 Xxxx Xxxxxx Xxxxxx
00xx xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx Capital Management, Inc.
00 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
[Remainder of Page Intentionally Left Blank]
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If the foregoing accurately describes the understanding between the
Company and MCM, please sign in the space below, whereupon this letter agreement
will become a legally binding agreement between the parties, enforceable in
accordance with its terms.
Sincerely,
Xxxxxxxx Capital Management, Inc.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President
Accepted and agreed to as of
the date first-above written.
Metal Management, Inc.
By: /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
Executive Vice President
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