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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 16, 1996.
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METAL MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware (0-14836) (94-2835068)
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
101 West Grand Ave., Suite 305, Chicago, Illinois 60610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 645-0700
1250 Ninth St., Berkeley, California 94710
(Former name or former address, if changed since last report)
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ITEM 5. ACQUISITION OR DISPOSITION OF ASSETS
On July 16, 1996 (the "Closing Date"), Metal Management, Inc. (the
"Registrant") sold substantially all of the assets held by it (the "Assets")
relating to its Spectra*Star Division (the "Division"), which designs,
manufactures, markets and sells color printers, spare parts and related supplies
and provides services related thereto, to Mannesmann Tally Corporation, a New
York corporation, pursuant to an Asset Purchase and Sale Agreement between the
Registrant and the Buyer dated as of July 16, 1996 (a "Asset Purchase
Agreement").
The Assets include the inventory, test equipment and office furniture,
trade names, trademarks, licenses, copyrights, technologies, designs and
know-how, goodwill, all rights under the Division's contracts, all customer
lists, all financial and business records and similar documents related to the
Division's business. The Division's accounts receivables and certain other
assets enumerated in the Asset Purchase Agreement were excluded from the Assets.
The Buyer assumed all liabilities relating to certain enumerated agreements.
Other than the liabilities specifically assumed by the Buyer, all of the Assets
were transferred free and clear of any liabilities.
The purchase price paid for the Assets was estimated as follows. The
Buyer paid the Registrant $1,250,000 in cash for the inventory of the Division,
which amount is subject to adjustment if such inventory is valued at less than
$1,250,000. In addition, up to $75,000 was paid for certain test equipment and
office furniture of the Division. Finally, the Buyer will pay the Registrant
royalties (a) in respect to the Division's printers and supplies sold by the
Buyer after the Closing Date ranging from $100 to $200 for each color printer
sold and (b) based on all revenue received by the Buyer for all the Division's
supplies ranging from 7% to 15% of revenue. The Buyer guaranteed that such
royalties will not be less than $2,000,000 over the three year period following
the Closing Date, contingent upon certain competitors of the Division not
entering the color printer business during such three year period. The Buyer is
obligated to assist in the collection of accounts receivables of the Division
for a fee of 3% of the receivables collected.
In the Asset Purchase Agreement, the Registrant has agreed not to
compete with the Buyer in the color printer business for a period of 10 years.
In addition, each party indemnifies the other for breach of representations or
failures to perform agreements required to be performed under the Asset Purchase
Agreement. In addition, the Registrant indemnifies the Buyer for obligations
arising from the Division's business incurred before the Closing Date. The Buyer
indemnifies the Registrant for obligations arising from the Division's business
following the Closing Date and for damages resulting to the Registrant for
liabilities assumed by the Buyer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Inapplicable.
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(b) Pro Forma Financial Information.
The following unaudited Pro Forma financial statements giving
effect to the sale of the Assets pursuant to the Asset Purchase Agreement as of
October 31, 1995, the last audited fiscal year end of the Registrant, and as of
March 31, 1996, which unaudited Pro Forma financial statements should be read
in conjunction with the pro forma information appearing in the Registrant's
Joint Proxy Statement dated March 8, 1996 and the pro forma information
included in Amendment No. 1 to Current Report on Form 8-K/A filed by the
Registrant on June 20, 1996, are attached to this Form 8-K as Exhibit 99.1:
1. Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended October 31, 1996.
2. Unaudited Pro Forma Combined Condensed Balance Sheet as
of October 31, 1995.
3. Notes to Unaudited Pro Forma Financial Information.
4. Unaudited Pro Forma Combined Condensed Statement of
Operations for the five months ended March 31, 1996.
5. Unaudited Pro Forma Combined Condensed Balance Sheet as
of March 31, 1996.
6. Notes to Unaudited Pro Forma Financial Information.
(c) Exhibits
2.1 Form of Asset Purchase and Sale Agreement by and between
Metal Management, Inc. and Mannesmann Tally Corporation
dated July 16, 1996.
99.1 Unaudited pro forma combined condensed financial
statements giving effect to the sale of the Assets
pursuant to the Asset Purchase Agreement for the year
ended October 31, 1995 and the five months ended March
31, 1996.
99.2 Press Release dated July 11, 1996.
99.3 Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended October 31, 1995,
unaudited Pro Forma Combined Condensed Balance Sheet as
of October 31, 1995 and Notes to Unaudited Pro Forma
Financial Information (incorporated by reference from
pages 41-45 to Joint Proxy Statement of the Registrant
and EMCO, dated March 8, 1996, furnished to the
stockholders of the Registrant and shareholders of EMCO
filed with the Commission).
99.4 Unaudited Pro Forma Combined Condensed Statement of
Operations for the five months ended March 31, 1996,
unaudited Pro Forma Combined Condensed Balance Sheet as
of March 31, 1996 and Notes to Unaudited Pro Forma
Financial Information (incorporated by reference from
Exhibit 99.4 to Amendment No. 1 to Current Report on
Form 8-K filed by the Registrant on June 20, 1996).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METAL MANAGEMENT, INC.
/s/ Gerard M. Jacobs
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Gerard M. Jacobs
President and Chief Executive Officer
Date: July 29, 1996
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Exhibit 2.1
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is entered
into as of July 9, 1996, by and between Metal Management, Inc., a Delaware
corporation (the "Seller"), and Mannesmann Tally Corporation, a New York
corporation (the "Buyer").
RECITALS
The Seller, through its Spectra*Star Division (the "Division"),
designs, manufactures, markets and sells color printers, spare parts and related
supplies and provides services related thereto (the "Business"); and
Seller desires to sell, and Buyer desires to purchase, substantially
all of the assets of the Division pertaining to the Business on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale. Seller shall sell, assign and deliver to Buyer
on the Closing Date (as defined in Section 4 below) all of its right, title and
interest in the following assets of the Division (collectively, the "Assets"):
(a) All of the Division's inventory of color printers, spare
parts and supplies related to the Business (the "Inventory");
(b) The Division's test equipment and office furniture related
to the Business (as described in Section 2.3);
(c) All trade names, trademarks (including the "Spectra Star"
trademark), marketing rights, copyrights, licenses, technology, designs and
know-how related to the Business;
(d) All goodwill associated with the Business of the Division;
(e) All rights, benefits and interests of Division under any
contracts, agreements, commitments, understandings, purchase orders, sales
orders, licenses, documents and instruments related to the Business;
(f) All approvals, authorizations, consents, licenses,
permits, tariffs, orders and other registrations of any federal, state or local
court or other governmental department, commission,
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board, bureau, agency or instrumentality held by Division and required for the
conduct of the Business; and
(g) All operating data and records relating solely to the
Business, including without limitation customer lists, financial, accounting and
credit records, correspondence, budgets, engineering, production and service
records and other similar documents and records. It is understood that many of
the operating data and records relating to the Business relate both to the
Assets and to the Excluded Assets and that any such common records are being
retained by Seller and made available to Buyer in accordance with Section 8.8.
The Assets include all of the assets listed on Schedule 1.1.
1.2 Excluded Assets. The Assets do not include:
(a) Corporate Documents. Seller's and the Division's corporate
seal, minute books, charter documents and corporate stock record books;
(b) Receivables. The Division's accounts receivables; and
(c) Other Assets. The assets, properties and rights identified
on Schedule 1.2, if any.
1.3 Assumption of Obligations and Liabilities. At the Closing and
subject to the terms and provisions of this Agreement, the Buyer shall assume
all and agree to pay, perform and discharge all liabilities and obligations of
Seller in respect of the contracts, licenses, and instruments so listed in
Schedule 1.3 to the extent that the contracts, licenses and instruments are
effectively assigned to the Buyer pursuant to this Agreement.
1.4 No Assumption of Liabilities. Seller shall transfer the Assets to
Buyer free of all liabilities, obligations, liens and encumbrances. Except as
specified in Section 1.3, Buyer shall not assume or be liable for any of
Seller's liabilities, obligations, or debts, known or unknown, contingent or
absolute, accrued or otherwise, including, but not limited to, any (a) taxes,
(b) salaries, employee benefits, severance pay or termination benefits, (c)
fines or penalties payable to any governmental authority, and (d) any
liabilities pertaining to the Division's leased premises located at 1250 Ninth
Street, Berkeley, California 94710, provided, however, that the Buyer shall
enter into a sublease terminating on October 31, 1996, with respect to such
premises substantially in the form of the sublease set out as Exhibit A hereto
(the "Sublease").
Notwithstanding the foregoing, the Buyer in its discretion from time to
time may settle and pay outstanding obligations of the Seller if Buyer believes
that such settlements and payments are reasonably necessary or advisable for a
sale of Buyer's color printer products, provided that Buyer has given Seller at
least 30 days' prior notice of any such settlement or payment. The Buyer may
offset any such settlements or payments by it against its royalty obligations
under Section 2.4. Any
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such settlements or payments shall not be construed as an assumption of any
liabilities or obligations of Seller other than pursuant to Section 1.3.
2. PURCHASE PRICE
2.1 Purchase Price at the Closing. Buyer shall pay to Seller as the
purchase price for the Assets (the "Purchase Price") an amount computed as
follows:
2.2 Inventory. The Seller shall pay for the Inventory the sum of
$1,250,000 plus any amounts due under Sections 2.2(d).
(a) Count. The Buyer and Seller shall take a physical account
of the Inventory on, or immediately prior to, the Closing Date, and shall agree
as to all items composing the Inventory.
(b) Valuation. The Buyer and Seller shall value the Inventory
using the following procedures:
(i) all Inventory shall be valued at its current
replacement value, using the most recent price quotes or actual
purchase prices from the relevant suppliers;
(ii) all Inventory which is obsolete shall be given
no value;
(iii) if there is any Inventory (by part number)
which is in excess of one year's supply but less than two year's
supply, then all of such Inventory parts, in their entirety, shall be
discounted by 20% off of their replacement value;
(iv) if there is any Inventory (by part number) which
is in excess of two year's supply, then all of such Inventory parts, in
their entirety, shall be discounted by 30% off of their replacement
value;
(v) whether Inventory is in excess of one-year's
supply or two year's supply shall be based on the Division's actual
sales of such Inventory for the twelve months ended June 1996. All
Inventory which has not been sold in the twelve months ended June 1996,
shall be considered "obsolete" for purposes of this Section.
(c) Allocation. If the Inventory is valued at or in excess of
$1,250,000, the $1,250,000 paid at Closing shall be deemed to include, first,
all printers; secondly, all spare parts; and the remaining portion of the
$1,250,000 shall be allocated to supplies.
(d) Remaining Unpaid Inventory. To the extent that the
Inventory is valued in excess of $1,250,000 (the "Remaining Unpaid Inventory"),
then such excess Inventory is nevertheless being sold and transferred to the
Buyer, and Buyer shall pay Seller therefore, at its allocated value
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pursuant to Section 2.2(b) when and if Buyer sells such Remaining Unpaid
Inventory to third parties or consumes such Remaining Unpaid Inventory in
production.
(e) Adjustment. If the Inventory is valued less than
$1,250,000, then the Purchase Price paid at Closing shall be reduced by an
amount equal to the difference between (i) the actual value of the Inventory
calculated as set forth in Section 2.2(b) and (ii) $1,250,000.
(f) Orders at Closing. All outstanding orders for additional
Inventory existing on the Closing Date shall be assigned to Buyer, provided that
Buyer shall be provided the reasonable opportunity to review such orders and
accept or reject such orders as reasonable for the Business, with supplies,
spare parts and printers which can reasonably be expected to be sold within one
to two months of delivery being deemed reasonable for the Business.
(g) Further Inspection. It is understood that Buyer shall not
have had the full opportunity to review the quality of all of the Inventory, and
shall have two weeks following the Closing Date to inspect and reject any and
all Inventory on the basis of unacceptable quality. The Buyer shall be deemed to
have accepted all Inventory which, by written notice to the Seller, it has not
rejected on the basis of quality within such two-week period.
2.3 Test Equipment and Furniture. The Buyer shall inspect all of the
Buyer's test equipment and office furniture prior to Closing and shall select
such equipment and furniture which it decides to purchase. The purchase price
paid for such equipment and furniture shall be agreed to by the Buyer and
Seller, but shall not be less than $40,000 nor more than $75,000, which amount
is in addition to the amount being paid under Section 2.2. Schedule 1.1 shall be
updated at Closing to reflect the test equipment and furniture being purchased
by the Buyer.
2.4 Royalties.
(a) Amount. The Buyer shall pay the Seller a royalty with
respect to the Division's printers and supplies sold by Buyer after the Closing
Date, as follows:
(i) $100.00 for each thermal color printer sold;
(ii) $200.00 for each sublimation printer sold;
(iii) 15% of all revenue received by the Buyer for
all of the Division's supplies for the first $20,000,000 of such
revenues, and 7% of such revenues in excess of $20,000,000.
For purposes of this Section, a Division printer and/or Division supplies shall
mean those items sold under the Spectra*Star trademark with original General
Parametric product line designations of Q\400, 200\G and DSx, and any future
supplies designed to work with any Division printer described in this sentence.
The Buyer shall not owe a royalty to Seller with respect to sales of printers or
supplies other than as described in the preceding sentence. The Buyer shall not
owe a royalty to Seller with respect to sales of printers or
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supplies other than as described in the preceding sentence. The Buyer shall not
change the designation of any of the Inventory from the designation applied to
such Inventory by the Seller except to be consistent with Buyer's product
designations (such change shall not affect Buyer's royalty obligations
hereunder).
(b) Reports and Payment. Buyer agrees to submit to Seller,
within 30 days following the last day of each fiscal quarter, a quarterly report
setting forth the sales of the Division printers, supplies and Remaining Unpaid
Inventory during the previous quarter, together with payment of the royalties
due thereon. The quarterly report shall include: a recital of all sales of
products completed the previous quarter; the applicable royalty rate and a
calculation of the royalties owned by Buyer to Seller as a result of such sales;
the amount of Remaining Unpaid Inventory unsold and Remaining Unpaid Inventory
sold or consumed during the previous quarter; and the allocated value of such
Remaining Unpaid Inventory and a calculation of amounts owing to Seller pursuant
to Section 2.2(d).
(c) Accurate and Complete Records. Buyer shall keep books and
records relating to its sales of Division printers and supplies, including the
information required in quarterly reports provided to Seller. Such books and
records shall be accurate, complete and current, and sufficiently detailed to
allow verification of the royalty calculations provided in the quarterly
reports.
(d) Inspection. Seller shall have the right to inspect Buyer's
books and records to verify information provided in Buyer's quarterly reports to
Seller. Seller shall give Buyer at least ten (10) business days' notice of its
desire to inspect such books and records. Such inspection shall be at Seller's
expense. Such inspection shall relate only to the subject matter of the
quarterly reports, shall be made during normal business hours of Buyer, and
shall relate to a period of not greater than one year prior to the date of such
inspection. Any of Buyer's accounting information not needed in a dispute
between Buyer and Seller will be maintained in confidence and Buyer shall not be
required to disclose any information confidential to its customers. Such
inspections shall be made no more than twice each calendar year.
(e) Payment Discrepancy. A discrepancy in any report and
payment revealed by inspection of Buyer's books and records shall be deemed
material if it involves payment or adjustment of more than ten percent (10%) of
reported royalties for any quarter, or more than five percent (5%) for any
12-month period. All discrepancies in royalty payments shall be paid upon
discovery. If any such discrepancy is material, Buyer will also pay interest on
the amount of such discrepancy at an interest rate equal to the then current
prime rate plus 5%. Furthermore, if a material discrepancy is revealed, the cost
of the audit will be borne by Buyer.
(f) Offset. Buyer may offset against any amount owed as
royalty to Seller pursuant to this Section 2.4 any amount which Seller owes to
Buyer under or pursuant to the Agreement, including without limitation the
Buyer's fees under Section 3, provided that any such offset shall be so
identified in reasonable detail. Any such offset shall not in and of itself give
rise to a payment discrepancy for purposes of Subsection 2.4(e).
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(g) Contingent Guaranty. The Buyer hereby guarantees that, in
addition to the Purchase Price and any other amounts paid at Closing, for the
three year period immediately following the Closing Date that the royalties paid
to Seller pursuant to Section 2.4 shall not be less than an aggregate of
$2,000,000, provided, however, that this guarantee (and the payment of any
amounts thereunder) is contingent upon (a) no cessation of supply from the
vendors listed on Schedule 2.4(g) (other than a cessation of supply caused by
actions or inactions of Buyer), and (b) no new competitor (other than Tektronix,
Inc., or an affiliate of Buyer or any company so listed on Schedule 2.4(g)) that
materially adversely affects Buyer's supply business entering the printer
supplies market currently served by the Division during such three-year period.
For purposes of this Section, a "competitor" would be any company or other
entity providing supplies designed to work with the Division's thermal or
sublimation printers, including paper, transparencies or ribbons, and the market
is worldwide. If any such new competitor enters into such market in such
three-year period, this guarantee shall be null and void.
3. ACCOUNTS RECEIVABLE
The Seller is not selling and the Buyer is not buying any of the
Division's accounts receivable that arise out of the Business (the "Division's
Receivables"). The Buyer, however, shall use its good faith efforts to collect
the Division's Receivables for the benefit of Seller on the following terms and
conditions:
(a) The Seller shall provide all documentation with respect to
the Division's Receivables that it has in its possession and control. In
addition, the Seller shall designate at least one individual who shall be
available to negotiate and settle reasonable collection disputes, and collect
and account for all of the Division Receivables. Such individual shall provide
such cooperation to Buyer as Buyer reasonably requests, including without
limitation providing payment information on a timely basis and such other
information (such as products sold, services rendered, proof of delivery and
costs incurred) as may be requested by Buyer.
(b) With respect to sales by the Buyer after the Closing Date
to customers who owe part of the Division's Receivables, the Buyer shall either
(i) settle the Division's Receivables from such customer before completing sales
of color printers or related supplies to such customer, or (ii) if such sales
are made by Buyer to such customer, allocate the first revenue received from
such customer to the Division's Receivables owed by that customer.
(c) Buyer shall use the same efforts towards collection of the
Division's Receivables as it does with respect to collecting its own
receivables.
(d) To the extent that any of the Division's Receivables are
90 days past due, Buyer may, in its discretion, turn such Division Receivables
over to a collection agency on a contingent fee basis.
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(e) The Seller (through its representative designated pursuant
to Section 3(a) above) shall provide a twice-weekly activity report with respect
to collections received of the Division's Receivables. Buyer shall receive a fee
of 3% of all of the Division's Receivables received by Seller after the Closing
Date. The Buyer shall provide a quarterly summary to Seller in support of its
statement of fees, which will be netted against the quarterly royalty payment
due under Section 2.4.
(f) To the extent that any of the Division's Receivables are
paid to Buyer, Buyer shall immediately remit such payments to Seller.
4. TRANSFER AND ASSIGNMENT OF ASSETS; CLOSING
4.1 Conveyance and Delivery. On the Closing Date, Seller shall deliver
to Buyer a bill of sale and such other instruments of transfer, conveyance and
assignment as shall be effective to vest in Buyer all of Seller's right, title
and interest in and to the Assets, free and clear of all liens, encumbrances and
claims. Simultaneously with such delivery, Seller shall take all steps necessary
to put Buyer in actual possession of the Assets.
4.2 Further Assurances. Seller shall from time to time at Buyer's
request but without further consideration, execute and deliver, or cause to be
executed and delivered, such instruments of transfer, conveyance and assignment
in addition to those delivered pursuant to Section 4.1 hereof, and take such
other action as Buyer may require, more effectively to transfer, convey and
assign to and vest in Buyer and to put Buyer in possession of, any of the Assets
as are reasonably necessary to carry out the provisions and intent of this
Agreement.
4.3 Closing. The closing of the purchase and sale of the Assets under
this Agreement (the "Closing") shall take place at the offices of the Seller in
Berkeley, California, on July 16, 1996 or at such other date and place as the
parties agree (the "Closing Date").
5. TAXES
Buyer shall promptly file all necessary sales tax returns and pay all
sales taxes due with respect to the purchase of the Assets following the Closing
Date. All personal property taxes with respect to the Assets shall be prorated
between the Seller and the Buyer by reference to the year in which such taxes
are levied. The Buyer and the Seller shall timely and properly file Internal
Revenue Service Form 8594 based on an allocation of the Purchase Price delivered
by the Buyer at the Closing.
6. SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as follows:
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6.1 Organization and Good Standing Authorization. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Seller has taken all corporate action necessary to
authorize its execution, delivery and performance of this Agreement. This
Agreement is a valid and binding obligation of Seller enforceable in
accordance with its terms. Seller has all necessary power to execute, deliver
and perform this Agreement. Except as indicated on Schedule 1.3, no consent or
approval by any person or public authority is required in connection with
Seller's execution and delivery of, or performance under, this Agreement.
6.2 Compliance. Seller's execution, delivery or performance of this
Agreement shall not violate the provisions of (a) Seller's Articles of
Incorporation or Bylaws, (b) any note, agreement or other instrument to which
Seller is a party or by which the Assets are bound, or (c) any federal, state or
local law applicable to Seller.
6.3 Financial Statements. Seller has heretofore delivered to Buyer its
balance sheets and consolidated statements of income, stockholders' equity and
changes in financial position for Seller as at and for the fiscal year ended
October 31, 1995, and an unaudited balance sheet and statements of income as at
March 31, 1996, and for the five months then ended. Said financial statements
(i) are in accordance with the books and records of Seller, (ii) set forth
completely and fairly the financial condition and statement of income of Seller
as at and for the periods therein specified, (iii) are prepared in accordance
with generally accepted accounting principles applied on a consistent basis, and
(iv) contain and reflect all necessary adjustments for a fair presentation of
the statement of income and financial condition for the periods covered by said
financial statements.
6.4 Title. Seller has good and marketable title to the Assets, free and
clear of all liens, charges and encumbrances, except for liens for current taxes
that are not yet due and payable. Schedule 1.1 contains a complete and correct
list of the Assets. Since March 31, 1996, Seller has not, except in the ordinary
and usual course of business (a) disposed of any of the Assets, or (b) entered
or committed to entering into any other agreement relating to the Assets.
6.5 Condition of Assets. The Assets are adequate to the conduct of the
Business of the Division as such Business is presently being conducted. The
Assets are now and on the Closing Date will be in good operating condition and
repair, free of any known defects, except such minor defects as do not and will
not substantially interfere with the continued use thereof in the conduct of
normal operation. Without limiting the foregoing, the inventories of the
Division shown on the Seller's balance sheet as at March 31, 1996, consist, and
the inventories thereafter acquired prior to the Closing Date will consist, of
items of a quality and quantity usable or salable in the normal course of the
Division's business and, if salable, are salable at values at least equal to the
replacement value amounts thereof; and the value of all items of obsolete
materials and of materials of below standard quality has been written down to
realizable marketable value or adequate reserves provided therefore.
6.6 Contracts. Schedule 1.3 contains a complete and accurate list of
all material contracts, oral or written, to which the Seller is a party which
relate to the Business, including, without limitation, all supplier agreements,
software and other licenses, product purchase agreements, reseller
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agreements, service agreements and distributorship agreements, and correctly
identifies each such contract for which a consent is required for the assignment
thereof to Buyer. All such contracts are valid, in full force and effect, the
Seller has performed all material obligations imposed upon it thereunder
required to be performed by it on or before the Closing Date, and there are not,
under any of such contracts, any defaults or events of default on the part of
the Seller or, to the Seller's knowledge, any other party thereto, which would
materially adversely affect the Business or the Assets or which could reasonably
be expected to materially adversely affect the prospects of the Business or the
Assets. The Seller has not received notice, nor is the Seller otherwise aware,
that any party to any such contract intends to cancel, terminate or refuse to
renew such contract or to exercise or decline to exercise any option or right
thereunder.
6.7 Taxes. Seller has paid all taxes, assessments, fees, imposts,
levies and other charges, including without limitation interest and penalties,
upon the Assets, other than those not yet delinquent, and have filed all
required returns and reports with the appropriate government agencies.
6.8 Litigation. There are no pending or threatened actions, disputes,
claims, proceedings, suits, appeals or investigations (a) involving the Business
or the Assets, (b) questioning the validity of this Agreement or any action
under this Agreement, or (c) that could reasonably be expected to result in a
judgment or injunction in an amount that would have a material adverse effect on
the Business or the Assets.
6.9 Disclosure. Neither this Agreement nor any schedule or certificate
furnished to Buyer by or on behalf of Seller in connection with this Agreement,
when considered together, contains any untrue statement of a material fact.
Seller has not omitted to state a material fact known by it to be necessary to
be stated in order to make the statements contained in this Agreement and such
schedules or certificates, in light of the circumstances in which they were
made, not materially misleading.
6.10 Brokers. No finder, broker, agent or other intermediary has acted
for or on behalf of Seller in connection with the purchase and sale of the
Assets or incurred any liability for any commission, brokerage or investment
banking fee or finder's fee in connection with the purchase and sale of the
Assets.
7. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows:
7.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Buyer possesses the corporate power to enter into this Agreement and
any documents required under this Agreement and to comply with its or their
terms.
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7.2 Authorization. Buyer has taken all corporate action necessary to
authorize the execution, delivery and performance of this Agreement and any
documents required under this Agreement. This Agreement and any documents
required under this Agreement are valid and binding obligations of Buyer
enforceable in accordance with their terms. No other consent or approval by any
person or public authority is required in connection with Buyer's execution and
delivery of, or performance under, this Agreement or any of the documents
required by this Agreement.
7.3 Compliance. Buyer's execution, delivery and performance of this
Agreement or any of the documents required under this Agreement shall not
violate the provisions of (a) Buyer's Articles of Incorporation or Bylaws, (b)
any note, agreement or other instrument to which Buyer is a party, or (c) any
federal, state or local law applicable to Buyer or the Assets.
7.4 Brokers. Neither Buyer nor any officer or director of Buyer, nor
any employee of Buyer, has employed any broker, finder or investment banker or
incurred any liability for any commission, brokerage or investment banking fee
or finder's fee in connection with the purchase and sale of the Assets.
7.5 Disclosure. Neither this Agreement nor any document furnished to
Seller by or on behalf of Buyer in connection with this Agreement, when
considered together, contains any untrue statement of a material fact. Buyer has
not omitted to state a material fact known by it to be necessary to be stated in
order to make the statements contained in this Agreement and such documents, in
light of the circumstances in which they were made, not materially misleading.
8. COVENANTS AND OTHER AGREEMENTS
8.1 Contractual Consents. Seller shall undertake to obtain promptly all
consents required for the assignment of the contracts, licenses and agreements
described on Schedule 1.3, and shall obtain such consents with no changes in the
terms of such contracts or any additional costs, penalties or interruption
suffered by or imposed on Buyer. Upon the assignment at Closing of such
contracts, the Seller shall not purchase or sell, or knowingly allow any other
person to purchase or sell, any color printer products and supplies covered by
such contracts.
8.2 Government Consents. Promptly upon the execution of this Agreement,
Buyer and Seller shall proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver, if any, that are
required in connection with the purchase and sale of the Assets. The parties
shall diligently and expeditiously pursue and cooperate fully in the pursuit of
any such requests for approval or waiver and all proceedings necessary to secure
such approvals and waivers.
8.3 Conduct of Business. Except as otherwise permitted by this
Agreement or with the prior written consent of Buyer, prior to the Closing,
Seller shall use its good faith, commercially reasonable efforts to:
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<PAGE> 11
(a) Operate the Business as presently operated and only in the
ordinary course and consistent with past practices;
(b) Advise Buyer in writing of any litigation or
administrative proceeding that challenges or otherwise materially affects this
Agreement, and of any material adverse change or any event, occurrence or
circumstance which may cause a material adverse change in the Assets or the
Business;
(c) Preserve its existing business and its relationships with
employees, customers, suppliers, and others;
(d) Obtain any consents required of third-parties on terms and
conditions not materially less favorable than those in effect on the date of
this Agreement;
(e) Maintain all of the tangible Assets in their current
condition, reasonable wear and tear excepted, consistent with past practices,
and take all steps reasonably necessary to maintain the intangible Assets;
(f) Not cancel or change any policy of insurance or fidelity
bond relating to the Assets or the Business, unless such cancellation or change
is effective only on or after the Closing Date;
(g) Maintain supplies, consistent with past practices, of all
inventories, spare parts, office supplies and other expendable items included in
Assets and keep Buyer informed with respect to all orders of additional
Inventory;
(h) Pay all bills relating to the Business or the Assets when
due;
(i) Maintain the Business's books and records in accordance
with past practices;
(j) Pay when due all taxes, assessments, governmental charges
and levies imposed upon the Business or the Assets; and
(k) Comply with all laws, rules and regulations applicable to
the Business.
8.4 Damage to Business. Seller shall notify Buyer in writing
immediately upon the occurrence of any material loss or damage to the Business
premises or any of the Assets prior to the Closing. If such loss or damage
cannot be substantially repaired, replaced or restored within 30 days of such
event, Buyer may, by written notice to Seller within five days after receipt of
Seller's notice, postpone the Closing until the damage has been substantially
repaired, replaced or restored.
8.5 Post-Closing Warranty Obligations. Buyer hereby agrees with Seller
that Buyer will perform Seller's warranty obligations with respect to the
Division's products sold in the ordinary
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<PAGE> 12
conduct of the Business prior to the Closing Date, provided that with respect to
the performance thereof Seller shall reimburse Buyer at the rate of $75 per hour
of service, and all costs of materials and third-party expenses related to
Seller's warranty obligations; provided further that for each service call,
Seller's obligation to Buyer under this Section 8.5 shall be limited to $150.00
plus cost of materials and third party expenses. Within ten days following the
end of each month, Buyer shall deliver an accounting with respect to the
performance of its obligations under this Section and Seller shall reimburse
Buyer within ten days thereafter.
8.6 Post-Closing Service Obligations. Buyer hereby agrees with Seller
that Buyer will perform Seller's service obligations with respect to its
existing service contracts provided that, at Closing, Seller shall pay to Buyer
a prorated portion of the service fees received by Buyer based upon the service
obligation remaining to be performed from and after the Closing Date.
8.7 Employees. Buyer may make such offers of employment under Buyer's
policies for new hires to as few or as many of Division employees as Buyer in
its sole discretion so decides. Unless and until an employee accepts such an
offer and commences employment with Buyer on or after the Closing Date, Buyer
shall have no responsibility or liability for any of Seller's employees. The
Seller shall have sole responsibility for compliance with, and shall assume all
liabilities and obligations resulting from any noncompliance with, the
requirements of any state, federal or local requirements with respect to any
termination of employment with Seller, including compliance with the
continuation coverage requirements applicable to group health plans under Code
Section 4980B
8.8 Access to Shared Information. Seller will make available to Buyer
all information relating to the Assets which also relates to the Excluded Assets
and which is contained in systems, records and reports that are not being
transferred by Seller to Buyer. The Seller shall make such items available to
Buyer during normal business hours upon reasonable advance notice from the
Buyer, and shall not destroy any such records or reports without at least 60
days advance notice to Buyer.
8.9 Conduct of the Business After the Closing. The Buyer agrees to use
its good faith, commercially reasonable efforts to continue to market and sell
the product lines being acquired hereunder.
9. BUYER'S CONDITIONS TO CLOSING
Buyer's obligation to close shall be subject to the satisfaction of the
following conditions, in form and substance satisfactory to Buyer, at or prior
to Closing:
9.1 Representations and Warranties. Seller's representations and
warranties contained in this Agreement shall be true and correct on and as of
the Closing Date in all material respects. Seller shall provide Buyer at Closing
with a statement signed by Seller certifying that such is the case.
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<PAGE> 13
9.2 Permits and Licenses. Buyer shall have obtained any governmental
permits, authorizations, consents and approvals required in regard to Buyer's
purchase of the Assets and operation of the Business in the Business Premises.
9.3 Due Diligence. Buyer shall have completed its due diligence
investigations and shall have been satisfied with the results.
9.4 Adverse Proceedings. No litigation, investigation or proceeding
shall have been instituted or threatened which would materially adversely affect
the ability of the parties to comply with the provisions of this Agreement.
9.5 No Adverse Change. There shall not have been any material adverse
change in the Assets or the operations or financial condition of the Business
since the date of this Agreement.
9.6 Bill of Sale. Seller shall have executed and delivered to Buyer a
Bill of Sale, in substantially the form attached as Exhibit B, conveying and
transferring the Assets.
9.7 Consents. The consents to the assignments of the contracts,
licenses and instruments described on Schedule 1.3 shall have been obtained.
9.8 Sublease. Buyer and Seller shall have executed and delivered the
Sublease and the lessor under the principal lease shall have consented to such
Sublease.
10. SELLER'S CONDITIONS TO CLOSING
Seller's obligation to close shall be subject to the fulfillment, at or
prior to Closing, in form and substance satisfactory to Seller, of the following
conditions:
10.1 Representations and Warranties. Buyer's representations and
warranties contained in this Agreement shall be true and correct on the Closing
Date in all material respects. Buyer shall provide Seller at Closing with a
statement signed by Buyer, certifying that such is the case.
10.2 Adverse Proceedings. No litigation, investigation or proceeding
shall have been instituted or threatened which would materially adversely affect
the ability of the parties to comply with the provisions of this Agreement.
10.3 Sublease. Buyer and Seller shall have executed and delivered the
Sublease, and the lessor under the principal lease shall have consented to such
Sublease.
10.4 Check. The Buyer shall deliver a certified or bank check to the
Seller in the amount of $1,250,000 plus the amounts determined pursuant to
Sections 2.2(d) and 2.3, less the fees due Buyer pursuant to Section 8.6.
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<PAGE> 14
11. NONCOMPETITION
11.1 Noncompetition. During the period ending ten years from the
Closing Date, and in North America, Europe and Asia, neither the Seller nor any
parent or subsidiary of, or other company under common control with, Seller
shall in any way, by action or inaction, directly or indirectly, for itself or
for the benefit of any other person, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, consult with
or perform services for, or be connected in any manner with, any person which
competes with the Buyer in the design, manufacture, marketing, distribution or
sale of color printers and parts, supplies and service related thereto or agree
to do any of the foregoing. For purposes of this Section 11, a person which
"competes" with the Buyer shall include any entity which, directly or
indirectly, derives benefit from the design, manufacture, marketing,
distribution or sale of color printers and related products. Without limiting
the generality of the foregoing, the Seller shall be deemed to be related to or
connected with a person which competes with the Buyer if, among other things,
such person is (a) a partnership in which the Seller is a general or limited
partner, (b) a corporation or association of which the Seller is a shareholder
or for which a director or officer of the Seller is an officer, employee or
director, or (c) a partnership, corporation or association for which the Seller
is a consultant or agent.
11.2 Reasonable Scope. The Seller confirms and expressly agrees that
the time period and geographical area of the covenant is reasonable and
acceptable, and the Seller acknowledges that the covenant is an important part
of the Buyer's willingness to execute and perform the Agreement and that the
Buyer would be harmed by the Seller's direct or indirect violation thereof.
11.3 Specific Performance. The Seller and the Buyer acknowledge that it
may be impossible to measure in money the damages that the Purchaser shall incur
as a result of the Seller's violation of any provision in this Section 11.
Consequently, in any action specifically to enforce any provision in this
Agreement, the Seller hereby waives any claim or defense therein that an
adequate remedy at law or in damages exists. The Seller further agrees that the
Buyer shall be entitled to injunctive relief, specific performance or other
equitable relief to prevent violation of any provision in this Agreement,
including the foregoing covenant.
11.4 Reformation. It is the intention of the parties hereto that in the
event any of the covenants contained in this Section 11 shall be construed by
any court as being in any respect illegal or against public policy, any such
covenant or portion thereof shall not fail in its entirety, but shall continue
in force and effect for the term hereof to whatever extent may be necessary to
protect the interests of the Buyer and its respective successors and assigns
within the permissible limits of legality and public policy.
12. TERMINATION
12.1 Right to Terminate. Either party may terminate this Agreement if
(a) the other party has materially breached any of its obligations under this
Agreement, or (b) the Closing has not occurred on or before July 31, 1996,
unless such party's failure to fulfill or perform any obligation
-14-
<PAGE> 15
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date.
12.2 Effect of Termination. If this Agreement is terminated under this
Section, the parties shall be released from all liabilities, obligations or
damages arising under this Agreement, other than pursuant to the confidentiality
obligations set forth in Section 14.
13. INDEMNIFICATION
13.1 Indemnification by Seller. Seller shall indemnify Buyer and hold
it harmless from and against all losses, costs, expenses, damages or
liabilities, including reasonable attorney fees ("Damages"), incurred by Buyer
by reason of or arising out of or in connection with (a) any breach or
inaccuracy of any of the representations or warranties made by Seller in this
Agreement, or in any schedule or certificate delivered by Seller under this
Agreement, (b) Seller's failure to fulfill any covenant or other agreement
imposed on it under this Agreement, or in any agreement delivered pursuant to
this Agreement; or (c) the operation of the Business before Closing (other than
liabilities expressly assumed by Buyer pursuant to Section 1.3).
13.2 Indemnification by Buyer. Buyer shall indemnify Seller and hold it
harmless from and against all Damages incurred by Seller by reason of or arising
out of or in connection with (a) any breach or inaccuracy of any representation
or warranty of Buyer made in this Agreement or in any schedule or certificate
delivered by Buyer under this Agreement, (b) any failure by Buyer to fulfill any
covenant or other agreement imposed on Buyer under this Agreement or in any
agreement delivered pursuant to this Agreement, (c) the operation of the
Business after Closing and (d) the liabilities assumed by Buyer pursuant to
Section 1.3.
14. CONFIDENTIALITY
14.1 Before Closing. Before Closing, neither party shall (a) disclose
to any person any information concerning the other party obtained under this
Agreement, except in confidence to its employees, legal counsel, financial
advisers, bankers, or independent public accountants who, in that party's
reasonable determination, have a need to know such information, or (b) issue or
approve a news release or other announcement concerning the purchase and sale of
the Assets without the other's prior consent.
14.2 After Closing. After Closing, each party shall continue to hold
such information in confidence, except that Buyer may disclose such information
as Buyer reasonably determines is necessary in order to run a successful
business in the Business premises. The Buyer and Seller shall jointly agree to
the text of any press release.
14.3 Termination Before Closing. If this Agreement is terminated prior
to the Closing, each party shall hold such information in confidence at all
times after the termination date and shall immediately return all written
information to the other party.
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<PAGE> 16
14.4 Exceptions. This Section shall not apply to information that is or
was (a) publicly available from another source, (b) known by the receiving party
at the time of its receipt under this Agreement, (c) received from a third party
without breach of this Agreement, (d) required by securities or other law, rule
or regulation, or by court order to be disclosed, or (e) disclosed after
obtaining the written consent of the other party.
15. OTHER PROVISIONS
15.1 Successors; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
No party may voluntarily or involuntarily assign that party's interest in this
Agreement or any documents or instruments related to this Agreement without the
prior written consent of the other parties.
15.2 Fees and Expenses. Each party shall be solely responsible for all
costs and expenses incurred by it in connection with the negotiation,
preparation and performance of and compliance with the terms of this Agreement
and of any documents required by this Agreement, except as provided in Section
15.8.
15.3 Amendment; Waiver. The parties may amend or modify this Agreement
only in writing signed by both parties. Any waiver of any term or condition of
this Agreement or any breach of this Agreement shall not operate as a waiver of
any other such term, condition or breach. No failure to enforce any provision of
this Agreement shall operate as a waiver of such provision or of any other
provision of this Agreement.
15.4 Survival of Representations. All representations, warranties and
covenants of the parties contained in this Agreement shall survive Closing for a
period of two years.
15.5 Governing Law. This Agreement shall be construed and governed by
the laws of the State of Washington. The parties consent to the exclusive
jurisdiction of and venue in any competent federal or state court located in
King County, Washington.
15.6 Notices. All notices, requests, demands, and other communications
given under this Agreement shall be deemed given on the date personally
delivered, or, if mailed by certified or registered mail with postage prepaid,
on the date of the return receipt, if delivered to the following addresses or to
such other addresses as the parties designate in writing:
SELLER: Metal Management, Inc.
101 West Grand, Suite 200
Chicago, IL 60610
Attention: Gerald Jacobs
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<PAGE> 17
With copies to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Robert T. Clarkson
BUYER: Mannesmann Tally Corporation
8301 S. 180th
Kent, Washington 98032
Attention: President
With copies to:
Stoel Rives LLP
600 University Street,
One Union Square, Suite 3600
Seattle, Washington 98101-3197
Attention: Kenneth W. Johnson
15.7 Equitable Relief; Time. The Assets and the parties' rights under
this Agreement are unique, and money damages alone for breach of this Agreement
would be inadequate. Therefore, a party may sue for legal or equitable relief,
including specific performance, injunctive relief or other equitable remedy if
the other party breaches this Agreement. Time and strict performance are of the
essence in this Agreement.
15.8 Attorney Fees. The prevailing party in any litigation relating to
this Agreement shall be entitled to reimbursement of its costs and reasonable
attorney fees from the non-prevailing party, including all such costs incurred
in any appeal of such action.
15.9 Assurances. Seller and Buyer shall execute such further documents
and instruments, requested by either party, as may be necessary or reasonably
desirable to consummate the transaction contemplated by this Agreement or any
part thereof.
15.10 Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable under present or future law in whole or in part by
any court of any jurisdiction, such provisions shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or unenforceability of such provisions in any other jurisdiction. Such
invalid or unenforceable provision shall be replaced as to such jurisdiction by
a provision that comes closest to the business objective intended by such
invalid or unenforceable provision without being invalid or unenforceable
itself.
15.11 Entire Agreement. This Agreement and the attached Schedules and
Exhibits contain the entire agreement of the parties and supersede any and all
prior agreements, arrangements and
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<PAGE> 18
understandings in regard to the Assets. The parties agree that the Schedules and
Exhibits shall be completed and mutually agreed to by the Closing.
15.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Executed and delivered as of the date first written above.
SELLER:
METAL MANAGEMENT, INC.,
a Delaware corporation
By: ___________________________
Its:
BUYER:
Mannesmann Tally Corporation,
a New York corporation
By: ___________________________
Its:
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<PAGE> 19
EXHIBIT A
Sublease
-19-
<PAGE> 20
EXHIBIT B
Bill of Sale
-20-
<PAGE> 21
SCHEDULE 1.1
Assets
-21-
<PAGE> 22
SCHEDULE 1.2
Other Excluded Assets
-22-
<PAGE> 23
SCHEDULE 1.3
Contracts, Licenses
-23-
<PAGE> 24
SCHEDULE 2.4(g)
List of Competitors
-24-
<PAGE> 1
Exhibit 99.1
PRO FORMA FINANCIAL INFORMATION
PRO FORMA FINANCIAL INFORMATION
The acquisition of EMCO Recycling Corp. (EMCO) by Metal Management, Inc. (MMI)
was completed April 11, 1996, the sale of MMI's Spectra*Star printer and
consumables business closed on July 16, 1996 and the discontinuance of the
VideoShow and related product lines was done in the fourth quarter of fiscal
1995. The following pro forma information updates the pro forma information
appearing on pages 41 through 45 of the companies' Joint Proxy Statement dated
March 8, 1996 and the pro forma information included in MMI's Form 8K/A filed on
June 20, 1996, both of which are incorporated herein by reference.
The following unaudited pro forma combined condensed statement of operations
gives effect to the merger of Metal Management, Inc. (MMI) and EMCO Recycling
Corp. (EMCO), the sale of MMI's Spectra*Star printer and consumables business
and the discontinuance of the VideoShow and related product lines for the year
ended October 31, 1995 and the five months ended March 31, 1996. The acquisition
of EMCO is reflected by combining the results of operations of MMI for the year
ended October 31, 1995 and the five months ended March 31, 1996 with the results
of EMCO for the twelve months ended September 30, 1995 and the five months ended
February 29, 1996, respectively, using the purchase method of accounting as if
the merger had occurred November 1, 1994 and 1995, respectively, and by giving
effect to the pro forma adjustments described below. The sale of the
Spectra*Star printer and consumables business and the discontinuance of the
VideoShow and related product lines are reflected by reversing all sales, costs
and expenses of such business, including the discontinued VideoShow and related
product lines, for the year ended October 31, 1995 and the five months ended
March 31, 1996 as if the sale of the Spectra*Star printer and consumables
business and the discontinuance of the VideoShow and related product lines had
occurred November 1, 1994 and 1995, respectively, and by giving effect to the
pro forma adjustments described below.
The following unaudited combined condensed balance sheet presents the combined
financial position of MMI as of October 31, 1995 and March 31, 1996 and EMCO as
of September 30, 1995 and February 29, 1996, respectively, assuming the merger
with EMCO occurred as of October 31, 1995 and March 31, 1996, respectively, and
the acquisition of EMCO was accounted for using the purchase method and includes
the pro forma adjustments described below. The allocation of the excess of the
acquisition costs over the book value of the net assets acquired has been
applied to intangible assets, based on the Company's estimate of the fair value
of the net assets acquired. Such allocation of the purchase price may change
upon the final determination of the fair value of assets acquired and
liabilities assumed; however management believes that the final allocation of
the purchase price will not be materially different from that used in preparing
the pro forma financial information. In addition the unaudited combined
condensed balance sheet presents the combined financial position of MMI and EMCO
as of October 31, 1995 and March 31, 1996 as if the sale of the Spectra*Star
printer and consumables business occurred as of October 31, 1995 and March 31,
1996, respectively, and includes the pro forma adjustments described below. No
significant pro forma adjustments to the unaudited combined condensed balance
sheets were necessary relating to the discontinued VideoShow and related product
lines because such adjustments were actually recorded in the fourth quarter of
fiscal 1995.
The unaudited pro forma condensed financial information does not purport to
represent what the Combined Company's results of operations would have been had
the Merger, sale of the Spectra*Star printer and consumables business and the
discontinuance of the VideoShow and related product lines occurred on the dates
indicated or for any future period or date.
The pro forma financial information should be read in conjunction with the
historical financial statements and notes thereto for MMI and for EMCO.
<PAGE> 2
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
EMCO
METAL RECYCLING
MANAGEMENT, CORP. PRO FORMA
INC. TWELVE MONTHS COMBINED
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, SEPTEMBER 30, PRO FORMA OCTOBER 31,
1995 1995 ADJUSTMENTS 1995
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 9,511 $ 69,590 ($ 9,511)(12) $ 69,590
Cost of sales 7,028 60,324 (7,028)(12) 60,324
----------- -------- ----------- --------
Gross profit 2,483 9,266 (2,483) 9,266
Operating expenses:
Marketing and sales 2,088 (2,088)(12) 0
Research and development 1,044 (1,044)(12) 0
General and administrative 1,163 3,656 (60) (8) 5,140
569 (8)
172 (8)
(361)(12)
Restructuring cost 1,437 (1,437)(12) 0
----------- -------- ------------ --------
Total operating expenses 5,732 3,656 (4,248) 5,140
Income (loss) from operations (3,249) 5,610 1,765 4,126
Interest expense 1,433 86 (9) 1,519
Other (income) expense (312) (55) 95 (10) (327)
(55)(13)
----------- -------- ----------- --------
Income (loss) before income tax (2,937) 4,232 1,639 2,934
Benefit from income tax (500) 1,796 (269)(11) 1,027
----------- -------- ----------- --------
Net income (loss) ($ 2,437) $ 2,436 $ 1,908 $ 1,907
=========== ======== =========== ========
Net income (loss) per share ($ 0.48) $ 243.60 $ 0.22
Weighted average number of shares
outstanding 5,125,000 10,000 8,625,000
</TABLE>
<PAGE> 3
PRO FORMA COMBINED CONDENSED BALANCE SHEET
OCTOBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
METAL EMCO
MANAGEMENT RECYCLING
INC. CORP.
OCTOBER 31, SEPTEMBER 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,032 $ 227 ($ 2,050) (4) $ 2,309
1,100 (13)
Marketable securities 3,246 3,246
Accounts receivable, net 1,599 4,512 6,111
Loan to EMCO Recycling Corp.
Inventories 1,718 3,185 (1,718) (14) 3,185
Other current assets 362 1,434 1,796
------- ------- -------- -------
Total current assets 9,957 9,358 (2,668) 16,647
Property and equipment, net 58 7,213 1,100 (2) 8,313
(58) (14)
Other assets 115 490 605
Goodwill and other intangibles 764 (764) (7) 10,258
10,258(1)(7)
------- ------- -------- -------
Total assets $10,130 $17,825 $ 7,868 $35,823
------- ------- -------- -------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Operating line of credit $ 4,342 $ 4,342
Accounts payable 331 3,831 (331) (14) 3,831
Other accrued liabilities 486 923 (151) (14) 1,258
Current portion of long term debt 940 940
------- ------- -------- -------
Total current liabilities 817 10,036 (482) 10,371
Long term debt, less current portion 4,400 950 (4) 5,350
Other liabilities 141 1,719 (7) 1,860
------- ------- -------- -------
Total liabilities 817 14,577 2,187 17,581
------- ------- -------- -------
Stockholders' equity
Common stock and additional
paid in capital 3,089 97 (97) (6) 12,212
8,807(1)(3)
316(1)(5)
Retained earnings 6,224 3,151 (3,151) (6) 6,030
(194) (14)
------- ------- -------- -------
Total stockholders' equity 9,313 3,248 5,681 18,242
------- ------- -------- -------
Total liabilities and stockholders'
equity $10,130 $17,825 $ 7,868 $35,823
======= ======= ======== =======
</TABLE>
<PAGE> 4
NOTES TO PRO FORMA FINANCIAL INFORMATION
AS OF AND FOR THE YEAR ENDED OCTOBER 31, 1995
The pro forma financial information is based on the following assumptions and
adjustments:
(1) Reflects the issuance of common stock, warrants and cash consideration
for the acquisition of EMCO as follows:
Total acquisition costs are estimated as follows:
<TABLE>
<CAPTION>
Amount
--------------
(In thousands)
<S> <C>
Cash payment to EMCO shareholders $ 1,150
Issue 3,500,000 shares of MMI Common Stock (see Note 3) 8,807
Issue warrants for 600,000 shares of MMI Common Stock at $4.48 per share
and 400,000 shares at $6.48 per share 316
Accrual of covenants-not-to-compete 1,719
Cash payment for transaction costs 750
--------------
Total estimated consideration $ 12,742
==============
</TABLE>
The acquisition costs will be allocated for pro forma purposes as
follows:
<TABLE>
<CAPTION>
Amount
--------------
(In thousands)
<S> <C>
Current assets $ 9,358
Property and equipment 7,213
Other assets 490
Current liabilities (10,036)
Long term debts (4,541)
Goodwill and other intangibles, including covenants not to compete of $1,719 10,258
---------------
$ 12,742
===============
</TABLE>
The above allocation of acquisition cost is preliminary and may change
upon final determination of the fair value of assets acquired and
liabilities assumed; however, management believes that the final
allocation of the purchase price will not be materially different from
that used in preparing the pro forma financial information. Goodwill
and the covenants not to compete are being amortized over 15 years and
10 years, respectively.
(2) MMI will acquire from Harold Rubinstein for $150,000 in cash and
$950,000 9% notes payable in three years two parcels of real estate on
which certain of Ellis Metals Inc.'s (Ellis) operations are located.
<PAGE> 5
NOTES TO PRO FORMA FINANCIAL INFORMATION --- (CONTINUED)
AS OF AND FOR THE YEAR ENDED OCTOBER 31, 1995
(3) Reflects the issuance of 3,500,000 shares of MMI Common Stock at a
weighted average share price of $2.52 per share in partial
consideration for all the outstanding shares of EMCO Common Stock, for
a total of $8,807,000. Such price reflects various discounts from the
average closing market price per share as quoted on the NASDAQ during
the period from November 28, 1995 through December 7, 1995. The
discounts reflect, among other things, that none of the 3,500,000
shares are currently registered; 300,000 shares with demand
registration rights principally at shareholders' expense are discounted
15% and the remaining 3,200,000 shares with "piggy-back" registration
rights for two years following the closing of the transaction for up to
20% of the company owned shares that would be registered are discounted
30%.
(4) Reflects the cash consideration of $1,150,000 in partial consideration
for all the outstanding shares of EMCO Common Stock, $150,000 in cash
and $950,000 in notes payable in consideration for two parcels of real
estate on which certain of Ellis' operations are located and $750,000
for the payment of transaction related expenses, principally legal and
accounting fees. Presented as a reduction of $2,050,000 in cash and
cash equivalents, and an increase of $950,000 in long term debt.
(5) Reflects the estimated value of 600,000 warrants to acquire MMI Common
Stock at $4.48 per share and 400,000 warrants to acquire MMI Common
Stock at $6.48 per share in partial consideration for all the
outstanding shares of EMCO Common Stock.
(6) Reflects the elimination of EMCO's stockholders equity accounts.
(7) Reverse EMCO's goodwill related to its prior acquisitions and record
goodwill ($8,539) and covenants not to compete ($1,719) related to
MMI's acquisition of EMCO as if the transaction occurred October 31,
1995.
(8) Reflects the reversal of EMCO's amortization of goodwill from prior
acquisitions and recording amortization of goodwill and other
intangible assets arising upon MMI's acquisition of EMCO ($569,000) and
($172,000), respectively, as if the acquisition had occurred on
November 1, 1994.
(9) Adjustment to record interest expense for $950,000 notes payable in
three years which bear interest at 9% which will be issued to acquire
two parcels of real estate on which certain of Ellis' operations are
located.
(10) Adjustment to reduce interest income for the payment of $2,050,000 cash
consideration and related transaction costs as if the acquisitions of
EMCO and the two parcels of real estate on which certain of Ellis'
operations are located had occurred on November 1, 1994.
(11) Adjustment to the income tax provision to reflect the combined results
of operations of MMI and EMCO.
(12) Adjustment to reverse sales, cost of sales, marketing and sales
expenses, research and development expenses, general and
administrative expenses and restructuring costs relating to the
Spectra*Star printer and consumables business and the discontinued
VideoShow and related product lines. The Spectra*Star printer and
consumables business was sold as of July 16, 1996 for proceeds of
$1,250,000 in cash and other contingent consideration which is not
valued for purposes of this pro forma presentation. Transaction costs
including severance costs and professional fees are estimated to be
approximately $150,000 and are not included in the pro forma combined
condensed statement of operations.
<PAGE> 6
NOTES TO PRO FORMA FINANCIAL INFORMATION --- (CONTINUED)
AS OF AND FOR THE YEAR ENDED OCTOBER 31, 1995
The VideoShow and related product lines were discontinued in the
fourth quarter of fiscal 1995.
(13) Adjustment to record net cash proceeds of $1,100,000 ($1,250,000 in
cash net of estimated transactions expenses of $150,000) and related
interest income from the sale of Spectra*Star printer and consumables
business.
(14) Adjustment to eliminate inventory, fixed assets, accounts payable and
estimated accrued expenses relating to the Spectra*Star printer and
consumables business and the discontinued VideoShow and related product
lines.
<PAGE> 7
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE FIVE MONTH PERIOD ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
METAL EMCO
MANAGEMENT, RECYCLING PRO FORMA
INC. CORP. COMBINED
FIVE MONTHS FIVE MONTHS FIVE MONTHS
ENDED ENDED ENDED
MARCH 31, FEBRUARY 29, PRO FORMA MARCH 31,
1996 1996 ADJUSTMENTS 1996
---------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 3,074 $ 29,752 ($3,074)(12) $ 29,752
Cost of sales 1,969 27,429 (1,969)(12) 27,429
---------------- -------------- ------------- -----------------
Gross profit 1,105 2,323 (1,105) 2,323
Operating expenses:
Marketing and sales 546 (546)(12) 0
Research and development 77 (77)(12) 0
General and administrative 618 2,717 (25) (8) 3,348
250 (8)
72 (8)
(284)(12)
---------------- -------------- ------------- -----------------
Total operating expenses 1,241 2,717 (610) 3,348
Loss from operations (136) (394) (495) (1,025)
Interest expense 593 36 (9) 629
Other (income) expense (142) (128) 43 (10) (250)
(23)(13)
---------------- -------------- ------------- -----------------
Income (loss) before income tax 6 (859) (551) (1,404)
Benefit from income tax (345) (146)(11) (491)
---------------- -------------- ------------- -----------------
Net income (loss) $ 6 ($514) ($404) ($912)
=============== ============== ============= =================
Net income (loss) per share $ 0.00 ($51.40) ($0.10)
Weighted average number of shares
outstanding 5,870,000 10,000 9,370,000
</TABLE>
<PAGE> 8
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
METAL EMCO
MANAGEMENT RECYCLING
INC. CORP.
MARCH 31, FEBRUARY 29, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
---------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,093 $ 178 ($ 2,050) (4) $ 3,321
1,000(6)
1,100(13)
Marketable securities 2,644 2,644
Accounts receivable, net 1,488 5,512 7,000
Loan to EMCO Recycling Corp. 1,000 (1,000(6)
Inventories 1,359 1,618 (1,359) (14) 1,618
Other current assets 128 1,015 1,143
------- ------- -------- -------
Total current assets 9,712 8,323 (2,309) 15,726
Property and equipment, net 44 7,266 1,100 (2) 8,366
(44) (14)
Deferred charges 478 478
Other assets 115 488 603
Goodwill and other intangibles 739 (739) (7) 10,734
10,734(1)(7)
------- ------- -------- -------
Total assets $10,349 $16,816 $ 8,742 $35,907
======= ======= ======== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Operating line of credit $ 4,735 $ 4,735
Accounts payable 282 3,611 (282) (14) 3,611
Other accrued liabilities 459 216 (211) (14) 464
Current portion of long term debt 956 956
------- ------- -------- -------
Total current liabilities 741 9,518 (493) 9,766
Long term debt, less current portion 4,410 950 (4) 5,360
Other liabilities 141 1,667 (7) 1,808
------- ------- -------- -------
Total liabilities 741 14,069 2,124 16,934
------- ------- -------- -------
Stockholders' equity
Common stock and additional
paid in capital 3,378 110 (110) (6) 12,501
8,807(1)(3)
316(1)(5)
Retained earnings 6,230 2,637 (2,637) (6) 6,472
242 (14)
------- ------- -------- -------
Total stockholders' equity 9,608 2,747 6,618 18,973
------- ------- -------- -------
Total liabilities and stockholders'
equity $10,349 $16,816 $ 8,742 $35,907
======= ======= ======== =======
</TABLE>
<PAGE> 9
NOTES TO PRO FORMA FINANCIAL INFORMATION
AS OF AND FOR THE FIVE MONTH PERIOD ENDED MARCH 31, 1996
The pro forma financial information is based on the following assumptions and
adjustments:
(1) Reflects the issuance of common stock, warrants and cash consideration
for the acquisition of EMCO as follows:
Total acquisition costs are estimated as follows:
<TABLE>
<CAPTION>
Amount
-------------
(In thousands)
<S> <C>
Cash payment to EMCO shareholders $ 1,150
Issue 3,500,000 shares of MMI Common Stock (see Note 3) 8,807
Issue warrants for 600,000 shares of MMI Common Stock at $4.48 per share
and 400,000 shares at $6.48 per share 316
Accrual of covenants-not-to-compete 1,719
Cash payment for transaction costs 750
-------------
Total estimated consideration $ 12,742
==============
</TABLE>
The acquisition costs will be allocated for pro forma purposes as
follows:
<TABLE>
<CAPTION>
Amount
-------------
(In thousands)
<S> <C>
Current assets $ 8,323
Property and equipment 7,266
Other assets 488
Current liabilities (9,518)
Long term debts (4,551)
Goodwill and other intangibles, including covenants not to compete of $1,719 10,734
--------------
$ 12,742
==============
</TABLE>
The above allocation of acquisition cost is preliminary and may change
upon final determination of the fair value of assets acquired and
liabilities assumed; however, management believes that the final
allocation of the purchase price will not be materially different from
that used in preparing the pro forma financial information. Goodwill
and the covenants not to compete are being amortized over 15 years and
10 years, respectively.
(2) MMI will acquire from Harold Rubinstein for $150,000 in cash and
$950,000 9% notes payable in three years two parcels of real estate on
which certain of Ellis Metals Inc.'s (Ellis) operations are located.
<PAGE> 10
NOTES TO PRO FORMA FINANCIAL INFORMATION --- (CONTINUED)
AS OF AND FOR THE FIVE MONTH PERIOD ENDED MARCH 31, 1996
(3) Reflects the issuance of 3,500,000 shares of MMI Common Stock at a
weighted average share price of $2.52 per share in partial
consideration for all the outstanding shares of EMCO Common Stock, for
a total of $8,807,000. Such price reflects various discounts from the
average closing market price per share as quoted on the NASDAQ during
the period from November 28, 1995 through December 7, 1995. The
discounts reflect, among other things, that none of the 3,500,000
shares are currently registered; 300,000 shares with demand
registration rights principally at shareholders' expense are discounted
15% and the remaining 3,200,000 shares with "piggy-back" registration
rights for two years following the closing of the transaction for up to
20% of the company owned shares that would be registered are discounted
30%.
(4) Reflects the cash consideration of $1,150,000 in partial consideration
for all the outstanding shares of EMCO Common Stock, $150,000 in cash
and $950,000 in notes payable in consideration for two parcels of real
estate on which certain of Ellis' operations are located and $750,000
for the payment of transaction related expenses, principally legal and
accounting fees. Presented as a reduction of $2,050,000 in cash and
cash equivalents, and an increase of $950,000 in long term debt.
(5) Reflects the estimated value of 600,000 warrants to acquire MMI Common
Stock at $4.48 per share and 400,000 warrants to acquire MMI Common
Stock at $6.48 per share in partial consideration for all the
outstanding shares of EMCO Common Stock.
(6) Reflects the elimination of EMCO's stockholders equity accounts and
loan from MMI to EMCO in March 1996.
(7) Reverse EMCO's goodwill related to its prior acquisitions and record
goodwill ($9,015) and covenants not to compete ($1,719) related to
MMI's acquisition of EMCO as if the transaction occurred March 31,
1996.
(8) Reflects the reversal of EMCO's amortization of goodwill from prior
acquisitions and recording amortization of goodwill and other
intangible assets arising upon MMI's acquisition of EMCO ($250,000) and
($72,000), respectively, as if the acquisition had occurred on November
1, 1995.
(9) Adjustment to record interest expense for $950,000 notes payable in
three years which bear interest at 9% which will be issued to acquire
two parcels of real estate on which certain of Ellis' operations are
located.
(10) Adjustment to reduce interest income for the payment of $2,050,000 cash
consideration and related transaction costs as if the acquisitions of
EMCO and the two parcels of real estate on which certain of Ellis'
operations are located had occurred on November 1, 1995.
(11) Adjustment to the income tax provision to reflect the combined results
of operations of MMI and EMCO.
(12) Adjustment to reverse sales, cost of sales, marketing and sales
expenses, research and development expenses, and general and
administrative expenses relating to the Spectra*Star printer and
consumables business and the discontinued VideoShow and related product
lines. The Spectra*Star printer and consumables business was sold as of
July 16, 1996 for proceeds of $1,250,000 in cash and other contingent
consideration which is not valued for purposes of this pro forma
presentation.
<PAGE> 11
NOTES TO PRO FORMA FINANCIAL INFORMATION --- (CONTINUED)
AS OF AND FOR THE FIVE MONTH PERIOD ENDED MARCH 31, 1996
Transaction costs including severance costs and professional fees are
estimated to be approximately $150,000 and are not included in the pro
forma combined condensed statement of operations. The VideoShow and
related product lines were discontinued in the fourth quarter of fiscal
1995.
(13) Adjustment to record net cash proceeds of $1,100,000 ($1,250,000 in
cash net of estimated transaction expenses of $150,000) and related
interest income from the sale of Spectra*Star printer and consumables
business, including the discontinuance of VideoShow and related
products, which was sold as of July 16, 1996 for proceeds of $1,250,000
in cash.
(14) Adjustment to eliminate inventory, fixed assets, accounts payable and
estimated accrued expenses relating to the Spectra*Star printer and
consumables business and the discontinued VideoShow and related product
lines.
<PAGE> 1
Exhibit 99.2
Press Release dated July 11, 1996
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION CONTACT:
Xavier Hermosillo, Corporate Communications and
Investor Relations - (310) 832-2999
METAL MANAGEMENT, INC. ANNOUNCES DIVESTITURE
Berkeley, CA July 11, 1996 -- Metal Management, Inc. (the "Company"), formerly
General Parametrics Corporation, (NASDAQ symbol-MTLM) announced that it has
entered into a Definitive Principles of Agreement ("Definitive Agreement") to
sell certain of its Spectra*Star Division's assets and rights to Mannesmann
Tally Corporation ("Tally") of Seattle.
The Definitive Agreement calls for Tally to acquire all technological,
manufacturing, product and marketing rights to the Spectra*Star family of
products. Tally intends to integrate the Spectra*Star product line into its
complete line of printer products. The Definitive Agreement also calls for Tally
to continue all marketing efforts under the Spectra*Star trade name. Tally has
agreed to purchase certain of the Company's color printer product inventory at
the Closing Date for $1,300,000 and to collect accounts receivables of
$1,250,000 on behalf of the Company. Tally has also agreed to guarantee a
minimum of $2,000,000 of royalty payments for consumables and hardware units
sold over the next three years.
Mr. Daniel Burgess, the Spectra*Star Division President stated "We are delighted
with the agreement to sell certain assets of our Spectra*Star Division.
Mannesmann Tally is an outstanding organization and our products will integrate
very well into their printer strategy."
T. Benjamin Jennings, Chairman of the Board stated "This agreement continues our
re-direction of the Company into the scrap metal recycling business and allows
us to direct our resources accordingly." Metal Management intends to close down
all remaining operations associated with its Spectra*Star Division. Gerard M.
Jacobs, Metal Management's President and Chief Executive Officer, added, "This
divestiture allows us to continue our focus on consolidation of the scrap metal
industry through acquisitions and mergers."
The Definitive Agreement is subject to the review and approval of each company's
Board of Directors. The Company hopes to close the Definitive Agreement this
month.
* * * * * *
