<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-14836
METAL MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2835068
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
500 N. DEARBORN ST., SUITE 405,
CHICAGO, IL 60610
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 645-0700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01
PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value for the Registrant's voting stock held by
non-affiliates of the Registrant based upon the closing sale price of the Common
Stock on June 16, 1999 as reported on the NASDAQ SmallCap Market, was
approximately $66.1 million. Shares of Common Stock held by each officer and
director and each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. The
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of June 16, 1999, the Registrant had 53,191,185 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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<PAGE> 2
This Amendment is being filed to include the information required by Part
III of Form 10-K. The Registrant excluded the information required by Part III
of Form 10-K because the Registrant intended to incorporate that information by
reference to its proxy statement to be filed in connection with the 1999 annual
meeting of its stockholders. However, the Registrant does not expect to file its
definitive proxy statement within the required 120 days of the end of its fiscal
year end, therefore, is required to file this Amendment.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning the executive
officers and directors of the Company as of July 22, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Albert A. Cozzi...................... 54 Director, Chairman of the Board, President and Chief
Operating Officer
George A. Isaac, III................. 46 Director and Executive Vice President
Frank J. Cozzi....................... 49 Director and Vice President
Joseph F. Naporano................... 58 Director and Vice Chairman of the Board
Gregory P. Cozzi..................... 44 Director
Gerard M. Jacobs..................... 44 Director
Eugene C. McCaffery.................. 51 Director
Kenneth A. Merlau.................... 53 Director
Timothy T. Orlowski.................. 39 Director
William T. Proler.................... 51 Director
Daniel B. Burgess.................... 35 Executive Vice President
David A. Carpenter................... 36 Executive Vice President, Administration, Legal &
Regulatory Affairs and Secretary
Robert C. Larry...................... 38 Executive Vice President, Finance, Treasurer, Chief
Financial Officer, and Assistant Secretary
Amit N. Patel........................ 31 Vice President, Finance and Controller
Larry S. Snyder...................... 44 Vice President, Non-Ferrous
</TABLE>
Albert A. Cozzi joined the Company's Board of Directors and became the
Company's President and Chief Operating Officer in December 1997, following the
Company's merger with Cozzi Iron & Metal, Inc. ("Cozzi Iron & Metal"). Mr. Cozzi
became Chairman of the Board on July 15, 1999. Mr. Cozzi also served as a member
of the Executive Committee of the Company's Board of Directors from December
1997 through February 1999. Mr. Cozzi was employed by Cozzi Iron & Metal from
1963 to December 1997, and from 1980 to December 1997 served as its President.
Mr. Cozzi served as the Company's Senior Vice President and Chief Operating
Officer from September 1997 through December 1997. Mr. Cozzi earned an MBA from
the University of Chicago in 1988. From 1990 to 1992 he served as Chairman of
the Ferrous Committee of the Institute of Scrap Recycling Industries ("ISRI"),
an industry association. Mr. Cozzi is the brother of Frank J. Cozzi and Gregory
P. Cozzi.
George A. Isaac, III joined the Company's Board of Directors and became an
Executive Vice President in June 1997, following the Company's acquisition of
The Isaac Corporation, Ferrex Trading Corporation, Briquetting Corporation of
America and Paulding Recycling, Inc. (collectively, the "Isaac Group"). Mr.
Isaac also served as a member of the Executive Committee of the Company's Board
of Directors from June 1997 through February 1999. Since 1988, he has served as
President and Chief Executive Officer of the companies in the Isaac Group. From
1977 through 1988, he worked as a management consultant at Deloitte and Touche
LLP, where he was elected a partner. Mr. Isaac is on the boards of
directors/advisors of several companies in the Toledo, Ohio area including
Capital Bank, N.A. (a public bank holding company), Betco, Inc. (a manufacturer
of chemicals) and Findley-Davies (a benefits consulting firm). Mr. Isaac is also
member of the board of trustees of the Foundry Educational Foundation and the
Toledo Symphony. He earned a B.S. and an MBA with distinction from the
University of Michigan.
2
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Frank J. Cozzi joined the Company's Board of Directors and became a Vice
President in December 1997, following the Company's merger with Cozzi Iron &
Metal. Mr. Cozzi has been employed by Cozzi Iron & Metal since 1967 and became
its President in December 1997. From February 1995 to December 1997, he served
as Executive Vice President of Cozzi Iron & Metal. From March 1981 to December
1997, Mr. Cozzi served as Cozzi Iron & Metal's Treasurer and Secretary. From
1990 to 1991 he served as President of the Chicago Chapter of ISRI, and from
1988 to 1990 was national chairman of ISRI's transportation committee. Mr. Cozzi
completed Harvard University's Owner President Management executive program in
1991. He has also served in local and national positions with ISRI. Mr. Cozzi is
the brother of Albert A. Cozzi and Gregory P. Cozzi.
Joseph F. Naporano joined the Company's Board of Directors and became Vice
Chairman of the Board in August 1998, following the Company's acquisition of
Naporano Iron & Metal Co. and NIMCO Shredding Co. (collectively, "Naporano").
Mr. Naporano has served as the President of Naporano Iron & Metal Co. since
1965. He has served as President of NIMCO Shredding Co. since 1972. Mr. Naporano
earned a Metallurgical Engineer's degree from the Colorado School of Mines and
earned an MBA from Columbia University.
Gregory P. Cozzi joined the Company's Board of Directors in December 1997,
following the Company's merger with Cozzi Iron & Metal. Mr. Cozzi has been
employed by Cozzi Iron & Metal since 1977 and became Executive Vice President
and Secretary in December 1997. Since 1977, Mr. Cozzi has been a Vice President
of Cozzi Iron & Metal. Mr. Cozzi is a graduate of Northern Michigan University.
Mr. Cozzi is the brother of Albert A. Cozzi and Frank J. Cozzi.
Gerard M. Jacobs joined the Company's Board of Directors in August 1995.
Mr. Jacobs served as the Company's Chief Executive Officer and as a member of
the Executive Committee of the Company's Board of Directors from April 1996
through February 1999, when he resigned from such positions in connection with
the sale of the Company's Superior Forge, Inc. subsidiary to a corporation
formed by Mr. Jacobs. From April 1996 through December 1997, Mr. Jacobs also
served as the Company's President. From August 1995 through April 1996, Mr.
Jacobs served as the Company's Co-Chairman of the Board, Co-President and Co-
Chief Executive Officer. Mr. Jacobs is currently the Chief Executive Officer of
Huntington Alu-Tech, Inc., which is a holding company formed in part to acquire
Superior Forge, Inc. from the Company. From 1983 to 1995, Mr. Jacobs developed
resource recovery, landfill and hydroelectric projects for his own account and
for the investment banking firm of Russell, Rea & Zappala, Inc. in Pittsburgh,
Pennsylvania. Mr. Jacobs is a director of Crown Group, Inc., a publicly traded
company engaged in various businesses. Mr. Jacobs is a graduate of Harvard
University and the University of Chicago School of Law. Mr. Jacobs is also a
director of Chicago Inner-City Games Foundation.
Eugene C. McCaffery joined the Company's Board of Directors in January
1999. Since June 1998, Mr. McCaffery has served as Chief Executive Officer and a
director of ValueVision International, Inc., a NASDAQ-listed integrated direct
marketing company. In 1996, Mr. McCaffery founded Marketing Advocates, a
celebrity-driven product and marketing development company. From 1995 through
1996, Mr. McCaffery served as Senior Executive Vice President of Montgomery Ward
& Co., Incorporated in charge of its merchandising, strategic planning,
advertising and marketing operations. Prior to 1995, Mr. McCaffery held various
executive positions with Montgomery Ward. While at Montgomery Ward, Mr.
McCaffery also served as Vice Chairman of The Signature Group, a subsidiary of
Montgomery Ward and one of the nation's largest direct marketing companies.
Kenneth A. Merlau joined the Company's Board of Directors in July 1998.
From November 1998 through May 1999, Mr. Merlau served as an Executive Vice
President of the Company. Since June 1993, Mr. Merlau has served as Chairman of
Clipper Development Company, a business advisory service for owned and invested
companies and a strategic and operations consultant to emerging private
companies. Mr. Merlau is a graduate of Purdue University and earned an MBA from
the University of Chicago. Mr. Merlau previously served on the Company's Board
of Directors from September 1997 through November 1997.
Timothy T. Orlowski joined the Company's Board of Directors in November
1998. Since 1980, Mr. Orlowski has served in various management positions, most
recently as Executive Vice President-
3
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Operations, for Arlington Metals Corporation, headquartered in Franklin Park,
Illinois. In this position, Mr. Orlowski has been responsible for operating two
facilities with over 100 employees. In addition, Mr. Orlowski has owned, and
been President of, Tisha-K Corporation, an independent transportation company,
since 1984.
William T. Proler joined the Company's Board of Directors in August 1997,
following the Company's acquisition of Proler Southwest Inc. and Proler
Steelworks L.L.C. (collectively, "Proler Southwest"). Since 1992, he has served
as President and Chief Executive Officer of Proler Southwest Inc., and since
1994, he has served as manager of Proler Steelworks L.L.C.
Daniel B. Burgess has served as an Executive Vice President of the Company
since September 1995. Prior to July 1996, Mr. Burgess served as Executive Vice
President responsible for certain business operations which were subsequently
discontinued by the Company. From June 1992 through September 1995, Mr. Burgess
served as a Global Account Manager and Marketing Manager for AT&T Corp. Mr.
Burgess is a graduate of Rice University and earned an MBA from Southern
Methodist University.
David A. Carpenter has served as the Company's Executive Vice President,
Administration, Legal & Regulatory Affairs since July 1999 and as Secretary
since March 1998. Mr. Carpenter served as the Company's Vice President and
General Counsel from March 1998 through July 1999. From October 1987 through
March 1998, Mr. Carpenter was a corporate and securities law practitioner in the
Chicago and London offices of Mayer, Brown & Platt, where he was a partner from
and after January 1, 1997. Mr. Carpenter is a graduate of the University of
Illinois and DePaul University College of Law. Mr. Carpenter is a director of
Metropolitan Family Services, a Chicago-based charitable organization. Mr.
Carpenter is also a member of the American Bar Association, the Chicago Bar
Association and the American Society of Corporate Secretaries.
Robert C. Larry has served as the Company's Executive Vice President,
Finance, Treasurer and Chief Financial Officer since April 1999. From August
1996 through April 1999, Mr. Larry served as the Company's Vice President,
Finance, Treasurer and Chief Financial Officer. From March 1995 through August
1996, he served as Director of Finance and Investments for Caremark
International, Inc., a diversified, publicly traded company engaged in providing
health care services. In 1991, Mr. Larry co-founded The Grabscheid Group, Ltd.,
a professional services firm which specialized in financial restructuring and
recapitalization services for private and publicly held firms. Mr. Larry is a
graduate of Purdue University and earned an MBA from the University of Chicago.
Mr. Larry is a certified public accountant.
Amit N. Patel has served as the Company's Vice President, Finance and
Controller since June 1999. From February 1997 through June 1999, Mr. Patel
served as the Company's Controller. From November 1993 through February 1997,
Mr. Patel served as Manager, Financial Reporting and Analysis for Caremark
International, Inc., a diversified, publicly traded company engaged in providing
health care services. He is a graduate of Miami University. Mr. Patel is a
certified public accountant.
Larry S. Snyder has served as the Company's Vice President, Non-Ferrous
since December 1997. From November 1983 through December 1997, Mr. Snyder served
as Vice President, Non-Ferrous for Cozzi Iron & Metal. Mr. Snyder is a graduate
of the University of Illinois. He has served as President of the Chicago Chapter
of ISRI.
DIRECTOR COMPENSATION
Directors are paid a fee of $1,000 for each board or committee meeting
attended in person (other than board and committee meetings held on the same
day) and are reimbursed for their reasonable expenses in attending such
meetings. Under the Company's 1998 Director Option Plan (the "1998 Director
Plan"), each non-employee director of the Company (an "Outside Director") is
automatically granted an option to purchase shares of Common Stock having a
value equal to $30,000, as determined using the Black-Scholes valuation method,
on the first day of each fiscal year (pro-rated if the person becomes a director
after the first day of any fiscal year).
4
<PAGE> 5
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of the
relationship on Form 3 and changes in ownership on Forms 4 or 5 with the
Securities and Exchange Commission (the "SEC") and the NASDAQ. These officers,
directors and ten percent shareholders are also required by SEC rules to furnish
the Company with copies of all forms they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that its officers, directors and ten percent shareholders have complied
with all applicable Section 16(a) filing requirements, except for the following:
- Kenneth A. Merlau, a director of the Company, was late in filing a report
on Form 3 and late in filing a report on Form 4 relating to the purchase
of Common Stock in a single transaction;
- Eugene C. McCaffery, a director of the Company, was late in filing a
report on Form 3;
- Joseph F. Naporano, a director of the Company, was late in filing a
report on Form 3;
- Timothy T. Orlowski, a director of the Company, was late in filing a
report on Form 3;
- William T. Proler, a director of the Company, was late in filing a report
on Form 3;
- Harold Rubenstein, a former director of the Company, was late in filing
five reports on Form 4 relating to the sale of Common Stock in
twenty-nine separate transactions;
- Daniel B. Burgess, an officer of the Company, was late in filing a report
on Form 3; and
- Larry S. Snyder, an officer of the Company, was late in filing a report
on Form 5 for the fiscal year ended March 31, 1999 relating to a gift of
Common Stock received in a single transaction.
5
<PAGE> 6
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information with respect to those persons
who: (i) served as the chief executive officer of the Company during the fiscal
year ended March 31, 1999; and (ii) were the most highly compensated executive
officers of the Company at March 31, 1999 whose total annual salary and bonus
exceeded $100,000 for the year. Compensation paid to these individuals for the
years ended March 31, 1999, 1998 and 1997 is as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------------ -------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND FISCAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARD(S) WARRANTS(#) PAYOUTS SATION(2)
- ------------------ ------ -------- -------- --------- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. Benjamin Jennings(3)....... 1999 $275,016 $ 68,750 $ -- $ -- -- $ -- $ 7,796
Chairman of the Board and 1998 257,180 118,750 -- -- 725,000 -- 13,501
Chief Executive Officer 1997 165,500 -- -- -- 200,000 -- 8,896
Gerard M. Jacobs(4)........... 1999 275,057 68,750 -- -- -- -- 9,518
Chief Executive Officer 1998 269,180 118,750 -- -- 725,000 -- 13,912
1997 177,500 -- -- -- 200,000 -- 7,505
Albert A. Cozzi(5)............ 1999 275,016 68,750 -- -- -- -- 4,257
President and 1998 91,672 31,383 -- -- -- -- 5,793
Chief Operating Officer 1997 N/A
Frank J. Cozzi(6)............. 1999 275,004 68,750 -- -- -- -- 7,954
Vice President 1998 93,751 39,300 -- -- -- -- 5,299
1997 N/A
George A. Isaac, III(7)....... 1999 275,000 68,750 -- -- -- -- 14,571
Executive Vice President 1998 221,539 68,750 -- -- 76,923 -- 19,120
1997 N/A
Larry S. Snyder(8)............ 1999 300,000 24,600 -- -- 123,750(9) -- 20,636
Vice President, Non-Ferrous 1998 100,000 3,175 -- -- 165,000(9) -- 353,271
1997 N/A
</TABLE>
- ---------------
(1) The dollar value of perquisites and other personal benefits did not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus reported
for each of the named executive officers.
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<PAGE> 7
(2) All other compensation for each named executive officer consists of the
following:
<TABLE>
<CAPTION>
HEALTH
INSURANCE LONG-TERM 401K AND
PREMIUMS LIFE DISABILITY PROFIT
FISCAL AND OTHER INSURANCE INSURANCE SHARING
NAME YEAR HEALTH BENEFITS PREMIUMS PREMIUMS MATCH OTHER(A) TOTAL
---- ------ --------------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
T. Benjamin Jennings.... 1999 $ 7,796 $ -- $ -- $ -- $ -- $ 7,796
1998 13,501 -- -- -- -- 13,501
1997 8,476 -- 420 -- -- 8,896
Gerard M. Jacobs........ 1999 9,518 -- -- -- -- 9,518
1998 13,912 -- -- -- -- 13,912
1997 6,941 -- 564 -- -- 7,505
Albert A. Cozzi......... 1999 4,257 -- -- -- -- 4,257
1998 2,300 -- -- 3,493 -- 5,793
1997 N/A
Frank J. Cozzi.......... 1999 4,257 400 797 2,500 -- 7,954
1998 1,419 121 266 3,493 -- 5,299
1997 N/A
George A. Isaac, III.... 1999 1,035 11,698 1,033 805 -- 14,571
1998 764 11,698 2,018 4,640 -- 19,120
1997 N/A
Larry S. Snyder......... 1999 4,256 400 870 2,500 12,610 20,636
1998 1,627 133 290 3,493 347,728 353,271
1997 N/A
</TABLE>
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(a) The amounts shown for Mr. Snyder include payments made to him pursuant
to a deferred compensation plan that the Company assumed in connection
with its acquisition of Cozzi Iron & Metal.
(3) Mr. Jennings resigned as the Company's Chairman of the Board and Chief
Executive Officer on July 15, 1999.
(4) Mr. Jacobs resigned as the Company's Chief Executive Officer on February 12,
1999.
(5) Mr. Cozzi joined the Company on September 1, 1997 and served without
compensation until December 1, 1997, when the Company acquired Cozzi Iron &
Metal.
(6) Mr. Cozzi joined the Company on December 1, 1997, following the Company's
acquisition of Cozzi Iron & Metal.
(7) Mr. Isaac joined the Company on June 23, 1997, following the Company's
acquisition of the Isaac Group.
(8) Mr. Snyder joined the Company on December 1, 1997, following the Company's
acquisition of Cozzi Iron & Metal.
(9) Pursuant to the Company's Voluntary Option/Warrant Exchange Program, the
options granted to Mr. Snyder in fiscal 1998 were terminated and exchanged
for new options granted in fiscal 1999. See "-- Ten-Year Option Repricing."
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OPTION AND WARRANT GRANTS IN FISCAL 1999
The following table sets forth information concerning grant of stock
options and warrants to the named executive officers during fiscal 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZATION
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL ANNUAL RATE OF
UNDERLYING OPTIONS/WARRANTS STOCK APPRECIATION FOR
OPTIONS AND GRANTED TO OPTION/WARRANT TERM(1)
WARRANTS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ---- ----------- ---------------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
T. Benjamin Jennings....... 0 0% $ -- -- $ -- $ --
Gerard M. Jacobs........... 0 0% -- -- -- --
Albert A. Cozzi............ 0 0% -- -- -- --
Frank J. Cozzi............. 0 0% -- -- -- --
George A. Isaac, III....... 0 0% -- -- -- --
Larry S. Snyder............ 123,750(2) 3.9% 3.87 11/30/03 9,122 136,926
</TABLE>
- ---------------
(1) In accordance with SEC rules, these columns show gains that might exist for
the respective options and warrants, assuming the market price of the
Company's Common Stock appreciates from the date of grant over the term of
the option/warrant at the annualized rates of five and ten percent,
respectively. If the stock price does not increase above the exercise price
at the time of exercise, realized value to these named executives will be
zero.
(2) The Company granted Mr. Snyder an option pursuant to the Company's Voluntary
Option/Warrant Exchange Program, whereby an option originally granted to Mr.
Snyder in fiscal 1998 was exchanged for a new option with a lower exercise
price, but which allowed Mr. Snyder to purchase only 0.75 shares of Common
Stock for every share of Common Stock for which the original option allowed.
The new option vests ratably over three years from the date of grant. See
"-- Ten-Year Option Repricing."
AGGREGATED OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION AND WARRANT VALUES
The following table sets forth the employee stock options and warrants
exercised during fiscal 1999 by each named executive officer and the number and
value of securities underlying unexercised options and warrants held by each
named executive officer at March 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AND WARRANTS OPTIONS AND WARRANTS
ACQUIRED ON VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- -------- ------------------------- ---------------------------------
<S> <C> <C> <C> <C>
T. Benjamin Jennings... 0 $0 1,008,333/0 $0/$0
Gerard M. Jacobs....... 0 0 1,008,333/0 0/0
Albert A. Cozzi........ 0 0 755,172/0 0/0
Frank J. Cozzi......... 0 0 582,760/0 0/0
George A. Isaac, III... 0 0 768,888/0 0/0
Larry S. Snyder........ 0 0 0/123,750 0/0
</TABLE>
- ---------------
(1) Based on March 31, 1999 closing price of Common Stock of $1.594.
TEN-YEAR OPTION REPRICING
The Compensation Committee and the Board of Directors each believe that the
future growth and success of the Company is dependent upon its ability to
attract and retain executive officers and other key employees.
On December 1, 1998, the Board of Directors provided most of the Company's
employees with a Voluntary Option/Warrant Exchange Program pursuant to which
employees holding employee stock options
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<PAGE> 9
or warrants ("Old Options/Warrants") could voluntarily surrender and relinquish
their existing Old Options/ Warrants and receive new employee stock options or
warrants ("New Options/Warrants"). Each employee who participated in the
Voluntary Option/Warrant Exchange Program received New Options/Warrants giving
him or her the right to purchase shares of Common Stock equal to 75% of number
of shares of Common Stock under his or her Old Options/Warrants. The New
Options/Warrants were granted at an exercise price of $3.87 per share, which
represented 125% of the closing price of the Company's Common Stock on December
1, 1998. The New Options/Warrants vest ratably over a three year period. Stock
options to purchase a total of 1,513,900 shares of Common Stock, with a weighted
average exercise price of $14.42 per share, were terminated in exchange for new
stock options to purchase a total of 1,135,425 shares of Common Stock. Warrants
to purchase a total of 245,000 shares of Common Stock, with a weighted average
exercise price of $10.76 per share, were terminated in exchange for new warrants
to purchase a total of 183,750 shares of Common Stock.
Set forth below is information for each executive officer that participated
in the Voluntary Option/ Warrant Exchange Program.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF NUMBER OF ORIGINAL
SECURITIES MARKET PRICE SECURITIES EXERCISE OPTION TERM
DATE UNDERLYING OF COMMON UNDERLYING PRICE AT NEW REMAINING AT
OF OPTIONS STOCK AT TIME NEW OPTIONS TIME OF EXERCISE DATE OF
NAME REPRICING REPRICED OF REPRICING GRANTED REPRICING PRICE REPRICING
- ---- --------- ---------- ------------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel B. Burgess.......... 12/1/98 7,500 $3.09 5,625 $19.00 $3.87 4.17 yrs
David A. Carpenter......... 12/1/98 50,000 3.09 37,500 12.63 3.87 4.25 yrs
12/1/98 15,000 3.09 11,250 17.00 3.87 4.25 yrs
12/1/98 15,000 3.09 11,250 18.00 3.87 4.25 yrs
Robert C. Larry............ 12/1/98 25,000 3.09 18,750 12.00 3.87 3.41 yrs
12/1/98 5,000 3.09 3,750 19.00 3.87 4.17 yrs
Amit N. Patel.............. 12/1/98 15,000 3.09 11,250 10.00 3.87 3.41 yrs
12/1/98 5,000 3.09 3,750 19.00 3.87 4.17 yrs
Larry S. Snyder............ 12/1/98 100,000 3.09 75,000 21.13 3.87 4.00 yrs
12/1/98 50,000 3.09 37,500 12.63 3.87 4.25 yrs
12/1/98 15,000 3.09 11,250 12.75 3.87 4.32 yrs
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Albert A. Cozzi,
Frank J. Cozzi and George A. Isaac, III (each, an "Executive"). The terms of
each Executive's employment agreement are substantially the same. Each agreement
provides an initial minimum annual base salary of $275,000, subject to periodic
adjustments, plus a minimum cash bonus equal to 25% of the Executive's
then-current base salary. Each employment agreement also restricts the
Executive's ability to compete with the Company during the term of the agreement
and for three years following the termination of his employment.
The employment agreement of each Executive has a term of five years,
beginning on December 1, 1997 or, in the case of Mr. Isaac, June 23, 1997. The
employment agreements with Messrs. A. Cozzi and F. Cozzi provide that on each
anniversary the term is automatically extended for one additional year unless
either the Company or the Executive elects prior to such anniversary not to
extend the term. The employment agreement with Mr. Isaac provides that, after
the initial five-year term, the agreement is automatically extended for one-year
periods unless either the Company or Mr. Isaac elects prior to such anniversary
not to extend the term.
As additional compensation under their employment agreements, the Company
issued warrants to each Executive to purchase Common Stock. Each of Messrs. A.
Cozzi and F. Cozzi received warrants to purchase: (a) 377,586 and 291,380 shares
of Common Stock, respectively, at an exercise price of $5.91 per share,
exercisable until December 1, 2002; and (b) 377,586 and 291,380 shares of Common
Stock, respectively, at an exercise price of $15.84 per share, exercisable until
December 1, 2002. Mr. Isaac received warrants to purchase: (x) 76,923 shares of
Common Stock at an exercise price of $13.00 per share, which expired
9
<PAGE> 10
unexercised; and (y) 287,500 shares of Common Stock at an exercise price of
$11.70 per share, exercisable until June 23, 2002.
Each employment agreement also contains certain provisions in the event the
Executive is terminated due to a "change in control" of the Company (as such
term is defined in each employment agreement), including, in the case of Mr.
Isaac, the cessation of Gerard M. Jacobs as the Chief Executive Officer of the
Company. The employment agreements with Messrs. A. Cozzi and F. Cozzi provide
that such Executives will be entitled to receive, in addition to other benefits,
a cash payment equal to: (i) any accrued but unpaid salary, pro-rated bonus,
pro-rated vacation and any other amounts accrued but unpaid at the time of
termination, and (ii) a lump-sum payment equal to the greater of: (A) the
Executive's then-current salary and annual cash bonus for the balance of the
term of the employment agreement, or (B) the product of 5.00 multiplied by the
highest total annual cash compensation earned in any one of the previous three
calendar years. The employment agreement with Mr. Isaac provides that he will be
entitled to receive, in addition to other benefits, a cash payment equal to the
greater of: (a) Mr. Isaac's then-current salary and annual cash bonus for the
balance of the term of the employment agreement; or (b) the product of 2.99
multiplied by the highest total annual cash compensation earned in any one of
the previous three calendar years. However, in no event will the formula used to
calculate this cash payment to Mr. Isaac be less than that for any other member
of the Executive Committee. Any payment made pursuant to the employment
agreements in connection with a change in control would likely exceed $1
million.
The Company has also entered into an employment agreement with Larry S.
Snyder. The employment agreement has a term of five years, beginning on November
30, 1998. The agreement provides for an initial base salary of $300,000, plus a
cash bonus subject to the discretion of the Executive Committee of the Board of
Directors. The employment agreement allows the Company to terminate the
agreement with cause under specified circumstances and without cause upon ninety
days' prior written notice. The employment agreement also contains provisions in
the event Mr. Snyder is terminated following a "change of control" of the
Company (as such term is defined in his employment agreement). The employment
agreement provides that Mr. Snyder will be entitled to receive, in addition to
all other benefits, a cash payment equal to the greater of (i) Mr. Snyder's
then-current salary and annual cash bonus for the balance of the term of his
employment agreement (but in no event to be less than three years) or (ii) the
product of 3.00 multiplied by Mr. Snyder's highest total annual cash
compensation in any one of the three preceding calendar years.
In addition to the employment agreements discussed above, the Company has
entered into numerous other employment agreements with certain key employees of
the companies it has acquired. The employment agreements have durations of one
to ten years and generally contain provisions concerning the employee's duties,
salary, bonus and benefits. Each employment agreement contains a confidentiality
provision and also restricts the employee's ability to compete with the Company
during the term of the agreement and for two to five years after employment is
terminated. Furthermore, each employment agreement allows the Company to
terminate the employee for "cause" (as such term is defined in each employment
agreement), and certain employment agreements allow the Company or the employee
to terminate the agreement without cause upon thirty to ninety days' prior
written notice to the other party.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Merlau and Orlowski. Mr.
Merlau currently serves as a director of the Company and, from November 1998
through May 1999, served as an Executive Vice President of the Company. Mr.
Orlowski currently serves as a director of the Company.
Messrs. T. Benjamin Jennings, Rod F. Dammeyer and Christopher G. Knowles
also served on the Compensation Committee during the year ended March 31, 1999.
Mr. Jennings is a former director, Chairman of the Board and Chief Executive
Officer of the Company. Messrs. Dammeyer and Knowles are former directors of the
Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In establishing and monitoring executive compensation, the Compensation
Committee (the "Committee") focuses on the Company's mission to continually
improve its position in the scrap metals industry, with a strong focus on
improving cash flow and increasing shareholder value. The Company's executive
compensa-
10
<PAGE> 11
tion policy is designed to enable the Company to attract, retain and motivate
the high caliber executives which the Board of Directors and the Committee
believe are required in order to achieve the Company's objectives. The Company's
compensation structure emphasizes pay-for-performance and stockholder value with
the goal of linking compensation to stockholder return and financial performance
of the Company by placing a significant portion of an executive's compensation
at risk. Each executive officer's compensation, including that of Mr. A. Cozzi,
is comprised of three elements: (i) base salary; (ii) annual bonus; and (iii)
incentive compensation. Overall, executive compensation levels are established
based on the Committee's evaluation of market terms and conditions coupled with
the Board of Director's view of what is necessary to attract and retain key
executive officers. Adjustments are made to each executive officer's total
compensation package based on changes in market factors as well as each
individual's contribution to Company performance. In addition, the Company
grants stock options as an additional element of compensation. The total number
of options awarded each executive is based on a subjective evaluation of the
performance of each executive under consideration without regard to the number
of options held by or previously granted to each executive. At no point during
the last completed fiscal year did the Company's Board of Directors modify or
reject in any material way any action or recommendation of the Committee.
The Committee is responsible for evaluating the compensation levels of the
Company's Chairman of the Board, Chief Executive Officer, President, Chief
Operating Officer and certain other executive officers. It is also responsible
for recommending general compensation practices to be applied to other employees
of the Company. In the fiscal year ended March 31, 1999, in light of the
financial performance of the Company, the Committee did not recommend the
payment of any discretionary bonuses or the issuance of any non-cash
discretionary compensation to T. Benjamin Jennings, the Company's former
Chairman of the Board and Chief Executive Officer, Albert A. Cozzi, George A.
Isaac, III or Frank J. Cozzi, each of whom is an executive who had his
compensation directly reviewed by the Committee. Accordingly, each of these
executives received only the cash compensation to which he was entitled under
his employment contract for the fiscal year ended March 31, 1999.
During the fiscal year ended March 31, 1999, in light of the decline in the
market value of the Company's Common Stock, the Committee recommended that the
Company reprice the Old Options/Warrants held by employees of the Company, other
than the Chairman of the Board, Chief Executive Officer, President and Chief
Operating Officer. In accordance with the Voluntary Option/Warrant Exchange
Program, which was effected as of December 1, 1998, each eligible employee was
entitled to exchange his or her Old Options/ Warrants for New Options/Warrants.
The New Options/Warrants gave each person who took part in the exchange the
right to purchase shares of Common Stock in an amount equal to 75% of the number
of shares of Common Stock under his or her Old Options/Warrants, at a price
equal to 125% of the closing price of the Common Stock on December 1, 1998
($3.87). The New Options/Warrants are also subject to a new three year vesting
schedule, notwithstanding the vesting schedule applicable to the Old
Options/Warrants. The Voluntary Option/Warrant Exchange Program was recommended
by the Committee in order to provide meaningful equity-based incentives to the
Company's key employees in light of the decline in the market price of the
Company's Common Stock and, thereby, assist the Company in securing the
continued employment of the effected employees. See "-- Ten-Year Option
Repricing."
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
Company's deduction for compensation paid to the Chief Executive Officer and the
four other most highly compensated executive officers of the Company to $1
million unless certain requirements are met. The policy of the Company and the
Compensation Committee is to establish and maintain a compensation program which
will optimize the deductibility of compensation. The Company, however, reserves
the right to authorize compensation which may not be fully deductible by the
Company.
The Compensation Committee
Kenneth A. Merlau
Timothy T. Orlowski
11
<PAGE> 12
The Compensation Committee Report on Executive Compensation and related
disclosure, including the Stock Price Performance Graph, shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
12
<PAGE> 13
STOCK PRICE PERFORMANCE GRAPH
The following graph compares total return of the Company's Common Stock
during the five year period beginning March 31, 1994, with the NASDAQ Composite
Index and the Russell 2000 Index. Each index assumes $100 invested at the close
of trading on March 31, 1994, and reinvestment of dividends.
[Stock Price Performance Graph]
<TABLE>
<CAPTION>
MTLM NASDAQ RUSSELL 2000
---- ------ ------------
<S> <C> <C> <C>
'1994' 100.00 100.00 100.00
'1995' 77.10 109.92 103.87
'1996' 216.68 148.50 131.75
'1997' 415.55 164.33 138.99
'1998' 682.69 246.91 191.46
'1999' 75.70 331.07 158.38
</TABLE>
13
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1999 by: (i) each person
who is known by the Company to own more than 5% of the Company's Common Stock;
(ii) the directors, the chief executive officer and each of the executive
officers of the Company named in the Summary Compensation Table; and (iii) all
current officers and directors as a group. Share amounts and percentages shown
for each person or entity are adjusted to give effect to shares of the Company's
Common Stock that are not outstanding but may be acquired by a person or entity
upon exercise of all options and warrants exercisable by such entity or person
within 60 days March 31, 1999. However, those shares of Common Stock are not
deemed to be outstanding for the purpose of computing the percentage of
outstanding shares beneficially owned by any other person.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES TOTAL SHARES
- --------------------------------------- ---------- ------------
<S> <C> <C>
Albert A. Cozzi............................................. 6,509,098(2) 13.1%
500 N. Dearborn St., Suite 405
Chicago, IL 60610
Frank J. Cozzi.............................................. 5,043,350(3) 10.2%
2232 S. Blue Island Ave.
Chicago, IL 60608
T. Benjamin Jennings........................................ 1,746,349(4) 3.5%
Gerard M. Jacobs............................................ 1,538,051(5) 3.1%
Gregory P. Cozzi............................................ 1,403,752(6) 2.9%
George A. Isaac, III........................................ 1,315,744(7) 2.6%
Joseph F. Naporano.......................................... 1,213,924(8) 2.5%
William T. Proler........................................... 758,350 1.6%
Kenneth A. Merlau........................................... 234,831(9) *
Timothy T. Orlowski......................................... 35,000(10) *
Eugene C. McCaffery......................................... 10,000(11) *
Larry S. Snyder............................................. 2,000 *
All current officers and directors as a group (16 20,029,005 37.4%
persons)..................................................
</TABLE>
- ---------------
* Less than 1%
(1) Except as disclosed in the notes below, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) Includes warrants to purchase 755,172 shares of Common Stock.
(3) Includes warrants to purchase 582,760 shares of Common Stock.
(4) Includes warrants to purchase 808,333 shares of Common Stock and options to
purchase 200,000 shares of Common Stock.
(5) Includes warrants to purchase 808,333 shares of Common Stock and options to
purchase 200,000 shares of Common Stock.
(6) Includes warrants to purchase 162,070 shares of Common Stock.
(7) Includes warrants to purchase 768,888 shares of Common Stock.
(8) Includes 730,866 shares of Common Stock held by JANX Partners, L.P., a
partnership in which Mr. Naporano shares voting and investment power over
the shares.
(9) Includes warrants to purchase 75,000 shares of Common Stock and options to
purchase 10,000 shares of Common Stock.
(10) Includes options to purchase 10,000 shares of Common Stock.
(11) Includes options to purchase 10,000 shares of Common Stock.
14
<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALE OF SUPERIOR FORGE
On March 12, 1999, the Company completed the sale of its Superior Forge,
Inc. ("Superior Forge") subsidiary to a corporation formed by the Company's
former Chief Executive Officer, Gerard M. Jacobs. The Company's proceeds from
the sale consisted of approximately $13.6 million in cash and a promissory note
in the aggregate principal amount of $2.5 million. In addition, under the stock
purchase agreement governing the sale of Superior Forge, the Company will
receive an additional $1.0 million "success fee" if Superior Forge achieves
EBITDA (as defined in the stock purchase agreement) in excess of $6.25 million
in any of the five years following the closing.
PRIVATE SALE OF RESTRICTED COMMON STOCK
On January 22, 1999, the Company entered into a stock purchase agreement
with certain officers and directors of the Company. Pursuant to the stock
purchase agreement, the Company issued an aggregate of 192,000 shares of
restricted Common Stock to those officers and directors for an aggregate
purchase price of $384,000. See Proposal Three, "Approval and Ratification of
the Issuance of Common Stock Previously Issued in a Private Placement to Certain
Officers and Directors of the Company."
ACQUISITION OF THE ISAAC GROUP, PROLER SOUTHWEST, COZZI IRON & METAL AND
NAPORANO
George A. Isaac, III, a member of the Board of Directors and Executive Vice
President of the Company, is the former principal stockholder of the companies
of the Isaac Group, which the Company acquired on June 23, 1997. In exchange for
all of the outstanding stock of the Isaac Group, the Company paid $36.5 million
in cash, and issued an aggregate of 1,942,857 shares of Common Stock and
warrants to purchase an aggregate of 462,500 shares of Common Stock at exercise
prices ranging from $10.80 to $11.70 per share. The Common Stock and warrants
were recorded as purchase consideration at their fair value of $24.1 million.
The purchase price was negotiated at arms-length by the Company with the
stockholders of the Isaac Group. The Company also issued Mr. Isaac warrants to
purchase 287,500 shares of Common Stock at an exercise price of $11.70 per share
in consideration for entering into a non-compete agreement with the Company.
These warrants were recorded at their fair value of $1.8 million. In addition,
the Company issued warrants to purchase 76,923 shares of Common Stock at an
exercise price of $13.00 per share in consideration for services rendered or to
be rendered to the Company. These warrants have since expired unexercised.
William T. Proler, a member of the Board of Directors of the Company, is
the former principal stockholder of Proler Southwest, which the Company acquired
on August 28, 1997. In exchange for all of the outstanding stock of Proler
Southwest, the Company paid $18.0 million in cash, and issued an aggregate of
1,750,000 shares of Common Stock and warrants to purchase an aggregate of
375,000 shares of Common Stock at an exercise price of $6.00 per share. The
Common Stock and warrants were recorded as purchase consideration at their fair
value of $12.7 million. The purchase price was negotiated at arms-length by the
Company with the stockholders of Proler Southwest.
Albert A. Cozzi, a member of the Board of Directors, President and Chief
Operating Officer of the Company, Frank J. Cozzi, a member of the Board of
Directors and Vice President of the Company, and Gregory P. Cozzi, a member of
the Board of Directors of the Company, are the former principal stockholders of
Cozzi Iron & Metal, which the Company acquired on December 1, 1997. In exchange
for all of the outstanding stock of Cozzi Iron & Metal, the Company paid $6.0
million in cash, and issued an aggregate of 11,499,986 shares of Common Stock,
warrants to purchase an aggregate of 750,001 shares of Common Stock at an
exercise price of $5.91 per share and warrants to purchase 750,001 shares of
Common Stock at an exercise price of $15.84 per share. The Common Stock and
warrants were recorded as purchase consideration at their fair value of $73.4
million. The purchase price was negotiated at arms-length by the Company with
the stockholders of Cozzi Iron & Metal.
Joseph F. Naporano, a member of the Board of Directors and Vice Chairman of
the Board of the Company, is the former principal stockholder of Naporano, which
the Company acquired on July 1, 1998. In
15
<PAGE> 16
exchange for all of the outstanding stock of Naporano, the Company paid $84.0
million in cash, and issued an aggregate of 1,938,879 shares of Common Stock.
The Common Stock was recorded as purchase consideration at its fair value of
$18.5 million. The purchase price was negotiated at arms-length by the Company
with the stockholders of Naporano.
STOCKHOLDERS AGREEMENTS
T. Benjamin Jennings, a former director and former Chairman of the Board
and Chief Executive Officer of the Company ("Mr. Jennings"), Albert A. Cozzi,
Frank J. Cozzi and Gregory P. Cozzi (the "Cozzi Shareholders") and Samstock,
L.L.C. ("Samstock") (collectively, the "Shareholders") together own
approximately 28% of the Company's issued and outstanding Common Stock as of
March 31, 1999 (without giving effect to the issuance of Common Stock issuable
upon exercise of warrants and options granted by the Company).
Pursuant to the amended and restated stockholders' agreement (the
"Stockholders Agreement"), dated February 12, 1999, among Mr. Jennings, the
Cozzi Shareholders, Samstock and the Company, the Shareholders have agreed that
the Company's Board of Directors shall consist of twelve persons until the
second annual meeting of the shareholders held after the date of the
Stockholders Agreement. In addition, the Shareholders have agreed that (i) Mr.
Jennings will have the right to designate three persons as nominees for
directors, provided that at least one of the nominees must be independent and
reasonably acceptable to the Cozzi Shareholders; (ii) the Cozzi Shareholders
will have the right to designate five persons as nominees for directors,
provided that at least one of the nominees must be independent and reasonably
acceptable to Mr. Jennings; and (iii) so long as the Purchaser Condition, as
defined in the following sentence, is satisfied, Samstock has the right to
designate either Sam Zell or Rod F. Dammeyer as a nominee for director. The
Purchaser Condition is satisfied if both: (a) the date is prior to December 19,
2000, and (b) Samstock and its Permitted Transferees (as such term is defined in
the Stockholders Agreement) have not sold or transferred more than one-third of
their shares (including shares issuable upon the exercise of warrants). The
Stockholders Agreement further requires each Shareholder to vote for the other
parties' nominees for election to the Board of Directors. The remaining nominees
for directors will be recommended by the Nominating Committee of the Board of
Directors, which is currently comprised of Messrs. A. Cozzi, Kenneth A. Merlau,
Joseph F. Naporano and William T. Proler.
In connection with his resignation from the Board of Directors of the
Company in July 1999, Mr. Jennings renounced his right to designate nominees for
election. In addition, Samstock currently has elected not to exercise its right
to designate either Mr. Zell or Mr. Dammeyer for election to the Company's Board
of Directors.
Under the Stockholders Agreement, Mr. Jennings and the Cozzi Shareholders
are prohibited from transferring or disposing of their shares, or any interest
therein, for the term of the agreement except in accordance with the terms of
the Stockholders Agreement. If Mr. Jennings desires to sell his shares of Common
Stock, he must first offer his shares to the Cozzi Shareholders and to the
Company, in that order, before selling to a third party. If any of the Cozzi
Shareholders desire to sell their shares of Common Stock, they must first offer
their shares to the remaining Cozzi Shareholders, Mr. Jennings and the Company,
in that order, before selling to a third party. Also, if either Mr. Jennings or
the Cozzi Shareholders receive an offer to buy their shares from a third party,
they generally must offer the other Shareholders (including Samstock) the right
to participate in the offer on the same terms and conditions.
In connection with the Company's acquisition of Proler Southwest Inc., the
former equity owners of Proler Southwest Inc. (the "Proler Shareholders")
entered into a two-year stockholders agreement with T. Benjamin Jennings, dated
August 27, 1997, pursuant to which the parties agree to vote their shares of
Common Stock in favor of William T. Proler (or, if he is unable to serve,
another individual chosen by the Proler Shareholders) as a director of the
Company.
16
<PAGE> 17
DESIGNATION OF JOSEPH F. NAPORANO AS A NOMINEE FOR DIRECTOR
Pursuant to the stock purchase agreement, dated May 24, 1998 (the "Stock
Purchase Agreement"), among the Company, Andrew J. Naporano, Jr. and Joseph F.
Naporano (the "Naporano Shareholders"), and subject to the approval of the
Company's stockholders, the Company agrees to nominate Joseph F. Naporano or
Andrew J. Naporano, Jr. to the Board of Directors, and has so nominated Joseph
F. Naporano, until the earlier of: (i) July 1, 2001; and (ii) the date upon
which the Naporano Shareholders collectively own less than 50% of the Common
Stock issued to them pursuant to the terms of the Stock Purchase Agreement.
ISAAC GROUP NOTES
In connection with the Company's acquisition of the Isaac Group on June 23,
1997, the Company incurred $45.0 million of indebtedness to former Isaac Group
shareholders, of which $2.4 million remains outstanding (the "Isaac Notes"). The
Isaac Notes bear interest at a floating rate per annum equal to Bankers Trust
Company's prime rate as in effect from time to time, payable quarterly. As of
the date of this Proxy Statement, Bankers Trust Company's prime rate is 8.0%.
The Isaac Notes mature on February 15, 2000. The Isaac Notes are secured by a
letter of credit that is provided under the Company's credit facility and is
applied against the Company's availability thereunder.
During fiscal 1999, the Company repaid $19.8 million of outstanding Isaac
Notes before its due date in order to reduce the Company's overall financing
costs. The former Isaac Group shareholders were issued warrants to purchase
106,797 shares of Common Stock at an exercise price of $6.50 per share as
consideration for the prepayment, including warrants to purchase 18,888 shares
of Common Stock issued to George A. Isaac, III. The warrants expire on December
31, 2001.
LOANS TO GERARD M. JACOBS AND T. BENJAMIN JENNINGS
On July 22, 1998, Gerard M. Jacobs, a member of the Board of Directors and
former Chief Executive Officer of the Company, and T. Benjamin Jennings, a
former member of the Board of Directors, and former Chairman of the Board and
Chief Executive Officer of the Company, each executed a $500,000 Secured
Promissory Note ("Promissory Note") in favor of the Company, pursuant to which
the Company loaned each of them $500,000. Each Promissory Note is due on July
22, 1999 and bears interest at 10% per annum. In addition, Messrs. Jacobs and
Jennings each executed a Pledge Agreement, dated July 22, 1998 ("Pledge
Agreement"), whereby Messrs. Jacobs and Jennings pledged options to purchase
200,000 shares of Common Stock at an exercise price of $4.00 as security for
their respective Promissory Notes.
As part of the Company's sale of Superior Forge to a corporation formed by
Mr. Jacobs, the Promissory Note owing to the Company from Mr. Jacobs was
purchased from the Company by the company that acquired Superior Forge for the
principal amount thereof, plus accrued interest thereon. In connection with Mr.
Jennings' resignation as the Chairman of the Board and Chief Executive Officer
and as a director of the Company in July 1999, the Company agreed that, along
with certain other benefits and payments, it would forgive Mr. Jennings'
obligation under his Promissory Note, including accrued interest, during the
month of January 2000 provided Mr. Jennings complied with his obligations to the
Company under a severance agreement executed at the time of his resignation.
OTHER RELATED PARTY TRANSACTIONS
To facilitate a loan to the Company from a commercial bank, on January 7,
1997, Gerard M. Jacobs, T. Benjamin Jennings, each of whom is a director of the
Company, and certain former directors of the Company provided personal
guarantees to the bank. In consideration of the guarantees, the Company issued
warrants to these individuals (the "Guaranty Warrants") to purchase an aggregate
of 500,000 shares of Common Stock at $4.00 per share (subject to certain
restrictions). The Guaranty Warrants expire on or about January 7, 2002.
The Isaac Group leases certain property from Isaac Building Company, Ltd.,
a company in which George A. Isaac, III, a director and Executive Vice President
of the Company, is a shareholder. The property
17
<PAGE> 18
is subject to a lease which commenced with the acquisition of the Isaac Group on
June 23, 1997. The annual base rent for the property is approximately $317,000.
The actual rent paid was $317,438 during the year ended March 31, 1999 and
$238,079 during the period from June 23, 1997 through March 31, 1998.
Cozzi Iron & Metal utilizes certain printing services of Minute Man
Printing, a company in which Frank J. Cozzi, a director and Vice President of
the Company, has a 50% ownership interest. Cozzi Iron & Metal paid Minute Man
Printing $227,178 for these services during the year ended March 31, 1999 and
$77,990 for these services during the period from December 1, 1997 through March
31, 1998.
Naporano leases property from 303 Doremus Ave. L.P., a limited partnership
in which Joseph F. Naporano, a director and Vice Chairman of the Board of the
Company, has a 77% ownership interest. Naporano paid 303 Doremus Ave. L.P.
$120,010 in rent during the period from July 1, 1998 through March 31, 1999.
Naporano also provides management services to NAP Realty Corporation, a company
in which Joseph F. Naporano has a 72% ownership interest. Naporano received
$153,359 in fees from NAP Realty Corporation for services provided during the
period from July 1, 1998 through March 31, 1999.
Cozzi Iron & Metal purchases scrap metals from, and sells processed scrap
metals to, Arlington Metals Corporation, a company in which Timothy T. Orlowski,
a director of the Company, is an officer. During the period from November 1,
1998 through March 31, 1999, Cozzi Iron & Metal purchased approximately $271,000
of scrap metals from Arlington Metals Corporation. During the same period, Cozzi
Iron & Metal sold approximately $33,000 of processed scrap metals to Arlington
Metals Corporation.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois
on July 22, 1999.
METAL MANAGEMENT, INC.
By: /s/ ALBERT A. COZZI
------------------------------------
Albert A. Cozzi
Director, Chairman of the Board,
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on July 22, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ALBERT A. COZZI Director, Chairman of the Board, President and
- ----------------------------------------------------- Chief Operating Officer
Albert A. Cozzi
Director and Executive Vice President
- -----------------------------------------------------
George A. Isaac III
/s/ FRANK J. COZZI Director and Vice President
- -----------------------------------------------------
Frank J. Cozzi
/s/ GREGORY P. COZZI Director
- -----------------------------------------------------
Gregory P. Cozzi
/s/ GERARD M. JACOBS Director
- -----------------------------------------------------
Gerard M. Jacobs
Director
- -----------------------------------------------------
Eugene C. McCaffery
/s/ KENNETH A. MERLAU Director
- -----------------------------------------------------
Kenneth A. Merlau
/s/ JOSEPH F. NAPORANO Director and Vice-Chairman of the Board
- -----------------------------------------------------
Joseph F. Naporano
/s/ TIMOTHY T. ORLOWSKI Director
- -----------------------------------------------------
Timothy T. Orlowski
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM T. PROLER Director
- -----------------------------------------------------
William T. Proler
/s/ ROBERT C. LARRY Executive Vice President, Finance and Chief
- ----------------------------------------------------- Financial Officer (Principal Financial
Robert C. Larry Officer)
/s/ AMIT N. PATEL Vice President, Finance and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Amit N. Patel
</TABLE>
20
