SPECIAL METALS CORPORATION
340,000 Shares
6.625% Series A Senior Convertible Preferred Stock
(Liquidation Amount $50.00 per Share)
INVESTMENT AGREEMENT
October 28, 1998
Inco Limited
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Ladies and Gentlemen:
Special Metals Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to Inco Limited, a corporation continued under the
laws of Canada (the "Investor"), 340,000 shares of its 6.625% Series A Senior
Convertible Preferred Stock, liquidation amount $50.00 per share (the
"Convertible Preferred Securities"). The Convertible Preferred Securities will
be convertible into shares of the common stock, par value $.01 per share (the
"Common Stock"), of the Company initially at the conversion price set forth
herein and will rank, with respect to dividend rights and rights upon
liquidation, winding up and dissolution, senior to the Common Stock, and each
other class of capital stock or series of preferred stock of the Company
established after the original issuance of the Convertible Preferred Securities,
and PARI PASSU with the Convertible Preferred Securities issued to Timet Finance
Management Company ("Timet") pursuant to the Investment Agreement, dated as of
July 8, 1998, as amended on October 28, 1998, among Timet, Titanium Metals
Corporation and the Company (the "Timet Investment Agreement").
The Investor, Inco United States, Inc., Inco Europe Limited and Inco
S.A. (collectively, "Inco") and the Company have entered into a stock purchase
agreement, dated as of July 8, 1998, as amended (the "Acquisition Agreement"),
pursuant to which the Company has agreed to acquire (the "Acquisition") the Inco
Alloys International division ("IAI") of the Investor. In connection with the
amendment to the Acquisition Agreement and the closing of the Acquisition, the
parties hereto have agreed to enter into this Agreement pursuant to which the
Company has agreed to issue the Convertible Preferred Securities as part of the
consideration to be paid to Inco in connection with the Non- Competition
Agreement (as defined in the Acquisition Agreement.)
The sale of the Convertible Preferred Securities to the Investor will
be made without registration of the Convertible Preferred Securities under the
Securities Act of 1933,
as amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. However, the Investor (and
subsequent permitted transferees) of the Convertible Preferred Securities (and
the Common Stock issued upon conversion thereof) will have the registration
rights set forth in the Registration Rights Agreement in the form attached as
Exhibit A hereto (the "Registration Rights Agreement") to be entered into
between the Company and the Investor.
1. Purchase and Sale. On the terms and in reliance upon the
representations and warranties set forth in this Agreement, the Company agrees
to issue, sell and deliver to the Investor, and the Investor agrees to acquire
from the Company, 340,000 Convertible Preferred Securities with an aggregate
liquidation amount of $17,000,000 as partial payment of the consideration to be
paid to Inco for the Non-Competition Agreement to be entered into in connection
with the Acquisition Agreement. Each Convertible Preferred Security shall be
convertible at the option of the holder into shares of Common Stock of the
Company following the Initial Conversion Date (as defined herein) at a
conversion price equal to $16.50 per share. Such conversion price will be
subject to adjustment from time to time as set forth in the Certificate of
Designation of Rights and Preferences establishing the terms and relative rights
and preferences of the Convertible Preferred Securities substantially in the
form set forth in Exhibit B hereto (the "Certificate of Designation"). The term
"Initial Conversion Date" shall mean the latest of (i) 90 days following the
date of original issuance of the Convertible Preferred Securities, (ii) the date
on which approval is obtained in accordance with Regulation 14A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the
stockholders of the Company entitled to vote thereon (the "Stockholders
Conversion Vote") of the issuance of Common Stock upon the conversion of the
Convertible Preferred Securities upon the terms and conditions set forth in the
Certificate of Designation and (iii) the date upon which all waiting periods
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, have
expired or been terminated.
2. Delivery. Delivery of the Convertible Preferred Securities shall be
made at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ at 10:00 a.m.,
New York City time, on the date hereof (the "Closing Time").
3. Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows:
(a) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority under such laws to own
its property and to conduct its business as presently conducted and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries (as defined below), taken as a whole.
(b) Each subsidiary of the Company that is listed on Schedule
3(b) attached hereto (collectively, the "Subsidiaries") has been duly
incorporated, is validly existing as a
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corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority under such laws to own its
property and to conduct its business as presently conducted and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; except as described in the
annual reports on Form 10-K, quarterly reports on Form 10-Q, registration
statements, reports on Form 8-K and Form 8-A, proxy statements, information
statements or other forms, schedules, documents, reports or statements filed by
the Company or any of its Subsidiaries with the Securities and Exchange
Commission since March 3, 1997 and prior to the date hereof (collectively, the
"SEC Reports"), all of the issued shares of capital stock of each Subsidiary of
the Company, other than one share of Udimet Special Metals Ltd., which is owned
by a director thereof, have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims, except to the extent that
such liens, encumbrances, equities or claims would not, singly or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole; the Subsidiaries are the only subsidiaries of the Company
required to be listed on Exhibit 21 to the SEC Reports.
(c) The Convertible Preferred Securities have been duly
authorized by the Company and, when issued and delivered by the Company to the
Investor against payment of the Purchase Price therefor, will be validly issued
and fully paid and non-assessable and the issuance of the Convertible Preferred
Securities will not be subject to any preemptive or other similar rights.
(d) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Investor, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws affecting creditors' rights generally and general principles of
equity, regardless of whether enforceability is considered in a proceeding in
equity or at law.
(e) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming the due
authorization, execution and delivery of the Registration Rights Agreement by
the Investor, will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that (i)
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors' rights
generally and general principles of equity, regardless of whether enforceability
is considered in a proceeding in equity or at law and (ii) the enforceability of
indemnification and contribution provisions may be limited by federal and state
securities laws and the policies underlying such laws.
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(f) Except as set forth on Schedule 3(f) hereto, (i) the
execution and delivery by the Company of, and the performance by the Company of
its obligations under, this Agreement and the Registration Rights Agreement, and
the consummation of the transactions contemplated hereby and thereby, will not
contravene any provision of applicable law material to the Company, the
Certificate of Designation, the articles of incorporation or the by-laws of the
Company, or any agreement or other instrument binding upon the Company or any of
its Subsidiaries, except where such contravention of any such agreement or
instrument would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body or agency or court having jurisdiction over the Company or any
of its Subsidiaries and material to it, and (ii) no consent, approval,
authorization, waiver or order of, or qualification with, any court or
governmental body or agency or any other person is required for the performance
by the Company of its obligations under this Agreement and the Registration
Rights Agreement, except such as may be required by federal, state or foreign
securities laws in connection with the offer and sale of the Convertible
Preferred Securities and the Conversion Shares (as defined below) and the
registration of such securities pursuant to the terms of the Registration Rights
Agreement, and except for any such consent, approval, authorization, waiver,
order or qualification the failure of which to obtain would not result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of Company and its Subsidiaries, taken as a
whole, and would not materially impair the ability of the Company to effect the
transactions contemplated hereby and pursuant to the Registration Rights
Agreement.
(g) The authorized capital stock of the Company consists of
(i) 35,000,000 shares of Common Stock, par value $0.01 per share, of which, as
of the date hereof, 15,479,000 shares are issued and outstanding and 7,600,000
shares have been reserved for issuance upon conversion of the Convertible
Preferred Securities and (ii) 10,000,000 shares of preferred stock, par value
$0.01 per share, of which, as of the date hereof, no shares are outstanding. All
of the outstanding shares of Common Stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable.
(h) The shares of Common Stock initially issuable upon
conversion of the Convertible Preferred Securities (the "Conversion Shares")
have been duly authorized and, when issued upon such conversion in accordance
with the provisions of the Certificate of Designation, will be validly issued,
fully paid and non-assessable; the issuance of the Conversion Shares will not be
subject to any preemptive or similar rights.
(i) The financing contemplated by (i) the new credit facility
to be entered into by the Company, Credit Lyonnais New York Branch as agent and
various lenders with respect to the Acquisition, (ii) the Investor's investment
in the Convertible Preferred Securities as contemplated by this Agreement, (iii)
Timet's investment in $80,000,000 aggregate liquidation amount of Convertible
Preferred Securities as contemplated by the Timet Investment Agreement and (iv)
Inco's agreement to pay Credit Lyonnais New York Branch, as agent, a fee of
$10,000,000 pursuant to the letter agreement dated October 5, 1998, constitute
the only financing arrangements to be entered into by the Company or any
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of its Subsidiaries in connection with the financing of the Acquisition other
than indebtedness of Inco and/or its subsidiaries to be assumed in connection
with the Acquisition.
4. Representations and Warranties of the Investor. The Investor
represents and warrants to the Company as follows:
(a) The Investor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation.
(b) This Agreement has been duly authorized, executed and
delivered by the Investor and, assuming due authorization, execution and
delivery of this Agreement by the Company constitutes a valid and binding
agreement of the Investor, enforceable against the Investor in accordance with
its terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws affecting creditors' rights generally and general principles of
equity, regardless of whether enforceability is considered in a proceeding in
equity or at law.
(c) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Investor and, assuming the due
authorization, execution and delivery of the Registration Rights Agreement by
the Company, will be a valid and binding agreement of the Investor, enforceable
against the Investor in accordance with its terms, except to the extent that (i)
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors' rights
generally and general principles of equity, regardless of whether enforceability
is considered in a proceeding in equity or at law and (ii) the enforceability of
indemnification and contribution provisions may be limited by federal and state
securities laws and the policies underlying such laws.
(d) Except as set forth on Schedule 4(d), (i) the execution
and delivery by the Investor of, and the performance by the Investor of its
obligations under, this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby will not
contravene any provision of applicable law material to the Investor or the
articles of incorporation or by-laws of the Investor or any agreement or other
instrument binding upon the Investor, except where such contravention of any
such agreement or instrument would not have any material adverse effect on the
Investor and its subsidiaries, taken as a whole, or any judgement, order or
decree of any governmental body, agency or court having jurisdiction over the
Investor that is material to it, and (ii) no consent, approval, authorization,
waiver or order of, or qualification with, any court or governmental body or
agency or any other person is required for the performance by the Investor of
its obligations under this Agreement, except such as may be required by federal,
state or foreign securities laws in connection with the offer and sale of the
Convertible Preferred Securities, the Conversion Shares and the registration of
such securities pursuant to the terms of the Registration Rights Agreement, and
except for any such consent, approval, authorization, waiver, order or
qualification the failure of which to obtain would not result in a material
adverse change in the condition, financial or otherwise, or in the earnings,
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business or operations of the Investor and its subsidiaries, taken as a whole,
or materially impair the ability of the Investor to perform its obligations
hereunder.
(e) The Investor is acquiring the Convertible Preferred
Securities under this Agreement for its own account solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act. The Investor has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Convertible Preferred
Securities and the Conversion Shares and is able to bear the economic risk of
such investment. The Investor acknowledges that none of the Convertible
Preferred Securities or the Conversion Shares have been registered under the
Securities Act and such securities may be sold or disposed of in the absence of
such registration only pursuant to an exemption from such registration and in
accordance with the terms of this Agreement.
5. Dispositions. The Investor shall not, directly or indirectly, sell,
assign, transfer, pledge, hypothecate or otherwise dispose of any interest in
any Convertible Preferred Securities or any Conversion Shares (a "Disposition"),
except as set forth in this Section 5.
(a) Dispositions may be made at any time and from time to time
following the Closing Time, to one or more wholly-owned subsidiaries of the
Investor, provided that each such subsidiary agrees in writing to be bound by
this Agreement to the same extent as the Investor.
(b) Dispositions may be made (i) following the second
anniversary of the Closing Time, in a bona fide public offering effected in
accordance with the provisions of the Registration Rights Agreement; and (ii)
following the earlier of the third anniversary of the Closing Time and the
occurrence of a "change of control" (as hereinafter defined), provided, however,
that Dispositions shall not be made pursuant to clauses (i) and (ii) of this
Section 5(b) to any person who, to the actual knowledge of the Investor (without
any duty of inquiry) in the case of Dispositions to be made pursuant to bona
fide open market "brokers transactions" as permitted pursuant to the provisions
of Rule 144 promulgated under the Securities Act and to the knowledge of the
Investor (after reasonable inquiry) in all other cases, is (x) a Significant
Competitor of the Company (as hereinafter defined), (y) a person that is or
theretofore had been engaged in any material litigation adverse to the Company
or any of its affiliates or (z) a person (other than any underwriter who is in
the business of underwriting securities and who, in the ordinary course of its
business as an underwriter, acquired Convertible Preferred Securities or
Conversion Shares in connection with a public offering with the bona fide
intention of reselling all of the securities so acquired pursuant to such public
offering) who, after acquiring such interest in Convertible Preferred Securities
or Common Stock, would beneficially own voting securities of the Company
representing more than 10% of the outstanding shares of voting securities of the
Company (assuming any Convertible Preferred Securities owned by such person were
converted into Common Stock); provided that any Disposition proposed to be made
by the Investor pursuant to this Section 5(b) shall be subject to the Company's
prior right of first refusal as set forth in Section 6 of this Agreement and, in
the case of Dispositions to be made pursuant to
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Section 5(b)(i) hereof, shall be subject to the additional purchase rights of
the Company set forth in Section 2.6(b) of the Registration Rights Agreement.
As used in this Section 5(b), "change of control" means the occurrence
of any of the following events.
(A) in any three-year period, a majority of the members of the
Board elected during such three-year period shall have been so elected against
the recommendation of the management of the Company or the Board in office
immediately prior to such election; or
(B) any Designated Person (as defined herein) or Persons
acting in concert shall, except as provided in clause (C) below, acquire
(whether by merger, consolidation, sale, assignment, lease, transfer or
otherwise, in one transaction or any related series of transactions) or
otherwise beneficially own a majority of the voting power of the outstanding
securities of the Company generally entitled to vote for the election of
directors ("Voting Securities"); or
(C) upon consummation of a consolidation or merger of the
party with another Designated Person in which the holders of the Voting
Securities of the Company immediately prior to such consolidation or merger
would not own Voting Securities representing at least a majority of the
outstanding voting power of such Designated Person or its ultimate parent upon
consummation of such consolidation or merger; or
(D) upon the sale, transfer or assignment (it being understood
that the pledge of, or the granting of a security interest in, assets of the
Company or its subsidiaries shall not be deemed a sale, transfer or assignment)
of all or substantially all of the assets of the Company to any person in a
single transaction or a series of related transactions; provided, however, that
a sale, transfer or assignment of all or substantially all of the assets of the
Company, to (x) the Principal Stockholders (as defined herein), or to (y) any
entity the holders of at least a majority of the Voting Securities of which (or
of such entity's ultimate parent) were holders of Voting Securities of the
Company immediately prior to such sale, transfer or assignment shall not
constitute a "change of control" hereunder; or
(E) at such time as the Principal Stockholders fail to
beneficially own, in the aggregate, at least 30% of the voting power of the
outstanding Voting Securities of the Company.
For purposes hereunder, "Designated Person" shall mean any person, corporation,
partnership or other entity other than Societe Industrielle de Materiaux Avances
("SIMA") and its affiliates and "Principal Stockholders" shall mean SIMA, LWH
Holdings S.A. and their respective affiliates. Reference to a "Significant
Competitor" of the Company means any person identified in writing to the
Investor (as provided below) that manufactures or sells high performance nickel
base alloys, cobalt base alloys, stainless steels or other similar based alloys
where annual sales of such alloys for such person's most recently completed
fiscal year exceeded $75 million (which term shall exclude Inco Limited and its
subsidiaries). The
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Company shall provide to the Investor prior to the date of this Agreement a
written list of such Significant Competitors (which list the Company may, by
notice to the Investor, amend or supplement at any time or from time to time),
which Significant Competitors shall conform to the provisions of the definition
of Significant Competitor contained herein. The Significant Competitors so
designated on such list shall constitute the Significant Competitors hereunder.
(c) Dispositions may be made pursuant to a bona fide pledge
not intended to circumvent the provisions of this Section 5 to one or more banks
or other lending institutions (or any agent on their behalf) (each a "Lender"),
provided that prior to any foreclosure upon or other acquisition by such Lender
of any Convertible Preferred Securities or Conversion Shares pledged to it such
Lender agrees in writing to be bound by the provisions of Sections 5(d) (to the
extent set forth therein) and 6 of this Agreement to the same extent as the
Investor. Upon any such foreclosure or other acquisition by a Lender of any
Convertible Preferred Securities or Conversion Shares pledged to it, such Lender
shall succeed to the rights and (to the extent set forth under Section 6 and
Section 5(d)) the obligations of the Investor hereunder and, following a
Disposition of such Convertible Preferred Securities or Conversion Shares by
such Lender, the subsequent transferee shall succeed to the same rights and
obligations hereunder as such Lender; provided, however, that if such Lender
makes a Disposition of such Convertible Preferred Securities or Conversion
Shares to the Investor, Timet or any of their affiliates, such transferees shall
agree in writing to be bound by the terms of this Agreement and the Registration
Rights Agreement to the same extent as the Investor hereunder.
(d) Notwithstanding any other provision of this Agreement, no
Disposition may be made pursuant to this Section 5 unless (i) the transfer
complies in all respects with the applicable provisions of this Agreement and
applicable federal and state securities laws, including, without limitation, the
Securities Act, (ii) except for Dispositions made pursuant to Section 5(b)(i) of
this Agreement, pursuant to foreclosures or other acquisitions by a Lender
pursuant to Section 5(c) of this Agreement or by a Lender's transferee (unless
such transferee is the Investor, Timet or any of their affiliates), or pursuant
to a brokers transaction under Rule 144 (other than Rule 144(k)) promulgated
under the Securities Act, the transferee agrees in writing to be bound by the
terms and conditions of this Agreement, to the extent applicable, and the
Registration Rights Agreement (whereupon such transferee shall be substituted
for, and shall enjoy the same rights and be subject to the same obligations, as
its predecessor hereunder except as contemplated below) and (iii) if requested
by the Company in its sole judgment, an opinion of counsel (reasonably
acceptable to the Company) to such transferring holder (or with respect to any
Disposition under Section 5(c) of this Agreement, an opinion of counsel
(reasonably acceptable to the Company) to such transferring holder or any
Lender) shall be supplied to the Company, at such transferring holder's expense,
to the effect that such transfer complies with applicable federal and state
securities laws. Any attempt to transfer any Convertible Preferred Securities or
any Conversion Shares hereunder in violation of this Agreement shall be null and
void ab initio and the Company shall not register such transfer.
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6. Right of First Refusal. Prior to any Disposition by the Investor
pursuant to Section 5(b), the Company shall have the right, exercisable in
accordance with this Section 6, to purchase all, but not less than all, of the
Convertible Preferred Securities or Conversion Shares intended to be subject to
such Disposition by the Investor.
(a) The Investor shall give notice (a "Transfer Notice") to
the Company of such intended Disposition, specifying the Convertible Preferred
Securities or Conversion Shares, as the case may be (the "Offered Securities"),
to be subject to a Disposition and the intended method of Disposition. The
Transfer Notice shall specify the cash price (the "First Offer Price") at or
above which the Investor intends to effect such Disposition and, in the case of
a privately negotiated Disposition, the terms of the bona fide third party offer
(a "Third Party Offer") to purchase such Offered Securities theretofore received
by the Investor and then remaining open (including the identity and address of
the offeror and the price offered).
(b) If the Company wishes to purchase the Offered Securities
specified in the Transfer Notice, then within thirty days following receipt of
the Transfer Notice, the Company shall deliver a written notice (an "Acceptance
Notice") to the Investor indicating that the Company wishes to purchase such
Offered Securities, a date for the closing of such purchase, which shall not be
more than ten business days after delivery of such Acceptance Notice (subject to
extension as provided in Section 6(f) hereof), and a place for the closing of
such purchase. Upon delivery of an Acceptance Notice, a binding agreement shall
be deemed to exist providing for the purchase by the Company of the Offered
Securities to which such Acceptance Notice relates, upon the terms and subject
to the conditions set forth in this Section 6 and the Company shall use its
reasonable best efforts to secure all approvals required in connection
therewith.
(c) The cash purchase price to be paid by the Company
hereunder for any Offered Securities (the "Designated Price") shall be
determined as set forth below.
(i) With respect to any Offered Securities for which
a First Offer Price or a Third Party Offer consisting solely of cash
and/or readily marketable securities is disclosed in the applicable
Transfer Notice, the Designated Price per share of such Offered
Securities shall equal the per share price specified in such First
Offer Price or Third Party Offer; provided, however, that, in the event
the Market Price (as defined in Section 6(c)(iii)) per share on the
last business day prior to the date the Acceptance Notice is delivered
is more than 10% greater than or is less than 10% lower than the per
share price specified by such First Offer Price or Third Party Offer,
then the price per share shall equal the Market Price per share on the
last business day prior to the date the Acceptance Notice is delivered.
The value of any readily marketable securities identified in such Third
Party Offer shall equal the average Market Price per share of such
securities during the ten consecutive trading days immediately
preceding the Company's receipt of the Transfer Notice. In the case of
any securities not theretofore traded, such securities must be issued
or proposed to be issued by an entity which has been subject to the
reporting requirements of the Exchange Act for at least one year, and
the value of such securities shall be
9
determined by two nationally recognized investment banking firms, one
firm to be selected by each of the Investor and the Company, or in the
event such firms are unable to agree, by a third nationally recognized
investment banking firm selected by such firms. The Investor and the
Company shall use their reasonable best efforts to cause any such
determination of value to be made within five business days following
the Company's receipt of the applicable Transfer Notice. In connection
with any determination of value pursuant to this Section 6(c)(i), each
party will bear the fees and expenses of the investment banking firm
selected by it and the parties will bear equally the fees and expenses
of any third investment banking firm.
(ii) With respect to any Offered Securities for which
a Third Party Offer consisting of other than solely cash and/or readily
marketable securities is disclosed in the applicable Transfer Notice,
the Designated Price per share of such Offered Securities (which shall
refer, in the case of shares of Convertible Preferred Securities that
are Offered Securities, to the applicable number of Conversion Shares
issuable upon conversion of such Convertible Preferred Securities)
shall equal the average Market Price per share during the twenty
consecutive trading days immediately preceding the Company's receipt of
the Transfer Notice.
(iii) "Market Price" of any security on any trading
day shall mean (i) the closing price of such security on the principal
national securities exchange on which such security is listed at the
time (or if there have been no sales on such exchange on such day, the
average of the highest bid and lowest asked prices on such exchange on
such day), or (ii) if the security is not listed on a national
securities exchange at the time, the sales price of such security as
reported on the NASDAQ National Market as of 4:00 p.m., New York time,
on such day (or, if there is no reported sales price of such security
on the NASDAQ National Market on such day, the average of the
representative bid and asked prices quoted on the NASDAQ National
Market as of 4:00 p.m., New York time, on such day, or (iii) if such
security is not reported on the NASDAQ National Market at the time, the
average of the representative bid and asked prices quoted in the NASDAQ
System as of 4:00 p.m., New York time, on such day, or (iv) if the
security is not quoted on the NASDAQ System at the time, the average of
the highest bid and lowest asked prices on such day in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated or any similar successor organization.
(d) At any closing pursuant to this Section 6, the Company
shall pay to the Investor (or its designees) the aggregate Designated Price for
the Offered Securities by wire transfer of immediately available funds, and the
Investor shall deliver or cause to be delivered to the Company such Offered
Securities, with documentation satisfactory to the Company evidencing the
transfer of such Offered Securities, in form acceptable for transfer on the
Company's books. The Company may assign its right to purchase the Offered
Securities pursuant to this Section 6 to an affiliate of the Company or an
unrelated third party, provided that such affiliate or other third party agrees
in writing to be bound by the provisions of this Section 6 to the same extent as
the Company, and provided further that the
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Company shall remain liable for the obligations of such affiliate or other third
party under this Section 6.
(e) If the Company does not exercise its right to purchase
Offered Securities specified in a Transfer Notice, then the party giving such
Transfer Notice shall be free to effect the Disposition of such Offered
Securities on terms no less favorable than those set forth in such Transfer
Notice, subject to any other requirements applicable to such Disposition
pursuant to Section 6(b) and (c) hereof and, in the case of a Disposition
pursuant to Section 6(b)(i), the additional purchase rights of the Company set
forth in Section 2.6(b) of the Registration Rights Agreement; provided, that any
such Disposition is completed within 180 days, in the case of a Disposition
pursuant to Section 6(b)(i), and 75 days, in the case of a Disposition pursuant
to Section 6(b)(ii), in each case following the expiration of the period in
which the Company had the right to elect to purchase such Offered Securities on
terms no less favorable than those set forth in such Transfer Notice. In the
event that such sale is not consummated within such 180 or 75-day period for any
reason, then the restrictions on transfers provided for herein shall again
become effective, and no transfer of such Offered Securities may be made
thereafter by the Investor without again offering the same to the Company in
accordance with this Section 6.
(f) The obligations of the parties to effect any closing
pursuant to this Section 6 shall be subject to the satisfaction of the following
conditions: (i) all requisite regulatory or third party approvals and consents
necessary to effect the purchase and sale of the Offered Securities shall have
been received and (ii) no statute, rule, regulation, executive order, decree,
ruling, injunction or other order shall have been enacted, entered, promulgated
or enforced by any court or governmental authority of competent jurisdiction
which prohibits such transaction or makes such transaction illegal. If, as of
any date on which a closing under this Section 6 is scheduled to occur, the
foregoing conditions relating thereto have not been satisfied, then such closing
shall occur as promptly as practicable following such satisfaction, and the
parties shall use their reasonable best efforts to cause the satisfaction of
such conditions; provided that if the foregoing conditions relating to any
closing hereunder are not satisfied within 60 days following delivery of the
applicable Acceptance Notice (or in the case of an order or injunction arising
out of any proceeding initiated by the Investor, such later date on which such
order or injunction becomes final and nonappealable), then the Investor or the
Company may terminate the agreement deemed to exist upon delivery of the
applicable Acceptance Notice; provided that no such termination shall excuse any
party for a breach of its obligations thereunder.
(g) Pursuant to Section 2.6(a) of the Registration Rights
Agreement, the sale of Registrable Securities by Selling Holders (as such terms
are defined in the Registration Rights Agreement), in addition to the Investor,
shall be subject to the Company's prior right of first refusal set forth in this
Section 6, and the additional purchase rights of the Company set forth in
Section 2.6(b) of the Registration Rights Agreement.
7. NASDAQ Quotation. As soon as practicable, but in any event prior to
the Initial Conversion Date, the Company shall take such action as is required
to cause the Conversion Shares into which the Convertible Preferred Securities
are convertible to be listed
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for trading on the NASDAQ National Market or such other exchange on which the
Company's securities are listed, as applicable.
8. Legend. The Investor agrees to the placement on certificates
representing Convertible Preferred Securities purchased by the Investor pursuant
hereto, of a legend substantially as set forth below (except that (i) the first
sentence of such legend shall not be placed on any Convertible Preferred
Securities or Conversion Shares that have been registered under the Securities
Act or if, in the opinion of counsel, such sentence is not required under the
Securities Act and (ii) the second sentence of such legend relating to
restrictions on transfer provided in this Agreement shall not be placed on any
Convertible Preferred Securities or Conversion Shares acquired by a transferee
pursuant to Section 5(b)(i) of this Agreement, 5(c) or pursuant to brokers
transactions under Rule 144 of the Securities Act), unless the Company
determines otherwise, in accordance with the opinion of counsel:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR NON-U.S. JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER STATE
OR NON-U.S. JURISDICTIONS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS THAT
RESTRICT THE TRANSFER OF SUCH SECURITIES) OF AN INVESTMENT AGREEMENT
DATED AS OF OCTOBER 28, 1998 BETWEEN SPECIAL METALS CORPORATION (THE
"COMPANY") AND INCO LIMITED, COPIES OF WHICH ARE ON FILE AT THE OFFICES
OF THE SECRETARY OF THE COMPANY. THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS."
9. Fees and Expenses. Each party shall bear its own expenses, including
the fees and expenses of counsel, accountants, financial or other advisors or
representatives engaged by it, incurred in connection with this Agreement and
the transactions contemplated hereby.
10. Survival. The representations and warranties and agreements
contained in or made pursuant to this Agreement shall survive without limitation
and the covenants and agreements contained in or made pursuant to this Agreement
which by their terms are to survive after the Closing Time shall survive for the
period specified therein, provided, that if a claim or notice is given with
respect to any representation, warranty, covenant or agreement prior to any such
expiration date, the claim with respect to such representation, warranty,
covenant or agreement shall continue in definitely until such claim is finally
resolved.
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11. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given, if delivered personally, by
telecopier or sent by first class mail, postage prepaid, as follows:
(a) If to the Company, to:
Special Metals Corporation
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Investor, to:
Inco Limited
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to any other holder of Convertible Preferred Securities
of the Company, addressed to such holder at the address of such holder in the
record books of the Company; or to such other address or addresses as shall be
designated in writing. All notices shall be effective when received.
12. Entire Agreement; Amendment. This Agreement and the documents
described herein or delivered pursuant hereto (including, without limitation,
the Registration Rights Agreement) set forth the entire agreement between the
parties hereto with respect to the matters provided herein and therein. Any
provision of this Agreement may be amended or modified in whole or in part at
any time by an agreement in writing among the parties hereto executed in the
13
same manner as this Agreement; provided, however that the provisions set forth
in Sections 5(c), 5(d), 6 and 17 hereof may not, directly or indirectly, be
amended or modified without the prior written consent of each Lender affected
thereby.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
14. Governing Law. This Agreement shall be governed by, and construed,
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed in that state.
15. Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors.
16. Stockholder Vote. The Company shall, in accordance with applicable
law and the Company's Certificate of Incorporation and By-laws, (a) duly call,
give notice of and convene and hold a special meeting of its stockholders as
promptly as practicable following the Closing Time for the purpose of
considering and taking action on the Stockholder Conversion Vote and (b) subject
to the fiduciary obligations of the Board of the Company, include in the Proxy
Statement for such stockholders' meeting the recommendation of the Board that
the stockholders of the Company approve the Stockholder Conversion Vote and,
subject to such fiduciary duty, use all reasonable efforts to obtain such
approval. If a favorable vote of the Company's stockholders is not obtained (i)
within 120 days following the Closing Time, then the dividend rate on the
Convertible Preferred Securities shall increase automatically from and including
the 121st day following such Closing Time to, but not including, the date a
favorable vote of the Company's stockholders is obtained on the Stockholder
Conversion Vote by an additional increment of one-quarter of one percent (.25%)
per annum of the liquidation amount thereof and (ii) prior to the 270th day
following the Closing Time, the dividend rate on the Convertible Preferred
Securities shall increase automatically from and including such 270th day to,
but not including, the date a favorable vote of the Company's stockholders on
the Stockholder Conversion Vote is obtained by an additional increment (which
shall be in addition to the incremental increase provided in clause (i) of this
Section 16) of one-quarter of one percent (.25%) per annum (or one-half of one
percent (.50%) per annum when combined with the incremental increase set forth
in clause (i) of this Section 16) of the liquidation amount thereof, upon the
terms and conditions set forth in the Certificate of Designation.
17. Assignment. Except as otherwise expressly provided in Section 5 or
7 hereof, neither this Agreement nor any rights or obligations of the parties
hereunder shall be assignable; provided, however, the rights of the Investor
under this Agreement may be assigned to a wholly-owned subsidiary of the
Investor, without the consent of the Company, provided that the Investor shall
remain liable for the obligations of the assignee hereunder to the same extent
as the Investor; and provided, further, that the Investor and assignee may
assign its rights and obligations under this Agreement (as well as the
Registration Rights Agreement) to one or more Lenders or their transferees in
connection with a bona fide pledge or Disposition permitted by Section 5(c).
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18. Remedies; Waiver. To the extent permitted by law, all rights and
remedies existing under this Agreement and any related agreements or documents
are cumulative to, and are exclusive of, any rights or remedies otherwise
available under applicable law. No failure on the part of any party to exercise,
or delay in exercising, any right hereunder shall be deemed a waiver thereof,
nor shall any single or partial exercise preclude any further or other exercise
of such or any other right.
19. Specific Performance. Each party hereto acknowledges that, in view
of the uniqueness of the transactions contemplated by this Agreement, the other
party would not have an adequate remedy at law for money damages in the event
that this Agreement has not been performed in accordance with its terms. Each
party therefore agrees that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
20. Severability. If any provision of this Agreement is determined to
be invalid, illegal, or unenforceable, the remaining provisions of this
Agreement shall remain in full force and effect provided that the economic and
legal substance of the transactions contemplated is not affected in any manner
materially adverse to any party. In the event of any such determination, the
parties agree to negotiate in good faith to modify this Agreement to fulfill as
closely as possible the original intent and purpose hereof. To the extent
permitted by law, the parties hereby to the same extent waive any provision of
law that renders any provision hereof prohibited or unenforceable in any
respect.
21. Business Day. For purposes of this Agreement, "business day" means
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
22. Acknowledgment. The Investor hereby acknowledges that the Company
has advised the Investor that, at the Closing Time, the Company will issue under
the Certificate of Designation, sell and deliver to Timet 1,600,000 Convertible
Preferred Securities at a purchase price of $50.00 per Convertible Preferred
Security and for an aggregate purchase price of $80,000,000 pursuant to the
terms of the Timet Investment Agreement and the Investor has agreed to such
issuance to Timet.
23. Further Assurances. Each of the parties hereto agrees to use its
reasonable best efforts promptly to take or cause to be taken all action and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
closing of the transactions contemplated by this Agreement.
15
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the parties hereto.
Very truly yours,
SPECIAL METALS CORPORATION
By:___________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
INCO LIMITED
By:_____________________________
Name:
Title:
16
SCHEDULE 3(B)
Name of Subsidiary: State of Incorporation
------------------- ----------------------
Udimet Special Metals Ltd. United Kingdom
Special Metals Foreign Sales Corporation Barbados
Special Metals Domestic Sales Corporation Delaware
SCHEDULE 3(F)
Consent is required under the Credit Agreement, dated as of October 18,
1996, as amended, among the Company, the several lenders from time to time party
thereto and Credit Lyonnais New York Branch, as agent.
Stockholder approval is required for the issuance of the Conversion
Shares under NASDAQ rules.
Filing and waiting period are required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
SCHEDULE 4(D)
Filing and waiting period are required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.