1,600,000 Shares
6.625% Series A Senior Convertible Preferred Stock
(Liquidation Amount $50.00 per Share)
AMENDMENT TO INVESTMENT AGREEMENT
October 28, 1998
Titanium Metals Corporation
TIMET Finance Management Company
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Investment Agreement, dated July 8, 1998 (the
"Investment Agreement"), among Special Metals Corporation, a Delaware
corporation (the "Company"), Titanium Metals Corporation, a Delaware corporation
("TMC"), and TIMET Finance Management Company, a Delaware corporation and a
wholly-owned subsidiary of TMC (the "Investor"), relating to the proposed
issuance and sale by the Company to the Investor of shares (the "Shares") of the
Company's 6.625% Series A Senior Convertible Preferred Stock, liquidation amount
$50.00 per share (the "Convertible Preferred Securities").
In consideration of the premises and mutual agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Investment Agreement pursuant to Section 19 thereof as follows:
1. Defined Terms. Except as otherwise provided herein, capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Investment Agreement. References herein to this
"Amendment" shall mean this Amendment to the Investment Agreement. Unless the
context otherwise requires, references in the Investment Agreement to
"Convertible Preferred Securities" shall refer solely to the Shares of the
Company's 6.625% Series A Senior Convertible Preferred Stock being purchased by
the Investor pursuant to the Investment Agreement, as amended hereby, and shall
not include any shares being purchased by Inco Limited pursuant to the Inco
Investment Agreement (as hereinafter defined).
2. Amendments to Investment Agreement.
(a) The first paragraph of the Investment Agreement is hereby
amended by deleting such paragraph in its entirety and replacing it with a
new paragraph as follows:
"Special Metals Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to TIMET Finance Management
Company, a Delaware corporation (the "Investor"), and a wholly-owned
subsidiary of Titanium Metals Corporation, a Delaware corporation
("TMC"), 1,600,000 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 to be issued under the Certificate of
Designation referred to in Section 1 below to Inco Limited, a
corporation continued under the laws of Canada ("Inco Limited),
pursuant to the Investment Agreement to be entered into between Inco
Limited and the Company (the "Inco Investment Agreement").
(b) Section 1 of the Investment Agreement is hereby amended by
deleting such Section in its entirety and replacing it with a new Section 1
as follows:
"1. Purchase and Sale. On the terms and subject to the
conditions 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 purchase from the Company,
1,600,000 Convertible Preferred Securities, at a purchase price of
$50.00 per Convertible Preferred Security, for an aggregate purchase
price of $80,000,000 (the "Purchase Price"). 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 C 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 (the "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act"), have expired or
been terminated."
(c) Section 3 of the Investment Agreement is hereby amended by
deleting Section 3(h) in its entirety and replacing it with a new Section
3(h) as follows:
" (h) 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 (the "New Credit Agreement"), (ii) the
Investor's investment in the Convertible Preferred Securities
as contemplated by this Agreement, (iii) Inco Limited's
investment in $17,000,000 aggregate liquidation amount of
Convertible Preferred Securities as contemplated by the Inco
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 or on behalf of the Company or any 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."
(d) Section 3(q) of the Investment Agreement is hereby
amended by inserting the words", the Inco Investment Agreement"
immediately after the words "this Agreement" on the 2nd line of
such Section.
(e) Section 5 of the Investment Agreement is hereby
amended by deleting such Section 5 in its entirety and replacing
it with a new Section 5 as follows:
"5. Governance. The Company agrees with the Investor and TMC
that:
(a) Immediately following the Closing Time, the Board of
Directors of the Company (the "Board") shall increase the authorized
number of Directors of the Board by a number sufficient to include as
an additional director of the Company one Investor Nominee (as defined
in Section 5(b) hereof) who has been designated by the Investor in the
Investor Nominee Notice (as defined in Section 5(b) hereof) and shall
appoint such Investor Nominees to the Board as a Class III Director in
accordance with the Company's procedures for the appointment of
directors. Such Investor Nominee shall hold office for a term
expiring at the annual meeting of stockholders at which the term of
the class to which he or she has been elected expires or until his or
her successor is duly elected and qualified. So long as the Investor
(together with TMC and any wholly-owned subsidiary of TMC)
beneficially owns voting securities of the Company representing at
least 10% of the outstanding voting securities of the Company
(assuming for purposes of this Section 5, that any Convertible
Preferred Securities owned by the Investor, TMC or such subsidiary
have been converted into Common Stock), the Investor shall be entitled
to designate one Investor Nominee to the Board. If at any time the
number of members constituting the entire Board shall exceed 10,
including the Investor Nominee appointed pursuant to this Section 5
but excluding all directors elected by holders of the Convertible
Preferred Securities pursuant to Section 9 of the Certificate of
Designation, the Investor shall be entitled to designate pursuant to
an Investor Nominee Notice, and the Board shall appoint to the Board,
one additional Investor Nominee in accordance with the provisions of
this Section 5. In the event of a vacancy caused by the
disqualification, removal, resignation or other cessation of service
of any Investor Nominee from the Board, the Board shall elect as a
director (to serve until the Company's immediately succeeding annual
meeting of shareholders at which the term of the class to which such
Investor Nominee has been elected expires) a new Investor Nominee who
has been designated by the Investor in an additional Investor Nominee
Notice that has been provided to the Company at least five days prior
to the date of a regular meeting of the Board. The Investor shall
nominate each Investor Nominee pursuant to an additional Investor
Nominee Notice in advance of each meeting of shareholders at which
such Investor Nominee is to be elected. If the beneficial ownership
by the Investor (together with the beneficial ownership by TMC or any
wholly-owned subsidiary of TMC) of the outstanding voting securities
of the Company decreases below 10% of the outstanding voting
securities of the Company (assuming for purposes of this Section 5,
that any Convertible Preferred Securities owned by the Investor, TMC
and any such wholly-owned subsidiary of TMC have been converted into
Common Stock) the Investor shall, at the request of the Company, cause
all its Investor Nominees to resign from the Board, in accordance with
the Company's procedures for the resignation of directors and
applicable laws and regulations.
(b) The Investor shall provide a designation notice to the
Company (the "Investor Nominee Notice") as required by Section 5(a)
above for each Investor Nominee, which notice shall contain the
following information: (i) the name of the person(s) it has designated
to become director(s) of the Company (each, an "Investor Nominee"),
and (ii) all information required by Regulation 14A and Schedule 14A
under the Exchange Act with respect to each such Investor Nominee.
Such Investor Nominee may be any person designated by the Investor,
including, but not limited to, persons who are officers, directors or
employees of the Investor.
Notwithstanding the above, the Company shall not be
obligated to perform the obligations under this Section 5 with respect
to any Investor Nominee designated by the Investor if such Investor
Nominee is (i) a director, officer, employee, shareholder, controlling
person or otherwise affiliated with a Significant Competitor (as
hereinafter defined), other than TMC or its affiliates, (ii) a person
that is or theretofore has been engaged in material litigation adverse
to the Company or any of its affiliates, (iii) a person (other than
TMC and/or its wholly owned subsidiaries) who beneficially owns voting
securities of the Company representing more than 10% of the
outstanding voting securities of the Company, or (iv) a person (x)
other than the person then serving as chief executive officer, chief
financial officer or chief operating officer of TMC and/or as a
director of TMC or (y) who the Board, after customary investigation of
such person's qualifications, reasonably determines in good faith is
not qualified or acceptable under standards applied fairly and equally
to all nominees (it being understood that any person listed on
Schedule 5(b) hereto or falling within subclause (x) of this clause
(iii) shall be deemed qualified and acceptable hereunder).
(c) The Company agrees to cause to include the Investor Nominee
which the Investor is entitled to designate pursuant to this Agreement
in the slate of nominees recommended by the Board to the Company's
shareholders for election as directors and shall use its reasonable
best efforts to cause the election or reelection of each such Investor
Nominee to the Board at each meeting of shareholders at which such
Investor Nominee is up for election, including soliciting proxies in
favor of the election of such persons. At the direction of the
Investor, the Company shall use reasonable efforts to cause the
removal from the Board of any Investor Nominee.
(d) Each Investor Nominee shall be reimbursed for his or her
out-of-pocket expenses incurred in attending regular and special Board
meetings and any meeting of any Board committee by the Company to the
extent of, and in accordance with, the policies of the Company
generally applicable to the reimbursement of expenses of directors of
the Company.
(e) The Board will not establish an executive committee
authorized to exercise the power of the Board generally unless the
Investor is granted representation on such committee proportional to
its representation on the Board, nor will the Board establish or
employ committees (unless the Investor is granted proportional
representation thereon) as a means designed to circumvent or having
the effect of circumventing the rights of the Investor under this
Agreement to representation on the Board."
(f) Section 7(c) of the Investment Agreement is hereby amended
by inserting the words", Inco" immediately after the word "TMC."
(g) Section 7(d) of the Investment Agreement is hereby amended
by inserting the words", Inco" immediately after the word "TMC" on the 7th
line of such Section.
(h) Section 9 of the Investment Agreement is hereby amended by
inserting the words "(other than the Convertible Preferred Securities or
Conversion Shares that are to be issued under the Inco Investment
Agreement)" immediately after the words "or other voting securities" on the
3rd line from the top of such Section.
(i) Section 11 of the Investment Agreement is hereby amended by
adding subsection (l) thereto as follows:
" (l) The terms of the Convertible Preferred Stock to be issued
and sold to Inco Limited pursuant to the Inco Investment Agreement,
and any additional rights granted to Inco with respect thereto or in
connection therewith, shall be in all material respects as set forth
in the attached Certificate of Designation, Inco Investment Agreement
and registration rights agreement between the Company and Inco
Limited."
(j) Section 12 of the Investment Agreement is hereby amended by
deleting Section 12(b) in its entirety.
(k) The Investment Agreement is hereby amended by adding a
Section 31 thereto as follows:
"31. Acknowledgment of Inco Investment Agreement. The Investor
hereby acknowledges that the Company has advised the Investor that, at
the Closing Time, the Company and Inco Limited will enter into the
Inco Investment Agreement pursuant to which the Company will issue
under the Certificate of Designation, sell and deliver to Inco Limited
340,000 Convertible Preferred Securities, at a purchase price of
$50.00 per Convertible Preferred Security, for an aggregate purchase
price of $17,000,000, and the Investor has agreed to such issuance to
Inco Limited."
3. Confirmation of Investment Agreement. Except as otherwise
expressly provided herein, the Investment Agreement is and shall remain in full
force and effect and is hereby ratified and confirmed.
4. Governing Law. This Amendment 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.
5. Counterparts. This Amendment 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.
If the foregoing is in accordance with your understanding of our
agreement with respect to the amendment of the Investment Agreement, please sign
and return to us the enclosed duplicate hereof, whereupon this Amendment and
your acceptance shall represent a binding agreement between the Company, on the
one hand, and the Investor and TMC, on the other hand.
Very truly yours,
SPECIAL METALS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
The foregoing Amendment is hereby
confirmed and accepted as of the
date first above written:
TIMET FINANCE MANAGEMENT COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Treasurer
TITANIUM METALS CORPORATION
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer