SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 8, 1998
SPECIAL METALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 000-22029 25-1445468
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
4317 Middlesettlement Road
New Hartford, New York 13413
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(Address of principal executive offices)
Registrant's telephone number, including area code: (315) 798-2900
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Item 5. Other Events
On July 8, 1998, Special Metals Corporation, a Delaware corporation
("SMC"), announced that it had entered into a definitive agreement (the
"Purchase Agreement") with Inco Limited, a corporation continued under the laws
of Canada ("Inco"), and certain of its subsidiaries, to acquire the Inco Alloys
International nickel alloys business unit (the "Acquisition") for a cash
purchase price of $408 million. The Acquisition, which is subject to certain
closing conditions and regulatory approvals, including antitrust clearance, is
expected to close in the third quarter of 1998.
SMC also announced that it concurrently entered into a definitive
agreement (the "Investment Agreement") with Titanium Metals Corporation, a
Delaware corporation ("TIMET"), pursuant to which a subsidiary of TIMET would
purchase from SMC (the "Investment") $125 million aggregate liquidation value of
6- 5/8% Series A Senior Convertible Preferred Stock (the "Series A Preferred
Stock"). The Series A Preferred Stock will, subject to the favorable vote (the
"Conversion Vote") of a majority of the holders of the common stock of SMC
("Common Stock"), be convertible into shares of Common Stock at a conversion
price equal to 125% of the average closing price of Common Stock over the 40
consecutive trading day period ending 20 days following the announcement of the
transaction. The Series A Preferred Stock is subject to mandatory redemption in
2006. The Investment would occur concurrently with, and is conditioned upon, the
closing of the Acquisition.
In connection with the Investment, SMC and TIMET also announced that
they signed an agreement in principle to form a strategic alliance to pursue
certain manufacturing and joint development and marketing arrangements.
SMC's three principal stockholders, which collectively own a majority
of the outstanding Common Stock, will agree to vote their shares in favor of the
Conversion Vote and in favor of the two designees TIMET will be entitled to
nominate for election to SMC's Board of Directors.
A copy of the press release announcing the Acquisition and the
Investment is attached hereto as Exhibit 99.1 and is incorporated by reference.
The press release filed as an exhibit to this report includes "safe
harbor" language, pursuant to the Private Securities Litigation Reform Act of
1995, indicating that certain statements about SMC's business contained in the
press release are matters that are not historical facts and that are
"forward-looking" that involve risks and uncertainties, including, but not
limited to, satisfaction of conditions to closing, the cyclicality of the
aerospace industry, future global economic conditions, global productive
capacity, competitive products and other risks and uncertainties detailed in
SMC's Securities and Exchange Commission filings.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) The following are exhibits to this Report:
Exhibit 2.1 Stock Purchase Agreement, dated as of July 8,
1998 between Special Metals Corporation and
Inco Limited, Inco United States, Inc., Inco
Europe Limited and Inco S.A.
Exhibit 99.1 Press Release dated July 8, 1998 of
Special Metals Corporation
Exhibit 99.2 Exhibit 99.2 Investment Agreement, datd July 8,
1998 among Special Metals Corporation,
Titanium Metals Corporation and TIMET Finance
Management Company
Exhibit 99.3 Agreement in Principle, dated July 8, 1998,
between Special Metals Corporation and Titanium
Metals Corporation
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
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Name: Donald R. Muzyka
Title: President and Chief Executive Officer
Dated: July 10, 1998
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EXHIBIT INDEX
SPECIAL METALS CORPORATION
Current Report on Form 8-K
Dated July 8, 1998
Exhibit No. Description
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Exhibit 2.1 Stock Purchase Agreement, dated as of July 8,
1998 between Special Metals Corporation and
Inco Limited, Inco United States, Inc., Inco
Europe Limited and Inco S.A.
Exhibit 99.1 Press Release dated July 8, 1998 of
Special Metals Corporation
Exhibit 99.2 Exhibit 99.2 Investment Agreement, datd July 8,
1998 among Special Metals Corporation,
Titanium Metals Corporation and TIMET Finance
Management Company
Exhibit 99.3 Agreement in Principle, dated July 8, 1998,
between Special Metals Corporation and Titanium
Metals Corporation
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STOCK PURCHASE AGREEMENT
between
SPECIAL METALS CORPORATION
and
INCO LIMITED,
INCO UNITED STATES, INC.,
INCO EUROPE LIMITED and
INCO S.A.
Dated as of July 8, 1998
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TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions............................................2
Section 1.2 Other Terms....................................................14
Section 1.3 Other Definitional Provisions..................................14
ARTICLE II
PURCHASE OF THE SHARES
Section 2.1 Purchase and Sale of the Shares; Noncompetition
Payment........................................................15
Section 2.2 Closing; Delivery and Payment..................................16
Section 2.3 Certain Transactions to be Consummated
Prior to or Concurrently with Closing..........................17
Section 2.4 Purchase Price Adjustments.....................................18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 3.1 Organization, Qualification and Authority of the
Sellers........................................................23
Section 3.2 Binding Effect.................................................24
Section 3.3 Organization, Qualification and Authority
of the Companies...............................................24
Section 3.4 Ownership of Shares............................................24
Section 3.5 Investments; Joint Ventures, Etc...............................25
Section 3.6 Consents and Approvals.........................................27
Section 3.7 Non-Contravention..............................................27
Section 3.8 Financial Statements...........................................28
Section 3.9 Litigation and Claims..........................................29
Section 3.10 Taxes..........................................................30
Section 3.11 Employee Benefits..............................................31
Section 3.12 Compliance with Laws...........................................35
Section 3.13 Environmental Matters..........................................35
Section 3.14 Intellectual Property..........................................37
Section 3.15 Collective Bargaining Agreements...............................38
Section 3.16 Contracts......................................................38
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Section 3.17 Real Property..................................................41
Section 3.18 Absence of Change..............................................45
Section 3.19 Finders' Fees..................................................45
Section 3.20 Insurance......................................................45
Section 3.21 Affiliate Transactions.........................................46
Section 3.22 All Assets Necessary for the Conduct of the
Business.......................................................47
Section 3.23 Company Products...............................................47
Section 3.24 Tangible Property..............................................47
Section 3.25 Conflicts of Interest..........................................48
Section 3.26 No Other Representations or Warranties.........................48
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization and Qualification.................................48
Section 4.2 Binding Effect.................................................48
Section 4.3 Corporate Authorization........................................49
Section 4.4 Consents and Approvals.........................................49
Section 4.5 Non-Contravention..............................................49
Section 4.6 Finders' Fees..................................................50
Section 4.7 Financing......................................................50
Section 4.8 Securities Act.................................................50
Section 4.9 No Impediments.................................................50
Section 4.10 No Other Representations or Warranties.........................50
ARTICLE V
COVENANTS
Section 5.1 Access; Financing..............................................51
Section 5.2 Conduct of Business............................................53
Section 5.3 Reasonable Efforts; Good Faith.................................58
Section 5.4 Tax Matters....................................................59
Section 5.5 Continuation of Employment.....................................68
Section 5.6 Continuation of Defined Benefit
(Retirement) Plans.............................................68
Section 5.7 Continuation of Defined Contribution
(Savings) Plans 69
Section 5.8 Welfare Benefits...............................................70
Section 5.9 Post-Retirement Welfare Benefits...............................70
Section 5.10 Credit For Past Service........................................71
Section 5.11 Other Business Information.....................................71
Section 5.12 Compliance with WARN...........................................72
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Section 5.13 Ancillary Agreements...........................................72
Section 5.14 Further Assurances.............................................75
Section 5.15 No Solicitation................................................76
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of
Purchaser and the Sellers......................................76
Section 6.2 Conditions to the Obligations of Purchaser.....................77
Section 6.3 Conditions to the Obligations of the Sellers...................79
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival.......................................................81
Section 7.2 Indemnification by Purchaser...................................81
Section 7.3 Indemnification by the Sellers.................................82
Section 7.4 Indemnification Procedures.....................................83
Section 7.5 Characterization of Indemnification Payments...................86
Section 7.6 Computation of Losses Subject to
Indemnification................................................86
Section 7.7 Allocation of Purchaser Indemnity Payments.....................86
Section 7.8 Indemnification as Sole Remedy.................................86
ARTICLE VIII
TERMINATION
Section 8.1 Termination....................................................86
Section 8.2 Effect of Termination..........................................88
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices........................................................88
Section 9.2 Amendment; Waiver..............................................89
Section 9.3 Assignment.....................................................90
Section 9.4 Entire Agreement...............................................90
Section 9.5 Fulfillment of Obligations.....................................90
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Section 9.6 Parties in Interest............................................90
Section 9.7 Public Disclosure..............................................90
Section 9.8 Return of Information..........................................91
Section 9.9 Expenses.......................................................91
Section 9.10 Schedules......................................................91
SECTION 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM.............................................91
Section 9.12 Counterparts...................................................92
Section 9.13 Headings.......................................................92
Section 9.14 Severability...................................................92
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ANNEXES AND EXHIBITS
ANNEXES
Annex 6.2(c) - Opinion of Sellers' Counsel
Annex 6.3(c) - Opinion of Purchaser's Counsel
EXHIBITS
Exhibit A - Noncompetition Agreement
Exhibit B - Tradename and Trademark License Agreement
Exhibit C - Transitional Services Agreement
Exhibit D - Quitclaim Assignment
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This STOCK PURCHASE AGREEMENT, dated as of July 8, 1998, is made
between Inco Limited, a corporation continued under the laws of Canada ("Inco"),
Inco United States, Inc., a Delaware corporation ("Inco U.S."), Inco Europe
Limited, a limited company incorporated under the laws of England and Wales
("Inco Europe"), and Inco S.A., a French SOCIETE ANONYME ("Inco S.A." and,
collectively with Inco, Inco U.S. and Inco Europe, the "Sellers") and Special
Metals Corporation, a Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Inco U.S. is the record and beneficial owner of all of the
issued and outstanding shares (the "IAII Shares") of common stock, par value
$100 per share, of Inco Alloys International, Inc., a Delaware corporation
("IAII");
WHEREAS, Inco S.A. is the record and beneficial owner of 9,495 shares
(the "Rescal Shares") of common stock of Rescal S.A., a French SOCIETE ANONYME
("Rescal");
WHEREAS, Inco Europe is (i) the legal and beneficial owner of the
entire share capital (the "IAL Shares") of Inco Alloys Limited, a limited
company incorporated under the laws of England and Wales ("IAL") (other than
with respect to one IAL Share owned by IAIL); (ii) the legal and beneficial
owner of the entire share capital (the "IAIL Shares") of Inco Alloys
International Limited, a limited company incorporated under the laws of England
and Wales ("IAIL")(other than with respect to one IAIL Share owned by IAL); and
(iii) the legal and beneficial owner of one share (the "Incotherm Share") of
common stock of Incotherm Limited, a limited company incorporated under the laws
of England and Wales ("Incotherm") (the other outstanding shares of which are
legally and beneficially owned by IAL);
WHEREAS, Inco is the record and beneficial owner of (i) all of the
issued and outstanding shares (the "IACL Shares") of common stock of Inco Alloys
Canada Limited, a Canadian corporation ("IACL"); and (ii) 400,000 shares (the
"DIAL Shares" and, collectively with the IAII Shares, the Rescal Shares, the IAL
Shares, the IAIL Shares, the IACL Shares and such additional shares of such
entities as may be issued to any Seller pursuant to the QuitClaim Assignment (as
hereinafter defined), in accordance with Section 5.13(d)(iv) or otherwise, the
"Shares") of Daido Inco Alloys Ltd., a corporation incorporated under the
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laws of Japan ("DIAL" and, collectively with IAII, Rescal, IAL, IAIL and IACL,
the "Companies");
WHEREAS, Inco is the direct or indirect owner of at least a majority of
the issued and outstanding shares of capital stock of each of the Sellers other
than itself; and
WHEREAS, the parties hereto desire that the Sellers sell and transfer
to Purchaser (or to certain subsidiaries of Purchaser that are, except for
directors' qualifying shares, wholly-owned by Purchaser) and Purchaser (or such
subsidiaries of Purchaser) purchase from the Sellers all of the Shares on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and on the terms and subject to the conditions
set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions. As used in this Agreement, the
following terms have the meanings set forth or referenced below:
"A/R Termination" has the meaning set forth in Section 2.3(a).
"Actions" has the meaning set forth in Section 3.9(a).
"Adjustment Reports" has the meaning set forth in Section 2.4(b).
"Affiliate" means, with respect to any Person, any Person directly or indirectly
controlling, controlled by, or under common control with, such other
Person at the time at which the determination of affiliation is being
made. The term "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as applied to
any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or other
ownership interests, by contract or otherwise.
"Affiliate Transaction" means any transaction between Inco or any Affiliate of
Inco (other than any of the Companies, the
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Subsidiaries or the Investments) on the one hand, and any of
the Companies, the Subsidiaries or the Investments on the
other hand.
"Agreement" means this Agreement, including the schedules and exhibits hereto,
as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
"Ancillary Agreements" means the Noncompetition Agreement, the Tradename and
Trademark License Agreement, the Transitional Services Agreement and
the QuitClaim Assignment, attached hereto as Exhibits A, B, C and D,
respectively.
"Applicable Rate" has the meaning set forth in Section 2.4(e).
"Approved Capital Expenditures" has the meaning set forth in Section 5.2(6).
"Approved Commodity Hedging Transactions" has the meaning set forth in Schedule
3.16(a)(i)b of the Disclosure Schedule.
"Approved Currency Hedging Transactions" has the meaning set forth in Schedule
3.16(a)(i)a of the Disclosure Schedule.
"Approved Hedging Policies" has the meaning set forth in
Section 3.16(d).
"Audited Financial Statements" has the meaning set forth in
Section 3.8.
"Benefit Plans" has the meaning set forth in Section 3.11(a).
"Books and Records" means all books, ledgers, files, reports, plans and
operating records of, or maintained by, the Companies or the
Subsidiaries other than DIAL, in whatever format maintained by such
Companies or Subsidiaries.
"Business" means the development, manufacture and marketing of high-performance
nickel-containing alloys, wrought nickel products (including anodes)
that are currently manufactured by the Companies or the Subsidiaries,
electroformed nickel foil and electroformed nickel strip except
electroformed nickel foil for solar-power or any other power panel
applications, mechanically alloyed powders except powders that would
represent materials for use in the automotive or other vehicle,
industrial or dry-cell battery or other power source applications, or
powders which would be used in any
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flake form and the operation of subsidiary wire drawing and processing
facilities, welding product manufacturers and distributors.
"Business Day" means any day other than a Saturday, a Sunday or a day on which
banks in New York City are authorized or obligated by law or executive
order to close.
"CAFCO" means Corporate Asset Funding Company, Inc., a Delaware corporation.
"Calculation Date" has the meaning set forth in Section 2.4(b).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq.
"Chosen Courts" has the meaning set forth in Section 9.11.
"Citicorp" means Citicorp North America, Inc., a Delaware corporation.
"Claim Notice" has the meaning set forth in Section 7.4.
"Closing" means the closing of the transactions contemplated by this Agreement.
"Closing Date" has the meaning set forth in Section 2.2(a).
"Closing Adjusted Net Worth" has the meaning set forth in Section 2.4(b).
"Closing Adjusted Net Worth Schedule" has the meaning set forth in Section
2.4(b).
"Cobalt Supply Agreements" means (i) the cobalt supply agreement, dated February
11, 1997, between IAII and Inco Inc. and (ii) the Cobalt Supply
Agreement, effective as of July 1, 1998 between IAL and Inco Europe, in
each case in the form previously provided to Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" has the meaning set forth in the recitals.
"Company Products" has the meaning set forth in Section 3.23.
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"Competition Laws" mean statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed
or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
"Confidentiality Agreement" means the agreement dated March 31, 1997 between
Inco and Purchaser.
"Contract" means any agreement, contract, lease, purchase order, arrangement,
commitment or license.
"CPA Firm" has the meaning set forth in Section 2.4(d).
"Deductible Amount" has the meaning set forth in Section 7.3(b).
"Determination" has the meaning set forth in Section 2.4(d).
"Determination Date" has the meaning set forth in Section 2.4(e).
"DIAL" has the meaning set forth in the recitals.
"DIAL Agreements" has the meaning set forth in Schedule 3.6 of the Disclosure
Schedule.
"DIAL Shares" has the meaning set forth in the recitals.
"Differences" has the meaning set forth in Section 2.4(d).
"Disclosure Schedule" has the meaning set forth in Article III.
"Employee" means any current or former employee of any of the Companies or the
Subsidiaries or any of their respective predecessors or subsidiaries.
"Encumbrances" mean all liens, charges, encumbrances, security interests,
options, other restrictions or third party rights, encroachments,
leases, licenses, transfer restrictions, servitudes, pledges,
mortgages, survey defects, deeds of trust or other limitations on
ownership, conveyance or use.
"Environmental Law" means any Federal, state, local or foreign law, statute,
ordinance, rule, regulation, code, order, judgment, decree or
injunction relating to pollution or the protection of the environment,
health and safety or the use, storage, recycling, treatment,
generation, transportation,
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processing, handling, labeling, release or disposal of Hazardous
Substances.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 3.11(c).
"Final Closing Balance Sheet" has the meaning set forth in Section 2.4(b).
"Financial Statements" has the meaning set forth in Section 3.8.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any supranational, national, Federal, state,
local or other political subdivision thereof or entity, agency or
instrumentality exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Governmental Authorizations" mean all licenses, permits, certificates and other
authorizations and approvals required (i) with respect to the Sellers
or Purchaser, to perform their respective obligations hereunder and
(ii) with respect to the Companies, to carry on the Business as
currently conducted by the Companies under applicable Laws.
"Hazardous Substances" mean any hazardous substances within the meaning of
101(14) of CERCLA, 42 U.S.C. ss. 9601(14), or any toxic waste,
contaminant, hazardous waste, toxic substance, special waste,
industrial substance or waste, petroleum or petroleum-derived substance
or waste, radioactive substance or waste, pollutant or any constituent
of such substance or waste that is regulated, defined or listed under
any other applicable Environmental Law.
"Hourly Plan" means the Inco Alloys International, Inc. Retirement Plan for
Hourly Paid Employees.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IACL" has the meaning set forth in the recitals.
"IACL Shares" has the meaning set forth in the recitals.
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"IAII" has the meaning set forth in the recitals.
"IAII Receivables" has the meaning set forth in Section 2.3.
"IAII Shares" has the meaning set forth in the recitals.
"IAIL" has the meaning set forth in the recitals.
"IAIL Shares" has the meaning set forth in the recitals.
"IAL" has the meaning set forth in the recitals.
"IAL Shares" has meaning set forth in the recitals.
"Inco" has the meaning set forth in the recitals.
"Inco Alloys Companies" has the meaning set forth in Section 5.13(d).
"Inco Alloys Settlement" has the meaning set forth in Section 5.13(d).
"Inco Europe" has the meaning set forth in the recitals.
"Inco Inc." means International Nickel Inc., a Delaware corporation and a
wholly-owned subsidiary of Inco U.S.
"Inco Other Business Information" has the meaning set forth in Section 5.11.
"Inco S.A." has the meaning set forth in the recitals.
"Incotherm" has the meaning set forth in the recitals.
"Incotherm Share" has the meaning set forth in the recitals.
"Inco U.S." has the meaning set forth in the recitals.
"Indemnified Parties" has the meaning set forth in Section 7.3(a).
"Indemnifying Party" has the meaning set forth in Section 7.4.
"Intellectual Property" means all U.S. and foreign patents, patent applications,
registered and common law trademarks, tradenames, service names,
service marks, logos, registered and unregistered copyrights, computer
software programs,
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trade secrets, proprietary technology, research records, processes,
procedures, inventions (whether or not patentable and whether or not
reduced to practice), invention disclosures and improvements thereto
and know-how of the Companies and the Subsidiaries; it being understood
that Intellectual Property shall only include computer software
programs which were developed or customized for or on behalf of the
Companies or the Subsidiaries.
"Interim Financial Statements" has the meaning set forth in Section 3.8.
"Investments" has the meaning set forth in Section 3.5(a).
"Knowledge of the Sellers" means the actual knowledge, after due inquiry, of
each individual set forth on Schedule 1.1 of the Disclosure Schedule
with respect to the representations and warranties set forth beside the
name of such individual on Schedule 1.1 of the Disclosure Schedule;
provided, however, that with respect to the representations and
warranties set forth in Section 3.23 and Section 3.25, the parties
hereto acknowledge that the inquiry conducted has been limited to a
review of such representations and warranties by the individuals
indicated on such Disclosure Schedule.
"Laws" mean any Federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, judgment or decree.
"Leased Property" has the meaning set forth in Section 3.17(a).
"Losses" has the meaning set forth in Section 7.2.
"Major Facility" means the Real Property located at Epone, France; Huntington,
West Virginia; Newton and Pittsborough, North Carolina; Burnaugh,
Kentucky; Rockford, Illinois and Elkhart, Indiana.
"Major Marks" has the meaning set forth in Section 3.14(b).
"Material Adverse Change" means a change, development or effect that, together
with all such other changes, developments or effects, individually or
in the aggregate, has had or is reasonably likely to have a Material
Adverse Effect.
"Material Adverse Effect" means a circumstance, fact, change, development or
effect (i) that is materially adverse to the financial condition,
business, assets or results of
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operations of the Companies and their Subsidiaries taken as a whole or
(ii) that adversely affects the ability of the Sellers to consummate
the transactions contemplated by this Agreement in any material respect
or materially impairs the ability of the Sellers to effect the Closing,
but in each case (i) and (ii) shall exclude any circumstance, fact,
change, development, effect, affect or impairment resulting primarily
from (x) events adversely affecting any of the principal markets served
by the Business generally or shortages or price increases with respect
to scrap or virgin raw materials (nickel, iron, copper, chromium,
cobalt, niobium, molybdenum, titanium and aluminum) used by the
Business or (y) any generally applicable change in Laws (orders,
judgments or decrees against any of the Companies or the Subsidiaries
shall not be considered generally applicable changes in Laws) or GAAP
or interpretations thereof.
"Maximum Amount" has the meaning set forth in Section 7.3(b).
"Maximum Non-Affiliate Debt" has the meaning set forth in Section 5.2(15).
"Net Worth" has the meaning set forth in Section 2.4(a).
"New Nickel Supply Agreements" mean (i) the nickel supply agreement, dated the
date hereof, between IAII and Inco Inc. (together with its Affiliates)
and (ii) the nickel supply agreement, dated the date hereof, between
Inco Europe (together with its Affiliates) and IAL, in each case in the
form provided to Purchaser as of the date hereof.
"Non-Affiliate Debt" has the meaning set forth in Section 5.2(15).
"Noncompetition Agreement" means the Noncompetition Agreement to be dated as of
the Closing Date between Inco and Special Metals Corporation, the form
of which is attached hereto as Exhibit A.
"Noncompetition Payment" has the meaning set forth in Section 2.1.
"Notice Period" has the meaning set forth in Section 7.4.
"Old Nickel Supply Agreements" means the Nickel Supply Agreement between IAII
and Inco Inc., dated January 29, 1997 and the
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understanding pursuant to which nickel is currently supplied to IAL by
Inco Europe on the terms set forth in the draft agreement provided by
Inco to the Purchaser, in each case in the form previously provided to
Purchaser.
"Order" has the meaning set forth in Section 5.3(b).
"Owned Real Property" has the meaning set forth in Section 3.17(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 3.11(b).
"Permitted Encumbrances" has the meaning set forth in Section 3.17(a).
"Person" means an individual, a corporation, a partnership, an association, a
trust or other entity or organization of whatever nature.
"Planned Inventory Counts" has the meaning set forth in Section 2.4(c).
"Pre-Closing Periods" has the meaning set forth in Section 5.4(a)(i).
"Preliminary Closing Balance Sheet" has the meaning set forth in Section 2.4(b).
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchaser" has the meaning set forth in the recitals.
"Purchaser Indemnified Parties" has the meaning set forth in Section 7.3(a).
"Purchaser Notice" has the meaning set forth in Section 2.1.
"Purchaser Required Approvals" means those consents, approvals, waivers,
authorizations, notices and filings designated as Purchaser Required
Approvals on Schedule 3.6 of the Disclosure Schedule and any other
consent, approval, waiver, authorization, notice or filing which, if
not obtained or made in connection with the consummation of the
transactions contemplated hereby, would materially adversely affect the
ability of the Companies to conduct the Business
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substantially as heretofore conducted or materially adversely affect
Purchaser, as the case may be, or materially impair or delay the
ability of the Sellers or Purchaser, as the case may be, to effect the
Closing or subject Purchaser, the Companies or the Subsidiaries to
criminal sanction or penalty; it being understood that the following
shall not be deemed Purchaser Required Approvals: (i) approvals under
the merger control provisions of the UK Fair Trading Act of 1973, as
amended by the Companies Act 1989 and the Deregulation and Contracting
Out Act 1994 or under the merger control rules of the French Republic;
and (ii) any consents, approvals, waivers, authorizations, notices or
filings required to be made or obtained by Purchaser or any of its
Affiliates under any Contract to which Purchaser or any of its
Affiliates is a party or under any Law applicable to Purchaser or any
of its Affiliates. Purchaser acknowledges that no inquiry, demand for
settlement or threat of litigation by the PBGC is a Purchaser Required
Approval and that Purchaser will not treat any such inquiry, demand or
threat as a ground for seeking to postpone the Closing or to fail to
close the transaction.
"QuitClaim Assignment" means the QuitClaim Assignment to be dated as of the day
immediately preceding the Closing Date between Inco and IACL relating
to the assignment of certain trademarks, the form of which is attached
hereto as Exhibit D.
"Real Property" has the meaning set forth in Section 3.17(b).
"Receivables Program" means the trade receivables program established and
carried on pursuant to the Trade Receivables Purchase and Sale
Agreement dated as of September 22, 1992, as amended and restated by
the Pool Expansion Amendment dated as of December 22, 1992, as further
amended as of December 30, 1993, and as of December 20, 1996,
respectively, and as may be further amended after the date hereof in
accordance herewith, among Inco Inc., as seller thereunder; CAFCO, as
Initial Purchaser, as defined therein; and Citicorp, as Agent
thereunder.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, dispersal, discharge, disposal, leaching or migration into or
through the environment or into, through or out of any property,
including the movement of
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Hazardous Substances through or in the air, soil, surface water, ground
water or property.
"Rescal" has the meaning set forth in the recitals.
"Rescal Shares" has the meaning set forth in the recitals.
"Reserve" means amounts payable or receivable, accrued liabilities or other
amounts owing in respect of Taxes payable as reflected in the Financial
Statements for purposes of Section 3.10 and in the Final Closing
Balance Sheet for all other purposes, excluding deferred income tax
liabilities.
"Retirement Plans" has the meaning set forth in Section 5.6.
"Savings Plans" has the meaning set forth in Section 5.7.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Companies" has the meaning set forth in Section 5.13(d)(ii).
"Seller Indemnified Parties" has the meaning set forth in Section 7.2.
"Seller Required Approvals" means any consent, approval, waiver, authorization,
notice or filing required to be obtained by Purchaser in connection
with the consummation of the transactions contemplated hereby which, if
not obtained or made, would subject any of the Sellers to criminal
sanction or penalty.
"Sellers" has the meaning set forth in the recitals.
"Sellers' Group" means any "affiliated group" (as defined in Section 1504(a) of
the Code without regard to the limitations contained in Section 1504(b)
of the Code) that includes any Seller or any predecessor of or
successor to any Seller (or another such predecessor or successor).
"Selling Affiliate Purchase Letter" means the letter, dated as of December 22,
1992, as amended by consent as of December 30, 1993 and December 20,
1996, and as it may be further amended after the date hereof in
accordance herewith, among Inco Inc., Citicorp, and IAII pursuant to
which the IAII
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Receivables were purchased by Inco Inc. and sold to CAFCO
under the Receivables Program.
"Seller Settlement Amount" has the meaning set forth in Section 5.13(d).
"Special Dividend" means the dividend referred to in the Interim Financial
Statements of $21,739,000 declared and paid to Inco U.S. no later than
April 30, 1998.
"Subsidiaries" mean the Investments as to which the Companies own, directly or
indirectly, or otherwise control, 50% or more of the outstanding voting
shares or other similar interests.
"Supply Agreements" means the New Nickel Supply Agreements, the Old Nickel
Supply Agreements and the Cobalt Supply Agreements.
"Tax Package" has the meaning set forth in Section 5.4(c).
"Tax Returns" mean all reports and returns required to be filed with respect to
Taxes.
"Taxes" mean all United States Federal, state or local and all foreign taxes,
including, but not limited to, income, gross receipts, windfall
profits, value added, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes
(but excluding stamp duty and stamp duty reserve taxes; provided,
however, that, solely for purposes of determining the Sellers'
obligations to indemnify the Purchaser Indemnified Parties under
Section 7.3 and 7.4 hereof as a result of a breach of the
representation set forth in Section 3.10(k), such term shall include
stamp duty and stamp duty reserve taxes) together with any interest,
additions or penalties with respect thereto and any interest in respect
of such additions or penalties.
"TIMET Investment Agreement" means the Investment Agreement, dated as of the
date hereof, among Titanium Metals Corporation, TIMET Finance
Management Company and Purchaser relating to the sale and issuance of
$125 million of 65/8% Series A Convertible Preferred Stock of
Purchaser.
"Tradename and Trademark License Agreement" means the Trademark and Trade/Name
License Agreement to be dated as of the
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Closing Date between Inco and Purchaser, the form of which is attached
hereto as Exhibit B.
"Transitional Services Agreement" means the Transitional Services Agreement to
be dated as of the Closing Date between Inco and Purchaser, the form of
which is attached hereto as Exhibit C.
"UK Properties" means the UK Freehold Properties and the UK Leasehold Property.
"UK Freehold Properties" means the following freehold properties: the factory
site at Holmer Road, Hereford - Title No. HE796, 48 Kempton Avenue,
Hereford - Title No. HW45529, 63-65 Old School Lane, Hereford - Title
HW141902, in each case as referred to in Schedule 3.17(a)(1)(B) of the
Disclosure Schedule.
"UK Leasehold Property" means the following leasehold property: the premises at
7/8 Regal Road Stratford upon Avon referred to in Schedule 3.17(a)(2)
(B) of the Disclosure Schedule.
"U.S. Plans" has the meaning set forth in Section 3.11(b).
"WARN" means the Worker Adjustment and Retraining Notification Act.
"Wiretech Plan" means the A-1 Wiretech, Inc. Employees Savings and Retirement
Plan.
Section 1.2 Other Terms. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, have such meaning
throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement.
(b) Terms defined in the singular have a comparable meaning when used
in the plural, and vice versa.
(c) The terms "dollars" and "$" mean United States dollars.
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(d) This Agreement shall be deemed to have been drafted by each party
hereto and this Agreement shall not be construed against any party as the
principal draftsperson hereof.
(e) Whenever any of the representations or warranties set forth in
Article III hereof is qualified by reference to a dollar threshold or any of the
covenants set forth in Article V herein restricts actions with reference to a
dollar threshold, transactions in foreign currencies shall be deemed to be
converted into dollars at the then prevailing exchange rate.
(f) References herein to criminal sanctions or penalties shall not in
any way limit, expand or affect the meaning of materiality for purposes of this
Agreement.
ARTICLE II
PURCHASE OF THE SHARES
Section 2.1 Purchase and Sale of the Shares; Noncompetition Payment. On
the terms and subject to the conditions set forth herein, at the Closing (a) the
Sellers agree to sell and transfer to Purchaser (or to such subsidiary or
subsidiaries of Purchaser that are, except for directors' qualifying shares,
wholly-owned by Purchaser and designated by notice (the "Purchaser Notice") from
Purchaser to Inco not less than five Business Days prior to the Closing (in
which case, unless the context otherwise requires, the term "Purchaser" shall
include such subsidiary or subsidiaries) in accordance with Section 9.3 hereof),
and Purchaser agrees to purchase from the Sellers, the Shares, for an aggregate
purchase price of $373 million as allocated among the Shares as set forth on
Schedule 2.1 of the Disclosure Schedule (the "Purchase Price"), subject to
adjustment in accordance with Sections 2.4 and 5.4(a)(iv) and (b) Purchaser
agrees to pay Inco $35 million (the "Noncompetition Payment") as consideration
for Inco entering into the Noncompetition Agreement. The Shares to be purchased
by each Purchaser shall also be designated in the Purchaser Notice; provided
that all of the Shares shall be purchased by one or more Purchasers.
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Section 2.2 Closing; Delivery and Payment.
(a) The Closing shall take place at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York at
10:00 A.M. New York City time, on the third Business Day following satisfaction
or, if permissible, waiver, of the conditions set forth in Article 6 of this
Agreement (other than those that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver at or prior to the Closing of
all such conditions) or at such other time and place as the parties hereto may
mutually agree. The time and date on which the Closing occurs is called the
"Closing Date".
(b) On the Closing Date, on the terms and subject to the conditions of
this Agreement, the Sellers shall deliver to Purchaser (i) with respect to all
Shares other than the DIAL, IAL, IAIL and Rescal Shares, certificates
representing such Shares duly endorsed in blank or accompanied by stock powers
duly executed in blank, with all necessary stock transfer stamps to be paid and
affixed by Purchaser, (ii) with respect to the Incotherm Share and the IAL and
IAIL Shares, certificates representing the Incotherm Share and the IAL and IAIL
Shares with duly executed stock transfer forms in favor of Purchaser or a
nominee of Purchaser, (iii) with respect to the DIAL and Rescal Shares,
documents necessary to effect the transfer thereof, in the case of the DIAL
Shares (unless such documents are not necessary because the DIAL Shares have
been transferred to IAII prior to the Closing as set forth on Schedule 5.2 of
the Disclosure Schedule), in accordance with Japanese law, and in the case of
the Rescal Shares, an ORDRE DE MOUVEMENT in respect of the Rescal Shares, duly
endorsed in the name of Purchaser, the COMPTES D'ACTIONNAIRES, REGISTRE DE
MOUVEMENTS DE TITRES and board and shareholders minute books of Rescal, together
with a certified copy of the current STATUTS of Rescal, with all necessary stock
transfer stamps to be paid and affixed by Purchaser, and (iv) the instruments
and opinions required to be delivered pursuant to Section 6.2, and Purchaser
shall pay to Inco the Noncompetition Payment by wire transfer of immediately
available funds to an account designated by Inco not less than two Business Days
prior to the Closing and, at Inco's option, either pay to (x) Inco, on behalf of
the Sellers, the Purchase Price for the Shares by wire transfer of immediately
available funds to accounts designated by Inco not less than two Business Days
prior to the Closing, or (y) the appropriate Seller its allocable share of the
Purchase Price (as allocated among the Shares pursuant to Section 2.1 of this
Agreement) by wire transfer of immediately available funds
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to an account designated by such Seller not less than two Business Days prior to
the Closing, in either case ((x) or (y)) net of any and all applicable
withholding taxes calculated on the assumption that the actual purchaser of any
Shares is a U.S. corporation, and Purchaser shall deliver to the Sellers the
instruments and opinions required to be delivered pursuant to Section 6.3.
(c) On the Closing Date, on the terms and subject to the conditions of
this Agreement, the Sellers shall cause (i) six shares of Rescal held by
Rescal's directors, (ii) two shares of Inco Alloys Services (Pacific) Pte. Ltd.
held by F.C. Britton and J.P. McGrath and (iii) all of the shares of Inco Alloys
Services S.A. held by G. Cerami, G.B. Nairn, D.W. Ohl and C. Minot, to be
transferred to such directors of such companies as may be selected by Purchaser
for no additional consideration.
(d) No later than immediately after the Closing, but as a condition to
the Closing, the Sellers shall assign all of Sellers' rights under the DIAL
Agreements to IAII and IAII shall assume all obligations of the Sellers under
the DIAL Agreements.
(e) If the DIAL Shares have not been transferred to IAII prior to the
Closing, promptly after the Closing Purchaser will assign the DIAL Shares to
IAII at no cost to Purchaser.
Section 2.3 Certain Transactions to be Consummated Prior to or
Concurrently with Closing. Purchaser and Inco U.S. agree that they shall
cooperate as hereinafter set forth to discontinue from the Receivables Program,
as of the Closing Date, all trade receivables originated by IAII under the
Receivables Program and still subject thereto (the "IAII Receivables").
(a) Procedures to Terminate IAII Receivables from the Receivables
Program. Effective upon the Closing, the Sellers shall cause Inco Inc. and IAII
to terminate the Selling Affiliate Purchase Letter and all obligations and
liabilities of IAII thereunder and under the Receivables Program. Effective upon
the Closing, the Sellers shall also cause Inco Inc. to repurchase from CAFCO all
of the IAII Receivables and assign to Purchaser all such IAII Receivables, free
and clear of any Encumbrances. The Sellers shall, at the Closing, provide
Purchaser with evidence of such termination, repurchase and assignment (the "A/R
Termination") in a form reasonably acceptable to Purchaser. In connection with
the A/R Termination, the Sellers and Purchaser shall take such actions as are
reasonably necessary or appropriate to effectuate the A/R Termination; it being
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understood that such action shall be without cost to Purchaser other than costs
not in excess of a de minimus amount.
(b) Payments to Inco Inc. Commencing on the last day of the month
following the month in which the Closing Date occurs, and on the last day of
each of the next two succeeding months, Purchaser agrees to pay (without regard
to whether or not such receivables are actually paid by the account party) Inco
Inc. an amount equal to one third of the face amount of the IAII Receivables
assigned under subsection (a) above to Purchaser by wire transfer of immediately
available funds to an account designated by Inco Inc.; provided that in no event
shall such payments exceed $35 million.
(c) UCC-3s. At the Closing, Inco shall cause executed UCC-3 termination
statements to be delivered to Purchaser in order that the IAII Receivables may
be assigned to the Purchaser free of any Encumbrances.
(d) Purchaser Acknowledgment. Purchaser acknowledges that IAII and/or
its Affiliates have entered into the Receivables Program and, in connection
therewith, have sold the IAII Receivables.
Section 2.4 Purchase Price Adjustments.
(a) Determination of Net Worth. As used herein, the "Net Worth" of the
Companies and the Subsidiaries as of any particular date means an amount equal
to the total assets less the total liabilities of the Companies and the
Subsidiaries on a combined basis and shall be determined as set forth below.
(b) Preparation of Closing Statement. Within 30 days after the Closing
Date, the Sellers shall prepare (based on data and financial statements supplied
by Purchaser and the Companies) the combined balance sheets of the Companies and
the Subsidiaries as of the close of business on the last day of the last
calendar month ending prior to or on the Closing Date (such date and time, the
"Calculation Date"). Such balance sheets shall be prepared on a basis consistent
with the preparation of the Audited Financial Statements at December 31, 1997
and for the year then ended and using the same accounting policies, practices
and procedures used to prepare the Audited Financial Statements without any
modification unless such policies, practices or procedures are not in accordance
with GAAP (in which case the policies, practices or procedures to be used shall
be in accordance with GAAP) (such combined balance sheets as of the
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Calculation Date, the "Preliminary Closing Balance Sheet"). Within 60 days after
the Closing Date, the Preliminary Closing Balance Sheet shall be audited by
PricewaterhouseCoopers LLP ("PwC")(the "Final Closing Balance Sheet") and such
firm shall deliver an audit opinion stating that the Final Closing Balance Sheet
presents fairly, in all material respects, the financial position of the
Companies and the Subsidiaries on a combined basis at the Calculation Date in
accordance with GAAP consistently applied. In addition, within 60 days after the
Closing Date, PwC shall perform certain procedures on the Closing Adjusted Net
Worth Schedule (as defined below) and such firm shall deliver a procedures
report stating that the Closing Adjusted Net Worth Schedule has been derived
from the Final Closing Balance Sheet as adjusted as set forth below. The Final
Closing Balance Sheet shall include a schedule (the "Closing Adjusted Net Worth
Schedule"), prepared by the Sellers and the procedures report of PwC referred to
above, calculating the Net Worth of the Companies and the Subsidiaries as of the
Calculation Date as adjusted based upon the applicable terms of this clause (b)
(as so adjusted, the "Closing Adjusted Net Worth"). In order to determine the
Closing Adjusted Net Worth, the Net Worth as of the Calculation Date shall be
adjusted by (i) eliminating any portion of the cumulative currency translation
adjustments included in shareholder's equity that relate to foreign currency
exchange rate changes subsequent to May 31, 1998, (ii) eliminating any changes
to shareholder's equity due to changes since March 31, 1998 in the discount rate
assumption required by GAAP and used in determining the post-retirement
liabilities of any of the Companies or the Subsidiaries, (iii) eliminating any
impact of the cumulative effect to net income of any change subsequent to
December 31, 1997 in accounting principles in accordance with GAAP as permitted
under Section 5.2(8), (iv) taking into account any book to physical adjustments
to inventories (excluding supplies) with respect to inventories (excluding
supplies) as of the Calculation Date (to the extent such adjustments have not
already been reflected in the Final Closing Balance Sheet) as a result of the
Planned Inventory Counts (as defined below) provided that such Planned Inventory
Counts are completed within 60 days of the Closing Date,(v) to the extent not
otherwise reflected in the Final Closing Balance Sheet, reducing Net Worth by
(A) the gross value of any dividend or other distribution made to the
shareholders of DIAL that is declared or paid prior to the Closing less any
amounts which are recontributed by the shareholders of DIAL to DIAL following
such dividend or distribution and prior to the Closing multiplied by (B) Inco's
equity percentage interest in DIAL and (vi) adjusted to give effect to material
changes to Net Worth arising other
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than in the ordinary course of the Business (but specifically including plant
shutdowns) between the Calculation Date and the Closing Date as if such change
had occurred prior to the Calculation Date. The Preliminary Closing Balance
Sheet, the Final Closing Balance Sheet, the Closing Adjusted Net Worth Schedule
and the PwC audit opinion and procedures report referred to above (collectively,
the "Adjustment Reports") shall be provided to Purchaser promptly upon the
respective availability thereof. Purchaser will (and will cause the Companies
and the Subsidiaries to) provide Inco and PwC full access to the Books and
Records and the active Employees and will fully cooperate, and will use its best
efforts to cause the active Employees to fully cooperate, in preparing and
reviewing the Adjustment Reports.
(c) Purchaser's Review. Upon receipt of the Adjustment Reports,
Purchaser and its independent accountants shall have the right during the
succeeding 45-day period to examine the Adjustment Reports and all books and
records used to prepare the Adjustment Reports. The Sellers shall use their best
efforts to cause PwC to provide access to the work papers used to prepare, audit
and perform procedures on the Adjustment Reports and supporting their report and
opinion referred to above, and Inco shall provide Purchaser with access to its
books and records and employees relevant to or otherwise involved in the
preparation of the Adjustment Reports. Purchaser and the Sellers acknowledge
that book to physical counts of inventory (excluding supplies), in each case
consistent with past practices and using the same procedures previously used by
the respective Company or Subsidiary so long as such practices and procedures
were in accordance with GAAP may only be taken at the following locations: (i)
IAII's facilities in Huntington, West Virginia (to take place on or about August
8, 1998 and be completed by August 15, 1998),(ii) IAL's facilities in Hereford,
U.K. (to take place by the end of August 1998 and be completed by September 15,
1998), (iii) A-1 Wire Tech, Inc., (iv) IAL's welding products operations, (v)
Rescal's facilities, (vi) Inco Alloys Services SpA's facilities, and (vii) Inco
Alloys Services (Pacific) Pte. Ltd.'s facilities (such inventory counts, the
"Planned Inventory Counts"). Sellers may, at their option, conduct one or more
of the Planned Inventory Counts prior to the Closing Date, subject to the third
succeeding sentence. The parties hereby acknowledge that taking into account the
planning and complexity of the Planned Inventory Counts, the personnel of the
Companies or the Subsidiaries who have previously been responsible for
overseeing prior inventory counts taken at the relevant locations will, in
consultation with Purchaser, be responsible for and will oversee
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the Planned Inventory Counts, subject to the second succeeding sentence. No book
to physical adjustments with respect to inventories shall be made to the
Adjustment Reports other than as provided for above with respect to the Planned
Inventory Counts. The Sellers and Purchaser and their respective accountants and
representatives shall be afforded prior notice of and a reasonable opportunity
to observe the Planned Inventory Counts; the parties acknowledge that the
Planned Inventory Counts shall only be taken in a manner consistent with the
past practices and utilizing the same procedures previously utilized by the
Companies so long as such practices and procedures are in accordance with GAAP
and that no adjustment to the Adjustment Reports relating to slow-moving or
obsolete inventory or due to valuation or similar adjustments shall be permitted
unless such adjustments are not in accordance with (x) past policies, practices
or procedures applied on a basis consistent with the Audited Financial
Statements or (y) GAAP.
If Purchaser does not agree that the Closing Adjusted Net Worth has
been prepared on the basis set forth in Section 2.4(b) or is of the view that it
is otherwise inaccurate, Purchaser shall so notify Inco in writing on or before
the last day of the 45-calendar-day period after delivery to Purchaser of the
Adjustment Reports, setting forth a reasonably specific description of
Purchaser's objections and the adjustments which Purchaser believes should be
made; it being understood that Purchaser may not object to the use of accounting
policies, practices and procedures used in preparing the Audited Financial
Statements to the extent such policies, practices and procedures are in
accordance with GAAP consistently applied. If Purchaser does not deliver such
notice within such 45-calendar-day period, the Final Closing Balance Sheet, the
Closing Adjusted Net Worth Schedule and the Closing Adjusted Net Worth shall be
deemed to have been accepted by Purchaser.
(d) Dispute Resolution. In the event Purchaser objects to the Final
Closing Balance Sheet and/or the Closing Adjusted Net Worth Schedule, Inco and
Purchaser shall attempt to resolve such objections within 15 calendar days of
Inco's receipt of Purchaser's objections. If Inco and Purchaser are unable to
resolve all such objections (any objections remaining after such attempt at
resolution being referred to as "Differences") within such 15-calendar-day
period, KPMG Peat Marwick LLP ("KPMG") or, if such firm is unavailable, another
mutually acceptable firm of independent accountants of national reputation (or,
if Inco and Purchaser cannot agree on a mutually acceptable firm, they shall
cause their respective accounting firms to select such firm,
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which firm, in any case, shall have no auditing or other relationship with
Purchaser, Inco or any of their respective Affiliates) within five calendar days
of the end of such 15- calendar-day period (KPMG or such other firm, the "CPA
Firm"). The CPA Firm, acting as experts and not as arbitrators, shall review the
Differences and determine, based on the requirements set forth in Section 2.4(b)
and only with respect to Differences submitted to the CPA Firm, whether and to
what extent the Final Closing Balance Sheet and Closing Adjusted Net Worth
Schedule require adjustment (such determination, the "Determination"). The
Determination shall be delivered to Inco and Purchaser in writing. The parties
shall instruct the CPA Firm to deliver the Determination no later than 45 days
after the remaining Differences are referred to the CPA Firm. The fees and
disbursements of the CPA Firm shall be allocated between Purchaser and the
Sellers in such a way that Purchaser shall be responsible for that portion of
the fees and expenses equal to such fees and expenses multiplied by a fraction
the numerator of which shall be the difference between (x) the total dollar
value of the Differences and (y) the total dollar value of the Differences as
determined by the CPA Firm after its review and the denominator of which shall
be the total dollar value of the Differences and the Sellers shall be
responsible for the remainder of such fees and expenses. Inco and Purchaser
shall (and shall cause the Companies and the Subsidiaries to) provide to the CPA
Firm full cooperation. The CPA Firm's Determination shall be conclusive and
binding upon the parties.
(e) Adjustment. Upon the date (the "Determination Date") that is the
earliest to occur of (i) acceptance of the Final Closing Balance Sheet pursuant
to the last sentence of Section 2.4(c) hereof, (ii) resolution of disputes by
the parties hereto or (iii) receipt by Inco and Purchaser of the Determination,
as an adjustment to the Purchase Price, either (x) Purchaser shall pay to the
Sellers an amount equal to the excess, if any, of the Closing Adjusted Net Worth
(as increased or decreased, as the case may be, by the Determination) over
$301,003,000 (the Net Worth of the Companies as of May 31, 1998 adjusted to
eliminate any impact of the cumulative currency translation adjustments included
in shareholder's equity that relate to foreign currency exchange rate changes
subsequent to December 31, 1997 and up to and including May 31, 1998) or (y)
Inco shall pay to Purchaser an amount equal to the excess, if any, of
$301,003,000 over the Closing Adjusted Net Worth (as increased or decreased, as
the case may be, by the Determination); provided that with respect to each
separate line item as disclosed on the face of the Final Closing Balance Sheet
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no such adjustment to the Purchase Price shall be made pursuant to this clause
(e) for any Difference relating to any such line item if the adjustment
resulting from such Difference would otherwise be less than $200,000. In either
case, such amount shall be payable on or prior to the fifth Business Day
following the Determination Date, with interest, based upon a year of 365 days
for the actual number of days elapsed, accrued from the Closing Date until, but
not including, the date of payment thereof at a rate equal to the rate publicly
announced by The Chase Manhattan Bank as its prime rate (the "Applicable Rate")
on the Closing Date. Such payment shall be made by wire transfer of immediately
available funds to a bank account or accounts to be designated by Inco or
Purchaser, as the case may be.
(f) Allocation of Purchase Price Adjustment. Any adjustment to the
Purchase Price in accordance with this Section 2.4 or any other provision herein
shall be allocated to the Company or Companies with respect to which the
adjustment arose, or if such allocation cannot be made, then the allocation
shall be made on a pro rata basis between the amounts shown for the IAII Shares
and the IAL/IAIL Shares in Schedule 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as otherwise set forth or cross-referenced in the section of the
disclosure schedule delivered by the Sellers to Purchaser on the date of
execution of this Agreement (the "Disclosure Schedule") corresponding to such
representation or warranty, the Sellers jointly and severally make the following
representations and warranties to Purchaser as of the date hereof and as of the
Closing Date; provided, however, that any representations and warranties made as
of a specific date shall only be made as of such date:
Section 3.1 Organization, Qualification and Authority of the Sellers.
Each Seller is a corporation or other entity duly organized, validly existing
and, where applicable, in good standing under the laws of its respective
jurisdiction of organization and has all requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder and under
the Ancillary Agreements and the Supply Agreements to which it is a party. This
Agreement and the Supply Agreements have been, and each Ancillary Agreement will
at Closing be, duly authorized, executed and delivered by each Seller and no
additional corporate proceedings on the part of
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such Seller are necessary to authorize the consummation of this Agreement and
the transactions contemplated hereby and thereby.
Section 3.2 Binding Effect. This Agreement and, except as set forth on
Schedule 3.7 of the Disclosure Schedule, each of the Supply Agreements
constitutes a valid and legally binding obligation of each Seller enforceable
against each Seller in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
Section 3.3 Organization, Qualification and Authority of the Companies.
Each of the Companies (a) is a corporation or other entity duly organized,
validly existing and, where applicable, in good standing under the laws of its
respective jurisdiction of organization, (b) has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as presently conducted and (c) is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction set forth
on Schedule 3.3(c) of the Disclosure Schedule, which are the only jurisdictions
where the ownership or operation of its properties and assets or the conduct of
the Business requires such qualification, except as set forth on Schedule 3.3(c)
of the Disclosure Schedule or where the failure to be so qualified or in good
standing, as the case may be, would not reasonably be likely to have a Material
Adverse Effect. Schedule 3.3(c) of the Disclosure Schedule sets forth the number
of authorized, issued and outstanding shares of capital stock of each of the
Companies as of the date hereof.
Section 3.4 Ownership of Shares.
(a) Except as set forth on Schedule 3.4 (a) of the Disclosure Schedule,
the Sellers own the Shares, which Shares constitute all of the outstanding
equity and voting interests in the Companies, of record and beneficially, free
and clear of Encumbrances and, upon delivery of and payment for such Shares at
the Closing as herein provided, will convey to Purchaser good and valid title to
the Shares, or, in the case of the Companies incorporated under the laws of
England and Wales, legal and beneficial ownership of the Shares in such
Companies, free and clear of any Encumbrance except for any Encumbrance created
by or on behalf of Purchaser.
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(b) Except as set forth on Schedule 3.4(b) of the Disclosure Schedule,
all of the Shares are validly issued, fully paid and nonassessable.
(c) Except for this Agreement and as set forth on Schedule 3.4(c) of
the Disclosure Schedule, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights or similar
derivative instruments or Contracts or commitments relating to the authorized
and issued, unissued or treasury shares of capital stock or other equity or
voting interest of any of the Companies, and none of the Companies has issued
any debt securities or other securities which are convertible into or
exchangeable for, or that give any Person a right to subscribe for or acquire,
capital stock or other equity or voting interests of any of the Companies, and
no such securities or obligations evidencing any such rights are outstanding.
Section 3.5 Investments; Joint Ventures, Etc.
(a) Schedule 3.5(a) of the Disclosure Schedule sets forth a true and
complete list of each corporation and other entity (together, the "Investments")
owned directly or indirectly in whole or in part by any of the Companies or the
Subsidiaries together with its jurisdiction of organization. Each Subsidiary
shown on such Schedule (i) is a corporation or other entity duly organized,
validly existing, and, where applicable, in good standing under the laws of its
jurisdiction of organization, which is also shown on Schedule 3.5(a), (ii) has
all requisite corporate or similar power and authority to own, lease and operate
its properties and assets and to carry on its business as currently conducted
and (iii) is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction set forth on Schedule 3.5(a) of
the Disclosure Schedule, which are the only jurisdictions in which the ownership
or operation of its properties and assets or the conduct of its business
requires such qualification, except where the failure to be so duly qualified
would not reasonably be likely to have a Material Adverse Effect. Schedule
3.5(a) of the Disclosure Schedule sets forth the number of authorized, issued
and outstanding shares of capital stock of each of the Investments as of the
date hereof.
(b) (i) Except as set forth on Schedule 3.5(a) of the Disclosure
Schedule, the Companies own, directly or indirectly, all of the outstanding
capital stock or other equity interest of each Subsidiary, and, except as set
forth on Schedule 3.5(b)(i)
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of the Disclosure Schedule, such ownership is free and clear of all
Encumbrances. Except as contemplated by the QuitClaim Assignment or as set forth
on Schedule 3.5(b)(i) of the Disclosure Schedule, there is no preemptive or any
other out standing right, option, warrant, conversion right, Contract, stock
appreciation right or similar derivative instrument or commitment to issue or
sell any shares of capital stock or other equity interest of any such Subsidiary
or any securities or obligations convertible into or exchangeable for, or giving
any Person a right to subscribe for or acquire, any shares of capital stock or
other equity interest of any such Subsidiary, and no securities or obligations
evidencing such rights are outstanding.
(ii) Except as set forth on Schedule 3.5(b)(ii) of the Disclosure
Schedule, the Companies own, directly or indirectly, the interest in each
Investment which is not a Subsidiary set forth in Schedule 3.5(a), free and
clear of all Encumbrances.
(iii) Schedule 3.5(b)(iii) of the Disclosure Schedule sets forth all
agreements currently in effect relating to the acquisition or disposition by any
Company, Subsidiary or Seller of equity interests in any Investment and all
shareholder or investor agreements currently in effect or other similar
agreements currently in effect to which any Company or Subsidiary is a party.
(iv) Except as set forth on Schedule 3.5(b)(iv) of the Disclosure
Schedule or as disclosed in the Financial Statements, there are no outstanding
obligations of any of the Companies or any of the Subsidiaries to repurchase,
redeem or otherwise acquire any securities of any of the Companies or any of the
Subsidiaries or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Investment other than a
wholly-owned Subsidiary.
(v) The Sellers have heretofore made available to Purchaser true and
complete copies of (a) the Certificate of Incorporation and By-laws, or other
organizational documents of each Company and Subsidiary in effect on the date
hereof and (b) each of the documents listed on Schedule 3.5(b)(iii) of the
Disclosure Schedule. The minute books, or comparable records, of each Company
(other than DIAL) and each Subsidiary heretofore have been made available to
Purchaser for its inspection and contain true and complete records of all
meetings and consents in lieu of meeting of the Board of Directors or comparable
body (and any committees thereof) and shareholders (or other equity owners) of
each Company and each Subsidiary. The stock ledgers, or
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comparable records, of each Company (other than DIAL) and each of the
Subsidiaries heretofore have been made available to Purchaser for inspection at
the respective headquarters of such Company or Subsidiary.
(vi) The value of the Incotherm Share is not material.
Section 3.6 Consents and Approvals. Except as (a) set forth on Schedule
3.6 of the Disclosure Schedule, (b) as may be required in connection with the
Sellers' performance of the covenants in Section 5.4 or in connection with the
QuitClaim Assignment, or (c) as required by the HSR Act, other Competition Laws,
foreign investment laws, applicable securities laws or stock exchange
requirements, no consent, approval, permit, waiver or authorization is required
to be obtained by any Seller, Company or Subsidiary from, and no notice or
filing is required to be given by any Seller, Company or Subsidiary to or made
by any Seller, Company or Subsidiary with, any Governmental Authority or other
Person in connection with the execution, delivery and performance by the Sellers
of this Agreement, other than (x) with respect to a Person other than a
Governmental Authority where the failure to obtain such consent, approval,
permit, waiver or authorization, or to give or make such notice or filing, would
not, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect and (y) with respect to a Governmental Authority, where the
failure to obtain such consent, approval, permit, waiver or authorization would
not reasonably be likely to be material to the Companies and the Subsidiaries
taken as a whole or the Business or subject the Companies, the Subsidiaries or
Purchaser to criminal penalty or sanction.
Section 3.7 Non-Contravention. Except as set forth on Schedule 3.7 of
the Disclosure Schedule, the execution, delivery and performance by the Sellers
of this Agreement, and the consummation by the Sellers of the transactions
contemplated hereby, does not and will not (i) violate any provision of the
Certificate of Incorporation, Bylaws or other organizational documents of any
Seller, Company or Subsidiary, (ii) subject to obtaining the consents referred
to in Section 3.6, conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the giving of notice or the lapse of time or both) of any right
or obligation of any Seller, Company or Subsidiary under, or to a loss of any
benefit to which any Seller, Company or Subsidiary is entitled under, or
adversely affect (including by increase in price or cost), any Contract,
agreement, lease,
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indenture or other instrument to which any Seller, Company or Subsidiary is a
party or by which any of its respective properties or assets are bound or
affected or result in the creation of any Encumbrance upon any of the Shares or
properties or assets of the Companies or any Subsidiaries, or (iii) assuming
compliance with the matters set forth in Sections 3.6 and 4.4, violate or result
in a breach of or constitute a default under any Law of any Governmental
Authority to which any Seller, Company or Subsidiary is subject or by which any
of the respective properties or assets are bound or affected, including any
Governmental Authorization, other than, in the case of clause (ii), any
conflict, breach, termination, default, can cellation, acceleration, loss,
violation or Encumbrance which, individually or in the aggregate, would not
reasonably be likely to have a Material Adverse Effect or, with respect to
clause (iii), any such violation, breach or default that would not reasonably be
likely to be material to the Companies or the Business or subject the Companies,
the Subsidiaries or Purchaser to criminal penalty or sanction.
Section 3.8 Financial Statements. Schedule 3.8 of the Disclosure
Schedule contains a copy of the audited combined balance sheets of the Companies
and the Subsidiaries as of December 31, 1997 and December 31, 1996 and the
related audited combined income statements and combined statements of cash flows
of the Companies and the Subsidiaries for each of the fiscal years ended
December 31, 1995, 1996 and 1997, accompanied by the reports thereon of Price
Waterhouse LLP (all such financial statements, including the notes thereto,
referred to herein as the "Audited Financial Statements"). The Audited Financial
Statements have been prepared in accordance with GAAP consistently applied
during the periods involved, except as otherwise disclosed in the notes to such
financial statements, and present fairly in all material respects the combined
financial position of the Companies and the Subsidiaries as of such dates and
the combined results of their operations and their combined cash flows for the
fiscal years then ended. The unaudited interim combined balance sheets of the
Companies and the Subsidiaries as of March 31, 1998 and March 31, 1997 and the
related unaudited combined income statements and combined statements of cash
flows of the Companies and the Subsidiaries for the three-month periods ended on
such dates are also contained in Schedule 3.8 of the Disclosure Schedule (all
such financial statements, including the notes thereto, referred to herein as
the "Interim Financial Statements" and, collectively with the Audited Financial
Statements, the "Financial Statements"). The Interim Financial Statements have
been
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prepared in accordance with GAAP on a basis consistent with the Audited
Financial Statements (subject to the absence of year-end adjustments and having
only certain notes thereto) and present fairly in all material respects the
combined financial position of the Companies and the Subsidiaries as of such
dates and the combined results of their operations and their combined cash flows
for the three-month periods then ended (subject to normal year-end audit
adjustments). There is no liability or obligation of a kind required to be
disclosed under GAAP, whether accrued, absolute, fixed or contingent, of the
Companies and the Subsidiaries taken as a whole that is not disclosed, reflected
or reserved against in the Audited Financial Statements, except such liabilities
or obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1997 or as set forth on Schedule 3.8 of the
Disclosure Schedule. Except as set forth on Schedule 3.8 of the Disclosure
Schedule, no Company or Subsidiary has any obligation to make any "earn out" or
similar payments.
Section 3.9 Litigation and Claims.
(a) Set forth on Schedule 3.9(a) of the Disclosure Schedule is a list
of each civil, criminal or administrative action, suit, demand, claim, hearing,
proceeding, arbitration or investigation (collectively "Actions") (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or, to the Knowledge of the Sellers, threatened, involving
any Company or any Subsidiary or any of their respective properties or assets
that (i) as of the date hereof, would reasonably be likely to subject the
Companies and the Subsidiaries to liabilities in excess of $100,000 per Action
or series of related Actions or (ii) that would reasonably be likely to have a
Material Adverse Effect. Except as would not reasonably be likely to have a
Material Adverse Effect, all notices required to have been given to any
insurance company insuring any Action set forth on Schedule 3.9(a) of the
Disclosure Schedule have been timely and duly given and, except as set forth on
Schedule 3.9(a) of the Disclosure Schedule, to the Knowledge of the Sellers no
such insurance company has asserted, orally or in writing, that such Action is
not covered by the applicable policy relating to such Action.
(b) Set forth on Schedule 3.9(b) of the Disclosure Schedule is a list
of each order, writ, judgment, award, injunction or decree of any court or
Governmental Authority or any arbitrator or arbitrators of competent
jurisdiction currently applicable to any of the Companies, the Subsidiaries, or
any of
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their respective properties or assets that (i) as of the date hereof, concerns
or involves an amount reasonably likely to be in excess of $100,000, or (ii)
individually or in the aggregate, would reasonably be likely to have a Material
Adverse Effect.
Section 3.10 Taxes. Except as set forth on Schedule 3.10 of the
Disclosure Schedule: (a) all Tax Returns that are required to be filed on or
before the date of this Agreement (taking into account applicable extensions) by
the Companies and the Subsidiaries or by any consolidated, combined, unitary,
aggregate or other similar group for Tax purposes of which any of the Companies
or the Subsidiaries is or has been a member, have been duly filed, except for
Tax Returns as to which the failure to file, when taken together with all other
such failures, would not reasonably be likely to have a Material Adverse Effect;
(b) all Taxes shown to be due on the Tax Returns referred to in clause (a) and
all Taxes for periods ending on or before the date of this Agreement for which
Tax Returns have not yet been filed have been timely paid or recorded as
Reserves or current liabilities on the March 31, 1998 combined balance sheets
included in the Interim Financial Statements, with respect to periods ending on
or prior to March 31, 1998, and in the Books and Records for periods commencing
after March 31, 1998, except for such Taxes (i) which are being contested by the
Sellers, the Companies or any Subsidiaries in good faith or (ii) as to which the
failure to pay or record, when taken together with all other such failures,
would not reasonably be likely to have a Material Adverse Effect; (c) as of the
date hereof no adjustments relating to the Tax Returns referred to in clause (a)
have been proposed by the Internal Revenue Service or the appropriate state,
local or foreign taxing authority, except for such adjustments that, when taken
together with all other such adjustments that have been proposed, would not
reasonably be likely to have a Material Adverse Effect; (d) there are no pending
or, to the Knowledge of Sellers, threatened, actions or proceedings for the
assessment or collection of Taxes against any entity described in clause (a),
except for such actions or proceedings that, when taken together with all other
such actions and proceedings that are pending or have been threatened, would not
reasonably be likely to have a Material Adverse Effect; (e) as of the date
hereof there are no outstanding waivers or agreements extending the applicable
statute of limitations for any period with respect to any Taxes of any entity
described in clause (a), except for such waivers or agreements that, when taken
together with all other such waivers and agreements that are outstanding, would
not reasonably be likely to have a Material Adverse Effect; and (f) as of the
date hereof to the Knowledge of Sellers no taxing authorities are
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presently conducting any audits or other examinations of any Tax Returns
referred to in clause (a), except for such audits or examinations that, when
taken together with all other such audits and examinations that are presently
being conducted, would not reasonably be likely to have a Material Adverse
Effect; (g) all Taxes required to have been withheld, collected or deposited by
the Companies or the Subsidiaries as of the date of this Agreement have been
timely withheld, collected or deposited or are being contested in good faith
and, to the extent required under applicable law, have been paid to the relevant
governmental or taxing authorities, except for such failures individually or in
the aggregate, as would not reasonably be likely to have a Material Adverse
Effect; (h) as of the date hereof there are no liens for, or in respect of,
Taxes on any of the assets of the Companies or the Subsidiaries, other than
liens for current Taxes which are not yet due or payable except for liens,
individually or in the aggregate, which would not reasonably be likely to have a
Material Adverse Effect; (i) except as recorded as Reserves, current liabilities
or intercompany accounts, none of the Companies or the Subsidiaries owes any
amount pursuant to any written or unwritten Tax sharing, group or indemnity
agreement or arrangement, or will have any liability after the date hereof for
any amounts due under or in respect of any written or unwritten Tax sharing,
group or indemnity agreement or arrangement executed or agreed to on or prior to
the date of this Agreement or will otherwise have liability for Taxes of any
other Person and (j) no entity described in clause (a) has agreed to or is
required to make any adjustments under Section 481(a) of the Code by reason of a
change in accounting method or otherwise; (k) with respect to any of the
Companies or Subsidiaries which are organized in or otherwise subject to tax in
the United Kingdom, all documents which such Companies or Subsidiaries require
to prove title to any material asset owned by such Companies or Subsidiaries at
the Closing Date have been duly stamped. No such Company or Subsidiary has
incurred any liability to or been accountable for any stamp duty reserve tax
which has not been paid or cancelled; and (l) as of the date hereof, no entity
described in clause (a) has made any material Tax elections for the fiscal year
ending December 31, 1997 or the fiscal year beginning January 1, 1998.
Section 3.11 Employee Benefits.
(a) Schedule 3.11(a)(i) of the Disclosure Schedule contains a true and
complete list of all benefit plans, contracts or arrangements maintained by the
Companies or any of the Subsidiaries as of the date hereof, including, but not
limited
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to, "employee benefit plans" within the meaning of Section 3(3) of ERISA,
pension, savings, stock purchase, stock option, severance, employment, change in
control, fringe benefit, bonus, incentive and deferred compensation plans,
agreements, programs and policies (collectively, the "Benefit Plans"). Schedule
3.11(a)(ii) of the Disclosure Schedule separately identifies the Benefit Plans
which provide post-retirement welfare benefits to Employees. Schedule
3.11(a)(iii) of the Disclosure Schedule lists all employee benefit plans which
cover Employees other than the Benefit Plans. As of the Closing Date, none of
the Companies, or any of the Subsidiaries shall have, or reasonably expect to
have, any liability under any employee benefit plan which covers Employees other
than the Benefit Plans. As of the date hereof, true and complete copies of all
Benefit Plans and, if applicable (i) the most recent determination letter for
each Benefit Plan; (ii)any summary plan description for each Benefit Plan; (iii)
the most recent (A) Form 5500 and attached schedules for each Benefit Plan, (B)
audited financial statements for each material Benefit Plan, to the extent
required and (C) actuarial valuation reports for each material Benefit Plan, to
the extent required; (iv) any trust instruments (including those relating to
rabbi trusts) and insurance contracts forming a part of any material Benefit
Plan; and (v) the employee benefit plans listed on Schedule 3.11(a)(iii) of the
Disclosure Schedule have been provided or made available to Purchaser.
(b) All Benefit Plans covering Employees employed within the United
States (the "U.S. Plans") are in substantial compliance with applicable
provisions of ERISA, the Code and other applicable Laws except as set forth on
Schedule 3.11(b)(i) to the Disclosure Schedule. No Benefit Plan is, or will be
as a result of the transactions contemplated hereby, a "multiple- employer plan"
within the meaning of the Code and ERISA. At no time since the enactment of the
Multiemployer Pension Plan Amendments Act of 1980 have the Companies contributed
to or maintained any "multiemployer plan" within the meaning of Section 3(37) of
ERISA. The transfers of assets and liabilities (the "Spinoffs") to the Inco
Alloys International, Inc. Retirement Plan Applicable to Non-Union Employees
Paid in U.S. Dollars, the Inco Alloys International, Inc. Security Reserve Plan
and the Inco Alloys Limited Pension Plan (the "Spinoff Plans") were made in
accordance with Sections 414(l) and 401(a)(12) of the Code, if applicable,
applicable PBGC regulations and other applicable Laws, and all required filings
in connection therewith have been timely filed. As of the date of the respective
Spinoffs, each Spinoff Plan maintained in the United States was identical in all
material respects to a
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retirement plan of the Sellers which has received a favorable determination
letter from the Internal Revenue Service with respect to the qualification of
such plan under Section 401(a) of the Code (including any required amendments
under the Tax Reform Act of 1986). Sellers shall cause a determination letter
request to be filed with the Internal Revenue Service with respect to each U.S.
Plan adopted in 1997 which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code prior to the expiration of the
applicable remedial amendment period in respect of such Pension Plan. With
respect to the period prior to the Closing Date, no events or facts exist to the
Knowledge of the Sellers that are reasonably likely to result in a Pension Plan
not being qualified prior to the Closing Date. Each of the Hourly Plan and the
Wiretech Plan has received a favorable determination letter from the Internal
Revenue Service regarding its qualification under Section 401(a) of the Code,
and nothing has occurred, to the Knowledge of Sellers, whether by action or
failure to act, that would cause the loss of such qualification. There is no
material pending or, to the Knowledge of Sellers, threatened, litigation
relating to the Benefit Plans. No written or oral communication has been
received from the PBGC by the Sellers, the Companies or the Subsidiaries in
respect of any Pension Plan subject to Title IV of ERISA, except as summarized
on Schedule 3.11(b)(ii) of the Disclosure Schedule. None of the Companies nor
any of the Subsidiaries have engaged in a transaction with respect to any Plan
that is reasonably expected to subject the Companies or any Subsidiary to a tax
or penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA.
(c) No liability under Title IV of ERISA, other than premiums payable
to the PBGC which are not yet due, has been or is expected to be incurred by the
Companies or any of the Subsidiaries with respect to any Pension Plan, currently
or formerly maintained by them or with respect to any single- employer plan
covered by Title IV of ERISA currently or formerly maintained by any entity
which is or was, under Section 4001 of ERISA or Section 414 of the Code,
considered one employer with the Companies (an "ERISA Affiliate"). Neither the
Companies nor any Subsidiary has incurred any liability with respect to a
multiemployer plan under Title IV of ERISA (regardless of whether based on
contributions of a current or former ERISA Affiliate).
(d) No Pension Plan maintained by the Companies or an ERISA Affiliate
has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or
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Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver.
None of the Companies nor any of the Subsidiaries has provided, or is required
to provide, security to any such Pension Plan pursuant to Section 401(a)(29) of
the Code. The "Projected Benefit Obligation" under each Pension Plan subject to
Title IV of ERISA, as of the last day of the most recent plan year (as
determined on the basis of the assumptions used in the Companies' annual
disclosure under FAS 87) did not exceed the then market value of the assets of
such Pension Plan as reported by the trustee thereof, and there has been no
material adverse change in the financial condition of such Pension Plan since
the last day of the most recent plan year, except for changes resulting from
changes in the stock and/or bond markets since the last day of the most recent
plan year. No event has occurred within the 12-month period ending on the
Closing Date, which would require a notice of a "reportable event" within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived to be filed for any Pension Plan.
(e) All Benefit Plans covering non-U.S. Employees comply in all
material respects with applicable local law. Each Benefit Plan covering non-U.S.
Employees, including expatriate Employees, has been funded, if required by local
law, in accordance with reasonable actuarial assumptions and methods in the
relevant jurisdiction, to provide all benefits accrued thereunder by reference
to service completed prior to the date hereof. Each Benefit Plan covering
non-U.S. Employees has received all applicable approvals or certification of
appropriate governmental or regulatory authorities (other than with respect to
the Inco Alloys Limited Pension Plan, for which Inland Revenue approval is
pending), and no events or circumstances have occurred, to the Knowledge of
Sellers, which are likely to prejudice such approval or certification. The
Pension Scheme Office of Inland Revenue has consented in writing to the transfer
of assets to the Inco Alloys Limited Pension Plan from the Inco Europe Limited
Pension Plan.
(f) Except as set forth on Schedule 3.11(f) to the Disclosure Schedule,
the consummation of the transactions set forth in this Agreement will not (i)
entitle any Employee to severance pay or (ii) accelerate or provide any other
payments, rights or benefits under, or increase the amount payable under, any
Benefit Plan or other benefit plans or arrangements in any event for which the
Companies, the Subsidiaries or the Purchaser shall have liability on or after
the Closing Date. No Employee is entitled to a bonus or any other payment which
is payable by
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the Companies, the Subsidiaries or the Purchaser solely as a result of the
consummation of the transactions contemplated hereby. On and after the Closing
Date, none of the Companies, the Subsidiaries or the Purchaser shall have any
liability with respect to, and Sellers shall be solely responsible for, (i) any
awards made under the Inco Limited 1997 Key Employees Incentive Plan or any
predecessor plan, (ii) any pro-rated bonuses payable to the Employees as of the
Closing Date under the Inco Limited annual Management Incentive Plan applicable
for 1998 and (iii) any award made under the Inco Limited Employee Share Award
Plan. No U.S. Plan, whether individually or in the aggregate, covering any
Employee would reasonably be expected to give rise to the payment of an amount
that would not be deductible pursuant to the terms of Section 280G of the Code.
(g) To the Knowledge of the Sellers, as of the date hereof, the plans
set forth on Schedule 3.11(a)(i) items 47-49 are not materially underfunded.
Section 3.12 Compliance with Laws. Except as set forth on Schedule 3.12
of the Disclosure Schedule, the Business is being conducted in material
compliance with all applicable Laws, including all Governmental Authorizations,
except where the failure to so comply, individually or in the aggregate, would
not reasonably be likely to have a Material Adverse Effect; the Companies and
the Subsidiaries have all Governmental Authori zations necessary for the conduct
of the Business as currently conducted, other than those Governmental
Authorizations the absence of which, individually or in the aggregate, would not
reasonably be likely to have a Material Adverse Effect; and there are no
proceedings pending or, to the Knowledge of Sellers, threatened, which are
likely to result in the revocation, cancellation or suspension of any such
Governmental Authorization except Governmental Authorizations the absence of
which, individually or in the aggregate, would not reasonably be likely to have
a Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue related to
environmental, tax or employee benefit matters.
Section 3.13 Environmental Matters. Except as set forth on Schedule
3.13 of the Disclosure Schedule:
(a) the operations of the Companies and the Subsidiaries are in
material compliance with all applicable Environmental Laws, including, without
limitation, the possession of and compliance with all material permits,
licenses, Government
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Authorizations and approvals required under applicable Environmental Laws with
respect to the Business, other than such non-compliance that, individually or in
the aggregate, would not reasonably be likely to have a Material Adverse Effect;
(b) none of the Sellers, the Companies and the Subsidiaries has
received any complaint, claim, notice or request for information concerning any
material violation or alleged violation of, or any liability under, any
applicable Environmental Law with respect to the Business, the Companies or the
Subsidiaries during the past five years except for any such violation, alleged
violation or liability which individually or in the aggregate would not
reasonably be likely to have a Material Adverse Effect, and, to the Knowledge of
the Sellers, no such claim, notice or request is threatened;
(c) there are no material writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, proceedings or investigations
pending or, to the Knowledge of the Sellers, threatened, relating to compliance
by the Companies or the Subsidiaries with, or liability of the Companies, the
Subsidiaries or the Business under, any applicable Environmental Law;
(d) there are no environmental liens, declarations or deed restrictions
affecting the properties of the Companies or the Subsidiaries, except for such
matters as would not, individually or in the aggregate, reasonably be likely to
have a Material Adverse Effect;
(e) none of the Companies and the Subsidiaries have entered into, or
agreed to, any material decree or material order with any Governmental Authority
under any Environmental Law; and
(f) to the Knowledge of the Sellers, no facility currently or formerly
owned or operated by the Companies or the Subsidiaries is contaminated with
Hazardous Substances requiring remediation under any applicable Environmental
Law or that would reasonably be expected to result in liability under any such
Environmental Law and neither the Companies nor the Subsidiaries has caused any
Hazardous Substance contamination on any third party site, except in each case
as would not reasonably be likely to have a Material Adverse Effect.
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Section 3.14 Intellectual Property.
(a) Schedule 3.14(a) of the Disclosure Schedule sets forth as of the
date hereof a list and brief description (including the country of registration)
of (i) all U.S. and foreign patents, patent applications, registered trademarks,
trademark applications, material registered copyrights and material copyright
applications that are owned by the Companies or the Subsidiaries and (ii) all
agreements ("IP Licenses") under which the Companies or the Subsidiaries are
licensed, have licensed or are otherwise permitted to use or have granted
permission to use patents, trademarks and copyrights, except for all such
agreements which, individually or in the aggregate, are not material to the
Companies and the Subsidiaries taken as a whole.
(b) To the Knowledge of the Sellers (i) except as set forth on Schedule
3.14(b)(i) of the Disclosure Schedule, with respect to Intellectual Property of
the Companies or the Subsidiaries other than trademarks, as of the date hereof
no product (or component thereof or process) used, sold or manufactured by the
Companies or the Subsidiaries infringes upon or otherwise violates any
Intellectual Property rights of any Person or any confidentiality obligation
enforceable against the Companies or the Subsidiaries, (ii) with respect to the
trademarks listed on Schedule 3.14(b)(ii) (the "Major Marks"), except as set
forth on Schedule 3.14(b)(ii), as of the date hereof there are no restrictions
that would materially impair the use of the Major Marks in connection with the
Business and the Major Marks do not infringe upon or otherwise violate any
Intellectual Property rights of any Person, (iii) as of the date hereof no
Person is challenging or, to the Knowledge of Sellers, infringing or otherwise
violating the Intellectual Property of the Companies or the Subsidiaries
(excluding trademarks included on Schedule 3.14(b)(ii)), (iv) the Companies or
the Subsidiaries own or are licensed or otherwise have the right to use, all
material Intellectual Property currently used in connection with the Business of
the Companies and the Subsidiaries, free and clear of any lien, pledge, mortgage
or security interest, (v) none of the Companies or the Subsidiaries or any other
party is in breach of, or in default under, any material IP License and each
material IP License is now and immediately following the consummation of the
Closing will be valid and in full force and effect except as set forth in
Section 3.14 of the Disclosure Schedule, (vi) all material patents and
registered trademarks and copyrights owned by the Companies or the Subsidiaries
are valid and subsisting and the Companies and the Subsidiaries have taken
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all reasonable action to maintain and protect each item of material Intellectual
Property owned by the Companies or the Subsidiaries and currently used in the
Business, except in each case (i) through (vi) for challenges, infringements,
violations, restrictions, liens, pledges, mortgages, security interests,
invalidities or failures to subsist or protect that would not, individually or
in the aggregate, reasonably be likely to have a Material Adverse Effect.
Section 3.15 Collective Bargaining Agreements.
(a) Except as set forth on Schedule 3.15 of the Disclosure Schedule, as
of the date hereof none of the Companies and none of the Subsidiaries is a party
to or bound by any labor agreement or collective bargaining agreement nor is any
such agreement presently being negotiated, nor is there pending or, to the
Knowledge of Sellers, threatened, any strike, walkout or other work stoppage.
Except as set forth on Schedule 3.15 of the Disclosure Schedule, no notice is
required to be provided under any collective bargaining agreement or labor
agreement as a result of the transactions contemplated hereby.
(b) Social Charges. Except as disclosed on Schedule 3.15(b) of the
Disclosure Schedule or as would not reasonably be likely to have a Material
Adverse Effect, (i) each of the Companies and the Subsidiaries is in substantial
compliance with its respective obligations in respect of social security
legislation and regulations applicable to them and has duly filed all social
security returns and paid the corresponding amounts within the required time
limits, (ii) the social security declarations of each Company have been filed in
a timely manner; and (iii) since January 1, 1997 none of the Companies or the
Subsidiaries has been subject to any social security audit or has received
notice of any social security claims.
(c) The LOI ROBIEN. None of the active Employees was hired pursuant to
the LOI ROBIEN of the French Republic. As of the date hereof, Inco Alloys
Services S.A. has no more than 50 employees.
Section 3.16 Contracts.
(a) Schedule 3.16(a) of the Disclosure Schedule sets forth, as of the
date hereof, all of the following Contracts to which the Companies or any of the
Subsidiaries is a party or by or to which any of them or any of their properties
is bound or subject: (i) Contracts between any of the Companies or
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Investments, on the one hand, and Inco or any of its Affiliates (other than the
Companies or the Investments that are wholly-owned (except for directors'
qualifying shares) directly or indirectly by Inco), on the other hand not
otherwise disclosed on Schedule 3.5(b) of the Disclosure Schedule; (ii)
Contracts for the purchase of materials, supplies, goods, services, equipment or
other assets (x) providing for annual payments by any of the Companies or any of
the Subsidiaries of, or pursuant to which in the last year any of the Companies
or any of the Subsidiaries paid in the aggregate, $5,000,000 or more or (y)
requiring by its terms that any of the Companies or any of the Subsidiaries
purchase over $300,000 of such materials, supplies, goods, services, equipment
or other assets in any 12-month period on terms prohibiting such Company or
Subsidiary from purchasing similar materials, supplies, goods, services,
equipment or other assets from any other Person; (iii) Contracts for the sale of
over $300,000 of goods or services in any 12-month period to any customer and
having a term of greater than 12 months; (iv) material distributorship, sales
representative, marketing, agency, dealer, or other similar Contracts; (v)
Contracts under which any of the Companies or any of the Subsidiaries agrees to
share material Tax liabilities of any party; (vi) Contracts containing covenants
of any of the Companies or any of the Subsidiaries not to compete in any
material respect in any line of business or with any Person in any geographical
area or covenants of any other Person not to compete in any material respect
with any of the Companies or any of the Subsidiaries in any line of business or
in any geographical area; (vii) material Contracts containing any so-called
"most favored nation" provisions or any other similar provision requiring any of
the Companies or the Subsidiaries to offer a third party terms or concessions at
least as favorable as offered to one or more other parties; (viii) Contracts
relating to the acquisition by any of the Companies or any of the Subsidiaries
of any operating business or the capital stock of any other Person for
consideration of $300,000 or more entered into since January 1, 1995; (ix)
Contracts relating to the incurrence or guaranty of outstanding indebtedness in
excess of $300,000 (other than any such Contracts with any of the Sellers or
their Affiliates disclosed on Schedule 3.16(a)(i) of the Disclosure Schedule);
(x) Contracts containing material obligations or liabilities to holders (other
than any of the Sellers or their Affiliates) of the capital stock of any of the
Companies or any of the Subsidiaries as such (including any obligation to
register any securities under any Federal or state securities Laws); (xi)
Contracts involving the payment of an amount of $100,000 or more in any 12-month
period with any current or former officer,
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director, shareholder, employee, consultant, agent or other representative of
any of the Companies or any of the Subsidiaries or with any entity controlled by
any of the foregoing (excluding any oral employee-at-will contracts with respect
to annual salaries not in excess of $180,000 per employee); (xii) Contracts
(other than this Agreement) granting any Person an option or right of first
refusal to purchase any material amount of any assets of the Companies or
Subsidiaries other than in the ordinary course of business consistent with past
practice; (xiii) Contracts containing an obligation of any of the Companies or
Subsidiaries to indemnify a third party for any amount over $100,000 except for
indemnification provisions entered into in the ordinary course of business
consistent with past practice or set forth in the Contracts listed on Schedule
3.16 of the Disclosure Schedule; and (xiv) any other Contract that is otherwise
material to the Companies and the Subsidiaries taken as a whole.
(b) Except for the Contracts referred to in subsection (ii)(a) or
subsection (iii) of Schedule 3.16(a) of the Disclosure Schedule (which Contracts
will be made available to Purchaser promptly after the date hereof), there have
been delivered or made available to the Purchaser true, complete and correct
copies of all of the Contracts set forth on Schedule 3.16(a) of the Disclosure
Schedule. Except as set forth on Schedule 3.16(b)(i) of the Disclosure Schedule,
each Contract listed on Schedule 3.16(a) of the Disclosure Schedule is a valid
and binding agreement of the Companies or the Subsidiaries party thereto, and is
in full force and effect. Except as set forth on Schedule 3.16(b)(ii) of the
Disclosure Schedule, (i) none of the Companies or the Subsidiaries is in default
in any material respect under any of the Contracts listed on Schedule 3.16(a) of
the Disclosure Schedule, which default has not been cured or waived, nor with
respect to any such Contract which is an Affiliate Transaction or to the
Knowledge of the Sellers with respect to any other such Contract, does any
condition exist that with notice or lapse of time or both would constitute such
a default thereunder; and (ii) none of the Sellers or any of their Affiliates
or, to the Knowledge of the Sellers, any other party to any Contract listed on
Schedule 3.16(a) of the Disclosure Schedule is in material default thereunder
nor does any condition exist that with notice or lapse of time or both would
constitute such a material default thereunder, except, in the case of clause (i)
and (ii) (except with respect to any Contract which is an Affiliate
Transaction), for such defaults as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect.
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(c) The only outstanding indebtedness for borrowed money in excess of
$300,000 as of the date hereof of any of the Companies or any of the
Subsidiaries from third parties is listed on Schedule 3.16(c) of the Disclosure
Schedule or in the Financial Statements. Except as otherwise described on
Schedule 3.16(c) of the Disclosure Schedule, the loans and other extensions of
credit under the Contracts listed on Schedule 3.16(c) of the Disclosure Schedule
are each prepayable in full, without any prepayment penalty or premium. The only
obligations in excess of $300,000 of the Companies or the Subsidiaries to any
Person other than their Affiliates as of the date hereof evidenced by bonds,
debentures, notes or similar instruments, guarantees of the debt of others,
obligations as an account party in respect of letters of credit and letters of
guaranty or obligations, contingent or otherwise in respect of bankers'
acceptances are listed on Schedule 3.16(c) of the Disclosure Schedule or in the
Financial Statements, other than such obligations and guarantees incurred in the
ordinary course of business consistent with past practice.
(d) All currently outstanding or open (1) put, call, option, or futures
foreign currency Contracts and (2) commodity (nickel and cobalt) forward priced
Contracts or hedging transactions are summarized on Schedule 3.16(a)(i)(a) and
(b) of the Disclosure Schedule, respectively, and have been entered into for
bona fide hedging purposes consistent with relevant policies, practices and
procedures of the Companies and the Subsidiaries as reflected in Note 14 to the
Audited Financial Statements, and all Approved Commodity Hedging Transactions
relate to firm purchase orders for Company Products and are not speculative
("Approved Hedging Policies").
Section 3.17 Real Property. The following subsections (a) through (f)
of this Section 3.17 shall not apply to the UK Properties. Except as set forth
on Schedule 3.17 of the Disclosure Schedule (a) the Companies or the
Subsidiaries, as the case may be, have (i) good and marketable title to the fee
with respect to the land described on Schedule 3.17(a)(1)(A) of the Disclosure
Schedule and to all of the buildings, structures and improvements located
thereon (collectively, the "Owned Real Property") or (ii) a valid and binding
leasehold interest in the land, buildings and other improvements (collectively,
the "Leased Property")set forth on Schedule 3.17(a)(2)(A) of the Disclosure
Schedule, which Schedule 3.17(a)(2)(A) sets forth with respect to all such
properties other than the properties in Japan (x) the date of and the parties to
each such lease and any other material agreement under which any of the
Companies or any of the
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Subsidiaries, as the case may be, uses or occupies or has the right to use or
occupy, now or in the future, any Leased Property or grants to any person, other
than any of the Companies or any of the Subsidiaries, any right to possession of
the Real Property (as hereinafter defined) or any portion thereof (collectively,
the "Real Property Leases") and (y) each amendment, modification and supplement
thereto, in the case of the Owned Real Property, free and clear of all
Encumbrances, except (i) as set forth on Schedule 3.17(a) of the Disclosure
Schedule, (ii) mechanics', workmen's, repairmen's, warehousemen's, carriers' or
other like liens arising or incurred in the ordinary course of business
consistent with past practice, original purchase price condi tional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business consistent with past practice, (iii) easements, flowage
easements, quasi- easements, restrictive covenants, public roads and
rights-of-way, rights of third parties to minerals lying in and under the Owned
Real Property and other similar restrictions that do not materially interfere
with the existing use of the Owned Real Property and other minor restrictions,
defects, irregularities and clouds on title as normally exist with respect to
real property similar to the Owned Real Property and do not, in the aggregate,
materially interfere with the existing use of the Owned Real Property, (iv)
liens for taxes, assessments and other governmental charges affecting real
property not then delinquent or being contested in good faith and shown as
reserves on the Financial Statements, (v) those matters customarily listed as
exception to title in the ALTA 1992 form, as amended, of owner's title insurance
policies insuring properties similar to the applicable parcel of Owned Real
Property, and (vi) zoning, building and other similar restrictions (all items
included in (i) through (vi) are referred to collectively herein as the
"Permitted Encumbrances").
(b) Defaults, etc. Each Real Property Lease is valid, binding and in
full force and effect, all rent and other sums and charges payable by the
Companies or the Subsidiaries, as the case may be, thereunder have been paid up
to date, there are no outstanding defaults beyond any applicable grace period
under any Real Property Lease or, to the Knowledge of the Sellers does any
condition exist that with notice or lapse of time or both would constitute a
material default thereunder, no notice of default or termination under any Real
Property Lease is outstanding. None of the Sellers, the Subsidiaries or the
Companies have an ownership, financial or other interest in the other party to
each Real Property Lease as landlord or tenant, as the case may be. All of the
land, buildings, structures and other improvements
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necessary for or used by any of the Companies or the Subsidiaries in the conduct
of the Business, except for services that may be provided pursuant to the
Ancillary Agreements or the Supply Agreements, are included in the Owned Real
Property and the Leased Real Property. The Leased Real Property and the Owned
Real Property are hereinafter collectively referred to as the "Real Property."
Except as set forth on Schedule 3.17(b) of the Disclosure Schedule none of the
Sellers, the Subsidiaries or the Companies has leased any of the Real Property
to any third parties.
(c) Operation of Improvements. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines and systems
and other similar systems necessary for the use of the Real Property as it is
currently used are installed and operating in a manner sufficient to enable the
Real Property to continue to be used and operated in the manner currently being
used and operated except as would not materially impair the current use of such
Real Property. Each Major Facility has access to a public street sufficient to
enable it to continue to be used and operated in the manner currently being used
and operated except as would not materially impair the current use of such Real
Property.
(d) Loan Documents. Except as disclosed on Schedule 3.17(d) of the
Disclosure Schedule, no note, bond, mortgage, deed of trust, collateral security
document or guarantee encumbers or otherwise affects all or any portion of the
Owned Real Property.
(e) Condemnation. None of the Sellers, the Subsidiaries or the
Companies have received notice of, and, to the Knowledge of the Sellers there is
not any pending, threatened or contemplated condemnation proceeding or
compulsory purchase proceeding, as applicable, or sale in lieu of condemnation
that would have a Material Adverse Effect.
(f) Structure. To the Knowledge of the Sellers, except as set forth on
Schedule 3.17(f) of the Disclosure Schedule, the Owned Real Property is free of
hidden material structural defects.
The following subsections (g) through (q) of this Section 3.17 only
apply to the UK Properties.
(g) Land Owned. The UK Properties comprise all the land and premises
owned or used by IAL in the UK, and all deeds
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and documents necessary to provide title to each UK property are in the
possession of IAL.
(h) Title. IAL has good and marketable title to each of the UK
Properties and insofar as the Sellers are aware and save as have been disclosed
to Purchaser, the UK Properties are free from any mortgage charge, rent charge,
lien, option, tenancy, license, encumbrance, overriding interest (as defined by
Section 70 of the Land Registration Act 1925), right of occupation or any other
third party right in the nature of security or any agreement or commitment to
create any of the foregoing.
(i) Use. To the Knowledge of the Sellers there are no other matters,
save as have been disclosed to Purchaser which would prevent or substantially
affect the continued use and enjoyment of the UK Properties as they are used at
the present time.
(j) Breaches. To the Knowledge of the Sellers there are no outstanding
breaches of restrictions, covenants, conditions, agreements, statutory
requirements, planning consents, bylaws, orders or regulations affecting the UK
Properties or any business carried out thereon.
(k) Rents Paid. All rents and other sums due in respect of the UK
Leasehold Property have been paid up to date and to the Knowledge of the Sellers
there are no material outstanding breaches of the leases in relation to the UK
Leasehold Property. IAL has not received any Schedule of Dilapidation which
remains outstanding or any Notice served under Section 146 of the Law of
Property Act 1925 in respect of the UK Leasehold Property.
(l) Leases. In respect of the UK Leasehold Property, the lease has not
been varied nor have any licenses or consents been issued under it.
(m) Services. The UK Property is served by water, gas, electrical,
steam, compressed air, telecommunications, sanitary and storm sewerage lines
systems and other similar systems necessary for the use of each UK Property as
it is currently used and such items are installed and operating in a manner
sufficient to enable the UK Properties to continue to be used and operated in
the manner in which they are currently being used.
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(n) Access. The means of access to and egress from each UK Property are
over either roads which have been adopted by a local authority and are
maintainable at public expense or roads in respect the use of which the relevant
Company and those deriving title under it to that property have a permanent and
legal easement free from onerous or unusual conditions.
(o) Orders. To the Knowledge of the Sellers, no compulsory purchase
order has been served in respect of any of the UK Properties and to the
Knowledge of the Sellers no other notice or order which would materially affect
the continuing use of the UK Properties is in effect.
(p) Defects. Except as disclosed on Schedule 3.17(p) of the Disclosure
Schedule, to the Knowledge of the Sellers the UK Properties are free of any
hidden material structural defects.
(q) Liability. There is no leasehold property in the UK in respect of
which there remains any outstanding contingent liability of IAL, either as
original lessee as assignee or surety.
Section 3.18 Absence of Change. Except (x) as set forth on Schedule
3.18 of the Disclosure Schedule, (y) to the extent arising out of or relating to
the transactions contemplated by this Agreement, or (z) for the Contracts
entered into since December 31, 1997 that are listed on Schedule 3.16 of the
Disclosure Schedule, since December 31, 1997, (i) the Companies, the
Subsidiaries and the Business have been operated in the ordinary course of
business consistent with past practice, other than changes which would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect and (ii) there has not been any Material Adverse Change.
Section 3.19 Finders' Fees. Except for Morgan Stanley & Co.
Incorporated, whose fees will be paid by the Sellers, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Sellers, the Companies or the Subsidiaries
who might be entitled to any fee or commission from the Sellers, the Companies
or the Subsidiaries in connection with the purchase and sale of the Shares
pursuant to this Agreement.
Section 3.20 Insurance. Schedule 3.20 of the Disclosure Schedule lists
all insurance policies of the Companies and the Subsidiaries as of the date
hereof that relate to the Business and is accurate in all material respects.
None of the
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Companies nor any of the Subsidiaries is, or with the lapse of time or the
making of a claim or both, would be in material default with respect to any
provision contained in, or any warranty given in respect of, any material policy
or binder or has failed to give any material notice or present any material
claim under any material policy or binder in due and timely fashion. Except for
claims set forth on Schedule 3.9 or 3.20 of the Disclosure Schedule, there are
no material outstanding unpaid claims under any such policy or binder, and none
of the Companies nor any of the Subsidiaries has received any notice of
cancellation or non-renewal of any material policy or binder. To the Knowledge
of the Sellers, except as set forth on Schedule 3.20 of the Disclosure Schedule,
none of the Companies nor any of the Subsidiaries has received any notice from
any of its insurance carriers stating that as the result of the specific claims
history of such Companies or Subsidiaries any insurance premiums under any
material insurance policy of any of the Companies or the Subsidiaries will be
materially increased in the future or that any material insurance coverage
listed on Schedule 3.20 of the Disclosure Schedule will not be available in the
future on substantially the same terms as presently in effect. Purchaser
acknowledges that Inco and its Affiliates (other than the Companies and the
Subsidiaries) maintain insurance policies that include coverage with respect to
the Companies and the Subsidiaries and that, except as set forth in the
Transitional Services Agreement, none of Purchaser, the Companies or the
Subsidiaries will, after the Closing, have any rights under such insurance
policies. Sellers acknowledge that the Companies and the Subsidiaries maintain
insurance policies that include coverage with respect to Sellers and/or
directors, officers and trustees of Sellers and that, except as set forth in the
Transitional Services Agreement, none of Sellers or any of its Affiliates or
their respective directors, officers or trustees (other than the Companies or
its Subsidiaries) will, after the Closing, have any rights under such insurance
policies.
Section 3.21 Affiliate Transactions. Schedule 3.21, Schedule
5.13(d)(iv) and Schedule 6.2(f) of the Disclosure Schedule summarize as of the
date hereof all Affiliate Transactions entered into on or after January 1, 1997,
other than (a) transactions entered into on an arm's length basis in the
ordinary course of business consistent with past practice (including, but not
limited to, bona fide purchases, sales and payments for goods and services), (b)
employment agreements or arrangements and employee benefit plans which are set
forth on Schedule 3.9 of the Disclosure Schedule, or (c) transactions reflected
in the Financial Statements (including the notes
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thereto). All Affiliate Transactions occurring after December 31, 1997 (except
for the Special Dividend) have been recorded in the Books and Records on a basis
that is consistent with the preparation of the Audited Financial Statements.
Section 3.22 All Assets Necessary for the Conduct of the Business.
Except as set forth on Schedule 3.22 of the Disclosure Schedule and except for
assets, properties, interests and rights to be provided pursuant to the
Ancillary Agreements, the Companies, the Subsidiaries and their Investments own,
are licensed or leased or constitute, as the case may be, all the assets,
properties, interests and rights necessary for (a) the conduct of the Business
as currently conducted in all material respects directly or indirectly by the
Sellers and (b) the operation of any other businesses as currently conducted in
all material respects by the Companies and the Subsidiaries.
Section 3.23 Company Products. Except as set forth on Schedule 3.23 of
the Disclosure Schedule, to the Knowledge of the Sellers, (i) there are no
statements, citations or decisions by any Governmental Authority specifically
stating that any products of the Business ("Company Products") are defective or
unsafe, (ii) the Sellers have not received written notice from a Governmental
Authority specifically stating that any Company Products do not meet specific
standards of such Governmental Authority; (iii) there have been no recalls
within the past five years ordered by any Governmental Authority of any Company
Products; (iv) there are no material product liability Claims against or
involving any of the Companies or any of the Subsidiaries or any Company
Products, and no such Claims have been settled, adjudicated or otherwise
disposed of since December 31, 1995; and (v) there is no material latent or
overt design, manufacturing or other defect in any of the Company Products;
except in each case (i) through (v) as would not reasonably be likely to have a
Material Adverse Effect. Schedule 3.23 of the Disclosure Schedule also sets
forth all currently effective service warranties or product performance
guarantees or similar undertakings (collectively, "Product Warranties") with
respect to the service or fitness for a particular purpose of any Company
Products; it being understood that customer specifications shall not be deemed
Product Warranties.
Section 3.24 Tangible Property. Except as set forth on Schedule 3.24 of
the Disclosure Schedule or as would not reasonably be expected to have a
Material Adverse Effect, the Companies own or have the right to use all
facilities, machinery,
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equipment, furniture, improvements, fixtures, vehicles, structures and other
tangible property currently used by the Companies and the Subsidiaries in the
Business ("Tangible Property"). Except as would not reasonably be expected to
have a Material Adverse Effect, all such Tangible Property is in good operating
condition and repair, subject to continued repair and replacement in accordance
with past practice and is suitable for its current use in the Business.
Section 3.25 Conflicts of Interest. The Sellers have delivered to
Purchaser a summary of the responses from the Companies and the Subsidiaries to
Inco's latest (July 1997) survey covering its Conflict of Interests Policy
Statement (the "Inco Conflicts Policy"). As of the date hereof, except as set
forth on Schedule 3.25 of the Disclosure Schedule, to the Knowledge of the
Sellers, there are no events or occurrences covered by the Inco Conflicts Policy
that have occurred that, individually or in the aggregate, would reasonably be
likely to result in a Material Adverse Effect.
Section 3.26 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither the
Sellers nor any other Person makes any other express or implied representation
or warranty on behalf of the Sellers or otherwise in respect of the Companies or
the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser makes the following representations and warranties to the
Sellers as of the date hereof and as of the Closing Date; provided, however,
that representations and warranties made as of a specific date shall only be
made as of such date and that each Person that becomes a Purchaser pursuant to
Section 2.1 will as of the Closing be deemed to have made the representations
and warranties set forth in Sections 4.1 through 4.5 and in Sections 4.8 and
4.9:
Section 4.1 Organization and Qualification. Purchaser is a corporation
or other entity duly organized, validly existing and, where applicable, in good
standing under the laws of the jurisdiction of its incorporation.
Section 4.2 Binding Effect. This Agreement constitutes, and each
Ancillary Agreement to which Purchaser is a
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party will at Closing constitute, a valid and legally binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
Section 4.3 Corporate Authorization. Purchaser has full corporate power
and authority to execute and deliver this Agreement, and to perform its
obligations hereunder and under the Ancillary Agreements to which it is a party.
This Agreement has been, and each Ancillary Agreement to which it is a party
will at Closing be, duly authorized, executed and delivered by Purchaser and no
additional corporate proceedings on the part of Purchaser are necessary to
authorize the consummation of this Agreement and the transactions contemplated
hereby and thereby.
Section 4.4 Consents and Approvals. Except as required by the HSR Act,
other Competition Laws and foreign investment laws, no consent, approval, waiver
or authorization is required to be obtained by Purchaser from, and no notice or
filing is required to be given by Purchaser to or made by Purchaser with, any
Governmental Authority or other Person in connection with the execution,
delivery and performance by Purchaser of this Agreement, other than in all cases
those the failure of which to obtain, give or make, individually or in the
aggregate, would not reasonably be likely to materially impair the ability of
Purchaser to effect the Closing.
Section 4.5 Non-Contravention. The execution, delivery and performance
by Purchaser of this Agreement, and the consummation by Purchaser of the
transactions contemplated hereby, do not and will not (i) violate any provision
of the Certificate of Incorporation, Bylaws or other organizational documents of
Purchaser, (ii) subject to obtaining the consents referred to in Section 4.4,
conflict with, or result in the breach of, or constitute a default under, or
result in the termination, cancellation or acceleration (whether after the
giving of notice or the lapse of time or both) of any right or obligation of
Purchaser under, or to a loss of any benefit to which Purchaser is entitled
under, any Contract, or (iii) assuming compliance with the matters set forth in
Sections 3.6 and 4.4, to the knowledge of Purchaser, violate or result in a
breach of or constitute a default under any Law of any Governmental Authority to
which Purchaser is subject, including any Governmental Authorization, other than
in the cases of clauses (ii) and (iii), any conflict, breach, termination,
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default, cancellation, acceleration, loss or violation which, individually or in
the aggregate, would not reasonably be likely to materially impair Purchaser's
ability to perform its obliga tions hereunder.
Section 4.6 Finders' Fees. Except for Donaldson, Lufkin & Jenrette
Securities Corporation, whose fees will be paid by Purchaser, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Purchaser who might be entitled to any
fee or commission from Purchaser in connection with the transactions
contemplated by this Agreement.
Section 4.7 Financing. Purchaser has delivered to Inco an executed
written commitment, dated July 2, 1998, from Credit Lyonnais to provide
financing to Purchaser upon the terms set forth therein together with a related
letter, dated July 8, 1998, from Credit Lyonnais (the "Bank Commitment").
Section 4.8 Securities Act. Purchaser is acquiring the Shares solely
for the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities Act. Purchaser
acknowledges that the Shares are not registered under the Securities Act or any
applicable state or foreign securities law, and that such Shares may not be
transferred or sold except pursuant to the registration provisions of such
Securities Act or pursuant to an applicable exemption therefrom and pursuant to
state or foreign securities laws and regulations as applicable.
Section 4.9 No Impediments. There is no Action pending or, to the
knowledge of Purchaser, threatened, or any outstanding judgment, order,
injunction or decree of any Governmental Authority, against Purchaser or any of
its Affiliates that would be reasonably likely, individually or in the
aggregate, to impair the ability of Purchaser to obtain the consents, approvals,
waivers or authorizations described in Section 4.4 or impair the ability of the
parties hereto to effect the Closing.
Section 4.10 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Purchaser
nor any other Person makes any other express or implied representation or
warranty on behalf of Purchaser.
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ARTICLE V
COVENANTS
Section 5.1 Access; Financing.
(a) During the period from the date hereof to the Closing, the Sellers
shall, and shall use their reasonable efforts to cause the Companies, the
Subsidiaries and their respective officers, directors, employees, auditors,
counsel, financial advisors and other agents to, permit Purchaser and its
representatives and financing sources that enter into appropriate
confidentiality agreements to have access, during regular business hours and
upon reasonable advance notice, to the Companies and the Subsidiaries, their
respective officers, employees, agents, properties, offices, centers and other
facilities, including for purposes of obtaining surveys of UK Properties,
subject to reasonable rules and regulations of the Sellers, and shall furnish,
or cause to be furnished, to Purchaser, as the case may be, such financial and
operating data and other information that is available as Purchaser shall from
time to time reasonably request; it being recognized that the Sellers will have
no liability for any Losses of any kind to Purchaser, any of its Affiliates or
any third parties with respect to such financing, such assistance or any
information provided in connection therewith or any written or oral information
provided in connection with Clause (d) below, and, subject to the general
provisions of Section 7.4, Purchaser shall indemnify, defend and hold the
Sellers harmless from any such liability for any such Losses for a period of
five years following the Closing.
(b) Subject to the failure of Credit Lyonnais to comply with the terms
of the Bank Commitment,(i) Purchaser will use its best efforts to enter into
agreements containing the terms specified in the Bank Commitment and such other
terms as are reasonably satisfactory to it and (ii) Purchaser will obtain the
financing thereunder subject to the satisfaction of the terms and conditions
thereof; provided, however, that the terms and conditions to receipt of
financing contained or referred to therein shall not differ from the terms and
conditions set forth in the Bank Commitment in any way that would materially
impair the ability of Special Metals to obtain such financing.
(c) No investigation undertaken pursuant to Section 5.1(a) shall affect
any representation or warranty of the parties
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herein or the conditions to the obligations of the parties hereto.
(d) Purchaser acknowledges that the information provided to it in
connection with this Agreement is subject to the Confidentiality Agreement.
Notwithstanding the foregoing, Sellers acknowledge that prior to the Closing,
Purchaser intends, subject to Section 9.7, to (x) issue a press release
containing certain pro forma information related to the Companies, (y) file a
Form 8-K describing the transactions contemplated hereby and (z) make certain
filings under the HSR Act. Sellers specifically acknowledge that Purchasers are
free to disclose such pro forma information and other information reasonably
necessary or advisable in Purchaser's good faith judgment in connection with the
foregoing without violation of the Confidentiality Agreement so long as the
Sellers have been provided with a reasonable opportunity to review and comment
on all such written information. Effective as of the Closing, the
Confidentiality Agreement shall terminate. All information that relates to Inco
or any of its Affiliates (other than any of the Companies or the Investments)
and which is or was provided, conveyed, or obtained either pursuant to clause
(a) above or in accordance with the Confidentiality Agreement and any other
information furnished to Purchaser or Purchaser's representatives, including any
technical, scientific, trade secret or other proprietary information of Inco or
any of its Affiliates (other than any of the Companies or the Investments) with
which Purchaser or Purchaser's representatives come into contact in the course
of Purchaser's investigation of any of the Companies or the Investments, whether
before or after the date of the Confidentiality Agreement, together with any
reports, analyses, compilations, memoranda, notes and any other writings
prepared by Purchaser or Purchaser's representatives which contain, reflect or
are based upon such information, shall be and continue to be kept confidential
by Purchaser and Purchaser's representatives for a period of five years
following the Closing (except as required by applicable Law or policies of any
securities regulating body or stock exchange).
Notwithstanding the foregoing, the term "information" as used above
does not include information which (i) is or becomes publicly available other
than as a result of its disclosure by either Purchaser, any of its Affiliates or
any of their respective representatives or (ii) is or becomes available to
Purchaser on a non-confidential basis from a source which, to the knowledge of
Purchaser after due inquiry, is not prohibited from disclosing such information
to Purchaser by any legal,
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contractual or fiduciary obligation to Inco or any other party or person.
Section 5.2 Conduct of Business. During the period from the date hereof
to the Closing, except (i) as disclosed on Schedule 5.2 of the Disclosure
Schedule, (ii) as otherwise permitted by this Agreement or (iii) as Purchaser
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed, the Sellers covenant and agree that they shall cause the
Companies and the Subsidiaries to operate the Business in the ordinary course of
business consistent with past practice, and use their reasonable efforts to
preserve intact the Business and relationships of the Companies and the
Subsidiaries with third parties and keep available the services of the present
officers, employees and consultants of the Companies and the Subsidiaries.
During the period from the date hereof to the Closing, except (i) as disclosed
on Schedule 5.2 of the Disclosure Schedule, (ii) as otherwise permitted by this
Agreement, including Section 5.13(d), or (iii) as Purchaser shall otherwise
consent in writing (which consent shall not be unreasonably withheld or
delayed), the Sellers covenant and agree that they shall, and shall cause each
Company and each Subsidiary to:
(1) maintain insurance coverage at presently existing levels so long as
such insurance is available at commercially reasonable rates;
(2) not amend or otherwise change the certificate of incorporation or
by-laws or equivalent organizational documents of any Company or any Subsidiary
other than to change the name of any Company or any Subsidiary (other than IAL,
IAII or DIAL) and not amend or otherwise change, or grant any material waivers
with respect to, any of the Contracts with respect to DIAL, Rescal, Wiggin Alloy
Products Limited or Valinco NSSS Metal Products disclosed on Schedule 3.16(a) of
the Disclosure Schedule;
(3) except in connection with the QuitClaim Assignment, not issue,
deliver, sell, lease, sell and leaseback, encumber or dispose of, or authorize
or commit to the issuance, delivery, sale, lease, sale/leaseback, encumbrance or
disposition of, (A) any shares of capital stock of any class or series, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of capital stock or any other equity or ownership interest (including
but not limited to stock appreciation rights or phantom stock), of any Company
or any Subsidiary or (B) any assets of any Company or any Subsidiary,
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other than assets sold, leased, or disposed of in the ordinary course of
business consistent with past practice;
(4) not declare, set aside, make or pay any dividend or other
distribution, payable in stock, property or other assets, with respect to any
capital stock or other equity or ownership interest in any Company or any
Subsidiary; provided, however, that cash dividends or other cash distributions
may be declared and paid prior to the Calculation Date;
(5) except in connection with the QuitClaim Assignment, not reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any capital stock or other equity or ownership interest in any
Company or any Subsidiary;
(6) (A) subject to the other provisions of this Section 5.2, not enter
into any material Contract other than in the ordinary course of business
consistent with past practice; (B) not make or authorize any single expenditure
in excess of $500,000 or series of related expenditures in excess of $2,500,000
in the aggregate for any capital expenditure or acquisition (including without
limitation any acquisition of any corporation, partnership or other business
enterprise or division thereof) which are not specifically provided for in the
Companies' latest 1998 capital budget (such budget, the "Approved Capital
Expenditures") as set forth on Schedule 5.2(6) of the Disclosure Schedule; and
(C) not enter into or amend in any material respect any Contract with respect to
any of the matters set forth in this Section 5.2(6);
(7) Except to the extent required under existing agreements or
arrangements as in effect on the date of this Agreement and disclosed in
Schedule 3.9 of the Disclosure Schedule (including, without limitation, actions
approved or directed by the Board of Directors of Inco as of the date hereof and
disclosed on Schedule 5.2(7) of the Disclosure Schedule), (A) not increase the
compensation or fringe benefits of any Employee, except for increases in salary
or wages of active Employees in the ordinary course of business consistent with
past practice, (B) not grant any severance or termination pay exceeding IAII's
maximum guidelines under existing severance plans to, or enter into any
employment, consulting or severance agreement or any new agreement or
arrangement involving the payment of in excess of $100,000 in any 12-month
period with any Employee, except for the granting of severance or termination
pay in the ordinary course of business consistent with past practice
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to Employees who are terminated after the date hereof but prior to Closing; or
(C) except as disclosed on Schedule 5.2(7) of the Disclosure Schedule and with
the prior consent of Purchaser (which shall not be unreasonably withheld or
delayed), not establish, adopt or enter into any new collective bargaining
agreement or any new bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, policy or arrangement for the
benefit of any Employee or amend any such plan, agreement, policy or arrangement
to increase benefits thereunder, or invest Pension Plan assets other than in the
ordinary course of business consistent with past practice, except to the extent
necessary to maintain the tax-qualified status of any Benefit Plan or as may be
required by any Law;
(8) except as may be required as a result of a change in Law or GAAP,
not change any of the accounting practices, policies or principles and not
reduce any reserves established in respect of the Companies and the Subsidiaries
from those set forth in the Audited Financial Statements (other than a reduction
in reserves as a result of (A) payment by the Companies or the Subsidiaries of
Taxes in respect of which the reserve was established or (B) the settlement or
other payment in respect of any litigation for which a reserve was established,
so long as any such reduction in this clause (B) does not exceed $100,000);
(9) not make any material tax election (except for elections undertaken
to transfer Intellectual Property pursuant to the terms of the QuitClaim
Assignment or in respect of any reallocation of any taxable income to Inco
Alloys Foreign Sales (1991) Corp. with respect to periods ending before the
Closing Date) or settle or compromise any material Federal, state, local or
foreign tax liability;
(10) not enter into any Affiliate Transactions or amend, modify or
otherwise alter the terms of any existing Affiliate Transactions (including,
without limitation, the Supply Agreements) other than, in each case (other than
the Supply Agreements), in the ordinary course of business consistent with past
practice and otherwise in accordance with Section 5.13(d) to the extent
applicable;
(11) not adopt a plan of complete or partial liquidation, dissolution,
merger, amalgamation, consolidation, restructuring, recapitalization or other
reorganization of any Company or any Subsidiary;
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(12) other than in the ordinary course of business consistent with past
practice, not settle or otherwise compromise any audit issue or other dispute
with the Internal Revenue Service or other state, local or foreign taxing
authority;
(13) not enter into, or pay any amounts under or in respect of, any Tax
sharing or indemnity agreement or arrangement after the date hereof except to
the extent the payment of any amount due under, or in respect of, a Tax sharing
agreement or arrangement has been or will be included in the Tax reserves or
included in "income taxes payable" in the combined balance sheet of the Interim
Financial Statements or the Final Closing Balance Sheet;
(14) not effectuate a "plant closing" or "mass layoff" as those terms
are defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or Employee of the Companies or the Subsidiaries;
(15) not incur, guarantee or otherwise become liable for (in each case,
whether directly, indirectly or contingently), any indebtedness for borrowed
money from parties which are not Affiliates ("Non-Affiliate Debt") which would
have the effect of increasing such then outstanding Non-Affiliate Debt to a
level greater than the sum of (a) the total debt reflected in the Audited
Financial Statements as of December 31, 1997 and (b) additional debt incurred
subsequent to December 31, 1997 to fund Approved Capital Expenditures (the
"Maximum Non-Affiliate Debt") as of the Closing Date, provided that any such
Non-Affiliate Debt shall be incurred on commercially reasonable terms and shall
be prepayable at any time without penalty or premium and that if such total
aggregate outstanding Non-Affiliate Debt exceeds the Maximum Non-Affiliate Debt
as of the Closing Date then any such excess shall be paid by Inco to Purchaser
on the Closing Date;
(16) not incur, guarantee or otherwise become liable for (in each case,
whether directly, indirectly or contingently), any indebtedness for borrowed
money from a party which is an Affiliate unless such indebtedness is incurred on
commercially reasonable terms and is prepayable at any time without penalty or
premium;
(17) not dispose of, or incur, create or assume any Encumbrance other
than Permitted Encumbrances (except for clause (v) in the definition thereof)
on, any individual capital asset if the greater of the book value or the fair
market value of such
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capital asset exceeds $500,000 individually or $2,500,000 in the aggregate;
(18) not amend the Selling Affiliate Purchase Letter, the Receivables
Program (except to the extent such amendment does not affect the IAII
Receivables or Section 2.3 hereof) or the QuitClaim Assignment;
(19) notify the Purchaser promptly of (A) any occurrence or event
subsequent to the Calculation Date which would reasonably be expected to have a
material effect on Closing Adjusted Net Worth; (B) any single capital
expenditure or series of related capital expenditures (or the entering into of
any Contract relating thereto) after the Calculation Date in excess of $100,000;
(C) the granting of any increase after the Calculation Date in any severance or
termination pay or other bonus or other compensation or the entering into, on or
after the Calculation Date of any employment, consulting or severance agreement
or arrangement, in each case, involving a payment, on or after the Calculation
Date, in excess of $25,000 to any individual Employee or $250,000 in the
aggregate to one or more Employees; (D) the entering into after the Calculation
Date of any Contract permitted by Section 5.2(22); (E) any new Actions that
would reasonably be likely to subject the Companies and the Subsidiaries to
liabilities in excess of $100,000 per Action or series of related Actions; (F)
the making of any tax election, or the settlement or compromise of any tax
liability or any audit issue or other dispute with the Internal Revenue Service
or other state, local or foreign taxation authority permitted pursuant to
Section 5.2(9) or 5.2(12), in each case on or after the Calculation Date; (G)
any amendment, modification or alteration to the terms of any Affiliate
Transaction existing as of the Calculation Date, in each case with a reasonably
detailed description of such Affiliate Transactions, including an itemized
accounting of the types of services, products or other consideration exchanged
in respect thereof (provided that such notice may be given promptly after the
Closing); (H) any incurrence or guaranty of any Non-Affiliate Debt or any
indebtedness for borrowed money from a party which is an Affiliate of any
Company or Subsidiary, in each case except to the extent that such liability has
been or will be included in the Final Closing Balance Sheet, and (I) any
disposal of, or incurrence, creation or assumption of any Encumbrance on, any
individual capital asset on or after the Calculation Date, if either the book
value or the fair market value of such capital asset exceeds $100,000;
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(20) not agree upon the price to be paid for any outstanding shares of
Rescal subject to the Binding Rescal Provisions referred to in Schedule
3.5(b)(4) of the Disclosure Schedule;
(21) not enter into any (a) put, call, option, forward or futures
Contracts covering foreign currencies or (b) forward priced commodity Contracts
or commodity hedging transactions except for those that would constitute
Approved Currency Hedging Transactions or Approved Commodity Hedging
Transactions, as the case may be;
(22) not take or agree to commit to enter into any agreement that would
be required to be disclosed pursuant to Section 3.16(a)(other than pursuant to
clause (i) or (iv) or subsection (y) of clause (ii) of such Section 3.16(a)) if
such agreement were in effect as of the date hereof or would otherwise
reasonably be likely to result in a material delay in the consummation of the
transactions contemplated hereby;
(23) not terminate the employment of any Employee who is covered by a
change of control agreement listed on Schedule 3.11(f) of the Disclosure
Schedule, except for Good Cause, as defined in such agreement, and shall not
permit circumstances to exist that would provide any such Employee with Good
Reason (as defined in such agreement) to terminate employment;
(24) not take, or offer or propose to take, or agree to take in writing
or otherwise, any of the actions described in Sections 5.2(1) through 5.2(23).
Section 5.3 Reasonable Efforts; Good Faith.
(a) The Sellers and Purchaser will cooperate and use their respective
commercially reasonable best efforts to fulfill the conditions precedent to the
other party's obligations hereunder, including (but not limited to) securing as
promptly as practicable all consents, approvals, waivers and authorizations
required in connection with the transactions contemplated hereby, whether or not
such consents, approvals, waivers and authorizations are Purchaser Required
Approvals or Seller Required Approvals. Purchaser and the Sellers will promptly
file documentary materials required by Competition Laws, Environmental Laws and
each other item listed in Section 3.6 and Section 4.4, together with any
information or documents necessary, proper or advisable to permit consummation
of the transactions contemplated hereby, and promptly file any additional
information requested as
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soon as practicable after receipt of a request therefor. Except as expressly
contemplated by this Agreement, neither Purchaser nor any of the Sellers will
take any action which would be reasonably likely to materially impair or delay
the Closing, and, so long as this Agreement is in effect, Purchaser will not
terminate the Timet Investment Agreement without the prior written consent of
Inco, which consent will not be unreasonably withheld or delayed.
(b) Without limiting the provisions set forth in paragraph (a) above,
Purchaser shall use its commercially reasonable best efforts to take or cause to
be taken all commercially reasonable actions necessary, proper or advisable to
obtain any consent, waiver, approval or authorization relating to any
Competition Law that is required for the consummation of the transactions
contemplated by this Agreement.
(c) The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other Competition Law
or any inquiries instituted by the PBGC. Purchaser and Inco agree that the other
party's legal counsel may, if such other party so wishes, participate in any
meeting with any Governmental Authority with jurisdiction over the enforcement
of any applicable Law regarding this Agreement to the extent permitted by such
Governmental Authority and to advise each other in advance of any such meeting.
Purchaser acknowledges that the Sellers may, at their election, file certain
information with the Competition Bureau in Canada relating to the transactions
contemplated hereby, so long as such information has been provided to and
approved by Purchaser prior to the filing thereof; it being understood that the
information provided to Purchaser prior to the date hereof has been so approved.
Section 5.4 Tax Matters.
(a) Liability for Taxes and Related Matters. (i) Liability for Taxes.
Except as otherwise provided herein, the Sellers shall be jointly and severally
liable to Purchaser, the Companies and the Subsidiaries and shall, unless
otherwise directed by Purchaser, pay to Purchaser an amount equal to any
liability of the Companies and the Subsidiaries for the following Taxes
(including, without limitation, any obligation to
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contribute to the payment of a Tax determined on a consolidated, combined,
unitary, aggregate or other similar basis with respect to a group of
corporations that includes or included the Companies and/or the Subsidiaries and
Taxes resulting from the Companies and/or the Subsidiaries ceasing to be members
of Sellers' Group): (A) Taxes imposed on Sellers' Group (other than the
Companies and the Subsidiaries) for any taxable year; (B) Taxes imposed on the
Companies and/or the Subsidiaries or for which the Companies and/or the
Subsidiaries may otherwise be liable for any taxable year or period that ends on
or before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year ending on and including the Closing Date (an "Interim Period") (Interim
Periods and any taxable year or period ending on or before the Closing Date
shall be referred to collectively hereinafter as "Pre-Closing Periods"); (C)
Taxes required to be paid or reimbursed by the Sellers under Section
5.4(a)(vi)(to the extent such Taxes have not been paid by the Sellers); (D)
Taxes or additional Taxes imposed on the Purchaser, the Companies or the
Subsidiaries (or any consolidated, combined, unitary, aggregate or similar group
that includes (or did include) the Purchaser, the Companies or the Subsidiaries)
as a result of the breach of the covenants of the Sellers set forth herein; and
(E) except as provided in Section 5.4(a)(viii) hereof, Taxes or other payments
required to be made after the Closing Date by any Company or any Subsidiary to
any party (other than any Company or any Subsidiary) under (or in respect of)
any Tax sharing, group, indemnity or allocation agreement or arrangement entered
into prior to the Closing Date (whether written or unwritten); provided,
however, that the Sellers shall be obligated to indemnify against, or pay or
cause to be paid, any amounts in respect of Taxes imposed on the Companies or
the Subsidiaries, as the case may be, for any Pre-Closing Period only to the
extent that, the amount of such Taxes exceeds the amount of the Reserves
contained in the Final Closing Balance Sheet reduced by the amount of any
payments made by the Companies or the Subsidiaries in respect of Taxes which had
been accrued and included in such Reserves (it being understood that, in the
event the amount of the Reserves contained in the Final Closing Balance Sheet
for one or more of the Companies or Subsidiaries is in excess of the amount
which such Company or Subsidiary is actually required to pay in respect of
Taxes, the amount of such excess (any such amount, an "overprovision") shall be
set off against any other amounts which are otherwise required to be paid by the
Sellers under this Section 5.4, but only to the extent such other amounts arise
in or are otherwise attributable to the country in which such overprovision
arose); and further provided that the
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Sellers shall not be liable for or indemnify Purchaser for such Taxes arising,
directly or indirectly, as a result of any acts, transactions or omissions of
Purchaser or the Companies or the Subsidiaries which are not in the ordinary
course of business and which occur after the consummation of the transactions
contemplated hereby. Except as set forth in Section 5.4(a)(v) hereof, the
Sellers shall be entitled to any refund of Taxes of the Companies and/or the
Subsidiaries received in respect of such Pre-Closing Periods only to the extent
that the amount of such refund exceeds the amount of Tax receivables contained
in the Final Closing Balance Sheet.
(ii) Purchaser shall be liable for and indemnify the Sellers for the
Taxes of the Companies for any taxable year or period that begins after the
Closing Date and, with respect to any taxable year or period beginning before
and ending after the Closing Date, the portion of such taxable year beginning
after the Closing Date (each a "Post-Closing Period"). Purchaser shall be
entitled to any refund of Taxes of the Companies and/or the Subsidiaries
received by the Sellers for such Post-Closing Periods.
(iii) Taxes for Short Taxable Year.
Apportionment of Taxes. In order to apportion appropriately any Taxes
relating to any taxable year or period that includes an Interim Period, the
parties hereto shall, to the extent permitted under applicable law, elect with
the relevant taxing authority to treat for all purposes the Closing Date as the
last day of the taxable year or period of the relevant Company or Subsidiary
(other than IAL, IAIL, or any of the Subsidiaries incorporated under the laws of
England and Wales (collectively, the "U.K. Subsidiaries")), as the case may be,
and such Interim Period shall be treated as a short taxable year and a
Pre-Closing Period for purposes of this Section 5.4. In any case where
applicable law does not permit a Company or a Subsidiary, as the case may be, to
treat the Closing Date as the last day of the taxable year or period of such
Company or Subsidiary with respect to Taxes that are payable with respect to an
Interim Period and with respect to Taxes that are payable by any U.K. Subsidiary
with respect to an Interim Period, the portion of any such Tax that is allocable
to the portion of the Interim Period ending on the Closing Date shall be:
(x) in the case of Taxes that are either (1) based upon or
related to income or receipts, or (2) imposed in connection with any
sale or other transfer or assignment of
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property (real or personal, tangible or intangible) (other than
conveyances pursuant to this Agreement, which are covered under Section
5.4(b)), deemed equal to the amount which would be payable if the
taxable year or period ended on the Closing Date (except that, solely
for purposes of determining the marginal tax rate applicable to income
or receipts during such period in a jurisdiction in which such tax rate
depends upon the level of income or receipts, annualized income or
receipts may be taken into account, if appropriate, for an equitable
sharing of such Taxes);
(y) in the case of Taxes not described in subparagraph (x)
above that are imposed on a periodic basis and measured by the level of
any item, deemed to be the amount of such Taxes for the entire relevant
period (or, in the case of such Taxes determined on an arrears basis,
the amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of
calendar days in the Interim Period ending on the Closing Date and the
denominator of which is the number of calendar days in the entire
relevant period; and
(z) for purposes of determining such Taxes, exemptions,
reliefs, allowances or deductions that are calculated on an annual
basis, such as the deduction for depreciation, shall be apportioned on
a time basis.
(iv) Adjustment to Purchase Price. Any payment by Purchaser or the
Sellers under this Section 5.4 will be treated for all purposes as an adjustment
to the Purchase Price and such payment shall be allocated to the Purchase Price
in accordance with Section 2.4(f).
(v) Refunds from Carrybacks. If the Sellers become entitled to a refund
or credit of Taxes for any period for which they are liable under Section
5.4(a)(i) to indemnify Purchaser and such Taxes are attributable solely to the
carryback of losses, credits or similar items attributable to the Companies or
the Subsidiaries, as the case may be, and from a taxable year or period that
begins after the Closing Date, the Sellers shall promptly pay to Purchaser the
amount of such refund or credit together with any interest received or otherwise
credited thereon. In the event that any refund or credit of Taxes for which a
payment has been made is subsequently reduced or disallowed, Purchaser shall
indemnify and hold harmless the Sellers for any tax liability, including
interest and penalties,
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assessed against the Sellers by reason of such reduction or disallowance.
(vi) Tax Returns; Payment of Taxes. The Sellers shall file or cause to
be filed when due all Tax Returns that are required to be filed by or with
respect to the Companies and/or the Subsidiaries for all taxable years or
periods ending on or before the Closing Date in a manner consistent with past
practices, shall allow the Purchaser the opportunity to review and comment upon
any portion of such Tax Returns that relate to the Companies and/or Subsidiaries
(it being understood that the Sellers shall not be obligated to allow Purchaser
to review any other portions of such Tax Returns) prior to filing such Tax
Returns, and shall pay when due any and all Taxes shown as due in respect of
such Tax Returns to the extent such Taxes exceed the Reserves established
therefor (it being understood that Taxes not in excess of such Reserves shall be
paid by the Companies and/or the Subsidiaries, as provided in Section
5.4(b)(viii) hereof), and Purchaser shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with respect to the Companies
and/or the Subsidiaries for taxable years or periods ending after the Closing
Date and shall remit when due any Taxes due in respect of such Tax Returns.
(vii) Contest Provisions. Purchaser shall promptly notify the Sellers
in writing upon receipt by Purchaser, any of its Affiliates or the Companies or
the Subsidiaries of notice of any pending or threatened Federal, state, local or
foreign income or franchise tax audits or assessments or notification of any
claim for taxation which may materially affect the tax liabilities of the
Companies and/or the Subsidiaries for which the Sellers would be required to
indemnify Purchaser, the Companies or the Subsidiaries pursuant to Section
5.4(a)(i); provided, however, that a failure to give such notice will not affect
Purchaser's, the Companies' or the Subsidiaries' rights to indemnification
hereunder, except to the extent, if any, that, but for such failure, the Sellers
could have avoided the Tax liability in question. The Sellers shall have the
right to control the conduct of any audit or claim or administrative or judicial
proceeding relating to any Pre-Closing Period (other than an Interim Period, the
treatment of which is discussed in the immediately succeeding paragraph), and to
employ counsel of their choice at their expense. Notwithstanding the foregoing,
the Sellers shall not be entitled to settle, either administratively or after
the commencement of litigation, any claim for Taxes which would adversely affect
the liability for Taxes of Purchaser, the Companies or the Subsidiaries for any
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period after the Closing Date (including, but not limited to, the imposition of
income tax deficiencies, the reduction of asset basis or cost adjustments, the
lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions, or the reduction of loss or credit
carryforwards) without the prior written consent of Purchaser. Such consent
shall not be unreasonably withheld or delayed, and shall not be necessary to the
extent that the Sellers have indemnified the Purchaser against the effects of
any such settlement. Purchaser (and its representatives) also may participate in
any such audit or claim or administrative or judicial proceeding at its own
expense and, if the Sellers do not promptly assume the conduct or defense of any
such audit or claim or proceeding, Purchaser (or its representatives) may, at
the Sellers' reasonable expense and without any effect to its or the Companies'
or Subsidiaries' rights to indemnification under Section 5.4(a)(i) of this
Agreement, defend the same in such manner as it may deem appropriate, including,
but not limited to, settling such audit or proceeding.
The Sellers shall be entitled to participate at their expense in the
defense of any claim for Taxes for an Interim Period which may be the subject of
indemnification by the Sellers pursuant to Section 5.4(a)(i) and, with the
written consent of Purchaser, which shall not be unreasonably withheld or
delayed (it being understood that it would be reasonable for Purchaser to
withhold such consent if as part of the same defense proceeding, there exist
issues with respect to Taxes which may not be the subject of indemnification by
the Sellers pursuant to Section 5.4(a)(i)), and at its sole expense, may assume
the entire defense of such Tax claim; provided, however, that, notwithstanding
the foregoing, the Sellers shall not be entitled to settle or otherwise
compromise, either administratively or after the commencement of litigation, any
such Tax claim without the prior written consent of Purchaser (which consent
shall not be unreasonably withheld or delayed) if the settlement or compromise
would result in any additional liability for Taxes of Purchaser, the Companies
or the Subsidiaries for such Interim Period or any period after the Closing Date
(including, but not limited to, the imposition of income tax deficiencies, the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions, or the reduction of loss or credit carryforwards) which would not be
fully indemnified by the Sellers under Section 5.4(a)(i) of this Agreement.
Purchaser, the Companies and the Subsidiaries shall not agree to settle any tax
claim for the portion of the year or period ending
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on the Closing Date which may be the subject of indemnification by the Sellers
under Section 5.4(a)(i) without the prior written consent of the Sellers, which
consent shall not be unreasonably withheld or delayed. Except as provided
otherwise in Section 5.4(a)(vi) and this Section 5.4(a)(vii), Purchaser shall
control at its own expense any and all audit, administrative and judicial
proceedings related to the Taxes of the Companies or the Subsidiaries.
(viii) Termination of Tax Allocation Agreements. (x) Any tax allocation
or sharing agreement or arrangement, whether or not written, that may have been
entered into by the Sellers or any member of the Sellers' Group and the
Companies and/or the Subsidiaries shall be terminated as to the Companies and/or
the Subsidiaries as of the Closing Date, and, after the date hereof, no Taxes or
other amounts shall be paid or reimbursed by the Companies or the Subsidiaries
under any such agreement or arrangement, regardless of the taxable year or
period for which such Taxes are imposed, and the provisions of this Section 5.4
shall govern thereafter, and (y) notwithstanding (x) above, the Companies and/or
the Subsidiaries shall pay, at the same time as any payment is due from any
Seller under Section 5.4(e) to the appropriate Seller the amount recorded as
"income taxes payable" on the Final Closing Balance Sheet that are attributable
to the operations of the Companies and/or the Subsidiaries but which are payable
by a Seller (or an Affiliate of a Seller) to the extent provided in Section
5.4(a)(vi) hereof; provided, however, that (1) the amount of such Taxes shall
have been calculated for each Company and/or Subsidiary on a separate
stand-alone basis or on a sub-group basis, as appropriate, and (2) the payments
in respect of such Taxes shall not exceed the amount accrued or established in
the Reserve in respect of such Taxes. The Reserves shall be reduced by the
amount of any payments made to a Seller (or an Affiliate of a Seller) under this
Section 5.4(a)(viii).
(b) Transfer and Withholding Taxes. (i) Purchaser shall be responsible
for all applicable sales, transfer, recording, deed, stamp and other similar
taxes arising from the sale of the Shares, including, but not limited to any
real property transfer taxes.
(ii) To the extent, if any, that Purchaser (or any of its assignees) is
required to withhold Taxes ("Withholding Taxes") from the Purchase Price under
applicable law, (x) Purchaser (or such assignee) shall withhold and pay such
Withholding Taxes to the appropriate Governmental Authority at the time and in
the manner prescribed by applicable law, (y)
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Purchaser (or such assignee) shall provide the applicable receipts, if any,
evidencing (or otherwise establishing to the satisfaction of the Sellers) the
payment of such Withholding Taxes and (z) Purchaser shall be deemed to have paid
the amount of such Withholding Taxes as part of the Purchase Price due to the
Sellers. Purchaser agrees not to make any assignment to any assignee the effect
of which would be to increase Withholding Taxes above those that would have been
incurred had the Purchaser not made such assignment.
(c) Information to be Provided by Purchaser. With respect to the
taxable year of the Sellers ending December 31, 1997 and any period in 1998
prior to the Closing Date, Purchaser shall promptly cause the Companies to
prepare and provide to the Sellers a package of tax information materials (the
"Tax Package"), which shall be completed in accordance with past practices
including past practice as to providing the information, schedules and work
papers and as to the method of computation of separate taxable income or other
relevant measure of income of the Companies. Purchaser shall cause the Tax
Package for the portion of the taxable period ending on the Closing Date to be
delivered to the Sellers within one hundred twenty (120) days after the Closing
Date.
(d) Tax Elections. Except for the elections referred to in Section
5.2(9), from and after the date hereof, the Sellers shall not, without the prior
written consent of Purchaser (which consent may not be unreasonably withheld or
delayed), make or revoke, or cause or permit to be made or revoked, any Tax
election, or adopt or change any method of accounting for Tax purposes, that
would reasonably be likely to have an effect that is materially adverse to any
Company or any Subsidiary.
(e) Time of Payment. Except as otherwise provided in Section 5.4(a)(vi)
of this Agreement, payments of any amounts due under this Section 5.4 in respect
of Taxes shall be made by the Sellers at least ten (10) Business Days before the
due date of the applicable estimated or final Tax Return required to be filed by
Purchaser on which is required to be reported Taxes for an Interim Period for
which the Sellers are responsible under Section 5.4(a)(i) of this Agreement,
(without regard as to whether the Tax Return for an Interim Period shows overall
net income or loss for such Interim Period), or, with respect to other indemnity
payments due from the Sellers under Section 5.4(a)(i) of this Agreement, within
ten (10) Business Days following a settlement or compromise of an assessment or
collection of a Tax by a taxing authority or a "determination" as
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defined in Section 1313(a) of the Code. If liability under this Section 5.4 is
in respect of other costs or expenses other than Taxes, payment by the Sellers
of any such amounts shall be made within ten (10) Business Days after the date
that the Sellers have been notified by Purchaser in writing that the Sellers
have a liability for a determinable amount under this Section 5.4 and they are
provided with calculations or other materials supporting the Sellers' liability
for such amounts. This provision shall apply pari passu to payments required to
be made by the Purchaser to the Sellers.
(f) Assistance and Cooperation. After the Closing Date, each of the
Sellers and Purchaser shall as may reasonably be requested:
(i) assist (and, where appropriate, cause their respective Affiliates
to assist) the other party in preparing any Tax Returns or reports which such
other party is responsible for preparing and filing in accordance with this
Section 5.4;
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of the Companies or the
Subsidiaries;
(iii) make available to the other and to any taxing authority to the
extent reasonably requested all information, records, and documents relating to
Taxes of the Companies or the Subsidiaries;
(iv) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments of the Companies or the Subsidiaries for
Pre-Closing Periods; and
(v) furnish the other with copies of all correspondence received from
any taxing authority in connection with any tax audit or information requested
with respect to any such taxable period.
Any information obtained under the provisions of this Section 5.4(f)
shall be kept confidential except as may otherwise be necessary in connection
with the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.
(g) Survival of Obligations. The obligations of the parties set forth
in this Section 5.4 shall be unconditional and absolute and shall remain in
effect without limitation as to time and shall not be subject to Section 7.1.
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(h) No Section 338(h)(10) Election. Purchaser and the Sellers
acknowledge and agree that a joint election under Section 338(h)(10) of the Code
will not be made with respect to the sale of the IAII Shares.
Section 5.5 Continuation of Employment. Purchaser shall cause each of
the Companies and the Subsidiaries to continue the employment, in comparable
positions and at the same or greater wage rates or salaries, of (i) all active
Employees as of the Closing Date and (ii) upon their return to active
employment, any Employees who are, as of the Closing Date, on disability,
medical leave or other authorized leave; provided, however, that nothing herein
shall limit or restrict the ability of the Companies or any of the Subsidiaries
to sever the employment of any Employee following the Closing Date, subject to
the terms of the severance plans and policies which Purchaser has agreed to
maintain pursuant to the following sentence. For the period of two years
following the Closing Date, Purchaser shall, or shall cause the Companies and
the Subsidiaries to, provide the Employees with severance benefits which are no
less favorable than the benefits provided under the severance programs, policies
and guidelines which cover the Employees as of the Closing Date and which are
Benefit Plans disclosed on Schedule 3.11(a) of the Disclosure Schedule;
provided, however, that to the extent that any portion of any covenant set forth
in this sentence, or the performance of any obligations pursuant to this
sentence, would cause any of the Sellers, Purchaser, the Companies or the
Subsidiaries to commit an unfair labor practice or to be in violation of any
labor law, such portion of such covenant shall be of no force and effect with
respect to Employees who are subject to a collective bargaining agreement.
Section 5.6 Continuation of Defined Benefit (Retirement) Plans.
Purchaser acknowledges its obligations under existing law and this Agreement in
respect of the protection and preservation of accrued and vested benefits of
Employees, including the protection and preservation of the conditions of
vesting in respect of, and eligibility for, such benefits, under the defined
benefit plans of the Companies and the Subsidiaries that are in effect for the
Employees on the Closing Date and which are Benefit Plans disclosed on Schedule
3.11(a) of the Disclosure Schedule; including, without limitation, supplemental
executive and cost-of-living retirement plans, excess benefit plans and
individual pension arrangements (together, the "Retirement Plans"). Purchaser
agrees that, for a period of two years following the Closing Date, without
interruption, (i) it shall, or shall cause the Companies and the Subsidiaries
to,
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continue to fund the Retirement Plans in accordance with funding standards under
ERISA (where applicable), as determined by reputable and recognized actuaries
appointed under such plans, and (ii) neither it, the Companies nor the
Subsidiaries shall cause the Retirement Plans to be terminated or to be amended
or modified in any manner that would adversely affect the rights of Employees
thereunder except as may be expressly required by law; provided, however, that
to the extent that any portion of any covenant set forth in this sentence, or
the performance of any obligations pursuant to this sentence, would cause any of
the Sellers, Purchaser, the Companies or the Subsidiaries to commit an unfair
labor practice or to be in violation of any labor law, such portion of such
covenant shall be of no force and effect with respect to Employees who are
subject to a collective bargaining agreement. Purchaser agrees that it shall
cause the Companies and the Subsidiaries to honor the terms of the Retirement
Plans.
Section 5.7 Continuation of Defined Contribution (Savings) Plans.
Purchaser acknowledges its obligations under existing law in respect of the
protection and preservation of accrued and vested benefits of Employees,
including the protection and preservation of the conditions of vesting in
respect of, all benefit options in respect of, and eligibility for, such
benefits under the defined contribution plans of the Companies and the
Subsidiaries that are in effect for the Employees on the Closing Date and which
are Benefit Plans disclosed on Schedule 3.11(a) of the Disclosure Schedule;
including, without limitation, individual pension arrangements or other
non-qualified arrangements (together, the "Savings Plans"). Purchaser agrees
that, for a period of two years following the Closing Date, without
interruption, (i) the Companies and the Subsidiaries shall continue to make
matching contributions consistent with the past practice of Sellers pursuant to
the Savings Plans, and (ii) neither it, the Companies nor the Subsidiaries shall
cause any Savings Plans to be terminated or to be amended or modified in any
manner that would adversely affect the rights of Employees thereunder except as
may be expressly required by law; provided, however, that to the extent that any
portion of any covenant set forth in this sentence, or the performance of any
obligations pursuant to this sentence, would cause any of the Sellers,
Purchaser, the Companies or the Subsidiaries to commit an unfair labor practice
or to be in violation of any labor law, such portion of such covenant shall be
of no force and effect with respect to Employees who are subject to a collective
bargaining agreement. Purchaser agrees
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that it shall cause the Companies and the Subsidiaries to honor the terms of the
Savings Plans.
Section 5.8 Welfare Benefits. Purchaser agrees that, for a period of
two years following the Closing Date, without interruption, neither it, the
Companies nor the Subsidiaries shall cause any Benefit Plans disclosed on
Schedule 3.11(a) of the Disclosure Schedule which are "welfare plans", within
the meaning of Section 3(1) of ERISA, including, without limitation, long-term
disability, accident and sickness, group and individual health plans, travel
accident and group life insurance and tuition assistance programs, but not
including those plans referred to in Sections 5.6 and 5.7, and all fringe
benefit plans which are in effect for Employees on the Closing Date, to be
terminated or to be amended or modified in any manner that would adversely
affect the Employees except as may be expressly required by law; provided,
however, that to the extent that any portion of any covenant set forth in this
sentence, or the performance of any obligations pursuant to this sentence, would
cause any of the Sellers, Purchaser, the Companies or the Subsidiaries to commit
an unfair labor practice or to be in violation of any labor law, such portion of
such covenant shall be of no force and effect with respect to Employees who are
subject to a collective bargaining agreement.
Section 5.9 Post-Retirement Welfare Benefits. For two years following
the Closing, Purchaser agrees to, and to cause the Companies and the
Subsidiaries to, continue to provide for and maintain in effect those
post-retirement life insurance and health benefits of the Companies and the
Subsidiaries that are provided under Benefit Plans disclosed on Schedule 3.11(a)
of the Disclosure Schedule on the Closing Date in respect of the Employees
(including Employees who are eligible to retire, whether eligible for immediate
or deferred retirement or who have retired on early, normal, late or disability
retirement on or prior to the Closing Date) without amendment, except as may be
expressly required by law, including with respect to benefit levels and
contributions; provided, however, that to the extent that any portion of any
covenant set forth in this sentence, or the performance of any obligations
pursuant to this sentence, would cause any of the Sellers, Purchaser, the
Companies or the Subsidiaries to commit an unfair labor practice or to be in
violation of any labor law, such portion of such covenant shall be of no force
and effect with respect to Employees who are subject to a collective bargaining
agreement.
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Section 5.10 Credit For Past Service. Purchaser agrees that the
Employees shall be given credit for all service with the Companies or any of the
Subsidiaries or their Affiliates or predecessors (including service credited by
such Companies, Subsidiaries, Affiliates and predecessors), to the extent
credited under the Benefit Plans, for purposes of eligibility, vesting and
benefit accrual under any employee benefit plans of Purchaser or any new
employee benefit plans of the Companies and the Subsidiaries in which the
Employees may become participants following the Closing Date.
Section 5.11 Other Business Information. It is understood by Purchaser
that when Inco sold its research and development facilities in Sterling Forest,
New York it decided to relocate certain proprietary records, data and other
information relating to a variety of research and/or development ideas and other
projects or efforts not applicable to the Business but applicable to other
businesses which were then part of Inco or were being considered as potential
business or commercial opportunities for Inco outside the Business (together,
"Inco Other Business Information") to IAII's facilities in Huntington, West
Virginia. In connection with Purchaser's purchase of the Shares, Purchaser
acknowledges that (x) all Inco Other Business Information is and remains the
sole property of Inco and (y) neither Purchaser nor any of the Companies,
Subsidiaries or Investments has any rights to, or interest in, any of the Inco
Other Business Information and Purchaser agrees that (i) it will maintain, on
behalf of Inco, the Inco Other Business Information without any cost to Inco for
five years from the Closing Date and not move or destroy any of the Inco Other
Business Information without Inco's prior written approval, (ii) it will not,
and it will not permit any of the Companies or the Subsidiaries to, in any way
or manner use any of the Inco Other Business Information for any purpose without
the prior written approval of Inco, (iii) it will provide, and it will cause the
Companies and the Subsidiaries to provide, Inco and any of Inco's officers,
directors, employees, consultants, representatives and agents (including legal
counsel) with reasonable access to the Inco Other Business Information during
normal business hours of the Business to review, copy or remove any of the Inco
Other Business Information, (iv) it will maintain, and it will cause the
Companies and the Subsidiaries to maintain, the confidence of all Inco Other
Business Information and will not grant any access to, disclose in any manner or
form any part of, or, otherwise make available in any form or manner, any such
Inco Other Business Information to any third party and (v) in the event that
Purchaser directly or indirectly sells, transfers or otherwise
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disposes of any portion of the Business, then Inco will be given ample
opportunity to remove, at Inco's cost and expense, any and all Inco Other
Business Information from the premises of the Business prior to the
effectiveness of any such sale, transfer or disposition.
Section 5.12 Compliance with WARN. Purchaser shall cause the Companies
or the applicable Subsidiaries to, with respect to the Employees, timely give
all notices required to be given under WARN or other similar statutes or
regulations of any jurisdiction relating to any plant closing or mass layoff
occurring on or after the Closing Date.
Section 5.13 Ancillary Agreements.
(a) At the Closing, Inco and Purchaser shall enter into the
Noncompetition Agreement in the form attached hereto as Exhibit A.
(b) At or prior to the Closing, Inco and Purchaser shall enter into the
Tradename and Trademark License Agreement in the form attached hereto as Exhibit
B. In order to reduce the possibility of trademark and/or trade name confusion,
following the Closing, except as permitted by the Tradename and Trademark
License Agreement, neither Purchaser nor any of the Companies nor any of their
respective Affiliates shall use the name Inco, INCO or International Nickel
Company or any confusingly similar variation thereof either singularly or as any
part of any of their corporate names or identities or part of any trademark or
tradenames, except for the Designated Marks (as defined in the Tradename and
Trademark License Agreement) which already include INCO therein and any new
trademark, servicemark, domain name or tradename expressly including in full a
Designated Mark (but no other Inco name).
(c) At or prior to the Closing, Inco U.S. and IAII shall enter into the
Transitional Services Agreement in the form attached hereto as Exhibit C.
(d) (i) In the case of all Affiliate Transactions reflected in the
Interim Financial Statements or which have occurred subsequent to March 31, 1998
in the ordinary course of business consistent with past practice, including, but
not limited to, (A) cash advances, and repayments thereof, dividends and cash
sweep transactions as contemplated by the centralized cash management system
referred to in Note 13 of the Audited Financial Statements, (B) raw materials
purchases of nickel and
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cobalt by the Companies or the Subsidiaries, from the Sellers or one of its
Affiliates (other than any of the Companies or Subsidiaries) or (C) Approved
Currency Hedging Transactions that constitute Affiliate Transactions, (D)
Approved Commodity Hedging Transactions that constitute Affiliate Transactions,
(E) management fees, hedging fees and pension administration services payable by
the Companies or the Subsidiaries, (F) direct and allocated charges to the
Companies and the Subsidiaries in respect of any pension or other contributions
made to any Benefit Plans, workmen's compensation payments, insurance premiums,
patent and licensing fees and expenses, external legal fees and expenses,
interest expenses and borrowing costs and fees, foreign office overhead charges,
Taxes, expenses associated with the Receivables Program, and payment for goods
and services, (G) toll refining charges for precious metals scrap from
thermocouples and furnace windings generated by the Companies or the
Subsidiaries, in each case under (i) clauses (C) and (D), between any of the
Companies and any of the Subsidiaries, on the one hand, and the Sellers or any
of their Affiliates (other than the Companies or the Subsidiaries) on the other
hand, and (ii) clauses (A), (B) and (E) - (G) either between any of the
Companies and any of the Subsidiaries, on the one hand, and the Sellers or any
of their Affiliates (other than the Companies and the Subsidiaries) on the other
hand or for or on behalf of the Companies and the Subsidiaries, and (H) sales of
Company Products, certain pension and other administrative services, car lease
payments for Inco Europe personnel, joint bottled gas purchases made for or on
behalf of Inco Europe's Clydach refining facility, in each case provided to or
entered into on behalf of the Sellers and their Affiliates (other than any of
the Companies and the Subsidiaries), each such Affiliate Transaction shall be
(x) recorded, as appropriate and consistent with past practices in recording
Affiliate Transactions in the Audited Financial Statements, in either the "due
from affiliates" account, (such account being referred to as the "Inco Alloys
Settlement Account"), or the "trade accounts payable to affiliates" account
(such account are referred to as the "Seller Settlement Account"), as such
accounts are referred to on the face of the combined balance sheets in the
Audited Financial Statements or in Note 10 or 13 to the Audited Financial
Statements, and (y) settled after the date of this Agreement monthly in the
normal course of business within 15 days following each calendar month end and,
to the extent that amounts are still outstanding in such accounts at the Closing
Date, such amounts shall be settled in accordance with Section 5.13(d)(iii)
below.
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(ii) Except as otherwise provided for in this Agreement, or any
agreement or arrangement disclosed on Schedule 6.2(f) of the Disclosure
Schedule, the Supply Agreements or any Ancillary Agreement, as of the Closing
none of the Companies, the Subsidiaries or the Investments (collectively, the
"Inco Alloys Companies"), on the one hand, and Inco, any of the other Sellers or
any of their respective Affiliates (other than the Inco Alloys Companies)
(collectively, the "Seller Companies"), on the other hand, shall have any
liability or other obligation of any kind (whether accrued, absolute, fixed or
contingent) to each other with respect to Affiliate Transactions which have
occurred on or prior to the Closing Date, except for:
(A) all obligations or liabilities of the Inco Alloys Companies to the
Seller Companies, to the extent such amounts are outstanding as of the Closing
Date and are reflected or included in the Seller Settlement Account as of the
Closing Date, subject to any adjustments required to reflect the CPA Firm's
determination of any Differences, if any, with respect to such accounts pursuant
to Section 2.4 (such amounts being referred to herein as the "Inco Alloys
Settlement Amount"); and
(B) all obligations or liabilities of the Seller Companies to the Inco
Alloys Companies to the extent such total aggregate amounts are outstanding as
of the Closing Date and are reflected or included in the Inco Alloys Settlement
Account, subject to any adjustment required to reflect the CPA Firm's
determination of any Differences, if any, with respect to such account pursuant
to Section 2.4 (such amounts being referred to herein as the "Seller Settlement
Amount").
(iii) No later than the later of (1) 30 calendar days after the Closing
Date and (2) the fifth Business Day following the Determination Date in the
event any Differences involve the Seller Settlement Account or the Inco Alloys
Settlement Account, (A) the Seller Companies shall (and the Sellers hereby agree
to cause the Seller Companies to) pay the Seller Settlement Amount (if any) in
immediately available funds to an account designated by Purchaser and (B) the
Inco Alloys Companies shall (and the Purchaser hereby agrees to cause the Inco
Alloys Companies to) pay the Inco Alloys Settlement Amount (if any) in
immediately available funds to an account designated by Inco.
(iv) The Sellers and Purchaser agree that notwithstanding anything to
the contrary contained herein:
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(A) as of or prior to the Closing, one or more dividends or other
distributions of cash of up to 300 million Japanese yen in total may be declared
and/or paid by DIAL to its shareholders and the Sellers shall be entitled to up
to 50% of such dividends and/or other distributions and additional shares may be
issued by DIAL on a pro rata basis to its shareholders as part of, or in
connection with, the declaration and/or payment of such dividends and/or other
distributions; and
(B) shareholders' advances to the Companies and the Subsidiaries set
forth in Schedule 5.13(d)(iv) of the Disclosure Schedule aggregating
$231,239,000 at March 31, 1998, which have been reflected as part of
shareholder's equity in the Financial Statements (based upon historical exchange
rates and subject to adjustment to reflect exchange rates at the time of
conversion), shall be converted into share capital and/or capital surplus of
such Companies and Subsidiaries prior to the Closing Date, such conversion to be
achieved through the issuance of additional shares, and/or contribution of
amounts as capital surplus or contributed surplus provided that, for the
purposes of the Adjustment Reports under Section 2.4, all such conversions of
shareholders' advances shall be deemed to have taken place as of the Calculation
Date and to the extent any of such shareholders' advances shall not have been
converted prior to the Closing they shall be forgiven as of the Closing.
(e) Prior to the date immediately preceding the Closing, Inco and IACL
shall enter into the QuitClaim Assignment in the form attached hereto as Exhibit
D.
Section 5.14 Further Assurances. Each of the parties shall execute such
documents and take such further actions as may be commercially reasonable to
carry out the provisions hereof and to consummate the transactions contemplated
hereby. At any time after the Closing Date, the Sellers and Purchaser shall (and
Inco shall cause the Sellers to) promptly execute, acknowledge and deliver any
other assurances reasonably requested by the Sellers and Purchaser, as the case
may be, and necessary for the Sellers and Purchaser, as the case may be, to
satisfy their respective obligations hereunder or obtain the benefits
contemplated hereby. Purchaser and the Seller agree that if Inco S.A. is
obligated to purchase shares of Rescal pursuant to the Binding Rescal
Provisions, dated as of November 30, 1995, between certain shareholders of
Rescal and Inco S.A., Purchaser and Inco will cooperate in the negotiations of
the price to be paid for such shares. In such event, Purchaser will forward Inco
S.A. on or after the Closing the purchase price for such shares and Inco
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S.A. will purchase such shares and transfer such shares to Purchaser.
Section 5.15 No Solicitation. The Sellers agree that prior to the
earlier of the Closing or termination of this Agreement, the Sellers will not,
and will cause their respective officers, directors, employees and agents not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to, or engage in any negotiations concerning
or provide any confidential information or data to, have any discussions with or
enter into any agreements with any Person relating to, any acquisition, business
combination or purchase of all or any portion of the capital stock or assets of
the Companies or the Subsidiaries other than in the ordinary course of business
consistent with past practice with regard to assets of the Companies or the
Subsidiaries. The Sellers will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any such potential transactions involving the
Companies or the Subsidiaries. The Sellers shall promptly notify the Purchaser
if any inquiries are received in respect of any Company or Subsidiary. Each of
Purchaser and its Affiliates agrees that prior to the earlier of the Closing or
termination of this Agreement, it will not, and will cause its direct and
indirect subsidiaries, persons controlled by it and its officers, directors,
employees and agents not to, enter into any agreements with any Person relating
to any acquisition, business combination or purchase of all or any portion of
the capital stock or assets of any business that is competitive with any aspect
of the Business.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Purchaser and the Sellers.
The obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver) prior to or at the Closing of the following conditions:
(a) HSR and Other Antitrust Laws. All required filings under
Competition Laws shall have been made and any required waiting period under such
laws applicable to the trans actions contemplated hereby shall have expired or
been earlier terminated. The Parties hereto agree that the Closing is not
conditioned upon clearance of the transaction under the merger control
provisions of the UK Fair Trading Act of 1973, as amended
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by the Companies Act 1989 and the Deregulation and Contracting Out Act 1994, or
under the merger control rules of the French Republic and that without prejudice
to the foregoing, any investigation by the UK Office of Fair Trading, referral
of the transaction to the UK Monopolies and Mergers Commission, or any
investigation by any competition authority of the French Republic will not be
treated by Purchaser as a ground for seeking to postpone the Closing or to fail
to close the transaction.
(b) No Injunctions. No court or Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, or judgment, decree, order or injunction which is in
effect on the Closing Date and prohibits the consummation of the Closing and no
Governmental Authority shall have initiated any action to restrain, enjoin or
otherwise prohibit the consummation of the transactions contemplated by this
Agreement which action remains outstanding at such time.
Section 6.2 Conditions to the Obligations of Pur chaser. The obligation
of Purchaser to effect the Closing is subject to the satisfaction (or waiver by
Purchaser) prior to the Closing, of the following conditions:
(a) Representations and Warranties. The represen tations and warranties
of the Sellers contained herein that are qualified by reference to a Material
Adverse Effect shall have been true and correct when made and shall be true and
correct as of the Closing as if made as of the Closing and all other
representations and warranties of the Sellers shall have been true and correct
when made and as of the Closing as if made as of the Closing except for such
inaccuracies as in the aggregate are not reasonably likely to have a Material
Adverse Effect or subject Purchaser to criminal sanction or penalty (except that
representations and warranties that are made as of a specific date or as of the
date hereof need be true only as of such date), and that with respect to the
representations and warranties set forth in Section 3.18, none of the actions
taken by Purchaser pursuant to and in accordance with Section 5.3(b), or the
financial effects thereof, shall be taken into consideration when determining
the truth and correctness of such representations and warranties) and Purchaser
shall have received certificates to such effect dated the Closing Date and
executed by a duly authorized officer of each Seller.
(b) Covenants. The covenants and agreements of the Sellers to be
performed on or prior to the Closing shall have
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been duly performed in all material respects, and Purchaser shall have received
certificates to such effect dated the Closing Date and executed by a duly
authorized officer of each Seller.
(c) Legal Opinions. Purchaser shall have received the opinions of the
Sellers' counsel, dated the Closing Date, addressed to Purchaser substantially
to the effect set forth in Annex 6.2(c) hereto.
(d) No Material Adverse Change. Since December 31, 1997, no Material
Adverse Change shall have occurred.
(e) Resignations. Such directors of the Companies and the Subsidiaries
as requested by Purchaser at least 10 Business Days prior to the Closing shall
have tendered their written resignations from the Boards of Directors of the
Companies and the Subsidiaries effective upon consummation of the Closing; it
being understood that any director who is also a director, officer or employee
of Inco or any of its Affiliates (other than the Companies or the Subsidiaries)
shall resign effective as of the Closing.
(f) Termination of Affiliate Transactions. The Sellers shall have
delivered to Purchaser reasonably satisfactory evidence of the A/R Termination
and reasonably satisfactory legally binding documentation evidencing the
termination effective as of the Closing without any further liability to
Purchaser, the Companies or the Subsidiaries of all Affiliate Transactions
(other than the agreements or arrangements set forth on Schedule 6.2(f), which
notwithstanding anything to the contrary set forth herein shall continue after
Closing in accordance with their respective terms, or amounts which are
otherwise to be settled in accordance with Section 5.13(d)).
(g) Financing Condition. The Purchaser's lead credit bank shall not
have failed to consummate the borrowings contemplated by the Bank Commitment.
(h) FIRPTA Affidavit. Purchaser shall have received an affidavit of an
officer of Inco U.S. sworn to under penalty of perjury, setting forth Inco
U.S.'s address and Federal tax identification number and stating that Inco U.S.
is not a "foreign person" within the meaning of Section 1445 of the Code.
(i) Consents and Approvals. All Purchaser Required Approvals shall have
been obtained or made.
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(j) Ancillary Agreements. The Ancillary Agreements shall have been duly
signed, executed and delivered by each party thereto other than Purchaser.
(k) Title Insurance. This Subsection 6.2(k) shall not apply to the UK
Properties. Purchaser shall have received, at Purchaser's expense, an extended
coverage ALTA owner's policy or policies of title insurance from an insurance
company reasonably acceptable to Purchaser (the "Title Company") insuring title
to each parcel of Owned Real Property subject only to Permitted Encumbrances and
other customary exceptions and including a non- imputation endorsement. Each
such title insurance policy shall be issued on the Closing Date and shall insure
ownership of fee title as aforesaid without inclusion of the Schedule B standard
preprinted exceptions that are customarily removed by the provision of a
standard owner's affidavit. If Purchaser shall so request, the relevant Sellers,
Companies or Subsidiaries shall provide an affidavit in a form reasonably
requested by the Title Company, duly executed by the relevant party, to remove
such Schedule B standard preprinted exceptions (even if such exceptions would
otherwise be Permitted Encumbrances).
(l) Survey. (i) Purchaser shall have received, at Purchaser's expense,
a current survey of each parcel of the Owned Real Property (except for the UK
Freehold Property) in insurable form in accordance with standards applicable to
registered and licensed land surveyors making surveys in the states and
countries in which such parcels are located and in accordance with the further
provisions of this Section 6.2(l). Each such survey shall be certified to (i)
Purchaser, (ii) the Companies or the Subsidiaries, as applicable, and (iii) the
applicable title insurance company and shall show no defect other than Permitted
Encumbrances.
(ii) Purchaser shall have received at Purchaser's expense a survey of
the factory site at Holmer Road, Hereford England (registered in England under
title number HE796) (the "Holmer Road Factory") and addressed to Purchaser, IAL
and (if relevant) any bank which intends to loan money to Purchaser in relation
to this transaction carried out by a chartered surveyor who is a member of the
Royal Institution of Chartered Surveyors and such survey shall not show any
defects as would materially adversely affect the value of the Holmer Road
Factory save as have been previously disclosed to Purchaser.
Section 6.3 Conditions to the Obligations of the Sellers. The
obligation of the Sellers to effect the Closing is
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subject to the satisfaction (or waiver) prior to the Closing of the following
conditions:
(a) Representations and Warranties. The repre sentations and warranties
of Purchaser contained herein shall have been true and correct when made and
shall be true and correct as of the Closing as if made as of the Closing, in
each case except for such inaccuracies as, individually or in the aggregate,
would not reasonably be expected to materially adversely affect any of the
Sellers or the benefits expected to be received by the Sellers pursuant to the
transactions contemplated hereby (except that representations and warranties
that are made as of a specific date need be true only as of such date), and the
Sellers shall have received a certificate to such effect dated the Closing Date
and executed by a duly authorized officer of Purchaser.
(b) Covenants. The covenants and agreements of Purchaser to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and the Sellers shall have received a certificate to such
effect dated the Closing Date and executed by a duly authorized officer of
Purchaser.
(c) Legal Opinions. The Sellers shall have received the opinions of
Purchaser's counsel dated the Closing Date, addressed to the Sellers
substantially to the effect set forth in Annex 6.3(c) hereto.
(d) Surety Bonds and Guarantees. Purchaser shall have arranged for
substitute surety bonds and guarantees to replace the existing bonds and
guarantees listed on Schedule 6.3(d) of Inco and its Affiliates (other than the
Companies and the Subsidiaries) relating to the Companies and the Subsidiaries.
(e) Consents and Approvals. All Seller Required Approvals shall have
been obtained or made.
(f) Ancillary Agreements. The Ancillary Agreements shall have been duly
signed, executed and delivered by each party thereto other than the Sellers or
any of their Affiliates.
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ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival. The representations and warranties of the Sellers
and Purchaser contained in this Agree ment shall survive the Closing for the
period set forth in this Section 7.1. All of the representations and warranties
of the Sellers and Purchaser contained in this Agreement and all claims and
causes of action with respect thereto shall terminate on the first anniversary
of the Closing, except that the representations and warranties in Sections 3.1,
3.2, 3.3, 3.4, 3.5, 3.6, 4.1, 4.2, 4.3, 4.4, 4.5 and 4.8 shall have no
expiration date, the representatives and warranties in Section 3.13 shall expire
on the third anniversary of the Closing and the representation and warranty in
Section 3.10 shall survive, with respect to any Tax Return, until the applicable
statute of limitations has run for any such Tax Return required to be filed on
or before the date of this Agreement. In the event notice of any claim for
indemnification under Section 7.2(a) or Section 7.3(a)(i) hereof shall have been
given pursuant to Section 9.1 within the applicable survival period, the
representations and warranties that are the subject of such indemnification
claim shall survive until such time as such claim is finally resolved.
Section 7.2 Indemnification by Purchaser. Purchaser hereby agrees that
it shall indemnify, defend and hold harmless the Sellers, their Affiliates, and,
if applicable, their respective directors, officers, shareholders, partners,
attorneys, accountants, agents and employees and their heirs, successors and
assigns (the "Seller Indemnified Parties") from, against and in respect of any
damages, claims, losses, charges, actions, suits, proceedings, deficiencies,
Taxes, interest, penalties, and reasonable costs and expenses (including without
limitation reasonable attorneys' fees, removal costs, remediation costs, closure
costs, fines, penalties and expenses of investigation and ongoing monitoring)
(collectively, "Losses") imposed on, sustained, incurred or suffered by or
asserted against any of the Seller Indemnified Parties, directly or indirectly
relating to or arising out of (a) any inaccuracy or breach of any representation
or warranty made by Purchaser contained in this Agreement for the period such
representation or warranty survives; (b) the breach of any covenant or agreement
of Purchaser contained in this Agreement; (c) without duplication, any failure
by Purchaser to perform its covenants or obligations set forth in Section 5.4;
(d) all other liabilities relating to, or arising out of, the Companies or the
Business (except for such
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matters for which the Sellers are obligated to indemnify the Purchaser
Indemnified Parties pursuant to Section 7.3); and (e) the non-imputation
endorsement referred to in Section 6.2(k) hereof (provided that Purchaser will
not be required to indemnify any Losses of the Seller Indemnified Parties
pursuant to this Section 7.2(e) if Purchaser has suffered Losses for which the
Sellers are obligated to indemnify the Purchaser Indemnified Parties hereunder
in excess of the Deductible Amount (treating any payment to be paid pursuant to
Section 6.2(k) as a Loss hereunder)).
Section 7.3 Indemnification by the Sellers.
(a) The Sellers jointly and severally hereby agree to indemnify, defend
and hold harmless Purchaser, its Affiliates and, if applicable, their respective
directors, officers, share holders, partners, attorneys, accountants, agents and
employees and their heirs, successors and assigns (the "Purchaser Indemni fied
Parties" and, collectively with the Seller Indemnified Parties, the "Indemnified
Parties") from, against and in respect of any Losses imposed on, sustained,
incurred or suffered by or asserted against any of the Purchaser Indemnified
Parties, directly or indirectly relating to or arising out of (i) subject to
Section 7.3(b), any inaccuracy or breach of any representation or warranty made
by the Sellers contained in this Agreement (it being agreed that any
representation or warranty of the Sellers that is subject to a materiality or
Material Adverse Effect qualification, other than the representations set forth
in Section 3.11(d) and (g), shall be deemed not to be so qualified for purposes
of establishing an inaccuracy or breach of such representation and warranty
pursuant to this Section 7.3 and any claim for indemnification as a result of
such inaccuracy or breach and that, notwithstanding anything to the contrary
contained herein, Section 7.3(b) shall not apply to any breach of the
representation and warranty set forth in Section 3.19) for the period such
representation or warranty survives; (ii) without duplication of the obligations
of the Sellers in Section 5.4, any failure by the Sellers to perform their
covenants or obligations set forth in Section 5.4; (iii) the breach of any
covenant or agreement of the Sellers contained in this Agreement; (iv) any
instance of non-compliance with ERISA and the Code occurring prior to the
Closing Date by the Sellers, the Companies or the Subsidiaries as set forth in
Schedule 3.11(b)(i)(1) of the Disclosure Schedule.
(b) The Sellers shall be liable to the Purchaser Indemnified Parties
for any Losses (excluding any Losses relating
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to Taxes) with respect to the matters contained in Section 7.3(a) (i) only to
the extent the Losses (excluding any Losses relating to Taxes) therefrom exceed
an aggregate amount equal to $7,500,000 (the "Deductible Amount") and then only
for all such Losses (excluding any Losses relating to Taxes) in excess thereof
up to an aggregate amount equal to $50,000,000 (the "Maximum Amount"); provided
further that no indemnity (except for the indemnification obligations relating
to Taxes) shall be recoverable by the Purchaser Indemnified Parties (x) with
respect to any individual Loss or group of related Losses covered by the matters
contained in Section 7.3(a)(i) unless the amount (exclusive of fees and expenses
of counsel) thereof exceeds $75,000 or (y) with respect to any Loss to the
extent such Loss has been reflected in the calculation of the adjustment to the
Purchase Price pursuant to Section 2.4 and no Losses described in the foregoing
clauses (x) or (y) shall count towards the Deductible Amount.
Section 7.4 Indemnification Procedures. With respect to third party
claims other than those relating to Taxes (which claims shall be governed by
Section 5.4), all such claims for indemnification by any Indemnified Party
hereunder shall be asserted and resolved as set forth in this Section 7.4. In
the event that any written claim or demand for which an indemnifying party, the
Sellers or Purchaser as the case may be (an "Indemnifying Party") would be
liable to any Indemnified Party hereunder is asserted against or sought to be
collected from any Indemnified Party by a third party, such Indemnified Party
shall promptly, but in no event more than 30 days following such Indemnified
Party's receipt of such claim or demand, notify the Indemnifying Party of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which esti mate shall not be conclusive of the final amount of
such claim and demand) (the "Claim Notice") (it being understood that the
failure to provide a timely Claim Notice shall not diminish the Indemnified
Party's rights to indemnification hereunder, except to the extent such delay
actually prejudices the Indemnifying Party). The Indemnifying Party shall have
no liability with respect to any expenses incurred by the Indemnified Party
prior to the time the Claim Notice is delivered to the Indemnifying Party
(unless, in light of the circumstances, it was reasonable to incur such expenses
prior to such time). The Indemnifying Party shall notify the Indemnified Party
within 30 days (or sooner if the nature of the claim or demand so requires) from
the personal delivery or mailing of the Claim Notice (the "Notice Period") to
the Indemnified Party whether or not it desires to defend the Indemnified Party
against such claim or demand.
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Except as hereinafter provided, in the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, the Indemnifying
Party shall have the right at its own expense to defend the Indemnified Party by
appropriate proceedings and shall have the sole power to direct and control such
defense; provided that the Indemnified Party shall have the right to approve the
counsel selected by the Indemnifying Party to defend such claim or demand, such
approval not to be unreasonably withheld or delayed. If any Indemnified Party
desires to participate in, but not control, any such defense it may do so at its
sole cost and expense. No Indemnified Party shall be entitled to any
indemnification under this Agreement for any settlement, compromise or discharge
of a claim or demand or any admission of any liability with respect to any such
claim or demand effected without the prior written consent of the Indemnifying
Party (which consent shall not be unreasonably withheld or delayed). The
Indemnifying Party shall not, without the prior written of the Indemnified Party
(which consent shall not be unreasonably withheld or delayed), settle,
compromise or offer to settle or compromise a claim or demand subject to
indemnification hereunder against or affecting the Indemnified Party, unless
such compromise, settlement or offer would not reasonably be expected to result
in the imposition of a consent order, injunction or decree or other restriction
on the future activity or conduct of the Indemnified Party or any subsidiary or
Affiliate thereof. Any payments by an Indemnifying Party to any third party with
respect to a third party claim for which an Indemnified Party is indemnified
hereunder shall be deemed Losses hereunder and shall count towards the Maximum
Amount. If the Indemnifying Party elects not to defend the Indemnified Party
against such claim or demand, whether by failing to give the Indemnified Party
timely notice as provided above or otherwise, then the Losses relating to or
arising out of any such claim or demand, or, if the same be contested by the
Indemnified Party, then that portion thereof as to which such defense is
unsuccessful (including, without limitation, the reasonable costs and expenses
pertaining to such defense) shall be the liability of the Indemnifying Party
hereunder, subject to the limitations set forth in Section 7.3(b) hereof.
Notwithstanding anything to the contrary contained herein, with respect
to any matter subject to indemnification under Section 7.3 of this Agreement
which concerns the compliance of the operations of the Companies or the
Subsidiaries with Environmental Laws or the environmental condition of any of
the Real Property (an "Environmental Claim"), Purchaser shall have
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the right at its option to manage and direct any environmental investigation or
remediation on any of the Real Property; provided, however, that the Purchaser
Indemnified Parties shall not be entitled to any indemnification under Section
7.3 with respect to any Losses arising out of any such activity unless Inco
shall have been notified of, and approved, such activity, such approval not to
be unreasonably withheld or delayed. Any remedial alternative selected in
connection with any indemnification under Section 7.3 for an Environmental Claim
shall be the most cost effective alternative permitted under applicable
Environmental Laws that does not cause or result in a material interference with
operations on the Real Property and may include, without limitation, the use of
risk assessments, deed restrictions, institutional controls and industrial
remediation standards. Inco shall have the right to advise and participate in
the selection of remedial alternatives and may participate in any meetings with
regulatory authorities with respect to any matter covered by any indemnification
under Section 7.3 for an Environmental Claim. Purchaser shall promptly provide
copies to Inco of any notices, correspondence, draft and final reports relating
to any covered matter.
Notwithstanding anything to the contrary contained herein, with respect
to any claim for indemnification under Section 7.3 relating to an alleged breach
of a representation or warranty which is a third-party claim and which would
reasonably be expected to materially adversely affect the ongoing Business as a
result of injunctive or similar equitable relief being sought or otherwise or
which is reasonably expected to result in Losses in excess of the Maximum
Amount, the Purchaser Indemnified Parties shall have the right to control the
defense, settlement or compromise of such third-party claim; provided, however,
that the Purchaser Indemnified Parties shall not be entitled to any
indemnification under this Agreement for any payment, judgment, settlement,
compromise, discharge or admission effected without the prior written consent of
the Indemnifying Parties (which consent shall not be unreasonably withheld or
delayed).
To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third party claim or demand, the
Indemnified Party will provide the Indemnifying Party and its counsel access to,
during normal business hours, relevant business records and other documents
within its control that may be useful in such defense, and shall permit them to
consult with the employees and counsel of the Indemnified Party. The Indemnified
Party shall cooperate in good faith in the defense of all such claims. The
Indemnifying Party
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shall have the right to participate in the defense or settlement of any third
party claim or demand for which the Indemnifying Party may be liable hereunder
at its own expense.
Section 7.5 Characterization of Indemnification Payments. All amounts
paid by the Sellers or Purchaser under Article V and this Article VII shall be
treated for all Tax and other purposes as adjustments to the Purchase Price.
Section 7.6 Computation of Losses Subject to Indemnification. The
amount of any Loss for which indemni fication is provided by an Indemnifying
Party under this Article VII or otherwise in this Agreement shall be computed
net of any insurance proceeds received by the Indemnified Party pursuant to an
insurance policy listed on Schedule 3.20 with respect to such Loss (using a
discount rate of 10%).
Section 7.7 Allocation of Purchaser Indemnity Payments. Purchaser
agrees that, in the event it is obligated to make any payments to the Seller
Indemnified Parties under this Agreement, such payments shall be allocated among
the Seller Indemnified Parties in accordance with the Sellers' request.
Section 7.8 Indemnification as Sole Remedy. Except with respect to
claims relating to actual fraud, the indemnity provided herein as it relates to
this Agreement and the stock purchase transaction contemplated by this Agreement
shall be the sole and exclusive remedy of the Seller Indemnified Parties and the
Purchaser Indemnified Parties with respect to any and all claims for Losses
sustained, incurred or suffered directly or indirectly relating to or arising
out of this Agreement and Purchaser on behalf of the Purchaser Indemnified
Parties and the Sellers on behalf of the Seller Indemnified Parties waive any
and all rights, legal or equitable, to pursue any other remedies.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by agreement of Purchaser and Inco on behalf of the Sellers;
(b) on or after October 6, 1998, by either Purchaser or Inco on behalf
of the Sellers, by giving written notice of
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such termination to the other party, if any condition to such party's
obligations hereunder has not been satisfied or waived; provided that the
terminating party is not in material breach of its obligations under this
Agreement;
(c) on or within five Business Days after September 6, 1998, by Inco on
behalf of the Sellers, by giving written notice of such termination to Purchaser
if (x) the conditions to the obligations of Purchaser to the extent related to
Competition Laws shall not have been satisfied or waived; and (y) the Sellers
are not in material breach of their obligations under this Agreement;
(d) by either Purchaser or Inco on behalf of the Sellers if there shall
be in effect any law or regulation that prohibits the consummation of the
Closing, if consummation of the Closing would violate any non-appealable final
order, decree or judgment of any court or governmental body having competent
jurisdiction or if the Federal Trade Commission, the Antitrust Division of the
United States Department of Justice, the European Commission or any competition
or similar regulatory agency of any member state of the European Commission or
of Japan shall have formally advised one or more of the parties that it intends
to initiate proceedings to enjoin the transactions contemplated by this
Agreement or to take any other action to prevent the consummation thereof;
(e) by Purchaser if the Sellers have breached a representation or
warranty that is qualified by reference to a Material Adverse Effect or breached
any other representation or warranty to an extent such breach is reasonably
likely to have a Material Adverse Effect, or materially breached any covenant or
agreement contained in this Agreement and such breach is either not capable of
being cured prior to the Closing or if such breach is capable of being cured, is
not so cured within a reasonable amount of time (and in any event prior to the
Closing);
(f) by Inco on behalf of the Sellers if Purchaser has materially
breached any representation, warranty, covenant or agreement contained in this
Agreement and such breach is either not capable of being cured prior to the
Closing or, if such breach is capable of being cured, is not so cured within a
reasonable amount of time (and in any event prior to the Closing; or
(g) by Inco on behalf of the Sellers if the Closing shall not have
occurred on or prior to 10 Business Days following
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the satisfaction of all the conditions to Closing set forth in Sections 6.1 and
6.2 hereof as a result of any action or inaction by Purchaser.
Section 8.2 Effect of Termination. In the event of the termination of
this Agreement in accordance with Section 8.1 hereof, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other party hereto or their respective Affiliates, directors,
officers or employees, except for the obligations of the parties hereto
contained in this Section 8.2 and in Sections 9.1, 9.7, 9.8, 9.9 and 9.11
hereof, and except that nothing herein will relieve any party from liability for
any breach of this Agreement prior to such termination.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices or other communi cations hereunder
shall be deemed to have been duly given and made when delivered if in writing
and if served by personal delivery upon the party for whom it is intended, if
delivered by registered or certified mail, return receipt requested, or by a
national courier service, or if sent by facsimile, provided that the facsimile
is promptly confirmed by telephone confirmation thereof, to the person at the
address set forth below, or such other address, facsimile or telephone number as
may be designated in writing hereafter, in the same manner, by such person:
To Purchaser:
Special Metals Corporation
4317 Middle Settlement Road
New Hartford, New York 13413
Telephone: (315) 798-2900
Facsimile: (315) 798-2001
Attn: Donald R. Muzyka
with a copy to:
Special Metals Corporation
4317 Middle Settlement Road
New Hartford, New York 13413
Telephone: (315) 798-2900
Facsimile: (315) 798-2001
Attn: Robert F. Dropkin
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and to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attn: Robert B. Schumer
To the Sellers:
Stuart F. Feiner
General Counsel
Inco Limited
145 King Street West, Suite 1500
Toronto, Ontario M5H 4B7, Canada
Telephone: (416) 361-7680
Facsimile: (416) 361-7734
and to:
Richard L. Guido
President
Inco United States, Inc.
One New York Plaza
New York, New York 10004
Telephone: (212) 612-5874
Facsimile: (212) 612-5873
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Attn: Donald R. Crawshaw
Section 9.2 Amendment; Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and the Sellers, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right,
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power or privilege. The rights and remedies herein provided shall be cumulative
and, except as otherwise provided herein, shall not be exclusive of any rights
or remedies provided by law.
Section 9.3 Assignment. No party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written consent
of the other parties hereto; provided, however, that Purchaser may assign its
rights to purchase any of the Shares to one or more subsidiaries of Purchaser
that is, in each case, except for directors' qualifying shares, wholly-owned by
Purchaser without, however, in any respect limiting Purchaser's obligations
pursuant to this Agreement. Any purported assignment in violation of this
provision shall be null and void.
Section 9.4 Entire Agreement. This Agreement (including all Schedules
and Annexes hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters, except for
the Confidentiality Agreement which will remain in full force and effect until
the earlier of the Closing and the term provided for therein.
Section 9.5 Fulfillment of Obligations. Any obli gation of any party to
any other party under this Agreement, which obligation is performed, satisfied
or fulfilled by an Affiliate of such party, shall be deemed to have been
performed, satisfied or fulfilled by such party.
Section 9.6 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than Purchaser, the Sellers or their
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement.
Section 9.7 Public Disclosure. Notwithstanding anything herein to the
contrary, each party to this Agreement hereby agrees with the other parties
hereto that, except as may be required to comply with the requirements of any
applicable Laws or as permitted by the second sentence of Section 5.1(d), or as
required under the rules and regulations of any stock exchange upon which the
securities of one of the parties is listed or applicable policies of any
securities regulatory body, no press release or similar public announcement or
communication shall,
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prior to the Closing, be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in advance by all
parties hereto.
Section 9.8 Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Purchaser shall
promptly return to the Sellers all Books and Records furnished by the Sellers,
the Companies, any of the Subsidiaries or any of their respective agents,
employees, or representatives (including all copies or materials developed from
such Books and Records, if any) and shall not use or disclose the information
contained in such Books and Records for any purpose or make such information
available to any other entity or person.
Section 9.9 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the parties to this Agreement shall bear their respective costs and
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including any fees
and expenses of agents, representatives, counsel and accounts (it being
understood that any such fees and expenses incurred by the Companies or any of
the Subsidiaries on or before Closing shall be borne by the Sellers, except for
any such fees and expenses incurred at Purchaser's request in connection with
Purchaser's financing of the transactions contemplated by this Agreement).
Section 9.10 Schedules. The disclosure of any matter in any schedule to
this Agreement shall expressly not be deemed to constitute an admission by the
Sellers or Purchaser, or to otherwise imply, that any such matter is material
for the purposes of this Agreement.
SECTION 9.11 GOVERNING LAW; SUBMISSION TO JURISDIC TION; SELECTION OF
FORUM. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT
OF ANY CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR
AT LAW OR IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR
THE COUNTY OF NEW YORK (THE "CHOSEN COURTS") AND (I) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY
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OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS,
(III) WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR
DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV) AGREES THAT SERVICE OF
PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF
NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 9.1 OF THIS AGREEMENT.
Section 9.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
Section 9.13 Headings. The heading references herein and the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section 9.14 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
INCO LIMITED
By: /s/ Stuart F. Feiner
--------------------
Name: Stuart F. Feiner
Title: Executive Vice President
INCO UNITED STATES, INC.
By: /s/ Richard L. Guido
--------------------
Name: Richard L. Guido
Title: President, Chief Legal Officer & Secretary
INCO EUROPE LIMITED
By: /s/ Stuart F. Feiner
--------------------
Name: Stuart F. Feiner
Title: Attorney-in-Fact
INCO S.A.
By: /s/ Stuart F. Feiner
--------------------
Name: Stuart F. Feiner
Title: Attorney-in-Fact
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
--------------------
Name: Donald R. Muzyka
Title: President & CEO
Investor Contact:
- -----------------
Donald C. Darling
Vice President Administration &
Chief Financial Officer
Special Metals Corporation
(315) 798-2058
News Media Contact:
- -------------------
Jeffrey A. Schoenborn
Collins & Company
(716) 842-2266 - office
(716) 553-0521 - mobile/pager
Special Metals Agrees to Acquire Inco Alloys International (IAI)
Acquisition of Inco Alloys International Business Unit Diversifies
Special Metals' Markets
Transaction Expected to be Accretive to Earnings and Cash Flow
NEW HARTFORD, N.Y., July 8, 1998 -- Special Metals Corporation (NASDAQ:
SMCX) announced today that it has entered into a definitive agreement with Inco
Limited (NYSE/TSE: N) to acquire the Inco Alloys International (IAI) business
unit of Inco Limited for $408 million in cash.
In addition, Special Metals Corporation announced that it concurrently
entered into a definitive agreement with Titanium Metals Corporation (NASDAQ:
TIMT), a leading worldwide integrated producer of titanium metal products,
pursuant to which Titanium Metals would purchase from Special Metals $125
million aggregate liquidation value of 6- 5/8% Series A Convertible Preferred
Stock. In connection with the transaction, Special Metals and Titanium Metals
also announced that they signed an agreement in principle to form a strategic
alliance to pursue certain joint development and marketing arrangements.
Special Metals Corporation is one of the world's leading producers of
superalloy materials used for manufacturing critical parts for the aircraft
engine industry, and for the gas-turbine power-generating industry. These
products are produced primarily by double vacuum melting and are sold primarily
in bar and billet forms. Special Metals currently has manufacturing facilities
in New Hartford, Dunkirk, N.Y., Princeton, Ky. and Ann Arbor, Mich.
Inco Alloys International is a manufacturer of nickel-based
high-performance alloys for a broad range of applications and markets, including
chemical process industries, power generation, pollution control, oil and gas
industries, aerospace and other specialty areas. IAI makes a broad range of
product forms which include plate, sheet, strip, billet, bar, wire and tubing.
Based in Huntington, W.Va., with operations in the United States and the United
<PAGE>
Kingdom, IAI also has joint ventures, distribution centers and related
businesses located in several countries, including Japan, Canada and France.
"The combination of Special Metals and Inco Alloys International will
make the resulting company one of the most-diversified nickel-based alloy
producers in the world," Special Metals President and Chief Executive Officer
Donald R. Muzyka said. "With planned operating synergies, we expect the
acquisition to be substantially accretive in the first full year of the
combination."
"Since Special Metals' IPO in early 1997, we have stated our intention
to explore acquisitions that complement and extend our product line and
diversify our markets. The combination of Special Metals and IAI diversifies our
product line into every major market for nickel-based alloys, while reducing our
dependence on aerospace revenues to about 39% of sales, compared to 81% prior to
the acquisition," Muzyka added.
On a pro forma basis, assuming that Inco Alloys International was
acquired as of Jan. 1, 1997, the 1997 net sales of Special Metals would have
been $854.5 million, and pro forma EBITDA would have been $96.5 million compared
to Special Metals' actual 1997 EBITDA of $40.8 million.
Special Metals will finance the all cash transaction with proceeds from
a $425 million bank credit facility, with Credit Lyonnais as lead banker, and
the issuance of $125 million of Series A Convertible Preferred Stock to Titanium
Metals. The preferred securities will be convertible into Special Metals' common
stock at a conversion price equal to 125% of the average closing price of
Special Metals shares over the 40 consecutive trading day period ending on
August 5, 1998.
Special Metals Corporation plans to maintain IAI's management and
operations staff, sales team and work force of nearly 3,000 employees. Francis
J. Petro, President of IAI, and his staff of executives will remain responsible
for the operations of IAI. He will report to the Special Metals Corporation
Board of Directors through the President and Chief Executive Officer Donald R.
Muzyka.
"Inco Alloys has a winning team that has built a strong business with
high performance, quality products, solid fundamentals and a strong base of
loyal customers." Muzyka said, "This transaction combines the strengths of
Special Metals in premium superalloys with the diversified product mix of IAI in
commercial high-performance nickel- based alloys. This strategic combination
will result in a technologically advanced and integrated company. Both companies
have unique manufacturing strengths, and we can capitalize on operational
synergies to reduce manufacturing costs, increase production volumes and
diversify our product lines."
The proposed strategic alliance between Special Metals and Titanium
Metals would include collaborative development of new uses for the titanium
produced by Titanium Metals
<PAGE>
and high-performance nickel alloys produced by Special Metals and Inco Alloys
International. The alliance may also present opportunities for marketing
efficiencies and joint processing of Titanium Metals titanium at Special Metals
facilities.
Completion of the IAI acquisition is subject to a number of conditions,
and the receipt of regulatory approvals, including antitrust clearance. The
purchase price is subject to adjustment, based on certain changes to IAI's net
worth to closing. The acquisition is expected to close in 60 days. The issuance
of the Series A Convertible Preferred Stock to Titanium Metals will occur
concurrently with, and is conditioned upon, the closing of the IAI acquisition.
Inco Limited is one of the world's premier mining and metals companies.
It is a leading producer of nickel and an important producer of copper, precious
metals and cobalt.
Donaldson, Lufkin & Jenrette Securities Corporation is acting as
financial advisor to Special Metals Corporation and Wasserstein Perella & Co. is
acting as financial advisor to Titanium Metals Corporation.
Commentary on Second Quarter EPS
Management also discussed expectations regarding net income per share
for the second quarter of 1998. The well-publicized problems faced by major
commercial aircraft producers are beginning to impact the specialty metals
industry and other downstream aerospace suppliers, including Special Metals. The
Company announced today that it expects second quarter net income to be at or
slightly below the lower end of the range of current analysts' estimates.
"Our expectations are primarily due to reduced shipments as a result of
customer inventory adjustments in response to changes in commercial aircraft
production rates," Muzyka explained. "However, with the IAI acquisition and the
anticipated significant operating synergies, we believe the results of the
combined companies will be substantially accretive in the first full year of the
combination."
The statements in this release relating to matters that are not
historical facts are forward-looking statements that involve risks and
uncertainties, including, but not limited to, satisfaction of conditions to
closing, the cyclicality of the aerospace industry, future global economic
conditions, global productive capacity, competitive products and other risks and
uncertainties detailed in the Company's Securities and Exchange Commission
filings.
SPECIAL METALS CORPORATION
2,500,000 Shares
6.625% Series A Senior Convertible Preferred Stock
(Liquidation Amount $50.00 per Share)
INVESTMENT AGREEMENT
July 8, 1998
Titanium Metals Corporation
TIMET Finance Management Company
1999 Broadway, Suite 4300
Denver, Colorado 80202
Ladies and Gentlemen:
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"), 2,500,000 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.
The proceeds of the sale by the Company of the Convertible Preferred
Securities are to be used to finance a portion of the acquisition (the
"Acquisition") by the Company of the Inco Alloys International division ("IAI")
of INCO Limited pursuant to the terms of the stock purchase agreement, dated as
of July 8, 1998 (the "Acquisition Agreement"), among INCO Limited, Inco United
States, Inc., Inco Europe Limited and Inco S.A. (collectively, "Inco") and the
Company.
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 (the
"Registration Rights Agreement") to be entered into between the Company and the
Investor.
<PAGE>
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, 2,500,000 Convertible Preferred Securities,
at a purchase price of $50.00 per Convertible Preferred Security, for an
aggregate purchase price of $125,000,000 (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 the lesser of (i) 125% of the
average of the closing prices of shares of Common Stock for the 40 consecutive
trading day period ending on the 20th trading day immediately following the date
on which the Acquisition is first publicly announced by the parties or otherwise
made known to the public and (ii) $26.00. 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 later 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
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act"), have expired or been terminated.
2. Delivery and Payment Delivery of and payment for the Convertible
Preferred Securities shall be made at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison at 10:00 a.m., New York City time, on the same date as the
closing date under the Acquisition Agreement (as such date shall be notified in
writing by the Company to the Investor not less than 2 business days prior
thereto) or such other time (not later than the 120th day following the date of
this Agreement) and place as the Investor and the Company shall agree upon in
writing (the "Closing Time"). Delivery of the Convertible Preferred Securities
shall be made to the Investor against payment by the Investor of the Purchase
Price to or upon the order of the Company by wire transfer drawn and payable in
same day funds or such other manner of payment as may be agreed by the Company
and the Investor.
3. Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows:
2
<PAGE>
(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 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 SEC Reports (as defined herein), 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) As of the Closing Time, the Convertible Preferred
Securities will 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 and TMC, 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 Company has taken the corporate action necessary to
approve the transactions contemplated by this Agreement for purposes of Section
203 of the General Corporation Law of the State of Delaware.
3
<PAGE>
(f) As of the Closing Time, the Registration Rights Agreement
will have 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; and
(g) Except as set forth on Schedule 3(g) 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.
(h) The financing contemplated by 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") and
the Investor's investment in the Convertible Preferred Securities as
contemplated by this Agreement constitute the only financing arrangements to be
entered into by 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.
(i) 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, as of the
Closing Time, 7,600,000 shares will be reserved for issuance upon conversion of
the Convertible Preferred Securities and (ii) 10,000,000 shares of
4
<PAGE>
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.
(j) As of the Closing Time, the shares of Common Stock
initially issuable upon conversion of the Convertible Preferred Securities (the
"Conversion Shares") will 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.
(k) The Company has delivered or made available to the
Investor a true and complete copy of (i) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "Form 10-K"); (ii) the
Company's Quarterly Report on Form 10-Q for the period ended March 31, 1998 (the
"Form 10-Q"), and (iii) each registration statement, report on Form 8-K and Form
8-A, proxy statement, information statement or other form, schedule, document,
report or statement filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission (the "Commission") since March 3, 1997, in
each case in the form (including financial statements, schedules, exhibits and
any amendments thereto) filed with the Commission (collectively, the "SEC
Reports"). As of their respective dates, the SEC Reports (i) were timely filed
with the Commission; (ii) complied, in all material respects, with the
applicable requirements of the Exchange Act and the Securities Act of 1933, as
amended (the Securities Act"); and (iii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Other than the SEC
Reports, the Company and its Subsidiaries have not filed or been required to
file any other reports or statements with the Commission since March 3, 1997.
(l) Each of (i) the consolidated balance sheets (including the
related notes and schedules) included in the SEC Reports fairly presents the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof, subject, in the case of unaudited statements, to normal year-end
adjustments, and (ii) the consolidated statements of income (or statements of
results of operations), shareholders' equity and cash flows (including the
related notes and schedules) included in or incorporated by reference into the
SEC Reports fairly presents the results of operations, retained earnings and
cash flows, as the case may be, of the Company and its Subsidiaries (on a
consolidated basis) for the periods set forth therein, in each case in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods (except as stated therein or in the notes thereto)
and in compliance with the rules and regulations of the Commission.
(m) Except, in each case, as disclosed in the SEC Reports,
there are no legal or governmental proceedings, claims, suits, actions,
arbitrations or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries that, singly or in the
aggregate, would reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; nor are there any judgments,
orders, decrees, awards or rulings of any governmental body or agency
outstanding against or applicable to the
5
<PAGE>
Company or any of its Subsidiaries or against or applicable to any of their
respective assets, properties or businesses that, singly or in the aggregate,
would reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.
(n) Each of the Company and its Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of and
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, to own, lease, license and use its properties and
assets and to conduct its business as presently conducted, except as set forth
in the SEC Reports or to the extent that the failure to obtain such consents,
authorizations, approvals, orders, certificates and permits or make such
declarations and filings would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. Except as set forth in the SEC Reports,
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such consent,
authorization, approval, order, certificate or permit which, singly or in the
aggregate, would result in a material adverse change in the condition, financial
or otherwise, or in the earnings, business or operations of the Company and its
Subsidiaries, taken as a whole.
(o) The Company and its Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except as set forth in the
SEC Reports or where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
(p) In the ordinary course of its business, the Company
reviews the effect of Environmental Laws on the business, operations and
properties of the Company and its Subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
its Subsidiaries, taken as a whole, except as set forth in the SEC Reports.
(q) Subsequent to December 31, 1997, except as contemplated by
this Agreement, the Registration Rights Agreement, the Acquisition Agreement and
the New Credit Agreement, (1) as of the date hereof, the Company and its
Subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction, in each case, not in the
ordinary course of business; (2) the Company has not purchased any of its
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outstanding capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock; and (3) there has not been any
material change in the capital stock, short-term debt or long-term debt of the
Company and its consolidated Subsidiaries, except (i) for borrowings and
repayments under the Company's existing Credit Agreement, dated October 18,
1996, as amended, among the Company, the lenders from time to time party thereto
and Credit Lyonnais New York Branch (the "Credit Agreement") or (ii) as
described in the SEC Reports.
(r) Except as set forth in the SEC Reports, the Company and
its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property in each case
owned by them which is material to the business of the Company and its
Subsidiaries, taken as a whole, in each case free and clear of all liens,
encumbrances and defects, except for any liens or encumbrances created in
connection with the Credit Agreement or under the financing agreements entered
into by the Company in connection with the Acquisition, or except such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its Subsidiaries; and any material real property and buildings held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(s) Except as set forth in the SEC Reports, the Company and
its Subsidiaries own or otherwise have the right to use, or can acquire on
reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, except where the failure
thereof would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and neither the Company nor any of its
Subsidiaries has received any written notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly or
in the aggregate, could reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole.
(t) Except as set forth in the SEC Reports, the Company and
its Subsidiaries have complied in all material respects with all material laws
applicable to the Company's and its Subsidiaries' business and operations
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes applicable to the Company's and its Subsidiaries'
business and operations, and no material labor dispute with the employees of the
Company or any of its Subsidiaries exists or, to the knowledge of the Company,
is threatened.
(u) Except as set forth in the SEC Reports, the Company and
its Subsidiaries are in compliance in all material respects with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the regulations and published interpretations thereunder.
No "reportable event" (as defined in ERISA and the
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regulations and published interpretations thereunder) has occurred with respect
to any "pension plan" (as defined in ERISA and the regulations and published
interpretations thereunder) established or maintained by the Company or its
subsidiaries, except with respect to which the 30-day notice requirement has
been waived . The Company and its Subsidiaries have not incurred and do not
expect to incur liability under (i) Title IV of ERISA with respect to the
termination of, or withdrawal from, any "pension plan" or (ii) Sections 4971,
4975 or 4980B of the Internal Revenue Code of 1986, as amended (the "Code"),
except where such liability would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. Each "pension plan" established
or maintained by the Company or its subsidiaries that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(v) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the businesses in which they are engaged
to the Company's knowledge, neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for; and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its Subsidiaries, taken as a whole, except as set forth in the
SEC Reports.
(w) Neither the Company nor any of its Subsidiaries is (i) in
violation of its respective charter, by-laws or other organizational documents
or (ii) in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any other agreement or instrument binding upon the Company or any of its
Subsidiaries that is material to the Company and its Subsidiaries, taken as a
whole, except in each case, as set forth in the SEC Reports, or except in the
case of clause (ii) where such failure to perform would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
(x) The Company and its Subsidiaries have filed all tax
returns which they are required to file under applicable laws and regulations,
except where such failure to file would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole; all such returns are
complete and correct in all material respects; except with respect to amounts
which are being contested in good faith and by appropriate proceedings, the
Company and each Subsidiary in all material respects have paid all taxes due and
owing by them and have withheld and paid over all taxes which they are obligated
to withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party. Neither the Company nor any Subsidiary has waived any statute
of limitations with respect to taxes or agreed to any extension of time with
respect to a material tax assessment or deficiency. No foreign, federal, state
or local tax audits are pending or being conducted with respect to the Company
or any Subsidiary. Except as set forth on Schedule 3(x), no information related
to tax matters has been requested in writing by
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any foreign, federal, state or local taxing authority and no written notice
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local taxing authority with respect
to any material tax liability.
(y) Except for Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees will be paid by the Company, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company who might be entitled to any fee or
commission from the Company in connection with the transactions contemplated by
this Agreement.
(z) Neither the Company nor any of its Subsidiaries is an
"investment company" required to be registered under the Investment Company Act
of 1940, as amended.
(aa) Assuming the accuracy of the representations and
warranties of the Investor set forth in Section 4(e) hereof, no registration of
the Convertible Preferred Securities under the Securities Act is required for
the issuance and sale by the Company of the Convertible Preferred Securities in
the manner contemplated by this Agreement.
(bb) The representations and warranties made by the Company in
Article IV and elsewhere in the Acquisition Agreement that are qualified by
reference to materiality or a material adverse effect are true and correct and
all other representations and warranties made by the Company in Article IV and
elsewhere in the Acquisition Agreement are true and correct in all material
respects. To the Company's knowledge, the representations and warranties made by
Inco in Article III and elsewhere in the Acquisition Agreement that are
qualified by reference to a material adverse effect are true and correct and all
other representations and warranties made by Inco in Article III and elsewhere
in the Acquisition Agreement are true and correct except for such inaccuracies
as in the aggregate are not reasonably likely to have a material adverse effect
and all information contained in any exhibit, schedule or attachment thereto is
true and correct in all material respects.
4. Representations and Warranties of the Investor and TMC. TMC and the
Investor, jointly and severally, represent and warrant to the Company as
follows:
(a) Each of TMC and 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 each of TMC and the Investor and, assuming due authorization,
execution and delivery of this Agreement by the Company constitutes a valid and
binding agreement of each of TMC and the Investor, enforceable against each of
TMC and 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.
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(c) As of the Closing Time, the Registration Rights Agreement
will have 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 each of TMC and the Investor of, and the performance by each of
TMC and the Investor of its respective 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 TMC or the Investor or the articles of incorporation or by-laws
of either of TMC or the Investor or any agreement or other instrument binding
upon TMC or the Investor, except where such contravention of any such agreement
or instrument would not have any material adverse effect on TMC and its
subsidiaries, taken as a whole, or any judgement, order or decree of any
governmental body, agency or court having jurisdiction over TMC or the Investor
that is material to either of them, 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 each of TMC or the Investor of its respective 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,
business or operations of TMC and its subsidiaries, taken as a whole, or
materially impair the ability of TMC or 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 the Investment Agreement.
(f) As of the Closing Time, the Investor (or any wholly-owned
subsidiary of TMC to which the Investor has assigned its rights pursuant to
Section 25 of this Agreement) will
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have sufficient funds to purchase the Convertible Preferred Securities on the
terms and subject to the conditions contemplated by this Agreement and to
consummate the transactions contemplated hereby.
(g) No part of the source of funds to be used by the Investor
to acquire the Convertible Preferred Securities constitutes the assets of any
"employee benefit plan" as defined in section 3(3) of ERISA, or its related
trust, or any "plan" as defined in Section 4975(e)(1) of the Code, or its
related trust.
(h) Except for Wasserstein & Perella & Co., whose fees will be
paid by TMC, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Investor or
TMC who might be entitled to any fee or commission from the Investor or TMC in
connection with the transactions contemplated by this Agreement.
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 additional directors
of the Company the two Investor Nominees (as defined in Section 5(b) hereof) who
have 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
Class II Director and Class III Director, respectively, in accordance with the
Company's procedures for the appointment of directors. Such Investor Nominees
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of the class to which they have been elected expires or, in each
case, until their respective successors are 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 20% 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 two Investor Nominees to the Board. In addition, for so
long as the Investor beneficially owns voting securities of the Company
representing at least 10% (but less than 20% of the outstanding voting
securities of the Company), 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 equal or exceed 15, including the Investor Nominees
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
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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 TMC and any wholly-owned subsidiary of TMC) of voting securities of the
Company decreases below 20% but exceeds 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 cause a number of its Investor
Nominees to resign from the Board so that there shall only remain one Investor
Nominee on the Board (or two if the Board is then comprised of 15 or more
members as provided above), in accordance with the Company's procedures for the
resignation of directors and applicable laws and regulations. If the beneficial
ownership by the Investor, TMC or such subsidiary of the outstanding voting
securities of the Company decreases below 10% of the outstanding voting
securities of the Company, 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
(the "Investor Nominees"), and (ii) all information required by Regulation 14A
and Schedule 14A under the Exchange Act with respect to each such Investor
Nominee. Such Investor Nominees 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
Nominees 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,
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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) Investor Nominees shall be reimbursed for their
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.
6. Standstill.
(a) Except as provided in this Section 6(a), commencing on
April 13, 1998 (the "Standstill Commencement Date"), the date of the letter
agreement among the Company, the Investor and TMC (the "Letter Agreement"), and
ending on the date (the "Standstill Termination Date") that is the earliest of
(x) the first anniversary of the date (following the closing under this
Agreement) when the Investor no longer owns shares of Common Stock and/or
Convertible Preferred Securities convertible into the Common Stock or other
voting securities of the Company, which represents more than 5% of the
outstanding voting securities of the Company, (y) such time as the Company
enters into, or publicly announces an intention to enter into, directly or
indirectly, a definitive agreement (a "Change of Control Agreement") that would
result in a "change of control" of the Company (as defined in Section 7(b)) or a
sale of all or substantially all of the assets of the Company, with respect to
which transactions contemplated by this clause (y), the Investor's
representatives on the Company's Board voted against such transaction (or, in
the event they were interested parties to such transaction, abstained from
voting on such transaction) and (z) the occurrence of a "change of control" of
the Company (as defined in Section 7(b)), neither TMC, the Investor nor any of
their respective affiliates will, directly or indirectly, acting alone or in
concert with others, except with the prior approval of the Board of Directors of
the Company, (a) acquire, or offer, propose or agree to acquire, or otherwise
possess, ownership (including, but not limited to, beneficial ownership as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, by
purchase or otherwise, of any equity securities issued by the Company other than
(i) the securities it may acquire pursuant to any provision of this Agreement,
(ii) rights, options or warrants distributed on a pro rata basis to all holders
of the class or classes or securities of the Company held by the Investor, (iii)
securities acquired from the Company pursuant to a rights offer, exchange offer
or similar transaction made by the Company, (iv) securities acquired by employee
benefits plans sponsored or maintained by the Investor or TMC, or any of their
respective subsidiaries, provided that the investment decisions of such plans
are made by persons or entities which are independent of the management of the
Investor, TMC, or such subsidiary, as the case may be, (v) purchases in
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accordance with Section 9 below or (vi) securities acquired pursuant to a
merger, business combination, purchase of assets or similar transaction between
two or more entities, none of which is an affiliate of the Investor, (b) propose
to enter into, directly or indirectly, any merger, consolidation, tender
exchange offer or other business combination or extraordinary transaction
involving the Company or any of its subsidiaries, (c) solicit proxies from
stockholders of the Company, become a " participant" in any "election contest"
(as such terms are used in Rule 14a-11 of the Securities Exchange Act of 1934
(the "Exchange Act") with respect to the Company, make a communication referred
to in Rule 14a-1(1)(2)(iv) of the Exchange Act or otherwise seek to influence or
control the management or policies of the Company or any of its affiliates
(provided that the foregoing shall not prohibit the Investor from voting its
shares of stock or having its board designees vote or participate in any board
matter), (d) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company or its subsidiaries, (e) otherwise act alone or in
concert with others to seek to control or influence the management, board of
directors of policies of the Company provided that the foregoing shall not
prohibit the Investor from voting its shares of stock or having its board
designees vote or participate in any board matter, (f) disclose any intention,
plan or arrangement inconsistent with the foregoing, or (g) assist, advise,
participate with or encourage any person to do any of the foregoing. Prior to
the Standstill Termination Date, without the prior approval of the Board of
Directors of the Company, neither TMC nor the Investor will (and each shall
cause its respective affiliates not to) take any action that is reasonably
likely to require the Company to make a public announcement regarding the
possibility of any extraordinary transaction. Notwithstanding the foregoing, if
the Standstill Termination Date shall have occurred as a result of the Company
having entered into a Change of Control Agreement and such agreement terminates
without a change of control having occurred thereunder, the obligations
contained in this Section 6(a), shall be automatically reinstated; provided that
any actions taken by the Investor, TMC or their affiliates prior to such
reinstatement or taken pursuant to (x) definitive agreements entered into with
the Company, or (y) a tender or exchange offer commenced, or (z) a proxy
statement filed with the Commission, in each case prior to such reinstatement,
may be pursued, consummated or completed without regard to such reinstatement.
(b) Except as provided in this Section 6(b), commencing on the
Standstill Commencement Date and ending on the Standstill Termination Date,
neither the Company nor any of its affiliates will, directly or indirectly,
acting alone or in concert with others, except with the prior approval of the
Board of Directors of TMC, (a) acquire, or offer, propose or agree to acquire,
or otherwise possess, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, by purchase or otherwise, of more than 5% of the outstanding equity
securities issued by TMC other than (i) rights, options or warrants distributed
on a pro rata basis to all holders of the class or classes of securities of TMC
held by the Company, (ii) securities acquired pursuant to a rights offer,
exchange offer or similar transaction made by TMC, (iii) securities acquired by
employee benefit plans sponsored or maintained by the Company or any of its
subsidiaries, provided that the investment decisions of such plans are made by
persons or entities which are independent of the management of the Company or
such subsidiary, as the case may be, or (iv) securities acquired pursuant to a
merger, business combination, purchase of assets or similar transaction between
two or more entities,
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none of which is an affiliate of the Company, (b) propose to enter into,
directly or indirectly, any merger, consolidation, tender exchange offer or
other business combination or extraordinary transaction involving TMC or any of
its subsidiaries, (c) solicit proxies from stockholders of TMC, become a
"participant" in any "election contest" (as such terms are used in Rule 14a-11
of the Exchange Act with respect to TMC, make a communication referred to in
Rule 14a-1(1)(2)(iv) of the Exchange Act or otherwise seek to influence or
control the management or policies of TMC or any of its affiliates (provided
that the foregoing shall not prohibit the Company from voting its shares of
stock or having its designee vote or participate in any board matter), (d) form,
join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of TMC or
its subsidiaries, (e) otherwise act alone or in concert with others to seek to
control or influence the management, board of directors of policies of TMC
provided that the foregoing shall not prohibit the Company from voting its
shares of stock or having its board designees vote or participate in any board
matter, (f) disclose any intention, plan or arrangement inconsistent with the
foregoing, or (g) assist, advise, participate with or encourage any person to do
any of the foregoing. Prior to the Standstill Termination Date, without the
prior approval of the Board of Directors of TMC, the Company will not (and the
Company will cause its affiliates not to) take any action that is reasonably
likely to require TMC to make a public announcement regarding the possibility of
any extraordinary transaction. Notwithstanding the foregoing, if the Standstill
Termination Date shall have occurred as a result of the Company having entered
into a Change of Control Agreement and such agreement terminates without a
change of control having occurred thereunder, the obligations contained in this
Section 6(b) shall be automatically reinstated; provided that any actions taken
by the Company or its affiliates prior to such reinstatement or taken pursuant
to (x) definitive agreements entered into with TMC, or (y) a tender or exchange
offer commenced, or (z) a proxy statement filed with the Commission, in each
case prior to such reinstatement, may be pursued, consummated or completed
without regard to such reinstatement.
7. Dispositions. (i) 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 7 and (ii) TMC shall not,
directly or indirectly dispose of any securities of any direct or indirect
subsidiary that is a holder of record of any Convertible Preferred Securities or
Conversion Shares (except for Dispositions to one or more of its wholly-owned
subsidiaries or Dispositions to any Lender (as hereinafter defined) made
pursuant to a bona fide pledge under Section 7(c)) and shall take all action as
is necessary so that, unless disposed of in accordance with Section 7(b) below,
all Convertible Preferred Securities and Conversion Shares will directly or
indirectly be wholly-owned by TMC or any of its wholly-owned subsidiaries.
(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
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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 7(b) to any person who, to the actual
knowledge of the Investor or TMC (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 or TMC (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 7(b) shall be subject to the Company's prior right of
first refusal as set forth in Section 8 of this Agreement and, in the case of
Dispositions to be made pursuant to Section 7(b)(i) hereof, shall be subject to
the additional purchase rights of the Company set forth in Section 2.8(b) of the
Registration Rights Agreement.
As used in this Section 7(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;
(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
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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 TMC and its subsidiaries). The 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 7 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 7(d) (to the
extent set forth therein) and 8 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
(except for the rights set forth under Sections 5, 6 and 9) shall succeed to the
rights and (to the extent set forth under Section 8 and Section 7(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, TMC
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 7 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 7(b)(i) of
this Agreement, pursuant to foreclosures or other acquisitions by a Lender
pursuant to Section 7(c) of this Agreement or by a Lender's transferee (unless
such transferee is
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the Investor, TMC 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
7(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. Notwithstanding the
above, no transferee of Convertible Preferred Securities or Conversion Shares
hereunder (other than TMC or its affiliates) shall be entitled to any of the
rights or subject to any of the obligations set forth in Sections 5, 6 and 9 of
this Agreement. 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.
8. Right of First Refusal. Prior to any Disposition by the Investor
pursuant to Section 7(b), the Company shall have the right, exercisable in
accordance with this Section 8, 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 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 8(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 8 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.
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(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 8(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 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 8(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
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<PAGE>
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 8, 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 8 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 8 to the same extent as
the Company, and provided further that the Company shall remain liable for the
obligations of such affiliate or other third party under this Section 8.
(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 7(b) and (c) hereof and, in the case of a Disposition
pursuant to Section 7(b)(i), the additional purchase rights of the Company set
forth in Section 2.8(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 7(b)(i), and 75 days, in the case of a Disposition pursuant
to Section 7(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 8.
(f) The obligations of the parties to effect any closing
pursuant to this Section 8 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 8 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
20
<PAGE>
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 2.8(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 8, and the additional purchase rights of the Company set forth in
Section 2.8(b) of the Registration Rights Agreement.
9. Top-Up Rights. If, prior to any Disposition by the Investor (other
than any Disposition pursuant to Section 7(a) hereof), the Company issues
additional shares of Common Stock, Convertible Preferred Securities or other
voting securities that results in the voting securities beneficially owned by
the Investor (together with TMC and any wholly-owned subsidiary of TMC)
representing less than 20% of the outstanding voting securities of the Company
(assuming, for purposes of this Section 9, that any Convertible Preferred
Securities owned by the Investor or such subsidiary have been converted into
Common Stock), the Investor at its option may at any time purchase in open
market purchases or privately negotiated transactions such minimum number of
additional shares of equity securities (as reasonably and in good faith
determined by the Investor) that would enable the Investor (together with TMC
and any wholly-owned subsidiary of TMC) to restore its beneficial ownership to
20% of the outstanding voting securities of the Company; provided that a block
purchase of equity securities of the Company in accordance with the foregoing
effected as a single transaction which results in the beneficial ownership of
the Company's voting securities by the Investor (together with TMC and any
wholly-owned subsidiary of TMC) exceeding 20% shall not be deemed to violate
this Section 9, Section 6 or any other provision hereof or paragraph 6 of the
Letter Agreement solely as a result of the acquisition of such excess securities
so long as (i) the aggregate voting securities so held by the Investor (together
with TMC and any wholly-owned subsidiary of TMC) at any time in excess of 20%
represents less than 1/2 of 1% of the Company's outstanding voting securities
and (ii) the Investor transfers, or causes to be transferred, such excess voting
securities to an unaffiliated entity within 120 days of the acquisition thereof
by the Investor.
10. Pre-Closing Covenants
(a) 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. Without limiting the foregoing, the
Investor and TMC, on the one hand, and the Company on the other hand, (i) will
use their reasonable best efforts to obtain all consents, approvals,
authorizations, waivers and orders of any court or governmental agency or body
or any other person necessary or, in the opinion of the Investor or the Company,
advisable in order to permit the consummation of the transactions contemplated
by this Agreement and the other Transaction Documents and (ii) will not take any
actions that could reasonably be expected to have the effect of delaying or
hindering the closing of the transactions contemplated by this Agreement.
Without limiting the generality of the
21
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foregoing, the Investor will use its best efforts to satisfy the conditions of
the Lenders described on Schedule 4(d).
(b) At all times prior to the Closing Time, the Investor shall
promptly notify the Company, and the Company shall promptly notify the Investor,
in writing of any fact, change, condition, circumstance or occurrence or
nonoccurrence of any event actually known to it which will or is reasonably
likely to (i) constitute a breach of any representation or warranty of such
party contained in this Agreement or (ii) result in the failure to satisfy the
conditions to be complied with or satisfied by it hereunder; provided, that the
delivery of any notice pursuant to this Section 10(b) shall not limit or
otherwise affect the remedies available hereunder to any party receiving such
notice.
(c) 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 for trading on the NASDAQ National Market or such other
exchange on which the Company's securities are listed, as applicable.
(d) As of the Closing Time, the Company and the Investor shall
enter into the Registration Rights Agreement.
(e) The Company shall (and shall cause each of its
subsidiaries and their respective officers, directors, employees, attorneys,
accountants, financial advisors and other agents to), from and after the date
hereof and until the Closing Time, afford to the Investor, TMC and their
representatives, including without limitation their officers, directors,
employees, agents, attorneys, accountants, consultants, financing sources or
financial or other advisors or other person associated with or acting on their
behalf (collectively, the "Representatives"), access, upon reasonable notice and
in such manner as will not unreasonably interfere with the conduct of the
Company's business, to material financial and other information regarding the
Company and its Subsidiaries and afford to the Investor, TMC and their
Representatives reasonable access to such material information concerning IAI,
which has been made available to the Company by Inco. In addition, the Company
will promptly inform the Investor of the principal terms of any additional
financing proposal with respect to which the Company has entered into
substantive discussions or negotiations and the Company shall provide the
Investor with such information in respect of such financing as the Investor
shall reasonably request. All information provided hereunder to the Investor or
TMC, on the one hand, or to the Company, on the other hand, shall be provided in
confidence in accordance with the provisions of the confidentiality agreement,
dated March 6, 1998 (the "Confidentiality Agreement"), between the Company and
TMC and, in the case of information concerning IAI, the provisions of the
confidentiality agreement, dated March 31, 1998, between the Company and Inco,
as agreed to by TMC pursuant to an acknowledgement, dated April 15, 1998 (the
"Acknowledgement"), between TMC and the Company.
11. Conditions to the Obligations of the Investor. The obligation of
the Investor to purchase and pay for the Convertible Preferred Securities at the
Closing Time shall be subject (i)
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to the accuracy of the representations and warranties on the part of the Company
contained herein that are qualified by reference to materiality or a material
adverse effect and to the accuracy in all material respects of all other
representations and warranties on the part of the Company contained herein that
are not so qualified, in each case as of the date and time that this Agreement
is executed and delivered by the parties hereto (the "Execution Time"), and as
of the Closing Time, except for such representations and warranties that are
expressly made as of an earlier date in which case such representations and
warranties shall only be true and correct on and as of such earlier date, (ii)
to the accuracy of the statements of the Company made in any certificates
pursuant to the provisions hereof, (iii) to the performance by the Company of
their respective obligations hereunder in all material respects, and (iv) to the
following additional conditions:
(a) The Company shall have furnished to the Investor the
opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Company,
dated as of the Closing Time, in the form set forth in Exhibit A hereto. Such
counsel may state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers of
the Company and its Subsidiaries and certificates of public officials.
(b) The Company shall have furnished to the Investor a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Time, to the effect that the signers of such certificate have carefully
read this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement that are qualified by reference to materiality or a material
adverse effect are true and correct on and as of the Closing Time with
the same effect as if made as of the Closing Time and all other
representations and warranties of the Company in this Agreement that
are not so qualified are true and correct on and as of the Closing Time
with the same effect as if made as of the Closing Time, except for such
representations and warranties that are expressly made as of an earlier
date in which case such representations and warranties shall only be
true and correct on and as of such earlier date, and the Company has
complied in all material respects with all the agreements and satisfied
all the conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Time; and
(ii) since December 31, 1997, there has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise,
earnings, business or operations of the Company and its Subsidiaries,
taken as a whole, excluding any change or development resulting from
(i) events adversely affecting any of the principal markets served by
the business of the Company generally or shortages or price increases
with respect to scrap or raw materials, (ii) general economic
conditions, including changes in the economies of any of the
jurisdictions in which the Company or any of its Subsidiaries conduct
business or (iii) the Acquisition Agreement and any financing
arrangements entered into in connection therewith.
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(c) All consents, approvals, authorizations, waivers and
orders of any court or governmental body or agency or any other person required
in connection with the execution and delivery of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby shall have been obtained or made on terms
reasonably satisfactory to the Investor, except such as may be required by
federal, state or foreign securities laws in connection with the registration of
the Convertible Preferred Securities and the Conversion Shares pursuant to the
terms of the Registration Rights Agreement and except where the failure to
obtain such consents, approvals, authorizations, waivers and orders 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.
(d) No governmental body or agency or court of competent
jurisdiction shall have (i) enacted, issued, promulgated, enforced or entered
any statute, rule, regulation or nonappealable judgment, decree, injunction or
other order restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement and the Registration Rights
Agreement or (ii) commenced any action, suit or proceeding seeking to restrain,
enjoin, prohibit or otherwise make illegal the performance of this Agreement or
the Registration Rights Agreement or the consummation of the transactions
contemplated hereby and thereby.
(e) since December 31, 1997, there has not occurred any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, earnings, business or
operations of the Company and its Subsidiaries, taken as a whole, excluding any
change or development resulting from (i) events adversely affecting any of the
principal markets served by the business of the Company generally or shortages
or price increases with respect to scrap or raw materials (ii) general economic
conditions, including changes in the economies of any of the jurisdictions in
which the Company or any of its Subsidiaries conduct business or (iii) the
Acquisition Agreement and any financing arrangements entered into in connection
therewith.
(f) The Registration Rights Agreement shall have been duly
executed and delivered by the Company.
(g) On or prior to the Closing Time, the Acquisition, and all
transactions to be consummated in connection therewith pursuant to the
Acquisition Agreement, shall have been consummated and the Company shall have
provided to the Investor and its counsel copies of all material closing
documents delivered to the parties in respect of the Acquisition.
(h) Prior to the Closing Time, the Company shall have
furnished to the Investor such further information, certificates and documents
as the Investor may reasonably request.
(i) An agreement, substantially in the form set forth in
Exhibit D hereto, pursuant to which the Principal Stockholders shall have agreed
to vote their shares of Common Stock in
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favor of the Stockholder's Conversion Vote and in favor of the Investor's
Nominees to the Board selected in accordance with Section 5 shall have been
executed and delivered to the Investor by the Principal Stockholders.
(j) The terms of the New Credit Agreement shall be
substantially as contemplated in the related Commitment Letter, dated July 2,
1998 (a copy of which was provided to TMC and the Investor prior to the date of
this Agreement).
(k) The Company shall have duly adopted, executed and filed
with the Secretary of State of the State of Delaware the Certificate of
Designation establishing the terms and the relative rights and preferences of
the Convertible Preferred Securities, and the Company shall not have adopted or
filed any other document designating terms, relative rights or preferences of
its preferred stock. The Certificate of Designation shall be in full force and
effect as of the Closing Time under the laws of the State of Delaware and shall
not have been amended or modified.
If any of the conditions specified in this Section 11 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Investor and its counsel,
this Agreement and all obligations of the Investor hereunder may be canceled at,
or at any time prior to, the Closing Time by the Investor or TMC. Notice of such
cancellation shall be given to the Company in writing or by telephone confirmed
in writing.
12. Conditions to the Obligations of the Company. The obligations of
the Company to issue and sell the Convertible Preferred Securities at the
Closing Time shall be subject to the accuracy of the representations and
warranties on the part of the Investor contained herein at the Execution Time
and the Closing Time, to the performance by the Investor of its obligations
hereunder in all material respects, and to the following additional conditions:
(a) On or prior to the Closing Time, the Acquisition, and all
transactions to be consummated in connection therewith pursuant to the
Acquisition Agreement, shall have been consummated.
(b) The average of the closing prices of shares of Common
Stock of the Company for the 20 consecutive trading days immediately preceding
the Closing Time shall not have been less than $16.50 per share.
(c) All consents, approvals, authorizations, waivers and
orders of any court or governmental body or agency or any other person required
in connection with the execution and delivery of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby shall have been obtained or made on terms
reasonably satisfactory to the Company, except such as may be required by
federal, state or foreign securities laws in connection with the registration of
the Convertible Preferred Securities and the Conversion Shares pursuant to the
terms of the Registration Rights Agreement and except where the failure to
obtain such consents, waivers and approvals would not result in a material
adverse change in the condition, financial or otherwise, or in the earnings,
business or
25
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operations of TMC and its subsidiaries, taken as a whole, and would
not materially impair the ability of the Investor or TMC to effect the
transactions contemplated hereby and pursuant to the Registration Rights
Agreement.
(d) No governmental body or agency or court of competent
jurisdiction shall have (i) enacted, issued, promulgated, enforced or entered
any statute, rule, regulation or nonappealable judgment, decree, injunction or
other order restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement and the Registration Rights
Agreement or (ii) commenced any action, suit or proceeding seeking to restrain,
enjoin, prohibit or otherwise make illegal the performance of this Agreement or
the Registration Rights Agreement or the consummation of the transactions
contemplated hereby and thereby.
(e) TMC and the Investor shall have furnished to the Company,
the opinion of Bartlit Beck Herman Palenchar & Scott, counsel to TMC and the
Investor, dated as of the Closing Time, in the form set forth in Exhibit B
hereto. Such counsel may state that, insofar as such opinion involves factual
matters, they have relied to the extent they deem proper upon certificates of
officers of TMC and the Investor and certificates of public officials.
(f) Each of TMC and the Investor shall have furnished a
certificate of TMC, signed by the Chairman of the Board of Directors or the
President and the principal financial or accounting officer of TMC, dated the
Closing Time, to the effect that the signers of such certificate have carefully
read this Agreement and that the representations and warranties of each of TMC
and the Investor in this Agreement that are qualified by reference to
materiality or a material adverse effect are true and correct on and as of the
Closing Time with the same effect as if made as of the Closing Time and all
other representations and warranties of each of TMC and the Investor in this
Agreement that are not so qualified are true and correct on and as of the
Closing Time with the same effect as if made as of the Closing Time, except for
such representations and warranties that are expressly made as of an earlier
date in which case such representations and warranties shall only be true and
correct as of such earlier date, and each of TMC and the Investor has complied
in all material respects with the agreements and satisfied all the conditions on
its part to be performed or satisfied hereunder at or prior to the Closing Time.
(g) The Registration Rights Agreement shall have been duly
executed and delivered by the Investor.
If any of the conditions specified in this Section 12 shall not have
been fulfilled when and as provided in this Agreement, this Agreement and all
obligations of the Company hereunder may be canceled at, or at any time prior
to, the Closing Time by the Company. Notice of such cancellation shall be given
to the Investor in writing or by telephone confirmed in writing.
13. Publicity. Except as may be required by applicable law or by the
rules and regulations of any securities exchange or inter-dealer quotation
system upon which the securities of one of the parties are listed or admitted
for trading, neither the Company or any of its affiliates nor TMC or any of its
affiliates shall, without the prior written consent of the other, which
26
<PAGE>
consent shall not be unreasonably withheld or delayed, make any public
announcement or issue any press release with respect to the transactions
contemplated by this Agreement. Prior to making any public disclosure required
by applicable law or the rules and regulations of any relevant securities
exchange or inter-dealer quotation system, the disclosing party shall consult
with the other party, to the extent feasible, as to the content of such public
announcement or press release and provide the other party an opportunity to
review and comment upon such public announcement.
14. 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 7(b)(i) of this Agreement, 7(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 JULY 8, 1998 AMONG SPECIAL METALS CORPORATION (THE
"COMPANY"), TIMET FINANCE MANAGEMENT COMPANY AND TITANIUM METALS
CORPORATION, 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."
15. Termination. This Agreement may be terminated by notice in writing
at any time prior to the Closing Time by either the Investor or the Company if
(a) the closing of the transactions contemplated by this Agreement shall not
have occurred on or before the 120th day
27
<PAGE>
following the date of this Agreement; (b) the Acquisition Agreement shall have
been terminated in accordance with its terms; or (c) the Company and the
Investor so mutually agree in writing.
16. 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.
17. Survival. The representations, warranties, covenants and agreements
contained in or made pursuant to this Agreement shall expire as of the
consummation of the transactions to be completed as of the Closing Time, except
(i) for the representations and warranties contained in Section 3(a) through (j)
and Section 4(a) through (e) and Section 4(g) which shall survive without
limitation, and (ii) the covenants and agreements contained in or made pursuant
to this Agreement which by their terms are to survive after the Closing Time,
which 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.
18. 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
Middle Settlement Road
New Hartford, New York 13413
Attention: Robert F. Dropkin
Telecopier: (315) 798-2001
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert B. Schumer
Telecopier: (212) 757-3990
(b) If to the Investor, to:
TIMET Finance Management Company
1999 Broadway, Suite 4300
Denver, Colorado 80202
Attention: Robert E. Musgraves
Telecopier: (303) 291-2990
28
<PAGE>
With a copy to:
Bartlit Beck Herman Palenchar & Scott
511 Sixteenth Street
Denver, Colorado 80202
Attention: James L. Palenchar
Telecopier: (303) 592-3140
(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.
19. Entire Agreement; Amendment. This Agreement and the documents
described herein or delivered pursuant hereto (including, without limitation,
the Registration Rights Agreement), the Letter Agreement, the Confidentiality
Agreement and the Acknowledgement 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
same manner as this Agreement; provided, however that the provisions set forth
in Sections 7(c), 7(d), 8 and 25 hereof may not, directly or indirectly, be
amended or modified without the prior written consent of each Lender affected
thereby.
20. 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.
21. 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.
22. 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.
23. Obligations of the Investor. TMC shall cause the Investor to
perform the obligations required to be performed by it hereunder when and as the
same shall be required to be performed and hereby guarantees the payment of all
amounts required to be paid and the performance of all covenants, agreements and
obligations required to be performed or complied with by the Investor hereunder.
The guarantee by TMC of the Investor's obligations hereunder shall be construed
as a continuing, absolute , unconditional and irrevocable guarantee of payment
and performance (and not merely of collection).
29
<PAGE>
24. 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 24) 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 24) of the liquidation amount thereof, upon the
terms and conditions set forth in the Certificate of Designation.
25. Assignment. Except as otherwise expressly provided in Section 7 or
8 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 TMC,
without the consent of the Company, provided that TMC shall remain liable for
the obligations of the Investor hereunder to the same extent as the Investor;
and provided, further, that the Investor and TMC may assign their 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 7(c).
26. 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.
27. 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.
30
<PAGE>
28. 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.
29. 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.
30. Acknowledgement. The parties hereto hereby acknowledge that, at the
Closing Time, the Investor shall pledge to Bankers Trust Company or its agent
("BTC") the Convertible Preferred Securities purchased by the Investor under
this Agreement (as well as the Common Stock issued upon conversion thereof and
any securities issued in exchange therefor) and the Investor and TMC shall
assign their rights and obligations under this Agreement to BTC to the extent
provided in Section 7(c) with respect to Dispositions pursuant to a bona fide
pledge to any Lender, and that BTC, in its individual capacity and as agent for
other Lenders, shall constitute a Lender under Section 7(c).
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<PAGE>
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 Company, on the one hand, and the Investor and TMC, on the other hand.
Very truly yours,
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
--------------------
Name: Donald R. Muzyka
Title: President & CEO
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
TIMET FINANCE MANAGEMENT COMPANY
By: /s/ Susan E. Alderton
---------------------
Name: Susan Alderton
Title:
TITANIUM METALS CORPORATION
By: /s/ J. Landis Martin
--------------------
Name: J. Landis Martin
Title:
TITANIUM METALS CORPORATION
1999 Broadway
Denver, Colorado 80202
July 8, 1998
Dr. Donald R. Muzyka
President and Chief Executive Officer
Special Metals Corporation
4317 Middle Settlement Road
New Hartford, New York 13413
Re: Strategic Manufacturing, Marketing and Product Development Alliance
Dear Don:
This will confirm the mutual understanding of Titanium Metals Corporation, a
Delaware corporation ("TIMET"), and Special Metals Corporation, a Delaware
corporation ("SMC"), in connection with our discussions concerning the formation
of a strategic alliance, which will encompass (i) a manufacturing arrangement
whereby TIMET will convert certain titanium products (primarily titanium
products for new uses) at SMC's facilities, (ii) joint marketing by TIMET and
SMC of titanium and nickel alloy products to jet engine and other manufacturers,
and (iii) joint efforts by TIMET and SMC to develop new uses for titanium and
nickel alloys.
1. The proposed strategic marketing, manufacturing and product
development alliance (the "Strategic Alliance") between TIMET and SMC is subject
to, among other things, the completion of mutual due diligence, and the
negotiation and execution of definitive agreements containing customary terms
and conditions, and mutually acceptable in form and substance to TIMET and SMC
(the "Agreements"). TIMET and SMC will, following the closing of the acquisition
(the "Acquisition") by SMC of the Inco Alloys International business unit of
INCO Limited, negotiate in good faith and cooperate with each other in
connection with promptly negotiating and executing the Agreements.
2. Except as may otherwise be agreed between them, TIMET and SMC agree
that disclosure of this letter or the fact that the parties are negotiating may
adversely affect the negotiations concerning the Agreements and, as a result,
except as otherwise agreed or required by law, the parties agree to keep this
letter and the existence and the terms and conditions of such negotiations
confidential. Any disclosures that either party believes are required by law
shall be reviewed in advance with the other party. The provisions of this
paragraph will survive the termination of this letter.
3. It is understood that this letter merely constitutes a statement of
our mutual intentions with respect to the negotiation of the Agreements, does
not contain all matters upon which agreement must be reached in order for the
Agreements to be executed and, therefore, does not constitute a binding
agreement with respect to any Strategic Alliance. A binding commitment with
respect to an Alliance will result only from the execution of the Agreements,
subject to the conditions expressed therein. Notwithstanding the foregoing, the
provisions of paragraphs 2 and 4 of this letter are intended to be legally
binding on the parties regardless of whether a binding commitment with respect
to a Strategic Alliance is ever reached.
4. This letter agreement may be terminated: (a) at any time by mutual
agreement of TIMET and SMC; (b) by either party hereto if the parties shall not
have executed the Agreements on or before 90 days following the closing under
the Acquisition Agreement (as defined below). In
<PAGE>
2
addition, this letter agreement shall automatically terminate in the event that
either (x) the acquisition agreement (the "Acquisition Agreement") between SMC
and INCO Limited relating to the Acquisition is terminated in accordance with
its terms or (y) the proposed investment by TIMET (or a wholly owned subsidiary
thereof) in $125,000,000 shares of convertible preferred stock of SMC is not
consummated on or prior to the 120th day following the date of the Acquisition
Agreement.
If this letter agreement is acceptable to SMC, we request that SMC
approve this letter agreement and evidence such approval by causing the enclosed
copy of this letter agreement to be signed, dated and returned to the
undersigned by facsimile (hard copy to follow), following which we would be
prepared immediately to commence preparation and negotiation of the Agreements.
We look forward to receiving SMC's favorable response at SMC's earliest
convenience but in any event by July 8, 1998.
Very truly yours,
Titanium Metals Corporation
By: /s/ Andrew R. Dixey
-------------------
Name: Andrew R. Dixey
Title: President and Chief Operating Officer
Accepted and agreed to this
8th day of July, 1998
Special Metals Corporation.
By: /s/ Donald R. Muzyka
--------------------
Name: Donald R. Muzyka
Title: President and Chief Executive Officer
