SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SPECIAL METALS CORPORATION
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (sets forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SPECIAL METALS CORPORATION
4317 MIDDLE SETTLEMENT ROAD
NEW HARTFORD, NEW YORK 13413
--------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
____________, 1999
To Our Stockholders:
Please take notice that a special meeting (the "Special Meeting") of
stockholders of Special Metals Corporation, a Delaware corporation (the
"Company"), will be held at the offices of Special Metals Corporation, 4317
Middle Settlement Road, New Hartford, New York 13413 at ____ a.m. (Eastern
Standard Time), __________, 1999 to consider and vote on the following matters
described in this notice and the accompanying Proxy Statement:
1. A proposal to approve and authorize the issuance by the Company of
an aggregate of 5,878,787 shares of common stock, par value $.01 per share (the
"Common Stock") issuable upon the conversion of the Company's outstanding 6.625%
Series A Senior Convertible Preferred Stock, liquidation amount $50.00 per share
(the "Convertible Preferred Stock").
2. To transact such other business related to Proposal 1 as may
properly come before the Special Meeting or any adjournments or postponements
thereof.
The Company's outstanding Convertible Preferred Stock consists of (i)
1,600,000 shares issued to TIMET Finance Management Company, a Delaware
corporation, ("TFMC") pursuant to the TFMC Investment Agreement, dated as of
July 8, 1998, as amended, among the Company, TFMC and Titanium Metals
Corporation, a Delaware corporation and parent of TFMC; and (ii) 340,000 shares
issued to Inco Limited, a corporation continued under the laws of Canada
("Inco"), pursuant to the Inco Investment Agreement, dated October 28, 1998,
between the Company and Inco.
The Board of Directors has fixed the close of business on January ,
1999, as the record date for determination of the stockholders entitled to vote
at the Special Meeting, or any adjournments thereof, and only record holders of
Common Stock at the close of business on that day will be entitled to vote.
TO ASSURE REPRESENTATION AT THE SPECIAL MEETING, STOCKHOLDERS ARE URGED
TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any stockholder attending
the Special Meeting may vote in person even if he or she previously returned a
proxy.
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If you do plan to attend the Special Meeting in person, we would
appreciate your indicating such attendance at the appropriate place on the proxy
card enclosed.
By Order of the Board of Directors,
Robert F. Dropkin
Secretary
New Hartford, New York
January , 1999
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SPECIAL METALS CORPORATION
4317 MIDDLE SETTLEMENT ROAD
NEW HARTFORD, NEW YORK 13413
--------------------------
PROXY STATEMENT
--------------------------
SPECIAL MEETING OF STOCKHOLDERS
MEETING DATE: __________, 1999
This Proxy Statement and the enclosed proxy card are being sent on or
about __________, 1999 in connection with the solicitation of proxies by the
Board of Directors of Special Metals Corporation, a Delaware corporation (the
"Company"), for use at the Company's special meeting of stockholders, which will
be held at the Company's offices, 4317 Middlesettlement Road, New Hartford, New
York 13413, at ____ a.m. (Eastern Standard Time), on January , 1999, and at any
meetings held upon any adjournment thereof (the "Special Meeting"), for the
purposes set forth in the accompanying Notice of Special Meeting. The record
date for the Special Meeting is the close of business on January , 1999 (the
"Record Date"). Only holders of record of the Company's Common Stock, $0.01 par
value per share (the "Common Stock"), on the Record Date (the "Stockholders")
are entitled to receive the Notice of Special Meeting and to vote at the Special
Meeting and at any meetings held upon adjournment or postponement thereof.
At the Special Meeting, the Stockholders will be asked to consider and
vote upon the following proposals:
1. To approve and authorize the issuance by the Company of an aggregate
of 5,878,787 shares of Common Stock (the "Conversion Shares") issuable upon the
conversion of the Company's outstanding 6.625% Series A Senior Convertible
Preferred Stock, liquidation amount $50.00 per share (the "Convertible Preferred
Stock").
2. Any other business related to Proposal 1 as may properly come before
the Special Meeting or any adjournments or postponements thereof.
The Company's outstanding Convertible Preferred Stock consists of (i)
1,600,000 shares issued to TIMET Finance Management Company, a Delaware
corporation ("TFMC"), pursuant to the Investment Agreement, dated as of July 8,
1998 as amended (the "TFMC Investment Agreement"), among the Company, TFMC and
Titanium Metals Corporation, a Delaware corporation and parent of TFMC ("TMC");
and (ii) 340,000 shares issued to Inco Limited, a corporation continued under
the laws of Canada ("Inco" and, together with TFMC, the "Investors") pursuant to
the Investment Agreement, dated October 28, 1998, between the Company and Inco
(the "Inco Investment Agreement" and together with the TFMC Investment
Agreement, the "Investment Agreements").
The Board of Directors knows of no other matters which are likely to be
brought before the Special Meeting. If any other matters are properly brought
before the Special
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Meeting or any adjournments or postponements thereof, it is the intention of the
persons named in the accompanying proxy to vote the proxy on such matters as
recommended by the Board of Directors.
VOTING SECURITIES
As of the Record Date, there were 15,479,000 shares of Common Stock and
1,940,000 shares of Convertible Preferred Stock issued and outstanding. The
presence, either in person or by proxy, of Stockholders entitled to vote a
majority of the Company's outstanding Common Stock is necessary to constitute a
quorum for the transaction of business at the Special Meeting. Abstentions and
broker non-votes will be counted for purposes of determining a quorum, but will
not be considered as having voted for purposes of determining the outcome of a
vote.
Holders of Common Stock have one vote for each share on any matter that
may be presented for consideration and action by the Stockholders at the Special
Meeting. The holders of Convertible Preferred Stock are not entitled to notice
of, nor are they entitled to vote at, the Special Meeting. At the Special
Meeting (at which a quorum is present to organize the Special Meeting), approval
of the transaction described in the proposals set forth in this Proxy Statement
will require the affirmative vote of a majority of the votes cast at the Special
Meeting by the Stockholders present in person or represented by proxy and
entitled to vote thereon, whether or not a quorum is present when the vote is
taken.
Stockholders holding in the aggregate securities representing a
majority of the shares of Common Stock entitled to vote at the Special Meeting
have already agreed to vote in favor of Proposal 1 set forth in this Proxy
Statement. Societe Industrielle de Materiaux Avances, LWH Holding S.A. and
Advanced Materials Investments Holding S.A. (collectively, the "Principal
Stockholders") have entered into a Voting Agreement with TMC and TFMC, dated
October 28, 1998 (the "Voting Agreement"), pursuant to which each of the
Principal Stockholders has agreed, at the Special Meeting or any other meeting
of the stockholders of the Company, to vote all of the shares of Common Stock
owned by them on the date of the Special Meeting (the "Principal Stockholders'
Shares") to approve the issuance of the Conversion Shares to the Investors
pursuant to the conversion by the Investors of their shares of Convertible
Preferred Stock. The Principal Stockholders owned 11,625,000 shares of Common
Stock in the aggregate on the Record Date. In addition, the Principal
Stockholders and the Company are parties to a Stockholders' Agreement, dated as
of February 25, 1997, as amended (the "Stockholders' Agreement"). Under the
Stockholders' Agreement, the Principal Stockholders have agreed, in connection
with a vote relating to any matter other than the election of directors, to vote
all the Principal Stockholders' Shares unanimously as a group in accordance with
the instructions of the holder(s) of a majority of the Principal Stockholders'
Shares. As of the Record Date, directors and executive officers of the Company
as a group (12 persons) less than 1% of the total number of shares of Common
Stock outstanding.
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SOLICITATION AND VOTING OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to soliciting stockholders by mail through its regular employees, the
Company will request banks and brokers, and other custodians, nominees and
fiduciaries, to solicit their customers who have stock of the Company registered
in the names of such persons and will reimburse them for their reasonable,
out-of-pocket costs. The Company may use the services of its officers, directors
and others to solicit proxies, personally or by telephone, without additional
compensation.
All valid proxies received prior to the Special Meeting will be voted.
All shares represented by a proxy will be voted, and where a Stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares represented by such proxy will be voted in accordance with the
specification so made. IF NO CHOICE IS INDICATED ON THE PROXY, THE SHARES
REPRESENTED BY SUCH PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL. A stockholder
giving a proxy has the power to revoke his or her proxy, at any time prior to
the time it is voted, by delivering to the Secretary of the Company a written
instrument revoking the proxy or by delivering to the Secretary of the Company a
duly executed proxy bearing a later date, or by attending the meeting and voting
in person. Attendance at the Special Meeting will not by itself constitute
revocation of a proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of the Record
Date, with respect to beneficial ownership of the shares of Common Stock and
Convertible Preferred Stock by (a) each person (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act")) known to the Company to be beneficial owners of more than 5% of the
Company's Common Stock, (b) each of the Company's directors, (c) the Company's
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for the fiscal year ended December 31, 1997, and (d) all
persons serving as executive officers and directors of the Company as of the
Record Date as a group.
Unless otherwise indicated in the notes below, the address of each
beneficial owner is in care of Special Metals Corporation, 4317 Middle
Settlement Road, New Hartford, New York 13413. With respect to holders of 5% or
more of the shares of Common Stock or Convertible Preferred Stock, the following
information is based on a review, as of January , 1999, by the Company of
statements filed with the Securities and Exchange Commission under Sections
13(d) and 13(g) of the Exchange Act. To the best knowledge of the Company,
except as set forth above, no person owns beneficially more than 5% of the
outstanding Common Stock or Convertible Preferred Stock.
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Unless otherwise indicated, each person listed below has sole voting
and investment power with respect to the shares of Common Stock or Convertible
Preferred Stock held by such person except, in the case of the Principal
Stockholders, to the extent voting power is shared pursuant to the Voting
Agreement and the Stockholders' Agreement. See "Voting Securities."
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<TABLE>
<CAPTION>
Shares of Convertible
Shares of Common Stock Preferred Stock Beneficially
Beneficially Owned Owned
-------------------------------- ------------------------------
Number of Number of
Names and Addresses Shares Percent of Class Shares Percent of Class
------------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Societe Industrielle de Materiaux Avances
("SIMA")(1)(2)...................... 5,952,000 38.5% -- --
LWH Holding S.A. ("LWH")(2)(3)......... 3,580,500 23.1% -- --
Advanced Materials Investments Holdings, 2,092,500 13.5% -- --
S.A. ("AMI")(2)(4)..................
Donald R. Muzyka(5).................... 33,833 * -- --
Donald C. Darling(5)................... 17,417 * -- --
Robert D. Halverstadt(5)............... 12,750 * -- --
Raymond F. Decker(5)................... 3,500 * -- --
Antoine G. Treuille(5)................. 12,250 * -- --
Robert F. Dropkin(5)................... 14,917 * -- --
Thomas E. MacDonald(5)................. 14,617 * -- --
James D. Page(5)....................... 14,917 * -- --
Edouard Duval(1)....................... -- -- -- --
Francis J. Petro ...................... 1,000 * -- --
Andrew R. Dixey........................ -- -- -- --
TIMET Finance Management Company(6)(8). -- -- 1,600,000 82.5%
Inco Ltd.(7)(8) -- -- 340,000 17.5%
All Directors and Executive Officers as a
Group (12 persons)..................... 129,700 * -- --
</TABLE>
- ------------------------------------
* Less than 1%
(1) SIMA's address is 41, Rue de Villiers, BP120, 92202 Neuilly-Sur-Seine,
Cedex, France. The common equity of SIMA is beneficially owned by members
of the Duval family and certain related parties. Edouard Duval, a director
of the Company, is a Directeur General of SIMA and has a minority equity
interest in SIMA. Mr. Duval's address is in care of SIMA.
(2) The Company, SIMA, AMI and LWH have entered into the Stockholders'
Agreement, which provides for certain voting rights, nominating rights and
transfer restrictions. TFMC, TMC, SIMA, AMI and LWH are parties to the
Voting Agreement which provides that SIMA, AMI and LWH will vote all of
the shares owned by each of them in favor of the issuance of the
Conversion Shares to the Investors. Each entity has sole voting and
investment power with respect to their shares of Common Stock except to
the extent voting power is shared pursuant to the Voting Agreement and the
Stockholders' Agreement. See "Voting Securities."
(3) LWH's address is Boulevard Royal 3, L-2449 Luxembourg. Carlos Luis Landin
beneficially owns 100% of the capital stock of LWH and may be deemed to
beneficially own the shares of Common Stock owned of record by LWH. Mr.
Landin's address is in care of LWH.
(4) AMI's address is 3A Rue Guillaume Kroll, L-1882 Luxembourg. Jean Chauveau
beneficially owns 100% of the capital stock of AMI and may be deemed to
beneficially own the shares of Common Stock owned of record by AMI. Mr.
Chauveau's address is in care of AMI.
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(5) In the case of Drs. Muzyka and Decker and Messrs. Darling, Halverstadt,
Treuille, Dropkin, MacDonald and Page, includes 28,833, 2,500, 14,417,
14,417, 11,250, 11,250, 14,417, and 14,417 shares of Common Stock,
respectively, issuable upon exercise of options which become exercisable
on February 25, 1999.
(6) TFMC's address is 300 Delaware Avenue, 9th Floor, Wilmington, Delaware
19801.
TMC is the direct holder of 100% of the outstanding shares of TFMC and may
be deemed to control TFMC. Tremont Corporation ("Tremont") is the direct
holder of 33.5% of the outstanding common stock of TMC and has an option
to purchase an additional 4.8% of TMC's outstanding common stock expiring
on February 15, 1999. Tremont may be deemed to control TMC. Valhi, Inc.
("Valhi"), the Harold Simmons Foundation, Inc. (the "Foundation"), NL
Industries, Inc. ("NL"), Valmont Insurance Company ("Valmont") and the
Combined Master Retirement Trust (the "CMRT") are the direct holders of
approximately 48.4%, 3.9%, 0.6%, 0.5% and 0.1%, respectively, of the
outstanding shares of common stock of Tremont. Valhi may be deemed to
control Tremont. Valhi and Tremont are the direct holders of approximately
57.8% and 19.6%, respectively of the outstanding common stock of NL and
together may be deemed to control NL. Valhi is the direct holder of 100%
of the outstanding common stock of Valmont and may be deemed to control
Valmont, Valhi Group, Inc. ("VGI"), National City Lines, Inc.
("National"), Contran Corporation ("Contran"), the Foundation and the CMRT
are the direct holders of 81.9%, 9.5%, 0.8%, 0.5% and 0.1% of the common
stock of Valhi. Together, VGI, National and Contran may be deemed to
control Valhi. National, NOA, Inc. ("NOA") and Dixie Holding Company
("Dixie Holding") are the direct holders of approximately 73.3%, 11.4% and
15.3%, respectively, of the outstanding common stock of VGI. Together,
National, NOA and Dixie Holding may be deemed to control VGI. Contran and
NOA are the direct holders of approximately 85.7% and 14.3%, respectively,
of the outstanding common stock of National and together may be deemed to
control National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA and together may be
deemed to control NOA. Dixie Rice Agricultural Corporation, Inc. ("Dixie
Rice") is the holder of 100% of the outstanding common stock of Dixie
Holding and may be deemed to control Dixie Holding. Contran is the holder
of approximately 88.8% and 66.3% of the outstanding common stock of
Southwest and Dixie Rice, respectively, and may be deemed to control
Southwest and Dixie Rice.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of certain of Mr. Harold C. Simmons' children
and grandchildren (the "Trusts"), of which Mr. Simmons is the sole
trustee. As sole trustee of each of the Trusts, Mr. Simmons has the power
to vote and direct the disposition of the shares of Contran stock held by
each of the Trusts. Mr. Simmons however, disclaims beneficial ownership of
such shares.
The CMRT directly holds approximately 0.1% of each of the outstanding
shares of Tremont and Valhi common stock. The CMRT is a trust formed by
Valhi to permit the collective investment by trusts that maintain the
assets of certain employee benefit plans adopted by Valhi and related
companies. Mr. Simmons is the sole trustee of the CMRT and the sole member
of the trust investment committee for the CMRT. Mr. Simmons is a
participant in one or more of the employee benefit plans that invest
through the CMRT.
The Foundation directly holds approximately 3.9% of the outstanding
Tremont common stock and 0.5% of the outstanding Valhi common stock. The
Foundation is a tax-exempt foundation organized for charitable purposes.
Harold C. Simmons is the chairman of the board and chief executive officer
of the Foundation and may be deemed to control the Foundation.
The Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2") directly
holds approximately 0.2% of Valhi common stock. Boston Safe Deposit and
Trust Company serves as the trustee of the CDCT No. 2. Contran established
the CDCT No. 2 as an irrevocable "rabbi trust" to assist Contran in
meeting certain deferred compensation obligations that it owed to Harold
C. Simmons. If the CDCT No. 2 assets are insufficient to satisfy such
obligations, Contran is obligated to satisfy the balance of such
obligations as they come due. Due to the terms of the CDCT No. 2, Contran
(i) retains the power to vote the shares of Valhi common stock held
directly by the CDCT No. 2, (ii) retains dispositive power over such
shares and (iii) may be deemed the indirect beneficial owner of such
shares.
Valmont and NL directly own 1,000,000 shares and 1,186,200 shares,
respectively, of Valhi common stock. Pursuant to Delaware law, Valhi
treats the shares of Valhi common stock owned by Valmont and NL as
treasury stock for voting purposes and for the purposes hereof are not
deemed outstanding.
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Mr. Harold C. Simmons is chairman of the board and chief executive officer
of Valhi, VGI, National, NOA, Dixie Holding, Dixie Rice, Southwest and
Contran. Mr. Simmons is also chairman of the board of NL and a director of
Tremont.
By virtue of the holding of the offices, the stock ownership and his
services as trustee, all as described above, (a) Mr. Simmons may be deemed
to control the entities described above (excluding the Company) and (b)
Mr. Simmons and certain of such entities may be deemed to possess indirect
beneficial ownership of the shares of Convertible Preferred Stock
beneficially owned by TFMC. However, Mr. Simmons disclaims beneficial
ownership of the shares of Convertible Preferred Stock beneficially owned,
directly or indirectly, by any of such entities.
Harold C. Simmons' spouse is the direct owner of 3,747 shares of Tremont
common stock and 77,000 shares of Valhi common stock. Mr. Simmons may be
deemed to share indirect beneficial ownership of such shares. Mr. Simmons
disclaims all such beneficial ownership.
(7) INCO's address is 145 King Street West, Suite 1500, Toronto, Ontario M5H
487, Canada.
(8) The shares of Convertible Preferred Stock will become convertible at any
time at the election of the Investors into an aggregate of 5,878,787
shares of Common Stock following the approval of the issuance of such
shares at the Special Meeting and the satisfaction of certain regulatory
conditions. The shares of Convertible Preferred Stock are not currently
entitled to vote. Assuming all of the shares of Convertible Preferred
Stock held by TFMC and Inco were converted into Common Stock, TFMC would
(and the entities and persons described in footnote (6) above may be
deemed to) beneficially own an aggregate of 4,848,484 shares of Common
Stock (representing 22.7% of the Common Stock outstanding after giving
effect to such conversion) and Inco would beneficially own 1,030,303
shares of Common Stock (representing 4.8% of the Common Stock outstanding
after giving effect to such conversion).
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PROPOSAL 1
TO APPROVE THE ISSUANCE TO THE INVESTORS
OF AN AGGREGATE OF 5,878,788 SHARES OF COMMON STOCK
INCO ALLOYS INTERNATIONAL ACQUISITION
On October 28, 1998, the Company acquired the Inco Alloys International
high performance nickel alloys business unit of Inco and entered into a
non-competition agreement with Inco for an aggregate consideration of $365
million, consisting of $348 million in cash and 340,000 shares of Convertible
Preferred Stock having an aggregate liquidation value of $17 million. The
Company financed the cash portion of the consideration with funds drawn under a
new $375 million bank credit facility (the "Credit Facility") and with proceeds
from the issuance to TFMC of 1,600,000 shares of Convertible Preferred Stock
having an aggregate liquidation value of $80 million.
TERMS OF THE CONVERTIBLE PREFERRED STOCK
CONVERSION AND REDEMPTION
The Convertible Preferred Stock issued to TFMC and Inco will, subject
to the favorable vote of a majority of the holders of the Common Stock of the
Company and the satisfaction of certain regulatory conditions, be convertible
into the Conversion Shares at a conversion price equal to $16.50 per share. At
any time after October 28, 2001 and prior to conversion, the Company has the
option under the Certificate of Designations relating to the Convertible
Preferred Stock (the "Certificate of Designations") to redeem the outstanding
Convertible Preferred Stock, in whole or part, at decreasing redemption prices,
starting at 103.975% if the shares are redeemed after October 28, 2001. In
addition, the Convertible Preferred Stock is mandatorily redeemable on or after
April 28, 2006 and prior to conversion at a redemption price per share equal to
100% of the liquidation amount thereof, plus all accumulated and unpaid
dividends, if any, to the redemption date.
The holders of Convertible Preferred Stock have the right to request
the Company to repurchase their shares for cash at a repurchase price equal to
100% of the liquidation amount of such shares, plus accumulated and unpaid
dividends, upon the occurrence of a "change of control" of the Company (as such
term is defined in the Investment Agreements), subject to the terms of the
Credit Facility. Notwithstanding the above, if such change of control occurs on
or prior to October 28, 2001 and would alter or change the powers, preferences
or special rights of the Convertible Preferred Stock so as to adversely affect
such Convertible Preferred Stock, then the repurchase price will be equal to
103.975% of the aggregate liquidation amount of the Convertible Preferred Stock,
plus accumulated and unpaid dividends, if any, to the repurchase date.
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BOARD REPRESENTATION
Pursuant to the TFMC Investment Agreement, TFMC has the right to
designate one director to be appointed to the Board of Directors of the Company
for so long as it owns securities representing at least 10% of the outstanding
voting securities of the Company, subject to adjustments if the size of the
Board of Directors is increased. Pursuant to such agreement, the Board of
Directors appointed Mr. Andrew R. Dixey, President, Chief Operating Officer and
Director of TMC, to the Board of Directors on November 18, 1998 for a term of
office ending at the annual meeting of the Board of Directors in 2000.
DIVIDENDS
The holders of outstanding Convertible Preferred Stock will be entitled
to receive, and the Company will pay, when and as declared by the Board of
Directors, cash dividends, at a rate of 6.625% (subject to adjustment as set
forth in the Certificate of Designations) of the liquidation amount of each
share of Convertible Preferred Stock, plus all accumulated and unpaid dividends
on such share, from October 28, 1998 to but not including the date on which the
liquidation amount of such share (plus all accumulated and unpaid dividends on
such share) is paid or the date on which such share is converted into Conversion
Shares. Such dividends will accumulate whether or not they have been declared
and whether or not there are profits, surplus or other property of the Company
legally available for the payment of dividends. The Company has the right at any
time to defer payment of accumulated dividends on the Convertible Preferred
Stock (an "Extension Period"). During any such Extension Period, dividends as
well as additional dividends on any accumulated and unpaid dividends will accrue
at the rate of 6.625% per annum. If the Company defers payment of accumulated
dividends for more than six quarters, then the Investors will be entitled to
designate two directors to the Board of Directors of the Company in addition to
the director already designated by TFMC. In addition, upon such circumstances,
the dividend rate on the Convertible Preferred Stock will automatically increase
by one-quarter of one percent (.25%) per annum of the liquidation amount, unless
a material event of default under the Credit Facility shall have occurred and be
continuing or any event of default under the Credit Facility would result from
the making of the payment or payments that were deferred.
REGISTRATION RIGHTS
DEMAND RIGHTS
In connection with the TFMC Investment Agreement, the Company and TFMC
entered into a Registration Rights Agreement (the "TFMC Registration Rights
Agreement") which provides TFMC and any subsequent transferees of TFMC's shares
of Convertible Preferred Stock and/or Conversion Shares with demand and
piggyback registration rights for its shares of Convertible Preferred Stock and
the Conversion Shares issuable upon conversion thereof. Demand registration
rights may be exercised by the
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holder(s) of a majority of the Convertible Preferred Stock or Conversion Shares
issued upon conversion of such Convertible Preferred Stock at any time after
October 28, 2000 (the second anniversary of the date of original issuance of the
Convertible Preferred Stock). Demand registration rights may also be exercised
after October 28, 2000 by TFMC alone so long as (i) TFMC holds Convertible
Preferred Stock and/or Conversion Shares representing more than 5% of the
outstanding Common Stock (assuming any shares of Convertible Preferred Stock
held by TFMC have been converted into Common Stock) or (ii) TFMC's request for
registration covers all shares of Convertible Preferred Stock and Conversion
Shares issued upon conversion thereof then held by TFMC. Pursuant to the
provisions of the TFMC Investment Agreement and the TFMC Registration Rights
Agreement, the Company will have a prior right of first refusal and additional
purchase rights with respect to the shares of Convertible Preferred Stock or the
Conversion Shares that are proposed to be registered.
The Company has the right to reject (i) requests for more than two
demand registrations, (ii) a registration within the 12 month period immediately
after a registration statement filed by the Company pursuant to the TFMC
Registration Rights Agreement becomes effective or a registration statement is
filed by the Company regarding an offering of Common Stock (other than with
respect to an employee benefit plan) where the holders of Convertible Preferred
Stock or Conversion Shares elect not to exercise their piggyback registration
rights, or (iii) a registration with an aggregate offering price of less than
$15 million.
PIGGYBACK RIGHTS
Pursuant to the TFMC Registration Rights Agreement, TFMC and any
subsequent transferees of TFMC's shares of Convertible Preferred Stock or
Conversion Shares may also exercise piggyback registration rights in connection
with registrations by the Company of Common Stock other than registrations in
connection with the exercise of exclusive demand rights under the existing
registration rights agreement between the Company and the Principal
Stockholders, employee benefit plans and mergers or similar transactions.
Pursuant to the registration rights agreement, dated October 28, 1998,
between the Company and Inco (the "Inco Registration Rights Agreement"), Inco
and any subsequent transferee of Inco's shares of Convertible Preferred Stock or
Conversion Shares may also exercise piggyback registration rights with
limitations that are similar to those applicable under the TFMC Registration
Rights Agreement. However, the exercise by Inco or its transferees of their
piggyback registration rights under the Inco Registration Rights Agreement is
subordinated to TFMC's or its transferees' piggyback registration rights under
the TFMC Registration Rights Agreement.
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STANDSTILL AND TOP-UP RIGHTS
Pursuant to standstill provisions of the TFMC Investment Agreement,
TFMC, TMC and their affiliates may not acquire beneficial ownership of
additional securities of the Company, enter into a business combination with the
Company, enter into voting arrangements with respect to securities of the
Company, solicit proxies or otherwise seek to influence or control the
management or policies of the Company, 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, act alone or in concert with others to seek to
control or influence the management, board of directors or policies of the
Company, disclose any intention, plan or arrangement inconsistent with the
foregoing, or assist, advise, participate with or encourage any person to do the
foregoing. The Company is similarly restricted with respect to TMC. These
standstill provisions remain in effect until the earlier of (a) one year after
TFMC ceases to own Common Stock and/or Convertible Preferred Stock or other
voting securities of the Company which together represent more than 5% of the
outstanding voting securities of the Company, (b) the Company enters into an
agreement (or announces an intention to enter into an agreement) regarding a
change of control of the Company and (c) the occurrence of a change of control
of the Company. However, the TFMC Investment Agreement provides that if,
following an issuance of voting securities by the Company, other than pursuant
to the Inco Investment Agreement, the voting securities beneficially owned by
TFMC represent less than 20% of the outstanding voting securities of the
Company, then TFMC may make purchases of equity securities of the Company to
restore its beneficial ownership to 20% of the outstanding voting securities of
the Company.
TRANSFER RESTRICTIONS OF PREFERRED STOCK
Pursuant to the Investment Agreements, the Investors will be able to
dispose of their Convertible Preferred Stock only (i) to subsidiaries, (ii)
following October 28, 2000 (the second anniversary of the issue date), in a
public offering, or (iii) following the earlier of October 28, 2001 (the third
anniversary of the issue date) and a "change of control" (as defined in the
Investment Agreements), except that, in the case of dispositions pursuant to
(ii) and (iii) above, the Investors may not sell to any person who is a
significant competitor of the Company, engaged in material litigation against
the Company or who, after acquiring such interest in Convertible Preferred Stock
would beneficially own voting securities representing more than 10% of the
outstanding voting securities of the Company. The Company has a right of first
refusal with respect to dispositions made pursuant to (ii) and (iii) above and
additional rights of first refusal with respect to dispositions made pursuant to
(ii) above under the TFMC Registration Rights Agreement and the Inco
Registration Rights Agreement (together, the "Registration Rights Agreements"),
if in connection with a registered offering pursuant to the Registration Rights
Agreements, if the offering price of the securities registered is less than 95%
of the original price indicated by the holders of the securities as an
acceptable sale price at the time they exercised their demand or piggyback
registration rights.
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NASDAQ STOCKHOLDER APPROVAL REQUIREMENT
The Company's Common Stock is traded on the over-the-counter market and
is quoted on The Nasdaq Stock Market National Market System. In order to qualify
for initial inclusion in The Nasdaq Stock Market National Market System, it is
necessary that the Company satisfy certain financial and other criteria set
forth in The Nasdaq Marketplace Rules (the "Rules"). In addition, in order to
maintain such inclusion under the Rules, the Company must, among other things,
follow certain corporate governance procedures, including obtaining stockholder
approval in connection with certain corporate transactions.
Rule 4310(c)(25)(H) of the Rules requires stockholder approval of the
issuance of securities by an issuer under various circumstances. In particular,
Subsection (i)d. of paragraph (H) requires stockholder approval prior to the
issuance of securities in the following situations:
"d. In connection with a transaction other than a public
offering involving:
1. the sale or issuance by the issuer of common stock
(or securities convertible into or exercisable for common
stock) at a price less than the greater of book or market
value which together with sales by officers, directors or
substantial shareholders of the Company equals 20% or more of
common stock or 20% or more of the voting power outstanding
before the issuance; or
2. the sale or issuance by the Company of common
stock (or securities convertible into or exercisable for
common stock) equal to 20% or more of the common stock or 20%
or more of the voting power outstanding before the issuance
for less than the greater of book or market value of the
stock."
Pursuant to the terms of the Investment Agreements, the Convertible
Preferred Stock is convertible at the option of the Investors into shares of
Common Stock of the Company at a conversion price equal to $16.50 per share.
Such conversion price may be subject to adjustment from time to time as set
forth in the Certificate of Designations. If all shares of Convertible Preferred
Stock were converted as of the Record Date, the total outstanding Conversion
Shares issued would represent 27.5% of the total outstanding Common Stock of the
Company. Therefore, in accordance with the above-mentioned Rule, the Company is
seeking stockholder approval and authorization for the issuance of the
Conversion Shares.
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TERMS OF COMMON STOCK
VOTING RIGHTS
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that holders of Common Stock are
entitled to one vote per share held of record on all matters submitted to a vote
of stockholders. The stockholders are not entitled to vote cumulatively for the
election of directors. The Company and the Principal Stockholders have entered
into the Stockholders' Agreement which governs the voting of the Common Stock
held by the Principal Stockholders. TFMC, TMC and the Principal Stockholders are
parties to the Voting Agreement which provides that each of the Principal
Stockholders will vote all of the shares owned by each of them in favor of the
issuance of the Conversion Shares to the Investors.
DIVIDENDS
Subject to the rights of the holders of the Convertible Preferred Stock
or any shares of preferred stock which may be outstanding from time to time, if
any, each holder of Common Stock on the applicable record date is entitled to
receive dividends if, as and when declared by the Board of Directors. Under the
Delaware General Corporation Law (the "DGCL"), a corporation may declare and pay
dividends out of surplus, or if there is no surplus, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding year. No
dividends may be declared, however, if the capital of the corporation has been
diminished by depreciation in the value of its property, losses or otherwise to
an amount less than the aggregate amount of capital represented by any issued
and outstanding stock having a preference on the distribution of assets.
Currently, the Board of Directors of the Company does not anticipate declaring
and paying any dividends with respect to the Common Stock.
OTHER RIGHTS
Stockholders of the Company have no preemptive or other rights to
subscribe for additional shares. Subject to any rights of the holders of the
Convertible Preferred Stock or any shares of preferred stock that may be
outstanding from time to time, if any, all holders of Common Stock are entitled
to share equally on a share-for-share basis in any assets available for
distribution to stockholders on liquidation, dissolution or winding up of the
Company. No shares of Common Stock are subject to conversion, redemption or a
sinking fund. All outstanding shares of Common Stock are, and the Conversion
Shares to be outstanding upon conversion of the Convertible Preferred Stock will
be, fully paid and nonassessable.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND
BY- LAWS
Certain provisions of the Certificate of Incorporation and By-laws (the
"By-laws") of the Company summarized below may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in its best interest, including an
attempt that might result in the receipt of a premium over the market price for
the shares held by stockholders.
CLASSIFIED BOARD OF DIRECTORS. The Certificate of Incorporation and the
By-laws provide for the Board of Directors to be divided into three classes of
directors serving staggered three-year terms. Notwithstanding the foregoing, the
term of any director who is also an officer of the Company will automatically
end if he or she ceases to be an employee of the Company. As a result,
approximately one-third of the Board of Directors will be elected each year.
Moreover, under the DGCL, in the case of a corporation having a classified
board, stockholders may remove a director only for cause. This provision, when
coupled with the provision of the By-laws authorizing only the Board of
Directors to fill vacant directorships, will preclude a stockholder from
removing incumbent directors without cause and simultaneously gaining control of
the Board of Directors by filling the vacancies created by such removal with its
own nominees.
SPECIAL MEETING OF STOCKHOLDERS. The Certificate of Incorporation and
the Bylaws provide that special meetings of stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board of Directors or
the President of the Company. This provision will make it more difficult for
stockholders to take actions opposed by the Board of Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate of Incorporation
and the By-laws provide that no action required or permitted to be taken at any
annual or special meeting of the stockholders of the Company may be taken
without a meeting, and the power of stockholders of the Company to consent in
writing, without a meeting, to the taking of any action is specifically denied.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The By-laws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days' notice or
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prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public discourse was made.
The By-laws also specify certain requirements for a stockholder's notice to be
in proper written form. These provisions may preclude some stockholders from
bringing matters before the stockholders at an annual or special meeting or from
making nominations for directors at an annual or special meeting.
CONSEQUENCES IF STOCKHOLDER APPROVAL NOT OBTAINED
Under the terms of the Investment Agreements, if a vote of the
Company's Stockholders in favor of the issuance of the Conversion Shares upon
the conditions set forth in Proposal 1 is not obtained, then the dividend rate
on the Convertible Preferred Stock will be increased as follows: (i) if such
favorable vote is not obtained by February 25, 1999, (120 days following October
28, 1998, the date of original issuance of the Convertible Preferred Stock), the
dividend rate will automatically increase by one-quarter of one percent (.25%)
per annum of the liquidation amount; (ii) if such favorable vote is not obtained
by July 25, 1999 (270 days following October 28, 1998, the date of original
issuance of the Convertible Preferred Stock), the dividend rate will
automatically increase by an increment in addition to the increment referred to
in (i) above, 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 (i) above) of the liquidation amount, upon the terms and conditions set forth
in the Certificate of Designations.
EFFECT OF CONVERSION OF PREFERRED STOCK ON HOLDERS OF COMMON STOCK
The issuance of the Conversion Shares upon the conversion of the
Convertible Preferred Stock will have no effect on the rights or privileges of
existing stockholders except to the extent that the interest of each stockholder
in the economic results and voting power in the Company will be reduced pro rata
based on the number of shares owned by existing stockholders prior to any
issuance.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL AND AUTHORIZATION OF THE ISSUANCE
OF 5,878,787 SHARES OF COMMON STOCK PURSUANT TO
THE TERMS OF THE INVESTMENT AGREEMENTS.
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TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment or postponement thereof, it is the
intention of the persons named in the accompanying form of proxy to vote the
proxy on such matters in accordance with their best judgment.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must have been received by the
Company at its offices at 4317 Middle Settlement Road, New Hartford, New York
13413, on or before December 16, 1998, and satisfied the conditions established
by the Securities and Exchange Commission for stockholder proposals to be
included in the Company's proxy statement for that meeting.
By Order of the Board of Directors,
Robert F. Dropkin
Secretary
New Hartford, New York
January , 1999
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SPECIAL METALS CORPORATION
4317 MIDDLE SETTLEMENT ROAD
NEW HARTFORD, NEW YORK 13413
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -- _________, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Special Metals Corporation (the
"Company") hereby appoints Donald R. Muzyka and __________, and each of them,
with full power of substitution in each, as proxies to cast all votes, as
designated on the reverse side, which the undersigned stockholder is entitled to
cast at the Special Meeting of Stockholders of the Company (the "Special
Meeting") to be held on [date], at [time], at Special Metals Corporation, 4317
Middle Settlement Road, New Hartford, NY 13413, and at any adjournments or
postponements thereof, upon the following matters:
1. Proposal to approve the issuance of an aggregate of 5,878,787 shares
of Common Stock, par value $.01 per share, of the Company, upon the conversion
of the outstanding 1,940,000 shares of Convertible Preferred Stock of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(INSTRUCTIONS: Check appropriate box. Proxies returned with no box checked
will be voted for Proposal 1.)
2. In their discretion, the proxies are authorized to vote upon such
other business related to Proposal 1 as may properly come before the Special
Meeting or any adjournments or postponements thereof.
Please check here if you plan to attend the Special Meeting [ ].
(PLEASE SIGN ON OTHER SIDE)
<PAGE>
2
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" PROPOSAL 1, AND WILL BE VOTED IN THE DISCRETION OF THE
PROXIES WITH RESPECT TO ANY OTHER MATTER RELATED TO PROPOSAL 1 THAT IS PROPERLY
PRESENTED AT THE SPECIAL MEETING.
_________________________ _______________________________ Dated ___________1999
Signature Signature if Held Jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
Please execute this proxy as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
