<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 18, 1997
IMCO RECYCLING INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-7170 75-2008280
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
5215 NORTH O'CONNOR BLVD., SUITE 940
CENTRAL TOWER AT WILLIAMS SQUARE
IRVING, TEXAS 75039
(Address of principal
executive offices)
(972) 869-6575
(Registrant's telephone number, including area code)
================================================================================
<PAGE> 2
With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commission as an exhibit to
this report, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 14, 1997, IMCO Recycling Inc. (the "Company"), in a
privately-negotiated transaction (the "Alchem Acquisition"), completed its
acquisition of Alchem Aluminum, Inc. ("Alchem"). The acquisition was
accomplished by a statutory merger of Alchem with and into a wholly-owned
subsidiary of the Company. Contemporaneously with the effectiveness of the
merger, the Company's subsidiary changed its corporate name to "Alchem
Aluminum, Inc." The consideration for the acquisition by the Company was the
issuance of 1,208,339 shares of common stock, $0.10 par value per share
("Common Stock") of the Company, and the payment of an aggregate of $9,647,369
in cash, to the former Alchem shareholders in accordance with the terms of the
Agreement and Plan of Merger dated as of November 14, 1997 (the "Merger
Agreement"), by and among the Company, IMCO Recycling of Coldwater Inc., Alchem
and the shareholders of Alchem. The issuance of the Common Stock was effected
in a transaction exempt from registration pursuant to the provisions of Section
4(2) under the Securities Act of 1933. The amount of cash paid was determined
by deducting from $26,250,000, the aggregate amount of Alchem's obligations for
borrowed money outstanding as of October 31, 1997, in accordance with the terms
of the Merger Agreement. The Merger Agreement also contemplates certain
post-closing adjustments to the merger terms based upon Alchem's working
capital as of October 31, 1997. The terms of the Alchem Acquisition were
determined pursuant to arms'-length negotiations between the parties. The
closing price of the Common Stock on the New York Stock Exchange on November
14, 1997 was $17-15/16 per share.
Up to 250,000 shares of Common Stock will be held in escrow by the Company for
a period of up to five years from the closing date as potential recourse for
the Company for breaches by Alchem and the Alchem shareholders of
representations and covenants contained in the Merger Agreement; shares may be
released from escrow during the escrow term upon the occurrence of a "change in
control" of the Company or upon payment into escrow by the former Alchem
shareholder(s) of cash or other property having a value equal to the "market
price" (as defined in the escrow agreement) of such shares to be released. In
addition, the Merger Agreement provides that all shares of Common Stock issued
in connection with the Alchem Acquisition are contractually restricted from
resale for periods of up to three years. Pursuant to the terms of the Merger
Agreement, up to an aggregate of 350,000 shares of Common Stock may be
transferred by the former Alchem shareholders after that date which is one year
from the closing date, up to an additional 350,000 shares may be transferred
after that date which is two years from the closing date and the remaining
shares may be transferred after that date which is three years after the
closing date (except, in each case, the shares of Common Stock remaining on
deposit in escrow).
The Company also granted registration rights to each of the Alchem shareholders
pursuant to a Registration Rights Agreement dated as of November 14, 1997 (the
"Registration Rights Agreement"). The Registration Rights Agreement grants
piggyback registration rights, which allow the Alchem shareholders to
participate in underwritten public offerings initiated by the Company after
January 1, 1998, subject to certain limitations and conditions set forth
therein. In addition, the Registration Rights Agreement grants the Alchem
shareholders one demand registration commencing after the third anniversary of
the closing date, subject to certain limitations and conditions set forth
therein. Under the terms of the Registration Rights Agreement, the ability of
any Alchem shareholder to exercise the rights granted thereunder is expressly
subordinate in all respects and subject to the rights granted by the Company
pursuant to that certain Amended and Restated Registration Rights Agreement
entered into between the Company and certain Existing Holders (as defined
therein) on September 30, 1988.
- 2 -
<PAGE> 3
Alchem is a producer of specification aluminum alloys for automotive
manufacturers and their suppliers and has operated its facility located in
Coldwater, Michigan since 1972. The Company presently intends to continue the
business of Alchem in substantially the same manner as it was conducted
prior to the Alchem Acquisition. Alchem and the Company have been operating
under a joint venture agreement entered into in October 1995 to construct and
operate an aluminum recycling plant adjacent to Alchem's processing facility in
Coldwater. This facility began operating in February 1997 and reached full
capacity in October 1997. Alchem's facility has an annual melting capacity of
180 million pounds; the joint venture facility with the Company has an annual
capacity of 150 million pounds.
It is expected that the Alchem Acquisition will permit the Company to increase
its participation in the automotive industry, broaden its customer base and
expand its product range to include specification alloys. The Company
estimates that, after giving effect to the Alchem Acquisition, approximately
30% of the Company's annual domestic capacity will be supplied to the
transportation sector. As of the close of business on November 14, 1997,
William Warshauer, the former principal shareholder of Alchem, beneficially
owned 1,102,660 shares of Common Stock, or 6.7% of the outstanding shares of
Common Stock as of that date.
In connection with the Alchem Acquisition, the Company also paid approximately
$15,500,715 in extinguishment of outstanding indebtedness of Alchem and assumed
$1,440,000 of indebtedness of Alchem related to outstanding revenue bonds. In
order to fund the repayment of such Alchem debt in connection with the Alchem
Acquisition and to fund the cash portion of the merger consideration for
Alchem, as well as increase the limits of its working capital facility, on
November 5, 1997, the Company amended and restated its senior credit facilities
with its senior lenders, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated as arranger and syndication agent, and Texas Commerce Bank
National Association as administrative agent for the lenders, pursuant to the
terms of an Amended and Restated Credit Agreement.
The Amended and Restated Credit Agreement permitted the Company to fund the
Alchem Acquisition and consolidated the Company's outstanding indebtedness
under the facility into a reducing revolving credit facility. The maximum
amount available for borrowings under the amended and restated credit facility
was increased from $125,000,000 to $200,000,000. In addition, up to
$12,000,000 of borrowings available under the Amended and Restated Credit
Agreement may be used, as needed, by the Company for letters of credit.
Indebtedness under the Amended and Restated Credit Agreement will mature in
December 2003. The agreement provides that the maximum amount of commitments
under the facility will be reduced on an annual basis beginning in December
1999, so that by December 31, 2002, the maximum amount of aggregate commitments
under the facility may not exceed $100,000,000. Outstanding indebtedness under
the Amended and Restated Credit Agreement will bear interest, at the Company's
option, at fluctuating interest rates based upon an alternative base rate
(which may be the prime rate) or a rate based upon the applicable LIBOR rate
plus a credit margin based upon the Company's ratio of debt to total
capitalization. In addition, the Company must pay a commitment fee for
unborrowed amounts available under the reducing revolving facility, initially
in the amount of 0.30% of the aggregate nonutilized revolving credit
commitments, and after March 31, 1998, an amount based upon the Company's ratio
of debt to total capitalization. As of November 17, 1997, $89,225,000 of
indebtedness under the Amended and Restated Credit Agreement was outstanding.
The amended and restated credit facilities are secured by a first lien mortgage
and security interest on seven plant facilities owned by the Company, as well
as security interests in equipment, accounts receivable, inventories and
certain intellectual property and general intangibles. The facilities are
additionally secured by a pledge of the capital stock and equity interests of
substantially all of the Company's wholly-owned subsidiaries and certain joint
ventures in which the Company is directly or indirectly a joint venturer.
Additionally, substantially all of the Company's wholly-owned subsidiaries have
guaranteed the Company's obligations under the credit facilities. The Amended
and Restated Credit Agreement provides that if (i) the Company's senior
unsecured long-term indebtedness for borrowed money is rated at least BBB- or
Baaa3, or (ii) during four consecutive fiscal quarters the Company's leverage
ratio and debt to capitalization ratio meet
- 3 -
<PAGE> 4
certain requirements, then the lenders' liens in the collateral may be released
upon the request and at the expense of the Company.
The Amended and Restated Credit Agreement contains certain covenants,
representations and warranties by the Company and its subsidiary guarantors,
including (i) limitations on the ability to dispose of assets of the Company
and its subsidiaries or equity interests of subsidiaries, (ii) limitations on
acquisitions of unaffiliated businesses other than certain scheduled specified
transactions, and additional unscheduled acquisitions not to exceed $75 million
in the aggregate (excluding the Alchem Acquisition), (iii) restrictions on
liens and indebtedness permitted to be incurred or assumed by the Company and
its subsidiaries, except as otherwise scheduled or permitted under the Amended
and Restated Credit Agreement, and (iv) restrictions on investments by the
Company and its subsidiaries.
The Amended and Restated Credit Agreement also contains limitations on the
Company's ability to declare and pay dividends in cash or property; however, if
there is no default under the agreement, then the Company is permitted to make
cash dividend payments in an aggregate amount of up to $4 million in 1997, $5
million in 1998, $6 million in 1999 and in 2000, and $8 million in any year
thereafter. No assurances can be given as to future levels of dividends, if
any, which may be declared and paid; decisions concerning the declaration and
payment of dividends are made by the Company's Board of Directors and will be
based upon the Company's level of earnings, cash flow, financial requirements,
and economic and business conditions then prevailing, as well as other relevant
factors. The Amended and Restated Credit Agreement further contains provisions
restricting the amount of capital expenditures that the Company and its
subsidiaries may make in any fiscal year ($38 million in fiscal 1997, excluding
the Alchem Acquisition, and $35 million for each fiscal year thereafter, not
including the Alchem Acquisition and certain other permitted acquisitions).
Finally, the agreement requires the Company to maintain and comply with certain
financial covenants and ratios, including a maximum debt to capitalization
ratio, a minimum interest coverage ratio and a covenant requiring that certain
minimum net worth amounts be maintained.
The Company will account for the Alchem Acquisition using the purchase method
for financial accounting purposes.
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS
Certain information contained in this Item 2. of this Current Report on Form
8-K may be deemed to be forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and is subject to the "Safe
Harbor" provisions of that section. This information includes, without
limitation, statements concerning the expected effects of the Alchem
Acquisition, percentages of capacity supplying the transportation sector and
future dividends. These statements are based on current expectations and
involve a number of risks and uncertainties. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct.
When used in this report, the words "anticipate," "estimate," "expect," "may,"
"project" and similar expressions are intended to be among the statements that
identify forward-looking statements. Important factors which could affect the
Company's actual results and cause actual results to differ materially from
those results which might be projected, forecast or estimated by the Company in
such forward-looking statements include, but are not limited to, the following:
conditions or developments in the business and prospects concerning Alchem and
the Company and the future mix of business at the Company's various facilities,
the growth of the use of aluminum in automotive products, U.S. demand for
automotive products, and future revenues, net earnings, cash flows, capital
expenditures, demands on the Company's liquidity, and other factors affecting
the amount and timing of dividends. The foregoing review of factors should not
be construed as exhaustive. Additional
- 4 -
<PAGE> 5
factors that could cause actual results to differ materially from those
contemplated in the forward-looking statements contained in this Current Report
on Form 8-K may be found in the Company's Quarterly Report on Form 10-Q for its
fiscal quarter ended September 30, 1997, under Item 2.- "Management's
Discussion and Analysis of Financial Condition and Results of Operation" as
filed with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired:
AT THIS TIME IT IS IMPRACTICABLE TO PROVIDE THE REQUIRED
CONSOLIDATED FINANCIAL STATEMENTS FOR ALCHEM ALUMINUM, INC.;
THEREFORE, THE REQUIRED FINANCIAL STATEMENTS WILL BE FILED WITH THE
COMMISSION NO LATER THAN JANUARY 27, 1998.
(b) Pro Forma Financial Information:
AT THIS TIME IT IS IMPRACTICABLE TO PROVIDE THE REQUIRED PRO
FORMA FINANCIAL INFORMATION REQUIRED PURSUANT TO ARTICLE 11 OF
REGULATION S-X; THEREFORE, ALL REQUIRED PRO FORMA FINANCIAL
INFORMATION WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
NO LATER THAN JANUARY 27, 1998.
(c) Exhibits:
**10.1 Letter of Intent dated September 15, 1997, by and
between the Company and Alchem.
**10.2 Amendment to Letter of Intent dated September 29,
1997.
*10.3 Agreement and Plan of Merger by and among the
Company, IMCO Recycling of Coldwater Inc., Alchem
Aluminum, Inc. and the Shareholders of Alchem
Aluminum dated November 14, 1997.
*10.4 Registration Rights Agreement by and among the
Company and the Shareholders of Alchem dated November
14, 1997.
***10.5 Amended and Restated Credit Agreement by and among
the Company, the Subsidiary Guarantors named therein,
the Lenders thereunder, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as
arranger and syndication agent, and Texas Commerce
Bank National Association, as administrative agent,
dated November 5, 1997 (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated
herein by reference).
- ----------------------
* Filed herewith
** Previously Filed in this Current Report on Form 8-K
*** Previously Filed in another Report Filed with the Securities and
Exchange Commission
- 5 -
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
IMCO RECYCLING INC.
("Registrant")
/s/ ROBERT R. HOLIAN
Date: November 19, 1997 ----------------------------
Robert R. Holian
Vice President and Controller
- 6 -
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<S> <C>
**10.1 Letter of Intent dated September 15, 1997, by and between the Company and Alchem.
**10.2 Amendment to Letter of Intent dated September 29, 1997.
*10.3 Agreement and Plan of Merger by and among the Company, IMCO Recycling of Coldwater Inc., Alchem Aluminum,
Inc. and the Shareholders of Alchem Aluminum dated November 14, 1997.
*10.4 Registration Rights Agreement by and among the Company and the Shareholders of Alchem dated November 14,
1997.
***10.5 Amended and Restated Credit Agreement by and among the Company, the Subsidiary Guarantors named therein,
the Lenders thereunder, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as arranger
and syndication agent, and Texas Commerce Bank National Association, as administrative agent, dated
November 5, 1997 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by reference).
</TABLE>
- ----------------------
* Filed herewith
** Previously Filed in this Current Report on Form 8-K
*** Previously Filed in another Report Filed with the Securities and
Exchange Commission
<PAGE> 1
EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IMCO RECYCLING INC.,
IMCO RECYCLING OF COLDWATER INC.,
ALCHEM ALUMINUM, INC.,
AND
THE SHAREHOLDERS OF ALCHEM ALUMINUM, INC.
NOVEMBER 14, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 MERGER; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Additional Representations and Warranties of the Shareholders . . . . . . . . . . . . . . . . . . 29
3.3 Limitations of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB . . . . . . . . . . . . . . . . . . . . . 31
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5 COVENANTS OF THE SHAREHOLDERS PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . 32
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2 Operation of the Businesses of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.4 Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.5 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 Payment of Indebtedness by Related Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Dissenter's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9 No Shopping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 6 COVENANTS OF BUYER AND MERGER SUB PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . 34
6.1 Approvals of Governmental Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 7 CONDITIONS PRECEDENT TO BUYER'S AND MERGER SUB'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . 34
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Shareholders' Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 HSR Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
7.5 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Environmental Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.9 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . . . . . . . . . . . . . . . . . . . 36
7.10 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.11 No Dissenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.12 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.13 Tax Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 8 CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . 37
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Buyer's and Merger Sub's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10 INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Survival; Right to Indemnification Not Affected by Knowledge . . . . . . . . . . . . . . . . . . 39
10.2 Indemnification and Payment of Damages by Shareholders . . . . . . . . . . . . . . . . . . . . . 39
10.3 Environmental Indemnification; Post-Closing Report . . . . . . . . . . . . . . . . . . . . . . . 40
10.4 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.5 Limitations on Amount -- Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.6 Proportionate Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.7 Limited Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.8 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.9 Procedure for Indemnification -- Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . 42
10.10 Procedure for Indemnification -- Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.5 Jurisdiction; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.8 Entire Agreement and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.9 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 Assignments, Successors and No Third-party Rights . . . . . . . . . . . . . . . . . . . . . . . . 46
11.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.12 Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
- ii -
<PAGE> 4
EXHIBITS
Exhibit A Shareholder Ownership and Percentage of Company Shares
Exhibit B Form of Escrow Agreement
Exhibit C Form of Shareholder Release
Exhibit D Form of Employment Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Opinion of Baker & Daniels
Exhibit G Form of Investment Letter
Exhibit H List of Properties
Exhibit I Form of Opinion of Haynes and Boone, LLP
- iii -
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("AGREEMENT") is made as of November
14, 1997, by and among IMCO RECYCLING INC., a Delaware corporation ("BUYER"),
IMCO RECYCLING OF COLDWATER INC., a Delaware corporation ("MERGER SUB"), Alchem
Aluminum, Inc., an Indiana corporation ("COMPANY"), and William Warshauer, an
individual residing in Fremont, Indiana, Louise Warshauer, an individual
residing in Fremont, Indiana, and Lawrence E. Donay, an individual residing in
Angola, Indiana (collectively with William Warshauer and Louise Warshauer, the
"SHAREHOLDERS").
WHEREAS, the Shareholders own all of the outstanding shares of capital
stock of the Company; and
WHEREAS, Buyer is the sole shareholder of Merger Sub; and
WHEREAS, the parties hereto desire to enter into this Agreement
pursuant to which Buyer will acquire all of the outstanding shares of the
capital stock of the Company by means of a merger of the Company with and into
Merger Sub, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
The parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 1:
"ACCOUNTS RECEIVABLE" is defined in Section 3.1.8.
"AFFILIATE" means any Person that, directly or indirectly, controls or
is controlled by or under common control with, another Person. For the
purposes of this definition, "control" (including the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
power to direct or cause the direction of the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or by contract or otherwise.
"APPLICABLE CONTRACT" means any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability or (c) by which the Company or any of
the assets owned or used by it is or may become bound.
"BALANCE SHEET" is defined in Section 3.1.4.
<PAGE> 6
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"BORROWED MONEY" means, as of any date, the sum of the following
(without duplication): (i) all indebtedness which would be classified as
"funded indebtedness" or "long-term indebtedness" on a consolidated balance
sheet of a Person and its consolidated Subsidiaries prepared as of such date in
accordance with GAAP, (ii) all indebtedness, whether secured or unsecured, of a
Person and its consolidated Subsidiaries, having a final maturity (or which is
renewable or extendable at the option of the obligor for a period ending) more
than one year after the date of creation thereof, notwithstanding the fact that
payments in respect thereof (whether installment, serial maturity or sinking
fund payments, or otherwise) are required to be made by the obligor less than
one year after the date of the creation thereof and notwithstanding the fact
that any amount thereof is at the time included also in Current Liabilities of
such obligor, and (iii) all indebtedness of a Person and its consolidated
Subsidiaries outstanding under a revolving credit or similar agreement
providing for borrowings (and renewals and extensions thereof) over a period of
more than one year, notwithstanding the fact that any such indebtedness is
created within one year of the expiration of such agreement.
"BREACH" means the following: a "BREACH" of a representation,
warranty, covenant, obligation or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to have occurred
if there is or has been (a) any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant, obligation or
other provision or (b) any claim (by any Person) or other occurrence or
circumstance that is or was inconsistent with such representation, warranty,
covenant, obligation or other provision, and the term "BREACH" means any such
inaccuracy, breach, failure, claim, occurrence or circumstance.
"BUYER" is defined in the first paragraph of this Agreement.
"BUYER'S ADVISORS" is defined in Section 5.1.
"BUYER'S CLOSING DOCUMENTS" is defined in Section 4.2.1.
"CASH MERGER ADJUSTMENT AMOUNT" is defined in Section 2.2.3.
"CASH MERGER CONSIDERATION" is defined in Section 2.2.1(b).
"CLAIM" is defined in Section 10.5.
"CLOSING" is defined in Section 2.3.
"CLOSING BALANCE SHEET" is defined in Section 2.2.2.
"CLOSING DATE" means the date and time as of which the Closing
actually takes place.
"COMPANY" is defined in the first paragraph of this Agreement.
2
<PAGE> 7
"COMPANY SHARES" means the Company's common shares, no par value,
comprised of Series A and Series B.
"CONSENT" means any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"CONSTITUENT CORPORATIONS" means together, Merger Sub and the Company.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
by this Agreement, including:
(a) the Merger;
(b) the execution, delivery and performance of the
Employment Agreements, the Shareholders' Releases, the Registration
Rights Agreement and the Escrow Agreement; and
(c) the performance by Buyer, Merger Sub, the Company and
Shareholders of their respective covenants and obligations under this
Agreement.
"CONTRACT" means any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding , including, without limitation, all commitments (in the form
of accepted purchase orders) to sell products and/or services, or outstanding
quotations, proposals or bids for the sale of goods and all commitments (in the
form of issued purchase orders), or outstanding quotations, proposals or bids,
to purchase or acquire raw materials, components, supplies or services.
"CURRENT ASSETS" means, as of any date, the Company's current assets
which would be reflected on the Company's balance sheet prepared as of such
date in accordance with GAAP, but excluding (i) all accounts receivable in
respect of products, goods and/or services which were delivered or performed by
the Company at least 90 days prior to such date (except with respect to DuPage
Diecasting Corporation, Niles, Illinois, for which the period shall be 100 days
prior to such date) and (ii) intangible assets.
"CURRENT LIABILITIES" means, as of any date, the current liabilities
which would be reflected on the Company's balance sheet prepared as of such
date in accordance with GAAP, but excluding current maturities of long-term
debt.
"DAMAGES" is defined in Section 10.2.
"DGCL" means the Delaware General Corporation Law, as amended.
"DISCLOSURE LETTER" means the disclosure letter delivered by the
Shareholders to Buyer concurrently with the execution and delivery of this
Agreement.
"EFFECTIVE TIME" is defined in Section 2.1.2.
"EMPLOYEE BENEFIT PLANS" is defined in Section 3.1.13.
"EMPLOYMENT AGREEMENTS" is defined in Section 7.6.3.
3
<PAGE> 8
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" means any cost,
damages, expense, liability, obligation or other responsibility arising from or
under Environmental Law and consisting of or relating to (a) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial or inspection
costs and expenses arising under Environmental Law; (b) financial
responsibility under Environmental Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment or other remediation
or response actions required or requested by any Governmental Body with respect
to Hazardous Materials and for any natural resource damages with respect to
Hazardous Materials; or (c) any other compliance, corrective, investigative or
remedial measures required under Environmental Law. The terms "removal,"
"remedial," and "response action," include the types of activities covered by
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" means the (1) Toxic Substance Control Act, 15
U.S.C. Sections 2601 et seq., (2) National Historic Preservation Act, 16 U.S.C.
Sections 470 et seq., (3) Coastal Zone Management Act of 1972, 16 U.S.C.
Section 1451 et seq., (4) Rivers and Harbors Act of 1899, 33 U.S.C. Sections
401 et seq., (5) Clean Water Act, 33 U.S.C. Sections 1251 et seq., (6) Flood
Disaster Protection Act, 41 U.S.C. Sections 4001 et seq., (7) National
Environmental Policy Act, 41 U.S.C. Sections 432` et seq., (8) Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq.
("RCRA"), (9) Clean Air Act, 41 U.S.C. Sections 7401 et seq., (10)
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
Sections 9601 et seq. ("CERCLA"); (11) Hazardous Materials Transportation Act,
49 U.S.C. Sections 1801 et seq., (12) Safe Drinking Water Act, 42 U.S.C.
Sections 300f et seq., (13) Emergency Planning and Community Right-to-Know Act,
42 U.S.C. Sections 11001 et seq., (14) Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Sections 136 et seq., (15) Occupational Safety and
Health Act, 29 U.S.C. Sections 651 et seq., and (16) Solid Waste Disposal Act,
42 U.S.C. Sections 694 et seq., (17) Superfund amendments and Reauthorization
Act of 1986, (18) Hazardous Materials Transportation Act and (19) all other
federal, state, county, municipal and local, foreign and other statutes, laws,
regulations, ordinances, codes, judgments or orders which relate to or deal
with protection of human health or the Environment, all as in effect on the
Closing Date.
"ENVIRONMENTAL REPORT" is defined in Section 7.7.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law and regulations and rules issued pursuant to that
Act or any successor law.
"ESCROW AGREEMENT" is defined in Section 2.2.3.
4
<PAGE> 9
"FACILITIES" means any real property, leaseholds or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures or equipment (including motor vehicles, tractors, vans,
trailers and roll-off containers) currently or formerly owned or operated by
the Company.
"FUTURES CONTRACTS" is defined in Section 3.1.17.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.1.4 were prepared.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any: (a) nation, state, county, city, town,
village, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.
"HAZARDOUS MATERIALS" means any substance, material or waste regulated
under any of the Environmental Laws (including, without limitation, raw
materials which contain hazardous materials) and (2) petroleum, petroleum
products, asbestos, polychlorinated biphenyls, urea formaldehyde, and radon.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"IBCA" means the Indiana Business Corporation Act, as amended.
"IMCO SHARES" means shares of Buyer's common stock, par value $.10 per
share.
"INDEMNIFIED PERSONS" is defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" is defined in Section 3.1.22.
"INTERIM BALANCE SHEET" is defined in Section 3.1.4.
"IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code of 1986, as amended, or any successor law.
"IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
5
<PAGE> 10
"KNOWLEDGE" means the following: an individual will be deemed to have
"KNOWLEDGE" of a particular fact or other matter if: (a) such individual is
actually aware of such fact or other matter; or (b) a prudent individual could
be expected to discover or otherwise become aware of such fact or other matter
in the course of conducting a reasonable investigation concerning the existence
of such fact or other matter. A Person (other than an individual) will be
deemed to have "KNOWLEDGE" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"MARKS" is defined in Section 3.1.22.
"MERGER" is defined in Section 2.1.1.
"MERGER CONSIDERATION" means the consideration stated in Section
2.2.1(b), consisting of the Cash Merger Consideration and the Stock Merger
Consideration, collectively, which shall be allocated and distributed in
accordance with Section 2.2.1 to each holder of Company Shares outstanding
immediately prior to the Effective Time.
"NYSE" means The New York Stock Exchange.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means the following: an action taken by
a Person will be deemed to have been taken in the "ORDINARY COURSE OF BUSINESS"
only if: (a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person and (b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"PLAN" is defined in Section 3.1.13.
6
<PAGE> 11
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" means, with respect to a particular individual: (a)
each other member of such individual's Family; (b) any Person that is directly
or indirectly controlled by such individual or one or more members of such
individual's Family; (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and (d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor or trustee (or in a similar capacity). With respect to a
specified Person other than an individual: (a) any Person that directly or
indirectly controls, is directly or indirectly controlled by or is directly or
indirectly under common control with such specified Person; (b) any Person
that holds a Material Interest in such specified Person; (c) each Person that
serves as a director, officer, partner, executor or trustee of such specified
Person (or in a similar capacity); (d) any Person in which such specified
Person holds a Material Interest; (e) any Person with respect to which such
specified Person serves as a general partner or a trustee (or in a similar
capacity); and (f) any Related Person of any individual described in clause (b)
or (c). For purposes of this definition, (a) the "FAMILY" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree and (iv) any other natural person who resides with
such individual and (b) "MATERIAL INTEREST" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"REGISTRATION RIGHTS AGREEMENT" is defined in Section 7.6.5.
"RELEASE" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SHAREHOLDERS" is defined in the first paragraph of this Agreement.
"SHAREHOLDERS' CLOSING DOCUMENTS" is defined in Section 3.2.6.
"SHAREHOLDERS' RELEASES" is defined in Section 7.6.2.
"STOCK MERGER CONSIDERATION" is defined in Section 2.2.1(b).
7
<PAGE> 12
"SUBSIDIARY" means with respect to any Person (the "OWNER"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body or otherwise having the power to direct the
business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "SUBSIDIARY"
means a Subsidiary of the Company.
"SURVIVING CORPORATION" is defined in Section 2.1.1.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under IRC Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
"TAX RETURN" means any return (including any information return),
report, statement, schedule, notice, form or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" means a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"THREATENED" means the following: a claim, Proceeding, dispute, action
or other matter will be deemed to have been "THREATENED" if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing), or if any other event has occurred or any other
circumstances exist, that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action or other matter is likely to be asserted,
commenced, taken or otherwise pursued in the future.
"TRADE SECRET" is defined in Section 3.1.22.
"TRANSFER" means any exercise, sale, transfer, encumbrance, gift,
donation, assignment, grant of any interest, pledge, hypothecation or other
disposition of any IMCO Shares or any interest therein, whether voluntary or
involuntary, including, but not limited to, any transfer by operation of law,
by court order, by judicial process, or by foreclosure, levy or attachment.
"WORKING CAPITAL" means Current Assets less Current Liabilities.
8
<PAGE> 13
ARTICLE 2
MERGER; CLOSING
2.1 The Merger.
2.1.1 The Merger. Upon the terms and subject to
the conditions set forth in this Agreement and in accordance with the IBCA and
the DGCL, at the Effective Time, the Company shall be merged with and into
Merger Sub (the "MERGER"), in accordance with the terms set forth in this
Agreement. From and after the Effective Time, the separate corporate existence
of the Company shall cease, and Merger Sub shall continue as the surviving
corporation in the Merger and shall continue to be governed by the laws of the
State of Delaware (the "SURVIVING CORPORATION"). The Merger shall be
consummated by filing a Certificate of Merger with the Secretary of State of
the State of Delaware and Articles of Merger with the Secretary of State of the
State of Indiana, together with all other documents, notices and filings
required by the IBCA and the DGCL.
2.1.2 Effective Time of the Merger. The Articles
of Merger and the Certificate of Merger shall provide that the Merger shall be
effective as of the time of filing (the "EFFECTIVE TIME").
2.1.3 Effect of the Merger. At the Effective Time,
the effect of the Merger shall be as provided in Section 23-1-40-6 of the IBCA
and Section 259 of the DGCL. If at any time the Surviving Corporation shall
consider or be advised that any further assignments, assurances in law or other
acts or instruments are necessary or desirable to vest, perfect or confirm in
the Surviving Corporation the title to any property or rights of the
Constituent Corporations, the Constituent Corporations and their proper
officers and directors shall and will do all such acts and things as may be
necessary or proper to vest, effect or confirm title to such property or rights
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement.
2.1.4 Certificate of Incorporation; Bylaws;
Directors and Officers. The Certificate of Incorporation and Bylaws of Merger
Sub, in each case as in effect at the Effective Time, shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation, except as described
in Section 2.1.5. At the Effective Time, the Board of Directors and officers
of the Surviving Corporation shall be comprised of the directors and officers
of Merger Sub, to hold office until their respective successors are duly
elected or appointed and qualified.
2.1.5 Amendment to Certificate of Incorporation.
At the Effective Time, Article First of the Certificate of Incorporation of
Merger Sub shall be amended to read in its entirety as follows: "First: The
name of the Corporation is Alchem Aluminum, Inc."
2.1.6 Tax Consequences. It is intended that the
Merger shall constitute a reorganization described in Section 368(a)(2)(D) of
the IRC and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the IRC. It shall not be a condition to the
consummation of the Merger that any party hereto shall have received a ruling
of the Internal Revenue Service as to the federal income tax consequences of
the Merger.
9
<PAGE> 14
2.2 Terms of the Merger.
2.2.1 Merger Consideration.
(a) At the Effective Time, by virtue of the
Merger and without any action by the holders of the Company
Shares, all Company Shares issued and outstanding immediately
prior to the Effective Time shall be canceled and retired and
converted into and become rights to receive the Merger
Consideration in the manner described in Section 2.2.1(c).
(b) Subject to the adjustments described below in
Sections 2.2.2, 2.2.3 and 2.2.4, the aggregate Merger
Consideration shall be equal to $49,250,000, less the amount
of the Company's obligations for Borrowed Money as of October
31, 1997, as reflected on the Closing Balance Sheet. The
aggregate Merger Consideration shall be payable at Closing by
delivery of:
(i) 1,208,339 IMCO Shares (the "STOCK
MERGER CONSIDERATION"); and
(ii) (subject to the adjustments
described below in Sections 2.2.2, 2.2.3 and 2.2.4), cash,
payable by wire transfer of immediately available funds in the
amounts and to the account(s) designated in writing by the
Shareholders at least two (2) business days before the
Closing, in a total amount equal to $26,250,000 less the
amount of the Company's obligations for Borrowed Money as of
October 31, 1997, as reflected on the Closing Balance Sheet
(the "CASH MERGER CONSIDERATION").
(c) At the Effective Time, each issued and
outstanding share of Company Shares shall be converted without
any action on the part of the holder thereof into and be
exchangeable for (i) an amount of the Cash Merger
Consideration determined by multiplying the percentage set
forth opposite such Shareholder's name on Exhibit A hereto by
the aggregate amount constituting the Cash Merger
Consideration and (ii) an amount of IMCO Shares determined by
multiplying the percentage set forth opposite such
Shareholder's name on Exhibit A hereto by the aggregate number
of shares of IMCO Shares constituting the Merger
Consideration.
(d) As soon as practicable after the Effective
Time, the Merger Consideration shall be distributed pursuant
to Section 2.2.1 and Section 2.2.2.
(e) At the Effective Time and in accordance with
the terms of this Agreement, Buyer agrees to issue and deliver
a sufficient number of IMCO Shares necessary to satisfy its
obligations set forth in this Section 2.2.1.
2.2.2 Cash Merger Adjustment Amount. After the Closing
Date, Buyer shall cause the Company to prepare, and will cause Ernst & Young to
audit, a balance sheet for the Company as of October 31, 1997 in accordance
with GAAP (the "CLOSING BALANCE SHEET"). Buyer shall deliver the Closing
Balance Sheet to the Shareholders within sixty (60) days after the Closing
Date. If within thirty (30) days following delivery of the Closing Balance
Sheet, the Shareholders have not given Buyer notice of their objection to the
Closing
10
<PAGE> 15
Balance Sheet (such notice must contain a statement of the basis of the
Shareholders' objection), then the Closing Balance Sheet will be used in
computing the Cash Merger Adjustment Amount (defined below). If the
Shareholders give such notice of objection, then the issues in dispute will be
submitted to a nationally recognized firm of certified public accountants
selected by the agreement of Buyer and the Shareholders (other than Ernst &
Young or Arthur Andersen LLP, such other firm being referred to as the
"Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution, (i) each party will furnish to the Accountants such
workpapers and other documents and information relating to the disputed issues
as the Accountants may request and are available to that party (or its
independent public accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (iii) Buyer and
the Shareholders shall each bear 50% of the fees of the Accountants for such
determination.
2.2.3 Calculation of Cash Merger Adjustment Amount. The
"CASH MERGER ADJUSTMENT AMOUNT" (herein so called) will be calculated as
follows:
(a) if the Company's Working Capital as
calculated on a FIFO basis, as set forth on the Closing
Balance Sheet, exceeds $16,347,030, then the Cash Merger
Adjustment Amount shall be equal to the sum of (i) the amount
of such excess, plus (ii) (the ending LIFO inventory reserve,
as set forth on the Closing Balance Sheet, minus $2,465,916)
multiplied by 60%;
(b) if the Company's Working Capital as
calculated on a FIFO basis, as set forth on the Closing
Balance Sheet, is less than $16,347,030, then the Cash Merger
Adjustment Amount shall be equal to the sum of (i) the amount
of such deficit, plus (ii) (the ending LIFO inventory reserve,
as set forth on the Closing Balance Sheet, minus $2,465,916)
multiplied by 60%.
2.2.4 Payment of Adjustment. On the tenth business day
following the final determination of the Cash Merger Adjustment Amount: if the
Cash Merger Adjustment Amount is a positive number, then Buyer shall pay to the
Shareholders (allocated among the Shareholders in accordance with the
percentages set forth on Exhibit A hereto) the Cash Merger Adjustment Amount;
if the Cash Merger Adjustment Amount is a negative number, then the
Shareholders (each in accordance with the percentages set forth on Exhibit A
hereto) shall pay to Buyer the Cash Merger Adjustment Amount. Payments must be
made by wire transfer to specified bank accounts in immediately available
funds.
2.2.5 Exchange Procedure for the Shareholders. After the
Effective Time, each holder of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of Company Shares
shall surrender such certificate or certificates to the Surviving Corporation,
duly endorsed and executed as the Surviving Corporation may require, to the
Surviving Corporation for cancellation, at which time the Cash Merger
Consideration and the Stock Merger Consideration applicable to such shares of
Company Shares shall be delivered to such Shareholder. At the Effective Time,
the holders of certificates evidencing the Company Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such stock, and their sole right shall be to receive their
respective portions of the Merger Consideration, as set forth above.
11
<PAGE> 16
All rights to receive the Cash Merger Consideration and the Stock Merger
Consideration (or cash in lieu of fractional shares of IMCO Shares), shall be
deemed, when paid or issued hereunder, to have been paid or issued, as the case
may be, in full satisfaction of all rights pertaining to the Company Shares.
Notwithstanding any other provision of this Agreement, no certificates or scrip
representing fractional shares of IMCO Shares shall be issued upon the
surrender for exchange of certificates which prior to the Effective Time shall
have represented any Company Shares. In lieu of any fractional shares, there
shall be paid to each Shareholder who would be entitled to receive a fractional
share of IMCO Shares an amount of cash (without interest) determined by
multiplying such fraction by $19.0344.
2.2.6 Escrow Agreement. At the Closing, the parties hereto
shall execute and deliver an Escrow Agreement with the Escrow Agent (the
"ESCROW AGREEMENT") substantially in the form of Exhibit B hereto, pursuant to
which Shareholders shall deliver to the Escrow Agent (in accordance with the
percentages set forth on Exhibit A hereto) an aggregate of 250,000 IMCO Shares.
Such IMCO Shares shall be held and distributed under the terms and conditions
of the Escrow Agreement.
2.2.7 Merger Sub Capital Stock. Each share of common stock
of Merger Sub issued and outstanding immediately prior to the Merger shall
continue to be issued and outstanding and evidence ownership of the same number
of shares of common stock of the Surviving Corporation, and the Merger shall
effect no change in any of such shares, and no shares of Merger Sub common
stock shall be converted in the Merger. Any Company Shares held in the
treasury of the Company immediately prior to the Effective Time shall be
canceled as of the Effective Time, without payment of any consideration
therefor.
2.2.8 Listed Shares. Within 90 days after the Closing
Date, Buyer shall have caused the IMCO Shares deliverable pursuant to the
Merger to be duly listed for trading on the NYSE and/or approved for listing
upon official notice of issuance.
2.2.9 Transfer Restrictions. Each Shareholder agrees that
he or she shall not Transfer any of the IMCO Shares except that (i) after the
first anniversary of the Closing Date, each Shareholder may Transfer that
number of IMCO Shares (other than any IMCO Shares that remain on deposit under
the Escrow Agreement) determined by multiplying the percentage set forth
opposite such Shareholder's name on Exhibit A hereto by 350,000, (ii) after the
second anniversary of the Closing Date, each Shareholder may Transfer that
number of IMCO Shares (other than any IMCO Shares that remain on deposit under
the Escrow Agreement) determined by multiplying the percentage set forth
opposite such Shareholder's name on Exhibit A hereto by 350,000 (in addition
to the 350,000 permitted to be Transferred under (i) above) and (iii) after the
third anniversary of the Closing Date, each Shareholder may Transfer any IMCO
Shares (other than any IMCO Shares that remain on deposit under the Escrow
Agreement); provided, further, that any Transfer is in compliance with the
Securities Act and applicable state securities laws, as then in effect.
2.3 Closing. The closing of the Merger (the "CLOSING") shall take
place at the offices of Haynes and Boone, L.L.P., at 901 Main Street, Suite
3100, Dallas, Texas 75202, at 10:00 a.m., Dallas time, on November 14, 1997,
or, if later, on the first business day on or by which the last to be fulfilled
or waived of the conditions set forth in Articles 7 and 8 hereof shall be
fulfilled or waived in accordance therewith, but in any event not later than
December 1, 1997.
12
<PAGE> 17
2.4 Accounting Treatment. The parties to this Agreement
acknowledge and agree that the transactions contemplated hereby shall for
financial purposes be accounted for as having been consummated as of November
1, 1997.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
3.1 Shareholders jointly and severally represent and warrant to
Buyer and Merger Sub as follows:
3.1.1 Organization and Good Standing. Part 3.1.1 of the
Disclosure Letter contains a complete and accurate list of the Company's name,
its jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business, and its capitalization (including the identity of
each stockholder and the number of shares held by each). The Company is a
corporation duly organized and validly existing under the laws of Indiana, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. The
Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification.
Shareholders have delivered to Buyer copies of the Organizational Documents of
the Company, as currently in effect.
3.1.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The Company has the
absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and to perform its
obligations under this Agreement.
(b) Except as set forth in Part 3.1.2(b) of the
Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with or result
in a violation of (A) any provision of the Organizational
Documents of the Company or (B) any resolution adopted by the
board of directors or the stockholders of the Company;
(ii) contravene, conflict with or result
in a violation of or give any Governmental Body or other
Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company
or any of the assets owned or used by the Company, may be
subject;
13
<PAGE> 18
(iii) contravene, conflict with or result
in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) cause Buyer, Merger Sub or the
Company to become subject to, or to become liable for the
payment of, any Tax;
(v) cause any of the assets owned by the
Company to be reassessed or revalued by any taxing authority
or other Governmental Body;
(vi) contravene, conflict with, or result
in a violation or breach of any provision of, or give any
Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify, any Applicable Contract; or
(vii) result in the imposition or creation
of any Encumbrance upon or with respect to any of the assets
owned or used by the Company.
Except as set forth in Part 3.1.2(b) of the Disclosure Letter,
the Company is not and will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.1.3 Capitalization. The authorized equity securities of
the Company consist of 15,000 common shares, comprised of Series A and Series
B, of which 100 common shares, Series A, are issued and outstanding, and 11,861
common shares, Series B, are issued and outstanding. The 100 outstanding
common shares, Series A, and the 11,861 outstanding common shares, Series B,
collectively constitute the Company Shares. There are no other outstanding
equity securities of the Company. Shareholders are and will be on the Closing
Date the record and beneficial holders of the Company Shares, in the amounts
set forth on Exhibit A, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts relating to the issuance,
sale or transfer of any equity securities or other securities of the Company.
None of the outstanding equity securities or other securities of the Company
was issued in violation of the Securities Act or any other Legal Requirement.
The Company does not own, and does not have any Contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity
or ownership interest in any other business.
3.1.4 Financial Statements. Shareholders have delivered to
Buyer: (a) audited balance sheets of the Company as at October 31 in each of
the years 1993 through 1995, and the related statements of income, changes in
Shareholders' equity, and cash flow for each of the fiscal years then ended,
(b) an audited balance sheet of the Company as at October 31, 1996 (including
the notes thereto, the "BALANCE SHEET"), and the related statement of income,
changes in shareholders' equity, and cash flow for the fiscal year then ended
and (c) an unaudited balance sheet of the Company as at June 30, 1997 and
contained in the Alchem Aluminum, Inc. Confidential Memorandum dated August
1997, prepared by
14
<PAGE> 19
McDonald and Company (the "INTERIM BALANCE SHEET") and the related unaudited
statement of income for the eight months then ended. Such financial statements
and notes fairly present the financial condition and the results of operations,
changes in Shareholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not be material) and the absence of notes (that, if presented, would
not differ from those included in the Balance Sheet); the financial statements
referred to in this Section 3.1.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. No financial statements of any Person
other than the Company are required by GAAP to be included in the financial
statements of the Company.
3.1.5 Books and Records. The books of account, minute
books, stock record books and other records of the Company, all of which have
been made available to Buyer, are complete and correct in all material respects
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute books
of the Company contain accurate and complete records of all meetings held of,
and corporate action taken by, the Shareholders, the Boards of Directors, and
committees of the boards of directors of the Company, and no meeting of any
such Shareholders, board of directors or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the
Company.
3.1.6 Title to Properties; Encumbrances. Part 3.1.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds or other interests therein owned by the Company. Shareholders have
delivered or made available to Buyer copies of the deeds and other instruments
(as recorded) by which the Company acquired such real property and interests,
and copies of all title insurance policies, opinions, abstracts and surveys in
the possession of Shareholders or the Company and relating to such property or
interests. The Company owns (with good and marketable title in the case of
real property, subject only to the matters permitted by the following sentence)
all the properties and assets (whether real, personal or mixed and whether
tangible or intangible) that it purports to own located in the facilities owned
or operated by the Company or reflected as owned in the books and records of
the Company, including all of the properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.1.6 of
the Disclosure Letter and personal property sold since the date of the Balance
Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary Course
of Business) and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.1.6 of the Disclosure Letter.
All properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Balance Sheet or the Interim Balance
15
<PAGE> 20
Sheet as securing specified liabilities or obligations, with respect to which
no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the
Interim Balance Sheet (such mortgages and security interests being limited to
the property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, detracts from the value or impairs the use of the property subject
thereto or impairs the operations of the Company and (ii) zoning laws and other
land use restrictions that do not impair the present or anticipated use of the
property subject thereto. All buildings, plants and structures owned by the
Company lie wholly within the boundaries of the real property owned by the
Company and do not encroach upon the property of, or otherwise conflict with
the property rights of, any other Person.
3.1.7 Condition and Sufficiency of Assets. The buildings,
plants, structures and equipment of the Company are structurally sound, are
maintained in a reasonable state of repair and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs. The building, plants, structures and equipment of the
Company are currently sufficient for the continued conduct of the Company'
businesses after the Closing in substantially the same manner as conducted
prior to the Closing.
3.1.8 Accounts Receivable. All accounts receivable of the
Company that are reflected on the Balance Sheet or the Interim Balance Sheet or
on the accounting records of the Company as of the Closing Date (collectively,
the "ACCOUNTS RECEIVABLE") represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible net of
the respective reserves shown on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice). Subject
to such reserves, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, within 90 days after the day on which
it first becomes due and payable (except as set forth in Part 3.1.8 of the
Disclosure Letter). There is no contest, claim or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.1.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list also sets forth the aging of such Accounts Receivable.
3.1.9 Inventory. All inventory of the Company, whether or
not reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which
have been written off or written down to net realizable value in the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date, as the case may be. All inventories not written off
have been priced at the lower of cost or market on "a last in, first out" basis
with no adjustment to the LIFO reserve on the Interim Balance Sheet from that
shown on the October 31, 1996 balance sheet.
16
<PAGE> 21
3.1.10 No Undisclosed Liabilities. Except as set forth in
Part 3.1.10 of the Disclosure Letter, the Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.1.11 Taxes.
(a) For the period December 30, 1988, through
October 31, 1997, the Company was an S corporation, as defined
by Section 1361 of the IRC. Shareholders have delivered to
Buyer true and correct copies of (i) the statement that the
Company received from the IRS regarding its status as an S
corporation and (ii) its three (3) most recently filed U.S.
federal income Tax Returns as an S corporation. The Company
has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all respects and
all positions taken thereon have been disclosed that could
give rise to a substantial understatement of federal income
Tax within the meaning of Sec. 6662 of the IRC. All Taxes
due and owing by the Company (whether or not shown on any Tax
Return, whether known or unknown, asserted or unasserted) have
been paid other than matters previously disclosed in writing,
for which adequate accruals or reserves have been established.
The Company is not a party to any tax sharing or other
agreement that will require any payment with respect to Taxes.
The Company is not the beneficiary of any extension of time
within which to file any Tax Return. The Company has not
waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax
assessment or deficiency or the collection of Taxes.
(b) Since January 1, 1993, no taxing authority or
other governmental unit has claimed, raised with the Company,
discussed with the Company, proposed, or to the Shareholders'
Knowledge, Threatened any assessment, deficiency, adjustment,
dispute, or claim concerning any Tax Return or any Tax
liability of the Company. There is no asserted unpaid
assessment, deficiency or adjustment concerning any Tax Return
or Tax liability of the Company. To the Knowledge of the
Shareholders, none of the Tax Returns of the Company has been
selected for or are now under audit or examination by any
taxing authority or other governmental unit, and there are no
suits, actions, proceedings or investigations pending or, to
the Knowledge of the Shareholders, Threatened against the
Company with respect to any Taxes.
(c) The Company has withheld and timely deposited
or paid all Taxes required to have been withheld and deposited
or paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or
other third party.
17
<PAGE> 22
(d) The Company (A) has not been a member of an
affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the
Company); and (B) has no liability for the Taxes of any Person
(other than the Company) under Treas. Reg. Sec. 1.1502-6 or
any similar provision of state, local or foreign law), as
transferee or successor, by contract, or otherwise. None of
the Company nor any Shareholder is a Person other than a
United States person within the meaning of the IRC and
payments of purchase price made pursuant to the transaction
contemplated herein are not subject to the withholding
provisions of Sec. 3406 of the IRC or subchapter A of Chapter
3 of the IRC.
(e) Any unpaid Taxes of the Company, including
all Taxes not yet due for any and all periods through October
31, 1997, whether known or unknown, asserted or unasserted, do
not exceed the reserve for Tax liability set forth in the
Closing Balance Sheet. Buyer will be responsible for the
preparation of all Tax returns and filings required to be
filed, and the payment of all Taxes arising as a result of the
operations of the Company's business on and after November 1,
1997.
3.1.12 No Material Adverse Change. Since the date of the
Balance Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets or condition of the Company, and, to
the Knowledge of the Shareholders, no event has occurred or circumstance exists
that may result in such a material adverse change.
3.1.13 Employee Benefits.
(a) Part 3.1.13(a) of the Disclosure Letter lists
each "employee welfare benefit plan" (as defined in Section
3(1) of ERISA), any other deferred compensation, bonus,
overtime, fringe benefit, insurance, welfare, medical, health,
life, company car, disability, injury, illness, accident, sick
pay, sick leave, vacation, termination, severance, retention,
executive compensation, incentive, commission or other plan,
agreement, policy, trust fund or arrangement, not otherwise
listed on any exhibit to this Agreement, maintained or to
which contributions are being made by the Company or which
provide benefits to the Company's employees (collectively, the
"BENEFIT PLANS"). True and correct copies of each Benefit
Plan have been delivered to Buyer. To the extent applicable,
for each Benefit Plan, Shareholders have provided to Buyer
copies of (i) the most recent determination letter and any
outstanding request for a determination letter; (ii) IRS Forms
5500 with respect to the last two plan years; (iii) certified
financial statements; (iv) summary plan descriptions to
employees purporting to inform them of the Benefit Plan; (v)
any related trust agreement; (vi) all insurance contracts or
other funding arrangements; and (vii) all communications
received from or sent to the IRS or the Department of Labor
within the last two years. All contributions or premiums
required to be made by the Company as of the date of this
Agreement on account of, or under each, Benefit Plan have been
paid or adequate accruals have been made therefore on the
books of the Company and, except as disclosed on Part
3.1.13(a) of the Disclosure Letter, no such contribution or
premium is delinquent under the terms of the applicable
Benefit Plan. The Company does not maintain any Benefit Plan
that provides
18
<PAGE> 23
post-retirement or post-termination welfare benefits for
retired employees, except for continuing benefits required by
applicable state and federal laws.
(b) Except as set forth on Part 3.1.13(b) of the
Disclosure Letter, the Company does not contribute to and has
not, within the five-year period ending on the date of this
Agreement, contributed to any "multi-employer plan" (as
defined in Section 4001(a)(3) of ERISA), any plan which is
subject to Section 412 of the IRC or Title IV of ERISA, or any
Benefit Plan that is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
(c) No termination, retention, severance or
similar benefit will become payable as a result of any of the
Contemplated Transactions.
(d) Benefits under any Benefit Plan are as
represented in said documents and, except as noted in Part
3.13(d) of the Disclosure Letter, have not been increased or
modified (whether written or not written) subsequent to the
dates of such documents. The Company has not communicated to
any employee or former employee any intention or commitment to
modify any Benefit Plan or to establish or implement any other
employee or retiree benefit or compensation arrangement.
(e) Each Benefit Plan has been maintained and
administered in compliance in all respects with its terms and
in all respects with the requirements (including reporting
requirements) prescribed by any and all applicable statutes,
orders, rules and regulations, including, but not limited to,
ERISA and the IRC.
3.1.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.1.14 of the
Disclosure Letter:
(i) the Company is, and at all times
since January 1, 1993 has been, in full compliance with each
Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use
of any of its assets;
(ii) no event has occurred or, to the
Knowledge of the Shareholders, circumstance exists that (with
or without notice or lapse of time) (A) may constitute or
result in a violation by the Company of, or a failure on the
part of the Company to comply with, any Legal Requirement or
(B) may give rise to any obligation on the part of the Company
to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature; and
(iii) the Company has not received, at any
time since January 1, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or
potential violation of, or failure to comply with, any Legal
Requirement or (B) any actual, alleged, possible or potential
obligation on the part of the Company to undertake, or to bear
all or any portion of the cost of, any remedial action of any
nature.
19
<PAGE> 24
(b) Part 3.1.14 of the Disclosure Letter contains
a complete and accurate list of each Governmental
Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or
used by, the Company. Each Governmental Authorization listed
or required to be listed in Part 3.1.14 of the Disclosure
Letter is valid and in full force and effect. Except as set
forth in Part 3.1.14 of the Disclosure Letter:
(i) the Company is, and at all times
since January 1, 1993, has been, in full compliance with all
of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part
3.1.14 of the Disclosure Letter;
(ii) no event has occurred or, to the
Knowledge of the Shareholders, circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure
to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.1.14
of the Disclosure Letter or (B) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3.1.14
of the Disclosure Letter;
(iii) the Company has not received, at any
time since January 1, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization or (B) any
actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of or
modification to any Governmental Authorization; and
(iv) all applications required to have
been filed for the renewal of the Governmental Authorizations
listed or required to be listed in Part 3.1.14 of the
Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.1.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company lawfully to conduct and operate
its business in the manner it currently conducts and operates such business and
to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets.
3.1.15 Legal Proceedings; Orders.
(a) There is no pending Proceeding: (i) that has
been commenced by or against the Company or that otherwise
relates to or may affect the business of, or any of the assets
owned or used by, the Company; or (ii) that challenges, or
that may have the effect of preventing, delaying, making
illegal, or
20
<PAGE> 25
otherwise interfering with, any of the Contemplated
Transactions. To the Knowledge of the Shareholders and the
Company, (1) no such Proceeding has been Threatened and (2) no
event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such
Proceeding.
(b) There is no Order to which any of the
Company, or any of the assets owned or used by the Company, is
subject; none of the Shareholders is subject to any Order
that relates to the business of, or any of the assets owned or
used by, the Company; and no officer, director, agent or
employee of the Company is subject to any Order that prohibits
such officer, director, agent or employee from engaging in or
continuing any conduct, activity or practice relating to the
business of the Company.
(c) Except as set forth in Part 3.1.15 of the
Disclosure Letter: (i) the Company is, and at all times since
January 1, 1993, has been, in full compliance with all of the
terms and requirements of each Order to which it or any of the
assets owned or used by it, is or has been subject; (ii) no
event has occurred or, to the Knowledge of the Shareholders,
circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is
subject; and (iii) the Company has not received, at any time
since January 1, 1993, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible or
potential violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is or has been subject.
3.1.16 Absence of Certain Changes and Events. Except as set
forth in Part 3.1.16 of the Disclosure Letter, since the date of the Balance
Sheet, the Company has conducted its business only in the Ordinary Course of
Business and there has not been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase
shares of capital stock of the Company; issuance of any
security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement or other
acquisition by the Company of any shares of any such capital
stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of
the Company;
(c) payment or increase by the Company of any
bonuses, salaries or other compensation to any shareholder,
director, officer or (except in the Ordinary Course of
Business) employee or entry into any employment, severance or
similar Contract with any director, officer or employee;
21
<PAGE> 26
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement or other
employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset
or property of the Company, whether or not covered by
insurance, adversely affecting the properties, assets,
business, financial condition or prospects of the Company;
(f) entry into, termination of, or receipt of
notice of termination of, (i) any license, distributorship,
dealer, sales representative, joint venture, credit or similar
agreement or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least
$50,000;
(g) (other than in the Ordinary Course of
Business) sale, lease or other disposition of any asset or
property of the Company or mortgage, pledge or imposition of
any lien or other Encumbrance on any asset or property of the
Company, including the sale, lease or other disposition of any
of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or
rights with a value to the Company in excess of $50,000;
(i) change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the
Company to do any of the foregoing.
3.1.17 Contracts; No Defaults.
(a) Part 3.1.17 of the Disclosure Letter contains
a complete and accurate list, and Shareholders have delivered
to Buyer true and complete copies, of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or
materials by the Company of an amount or value in excess of
$50,000;
(ii) each Applicable Contract that
involves performance of services or delivery of goods or
materials to the Company of an amount or value in excess of
$50,000;
(iii) each Applicable Contract that was
not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company in excess of
$50,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement
and other Applicable Contract affecting the ownership of,
leasing of, title to, use of or any leasehold or other
interest in, any real or personal property (except personal
property leases and
22
<PAGE> 27
installment and conditional sales agreements and other
applicable contracts having a value per item or aggregate
payments of less than $50,000; and with terms of less than one
year);
(v) each licensing agreement or other
Applicable Contract with respect to patents, trademarks,
copyrights or other intellectual property, including
agreements with current or former employees, consultants or
contractors regarding the appropriation or the non-disclosure
of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement
and other Applicable Contract to or with any labor union or
other employee representative of a group of employees;
(vii) each joint venture, partnership and
other Applicable Contract (however named) involving a sharing
of profits, losses, costs or liabilities by the Company with
any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business
activity of the Company or any Affiliate of the Company or
limit the freedom of the Company or any Affiliate of the
Company to engage in any line of business or to compete with
any Person;
(ix) each Applicable Contract providing
for payments to or by any Person based on sales, purchases or
profits, other than direct payments for goods;
(x) each power of attorney by or
affecting the Company that is currently effective and
outstanding;
(xi) each Applicable Contract entered
into other than in the Ordinary Course of Business that
contains or provides for an express undertaking by the Company
to be responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $50,000;
(xiii) each Applicable Contract relating to
the purchase of aluminum or any other commodity ("FUTURES
CONTRACTS"), all of which have been entered into by the
Company solely for the purpose of hedging against fluctuations
in the price of metals, and none of which have been entered
into for speculative purpose;
(xiv) each written warranty, guaranty and
or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary
Course of Business; and
(xv) each amendment, supplement and
modification (whether oral or written) in respect of any of
the foregoing.
23
<PAGE> 28
(b) Except as set forth in Part 3.1.17 of the
Disclosure Letter:
(i) none of the Shareholders (and no
Related Person of any Shareholder) has or may acquire any
rights under, and none of the Shareholders has or may become
subject to any obligation or liability under, any Contract
that relates to the business of, or any of the assets owned or
used by, the Company; and
(ii) No officer, director, or (to the
Knowledge of the Shareholders) employee of the Company is
bound by any Contract that purports to limit the ability of
such officer, director, or employee to (A) engage in or
continue any conduct, activity or practice relating to the
business of the Company or (B) assign to the Company or to any
other Person any rights to any invention, improvement or
discovery.
(c) Except as set forth in Part 3.1.17 of the
Disclosure Letter, each Contract identified or required to be
identified in Part 3.1.17 of the Disclosure Letter is in full
force and effect and is valid and enforceable in accordance
with its terms.
(d) Except as set forth in Part 3.1.17 of the
Disclosure Letter:
(i) the Company is, and at all times
since January 1, 1993, has been, in full compliance with all
applicable terms and requirements of each Contract under which
the Company has or had any obligation or liability or by which
the Company or any of the assets owned or used by the Company
is or was bound;
(ii) each other Person that has or had
any obligation or liability under any Contract under which the
Company has or had any rights is, and at all times since
January 1, 1997 has been, to the Knowledge of the
Shareholders, in compliance in all material respects with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or (to the
Knowledge of the Shareholders) circumstance exists that (with
or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any
Applicable Contract; and
(iv) the Company has not given to or
received from any other Person, at any time since January 1,
1996, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible or potential
violation or breach of or default under, any Contract.
(e) There are no renegotiations of, attempts to
renegotiate or outstanding rights to renegotiate any amounts
paid or payable to the Company under current or completed
Contracts with any Person and no such Person has made written
demand for such renegotiation.
24
<PAGE> 29
(f) The Contracts relating to the sale, design,
manufacture or provision of products or services by the
Company have been entered into in the Ordinary Course of
Business and have been entered into without the commission of
any act alone or in concert with any other Person or any
consideration having been paid or promised, that is or would
be in violation of any Legal Requirement.
3.1.18 Insurance.
(a) Shareholders have delivered to Buyer: (i)
true and complete copies of all policies of insurance to which
the Company is a party or under which the Company or any
director of the Company, is or has been covered at any time
within the one-year period preceding the date of this
Agreement; and (ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.1.18 of the Disclosure Letter
describes: (i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company; and (iii) all obligations of the Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.1.18 of the Disclosure Letter sets
forth, by year, for the current policy year and each of the
two preceding policy years: (i) a summary of the loss
experience under each policy; (ii) a statement describing each
claim under an insurance policy for an amount in excess of
$50,000, which sets forth: (A) the name of the claimant; (B) a
description of the policy by insurer, type of insurance and
period of coverage; and (C) the amount and a brief description
of the claim; and (iii) a statement describing the loss
experience for all claims that were self-insured, including
the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.1.18 of the
Disclosure Letter: (i) All policies to which the Company is a
party or that provide coverage to any Shareholder, the Company
or any director or officer of the Company: (A) are valid,
outstanding and enforceable; (B) are sufficient for compliance
with all Legal Requirements and Contracts to which the Company
is a party or by which any of them is bound; (C) will continue
in full force and effect following the consummation of the
Contemplated Transactions; and (D) do not provide for any
retrospective premium adjustment or other experienced-based
liability on the part of the Company; (ii) since January 1,
1996, and except as set forth in Part 3.1.18 of the Disclosure
Letter, no Shareholder or the Company has received (A) any
refusal of coverage or any notice that a defense will be
afforded with reservation of rights or (B) any notice of
cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to
perform its obligations thereunder; (iii) the Company has paid
all premiums due, and
25
<PAGE> 30
have otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides
coverage to the Company or director thereof; and (iv) the
Company has given notice to the insurer of all claims that may
be insured thereby.
3.1.19 Environmental Matters. Except as set forth in Part
3.1.19 of the Disclosure Letter:
(a) The Company is now in compliance with all
applicable Environmental Laws. The Company has obtained all
permits, licenses, approvals and consents required by all
applicable Environmental Laws or required for the operation of
its business ("ENVIRONMENTAL PERMITS"). All such
Environmental Permits are in full force and effect, and the
Company is and has at all times within three (3) years prior
to the Closing Date been in compliance in all respects with
all such Permits.
(b) There are no pending or, to the knowledge of
Shareholders, threatened, claims, investigations,
administrative proceedings, litigation, regulatory hearings or
requests or demands for information or for investigative
cleanup, remedial, removal or response actions or for
compensation, cost recovery or contribution, judgments,
stipulations, orders, decrees, notices of non-compliance, or
notices of violation alleging noncompliance with or violation
of any Environmental Law or Environmental Permits, or seeking
relief under any Environmental Law, or asserting any
Environmental, Health and Safety Liabilities.
(c) There are not now and have never been (except
with respect to underground storage tanks, which are not now
but previously were at the Facilities) any underground storage
tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps or
any other part of the Facilities or incorporated into any
structure therein or thereon.
3.1.20 Employees.
(a) Part 3.1.20 of the Disclosure Letter contains
a complete and accurate list of the following information for
each employee or director of the Company, including each
employee on leave of absence or layoff status: name; job
title; current compensation paid or payable; vacation accrued;
and service credited for purposes of vesting and eligibility
to participate under the Company's deferred compensation, cash
bonus, severance pay, insurance, medical, welfare or vacation
plan, other Employee Pension Benefit Plan or Employee Welfare
Benefit Plan or any other employee benefit plan or any
Director Plan.
(b) No officer, director or key employee of the
Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition
or proprietary rights agreement, between such officer,
director or key employee and any other Person that in any way
26
<PAGE> 31
adversely affects or will affect (i) the performance of his
duties as an employee, director, or key employee of the
Company or (ii) the ability of the Company to conduct its
business. To the Shareholders' Knowledge, no director,
officer or key employee of the Company intends to terminate
his employment with the Company.
(c) Part 3.1.20 of the Disclosure Letter also
contains a complete and accurate list of the following
information for each retired employee or director of the
Company, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage,
retiree life insurance coverage and other benefits.
3.1.21 Labor Relations; Compliance. The Company has not
been and is not a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and to
Shareholders' Knowledge there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission or any comparable
Governmental Body, organizational activity or other labor or employment dispute
against or affecting any of the Company or their premises or (c) any
application for certification of a collective bargaining agent. No event has
occurred or (to the Knowledge of the Shareholders) circumstance exists that
could provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by the Company and no such action is contemplated
by the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.1.22 Intellectual Property.
(a) Intellectual Property Assets. The term
"INTELLECTUAL PROPERTY ASSETS" includes: (i) the name "Alchem
Aluminum," all fictional business names, trading names,
trademarks, service marks and applications (collectively,
"MARKS") and (ii) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings and blue prints
(collectively, "TRADE SECRETS"); in each case owned, used or
licensed by the Company as licensee or licensor.
(b) Intellectual Property Agreements. Part
3.1.22 of the Disclosure Letter contains a complete and
accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to
the Intellectual Property Assets to which the Company is a
party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with an
individual value of less than $2,500 under which the Company
is the licensee. There are no outstanding and, to
Shareholders'
27
<PAGE> 32
Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
(c) Know-How Necessary for the Business. The
Intellectual Property Assets are all those necessary for the
operation of the Company's businesses as they are currently
conducted. Except as set forth in Part 3.1.22 of the
Disclosure Letter, the Company is the owner of all right,
title and interest in and to each of the Intellectual Property
Assets, free and clear of all Encumbrances and other adverse
claims and has the right to use without payment to a third
party all of the Intellectual Property Assets.
(d) Patents. The Company does not possess any
registered patents, has not filed any patent applications and,
to the Knowledge of the Shareholders, does not have any
inventions or discoveries that may be patentable.
(e) Trademarks. Part 3.1.22 of Disclosure Letter
contains a complete and accurate list and summary description
of all Marks. The Company is the owner of all right, title
and interest in and to each of the Marks, free and clear of
all Encumbrances and other adverse claims. No Mark is
infringed or, to Shareholders' Knowledge, has been challenged
or threatened in any way. None of the Marks used by the
Company infringes or is alleged to infringe any trade name,
trademark or service mark of any third party.
(f) Copyrights. The Company does not possess any
registered copyrights.
(g) Trade Secrets. No Trade Secret is subject to
any adverse claim or has, to Shareholder's Knowledge, been
challenged or threatened in any way.
3.1.23 Certain Payments. Neither the Company nor any
director, officer, agent or employee of the Company, or any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, and whether in money, property or services, in violation of the
Foreign Corrupt Practices Act or similar laws, or (b) established or maintained
any fund or asset that has not been recorded in the books and records of the
Company.
3.1.24 Disclosure. No representation or warranty of
Shareholders in this Agreement and no statement in the Disclosure Letter omits
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. No notice
given pursuant to Section 5.5 will contain any untrue statement or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.1.25 Relationships with Related Persons. Except
as set forth in Part 3.1.25 of the Disclosure Letter, no Shareholder or any
Related Person of Shareholders or of the Company has, or since January 1, 1995
has had, any interest in any property (whether real, personal or mixed and
whether tangible or intangible), used in or pertaining to the Company's
business. Except as set forth in Part 3.1.25 of the Disclosure Letter, no
28
<PAGE> 33
Shareholder or any Related Person of Shareholders or of the Company is, or
since January 1, 1995 has owned, (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i)
had business dealings or a financial interest in any transaction with the
Company or (ii) engaged in competition with the Company with respect to any
line of the products or services of the Company in any market presently served
by the Company except for less than one percent of the outstanding capital
stock of any such business that is publicly traded on any recognized exchange
or in the over-the-counter market. Except as set forth in Part 3.1.25 of the
Disclosure Letter, no Shareholder or any Related Person of Shareholders or of
the Company is a party to any Contract with, or has any claim or right against,
the Company.
3.1.26 Brokers or Finders. Except for the fee and
expenses payable to McDonald & Company Securities, Inc. (for which Shareholders
shall be fully responsible), Shareholders and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.1.27 Customers and Suppliers. Part 3.1.27 of the
Disclosure Letter sets forth (a) a list of the ten (10) largest customers of
the Company in the terms of revenue during the fiscal year ended October 31,
1996, showing the approximate total revenue received from each such customer
during such fiscal year, (b) a list of the ten (10) largest suppliers to the
Company, in terms of purchases during the fiscal year ended October 31, 1996,
showing the approximate total purchases by the Company from each supplier
during such fiscal year. Except as set forth in Part 3.1.27 of the Disclosure
Letter, since November 1, 1996, there has not been any adverse change in the
business relationship of the Company with any material customer or supplier.
3.2 Additional Representations and Warranties of the Shareholders.
Each Shareholder represents and warrants to Buyer and Merger Sub, severally and
not jointly, solely with respect to such Shareholder, the following:
3.2.1 Quality of Title to Shares. There are no
Contracts, subscriptions, options, warrants, rights, conversion rights, rights
of first refusal or other agreements or commitments, other than this Agreement,
obligating such Shareholder to transfer or granting an option or right by such
Shareholder to any person or entity to purchase or acquire securities of the
Company from such Shareholder. Such Shareholder has not made or entered into
any Contract or understanding with respect to the disposition of the Company
Shares owned beneficially or of record by such Shareholder in any manner other
than by this Agreement. Such Shareholder is the record and beneficial owner of
the Company Shares, shown as held by such Shareholder on Exhibit A, and holds
such Company Shares free and clear of any Encumbrance, security interest,
voting trust or voting agreement or similar arrangement, proxy, prior purchase
right or other restriction on transfer or equitable rights or other adverse
claim.
3.2.2 Solvency. Such Shareholder is solvent and
will not be rendered insolvent by the occurrence of the Merger and is entering
into this Agreement without any actual intent to hinder, delay or defraud any
creditor of such Shareholder.
29
<PAGE> 34
3.2.3 Securities Compliance History. All offers
and sales of Company Shares by the Company to such Shareholder have been made
in compliance with the 1933 Act and all applicable state blue sky laws.
3.2.4 Shares Acquired for Investment. Such
Shareholder is acquiring the IMCO Shares for his or her own account and not
with a view to their distribution within the meaning of Section 2(11) of the
Securities Act. Such Shareholder is an "accredited investor" as such term is
defined in Rule 501(a) under the Securities Act.
3.2.5 Competency. Such Shareholder is competent
and possesses full power and ability to execute, deliver and perform this
Agreement (including, without limitation, the execution, delivery and
performance of any Shareholders' Closing Documents to be executed, delivered or
performed by such Shareholder) and may execute, deliver and perform such
Shareholder's obligations under this Agreement without the necessity of
obtaining any consent, approval, authorization or waiver or giving any notice
or otherwise, except for consents, approvals, authorizations, waivers and
notices which have been given or obtained (or will be given or obtained on or
prior to the Closing Date).
3.2.6 Authority; No Conflict. This Agreement
constitutes the legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms. Upon the
execution and delivery by such Shareholder of the Escrow Agreement, the
Shareholders' Releases, the Employment Agreements and the Registration Rights
Agreement (collectively, the "SHAREHOLDERS' CLOSING DOCUMENTS"), the
Shareholders' Closing Documents (to the extent that such Shareholder is a party
to each of such documents) will constitute the legal, valid and binding
obligations of such Shareholder, enforceable against such Shareholder in
accordance with their respective terms. Such Shareholder has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and Shareholders' Closing Documents and to perform his or her
obligations under this Agreement and Shareholders' Closing Documents. Except
as set forth in Part 3.2.6 of the Disclosure Letter, such Shareholder is not
and will not be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.2.7 Receipt of Information. Such Shareholder
acknowledges that the Shareholder has received and reviewed the following
documents from Buyer: (i) Buyer's Annual Report to Stockholders for its fiscal
year ended December 31, 1996, (ii) Buyer's Annual Report on Form 10-K for the
year ended December 31, 1996, (iii) Buyer's Quarterly Reports on Form 10-Q for
its fiscal quarters ended March 31, 1997 and June 30, 1997 and (iv) Buyer's
Proxy Statement for its 1997 annual meeting of stockholders. Such Shareholder
has had an opportunity to ask questions of and receive satisfactory answers
from Buyer sufficient to enable such Shareholder to evaluate the merits and
risks of the acquisition of the IMCO Shares pursuant to the Merger.
3.3 Limitations of Warranties. The foregoing representations and
warranties set forth in this Article 3 are made only with respect to matters
relating to the Company and do not in any manner pertain to IMCO Recycling of
Michigan LLC or the Company's participation in the ownership and operations
thereof.
30
<PAGE> 35
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Shareholders as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of Indiana. Buyer owns, beneficially and of
record, all of the issued and outstanding shares of capital stock of Merger
Sub.
4.2 Authority; No Conflict.
4.2.1 This Agreement constitutes the legal, valid and
binding obligation of Buyer and Merger Sub, enforceable against Buyer and
Merger Sub in accordance with its terms. Upon the execution and delivery by
Buyer and Merger Sub of the [Escrow Agreement, the Employment Agreements and
the Registration Rights Agreement] (collectively, the "BUYER'S CLOSING
DOCUMENTS"), the Buyer's Closing Documents will constitute the legal, valid and
binding obligations of Buyer and Merger Sub, enforceable against Buyer and
Merger Sub in accordance with their respective terms. Buyer and Merger Sub
have the absolute and unrestricted right, power and authority to execute and
deliver this Agreement and the Buyer's Closing Documents and to perform their
obligations under this Agreement and the Buyer's Closing Documents.
4.2.2 Neither the execution and delivery of this Agreement
by Buyer or Merger Sub nor the consummation or performance of any of the
Contemplated Transactions by Buyer or Merger Sub will give any Person the right
to prevent, delay or otherwise interfere with any of the Contemplated
Transactions pursuant to: (i) any provision of Buyer's or Merger Sub's
Organizational Documents; (ii) any resolution adopted by the board of directors
or Shareholders of Buyer or Merger Sub; (iii) any Legal Requirement or Order to
which Buyer or Merger Sub may be subject; or (iv) any Contract to which Buyer
or Merger Sub is a party or by which Buyer or Merger Sub may be bound. Neither
Buyer nor Merger Sub is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Investment Intent. Buyer is acquiring the Company Shares for
its own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
4.4 Certain Proceedings. There is no pending Proceeding that has
been commenced against Buyer or Merger Sub and that challenges, or may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions. To Buyer's and Merger Sub's Knowledge,
no such Proceeding has been Threatened.
31
<PAGE> 36
4.5 Brokers or Finders. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholders harmless from any
such payment alleged to be due by or through Buyer or Merger Sub as a result of
the action of Buyer, Merger Sub or their respective officers or agents.
ARTICLE 5
COVENANTS OF THE SHAREHOLDERS PRIOR TO CLOSING DATE
5.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, Shareholders shall, and shall cause the Company and its
Representatives to, (a) afford Buyer and its Representatives (collectively,
"BUYER'S ADVISORS") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records and other existing documents and data as
Buyer may reasonably request and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating and other data and information as Buyer
may reasonably request.
5.2 Operation of the Businesses of the Company. Between the date
of this Agreement and the Closing Date, Shareholders shall, and shall cause the
Company to, (a) conduct the business of the Company only in the Ordinary Course
of Business; (b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents
and others having business relationships with the Company; (c) confer with
Buyer and Merger Sub concerning operational matters; and (d) otherwise report
periodically to Buyer and Merger Sub concerning the status of the business,
operations and finances of the Company.
5.3 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date,
Shareholders shall not, and shall cause the Company not to, without the prior
consent of Buyer and Merger Sub, (a) take any affirmative action, or fail to
take any reasonable action within their or its control, as a result of which
any of the changes or events listed in Section 3.1.16 is likely to occur or (b)
permit the Company's indebtedness for Borrowed Money to exceed $21,000,000 in
the aggregate.
5.4 Required Approvals. As promptly as practicable after the date
of this Agreement, Shareholders shall, and shall cause the Company to, make all
filings required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions, including any necessary filings under
the HSR Act. Between the date of this Agreement and the Closing Date,
Shareholders shall, and shall cause the Company to, (a) cooperate with Buyer
and Merger Sub with respect to all filings that Buyer and Merger Sub elect to
make or is required by Legal Requirements to make in connection with the
Contemplated Transactions and (b) cooperate with Buyer and Merger Sub in
obtaining all consents identified in Schedule 4.2, including taking all actions
requested by Buyer and Merger Sub to cause early termination of any applicable
waiting period under the HSR Act.
32
<PAGE> 37
5.5 Notification. Between the date of this Agreement and the
Closing Date, each Shareholder shall promptly notify Buyer in writing if such
Shareholder or the Company becomes aware of any fact or condition that causes
or constitutes a Breach of any of Shareholders' representations and warranties
as of the date of this Agreement or if such Shareholder or the Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any
change in the Disclosure Letter if the Disclosure Letter were dated the date of
the occurrence or discovery of any such fact or condition, Shareholders shall
promptly deliver to Buyer and Merger Sub a supplement to the Disclosure Letter
specifying such change. During the same period, each Shareholder shall
promptly notify Buyer and Merger Sub of the occurrence of any Breach of any
covenant of Shareholders in this Article 5 or of the occurrence of any event
that could adversely affect the satisfaction of the conditions in Article 7.
5.6 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement, Shareholders shall cause all indebtedness
owed to the Company by any Shareholder or any Related Person of any Shareholder
to be paid in full prior to Closing.
5.7 Best Efforts. Between the date of this Agreement and the
Closing Date, Shareholders shall use their Best Efforts to cause the
conditions in Articles 7 and 8 to be satisfied.
5.8 Dissenter's Rights. Each Shareholder hereby irrevocably
waives any rights that such Shareholder may have under the IBCA to dissent to
the Merger.
5.9 No Shopping. Shareholders shall not, and shall not permit the
Company to, directly or indirectly, through any officer, director, agent or
otherwise, (i) solicit, initiate or encourage submission of proposals or offers
from any Person (other than Buyer or Merger Sub) relating to any acquisition or
purchase (other than in the Ordinary Course of Business) of all or a material
amount of the assets of, or any equity interest in, the Company or any merger,
consolidation or business combination with the Company or (ii) participate in
any discussions or negotiations regarding, or furnish to any Person (other than
Buyer or Merger Sub) any information with respect to, any of the foregoing or
(iii) otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or
seek any of the foregoing. Shareholders shall promptly notify Buyer and Merger
Sub if Shareholders or the Company receives any such proposal or offer or any
inquiry or contract with respect thereto.
5.10 Futures Contracts. Prior to the Closing Date, the
Shareholders shall not permit the Company to enter into, sell, purchase, modify
or otherwise deal in, any Futures Contracts other than in the Ordinary Course
of Business without the written permission of Buyer.
33
<PAGE> 38
ARTICLE 6
COVENANTS OF BUYER AND MERGER SUB
PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Buyer and Merger Sub shall, and shall cause
each of their respective Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Date, Buyer and Merger Sub shall, and shall cause each Related
Person to, cooperate with Shareholders with respect to all filings that
Shareholders are required by Legal Requirements to make in connection with the
Contemplated Transactions and (ii) cooperate with Shareholders in obtaining all
consents identified in Part 3.1.2 and Part 3.2.1 of the Disclosure Letter;
provided that this Agreement will not require Buyer or Merger Sub to dispose of
or make any change in any portion of its business or to incur any other burden
to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section
6.1, between the date of this Agreement and the Closing Date, Buyer and Merger
Sub shall use their Best Efforts to cause the conditions in Articles 7 and 8 to
be satisfied.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER'S
AND MERGER SUB'S OBLIGATION TO CLOSE
Buyer's and Merger Sub's obligation to consummate the Merger and to
take the other actions required to be taken by Buyer and Merger Sub at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyer and Merger Sub,
in whole or in part):
7.1 Accuracy of Representations.
(a) All of Shareholders' representations and
warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered
individually), must have been accurate in all material
respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if
made on the Closing Date.
(b) Each of Shareholders' representations and
warranties in Sections 3.1.3, 3.1.4, 3.1.5, 3.1.12,
3.1.17(d)(ii), 3.1.24 and 3.2 must have been accurate in all
respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on
the Closing Date.
7.2 Shareholders' Performance. All of the covenants and
obligations that Shareholders are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all material
respects. Each document required to be delivered pursuant to Section 7.6 must
have been delivered, and each of the other covenants and obligations in Section
5.4 must have been complied with in all respects.
34
<PAGE> 39
7.3 Consents. Each of the Consents identified in Part 3.1.2 and
Part 3.2.6 of the Disclosure Letter and each Consent identified in Schedule
4.2, must have been obtained and must be in full force and effect.
7.4 HSR Compliance. The waiting period under the HSR Act shall
have expired or the parties shall otherwise be permitted under the HSR Act to
proceed with the Closing.
7.5 Merger. The Secretary of State of the State of Indiana must
have accepted for filing the Articles of Merger and the Secretary of State of
Delaware must have accepted for filing the Certificate of Merger.
7.6 Deliveries. Each of the following documents must have been
delivered to Buyer and Merger Sub:
7.6.1 certificates representing the Company Shares,
duly endorsed (or accompanied by duly executed stock powers);
7.6.2 releases in the form of Exhibit C executed by
the Shareholders (collectively, "SHAREHOLDERS' RELEASES");
7.6.3 employment agreements in the form of Exhibit
D executed by each of William Warshauer, Bruce Warshauer and Lawrence E. Donay,
respectively (collectively, the "EMPLOYMENT AGREEMENTS");
7.6.4 the Escrow Agreement, executed by the
Shareholders;
7.6.5 a Registration Rights Agreement in the form
of Exhibit E executed by the Shareholders (the "REGISTRATION RIGHTS
AGREEMENT");
7.6.6 a certificate executed by Shareholders
representing and warranting to Buyer that each of Shareholders' representations
and warranties in this Agreement was accurate in all respects as of the date of
this Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date.
7.6.7 an opinion of Baker & Daniels, dated the
Closing Date, in the form of Exhibit F;
7.6.8 investment letters in the form of Exhibit G
executed by each Shareholder;
7.6.9 a certificate of existence of the Company as
of the most recent practicable date, from the Secretary of State of Indiana and
certificates of authority and certificates of good standing of the Company as
of the most recent practicable date from the Secretary of State of each State
in which Company is qualified to do business;
7.6.10 certified copies of resolutions of the Board
of Directors and shareholders of the Company approving the transactions set
forth in this Agreement;
35
<PAGE> 40
7.6.11 incumbency certificates for the officers of
the Company executing this Agreement or any agreement ancillary hereto; and
7.6.12 such other documents as Buyer may reasonably
request for the purpose of (i) evidencing the accuracy of any of Shareholders'
representations and warranties, (ii) evidencing the performance by any
Shareholder of, or the compliance by any Shareholder with, any covenant or
obligation required to be performed or complied with by such Shareholder, (iii)
evidencing the satisfaction of any condition referred to in this Article 7 or
(iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.7 Environmental Report. Buyer shall have a separate
environmental audit report covering each parcel of Property which report (the
"ENVIRONMENTAL REPORT") is to be: (1) prepared by an environmental engineering
firm reasonably acceptable to Shareholders and Buyer and the fees and expenses
of which shall be borne by Buyer and (2) in accordance with ASTM Standard for
Phase 1 environmental assessments, including a review of waste management and
record keeping compliance with respect to the operations at each parcel of
Property. Each such Environmental Report shall be in form and substance
reasonably satisfactory to Buyer.
7.8 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the Contemplated Transactions.
7.9 No Claim Regarding Stock Ownership or Sale Proceeds. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of or any other voting,
equity or ownership interest in, any of the Company or (b) is entitled to all
or any portion of the Merger Consideration.
7.10 No Prohibition. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), contravene or conflict with, or result in a
violation of, or cause Buyer, Merger Sub or any Person affiliated with Buyer or
Merger Sub to suffer any adverse consequence under, (a) any applicable Legal
Requirement or Order or (b) any Legal Requirement or Order that has been
published, introduced or otherwise proposed by or before any Governmental Body.
7.11 No Dissenters. None of Shareholders shall have exercised
their dissenters' rights under the IBCA arising in connection with the Merger.
Each Shareholder shall have tendered, at Closing, to Buyer such Shareholder's
certificates for Company Shares, together with appropriate executed transfer
documents.
7.12 Indebtedness. The Company shall not have indebtedness for
Borrowed Money exceeding $21,000,000 in the aggregate.
36
<PAGE> 41
7.13 Tax Deposit. At the Closing, the Company shall possess all
rights to the tax deposits that have been made, or will be made before the
Closing, with the IRS with respect to deferred Taxes arising from the Company's
retention of October 31 as its fiscal year end (which as of the date hereof are
approximately $388,409.00).
ARTICLE 8
CONDITIONS PRECEDENT TO
SHAREHOLDERS' OBLIGATION TO CLOSE
Shareholders' obligation to cause the consummation of the Merger and
to take the other actions required to be taken by Shareholders at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Shareholders, in whole or
in part):
8.1 Accuracy of Representations. All of Buyer's and Merger Sub's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date.
8.2 Buyer's and Merger Sub's Performance. All of the covenants
and obligations that Buyer and Merger Sub are required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all material
respects.
8.3 Consents. Each of the Consents identified in Part 3.1.2 and
Part 3.2.6 of the Disclosure Letter must have been obtained and must be in full
force and effect.
8.4 Deliveries. Buyer and Merger Sub must have caused the
following documents to be delivered to Shareholders:
8.4.1 the IMCO Shares, divided among each of the
Shareholders in proportion to their ownership of the Company Shares as set
forth on Exhibit A;
8.4.2 the Employment Agreements executed by Buyer;
8.4.3 the Escrow Agreement executed by Buyer;
8.4.4 the Registration Rights Agreement executed by
Buyer;
8.4.5 a certificate executed by Buyer and Merger
Sub to the effect that, except as otherwise stated in such certificate, each of
Buyer's and Merger Sub's representations and warranties in this Agreement was
accurate in all material respects as of the date of this Agreement and is
accurate in all material respects as of the Closing Date as if made on the
Closing Date;
37
<PAGE> 42
8.4.6 certified copies of resolutions of (i) the
Board of Directors of Buyer and (ii) the Board of Directors and sole
shareholder of Merger Sub, approving the transactions set forth in this
Agreement;
8.4.7 incumbency certificates for the officers of
Buyer and Merger Sub executing this Agreement or any agreement ancillary
hereto;
8.4.8 an opinion of Haynes and Boone, LLP, dated
the Closing Date, in the form of Exhibit I; and
8.4.9 such other documents as Shareholders may
reasonably request for the purpose of (i) evidencing the accuracy of any
representation or warranty of Buyer, (ii) evidencing the performance by Buyer
and Merger Sub of, or the compliance by Buyer and Merger Sub with, any covenant
or obligation required to be performed or complied with by Buyer and Merger
Sub, (iii) evidencing the satisfaction of any condition referred to in this
Article 8 or (iv) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4.10 No Injunction. There must not be in effect
any Legal Requirement or any injunction or other Order that (a) prohibits the
Merger and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
ARTICLE 9
TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
9.1.1 by either Buyer or Merger Sub, on the one
hand or Shareholders, on the other hand, if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
9.1.2 (i) by Buyer or Merger Sub if any of the
conditions in Article 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer or Merger Sub to comply with their obligations under this
Agreement) and neither Buyer nor Merger Sub has waived such condition on or
before the Closing Date; or (ii) by Shareholders, if any of the conditions in
Article 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of
Shareholders to comply with their obligations under this Agreement) and
Shareholders have not waived such condition on or before the Closing Date;
9.1.3 by mutual consent of Buyer, Merger Sub and
Shareholders; or
9.1.4 by either Buyer or Merger Sub, on the one
hand, or Shareholders, on the other hand, if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before December 1, 1997, or such later date as the parties may agree upon.
38
<PAGE> 43
9.2 Effect of Termination. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 11.1 and 11.3 will survive;
provided, however, that if this Agreement is terminated by a party because of
the Breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
ARTICLE 10
INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants and obligations in this Agreement,
the Disclosure Letter and any other certificate or document delivered pursuant
to this Agreement will survive the Closing. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants and obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired) at
any time (except with respect to items described in the Disclosure Letter),
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or obligation. The waiver of any
condition which was predicated upon the accuracy of any representation or
warranty or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages or
other remedy based on such representations, warranties, covenants and
obligations.
10.2 Indemnification and Payment of Damages by Shareholders. In
accordance with Section 10.6, Shareholders will indemnify and hold harmless
Buyer, the Surviving Corporation (from and after the Closing) and their
respective Representatives and Affiliates (collectively, the "INDEMNIFIED
PERSONS") for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and consequential damages),
after taking into account any insurance proceeds collected by the Company,
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "DAMAGES"), arising, directly or indirectly, from or in
connection with:
10.2.1 any Breach of any representation or warranty
made by Shareholders in this Agreement, the Disclosure Letter, the supplements
to the Disclosure Letter or any other certificate or document delivered by
Shareholders pursuant to this Agreement;
10.2.2 any Breach of any representation or warranty
made by Shareholders in this Agreement as if such representation or warranty
were made on and as of the Closing Date;
10.2.3 any Breach by a Shareholder of any covenant
or obligation of such Shareholder in this Agreement;
39
<PAGE> 44
10.2.4 any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with any Shareholder
or the Company (or any Person acting on their behalf) in connection with any of
the Contemplated Transactions; and
10.2.5 any payment by Buyer or Merger Sub for
liabilities for Taxes, if any, that accrued or relate to the period prior to
the Closing which are in excess of the amounts accrued and reflected for such
purpose in the books of the Company as of the Closing.
10.3 Environmental Indemnification; Post-Closing Report. The
Shareholders shall defend, indemnify and hold the Surviving Corporation and
Buyer harmless from all loss, claims, costs, liabilities, damages and expenses,
and reasonable attorneys' fees, in defending against any claim or action
against the Surviving Corporation, Buyer, and the other Indemnified Persons for
personal injury or property damage, or any action by any Governmental Body
asserting Environmental, Health and Safety Liabilities, in all cases arising
from the inaccuracy of the representations contained in Section 3.1.19 hereof
as of the Closing Date, but expressly excluding therefrom all costs and
expenses incurred by the Surviving Corporation or Buyer in connection with
causing the Facilities to comply with any existing or future legislation
relating to air emissions including, without limitation, the Clean Air Act, 42
U.S.C. Sections 7401 et seq., and any State environmental protection statutes,
any rules and regulations of MDEQ, and any local ordinances, rules or
regulations implementing the Clean Air Act. The Shareholders may at their
option control the defense of any such claims or actions, but in such event,
Shareholders will not assume any ownership interest in or management authority
over the Surviving Corporation or any of its property. In calculating Damages
under this Section 10.3, Buyer or the Surviving Corporation, as applicable,
shall deduct the amount of insurance proceeds actually collected by Buyer or
the Surviving Corporation that relate specifically to such indemnification
claim.
As soon as is practicable after the Closing Date, Buyer shall cause an
engineering firm, mutually agreed upon by Buyer and the Shareholders, to
conduct tests of the Company's facilities for the purpose of determining the
Company's compliance with Environmental Laws governing air emissions. Such
tests will be jointly supervised by Buyer and the Shareholders, and both such
parties shall have the opportunity to provide input to such engineering firm
prior to the completion of the engineer's report. The engineer's report shall
specifically state whether, as of the Closing Date, the Company's facilities
were in full compliance with all Environmental Laws governing air emissions,
or, if not in full compliance, in what respects such compliance was lacking.
If the report referenced above indicates non-compliance with Environmental Laws
governing air emissions, then the Shareholders' representation in Section
3.1.19 shall be deemed to have been Breached as of the Closing Date. For the
purpose of Section 3.1.19, the report of such engineer shall be final, binding,
and uncontestable by the parties to this Agreement. If the report indicates
non-compliance with Environmental Laws governing air emissions, then the Buyer
shall take such actions as are needed in order to bring the facilities into
compliance with Environmental Laws governing air emissions in an expeditious
manner. However, such actions shall bring the facilities into compliance with
Environmental Laws governing air emissions not later than six (6) months after
the receipt by the parties of the final report of the engineer, unless the
parties agree (and such agreement shall not be unreasonably withheld) that a
longer period of time is necessary in order to cause compliance.
40
<PAGE> 45
10.4 Time Limitations. If the Closing occurs, Shareholders will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections 3.1.3,
3.1.11, 3.1.13, 3.1.19 or 3.2.1 unless on or before the third anniversary of
the Closing Date, Buyer notifies Shareholders of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Sections 3.1.11, 3.1.13 or 3.1.19 or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made before the fifth anniversary of the Closing Date; and
a claim with respect to Section 3.1.3 or 3.2.1 may be made at any time. If the
Closing occurs, Buyer will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or before the
first anniversary of the Closing Date, Shareholders notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Shareholders.
10.5 Limitations on Amount -- Shareholders. Shareholders will have
no liability (for indemnification or otherwise) with respect to the matters
described in Section 10.1, 10.2 or 10.3 until the total of all Damages with
respect to such matters exceeds $375,000, and then only for the amount by which
such Damages exceed $375,000. However, this Section 10.5 will not apply to (i)
any Breach of any of Shareholders' representations and warranties of which any
Shareholder had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by any
Shareholder of any covenant or obligation or (ii) any Damages under Sections
3.1.3 or 3.2.1.
10.6 Proportionate Liability. If the Shareholders are required to
provide indemnification under this Article 10, then William Warshauer and
Louise Warshauer shall be jointly and severally liable with respect to 90% of
the indemnifiable amount, and Lawrence E. Donay shall be liable with respect to
10% of such amount; provided, however, that each of the Shareholders shall be
severally, not jointly, liable with respect to Damages arising from a breach of
such Shareholder's representations set forth in Section 3.2.
10.7 Limited Recourse. If the Shareholders are required to provide
indemnification under this Article 10, then Buyer and the Indemnified Persons
shall have recourse solely against the property held pursuant to the Escrow
Agreement. However (i) in the case of a breach of the representations and
warranties set forth in Sections 3.1.3 and 3.2.1, and (ii) in the case of
fraud, Buyer and the Indemnified Persons shall not be limited to recourse
against the property held pursuant to the Escrow Agreement but, in addition
thereto, shall have all other remedies provided by law.
10.8 Escrow. Upon notice to Shareholders specifying in reasonable
detail the basis for a claim for indemnification under this Article 10
("CLAIM"), Buyer may give notice of a Claim under the Escrow Agreement. The
failure to give a notice of a Claim under the Escrow Agreement will not
constitute an election of remedies or limit Buyer in any manner in the
enforcement of any other remedies that may be available to it.
41
<PAGE> 46
10.9 Procedure for Indemnification -- Third Party Claims.
10.9.1 Promptly after receipt by an indemnified
party under Section 10.2 or (to the extent provided in the last sentence of
Section 10.3) Section 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may have
to any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
10.9.2 If any Proceeding referred to in Section 10.5
is brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith
that joint representation would be inappropriate or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Article 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election
to assume the defense of such Proceeding, the indemnifying party will be bound
by any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
10.9.3 Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
42
<PAGE> 47
10.9.4 Shareholders hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought
against any Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein and agree that process may be served on Shareholders
with respect to such a claim anywhere in the world.
10.10 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
ARTICLE 11
GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel and accountants. Shareholders will cause the
Company not to incur any out-of-pocket expenses in connection with the
Contemplated Transactions. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a Breach of this Agreement by another party. Buyer
shall pay all filing fees incurred in connection with the filing made under the
HSR Act and shall reimburse the Company prior to the Closing Date for all
filing fees incurred by the Company in connection therewith. Buyer shall pay
all fees incurred in connection with the audit of the Company as of October 31,
1997, by Ernst & Young.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer and Merger Sub
determine. Unless consented to by Buyer or Merger Sub in advance or required
by Legal Requirements, prior to the Closing Shareholders shall, and shall cause
the Company to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Shareholders, Buyer and Merger Sub
will consult with each other concerning the means by which the Company's
employees, customers and suppliers and others having dealings with the Company
will be informed of the Contemplated Transactions, and Buyer and Merger Sub
will have the right to be present for any such communication.
11.3 Confidentiality. Between the date of this Agreement and the
Closing Date, Buyer, Merger Sub and Shareholders will maintain in confidence,
and will cause the directors, officers, employees, agents and advisors of Buyer
and the Company to maintain in confidence, and not use to the detriment of
another party or the Company any written, oral or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, (c) the furnishing or use of such information is
required by legal proceedings or (d) the disclosure is required by Legal
Requirements.
43
<PAGE> 48
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Shareholders waive
and will upon Buyer's or Merger Sub's request cause the Company to waive, any
cause of action, right or claim arising out of the access of Buyer, Merger Sub
or their representatives to any trade secrets or other confidential information
of the Company except for the intentional competitive misuse by Buyer or Merger
Sub of such trade secrets or confidential information.
11.4 Notices. All notices, consents, waivers and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
To Shareholders:
William and Louise Warshauer
80 Lane 530 A
Lake James
Fremont, Indiana 46737
Lawrence E. Donay
15 Lane 470 B
Lake James
Angola, Indiana 46703
with a copy to:
Baker & Daniels
111 E. Wayne St.
Suite 800
Fort Wayne, Indiana 46802
Attention: N. Reed Silliman, Esq.
To Buyer or Merger Sub:
IMCO Recycling Inc.
5215 N. O'Connor Blvd.
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
Attention: Paul V. Dufour
44
<PAGE> 49
with a copy to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attention: David H. Oden, Esq.
11.5 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the state and federal
courts serving Detroit, Michigan, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may
be served on any party anywhere in the world.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Shareholders dated September
15, 1997) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 Disclosure Letter. In the event of any inconsistency between
the statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
45
<PAGE> 50
11.10 Assignments, Successors and No Third-party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that Buyer and/or Merger Sub may assign any
of its rights under this Agreement to any Subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Delaware without regard to conflicts of laws principles.
11.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
* * * * *
46
<PAGE> 51
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
IMCO RECYCLING INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
MERGER SUB:
IMCO RECYCLING OF COLDWATER INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
THE COMPANY:
ALCHEM ALUMINUM, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
SHAREHOLDERS:
---------------------------------------
William Warshauer
---------------------------------------
Louise Warshauer
---------------------------------------
Lawrence E. Donay
47
<PAGE> 52
EXHIBIT A
OWNERSHIP PERCENTAGES
<TABLE>
<CAPTION>
Stock Merger Cash Merger
Shareholder Consideration Percentage Consideration Percentage
<S> <C> <C>
William Warshauer 45.62% 32.05%
Louise Warshauer 45.63% 32.06%
Lawrence E. Donay 8.75% 35.89%
</TABLE>
48
<PAGE> 1
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT") is made and entered
into as of November 14, 1997, by and between IMCO Recycling Inc., a Delaware
corporation (the "COMPANY"), and the Purchasers (as defined below).
Recitals
WHEREAS, the Company, the Purchasers, IMCO Recycling of Coldwater
Inc., a Delaware corporation ("IMCO RECYCLING OF COLDWATER"), and Alchem
Aluminum, Inc., an Indiana corporation ("ALCHEM"), have entered into an
Agreement and Plan of Merger dated as of the date hereof (the "MERGER
AGREEMENT"), pursuant to which the Company has acquired all of the issued and
outstanding capital stock of Alchem; and
WHEREAS, pursuant to the Merger Agreement, each of the Purchasers has
acquired shares (collectively, the "SHARES") of the Company's common stock,
$0.10 par value per share ("COMMON STOCK"); and
WHEREAS, the Company wishes to grant each of the Purchasers certain
registration rights with respect to the Shares;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"PURCHASERS" shall mean the owners of Common Stock identified on the
signature page hereof, each of whom is referred to individually herein as a
"PURCHASER" and a transferee of Registrable Securities from a Purchaser,
provided such transfer complies with Section 3.2 of this Agreement.
"REGISTRABLE SECURITIES" shall mean (i) the Shares and any and all
shares of Common Stock issued or issuable at any time or from time to time in
respect of which the Company has previously or may in the future grant in
writing registration rights (collectively, the "REGISTRABLE COMMON"); and (ii)
any Common Stock issued or issuable at any time or from time to time in respect
of the Shares or the Registrable Common upon a stock split, stock dividend,
recapitalization or other similar event involving the Company.
The terms "REGISTER," "REGISTERED", and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
<PAGE> 2
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with Sections
2.1 and 2.2 hereof, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company and one counsel for all
holders of Registrable Securities (in an amount not to exceed $5,000), blue sky
fees and expenses and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees
of the Company which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean only the underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
a Purchaser.
"UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which
the Common Stock is offered and sold on a firm commitment basis through one or
more underwriters, all pursuant to an underwriting agreement between the
Company and such underwriter(s).
2. Registration Rights.
2.1 Requested Registration.
(a) Request for Registration. Subject to the terms hereof
(and except as otherwise provided in Section 3.2), if at any time
after the third anniversary of the date of this Agreement, any
Purchaser(s) who collectively own at least a majority of the
Registrable Securities then owned by the Purchasers makes a
written request that the Company register under the Securities Act all
or any portion (provided that such portion will have an
aggregate offering price of at least $5,000,000) of the Registrable
Securities, the Company shall:
(i) promptly give written notice of the proposed
registration to all other Purchasers; and
(ii) as soon as practicable, use commercially
reasonable efforts to effect such a registration statement
(including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue
sky laws or other compliance), and will also include in such
registration all Registrable Securities of other Purchasers
with respect to which the Company has received written
requests for inclusion therein within 20 days after the
receipt of the Company's notice. The Company shall be
obligated to register Registrable Securities for the
Purchasers pursuant to this Section 2.1 on one occasion only,
unless solely because of the rights of the Existing Holders
(as defined in Section 2.4) the Purchasers are not able to
include at least 90% of the Registrable Securities they wish
to include in such registration, in which case such
registration shall not count under this Section 2.1.
(b) Postponed Registration. Notwithstanding anything to
the contrary contained herein, the Company may delay the filing or
effectiveness of a registration statement under this Section 2.1 after
receipt of a request under this Section 2.1
2
<PAGE> 3
(i) during the period commencing 60 days prior to the Company's
estimated filing date of, and ending on a date 90 days after the
effective date of, a registration statement filed by the Company
relating to an Underwritten Public Offering for which the Company has
delivered the notice to Purchasers required in Section 2.2 or
(ii) for a period of up to 180 days if at the time of such request,
the Board of Directors of the Company determines in its reasonable
judgment and in good faith that the filing of such registration
statement or the making of any required disclosure in connection
therewith would have a material adverse effect on the Company or
substantially interfere with a significant transaction in which the
Company is then engaged.
2.2 Company Registration.
(a) Notice of Registration. Subject to the terms hereof,
beginning on January 1, 1998, if at any time or from time to time
(except as otherwise provided in Section 3.2), the Company shall
determine to register any of its Common Stock for its own account
relating to an Underwritten Public Offering, the Company shall:
(i) promptly, but in any event at least 30 days
before the Company files a registration statement pursuant to
an Underwritten Public Offering, give to each Purchaser
written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
the underwriting involved therein, such Registrable Securities
as each Purchaser may request in a writing delivered to the
Company within 20 days after each Purchaser's receipt of the
Company's written notice delivered pursuant to Section
2.2(a)(i) above.
(b) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by
it under this Section 2.2 prior to the effectiveness of such
registration whether or not any Purchaser has elected to include its
Registrable Securities in such registration, provided, however, that
in such event, the Company shall promptly pay all reasonable
out-of-pocket costs and expenses of the Purchasers (including, without
limitation, all reasonable fees and disbursements of one law firm
chosen to represent the Purchasers) incurred in connection with such
terminated registration.
2.3 Underwriting. The right of each Purchaser to
registration pursuant to Sections 2.1 and 2.2 shall be conditioned
upon such Purchaser's participation in such underwriting, and the
inclusion of Registrable Securities in the underwriting shall be
limited to the extent provided herein. Each Purchaser and all other
stockholders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Subject to the
provisions of Section 2.4 below, if the managing underwriter
determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit some
or all of the Registrable Securities that may be included in the
registration and underwriting as follows: the number of Registrable
Securities that may be included in the registration and underwriting
by each Purchaser shall be determined by multiplying the number of
shares of Registrable Securities of all selling stockholders of the
Company which the managing underwriter
3
<PAGE> 4
is willing to include in such registration and underwriting, times a
fraction, the numerator of which is the number of Registrable
Securities requested to be included in such registration and
underwriting by each Purchaser, and the denominator of which is the
total number of Registrable Securities which all selling stockholders
of the Company have requested to have included in such registration
and underwriting. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number
of shares allocable to any such person to the nearest 100 shares. If
any Purchaser disapproves of the terms of any such underwriting, it
may elect to withdraw therefrom by written notice to the Company and
the managing underwriter, delivered not less than seven days before
the effective date.
2.4 Subordination of Registration Rights.
Notwithstanding any other provision of this Agreement to the contrary,
the registration rights granted pursuant to Sections 2.1 and 2.2 are
expressly subordinate in all respects to the registration rights
previously granted by the Company to each of Merrill Lynch
Interfunding Inc., a Delaware corporation, Don V. Ingram, a resident
of Dallas County, Texas, and PTX Partners, a Texas limited partnership
(collectively, the "EXISTING HOLDERS"), pursuant to that certain
Amended and Restated Registration Agreement, dated September 30, 1988
(the "1988 AGREEMENT"). In the event that the managing underwriter of
any underwriting shall inform the Company of its intention to limit
the number of Registrable Securities to be included in any
registration and underwriting pursuant to Section 2.3 above, all
Registrable Securities held by the Existing Holders who have notified
the Company of their intent to include their Registrable Securities in
such registration and underwriting shall be included in such
registration and underwriting (subject to the terms of the 1988
Agreement), before the Purchasers shall be permitted to include any of
their Shares in such registration and underwriting. In the event that
additional Registrable Securities are available for inclusion in such
registration and underwriting after the inclusion of the Existing
Holders' Registrable Securities, then the number of Registrable
Securities to be included in such registration and underwriting by the
Purchasers shall be determined by multiplying the number of shares of
Registrable Securities remaining after the inclusion of the Existing
Holders' Registrable Securities which the managing underwriter is
willing to include in such registration and underwriting, times a
fraction, the numerator of which is the number of Registrable
Securities requested to be included in such registration and
underwriting by each Purchaser, and the denominator of which is the
total number of Registrable Securities which all Purchasers have
requested to have included in such registration and underwriting.
2.5 Expenses of Registration. All Registration Expenses
incurred in connection with all registrations pursuant to Sections 2.1
and 2.2 shall be borne by the Company. Unless otherwise stated
herein, all Selling Expenses relating to securities registered on
behalf of any Purchaser shall be borne by such Purchaser.
2.6 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company
pursuant to this Agreement, the Company will keep each Purchaser
advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its
expense, the Company will:
4
<PAGE> 5
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use commercially
reasonable efforts to cause such registration statement to become and
remain effective with respect to a registration statement filed
regarding an Underwritten Public Offering, for the lesser of (i) 90
days or (ii) until the distribution described in such registration
statement has been completed; and
(b) Furnish to each underwriter such number of copies of
a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as
such underwriter may reasonably request in order to facilitate the
public sale of the shares by such underwriter, and promptly furnish to
each underwriter and Purchaser notice of any stop-order or similar
notice issued by the Commission or any state agency charged with the
regulation of securities, and notice of NYSE or any other securities
exchange listing; and
(c) Furnish prospectuses, including preliminary
prospectuses and amendments and supplements thereto, to the Purchasers
electing to sell any of their Registrable Securities pursuant to
Sections 2.1 and 2.2 hereof, all in accordance with applicable
securities laws; and
(d) Notify the Purchasers in the event that the Company
becomes aware that a prospectus relating to the Registrable Securities
contains a materially untrue statement or omits to state a material
fact; and
(e) Apply to register or otherwise qualify the
Registrable Securities offered by the Purchasers or any of them under
all applicable blue sky laws of any state.
2.7 Indemnification.
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Purchaser, each of its officers and
directors and partners, and each person controlling each Purchaser
within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected
pursuant to this Agreement, against all expenses, claims, losses,
damages or liabilities (or actions in respect thereof) to the extent
to which such person or entity is subject, including any of the
foregoing incurred in settlement of any litigation, commenced or
threatened, to the extent such expenses, claims, losses, damages or
liabilities (or proceedings in respect thereof) arise out of or are
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus,
offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or
compliance, or arise out of or are based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act or any rule or
regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or
compliance, and the Company will reimburse each Purchaser, each of its
officers and directors and partners, and each person controlling each
Purchaser for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided, however, that the
indemnity contained herein shall not apply to amounts
5
<PAGE> 6
paid in settlement of any claim, loss, damage, liability or expense if
settlement is effected without the consent of the Company (which
consent shall not unreasonably be withheld); provided, further, that
the Company will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement
or omission, made in reliance upon and in conformity with information
furnished to the Company expressly for inclusion in such registration
by such Purchaser or such controlling person specifically for use
therein. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed with the Commission
pursuant to the applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall
not inure to the benefit of any underwriter or (if there is no
underwriter) any Purchaser if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda
thereto, was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is
required by the Securities Act.
(b) To the extent permitted by law, each Purchaser will,
severally but not jointly, if shares held by such Purchaser are
included in the shares as to which such registration, qualification or
compliance is being effected pursuant to the terms hereof, indemnify
and hold harmless the Company, each of its directors and officers,
each person who controls the Company within the meaning of Section 15
of the Securities Act, and each other person selling the Company's
shares covered by such registration statement, each of such person's
officers and directors and each person controlling such persons within
the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) to the
extent to which such person or entity is subject, arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement,
prospectus, offering circular or other document, or arising out of or
based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Purchaser
of any rule or regulation promulgated under the Securities Act
applicable to such Purchaser and relating to action or inaction
required of such Purchaser in connection with any such registration,
qualification or compliance, and will reimburse the Company, such
other persons, such directors, officers, persons or control persons
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with
information furnished to the Company by such Purchaser expressly for
inclusion in such registration; provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability or expense if settlement is effected
without the consent of the Purchaser (which consent shall not be
unreasonably withheld); and provided, further, that the maximum
liability of any Purchaser under this Section 2.7(b) shall be limited
to the aggregate amount of all sales proceeds actually received by
such Purchaser upon the sale of such Purchaser's Registrable
Securities in connection with such
6
<PAGE> 7
registration. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed pursuant to
applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit
of the Company, any underwriter or any other person if a copy of the
final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto, was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
(c) Each party entitled to indemnification under this
Section 2.7 (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY")
promptly after such Indemnified Party has actual knowledge of any
action or proceeding commenced against, or written demand made on any
such party in respect of which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless the failure to give such
notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is a
conflict of interest or as to which the Indemnifying Party is
asserting separate or different defenses, which defenses are
inconsistent with the defenses of the Indemnified Party. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without
the consent of each Indemnifying Party.
(d) If the indemnification provided for in this Section
2.7 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and all stockholders offering
shares in the offering (the "SELLING STOCKHOLDERS") on the other from
the offering of the Company's shares, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the Selling Stockholders on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Selling Stockholders on the other
shall be the net proceeds from the offering (before deducting
expenses) received by the Company on the one hand and the Selling
Stockholders on the other. The relative fault of the Company on the
one hand
7
<PAGE> 8
and the Selling Stockholders on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
or by the Selling Stockholders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Selling Stockholders
agree that it would not be just and equitable if contribution pursuant
to this Section 2.7(d) were based solely upon the number of entities
from whom contribution was requested or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 2.7(d). The amount paid or payable
by an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section 2.7(d) shall be deemed
to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any
such action or claim, subject to the provisions of Section 2.7(c)
hereof. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act).
2.8 Holdback Agreements. Each Purchaser agrees not to
effect any public sale or distribution of Common Stock (or other
shares) of the Company, or any shares convertible into or exchangeable
or exercisable for such Common Stock (or other shares), during the 30
days prior to and the 180-day period beginning on the effective date
of any registration statement filed hereunder except as part of such
registration, unless the underwriters managing the registered public
offering otherwise agree.
2.9 Certain Information. Each Purchaser agrees, with
respect to any Registrable Securities included in any registration, to
furnish to the Company such information regarding such Purchaser, the
Registrable Securities and the distribution proposed by such Purchaser
as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or
compliance referred to in Sections 2.1 and 2.2.
2.10 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which
may at any time permit the sale of the Restricted Securities (used
herein as defined in Rule 144 under the Securities Act) to the public
without registration, the Company agrees to use its best lawful
efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act,
at all times during which the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT");
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Exchange Act at all times during which the
Company is subject to such reporting requirements; and
8
<PAGE> 9
(c) So long as any Purchaser owns any Restricted
Securities, to furnish to such Purchaser forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 and with regard to the
Securities Act and the Exchange Act at all times during which the
Company is subject to such reporting requirements, a copy of the most
recent annual or quarterly report of the Company, and such other
non-confidential reports and documents of the Company and other
non-confidential information in the possession of or reasonably
obtainable by the Company as such Purchaser may reasonably request in
availing such Purchaser of any rule or regulation of the Commission
allowing Purchaser to sell any such shares without registration.
3. Miscellaneous.
3.1 Governing Law. This Agreement shall be governed in
all respects by the internal laws of the State of Texas.
3.2 No Transfer; Termination. The registration rights
contemplated herein are not transferable, except (i) by operation of
law and by the laws of descent and distribution; (ii) to any member of
a Purchaser's immediate family; or (iii) to any trust, partnership or
other entity as to which all of the beneficiaries or partners consist
of a Purchaser or members of such Purchaser's immediate family. The
registration rights granted herein shall terminate, and the
registration rights will not be exercisable by any Purchaser (or such
Purchaser's lawful transferees pursuant to this Section 3.2) at such
time as all shares of Registrable Securities held by such Purchaser
may immediately be sold under Rule 144 (as amended from time to time)
during any 90-day period.
3.3 Entire Agreement; Amendment. This Agreement
constitutes the full and entire understanding and agreement between
the parties with regard to the subject hereof. This Agreement, or any
provision hereof, may be amended, waived, discharged or terminated
only upon the written consent of the Company and those Purchasers who
are the record holders of at least majority of the Shares issued
pursuant to the Merger Agreement.
3.4 Notices. All notices, consents, waivers and other
communications under this Agreement must be in writing and will be
deemed to have been duly given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
To the Purchasers:
William & Louise Warshauer
80 Lane 530 A
Lake James
Fremont, Indiana 46737
9
<PAGE> 10
Lawrence E. Donay
80 Lane 470 B
Lake James
Fremont, Indiana 46737
with a copy to:
Baker & Daniels
111 E. Wayne St.
Suite 800
Fort Wayne, Indiana 46802
Fax: (214) 460-1700
Attention: N. Reed Silliman, Esq.
To the Company:
IMCO Recycling Inc.
5215 N. O'Connor Blvd.
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
Fax: (972) 869-6556
Attention: Chief Executive Officer and
Chief Financial Officer
with a copy to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Fax: (214) 651-5940
Attention: David H. Oden, Esq.
3.5 Delays or Omissions. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy
accruing to any party to this Agreement shall impair any such right,
power or remedy of such party nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of
any party of any breach or default under this Agreement, or any waiver
on the part of any party of any provisions or conditions of this
agreement, must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any party to
this Agreement, shall be cumulative and not alternative.
3.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which
together shall constitute one instrument.
10
<PAGE> 11
3.7 Severability. In the event that any provision of
this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision.
3.8 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not considered
in construing or interpreting this Agreement.
* * * * *
11
<PAGE> 12
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
COMPANY:
IMCO RECYCLING INC.
By:
------------------------------------
Title:
---------------------------------
PURCHASERS:
---------------------------------------
William Warshauer
---------------------------------------
Louise Warshauer
---------------------------------------
Lawrence E. Donay
12
