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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Exchange Act of 1934
Date of report (Date of earliest event reported): July 21, 1998
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IMCO Recycling Inc
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-7170 75-2008280
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(Commission File Number) (IRS Employer Identification No.)
5215 North O'Connor Blvd., Suite 940, Irving, Texas 75039
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972)-401-7200
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets.
On July 21, 1998, IMCO Recycling Inc. (the "Company"), pursuant to the
terms of a Purchase and Sale Agreement (the "U.S. Zinc Agreement") by and among
the Company and The Minette and Jerome Robinson Community Property Trust, The
Minette and Jerome Robinson Foundation, The Minette and Jerome Robinson
Charitable Remainder Trust, M. Russ Robinson, Howard Robinson and Mindy Robinson
Brown, former stockholders (the "Stockholders") of U.S. Zinc Corporation, a
Delaware corporation ("U.S. Zinc"), acquired in a privately negotiated
transaction 100% of the issued and outstanding capital stock of U.S. Zinc. The
consideration paid by the Company in exchange for the U.S. Zinc stock was (i)
$46,500,000 in cash, (ii) the issuance of 298,010 shares of common stock, par
value $.10 per share, of the Company ("Common Stock"), and (iii) the issuance of
four-year Warrants to purchase an aggregate of 1,500,000 shares of Common Stock.
At the date of the acquisition, U.S. Zinc had outstanding approximately
$17,000,000 of long-term indebtedness, substantially all of which was repaid by
the Company. The U.S. Zinc Agreement provides for certain purchase price
adjustments to be effected following the closing of the acquisition. In
addition, the transaction contemplates future contingent payments to certain of
the Stockholders (but not in an aggregate amount to exceed $11,500,000) based
upon the earnings performance of U.S. Zinc and the Company's other zinc-related
operations through June 30, 2002. The amount and terms of such consideration
were determined pursuant to arm's-length negotiations between the Company and
the Stockholders.
U.S. Zinc and its wholly-owned subsidiaries operate five zinc processing
and recycling facilities in Houston, Texas, Chicago, Illinois, Hillsboro,
Illinois and Millington, Tennessee. The Illinois and Tennessee facilities
principally process and supply zinc oxide, and the two Houston facilities
principally process and supply zinc dust and zinc metal. The Company presently
intends to continue operating the business and assets of U.S. Zinc in a similar
manner to that in which they were operated prior to the acquisition.
Of the 298,010 shares of Common Stock issued by the Company, 238,406 shares
have been deposited in escrow for a period of up to four years after the closing
date as potential recourse by the Company for breaches by the Stockholders of
representations and covenants contained in the U.S. Zinc Agreement and to
satisfy certain other indemnities provided for in the U.S. Zinc Agreement. The
escrow agreement provides for releases of shares of Common Stock from escrow to
the Stockholders on each of the first three anniversary dates of the closing
date, subject to the retention by the escrow agent of a number of shares of
Common Stock having a fair market value equal to the estimated amount of all
unresolved claims made by the Company against the escrow account. On the fourth
anniversary of the closing date, subject to the retention of shares of Common
Stock for unresolved claims as described above, the remaining shares of Common
Stock held in the escrow account will be released to the Stockholders.
The Company also granted registration rights to each of the Stockholders
pursuant to a Registration Rights Agreement dated July 21, 1998. The
Registration Rights Agreement, which expires on January 21, 2003, grants
piggyback registration rights, which allow the Stockholders to participate in
underwritten public offerings initiated by the Company after the closing date
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of the acquisition, subject to certain limitations and condition set forth
therein. In addition, the Registration Rights Agreement grants the Stockholders
one demand registration right, subject to certain limitations and conditions,
including the requirement that at least a minimum number of shares be sold in
the demand registration (1,000,000 shares for demand underwritten public
offerings). The Registration Rights Agreement contains provisions whereby the
Company has agreed to indemnify the Stockholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
The Warrants issued to the Stockholders are exercisable for an exercise
price of $19.04 per share of Common Stock, subject to adjustment for stock
dividends, distributions, recapitalizations and other extraordinary corporate
transactions. On July 21, 1998, the closing price per share of Common Stock as
reported on the New York Stock Exchange composite transactions was $17.3125. The
exercisability of the Warrants vests in four equal annual installments over the
term of the Warrants, beginning January 1, 1999, which accelerate upon a "Change
in Control" (as defined in the Warrants). The Warrants also provide that the
Stockholders may effect a cashless exercise of the Warrants and thereby receive
a number of shares of Common Stock equal to the quotient of (i) the excess of
the market value of the Common Stock at the time of exercise over the exercise
price thereof with respect to the vested shares being exercised, divided by (ii)
the market value per share of the Common Stock at the time of exercise. The
Warrants are also subject to certain restrictions on transfer. Upon any
attempted sale of such Warrants (other than as permitted under their terms), the
Company shall have a right of first refusal to purchase, at its option, all or
any portion of the offered Warrants at the purchase price per Warrant offered to
be paid by the proposed transferee.
The cash consideration paid by the Company in connection with the
acquisition and the repayment of U.S. Zinc's outstanding long-term bank
indebtedness were funded through borrowings under the Company's senior secured
credit facilities pursuant to the Amended and Restated Credit Agreement dated
November 5, 1997 by and among the lenders named therein, Merrill Lynch & Co. and
the Company.
The terms of the U.S. Zinc Agreement provide that the acquisition shall be
accounted for as occurring on July 1, 1998. The Company will account for its
acquisition of U.S. Zinc as a purchase transaction for financial accounting
purposes.
The foregoing, to the extent it summarizes terms of the U.S. Zinc Agreement
or the Warrants, is qualified in its entirety by reference to the full text of
such documents, copies of which have been filed herewith as exhibits and are
incorporated herein by reference.
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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 U.S. Zinc; therefore, the required consolidated
financial statements will be filed with the Commission no later than
October 5, 1998.
(b) Pro Forma Financial Information
At this time it is impracticable to provide the pro forma financial
information required pursuant to Article 11 of Regulation S-X; therefore,
the required pro forma financial information will be filed with the
Commission no later than October 5, 1998.
(c) Exhibits:
2.1 Memorandum of Purchase and Sale Agreement by and among IMCO
Recycling Inc., The Minette and Jerome Robinson Community
Property Trust, The Minette and Jerome Robinson Foundation, The
Minette and Jerome Robinson Charitable Remainder Trust, M. Russ
Robinson, Howard Robinson and Mindy Robinson Brown, dated July
21, 1998. (In accordance with Item 601 of Regulation S-K, the
copy of the U.S. Zinc Agreement filed with the Securities and
Exchange Commission (the "Commission") does not include the
schedules or exhibits thereto. The Company agrees to furnish
such information supplementally to the Commission upon request.)
2.2 Form of Common Stock Purchase Warrant dated July 21, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMCO RECYCLING INC.
By: /s/ Paul V. Dufour
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Paul V. Dufour
Executive Vice President and
Chief Financial Officer
Date: August 4, 1998
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EXHIBIT 2.1
MEMORANDUM OF
PURCHASE AND SALE AGREEMENT
This MEMORANDUM OF PURCHASE AND SALE AGREEMENT (the "Agreement"), is made
and entered into this 21st day of July, 1998, by and among IMCO RECYCLING INC.,
a Delaware corporation ("Buyer"), and each of THE MINNETTE AND JEROME ROBINSON
COMMUNITY PROPERTY TRUST, a Texas trust, THE MINNETTE AND JEROME ROBINSON
FOUNDATION, THE MINNETTE AND JEROME ROBINSON CHARITABLE REMAINDER TRUST, a Texas
trust, M. RUSS ROBINSON, HOWARD ROBINSON AND MINDY ROBINSON BROWN, all residents
of the State of Texas, (collectively, "Shareholders") the holders, presently
and/or at the Closing Date, of 100% of the outstanding shares of capital stock,
par value $1.00 per share, of U.S. Zinc Corporation, a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, the Board of Directors of Buyer and the Shareholders of the
Company, have each approved the Contemplated Transactions, pursuant to the terms
and subject to the conditions of this Agreement, whereby Buyer will purchase
from Shareholders 100% of the issued and outstanding shares of common stock, par
value $1.00 per share, of the Company (the "Shares"), being all of the
outstanding shares of capital stock of the Company; and
WHEREAS, Buyer, Shareholders and Principals desire to make certain
representations, warranties and agreements in connection with the Contemplated
Transactions (defined below);
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions, covenants and promises herein
contained, and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTANTS" has the same meaning as defined in Section 2.3.
"ACQUIRED COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by any Acquired Company or an ERISA
Affiliate of any Acquired Company.
"ACQUIRED COMPANY PLAN" means all Plans of which any Acquired Company or an
ERISA Affiliate of any Acquired Company is or was a Plan Sponsor at any time
within the six year period preceding the date of this Agreement, or to which
any Acquired Company or an ERISA Affiliate of any Acquired Company otherwise
contributes or has contributed at any
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time within the six year period preceding the date of this Agreement, or in
which any Acquired Company or an ERISA Affiliate of any Acquired Company
otherwise participates or has participated at any time within the six year
period preceding the date of this Agreement. All references to Plans are to
Company Plans unless the context requires otherwise.
"ACQUIRED COMPANY VEBA" means a VEBA whose members include employees of any
Acquired Company or any ERISA Affiliate of any Acquired Company.
"ACQUIRED COMPANIES" means the Company and its Subsidiaries, including the
New Subsidiaries, collectively.
"APPLICABLE CONTRACT" means any Contract (a) under which any Acquired
Company has acquired any rights, (b) under which any Acquired Company is subject
to any obligation or liability, or (c) by which any Acquired Company or any of
the assets owned or used by it is bound.
"BALANCE SHEET" has the same meaning as defined in Section 4.4.
"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 practicable.
"BREACH" means a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement; a Breach 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" has the same meaning as defined in the first paragraph of this
Agreement.
"BUYER COMMON STOCK" has the same meaning as defined in Section 2.2.
"BUYER SEC REPORTS" shall have the meaning assigned to it in Section 5.7.
"CASH COMPONENT" has the same meaning as defined in Section 2.2.
"CLAIM" means, as asserted (a) against any specified Person, any claim,
right to indemnification, demand or Proceeding made or pending against the
specified Person for Damages to any other Person, or (b) by the specified
Person, any claim, right to indemnification, demand or Proceeding of the
Specified Person against any other Person for Damages to the specified Person.
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"CLOSING" has the same meaning as defined in Section 2.4.
"CLOSING DATE" means the date and time as of which the Closing actually
takes place.
"CLOSING FINANCIAL STATEMENTS" has the meaning as defined in Section 2.3.
"COMMON STOCK" shall mean the common stock, par value $0.10 per share of
IMCO Recycling Inc., a Delaware corporation.
"COMMON STOCK WARRANT" has the meaning as defined in Section 2.2.
"COMPANY" has the same meaning as defined in the first paragraph of this
Agreement.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONSULTING AGREEMENT" has the same meaning as defined in Section
2.5(a)(xi).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by the Shareholders to Buyer;
(b) the execution and delivery of the Earn-Out Agreement, the Employment
Agreements, the Noncompetition Agreement, the Shareholders' Releases, the
Consulting Agreement, the Investment Letters, the Dana Zinc Lease, the Common
Stock Warrants, the Registration Rights Agreement and the Escrow Agreement;
(c) the performance by Buyer and Principals of their respective covenants
and obligations under this Agreement;
(d) the performance by Buyer and Shareholders of their respective
covenants and obligations under this Agreement;
(e) Buyer's acquisition and ownership of the Shares and exercise of
control over the Acquired Companies.
"CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written and whether express or implied) between any
Acquired Company and any Person other than an Acquired Company that is legally
binding.
"DAMAGES" has the same meaning as defined in Section 6.2.
"DANA ZINC FACILITY" has the same meaning as defined in Section 4.30.
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"DANA ZINC LEASE" has the same meaning as defined in Section 2.5(a)(xvii).
"DANA ZINC PROMISSORY NOTE" has the same meaning as defined in Section
4.30.
"DEFINED BENEFIT PENSION PLAN" has the meaning given in ERISA (S) 3(35).
"DISCLOSURE LETTER" means the disclosure letter delivered to Buyer in
connection with this Agreement.
"EARN-OUT AGREEMENT" has the same meaning as defined in Section
2.5(b)(vii).
"EFFECTIVE DATE" has the meaning set forth in Section 2.1.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA (S)3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA (S)3(1).
"EMPLOYMENT AGREEMENT" has the same meaning as defined in Section
2.5(a)(iii).
"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), ground waters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL LIABILITIES" means any cost, damages, expense (including
without limitation, attorney's fees), liability, obligation, or other
responsibility arising from or under Environmental Law or related common law and
consisting of or relating to:
(a) any environmental matters or conditions (including on-site or off-site
contamination, occupational safety and health, and regulation of chemical
substances or products);
(b) 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;
(c) financial responsibility under Environmental Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment,
or other remediation or response actions ("Cleanup") required by applicable
Environmental Law
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(whether or not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
(d) 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 United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" means any Legal Requirement in effect on or prior to
the Closing Date that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of Hazardous
Materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) the storage, handling, and use of chemicals and/or Hazardous
Materials;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up Hazardous Materials that have been released, preventing
the threat of release of Hazardous Materials, or paying the costs of such clean
up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA AFFILIATE" means, with respect to any Acquired Company, any other
Person that, together with such Acquired Company, would be, or at anytime within
the last six years was treated as a single employer under IRC (S) 414.
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"ESCROW AGREEMENT" has the same meaning as defined in Section 2.5(c).
"ESCROW AMOUNT" and "ESCROW SHARES" have the same respective meanings as
defined in Section 2.6.
"FACILITIES" means any real property, leaseholds, or other interests
currently owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently owned or operated by any Acquired Company.
"FAIR MARKET VALUE" means, solely for the purposes of Sections 2.2 and 2.3
of this Agreement, the average of the closing prices per share of the Buyer
Common Stock as reported on The New York Stock Exchange composite tape for the
twenty (20) consecutive trading days immediately preceding the date of the
Letter of Intent, with such average amount being $16.7781 per share.
"FIDUCIARY" has the meaning set forth in ERISA (S)3(21).
"FORMER FACILITIES" means any real property, leaseholds, or other interests
formerly owned or operated, but no longer owned or operated, by any Acquired
Company and any buildings, plants, structures, or equipment (including motor
vehicles, tank cars, and rolling stock) formerly owned or operated, but no
longer owned or operated, by any Acquired Company.
"GAAP" means generally accepted accounting principles, as utilized in the
United States.
"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 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.
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"HAZARDOUS MATERIALS" means any "hazardous substance," "pollutant or
contaminant," and "petroleum" and "natural gas liquids," as those terms are
defined in Section 101 of CERCLA, and any other substances subject to regulation
under Environmental Law, including without limitation, polychlorinated
byphenyls, lead paint, asbestos, and radioactive materials.
"INTELLECTUAL PROPERTY ASSETS" has the same meaning as defined in Section
4.21.
"INTERIM BALANCE SHEET" has the same meaning as defined in Section 4.4.
"INVESTMENT LETTERS" has the same meaning as defined in Section
2.5(a)(viii).
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code 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.
"KNOWLEDGE" means 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 reasonably
comprehensive 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 as a director,
executive officer, partner, executor, or trustee of such Person (or in any
similar capacity) has 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.
"LETTER OF INTENT" shall mean that certain Letter of Intent, dated April
13, 1998, by and among Buyer and Shareholders.
"MATERIAL ADVERSE EFFECT" means any change in or effect on the referenced
entity that is or will be materially adverse to the financial condition,
businesses, assets or liabilities of such entity and its subsidiaries taken as a
whole, but shall not include the effects of changes that are generally
applicable to the entity's industry or the United States economy generally.
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"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA (S)3(37).
"NET WORKING CAPITAL" means, for purposes of Section 2.3(a) of this
Agreement, the amount by which the consolidated current assets exceed the
consolidated current liabilities of the Company and its Subsidiaries (including
the New Subsidiaries) (for this purpose, current assets shall exclude the Dana
Zinc Promissory Note and current liabilities shall be deemed to include both
short-term and long-term portions of the indebtedness outstanding under the
Company's working capital revolving line of credit pursuant to that certain
Amended and Restated Credit Agreement dated as of April 30, 1995, as amended, by
and among U.S. Zinc Corporation, NationsBank of Texas, N.A. and the other Banks
signatory thereto) as determined by reference to the consolidated balance sheet
of the Company and its Subsidiaries (including the New Subsidiaries) prepared
pursuant to Section 2.3(d) in accordance with GAAP consistently applied.
"NET WORTH" means, for purposes of Section 2.3(c) hereof, the consolidated
total assets minus the consolidated total liabilities of the Company and its
Subsidiaries (including the New Subsidiaries) on the date specified, as
determined by reference to the consolidated balance sheet thereof prepared
pursuant to Section 2.3(d) in accordance with GAAP consistently applied.
"NEW SUBSIDIARIES" means MetalChem, Inc., a Pennsylvania corporation and
Western Zinc Corporation, a California corporation.
"NONCOMPETITION AGREEMENT" has the same meaning as defined in Section
2.5(a)(v).
"NYSE" means The New York Stock Exchange, Inc.
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court or
administrative agency or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if 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 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
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partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) the
certificate of formation and the operating or members' agreement (or their
substantial equivalents) of a limited liability company; (e) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents, other
than obligations, arrangements, and practices that are Plans. Other Benefit
Obligations include consulting agreements under which the compensation paid does
not depend upon the amount of service rendered, sabbatical policies, severance
payment policies, and fringe benefits within the meaning of IRC (S) 132.
"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.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PENSION PLAN" has the meaning given in ERISA (S) 3(2)(A).
"PLAN" has the meaning given in ERISA (S) 3(3).
"PLAN SPONSOR" has the meaning given in ERISA (S) 3(16)(B).
"PRINCIPALS" means Jerome Robinson, M. Russ Robinson and Howard Robinson.
"PRIVATE PLACEMENT MEMORANDUM" means that certain private placement
memorandum of Buyer, dated July 16, 1998, delivered to Shareholders, including
all attachments thereto.
"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.
"PURCHASE PRICE" has the same meaning as defined in Section 2.2.
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC (S) 401(a).
"RBI" means Robinson Brown Investments, L.L.C., a Texas limited liability
company, as defined in Section 2.5(a)(xvii).
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"REGISTRATION RIGHTS AGREEMENT" has the same meaning as defined in Section
2.5(b)(v).
"RELATED PERSON" with respect to a particular individual means:
(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 means:
(u) 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;
(v) any Person that holds a Material Interest in such specified Person;
(w) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(x) any Person in which such specified Person holds a Material Interest;
(y) any Person which is a limited partnership with respect to which such
specified Person serves as a general partner (or in a similar capacity); and
(z) any Related Person of any individual described in clause (v) or (w).
For purposes of this definition, (m) 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
(n) "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.
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"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" with respect to a particular Person, means any director,
executive officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SHAREHOLDERS" has the same meaning as defined in the first paragraph of
this Agreement.
"SHAREHOLDERS' RELEASES" has the same meaning as defined in Section
2.5(a)(ii).
"SHAREHOLDERS' REPRESENTATIVE" has the same meaning as defined in Section
7.
"SHARES" has the same meaning as defined in the Recitals of this Agreement.
"SUBSIDIARY" with respect to any Person (the "Owner"), means 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.
Where the context requires, the term "Subsidiary" or "Subsidiaries" shall also
include "Future Subsidiary" and "New Subsidiaries," respectively.
"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.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made or any notice has been given, 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.
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"TITLE IV PLANS" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. (S) 1301 et seq., other than Multiemployer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC (S)
501(c)(9).
"WARRANT TRANSFER AGREEMENTS" has the same meaning as defined in Section
2.5(a)(x).
"WELFARE PLAN" has the meaning given in ERISA (S) 3(l).
"ZINC-RELATED OPERATIONS" means any other present or future business and
operations of Buyer and its Subsidiaries (including that of Interamerican Zinc,
Inc., a Subsidiary of Buyer) engaged principally in the business of recycling,
processing and selling zinc and derivative products therefrom.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 PURCHASE. Effective as of 12:01 a.m., July 1, 1998 (such time and
date herein referred to as the "Effective Date"), subject to the terms and
conditions of this Agreement, at the Closing contemporaneously with the
execution and delivery hereof, the Shareholders have sold and transferred (and
do hereby sell and transfer) the Shares to Buyer, and Buyer hereby acknowledges
receipt of the Shares from Shareholders in exchange for the consideration set
forth in Section 2.2 below. The parties hereto acknowledge and agree that since
July 1, 1998, the business and operations of the Company and its Subsidiaries
(including the New Subsidiaries), but giving effect to the sale of the Dana Zinc
Facility as described in Section 4.30 hereof, have been conducted for the
account and benefit of Buyer and that the Contemplated Transactions shall be
accounted for as having been consummated as of July 1, 1998.
2.2 PURCHASE PRICE. The consideration (the "Purchase Price") for the
Shares is payable as follows:
(a) the Buyer shall pay to the Shareholders, by cashier's check or in
other immediately available funds, the aggregate sum of $46,500,000, allocated
among the Shareholders in proportion to their respective holdings of Shares
immediately prior to Closing as set forth on Schedule A to this Agreement ("Cash
Component");
(b) Buyer shall issue to Shareholders, in a transaction exempt from
registration under applicable federal and state securities laws, 298,010 shares
of Buyer's common stock, par value $0.10 per share ("Buyer Common Stock"),
subject to adjustment as provided in Sections 2.6 and 2.3, allocated among the
Shareholders in proportion to their respective holdings of Shares immediately
prior to Closing as set forth on Schedule A to this Agreement; and
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(c) Buyer shall issue to Shareholders, in a transaction exempt from
registration under applicable federal and state securities laws, warrants (the
"Common Stock Warrants") to purchase, in the aggregate, up to 1,500,000 shares
of Buyer Common Stock allocated among the Shareholders in proportion to their
respective holdings of Shares immediately prior to the Closing as set forth on
Schedule A to this Agreement, which form of Common Stock Warrant shall be
substantially in the form of Exhibit 2.2(c) attached hereto.
2.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price specified in
Section 2.2 shall be adjusted as follows:
(a) In the event that Net Working Capital is less than $5,000,000 as of
the Effective Date, then the amount of the Cash Component to be paid to
Shareholders as described in Section 2.2(a) herein, shall be reduced by an
amount (if any) equal to the difference between $5,000,000 and the Net Working
Capital as of the Effective Date.
(b) The amount of the Cash Component specified in Section 2.2(a) herein,
shall be (i) reduced by an amount equal to the amount by which the aggregate
amount of all bonuses (as determined on an assumed 38% tax-effected basis for
all bonus amounts) paid and to be paid, in a lump sum or on a deferred payment
or installment payment basis, to any and all employees of the Acquired Companies
who are eligible to receive bonuses in the event of a "change in control" of any
Acquired Company pursuant to the Company's Change of Control Bonus Plan, exceeds
$1,000,000, or (ii) increased by an amount equal to the amount by which
$1,000,000 exceeds the aggregate amount of all bonuses (as determined in the
manner set forth above in clause (i) of this Section 2.3(b)) paid and to be
paid, to any and all employees of the Acquired Companies who are eligible to
receive bonuses in the event of a "change in control" of any Acquired Company
pursuant to the Company's Change of Control Bonus Plan, as the case may be.
(c) In the event the Net Worth is less than $17,000,000 as of the Closing
Date, then the amount of the Cash Component to be paid to Shareholders as
described in Section 2.2(a) herein shall be reduced by an amount (if any) equal
to the difference between $17,000,000 and the Net Worth as of the Effective
Date.
(d) Buyer, at its sole expense, will cause its designated independent
certified public accountants, to conduct a review of and issue a review report
concerning the consolidated combined financial statements ("Closing Financial
Statements") of the Company and its Subsidiaries (including the New
Subsidiaries) as of the Effective Date and for the period from January 1, 1998
through the Effective Date. Such Closing Financial Statements shall reflect any
audit or post-audit adjustments resulting from the addition of the New
Subsidiaries and the completion of audited consolidated, combined financial
statements of the Acquired Companies (including the New Subsidiaries) as of and
for the year ended December 31, 1997. Buyer will deliver the Closing Financial
Statements to Shareholders within thirty (30) days after the Closing Date. If
within thirty days following delivery of the Closing Financial Statements,
Shareholders' Representative have not given Buyer notice of any objection to the
Closing Financial Statements (such notice must contain a statement of the basis
of
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Shareholders' Representative's objection), then the consolidated Net Working
Capital, Net Worth, bonuses and after-tax net income reflected in or derived
from the Closing Financial Statements will be used in computing the adjustments
to the Purchase Price. If Shareholders' Representative gives such notice of
objection, then the issues in dispute will be submitted to
PricewaterhouseCoopers LLP, certified public accountants (the "Accountants"),
for resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will furnish to the Accountants such work papers and
other documents and information relating to the disputed issues as the
Accountants may request and are available to that party or its Subsidiaries (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 will each bear 50% of the fees of the Accountants for such
determination.
(e) Not later than the tenth business day following the final
determination of the adjustments to the Purchase Price specified in Sections
2.3(a) through 2.3(d), if any, (i) to the extent the amount determined in
2.3(b)(ii) exceeds the other purchase price adjustments of this Section 2.3,
Buyer will pay the net aggregate amount of such adjustments to Shareholders by
delivering to Shareholders' Representative a cashier's check or other
immediately available funds in an amount equal to the net aggregate purchase
price adjustments determined pursuant to Sections 2.3(a) through 2.3(d), or (ii)
to the extent the net aggregate amount of the Purchase Price adjustments set
forth in this Section 2.3 results in a net reduction in the Cash Component of
the Purchase Price, the Shareholders will pay the net aggregate amount of such
adjustments to Buyer by delivering to Buyer a cashier's check or other
immediately available funds in an amount equal to the net aggregate purchase
price adjustments determined pursuant to Sections 2.3(a) through 2.3(d).
2.4 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Haynes and Boone, L.L.P., 1000
Louisiana Street, Suite 4300, Houston, Texas 77002, at 10:00 a.m. (local time)
on the date hereof. Failure to consummate the purchase and sale provided for
in this Agreement on the date and time and at the place determined pursuant to
this Section 2.4 will not result in the termination of this Agreement and will
not relieve any party of any obligation under this Agreement.
2.5 CLOSING OBLIGATIONS. At the Closing:
(a) The Shareholders and the Principals shall, and shall cause their
affiliates to, deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers);
(ii) releases in the form of Exhibit 2.5(a)(ii) executed by each of
the Shareholders (collectively "Shareholders' Releases");
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(iii) employment agreements in the form of Exhibit 2.5(a)(iii),
executed by each of M. Russ Robinson and Howard Robinson (together with the
employment agreement referred to in Section 2.5(a)(iv), "Employment
Agreements");
(iv) employment agreement in the form of Exhibit 2.5(a)(iv)
executed by Stephen N. Brown.
(v) noncompetition agreement in the form of Exhibit 2.5(a)(v)
executed by Mindy Robinson Brown (the "Noncompetition Agreement");
(vi) [Reserved];
(vii) the Disclosure Letter, executed by each Shareholder;
(viii) investment letters in the form of Exhibit 2.5(a)(viii)
executed by each of the Shareholders (collectively, the "Investment
Letters");
(ix) each of the Consents identified in Part 4.2 of the Disclosure
Letter;
(x) agreements relating to the transferability of the Common Stock
Warrants, executed by each of the Shareholders in the form of Exhibit
2.5(a)(x) (the "Warrant Transfer Agreements");
(xi) a Consulting Agreement executed by Jerome Robinson in the form
of Exhibit 2.5(a)(xi) (the "Consulting Agreement");
(xii) an opinion of Fulbright & Jaworski L.L.P., counsel to the
Company, dated the Closing Date, in the form of Exhibit 2.5(a)(xii);
(xiii) an opinion of Dvosha G. Roscoe, General Counsel of the
Company, dated the Closing Date, in the form of Exhibit 2.5(a)(xiii);
(xiv) estoppel certificates executed on behalf of each lessor
currently leasing real property to any Acquired Company, each in the form
of Exhibit 2.5(a)(xiv);
(xv) written resignations of all of the officers and directors of
the Acquired Companies effective as of the Closing Date who, as indicated
by Buyer, will not continue in such capacities following the Closing, and
signature cards for all banking, deposit and checking accounts of any
Acquired Company to reflect new signatories thereon;
(xvi) a cashier's check, or other immediately available funds, in an
aggregate amount equal to $500,000, payable to Gulf Reduction Corporation
in payment and
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complete satisfaction of the Dana Zinc Promissory Note as described in
Section 4.30 herein;
(xvii) a real property lease, in the form of Exhibit 2.5(a)(xvii), by
and between Robinson Brown Investments, L.L.C., a Texas limited liability
corporation ("RBI"), and Gulf Reduction Corporation (the "Dana Zinc
Lease"), as further described in Section 4.30 hereof;
(xviii) consolidated audited financial statements of the Acquired
Companies (excluding the New Subsidiaries) for the year ended and as of
December 31, 1997; and
(xix) Affidavits of Spouses, executed by the spouse of each
Shareholder, each in the form of Exhibit 2.5(a)(xix).
(b) Buyer will deliver to the Shareholders:
(i) cashier's checks or other immediately available funds in an
aggregate amount equal to the Cash Component, as specified in Section
2.2(a), payable to the order of the Shareholders in proportion to their
percentage ownership as specified on Schedule A hereto;
(ii) certificates representing the shares of Buyer Common Stock, as
specified in Section 2.2(b) less the number of shares set forth in Sections
2.6 and 2.3(b), registered in the names of the respective Shareholders in
proportion to their percentage ownership as specified on Schedule A hereto;
(iii) the Common Stock Warrants, each executed by Buyer;
(iv) [Reserved];
(v) the registration rights agreement in the form of Exhibit
2.5(b)(v) executed by Buyer (the "Registration Rights Agreement");
(vi) an opinion of Haynes and Boone, L.L.P., counsel to the Buyer,
in the form of Exhibit 2.5(b)(vi);
(vii) the Earn-Out Agreement in the form of Exhibit 2.5(b)(vii)
executed by Buyer (the "Earn-Out Agreement");
(viii) the Employment Agreements executed by the Company;
(ix) the Consulting Agreement executed by the Company;
(x) the Warrant Transfer Agreements executed by Buyer;
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(xi) the Dana Zinc Lease, executed by Gulf Reduction Corporation;
and
(xii) the original Dana Zinc Promissory Note, to be marked paid in
full and delivered to RBI upon payment of the amounts specified in Section
2.5(a)(xvi).
(c) Buyer and Shareholders will also execute and deliver an escrow
agreement in the form of Exhibit 2.5(c) (the "Escrow Agreement") with
NationsBank, N.A., as escrow agent.
(d) Buyer shall have caused the shares of Buyer's Common Stock issued
pursuant to Section 2.2 and to be issued upon exercise of the Common Stock
Warrants to be duly listed for trading on the NYSE and approved for listing upon
official notice of issuance.
2.6 DELIVERY OF ESCROW SHARES. At the Closing, 238,406 shares of Buyer's
Common Stock (the "Escrow Shares" or the "Escrow Amount") described in Section
2.2 will be deposited with NationsBank, N.A., who will act as escrow agent
pursuant to the Escrow Agreement. The Escrow Amount shall be the only amounts
and source of funds available to satisfy any claims made by Buyer for
indemnification under Section 10 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders severally represent and warrant to Buyer, as to such
Shareholder only, as follows:
3.1 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with its
terms.
(b) Except as set forth in Part 4.2 of the Disclosure Letter, such
Shareholder is not nor will he or she 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.
(c) Such Shareholder is acquiring the shares of Buyer Common Stock
issuable pursuant hereto for his or her own account and not with a view to their
resale or 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. Prior to the date of this Agreement, such
Shareholder has received a copy of the Private Placement Memorandum and has had
an adequate opportunity to review and understand the Private Placement
Memorandum.
(d) Such Shareholder is or will be on the Closing Date the record and
beneficial owners of all of the Shares, free and clear of all Encumbrances, as
shown on Schedule A attached hereto as owned by him or it. Each Shareholder who
is an individual owns his or her shares as his or her sole separate property,
and such shareholder's spouse has no
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ownership or property interest in such shares, community or otherwise, either as
a result of the community property laws of any State or otherwise.
3.2 BROKERS OR FINDERS. Except for fees payable by such Shareholder to
NationsBank Montgomery Securities, Inc., such Shareholder and its 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 such Shareholder will jointly and severally indemnify and
hold Buyer harmless from any such payment alleged to be due by or through such
Shareholder or the Company as a result of the action by such Shareholder or the
Company or its officers and agents.
4. REPRESENTATIONS AND WARRANTIES OF PRINCIPALS
Each of the Principals represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING. Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State or other jurisdiction of its incorporation or organization,
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. Part 4.1
of the Disclosure Letter contains a list of the other jurisdictions in which
each Acquired Company is authorized to transact business and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is duly qualified to transact 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, except with respect to states or jurisdictions with regard to
which the failure to be so qualified would not have a Material Adverse Effect.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation of
the Shareholders, enforceable against the Shareholders in accordance with its
terms. Upon the execution and delivery by the appropriate Shareholders of the
Employment Agreements, the Noncompetition Agreement, the Escrow Agreement, the
Shareholders' Releases, the Warrant Transfer Agreements, the Registration Rights
Agreement, the Earn-Out Agreement and the Consulting Agreement (collectively,
the "Shareholders' Closing Documents"), the Shareholders' Closing Documents will
constitute the legal, valid, and binding obligations of Shareholders,
enforceable against Shareholders in accordance with their respective terms.
(b) Except as set forth in Part 4.2 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):
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(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of any of the Acquired Companies,
or (B) any resolution adopted by the board of directors or the stockholders
of any Acquired 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 any Acquired
Company or Shareholders, or any of the assets owned or used by any Acquired
Company, may be subject;
(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 any Acquired Company or that otherwise
relates to the business of, or any of the assets owned or used by, any
Acquired Company;
(iv) cause Buyer or any Acquired Company to become subject to, or
to become liable for the payment of, any Tax (other than income and other
Taxes following the Closing, but not income taxes payable by the
Shareholders with respect to the sale of their shares);
(v) cause any of the assets owned by any Acquired 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 any Acquired Company.
Except as set forth in Part 4.2 of the Disclosure Letter, no Seller or
Acquired Company is or will be required to give any notice 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.
4.3 CAPITALIZATION. The authorized equity securities of the Company
consist of 3,000 shares of common stock, par value $1.00 per share, of which
2,000 shares are issued and outstanding and constitute the Shares. All of the
outstanding equity securities and other securities of each Acquired Company are
owned of record and beneficially by one or more of the Acquired Companies, free
and clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of any
Acquired Company. All of the outstanding equity securities of each Acquired
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There
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are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. No Acquired
Company is a party to 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 and is not a party to any joint venture, teaming
agreement, partnership or similar entity or enterprise.
4.4 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) Principals have delivered to Buyer: (i) audited consolidated balance
sheets of the Acquired Companies (other than MetalChem, Inc. and Western Zinc
Corporation) as of December 31 in each of the years 1994 through 1996, and the
related audited statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, together with the report thereon
of Deloitte & Touche L.L.P., independent certified public accountants, (ii) an
audited consolidated balance sheet of the Acquired Companies (excluding the New
Subsidiaries) as of December 31, 1997 (including the notes thereto, the "Balance
Sheet"), and the related statements of income, changes in stockholders' equity,
and cash flow for the fiscal year then ended, together with the report thereon
of Deloitte & Touche L.L.P., independent certified public accountants, and (iii)
an unaudited consolidated combined balance sheet of the Acquired Companies
(including the New Subsidiaries) as of May 31, 1998 (the "Interim Balance
Sheet"), and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for the five months then ended, including in
each case where applicable, the notes thereto. Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company and its
Subsidiaries as of 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, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet); the financial statements
referred to in this Section 4.4 reflect the consistent application of such
accounting principles throughout the periods involved.
(b) Except as set forth in the Disclosure Letter, to the Principals'
knowledge, none of the Acquired Companies has any liabilities or obligations (in
an amount, singly or in the aggregate, of more than $100,000) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
4.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Acquired Companies have been provided to Buyer
and are complete. All of those books and records are in the possession of the
Acquired Companies.
4.6 TITLE TO PROPERTIES; ENCUMBRANCES.
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(a) Part 4.6 of the Disclosure Letter contains a list of all real
property, leaseholds, or other interests therein owned by any Acquired Company.
Principals have delivered or made available to Buyer copies of the deeds and
other instruments (as recorded) by which the Acquired Companies acquired such
real property and interests, and copies of all title insurance policies,
opinions, abstracts, and surveys in the possession of Principals or the Acquired
Companies and relating to such property or interests. The Acquired Companies own
(with good and indefeasible title in the case of real property, subject only to
the matters permitted by Section 4.6(b)) all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own, 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 4.6 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
Acquired Companies 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).
(b) All material 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 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,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of any Acquired Company, and (ii) zoning laws
and other land use restrictions that do not impair the present or anticipated
use of the property subject thereto.
4.7 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on Part 4.7
of the Disclosure Letter, the buildings, plants, structures, and equipment of
the Acquired Companies 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.
4.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired
Companies that are reflected on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
receivables arising from sales actually made or services
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actually performed in the Ordinary Course of Business and will be collected in
accordance with their terms at their recorded amounts, subject only to a
$175,000 allowance for doubtful accounts as of the Effective Date. Except as set
forth on Part 4.8 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 4.8 of the Disclosure Letter contains
a list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
4.9 INVENTORY. All inventory of the Acquired Companies, 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 set forth on the Balance
Sheet not written off have been priced at the lower of cost or market on a last
in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
4.10 TAXES.
(a) Except as set forth on Part 4.10 of the Disclosure Letter, the
Acquired Companies have filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed on or before the date hereof by or
with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Principals have
delivered or made available to Buyer copies of all such Tax Returns filed since
December 31, 1994. The Acquired Companies have paid, or made provision for the
payment of, all Taxes reflected as due on those Tax Returns, or pursuant to any
assessment received by Principals or any Acquired Company, except such Taxes, if
any, as are listed in Part 4.10 of the Disclosure Letter and are being contested
in good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and state income and the foreign Tax Returns
of each Acquired Company subject to such Taxes have been audited by the IRS or
relevant state or foreign tax authorities or are closed by the applicable
statute of limitations for all taxable years through 1993. Part 4.10 of the
Disclosure Letter contains a list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 4.10 of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. Part 4.10
of the Disclosure Letter describes all adjustments to the United States federal
income Tax Returns filed by any Acquired Company or any group of corporations
including any Acquired Company for all taxable years since December 31, 1993,
and the resulting deficiencies proposed by the IRS. Except as described in Part
4.10
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of the Disclosure Letter, no Shareholder or Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of any Acquired Company or for which any Acquired
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the books
of each Acquired Company are adequate (determined in accordance with GAAP) and
for the periods covered thereby. There exists no proposed tax assessment
against any Acquired Company except as disclosed in the Balance Sheet or in Part
4.10 of the Disclosure Letter. No consent to the application of Section
341(f)(2) of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by any Acquired Company. All Taxes that any
Acquired Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed on or before the date hereof by (or that include
on a consolidated basis) the Acquired Companies are true, correct, and complete.
There is no tax sharing agreement that will require any payment by any Acquired
Company after the date of this Agreement.
4.11 NO MATERIAL ADVERSE CHANGE. Since the date of the Interim Balance
Sheet, there has not been any change in the business, operations, properties,
prospects, assets, or condition of any Acquired Company that may result in a
Material Adverse Effect.
4.12 EMPLOYEE BENEFITS.
(a) (i) Part 4.12(a)(i) of the Disclosure Letter contains a list of
all Acquired Company Plans, Acquired Company Other Benefit Obligations, and
Acquired Company VEBAS, and identifies as such all Acquired Company Plans that
are (A) Defined Benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans,
or (D) Multiemployer Plans.
(ii) Part 4.12(a)(ii) of the Disclosure Letter contains a list of
all ERISA Affiliates of the Acquired Companies.
(b) Principals have delivered to Buyer:
(i) all documents that set forth the terms of each Acquired
Company Plan or Acquired Company Other Benefit Obligation and of any
related trust, including (A) all plan descriptions and summary plan
descriptions of Acquired Company Plans for which Principals or the Acquired
Companies are required to prepare, file, and distribute plan descriptions
and summary plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding Acquired Company
Plans and Acquired Company Other Benefit Obligations for which a plan
description or summary plan description is not required;
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(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both
pension and welfare benefits) by any Acquired Company and the ERISA
Affiliates of the Acquired Companies, and all collective bargaining
agreements pursuant to which contributions are being made or obligations
are owed by such entities;
(iv) a written description of any Acquired Company Plan or Acquired
Company Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements with respect to any Acquired
Company Plan;
(vi) all insurance policies which were purchased by or to provide
benefits under any Acquired Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that
relate to any Acquired Company Plan or Acquired Company Other Benefit
Obligation;
(viii) all reports submitted within the four years preceding the date
of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Acquired Company Plan or Acquired Company Other Benefit Obligation;
(ix) samples of all notifications to employees of their rights
under ERISA (S) 601 et seq. and IRC (S) 4980B;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Acquired Company Plan, including all schedules
thereto and the opinions of independent accountants;
(xi) all notices or reports that were given by any Acquired Company
or any ERISA Affiliate of the Acquired Companies or any Acquired Company
Plan to the IRS or the PBGC, pursuant to statute, within the four years
preceding the date of this Agreement, including notices that are expressly
mentioned elsewhere in this Section 4.12;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to any Acquired Company, any ERISA Affiliate of the
Company, or any Acquired Company Plan within the four years preceding the
date of this Agreement;
(xiii) with respect to Acquired Company Plans that are Qualified
Plans, the most recent determination letter for each such Plan; and
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(c) Except as set forth in Part 4.12(c) of the Disclosure Letter:
(i) The Acquired Companies have performed all of their obligations
under all Acquired Company Plans and Acquired Company Other Benefit
Obligations. The Acquired Companies have made appropriate entries in their
financial records and statements for all obligations and liabilities under
such Plans and Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by any
Acquired Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit
Obligation.
(iii) No Acquired Company Plan is a Defined Benefit Pension Plan or
any other Pension Plan to which the minimum funding provisions of ERISA (S)
302 and IRC (S) 412 apply, or a Multiemployer Plan. There is no Acquired
Company VEBA.
(iv) The Acquired Companies and the ERISA Affiliates of the
Acquired Companies, with respect to all Acquired Company Plans and Acquired
Company Other Benefits Obligations, are, and each Acquired Company Plan and
Acquired Company Other Benefit Obligation is, in full compliance with
ERISA, the IRC, and other applicable Legal Requirements, including the
provisions of such Legal Requirements expressly mentioned in this Section
4.12, and with any applicable collective bargaining agreement.
(A) Neither the Acquired Companies nor any ERISA Affiliate of
the Acquired Companies has engaged in or knowingly permitted to occur
and, to Principals' knowledge, no other party has engaged in or
permitted to occur any transaction prohibited by ERISA (S) 406 or
"prohibited transaction" under IRC (S) 4975(c) with respect to any
Acquired Company Plan, except for any transactions which are exempt
under ERISA (S) 408 or IRC (S) 4975.
(B) Neither the Acquired Companies, any ERISA Affiliate of
the Acquired Companies, nor any Shareholder has any liability to the
IRS with respect to any Plan, including any such liability imposed by
Chapter 43 of the IRC.
(C) Neither the Acquired Companies nor any ERISA Affiliate of
the Acquired Companies has any liability with respect to any Acquired
Company Plan under ERISA (S) 502.
(D) All filings required by ERISA and the IRC as to each Plan
have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely
provided.
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(E) All contributions and payments made or accrued with
respect to all Acquired Company Plans and Acquired Company Other
Benefit Obligations which have been deducted were deductible under
applicable IRC provisions, including IRC (S) 162 or (S) 404. No
Acquired Company Plan or the assets thereof are liable for any tax as
unrelated business taxable income.
(F) Except for any formal qualification requirement with
respect to which the remedial amendment period set forth in IRS (S)
401(b), and any regulations, rulings or other IRS releases thereunder,
has not expired, (i) each Acquired Company Plan that is a Qualified
Plan is qualified in form and operation under IRC (S) 401(a), and each
trust for each such Plan is exempt from federal income tax under IRC
(S) 501 (a), and (ii) no event has occurred or circumstance exists
that gives rise to disqualification or loss of tax-exempt status of
any such Plan or trust.
(G) No event has occurred or circumstance exists that has
resulted in or could result in the partial termination, within the
meaning of IRC (S) 411(d)(3), of any Acquired Company Plan that is a
Qualified Plan, excluding any event with respect to which the
requirements of IRC (S) 411(d)(3) have been satisfied.
(v) Each Acquired Company Plan can be terminated without payment
of any additional contribution or amount and, except for any Qualified
Plan, without the vesting or acceleration of any benefits promised by such
Plan.
(vi) Since January 1, 1996, there has been no establishment or
amendment of any Acquired Company Plan or Acquired Company Other Benefit
Obligation.
(vii) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Acquired Company Plans and
Acquired Company Other Benefit Obligations that are insured, or a material
increase in benefit costs of such Plans and Obligations that are self-
insured.
(viii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Acquired Company Plan or Acquired Company Other Benefit Obligation is
pending or, to Principals' Knowledge, is Threatened.
(ix) No Acquired Company Plan is subject to Title IV of ERISA.
(x) Except to the extent required under ERISA (S) 601 et seq. and
IRC (S) 4980B, the Acquired Companies do not provide health or welfare
benefits for any retired or former employee nor are they obligated to
provide health or welfare benefits to any active employee following such
employee's retirement or other termination of service.
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(xi) The Acquired Companies have the right to modify and terminate
benefits as to retirees (other than pensions) with respect to both retired
and active employees.
(xii) The Acquired Companies have complied with the provisions of
ERISA (S) 601 et seq. and IRC (S) 4980B.
(xiii) No payment that is owed or may become due to any director,
officer, employee, or agent of any Acquired Company will be non-deductible
to such Acquired Company or subject to tax under IRC (S) 280G or (S) 4999;
nor will the Acquired Company be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person.
(xiv) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit, assuming
that no employee incurs a termination of employment or reduction in hours,
and no Acquired Company Plan or Acquired Company Other Benefit Obligation
is terminated, in connection with the Contemplated Transactions.
4.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Part 4.13 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since January 1,
1995 has been, in full compliance in all material respects 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 circumstance exists that (with or
without notice or lapse of time) (A) may reasonably be expected to
constitute or result in a violation by any Acquired Company of, or a
failure on the part of any Acquired Company to comply with, any material
Legal Requirement, or (B) may reasonably be expected to give rise to any
obligation on the part of any Acquired Company to undertake, or to bear all
or any portion of the cost of, any material remedial action of any nature;
and
(iii) no Acquired Company has received, at any time since January 1,
1995, any notice or other communication from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any material 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
material remedial action of any nature.
(iv) Each of the Acquired Companies has complied and is in
compliance in all material respects with all applicable Occupational Safety
and Health Laws,
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including any and all Legal Requirements promulgated by the Occupational
Safety and Health Administration. Each Acquired Company has obtained and
complied with, and is in compliance with, in all material respects, all
permits, licenses and other authorizations that are required pursuant to
any Occupational Safety and Health Law, except for permits, licenses and
authorizations, the failure of which to obtain would not cause a Material
Adverse Effect. None of the Acquired Companies has received any written or
oral notice or report regarding any actual or alleged material violation of
any Occupational Safety and Health Law, or any material liabilities or
potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of the Acquired Companies, the
Facilities or the Former Facilities arising under any Occupational Safety
and Health Law.
(b) Part 4.13 of the Disclosure Letter contains a list of each
Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
any Acquired Company. Each Governmental Authorization listed or required to be
listed in Part 4.13 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 4.13 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since January 1,
1996 has been, in compliance in all material respects with all of the terms
and requirements of each Governmental Authorization identified or required
to be identified in Part 4.13 of the Disclosure Letter;
(ii) no event has occurred or 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 material term
or requirement of any Governmental Authorization listed or required to be
listed in Part 4.13 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 4.13 of the Disclosure Letter;
(iii) no Acquired Company has received, at any time since January 1,
1996, any notice or other communication from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any material 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
4.13 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other material 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.
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4.14 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 4.14 of the Disclosure Letter, to the
Knowledge of Principals and the Acquired Companies, there is no pending
Proceeding:
(i) that has been commenced by or against any Acquired Company or
that otherwise relates to or may affect the business of, or any of the
assets owned or used by, any Acquired Company;
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions; or
(iii) that has been Threatened.
The Acquired Companies have made available to Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 4.14 of the Disclosure Letter.
(b) Except as set forth in Part 4.14 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is subject;
(ii) no Acquired Company is subject to any Order that relates to
the business of, or any of the assets owned or used by, any Acquired
Company; and
(iii) no officer, director, or employee of any Acquired Company is
subject to any Order that prohibits such officer, director, or employee
from engaging in or continuing any conduct, activity, or practice relating
to the business of any Acquired Company.
(c) Except as set forth in Part 4.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times since January 1,
1995 has been, in 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 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 material term or requirement of
any Order to which any Acquired Company, or any of the assets owned or used
by any Acquired Company, is subject; and
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(iii) no Acquired Company has received, at any time since January 1,
1995, any notice or other communication 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 any Acquired Company, or any of the assets owned or used by
any Acquired Company, is or has been subject.
4.15 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Part
4.15 of the Disclosure Letter, since the date of the Balance Sheet, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired 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 any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, 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;
(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 any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
(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 having a value of or in an amount of at least
$25,000, or (ii) any Contract or transaction involving a total remaining
commitment by or to the any Acquired Company of at least $100,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
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(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $25,000;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement by any Acquired Company to do any of the foregoing.
4.16 CONTRACTS; NO DEFAULTS.
(a) Part 4.16(a) of the Disclosure Letter contains a list, and Principals
have delivered to Buyer copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by one or more Acquired Companies of an
amount or value in excess of $100,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more Acquired Companies of an
amount or value in excess of (a) $100,000 with respect to zinc or zinc
bearing materials to be processed, and (b) $50,000 for all other services,
goods or materials;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
one or more Acquired Companies in excess of $10,000;
(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 installment and conditional sales agreements having a
value per item or aggregate payments of less than $10,000 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 any Acquired Company with any other Person;
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(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of any Acquired Company or limit the freedom of any Acquired
Company or any Affiliate of an Acquired 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 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 any Acquired Company to be responsible for consequential
damages;
(xii) each planned capital expenditure project that would require
expenditures in excess of $50,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification in respect of any
of the foregoing.
(b) Except as set forth in Part 4.16(b) of the Disclosure Letter:
(i) no Shareholder (and no Related Person of a Principal or
Shareholder) has or may acquire any rights under, and no Shareholder 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, any
Acquired Company; and
(ii) no officer, director, or, to the knowledge of the Company,
employee of any Acquired 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
any Acquired Company, or (B) assign to any Acquired Company or to any other
Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 4.16(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 4.16(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable
against the applicable Acquired Company in accordance with its terms.
(d) Except as set forth in Part 4.16(d) of the Disclosure Letter:
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(i) each Acquired Company is, and at all times since January 1,
1998 (if then in force) has been, in compliance in all material respects
with all applicable terms and requirements of each Contract identified in
Part 4.16(a) of the Disclosure Letter under which it has or had any
obligation or liability or by which it or any of the assets owned or used
by such Acquired Company is or was bound;
(ii) to the Principals' knowledge, each other Person that has or
had any obligation or liability under any Contract identified in Part
4.16(a) of the Disclosure Letter under which an Acquired Company has or had
any rights is, and at all times since January 1, 1998 has been, in full
compliance in all material respects with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a material violation or breach of, or give any Acquired 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) no Acquired Company has not given to or received from any
other Person, at any time since January 1, 1998, any notice or other
communication regarding any actual, alleged, possible, or potential
material violation or breach of, or material default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed Contracts with any Person, and no
such Person has made written demand for such renegotiation.
4.17 INSURANCE.
(a) The Principals have made available to Buyer:
(i) copies of all policies of insurance (A) to which any Acquired
Company is a party, or (B) under which any Acquired Company, or any officer
or director of any Acquired Company, is or has been covered at any time
within the three years preceding the date of this Agreement, which policy
is owned by any Acquired Company or to which any Acquired Company is a
beneficiary;
(ii) copies of all pending applications for policies of insurance;
and
(iii) any statement by any auditor of any Acquired Company's
financial statements with regard to the adequacy of such entity's coverage
or of the reserves for claims.
(b) Part 4.17(b) of the Disclosure Letter describes:
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(i) any self-insurance arrangement by or affecting any Acquired
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 any Acquired Company; and
(iii) all obligations of the Acquired Companies 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 4.17(c) 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 $10,000, 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 4.17(d) of the Disclosure Letter:
(i) All policies to which an Acquired Company is a party or that
provide coverage to any Principal or any Acquired Company:
(A) are valid, outstanding and enforceable;
(B) are issued by an insurer that, to the Knowledge of the
Principals, is financially sound;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Acquired Companies for all risks
normally insured against by a Person carrying on the same business or
businesses as the Company and for all risks to which the Acquired
Companies are normally exposed;
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(D) are sufficient for compliance with all Legal Requirements
and Contracts to which any Acquired Company is a party or by which it
is bound;
(E) will continue in full force and effect following the
Closing and the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of any Acquired
Company.
(e) Except as set forth on Part 4.17(c), for the current policy year and
each of the two preceding policy years:
(i) No Acquired 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.
(ii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy
to which any Acquired Company is a party or that provides coverage to any
Acquired Company or officer or director thereof.
(iii) The Acquired Companies have given notice to the insurer of all
claims that may be insured thereby.
4.18 ENVIRONMENTAL MATTERS. Except as set forth in Part 4.18 of the
Disclosure Schedule:
(a) The operations and the Facilities of the Acquired Companies are in
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental Laws and related
Orders, other than those non-compliances that would not result in Environmental
Liabilities in excess of $10,000;
(b) There are not any existing, pending or, to the Knowledge of the
Principals, threatened, actions, suits, claims, investigations, inquiries or
proceedings by or before any court or any other governmental entity directed
against the Acquired Companies, involving liabilities in excess of $10,000, that
pertain or relate to (i) any applicable Environmental Law, including without
limitation, violations by the Acquired Companies of any Environmental Law, and
investigative, response, removal, or remedial costs under the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), the Resource
Conservation and Recovery Act ("RCRA") or any similar state or federal law, or
(ii) personal injury or property damage claims relating to a Release of
chemicals or Hazardous Materials;
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(c) No person has disposed of or Released any Hazardous Materials on, at,
or under the Facilities, or the Former Facilities during the period of time the
Acquired Companies owned or operated them, except in compliance with
Environmental Laws and except as would not create liability in excess of $10,000
to or for the Acquired Companies;
(d) No facts or circumstances exist which could reasonably be expected to
result in any material Environmental Liabilities in connection with the
Facilities, the Former Facilities or the operations of the Acquired Companies;
and
(e) To the Knowledge of the Principals, all Hazardous Materials generated
by the Acquired Companies at any of the Facilities or Former Facilities have
been transported, stored, treated and disposed of by carriers or treatment,
storage and disposal facilities authorized or maintaining valid permits under
all applicable Environmental Laws and that are not the subject of any
governmental or private action seeking investigative, response, removal, or
remedial actions under CERCLA, RCRA or any similar state or federal law.
4.19 EMPLOYEES.
(a) Part 4.19 of the Disclosure Letter contains a list of the following
information for each employee or director of the Acquired Companies, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
January 1, 1997; vacation accrued; and service credited for purposes of vesting
and eligibility to participate under any Acquired Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), 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 compensatory or benefit plan
intended solely for directors of the Acquired Companies.
(b) To the Knowledge of the Principals, no employee or director of any
Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Acquired Companies, or (ii) the ability of any Acquired Company to conduct its
business, including any Proprietary Rights Agreement with Shareholders or the
Acquired Companies by any such employee or director. To Principals' Knowledge,
no director, officer, or other key employee of any Acquired Company intends to
terminate his employment with such Acquired Company.
(c) Part 4.19 of the Disclosure Letter also contains a list of the
following information for each retired employee or director of the Acquired
Companies, 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.
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4.20 LABOR RELATIONS; COMPLIANCE. Except as set forth on Part 4.20 of the
Disclosure Letter, since January 1, 1993, no Acquired Company has been or is a
party to any collective bargaining or other labor Contract. Since January 1,
1993, there has not been, there is not presently pending or existing, and to the
Principals' Knowledge there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting any Acquired 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 Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To the Principals' Knowledge, no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by any Acquired Company, and no
such action is contemplated by any Acquired Company. Each Acquired Company has
complied in all material 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. No Acquired
Company is 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.
4.21 INTELLECTUAL PROPERTY.
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) the name "U.S. Zinc Corporation," all fictional business
names, trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
(v) 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, owned, used or licensed by any Acquired Company as licensee or
licensor.
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(b) Agreements -- Part 4.21(b) of the Disclosure Letter contains a list
and summary description of all Contracts relating to the Intellectual Property
Assets to which any Acquired Company is a party or by which any Acquired 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 a value of less
than $5,000 under which an Acquired Company is the licensee. There are no
outstanding and, to the Principals' Knowledge, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for
the operation of the Acquired Companies' businesses as they are currently
conducted. Except as set forth in Part 4.21(c), one or more of the Acquired
Companies 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
has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Part 4.21(c) of the Disclosure Letter,
no former or current employee of any Acquired Company has executed a written
Contract with one or more of the Acquired Companies that assign to one or more
of the Acquired Companies any right to any inventions, improvements,
discoveries, or information relating to the business of any Acquired Company. To
the Knowledge of the Principals, no employee of any Acquired Company has entered
into any Contract that restricts or limits in any way the scope or type of work
in which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other than one or
more of the Acquired Companies.
(d) Patents
(i) None of the Acquired Companies owns or has any right, title or
interest in or to any Patent, except only as licensee pursuant to a
Contract or Contracts listed on Part 4.21(b) of the Disclosure Letter,
which Contracts do not require consent of licensor with respect to the
Contemplated Transactions.
(ii) To the Principals' Knowledge, no process or know-how used by
any Acquired Company infringes or is alleged to infringe any patent or
other proprietary right of any other Person.
(e) Trademarks
(i) Part 4.21(e) of Disclosure Letter contains a list and summary
description of all Marks. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
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(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal
legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid
and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to Principals' Knowledge, no such action
is Threatened with the respect to any of the Marks.
(iv) To Principals' Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Mark is infringed or, to Principals' Knowledge, has been
challenged or threatened in any way. None of the Marks used by any Acquired
Company infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(f) None of the Acquired Companies owns or has any right, title or
interest in or to any Copyright registration.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation relating
to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use
without reliance on the knowledge or memory of any individual.
(ii) The Principals and the Acquired Companies have taken
appropriate reasonable precautions to protect the secrecy, confidentiality,
and value of their Trade Secrets.
(iii) One or more of the Acquired Companies has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets.
The Trade Secrets are not part of the public knowledge or literature, and,
to the Principals' Knowledge, may have been used, divulged, or appropriated
either for the benefit of any Person (other than one or more of the
Acquired Companies) and to the detriment of the Acquired Companies. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
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4.22 CERTAIN PAYMENTS. Since January 1, 1994, no Acquired Company or
director, officer, agent, or employee of any Acquired Company, or any other
Person associated with or acting for or on behalf of any Acquired Company has,
directly or indirectly, in violation of any Legal Requirement (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, or (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of any Acquired Company or any Affiliate of an Acquired Company, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Acquired Companies.
4.23 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Part 4.23,
no Principal nor any Related Person of Principals or of any Acquired 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 Acquired Companies' businesses. No Shareholder or any Related
Person of Principals or of any Acquired 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 material financial interest in any transaction with any Acquired Company other
than business dealings or transactions conducted in the Ordinary Course of
Business with the Acquired Companies at substantially prevailing market prices
and on substantially prevailing market terms, or (ii) engaged in competition
with any Acquired Company with respect to any line of the products or services
of such Acquired Company (a "Competing Business") in any market presently served
by such Acquired Company except for ownership of less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any national securities exchange quoted on any national automated quotation
system, or traded in the over-the-counter market. Except as set forth in Part
4.23 of the Disclosure Letter, no Principal or any Related Person of Principals
or of any Acquired Company is a party to any Contract with, or has any claim or
right against, any Acquired Company.
4.24 HEDGING AND SPECULATION IN COMMODITIES AND INVENTORY LEVELS.
(a) Part 4.24 of the Disclosure Letter accurately summarizes the
outstanding metals commodities and financial hedging positions of the Acquired
Companies (including hedged futures contracts, fixed price controls, collars,
swaps, caps, hedges, and puts) as of the date reflected on the Disclosure
Letter.
(b) None of the Acquired Companies is subject to registration or
regulation under the Securities Exchange Act of 1934, any state securities act,
the Investment Company Act of 1940, the Commodity Exchange Act, or any rules or
regulations promulgated by the Commodities Futures Trading Commission or the
National Futures Association.
4.25 YEAR 2000 COMPLIANCE. Except as set forth in Part 4.25 of the
Disclosure Letter, with respect to any computer software, hardware, product or
service utilized by any Acquired Company in its ordinary course of business,
neither the performance nor the
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functionality of such computer software, hardware, product or service, or
anything affected by or produced in accordance with such computer software,
hardware, product or service, will be adversely affected by the advent of the
year 2000 or any other year, or by the advent of September 9, 1999 or February
29, 2000.
4.26 CERTAIN TAX STATUS. Each of MetalChem, Inc., a Pennsylvania
corporation and Western Zinc Corporation, a California corporation, was a
validly electing S corporation within the meaning of (S)(S)1361 and 1362 of the
IRC at all times during its existence and was an S corporation up to and
including the day immediately prior to the date on which such entity was
acquired by the Company.
4.27 FOREIGN CORPORATIONS.
(a) MetalChem Canada Incorporated is currently, and since its formation
has been, in compliance with the provisions of its Bylaws, its Articles of
Incorporation and the laws of Canada which require that (i) certain of the
directors of such company be resident Canadians, (ii) certain meetings of the
directors and shareholders of such company be held in Canada, and (iii) a
certain number of directors at any meeting of the board of directors of such
company be Canadian.
(b) U.S. Zinc FSC, Inc., a Barbados corporation and wholly-owned
subsidiary of the Company, has been a validly formed and operating Foreign Sales
Corporation within the meaning of (S)922 of the IRC at all times during its
existence and will be a validly formed and operating Foreign Sales Corporation
within the meaning of (S)922 of the IRC at all times up to and including the
Closing Date. In addition, since its formation, U.S. Zinc FSC, Inc. has filed
any and all necessary or required forms or documents with the Internal Revenue
Service to maintain its status as a Foreign Sales Corporation under the IRC. The
existence and operations of Dana Zinc Export Corporation, a Domestic
International Sales Corporation, have not affected the status of U.S. Zinc FSC,
Inc. as a duly qualified Foreign Sales Corporation under the IRC.
4.28 ACCESS TO RAIL. Each of the Facilities located in Houston, Texas,
Millington, Tennessee, Chicago, Illinois, and Hillsboro, Illinois, has access
to rail facilities sufficient for the shipment and delivery of its products and
the receipt of supplies and raw materials.
4.29 CUSTOMERS AND SUPPLIERS. Part 4.29 to the Disclosure Letter sets
forth (i) a true and correct list of (a) the ten largest customers of the
Acquired Companies in terms of sales during the fiscal year ended December 31,
1997, and (b) the ten largest customers of the Acquired Companies in terms of
sales during the three months ended March 31, 1998, showing the approximate
total sales to each such customer during each of such periods; (ii) a true and
correct list of (x) the ten largest suppliers of the Acquired Companies in terms
of purchases during the fiscal year ended December 31, 1997, and (y) the ten
largest suppliers of the Acquired Companies in terms of purchases during the
three months ended March 31, 1998, showing the approximate total purchases from
each such supplier during such respective periods. Except to the extent set
forth in Part 4.29 to the Disclosure Letter, there
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has not been any material adverse change in the business relationship of the
Acquired Companies with any customer or supplier so named in the Disclosure
Letter.
4.30 TRANSFER OF DANA ZINC FACILITY. Record and beneficial title to the
real property located at 1919 Goodyear, Houston, Texas (and all buildings,
improvements and fixtures and other personal property thereon) (the "Dana Zinc
Facility"), was duly conveyed by special warranty deed and bill of sale to RBI,
in exchange for that certain promissory note dated June 30, 1998 in the original
principal amount of $500,000, executed by RBI as maker and naming Gulf Reduction
Corporation or its order as payee (the "Dana Zinc Promissory Note"). All
equipment and other assets used on or with respect to the Dana Zinc Facility and
specifically excepted from the bill of sale were not so conveyed and remain the
property of Gulf Reduction Corporation. Upon execution, the Dana Zinc Lease
will constitute a valid and enforceable real property lease of a portion of the
Dana Zinc Facility entitling Gulf Reduction Corporation to occupy and use a
portion of the Dana Zinc Facility as provided in the Dana Zinc Lease upon
payment of the rent and of the performance of the obligations of tenant as
specified therein.
4.31 CONVERSION OF SUBORDINATED DEBT. Shareholders shall have caused the
outstanding indebtedness of the Company under those certain Subordinated
Convertible Promissory Notes payable to each of the Shareholders, executed
December 31, 1988, in the original principal amount of $484,700, to be
contributed to the paid in capital of the Company, and such notes have been duly
canceled, such that at Closing there is no outstanding indebtedness pursuant to
any of such Subordinated Convertible Promissory Notes.
4.32 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except for the Dana Zinc
Promissory Note and except as expressly provided in this Agreement, Shareholders
have caused all indebtedness owed to any Acquired Company by any Seller or any
Related Person of any Seller to be paid in full prior to Closing.
4.33 DISTRIBUTIONS; PAYMENT OF INDEBTEDNESS. Except as otherwise expressly
permitted by this Agreement, since January 1, 1998, Shareholders have not, and
have caused each Acquired Company not to, without the prior written consent of
Buyer, pay, make or declare any distribution or dividend, including but not
limited to any regular bonuses that would otherwise be payable to the
Shareholders during such time period, to the Shareholders or to any other
stockholder of any Acquired Company (except for Shareholders' payment of any
"change of control" bonuses permitted pursuant to Section 2.3(b) hereof).
Notwithstanding the provisions of the preceding sentence, MetalChem, Inc. and
Western Zinc Corporation shall have declared and made distributions or dividends
to the Shareholders in an amount not in excess of the retained earnings accrued
through the date of such distribution of each of MetalChem, Inc. and Western
Zinc Corporation.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Shareholders as follows:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
5.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Escrow Agreement, the Employment
Agreements, the Non-Competition Agreements, and the Common Stock Warrant
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents
will constitute the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms. Buyer has the absolute
and unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
(b) Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
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 Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject;
or
(iv) any Contract to which Buyer is a party or by which Buyer may
be bound.
Buyer is not and will not 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.
5.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
5.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer 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 Knowledge, no such Proceeding has been
Threatened.
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5.5 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 Buyer will indemnify and hold the Shareholders harmless from any
such payment alleged to be due by or through Buyer as a result of the action of
Buyer or its officers or agents.
5.6 BUYER CAPITALIZATION.
(a) The authorized capital stock of Buyer consists of 40,000,000 shares of
Buyer Common Stock, of which 16,736,950 shares were outstanding as of the close
of business on July 3, 1998, and 8,000,000 shares of preferred stock, par value
$0.10 per share ("Preferred Stock"), of which no shares were outstanding as of
the close of business on June 30, 1998. All of the outstanding shares of Buyer
Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable. Buyer has no Buyer Common Stock or preferred stock reserved for
issuance, except for the Buyer Common Stock to be issued under the Common Stock
Warrant and except that, as of June 30, 1998, there were an aggregate of
2,517,689 shares of Buyer Common Stock reserved for issuance pursuant to Buyer's
stock option and incentive plans. Except as set forth above, there are no
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or to sell any shares of capital stock or
other securities of Buyer or any of its Subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of Buyer or any of
its Subsidiaries, and no securities or obligation evidencing such rights are
authorized, issued or outstanding. Buyer does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of Buyer on any matter.
(b) Prior to the Closing, Buyer will have taken all necessary action to
permit it to issue the number of shares of Buyer Common Stock to be issued
pursuant to Section 2.2. The Buyer Common Stock, when issued, will be validly
issued, fully paid and nonassessable, and no stockholder of Buyer will have any
preemptive right of subscription or purchase in respect thereof.
5.7 BUYER SEC REPORTS. Buyer has delivered to the Shareholders the
Private Placement Memorandum and each registration statement, report or proxy
statement prepared by it since December 31, 1997, including (i) Buyer's Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) Buyer's Quarterly
Report on Form 10-Q for the period ended March 31, 1998 and (iii) Buyer's
definitive proxy statement prepared in connection with its annual meeting of
stockholders to be held on May 13, 1998, all in the form (including exhibits and
any amendments thereto) filed with the SEC (collectively, the "Buyer SEC
Reports"). As of their respective dates, the Buyer SEC Reports did not, and any
Buyer SEC Reports filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in
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which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Buyer SEC Reports (including
the related notes and schedules) fairly presents the consolidated financial
position of Buyer and its Subsidiaries as of its date and each of the
consolidated statements of income and of cash flow included in the Buyer SEC
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings and changes in cash flow, as the case may be,
of Buyer and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to notes and normal year end audit adjustments
that will not be material in amount or effect), in each case in accordance with
GAAP consistently applied during the periods involved, except as may be noted
therein.
5.8 COMMON STOCK WARRANT. Buyer covenants that it will at all times
reserve and keep available such number of authorized shares of its Buyer Common
Stock, free from all preemptive rights with respect thereto, which will be
sufficient to permit the exercise of the Common Stock Warrants for the full
number of shares of Common Stock specified therein. The shares of Common Stock
of Buyer to be issued upon exercise of the Common Stock Warrants have been duly
authorized by all necessary corporate action on the part of Buyer, and, when
issued and delivered by Buyer upon exercise of the Common Stock Warrants, will
be duly and validly issued, fully-paid and non-assessable shares of Common
Stock. The Shareholders will acquire valid and marketable title to the Buyer
Common Stock issued upon exercise of any Common Stock Warrant, free and clear of
any and all taxes, liens, charges and Encumbrances.
6. INDEMNIFICATION; REMEDIES
6.1 SURVIVAL. All representations, warranties, covenants, and obligations
in this Agreement and the Disclosure Letter will survive the Closing until the
fourth anniversary of the date hereof.
6.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS. Shareholders
will indemnify and hold harmless Buyer, the Acquired Companies, and their
respective Representatives, stockholders, controlling persons, 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), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim incurred, less the amount of any insurance
coverage (less any deductible amount) with respect to any such loss, liability,
claim, damage, expense or diminution in value and any reserves with respect
thereto reflected on the Closing Financial Statements with respect thereto
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty other than those set
forth in Section 4.18 hereof made by the Shareholders or the Principals in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, or
any other certificate
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or document delivered by the Acquired Companies, Shareholders or the Principals
pursuant to this Agreement;
(b) any Breach by any Shareholder, any Acquired Company or any Principal
of any covenant or obligation of such Shareholder, Acquired Company or Principal
set forth in this Agreement;
(c) any product shipped, processed or manufactured by, or any services
provided by, any of the Acquired Companies prior to the Closing Date;
(d) 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, any Acquired Company or any
Principal (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions;
(e) any claim or Proceeding brought against any Acquired Company by
Euromin, Inc. or any of its affiliates, attorneys, or representatives, arising
out of, related to or in connection with, either directly or indirectly, the
sale and/or purchase of zinc or zinc derivatives, including but not limited to
any claim or Proceeding arising out of, related to or in connection with (i)
that certain Demand for Arbitration filed with the American Arbitration
Association in May 1998 by Euromin, Inc. against U.S. Zinc, or (ii) the alleged
breach by U.S. Zinc of Contract no. 2338 by and between U.S. Zinc and Euromin,
Inc.; and
(f) any liability, claim or Proceeding arising out of those certain
pledges to The Jewish Federation of Greater Houston and The Jewish Community
Center as specified in Part 4.16 of the Disclosure Letter.
6.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS --ENVIRONMENTAL
MATTERS. In addition to the indemnification provided in Section 6.2, the
Shareholders will indemnify and hold harmless Buyer and the Indemnified Persons
from and against:
(a) Environmental Liabilities that may be imposed upon or incurred by
them arising out of or in connection with (i) environmental conditions or
contamination, known or unknown, existing on or prior to the Closing Date on,
at, or underlying any of the Facilities or Former Facilities, (ii) acts or
omissions of the Shareholders relating to the ownership or operation of the
Facilities or Former Facilities on or prior to the Closing Date, (iii) the on-
site or off-site handling, storage, treatment or disposal of any Hazardous
Materials generated by the Acquired Companies on or prior to the Closing Date,
or (iv) breach by Shareholders of any representation or warranty contained in
Section 4.18 hereof;
(b) bodily injury (including illness, disability, and death), personal
injury, property damage, or other damages to any third Person arising out of the
use, handling, storage, treatment, disposal, or Release of any Hazardous
Materials by the Acquired Companies at,
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on, or underlying any of the Facilities or Former Facilities owned by the
Acquired Companies, at any time on or prior to the Closing Date; and
(c) Environmental Liabilities that may be imposed on or incurred by them
arising out of or in connection with (i) environmental conditions, known or
unknown, on, at, emanating from, or underlying any of the properties currently
owned or acquired by Gulf Metals Industries, Inc. (a Delaware corporation), Gulf
Metals Export Corporation (a Delaware corporation), GMI Investments, L.L.C. (a
Texas limited liability company) (hereinafter referred to as "GMI"), (ii) any
acts or omissions of the Shareholders related to the ownership or operation of
GMI, (iii) the on-site or off-site handling, storage, treatment or disposal of
any Hazardous Materials by GMI, (iv) personal injury or environmental conditions
or contamination, known or unknown, on, at, emanating from, or underlying that
certain property located in Houston, Texas commonly referred to as the "Mykawa
Site", (v) environmental conditions or contamination, known or unknown, relating
to the operations of the scrap metal recycling business and the landfill
activities of Gulf Metals Industries, Inc. (a Texas corporation), and (vi)
bodily injury (including illness, disability, and death), personal injury,
property damage, or other damages to any third Person arising out of the use,
handling, storage, treatment, disposal, or Release of any Hazardous Materials by
GMI at, on, emanating from or underlying any of the properties currently owned
by GMI.
The indemnification rights under this Section 6.3 shall survive Closing for a
period of four (4) years. Buyer and the Indemnified Parties shall have no
indemnity rights after the expiration of the foregoing term, and shall forever
release the Shareholders from any and all claims that they may have against them
after the expiration of such term including, without limitation, all claims for
contribution or indemnity under Environmental Laws and claims under the terms of
this Agreement.
To the extent that the Shareholders or the Acquired Companies have
indemnification rights from any third party for any of the matters for which
Buyer is indemnified under this Section 6.3, Shareholders reserve the right to
pursue such parties for indemnification and Buyer shall not compromise or
interfere with the Shareholders' rights to pursue such rights, unless Buyer's
rights are prejudiced as a result thereof. The success or lack thereof of the
Shareholders' pursuit of indemnification from third parties shall not affect or
limit the Shareholders obligations to the Buyers and the Indemnified Persons
under the terms of this Agreement.
6.3A INDEMNIFICATION REGARDING OCCUPATIONAL SAFETY AND HEALTH LAWS. In
addition to the indemnification provided in Sections 6.2, 6.3 and 6.3B, and not
in limitation thereof, the Shareholders will indemnify and hold harmless Buyer
and the Indemnified Persons from and against:
(a) Until that date which is the first anniversary of the Closing Date,
any and all Damages (net of collections of any insurance coverage with respect
thereto) incurred by any Acquired Company and/or Indemnified Person in respect
of fines, penalties, claims and amounts expended in order to comply with, and as
a result of, any actual or alleged violations
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of or noncompliance with any Occupational Safety and Health Laws as mandated,
ruled, decreed or determined by any Governmental Body with respect to any pre-
existing condition at any Facility on or before the Closing Date. In addition,
on and after that date which is the first anniversary of the Closing Date and
through and until the second anniversary date thereof, Shareholders will
indemnify and hold harmless Buyer and the Indemnified Persons from and against
Damages as described in the preceding sentence of this Section 6.3A(a) (but only
to the extent of 50% of the amount thereof) incurred by any Acquired Company
and/or Indemnified Person. Shareholders shall have no obligation to indemnify
under this Section 6.3A(a) for Claims asserted by Buyer and/or any Indemnified
Person after the second anniversary date of the Closing Date, and
indemnification rights applicable to any and all Claims asserted prior to such
second anniversary date shall survive until all such Claims have been resolved
pursuant to the terms of the Escrow Agreement.
(b) Any Damages (net of collections of any insurance coverage with respect
thereto) arising, directly or indirectly, from or in connection with any
occupational health claim or Proceeding relating to any pre-existing condition
at any Facility on or before the Closing Date against any Acquired Company
and/or Indemnified Person by a current or former employee of any Acquired
Company who was hired by such Acquired Company before July 1, 1996; provided
however, that with respect to Claims made during periods commencing after the
first anniversary of the Closing Date, the Shareholders' liability to indemnify
pursuant to this Section 6.3A(b) shall be limited as follows:
Portion of Damages to be Indemnified by
Period Shareholders under Section 6.3A(b)
--------------------------------- ---------------------------------------
July 22, 1999 - July 21, 2000 75%
July 22, 2000 - July 21, 2001 50%
July 22, 2001 - July 21, 2002 25%
6.3B INDEMNIFICATION REGARDING FACILITY. In addition to the
indemnification provided in Sections 6.2, 6.3, and 6.3A and not in limitation
thereof, Shareholders shall indemnify and hold harmless Buyer and Indemnified
Persons from and against any and all Damages (net of collections of any
insurance coverage with respect thereto) incurred by or asserted against any
Acquired Company and/or Indemnified Person and arising, directly or indirectly,
from and in connection with the operations and/or ownership of the Dana Zinc
Facility prior to the Closing Date, including but not limited to any Release of
anhydrous ammonia or other substances from a storage tank situated on the Dana
Zinc Facility.
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6.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Shareholders, and will pay to Shareholders the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate or document delivered by Buyer pursuant to this Agreement, (b)
any Breach by Buyer of any covenant or obligation of Buyer in this Agreement, or
(c) 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 such Person with Buyer (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions. Buyer further indemnifies
and holds harmless Shareholders and Principals, and the officers, directors, and
employees of the Acquired Companies, their affiliates and successors, agents and
attorneys, from all claims that may arise after the Closing Date, other than
those for which Shareholders have specifically indemnified Buyer, resulting or
arising from Buyers' occupancy, use, possession or ownership of the properties
or occupancy, use, possession, ownership or operation of the Acquired Companies.
6.5 TIME LIMITATIONS. Except as otherwise provided in such Sections, the
indemnification rights under Sections 6.2, 6.3, 6.3A, 6.3B and 6.4 shall survive
Closing through and until that date which is the fourth anniversary of the
Closing Date ("Indemnification Termination Date"). Following such
Indemnification Termination Date, Buyer, the Indemnified Parties and the
Shareholders shall have no indemnity rights pursuant to this Agreement;
provided, however, the indemnification rights applicable to any and all Claims
asserted prior to the Indemnification Termination Date shall survive the
Indemnification Termination Date until such Claims have been resolved pursuant
to the terms of the Escrow Agreement.
6.6 LIMITATIONS ON AMOUNT--SHAREHOLDERS. Shareholders will have no
liability (for indemnification or otherwise) with respect to the matters
described in Section 6.3 or in clause (a), clause (b) or clause (c) of Section
6.2 until the total of all Damages with respect to such matters exceeds
$400,000, and then only for the amount by which such Damages exceed $400,000.
In addition, Shareholders will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 6.3A until the total
of all Damages with respect to matters described in Section 6.3A exceeds
$100,000, and then only for the amount by which such Damages exceed $100,000.
Damages incurred and counted toward the limitation amount set forth in the
immediately preceding sentence for purposes of Section 6.3A, may not be added to
and included in the amount of Damages accumulated for purposes of Section 6.2,
and vice versa. Notwithstanding any provision to the contrary contained herein,
the limitations set forth in this Section 6.6 will not apply to any intentional
Breach by any Shareholder of any covenant or obligation, and Shareholders will
be severally and not jointly liable for each such Shareholder's portion of all
Damages with respect to such intentional Breaches.
6.7 LIMITATIONS ON AMOUNT--BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) and clause (b) of Section 6.4 until the total of all Damages with respect to
such matters exceeds
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<PAGE>
$400,000, and then only for the amount by which such Damages exceed $400,000.
Buyer will have no liability (for indemnification or otherwise) with respect to
the matters described in Section 6.4 or otherwise following that time at which
the aggregate indemnification payments made by Buyer hereunder equals
$4,000,000. However, this Section 6.7 will not apply to any intentional Breach
by Buyer of any covenant or obligation, and Buyer will be liable for all Damages
with respect to such Breaches.
6.8 ESCROW; OFFSET FOR CERTAIN RECOVERIES AND OTHER ITEMS.
(a) Upon notice to Shareholders specifying in reasonable detail the basis
for a Claim, Buyer shall be entitled to give notice of a Claim only under and
pursuant to the terms of the Escrow Agreement and Buyer shall not be entitled to
enforce any remedies against any of the Shareholders, by means of offset or
otherwise, other than pursuant to the Escrow Agreement.
(b) To the extent that there are recoveries (net of related expenses
incurred after the Effective Date) by any of the Acquired Companies with respect
to any of the following on or before the Indemnification Termination Date:
(i) Any amounts paid to (net of any amounts paid to the
defendant(s) by and/or attorneys fees and expenses incurred after the
Effective Date by) the Acquired Companies in judgment or in settlement of
that certain proceeding styled Midwest Zinc Corporation v. Memphis Light,
Gas & Water currently pending in the United States District Court, Western
Division of Tennessee;
(ii) Any amounts paid (net of unrecovered attorney's fees and
expenses incurred after the Effective Date) in refund of any State of Texas
state sales taxes previously paid by the Acquired Companies during the
period from August 1, 1994 to December 31, 1997; and
(iii) Any amounts received by any of the Acquired Companies with
respect to any previous accounts receivables of any of the Acquired
Companies, which, prior to the Effective Date, have been written off as an
asset of such Acquired Company or Acquired Companies;
then, in each such instance, the amount(s) of such recoveries shall offset,
dollar-for-dollar, the amount of any claimed liability which is incurred by
Buyer subsequent to the date of such recovery, whether or not the same
constitutes a "Claim" pursuant to Sections 6.2, 6.3, 6.3A and 6.3B, and which
Buyer may have against Shareholders pursuant to the procedures set forth in this
Section 6, regardless of whether the applicable dollar limitation(s) on Damages
specified in Section 6.6 has been exceeded.
(c) In determining the amount of any Damages, appropriate adjustment shall
be made for (i) any recoveries or proceeds from any insurance coverage, but only
to the extent the indemnified party collects therefrom after reasonable efforts
to do so, (ii) and the Tax
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benefits to the indemnified party of such Damages, but only to the extent the
indemnified party reports such Damages as a deductible expense for purposes of
the IRC.
6.9 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 6.2, 6.3,
6.3A, 6.3B or 6.4 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.
(b) If any Proceeding referred to in Section 6.9(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will 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 Section 6 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.
(c) 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
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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).
6.10 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.
6.11 EXCLUSIVE REMEDY. The remedies provided in this Section 6 will be
exclusive of and limit all other remedies that may be available to Buyer or the
other Indemnified Persons or the Shareholders.
7. APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE.
Each Shareholder hereby constitutes and appoints M. Russ Robinson as his
true and lawful attorney-in-fact, agent and representative (collectively, the
"Shareholders' Representative"), with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to negotiate and sign all amendments to this Agreement, and all
other documents in connection with the transactions contemplated by this
Agreement, including without limitation those instruments called for by this
Agreement and all waivers, consents, instructions, authorizations and other
actions called for, contemplated or that may otherwise be necessary or
appropriate in connection with this Agreement or any of the foregoing agreements
or instruments, granting unto the Shareholders' Representative full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that the Shareholders'
Representative, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof, including without limitation the power and authority to
deliver and convey his Shares in accordance with the terms hereof, to receive
and give receipt for all consideration due him pursuant to this Agreement and to
receive all notices, requests and demands that may be made under and pursuant to
this Agreement. Should the Shareholders' Representative be unable or unwilling
to serve or to appoint his successor to serve in such Shareholder's stead, and
unless the Shareholders shall appoint a successor to serve in his stead, such
Shareholders shall be deemed to be represented by the Company. Buyer shall be
entitled to rely and protected in relying on the authority, actions and
decisions of the Shareholders' Representative, and Buyer will have no liability
to and shall be held harmless by any and all of the Shareholders and their heirs
and legal representatives with respect to any matter arising out of, either
directly or indirectly, Buyer's good faith reliance upon such authority, actions
or decisions of the Shareholders' Representative.
8. GENERAL PROVISIONS
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8.1 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. Without limiting the generality of
the foregoing, Shareholders will be responsible for the payment of all amounts
payable to NationsBank Montgomery Securities, Inc. in connection with this
Agreement and the Contemplated Transactions, the fees and expenses of
Shareholders' counsel, the costs of due diligence conducted on Shareholders'
behalf and any employee bonuses payable resulting from a "change in control" of
any Acquired Company.
8.2 CONFIDENTIALITY. Buyer and Shareholders will maintain in confidence,
and will cause the directors, officers, employees, agents, advisors and
Representatives of Buyer and the Acquired Companies to maintain in confidence,
and not use to the detriment of another party hereto or the Acquired Companies
any written, oral, or other information obtained in confidence from such other
party or any Acquired 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, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with any Legal Requirement or legal
proceeding.
If the Contemplated Transactions are not consummated, each party will
return or destroy all such written information (including documents including
such information) as the other party may request.
The provisions of this Section 8.2 are in addition to and cumulative of the
terms and conditions contained in (i) that certain confidentiality letter
agreement dated November 17, 1997, by and between NationsBank Montgomery
Securities, Inc., on behalf of the Company, and Buyer ("Confidentiality Letter")
and (ii) the Letter of Intent. In the event of any conflict between the terms
of this Section 8.2 and Section 10 of the Confidentiality Letter, the terms of
the Confidentiality Letter will supersede the conflicting terms of this Section
8.2. In the event of any conflict between the terms of this Section 8.2 and
Section 10 of the Letter of Intent, the terms of Section 10 of the Letter of
Intent will supersede the conflicting terms of this Section.
8.3 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), 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):
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SHAREHOLDERS:
Mr. M. Russ Robinson
U.S. Zinc Corporation
6020 Navigation St.
Houston, TX 77001
Facsimile No.: (713) 923-1783
BUYER:
Mr. Don V. Ingram
IMCO Recycling Inc.
5215 North O'Connor Blvd.
Irving, Texas 75039
Facsimile No.: (972) 401-7342
8.4 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 courts of the State of Texas,
County of Harris, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of Texas, 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.
8.5 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.
8.6 WAIVER. 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
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demand as provided in this Agreement or the documents referred to in this
Agreement.
8.7 ENTIRE AGREEMENT AND MODIFICATION. Except as otherwise provided
herein, this Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent) 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 each of the parties hereto.
8.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties, which will not be unreasonably withheld, except that Buyer 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.
8.9 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.
8.10 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.
8.11 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
8.12 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Texas without regard to conflicts of laws principles.
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8.13 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.
8.14 ACKNOWLEDGMENT. Buyer acknowledges that any and all sums in respect
of proceeds resulting from payments made by insurers, and recoveries under or
settlement of amounts in dispute, with respect to those certain liabilities and
umbrella excess insurance policies listed in Part 8.14 to the Disclosure Letter
for policy periods commencing January 1, 1963 and extending to and including
February 1, 1988, shall be the property of Gulf Metals Industries, Inc., a
Delaware corporation.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
effective as of the date first written above.
BUYER:
IMCO RECYCLING INC.
/s/ PAUL V. DUFOUR
--------------------------------------------------
PAUL V. DUFOUR, Executive Vice President and
Chief Financial Officer
SHAREHOLDERS:
/s/ M. RUSS ROBINSON
--------------------------------------------------
M. RUSS ROBINSON
/s/ HOWARD ROBINSON
--------------------------------------------------
HOWARD ROBINSON
/s/ MINDY ROBINSON BROWN
--------------------------------------------------
MINDY ROBINSON BROWN
THE MINNETTE AND JEROME ROBINSON COMMUNITY
PROPERTY TRUST
By: /s/ JEROME ROBINSON
-----------------------------------------------
Jerome Robinson, Co-Trustee
By: /s/ MINNETTE ROBINSON
-----------------------------------------------
Minnette Robinson, Co-Trustee
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KANALY TRUST COMPANY, Co-Trustee (in its
fiduciary capacity as Co-Trustee and not
otherwise)
By: /s/ JOAN L. ROMANS
-----------------------------------------
Joan L. Romans, Sr. Vice President and
Trust Officer
THE MINNETTE AND JEROME ROBINSON FOUNDATION
By: /s/ DVOSHA G. ROSCOE
----------------------------------------------
Dvosha G. Roscoe, Vice President
THE MINNETTE AND JEROME ROBINSON CHARITABLE
REMAINDER TRUST
KANALY TRUST COMPANY, Trustee (in its
fiduciary capacity as sole Trustee and
not otherwise)
By: /s/ JOAN L. ROMANS
-----------------------------------------
Joan L. Romans, Sr. Vice President and
Trust Officer
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SCHEDULE A
OWNERSHIP OF U.S. ZINC SHARES PRIOR TO CLOSING
----------------------------------------------
Name Shares Percentage
- ---- ------ ----------
M. Russ Robinson 500 25%
Howard Robinson 500 25%
Mindy Robinson Brown 500 25%
The Minnette & Jerome Robinson 420 21%
Community Property Trust
The Minnette & Jerome Robinson 40 2%
Foundation
The Minnette & Jerome Robinson 40 2%
Charitable Remainder Trust ---- ---
Total number of Shares Outstanding 2000 100%
==== ===
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EXHIBIT 2.2
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAW. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH (I) THE EXPRESS TERMS HEREOF AND (II) THAT CERTAIN AGREEMENT BY
AND BETWEEN HOLDER (AS DEFINED BELOW) AND THE COMPANY (AS DEFINED BELOW) DATED
AS OF THE DATE HEREOF, AND THEN ONLY PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATES' SECURITIES
LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT OR LAWS.
THIS WARRANT IS SUBJECT TO THAT CERTAIN AGREEMENT DATED AS OF THE DATE HEREOF BY
AND BETWEEN HOLDER (AS DEFINED BELOW) AND THE COMPANY (AS DEFINED BELOW) WHICH
CONTAINS PROVISIONS RESTRICTING THE TRANSFERABILITY OF THE WARRANTS TO CERTAIN
PERSONS OR ENTITIES AND PROVIDES THE COMPANY WITH A RIGHT OF FIRST REFUSAL TO
ACQUIRE THE WARRANTS UPON CERTAIN PROPOSED TRANSFERS BY HOLDER.
IMCO RECYCLING INC.
COMMON STOCK PURCHASE WARRANT
-----------------------------
July 21, 1998 Certificate No. ____
Void on July 21, 2002
This Common Stock Purchase Warrant (the "Warrant") is issued as of the 21st
day of July, 1998, by IMCO Recycling Inc., a Delaware corporation (the
"Company"), to _______________________ (the "Holder").
WHEREAS, the Company and the Holder are parties to that certain Memorandum
of Purchase and Sale Agreement dated as of July 21, 1998 (the "Agreement")
pursuant to which the Company purchased all of the outstanding capital stock of
U.S. Zinc Corporation; and
WHEREAS, the Company and the Holder have agreed under the Agreement that
the Company will issue this Warrant under the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder agree
as follows.
Part 1. Issuance and Sale of Warrant.
Subject to the terms and conditions hereof, the Company hereby grants to
the Holder the right to purchase from the Company in the manner prescribed
herein an aggregate of ____________ shares of the Company's Common Stock, par
value $0.10 per share (the "Common Stock") at an exercise price of $19.04 per
share. The amount and kind of securities
<PAGE>
purchasable pursuant to the rights granted hereunder and the exercise price for
such securities are subject to adjustment pursuant to the provisions contained
in this Warrant.
Capitalized terms not defined herein shall have such meaning as defined in
the Agreement.
Part 2. Exercise of Warrant.
2A. Exercise Period. The Holder may exercise, in whole or in part (but
not as to a fractional share of Common Stock), the purchase rights
represented by this Warrant at any time and from time to time in
the following cumulative installments of shares of Common Stock,
but, subject to the provisions of paragraph 2F hereof, no sooner
than as follows:
Number of
Exercise Date Purchase Rights
------------- ---------------
1. On and after January 1, 1999 Up to 25% of the total shares
purchasable under this Warrant.
2. On and after January 1, 2000 Up to an additional 25% of the
total shares purchasable under
this Warrant.
3. On and after January 1, 2001 Up to an additional 25% of the
total shares purchasable under
this Warrant.
4. On and after January 1, 2002 Up to an additional 25% of the
total shares purchasable under
this Warrant.
The purchase rights represented by this Warrant may be exercised
at any time and from time to time as set forth above up to and
including July 21, 2002, which is the fourth anniversary of the
Closing Date (the "Exercise Termination Date"), after which date
this Warrant shall terminate and no longer be exercisable.
2B. Exercise Procedure.
(i) This Warrant will be deemed to have been exercised when the
Company has received all of the following items (the
"Exercise Time"):
(a) a completed Exercise Agreement, as described in
paragraph 2C below, executed by the Holder, exercising
all or part of the shares then vested pursuant to
paragraph 2A above (the "Purchaser");
(b) this Warrant; and
(c) a cashier's check payable to the Company in an amount in
U.S. dollars equal to the Exercise Price (as such term
is defined in
<PAGE>
Part 3 hereof) multiplied by the number of shares of
Common Stock being purchased upon such exercise. In lieu
of the payment required by this paragraph 2B(i)(c),
Holder may exercise the Conversion Right set forth in
paragraph 2E hereof.
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant will be delivered by the Company to
the Purchaser within three (3) business days after the date
of the Exercise Time. Unless this Warrant has expired or all
of the purchase rights represented hereby have been
exercised, the Company will prepare a new Warrant,
substantially identical hereto, representing the rights,
formerly represented by this Warrant, which have not expired
or been exercised and will, within such three-day period,
deliver such new Warrant to the Holder.
(iii) The Common Stock issuable upon the exercise of this Warrant
will be deemed to have been issued to the Purchaser at the
Exercise Time, and the Purchaser will be deemed for all
purposes to have become the record holder of such Common
Stock at the Exercise Time.
(iv) The Company will pay all taxes (other than any income taxes
or other similar taxes), if any, attributable to the initial
issuance of the Warrant and the issuance of the shares of
Common Stock upon the exercise of the Warrant, provided,
however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of the issuance
or delivery of any Warrant, or the transfer thereof, and no
such issuance, delivery or transfer shall be made unless and
until the person requesting such issuance or transfer has
paid to the Company the amount of any such tax, or has
established, to the satisfaction of the Company, that no
such tax is payable or such tax has been paid. Each share of
Common Stock issuable upon exercise of this Warrant will,
upon payment of the Exercise Price therefor, be fully paid
and nonassessable and free from all liens and charges with
respect to the issuance thereof.
(v) The Company will not close its books against the transfer of
this Warrant or of any share of Common Stock issued or
issuable upon the exercise of this Warrant in any manner
which interferes with the timely exercise of this Warrant.
The Company will from time to time take all such action as
may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this
Warrant is at all times equal to or less than the Exercise
Price then in effect.
2C. Exercise Agreement. Upon any exercise of this Warrant, the
Exercise Agreement, substantially in the form set forth in Exhibit
I hereto, will be completed and executed, and if the number of
shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, a new Warrant for
the unexercised portion of the purchase rights hereunder shall be
delivered to the Holder. Such Exercise Agreement will be dated the
actual date of execution thereof.
<PAGE>
2D. Fractional Shares. If a fractional share of Common Stock would,
but for the provisions of paragraph 2A, be issuable upon exercise
of the rights represented by this Warrant, the Company will,
within seven (7) days after the date of the Exercise Time, deliver
to the Purchaser a check payable to the Purchaser in lieu of such
fractional share in an amount equal to the difference between
Market Price (as defined hereinbelow) of such fractional share as
of the date of the Exercise Time and the Exercise Price with
respect to such fractional share.
"Market Price" means as to any security the average of the closing
prices of such security's sales on all domestic national
securities exchanges on which such security may at the time be
listed, or, if there have been no sales on all such exchanges on
any day, the average of the closing bid and asked prices on all
such exchanges at the end of such day, or, if on any day such
security is not so listed, the closing sale price on such day in
the Nasdaq Stock Market, or if there is no closing sale price the
average of the representative bid and asked prices quoted in the
Nasdaq Stock Market as of 4:00 P.M., New York time, on such day,
or, if on any day such security is not quoted in the Nasdaq Stock
Market, the average of the highest bid and lowest asked prices in
the domestic over-the-counter market as reported by the OTC
Bulletin Board, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which Market
Price is being determined and the twenty (20) consecutive business
days prior to such day; provided that if such security is listed
on any domestic national securities exchange, the term "business
days" as used in this sentence means business days on which such
exchange is open for trading. If at any time such security is not
listed on any domestic national securities exchange or quoted in
the Nasdaq Stock Market or the domestic over-the-counter market,
the Market Price will be the fair value thereof determined jointly
by the Company and the Holder; provided that if such parties are
unable to reach agreement within a reasonable time, such fair
value will be determined in good faith by the Company as of the
Exercise Time.
2E. Right to Convert Warrants.
(i) The Holder shall have the right to convert this Warrant (the
"Conversion Right") at any time and from time to time to the
extent the purchase rights with respect to the shares
hereunder have vested pursuant to paragraph 2A (or earlier
if the exercisability of this Warrant is accelerated
pursuant to paragraph 2F) and prior to the expiration of the
Exercise Termination Date, into shares of Common Stock as
provided for in this paragraph 2E. Upon exercise of the
Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that
number of shares of Common Stock equal to the quotient
obtained by dividing (a) the value of the purchase rights
with respect to the vested shares under this Warrant to be
converted at the time the Conversion Right is exercised
(determined by subtracting the aggregate Exercise Price for
such shares to be converted in effect immediately prior to
the exercise of the Conversion Right from the product
obtained by multiplying such number of shares of Common
Stock to be converted by the Market Price per share of
Common Stock determined as of the immediately preceding
business day) by (b) the
<PAGE>
Market Price per share of Common Stock determined as of the
immediately preceding business day.
(ii) The Conversion Right may be exercised by the Holder at any
time prior to its expiration on any business day by
delivering a written notice in the form attached hereto as
Exhibit II (the "Conversion Notice") to the Company,
exercising the Conversion Right and specifying (a) the total
estimated number of shares of Common Stock the Holder
proposes to acquire pursuant to such conversion and (b) a
place and date not less than one nor more than 20 business
days from the date of the Conversion Notice for the closing
of such purchase. Following receipt of the Conversion
Notice, the Company shall notify Holder of the Company's
calculation of the Market Price and, if sufficient vested
shares are available to Holder to acquire the number of
shares of Common Stock specified in the Conversion Notice,
shall notify Holder that such exercise of the Conversion
Right has been accepted.
(iii) At any closing under paragraph 2E(ii) hereof, (a) the Holder
will surrender this Warrant and (b) the Company will deliver
to the Holder a certificate or certificates for the number
of shares of Common Stock issuable upon such conversion,
together with cash in lieu of any fractional share, as
provided in paragraph 2D above. In the event and to the
extent that this Warrant has not been converted in full,
then the Company shall prepare and deliver a new Warrant
evidencing the rights hereunder which have not previously
expired, been exercised or converted, in accordance with
paragraph 2B(ii) hereof or this paragraph 2E.
2F. Acceleration on Change in Control. In the event of a Change in
Control, then notwithstanding any other provision in this Warrant
to the contrary, all outstanding and unexercised purchase rights
and conversion rights represented by this Warrant shall thereupon
automatically be accelerated and exercisable in full.
For purposes of this Warrant, "Change in Control" shall mean the
occurrence of any of the following events: (i) there shall be
consummated any merger or consolidation pursuant to which shares
of Common Stock would be converted into cash, securities or other
property, or any sale, lease, exchange or other disposition
(excluding disposition by way of mortgage, pledge or
hypothecation), in one transaction or a series of related
transactions, of all or substantially all of the assets of the
Company (a "Business Combination"), in each case unless, following
such Business Combination, all or substantially all of the holders
of the outstanding Common Stock immediately prior to such Business
Combination beneficially own, directly or indirectly, more than
50.1% of the outstanding common stock or equivalent entity
interests of the corporation or entity resulting from such
Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the outstanding Common Stock, (ii) the
stockholders of the Company approve any plan or proposal for the
<PAGE>
complete liquidation or dissolution of the Company, (iii) any
"person" (as such term is described in Section 3(a)(9) or Section
13(d)(3) under the Securities Exchange Act of 1934) or any "group"
(as such term is used in Rule 13d-5 promulgated under the
Securities Exchange Act of 1934), other than the Company or any
successor of the Company or any subsidiary of the Company or any
employee benefit plan of the Company or any subsidiary (including
such plan's trustee), becomes a beneficial owner for purposes of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
directly or indirectly, of securities of the Company representing
50.1% or more of the Company's then outstanding securities having
the right to vote in the election of directors, or (iv) during any
period of two consecutive years, individuals who, at the beginning
of such period constituted the entire board of directors of the
Company, cease for any reason (other than death) to constitute a
majority of the directors, unless the election, or the nomination
for election, by the Company's stockholders, of each new director
was approved by a vote of at least a majority of the directors
then still in office who were directors at the beginning of the
period.
Part 3. Adjustment of Exercise Price and Number of Shares. The initial
Exercise Price as set forth in Part 1 shall be subject to adjustment from time
to time as provided in this Part 3 (such price or such price as last adjusted
pursuant to the terms hereof, as the case may be, is herein called the "Exercise
Price"), and the number of shares of Common Stock obtainable upon exercise of
this Warrant shall be subject to adjustment from time to time as provided in
this Part 3.
3A. Subdivision or Combination of Common Stock. If the Company
subdivides (by any stock split, stock dividend, recapitalization
or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the number of shares of Common Stock
obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time combines (by reverse stock
split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares, the number of shares of Common Stock
obtainable upon exercise of this Warrant will be proportionately
decreased. In the event of any adjustment of the total number of
shares of Common Stock obtainable upon the exercise of the
unexercised portion of the Warrant pursuant to this paragraph 3A,
the Exercise Price shall be adjusted to be the amount resulting
from dividing the number of shares of Common Stock covered by the
Warrant immediately after such adjustment into the total amount
payable upon exercise of the Warrant in full immediately prior to
such adjustment. Such adjustment shall be made successively
whenever any event listed above shall occur.
3B. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any capital reorganization, reclassification, statutory share
exchange, consolidation, merger or sale of all or substantially
all of the Company's assets, which is effected in such a way that
holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock, is referred to herein
as an "Organic Change." Prior to the consummation of any Organic
Change, the Company will make appropriate provision such that the
Holder will thereafter have the right to acquire and receive in
lieu of or in addition to the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such
Holder's Warrant, such shares of stock, securities or assets as
may be issued or
<PAGE>
payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable
upon exercise of such Holder's Warrant had such Organic Change not
taken place.
3C. Certain Events. If any event occurs of the type contemplated by
the provisions of this Part 3 but not expressly provided for by
such provisions, then the Company will make an appropriate
adjustment in the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the Holder
of the Warrant.
3D. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company will give written notice thereof to the Holder.
(ii) The Company will give written notice to the Holder at least
twenty (20) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any
dividend or distribution on the Common Stock, (B) with
respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company will also give written notice to the Holder at
least twenty (20) days prior to the date on which any
Organic Change, dissolution or liquidation will take place.
Part 4. No Voting Rights; Limitations of Liability. This Warrant will not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by
the Holder to purchase Common Stock, and no enumeration herein of the rights or
privileges of the Holder shall give rise to any liability of the Holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a stockholder
of the Company.
Part 5. Transfer of Warrants.
5A. Investment Purposes. By accepting this Warrant, the Holder hereby
agrees that such Warrant, and any shares of Common Stock issuable
hereunder, will be held for investment purposes only and not with
a view to resale. This paragraph 5A shall be binding upon the
Holder and his or her heirs, personal representatives, successors
and assigns.
5B. Transferability. The transferability of this Warrant is restricted
by the terms of that certain Agreement, dated as of July 21, 1998,
by and between Holder and the Company, except for assignments
occurring by operation of law. In case of any such transfer by
executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the
Company shall deliver a new Warrant or Warrants to the person so
entitled thereto. Notwithstanding the foregoing, the Company shall
have no obligation to cause a Warrant to be transferred on its
books to any person, unless (i) such Warrant and the shares of
Common Stock
<PAGE>
issuable upon exercise of such Warrant are registered under a
valid and effective registration statement under the Securities
Act of 1933, as amended, and applicable state blue sky laws or
(ii) the Company receives a written opinion of counsel
satisfactory to the Company that registration is not required
under such act. Any shares of Common Stock issued pursuant to this
Warrant shall bear legends describing, among other things, such
restrictions on transfer, except to the extent such shares are
registered with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended, or at or following such
time as such shares are otherwise transferrable without
restriction pursuant to Rule 144(k) promulgated by the Securities
and Exchange Commission.
Part 6. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal executive
offices of the Company, for new Warrants of like tenor representing in the
aggregate the purchase rights hereunder, and each of such new Warrants will
represent such portion of such rights as is designated by the Holder at the time
of such surrender. The date the Company initially issues this Warrant will be
deemed to be the date of issuance thereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All such Warrants representing
portions of the rights hereunder are referred to herein as the "Warrants."
Part 7. Replacement. Upon receipt of evidence reasonably satisfactory to
the Company (an affidavit of the Holder being deemed satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company, or, in the
case of any such mutilation upon surrender of such certificate, the Company will
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Part 8. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant will be in writing and will be delivered
personally or by registered or certified mail, return receipt requested, postage
prepaid and will be deemed to have been given when so delivered or mailed (i) to
the Company, at its principal executive offices, and (ii) to the Holder of this
Warrant, at such Holder's address as it appears in the records of the Company
(unless otherwise indicated by the Holder).
Part 9. Successors and Assigns. The terms, provisions and rights
evidenced by this Warrant shall inure to the benefit of, and be binding upon,
the Company and the Holder and their respective heirs, legal representatives,
successors and permitted assigns.
Part 10. Amendments and Waivers. Except for the number of shares of
Common Stock purchasable under this Warrant and except for the Exercise Price,
any term of this Warrant may be amended and the observance of any term of this
Warrant may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the
holders of sixty-six and two thirds (66 2/3%) of the total number of shares of
Common Stock issuable pursuant to this Warrant and other warrants of like tenor
and effect (except for variations necessary to express the name of the holder)
issued of even date herewith. Any waiver or amendment effected in accordance
with this Part 10 shall be binding upon each holder of any shares of Common
Stock purchased under this Warrant at the time outstanding
<PAGE>
(including any
securities into which such shares have been converted or exchanged), each future
holder of all such shares of Common Stock, and the Company.
Part 11. Descriptive Headings; Governing Law. The descriptive headings of
the several parts and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. The construction, validity
and interpretation of this Warrant will be governed by the laws of the State of
Delaware.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date first set forth above.
IMCO RECYCLING INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[Corporate Seal]
Attest:
- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT I
---------
EXERCISE AGREEMENT
------------------
To: Dated:
---------------------------------- -----------------------------
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. _____), hereby agrees to subscribe for and purchase
_______ shares of the Common Stock covered by such Warrant and makes payment
herewith in full therefor at the Exercise Price per share provided by such
Warrant.
Signature:
-------------------------------
Address:
---------------------------------
---------------------------------
<PAGE>
EXHIBIT II
----------
CONVERSION NOTICE
-----------------
(To be executed upon conversion of Warrant.)
The undersigned hereby irrevocably elects to exercise the Conversion Right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock and herewith tenders in payment for such shares this Warrant Certificate,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such shares be registered in the name of _______ whose address
is ______________________________________________________ and that such
certificate (or any payment in lieu thereof) be delivered to
_____________________ whose address is ____________________________________.
Dated:
--------------------- -------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
