SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
Special Metals Corporation
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock (par value $0.01 per share)
- --------------------------------------------------------------------------------
(Title of Class of Securities)
84741Y
------------------------------------
(CUSIP Number)
Stuart F. Feiner
Executive Vice-President,
General Counsel and Secretary
Inco Limited
145 King Street West, Suite 1500
Toronto, Ontario
M5H 4B7
Canada
(416) 361-7511
-----------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
October 28, 1998
------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
<PAGE>
CUSIP NO. 84741 Y 103
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Inco Limited
I.R.S. Identification No.: 98-0000676
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
SC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 1,030,303*
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 1,030,303*
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,030,303*
- --------------------------------------------------------------------------------
12. CHECK [ ] IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.2
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
- --------------------
* The shares of Common Stock covered by this item are purchasable by Inco
upon exercise of the Conversion Right at the Exercise Price in connection
with the Series A Preferred Stock pursuant to the terms of the Investment
Agreement and the Certificate of Designation (each as defined below).
-2-
<PAGE>
SCHEDULE 13D
RELATING TO THE COMMON STOCK OF
SPECIAL METALS CORPORATION
Item 1. Security and Issuer.
This Statement on Schedule 13D (the "Schedule 13D") relates to the
common stock, par value $0.01 per share (the "Common Stock"), of Special Metals
Corporation, a Delaware corporation ("Special Metals"). The principal executive
offices of Special Metals are located at Middle Settlement Road, New Hartford,
New York 13413.
Item 2. Identity and Background.
(a)-(c); (f) This Statement is filed by Inco Limited, a corporation
continued under the Canada Business Corporations Act ("Inco"). Inco's principal
business is the mining, manufacturing and sale of primary nickel, copper,
platinum-group and other precious metals products. Inco's business address is
145 King Street West, Suite 1500, Toronto, Ontario, M5H 4B7, Canada.
Inco, along with certain of its subsidiaries and affiliates, entered
into a stock purchase agreement, dated as of July 8, 1998, as amended (the
"Acquisition Agreement"), with Special Metals, pursuant to which Special Metals
agreed to acquire (the "Acquisition") the Inco Alloys International business
unit of Inco. On October 28, 1998 (the "Closing Date"), in connection with the
amendment to the Acquisition Agreement and the closing of the transactions
contemplated thereby, Inco and Special Metals entered into an Investment
Agreement (the "Investment Agreement") pursuant to which 340,000 shares of
6.625% Series A Senior Convertible Preferred Stock, liquidation amount $50.00
per share (the "Series A Preferred Stock"), of Special Metals were issued to
Inco as partial payment of the purchase price under the Acquisition Agreement. A
conformed copy of the Investment Agreement is attached hereto as Exhibit 1.
Subject to the terms and conditions contained in the Investment
Agreement and the Certificate of Designations of Rights and Preferences for the
Series A Preferred Stock (the "Certificate of Designation"), each share of the
Series A Preferred Stock is convertible (the "Conversion Right") into that
number of shares of Common Stock obtained by dividing the liquidation amount of
$50.00 per share of Series A Preferred Stock by the exercise price per share of
Series A Preferred Stock (the "Exercise Price"). The Certificate of Designation
provides that the Exercise Price shall initially be $16.50 per share of Series A
Preferred Stock and shall be proportionately adjusted on the occurrence of
certain events. A copy of the Certificate of Designation is attached hereto as
Exhibit 2.
Under the Investment Agreement, Special Metals agreed to obtain, within
120 days of the Closing Date, the vote of holders of Common Stock to approve the
issuance of Common Stock upon exercise of the Conversion Right in accordance
with Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such
-3-
<PAGE>
stockholder approval is required for the issuance of Common Stock pursuant to
the Conversion Right under the rules of the NASDAQ National Market, on which the
Common Stock is listed for trading.
The name, business address, present principal occupation or employment
and the name and principal business of any corporation or other organization in
which such employment is conducted of each executive officer and director of
Inco (the "Covered Persons") are set forth on a schedule attached hereto as
Exhibit 3. Except as otherwise indicated on such schedule, each of the Covered
Persons listed thereon is a citizen of Canada.
The descriptions set forth in this Schedule 13D are qualified in their
entirety by reference to the Investment Agreement, the Certificate of
Designation and the Registration Rights Agreement (as defined below), all of
which are attached hereto.
(d)-(e) During the last five years, neither Inco nor, to the knowledge
of Inco, any of the Covered Persons, (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws, or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Series A Preferred Stock was issued to Inco as part of the purchase
price under the Acquisition Agreement and for purposes thereof was valued at the
aggregate liquidation value thereof of $17,000,000. Subject to the terms and
conditions in the Investment Agreement and the Certificate of Designation,
shares of Series A Preferred Stock are convertible into Common Stock at the
Exercise Price.
Item 4. Purpose of the Transaction.
(a)-(j) Inco accepted the Series A Preferred Stock for investment
purposes as part of the purchase price under the Acquisition Agreement. A
further discussion of the terms of the transaction is set forth in the
Investment Agreement, the Certificate of Designation and the Registration Rights
Agreement (as defined below), all of which are attached hereto and incorporated
by reference in their entirety. On the Closing Date, Timet Finance Management
Company ("Timet") purchased 1,600,000 shares of Series A Preferred Stock for an
aggregate purchase price of $80,000,000.
Inco currently has no plans to purchase additional shares of Common
Stock or to effect any significant transaction involving Special Metals.
Further, Inco has no intention to cause the sale or transfer of a material
amount of assets of Special Metals, effect any change in the present board of
directors or management of Special Metals, or to cause any material change in
the present capitalization or dividend policy of Special Metals or any
-4-
<PAGE>
other material change in Special Metals' business or corporate structure. Inco
has no plans to effect any changes in Special Metals' charter or by laws or take
any action which may impede the acquisition of control of Special Metals by any
person (except any such actions as were taken in connection with the issuance
and sale of the Series A Preferred Stock as described below). Inco has no
intention to cause a class of securities of Special Metals to be delisted from a
national securities exchange or cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association or
to cause a class of securities of Special Metals to become eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act.
Furthermore, Inco has no plans to take any action similar to the actions
described above.
Notwithstanding the above, the Investment Agreement does not prohibit
Inco from acquiring additional securities of Special Metals or engaging in any
of the activities proscribed above.
In connection with the issuance and sale of the Series A Preferred
Stock the board of directors of Special Metals amended its Certificate of
Incorporation (the "Certificate of Incorporation") by adopting the Certificate
of Designation. The Certificate of Designation is attached hereto as Exhibit 2
and is incorporated herein by reference.
In addition to the amendment to the Certificate of Incorporation,
Special Metals took the following actions in connection with the issuance and
sale of the Series A Preferred Stock which may impede the acquisition of control
of Special Metals by any person other than Inco:
Investment Agreement Transfer Restrictions.
The Investment Agreement prohibits Inco from disposing of shares of
Series A Preferred Stock or shares of Common Stock obtained upon exercise of the
Conversion Right subject to certain exceptions including dispositions (i) to
wholly owned subsidiaries of Inco provided such subsidiaries agree to be bound
by the terms in the Investment Agreement; (ii) following the second anniversary
of the Closing Date, in a bona fide public offering effected in accordance with
the Registration Rights Agreement; or (iii) following the earlier of the third
anniversary of the Closing Date and the occurrence of a Change of Control (as
defined in the Investment Agreement). The Investment Agreement further provides
that certain dispositions pursuant to (ii) and (iii) above shall not be made, to
the knowledge of Inco, to certain persons who are significant competitors of
Special Metals as specified by Special Metals, are engaged in any material
litigation adverse to Special Metals or any of its affiliates or who, after
acquiring such shares, would beneficially own voting securities of Special
Metals representing more than 10% of the outstanding voting securities of
Special Metals and shall be subject to Special Metals' prior right of first
refusal described in the Investment Agreement. Further, a disposition pursuant
to (ii) above, shall be subject to the additional purchase rights of Special
Metals set forth in the Registration Rights Agreement. A full description of the
transfer restrictions can be found in the Investment Agreement.
-5-
<PAGE>
Voting Rights of Series A Preferred Stock.
The Certificate of Designation provides that holders of Series A
Preferred Stock shall have no voting rights except (i) as required by law or in
the Certificate of Incorporation; (ii) the vote of holders of a majority of the
outstanding shares of Series A Preferred Stock will be required in connection
with an amendment to the terms of the Series A Preferred Stock whether or not
such vote is required or authorized by the Certificate of Incorporation; (iii)
the vote of holders of 90% of the outstanding shares of Series A Preferred Stock
will be required to amend provisions governing the payment of dividends on, or
the conversion into Common Stock of, shares of Series A Preferred Stock; and
(iv) so long as shares of Series A Preferred Stock are outstanding, the vote of
the holders of at least two-thirds thereof shall be necessary to issue,
authorize or increase the authorized amount of, or issue or authorize or
increase any obligation or security convertible into or evidencing a right to
purchase any additional class or series of equity securities ranking senior to
the Series A Preferred Stock as to dividend rights and rights on liquidation,
winding up and dissolution or reclassify any Junior Securities (as defined in
the Certificate of Designation) or Parity Securities (as defined in the
Certificate of Designation) as Senior Securities (as defined in the Certificate
of Designation) and, in addition, the vote of the holders of a majority of
outstanding shares of Series A Preferred Stock shall be required to issue or
authorize or increase the authorized amount of, or issue or authorize or
increase any obligation or security convertible into or evidencing a right to
purchase any Parity Securities or reclassify any Junior Securities as Parity
Securities (provided that no such vote is required with respect to Senior
Securities or Parity Securities where, prior to such action, provision is made
for redemption of all the outstanding shares of Series A Preferred Stock). In
addition, in the event that Special Metals fails to pay or elects to defer
payment of accumulated dividends on the Series A Preferred Stock for six
quarterly dividend periods or any other Event of Noncompliance (as defined in
the Certificate of Designation) has occurred and is continuing, the number of
directors constituting Special Metals' board of directors will be increased by a
number sufficient to include two members designated by the holders of a majority
of the Series A Preferred Stock of which Inco currently owns approximately
17.5%. Such special right to elect directors and the term of any director so
elected terminate immediately upon the termination of any Event of Noncompliance
that gave rise to the special right.
Registration Rights Agreement.
As of the Closing Date the Series A Preferred Stock was not listed on
any national securities exchange and the issuance of the Series A Preferred
Stock will not be registered with the SEC and therefore will be restricted
securities. However, on the Closing Date, Special Metals entered into a
Registration Rights Agreement (the "Registration Rights Agreement") pursuant to
which Inco or any transferee from Inco in a private transaction will be entitled
to certain rights with respect to the registration under the Securities Act of
1933, as amended, of the shares of Series A Preferred Stock or the shares of
Common Stock issued upon exercise of the Conversion Right. A copy of the
Registration Rights Agreement is attached hereto as Exhibit 4 and incorporated
herein by reference.
-6-
<PAGE>
Item 5. Interest in Securities of the Issuer.
(a) - (b) The information required to be disclosed by Item 5 is set out
in Items 7 through 11 and 13 on the cover pages to this Schedule 13D. Such
information is based on the number of shares of Common Stock outstanding as of
November 2, 1998 (15,479,000) as reported by Special Metals in its Quarterly
Report on Form 10-Q for the period ended September 30, 1998.
As of the date hereof, neither Inco nor, to the best of Inco's
knowledge, any of the Covered Persons, unless otherwise indicated herein, owns
any Common Stock.
(c) Neither Inco nor, to the best of Inco's knowledge, any of the
Covered Persons, has effected any transaction in Common Stock during the past 60
days.
(d) through (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Contracts, arrangements, understandings or relationships (legal or
otherwise) with respect to securities of Special Metals, consist of the
Acquisition Agreement, the Investment Agreement, the Certificate of Designation
and the Registration Rights Agreement, each of which is attached hereto as an
exhibit and is incorporated in its entirety by reference.
Item 7. Material to be filed as Exhibits.
Exhibit 1 -- Investment Agreement, dated as of October 28, 1998,
between Inco Limited and Special Metals Corporation.
Exhibit 2 -- Certificate of Designations of Special Metals Corporation
for 6.625% Series A Senior Convertible Preferred Stock.
Exhibit 3 -- List of the Directors and Officers of Inco Limited, their
business addresses and principal occupations.
Exhibit 4 -- Registration Rights Agreement, dated as of October 28,
1998, between Inco Limited and Special Metals Corporation.
-7-
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 13D is true, complete
and correct.
Dated: December 18, 1998
INCO LIMITED
By: /s/ Stuart F. Feiner
--------------------------------
Name: Stuart F. Feiner
Title: Executive Vice-President, General
Counsel and Secretary
-8-
<PAGE>
Exhibit Index
Exhibit 1 -- Investment Agreement, dated as of October 28, 1998,
between Inco Limited and Special Metals Corporation (filed
herewith).
Exhibit 2 -- Certificate of Designations of Special Metals Corporation
for 6.625% Series A Senior Convertible Preferred Stock
(filed herewith).
Exhibit 3 -- List of the Directors and Officers of Inco Limited, their
business addresses and principal occupations (filed
herewith).
Exhibit 4 -- Registration Rights Agreement, dated as of October 28,
1998, between Inco Limited and Special Metals Corporation
(filed herewith).
-9-
EXHIBIT 1
SPECIAL METALS CORPORATION
340,000 Shares
6.625% Series A Senior Convertible Preferred Stock
(Liquidation Amount $50.00 per Share)
INVESTMENT AGREEMENT
October 28, 1998
Inco Limited
145 King Street West, Suite 1500
Toronto, Ontario M5H 4B7, Canada
Ladies and Gentlemen:
Special Metals Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell to Inco Limited, a corporation continued under the
laws of Canada (the "Investor"), 340,000 shares of its 6.625% Series A Senior
Convertible Preferred Stock, liquidation amount $50.00 per share (the
"Convertible Preferred Securities"). The Convertible Preferred Securities will
be convertible into shares of the common stock, par value $.01 per share (the
"Common Stock"), of the Company initially at the conversion price set forth
herein and will rank, with respect to dividend rights and rights upon
liquidation, winding up and dissolution, senior to the Common Stock, and each
other class of capital stock or series of preferred stock of the Company
established after the original issuance of the Convertible Preferred Securities,
and pari passu with the Convertible Preferred Securities issued to Timet Finance
Management Company ("Timet") pursuant to the Investment Agreement, dated as of
July 8, 1998, as amended on October 28, 1998, among Timet, Titanium Metals
Corporation and the Company (the "Timet Investment Agreement").
The Investor, Inco United States, Inc., Inco Europe Limited and Inco
S.A. (collectively, "Inco") and the Company have entered into a stock purchase
agreement, dated as of July 8, 1998, as amended (the "Acquisition Agreement"),
pursuant to which the Company has agreed to acquire (the "Acquisition") the Inco
Alloys International division ("IAI") of the Investor. In connection with the
amendment to the Acquisition Agreement and the closing of the Acquisition, the
parties hereto have agreed to enter into this Agreement pursuant to which the
Company has agreed to issue the Convertible Preferred Securities as part of the
consideration to be paid to Inco in connection with the Non- Competition
Agreement (as defined in the Acquisition Agreement.)
The sale of the Convertible Preferred Securities to the Investor will
be made without registration of the Convertible Preferred Securities under the
Securities Act of 1933,
<PAGE>
as amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. However, the Investor (and
subsequent permitted transferees) of the Convertible Preferred Securities (and
the Common Stock issued upon conversion thereof) will have the registration
rights set forth in the Registration Rights Agreement in the form attached as
Exhibit A hereto (the "Registration Rights Agreement") to be entered into
between the Company and the Investor.
1. Purchase and Sale. On the terms and in reliance upon the representations
and warranties set forth in this Agreement, the Company agrees to issue, sell
and deliver to the Investor, and the Investor agrees to acquire from the
Company, 340,000 Convertible Preferred Securities with an aggregate liquidation
amount of $17,000,000 as partial payment of the consideration to be paid to Inco
for the Non-Competition Agreement to be entered into in connection with the
Acquisition Agreement. Each Convertible Preferred Security shall be convertible
at the option of the holder into shares of Common Stock of the Company following
the Initial Conversion Date (as defined herein) at a conversion price equal to
$16.50 per share. Such conversion price will be subject to adjustment from time
to time as set forth in the Certificate of Designation of Rights and Preferences
establishing the terms and relative rights and preferences of the Convertible
Preferred Securities substantially in the form set forth in Exhibit B hereto
(the "Certificate of Designation"). The term "Initial Conversion Date" shall
mean the latest of (i) 90 days following the date of original issuance of the
Convertible Preferred Securities, (ii) the date on which approval is obtained in
accordance with Regulation 14A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), by the stockholders of the Company entitled to
vote thereon (the "Stockholders Conversion Vote") of the issuance of Common
Stock upon the conversion of the Convertible Preferred Securities upon the terms
and conditions set forth in the Certificate of Designation and (iii) the date
upon which all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, have expired or been terminated.
2. Delivery. Delivery of the Convertible Preferred Securities shall be made
at the offices of Paul, Weiss, Rifkind, Wharton & Garrison at 10:00 a.m., New
York City time, on the date hereof (the "Closing Time").
3. Representations and Warranties of the Company. The Company represents
and warrants to the Investor as follows:
(a) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority under such laws to own its
property and to conduct its business as presently conducted and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries (as defined below), taken as a whole.
(b) Each subsidiary of the Company that is listed on Schedule 3(b)
attached hereto (collectively, the "Subsidiaries") has been duly incorporated,
is validly existing as a
2
<PAGE>
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority under such laws to own its
property and to conduct its business as presently conducted and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; except as described in the
annual reports on Form 10-K, quarterly reports on Form 10-Q, registration
statements, reports on Form 8-K and Form 8-A, proxy statements, information
statements or other forms, schedules, documents, reports or statements filed by
the Company or any of its Subsidiaries with the Securities and Exchange
Commission since March 3, 1997 and prior to the date hereof (collectively, the
"SEC Reports"), all of the issued shares of capital stock of each Subsidiary of
the Company, other than one share of Udimet Special Metals Ltd., which is owned
by a director thereof, have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims, except to the extent that
such liens, encumbrances, equities or claims would not, singly or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole; the Subsidiaries are the only subsidiaries of the Company
required to be listed on Exhibit 21 to the SEC Reports.
(c) The Convertible Preferred Securities have been duly authorized by
the Company and, when issued and delivered by the Company to the Investor
against payment of the Purchase Price therefor, will be validly issued and fully
paid and non-assessable and the issuance of the Convertible Preferred Securities
will not be subject to any preemptive or other similar rights.
(d) This Agreement has been duly authorized, executed and delivered by
the Company and, assuming the due authorization, execution and delivery of this
Agreement by the Investor, constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors' rights generally and general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or at law.
(e) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and, assuming the due authorization,
execution and delivery of the Registration Rights Agreement by the Investor,
will be a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights generally and
general principles of equity, regardless of whether enforceability is considered
in a proceeding in equity or at law and (ii) the enforceability of
indemnification and contribution provisions may be limited by federal and state
securities laws and the policies underlying such laws.
3
<PAGE>
(f) Except as set forth on Schedule 3(f) hereto, (i) the execution and
delivery by the Company of, and the performance by the Company of its
obligations under, this Agreement and the Registration Rights Agreement, and the
consummation of the transactions contemplated hereby and thereby, will not
contravene any provision of applicable law material to the Company, the
Certificate of Designation, the articles of incorporation or the by-laws of the
Company, or any agreement or other instrument binding upon the Company or any of
its Subsidiaries, except where such contravention of any such agreement or
instrument would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body or agency or court having jurisdiction over the Company or any
of its Subsidiaries and material to it, and (ii) no consent, approval,
authorization, waiver or order of, or qualification with, any court or
governmental body or agency or any other person is required for the performance
by the Company of its obligations under this Agreement and the Registration
Rights Agreement, except such as may be required by federal, state or foreign
securities laws in connection with the offer and sale of the Convertible
Preferred Securities and the Conversion Shares (as defined below) and the
registration of such securities pursuant to the terms of the Registration Rights
Agreement, and except for any such consent, approval, authorization, waiver,
order or qualification the failure of which to obtain would not result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of Company and its Subsidiaries, taken as a
whole, and would not materially impair the ability of the Company to effect the
transactions contemplated hereby and pursuant to the Registration Rights
Agreement.
(g) The authorized capital stock of the Company consists of (i)
35,000,000 shares of Common Stock, par value $0.01 per share, of which, as of
the date hereof, 15,479,000 shares are issued and outstanding and 7,600,000
shares have been reserved for issuance upon conversion of the Convertible
Preferred Securities and (ii) 10,000,000 shares of preferred stock, par value
$0.01 per share, of which, as of the date hereof, no shares are outstanding. All
of the outstanding shares of Common Stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable.
(h) The shares of Common Stock initially issuable upon conversion of
the Convertible Preferred Securities (the "Conversion Shares") have been duly
authorized and, when issued upon such conversion in accordance with the
provisions of the Certificate of Designation, will be validly issued, fully paid
and non-assessable; the issuance of the Conversion Shares will not be subject to
any preemptive or similar rights.
(i) The financing contemplated by (i) the new credit facility to be
entered into by the Company, Credit Lyonnais New York Branch as agent and
various lenders with respect to the Acquisition, (ii) the Investor's investment
in the Convertible Preferred Securities as contemplated by this Agreement, (iii)
Timet's investment in $80,000,000 aggregate liquidation amount of Convertible
Preferred Securities as contemplated by the Timet Investment Agreement and (iv)
Inco's agreement to pay Credit Lyonnais New York Branch, as agent, a fee of
$10,000,000 pursuant to the letter agreement dated October 5, 1998, constitute
the only financing arrangements to be entered into by the Company or any
4
<PAGE>
of its Subsidiaries in connection with the financing of the Acquisition other
than indebtedness of Inco and/or its subsidiaries to be assumed in connection
with the Acquisition.
4. Representations and Warranties of the Investor. The Investor represents
and warrants to the Company as follows:
(a) The Investor has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation.
(b) This Agreement has been duly authorized, executed and delivered by
the Investor and, assuming due authorization, execution and delivery of this
Agreement by the Company constitutes a valid and binding agreement of the
Investor, enforceable against the Investor in accordance with its terms, except
to the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors' rights generally and general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or at law.
(c) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Investor and, assuming the due authorization,
execution and delivery of the Registration Rights Agreement by the Company, will
be a valid and binding agreement of the Investor, enforceable against the
Investor in accordance with its terms, except to the extent that (i) enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights generally and
general principles of equity, regardless of whether enforceability is considered
in a proceeding in equity or at law and (ii) the enforceability of
indemnification and contribution provisions may be limited by federal and state
securities laws and the policies underlying such laws.
(d) Except as set forth on Schedule 4(d), (i) the execution and
delivery by the Investor of, and the performance by the Investor of its
obligations under, this Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby will not
contravene any provision of applicable law material to the Investor or the
articles of incorporation or by-laws of the Investor or any agreement or other
instrument binding upon the Investor, except where such contravention of any
such agreement or instrument would not have any material adverse effect on the
Investor and its subsidiaries, taken as a whole, or any judgement, order or
decree of any governmental body, agency or court having jurisdiction over the
Investor that is material to it, and (ii) no consent, approval, authorization,
waiver or order of, or qualification with, any court or governmental body or
agency or any other person is required for the performance by the Investor of
its obligations under this Agreement, except such as may be required by federal,
state or foreign securities laws in connection with the offer and sale of the
Convertible Preferred Securities, the Conversion Shares and the registration of
such securities pursuant to the terms of the Registration Rights Agreement, and
except for any such consent, approval, authorization, waiver, order or
qualification the failure of which to obtain would not result in a material
adverse change in the condition, financial or otherwise, or in the earnings,
5
<PAGE>
business or operations of the Investor and its subsidiaries, taken as a whole,
or materially impair the ability of the Investor to perform its obligations
hereunder.
(e) The Investor is acquiring the Convertible Preferred Securities
under this Agreement for its own account solely for the purpose of investment
and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act. The Investor has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Convertible Preferred
Securities and the Conversion Shares and is able to bear the economic risk of
such investment. The Investor acknowledges that none of the Convertible
Preferred Securities or the Conversion Shares have been registered under the
Securities Act and such securities may be sold or disposed of in the absence of
such registration only pursuant to an exemption from such registration and in
accordance with the terms of this Agreement.
5. Dispositions. The Investor shall not, directly or indirectly, sell,
assign, transfer, pledge, hypothecate or otherwise dispose of any interest in
any Convertible Preferred Securities or any Conversion Shares (a "Disposition"),
except as set forth in this Section 5.
(a) Dispositions may be made at any time and from time to time
following the Closing Time, to one or more wholly-owned subsidiaries of the
Investor, provided that each such subsidiary agrees in writing to be bound by
this Agreement to the same extent as the Investor.
(b) Dispositions may be made (i) following the second anniversary of
the Closing Time, in a bona fide public offering effected in accordance with the
provisions of the Registration Rights Agreement; and (ii) following the earlier
of the third anniversary of the Closing Time and the occurrence of a "change of
control" (as hereinafter defined), provided, however, that Dispositions shall
not be made pursuant to clauses (i) and (ii) of this Section 5(b) to any person
who, to the actual knowledge of the Investor (without any duty of inquiry) in
the case of Dispositions to be made pursuant to bona fide open market "brokers
transactions" as permitted pursuant to the provisions of Rule 144 promulgated
under the Securities Act and to the knowledge of the Investor (after reasonable
inquiry) in all other cases, is (x) a Significant Competitor of the Company (as
hereinafter defined), (y) a person that is or theretofore had been engaged in
any material litigation adverse to the Company or any of its affiliates or (z) a
person (other than any underwriter who is in the business of underwriting
securities and who, in the ordinary course of its business as an underwriter,
acquired Convertible Preferred Securities or Conversion Shares in connection
with a public offering with the bona fide intention of reselling all of the
securities so acquired pursuant to such public offering) who, after acquiring
such interest in Convertible Preferred Securities or Common Stock, would
beneficially own voting securities of the Company representing more than 10% of
the outstanding shares of voting securities of the Company (assuming any
Convertible Preferred Securities owned by such person were converted into Common
Stock); provided that any Disposition proposed to be made by the Investor
pursuant to this Section 5(b) shall be subject to the Company's prior right of
first refusal as set forth in Section 6 of this Agreement and, in the case of
Dispositions to be made pursuant to
6
<PAGE>
Section 5(b)(i) hereof, shall be subject to the additional purchase rights of
the Company set forth in Section 2.6(b) of the Registration Rights Agreement.
As used in this Section 5(b), "change of control" means the occurrence
of any of the following events.
(A) in any three-year period, a majority of the members of the Board
elected during such three-year period shall have been so elected against the
recommendation of the management of the Company or the Board in office
immediately prior to such election; or
(B) any Designated Person (as defined herein) or Persons acting in
concert shall, except as provided in clause (C) below, acquire (whether by
merger, consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or any related series of transactions) or otherwise beneficially own
a majority of the voting power of the outstanding securities of the Company
generally entitled to vote for the election of directors ("Voting Securities");
or
(C) upon consummation of a consolidation or merger of the party with
another Designated Person in which the holders of the Voting Securities of the
Company immediately prior to such consolidation or merger would not own Voting
Securities representing at least a majority of the outstanding voting power of
such Designated Person or its ultimate parent upon consummation of such
consolidation or merger; or
(D) upon the sale, transfer or assignment (it being understood that the
pledge of, or the granting of a security interest in, assets of the Company or
its subsidiaries shall not be deemed a sale, transfer or assignment) of all or
substantially all of the assets of the Company to any person in a single
transaction or a series of related transactions; provided, however, that a sale,
transfer or assignment of all or substantially all of the assets of the Company,
to (x) the Principal Stockholders (as defined herein), or to (y) any entity the
holders of at least a majority of the Voting Securities of which (or of such
entity's ultimate parent) were holders of Voting Securities of the Company
immediately prior to such sale, transfer or assignment shall not constitute a
"change of control" hereunder; or
(E) at such time as the Principal Stockholders fail to beneficially
own, in the aggregate, at least 30% of the voting power of the outstanding
Voting Securities of the Company.
For purposes hereunder, "Designated Person" shall mean any person, corporation,
partnership or other entity other than Societe Industrielle de Materiaux Avances
("SIMA") and its affiliates and "Principal Stockholders" shall mean SIMA, LWH
Holdings S.A. and their respective affiliates. Reference to a "Significant
Competitor" of the Company means any person identified in writing to the
Investor (as provided below) that manufactures or sells high performance nickel
base alloys, cobalt base alloys, stainless steels or other similar based alloys
where annual sales of such alloys for such person's most recently completed
fiscal year exceeded $75 million (which term shall exclude Inco Limited and its
subsidiaries). The
7
<PAGE>
Company shall provide to the Investor prior to the date of this Agreement a
written list of such Significant Competitors (which list the Company may, by
notice to the Investor, amend or supplement at any time or from time to time),
which Significant Competitors shall conform to the provisions of the definition
of Significant Competitor contained herein. The Significant Competitors so
designated on such list shall constitute the Significant Competitors hereunder.
(c) Dispositions may be made pursuant to a bona fide pledge not
intended to circumvent the provisions of this Section 5 to one or more banks or
other lending institutions (or any agent on their behalf) (each a "Lender"),
provided that prior to any foreclosure upon or other acquisition by such Lender
of any Convertible Preferred Securities or Conversion Shares pledged to it such
Lender agrees in writing to be bound by the provisions of Sections 5(d) (to the
extent set forth therein) and 6 of this Agreement to the same extent as the
Investor. Upon any such foreclosure or other acquisition by a Lender of any
Convertible Preferred Securities or Conversion Shares pledged to it, such Lender
shall succeed to the rights and (to the extent set forth under Section 6 and
Section 5(d)) the obligations of the Investor hereunder and, following a
Disposition of such Convertible Preferred Securities or Conversion Shares by
such Lender, the subsequent transferee shall succeed to the same rights and
obligations hereunder as such Lender; provided, however, that if such Lender
makes a Disposition of such Convertible Preferred Securities or Conversion
Shares to the Investor, Timet or any of their affiliates, such transferees shall
agree in writing to be bound by the terms of this Agreement and the Registration
Rights Agreement to the same extent as the Investor hereunder.
(d) Notwithstanding any other provision of this Agreement, no
Disposition may be made pursuant to this Section 5 unless (i) the transfer
complies in all respects with the applicable provisions of this Agreement and
applicable federal and state securities laws, including, without limitation, the
Securities Act, (ii) except for Dispositions made pursuant to Section 5(b)(i) of
this Agreement, pursuant to foreclosures or other acquisitions by a Lender
pursuant to Section 5(c) of this Agreement or by a Lender's transferee (unless
such transferee is the Investor, Timet or any of their affiliates), or pursuant
to a brokers transaction under Rule 144 (other than Rule 144(k)) promulgated
under the Securities Act, the transferee agrees in writing to be bound by the
terms and conditions of this Agreement, to the extent applicable, and the
Registration Rights Agreement (whereupon such transferee shall be substituted
for, and shall enjoy the same rights and be subject to the same obligations, as
its predecessor hereunder except as contemplated below) and (iii) if requested
by the Company in its sole judgment, an opinion of counsel (reasonably
acceptable to the Company) to such transferring holder (or with respect to any
Disposition under Section 5(c) of this Agreement, an opinion of counsel
(reasonably acceptable to the Company) to such transferring holder or any
Lender) shall be supplied to the Company, at such transferring holder's expense,
to the effect that such transfer complies with applicable federal and state
securities laws. Any attempt to transfer any Convertible Preferred Securities or
any Conversion Shares hereunder in violation of this Agreement shall be null and
void ab initio and the Company shall not register such transfer.
8
<PAGE>
6. Right of First Refusal. Prior to any Disposition by the Investor
pursuant to Section 5(b), the Company shall have the right, exercisable in
accordance with this Section 6, to purchase all, but not less than all, of the
Convertible Preferred Securities or Conversion Shares intended to be subject to
such Disposition by the Investor.
(a) The Investor shall give notice (a "Transfer Notice") to the Company
of such intended Disposition, specifying the Convertible Preferred Securities or
Conversion Shares, as the case may be (the "Offered Securities"), to be subject
to a Disposition and the intended method of Disposition. The Transfer Notice
shall specify the cash price (the "First Offer Price") at or above which the
Investor intends to effect such Disposition and, in the case of a privately
negotiated Disposition, the terms of the bona fide third party offer (a "Third
Party Offer") to purchase such Offered Securities theretofore received by the
Investor and then remaining open (including the identity and address of the
offeror and the price offered).
(b) If the Company wishes to purchase the Offered Securities specified
in the Transfer Notice, then within thirty days following receipt of the
Transfer Notice, the Company shall deliver a written notice (an "Acceptance
Notice") to the Investor indicating that the Company wishes to purchase such
Offered Securities, a date for the closing of such purchase, which shall not be
more than ten business days after delivery of such Acceptance Notice (subject to
extension as provided in Section 6(f) hereof), and a place for the closing of
such purchase. Upon delivery of an Acceptance Notice, a binding agreement shall
be deemed to exist providing for the purchase by the Company of the Offered
Securities to which such Acceptance Notice relates, upon the terms and subject
to the conditions set forth in this Section 6 and the Company shall use its
reasonable best efforts to secure all approvals required in connection
therewith.
(c) The cash purchase price to be paid by the Company hereunder for any
Offered Securities (the "Designated Price") shall be determined as set forth
below.
(i) With respect to any Offered Securities for which a First Offer
Price or a Third Party Offer consisting solely of cash and/or readily
marketable securities is disclosed in the applicable Transfer Notice, the
Designated Price per share of such Offered Securities shall equal the per
share price specified in such First Offer Price or Third Party Offer;
provided, however, that, in the event the Market Price (as defined in
Section 6(c)(iii)) per share on the last business day prior to the date the
Acceptance Notice is delivered is more than 10% greater than or is less
than 10% lower than the per share price specified by such First Offer Price
or Third Party Offer, then the price per share shall equal the Market Price
per share on the last business day prior to the date the Acceptance Notice
is delivered. The value of any readily marketable securities identified in
such Third Party Offer shall equal the average Market Price per share of
such securities during the ten consecutive trading days immediately
preceding the Company's receipt of the Transfer Notice. In the case of any
securities not theretofore traded, such securities must be issued or
proposed to be issued by an entity which has been subject to the reporting
requirements of the Exchange Act for at least one year, and the value of
such securities shall be
9
<PAGE>
determined by two nationally recognized investment banking firms, one firm
to be selected by each of the Investor and the Company, or in the event
such firms are unable to agree, by a third nationally recognized investment
banking firm selected by such firms. The Investor and the Company shall use
their reasonable best efforts to cause any such determination of value to
be made within five business days following the Company's receipt of the
applicable Transfer Notice. In connection with any determination of value
pursuant to this Section 6(c)(i), each party will bear the fees and
expenses of the investment banking firm selected by it and the parties will
bear equally the fees and expenses of any third investment banking firm.
(ii) With respect to any Offered Securities for which a Third
Party Offer consisting of other than solely cash and/or readily marketable
securities is disclosed in the applicable Transfer Notice, the Designated
Price per share of such Offered Securities (which shall refer, in the case
of shares of Convertible Preferred Securities that are Offered Securities,
to the applicable number of Conversion Shares issuable upon conversion of
such Convertible Preferred Securities) shall equal the average Market Price
per share during the twenty consecutive trading days immediately preceding
the Company's receipt of the Transfer Notice.
(iii) "Market Price" of any security on any trading day shall mean
(i) the closing price of such security on the principal national securities
exchange on which such security is listed at the time (or if there have
been no sales on such exchange on such day, the average of the highest bid
and lowest asked prices on such exchange on such day), or (ii) if the
security is not listed on a national securities exchange at the time, the
sales price of such security as reported on the NASDAQ National Market as
of 4:00 p.m., New York time, on such day (or, if there is no reported sales
price of such security on the NASDAQ National Market on such day, the
average of the representative bid and asked prices quoted on the NASDAQ
National Market as of 4:00 p.m., New York time, on such day, or (iii) if
such security is not reported on the NASDAQ National Market at the time,
the average of the representative bid and asked prices quoted in the NASDAQ
System as of 4:00 p.m., New York time, on such day, or (iv) if the security
is not quoted on the NASDAQ System at the time, the average of the highest
bid and lowest asked prices on such day in the over-the-counter market as
reported by the National Quotation Bureau Incorporated or any similar
successor organization.
(d) At any closing pursuant to this Section 6, the Company shall pay to
the Investor (or its designees) the aggregate Designated Price for the Offered
Securities by wire transfer of immediately available funds, and the Investor
shall deliver or cause to be delivered to the Company such Offered Securities,
with documentation satisfactory to the Company evidencing the transfer of such
Offered Securities, in form acceptable for transfer on the Company's books. The
Company may assign its right to purchase the Offered Securities pursuant to this
Section 6 to an affiliate of the Company or an unrelated third party, provided
that such affiliate or other third party agrees in writing to be bound by the
provisions of this Section 6 to the same extent as the Company, and provided
further that the
10
<PAGE>
Company shall remain liable for the obligations of such affiliate or other third
party under this Section 6.
(e) If the Company does not exercise its right to purchase Offered
Securities specified in a Transfer Notice, then the party giving such Transfer
Notice shall be free to effect the Disposition of such Offered Securities on
terms no less favorable than those set forth in such Transfer Notice, subject to
any other requirements applicable to such Disposition pursuant to Section 6(b)
and (c) hereof and, in the case of a Disposition pursuant to Section 6(b)(i),
the additional purchase rights of the Company set forth in Section 2.6(b) of the
Registration Rights Agreement; provided, that any such Disposition is completed
within 180 days, in the case of a Disposition pursuant to Section 6(b)(i), and
75 days, in the case of a Disposition pursuant to Section 6(b)(ii), in each case
following the expiration of the period in which the Company had the right to
elect to purchase such Offered Securities on terms no less favorable than those
set forth in such Transfer Notice. In the event that such sale is not
consummated within such 180 or 75-day period for any reason, then the
restrictions on transfers provided for herein shall again become effective, and
no transfer of such Offered Securities may be made thereafter by the Investor
without again offering the same to the Company in accordance with this Section
6.
(f) The obligations of the parties to effect any closing pursuant to
this Section 6 shall be subject to the satisfaction of the following conditions:
(i) all requisite regulatory or third party approvals and consents necessary to
effect the purchase and sale of the Offered Securities shall have been received
and (ii) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order shall have been enacted, entered, promulgated or
enforced by any court or governmental authority of competent jurisdiction which
prohibits such transaction or makes such transaction illegal. If, as of any date
on which a closing under this Section 6 is scheduled to occur, the foregoing
conditions relating thereto have not been satisfied, then such closing shall
occur as promptly as practicable following such satisfaction, and the parties
shall use their reasonable best efforts to cause the satisfaction of such
conditions; provided that if the foregoing conditions relating to any closing
hereunder are not satisfied within 60 days following delivery of the applicable
Acceptance Notice (or in the case of an order or injunction arising out of any
proceeding initiated by the Investor, such later date on which such order or
injunction becomes final and nonappealable), then the Investor or the Company
may terminate the agreement deemed to exist upon delivery of the applicable
Acceptance Notice; provided that no such termination shall excuse any party for
a breach of its obligations thereunder.
(g) Pursuant to Section 2.6(a) of the Registration Rights Agreement,
the sale of Registrable Securities by Selling Holders (as such terms are defined
in the Registration Rights Agreement), in addition to the Investor, shall be
subject to the Company's prior right of first refusal set forth in this Section
6, and the additional purchase rights of the Company set forth in Section 2.6(b)
of the Registration Rights Agreement.
7. NASDAQ Quotation. As soon as practicable, but in any event prior to the
Initial Conversion Date, the Company shall take such action as is required to
cause the Conversion Shares into which the Convertible Preferred Securities are
convertible to be listed
11
<PAGE>
for trading on the NASDAQ National Market or such other exchange on which the
Company's securities are listed, as applicable.
8. Legend. The Investor agrees to the placement on certificates
representing Convertible Preferred Securities purchased by the Investor pursuant
hereto, of a legend substantially as set forth below (except that (i) the first
sentence of such legend shall not be placed on any Convertible Preferred
Securities or Conversion Shares that have been registered under the Securities
Act or if, in the opinion of counsel, such sentence is not required under the
Securities Act and (ii) the second sentence of such legend relating to
restrictions on transfer provided in this Agreement shall not be placed on any
Convertible Preferred Securities or Conversion Shares acquired by a transferee
pursuant to Section 5(b)(i) of this Agreement, 5(c) or pursuant to brokers
transactions under Rule 144 of the Securities Act), unless the Company
determines otherwise, in accordance with the opinion of counsel:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR NON-U.S.
JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
SECURITIES LAWS OF SUCH OTHER STATE OR NON-U.S. JURISDICTIONS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS
(INCLUDING PROVISIONS THAT RESTRICT THE TRANSFER OF SUCH SECURITIES) OF AN
INVESTMENT AGREEMENT DATED AS OF OCTOBER 28, 1998 BETWEEN SPECIAL METALS
CORPORATION (THE "COMPANY") AND INCO LIMITED, COPIES OF WHICH ARE ON FILE
AT THE OFFICES OF THE SECRETARY OF THE COMPANY. THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS."
9. Fees and Expenses. Each party shall bear its own expenses, including the
fees and expenses of counsel, accountants, financial or other advisors or
representatives engaged by it, incurred in connection with this Agreement and
the transactions contemplated hereby.
10. Survival. The representations and warranties and agreements contained
in or made pursuant to this Agreement shall survive without limitation and the
covenants and agreements contained in or made pursuant to this Agreement which
by their terms are to survive after the Closing Time shall survive for the
period specified therein, provided, that if a claim or notice is given with
respect to any representation, warranty, covenant or agreement prior to any such
expiration date, the claim with respect to such representation, warranty,
covenant or agreement shall continue in definitely until such claim is finally
resolved.
12
<PAGE>
11. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given, if delivered personally, by
telecopier or sent by first class mail, postage prepaid, as follows:
(a) If to the Company, to:
Special Metals Corporation
Middle Settlement Road
New Hartford, New York 13413
Attention: Robert F. Dropkin
Telecopier: (315) 798-2001
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert B. Schumer
Telecopier: (212) 757-3990
(b) If to the Investor, to:
Inco Limited
145 King Street West, Suite 1500
Toronto, Ontario M5H 4B7, Canada
Attention: Stuart F. Feiner
Telecopier: (416) 361-7734
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Donald R. Crawshaw
Telecopier: (212) 558-3588
(c) If to any other holder of Convertible Preferred Securities of the
Company, addressed to such holder at the address of such holder in the record
books of the Company; or to such other address or addresses as shall be
designated in writing. All notices shall be effective when received.
12. Entire Agreement; Amendment. This Agreement and the documents described
herein or delivered pursuant hereto (including, without limitation, the
Registration Rights Agreement) set forth the entire agreement between the
parties hereto with respect to the matters provided herein and therein. Any
provision of this Agreement may be amended or modified in whole or in part at
any time by an agreement in writing among the parties hereto executed in the
13
<PAGE>
same manner as this Agreement; provided, however that the provisions set forth
in Sections 5(c), 5(d), 6 and 17 hereof may not, directly or indirectly, be
amended or modified without the prior written consent of each Lender affected
thereby.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
14. Governing Law. This Agreement shall be governed by, and construed, in
accordance with, the laws of the State of New York applicable to contracts made
and to be performed in that state.
15. Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors.
16. Stockholder Vote. The Company shall, in accordance with applicable law
and the Company's Certificate of Incorporation and By-laws, (a) duly call, give
notice of and convene and hold a special meeting of its stockholders as promptly
as practicable following the Closing Time for the purpose of considering and
taking action on the Stockholder Conversion Vote and (b) subject to the
fiduciary obligations of the Board of the Company, include in the Proxy
Statement for such stockholders' meeting the recommendation of the Board that
the stockholders of the Company approve the Stockholder Conversion Vote and,
subject to such fiduciary duty, use all reasonable efforts to obtain such
approval. If a favorable vote of the Company's stockholders is not obtained (i)
within 120 days following the Closing Time, then the dividend rate on the
Convertible Preferred Securities shall increase automatically from and including
the 121st day following such Closing Time to, but not including, the date a
favorable vote of the Company's stockholders is obtained on the Stockholder
Conversion Vote by an additional increment of one-quarter of one percent (.25%)
per annum of the liquidation amount thereof and (ii) prior to the 270th day
following the Closing Time, the dividend rate on the Convertible Preferred
Securities shall increase automatically from and including such 270th day to,
but not including, the date a favorable vote of the Company's stockholders on
the Stockholder Conversion Vote is obtained by an additional increment (which
shall be in addition to the incremental increase provided in clause (i) of this
Section 16) of one-quarter of one percent (.25%) per annum (or one-half of one
percent (.50%) per annum when combined with the incremental increase set forth
in clause (i) of this Section 16) of the liquidation amount thereof, upon the
terms and conditions set forth in the Certificate of Designation.
17. Assignment. Except as otherwise expressly provided in Section 5 or 7
hereof, neither this Agreement nor any rights or obligations of the parties
hereunder shall be assignable; provided, however, the rights of the Investor
under this Agreement may be assigned to a wholly-owned subsidiary of the
Investor, without the consent of the Company, provided that the Investor shall
remain liable for the obligations of the assignee hereunder to the same extent
as the Investor; and provided, further, that the Investor and assignee may
assign its rights and obligations under this Agreement (as well as the
Registration Rights Agreement) to one or more Lenders or their transferees in
connection with a bona fide pledge or Disposition permitted by Section 5(c).
14
<PAGE>
18. Remedies; Waiver. To the extent permitted by law, all rights and
remedies existing under this Agreement and any related agreements or documents
are cumulative to, and are exclusive of, any rights or remedies otherwise
available under applicable law. No failure on the part of any party to exercise,
or delay in exercising, any right hereunder shall be deemed a waiver thereof,
nor shall any single or partial exercise preclude any further or other exercise
of such or any other right.
19. Specific Performance. Each party hereto acknowledges that, in view of
the uniqueness of the transactions contemplated by this Agreement, the other
party would not have an adequate remedy at law for money damages in the event
that this Agreement has not been performed in accordance with its terms. Each
party therefore agrees that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
20. Severability. If any provision of this Agreement is determined to be
invalid, illegal, or unenforceable, the remaining provisions of this Agreement
shall remain in full force and effect provided that the economic and legal
substance of the transactions contemplated is not affected in any manner
materially adverse to any party. In the event of any such determination, the
parties agree to negotiate in good faith to modify this Agreement to fulfill as
closely as possible the original intent and purpose hereof. To the extent
permitted by law, the parties hereby to the same extent waive any provision of
law that renders any provision hereof prohibited or unenforceable in any
respect.
21. Business Day. For purposes of this Agreement, "business day" means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
22. Acknowledgment. The Investor hereby acknowledges that the Company has
advised the Investor that, at the Closing Time, the Company will issue under the
Certificate of Designation, sell and deliver to Timet 1,600,000 Convertible
Preferred Securities at a purchase price of $50.00 per Convertible Preferred
Security and for an aggregate purchase price of $80,000,000 pursuant to the
terms of the Timet Investment Agreement and the Investor has agreed to such
issuance to Timet.
23. Further Assurances. Each of the parties hereto agrees to use its
reasonable best efforts promptly to take or cause to be taken all action and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
closing of the transactions contemplated by this Agreement.
15
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement between the
parties hereto.
Very truly yours,
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
-----------------------------
Name: Donald R. Muzyka
Title: President and Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
INCO LIMITED
By: /s/ Stuart F. Feiner
--------------------------------
Name: Stuart F. Feiner
Title: Executive Vice President
16
<PAGE>
SCHEDULE 3(b)
Name of Subsidiary: State of Incorporation
- ------------------- ----------------------
Udimet Special Metals Ltd. United Kingdom
Special Metals Foreign Sales Corporation Barbados
Special Metals Domestic Sales Corporation Delaware
<PAGE>
SCHEDULE 3(f)
Consent is required under the Credit Agreement, dated as of October 18,
1996, as amended, among the Company, the several lenders from time to time party
thereto and Credit Lyonnais New York Branch, as agent.
Stockholder approval is required for the issuance of the Conversion Shares
under NASDAQ rules.
Filing and waiting period are required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
<PAGE>
SCHEDULE 4(d)
Filing and waiting period are required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
<PAGE>
EXHIBIT A
[Form of Registration Rights Agreement]
A-1
<PAGE>
EXHIBIT B
[Form of Certificate of Designation for Convertible Preferred]
B-1
EXHIBIT 2
CERTIFICATE OF DESIGNATIONS
6.625 % SERIES A SENIOR CONVERTIBLE PREFERRED STOCK
(Liquidation Amount $50.00 Per Share)
of
SPECIAL METALS CORPORATION
-----------------------------------------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
-----------------------------------------------------------
Special Metals Corporation, a Delaware corporation (hereinafter called
the "Company"), pursuant to Section 151 of the General Corporation Law of the
State of Delaware (the "GCL") does hereby make this Certificate of Designations
and does hereby state and certify that, pursuant to the authority expressly
vested in the Board of Directors of the Company (the "Board of Directors") by
the Amended and Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), the following resolution has been duly adopted:
RESOLVED, that pursuant to Articles 4 and 5 of the Certificate of
Incorporation (which authorize 10,000,000 shares of preferred stock, $0.01 par
value), the designations, powers and preferences, and the relative
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, of a series of preferred stock are fixed
as stated herein.
Section 1. Designation; Rank. This series of preferred stock shall be
designated "Series A Senior Convertible Preferred Stock" (the "Convertible
Preferred"). Each share of Convertible Preferred shall be identical in all
respects with all other shares of Convertible Preferred. The Convertible
Preferred will rank, with respect to dividend rights and rights upon
liquidation, winding up and dissolution, senior to the Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company and each other class of
capital stock or series of preferred stock established after the original
issuance of the Convertible Preferred by the Board of Directors which, by the
terms of the Certificate of Incorporation or of the instrument by which the
Board of Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be junior to the Convertible Preferred in respect of dividend
rights and rights upon liquidation, winding up and dissolution (collectively
referred to with the Common Stock of the Company as "Junior Securities") and
pari passu with each other class of capital stock or series of preferred stock
established after the original issuance of the Convertible Preferred by the
Board of Directors which, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in
<PAGE>
the Certificate of Incorporation, shall, subject to Section 6(c), fix the
relative rights, preferences and limitations thereof, shall be entitled to share
ratably with the Convertible Preferred in respect of dividend rights and rights
under liquidation, winding up and dissolution (collectively referred to as
"Parity Securities"). Certain other capitalized terms used herein are defined in
Section 11.
Section 2. Authorized Number. The number of shares constituting the
Convertible Preferred shall be 1,940,000 shares.
Section 3. Dividends.
(a) General Obligation. Holders of shares of the Convertible
Preferred, in preference to holders of Junior Securities, shall be entitled to
receive, and the Company shall pay, when and as declared by the Board of
Directors and to the extent permitted under the GCL, cash dividends at a rate of
6.625% per annum (subject to adjustment as set forth herein) of the Liquidation
Amount of each share of Convertible Preferred, plus all accumulated and unpaid
dividends on such share (such dividends on accumulated and unpaid dividends
sometimes referred to herein as "additional dividends"), from and including the
date of original issuance of such share of Convertible Preferred to but not
including the date on which the Liquidation Amount of such share (plus all
accumulated and unpaid dividends on such share) is paid or the date on which
such share is converted into shares of Common Stock; provided, however, that
additional dividends shall cease to accrue on all shares of the Convertible
Preferred on the date of the consummation of a public offering of any shares
pursuant to an effective registration statement under the Securities Act. Such
dividends shall accumulate whether or not they have been declared and whether or
not there are profits, surplus or other property of the Company legally
available for the payment of dividends. The date on which the Company initially
issues shares of Convertible Preferred shall be the "date of original issuance"
regardless of the number of times transfer of such shares is made on the stock
register of the Company and regardless of the number of certificates which may
be issued to evidence such shares.
(b) Dividend Payment Dates. Dividends on the Convertible Preferred
will be payable quarterly (subject to deferral as set forth herein) in arrears
on January 28, April 28, July 28 and October 28 of each year (each a "Dividend
Payment Date") as fixed by the Board of Directors, commencing January 28, 1999,
to holders of record thereof as they appear on the stock register of the Company
on the regular record date for such dividends, which shall be on January 15,
April 15, July 15 and October 15 prior to the next succeeding Dividend Payment
Date, as fixed by the Board of Directors. The amount of dividends payable for
any period will be computed for any full quarterly dividend period on the basis
of a 360-day year of twelve 30-day months and, for any period shorter than a
full quarterly dividend period for which dividends are computed, dividends will
be computed on the basis of the actual number of days elapsed. If any date on
which dividends are payable on the Convertible Preferred is not a Business Day,
then payment of the dividend payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest, additional
dividend or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall
2
<PAGE>
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(c) Deferral of Dividends. The Company shall have the right at any
time to defer payment of accumulated dividends on the Convertible Preferred (an
"Extension Period"), during which Extension Period the Company shall have the
right to make partial payments of dividends on any Dividend Payment Date, and at
the end of which the Company shall pay all dividends then accumulated and
unpaid, including additional dividends, provided, however, that during any
Extension Period, the Company shall not declare or pay any dividends on, or make
a distribution with respect to, or redeem, or purchase or acquire, or make a
liquidation payment with respect to, any Junior Securities or Parity Securities,
other than (i) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of Junior Securities, (ii) any
declaration of a dividend in connection with the implementation of a rights plan
or the issuance of stock under any such rights plan in the future, or the
redemption or repurchase of any rights distributed pursuant to a rights plan,
(iii) purchases of Common Stock related to the issuance of Common Stock or
rights or options under any of the Company's benefit plans for its directors,
officers, employees or other persons within the definition of "employee" for
purposes of a registration of shares for an employee benefit plan of the Company
or related to the issuance of Common Stock or rights under a dividend
reinvestment or stock purchase plan, up to an aggregate amount not to exceed $3
million, (iv) purchases of Common Stock as consideration in an acquisition
transaction that was entered into prior to the commencement of such Extension
Period, (v) as a result of a reclassification of the Company's capital stock or
the exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock and (vi) the purchase
of fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock being converted or
exchanged. Dividends, as well as additional dividends on any accumulated and
unpaid dividends, will accrue during the Extension Period at the rate of 6.625%
per annum, subject to adjustment as provided in Sections 3(d) and 9(b)(ii). In
addition, in the event the Company elects to defer payment of accumulated
dividends on the Convertible Preferred for more than six quarterly dividend
periods, then the maximum authorized number of directors of the Company will be
increased and the holders of Convertible Preferred shall be entitled to elect
additional directors to the Company's Board of Directors in accordance with
Section 9(b)(iii).
The Company shall use its reasonable best efforts to give holders of
shares of Convertible Preferred notice of its election to begin any Extension
Period (or extension thereof) at least fifteen days prior to the earlier of (i)
the next succeeding Dividend Payment Date on which dividends on the Convertible
Preferred would be payable but for such deferral and (ii) the date the Company
is required to give notice to any securities exchange or other applicable
self-regulatory organization or to holders of shares of Convertible Preferred of
the record date or the date such dividends are payable.
Dividends on the Convertible Preferred shall be payable at the office
or agency of the Company in the United States maintained for such purpose and at
any other office or agency maintained by the Company for such purpose in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private
3
<PAGE>
debts; provided, however, that at the option of the Company, payment of
dividends may be made by check mailed to the address of the holder entitled
thereto as such address shall appear in the stock register of the Company or by
wire transfer or direct deposit in immediately available funds at such place and
to such account as may be designated in writing by the relevant regular record
date by the holder entitled thereto as specified in the stock register.
(d) Additional Dividend Rate Adjustments. The rate at which
dividends on the Convertible Preferred accrues is subject to adjustment in the
event the Stockholder Conversion Vote has not been obtained within the time
period provided in the immediately succeeding sentence. If a favorable vote of
the Company's stockholders with respect to the Stockholder Conversion Vote is
not obtained (i) within 120 days following the closing time under the Investment
Agreements (the "Closing Time"), then the dividend rate on the Convertible
Preferred shall increase automatically from and including the 121st day
following such Closing Time to, but not including, the date a favorable vote of
the Company's stockholders with respect to the Stockholder Conversion Vote is
obtained by an additional increment of one-quarter of one percent (.25%) per
annum of the Liquidation Amount and (ii) prior to the 270th day following the
Closing Time, the dividend rate on the Convertible Preferred shall increase
automatically from and including such 270th day to, but not including, the date
a favorable vote of the Company's stockholders with respect to the Stockholder
Conversion Vote is obtained by an additional increment (which shall be in
addition to the incremental increase provided in clause (i) of this subsection
(d)) of one-quarter of one percent (.25%) per annum of the Liquidation Amount
(or one-half of one percent (.50%) per annum of the Liquidation Amount when
combined with the incremental increase set forth in clause (i) of this
subsection (d)).
Section 4. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, before any
payment or distribution of assets is made on any Junior Securities, including,
without limitation, the Common Stock of the Company, but after payment or
provision for payment of the Company's debts and other liabilities to creditors,
the then holders of the Convertible Preferred shall be entitled to receive an
amount in cash equal to the aggregate of the stated Liquidation Amount of $50.00
per share and all accumulated and unpaid dividends (including any additional
dividends), whether or not declared, through the date of distribution. After
payment of any such aggregate Liquidation Amount and accumulated dividends
(including any additional dividends), the shares of Convertible Preferred will
not be entitled to any further participation in any distribution of assets by
the Company. If, upon such a voluntary or involuntary liquidation, dissolution
or winding up of the Company, the assets of the Company are insufficient to
permit payment in full to such holders of (a) the aggregate Liquidation Amount,
then the entire assets to be distributed will be distributed ratably among such
holders based upon the aggregate Liquidation Amount held by each such holder and
proportionate distributive amounts shall be paid on account of principal or
liquidation amounts of outstanding shares of Parity Securities, if any, ratably,
in proportion to the full distributable amounts to which such holders of Parity
Securities are entitled upon such liquidation, dissolution or winding up, or (b)
the aggregate accumulated and unpaid dividends on all shares of Convertible
Preferred outstanding, then any assets remaining to be distributed will be
distributed ratably among such holders based upon the aggregate
4
<PAGE>
accumulated and unpaid dividends owed to each such holder and proportionate
distributive amounts shall be paid on account of unpaid dividends or interest on
outstanding shares of Parity Securities, if any, ratably, in proportion to the
full distributable amounts to which such holders of Parity Securities are
entitled upon such liquidation, dissolution or winding up. The Company shall
mail written notice of such liquidation, dissolution or winding up not less than
30 days nor more than 60 days prior to the distribution date stated therein, to
each record holder of shares of Convertible Preferred. Such notice shall
describe in reasonable detail the definitive terms and date of consummation of
such liquidation, dissolution or winding up.
Section 5. Redemption.
(a) Option of Company. Shares of the Convertible Preferred may not
be redeemed by the Company on or prior to October 28, 2001. After October 28,
2001, the Company, at its option, may redeem the shares of Convertible
Preferred, in whole or in part, out of funds legally available therefor, at any
time or from time to time, at the following redemption prices (expressed as a
percentage of the Liquidation Amount of each share to be redeemed), plus, in
each case, accrued and unpaid dividends (including additional dividends), if
any, up to but excluding the date fixed for redemption (the "Redemption Date"),
whether or not declared (the "Redemption Price"), if redeemed during the
12-month period beginning October 28 (or April 28 if redeemed in 2006):
Year Redemption Price
---- ----------------
2001 103.975%
2002 103.092%
2003 102.208%
2004 101.325%
2005 100.442%
2006 or thereafter 100.000%
Notwithstanding the foregoing, the Company may not redeem any
Convertible Preferred pursuant to this Section 5(a), unless all dividends
(including additional dividends) accumulated on all of the outstanding
Convertible Preferred through the immediately preceding Dividend Payment Date
have been paid in full.
(b) Mandatory Redemption. The Company shall redeem all then
outstanding shares of Convertible Preferred in whole on April 28, 2006, at a
Redemption Price per share equal to 100% of the Liquidation Amount thereof,
plus, without duplication, all accrued and unpaid dividends (including
additional dividends), if any, thereon to the Redemption Date.
(c) Redemption Procedures. In the event the Company shall redeem
shares of Convertible Preferred, notice of such redemption shall be given by
first-class mail, postage prepaid, not less than 30 days nor more than 60 days
prior to the Redemption Date, to each holder of record of the shares of
Convertible Preferred to be redeemed, at such holder's address as the same
appears in the stock register of the Company. Each such notice
5
<PAGE>
shall state (i) the Redemption Date, (ii) the number of shares of Convertible
Preferred to be redeemed and, if less than all the shares held by such holder is
to be redeemed, the number of such shares to be redeemed from such holder, (iii)
the applicable Redemption Price, (iv) the place or places where certificates for
such shares of Convertible Preferred are to be surrendered for payment of the
Redemption Price, (v) the then current Conversion Price (as defined in Section 7
hereof) and (vi) that dividends on the shares of Convertible Preferred to be
redeemed shall cease to accrue on such Redemption Date. In order to facilitate
the redemption of the Convertible Preferred, the Board of Directors may fix a
record date for determination of holders of shares of Convertible Preferred to
be redeemed, which shall not be less than 30 days nor more than 60 days prior to
the Redemption Date with respect thereto.
If a notice of redemption of Convertible Preferred has been given in
accordance with Section 5(c) above and funds necessary for the redemption shall
be available therefor, and shall have been irrevocably deposited or set aside,
then, unless the Company shall have exercised its rescission rights as set forth
below, notwithstanding that the certificates evidencing any shares of
Convertible Preferred so called for redemption shall not have been surrendered
(unless the Company defaults in making payment of the Redemption Price or
exercises its rescission rights), the dividends with respect to the shares so
called for redemption shall cease to accrue after the Redemption Date, such
shares shall no longer be deemed outstanding, all rights of the holders of such
shares as stockholders of the Company shall cease, and all rights whatsoever
with respect to the shares so called for redemption (except the right of the
holders to receive the Redemption Price without interest upon surrender of their
certificates therefor and except with respect to the right of such holders to
convert their Convertible Preferred as set forth in Section 5(d) below) shall
terminate either (i) from and after the Redemption Date or (ii) if the Company
shall so elect and state in the notice of redemption, from and after the time
and date (which date shall be the Redemption Date or an earlier date not less
than 15 days after the date of mailing of the notice of redemption) on which the
Company shall irrevocably deposit with a designated bank or trust company as
paying agent money sufficient to pay at the office of such paying agent, on the
Redemption Date, the Redemption Price. Upon surrender in accordance with said
notice of the certificates for any such shares of Convertible Preferred so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the notice shall so state), such shares shall be redeemed
by the Company at the applicable Redemption Price. If any date fixed for
redemption of shares of Convertible Preferred is not a Business Day, then
payment of the amount payable on such date will be made on the next succeeding
day that is a Business Day (without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption.
If fewer than all of the outstanding shares of Convertible Preferred
are to be redeemed, the shares to be redeemed shall be redeemed pro rata from
each holder of Convertible Preferred Shares. If fewer than all the shares of
Convertible Preferred represented by any certificate are redeemed, a new
certificate (which shall be no less than the minimum Liquidation Amount of $50)
shall be issued representing the unredeemed shares
6
<PAGE>
without cost to the holder thereof, together with the amount of cash, if any, in
lieu of fractional shares.
If the funds of the Company legally available for redemption of shares
of Convertible Preferred on any Redemption Date are insufficient to redeem the
total number of shares to be redeemed on such date, those funds which are
legally available shall be used to redeem the maximum possible number of shares
of Convertible Preferred ratably among the holders of the shares to be redeemed
based upon the aggregate Liquidation Amount of such shares (plus all accrued and
unpaid dividends and any applicable premium on such shares) held by each such
holder. At any time thereafter when additional funds of the Company are legally
available for the redemption of shares of Convertible Preferred, such funds
shall immediately be used to redeem the balance of the shares of Convertible
Preferred which the Company has become obligated to redeem on any Redemption
Date but which it has not redeemed. Notwithstanding the foregoing, the Company
shall not be obligated to redeem shares of Convertible Preferred on any
Redemption Date, if, and for so long as, a material Bank Event of Default has
occurred and is continuing or a Bank Event of Default would occur as a result
thereof. In such event, the Company will act in good faith and use its
reasonable best efforts to cure any Bank Event of Default or obtain a waiver
thereof by or the consent of its lenders to enable the Company to redeem shares
of Convertible Preferred that it has become obligated to redeem on any
Redemption Date in accordance with the provisions of this Section 5. The
obligation of the Company to redeem shares of the Convertible Preferred shall be
automatically suspended and deferred, without any limitation as to time and
without any other consequence whatsoever (except that the right of the holders
of Convertible Preferred to seek specific enforcement of the provisions of the
preceding sentence shall not be suspended or deferred or otherwise abated or
impaired) until the date of the earliest to occur of (x) such Bank Event of
Default is cured, (y) such consent or waiver is granted by the lenders under the
Credit Agreement, or (z) all indebtedness outstanding under such Credit
Agreement is retired and repaid in full and in cash. Dividends (including
additional dividends) shall continue to accrue on all shares of Convertible
Preferred which the Company would be obligated to redeem, but for the provisions
of this paragraph, until such shares have been redeemed in full in cash as
provided herein.
Subject to applicable escheat laws, any moneys so set aside by the
Company and unclaimed at the end of one year from the Redemption Date shall
revert to the general funds of the Company, after which reversion the holders of
such shares so called for redemption shall only look to the general funds of the
Company for the payment of the Redemption Price without interest. Any interest
accrued on funds so deposited shall be paid to the Company from time to time.
In the event that a Redemption Rescission Event shall occur following
any day on which a notice of redemption pursuant to Section 5(a) shall have been
given pursuant to this Section but at or prior to the earlier of (a) the
Redemption Date as set forth in such notice of redemption and (b) the time and
date at which the Company shall have irrevocably deposited funds with a
designated bank or trust company pursuant to this Section, the Company may, at
its sole option, at any time prior to the earliest of (i) the close of business
(New York City time) on that day which is two (2) Trading Days following such
Redemption Rescission Event, (ii) the Redemption Date as set forth in such
notice and (iii) the time and
7
<PAGE>
date on which the Company shall have irrevocably deposited such funds with a
designated bank or trust company, rescind the redemption to which such notice of
redemption shall have related by making a public announcement of such rescission
(the date on which such public announcement shall have been made being
hereinafter referred to as the "Rescission Date"). The Company shall be deemed
to have made such announcement if it shall issue a release to the Dow Jones News
Service, Reuters Information Services or any successor news wire service. From
and after the making of such announcement, the Company shall have no obligation
to redeem shares of Convertible Preferred called for redemption pursuant to such
notice of redemption or to pay the Redemption Price therefor and all rights of
holders of shares of Convertible Preferred shall be restored as if such notice
of redemption had not been given. The Company shall give notice of any such
rescission by first-class mail, postage prepaid, mailed as promptly as
practicable, but in no event later than the close of business (New York City
time) on that date which is five (5) Trading Days following the Rescission Date
to each record holder of shares of Convertible Preferred at the close of
business (New York City time) on the Rescission Date and to any other person or
entity that was a record holder of shares of Convertible Preferred and that
shall have surrendered shares of Convertible Preferred for conversion following
the giving of notice of the subsequently rescinded redemption. Each notice of
rescission shall (w) state that the redemption described in the notice of
redemption has been rescinded, (x) state that any holder converting shares shall
be entitled to rescind the conversion of shares of Convertible Preferred
surrendered for conversion following the day on which notice of redemption was
given but on or prior to the date of the mailing of the Company's notice of
rescission, (y) be accompanied by a form prescribed by the Company to be used by
any converting holder rescinding the conversion of shares so surrendered for
conversion (and instructions for the completion and delivery of such form,
including instructions with respect to payments that may be required to
accompany such delivery) and (z) state that such form must be properly completed
and received by the Company no later than the close of business (New York City
time) on a date that shall be fifteen (15) Trading Days following the date of
the mailing of such notice of rescission.
(d) Right to Convert Shares. Notwithstanding the foregoing, if
notice of redemption has been given pursuant to subsection (c) and any holder of
shares of Convertible Preferred shall, prior to the close of business (New York
City time) on the Business Day immediately preceding the Redemption Date, give
written notice to the Company pursuant to Section 7(d) hereof of the conversion
of any or all of the shares to be redeemed held by such holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Company), which notice has not been rescinded as set forth in Section 5(c)
above, then (i) the Company shall not have the right to redeem such shares, (ii)
the conversion of such shares to be redeemed shall become effective as provided
in Section 7, and (iii) any funds that shall have been deposited for the payment
of the Redemption Price for such shares shall be returned to the Company
immediately after such conversion (subject to declared dividends payable to
holders of shares of Convertible Preferred on the dividend payment record date
for such dividends being so payable, to the extent set forth in Section 7
hereof, regardless of whether such shares are converted subsequent to such
dividend payment record date and prior to the related Dividend Payment Date);
provided, however, that shares of Convertible Preferred called for redemption
will not be convertible after the close of business (New York City time) on the
Business Day
8
<PAGE>
immediately preceding the Redemption Date, unless the Company defaults in the
payment of the Redemption Price.
Section 6. Voting Rights.
(a) Required by Law or Charter. Except as otherwise provided
herein, in the Certificate of Incorporation or as may be required by law, the
holders of shares of Convertible Preferred will have no voting rights.
(b) Amendment of Convertible Preferred. The vote or consent of the
holders of at least a majority in aggregate Liquidation Amount of the
outstanding shares of Convertible Preferred, voting as a class, will be required
to authorize an amendment to the terms of the Convertible Preferred, whether or
not such holders are entitled to vote thereon by the Certificate of
Incorporation; provided, however, that the vote or consent of the holders of at
least 90% in aggregate Liquidation Amount of the outstanding shares of
Convertible Preferred, voting as a class, will be required to amend the
provisions governing the payment of dividends on, or the conversion into Common
Stock of, the shares of such class.
(c) Issuance of Senior or Parity Securities. So long as any shares
of Convertible Preferred are outstanding, the vote or consent of the holders of
at least two-thirds in aggregate Liquidation Amount of the outstanding shares of
Convertible Preferred shall be necessary to issue, authorize or increase the
authorized amount of, or issue or authorize or increase any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of equity securities ranking senior to the Convertible Preferred
as to dividend rights and rights on liquidation, winding up and dissolution
("Senior Securities") or reclassify any Junior Securities or Parity Securities
as Senior Securities. Furthermore, the vote or consent of the holders of a
majority in aggregate Liquidation Amount of the outstanding shares of
Convertible Preferred shall be necessary to issue, authorize or increase the
authorized amount of, or issue or authorize or increase any obligation or
security convertible into or evidencing a right to purchase, any Parity
Securities or reclassify any Junior Securities as Parity Securities. However,
the Company may create any additional classes of Junior Securities, increase the
amount of any indebtedness or the authorized number of shares of any Junior
Security or issue any indebtedness or any Junior Securities without the consent
of any holder of the Convertible Preferred. No such vote or consent of the
holders of the Convertible Preferred is required if, at or prior to the time
when the issuance of any such Senior Securities or Parity Securities or
reclassification of any such Junior Securities or Parity Securities as Senior
Securities or reclassification of such Junior Securities as Parity Securities,
as the case may be, is to be made or any such change is to take effect, as the
case may be, provision is made for the redemption of all of the Convertible
Preferred at the time outstanding pursuant to the terms of the Convertible
Preferred.
Section 7. Conversion.
(a) Right To Convert. The holders of Convertible Preferred shares
shall have the right at any time following the Initial Conversion Date and prior
to the close
9
<PAGE>
of business (New York City time) on the Business Day immediately preceding the
date of repayment of such Convertible Preferred shares, whether at maturity or
upon redemption (unless the Company defaults in the payment of the Redemption
Price), at their option, to convert shares of Convertible Preferred (having a
Liquidation Amount of $50.00 or any multiple thereof and provided the
non-converted portion of the aggregate Liquidation Amount of Convertible
Preferred held by such holder shall be in denominations of $50.00 or any
integral multiple thereof) into shares of Common Stock of the Company in the
manner described herein on and subject to the following terms and conditions.
The term "Initial Conversion Date" shall mean the later of (i) 90 days following
the date of original issuance of the Convertible Preferred shares, (ii) the date
on which the Stockholder Conversion Vote is obtained, and (iii) the date upon
which any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, has expired or been terminated.
(b) Conversion Price. Shares of Convertible Preferred will be
convertible into such number of fully paid and nonassessable whole shares of
Common Stock of the Company as is equal to the aggregate Liquidation Amount of
such shares of Convertible Preferred surrendered for conversion divided by the
initial conversion price of $16.50 per share of Common Stock subject to certain
adjustments set forth in Section 7(g) below (as so adjusted, the "Conversion
Price").
(c) Accumulated Dividends. In the case of any share of Convertible
Preferred that is converted after any record date with respect to the payment of
a dividend on the Convertible Preferred and on or prior to the Dividend Payment
Date with respect to such dividend, the dividend due on such Dividend Payment
Date shall be payable to the holder of record of such share of Convertible
Preferred as of such record date, notwithstanding such conversion, on or prior
to the Dividend Payment Date or the default by the Company in the payment of the
dividends due on such Dividend Payment Date. Shares of Convertible Preferred
surrendered for conversion during the period from the close of business (New
York City time) on any record date with respect to the payment of a dividend on
the Convertible Preferred to the opening of business (New York City time) on the
Dividend Payment Date with respect to such dividend shall be accompanied by
payment in immediately available funds or other funds acceptable to the Company
of an amount equal to the dividend payable on such Dividend Payment Date on the
shares of Convertible Preferred being surrendered for conversion. If shares of
Convertible Preferred are converted during an Extension Period and the Company
is unable to pay any portion of the accumulated dividends on such Convertible
Preferred being converted, at the converting holder's option (i) such unpaid
dividends may be converted into an additional number of shares of Common Stock
determined by dividing the amount of the unpaid dividends to be applied for such
purpose by the Conversion Price then in effect, or (ii) the Company shall pay
such dividends to the converting holder at the end of such Extension Period or
such earlier date as funds of the Company are legally available for such
payment, and in each case the Company shall provide such holder with written
evidence of its obligation to such holder.
(d) Conversion Procedures. Before any holder of Convertible
Preferred shall be entitled to convert the same into shares of Common Stock and
to receive certificates therefor, such holder shall surrender the certificate or
certificates for the Convertible Preferred to be converted, duly endorsed and
accompanied by any transfer instrument as
10
<PAGE>
reasonably requested by the Company to transfer the Convertible Preferred being
converted, to the Company free of any adverse interest, at the office of the
Transfer Agent for the Convertible Preferred, and shall give written notice of
conversion to the Company at such office specifying the aggregate Liquidation
Amount of shares of Convertible Preferred to be converted (which aggregate
Liquidation Amount shall be equal to $50.00 or any integral multiples thereof,
and provided that the non-converted portion of the aggregate Liquidation Amount
of any Convertible Preferred shares shall be in denominations of $50.00 or any
integral multiple thereof) and the name or names, if other than the holder, in
which such holder wishes the certificate or certificates of Common Stock to be
issued. The Company shall as promptly as practicable (but not later than fifteen
days) after such delivery, deliver to the converting holder (or to any other
person specified in the notice delivered by such holder) (i) a certificate or
certificates representing the number of shares of Common Stock to which such
holder shall be entitled as aforesaid, (ii) if applicable, payment in cash of an
amount equal to all accumulated and unpaid dividends (including additional
dividends) with respect to each share of Convertible Preferred converted plus
any amounts payable as the result of a conversion into fractional shares of
Common Stock (which cash amount shall be based on the last reported sale price
of the Common Stock on the conversion date) and (iii) a certificate or
certificates for the number of shares of Convertible Preferred represented by
such surrendered certificate that are not being converted. Such conversion shall
be deemed to have been effected immediately prior to the close of business (New
York City time) on the date on which the Company receives notice and the shares
of Convertible Preferred to be converted, and the Person or Persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date of conversion, unless the stock register of the
Company shall be closed on that date, in which event such conversion shall be
deemed to have been effected immediately prior to the close of business (New
York City time) on the next succeeding day on which such stock register is open,
and such Person or Persons shall be deemed to have become a holder or holders of
record of Common Stock at the close of business (New York City time) on such
later date, but such conversion shall be at the Conversion Price in effect on
the date upon which such shares shall have been surrendered and such notice
received by the Company. Notwithstanding the foregoing, the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless the certificates evidencing the Convertible
Preferred are either delivered to the Company or the Transfer Agent for the
Convertible Preferred or the Company or the Transfer Agent for the Convertible
Preferred shall have received evidence satisfactory to it evidencing that such
certificates have been lost, stolen or destroyed and the holder of such
Convertible Preferred executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with such
certificates.
(e) Payment of Taxes. The Company will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock upon conversions of shares of Convertible
Preferred pursuant hereto; provided, however, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the holder of the shares of Convertible Preferred to be converted, and no such
issue or delivery shall be made unless and until the person
11
<PAGE>
requesting such issue or delivery has paid to the Company the amount of any such
tax or has established, to the satisfaction of the Company, that such tax has
been paid.
(f) Reservation and Issuance of Shares. The Company shall at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion of the Convertible Preferred,
free from any preemptive or other similar rights, such number of shares of
Common Stock as shall from time to time be issuable upon the conversion of all
the Convertible Preferred shares then outstanding. Notwithstanding the
foregoing, the Company shall be entitled to deliver upon conversion of shares of
Convertible Preferred, shares of Common Stock reacquired and held in the
treasury of the Company (in lieu of the issuance of authorized and unissued
shares of Common Stock), so long as any such treasury shares are free and clear
of all liens, charges, security interests or encumbrances. Any shares of Common
Stock issued upon conversion of the Convertible Preferred shall be duly
authorized, validly issued, fully paid and nonassessable. The shares of Common
Stock received by converting holders upon conversion of their shares of
Convertible Preferred shall be free and clear of all liens, charges, security
interests and encumbrances, except for United States withholding taxes. The
Company shall prepare and shall use its best efforts to obtain and keep in force
such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of the Common Stock (and all requirements to list
the Common Stock issuable upon conversion of Convertible Preferred that are at
the time applicable), in order to enable the Company to lawfully issue and
deliver Common Stock to each holder.
(g) Conversion Price Adjustments. The Conversion Price shall be
subject to adjustment (without duplication) from time to time as follows:
(i) In case the Company shall, while any shares of
Convertible Preferred are outstanding, (i) pay a dividend or make a
distribution with respect to any class of capital stock of the Company in
shares of Common Stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Conversion Price in
effect immediately prior to such action shall be proportionately adjusted
so that the holder of any shares of Convertible Preferred thereafter
surrendered for conversion shall be entitled to receive, upon payment of
the same aggregate amount as would have been payable before such date, the
number and kind of shares of capital stock of the Company which such holder
would have owned immediately following such action had such Convertible
Preferred shares been converted immediately prior thereto. An adjustment
made pursuant to this Section 7(g)(i) shall become effective immediately
after the record date in the case of a dividend or other distribution and
shall become effective immediately after the effective date in case of a
subdivision, combination or reclassification (or immediately after the
record date if a record date shall have been established for such event).
If a dividend, distribution, subdivision, combination or reclassification
is declared and such dividend or distribution is not paid or made or such
subdivision, combination or reclassification is not consummated, the
Conversion Price shall again be adjusted to be the Conversion
12
<PAGE>
Price in effect immediately prior to such record date or effective date, as
the case may be. If, as a result of an adjustment made pursuant to this
Section 7(g)(i), the holder of any share of Convertible Preferred
thereafter surrendered for conversion shall become entitled to receive
shares of two or more classes or series of capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall
be described in a resolution duly adopted by the Board of Directors) shall
determine the allocation of the adjusted Conversion Price between or among
shares of such classes or series of capital stock.
(ii) In case the Company shall, while any shares of
Convertible Preferred are outstanding, issue rights or warrants to all
holders of its Common Stock entitling them (for a period expiring within 45
days after the record date mentioned in this Section 7(g)(ii)) to subscribe
for or purchase shares of Common Stock at a price per share less than the
Current Market Price per share of Common Stock (as determined pursuant to
7(g)(vi) below) on such record date, the Conversion Price for the
Convertible Preferred shall be adjusted so that such Conversion Price shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of issuance of such rights or warrants by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such Current Market Price, and
of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. In case such price for subscription or purchase may be
paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be determined in good faith by
the Board of Directors of the Company based on the written opinion of a
nationally recognized investment banking firm. For the purposes of this
subsection, the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company
shall not issue any rights or warrants in respect of shares of Common Stock
held in the treasury of the Company. In case any rights or warrants
referred to in this subsection in respect of which an adjustment shall have
been made shall expire unexercised within 45 days after the same shall have
been distributed or issued by the Company, the Conversion Price shall be
readjusted at the time of such expiration to the Conversion Price that
would have been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(iii) Subject to the last sentence of this Section 7(g)(iii),
in case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including securities, but
excluding any rights or warrants referred to in Section 7(g)(ii), any
dividend or distribution referred to in Section 7(g)(i) and any dividend or
distribution paid exclusively in cash or any dividend of a "right" in
13
<PAGE>
connection with a rights plan or "poison pill"), the Conversion Price shall
be reduced so that such Conversion Price shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
Section 7(g)(iii) by a fraction of which the numerator shall be the Current
Market Price per share (determined as provided in Section 7(g)(vi)) of the
Common Stock on the date fixed for the payment of such distribution (the
"Reference Date") less the fair market value (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors), on the Reference
Date, of the portion of the evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price per share of
the Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following the Reference Date. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not occurred.
If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 7(g)(iii) by reference to the
actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price per share of
Common Stock (determined as provided in Section 7(g)(vi)); provided,
however, that no adjustment shall be made with respect to any distribution
of rights to purchase securities of the Company if the holder of shares of
Convertible Preferred would otherwise be entitled to receive such rights
upon conversion at any time of shares of Convertible Preferred into Common
Stock unless such rights are subsequently redeemed by the Company, in which
case such redemption shall be treated for purposes of this Section as a
dividend on the Common Stock. Such adjustment shall be made whenever any
such distribution is made and shall become effective retroactively
immediately after the record date for the determination of stockholders
entitled to receive such distribution. For purposes of this Section
7(g)(iii), any dividend or distribution that includes shares of Common
Stock or rights or warrants to subscribe for or purchase shares of Common
Stock shall be deemed instead to be (i) a dividend or distribution of the
evidences of indebtedness, shares of capital stock, cash or assets other
than such shares of Common Stock or such rights or warrants (making any
Conversion Price reduction required by this Section 7(g)(iii)) immediately
followed by (ii) a dividend or distribution of such shares of Common Stock
or such rights or warrants (making any further Conversion Price reduction
required by Section 7(g)(i) or 7(g)(ii)), except (A) the Reference Date of
such dividend or distribution as defined in this Section 7(g)(iii) shall be
substituted as (1) "the record date in the case of a dividend or other
distribution," and (2) "the record date for the determination of
stockholders entitled to receive such rights or warrants" and (3) "the date
fixed for such determination" within the meaning of Sections 7(g)(i) and
7(g)(ii) and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of computing any
adjustment of the Conversion Price in Section 7(g)(i).
14
<PAGE>
(iv) In case the Company shall pay or make a dividend or
other distribution on its Common Stock exclusively in cash (excluding all
regular cash dividends, to the extent that the annualized amount thereof
per share of Common Stock does not exceed 8% of the Current Market Price
per share determined as provided in Section 7(g)(vi) of the Common Stock on
the Trading Day immediately preceding the date of declaration of such
dividend), the Conversion Price shall be reduced so that such Conversion
Price shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this Section 7(g)(iv) by a fraction of which the
numerator shall be the Current Market Price per share (determined as
provided in Section 7(g)(vi)) of the Common Stock on the date fixed for the
payment of such distribution less the amount of cash so distributed and not
excluded as provided applicable to one share of Common Stock and the
denominator shall be such Current Market Price per share of the Common
Stock, such reduction to become effective immediately prior to the opening
of business on the day following the date fixed for the payment of such
distribution; provided, however, that in the event the portion of the cash
so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price per share (as defined in Section
7(g)(vi)) of the Common Stock on the record date mentioned above, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
holder of Convertible Preferred shall have the right to receive upon
conversion the amount of cash such holder would have received had such
holder converted each share of Convertible Preferred immediately prior to
the record date for the distribution of the cash. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such record date had not been fixed.
(v) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Company's Common Stock shall expire and such tender or
exchange offer shall involve the payment by the Company or such Subsidiary
of consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors) at the last time (the "Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it shall have
been amended) that exceeds 101% of the Current Market Price per share
(determined as provided in Section 7(g)(vi)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, the Conversion Price shall
be reduced so that such Conversion Price shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
Section 7(g)(v) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the Current Market Price per
share (determined as provided in Section 7(g)(vi)) of the Common Stock on
the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum
15
<PAGE>
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) at the Expiration Time
and the Current Market Price per share (determined as provided in Section
7(g)(vi)) of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior to
the opening of business on the day following the Expiration Time.
(vi) For the purpose of any computation under Section
7(g)(ii), 7(g)(iii), 7(g)(iv) and 7(g)(v), the "Current Market Price" per
share of Common Stock on any date in question shall be deemed to be the
average of the daily Closing Prices per share of Common Stock for the five
consecutive Trading Days selected by the Company commencing not more than
20 Trading Days before, and ending not later than, the earlier of the day
in question or, if applicable, the day before the "ex" date with respect to
the issuance or distribution requiring such computation; provided, however,
that if another event occurs that would require an adjustment pursuant to
Section 7(g)(i) through (v), inclusive, the Board of Directors may make
such adjustments to the Closing Prices during such five Trading Day period
as it deems appropriate to effectuate the intent of the adjustments in this
Section 7(g), in which case any such determination by the Board of
Directors shall be set forth in a Board Resolution and shall be conclusive.
For purposes of this paragraph, the term "ex" date, (i) when used with
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the Nasdaq National Market or on such
successor quotation system or securities exchange as the Common Stock may
be quoted or listed or in the relevant market from which the Closing Prices
were obtained without the right to receive such issuance or distribution,
and (ii) when used with respect to any tender or exchange offer, means the
first date on which the Common Stock trades regular way on such quotation
system or securities exchange or in such market after the Expiration Time
of such offer.
(vii) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 7(g)(i) through (v), as it
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend
or distribution of capital stock (or rights to acquire capital stock) or
from any event treated as such for income tax purposes.
(viii) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Conversion Price; provided, however, that any adjustments
which by reason of this Section 7(g)(viii) are not required to be made
shall be carried forward and taken into account in determining whether any
subsequent adjustment shall be required.
(ix) If any action would require adjustment of the Conversion
Price pursuant to more than one of the provisions described above, only one
16
<PAGE>
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holder of Convertible
Preferred.
(h) Reclassification, Consolidation, Merger or Sale of Assets. In
the event that the Company shall be a party to any transaction (including
without limitation (i) any recapitalization or reclassification of the Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
of the Common Stock), (ii) any consolidation of the Company with, or merger of
the Company into, any other person, or any merger of another Person into the
Company (other than a consolidation or merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), (iii) any sale, transfer or lease of all or
substantially all of the assets of the Company or (iv) any compulsory share
exchange pursuant to which the Common Stock is converted into the right to
receive other securities, cash or other property or, in the case of a sale,
transfer or lease of all or substantially all of the assets of the Company, then
the holders of Convertible Preferred will thereafter be entitled to convert
their shares in accordance with the terms hereof, into the same kind and amounts
of securities (including shares of stock), cash or other assets, or any
combination thereof, which were issuable or distributable to the holders of
outstanding Common Stock of the Company upon such recapitalization,
reclassification, consolidation, merger, sale, transfer, lease or share
exchange, in respect of that number of shares of Common Stock then deliverable
upon conversion of such shares of Convertible Preferred if the shares had been
converted immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer, lease or share exchange; and, in any such
case, appropriate adjustments (as determined in good faith by the Board of
Directors of the Company) shall be made to assure that the provisions hereof
(including provisions with respect to changes in, and other adjustments of, the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any securities or other assets thereafter
deliverable upon conversion of the Convertible Preferred.
The Company or the Person formed by such consolidation or resulting
from such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 7. The above provisions shall similarly apply to successive
transactions of the foregoing type.
(i) Notice of Adjustments of Conversion Price. Whenever the
Conversion Price is adjusted as herein provided: (a) the Company shall compute
the adjusted Conversion Price and shall prepare a certificate signed by the
Chief Financial Officer or the Treasurer of the Company setting forth the
adjusted Conversion Price and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall forthwith be filed with the
Transfer Agent for the Convertible Preferred Securities; and (b) a notice
stating that the Conversion Price has been adjusted and setting
17
<PAGE>
forth the adjusted Conversion Price shall as soon as practicable be mailed in
accordance with Section 12 by the Company to all record holders of Convertible
Preferred Securities at their last addresses as they appear upon the stock
register of the Company.
(j) Prior Notice of Certain Events. In case (a) the Company shall
(i) declare any dividend (or any other distribution) on its Common Stock, other
than (A) a dividend payable in shares of Common Stock, (B) a dividend payable in
cash that would not require an adjustment pursuant to Section 7(g)(iii) or
7(g)(iv) or (ii) authorize a tender or exchange offer that would require an
adjustment pursuant to Section 7(g)(v); (b) the Company shall authorize the
granting to all holders of Common Stock of rights or warrants to subscribe for
or purchase any shares of stock of any class or series or of any other rights or
warrants; (c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or other property; or (d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; then the Company shall cause to be
filed with the Transfer Agent for the Convertible Preferred, and shall cause to
be mailed to the holders of record of the Convertible Preferred, at their last
addresses as they shall appear upon the stock register of the Company, at least
5 days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record (if any) is to be taken for the
purpose of such dividend, distribution, rights or warrants or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(k) Dividend or Interest Reinvestment Plans. Notwithstanding the
foregoing provisions, the issuance of any shares of Common Stock pursuant to any
plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Common Stock under any such plan, and the issuance of any shares of
Common Stock or options or rights to purchase such shares pursuant to any
employee benefit plan or program of the Company or pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security outstanding
as of the date of original issuance of the Convertible Preferred, shall not be
deemed to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies. There shall be no adjustment of the Conversion Price in
case of the issuance of any
18
<PAGE>
stock (or securities convertible into or exchangeable for stock) of the Company
except as specifically described in this Section 7.
(l) Certain Additional Rights. In case the Company shall, by
dividend or otherwise, declare or make a distribution on its Common Stock
referred to in Section 7(g)(iii) or 7(g)(iv) (including, without limitation,
dividends or distributions referred to in the last sentence of Section
7(g)(iii)), the holder of shares of Convertible Preferred, upon the conversion
thereof subsequent to the close of business (New York City time) on the date
fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the Conversion Price adjustment
in respect of such distribution, shall instead of receiving the benefit of such
adjustment and at the Company's election be entitled to receive for each share
of Common Stock into which the shares of Convertible Preferred are converted,
the portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of Common Stock; provided, however, that, at the election of the
Company (whose election shall be evidenced by a resolution of the Board of
Directors) with respect to all Holders so converting, the Company may, in lieu
of distributing to such holder any portion of such distribution not consisting
of cash or securities of the Company, pay such holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors). If any conversion of Convertible Preferred described
in the immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Common Stock which the holder of shares of
Convertible Preferred so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such holder is so
entitled; provided that such due bill (i) meets any applicable requirements of
the principal national securities exchange, quotation system or other market on
which the Common Stock is then traded and (ii) requires payment or delivery of
such shares of Common Stock, rights, warrants, evidences of indebtedness, shares
of capital stock, cash or assets no later than the date of payment or delivery
thereof to holders of shares of Common Stock receiving such distribution.
(m) No Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company but will at all times in good faith assist in the
carrying out of all the provisions of this Section 7 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Convertible Preferred against
impairment.
Section 8. Repurchase Upon Change of Control.
(a) Change of Control Offer. Upon the occurrence of a Change of
Control, each holder of Convertible Preferred shall have the right to require
the Company to repurchase such holder's shares of Convertible Preferred, in
whole or in part (provided that
19
<PAGE>
the Liquidation Amount of the shares tendered shall be equal to $50.00 or any
integral multiples thereof and provided that the non-tendered portion of the
Liquidation Amount of any shares shall be in denominations of $50.00 or any
integral multiple thereof), pursuant to the offer described in Section 8(b) (the
"Change of Control Offer") for cash at a purchase price (the "Repurchase Price")
equal to 100% of the aggregate Liquidation Amount of such shares of Convertible
Preferred (or portions thereof), plus accumulated and unpaid dividends
(including additional dividends) to the Repurchase Date (as defined below);
provided, however, that if such Change of Control occurs on or prior to October
28, 2001, and such Change of Control would alter or change the powers,
preferences or special rights of the Convertible Preferred so as to adversely
affect the Convertible Preferred, then the Repurchase Price shall equal 103.975%
of the aggregate Liquidation Amount of such shares of Convertible Preferred (or
portions thereof), plus accumulated and unpaid dividends (including additional
dividends) to the Repurchase Date; provided, further, however, that in the case
of any share of Convertible Preferred that is tendered for repurchase after any
record date with respect to the payment of a dividend on the Convertible
Preferred and on or prior to the Dividend Payment Date with respect to such
dividend, the dividend due on such Dividend Payment Date shall be payable to the
holder of record of such share of Convertible Preferred as of such record date,
notwithstanding such repurchase, on or prior to the Dividend Payment Date.
(b) Change of Control Offer Procedures. Within 30 days following
the date of any Change of Control (or, if a Bank Event of Default has occurred
and is continuing, or would occur as a result thereof, within 5 days following
the date such Bank Event of Default is cured or waived), the Company shall send
by first-class mail, postage prepaid, to each holder as of the record date, if
any, of Convertible Preferred and to the Transfer Agent for the Convertible
Preferred, a notice (the "Notice of Change of Control") stating: (i) that a
Change of Control has occurred and a Change of Control Offer is being made
pursuant to this Section 8(b) and that all shares of Convertible Preferred that
are timely tendered will be accepted for payment; (ii) the Repurchase Price and
the repurchase date, which shall be a date occurring no earlier than 30 days and
no later than 60 days subsequent to the date on which such notice is mailed (the
"Repurchase Date"); (iii) that dividends will continue to accrue on any shares
of Convertible Preferred not tendered; (iv) that dividends will cease to accrue
on and after the Repurchase Date on any shares of Convertible Preferred accepted
for payment pursuant to the Change of Control Offer; (v) that any holder
electing to have shares of Convertible Preferred repurchased pursuant to a
Change of Control Offer will be required to surrender such shares, together with
a notice of such holder's election which sets forth the aggregate Liquidation
Amount to be repurchased, to the Company (or a duly appointed agent thereof) at
the address specified in the Notice of Change of Control on or prior to the
close of business (New York City time) on the Repurchase Date; (vi) that any
holder will be entitled to withdraw, in whole but not in part, such election if
the Company (or such agent) receives, not later than the close of business (New
York City time) on the third Business Day preceding the Repurchase Date, a
telegram, facsimile transmission or letter setting forth the name of the holder,
the aggregate Liquidation Amount of shares of Convertible Preferred the holder
delivered for repurchase and a statement that such holder is withdrawing the
holder's election to have such shares repurchased; and (vii) any other
information necessary to enable holders to tender Convertible Preferred and to
have such shares repurchased pursuant to this Section 8(b). The Notice of Change
of Control if mailed
20
<PAGE>
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice. In any case, a failure to
give such notice by mail or any defect in the notice to the holder of any
Convertible Preferred shall not limit any holder's right to exercise a
repurchase right during the applicable time periods set forth in this Section
8(b) or affect the validity of the proceedings for the repurchase of any other
shares. On the Repurchase Date, the Company shall accept for payment, and pay
for, all shares of Convertible Preferred duly tendered pursuant to the Change of
Control Offer. Notwithstanding the foregoing, if any shares of Convertible
Preferred accepted for payment shall not be so paid in accordance with this
Section 8, then, from the Repurchase Date until the aggregate Liquidation Amount
of and accumulated dividends on such shares is paid in full, dividends shall be
paid on the unpaid Liquidation Amount and, to the extent permitted by law, on
any accumulated but unpaid dividends thereon, in each case at the prescribed
rate set forth herein.
If fewer than all the shares of Convertible Preferred represented by
any certificate are repurchased, a new certificate (which shall be no less than
the minimum Liquidation Amount of $50) shall be issued representing the
unredeemed shares without cost to the holder thereof.
Notwithstanding the foregoing, the Company shall not be obligated to
make a Change of Control Offer or repurchase shares of Convertible Preferred
tendered pursuant to a Change of Control Offer so long as a Bank Event of
Default has occurred and is continuing or would occur as a result thereof. In
such event, the Company will act in good faith and use its reasonable best
efforts to cure any Bank Event of Default or obtain a waiver thereof by or the
consent of its lenders to enable the Company to make a Change of Control Offer
in accordance with the provisions of this Section 8 upon the occurrence of a
Change of Control. The obligation of the Company to offer to purchase the
Convertible Preferred shall be automatically suspended and deferred, without any
limitation as to time and without any other consequence whatsoever (except that
the right of the holders of Convertible Preferred to seek specific enforcement
of the provisions of the preceding sentence shall not be suspended or deferred
or otherwise abated or impaired) until the date of the earliest to occur of (x)
such Bank Event of Default is cured, (y) such consent or waiver is granted by
the lenders under the Credit Agreement, or (z) all indebtedness outstanding
under such Credit Agreement is retired and repaid in full and in cash.
The Company shall comply, in all material respects, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, to the extent applicable, in connection with the repurchase of
securities under the circumstances described in this Section 8. To the extent
that any provisions of any securities laws or regulations conflict with this
Section 8, the Company shall comply in all material respects with the applicable
securities laws and regulations and shall not be deemed to have breached an
agreement or covenant of the Company under this Certificate of Designation by
virtue thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Repurchase Date.
21
<PAGE>
Section 9. Events of Noncompliance.
(a) Definition. "Event of Noncompliance," wherever used herein,
means any one of the following events that has occurred and is continuing
(whatever the reason for such Event of Noncompliance and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body): (i) the failure by the Company to pay on
any Dividend Payment Date the full amount of dividends then accumulated on the
Convertible Preferred, including any additional dividends in respect thereof, if
any, when due; (ii) the failure by the Company to pay all or any part of the
aggregate Liquidation Amount (including any redemption premium) on the
Convertible Preferred when due, whether at maturity, upon redemption or
repurchase, whether or not such payment is legally permissible or is prohibited
by any agreement to which the Company is subject; or (iii) the failure by the
Company to deliver shares of its Common Stock within 30 days of an election by a
holder of shares of Convertible Preferred to convert such shares in accordance
with Section 7, which election has not been rescinded as set forth in Section
5(d).
(b) Additional Rights Upon Certain Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and is
continuing, then the Company shall not declare or pay any dividends on, or
make a distribution with respect to, or redeem, or purchase or acquire, or
make a liquidation payment with respect to, any Parity Securities or Junior
Securities, except, in the case of an Event of Noncompliance in respect of
the payment of accumulated dividends during an Extension Period, for such
dividends, distribution and purchases permitted pursuant to clauses (i)
through (vi) of Section 3(c).
(ii) If any Event of Noncompliance of the type described in
Section 9(a)(i) has occurred and has continued for six quarterly dividend
periods or any other Event of Noncompliance has occurred and is continuing,
the dividend rate on the Convertible Preferred shall increase immediately
by an increment of one-quarter of one percent (.25%) per annum; provided,
however, that no increase in the dividend rate shall be made pursuant to
this Section 9(b)(ii) if, and for so long as, a material Bank Event of
Default shall have occurred and is continuing or a Bank Event of Default
would result from such payment. Any increase of the dividend rate resulting
from the operation of this Section 9 shall terminate as of the close of
business (New York City time) on the date on which no Event of
Noncompliance exists, subject to subsequent increases pursuant to this
Section.
(iii) If any Event of Noncompliance of the type described in
Section 9(a)(i) has occurred and has continued for six quarterly dividend
periods or any other Event of Noncompliance has occurred and is continuing,
the number of directors constituting the Company's Board of Directors will
be increased by a number sufficient to include as additional directors of
the Company two members designated by the holders of Convertible Preferred
(which directors shall be in addition to any directors designated pursuant
to Section 5 of the Timet Investment
22
<PAGE>
Agreement and shall satisfy the qualifications for Investor Nominees (as
defined under the Timet Investment Agreement) set forth under Section 5(b)
of the Timet Investment Agreement). The holders of Convertible Preferred
will have the special right, voting separately as a single class (with each
share of Convertible Preferred being entitled to one vote) and to the
exclusion of all other classes of the Company's capital stock, to elect two
individuals to fill such newly created directorships, to fill any vacancies
in such directorships and to remove any individuals elected to such
directorships. The special right of the holders of Convertible Preferred to
elect members of the Board of Directors may be exercised at the special
meeting called pursuant to this subsection, at any annual or other special
meeting of stockholders and, to the extent and in the manner permitted by
applicable law and the Certificate of Incorporation as then in effect,
pursuant to a written consent in lieu of a stockholders meeting. Such
special right shall continue until such time as the Event of Noncompliance
that triggered this right ceases to exist, at which time such special right
shall terminate subject to revesting upon the occurrence and continuation
of any Event of Noncompliance which gives rise to such special right under
the terms of this subparagraph (iii).
At any time when such special right has vested in the holders of
Convertible Preferred, the Board of Directors may order, or any holder or
holders owning in the aggregate not less than 10% in aggregate Liquidation
Amount of the outstanding shares of Convertible Preferred may request, the
calling of a special meeting of holders of Convertible Preferred for the purpose
of electing directors pursuant to this subsection, which meeting shall thereupon
be called by the President, a Vice President or the Secretary of the Company.
Notice of such meeting and of any annual meeting at which holders of Convertible
Preferred are entitled to vote pursuant to this paragraph shall be given to each
holder of record of Convertible Preferred by mailing a copy of such notice to
such holder at such holder's last address as the same appears in the stock
register of the Company. Such special meeting shall be called for a time not
later than 60 days after such order or request, or in default of the calling of
such meeting within 60 days after such order or request, such meeting may be
called on similar notice by any holder or holders owning in the aggregate not
less than 10% in aggregate Liquidation Amount of the outstanding shares of
Convertible Preferred, and such holder or holders of Convertible Preferred shall
be given access to the stock register of the Company for the purpose of causing
a meeting of stockholders to be called pursuant to this paragraph.
Notwithstanding the provisions of this Section 9, no such special meeting shall
be called during the period within 60 days immediately preceding the date fixed
for the next annual meeting of stockholders.
At any meeting or at any adjournment of such meeting at which the
holders of Convertible Preferred have the special right to elect directors, the
presence, in person or by proxy, of the holders of a majority of the Convertible
Preferred then outstanding shall be required to constitute a quorum for the
election or removal of any director by the holders of the Convertible Preferred
exercising such special right. The vote of a majority of such quorum shall be
required to elect or remove any such director. The absence of a quorum of
holders of Common Stock, however, shall not affect the exercise of such voting
rights by the holders of Convertible Preferred.
23
<PAGE>
Immediately upon the termination of the Event of Noncompliance that
gave rise to such special right, (x) the right of the holders of Convertible
Preferred to elect directors shall cease, (y) the term of any directors elected
by the holders of Convertible Preferred shall terminate, and (z) the holders of
Convertible Preferred shall cause such directors to resign as promptly as
practicable in accordance with the Company's procedures for resignation of
directors and applicable laws and regulations.
Section 10. Status of Reacquired Shares. If shares of the Convertible
Preferred are redeemed pursuant to Section 5 hereof, converted pursuant to
Section 7 hereof or repurchased pursuant to Section 8 hereof, the shares so
redeemed, converted or repurchased shall, upon compliance with any statutory
requirements, assume the status of authorized but unissued shares of preferred
stock of the Company.
Section 11. Definitions.
"at least 35% of the total assets of the Company and its consolidated
subsidiaries, taken as a whole" shall mean assets having a fair market value
equal to or greater than 35% of the fair market value of the total assets of the
Company and its consolidated subsidiaries, taken as a whole, as reasonably
determined by the Board of Directors of the Company based on the written opinion
of a nationally recognized investment banking firm.
"Bank Event of Default" shall mean the occurrence and continuation of
an event of default under the Credit Agreement (including the failure to pay
when due any indebtedness outstanding thereunder or the occurrence of any event
described therein upon the occurrence of which such indebtedness becomes or may
become due).
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banking institutions in The City of New York are authorized or required
by law to close.
"Change of Control" means the occurrence of any of the following
events: (i) in any three-year period, a majority of the members of the Board of
Directors elected during such three-year period shall have been so elected
against the recommendation of the management of the Company or the Board of
Directors in office immediately prior to such election; (ii) any Designated
Person (as defined herein) or Persons acting in concert shall, except as
provided in clause (iii) below, acquire (whether by merger, consolidation, sale,
assignment, lease, transfer or otherwise, in one transaction or any related
series of transactions) or otherwise beneficially own a majority of the voting
power of the outstanding Voting Securities of the Company; (iii) upon
consummation of a consolidation or merger of the party with another Designated
Person in which the holders of at least a majority of the Voting Securities of
the Company immediately prior to such consolidation or merger would not own
Voting Securities representing at least a majority of the outstanding voting
power of such Designated Person or its ultimate parent upon consummation of such
consolidation or merger; or (iv) upon the sale, transfer or assignment (it being
understood that the pledge of, or the granting of a security interest in, assets
of the Company or its subsidiaries shall not be deemed a sale, transfer or
assignment) of assets constituting at least 35% of the total assets
24
<PAGE>
of the Company and its consolidated subsidiaries, taken as a whole, to any
person in a single transaction or a series of related transactions; provided,
however, that a sale, transfer or assignment of at least 35% of the total assets
of the Company and its consolidated subsidiaries, taken as a whole, to (x) the
Principal Stockholders, or to (y) any entity the holders of at least a majority
of the Voting Securities of which (or of such entity's ultimate parent) were
holders of Voting Securities of the Company immediately prior to such sale,
transfer or assignment shall not constitute a "Change of Control" hereunder; or
(v) at such time as the Principal Stockholders fail to beneficially own, in the
aggregate, at least 30% of the voting power of the outstanding Voting Securities
of the Company.
"Closing Price" of any Common Stock on any day shall mean the closing
price of the Common Stock on the principal national securities exchange on which
such security is listed at the time (or if there have been no sales on such
exchange on such day, the average of the highest bid and lowest asked prices on
such exchange on such day), or (ii) if the security is not listed on a national
securities exchange at the time, the sales price of such security as reported on
the Nasdaq National Market as of 4:00 p.m., New York City time, on such day (or,
if there is no reported sales price of such security on the Nasdaq National
Market on such day, the average of the representative bid and asked prices
quoted on the Nasdaq National Market as of 4:00 p.m. New York City time on such
day), or (iii) if such security is not reported on the Nasdaq National Market at
the time, the average of the representative bid and asked prices quoted in the
Nasdaq System as of 4:00 p.m., New York City time, on such day, or (iv) if the
security is not quoted on the Nasdaq System at the time, the average of the
highest bid and lowest asked prices on such day in the over-the-counter market
as reported by the National Quotation Bureau Incorporated or any similar
successor organization.
"Common Stock" shall mean the Common Stock, par value $0.01, of the
Company.
"Credit Agreement" shall mean the Credit Agreement, dated October 28,
1998, as amended or restated from time to time, among the Company, Credit
Lyonnais New York Branch as agent and the lenders named therein or, after said
credit agreement is retired and the indebtedness thereunder has been repaid in
full, any other loan or credit agreement pursuant to which senior indebtedness
of the Company is outstanding, if such other loan or credit agreement is
designated by the Company as a Credit Agreement for the purposes hereof.
"Designated Person" shall mean any person, corporation, partnership or
other entity other than Societe Industrielle de Materiaux Avances and its
affiliates.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation thereto.
"Inco Investment Agreement" shall mean the Investment Agreement, dated
October 28, 1998, between the Company and Inco Limited, a corporation continued
under the laws of Canada.
25
<PAGE>
"Investment Agreements" shall mean collectively, the Timet Investment
Agreement and the Inco Investment Agreement.
"Liquidation Amount" of any share of Convertible Preferred as of any
particular date shall be equal to $50.00.
"Person" shall mean any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Principal Stockholders" shall mean Societe Industrielle de Materiaux
Avances, LWH Holdings S.A. and their respective affiliates.
"Redemption Rescission Event" shall mean the occurrence of (a) any
general suspension of trading in, or limitation on prices for, securities on the
principal national securities exchange on which shares of Common Stock are
registered and listed for trading (or, if shares of Common Stock are not
registered and listed for trading on any such exchange, in the over-the-counter
market) for more than six-and-one-half (6 1/2) consecutive trading hours, (b)
any decline in either the Dow Jones Industrial Average or the Standard & Poor's
Index of 400 Industrial Companies (or any successor index published by Dow Jones
& Company, Inc. or Standard & Poor's Corporation) by either (i) an amount in
excess of 5%, measured from the close of business (New York City time) on any
Trading Day to the close of business (New York City time) on the next succeeding
Trade Day during the period commencing on the Trading Day preceding the date
notice of any redemption of shares of Convertible Preferred is given (or, if
such notice is given after the close of business (New York City time) on a
Trading Day, commencing on such Trading Day) and ending at the earlier of (x)
the time and date fixed for redemption in such notice and (y) the time and date
at which the Company shall have irrevocably deposited funds with a designated
bank or trust company pursuant to Section 5 or (ii) an amount in excess of 8%
(or, if the time and date fixed for redemption is more than 15 days following
the date on which notice of redemption is given, 12%), measured from the close
of business (New York City time) on the Trading Day preceding the day notice of
such redemption is given (or, if such notice is given after the close of
business (New York City time) on a Trading Day, from such Trading Day) to the
close of business (New York City time) on any Trading Day on or prior to the
earlier of the dates specified in clauses (x) and (y) above, (c) a declaration
of a banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States or (d) the commencement of a
war or armed hostilities or other national or international calamity directly or
indirectly involving the United States which in the reasonable judgment of the
Company could have a material adverse effect on the market for the Common Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder, or any
successor legislation thereto.
26
<PAGE>
"Stockholder Conversion Vote" shall mean the approval, as obtained in
accordance with Regulation 14A of the Exchange Act, by the stockholders of the
Company entitled to vote thereon of the issuance of Common Stock upon the
conversion of the Convertible Preferred upon the terms and conditions set forth
in Section 7.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Securities of which are owned, directly or indirectly, by
such Person and one or more other Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person and/or one or more other Subsidiaries of such
Person, directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof.
"Timet Investment Agreement" shall mean the Investment Agreement, dated
as of July 8, 1998, as amended on October 28, 1998, among the Company, Timet
Finance Management Company, a Delaware corporation, and Titanium Metals
Corporation, a Delaware corporation.
"Trading Day" shall mean a day on which securities are traded on the
national securities exchange, quotation system or over-the-counter market used
to determine the Closing Price.
"Voting Securities" of any person shall mean capital stock of such
person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
Section 12. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or when sent by telex or telecopier (with
receipt confirmed), provided a copy is also sent by express (overnight, if
possible) courier, addressed, (a) in the case of a holder of the Convertible
Preferred, to such holder's address of record and, (b) in the case of the
Company, to the Company's principal executive offices to the attention of the
Company's Secretary.
27
<PAGE>
IN WITNESS WHEREOF, Special Metals Corporation has caused this
Certificate of Designations to be duly executed by its duly authorized officer
and attested by its Secretary this 28th day of October, 1998.
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
--------------------------------
Name: Donald R. Muzyka
Title: President and Chief Executive
Officer
ATTEST:
/s/ Robert F. Dropkin
- ----------------------------------
Name: Robert F. Dropkin
Title: Vice President, Chief Legal
Counsel and Secretary
28
EXHIBIT 3
DIRECTORS AND EXECUTIVE OFFICERS OF
INCO LIMITED
The name, present principal occupation or employment, the name of any
corporation or other organization in which such employment is conducted, and the
business address of each of the directors and executive officers of Inco Limited
is set forth below. Messrs. Harquail and Mercaldo are the two Class VBN
Directors. Except as set forth below his or her name, each of the directors and
executive officers is a citizen of Canada.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND BUSINESS OR EMPLOYMENT BUSINESS ADDRESS
----------------- ------------- ----------------
<S> <C> <C>
DIRECTORS
Glen A. Barton Group Vice-Chairman Caterpillar, Inc.
(U.S.) 100 N.E. Adams Street
Peoria, Illinois 61629
Dr. Angus Bruneau, O.C. Chairman Fortis Inc.
Suite 1201, P.O. Box 8837
139 Water Street
St. John's, Newfoundland
A1B 3T2
Eleanor R. Clitheroe President and Chief Executive Ontario Hydro Services
Officer Company, Inc.
700 University Avenue
Toronto, Ontario
M5G 1X6
Purdy Crawford, Q.C. Chairman and Director Imasco Limited
Royal Bank Plaza
200 Bay Street, North Tower
Suite 2000, P.O.Box 84
Toronto, Ontario M5J 2J2
David Harquail Senior Vice-President Franco-Nevada Mining
Corporation Limited
Suite 1900
20 Eglinton Avenue West
Toronto, Ontario
M4R 1K8
Judith A. Erola Retired President of 150 Holmstedt Road
Pharmaceutical Manufacturers Site 12, Box 7
Association of Canada Lake Panache
Sudbury, Ontario
P0M 3E0
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND BUSINESS OR EMPLOYMENT BUSINESS ADDRESS
----------------- ------------- ----------------
<S> <C> <C>
DIRECTORS
William F. Glavin Retired President of Babson 120 Paget Court
(U.S.) College; Director of Other John's Island
Public Companies Vero Beach, Florida 32963
Scott M. Hand President Inco Limited
(U.S.) 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Charles M. Hantho, C.M. Chairman Dofasco Inc.
1330 Burlington Street East
P.O. Box No. 2460
Hamilton, Ontario L8N 3J5
Edward L. Mercaldo Financial Consultant and Private Anderson Mercaldo Consulting
(U.S. and Canadian) Investor Group
P.O. Box 48800
2100-1111 W. Georgia Street
Vancouver, B.C. V7X 1K9
David P. O'Brien Chairman, President & Chief Canadian Pacific Limited
Executive Officer 1800 Bankers Hall East
855 - 2nd Street S.W.
Calgary, Alberta T2P 4Z5
Dr. Robert J. Richardson Retired Executive; Director of 215 Ross Drive
Other Public Companies R.R. #3
North Bay, Ontario P1B 8G4
Dr. Michael D. Sopko Chairman & Chief Executive Inco Limited
Officer 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
James M. Stanford President & Chief Executive Petro-Canada
Officer P.O. Box 2844
Calgary, Alberta T2P 3E3
Richard M. Thomson Retired Chairman and Chief 9 Glengowan Road
Executive Officer, The Toronto- Toronto, Ontario M4N 1E9
Dominion Bank; Director of
Other Public Companies
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT BUSINESS ADDRESS
----------------- ---------- ----------------
<S> <C> <C>
EXECUTIVE OFFICERS
Michael D. Sopko Chairman and Chief Executive Officer Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Scott M. Hand President Inco Limited
(U.S.) 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Anthony E. Munday Executive Vice-President and Chief Inco Limited
(U.S.) Financial Officer 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Peter J. Goudie Executive Vice-President Inco Limited
(Australian) 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Peter C. Jones Executive Vice-President Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Stuart F. Feiner Executive Vice-President, General Inco Limited
(U.S.) Counsel and Secretary 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Lorne M. Ames Vice-President Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Wm. Gordon Bacon Vice-President Inco Limited
2060 Flavelle Boulevard
Sheridan Park
Mississauga, Ontario
L5K 1Z9
W. Charles Ferguson Vice-President Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Ronald A. Lehtovaara Vice-President and Comptroller Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT BUSINESS ADDRESS
----------------- ---------- ----------------
<S> <C> <C>
Donald T. Hurley, Jr. Vice-President and Treasurer Inco Limited
(U.S.) 145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Robert A. Horn Vice-President Inco Limited
2060 Flavelle Boulevard
Sheridan Park
Mississauga, Ontario
L5K 1Z9
Bruce R. Conard Vice-President Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario M5H 4B7
Ronald C. Aelick President, Ontario Division Inco Limited
Ontario Division
Copper Cliff, Ontario
P0M 1N0
Melvin Y. Wyshynski President, Manitoba Division Inco Limited
Manitoba Division
Thompson, Manitoba
R8N 1P3
</TABLE>
I-4
EXHIBIT 4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of October 28, 1998 (this
"Agreement") between Inco Limited, a corporation continued under the laws of
Canada (the "Investor"), and Special Metals Corporation, a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, in connection with the closing of the transactions contemplated by
the Investment Agreement, dated as of the date hereof (the "Investment
Agreement"), between the Company and the Investor, the parties have agreed to
enter into this Agreement, which sets forth certain registration rights
applicable to the Registrable Securities (as defined below) held from time to
time by the Investor and/or certain permitted transferees;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and subject to the conditions and upon the terms
hereof, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition shall have
their respective meanings set forth in the Investment Agreement. As used herein,
unless the context otherwise requires, the following terms have the following
respective meanings:
"Certificate of Designation" shall mean the Certificate of Designation
of Rights and Preferences establishing the terms and relative rights and
preferences of the Convertible Preferred Securities.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean and include (i) Common Stock, par value $0.01
per share, of the Company, (ii) each other class of capital stock of the Company
that does not have a preference over any other class of capital stock of the
Company as to dividends or upon liquidation, dissolution or winding up of the
Company, and (iii) any class of capital stock or securities into which or for
which shares of Common Stock or any other class of capital stock or securities
described in clauses (ii) or (iii) may hereafter be changed, converted or
exchanged or which are issued to holders of shares of Common Stock or any other
class of capital stock or securities described in clauses (ii) or (iii) upon any
reorganization, recapitalization, reclassification, share combination, share
subdivision, share dividend, merger, consolidation or similar transactions or
events.
1
<PAGE>
"Conversion Shares" shall mean and include the shares of Common Stock
issuable upon conversion of the Convertible Preferred Securities in accordance
with the terms of the Certificate of Designation.
"Convertible Preferred Securities" shall mean and include (i) the
6.625% Series A Senior Convertible Preferred Stock (Liquidation Amount $50.00
per Convertible Preferred Security) of the Company and (ii) any class of capital
stock or securities into which or for which Convertible Preferred Securities or
any other class of capital stock or securities described in this clause (ii) may
hereafter be changed, converted or exchanged (in each case, other than pursuant
to its terms) or which are issued to holders of Convertible Preferred Securities
or any other class of capital stock or securities described in this clause (ii)
upon any reorganization, recapitalization, reclassification, share combination,
share subdivision, share dividend, merger, consolidation or similar transactions
or events.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such superseding
Federal statute.
"First Offer Price" is defined in Section 2.1(a).
"a majority of the Registrable Securities" shall mean (i) more than 50%
of the shares of the issued and outstanding Registrable Securities if the
Registrable Securities are shares of capital stock or rights or warrants to
acquire capital stock, (ii) more than 50% of the aggregate principal amount of
the issued and outstanding Registrable Securities if the Registrable Securities
are debt securities or (iii) more than 50% of the aggregate liquidation amount
of the issued and outstanding Registrable Securities if the Registrable
Securities are Convertible Preferred Securities. If there is more than one class
of Registrable Securities, the term "a majority of the Registrable Securities"
shall mean a majority of the Registrable Securities, assuming for purposes of
this definition, that all such securities have been converted into securities of
the same class.
"Offered Securities" is defined in Section 2.6(a).
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind and shall include any
successor (by merger or otherwise) of such entity.
"Principal Stockholders" is defined in Section 2.1(a).
2
<PAGE>
"Principal Stockholders' Registration Agreement" is defined in Section
2.1(a).
"Principal Stockholders' Securities" is defined in Section 2.1(b).
"Registrable Securities" means the Convertible Preferred Securities,
the Conversion Shares and any other securities of the Company, in each case,
acquired pursuant to the terms of the Investment Agreement. As to any particular
Registrable Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by Rule 144 (or any
successor provision) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of such
distribution under the Securities Act or (d) they shall have ceased to be
outstanding. All references to percentages of Registrable Securities shall be
calculated pursuant to Section 12.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration and filing fees, all fees of the NASDAQ National Market, any
national securities exchange or the National Association of Securities Dealers,
Inc., all fees and expenses of the Company of complying with securities or blue
sky laws (if any), all word processing, duplicating and printing expenses,
messenger and delivery expenses of the Company, the fees and disbursements of
counsel for the Company and of the Company's independent public accountants,
including the expenses of "comfort" letters required by or incident to such
performance and compliance, any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding any underwriting
discounts or commissions or transfer taxes with respect to the Registrable
Securities) and the reasonable fees and expenses of one counsel to the Selling
Holders (selected by the Selling Holders representing a majority of the
Registrable Securities covered by such registration statement); provided,
however, that in the event the Company shall determine, in accordance with
Section 2.1(a), not to register any securities with respect to which it had
given written notice of its intention to so register to holders of Registrable
Securities, all of the costs of the type (and subject to any limitation to the
extent) set forth in this definition and incurred by Selling Holders in
connection with such registration on or prior to the date the Company notifies
the Selling Holders of such determination shall be deemed Registration Expenses.
"Second Offer Price" is defined in Section 2.6(b).
"Selling Holders" is defined in Section 2.1(a).
"Securities Act" means the Securities Act of 1933, as amended, or any
superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such superseding Federal
statute.
3
<PAGE>
"Timet" means Timet Finance Management Company, a Delaware corporation.
"Timet Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, between Timet Finance Management Company and
the Company, as amended from time to time.
2. Registration Under Securities Act, etc.
2.1 Piggy-back Registration.
(a) Right to Include Registrable Securities. Except in connection
with an exclusive demand registration pursuant to Section 2.1 of the Timet
Registration Rights Agreement or Section 2.1 of the Registration Rights
Agreement (the "Principal Stockholders' Registration Agreement"), dated as of
February 25, 1997, among Societe Industrielle de Materiaux Avances, LWH Holding
S.A. and Advanced Materials Investments Holding S.A. (collectively, the
"Principal Stockholders"), as in effect on the date hereof, if the Company at
any time after the second anniversary of the date of this Agreement, proposes to
register any of its Common Stock under the Securities Act by registration on any
form other than Forms S-4 or S-8, or a Form S-1 relating to securities to be
issued in connection with a merger or similar transaction, whether or not for
sale for its own account, it will each such time give prompt written notice to
all registered holders of Registrable Securities of its intention to do so and
of such holders' rights under this Section 2.1(a). Upon the written request of
any such holder made as promptly as practicable and in any event within 10 days
after the receipt of any such notice from the Company (which request shall
specify the Registrable Securities intended to be disposed of by such holder and
the selling price (the "First Offer Price") which is acceptable to such holder,
as determined in good faith by such holder), the Company will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof (all such holders are referred to herein as the "Selling Holders");
provided, that prior to the effective date of the registration statement filed
in connection with such registration, immediately upon notification to the
Company from the managing underwriter of the price at which such securities are
to be sold, if such price is below the First Offer Price which any Selling
Holder shall have indicated to be acceptable to such Selling Holder, the Company
shall so advise such Selling Holder of such price, and such Selling Holder shall
then have the right to withdraw its request to have its Registrable Securities
included in such registration statement; and provided, further, however, that
any sale of Offered Securities pursuant to the registration provisions of this
Section 2.1(a) shall, pursuant to Section 2.6(a), be subject to the Company's
prior right of first refusal set forth in Section 6 of the Investment Agreement
and shall be subject to the additional purchase rights of the Company set forth
in Section 2.6(b). If, at any time after giving written notice of its intention
to register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company shall give written notice of such
4
<PAGE>
determination to each Selling Holder of Registrable Securities and (x) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), and (y) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities.
(b) Priority in Piggy-back Registrations. If the managing
underwriter of any underwritten offering or, in the case of any offering that is
not underwritten, a nationally recognized investment banking firm shall advise
the Company (and the Company shall in each case so advise each Selling Holder of
Registrable Securities requesting registration of such advice in writing) that,
in its opinion, the number or type of Registrable Securities requested to be
included in such registration would materially adversely affect such offering or
the market for the Company's securities, then the Company will include in such
registration, to the extent of the number and type of securities which the
Company is so advised can be sold in (or during the time of) such offering,
first, all securities of the Company proposed by the Company to be sold for its
own account, or, in the case of a secondary offering made pursuant to demand
registration rights granted to any Person other than a holder of Registrable
Securities, all securities of the Company that such Person proposes to sell;
second, all securities, if any (the "Principal Stockholders' Securities"),
proposed by the Company to be sold for the account of the Principal Stockholders
pursuant to the exercise of their piggy-back registration rights under the
Principal Stockholders' Registration Rights agreement; third, all Registrable
Securities, if any, requested to be included in such registration pursuant to
the Timet Registration Rights Agreement (pro rata, based on the number of
Registrable Securities requested to be included by each holder thereunder);
fourth, such Registrable Securities requested to be included in such
registration pursuant to this Agreement (pro rata, based on the number of
Registrable Securities requested to be included by each Selling Holder
hereunder) among such Selling Holders; and fifth, all securities of the Company
to be sold for the account of a Person other than a holder of Registrable
Securities or Principal Stockholder Securities, as the case may be.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration contemplated pursuant to this Section 2.1.
2.2 Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 2.1, the Company will, as
expeditiously as possible:
(i) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such registration
and thereafter use its commercially reasonable best efforts to cause such
5
<PAGE>
registration statement to become effective; provided, however, that the
Company may discontinue any registration of securities that are not
Registrable Securities (and, under the circumstances specified in Section
2.1(a) and (b), Registrable Securities) at any time prior to the effective
date of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement; provided, that except with respect to any such registration
statement filed pursuant to Rule 415 under the Securities Act, such period
need not exceed 180 days;
(iii) furnish to each seller of Registrable Securities, such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request;
(iv) make any filings (if any) required under the blue sky or
securities laws of such States of the United States of America as the
sellers of Registrable Securities covered by such registration statement
shall reasonably request;
(v) furnish at the effective date of such registration statement
and/or on the date of closing under the underwriting agreement, as the case
may be, to each seller of Registrable Securities, and to the underwriters,
if any, a signed counterpart of:
(x) an opinion of counsel for the Company dated the effective
date of such registration statement and, if applicable, the date of
the closing under the underwriting agreement, and
(y) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included
6
<PAGE>
therein) and, in the case of the accountants' comfort letter, with
respect to events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' comfort letter, such other financial matters, and, in the
case of the legal opinion, such other legal matters, as counsel for
the seller or sellers of Registrable Securities may reasonably
request;
(vi) notify each seller of Registrable Securities at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of any such
seller promptly prepare and furnish to it a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to security
holders, as soon as reasonably practicable (but not more than sixteen
months after the effective date of such registration statement), an
earnings statement covering the period of at least twelve months beginning
with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder;
(viii) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such registration;
(ix) use its best efforts to list all Registrable Securities
covered by such registration statement on any national market or national
securities exchange on which Registrable Securities of the same class
covered by such registration statement are then listed and, if no such
Registrable Securities are so listed, on any national market or national
securities exchange on which the Common Stock is then listed;
7
<PAGE>
(x) to the extent reasonably requested by the managing underwriter
of any underwritten offering, send appropriate officers of the Company to
attend "road shows" scheduled in connection with any such registration; and
(xi) furnish unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be
requested by the sellers of Registrable Securities or the underwriters.
As a condition precedent of the Company's obligations under this Section
2.2, the Company may require each seller of Registrable Securities as to which
any registration is being effected to agree to comply with the Securities Act
and the Exchange Act in connection with the registration of such seller's
Registrable Securities and to provide the Company with such information required
under such Acts as the Company may reasonably request in connection therewith.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
subdivision (vi) of this Section 2.2, such holder will forthwith discontinue
such disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until the receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(vi) of this Section 2.2 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in its possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.3 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company proposes to
register any of its securities under the Securities Act as contemplated by
Section 2.1 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any Selling Holder of
Registrable Securities, use its best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such Selling
Holder among the securities of the Company to be distributed by such
underwriters, subject to the provisions of Section 2.1(b). The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and such
holders of Registrable Securities may, at the option of the holders of a
majority of the Registrable Securities to be distributed by such underwriters,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
Selling Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations,
8
<PAGE>
warranties or agreements regarding such Selling Holder, such Selling Holder's
Registrable Securities and such Selling Holder's intended method of distribution
or any other representations required by applicable law.
(b) Holdback Agreements.
(i) To the extent not inconsistent with applicable law, each
holder of Registrable Securities agrees not to effect any public sale or
distribution of any Registrable Securities of the Company or any securities
convertible into or exchangeable or exercisable for such Registrable
Securities, during the seven days prior to and the 90 days after any
registration relating to such Registrable Securities pursuant to Section
2.1 has become effective, except as part of such registration, if and to
the extent requested by the Company in the case of a non-underwritten
public offering or if and to the extent requested by the managing
underwriter or underwriters in the case of an underwritten public offering.
(ii) The Company agrees not to effect any public sale or
distribution of its Registrable Securities or securities convertible into
or exchangeable or exercisable for any of such Registrable Securities
during the seven days prior to and the 90 days after any registration
relating to such Registrable Securities pursuant to Section 2.1 has become
effective, except as part of such registration and except pursuant to
registrations on Form S-4 or S-8 or any successor or similar forms thereto;
provided, however, that the provisions of this Section 2.3(b)(ii) shall not
prevent the conversion or exchange of any securities pursuant to their
terms into or for other securities.
2.4 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give a representative holder (the
"Representative") designated in writing to the Company by a majority of the
holders of Registrable Securities to be registered under such registration
statement and counsel designated by the Representative the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such reasonable access to its
books and records and such opportunities to discuss the business of the Company
and its subsidiaries with officers of the Company and the independent public
accountants of the Company who have certified its financial statements as shall
be necessary, in the opinion of such Representative and such counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.
2.5 Indemnification.
(a) Indemnification by the Company. The Company shall, and hereby
does, indemnify and hold harmless, in the case of any registration
9
<PAGE>
statement filed pursuant to Section 2.1, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of any securities covered
by such registration statement and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act or the
Exchange Act, and their respective directors, officers, partners, agents and
affiliates, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or any such director, officer,
partner, agent, affiliate or controlling person may become subject under the
Securities Act or otherwise, including, without limitation, the reasonable fees
and expenses of legal counsel, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made) not misleading, and the Company will reimburse such seller
or underwriter and each such director, officer, partner, agent, affiliate and
controlling person for any reasonable legal or any other expenses incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall not
be liable in any case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof; and
provided, further, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus or
summary prospectus, amendment or supplement thereto if (i) such untrue statement
or omission or alleged untrue statement or omission is completely corrected in a
prospectus or prospectus supplement or in an amendment or supplement to such
prospectus or prospectus supplement, (ii) the seller of Registrable Securities
or the underwriter of Registrable Securities, as the case may be, has an
obligation under the Securities Act to deliver a prospectus or prospectus
supplement in connection with such sale of Registrable Securities and (iii) the
seller of Registrable Securities or the underwriter of Registrable Securities,
as the case may be, thereafter fails to deliver such prospectus or prospectus
supplement or such amendment or supplement to such prospectus or prospectus
supplement prior to or concurrently with the sale of Registrable Securities to
the person asserting such loss, claim, damage, liability or expense after the
Company has furnished the seller of Registrable Securities or the underwriter of
Registrable Securities, as the case may be, with a
10
<PAGE>
sufficient number of copies of the same. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or underwriter or any such director, officer, partner, agent,
affiliate or controlling person and shall survive the transfer of such
securities by such seller or underwriter.
(b) Indemnification by the Sellers. As a condition to including
any Registrable Securities in any registration statement, the Company shall have
received an undertaking reasonably satisfactory to it from the prospective
seller of such Registrable Securities to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 2.5(a)) the Company
and each director of the Company, each officer of the Company who signs the
registration statement and each other Person, if any, who participates as an
underwriter in the offering or sale of such securities and each other Person who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, with respect to any statement or alleged
untrue statement of a material fact in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the liability of such indemnifying party under this Section 2.5(b) shall be
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company or any such director, officer, employee, shareholder, controlling person
or other Person. Such indemnity shall survive the transfer of such securities by
such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.5(a) or (b), such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.5, except to the extent that
the indemnifying party is actually and materially prejudiced by such failure to
give notice. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for legal or other expenses subsequently incurred by the latter in connection
with the defense thereof; provided, however, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing,
11
<PAGE>
in any action or proceeding in which the Company as well as an indemnified party
is, or is reasonably likely to become, a party, such indemnified party shall
have the right to employ separate counsel at the expense of the Company, and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such indemnified party, (a) there are or may be any legal
defenses available to such indemnified party or to other indemnified parties
that are different from or additional to those available to the Company, or (b)
any conflict or potential conflict exist between the Company and such
indemnified party that would make such separate representation advisable in the
opinion of the indemnified party. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No indemnifying party shall,
without the consent of the indemnified party, which consent shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation or which requires action other
than the payment of money by the indemnifying party or which otherwise adversely
affects the indemnified party. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this
Section 2.5 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.5(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 2.5(a) or (b), the indemnified party
and the indemnifying party under Section 2.5(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), in such
proportion as is appropriate to reflect the relative fault of the Company on one
hand, and the prospective sellers on the other hand, which resulted in such
loss, claim, damage or liability, or action or proceeding in respect thereof,
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action or proceeding in respect thereof, as well as any
other relevant equitable considerations; provided, that for purposes of this
Section 2.5(d), no seller shall be obligated to contribute to another party any
amount in excess of the amount that such seller would have been obligated to pay
to such other party if the indemnity under Section 2.5(a) or (b) were available.
The relative fault shall be determined by reference to whether an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party on one hand and the indemnified party on the other hand, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by a
party's security ownership in the Company. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective seller's obligations to
contribute as provided in this Section 2.5(d) are several in proportion to the
relative value of such seller's
12
<PAGE>
respective Registrable Securities covered by such registration statement and not
joint. In addition, no Person shall be obligated to contribute hereunder any
amounts in payment for any settlement of any action or claim effected without
such Person's consent, which consent shall not be unreasonably withheld.
(e) Indemnification Payments. The indemnification and contribution
required by this Section 2.5 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
2.6 Company's Right of First Refusal
(a) Section 6 of Investment Agreement. Prior to any sale of
Registrable Securities by any Selling Holders pursuant to the registration
provisions of Section 2.1, the Company shall have the right, exercisable in
accordance with Section 6 of the Investment Agreement, to purchase all, but not
less than all, of the Registrable Securities to be subject to such sale by all
such Selling Holders (the "Offered Securities") at a purchase price in cash
equal to the First Offer Price per share of Common Stock of the Offered
Securities (assuming for this purpose that such Convertible Preferred Securities
have been converted into Common Stock). For purposes of this Section 2.6, (i)
references in Section 6 of the Investment Agreement to the term "Investor" shall
include, as the context requires, the Selling Holders, (ii) the demand for
registration or request for registration provided for in this Agreement shall be
deemed to be the Transfer Notice required by Section 6(a) of the Investment
Agreement, (iii) the date for the closing of a purchase by the Company of
specified Registrable Securities from a Selling Holder shall not be more than 10
business days after the delivery by the Company of an Acceptance Notice (as such
term is defined in the Investment Agreement) to such Selling Holder, subject to
extension as provided in Section 6(f) of the Investment Agreement, and (iv) in
the event the Company does not exercise its right to purchase Registrable
Securities, and such Registrable Securities are to be sold pursuant to an
underwritten offering, then the Selling Holders or the Requesting Holders, as
the case may be, shall cause the managing underwriter to use its commercially
reasonable efforts not to sell any such shares to any of the persons described
in clauses (x), (y) or (z) of Section 5(b) of the Investment Agreement, subject
to the exceptions and qualifications set forth therein.
(b) Additional Purchase Rights. In the event the Company elects
not to exercise its right to purchase the Offered Securities from the Selling
Holders as provided in Section 2.6(a) and the offering price at which such
Offered Securities to be registered with the Commission pursuant to Section 2.1
and purchased from the Selling Holders (the "Second Offer Price") is less than
95% of the First Offer Price, then the Company shall have the additional right
to cancel the proposed public offering and purchase all such Offered Securities
from such Selling Holders, at the Second Offer Price (less any underwriting
discounts and commissions). The Company and the Selling Holders shall cause any
underwriting agreement entered into in connection with the offer and sale of the
Offered Securities to reflect such purchase right of the Company. Immediately,
and in no event less than three business days,
13
<PAGE>
prior to the time the registration statement filed by the Company for the
registration of the Offered Securities becomes effective under the Securities
Act, the Company shall, or shall cause the managing underwriter to, notify the
Selling Holders, in the case of a registration requested pursuant to Section
2.1, of the Second Offer Price. If the Company elects to exercise its right to
purchase the Offered Securities at the Second Offer Price (less any underwriting
discounts and commissions), the Company shall promptly (and prior to the
effectiveness of the registration statement for such Offered Securities) deliver
an Acceptance Notice (as defined in the Investment Agreement) to each Selling
Holder of its intention to purchase the Offered Securities owned by such Selling
Holder at the Second Offer Price (less any underwriting discounts and
commissions), on a date not more than five business days after delivery of such
Acceptance Notice (subject to extension as provided in Section 6(f) of the
Investment Agreement). If the Company elects to exercise its purchase rights
hereunder and purchases the Offered Securities, the Company shall pay all fees
(including all underwriting discounts and commissions which would have been
given or retained by such underwriters had the proposed public offering been
consummated) of the underwriters in connection with the preparation and filing
of the registration statement and the Company shall pay all Registration
Expenses of the Selling Holders which would have been payable by it pursuant to
Section 2.1 had the Company not exercised its purchase rights hereunder.
3. Rule 144. The Company shall take all actions reasonably necessary to
enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exceptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rules or regulations hereafter adopted by
the Commission, and subject to the limitations on transfer set forth in Section
5 of the Investment Agreement. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether such requirements have been complied with.
4. Amendments and Waivers. This Agreement may be amended with the written
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holder or holders of at least a majority in aggregate
principal amount or liquidation amount, as the case may be, of the Registrable
Securities affected by such amendment, action or omission to act; provided,
however, that the provisions set forth in the third sentence of Section 5 may
not, directly or indirectly, be amended or modified without the prior written
consent of each Lender (as defined in Section 6(c) of the Investment Agreement)
affected thereby. Each holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
4, whether or not such Registrable Securities shall have been marked to indicate
such consent. No course of dealing between any parties or any delay on the part
of any party in exercising any rights hereunder or under any agreement
contemplated hereby shall operate as a waiver of any rights of any such party.
No delay on the part of any party in exercising any right, power or privilege
14
<PAGE>
hereunder shall operate as a waiver thereof, or shall any waiver on the part of
any party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or in equity.
5. Transfer of Registration Rights; Termination. Any holder of Registrable
Securities may transfer all or any portion of its rights under this Agreement to
any transferee (each, a "Transferee") of Registrable Securities owned by such
holder, subject to the limitations on transfers of Convertible Preferred
Securities and Conversion Shares set forth in Section 5 of the Investment
Agreement and the Company's rights of purchase set forth in Section 6 of the
Investment Agreement and Section 2.6 of this Agreement; provided, however, that
the rights of the Investor under this Agreement may be assigned to a
wholly-owned subsidiary of the Investor, without the consent of the Company,
provided that the Investor shall remain liable for the obligations of the
Investor hereunder. Any transfer of rights pursuant to this Section 5 shall be
effective upon receipt by the Company of (i) a written notice from such holder
stating the name and address of any Transferee and identifying the amount of
Registrable Securities with respect to which the rights under this Agreement are
being transferred and the nature of the rights so transferred and (ii) a written
agreement from such Transferee to be bound by the terms of this Agreement and
the Investment Agreement. In addition to the foregoing, and notwithstanding any
other provision of this Agreement or the Investment Agreement, the Investor may
transfer all or any portion of its rights under this Agreement to any Lender (as
defined in Section 5(c) of the Investment Agreement), subject to the Company's
rights of purchase set forth in Section 6 of the Investment Agreement and
Section 2.6 of this Agreement (other than Section 2.6(a)(iv). The holders of
Registrable Securities may exercise the rights hereunder in such priority as
they shall agree upon among themselves.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
7. Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be sent by registered or
certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
15
<PAGE>
(a) If to the Investor, at 145 King Street West, Suite 1500, Toronto,
Ontario M5H 4B7, Canada, attention: Stuart F. Feiner, General Counsel or at such
other address as the Investor shall have furnished to the Company in the manner
set forth herein;
(b) If to the Company, at 4317 Middle Settlement Road, New Hartford,
New York 13413, attention: Robert F. Dropkin, Vice President, Secretary and
Chief Legal Counsel or at such other address as the Company shall have furnished
to each holder of Registrable Securities at that time outstanding in the manner
set forth herein; or
(c) If to any other holder of Registrable Securities, at the address
that such holder shall have furnished to the Company in writing in the manner
set forth herein, or, until such holder so furnishes to the Company an address,
then to and at the address of the last holder of such Registrable Securities who
has furnished an address to the Company.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by a
courier, if delivered by overnight courier service; three business days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied.
8. Successors and Assigns; Third Parties.
(a) Subject to Section 5, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except by operation of law, this agreement shall not be
assigned by the Company without the prior written consent of the holders of a
majority of the Registrable Securities outstanding at the time such consent is
required.
(b) Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any Person (other than the parties and their
successors and permitted assigns and any Person entitled to the benefit of
Section 2.5) any right, remedy or claim under or by reason of this Agreement.
9. No Inconsistent Agreements; Acknowledgment. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Securities in
this Agreement. Without limiting the generality of the foregoing, the Company
will not hereafter enter into any agreement with respect to its securities which
grants to any holder of its securities in connection with a piggy-back
registration of such securities equal or higher priority to the rights granted
to the holders of Registrable Securities under Section 2. The parties hereby
acknowledge that, on the date hereof, the Company and Timet will enter into the
Timet Registration Rights Agreement pursuant to which the Company will grant to
Timet certain demand and priority piggy-back registration rights for the
Registrable Securities held by it.
16
<PAGE>
10. Remedies. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
11. Severability. If any term or provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
12. Calculation of Percentage Interests in Registrable Securities. For
purposes of this Agreement, all references to a percentage of the Registrable
Securities shall be calculated based upon the number of shares, warrants or
rights or the aggregate principal amount or liquidation amount, as applicable,
of Registrable Securities outstanding at the time such calculation is made.
13. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
14. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in that State, without regard to principles of conflicts of
law.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed an original and all of which taken together
shall constitute one and the same instrument.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
INCO LIMITED
By: /s/ Stuart F. Feiner
-------------------------------------
Name: Stuart F. Feiner
Title: Executive Vice President
SPECIAL METALS CORPORATION
By: /s/ Donald R. Muzyka
-------------------------------------
Name: Donald R. Muzyka
Title: President and Chief Executive
Officer
18
