<PAGE> 1
CONFORMED
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
Commission file number 1-228
ZEMEX CORPORATION
(Exact name of registrant as specified in its charter)
CANADA NONE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
CANADA TRUST TOWER, BCE PLACE, 161 BAY STREET, SUITE 3750
TORONTO, ONTARIO, CANADA M5J 2S1
(416) 365-8080
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Toronto Stock Exchange and New York Stock Exchange Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the registrant's voting stock (common shares, no
par value) held by non-affiliates as of March 31, 2000 (based on the closing
sale price of $8.375 on the New York Stock Exchange) was $40,358,510.
As of March 31, 2000, 8,899,224 shares of the registrant's common shares, no par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement filed with the Commission
pursuant to Regulation 14A with respect to the 2000
Annual Meeting of Shareholders Part III
<PAGE> 2
FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
AND
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART I
PAGE
<S> <C> <C>
Item 1. Business ........................................................... 1
Item 2. Properties ......................................................... 7
Item 3. Legal Proceedings .................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders ................ 8
Item 10. Executive and Other Officers of the Registrant(A) .................. *
</TABLE>
<TABLE>
<CAPTION>
PART II
<S> <C> <C>
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ............................................................ 9
Item 6. Selected Financial Data ............................................ 10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation ............................................... 11
Item 8. Financial Statements and Supplementary Data ........................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ............................................... 19
</TABLE>
<TABLE>
<CAPTION>
PART III
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant(B) .............. *
Item 11. Executive Compensation(B) .......................................... *
Item 12. Security Ownership of Certain Beneficial Owners and Management(B) .. *
Item 13. Certain Relationships and Related Transactions(B) .................. *
</TABLE>
<TABLE>
<CAPTION>
PART IV
<S> <C> <C>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ... 20
</TABLE>
__________________________
(A) Included in Part I, Item 1, pursuant to Instruction 3 of Item 401(b)
of Regulation S-K.
(B) Information responsive to these Items is set forth in the
registrant's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A and in the Annual Report to
Shareholders on page F-22 (Note 14) of this report.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Zemex Corporation (the "Corporation" or "Zemex"), a company incorporated under
the Canada Business Corporations Act, is a niche producer of specialty materials
and products for use in a variety of industrial applications. Zemex operates
through three major divisions: (i) industrial minerals, (ii) metal powders, and
(iii) aluminum recycling. Its major products include feldspar, feldspathic
minerals, kaolin, sand, mica, talc, ferrous and non ferrous powders, and
aluminum dross derivatives. As at December 31, 1999, Zemex operated eighteen
plants throughout Canada and the United States.
On December 8, 1999, the Corporation announced that it had retained Banc of
America Securities, LLC to review methods and opportunities to maximize value
for the Corporation's shareholders. On April 11, 2000, the Corporation announced
that it had completed the sale of the two subsidiaries comprising the metal
powders division, Pyron Corporation and Pyron Metal Powders, Inc., to a
subsidiary of Hoganas AB for gross proceeds of approximately $41 million in
cash, subject to certain post-closing adjustments. There can be no assurance
that any further transactions will result from these efforts to maximize
shareholder value. As a result of the sale of the Pyron companies, the metal
powders division has been reflected as discontinued operations in the
Corporation's consolidated statements of income.
Originally, Zemex was incorporated under the laws of the State of Maine in 1907
and was known as Yukon Gold Corporation. At its annual meeting of shareholders
on May 20, 1938, a resolution was passed to change its name to Yukon-Pacific
Mining Corporation. On November 8, 1939, Zemex reorganized, incorporated under
the laws of the State of Delaware, and changed its name to Pacific Tin
Consolidated Corporation. Also in 1939, Zemex listed on the New York Stock
Exchange. In 1985, Zemex changed its name to its current form and
reincorporated under the laws of the State of Delaware as the successor to
Pacific Tin Corporation. Effective January 21, 1999 Zemex completed a
reorganization pursuant to which shareholders of the predecessor Delaware
corporation became shareholders of a corporation incorporated under the Canada
Business Corporations Act.
INDUSTRIAL MINERALS
The Corporation's industrial minerals division is comprised of The Feldspar
Corporation ("TFC"), Suzorite Mica Products Inc. ("Suzorite"), Suzorite Mineral
Products, Inc. ("SMP"), Zemex Fabi-Benwood, LLC, Zemex Industrial Minerals, Inc.
and Zemex Mica Corporation ("ZMC") (collectively, "Zemex Industrial Minerals" or
"ZIM"). Each of these companies is either directly or indirectly a wholly-owned
subsidiary of Zemex, except for Zemex Fabi-Benwood, LLC of which Zemex owns 60%.
TFC has mining and processing facilities in Edgar, Florida; Monticello,
Georgia; and Spruce Pine, North Carolina. Using traditional methods, TFC mines
sodium feldspar from two different ore deposits in the Spruce Pine area.
Potassium feldspar is mined from two deposits close to the Monticello plant.
TFC's kaolin and sand products are recovered by dredging and wet separation at
the Edgar property. All mined and recovered products are subjected to standard
and proprietary milling and drying techniques.
TFC produces numerous products at its operating plants, including sodium and
potassium feldspar, silica, low iron sand, muscovite mica and kaolin clay.
Feldspathic materials are key ingredients for the ceramic industry, and are
incorporated into the production of ceramic floor and wall tiles, dinnerware,
plumbing fixtures, glazes and electrical insulators. TFC supplies its products
primarily to the glass and ceramics industries. Feldspar and certain grades of
industrial sand are also used to manufacture bottles, jars, and other glass
containers, fibreglass, paints and plastics, and television picture tubes.
Industrial sand is used for filter, filler, beach sand, blasting and concrete
applications. TFC also produces a low iron sand product for use in highly
specialized glass applications.
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Suzorite mines phlogopite mica in an open pit mining operation in Suzor
Township, Quebec, Canada, approximately 300 kilometres north of Montreal,
Quebec. The ore is mined by standard open pit methods and delivered to a siding
for transportation by rail to the processing plant, which is located in
Boucherville, Quebec, a suburb of Montreal. Because of its distinct thermal
stability advantage over competitive materials, phlogopite mica is used to
impart rigidity in technological and high temperature plastic applications.
Suzorite's phlogopite mica is used as a partial or complete substitute for
asbestos in fire retardation. It is also used in friction materials, oil well
drilling needs, caulking and molding compounds, coatings, plasters and
plastics. The principal markets served by Suzorite are the automobile,
construction and oil drilling industries. These products are marketed under the
trade names Suzorite Mica and Suzorex.
SMP produces talc and other minerals at Natural Bridge, New York; Murphy, North
Carolina; Van Horn, Texas; and Benwood, West Virginia. SMP purchases talc for
conversion and processing at its plant in Natural Bridge and processes products
directed primarily to the cosmetic and pharmaceutical industries. The
production facility in Van Horn processes talc mined in proximity to the plant
for the coatings, plastics and ceramics industries. The Benwood operation
processes a wide range of talc products from imported raw materials for
ultimate use in the plastics industry. The Murphy plant purchases raw
materials and produces baryte products, primarily for the oil drilling and
coatings industries.
In January 1998, the Corporation acquired ZMC, a muscovite mica producer in the
Spruce Pine, North Carolina area close to TFC's feldspar plant where by-product
muscovite mica is produced. A major capital expenditure program to retrofit
and expand these facilities was completed at the end of 1999 and it is expected
that the plant will be operating at close to full capacity by mid-2000. This
acquisition enhances the Corporation's position as a major mica supplier.
In February 1998, Industria Mineraria Fabi S.r.l. ("Fabi"), a leading
European talc producer, became an investor in the Corporation's talc facility
located in Benwood, West Virginia by acquiring a 40% interest in a new limited
liability company, Zemex Fabi-Benwood, LLC. As part of the transaction, Fabi
paid $3.4 million and is providing access to its technology and to its premium
talc deposit in Australia. SMP manages the new entity pursuant to an operating
agreement.
Demand for Zemex's industrial minerals is related to the pace of the general
economy and, particularly, the residential and commercial construction
industries.
The Corporation's industrial minerals sales were $50.4 million in 1999,
compared to $44.8 million in 1998 and $43.4 million in 1997. This business
segment reported operating income of $8.0 million in 1999, $5.8 million in
1998, and $6.5 million in 1997.
During 1999, considerable efforts were directed to product development,
marketing, capital expansion projects and product quality improvement. The
Corporation expects these efforts will bear fruit in the future.
Capital expenditures were $7.1 million in 1999 compared to $8.3 million in 1998
and $9.9 million in 1997. Major capital spending in 1999 included the
retrofitting of the muscovite mica operation that was acquired in 1998. In
2000, capital expenditures are expected to be approximately $3.4 million.
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METAL POWDERS
The metal powder division consists of two wholly-owned subsidiaries, Pyron
Corporation and Pyron Metal Powders, Inc. (together, "Pyron"). Pyron operates
plants located in Niagara Falls, New York; St. Marys, Pennsylvania; and
Greenback and Maryville, Tennessee. Pyron's major products include iron, steel,
copper, copper alloy powders and manganese sulfide. As noted below in more
detail, the metal powders division was sold on April 11, 2000.
The primary applications of metal powders are in the fabrication of precision
metal parts using powder metallurgy and in the friction industry. Powder
metallurgy is an efficient, economical process for the production of complex
components used in the automotive, farm, garden and lawn equipment, and business
machine industries. Key features of powder metallurgy technology are low scrap
ratios and lower production costs when compared to other conventional metal
working processes.
In recent years, metal powder use in the friction industry and, particularly,
in automotive and rail braking systems has grown rapidly as a replacement for
asbestos, achieving better performance and improved environmental and health
conditions. Metal powders are also used in the production of welding rods, for
cutting and scarfing of steel ingots and billets, for the inspection of oil
field pipe and tubing, and in food supplements.
Sales for the metal powders group increased to $39.0 million in 1999 from $35.6
million in 1998 as a result of higher sales volumes of ferrous and non ferrous
metal powders. Sales were $33.9 million in 1997. During the same period,
operating income increased from $4.0 million in 1998 to $6.1 million in 1999.
Operating income was $2.4 million in 1997. This division anticipates margins to
further improve in the year 2000 as a result of new products, higher metal
powder production, continuing cost reductions and efficiency improvement
programs.
Capital expenditures for the metal powders group were $1.6 million in 1999 as
compared to $2.1 million in 1998 and $1.3 million in 1997. During 1999,
expenditures were primarily directed towards general sustaining capital
requirements. In 2000, capital expenditures are anticipated to be $1.6 million.
On April 11, 2000, the Corporation announced the completion of the sale of its
metal powder division for gross proceeds of approximately $41 million, subject
to certain post-closing adjustments. The sale resulted in a gain of
approximately $18 million. These subsidiaries have been reflected as
discontinued operations on the Corporation's consolidated statement of income
and prior years have been reclassified to reflect this disclosure.
ALUMINUM RECYCLING
Zemex's aluminum recycling group is composed of Alumitech, Inc., Alumitech of
Cleveland, Inc., Alumitech of Wabash, Inc., ETS Schaefer Corporation and AWT
Properties, Inc. (collectively, "Alumitech"), all of which are direct or
indirect wholly-owned subsidiaries. Alumitech has three facilities: aluminum
dross reprocessing plants in Cleveland, Ohio and Wabash, Indiana, and a heat
containment fabrication plant in Macedonia, Ohio. Its administrative office is
in Streetsboro, Ohio.
Alumitech is an aluminum dross processor that has developed and patented
proprietary technology to recycle secondary aluminum drosses into industrial
feedstock components, eliminating the necessity for landfill. Aluminum dross is
the waste by-product produced by primary and secondary aluminum smelters.
Secondary dross, which has a high salt content, forms the primary feedstock for
Alumitech's process. Conventional dross processors simply recover aluminum
metal and some oxides and send the residue to landfill. Using its patented
process, Alumitech has the ability to separate the dross into its basic
components: aluminum metal, alumina and metal fines, salts and non-metallic
product ("NMP") and further refine the NMP for use as a feedstock for the
production of calcium aluminate, refractory ceramic fibre and other
commercially acceptable products. Currently, competitive processes landfill
anywhere from 40%-75% of the volume of dross received, whereas Alumitech's
recycling process has the ability to virtually eliminate the need for landfill.
Alumitech is considered the industry leader in the development of alternative
uses for NMP. Alumitech's patents on its technology to process NMP have a
remaining life of approximately 11 years.
In February 1997, Alumitech, through its wholly-owned subsidiary, Engineered
Thermal Systems, Inc., acquired the assets of Schaefer Brothers, Inc., a small
regional manufacturer of ceramic fiber-based heat containment systems located
in Medina, Ohio. The Schaefer Brothers business was merged with Engineered
Thermal Systems, Inc., also a manufacturer of ceramic fiber-based heat
containment systems, to form ETS Schaefer Corporation.
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<PAGE> 6
In June 1998, Alumitech acquired 100% of the issued and outstanding shares of
Alumitech of Wabash, Inc. (previously known as S&R Enterprises, Inc.), a Wabash,
Indiana based aluminum dross processor. This acquisition provides Alumitech with
additional metal melting capacity and the opportunity to expand its NMP
processing capability.
Sales for the aluminum recycling group increased to $27.2 million in 1999 from
$23.5 million in 1998 and $19.9 million in 1997. The increase from 1998 to 1999
was primarily due to increased sales from Alumitech of Wabash, Inc., which was
acquired in June 1998. The 1999 numbers include a full year of operation. During
the same interval, operating income decreased slightly to $2.8 million in 1999
from $2.9 million in 1998. Operating income was $1.9 million in 1997. Management
anticipates improved margins in this segment in 2000 as a result of new
products, continuing cost reductions, and efficiency improvement programs.
Capital expenditures for the aluminum recycling group were $5.0 million in 1999
as compared to $10.1 million in 1998 and $5.3 million in 1997. The 1999
expenditures were primarily directed to the construction and commercialization
of a new NMP processing facility at the Cleveland plant and the expansion of
the aluminum dross recycling operation in Wabash, Indiana. In 2000, capital
expenditures are anticipated to be $3.7 million.
RAW MATERIALS AND OTHER REQUIREMENTS
In recent years, the Corporation has not experienced any substantial difficulty
in satisfying the raw materials requirements for its metal powders and aluminum
recycling operations, which are the segments that consume, rather than supply,
raw materials. However, no assurance can be given that any shortages of these or
other necessary materials or equipment will not develop or that increased prices
will not adversely affect the Corporation's business in the future.
SEASONALITY
The efficiency and productivity of the Corporation's operations can be affected
by unusually severe weather conditions. During the winter of 1999, there were
minor production outages at the Corporation's operating facilities in North
Carolina, New York, Ohio and Quebec due to inclement weather, but they were not
significant enough to materially affect 1999 operating results.
COMPETITION
All of the Corporation's products are sold in highly competitive markets, which
are influenced by price, performance, customer location, service, competition,
material substitution and general economic conditions. The Corporation competes
with other companies active in industrial minerals, metal powders and aluminum
recycling. No material part of the Corporation's business is dependent upon any
single customer, or upon very few customers, the loss of any one of which could
have a material adverse impact on the Corporation.
Industrial mineral prices generally are not subject to the price fluctuations
typical of commodity metals. Demand for industrial minerals is primarily related
to general economic conditions, particularly in the automotive, housing and
construction industries. Markets for industrial mineral products are sensitive
not only to service, product performance, and price, but also to competitive
pressures and transportation costs. In the United States, there are three major
feldspathic mineral producers, including the Corporation. The Corporation is the
only North American producer of phlogopite mica and one of many talc producers.
The Corporation is one of five North American producers of metal powders. The
market for metal powders is affected primarily by product performance,
consistency of quality and price. To some extent, competition in the metal
powder industry is affected by imports of finished metal powder parts. Product
prices over the last several years have been strongly influenced by available
capacity. Demand for metal powders is a function of general economic conditions,
particularly in the automotive market. The Corporation completed the sale of its
metal powder division on April 11, 2000.
There are numerous aluminum dross processors in the United States, however,
only Alumitech has patented technology which enables it to process aluminum
dross without the necessity for landfill. While the
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Corporation competes for the supply of aluminum dross with a number of other
dross processors, the major factor affecting the supply of dross is the level
of activity of the aluminum smelting industry. In addition, as aluminum is one
of the products of aluminum dross reprocessing, commodity price fluctuations of
aluminum may have an impact on the earnings of the Corporation.
RESEARCH AND DEVELOPMENT
The Corporation carries on an active program of product development and
improvement. Research and development expense was $1.1 million in 1999, $0.6
million in 1998 and $1.0 million in 1997.
Financial information about continuing operations by industry segment is set
forth on pages F-22 to F-25 of this report. Financial information for the metal
powders division, which has been disclosed as a discontinued operation, is set
forth on pages F-20 to F-21.
ENVIRONMENTAL CONSIDERATIONS
Laws and regulations currently in force which do or may affect the Corporation's
domestic operations include the Federal Clean Air Act of 1970, the National
Environmental Policy Act of 1969, the Solid Waste Disposal Act (including the
Resource Conservation and Recovery Act of 1976), the Toxic Substances Control
Act, CERCLA (superfund) and regulations under these Acts, the environmental
protection regulations of various governmental agencies (e.g. the Bureau of Land
Management Surface Management Regulations, Forest Service Regulations, and
Department of Transportation Regulations), laws and regulations with respect to
permitting of land use, various state and local laws and regulations concerned
with zoning, mining techniques, reclamation of mined lands, air and water
pollution and solid waste disposal. Each of the Corporation's operations strives
to be environmentally sensitive. Currently, the Corporation is not aware of any
materially adverse environmental problems or issues.
EMPLOYEES
The approximate number of employees in the Corporation as of December 31, 1999
is set forth below:
<TABLE>
<S> <C>
Industrial Minerals 324
Metal Powders 173
Aluminum Recycling 171
Corporate 7
---
Total 675
===
</TABLE>
Approximately 65 employees at the Corporation's metal powder operations in
Niagara Falls, New York, are covered by a three-year collective bargaining
agreement, which expires April 15, 2001. At the ferrous metal powder facilities
in Tennessee, approximately 38 employees are covered by a four-year agreement,
which expires February 28, 2002.
Approximately 20 employees at Suzorite are covered by a three-year collective
bargaining agreement that expires December 12, 2002.
At Alumitech, approximately 28 employees are covered by two collective
bargaining agreements, one agreement expiring April 30, 2001 and one agreement
expiring December 31, 2001.
Approximately 57 hourly employees at TFC's sodium feldspar plant in Spruce Pine,
NC are covered by a wage agreement, which expires January 31, 2001.
The Corporation considers its labour relations to be good.
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FOREIGN OPERATIONS
The Corporation's operations are located in the United States and Canada,
countries whose institutions and governmental policies are generally similar.
Although there can be no assurance as to future conditions, the Corporation has
experienced no political activities, social upheavals, currency restrictions or
similar factors, which have had any material adverse effect to date on the
results of its operations or financial condition.
EXPORT SALES
The Corporation's industrial minerals, metal powders and aluminum recycling
operations sell their products internationally to a wide variety of customers
including the ceramics, glass and powder metallurgy industries. Export sales
were 8.5% of total sales for the year ended December 31, 1999.
EXECUTIVE AND OTHER OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
SERVED IN
OFFICER POSITION AGE POSITION SINCE
<S> <C> <C> <C>
Peter Lawson-Johnston Chairman of the Board of Directors 73 1975
Richard L. Lister President and Chief Executive Officer 61 1993
Allen J. Palmiere Vice President, Chief Financial Officer 47 1993
and Assistant Secretary
Peter J. Goodwin President, Industrial Minerals 49 1994
Terrance J. Hogan President, Aluminum Recycling 44 1995
George E. Gillespie President, Metal Powders 57 1997
Patricia K. Moran Corporate Secretary and 34 1997
Assistant Treasurer
</TABLE>
There are no family relationships between the officers listed above. The term
of office of each executive officer is until his/her respective successor is
elected and has qualified, or until his/her death, resignation or removal.
Officers are elected or appointed by the board of directors annually at its
first meeting following the annual meeting of shareholders. The following are
the current officers of the Corporation and a description of their business
activities if less than five years in their present position.
Mr. Goodwin joined the Corporation in August 1994 and became President of the
Corporation's talc operations in December 1994. From May 1993 to August 1994,
Mr. Goodwin was a self-employed consultant. Mr. Goodwin was President and Chief
Executive Officer of Miller and Co. from August 1990 to May 1993.
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Mr. Hogan became President of Alumitech, Inc. in May 1995. Prior to becoming
President, Mr. Hogan was Chief Operating Officer of Alumitech's subsidiary,
Aluminum Waste Technology, Inc., from December 1992 to May 1995.
Mr. Gillespie became President of the Metal Powders Group in April 1997. Prior
to joining the Corporation, Mr. Gillespie was Chairman of the Operating
Committee for three divisions of The Carborundum Company in 1996. Mr. Gillespie
was Vice-President Refractories from 1993 to 1996 for The Carborundum Company.
Ms. Moran assumed the duties of Corporate Secretary and Assistant Treasurer in
May 1997. Prior to that time Ms. Moran served as Assistant Secretary-Treasurer
since February 1995. Ms. Moran has been with the Corporation since 1993.
CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE
UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward looking statements that involve risks and uncertainties that could
cause actual results to differ materially from targeted or projected results.
Factors that could cause actual results to differ materially include, among
others, fluctuations in aluminum prices, problems regarding unanticipated
competition, processing, access and transportation of supplies, availability of
materials and equipment, force majeure events, the failure of plant equipment
or processes to operate in accordance with specifications or expectations,
accidents, labor relations, delays in start-up dates, environmental costs and
risks, the outcome of acquisition negotiations and general domestic and
international economic and political conditions, as well as other factors
described herein or in the Corporation's filings with the Commission. Many of
these factors are beyond the Corporation's ability to predict or control.
Readers are cautioned not to put undue reliance on forward looking statements.
ITEM 2. PROPERTIES
The industrial minerals segment has operations and mines in Edgar, Florida;
Monticello, Georgia; Boucherville, Quebec; Suzor Township, Quebec; Natural
Bridge, New York; Murphy, North Carolina; Spruce Pine, North Carolina; Van Horn,
Texas; and Benwood, West Virginia. This segment owns approximately 391,500
square feet of office and plant floor space. As well, the 60% owned processing
facility in Benwood, West Virginia has approximately twelve acres of land. TFC
also owns 703 acres which contain, at minimum, 50 years additional ore resources
for its Spruce Pine, North Carolina facility. The mineral deposits currently
operated by the industrial minerals segment are estimated by the Corporation to
range from 4 years to in excess of 100 years. All of the Corporation's mining
properties are either owned or leased, with the leases expiring from 2000 to
2018.
The metal powders group has operations in Niagara Falls, New York; St. Marys,
Pennsylvania; Greenback, and Maryville, Tennessee. At its facility in Niagara
Falls, Pyron Corporation utilizes approximately 79,000 square feet of office and
plant floor space. The atomized plant utilizes approximately 16,000 square feet
of floor space and is adjacent to the existing facility. The blending plant in
St. Marys, Pennsylvania has 32,000 square feet of plant, office and storage
space and is situated on 3.4 acres of land. The Greenback facility is situated
on 27.5 acres of land of which 6 acres is actively used in the operations. The
Maryville facility is a leased facility, which utilizes approximately 23,000
square feet of office and plant floor space. On April 11, 2000, the Corporation
announced the completion of the sale of the metal powders group.
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The aluminum recycling group has operations in Cleveland, Ohio; Macedonia, Ohio;
Streetsboro, Ohio and Wabash, Indiana. The aluminum dross processing plant in
Cleveland, Ohio owns 6.1 acres and has buildings totaling 51,000 square feet.
The Streetsboro, Ohio operation leases approximately 2,300 square feet of a
36,000 square foot building, which it uses primarily for office space. The
recently built Macedonia facility includes 72,210 square feet of plant of which
10,000 is designated office space and is situated on 8 acres of land. The
aluminum recycling operation in Wabash, Indiana sits on approximately 25 acres
of land and has 73,300 square feet of plant and office space.
All facilities relating to the Corporation's continuing operations are
maintained in good operating condition.
ITEM 3. LEGAL PROCEEDINGS
In February 1999, the Corporation received notice that it was party to an action
captioned Marsha Fisher-Carrington Administratrix to the Estate of Larry
Carrington v. Aluminum Waste Technology, Inc. and Alumitech, Inc., et al., Court
of Common Pleas, Cuyahoga County, Ohio, Case Number 373502. The action arises
from an accidental fatality that occurred at Alumitech of Cleveland, Inc. in
January 1997. The plaintiff sought damages on the basis that the Corporation
failed to provide a safe working area. The Corporation has tentatively settled
this claim and is awaiting court approval of the settlement. The cost to settle
will be covered by primary and excess liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Zemex Corporation's common shares are traded on the New York Stock Exchange
and, as of February 1, 1999, on the Toronto Stock Exchange, under the symbol
ZMX. The price range in which the shares have traded for the past two years is
shown below:
COMMON SHARES
<TABLE>
<CAPTION>
1999 Q1 Q2 Q3 Q4 YEAR
- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
HIGH $ 6.88 $ 6.50 $ 7.63 $ 9.75 $ 9.75
LOW 5.00 5.19 6.13 6.75 5.00
CLOSE 5.44 6.31 7.06 9.13 9.13
- ----- ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
1998 Q1 Q2 Q3 Q4 YEAR
- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
High $ 9.75 $10.44 $ 9.19 $ 6.94 $10.44
Low 7.81 8.75 6.00 6.00 6.00
Close 9.50 8.75 6.50 6.25 6.25
- ----- ------ ------ ------ ------ ------
</TABLE>
In the fourth quarters of 1998 and 1997, the Corporation declared a 2% stock
dividend.
As of December 31, 1999, there were approximately 1,830 holders of record of
the Corporation's capital stock. This number includes shares held in nominee
name and, thus, does not reflect the number of holders of a beneficial interest
in the shares.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $ 77,530,000 $ 68,338,000 $ 63,296,000 $ 54,695,000 $50,664,000
Reorganization and
restructuring charges - - - 1,216,000 -
Operating income 7,015,000 6,202,000 5,994,000 690,000 6,566,000
Other income (expense) (4,696,000) (3,022,000) (132,000) (1,313,000) (195,000)
Income from continuing operations 1,847,000 2,652,000 4,118,000 918,000 7,477,000
Income from discontinued
operations 3,934,000 2,713,000 1,675,000 1,694,000 941,000
Net income 5,781,000 5,365,000 5,793,000 2,612,000 8,418,000
FINANCIAL POSITION
Working capital $ 27,613,000 $ 14,810,000 $ 18,975,000 $ 18,688,000 $19,709,000
Total assets 159,528,000 148,866,000 118,774,000 109,376,000 96,681,000
Long term debt (non-current
portion) 50,502,000 39,354,000 20,527,000 17,797,000 7,485,000
COMMON SHARES
Average common shares outstanding 8,425,561 8,286,178 8,267,630 8,272,904 8,342,276
Actual common shares issued and
outstanding at year end 8,873,453 8,707,796 8,463,491 8,269,099 8,355,722
PER COMMON SHARE
Basic-Continuing operations $ 0.22 $ 0.32 $ 0.50 $ 0.11 $ 0.90
Basic-Discontinued operations $ 0.47 $ 0.33 $ 0.20 $ 0.21 $ 0.11
Basic earnings per share $ 0.69 $ 0.65 $ 0.70 $ 0.32 $ 1.01
Fully diluted-Continuing operations $ 0.20 $ 0.30 $ 0.46 $ 0.11 $ 0.82
Fully diluted-Discontinued operations $ 0.43 $ 0.30 $ 0.18 $ 0.20 $ 0.11
Fully diluted earnings per share $ 0.63 $ 0.60 $ 0.64 $ 0.31 $ 0.93
U.S. GAAP
Income from continuing operations
Income from discontinued $ 462,000 $ 1,595,000 $ 4,112,000 $ 918,000 $ 7,477,000
operations 3,934,000 2,713,000 1,675,000 1,694,000 941,000
Net income 4,396,000 4,308,000 5,787,000 2,612,000 8,418,000
Basic earnings per share
Continuing operations $ 0.05 $ 0.19 $ 0.50 $ 0.11 $ 0.90
Discontinued operations $ 0.47 $ 0.33 $ 0.20 $ 0.21 $ 0.11
$ 0.52 $ 0.52 $ 0.70 $ 0.32 $ 1.01
Diluted earnings per share
Continuing operations $ 0.05 $ 0.19 $ 0.49 $ 0.11 $ 0.86
Discontinued operations $ 0.46 $ 0.32 $ 0.20 $ 0.20 $ 0.11
$ 0.51 $ 0.51 $ 0.69 $ 0.31 $ 0.97
COMMON STOCK PRICES
High $ 9.75 $ 10.44 $ 10.94 $ 10.00 $ 10.88
Low 5.00 6.00 6.75 6.88 8.25
Year end 9.13 6.25 8.75 7.00 10.00
</TABLE>
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following is a discussion and analysis of the results of operations and
financial condition of the Corporation for the years ended December 31, 1999,
1998 and 1997, and certain factors that may affect the Corporation's prospective
financial condition and results of operations. The following should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
found on pages F-1 to F-31 of this Annual Report on Form 10-K.
OVERVIEW
The Corporation is a diversified producer of specialty materials and products
for use in a variety of industrial applications. The Corporation has operated in
three principal business segments: (i) industrial minerals, which includes The
Feldspar Corporation, Suzorite Mica Products Inc., Suzorite Mineral Products,
Inc., Zemex Fabi-Benwood, LLC, Zemex Industrial Minerals, Inc. and Zemex Mica
Corporation; (ii) metal powders, which includes Pyron Corporation and Pyron
Metal Powders, Inc. (see note 1 below); and (iii) aluminum recycling, which
includes Alumitech, Inc., Alumitech of Cleveland, Inc., Alumitech of Wabash,
Inc., ETS Schaefer Corporation and AWT Properties, Inc.
The financial performance of the Corporation from continuing operations was
significantly better in 1999 than in 1998. Net sales were up 13.5% but, more
importantly, the gross margin improved from 31.5% in 1998 to 34.5% in 1999.
1. On April 11, 2000, the Corporation announced that its wholly-owned
subsidiary, Zemex U.S. Corporation, had completed the sale of its 100% stock
ownership interest in Pyron Corporation and Pyron Metal Powders, Inc. to North
American Hoganas Holdings, Inc., a subsidiary of Hoganas AB, for gross proceeds
of approximately $41 million in cash, subject to certain post-closing
adjustments. The book value of the metal powder group as at December 31, 1999
was $23 million. Because of the sale, the two companies that make up the metal
powders group have been disclosed as discontinued operations and prior years
have been reclassified accordingly.
2. In January 1998, the Corporation, through its wholly-owned subsidiary, Zemex
Industrial Minerals, Inc., acquired a muscovite mica producer for approximately
$2.2 million, which included the assumption of debt. The two facilities acquired
in the purchase are located in Bakersville, North Carolina and are operating
under the name Zemex Mica Corporation. The acquisition was financed through
borrowings on the Corporation's credit facility. The acquisition was accounted
for using the purchase method of accounting and, accordingly, the purchase price
was allocated first to the assets purchased and liabilities assumed, and the
excess purchase price was allocated to intangible assets. The net purchase price
was allocated as follows:
<TABLE>
<S> <C>
Tangible assets acquired $ 614,000
Liabilities assumed (1,542,000)
Intangible assets acquired 2,934,000
-----------
Cash consideration $ 2,006,000
===========
</TABLE>
3. On February 24, 1998, Industria Mineraria Fabi S.r.l. ("Fabi") became a
partner in the Corporation's talc facility located in Benwood, West Virginia by
acquiring a 40% interest in a new limited liability company, Zemex
Fabi-Benwood, LLC. As part of the transaction, Fabi paid $3.4 million and is
providing access to its technology. Suzorite Mineral Products, Inc., a
wholly-owned subsidiary of the
11
<PAGE> 14
Corporation, manages the new entity pursuant to an operating agreement. There
was no gain or loss recognized by the Corporation on the transaction.
4. Effective June 1, 1998, Alumitech, Inc. ("Alumitech"), a wholly-owned
subsidiary of the Corporation, acquired all of the issued and outstanding shares
of S&R Enterprises, Inc. ("S&R"), an aluminum dross processor located in Wabash,
Indiana, for approximately $7.7 million, which included the assumption of debt.
At the beginning of 1999, this entity was renamed Alumitech of Wabash, Inc. The
Corporation used its credit facility to finance the acquisition. The acquisition
of S&R was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated first to the assets purchased and
liabilities assumed, and the excess purchase price was allocated to intangible
assets. The net purchase price was allocated as follows:
<TABLE>
<S> <C>
Tangible assets acquired $ 4,845,000
Liabilities assumed (2,849,000)
Intangible assets acquired 3,561,000
-----------
Cash consideration $ 5,557,000
===========
</TABLE>
5. During the second quarter of 1998, the Corporation initiated an attempted
acquisition of control of Inmet Mining Corporation ("Inmet"). Approximately
4.1 million shares of Inmet were acquired and financed by the Corporation's
credit facilities, as amended (see Liquidity and Capital Resources).
Subsequently, the acquisition was abandoned and the Corporation sold
approximately 2.6 million common shares of Inmet for proceeds of approximately
C$14.9 million. In 1998 the Corporation recorded a foreign exchange loss of
$0.7 million in other income (expense) as a result of a decline in the value of
its Canadian dollar investment in Inmet. At December 31, 1999, the Corporation
marked its investment to market and recorded a loss of $0.5 million. In
February 2000 the residual position was sold at book value.
6. In August 1997, the Corporation entered into a purchase and sale agreement
with respect to Alumitech's fiber manufacturing operation located in
Streetsboro, Ohio. Under the agreement, the fiber line was sold to a new
corporation in which Alumitech, Inc. retained a nominal non-voting equity
participation. Alumitech and the purchaser entered into a joint research and
development agreement in conjunction with the purchase and sale agreement. The
one-time gain, when netted against certain other non-recurring items, resulted
in other income of $1.8 million.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
NET SALES
<TABLE>
<CAPTION>
1999 1998 Change % Change
----------- ------------ ----------- -------
<S> <C> <C> <C> <C>
Industrial minerals $50,373,000 $44,835,000 $5,538,000 12.4%
Aluminum recycling 27,157,000 23,503,000 3,654,000 15.6%
----------- ------------ ----------- -------
$77,530,000 $68,338,000 $9,192,000 13.5%
=========== ============ =========== =======
</TABLE>
12
<PAGE> 15
The Corporation's net sales from continuing operations for 1999 were $77.5
million, an increase of $9.2 million, or 13.5%, from 1998. Sales in the
industrial minerals segment and the aluminum recycling group increased $5.5
million and $3.7 million, respectively.
The industrial minerals segment recorded a 12.4% increase in sales from $44.8
million in 1998 to $50.4 million in 1999. The increase was primarily due to a
$3.3 million increase from the mica group generated by an increase in sales
volume of 55.6%. Approximately two-thirds of this increase came from the
recently retrofitted muscovite mica operations in Bakersville, North Carolina.
Talc sales rose by 12.8% during 1999 and this trend is expected to continue as
the Corporation pursues greater market share. Sales of feldspar increased by
2.9%. Continued growth in mica and talc sales volume is anticipated in 2000
while new products and the utilization of byproduct material should enhance
profitability from the feldspar operations.
Net sales of the aluminum recycling group increased 15.6%, or $3.6 million,
from $23.5 million in 1998 to $27.2 million in 1999. Of the increase,
approximately $3.9 million was due to increased sales from Alumitech of Wabash,
Inc. This operation was acquired in June 1998 and the 1999 numbers include a
full year of operation. In 2000, sales growth in heat containment systems,
calcium aluminate and aluminum recycling is anticipated to increase.
COST OF GOODS SOLD
Costs of goods sold were $46.8 million in 1998 compared to $50.8 million in
1999. The corresponding gross margins were 31.5% for 1998 and 34.5% for 1999.
The largest component of the increase came from the industrial minerals group
where the gross margin increased from 32.1% to 36.1% as a result of the
utilization of a specific feldspar quarry. It is anticipated that the gross
margin in the year 2000 will be closer to that of 1998 as production shifts to
another quarry.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses increased 24.1% from $9.9
million in 1998 to $12.3 million in 1999. As a percentage of sales, SG&A
expense was 15.9% in 1999 as compared to 14.6% in 1998. The increase was
partially due to the relocation of the industrial minerals group's
administration function from Spruce Pine, North Carolina to Atlanta, Georgia,
increased SG&A for the new mica operation, higher staffing levels in the
management of the aluminum recycling group and a significant increase in the
cost of the defined benefit pension plans. During the year the Corporation
recognized pension expense of $0.7 million while the surplus, defined as the
excess of the fair value of the plan assets over the benefit obligation,
contained within the plans increased by $2.1 million.
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization increased by $2.0 million, or 38.3%,
from $5.4 million in 1998 to $7.4 million in 1999. This increase was driven by
the capital expenditures and acquisitions made by the Corporation over the past
several years. Prospectively, depreciation will continue to increase as
current capital programs are placed into service but the rate of increase is
expected to decline.
OPERATING INCOME
For the reasons discussed above, operating income increased from $6.2 million
for fiscal 1998 to $7.0 million in fiscal 1999, representing a 13.1% increase.
13
<PAGE> 16
INTEREST INCOME
Interest income for the year ended December 31, 1999 was $0.2 million, a slight
decrease from the same period in 1998.
INTEREST EXPENSE
Interest expense for the year ended December 31, 1999 was $4.3 million, an
increase of $1.9 million over 1998. Total indebtedness increased by $25.9
million in 1998 and by a further $5.1 million in 1999. The sale of the metal
powders group in April 2000 will result in a significant reduction in the
Corporation's debt position and a corresponding reduction in interest expense.
OTHER INCOME (EXPENSE)
In 1999, the Corporation recognized other expense of $0.5 million compared to
$0.8 million in 1998.
PROVISION FOR INCOME TAXES
The provision for income taxes for each of the 1999 and 1998 fiscal years was
$0.6 million.
DISCONTINUED OPERATIONS
Income from discontinued operations increased from $2.7 million for fiscal 1998
to $3.9 million in fiscal 1999. As previously discussed, in April 2000 the
Corporation sold its interest in Pyron Corporation and Pyron Metal Powders, Inc.
for approximate gross proceeds of $41 million in cash, subject to certain
post-closing adjustments. The book value of the metal powders group as at
December 31, 1999 was $23 million. While the metal powders group has been a
significant contributor of late to the results of the Corporation, the
opportunity to sell it at a gain of approximately $18 million enables the
Corporation to crystallize some of the value that it has created for its
shareholders as part of an ongoing effort to maximize shareholder value.
NET INCOME AND EARNINGS PER SHARE FROM CONTINUING OPERATIONS
As a result of the factors discussed above and given that all interest expense
is reflected at the corporate level, net income from continuing operations for
the year ended December 31, 1999 was $1.8 million, a decrease of $0.8 million
from 1998.
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net income from continuing operations $1,847,000 $2,652,000
Earnings per share - basic $0.22 $0.32
- fully diluted $0.20 $0.30
---------- ----------
</TABLE>
14
<PAGE> 17
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
NET SALES
<TABLE>
<CAPTION>
1998 1997 Change %Change
------------ ------------ ----------- -------
<S> <C> <C> <C> <C>
Industrial minerals $44,835,000 $43,396,000 $1,439,000 3.3%
Aluminum recycling 23,503,000 19,900,000 3,603,000 18.1%
------------ ------------ ----------- ------
$68,338,000 $63,296,000 $5,042,000 8.0%
============ ============ =========== ======
</TABLE>
The Corporation's net sales for 1998 were $68.3 million, an increase of $5.0
million, or 8.0%, from 1997. Sales in the industrial minerals segment and the
aluminum recycling group increased $1.4 million and $3.6 million, respectively.
The industrial minerals segment recorded a 3.3% increase in sales from $43.4
million in 1997 to $44.8 million in 1998. Of the increase, $0.7 million was
primarily due to a favorable feldspar product mix, resulting in slightly higher
margins, and $0.7 million was attributable to an increase in talc sales
volumes.
Net sales from the aluminum recycling group increased 18.1%, or $3.6 million,
from $19.9 million in 1997 to $23.5 million in 1998. This increase was due to
the acquisition of Alumitech of Wabash, Inc. in June 1998. If the effect of the
acquisition is removed, aluminum recycling revenues were static year over year.
In the face of a 13.5% decline in aluminum prices realized, the constant
revenue was achieved by an offsetting increase in volume sold.
COST OF GOODS SOLD
Costs of goods sold were $46.8 million in 1998 compared to $43.2 million in
1997. The corresponding gross margins were 31.5% for 1998 and 31.7% for 1997.
A 2.1% decrease in the gross margin from the industrial mineral group was
off-set by a 3.9% increase from the aluminum recycling group.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses increased 6.9% from $9.3
million in 1997 to $9.9 million in 1998. As a percentage of sales, SG&A
expense was 14.6% in 1998 as compared to 14.7% in 1997. In dollar terms, the
increase was due to increased staffing in the industrial minerals group,
expenses associated with investigating potential acquisitions, and bonuses paid
pursuant to the Corporation's management incentive program.
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization increased by $0.6 million, or 12.4%,
from $4.8 million in 1997 to $5.4 million in 1998. This increase was driven by
the capital expenditures made by the Corporation over the past several years.
Prospectively, depreciation will continue to increase as current capital
programs are placed into service.
15
<PAGE> 18
OPERATING INCOME
Operating income increased from $6.0 million for fiscal 1997 to $6.2 million in
fiscal 1998, representing a 3.5% increase.
INTEREST INCOME
Interest income increased from $0.1 million for fiscal 1997 to $0.2 million in
fiscal 1998.
INTEREST EXPENSE
Interest expense for the year ended December 31, 1998 was $2.4 million, an
increase of $0.5 million over 1997. During 1998, the Corporation's debt
increased by $25.9 million due to capital programs and the residual investment
in Inmet.
OTHER, NET
In 1998, the Corporation recognized other expense of $0.8 million. In 1997 the
Corporation realized a one-time gain of $1.8 million on the disposition of
certain assets utilized to manufacture refractory ceramic fiber. This gain was
recorded as other income.
PROVISION FOR INCOME TAXES
The provision for income taxes for the fiscal year 1998 was $0.6 million as
compared to $1.7 million in 1997.
DISCONTINUED OPERATIONS
Income from discontinued operations increased from $1.7 million for fiscal 1997
to $2.7 million for fiscal 1998.
NET INCOME AND EARNINGS PER SHARE FROM CONTINUING OPERATIONS
As a result of the factors discussed above, net income from continuing
operations for the year ended December 31, 1998 was $2.7 million, a decrease of
$1.5 million from 1997.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net income from continuing operations $2,652,000 $4,118,000
Earnings per share - basic $0.32 $0.50
- fully diluted $0.30 $0.46
---------- ----------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Corporation has historically funded its extraction and processing activities
through cash flow from operations, bank debt and sales of capital stock and
warrants. During the most recent three-year period ended December 31, 1999, the
Corporation funded all capital expenditures, acquisitions and debt reduction
from a combination of additional debt and cash flow from operations. The net
proceeds of the sale of the metal powders group in April 2000 will be applied
against the
16
<PAGE> 19
Corporation's outstanding debt. Should it be necessary, the Corporation will
have increased borrowing ability to fund capital and acquisitions going
forward.
CASH FLOW FROM OPERATIONS
The Corporation had $27.6 million of working capital at December 31, 1999,
compared to $14.8 million at December 31, 1998. The issuance of the senior
secured notes discussed below resulted in a reclassification of a portion of
the debt formerly classed as current to long-term, which resulted in an
increase in working capital of $6.0 million. During 1999, the Corporation
generated cash flow from operations of $8.5 million as compared to $4.6 million
for 1998. In 1999, non-cash working capital items used $5.5 million of the cash
otherwise generated from operations consistent with the $5.5 million used in
1998.
FINANCING AGREEMENTS
In March 1997, the Corporation amended its credit facility to increase the total
availability to $50,224,000. The credit facility was further subdivided into
four facilities: (i) a $30,000,000 revolving credit facility; (ii) a $10,000,000
multiple advance term loan facility; (iii) a $5,224,000 standby letter of
credit; and (iv) a $5,000,000 operating line. Specific assets and a floating
charge secured these facilities. The facilities bore interest at rates varying
from bank prime to bank prime plus 0.25% and from LIBOR plus 1.25% to LIBOR plus
2.25%, depending upon certain financial tests.
In May 1999, the Corporation replaced its credit facility. It completed a
private placement of two series of notes: $35,000,000 in 7.54% Senior Secured
Notes, Series A, due May 15, 2009 and $15,000,000 in 7.76% Senior Secured Notes,
Series B, due May 15, 2014. The proceeds of the Senior Secured Notes were used
to retire the Corporation's existing bank debt and its Industrial Development
Revenue Bond. In conjunction with the Secured Notes, the Corporation entered
into a credit agreement with a bank that provided for a senior secured revolving
credit facility in the amount of $20,000,000 (the "Credit Facility"). The
noteholders and the bank were secured pari-passu by a pledge of shares of the
Corporation's subsidiaries and a floating charge on the assets of the
subsidiaries. The revolving credit facility bears interest at LIBOR plus 1.625%
to LIBOR plus 1.875% in the case of LIBOR loans or at base rate plus 0.625% to
0.875% in the case of prime and base rate loans. The actual margin is determined
by certain financial ratios. The term of the revolver, which was originally 364
days, was extended to May 18, 2001 subsequent to December 31, 1999.
In March 2000, in connection with the sale of the metal powders group, the
Corporation redeemed the Senior Secured Notes by drawing down on a $50 million
bridge facility (the "Bridge Facility") provided by the bank that provided the
Credit Facility. The Bridge Facility bears interest at the same rate as the
Credit Facility, is secured by the same security package and matures October 31,
2000. The Bridge Facility is being repaid in part from the net proceeds of
the sale of the metal powders group. The make-whole fee associated with the
redemption of the Senior Secured Notes amounted to $1.1 million and will be
expensed in the first quarter of 2000.
Pyron Corporation ("Pyron") entered into a lease agreement on November 29, 1989
with the Niagara County Industrial Development Agency (the "Agency") to
partially finance the construction of a manufacturing facility, acquire and
install equipment and machinery, and renovate the existing Pyron facility for
the purpose of manufacturing atomized steel powders. The agreement authorized
the Agency to issue and sell Industrial Development Revenue Bonds in the
aggregate principal amount of $7,650,000 to provide the funds for the project.
On September 1, 1999, the Corporation repaid the outstanding principal amount,
purchased the facility and retired the bonds.
17
<PAGE> 20
CAPITAL EXPENDITURES
The Corporation's primary capital activities in the past involved the
acquisition and development of industrial mineral and metal processing
properties and facilities, and capital investments to expand its facilities,
increase operating efficiencies, and meet environmental, health and safety
standards at its existing operations. During 1999, capital expenditures from
continuing and discontinued operations were $13.8 million compared to $20.7
million and $16.6 million for the years ended December 31, 1998 and 1997,
respectively. The capital expenditures were funded by cash flow from operations
and indebtedness.
The Corporation has completed several major capital programs, including
retrofitting the aluminum dross plant in Cleveland and the muscovite mica
operation in Bakersville, North Carolina. In aggregate, 2000 capital
expenditures from continuing operations are anticipated to be approximately
$7.1 million. The Corporation plans on funding these expenditures from cash
flow from operations.
Although the Corporation's capital budgets provide for certain reclamation and
environmental compliance activities, management does not believe that the cost
of the Corporation's environmental compliance will have a material adverse
effect on the Corporation's results of operations or financial condition in
2000.
SEASONALITY AND INFLATION
Although the Corporation's results from continuing extraction and
processing operations are cyclical due to fluctuations in industrial minerals
and aluminum recycling demands, sales of the Corporation's products are
generally not seasonal. Inflation in recent years has not adversely affected the
Corporation's results of operations and is not expected to adversely affect the
Corporation in the future unless it grows substantially and the markets for
industrial minerals and aluminum recycling suffer from a negative impact on the
economy in general.
YEAR 2000
The Corporation operates in basic industries that do not rely heavily on
computerized systems. Although the change in date has occurred and the
Corporation has suffered no consequences, it is not possible to conclude that
all aspects of the year 2000 issue affecting the Corporation have been fully
resolved.
MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial statements of the Corporation due to adverse changes in financial
market prices and rates. The Corporation's market risk is primarily the result
of fluctuations in interest rates and aluminum prices. Management monitors the
movements in interest rates and performs sensitivity analysis on aluminum
prices and, on that basis, decides on the appropriate measures to take. Prices
and interest rates are such that no measures need be taken at this time.
The Corporation does not hold or issue financial instruments for trading
purposes. A discussion of the Corporation's financial instruments is included
in the financial instruments note to the Consolidated Financial Statements.
18
<PAGE> 21
CAPITAL STOCK
Zemex Corporation's common shares are traded on the New York Stock Exchange
and, as of February 1, 1999, on the Toronto Stock Exchange, under the symbol
ZMX. The price range in which the shares have traded for the past two years is
shown below:
COMMON SHARES
<TABLE>
<CAPTION>
1999 Q1 Q2 Q3 Q4 YEAR
- ---- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
HIGH $6.88 $ 6.50 $7.63 $9.75 $ 9.75
LOW 5.00 5.19 6.13 6.75 5.00
CLOSE 5.44 6.31 7.06 9.13 9.13
- ----- ----- ------ ----- ----- ------
</TABLE>
<TABLE>
<CAPTION>
1998 Q1 Q2 Q3 Q4 Year
- ---- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
High $9.75 $10.44 $9.19 $6.94 $10.44
Low 7.81 8.75 6.00 6.00 6.00
Close 9.50 8.75 6.50 6.25 6.25
- ----- ----- ------ ----- ----- ------
</TABLE>
In the fourth quarters of 1998 and 1997, the Corporation declared a 2% stock
dividend.
As of December 31, 1999, there were approximately 1,830 holders of record of
the Corporation's capital stock. This number includes shares held in nominee
name and, thus, does not reflect the number of holders of a beneficial interest
in the shares.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements responsive to this Item are set forth on pages F-1 through
F-31 of this Annual Report on Form 10-K. The Supplementary Schedule required by
this Item is set forth on page S-1 of this Annual Report on Form 10-K. See Item
14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information about the directors of the Corporation required by this item is
located in the Corporation's Proxy Statement for the 2000 Annual Meeting to be
filed within 120 days after the end of the fiscal year.*
_______________________
* References in this Annual Report on Form 10-K to material contained in the
Corporation's Proxy Statement for the 2000 Annual Meeting to be filed within
120 days after the fiscal year incorporate such material into this report by
reference.
19
<PAGE> 22
Information about the Executive Officers of the Corporation required by this
item appears in Part I, Item 1, of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Corporation's Proxy
Statement for the 2000 Annual Meeting to be filed within 120 days after the end
of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by this item appears in the Corporation's Proxy
Statement for the 2000 Annual Meeting to be filed within 120 days after the end
of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the Corporation's Proxy
Statement for the 2000 Annual Meeting to be filed within 120 days after the end
of the fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
1. Financial statements and independent auditors' report filed as part of this
report:
(a) Consolidated Balance Sheets at December 31, 1999 and 1998,
which information is found on page F-4 of this report;
(b) Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1999, which information is found on page
F-5 of this report;
(c) Consolidated Statements of Income for the three years ended
December 31, 1999, which information is found on page F-3 of this
report;
(d) Consolidated Statements of Cash Flows for the three years
ended December 31, 1999, which information is found on page F-6 of
this report;
(e) Notes to the Consolidated Financial Statements, which information is
found on pages F-7 to F-31 of this report; and
20
<PAGE> 23
(f) Independent Auditors' Report, which is found on page F-1 of
this report.
2. Financial statement schedules and independent auditors' report filed as
part of this report:
<TABLE>
<CAPTION>
SCHEDULE NUMBER DESCRIPTION
<S> <C>
Schedule II Valuation and Qualifying Accounts
and Reserves (page S-1)
</TABLE>
All other financial statements and schedules not listed have been omitted since
the required information is included in the consolidated financial statements
or the related notes thereto, or is not applicable or required.
3. EXHIBITS
(3)(a) Articles of Continuance (Incorporated by reference from Exhibit 3.1 of
the Corporation's Registration Statement on Form S-4, Registration No.
333-65307, which was declared effective on December 10, 1998)
(3)(b) Articles of Amendment to the Articles of Continuance (Incorporated by
reference from Exhibit 3.2 of the Corporation's Registration Statement
on Form S-4, Registration No. 333-65307, which was declared effective
on December 10, 1998)
(3)(c) By-Law No. 1 (Incorporated by reference from Exhibit 3.3 of the
Corporation's Registration Statement on Form S-4, Registration No.
333-65307, which was declared effective on December 10, 1998)
(4)(a) Indenture of Trust dated as of November 1, 1989 between Niagara County
Industrial Development Agency and The Bank of New York as trustee for
Pyron Corporation (Incorporated by reference from Exhibit (4)(a) of
the Corporation's Annual Report on Form 10-K filed March 31, 1990)
(4)(b) Agency Mortgage and Security Agreement dated as of November 1, 1989
from Pyron Corporation and Niagara County Industrial Development
Agency to The Bank of New York (Incorporated by reference from
Exhibit (4)(b) of the Corporation's Annual Report on Form 10-K filed
March 31, 1990)
21
<PAGE> 24
(4)(c) Letter of Credit Reimbursement Agreement dated as of November 1, 1989
between Pyron Corporation and Chemical Bank (Incorporated by
reference from Exhibit (4)(c) of the Corporation's Annual Report on
Form 10-K filed March 31, 1990)
(4)(d) First Amendment to Letter of Credit Reimbursement Agreement dated as
of November 1, 1989 between Pyron Corporation and Chemical Bank
(Incorporated by reference from Exhibit (4)(d) of the Corporation's
Annual Report on Form 10-K filed March 31, 1990)
(4)(e) Second Amendment to Letter of Credit Reimbursement Agreement dated as
of March 15, 1995 between Pyron Corporation and Chemical Bank
(Incorporated by reference from Exhibit (4)(e) of the Corporation's
Annual Report on Form 10-K filed March 30, 1995)
(4)(f) Bank Mortgage and Security Agreement dated as of November 1, 1989 from
Pyron Corporation and Niagara County Industrial Development Agency to
Chemical Bank (Incorporated by reference from Exhibit (4)(e) of the
Corporation's Annual Report on Form 10-K filed March 31, 1990)
(4)(g) Building Loan Agreement dated as of November 1, 1989 between Chemical
Bank and Pyron Corporation (Incorporated by reference from Exhibit
(4)(f) of the Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(h) Security Agreement dated as of November 1, 1989 between Pyron
Corporation and Chemical Bank (Incorporated by reference from Exhibit
(4)(g) of the Corporation's Annual Report on Form 10-K filed March 31,
1990)
(4)(i) Corporate Guaranty dated as of November 1, 1989 from Zemex Corporation
to Chemical Bank (Incorporated by reference from Exhibit (4)(h) of
the Corporation's Annual Report on Form 10-K filed March 31, 1990)
(4)(j) First Amendment to Corporate Guaranty dated as of November 1, 1989 of
Zemex Corporation to Chemical Bank (Incorporated by reference from
Exhibit (4)(i) of the Corporation's Annual Report on Form 10-K filed
March 31, 1990)
(4)(k) Second Amendment to Corporate Guaranty dated as of March 14, 1991 of
Zemex Corporation to Chemical Bank (Incorporated by reference from
Exhibit (4)(j) of the Corporation's Annual Report on Form 10-K filed
March 31, 1991)
(4)(l) Third Amendment to Corporate Guaranty dated as of February 25, 1992 of
Zemex Corporation to Chemical Bank (Incorporated by reference from
Exhibit (4)(m) of the Corporation's Annual Report on Form 10-K filed
March 31, 1993)
(4)(m) Fourth Amendment to Corporate Guaranty dated as of March 8, 1993 of
Zemex Corporation to Chemical Bank (Incorporated by reference from
Exhibit (4)(o) of the Corporation's Annual Report on Form 10-K filed
March 31, 1993)
(4)(n) Fifth Amendment to Corporate Guaranty dated as of March 15, 1995 of
Zemex Corporation to Chemical Bank (Incorporated by reference from
Exhibit (4)(n) of the Corporation's Annual Report on Form 10-K filed
March 30, 1995)
22
<PAGE> 25
(4)(o) Loan and Security Agreement dated as of March 15, 1995 among Zemex
Corporation and The Feldspar Corporation and NationsBank of Tennessee,
N.A. and Chemical Bank and NationsBank of Tennessee, N.A., as Agent
(Incorporated by reference from Exhibit (4)(p) of the Corporation's
Annual Report on Form 10-K filed March 30, 1995)
(4)(p) Amendment No. 1 dated as of March 12, 1997 to the Loan and Security
Agreement dated as of March 15, 1995 among Zemex Corporation and The
Feldspar Corporation and NationsBank of Tennessee, N.A. and Chemical
Bank and NationsBank of Tennessee, N.A., as Agent
(4)(q) Credit Agreement dated as of May 21, 1999 among Zemex Corporation and
Zemex U.S. Corporation, Bank of America Canada, Bank of America
National Trust and Savings Association et al.
(4)(r) Amendment No. 1 dated September 24, 1999 to the Credit Agreement dated
as of May 21, 1999 among Zemex Corporation and Zemex U.S. Corporation,
Bank of America Canada, Bank of America National Trust and Savings
Association et al.
(4)(s) Amendment No. 2 dated March 7, 2000 to the Credit Agreement dated as
of May 21, 1999 among Zemex Corporation and Zemex U.S. Corporation,
Bank of America Canada, Bank of America National Trust and Savings
Association et al.
(4)(t) Zemex U.S. Corporation, Note Purchase Agreement Dated as of May 21,
1999 (Incorporated by reference from Exhibit (4)(r) of the
Corporations Form 10-Q filed on August 9, 1999)
*(10)(a) Key Executive Common Stock Purchase Plan (Incorporated by reference
from Exhibit (10)(b) of the Corporation's Annual Report on Form 10-K
filed March 31, 1991)
(10)(b) Consent to Assignment of Lease and to Agreement Sublease, and
permission to Make Payments dated November 7, 1978 each from Joberta
Enterprises, Inc. to NL Industries, Inc. and The Feldspar Corporation
(Incorporated by reference from Exhibit 10(pp) to the Corporation's
Registration Statement on Form S-2, Registration No. 33-7774, filed on
August 5, 1986)
(10)(c) Additional Lease Agreement dated as of November 1, 1989 between
Niagara County Industrial Development Agency and Pyron Corporation
(Incorporated by reference from Exhibit (10)(ll) of the Corporation's
Annual Report on Form 10-K filed March 31, 1990)
*(10)(d) Subscription Agreement with Richard L. Lister dated November 26, 1991
(Incorporated by reference from Exhibit (5)(a) of the Corporation's
Annual Report on Form 10-K filed March 31, 1992)
(10)(e) 1995 Stock Option Plan (Incorporated by reference from Exhibit B of
the Corporation's 1995 Definitive Proxy Statement, filed on March 29,
1995)
(10)(f) Suzorite Mica Product Inc.'s Mining Lease dated August 25, 1975
between the Province of Quebec and Marietta Resources International
Ltd. (Incorporated by reference from Exhibit 10(av) of the
Corporation's Annual Report on Form 10-K filed March 31, 1994)
23
<PAGE> 26
(10)(g) Employee Stock Purchase Plan (Incorporated by reference as Exhibit A
to the Corporation's Proxy Statement filed May 6, 1994)
(10)(h) Asset Purchase Agreement dated December 7, 1994 between Whittaker,
Clark & Daniels, Inc., Clark Minerals, Inc., Cherokee Minerals, Inc.
and Pioneer Talc Company and Suzorite Mineral Products, Inc. and Zemex
Corporation (Incorporated by reference from Exhibit 10(u) of the
Corporation's Annual Report on Form 10-K filed March 30, 1995)
(10)(i) 1999 Stock Option Plan (Incorporated by reference from Exhibit A of
the Corporation's 1999 Definitive Proxy Statement, filed on March 25,
1999)
(10)(j) 1999 Employee Stock Purchase Plan (Incorporated by reference as
Exhibit B to the Corporation's Proxy Statement filed March 25, 1999)
(10)(k) Stock Purchase Agreement by and between North American Hoganas
Holdings, Inc. and Zemex U.S. Corporation, Pyron Corporation and Pyron
Metal Powders, Inc. dated as of March 6, 2000 (Incorporated by
reference from the Corporation's Current Report on Form 8-K dated
March 8, 2000 and filed on March 9, 2000)
*(10)(1) Agreement between Zemex Corporation and Richard L. Lister dated as of
the 1st day of October, 1999.
*(10)(m) Agreement between Zemex Corporation and Allen J. Palmiere dated as of
the 1st day of October, 1999.
*(10)(n) Agreement between Zemex Corporation and George E. Gillespie dated as
of the 1st day of October, 1999.
*(10)(o) Agreement between Zemex Corporation and Peter J. Goodwin dated as of
the 1st day of October, 1999.
*(10)(p) Agreement between Zemex Corporation and Terrance J. Hogan dated as of
the 1st day of October, 1999.
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
* Management contract or compensatory plan or arrangement.
24
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
RE: ZEMEX CORPORATION -- ANNUAL REPORT ON FORM 10-K
We have examined the supporting schedule on page S-1 of this Annual Report of
Form 10-K for the year ended December 31, 1999. In our opinion, this schedule
presents fairly, when read in conjunction with the related consolidated
financial statements, the financial data required to be set forth therein.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Chartered Accountants
Toronto, Canada
April 12, 2000
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ZEMEX CORPORATION
By:/s/ RICHARD L. LISTER
----------------------------------------
Dated: April 12, 2000 Richard L. Lister
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ PETER O. LAWSON-JOHNSTON Chairman of the Board April 12, 2000
- ---------------------------- and Director
Peter O. Lawson-Johnston
/s/ RICHARD L. LISTER President and Chief Executive April 12, 2000
- ---------------------------- Officer and Director
Richard L. Lister (Principal Executive Officer)
/s/ PAUL A. CARROLL Director April 12, 2000
- ----------------------------
Paul A. Carroll
/s/ MORTON A. COHEN Director April 12, 2000
- ----------------------------
Morton A. Cohen
/s/ JOHN M. DONOVAN Director April 12, 2000
- ----------------------------
John M. Donovan
/s/ R. PETER GILLIN Director April 12, 2000
- ----------------------------
R. Peter Gillin
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ GARTH A.C. MACRAE Director April 12, 2000
- ----------------------------
Garth A.C. MacRae
/s/ WILLIAM J. VANDEN HEUVEL Director April 12, 2000
- ----------------------------
William J. vanden Heuvel
/s/ ALLEN J. PALMIERE Vice President, Chief Financial April 12, 2000
- ---------------------------- Officer and Assistant Secretary
Allen J. Palmiere (Principal Financial and
Accounting Officer)
</TABLE>
27
<PAGE> 30
ZEMEX CORPORATION
AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ADDITIONS AT END
DESCRIPTION OF PERIOD EXPENSES (DEDUCTIONS) DEDUCTIONS OF PERIOD
- ----------- ------------ ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1999
RESERVES - OTHER $1,006,000 $138,000 -- $ 559,000 $ 585,000
ALLOWANCE FOR
DOUBTFUL ACCOUNTS 329,000 42,000 $ 3,000 25,000 349,000
============ ============ =========== ========== ==========
1998
RESERVES - OTHER $1,014,000 $ 64,000 $ (72,000) -- $1,006,000
ALLOWANCE FOR
DOUBTFUL ACCOUNTS 328,000 5,000 -- $ 4,000 329,000
============ ============ =========== ========== ==========
1997
RESERVES - OTHER $ 599,000 $165,000 $ 250,000 -- $1,014,000
ALLOWANCE FOR
DOUBTFUL ACCOUNTS 452,000 84,000 (76,000) $ 132,000 328,000
============ ============ =========== ========== ==========
</TABLE>
S-1
<PAGE> 31
AUDITORS' REPORT
To the Shareholders of Zemex Corporation
We have audited the consolidated balance sheets of Zemex Corporation as at
December 31, 1999 and 1998 and the consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three year
period ended December 31, 1999. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Zemex Corporation as at December
31, 1999 and 1998 and the results of its operations and its cash flows for each
of the years in the three year period ended December 31, 1999 in accordance
with accounting principles generally accepted in Canada.
Deloitte & Touche LLP
Chartered Accountants
Toronto, Ontario
March 8, 2000
F-1
<PAGE> 32
MANAGEMENT'S REPORT
The management of Zemex Corporation and its subsidiaries has the responsibility
for preparing the consolidated financial statements presented in this annual
report and for their accuracy and integrity. The statements have been prepared
in conformity with generally accepted accounting principles in Canada, and
include informed judgments and estimates as required. Other financial
information in this annual report is consistent with the financial statements.
Zemex Corporation's system of internal controls is designed to provide
reasonable assurance, at a justifiable cost, as to the reliability of financial
records and reporting and the protection of assets. This system includes
organizational arrangements with clearly defined lines of responsibility.
Deloitte & Touche LLP, independent auditors, have audited the consolidated
financial statements of Zemex Corporation and their opinion is included on the
preceding page.
Zemex Corporation has formal standards of corporate conduct and policies
regarding high standards of ethics and financial integrity. These policies
have been disseminated to appropriate employees and internal control procedures
provide reasonable assurance that violations of these policies, if any, are
detected.
Allen J. Palmiere Richard L. Lister
Vice President and President and Chief
Chief Financial Officer Executive Officer
AUDIT COMMITTEE REPORT
The audit committee of the board of directors is currently composed of three
independent directors, John M. Donovan, Garth A.C. MacRae and William J. vanden
Heuvel. The Committee held two meetings during 1999.
The audit committee oversees the financial reporting process of the Corporation
on behalf of the board of directors. In fulfilling its responsibility, the
committee recommended to the board of directors, subject to shareholder
approval, the selection of the Corporation's independent auditors. The audit
committee met with management and representatives of the auditors, Deloitte &
Touche LLP, to review accounting, auditing and financial reporting matters.
The committee met with Deloitte & Touche LLP representatives without management
present.
John M. Donovan
Chairman, Audit Committee
F-2
<PAGE> 33
CONSOLIDATED STATEMENTS OF INCOME
(All amounts are in U.S. dollars)
<TABLE>
<CAPTION>
Years ended December 31 1999 1998 1997
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
NET SALES $77,530,000 $68,338,000 $63,296,000
----------- ----------- -----------
COSTS AND EXPENSES
Cost of goods sold 50,776,000 46,842,000 43,234,000
Selling, general and administrative 12,337,000 9,941,000 9,304,000
Depreciation, depletion and amortization 7,402,000 5,353,000 4,764,000
----------- ----------- -----------
70,515,000 62,136,000 57,302,000
----------- ----------- -----------
OPERATING INCOME 7,015,000 6,202,000 5,994,000
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 151,000 202,000 100,000
Interest expense (note 4) (4,325,000) (2,384,000) (1,848,000)
Other, net (note 2) (522,000) (840,000) 1,616,000
----------- ----------- -----------
(4,696,000) (3,022,000) (132,000)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 2,319,000 3,180,000 5,862,000
Provision for income taxes (note 6) 577,000 569,000 1,744,000
Non-controlling interest in loss of
subsidiary (note 2) (105,000) (41,000) --
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,847,000 2,652,000 4,118,000
INCOME FROM DISCONTINUED OPERATIONS (note 10) 3,934,000 2,713,000 1,675,000
----------- ----------- -----------
NET INCOME $ 5,781,000 $ 5,365,000 $ 5,793,000
----------- ----------- -----------
NET INCOME PER SHARE
BASIC
Continuing operations $0.22 $0.32 $0.50
Discontinued operations $0.47 $0.33 $0.20
----------- ----------- -----------
$0.69 $0.65 $0.70
----------- ----------- -----------
FULLY DILUTED
Continuing operations $0.20 $0.30 $0.46
Discontinued operations $0.43 $0.30 $0.18
----------- ----------- -----------
$0.63 $0.60 $0.64
----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES O/S
Basic 8,425,561 8,286,178 8,267,630
Fully diluted 9,827,201 9,757,727 9,503,426
</TABLE>
See notes to the consolidated financial statements
F-3
<PAGE> 34
CONSOLIDATED BALANCE SHEETS (note 10)
(All amounts are in U.S. dollars)
<TABLE>
<CAPTION>
December 31 1999 1998
- ----------- ---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,592,000 $ 1,062,000
Accounts receivable
(less allowance for doubtful accounts of $349,000 at
December 31, 1999 and $329,000 at December 31, 1998)
(note 14) 19,829,000 17,642,000
Inventories (note 3) 19,482,000 18,036,000
Prepaid expenses and other current assets 2,457,000 946,000
Future income tax benefits (note 6) 677,000 657,000
------------ ------------
44,037,000 38,343,000
PROPERTY, PLANT AND EQUIPMENT (notes 4 and 8) 96,779,000 90,058,000
OTHER ASSETS (note 5) 18,228,000 20,374,000
FUTURE INCOME TAX BENEFITS (NON-CURRENT) (note 6) 484,000 91,000
------------- ------------
$159,528,000 $148,866,000
-------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness (note 8) $ 5,500,000 $ 10,000,000
Accounts payable 5,959,000 6,324,000
Accrued liabilities 3,398,000 4,433,000
Accrued income taxes 950,000 644,000
Current portion of long term debt (note 8) 617,000 2,132,000
16,424,000 23,533,000
LONG TERM DEBT (note 8) 50,502,000 39,354,000
OTHER NON-CURRENT LIABILITIES 585,000 1,006,000
------------- ------------
67,511,000 63,893,000
------------- ------------
NON-CONTROLLING INTEREST IN SUBSIDIARY COMPANY 2,970,000 3,075,000
------------- ------------
SHAREHOLDERS' EQUITY
Common stock (note 9) 58,560,000 8,708,000
Paid-in capital -- 48,876,000
Retained earnings 33,920,000 28,233,000
Note receivable from shareholder (note 9) (1,749,000) (1,749,000)
Cumulative translation adjustment (1,684,000) (2,170,000)
------------- ------------
89,047,000 81,898,000
------------- ------------
$ 159,528,000 $148,866,000
-------------- ------------
</TABLE>
See notes to the consolidated financial statements
<TABLE>
<S> <C> <C>
Approved by the Board of Directors /s/ John M. Donovan /s/ Garth A.C. MacRae
------------------- ---------------------
Director Director
</TABLE>
F-4
<PAGE> 35
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(All amounts are in U.S. dollars)
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings
------ ------- --------
<S> <C> <C> <C>
Balance at December 31, 1996 $ 8,950,000 $51,304,000 $20,040,000
Stock issued under ESPP(a) (b) 75,000 528,000 --
Stock dividend(a) 165,000 1,428,000 (1,598,000)
Stock options exercised(a) 14,000 205,000 --
Stock purchased for treasury(a) -- -- --
Stock options repurchased -- -- (167,000)
Net income for the year -- -- 5,793,000
Translation adjustment -- -- --
----------- ----------- -----------
Balance at December 31, 1997 9,204,000 53,465,000 24,068,000
Stock issued under ESPP (a) (b) 112,000 776,000 --
Stock dividend(a) 170,000 1,008,000 (1,182,000)
Stock options exercised(a) 27,000 186,000 --
Stock purchased for treasury(a) -- -- --
Stock options repurchased -- -- (18,000)
Cancellation of treasury stock (805,000) (6,559,000) --
Net income for the year -- -- 5,365,000
Translation adjustment -- -- --
----------- ----------- -----------
Balance at December 31, 1998 8,708,000 48,876,000 28,233,000
Reclassification of paid-in capital to
stated capital on reincorporation (c) 48,876,000 (48,876,000) --
Stock issued under ESPP (a) b) 972,000 -- --
Stock options exercised(a) 77,000 -- --
Stock purchased for treasury(a) -- -- --
Stock options repurchased -- -- (94,000)
Cancellation of treasury stock (73,000) -- --
Net income for the year -- -- 5,781,000
Translation adjustment -- -- --
------------- ------------- -------------
Balance at December 31, 1999 $58,560,000 $ -- $33,920,000
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Note
Receivable Cumulative
From Translation Treasury
Shareholder Adjustment Stock Total
----------- ----------- ----------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $(1,749,000) $(1,175,000) $(6,373,000) $70,997,000
Stock issued under ESPP(a) (b) -- -- -- 603,000
Stock dividend(a) -- -- -- (5,000)
Stock options exercised(a) -- -- -- 219,000
Stock purchased for treasury(a) -- -- (492,000) (492,000)
Stock options repurchased -- -- -- (167,000)
Net income for the year -- -- -- 5,793,000
Translation adjustment -- (413,000) -- (413,000)
------------- ------------- ----------- -----------
Balance at December 31, 1997 (1,749,000) (1,588,000) (6,865,000) 76,535,000
Stock issued under ESPP (a) (b) -- -- -- 888,000
Stock dividend(a) -- -- -- (4,000)
Stock options exercised(a) -- -- -- 213,000
Stock purchased for treasury(a) -- -- (499,000) (499,000)
Stock options repurchased -- -- -- (18,000)
Cancellation of treasury stock -- -- 7,364,000 --
Net income for the year -- -- -- 5,365,000
Translation adjustment -- (582,000) -- (582,000)
------------- ------------- ----------- -----------
Balance at December 31, 1998 (1,749,000) (2,170,000) -- 81,898,000
Reclassification of paid-in capital to
stated capital on reincorporation (c) -- -- -- --
Stock issued under ESPP (a) b) -- -- -- 972,000
Stock options exercised(a) -- -- -- 77,000
Stock purchased for treasury(a) -- -- (73,000) (73,000)
Stock options repurchased -- -- -- (94,000)
Cancellation of treasury stock -- -- 73,000 --
Net income for the year -- -- -- 5,781,000
Translation adjustment -- 486,000 -- 486,000
------------- ------------- ----------- -----------
Balance at December 31, 1999 $(1,749,000) $(1,684,000) $ -- $89,047,000
============= ============= =========== ===========
</TABLE>
See notes to the consolidated financial statements
(a) See note 9
(b) Employee stock purchase plan ("ESPP")
(c) See basis of preparation
F-5
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS (note 10)
(All amounts are in U.S. dollars)
<TABLE>
<CAPTION>
Years ended December 31 1999 1998 1997
------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,781,000 $ 5,365,000 $ 5,793,000
Adjustments to reconcile net income to net cash flows from
operating activities
Depreciation, depletion and amortization 8,860,000 6,561,000 5,871,000
Amortization of deferred financing costs 249,000 168,000 147,000
(Increase) decrease in future income tax benefits (413,000) (909,000) 356,000
Non-controlling interest in loss of subsidiary (105,000) (41,000) -
Loss (gain) on sale of property, plant and equipment 358,000 19,000 (1,831,000)
Increase in other assets (277,000) (795,000) (957,000)
(Decrease) increase in other non-current liabilities (421,000) (191,000) 415,000
Changes in non-cash working capital items(a) (5,517,000) (5,536,000) 3,709,000
------------- -------------- --------------
Net cash provided by operating activities 8,515,000 4,641,000 13,503,000
------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (13,803,000) (20,728,000) (16,584,000)
Assets acquired in connection with acquisitions, net of cash
acquired(b) - (7,468,000) -
Acquisitions of securities(b) (837,000) (14,566,000) -
Proceeds of sales of securities(b) 554,000 9,696,000 -
Proceeds from sale of assets(b) 36,000 3,126,000 3,939,000
------------- -------------- --------------
Net cash used in investing activities (14,050,000) (29,940,000) (12,645,000)
------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments) proceeds net, on bank indebtedness (4,500,000) 7,000,000 (3,590,000)
Proceeds from long term debt 50,733,000 21,572,000 5,717,000
Repayment of long term debt (41,100,000) (4,921,000) (3,169,000)
Cash paid in lieu of fractional shares - (4,000) (5,000)
Issuance of common stock(c) 1,049,000 1,101,000 679,000
Purchase of common stock and options(c) (167,000) (516,000) (516,000)
------------- -------------- --------------
Net cash provided by (used in) financing activities 6,015,000 24,232,000 (884,000)
------------- -------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 50,000 (60,000) (64,000)
------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH 530,000 (1,127,000) (90,000)
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,062,000 2,189,000 2,279,000
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,592,000 $ 1,062,000 $ 2,189,000
------------- -------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 3,369,000 $ 2,658,000 $ 821,000
Interest paid 3,969,000 2,957,000 2,412,000
------------- -------------- --------------
</TABLE>
See notes to the consolidated financial statements
(a) See note 13
(b) See note 2
(c) See note 9
F-6
<PAGE> 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
On January 21, 1999, a reincorporation merger was completed, the effect of
which was to migrate Zemex Corporation from the United States to Canada. The
predecessor Zemex Corporation became a wholly-owned subsidiary of Zemex Canada
Corporation. Zemex Canada Corporation subsequently changed its name to Zemex
Corporation. As the Canadian parent has as its sole asset the shares of the
U.S. subsidiary, and this change in structure has no effect on the ultimate
ownership of the Corporation, these financial statements have been prepared in
accordance with accounting principles generally accepted in Canada and reflect
the results of operations, financial position and changes in cash flows of the
consolidated entities as though the new structure had been in place for all
periods presented.
On March 6, 2000, a wholly-owned subsidiary of Zemex Corporation entered into a
stock purchase agreement whereby a wholly-owned subsidiary of Hoganas AB has
agreed to purchase 100% of the issued and outstanding shares of two
subsidiaries, Pyron Corporation and Pyron Metal Powders, Inc. Accordingly, these
subsidiaries have been reflected as discontinued operations and prior years have
been reclassified to reflect this disclosure (see note 10).
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
significant accounting policies of Zemex Corporation and its subsidiaries (the
"Corporation") are as follows:
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Zemex Corporation
and its subsidiaries. All intercompany transactions have been eliminated.
b. INVENTORIES
Inventories are stated at the lower of cost or net realizable value and are
computed using the average cost method. It is not practical to segregate
finished products from ore and concentrates. Materials and supplies are stated
at cost using the first-in, first-out or average cost method.
c. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Repairs and maintenance
are charged to expense as incurred. Expenditures for major renewals and
improvements are capitalized. When assets are sold or
F-7
<PAGE> 38
otherwise retired, the cost and accumulated depreciation or depletion are
removed from the accounts and any gain or loss is included in results of
operations. Provisions for depreciation are based upon estimated useful lives,
using the straight-line method. Depreciation on newly constructed or purchased
assets begins when the asset is placed into production. Depletion of mining
properties and depreciation of other mining assets are computed using the
unit-of-production method, except in the case of the Corporation's Canadian
mica operation where the estimated reserves exceed the expected production
during the term of the mining lease. The mica mining lease rights and deferred
costs, including all preproduction and set-up costs, are amortized using the
straight-line method over the term of the mining lease.
The Corporation evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets or
intangibles may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
d. POSTRETIREMENT BENEFITS
Pension Plans
Generally, the funding policy of the Corporation is to contribute annually at a
rate that is intended to provide for the cost of benefits earned during the
year and which will amortize prior service costs and experience gains and
losses over the average remaining service lives of the employee group.
Healthcare and Other Postretirement Benefits Other Than Pensions
The Corporation accounts for healthcare and other postretirement benefits other
than pensions by accruing for all such amounts during the years in which
employees render the necessary services to be entitled to receive such
benefits. The 1999, 1998 and 1997 amounts include the current year expense and
the impact of the transition liability, which is being amortized over a twenty
year period that began in 1993.
e. FOREIGN CURRENCY TRANSLATION
The functional currency for the Corporation's operations is the U.S. dollar.
Foreign currency assets and liabilities are translated using the exchange rates
in effect at the balance sheet date. The effect of exchange rate fluctuations
on translating foreign currency assets and liabilities into U.S. dollars is
accumulated as part of the cumulative translation adjustment component of
shareholders' equity. Results of operations and cash flows are translated
using the average exchange rates during the year. Gains and losses from
foreign currency transactions are included in net income for the year.
F-8
<PAGE> 39
f. REVENUE RECOGNITION
Revenue is recognized when goods are shipped to customers. Consignment sales
are recognized when a customer draws the goods from inventory.
g. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are charged to earnings in the periods in
which they are incurred. Research and development expenses were $1,060,000,
$636,000 and $961,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
h. PROVISION FOR FUTURE RECLAMATION COSTS
Provisions for future reclamation costs have been established based upon
estimated future reclamation costs allocated over the expected productive lives
of the Corporation's quarries and mines.
i. INCOME TAXES
The Corporation early adopted CICA Handbook Section 3465, "Income Taxes" in
fiscal 1998. Section 3465 substantially mirrors the U.S. pronouncement, SFAS
No. 109, "Accounting for Income Taxes". These pronouncements require income
taxes to be recognized during the year in which transactions enter into the
determination of financial statement income, with future income taxes being
provided for temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws.
j. EARNINGS PER SHARE
The Corporation calculates basic earnings per share in accordance with Canadian
accounting principles, which are substantially in accordance with the U.S.
pronouncement, SFAS No. 128, "Earnings Per Share". Under these standards,
earnings per share are calculated based upon the weighted average number of
common shares outstanding. For the purpose of calculating earnings per share,
stock dividends are considered to be issued at the beginning of all periods
presented.
k. DEFERRED FINANCING COSTS
Costs associated with the issuance of long term debt are deferred, and are
being amortized over the term of the debt on a straight-line basis which
approximates the effective interest rate yield method. The unamortized balance
is included in other assets.
l. OTHER ASSETS
Other assets includes assets held for sale, which are stated at the lower of
cost or estimated net realizable value. In determining the estimated net
realizable value, the Corporation deducts from the estimated selling price the
projected costs to bring the assets into a saleable condition, to dispose of
the assets and to hold the property to an expected date of sale. Other assets
also includes patents, which
F-9
<PAGE> 40
are stated at cost and are being amortized over their remaining life of 11
years on a straight-line basis. Intangible assets are evaluated periodically
and, if conditions warrant, an impairment charge is provided.
m. CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, highly liquid
investments with original maturities of three months or less when purchased are
considered as cash equivalents.
n. GOODWILL
Goodwill represents the excess at the dates of acquisition of the costs over
the fair values of the net identifiable assets of subsidiaries, and is
amortized on a straight-line basis over its estimated useful life, up to a
period of 15 years. The Corporation assesses the recoverability of goodwill at
each balance sheet date by determining whether the amortization of the balance
over its remaining useful life can be recovered through projected undiscounted
future operating cash flows.
o. STOCK-BASED COMPENSATION PLANS
The Corporation does not recognize compensation expense for its stock-based
compensation plans. Any consideration paid by employees on exercise of stock
options or purchase of stock is recorded as share capital. If stock is
repurchased from employees, the excess of the consideration paid over the
stated capital of the stock cancelled is charged to retained earnings.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
ACQUISITION OF ASPECT MINERALS, INC.
In January 1998, the Corporation, through its wholly-owned subsidiary, Zemex
Industrial Minerals, Inc., acquired all of the issued and outstanding shares of
Aspect Minerals, Inc., a muscovite mica processor, for approximately
$2.2 million, which included the assumption of debt. The two facilities
acquired in the transaction are located in the Spruce Pine, North Carolina area
and are operating under the name Zemex Mica Corporation ("ZMC"). The
acquisition was financed through borrowings on the Corporation's credit
facility. The acquisition of ZMC was accounted for using the purchase method of
accounting and, accordingly, the purchase price was allocated first to the
tangible assets purchased and liabilities assumed and the excess purchase price
was allocated to goodwill. The net purchase price was allocated as follows:
F-10
<PAGE> 41
<TABLE>
<S> <C>
Tangible assets acquired $ 614,000
Liabilities assumed (1,542,000)
Goodwill 2,934,000
------------
Cash consideration $ 2,006,000
============
</TABLE>
ACQUISITION OF S&R ENTERPRISES, INC.
Effective June 1, 1998, Alumitech, Inc., a wholly-owned subsidiary of the
Corporation, acquired all of the issued and outstanding shares of S&R
Enterprises, Inc. ("S&R") for approximately $7.7 million, which included the
assumption of debt. S&R is an aluminum dross processor located in Wabash,
Indiana. The Corporation used its credit facility to finance the acquisition.
The acquisition of S&R was accounted for using the purchase method of
accounting and, accordingly, the purchase price was allocated first to the
tangible assets purchased and liabilities assumed and the excess purchase price
was allocated to goodwill. The net purchase price was allocated as follows:
<TABLE>
<S> <C>
Tangible assets acquired $ 4,845,000
Liabilities assumed (2,849,000)
Goodwill 3,561,000
------------
Cash consideration $ 5,557,000
============
</TABLE>
INVESTMENT IN INMET MINING CORPORATION
During the second quarter of 1998, the Corporation initiated an attempted
acquisition of control of Inmet Mining Corporation ("Inmet"). Approximately
4.1 million shares of Inmet were acquired. The purchase was financed by the
Corporation's credit facilities, as amended. Subsequently, the acquisition was
abandoned and the Corporation sold, pursuant to an issuer bid, approximately
2.6 million common shares of Inmet for proceeds of approximately Cdn$14.9
million. No gain or loss was recognized on the transaction. The Corporation
recorded a foreign exchange loss in 1988 of $0.7 million in other income
(expense) as a result of a decline in the value of the Canadian dollar. At
December 31, 1999, the investment was written down by $0.5 million to the
amount realized when the investment was sold in February 2000.
DISPOSITIONS
SALE OF INTEREST IN BENWOOD FACILITY
On February 24, 1998, Industria Mineraria Fabi S.r.1. ("Fabi") became an
investor in the Corporation's talc facility located in Benwood, West Virginia
by acquiring a 40% interest in a new limited liability company, Zemex
Fabi-Benwood, LLC. As part of the transaction, Fabi paid $3.4 million and is
providing access to its technology. Suzorite Minerals Products, Inc., a
wholly-owned subsidiary of the
F-11
<PAGE> 42
Corporation, manages the new entity pursuant to an operating agreement. There
was no gain or loss recognized on the transaction.
ASSET SALE
During the third quarter of 1997, the Corporation sold certain assets utilized
to manufacture refractory ceramic fiber. These assets were vended into a joint
venture in which the Corporation retained a nominal interest. The sale
resulted in a pre-tax gain of $1.8 million, which was included in other income
(expense). Total proceeds were $4.3 million.
3. INVENTORIES
<TABLE>
<CAPTION>
1999 1998
--------------- -------------
<S> <C> <C>
ORE, RAW MATERIALS, WORK IN PROCESS AND FINISHED
PRODUCTS
Industrial minerals $11,080,000 $ 9,221,000
Metal powders 2,483,000 3,306,000
Aluminum recycling 717,000 321,000
-------------- -------------
14,280,000 12,848,000
-------------- -------------
MATERIALS AND SUPPLIES
Industrial minerals 4,093,000 3,703,000
Metal powders 1,109,000 1,032,000
Aluminum recycling - 453,000
-------------- -------------
5,202,000 5,188,000
-------------- -------------
$19,482,000 $18,036,000
============== =============
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Effective Life 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Land $ 7,336,000 $ 6,410,000
Mining properties and deferred costs 11,845,000 9,261,000
Buildings 30-40 years 25,882,000 21,267,000
Machinery and equipment 3-20 years 86,475,000 77,054,000
Construction in progress 13,604,000 17,077,000
------------- ------------
Total property, plant and equipment, at cost 145,142,000 131,069,000
Less: Accumulated depreciation &
amortization (48,363,000) (41,011,000)
------------- ------------
NET PROPERTY, PLANT AND EQUIPMENT $ 96,779,000 $ 90,058,000
============= ============
</TABLE>
F-12
<PAGE> 43
As at December 31, 1999, the Corporation estimates that approximately
$2,069,000 will be expended to complete its construction in progress
(December 31, 1998, $3,015,000). During 1999, the Corporation capitalized
$119,000 in interest relating to capital projects (1998, $394,000).
5. OTHER ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Goodwill, net
(accumulated amortization of $568,000 at December 31, 1999
and $140,000 at December 31, 1998) $5,582,000 $ 6,238,000
Patents, net 5,162,000 5,688,000
Investments 4,085,000 4,871,000
Deferred financing costs 1,760,000 445,000
Prepaid pension cost (note 17(d)) 890,000 1,318,000
Other 476,000 774,000
Deferred reorganization 273,000 191,000
Long term note receivable -- 549,000
Assets held for resale -- 300,000
----------- -----------
$18,228,000 $20,374,000
=========== ===========
</TABLE>
6. INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Total pre-tax income from continuing operations $2,319,000 $3,180,000 $5,862,000
---------- ---------- ----------
Current tax provision
Canadian $1,508,000 $ 557,000 $ 350,000
Federal U.S. (376,000) 550,000 1,042,000
State and local U.S. 131,000 179,000 161,000
---------- ---------- ----------
TOTAL 1,263,000 1,286,000 1,553,000
---------- ---------- ----------
Future tax provision
Canadian (428,000) -- --
Federal U.S. (68,000) (637,000) 77,000
State and local U.S. (190,000) (80,000) 114,000
---------- ---------- ----------
TOTAL (686,000) (717,000) 191,000
---------- ---------- ----------
PROVISION FOR INCOME TAXES $ 577,000 $ 569,000 $1,744,000
========== ========== ==========
</TABLE>
F-13
<PAGE> 44
The following tabulation reconciles the Canadian income tax rate to the
effective income tax rate.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
% % %
<S> <C> <C> <C>
Statutory federal rate 38.2 38.2 38.2
Mining taxes 23.7 5.3 0.6
Resource allowance (9.0) (5.5) (2.1)
Difference in U.S. tax rates (30.5) (23.9) (9.2)
Other 2.5 1.7 1.5
----- ----- -----
EFFECTIVE INCOME TAX RATE 24.9 15.8 29.0
===== ===== =====
</TABLE>
Future income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As at December 31, 1999
and 1998, the Corporation had unused tax benefits of $10,161,000 and
$8,239,000, respectively, related to U.S. federal and state net operating loss
and tax credit carryforwards. Significant components of the Corporation's
future tax benefits and obligations as of December 31 are as follows (dollars
in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------------- ---------------------------
CANADA U.S. TOTAL Canada U.S. Total
------ -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FUTURE TAX BENEFITS
Net operating loss and tax
credit carryforwards $ -- $10,161 $10,161 $ -- $ 8,239 $ 8,239
Accrued expenses and reserves -- 895 895 -- 513 513
Bad debt allowances -- 113 113 -- 109 109
Inventories -- 311 311 -- 173 173
Other -- 408 408 -- 173 173
------ -------- -------- ------- -------- --------
GROSS FUTURE TAX BENEFITS -- 11,888 11,888 -- 9,207 9,207
------ -------- -------- ------- -------- --------
Valuation allowance -- (1,129) (1,129) -- (1,014) (1,014)
------ -------- -------- ------- -------- --------
NET FUTURE TAX BENEFITS -- 10,759 10,759 -- 8,193 8,193
FUTURE TAX OBLIGATIONS
Property, plant and equipment 1,451 5,249 6,700 1,879 3,415 5,294
Patents -- 1,343 1,343 -- 1,456 1,456
Pension contributions -- 235 235 -- 512 512
Development costs -- 1,017 1,017 -- -- --
Other -- 303 303 -- 183 183
------ -------- -------- ------- -------- --------
TOTAL 1,451 8,147 9,598 1,879 5,566 7,445
------ -------- -------- ------- -------- --------
NET FUTURE TAX (BENEFITS)
OBLIGATIONS $1,451 $(2,612) $(1,161) $1,879 $(2,627) $ (748)
====== ======== ======== ======= ======== ========
</TABLE>
F-14
<PAGE> 45
At December 31, 1999, the Corporation had approximately $14,212,000 of U.S. net
operating loss carryforwards available to reduce future taxable income, which
will expire between 2002 and 2011. Additionally, the Corporation has unused
general business tax credits, which expire between 2000 and 2019, and
alternative minimum tax credits. The Corporation also has U.S. net operating
losses and investment credit carryforwards; however, a valuation allowance of
$1,129,000 has been recognized to offset the related future tax benefit due to
the uncertainty of realizing the full benefit of the tax attribute
carryforward.
7. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
PENSION PLANS
The Corporation has two non-contributory defined benefit pension plans covering
the majority of all U.S. resident employees. The plans provide pension
benefits that are based on the length of service and the compensation of the
employee.
The following table sets forth the financial position of the pension plans:
<TABLE>
<CAPTION>
At December 31 1999 1998
- -------------- --------------- --------------
<S> <C> <C>
Plan assets at market value $18,557,000 $17,591,000
--------------- --------------
Actuarial present value of accrued pension benefits $15,632,000 $14,522,000
=============== ==============
</TABLE>
OTHER POSTRETIREMENT BENEFITS
The Corporation provides healthcare and life insurance benefits for certain
retired employees, which are accrued as earned (note 1). The cost of such
benefits was $137,000 in 1999, $127,000 in 1998 and $115,000 in 1997.
F-15
<PAGE> 46
8. LONG TERM DEBT
<TABLE>
<CAPTION>
1999 1998
-------------- ------------------
<S> <C> <C>
Senior secured notes (a) $50,000,000 $ --
Credit facility (b) -- 36,945,000
Other term loans (c) -- 128,000
Industrial development revenue bonds (d) -- 3,060,000
Capital leases (e) 1,019,000 857,000
Other 100,000 496,000
-------------- ------------------
TOTAL DEBT 51,119,000 41,486,000
Less: Current portion 617,000 2,132,000
-------------- ------------------
LONG TERM DEBT $50,502,000 $39,354,000
============== ==================
</TABLE>
(a) In May 1999, the Corporation entered into note purchase agreements with
private investors whereby the Corporation issued $35,000,000, 7.54% Senior
Secured Notes, Series A, due May 15, 2009 and $15,000,000, 7.76% Senior
Secured Notes, Series B, due May 15, 2014. In the event of redemption the
noteholders are entitled to an interest make-whole payment based on a
discounted value of future cash flows arising from the notes. The
proceeds from the Senior Secured Notes were used to retire the
Corporation's credit facilities existing at the time (see (b), (c) and
note 18(b)).
Additionally during 1999, the Corporation entered into a 364-day,
$20,000,000 revolving credit facility. The Senior Secured Notes and the
credit facility rank pari-passu with respect to security. The
obligations are secured by a pledge of subsidiary shares and a floating
charge on the assets of the subsidiaries. As at December 31, 1999,
advances under the revolving credit facility were $5,500,000. Both the
Senior Secured Notes and the revolving credit facility contain certain
financial covenants which determine interest rate and credit
availability. The revolving credit facility bears interest at LIBOR plus
1.625% to LIBOR plus 1.875% in the case of LIBOR loans or at base rate
plus 0.625% to 0.875% in the case of prime and base rate loans. The
actual margin is determined by certain financial ratios. The term of the
revolver, which was originally 364 days, was extended to May 18, 2001
subsequent to December 31, 1999.
(b) During 1995, the Corporation entered into a credit facility with a
syndicate of two banks, which was amended during 1997 and 1998 to increase
the total availability to $50,224,000, and to provide for a short term
increase of the operating line to $15,000,000. As at December 31, 1998,
the operating line was reduced to $10,000,000 with a further reduction to
$5,000,000 occurring February 28, 1999. The amended credit facility was
further subdivided into four facilities: (i) a $30,000,000 revolving
credit facility; (ii) a $10,000,000 multiple advance term loan facility;
(iii) a $5,224,000 standby letter of credit; and (iv) a $5,000,000
operating line. These facilities were secured by specific assets and a
floating charge over the Corporation's assets. The facilities bore
interest at rates varying from bank prime to bank prime plus 0.25% and
from LIBOR plus 1.25% to LIBOR plus 2.25%, depending upon the financial
position of
F-16
<PAGE> 47
the Corporation. As at December 31, 1998, there was $10,000,000
outstanding under the operating line and $6,945,000 outstanding under the
multiple advance term loan facility. Advances under the revolving credit
facility as at December 31, 1998, were $30,000,000 and a standby letter
of credit was issued to secure Pyron's Industrial Development Revenue
Bonds (see (d) below).
During 1999, the Corporation revised its borrowing arrangements (see (a)
above) and all amounts owing under this facility were repaid in full.
(c) The other term loan bore interest at 6.79% and required annual payments
of approximately $40,000. During 1999, the Corporation repaid the amount
in full.
(d) Pyron Corporation ("Pyron") entered into a lease agreement on November
29, 1989 with the Niagara County Industrial Development Agency (the
"Agency") to partially finance the construction of a manufacturing
facility, acquire and install equipment and machinery, and renovate the
existing Pyron facility for the purpose of manufacturing atomized steel
powders. The agreement authorized the Agency to issue and sell Industrial
Development Revenue Bonds in the aggregate principal amount of $7,650,000
to provide the funds for the project.
While the bonds were not the obligation of Pyron, the agreement required
Pyron to make quarterly rental payments equal to the debt service under
the sinking fund requirements and interest on the outstanding principal
to the Agency. The amount outstanding at December 31, 1998 was
$3,060,000. Pyron's annual obligation under the agreement was $510,000
until repaid.
The bonds bore interest at a variable rate not to exceed 15% per annum.
The rate at December 31, 1998 was 4.02%. Pyron had the option to convert
the bonds to a fixed interest rate at any time during the term. Under
the lease agreement, Pyron could purchase the facility at any time during
the term, which would expire November 1, 2004, by paying the outstanding
principal amount of the bonds plus $1.
The bonds were collateralized by a mortgage on the land, the new facility
and the existing facility, which had an aggregate net book value of
approximately $10,134,000 at December 31, 1998.
On September 1, 1999, the Corporation repaid the outstanding principal
amount, purchased the facility and retired the bonds.
(e) The Corporation has long term capital lease agreements at various rates
and for various terms with maturities ranging from 2000 to 2003 for
equipment used in its operations. The carrying value of the leased
equipment as of December 31, 1999 and 1998 was $1,298,000 and $875,000,
respectively. The current obligation under the long term lease agreements
is $569,000 (1998, $359,000).
F-17
<PAGE> 48
Principal repayments on long term debt are as follows:
<TABLE>
<S> <C>
2000 $ 617,000
2001 316,000
2002 132,000
2003 32,000
2004 12,000
Thereafter 50,010,000
------------
$51,119,000
------------
</TABLE>
9. COMMON SHARES AND STOCK OPTIONS
SHARES OUTSTANDING
As at December 31, 1998, the Corporation's authorized capital stock was
25,000,000, par value one dollar per share, of which 20,000,000 was denominated
common shares and 5,000,000 was denominated preferred shares. Pursuant to the
reincorporation merger effective January 21, 1999, the authorized capital stock
of the Corporation now consists of an unlimited number of first preference
shares without par value and an unlimited number of common shares without par
value. There were 8,873,453 common shares issued and outstanding as of December
31, 1999 and 8,707,796 common shares issued and outstanding as of December 31,
1998.
During 1999, 1998 and 1997, 172,000, 131,000 and 90,000 common shares,
respectively, were issued pursuant to the Corporation's employee stock purchase
plan for an aggregate cost of $1,145,000, $1,045,000, and $729,000,
respectively.
As part of a stock repurchase program in 1999, the Corporation purchased 10,000
common shares for an aggregate cost of $73,000, 60,000 common shares in 1998
for an aggregate cost of $499,000, and 60,000 common shares in 1997 for an
aggregate cost of $492,000.
DIVIDENDS
On October 2, 1998, the Corporation declared a 2% stock dividend to
shareholders of record on October 19, 1998, which was paid November 2, 1998.
Retained earnings was charged $1,182,000 as a result of the issuance of 169,988
of the Corporation's common shares, and cash payments of $4,000 in lieu of
fractional shares.
On November 21, 1997, the Corporation declared a 2% stock dividend to
shareholders of record on December 1, 1997, which was paid December 15, 1997.
Retained earnings was charged $1,598,000 as a result of the issuance of 165,537
of the Corporation's common shares, and cash payments of $5,000 in lieu of
fractional shares.
F-18
<PAGE> 49
STOCK OPTIONS
The Corporation provides stock option incentive plans and has, with shareholder
approval, issued options to certain directors outside of the plans. The plans
are intended to provide long term incentives and rewards to executive officers,
directors and other key employees contingent upon an increase in the market
value of the Corporation's common shares. Options for 10% of the Corporation's
outstanding common shares are issuable under the plans. The options vest and are
exercisable from the beginning of the second year subsequent to the date of
issuance.
The following is a summary of option transactions under the Corporation's stock
option plans:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- -------------------------- ------------------------
WEIGHTED- Weighted- Weighted-
AVERAGE average average
EXERCISE exercise exercise
OPTIONS PRICE Options price Options price
------------ --------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 1,247,650 $ 7.90 942,750 $ 7.32 845,550 $ 7.31
Options granted during year 295,650 6.31 357,000 9.41 228,000 7.28
Options exercised during the year (5,000) 7.00 (26,600) 5.42 (13,800) 5.50
Options cancelled during the year (375,150) 6.14 (25,500) 8.07 (117,000) 5.04
------------ --------- ------------ ------------ ------------ -----------
Options outstanding at end of year 1,163,150 $ 8.11 1,247,650 $ 7.90 942,750 $ 7.32
Options exercisable at end of year 695,250 746,650 628,250
------------ --------- ------------ ------------ ------------ -----------
Price range of options granted
during the year $ 6.26-7.50 $ 6.50-10.19 $ 7.00-8.63
</TABLE>
The options expire from 2000 to 2009.
The following table summarizes information about the stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------- -------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
RANGE OF NUMBER AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING AT REMAINING EXERCISE EXERCISABLE AT EXERCISE
PRICES DECEMBER 31, 1999 CONTRACTUAL LIFE PRICE DECEMBER 31, 1999 PRICE
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 6.00 TO $ 6.99 318,650 8.63 YEARS $ 6.31 19,500 $ 6.57
$ 7.00 TO $ 7.99 262,500 3.76 YEARS 7.36 216,000 7.28
$ 8.00 TO $ 8.99 27,500 3.33 YEARS 8.63 27,500 8.63
$ 9.00 TO $ 9.99 305,000 1.25 YEARS 9.21 299,000 9.21
$ 10.00 TO $10.99 249,500 4.18 YEARS 10.17 133,250 10.16
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 6.00 TO $10.99 1,163,150 695,250
================= =================
</TABLE>
F-19
<PAGE> 50
NOTE RECEIVABLE FROM SHAREHOLDER
The note receivable from shareholder of $1,749,000 represents amounts due from
the Corporation's President and Chief Executive Officer pursuant to the Key
Executive Common Stock Purchase Plan. The note, which was used to acquire shares
of common stock of the Corporation, is non-interest bearing and secured by a
pledge of most of the shares acquired. The terms were amended in 1999 and the
note is now due on the earlier of December 31, 2000 or 30 days after the
termination of employment. Since the note arose from the sale of treasury stock,
it is classified as a reduction of shareholders' equity.
10. DISCONTINUED OPERATIONS
On March 6, 2000, the Corporation announced the sale of its metal powders
division for gross proceeds of approximately $41 million. The metal powders
division includes the Corporation's wholly-owned subsidiaries, Pyron Corporation
and Pyron Metal Powders, Inc. The sale will result in a gain of approximately
$18 million, which will be recorded on closing. The sale price is subject to
post-closing adjustments based on certain changes in the metal powders
division's net asset values up to the effective date.
Income from discontinued operations included in the Corporation's consolidated
statements of income were as follows:
<TABLE>
<CAPTION>
Year ended December 31 1999 1998 1997
- ---------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net sales $38,980,000 $35,556,000 $33,930,000
Operating income 6,112,000 3,990,000 2,376,000
Income before income taxes 5,974,000 3,857,000 2,200,000
Provision for income taxes 2,040,000 1,144,000 525,000
Income from discontinued operations 3,934,000 2,713,000 1,675,000
</TABLE>
Cash (used in) provided by discontinued operations included in the Corporation's
consolidated statements of cash flows was as follows:
<TABLE>
<CAPTION>
Year ended December 31 1999 1998 1997
- ---------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Operating activities $ 5,778,000 $ 4,065,000 $ 2,980,000
Investing activities (1,626,000) (2,113,000) (1,319,000)
Financing activities (4,489,000) (1,747,000) (2,081,000)
------------ ----------- -----------
Cash (used in) provided by discontinued operations $ (337,000) $ 205,000 $ (420,000)
=========== =========== ===========
</TABLE>
F-20
<PAGE> 51
The assets and liabilities of discontinued operations included in the
Corporation's consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
December 31 1999 1998
- ----------- ----------- -----------
<S> <C> <C>
Current assets $11,161,000 $10,468,000
Property, plant and equipment 14,796,000 14,585,000
Other assets 32,000 349,000
Future income tax benefits (non-current) (1,486,000) (813,000)
----------- -----------
24,503,000 24,589,000
Current liabilities 4,137,000 4,112,000
Other non-current liabilities 39,000 2,603,000
----------- -----------
Net assets $20,327,000 $17,874,000
=========== ===========
</TABLE>
11. OPERATING LEASES AND OTHER COMMITMENTS
OPERATING LEASES
The Corporation has a number of operating lease agreements primarily involving
equipment, office space, warehouse facilities and rail sidings. The operating
lease for equipment provides that the Corporation may, after the initial lease
term, renew the lease for successive yearly periods or may purchase the
equipment at its fair market value. An operating lease for office facilities
contains escalation clauses for increases in operating costs and property taxes.
The majority of the leases are cancellable and are renewable on a yearly basis.
Future minimum lease payments required by operating leases that have initial or
remaining non-cancellable lease terms in excess of one year as of December 31,
1999 are as follows:
<TABLE>
<CAPTION>
Years Minimum Lease Payments
- ----- ----------------------
<S> <C>
2000 $ 993,000
2001 906,000
2002 763,000
2003 533,000
2004 337,000
Thereafter 1,295,000
----------
Total minimum lease payments $4,827,000
==========
</TABLE>
Rent expense was $1,183,000, $569,000 and $492,000 in 1999, 1998 and 1997,
respectively.
12. FINANCIAL INSTRUMENTS
Financial instruments, which potentially subject the Corporation to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are
F-21
<PAGE> 52
limited due to the large number of customers comprising the Corporation's
customer base and their dispersion across a number of different industries,
principally construction, glass, electrical and automotive.
Financial instruments comprise cash and cash equivalents, accounts receivable,
short term bank borrowings, accounts payable, accrued liabilities, and long term
debt. The fair value of these financial instruments approximates their carrying
value reflecting: (i) the proximity to market rates of the interest obligations
on the debt instruments; and (ii) the limited durations of all of the other
instruments.
13. CHANGES IN NON-CASH WORKING CAPITAL
The changes in non-cash working capital items are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Increase in accounts receivable $(2,187,000) $ (476,000) $(1,285,000)
(Increase) decrease in inventories (1,446,000) (173,000) 576,000
(Increase) decrease in prepaid expenses and
other current assets (483,000) (120,000) 602,000
(Decrease) increase in accounts payable and
accrued liabilities (1,707,000) (4,177,000) 2,882,000
Increase (decrease) in accrued income taxes 306,000 (590,000) 934,000
----------- ----------- -----------
$(5,517,000) $(5,536,000) $ 3,709,000
=========== =========== ===========
</TABLE>
14. RELATED PARTY TRANSACTIONS
As at December 31, 1999 and 1998, accounts receivable included amounts due from
directors and one officer of $65,000, and $100,000, respectively. These amounts
are non-interest bearing, with no fixed terms of repayment and are secured by
common shares of the Corporation.
During 1998, a director became indebted to the Corporation in the amount of
$124,000. At December 31, 1999, $116,000 remained outstanding and is included in
accounts receivable (1998, $116,000). This obligation is secured by common
shares of the Corporation and bears interest at the Corporation's cost of
borrowing (7.6% at December 31, 1999, 7.4% at December 31, 1998).
15. SEGMENT INFORMATION
The Corporation's continuing operations now has two principal lines of business
and is organized into two operating units based on its product lines: (i)
industrial minerals, and (ii) aluminum recycling. Industrial mineral products
include feldspar, kaolin, mica, talc, baryte, feldspathic sand and industrial
sand. These products are marketed principally to the automotive, housing, and
ceramics industries in
F-22
<PAGE> 53
North America. They are produced from mines and processing plants located near
Edgar, Florida; Monticello, Georgia; Murphy, North Carolina; Spruce Pine, North
Carolina; Natural Bridge, New York; Van Horn, Texas; Benwood, West Virginia;
Boucherville, Quebec; and Suzor Township, Quebec. Aluminum dross is recycled at
plants in Cleveland, Ohio and Wabash, Indiana and ceramic fiber products are
fabricated at a plant in Macedonia, Ohio. Corporate assets principally include
cash, term deposits, and furniture and fixtures.
The accounting policies of the segments are the same as those described in note
1. Information pertaining to sales and earnings from continuing operations and
assets by business segment appears below:
<TABLE>
<CAPTION>
INDUSTRIAL ALUMINUM
YEAR ENDED DECEMBER 31, 1999 CONSOLIDATED MINERALS RECYCLING CORPORATE
- ---------------------------- ------------ -------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 77,530,000 $ 50,373,000 $ 27,157,000 $ --
DEPRECIATION, DEPLETION AND AMORTIZATION 7,402,000 4,380,000 2,416,000 606,000
OPERATING INCOME (LOSS) 7,015,000 7,988,000 2,833,000 (3,806,000)
INTEREST INCOME 151,000 47,000 43,000 61,000
INTEREST EXPENSE (4,325,000) (279,000) (63,000) (3,983,000)
INCOME (LOSS) BEFORE INCOME TAXES AND
NON-CONTROLLING INTEREST 2,319,000 7,608,000 2,845,000 (8,134,000)
PROVISION FOR (RECOVERY OF) INCOME TAXES 577,000 1,079,000 -- (502,000)
NON-CONTROLLING INTEREST IN LOSS OF
SUBSIDIARY (105,000) (105,000) -- --
INCOME FROM CONTINUING OPERATIONS 1,847,000 6,634,000 2,845,000 (7,632,000)
INCOME FROM DISCONTINUED OPERATIONS 3,934,000 -- -- --
NET INCOME (LOSS) 5,781,000 6,634,000 2,845,000 (7,632,000)
</TABLE>
<TABLE>
<CAPTION>
INDUSTRIAL ALUMINUM
Year Ended December 31, 1998 CONSOLIDATED MINERALS RECYCLING CORPORATE
- ---------------------------- ------------ -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 68,338,000 $ 44,835,000 $ 23,503,000 $ --
Depreciation, depletion and amortization 5,353,000 3,536,000 1,384,000 433,000
Operating income (loss) 6,202,000 5,840,000 2,881,000 (2,519,000)
Interest income 202,000 - 49,000 153,000
Interest expense (2,384,000) (60,000) (34,000) (2,290,000)
Income (loss) before income taxes and
non-controlling interest 3,180,000 5,674,000 2,933,000 (5,427,000)
Provision for income taxes 569,000 556,000 -- 13,000
Non-controlling interest in loss of subsidiary (41,000) (41,000) -- --
Income from continuing operations 2,652,000 5,159,000 2,933,000 (5,440,000)
Income from discontinued operations 2,713,000 -- -- --
Net income (loss) 5,365,000 5,159,000 2,933,000 (5,440,000)
</TABLE>
F-23
<PAGE> 54
<TABLE>
<CAPTION>
Industrial Aluminum
Year Ended December 31, 1997 Consolidated Minerals Recycling Corporate
- ---------------------------- ------------ -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 63,296,000 $43,396,000 $19,900,000 $ --
Depreciation, depletion and amortization 4,764,000 3,228,000 1,134,000 402,000
Operating income (loss) 5,994,000 6,498,000 1,924,000 (2,428,000)
Interest income 100,000 -- 73,000 27,000
Interest expense (1,848,000) (8,000) (84,000) (1,756,000)
Income (loss) before income taxes 5,862,000 6,660,000 3,725,000 (4,523,000)
Provision for income taxes 1,744,000 350,000 -- 1,394,000
Income from continuing operations 4,118,000 6,310,000 3,725,000 (5,917,000)
Income from discontinued operations 1,675,000 -- -- --
Net income (loss) 5,793,000 6,310,000 3,725,000 (5,917,000
</TABLE>
<TABLE>
<CAPTION>
INDUSTRIAL ALUMINUM DISCONTINUED
DECEMBER 31, 1999 CONSOLIDATED MINERALS RECYCLING CORPORATE OPERATIONS
- ----------------- ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS $159,528,000 $ 80,533,000 $ 37,167,000 $17,325,000 $24,503,000
TOTAL CURRENT LIABILITIES 16,424,000 4,943,000 2,794,000 4,550,000 4,137,000
TOTAL LONG TERM LIABILITIES 51,087,000 541,000 243,000 50,264,000 39,000
TOTAL SHAREHOLDERS' EQUITY 89,047,000 -- -- 89,047,000 --
</TABLE>
<TABLE>
<CAPTION>
Industrial Aluminum Discontinued
December 31, 1998 Consolidated Minerals Recycling Corporate Operations
- ----------------- ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total assets $148,866,000 $74,104,000 $33,464,000 $16,709,000 $24,589,000
Total current liabilities 23,533,000 5,029,000 3,777,000 10,615,000 4,112,000
Total long term liabilities 40,360,000 1,035,000 678,000 36,044,000 2,603,000
Total shareholders' equity 81,898,000 -- -- 81,898,000 --
</TABLE>
<TABLE>
<CAPTION>
Industrial Aluminum Discontinued
December 31, 1997 Consolidated Minerals Recycling Corporate Operations
- ----------------- ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total assets $118,774,000 $65,750,000 $17,853,000 $ 9,015,000 $26,156,000
Total current liabilities 19,210,000 5,438,000 4,047,000 5,081,000 4,644,000
Total long term liabilities 23,029,000 3,065,000 279,000 14,457,000 5,228,000
Total shareholders' equity 76,535,000 -- -- 76,535,000 --
</TABLE>
F-24
<PAGE> 55
<TABLE>
<CAPTION>
INDUSTRIAL ALUMINUM DISCONTINUED
CONSOLIDATED MINERALS RECYCLING CORPORATE OPERATIONS
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1999
CAPITAL EXPENDITURES $ 13,803,000 $ 7,104,000 $ 5,014,000 $ 41,000 $ 1,644,000
GOODWILL ACQUIRED -- -- -- -- --
------------- ------------- ------------- ------------- -------------
1998
Capital expenditures $ 20,728,000 $ 8,283,000 $ 10,124,000 $ 208,000 $ 2,113,000
Goodwill acquired 6,495,000 2,934,000 3,561,000 -- --
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CANADA U.S.
------------------------------------------- -------------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Capital expenditures $ 619,000 $ 605,000 $ 734,000 $ 13,184,000 $ 20,123,000 $ 15,850,000
Goodwill acquired -- -- -- -- 6,495,000 --
============= ============= ============= ============= ============= =============
</TABLE>
The Corporation bases its geographic allocation upon the location of its sales
offices which are all domiciled in the United States.
16. CONTINGENCIES
The Corporation is involved in various legal actions in the normal course of
business. In the opinion of management, the aggregate amount of any potential
liability, for which provision has not already been made, is not expected to
have a material adverse effect on the Corporation's financial position or its
results.
Uncertainty Due To The Year 2000 Issue
The year 2000 issue arose because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not possible to
conclude that all aspects of the year 2000 issue affecting the entity,
including those related to the efforts of customers, suppliers, or other third
parties, have been fully resolved.
17. DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. The differences between
Canadian and U.S. GAAP do not have a material effect on the Corporation's
reported financial position or net income except as follows:
F-25
<PAGE> 56
a. STATEMENTS OF INCOME
The implementation of the American Institute of Certified Public Accountants
Statement of Position ("SOP") 98-5 requires that the costs of start-up
activities and organization costs be expensed as incurred. Canadian GAAP permits
the deferral of such costs.
For purposes of reporting in accordance with U.S. GAAP, certain equity
securities that are not held principally for the purpose of sale in the near
term are classified as available-for-sale securities, are reported at fair
value, and are translated at the current exchange rate which can give rise to an
exchange gain or loss (see (c) below). For Canadian GAAP purposes, such
securities are reported at cost and are translated at the historical exchange
rate.
For the purposes of calculating diluted earnings per share, U.S. GAAP requires
the application of the treasury stock method.
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Income from continuing operations, as reported $ 1,847,000 $ 2,652,000 $4,118,000
Less: Start-up activities and organization costs (1,845,000) (1,255,000) (8,000)
Tax effect related thereto 460,000 198,000 2,000
----------- ----------- ----------
Income from continuing operations (U.S. GAAP) $ 462,000 $ 1,595,000 $4,112,000
Income from continuing operations per share (U.S. GAAP)
Basic $ 0.05 $ 0.19 $ 0.50
Diluted $ 0.05 $ 0.19 $ 0.49
----------- ----------- ----------
</TABLE>
b. BALANCE SHEETS
The following summarizes the balance sheet amounts in accordance with U.S. GAAP
where different from the amounts reported under Canadian GAAP.
For purposes of reporting in accordance with U.S. GAAP, certain equity
securities that are not held principally for the purpose of sale in the near
term are classified as available-for-sale securities and are reported at fair
value, with unrealized gains and losses excluded from earnings and reported in a
separate financial statement, a statement of comprehensive income. For Canadian
GAAP purposes, such securities are reported at cost, unless there is deemed to
have been a permanent impairment in their value.
U.S. GAAP, SOP 98-5, requires that the costs of start-up activities and
organization costs be expensed as incurred. SOP 98-5 is effective for periods
beginning after December 15, 1998. Initial implementation is reported as a
cumulative effect of a change in accounting principle without retroactive
application.
F-26
<PAGE> 57
<TABLE>
<CAPTION>
1999 1998
CANADIAN UNITED STATES Canadian United States
GAAP GAAP GAAP GAAP
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Property, plant and equipment $96,779,000 $94,042,000 $90,058,000 $90,058,000
Other assets 18,228,000 17,907,000 20,374,000 19,440,000
Accrued income taxes 950,000 491,000 644,000 644,000
Retained earnings 33,920,000 31,321,000 28,233,000 28,233,000
Unrealized loss on available-
for-sale securities -- -- -- (934,000)
------------ ------------- ------------ -------------
</TABLE>
c. STATEMENTS OF COMPREHENSIVE INCOME
U.S. GAAP requires a statement of comprehensive income as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Income from continuing operations $ 462,000 $1,595,000 $4,112,000
Change in foreign currency translation adjustment,
net of tax (1999, $121,000; 1998, $(92,000); 1997,
$(120,000)) 365,000 (490,000) (293,000)
Change in unrealized holding (losses) on
available-for-sale securities 934,000 (934,000) --
------------ ----------- ----------
Comprehensive income $1,761,000 $ 171,000 $3,819,000
============ =========== ==========
</TABLE>
d. PENSION PLANS
Under U.S. GAAP, the Corporation must adopt SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits". The following
data is based upon reports from independent consulting actuaries as at
December 31:
<TABLE>
<CAPTION>
Change in benefit obligation 1999 1998
- ---------------------------- ----------- -----------
<S> <C> <C>
Benefit obligation, beginning of year $16,876,000 $15,126,000
Service cost 725,000 532,000
Interest cost 1,104,000 1,015,000
Plan amendments 139,000 146,000
Actuarial (gain) loss (2,343,000) 778,000
Benefits paid (758,000) (721,000)
----------- -----------
Benefit obligation, end of year $15,743,000 $16,876,000
=========== ===========
</TABLE>
F-27
<PAGE> 58
<TABLE>
<CAPTION>
Change in fair value of plan assets 1999 1998
----------- -----------
<S> <C> <C>
Fair value, beginning of year $17,591,000 $17,177,000
Actual return on plan assets 1,447,000 916,000
Employer contribution 277,000 219,000
Benefits paid (758,000) (721,000)
----------- -----------
Fair value, end of year $18,557,000 $17,591,000
=========== ===========
</TABLE>
Net periodic pension expense (income) included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current service cost $ 725,000 $ 532,000 $ 466,000
Interest cost on projected benefit obligation 1,104,000 1,015,000 978,000
Expected return on assets (1,166,000) (1,175,000) (1,236,000)
Net amortization 41,000 (93,000) (98,000)
------------ ------------ ------------
Net pension expense $ 704,000 $ 279,000 $ 110,000
============ ============= ============
</TABLE>
Assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
% % %
<S> <C> <C> <C>
Weighted average discount rate 7.75 6.5 7.0
Expected long term rate of return 8.75 8.75 8.75
Increase in level of compensation 4.0 4.0 4.0
Weighted average health care cost trend rate 8.0 8.5 9.0
Weighted average ultimate health care cost trend rate 5.0 5.0 5.0
---- ---- ----
Year in which ultimate health care cost trend rate will be achieved 2005 2005 2005
</TABLE>
The status of the plans and the amounts recognized in the consolidated balance
sheets of the Corporation for its pension plans as of December 31, 1999 and
1998 are tabulated below:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Projected benefit obligation $(15,743,000) $(16,876,000)
Plan assets at fair value 18,557,000 17,591,000
------------ ------------
Plan assets in excess of projected benefit obligation 2,814,000 715,000
Unrecognized net (gain) loss (2,304,000) 331,000
Prior service cost not yet recognized in net periodic
pension expense 380,000 297,000
Unrecognized net assets at year end -- (25,000)
------------ ------------
Prepaid pension cost included in consolidated balance sheets $ 890,000 $ 1,318,000
============ ============
</TABLE>
F-28
<PAGE> 59
Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<S> <C> <C>
1% Increase 1% Decrease
----------- -----------
Effect on accumulated postretirement benefit obligation $38,288 $(33,300)
Effect on aggregate of the service and interest cost-components of
net postretirement benefit cost 4,324 (3,682)
=========== ===========
</TABLE>
e. STOCK BASED COMPENSATION
The Corporation does not recognize compensation expense for its stock-based
compensation plans. Had compensation cost for the stock option plans been
determined based upon fair value at the grant date for awards under these plans
consistent with the methodology prescribed under SFAS No. 123, "Accounting for
Stock-Based Compensation", the Corporation's net income and earnings per share
would have been reduced by approximately $681,000 or $0.08 per share in 1999,
$1,267,000 or $0.15 per share in 1998 and $589,000 or $0.07 per share in 1997.
The fair value of the options granted during 1999, 1998, and 1997 is estimated
to be $681,000, $1,267,000 and $589,000 respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1999, 1998 and 1997: dividend yield of 0%; expected volatility of
29%, 32% and 32%, respectively; risk-free interest rates varying from 4.73% to
6.34%; and an expected life of 5 years.
f. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which established
accounting and reporting standards for derivative instruments and hedging
activities. It requires an entity to measure all derivatives at fair value and
to recognize them in the balance sheet as an asset or liability, depending on
the entity's rights or obligations under the applicable derivative contract.
Management has not yet evaluated the effects of this statement on its results
of operations. As required, the Corporation will adopt SFAS No. 133 in the
first quarter of 2001.
F-29
<PAGE> 60
18. SUBSEQUENT EVENTS
a. As the first step in its efforts to maximize shareholder value, on March 6,
2000, the Corporation entered into a stock purchase agreement whereby it agreed
to sell the shares of Pyron Corporation and Pyron Metal Powders, Inc. The
selling price will be $41 million subject to closing adjustments. The
transaction is subject to regulatory approval.
b. To effect the disposition of Pyron Corporation and Pyron Metal Powders,
Inc., on March 8, 2000, the Corporation redeemed its outstanding Senior Secured
Notes (see note 8). The redemption was financed by a bridge facility structured
as an amendment to its existing credit facility (see note 8). The bridge
facility bears interest at the same rate and is secured by the same security
package as its existing credit facility. The bridge facility has a term to
October 31, 2000 and is to be partially repaid from the proceeds of the sale of
the Pyron Corporation and Pyron Metal Powders, Inc. The redemption necessitated
a make-whole payment to the noteholders of $1.1 million, which will be recorded
in the first quarter of 2000.
19. COMPARATIVE FIGURES
Certain of the comparative figures have been restated to comply with the
current year's presentation.
F-30
<PAGE> 61
FINANCIAL DATA (UNAUDITED)
The following is a summary of certain unaudited quarterly financial data.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
NET SALES FROM CONTINUING OPERATIONS
First quarter $18,586,000 $16,242,000
Second quarter 19,752,000 17,800,000
Third quarter 20,115,000 16,894,000
Fourth quarter 19,077,000 17,402,000
------------- -------------
$77,530,000 $68,338,000
------------- -------------
OPERATING INCOME FROM CONTINUING OPERATIONS
First quarter $ 1,804,000 $ 1,148,000
Second quarter 2,056,000 1,566,000
Third quarter 1,899,000 2,064,000
Fourth quarter 1,256,000 1,424,000
------------- -------------
$ 7,015,000 $ 6,202,000
------------- -------------
NET INCOME
First quarter $ 1,389,000 $ 1,228,000
Second quarter 1,614,000 1,274,000
Third quarter 1,680,000 1,358,000
Fourth quarter 1,098,000 1,505,000
------------- -------------
$ 5,781,000 $ 5,365,000
------------- -------------
NET INCOME PER SHARE - BASIC
First quarter $ 0.17 $ 0.15
Second quarter 0.19 0.15
Third quarter 0.20 0.16
Fourth quarter 0.13 0.18
- -------------- ------------- -------------
</TABLE>
F-31
<PAGE> 62
LIST OF EXHIBITS
EXHIBIT (4)(s) Amendment No. 2 dated March 7, 2000 to the Credit Agreement
dated as of May 21, 1999 among Zemex Corporation and Zemex
U.S. Corporation, Bank of America Canada, Bank of America
National Trust and Savings Association et al.
EXHIBIT (10)(l) Agreement between Zemex Corporation and Richard L. Lister
dated as of the 1st day of October, 1999.
EXHIBIT (10)(m) Agreement between Zemex Corporation and Allen J. Palmiere
dated as of the 1st day of October, 1999.
EXHIBIT (10)(n) Agreement between Zemex Corporation and George E. Gillespie
dated as of the 1st day of October, 1999.
EXHIBIT (10)(o) Agreement between Zemex Corporation and Peter J. Goodwin dated
as of the 1st day of October, 1999.
EXHIBIT (10)(p) Agreement between Zemex Corporation and Terrance J. Hogan
dated as of the 1st day of October, 1999.
EXHIBIT 21 Subsidiaries of the Registrant
EXHIBIT 27 Financial Data Schedule
<PAGE> 1
Exhibit 4(s)
AMENDMENT AGREEMENT
THIS SECOND AMENDMENT AGREEMENT is entered into as of March 7, 2000 among
ZEMEX CORPORATION, a corporation established under the federal laws of Canada
(the "Company"), ZEMEX U.S. CORPORATION, a corporation established under the
laws of Delaware (the "US Borrower") (the Company and the US Borrower called
the "Borrowers"), the several financial institutions from time to time parties
to the Credit Agreement (collectively, the "Banks"; individually a "Bank"),
Bank of America Canada as Agent for the Canadian Banks, Bank of America, N.A.
as agent for the US Banks, and Bank of America Canada as Arranger.
WHEREAS, the parties entered into a credit agreement dated as of May 21, 1999
(the "Credit Agreement") whereby the Banks provided certain credit facilities
to the Company and the US Borrower for working capital, short term liquidity
and general corporate purposes, including permitted Acquisitions;
AND WHEREAS, the parties have entered into a First Amendment to the Credit
Agreement dated as of September 24, 1999;
AND WHEREAS, the parties have agreed to make additional amendments to the
Credit Agreement, specifically, as required to incorporate a bridge loan
facility in favour of the US Borrower, and the parties are entering into this
Second Amendment Agreement to amend the Credit Agreement accordingly;
NOW THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
1. All capitalized terms used herein and not otherwise defined shall have
the same meaning as those ascribed thereto in the Credit Agreement (as
amended by the First Amendment
<PAGE> 2
-2-
Agreement).
2. The definition of "APPLICABLE MARGIN" is deleted and substituted with the
following:
<TABLE>
<CAPTION>
LIBOR (EXCLUDING BRIDGE LIBOR LOANS
LEVERAGE LOANS), B/A RATE PRIME AND FOR BRIDGE
RATIO LOANS AND L/CS BASE RATE LOANS LOANS ONLY
- -------- ----------------------- --------------- -----------
<S> <C> <C> <C>
UNDER 2.75 1.25% .25% 1.625%
FROM AND INCLUDING 2.75
TO LESS THAN 3.00 1.375% .375% 1.75%
3.00 OR MORE 1.50% .50% 1.875%
</TABLE>
3. The following definitions are added to the Credit Agreement:
"BRIDGE LOAN COMMITMENT" HAS THE MEANING SPECIFIED IN SECTION 2.01(D);
"BRIDGE LOAN FACILITY" MEANS THE TERM CREDIT FACILITY TO BE MADE
AVAILABLE TO THE US BORROWER BY THE BRIDGE LOAN LENDER UNDER SECTION 2.20
HEREOF;
"BRIDGE LOAN LENDER" MEANS BOFA;
"BRIDGE LOAN" MEANS A US BORROWING MADE PURSUANT TO SECTION 2.20 HEREOF;
"BRIDGE LOAN REPAYMENT DATE" HAS THE MEANING SPECIFIED IN SECTION 2.20
HEREOF.
"NET PROCEEDS" MEANS, AS TO ANY DISPOSITION, PROCEEDS IN CASH,
CHEQUES, OR OTHER CASH EQUIVALENT FINANCIAL INSTRUMENTS AS AND WHEN
RECEIVED BY EITHER BORROWER OR A SUBSIDIARY, NET OF:
<PAGE> 3
- 3 -
(A) THE DIRECT COSTS RELATING TO SUCH DISPOSITION EXCLUDING
AMOUNTS PAYABLE TO A BORROWER OR ANY AFFILIATE OF SUCH BORROWER,
(B) ANY INCOME, SALE, USE OR OTHER TRANSACTION, TAXES PAID OR
PAYABLE BY THE BORROWER OR SUBSIDIARY AS A DIRECT RESULT THEREOF.
4. The definition of "Commitment" is deleted and substituted with the
following:
"COMMITMENT", AS TO EACH BANK, IS THE AMOUNT SET FORTH
IN SCHEDULE 2.01 OPPOSITE EACH BANK'S NAME AND SHALL
INCLUDE THE BRIDGE LOAN COMMITMENT.
5. The definition of "Credit" is deleted and substituted with the
following:
"CREDIT" MEANS THE REVOLVING CREDIT FACILITY OF UP TO
$20,000,000 (OR THE CANADIAN DOLLAR EQUIVALENT) ESTABLISHED
BY THE BANKS IN FAVOUR OF THE BORROWERS, AND SPECIFICALLY
EXCLUDES THE BRIDGE LOAN FACILITY.
6. The definition of "Majority Banks" is deleted and substituted with the
following:
"MAJORITY BANKS" MEANS AT ANY TIME AT LEAST TWO BANKS THEN
HAVING AT LEAST 100% OF THE COMMITMENTS, OR IN THE EVENT
ONLY ONE BANK HAS COMMITMENTS, SUCH BANK."
7. The definition of "Loan" is amended by the addition of ", BRIDGE LOAN"
following the phrase "Swingline Loan" in lines 2 - 3 thereof.
8. The definition of "Pro Rata Share" is amended by the addition of the
following sentence at the end of such definition:
<PAGE> 4
- 4 -
"IN THE CASE OF THE BRIDGE LOAN FACILITY, THE BRIDGE LOAN LENDER'S PRO
RATA SHARE OF THE BRIDGE LOAN COMMITMENT IS 100%."
9. Section 2.01(a) is amended by the addition of ", PREPAY UNDER SECTION
2.21 " following the phrase "prepay under Section 2.07" in the last
sentence thereof.
10. Section 2.01(b) is amended by the addition of ", PREPAY UNDER SECTION
2.21 " following the phrase "prepay under Section 2.07 " in the last
sentence thereof.
11. Section 2.01(c) is amended by the addition of the following sentence at
the end thereof:
"ONLY THE BRIDGE LOAN LENDER SHALL MAKE BRIDGE LOANS TO THE
US BORROWER."
12. Section 2.01 is further amended by addition of the following:
"(D) THE BRIDGE LOAN LENDER AGREES, ON THE TERMS AND CONDITIONS SET
FORTH HEREIN, TO MAKE A SINGLE LOAN TO THE US BORROWER (THE "BRIDGE
LOAN") IN AN AMOUNT NOT TO EXCEED $50,000,000 (THE "BRIDGE LOAN
COMMITMENT"). AMOUNTS BORROWED AS A BRIDGE LOAN MAY NOT BE REBORROWED.
13. Section 2.05(a) is amended by the addition of "OR A BRIDGE LOAN"
following the phrase "a Swingline Loan" in line 1 thereof.
14. Section 2.06 is amended by the addition of the following:
"(G) THE PROVISIONS OF THIS SECTION 2.06 PERMITTING CONVERSION OF US LOANS
<PAGE> 5
- 5 -
SHALL NOT APPLY IN THE CASE OF THE BRIDGE LOAN."
15. Section 2.08 is amended by the addition of "(EXCLUDING THE BRIDGE LOAN)"
following the phrase "amount of US Loans outstanding" in line 3 thereof.
16. Section 2.10(b) is amended by the deletion of the third sentence thereof
and substitution of the following:
"INTEREST SHALL ALSO BE PAID ON THE DATE OF ANY PREPAYMENT
OF LOANS, INCLUDING ANY PAYMENT UNDER SECTION 2.07 OR 2.21,
FOR THE PORTION OF THE LOANS SO PREPAID AND UPON PAYMENT
(INCLUDING PREPAYMENT) IN FULL THEREOF AND, DURING THE
EXISTENCE OF ANY EVENT OF DEFAULT, INTEREST SHALL BE PAID ON
DEMAND OF THE APPLICABLE AGENT AT THE REQUEST OR WITH THE
CONSENT OF THE MAJORITY BANKS."
17. Section 2.11(b) is amended by the addition of "(EXCLUDING THE BRIDGE LOAN
COMMITMENT)" following the phrase "of the Total Commitments" in the first
sentence thereof.
18. Section 2.17(a) is amended by the addition of the following:
"(VII) NO REALLOCATION REQUEST MAY BE MADE IN RESPECT OF THE BRIDGE
LOAN."
19. The following section is added to the Agreement as a new section 2.20.
"2.20 BRIDGE LOAN FACILITY
(A) THE BRIDGE LOAN LENDER SHALL MAKE A ONE TIME BRIDGE LOAN TO
THE US BORROWER BY WAY OF LIBOR LOANS IN AN AMOUNT NOT TO EXCEED
$50,000,000. THE PROCEEDS FROM THE BRIDGE LOAN SHALL BE APPLIED BY
THE US BORROWER TO THE REPAYMENT OF
<PAGE> 6
-6-
THE SENIOR SECURED NOTES. THE BRIDGE LOAN SHALL BE MADE UPON THE
US BORROWER'S IRREVOCABLE WRITTEN NOTICE DELIVERED TO THE US AGENT
SPECIFYING: (I) THE AMOUNT OF THE BRIDGE LOAN; (II) THE REQUESTED
BORROWING DATE, WHICH SHALL BE A BUSINESS DAY; AND (III) THE
DURATION OF THE INITIAL LIBOR PERIOD.
(B) SUBJECT TO (D) BELOW, THE US BORROWER SHALL REPAY IN FULL THE
BRIDGE LOAN AND ALL ACCRUED INTEREST ON OCTOBER 31, 2000 (THE
"BRIDGE LOAN REPAYMENT DATE").
(C) REPAYMENT OR PREPAYMENT (INCLUDING PURSUANT TO SECTION 2.21)
OF ALL OR ANY PART OF THE BRIDGE LOAN SHALL PERMANENTLY REDUCE THE
BRIDGE LOAN FACILITY.
(D) IF AT ANY TIME THE OUTSTANDING AMOUNT OF THE LOANS IS LESS
THAN $10,000,000, THE US BORROWER SHALL IMMEDIATELY REPAY THE FULL
AMOUNT OUTSTANDING OF THE BRIDGE LOAN. SUCH REPAYMENT MAY BE MADE
BY WAY OF CANADIAN LOANS OR US LOANS."
20. The following Section is added to the Agreement as a new Section 2.21:
"2.21 MANDATORY PREPAYMENT
(A) IF THE COMPANY OR THE US BORROWER OR ANY SUBSIDIARY SHALL AT ANY
TIME OR FROM TIME TO TIME MAKE A DISPOSITION, THEN (I) THE
COMPANY OR THE US BORROWER, AS THE CASE MAY BE, SHALL PROMPTLY
NOTIFY THE CANADIAN AGENT OF SUCH PROPOSED DISPOSITION (INCLUDING
THE AMOUNT OF ESTIMATED NET PROCEEDS TO BE RECEIVED BY THE
COMPANY, US BORROWER OR SUBSIDIARY IN RESPECT THEREOF) AND (II)
PROMPTLY UPON RECEIPT BY THE COMPANY, US BORROWER OR SUBSIDIARY
OF THE NET PROCEEDS OF SUCH DISPOSITION, THE COMPANY OR THE US
BORROWER AS THE CASE MAY BE, SHALL REPAY LOANS (EXCLUDING L/C
LOANS) IN AN AGGREGATE AMOUNT EQUAL TO 100% OF THE AMOUNT OF SUCH
NET PROCEEDS. IN NO EVENT SHALL THE DATE FOR PAYMENT OF THE NET
PROCEEDS BY THE COMPANY OR THE US BORROWER TO THE APPLICABLE
<PAGE> 7
- 7 -
AGENT (THE "NET PROCEEDS PAYMENT DATE") BE LATER THAN TWO
BUSINESS DAYS FOLLOWING RECEIPT BY THE COMPANY, US BORROWER
OR SUBSIDIARY, AS THE CASE MAY BE, OF THE NET PROCEEDS OF
SUCH DISPOSITION. AT LEAST TWO BUSINESS DAYS PRIOR TO THE
NET PROCEEDS PAYMENT DATE, THE COMPANY OR THE US BORROWER, AS
THE CASE MAY BE, SHALL PROVIDE THE APPLICABLE AGENT WITH AN
IRREVOCABLE NOTICE OF PREPAYMENT, IDENTIFYING THE NET
PROCEEDS PAYMENT DATE AND A DETAILED CALCULATION OF NET
PROCEEDS FROM THE SUBJECT DISPOSITION. WHEN SUCH NOTICE IS
GIVEN BY THE COMPANY OR THE US BORROWER, THE COMPANY OR THE
US BORROWER, AS THE CASE MAY BE, SHALL MAKE SUCH PREPAYMENT
ON THE NET PROCEEDS PAYMENT DATE, TOGETHER WITH ACCRUED
INTEREST TO SUCH DATE ON THE AMOUNT PREPAID.
(B) THE COMPANY OR THE US BORROWER, AS THE CASE MAY BE, SHALL ALSO
PAY TO BANKS ANY AMOUNTS PAYABLE PURSUANT TO SECTION 4.04 AS A
RESULT OF A PREPAYMENT PURSUANT TO THIS SECTION 2.21.
(C) UPON RECEIPT BY AN AGENT OR AGENTS OF A NOTICE OF
PREPAYMENT PURSUANT TO SECTION 2.21(A) ABOVE, THE AGENTS SHALL
CALCULATE THE TOTAL OUTSTANDING AMOUNTS OF EACH CANADIAN LOAN
(EXCLUDING L/C LOANS), US LOANS (EXCLUDING L/C LOANS AND BRIDGE
LOANS) AND BRIDGE LOANS. THE TOTAL AMOUNT OF SUCH CANADIAN LOANS
AND US LOANS ARE CALLED THE "REVOLVING LOANS". THE AGENT(S) SHALL
APPLY THE NET PROCEEDS FROM A DISPOSITION RATABLY AGAINST THE
REVOLVING LOANS AND THE BRIDGE LOAN. SPECIFICALLY, APPLICATION OF
THE NET PROCEEDS SHALL BE DETERMINED OR CALCULATED IN PROPORTION
TO WHICH THE REVOLVING LOANS AND THE BRIDGE LOAN EACH BEAR TO THE
TOTAL AMOUNT OF ALL LOANS OUTSTANDING (EXCLUDING L/C LOANS).
DISBURSEMENT OF PAYMENTS BY THE APPLICABLE AGENT TO EACH
APPLICABLE BANK SHALL BE MADE ON THE NET PROCEEDS PAYMENT DATE
(OR OTHERWISE IN ACCORDANCE WITH SECTION 2.13) IN AMOUNTS EQUAL
TO EACH BANK'S PRO RATA
<PAGE> 8
- 8 -
SHARE, BUT APPLIED IN THE FOLLOWING PRIORITIES:
(I) IN THE CASE OF REVOLVING LOANS FIRST
TO PRIME RATE LOANS AND BASE RATE LOANS, AND SECOND TO
B/A EQUIVALENT LOANS AND LIBOR LOANS;
(II) IN THE CASE OF THE BRIDGE LOAN, FIRST
TO THE LIBOR LOANS."
21. Section 4.04 (d) is amended by the addition of "OR SECTION 2.21"
following the phrase "Section 2.07" in line 1 thereof.
22. The following Section is added to the Agreement as a new Section 5.03:
5.03 CONDITIONS TO BRIDGE LOAN BORROWINGS.
IN ADDITION TO THE PROVISIONS OF SECTION 5.01 AND 5.02, THE OBLIGATION
OF THE BRIDGE LOAN LENDER TO MAKE THE BRIDGE LOAN IS SUBJECT TO THE
SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT ON OR BEFORE THE
EFFECTIVE DATE OF THE INITIAL BRIDGE LOAN:
(A) PREPAYMENT AMOUNT. EVIDENCE OF THE ARRANGEMENTS FOR
PREPAYMENT OF THE SENIOR SECURED NOTES ON TERMS SATISFACTORY TO
THE AGENTS.
(B) CONFIRMATION OF EXISTING GUARANTEES. EACH GUARANTOR SHALL
CONFIRM IN WRITING TO THE BANKS, THE AGENTS AND THE BRIDGE LOAN
LENDER THAT THE GUARANTEE GRANTED BY EACH RESPECTIVE GUARANTOR
DATED MAY 21, 1999 REMAINS IN FULL FORCE AND EFFECT AND APPLY TO
THE CREDIT AGREEMENT AS AMENDED;
<PAGE> 9
- 9 -
(C) SECURITY CONFIRMATION. WRITTEN CONFIRMATION FROM THE
BORROWERS AND EACH GUARANTOR THAT THE EXISTING SECURITY DOCUMENTS
GRANTED PURSUANT TO THE CREDIT AGREEMENT REMAIN IN FULL FORCE AND
EFFECT AND APPLY TO THE CREDIT AGREEMENT, AS AMENDED.
(D) LEGAL OPINIONS. (I) AN OPINION OF STIKEMAN, ELLIOTT,
COUNSEL TO THE COMPANY AND ADDRESSED TO THE AGENTS AND THE BANKS,
IN FORM SATISFACTORY TO THE AGENTS, THE BANKS AND THEIR COUNSEL;
AND (II) AN OPINION OF HOGAN & HARTSON, COUNSEL TO THE US
BORROWER AND ADDRESSED TO THE AGENTS AND THE BANKS, IN FORM
SATISFACTORY TO THE AGENTS, THE BANKS AND THEIR COUNSEL.
23. Section 8.24 is amended by the deletion of the first sentence thereof and
substitution therefor with the following:
"NEITHER BORROWER SHALL USE OR PERMIT TO BE USED ANY
PART OF THE CREDIT, THE BRIDGE LOAN OR ANY LOAN
PROCEEDS FOR THE DIRECT OR INDIRECT ACQUISITION OF AN
EXCLUDED SUBSIDIARY."
24. Section 9.01 is amended by the addition of the following paragraph:
(N) DISPOSITIONS. THE COMPANY OR THE US BORROWER
FAILS TO SUBMIT THE NET PROCEEDS FROM ANY DISPOSITION
TO THE BANKS IN REPAYMENT OF THE LOANS.
25. Section 11.08 is amended by additions of the following:
(F) IN EACH INSTANCE WHERE A DECISION IS REQUIRED TO BE MADE BY THE
MAJORITY BANKS UNDER THIS AGREEMENT, EACH BANK SHALL ACT IN GOOD FAITH AND USE
ITS BEST EFFORTS TO REACH
<PAGE> 10
- 10 -
AGREEMENT WITH THE OTHER BANKS WITHIN FIVE BUSINESS DAYS, OR, IN THE CASE OF
ACTION OR DECISION REQUIRED PURSUANT TO SECTION 9.02, WITHIN 48 HOURS. IN THE
EVENT THAT THE BANKS ARE UNABLE TO REACH AGREEMENT WITHIN SUCH TIME PERIODS,
THE CHASE MANHATTAN BANK ("CHASE") SHALL BE DEEMED TO HAVE ASSIGNED ITS
COMMITMENTS AND ALL OTHER RIGHTS AND OBLIGATIONS OF CHASE HEREUNDER TO BofA,
AND BofA SHALL BE DEEMED TO HAVE ACCEPTED AND ACQUIRED ALL SUCH COMMITMENTS,
RIGHTS AND OBLIGATIONS FROM CHASE. THE COMPANY AND THE AGENTS WILL BE DEEMED
TO HAVE CONSENTED TO SUCH ASSIGNMENT. THE PARTIES SHALL EFFECT SUCH
ASSIGNMENT IN COMPLIANCE WITH THE PROVISIONS OF THIS SECTION 11, INCLUDING
DELIVERY OF AN ASSIGNMENT AND ACCEPTANCE.
26. Schedule 2.01 is replaced with the following:
SCHEDULE 2.01
BANK COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
CANADIAN BANKS COMMITMENT PRO RATA SHARE
- ------------------------ ----------- --------------
<S> <C> <C>
BANK OF AMERICA CANADA $2,000,000 10%
US BANKS
- ------------------------
BANK OF AMERICA, NA $9,000,000 45%
THE CHASE MANHATTAN BANK 9,000,000 45%
-----------
TOTAL $20,000,000
BRIDGE LOAN LENDER
- ------------------------
BANK OF AMERICA, NA $50,000,000 100%
</TABLE>
27. For greater clarification and certainty, the parties agree that any
obligation to make the Bridge Loan is only that of the Bridge Loan Lender
and the other Banks are under no obligation to participate directly or by
way of risk participation in any Bridge Loan.
<PAGE> 11
- 11 -
28. The parties confirm the terms and conditions of the Credit Agreement as
amended by the terms of the First Amendment Agreement and as amended by
this Second Amendment Agreement.
29. This Second Amendment Agreement may be referred to as being dated March
7, 2000, notwithstanding the actual date of execution.
30. This Second Amendment Agreement may be executed in any number of separate
counterparts, each of which, when so executed shall be deemed an original
and all said counterparts taken together shall be deemed to constitute one
and the same instrument.
31. The representations and warranties in Article VI of the Credit Agreement
remain true and correct with the same effect as if made on and as of the
date of this Second Amendment Agreement.
[The remainder of this page is intentionally left blank.]
<PAGE> 12
- 12 -
IN WITNESS WHEREOF the parties have executed this Agreement on March 7, 2000.
ZEMEX CORPORATION, AS COMPANY
By:___________________________________
Title:________________________________
ZEMEX U.S. CORPORATION,
AS US BORROWER
By:___________________________________
Title:________________________________
<PAGE> 13
- 13 -
BANK OF AMERICA CANADA,
AS CANADIAN AGENT AND AS A BANK
By:___________________________________
Title:________________________________
<PAGE> 14
-14-
BANK OF AMERICA N.A.
AS US AGENT
By:____________________________________
Title:_________________________________
<PAGE> 15
- 15 -
BANK OF AMERICA N.A.
AS A BANK
By:___________________________________
Title:________________________________
<PAGE> 16
- 16 -
BANK OF AMERICA N.A.
AS BRIDGE LOAN LENDER
By:___________________________________
Title:________________________________
<PAGE> 17
- 17 -
THE CHASE MANHATTAN BANK
AS A BANK
By:___________________________________
Title:________________________________
<PAGE> 1
Exhibit 10(l)
THIS AGREEMENT made as of the 1st day of October, 1999.
B E T W E E N:
ZEMEX CORPORATION (hereinafter called the
"Corporation")
- and -
RICHARD L. LISTER (hereinafter called the "Executive")
WITNESSES THAT:
WHEREAS the Executive is presently employed by the Corporation;
AND WHEREAS the Corporation and the Executive are desirous of having certain
rights and benefits in the event that the Executive is dismissed or the
Executive elects to terminate his employment relationship with the Corporation
in the manner set out herein;
AND WHEREAS the Corporation wishes to retain the benefit of the Executive's
employment with the Corporation and to ensure that the Executive is able to
carry out his responsibilities with the Corporation free from any distractions
associated with any change in the ownership of the Corporation or its assets;
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained, and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the parties
hereto), it is agreed by and between the parties hereto as follows:
SECTION 1 DEFINITIONS: Terms used in this Agreement but not otherwise
defined herein have the meanings set forth below:
(a) "BENEFIT PLANS" means any stock option or stock purchase plan,
employee loan, insurance, long-term disability, medical, dental and
other executive and employee benefit plans, including any pension or
similar plans, perquisites and privileges, such as club dues,
automobile expenses and similar items, as may be provided at the time
to the Executive by the Corporation;
(b) "CHANGE IN CONTROL" means a transaction or series of transactions
whereby directly or indirectly:
(i) any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate
thereof and Richard L. Lister or a corporation controlled by
any one or more of such persons) acting jointly or in concert
obtains a sufficient number of securities of the Corporation
to affect materially the control of the Corporation; or
<PAGE> 2
- 2 -
(ii) the Corporation shall consolidate or merge with or into,
amalgamate with, or enter into a statutory arrangement with,
any other person (other than a subsidiary of the Corporation)
or any other person (other than a subsidiary of the
Corporation) shall consolidate or merge with or into, or
amalgamate with or enter into a statutory arrangement with, the
Corporation, and, in connection therewith, all or part of the
outstanding voting shares shall be changed in any way,
reclassified or converted into, exchanged or otherwise acquired
for shares or other securities of the Corporation or any other
person or for cash or any other property; or
(iii) the Corporation shall be liquidated or dissolved or shall sell
or otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Corporation and its
subsidiaries as at the end of the most recently completed
financial year of the Corporation or (B) which during the most
recently completed financial year of the Corporation generated,
or during the then current financial year of the Corporation
are expected to generate, more than 50% of the consolidated
operating income or cash flow of the Corporation and its
subsidiaries, to any other person or persons (other than the
Corporation or one or more of its subsidiaries); or
(iv) the Corporation shall issue shares of common stock from the
treasury of the Corporation in a sufficient number to affect
materially the control of the Corporation; or
(v) the Incumbent Directors cease to represent a
majority of the members of the Board of Directors of the
Corporation;
for the purposes of Sections 1(b)(i) and (iv), a person or
combination of persons acting jointly or in concert and beneficially
owning shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of
the Corporation which may be cast to elect directors of the
Corporation, shall be deemed to be in a position to affect
materially the control of the Corporation;
(c) "EXPIRY DATE" means 24 months after a Change in Control
occurs; and
(d) "INCUMBENT DIRECTORS" means the members of the Board of Directors
holding office at the date of this Agreement and any additional
Directors appointed by or with the consent of the Incumbent
Directors.
SECTION 2 RIGHTS UPON OCCURRENCE OF CHANGE IN CONTROL: If a Change in
Control occurs, the Executive shall be entitled to elect to terminate his
employment with the Corporation unilaterally and to receive a
<PAGE> 3
- 3 -
payment from the Corporation in an amount equal to the aggregate of (a) 300% of
his current annual base salary applicable at the date of a notice of election to
terminate given to the Corporation by such Executive pursuant to Section 3 plus
(b) 300% of the average of the annual bonus, if any, payable to him and (c) 300%
of the deemed interest benefit ascribed to the Executive for tax purposes on his
interest-free share purchase loans with the Corporation, in the case of (b) and
(c) being in respect of each of the three fiscal years of the Corporation ended
immediately prior to the date of a notice of election to terminate given to the
Corporation by such Executive pursuant to Section 3
SECTION 3 TERMINATION RIGHTS CONDITIONAL: All termination rights of the
Executive provided for in Section 2 are conditional upon the Executive electing
to exercise such rights by notice given to the Corporation on or before the
Expiry Date and are exercisable only if the Executive does not resign from his
employment with the Corporation (other than at the request of the Corporation)
and does not actively seek alternative employment, in each case for at least
three months following the date of the Change of Control.
SECTION 4 RIGHTS UPON DISMISSAL WITHOUT CAUSE: The Executive shall be
entitled to a payment by the Corporation of an amount calculated as provided for
in Section 2 (except that his annual base salary as referred to in Section 2(a)
shall be that applicable immediately prior to the date of his dismissal) if the
Executive is dismissed from his employment with the Corporation without cause
after a Change in Control and on or before the Expiry Date. The Corporation
shall not dismiss the Executive for any reason unless such dismissal is
specifically approved by the Board of Directors of the Corporation. Likewise,
the Corporation shall have the right to dismiss the Executive from his
employment with the Corporation without cause after a Change in Control and on
or before the Expiry Date, subject to paying the Executive the amount calculated
as provided for in Section 2.
SECTION 5 PAYMENTS UNDER THIS AGREEMENT: Any payment to be made by the
Corporation pursuant to the terms of this Agreement shall be made by the
Corporation in cash in a lump sum within five business days of the giving of
notice by the Executive pursuant to Section 3, or within five business days of
the dismissal from the Executive's employment as referred to in Section 4, as
the case may be. Any payment to be made under Section 2 or 4 shall be
calculated, in the case of Section 2, at the date of giving notice pursuant to
Section 3 and, in the case of Section 4, at the date of dismissal.
Notwithstanding the foregoing provisions of this Section 5, at the option of the
Executive a payment, or any part thereof as shall be specified by the Executive,
to be made to the Executive shall be deferred to such date or dates as shall be
designated in writing by the Executive. Any payment so deferred shall bear
simple interest at the rate of 6% per annum calculated from the date payment of
the amount otherwise should have been made until the date of payment in full.
The Corporation shall list the items making up a payment calculated as provided
for in Section 2 and shall support the calculation of such amount.
SECTION 6 PAYMENTS IN LIEU OF ALL OTHER DAMAGE CLAIMS ETC.: All payments
provided for herein shall be in lieu of all other notice or damage claims as
regards dismissal or termination of the Executive's employment with the
Corporation or any subsidiary of the Corporation after a Change in Control and
on or before the Expiry Date. The arrangements provided for herein shall not be
considered in any judicial determination of appropriate damages at common law
for dismissal without cause, other than as provided for in this Agreement. At
the request of either party, the parties shall exchange mutual signed releases
of liability conforming to the substantive provisions of this Agreement.
<PAGE> 4
- 4 -
SECTION 7 AGREEMENT SUPPLEMENTAL: This Agreement shall be supplemental to
any other contract of employment or otherwise, whether written or oral, that
exists between the Corporation or any subsidiary of the Corporation and the
Executive, except insofar as any such contract relates to the termination of the
employment relationship between the Corporation or any subsidiary of the
Corporation and the Executive, in which case this Agreement shall supersede the
termination provisions of any such other contract of employment or otherwise
including, without limitation, the termination agreement between the Executive
and a predecessor of the Corporation dated October 1, 1998.
SECTION 8 BENEFIT PLANS: In the event that the Executive is entitled to a
payment pursuant to Section 2 or 4, the Executive shall be entitled to have all
Benefit Plans as constituted at the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment, as the case may be, continued for a period of 36 months after the
date of the giving of notice by the Executive pursuant to Section 3, or the
dismissal from the Executive's employment, as the case may be, or for any longer
period available under any Benefit Plans when coverage is provided from a source
other than the Corporation. Notwithstanding the foregoing provisions of this
Section 8, at the option of the Executive the cost to the Corporation of such
Benefit Plans, or any part of the benefits under any such Benefit Plans as shall
be specified by the Executive, shall be converted to a lump sum amount and shall
be paid to the Executive immediately or shall be deferred to such date or dates
as shall be designated in writing by the Executive. Any payment so deferred
shall bear simple interest at the rate of 6% per annum calculated from the date
payment of the amount otherwise should have been made until the date of payment
in full.
SECTION 9 STOCK OPTION AND STOCK PURCHASE PLANS: If the Executive is
entitled to a payment pursuant to Section 2 or 4, the term during which any
stock option granted to the Executive by the Corporation or any subsidiary of
the Corporation may be exercised shall be extended to the later of the expiry
date of the option or 12 months after the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment as referred to in Section 4, as the case may be; provided that the
maximum term of any such option shall not exceed six years from the date of
grant of the option or such longer period as shall be permitted under the terms
of the Corporation's stock option plan. In addition, in such event any
provisions of the stock option or the stock purchase plan restricting the number
of shares which may be purchased before a particular date shall be waived and
the options shall be fully vested immediately. If the Executive is entitled to a
payment pursuant to Section 2 or 4, all shares owned by the Executive and held
in any stock purchase plan shall immediately be released to the Executive,
subject to the Executive making any payments required under the plan. The terms
of any stock option plan, stock purchase plan or agreement therefor shall be
deemed amended to reflect the provisions of this Section 9.
SECTION 10 DESIGNATION OF BENEFICIARY: If the Executive dies prior to
satisfaction of all of the Corporation's obligations under this Agreement, any
remaining amounts payable to the Executive by the Corporation shall be paid to
the person or persons (a "Beneficiary") previously designated by the Executive
to the Corporation for such purposes. Any such designation of a Beneficiary
shall be made in writing, signed by the Executive and dated and filed with the
Secretary of the Corporation. In the event that no such designation is made, all
such remaining amounts shall be paid by the Corporation to the Estate of the
Executive. If the Executive has exercised the option pursuant to Section 5 or 8
to defer a payment, or any part thereof, to be made to or for the benefit of the
Executive, the Beneficiary or the Executor of the Estate,
<PAGE> 5
- 5 -
as the case may be, shall have the further option to require payment in full of
any such remaining amounts to the Beneficiary or the Executor, as the case may
be, by giving notice to that effect to the Corporation.
SECTION 11 ASSIGNMENT AND ASSUMPTION: This Agreement automatically shall be
assigned by the Corporation to any successor corporation of the Corporation and
shall be binding upon such successor corporation. For the purposes of this
Section 11, "successor corporation" shall include any person referred to in
Subsection 1(b)(ii) or (iii). The Corporation shall ensure that the successor
corporation shall continue the provisions of this Agreement as if it were the
original party in place of the Corporation; provided however that the
Corporation shall not thereby be relieved of any obligation to the Executive
pursuant to this Agreement. In the event of a transaction or series of
transactions as described in Subsection 1(b)(ii) or (iii), appropriate
arrangements shall be made by the Corporation for the successor corporation to
honour this Agreement as if the Executive had exercised his maximum rights
hereunder as of the effective date of such transaction.
SECTION 12 FURTHER ASSURANCES: Each of the parties hereto agrees to do and
execute or cause to be made, done or executed all such further and other things,
acts, deeds, documents, assignments and assurances as may be necessary or
reasonably required to carry out the intent and purpose of this Agreement fully
and effectually. Without limiting the generality of the foregoing, the
Corporation shall take all reasonable steps in order to structure the payment or
payments provided for in this Agreement in the manner most advantageous to the
Executive with respect to the provisions of the Income Tax Act (Canada), the
Internal Revenue Code (United States of America) or any similar legislation in
place in any other jurisdiction of the Executive's residence.
SECTION 13 REVIEW OF AGREEMENT: In the event of a threatened or pending
Change in Control of the Corporation, and following an actual Change in Control
of the Corporation, the Corporation in either case shall enter into a review of
the terms of this Agreement and shall implement any amendments hereto which are
agreed to by both parties.
SECTION 14 OUTPLACEMENT SERVICES: If the Executive is entitled to receive a
payment pursuant to Section 2 or 4, the Corporation shall pay the reasonable
costs (to a maximum of 10% of the annual base salary of the Executive as used
for the calculation of such payment) of the services for the Executive of a
suitable outplacement counselling service selected by the Corporation.
Notwithstanding the foregoing provisions of this Section 15, at the option of
the Executive the cost to the Corporation of such outplacement services shall be
converted to a lump sum amount and shall be paid to the Executive immediately.
SECTION 15 GENDER: Whenever the context of this Agreement so requires or
permits, the masculine gender includes the feminine gender.
SECTION 16 NOTICE: Any notice, election or designation to be made by the
Executive pursuant to this Agreement shall be in writing and shall be hand
delivered to the Corporation at the following address:
<PAGE> 6
- 6 -
Zemex Corporation
Canada Trust Tower, BCE Place
161 Bay Street, Suite 3750
Toronto, Ontario
M5J 2S1
Telephone: (416) 365-8080
Fax: (416) 365-8094
Attention: Chairman of the Board
SECTION 17 TERM: This Agreement shall commence as of the date first above
written and shall terminate on December 31, 2004 unless extended with the mutual
agreement of the parties hereto and approved by the Board of Directors of the
Corporation; provided that if a Change of Control occurs on or before December
31, 2004 the term of this Agreement automatically shall be extended to the
Expiry Date.
SECTION 18 GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario. The parties agree to
attorn to the jurisdiction of, and to submit any dispute arising out of this
Agreement to the Courts of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
as of the date first above written.
ZEMEX CORPORATION
per: c/s
------------------
Paul A. Carroll
Director
SIGNED, SEALED & DELIVERED )
in the presence of )
)
)
)
)
) l/s
- -------------------------- ------------------
Witness ) Richard L. Lister
)
<PAGE> 1
Exhibit 10(m)
THIS AGREEMENT made as of the 1st day of October, 1999.
B E T W E E N:
ZEMEX CORPORATION (hereinafter called the
"Corporation")
- and -
ALLEN J. PALMIERE (hereinafter called the "Executive")
WITNESSES THAT:
WHEREAS the Executive is presently employed by the Corporation or a Subsidiary;
AND WHEREAS the Corporation and the Executive are desirous of having certain
rights and benefits in the event that the Executive is dismissed or the
Executive's employment relationship with the Corporation or the Subsidiary is
terminated in the manner set out herein;
AND WHEREAS the Corporation wishes to retain the benefit of the Executive's
employment with the Corporation or the Subsidiary and to ensure that the
Executive is able to carry out his responsibilities with the Corporation or the
Subsidiary free from any distractions associated with any change in the
ownership of the Corporation or its assets;
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained, and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the parties
hereto), it is agreed by and between the parties hereto as follows:
SECTION 1 DEFINITIONS: Terms used in this Agreement but not otherwise
defined herein have the meanings set forth below:
(a) "BENEFIT PLANS" means any stock option or stock purchase plan,
employee loan, insurance, long-term disability, medical, dental and
other executive and employee benefit plans, including any pension or
similar plans, perquisites and privileges, such as club dues,
automobile expenses and similar items, as may be provided at the time
to the Executive by the Corporation or the Subsidiary;
<PAGE> 2
- 2 -
(b) "CHANGE IN CONTROL" means a transaction or series of transactions
whereby directly or indirectly:
(i) any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate
thereof and Richard L. Lister or a corporation controlled by
any one or more of such persons) acting jointly or in concert
obtains a sufficient number of securities of the Corporation
to affect materially the control of the Corporation; or
(ii) if the Executive is primarily employed by the Corporation, the
Corporation shall consolidate or merge with or into, amalgamate
with, or enter into a statutory arrangement with, any other
person (other than a subsidiary of the Corporation) or any
other person (other than a subsidiary of the Corporation) shall
consolidate or merge with or into, or amalgamate with or enter
into a statutory arrangement with, the Corporation, and, in
connection therewith, all or part of the outstanding voting
shares shall be changed in any way, reclassified or converted
into, exchanged or otherwise acquired for shares or other
securities of the Corporation or any other person or for cash
or any other property (other than a transaction which has been
approved by the Incumbent Directors); or
(iii) if the Executive is primarily employed by the Corporation, the
Corporation shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Corporation and its
subsidiaries as at the end of the most recently completed
financial year of the Corporation or (B) which during the most
recently completed financial year of the Corporation generated,
or during the then current financial year of the Corporation
are expected to generate, more than 50% of the consolidated
operating income or cash flow of the Corporation and its
subsidiaries, to any other person or persons (other than the
Corporation or one or more of its subsidiaries); or
(iv) if the Executive is primarily employed by a Subsidiary, the
Subsidiary shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Subsidiary and its
subsidiaries as at the end of the most recently completed
financial year of the Subsidiary or (B) which during the most
recently completed financial year of the Subsidiary generated,
or during the then current financial year of the Subsidiary are
expected to generate, more than 50% of the consolidated
operating income or cash flow of the Subsidiary
<PAGE> 3
- 3 -
and its subsidiaries, to any other person or persons (other
than the Corporation, the Subsidiary or one or more of its
subsidiaries); or
(v) if the Executive is primarily employed by the Corporation, the
Corporation shall issue shares of common stock from the
treasury of the Corporation in a sufficient number to affect
materially the control of the Corporation; or
(vi) if the Executive is primarily employed by a Subsidiary, (A) a
transfer of shares of the Subsidiary or (B) the issue of
treasury shares of the Subsidiary, in either case having the
result that any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate thereof
and Richard L. Lister or a corporation controlled by any one or
more of such persons) acting jointly or in concert beneficially
owns shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the
holders thereof to cast 49.9% or more of the votes attaching to
all shares of the Subsidiary which may be cast to elect
directors of the Subsidiary; or
(vii)the Incumbent Directors cease to represent a
majority of the members of the Board of Directors of the
Corporation;
for the purposes of Sections 1(b)(i) and (v), a person or
combination of persons acting jointly or in concert and beneficially
owning shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of
the Corporation which may be cast to elect directors of the
Corporation shall be deemed to be in a position to affect materially
the control of the Corporation;
(c) "EXPIRY DATE" means 24 months after a Change in Control
occurs;
(d) "INCUMBENT DIRECTORS" means the members of the Board of Directors
holding office at the date of this Agreement and any additional
Directors appointed by or with the consent of the Incumbent
Directors;
(e) "SUBSIDIARIES" means the following:
(i) Alumitech, Inc. and its subsidiaries;
(ii) Pyron Corporation and its subsidiaries; and
(iii) Zemex Industrial Minerals, Inc. and its
subsidiaries;
and "SUBSIDIARY" means any one of them with which the Executive has
employment;
<PAGE> 4
- 4 -
(f) "TRIGGERING EVENT" means any one of the following events which occurs
without the express or implied agreement of the Executive:
(i) an adverse change in any of the duties, powers, rights,
discretion, salary or benefits of the Executive as they exist
at the date of this Agreement; or
(ii) a diminution of the title of the Executive as it
exists at the date of this Agreement; or
(iii)a change in the person or body to whom the Executive reports
at the date of this Agreement, except if such person or body is
of equivalent rank or stature or such change is as a result of
the resignation or removal of such person or the persons
comprising such body, as the case may be, provided that this
shall not include a change resulting from a promotion in the
normal course of business; or
(iv) a change in the municipality at which the Executive is
regularly required to carry out the terms of his employment
with the Corporation at the date of this Agreement unless the
Executive's terms of employment include the obligation to
receive geographic transfers from time to time in the normal
course of business.
SECTION 2 RIGHTS UPON OCCURRENCE OF CHANGE IN CONTROL FOLLOWED BY A
TRIGGERING EVENT: If, in respect of the Executive, a Change in Control occurs
and if, in respect of the Executive, a Triggering Event occurs after the Change
of Control and on or before the Expiry Date, the Executive shall be entitled to
elect to terminate his employment with the Corporation and to receive a payment
from the Corporation in an amount equal to the aggregate of (a) 200% of his
annual base salary that was applicable immediately prior to the date of the
Triggering Event and (b) 200% of the average of the annual bonus, if any,
payable to him in respect of each of the two fiscal years of the Corporation
ended immediately prior to the date of a notice of election to terminate given
to the Corporation by such Executive pursuant to Section 3.
SECTION 3 RIGHTS CONDITIONAL: All termination rights of the Executive
provided for in Section 2 are (a) conditional upon the Executive electing to
exercise such rights by notice given to the Corporation on or before the Expiry
Date and (b) exercisable only if the Executive does not resign from his
employment with the Corporation or the Subsidiary (other than at the request of
the Corporation or the Subsidiary) and does not actively seek alternative
employment, in each case for at least three months following the date of the
Change in Control.
SECTION 4 RIGHTS UPON DISMISSAL WITHOUT CAUSE: The Executive shall be
entitled to a payment by the Corporation of an amount calculated as provided for
in Section 2 (except that his annual base salary as referred to in Section 2(a)
shall be that applicable immediately prior to the date of his dismissal) if a
Triggering Event does not occur but the Executive is dismissed from his
employment with the Corporation without cause after a Change in Control and on
or before the Expiry Date. The Corporation shall not dismiss the Executive for
any reason unless such dismissal is specifically approved by the Board of
Directors of the Corporation. Likewise, the Corporation shall have the right to
dismiss the Executive from his employment
<PAGE> 5
- 5 -
with the Corporation without cause after a Change in Control and on or before
the Expiry Date, subject to paying the Executive the amount calculated as
provided for in Section 2.
SECTION 5 PAYMENTS UNDER THIS AGREEMENT: Any payment to be made by the
Corporation pursuant to the terms of this Agreement shall be made by the
Corporation in cash in a lump sum within five business days of the giving of
notice by the Executive pursuant to Section 3, or within five business days of
the dismissal from the Executive's employment as referred to in Section 4, as
the case may be. Any payment to be made under Section 2 or 4 shall be
calculated, in the case of Section 2, at the date of giving notice pursuant to
Section 3 and, in the case of Section 4, at the date of dismissal.
Notwithstanding the foregoing provisions of this Section 5, at the option of the
Executive a payment, or any part thereof as shall be specified by the Executive,
to be made to the Executive shall be deferred to such date or dates as shall be
designated in writing by the Executive. Any payment so deferred shall bear
simple interest at the rate of 6% per annum calculated from the date payment of
the amount otherwise should have been made until the date of payment in full.
The Corporation shall list the items making up a payment calculated as provided
for in Section 2 and shall support the calculation of such amount.
SECTION 6 PAYMENTS IN LIEU OF ALL OTHER DAMAGE CLAIMS ETC.: All payments
provided for herein shall be in lieu of all other notice or damage claims as
regards dismissal or termination of the Executive's employment with the
Corporation or any subsidiary of the Corporation after a Change in Control and
on or before the Expiry Date. The arrangements provided for herein shall not be
considered in any judicial determination of appropriate damages at common law
for dismissal without cause, other than as provided for in this Agreement. At
the request of either party, the parties shall exchange mutual signed releases
of liability conforming to the substantive provisions of this Agreement.
SECTION 7 AGREEMENT SUPPLEMENTAL: This Agreement shall be supplemental to
any other contract of employment or otherwise, whether written or oral, that
exists between the Corporation or any subsidiary of the Corporation and the
Executive, except insofar as any such contract relates to the termination of the
employment relationship between the Corporation or any Subsidiary of the
Corporation and the Executive, in which case this Agreement shall supersede the
termination provisions of any such other contract of employment or otherwise
including, without limitation, the termination agreement between the Executive
and a predecessor of the Corporation dated October 1, 1998.
SECTION 8 BENEFIT PLANS: In the event that the Executive is entitled to a
payment pursuant to Section 2 or 4, the Executive shall be entitled to have all
Benefit Plans as constituted at the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment, as the case may be, continued for a period of 24 months after the
date of the giving of notice by the Executive pursuant to Section 3, or the
dismissal from the Executive's employment, as the case may be, or for any longer
period available under any Benefit Plans when coverage is provided from a source
other than the Corporation. Notwithstanding the foregoing provisions of this
Section 8, at the option of the Executive the cost to the Corporation of such
Benefit Plans, or any part of the benefits under any such Benefit Plans as shall
be specified by the Executive, shall be converted to a lump sum amount and shall
be paid to the Executive immediately or shall be deferred to such date or dates
as shall be designated in writing by the Executive. Any payment so deferred
shall bear simple interest at the rate of 6% per annum calculated from the date
payment of the amount otherwise should have been made until the date of payment
in full.
<PAGE> 6
- 6 -
SECTION 9 STOCK OPTION AND STOCK PURCHASE PLANS: If the Executive is
entitled to a payment pursuant to Section 2 or 4, the term during which any
stock option granted to the Executive by the Corporation or any subsidiary of
the Corporation may be exercised shall be extended to the later of the expiry
date of the option or 12 months after the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment as referred to in Section 4, as the case may be; provided that the
maximum term of any such option shall not exceed six years from the date of
grant of the option or such longer period as shall be permitted under the terms
of the Corporation's stock option plan. In addition, in such event any
provisions of the stock option or the stock purchase plan restricting the number
of shares which may be purchased before a particular date shall be waived and
the options shall be fully vested immediately. If the Executive is entitled to a
payment pursuant to Section 2 or 4, all shares owned by the Executive and held
in any stock purchase plan shall immediately be released to the Executive,
subject to the Executive making any payments required under the plan. The terms
of any stock option plan, stock purchase plan or agreement therefor shall be
deemed amended to reflect the provisions of this Section 9.
SECTION 10 DESIGNATION OF BENEFICIARY: If the Executive dies prior to
satisfaction of all of the Corporation's obligations under this Agreement, any
remaining amounts payable to the Executive by the Corporation shall be paid to
the person or persons (a "Beneficiary") previously designated by the Executive
to the Corporation for such purposes. Any such designation of a Beneficiary
shall be made in writing, signed by the Executive and dated and filed with the
Secretary of the Corporation. In the event that no such designation is made, all
such remaining amounts shall be paid by the Corporation to the Estate of the
Executive. If the Executive has exercised the option pursuant to Section 5 or 8
to defer a payment, or any part thereof, to be made to or for the benefit of the
Executive, the Beneficiary or the Executor of the Estate, as the case may be,
shall have the further option to require payment in full of any such remaining
amounts to the Beneficiary or the Executor, as the case may be, by giving notice
to that effect to the Corporation.
SECTION 11 ASSIGNMENT AND ASSUMPTION: This Agreement automatically shall be
assigned by the Corporation to any successor corporation of the Corporation and
shall be binding upon such successor corporation. For the purposes of this
Section 11, "successor corporation" shall include any person referred to in
Subsection 1(b)(ii), (iii) or (iv). The Corporation shall ensure that the
successor corporation shall continue the provisions of this Agreement as if it
were the original party in place of the Corporation; provided however that the
Corporation shall not thereby be relieved of any obligation to the Executive
pursuant to this Agreement. In the event of a transaction or series of
transactions as described in Subsection 1(b)(ii), (iii) or (iv), appropriate
arrangements shall be made by the Corporation for the successor corporation to
honour this Agreement as if the Executive had exercised his maximum rights
hereunder as of the effective date of such transaction.
SECTION 12 FURTHER ASSURANCES: Each of the parties hereto agrees to do and
execute or cause to be made, done or executed all such further and other things,
acts, deeds, documents, assignments and assurances as may be necessary or
reasonably required to carry out the intent and purpose of this Agreement fully
and effectually. Without limiting the generality of the foregoing, the
Corporation shall take all reasonable steps in order to structure the payment or
payments provided for in this Agreement in the manner most advantageous to the
Executive with respect to the provisions of the Income Tax Act (Canada), the
Internal Revenue Code (United States of America) or any similar legislation in
place in any other jurisdiction of the Executive's residence.
<PAGE> 7
- 7 -
SECTION 13 REVIEW OF AGREEMENT: In the event of a threatened or pending
Change in Control of the Corporation, and following an actual Change in Control
of the Corporation, the Corporation in either case shall enter into a review of
the terms of this Agreement and shall implement any amendments hereto which are
agreed to by both parties.
SECTION 14 RE-TRANSFER: If, within 12 months prior to the date of the
Triggering Event, or the date of dismissal without cause, as the case may be,
the Executive was transferred by the Corporation or the Subsidiary to his then
place of residence and if the Executive has been resident in such location for
less than 24 months at the time that he becomes entitled to a payment pursuant
to Section 2 or 4, if the Executive exercises his rights under this Section 14
at the time of the giving of notice by the Executive pursuant to Section 3, or
upon giving notice to the Corporation within 30 days of dismissal from the
Executive's employment as referred to in Section 4, as the case may be, the
Corporation shall pay the direct moving expenses of moving the Executive and his
immediate family and their household effects to his immediately preceding place
of residence offset by any such costs paid by any new employer.
SECTION 15 OUTPLACEMENT SERVICES: If the Executive is entitled to receive a
payment pursuant to Section 2 or 4, the Corporation shall pay the reasonable
costs (to a maximum of 10% of the annual base salary of the Executive as used
for the calculation of such payment) of the services for the Executive of a
suitable outplacement counselling service selected by the Corporation.
Notwithstanding the foregoing provisions of this Section 15, at the option of
the Executive the cost to the Corporation of such outplacement services shall be
converted to a lump sum amount and shall be paid to the Executive immediately.
SECTION 16 GENDER: Whenever the context of this Agreement so requires or
permits, the masculine gender includes the feminine gender.
SECTION 17 NOTICE: Any notice, election or designation to be made by the
Executive pursuant to this Agreement shall be in writing and shall be hand
delivered to the Corporation at the following address:
Zemex Corporation
Canada Trust Tower, BCE Place
161 Bay Street, Suite 3750
Toronto, Ontario
M5J 2S1
Telephone: (416) 365-8080
Fax: (416) 365-8094
Attention: President and
Chief Executive Officer
SECTION 18 TERM: This Agreement shall commence as of the date first above
written and shall terminate on December 31, 2004 unless extended with the mutual
agreement of the parties hereto and approved by the Board of Directors of the
Corporation; provided that if a Change of Control occurs on or before December
31, 2004 the term of this Agreement automatically shall be extended to the
Expiry Date.
<PAGE> 8
- 8 -
SECTION 19 GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario. The parties agree to
attorn to the jurisdiction of, and to submit any dispute arising out of this
Agreement to the Courts of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
as of the date first above written.
ZEMEX CORPORATION
per: c/s
------------------------
Richard L. Lister
President and
Chief Executive Officer
SIGNED, SEALED & DELIVERED )
in the presence of )
)
)
)
)
) l/s
- -------------------------- ) -----------------------
Witness ) Allen J. Palmiere
)
<PAGE> 1
Exhibit (10)n
THIS AGREEMENT made as of the 1st day of October, 1999.
B E T W E E N:
ZEMEX CORPORATION (hereinafter called the
"Corporation")
- and -
GEORGE E. GILLESPIE (hereinafter called the
"Executive")
WITNESSES THAT:
WHEREAS the Executive is presently employed by the Corporation or a Subsidiary;
AND WHEREAS the Corporation and the Executive are desirous of having certain
rights and benefits in the event that the Executive is dismissed or the
Executive's employment relationship with the Corporation or the Subsidiary is
terminated in the manner set out herein;
AND WHEREAS the Corporation wishes to retain the benefit of the Executive's
employment with the Corporation or the Subsidiary and to ensure that the
Executive is able to carry out his responsibilities with the Corporation or the
Subsidiary free from any distractions associated with any change in the
ownership of the Corporation or its assets;
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained, and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the parties
hereto), it is agreed by and between the parties hereto as follows:
SECTION 1 DEFINITIONS: Terms used in this Agreement but not otherwise
defined herein have the meanings set forth below:
(a) "BENEFIT PLANS" means any stock option or stock purchase plan,
employee loan, insurance, long-term disability, medical, dental and
other executive and employee benefit plans, including any pension or
similar plans, perquisites and privileges, such as club dues,
automobile expenses and similar items, as may be provided at the time
to the Executive by the Corporation or the Subsidiary;
<PAGE> 2
- 2 -
(b) "CHANGE IN CONTROL" means a transaction or series of transactions
whereby directly or indirectly:
(i) any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate
thereof and Richard L. Lister or a corporation controlled by
any one or more of such persons) acting jointly or in concert
obtains a sufficient number of securities of the Corporation
to affect materially the control of the Corporation; or
(ii) if the Executive is primarily employed by the Corporation, the
Corporation shall consolidate or merge with or into, amalgamate
with, or enter into a statutory arrangement with, any other
person (other than a subsidiary of the Corporation) or any
other person (other than a subsidiary of the Corporation) shall
consolidate or merge with or into, or amalgamate with or enter
into a statutory arrangement with, the Corporation, and, in
connection therewith, all or part of the outstanding voting
shares shall be changed in any way, reclassified or converted
into, exchanged or otherwise acquired for shares or other
securities of the Corporation or any other person or for cash
or any other property (other than a transaction which has been
approved by the Incumbent Directors); or
(iii) if the Executive is primarily employed by the Corporation, the
Corporation shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Corporation and its
subsidiaries as at the end of the most recently completed
financial year of the Corporation or (B) which during the most
recently completed financial year of the Corporation generated,
or during the then current financial year of the Corporation
are expected to generate, more than 50% of the consolidated
operating income or cash flow of the Corporation and its
subsidiaries, to any other person or persons (other than the
Corporation or one or more of its subsidiaries); or
(iv) if the Executive is primarily employed by a Subsidiary, the
Subsidiary shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Subsidiary and its
subsidiaries as at the end of the most recently completed
financial year of the Subsidiary or (B) which during the most
recently completed financial year of the Subsidiary generated,
or during the then current financial year of the Subsidiary are
expected to generate, more than 50% of the consolidated
operating income or cash flow of the Subsidiary
<PAGE> 3
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and its subsidiaries, to any other person or persons (other
than the Corporation, the Subsidiary or one or more of its
subsidiaries); or
(v) if the Executive is primarily employed by the Corporation, the
Corporation shall issue shares of common stock from the
treasury of the Corporation in a sufficient number to affect
materially the control of the Corporation; or
(vi) if the Executive is primarily employed by a Subsidiary, (A) a
transfer of shares of the Subsidiary or (B) the issue of
treasury shares of the Subsidiary, in either case having the
result that any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate thereof
and Richard L. Lister or a corporation controlled by any one or
more of such persons) acting jointly or in concert beneficially
owns shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the
holders thereof to cast 49.9% or more of the votes attaching to
all shares of the Subsidiary which may be cast to elect
directors of the Subsidiary; or
(vii) the Incumbent Directors cease to represent a majority of the
members of the Board of Directors of the Corporation;
for the purposes of Sections 1(b)(i) and (v), a person or
combination of persons acting jointly or in concert and beneficially
owning shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of
the Corporation which may be cast to elect directors of the
Corporation shall be deemed to be in a position to affect materially
the control of the Corporation;
(c) "EXPIRY DATE" means 24 months after a Change in Control occurs;
(d) "INCUMBENT DIRECTORS" means the members of the Board of Directors
holding office at the date of this Agreement and any additional
Directors appointed by or with the consent of the Incumbent
Directors;
(e) "SUBSIDIARIES" means the following:
(i) Alumitech, Inc. and its subsidiaries;
(ii) Pyron Corporation and its subsidiaries; and
(iii) Zemex Industrial Minerals, Inc. and its subsidiaries;
and "SUBSIDIARY" means any one of them with which the Executive has
employment;
<PAGE> 4
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(f) "TRIGGERING EVENT" means any one of the following events which occurs
without the express or implied agreement of the Executive:
(i) an adverse change in any of the duties, powers, rights,
discretion, salary or benefits of the Executive as they exist
at the date of this Agreement; or
(ii) a diminution of the title of the Executive as it
exists at the date of this Agreement; or
(iii)a change in the person or body to whom the Executive reports
at the date of this Agreement, except if such person or body is
of equivalent rank or stature or such change is as a result of
the resignation or removal of such person or the persons
comprising such body, as the case may be, provided that this
shall not include a change resulting from a promotion in the
normal course of business; or
(iv) a change in the municipality at which the Executive is
regularly required to carry out the terms of his employment
with the Corporation at the date of this Agreement unless the
Executive's terms of employment include the obligation to
receive geographic transfers from time to time in the normal
course of business.
SECTION 2 RIGHTS UPON OCCURRENCE OF CHANGE IN CONTROL FOLLOWED BY A
TRIGGERING EVENT: If, in respect of the Executive, a Change in Control occurs
and if, in respect of the Executive, a Triggering Event occurs after the Change
of Control and on or before the Expiry Date, the Executive shall be entitled to
elect to terminate his employment with the Corporation and to receive a payment
from the Corporation in an amount equal to the aggregate of (a) 200% of his
annual base salary that was applicable immediately prior to the date of the
Triggering Event and (b) 200% of the average of the annual bonus, if any,
payable to him in respect of each of the two fiscal years of the Corporation
ended immediately prior to the date of a notice of election to terminate given
to the Corporation by such Executive pursuant to Section 3.
SECTION 3 RIGHTS CONDITIONAL: All termination rights of the Executive
provided for in Section 2 are (a) conditional upon the Executive electing to
exercise such rights by notice given to the Corporation on or before the Expiry
Date and (b) exercisable only if the Executive does not resign from his
employment with the Corporation or the Subsidiary (other than at the request of
the Corporation or the Subsidiary) and does not actively seek alternative
employment, in each case for at least three months following the date of the
Change in Control.
SECTION 4 RIGHTS UPON DISMISSAL WITHOUT CAUSE: The Executive shall be
entitled to a payment by the Corporation of an amount calculated as provided for
in Section 2 (except that his annual base salary as referred to in Section 2(a)
shall be that applicable immediately prior to the date of his dismissal) if a
Triggering Event does not occur but the Executive is dismissed from his
employment with the Corporation without cause after a Change in Control and on
or before the Expiry Date. The Corporation shall not dismiss the Executive for
any reason unless such dismissal is specifically approved by the Board of
Directors of the Corporation. Likewise, the Corporation shall have the right to
dismiss the Executive from his employment
<PAGE> 5
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with the Corporation without cause after a Change in Control and on or before
the Expiry Date, subject to paying the Executive the amount calculated as
provided for in Section 2.
SECTION 5 PAYMENTS UNDER THIS AGREEMENT: Any payment to be made by the
Corporation pursuant to the terms of this Agreement shall be made by the
Corporation in cash in a lump sum within five business days of the giving of
notice by the Executive pursuant to Section 3, or within five business days of
the dismissal from the Executive's employment as referred to in Section 4, as
the case may be. Any payment to be made under Section 2 or 4 shall be
calculated, in the case of Section 2, at the date of giving notice pursuant to
Section 3 and, in the case of Section 4, at the date of dismissal.
Notwithstanding the foregoing provisions of this Section 5, at the option of the
Executive a payment, or any part thereof as shall be specified by the Executive,
to be made to the Executive shall be deferred to such date or dates as shall be
designated in writing by the Executive. Any payment so deferred shall bear
simple interest at the rate of 6% per annum calculated from the date payment of
the amount otherwise should have been made until the date of payment in full.
The Corporation shall list the items making up a payment calculated as provided
for in Section 2 and shall support the calculation of such amount.
SECTION 6 PAYMENTS IN LIEU OF ALL OTHER DAMAGE CLAIMS ETC.: All payments
provided for herein shall be in lieu of all other notice or damage claims as
regards dismissal or termination of the Executive's employment with the
Corporation or any subsidiary of the Corporation after a Change in Control and
on or before the Expiry Date. The arrangements provided for herein shall not be
considered in any judicial determination of appropriate damages at common law
for dismissal without cause, other than as provided for in this Agreement. At
the request of either party, the parties shall exchange mutual signed releases
of liability conforming to the substantive provisions of this Agreement.
SECTION 7 AGREEMENT SUPPLEMENTAL: This Agreement shall be supplemental to
any other contract of employment or otherwise, whether written or oral, that
exists between the Corporation or any subsidiary of the Corporation and the
Executive, except insofar as any such contract relates to the termination of the
employment relationship between the Corporation or any Subsidiary of the
Corporation and the Executive, in which case this Agreement shall supersede the
termination provisions of any such other contract of employment or otherwise.
SECTION 8 BENEFIT PLANS: In the event that the Executive is entitled to a
payment pursuant to Section 2 or 4, the Executive shall be entitled to have all
Benefit Plans as constituted at the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment, as the case may be, continued for a period of 24 months after the
date of the giving of notice by the Executive pursuant to Section 3, or the
dismissal from the Executive's employment, as the case may be, or for any longer
period available under any Benefit Plans when coverage is provided from a source
other than the Corporation. Notwithstanding the foregoing provisions of this
Section 8, at the option of the Executive the cost to the Corporation of such
Benefit Plans, or any part of the benefits under any such Benefit Plans as shall
be specified by the Executive, shall be converted to a lump sum amount and shall
be paid to the Executive immediately or shall be deferred to such date or dates
as shall be designated in writing by the Executive. Any payment so deferred
shall bear simple interest at the rate of 6% per annum calculated from the date
payment of the amount otherwise should have been made until the date of payment
in full.
<PAGE> 6
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SECTION 9 STOCK OPTION AND STOCK PURCHASE PLANS: If the Executive is
entitled to a payment pursuant to Section 2 or 4, the term during which any
stock option granted to the Executive by the Corporation or any subsidiary of
the Corporation may be exercised shall be extended to the later of the expiry
date of the option or 12 months after the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment as referred to in Section 4, as the case may be; provided that the
maximum term of any such option shall not exceed six years from the date of
grant of the option or such longer period as shall be permitted under the terms
of the Corporation's stock option plan. In addition, in such event any
provisions of the stock option or the stock purchase plan restricting the number
of shares which may be purchased before a particular date shall be waived and
the options shall be fully vested immediately. If the Executive is entitled to a
payment pursuant to Section 2 or 4, all shares owned by the Executive and held
in any stock purchase plan shall immediately be released to the Executive,
subject to the Executive making any payments required under the plan. The terms
of any stock option plan, stock purchase plan or agreement therefor shall be
deemed amended to reflect the provisions of this Section 9.
SECTION 10 DESIGNATION OF BENEFICIARY: If the Executive dies prior to
satisfaction of all of the Corporation's obligations under this Agreement, any
remaining amounts payable to the Executive by the Corporation shall be paid to
the person or persons (a "Beneficiary") previously designated by the Executive
to the Corporation for such purposes. Any such designation of a Beneficiary
shall be made in writing, signed by the Executive and dated and filed with the
Secretary of the Corporation. In the event that no such designation is made, all
such remaining amounts shall be paid by the Corporation to the Estate of the
Executive. If the Executive has exercised the option pursuant to Section 5 or 8
to defer a payment, or any part thereof, to be made to or for the benefit of the
Executive, the Beneficiary or the Executor of the Estate, as the case may be,
shall have the further option to require payment in full of any such remaining
amounts to the Beneficiary or the Executor, as the case may be, by giving notice
to that effect to the Corporation.
SECTION 11 ASSIGNMENT AND ASSUMPTION: This Agreement automatically shall be
assigned by the Corporation to any successor corporation of the Corporation and
shall be binding upon such successor corporation. For the purposes of this
Section 11, "successor corporation" shall include any person referred to in
Subsection 1(b)(ii), (iii) or (iv). The Corporation shall ensure that the
successor corporation shall continue the provisions of this Agreement as if it
were the original party in place of the Corporation; provided however that the
Corporation shall not thereby be relieved of any obligation to the Executive
pursuant to this Agreement. In the event of a transaction or series of
transactions as described in Subsection 1(b)(ii), (iii) or (iv), appropriate
arrangements shall be made by the Corporation for the successor corporation to
honour this Agreement as if the Executive had exercised his maximum rights
hereunder as of the effective date of such transaction.
SECTION 12 FURTHER ASSURANCES: Each of the parties hereto agrees to do and
execute or cause to be made, done or executed all such further and other things,
acts, deeds, documents, assignments and assurances as may be necessary or
reasonably required to carry out the intent and purpose of this Agreement fully
and effectually. Without limiting the generality of the foregoing, the
Corporation shall take all reasonable steps in order to structure the payment or
payments provided for in this Agreement in the manner most advantageous to the
Executive with respect to the provisions of the Income Tax Act (Canada), the
Internal Revenue Code (United States of America) or any similar legislation in
place in any other jurisdiction of the Executive's residence.
<PAGE> 7
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SECTION 13 REVIEW OF AGREEMENT: In the event of a threatened or pending
Change in Control of the Corporation, and following an actual Change in Control
of the Corporation, the Corporation in either case shall enter into a review of
the terms of this Agreement and shall implement any amendments hereto which are
agreed to by both parties.
SECTION 14 RE-TRANSFER: If, within 12 months prior to the date of the
Triggering Event, or the date of dismissal without cause, as the case may be,
the Executive was transferred by the Corporation or the Subsidiary to his then
place of residence and if the Executive has been resident in such location for
less than 24 months at the time that he becomes entitled to a payment pursuant
to Section 2 or 4, if the Executive exercises his rights under this Section 14
at the time of the giving of notice by the Executive pursuant to Section 3, or
upon giving notice to the Corporation within 30 days of dismissal from the
Executive's employment as referred to in Section 4, as the case may be, the
Corporation shall pay the direct moving expenses of moving the Executive and his
immediate family and their household effects to his immediately preceding place
of residence offset by any such costs paid by any new employer.
SECTION 15 OUTPLACEMENT SERVICES: If the Executive is entitled to receive a
payment pursuant to Section 2 or 4, the Corporation shall pay the reasonable
costs (to a maximum of 10% of the annual base salary of the Executive as used
for the calculation of such payment) of the services for the Executive of a
suitable outplacement counselling service selected by the Corporation.
Notwithstanding the foregoing provisions of this Section 15, at the option of
the Executive the cost to the Corporation of such outplacement services shall be
converted to a lump sum amount and shall be paid to the Executive immediately.
SECTION 16 GENDER: Whenever the context of this Agreement so requires or
permits, the masculine gender includes the feminine gender.
SECTION 17 NOTICE: Any notice, election or designation to be made by the
Executive pursuant to this Agreement shall be in writing and shall be hand
delivered to the Corporation at the following address:
Zemex Corporation
Canada Trust Tower, BCE Place
161 Bay Street, Suite 3750
Toronto, Ontario
M5J 2S1
Telephone: (416) 365-8080
Fax: (416) 365-8094
Attention: President and
Chief Executive Officer
SECTION 18 TERM: This Agreement shall commence as of the date first above
written and shall terminate on December 31, 2004 unless extended with the mutual
agreement of the parties hereto and approved by the Board of Directors of the
Corporation; provided that if a Change of Control occurs on or before December
31, 2004 the term of this Agreement automatically shall be extended to the
Expiry Date.
<PAGE> 8
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SECTION 19 GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario. The parties agree to
attorn to the jurisdiction of, and to submit any dispute arising out of this
Agreement to the Courts of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
as of the date first above written.
ZEMEX CORPORATION
per: c/s
------------------------
Richard L. Lister
President and
Chief Executive Officer
SIGNED, SEALED & DELIVERED )
in the presence of )
)
)
)
)
) l/s
-------------------------- ) ----------------------
Witness ) George E. Gillespie
)
<PAGE> 1
Exhibit 10(o)
THIS AGREEMENT made as of the 1st day of October, 1999.
B E T W E E N:
ZEMEX CORPORATION (hereinafter called the
"Corporation")
- and -
PETER J. GOODWIN (hereinafter called the "Executive")
WITNESSES THAT:
WHEREAS the Executive is presently employed by the Corporation or a Subsidiary;
AND WHEREAS the Corporation and the Executive are desirous of having certain
rights and benefits in the event that the Executive is dismissed or the
Executive's employment relationship with the Corporation or the Subsidiary is
terminated in the manner set out herein;
AND WHEREAS the Corporation wishes to retain the benefit of the Executive's
employment with the Corporation or the Subsidiary and to ensure that the
Executive is able to carry out his responsibilities with the Corporation or the
Subsidiary free from any distractions associated with any change in the
ownership of the Corporation or its assets;
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained, and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the parties
hereto), it is agreed by and between the parties hereto as follows:
SECTION 1 DEFINITIONS: Terms used in this Agreement but not otherwise
defined herein have the meanings set forth below:
(a) "BENEFIT PLANS" means any stock option or stock purchase
plan, employee loan, insurance, long-term disability, medical,
dental and other executive and employee benefit plans, including any
pension or similar plans, perquisites and privileges, such as club
dues, automobile expenses and similar items, as may be provided at
the time to the Executive by the Corporation or the Subsidiary;
<PAGE> 2
- 2 -
(b) "CHANGE IN CONTROL" means a transaction or series of
transactions whereby directly or indirectly:
(i) any person or combination of persons (other than any combination
of Dundee Bancorp Inc. or any affiliate thereof and Richard L.
Lister or a corporation controlled by any one or more of such
persons) acting jointly or in concert obtains a sufficient number
of securities of the Corporation to affect materially the control
of the Corporation; or
(ii) if the Executive is primarily employed by the Corporation, the
Corporation shall consolidate or merge with or into, amalgamate
with, or enter into a statutory arrangement with, any other
person (other than a subsidiary of the Corporation) or any other
person (other than a subsidiary of the Corporation) shall
consolidate or merge with or into, or amalgamate with or enter
into a statutory arrangement with, the Corporation, and, in
connection therewith, all or part of the outstanding voting
shares shall be changed in any way, reclassified or converted
into, exchanged or otherwise acquired for shares or other
securities of the Corporation or any other person or for cash or
any other property (other than a transaction which has been
approved by the Incumbent Directors); or
(iii) if the Executive is primarily employed by the Corporation, the
Corporation shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a leasehold
interest (or one or more of its subsidiaries shall sell or
otherwise transfer, including by way of the grant of a leasehold
interest) property or assets (A) aggregating more than 50% of the
consolidated assets (measured by either book value or fair market
value) of the Corporation and its subsidiaries as at the end of
the most recently completed financial year of the Corporation or
(B) which during the most recently completed financial year of
the Corporation generated, or during the then current financial
year of the Corporation are expected to generate, more than 50%
of the consolidated operating income or cash flow of the
Corporation and its subsidiaries, to any other person or persons
(other than the Corporation or one or more of its subsidiaries);
or
(iv) if the Executive is primarily employed by a Subsidiary, the
Subsidiary shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a leasehold
interest (or one or more of its subsidiaries shall sell or
otherwise transfer, including by way of the grant of a leasehold
interest) property or assets (A) aggregating more than 50% of the
consolidated assets (measured by either book value or fair market
value) of the Subsidiary and its subsidiaries as at the end of
the most recently completed financial year of the Subsidiary or
(B) which during the most recently completed financial year of
the Subsidiary generated, or during the then current financial
year of the Subsidiary are expected to generate, more than 50% of
the consolidated operating income or cash flow of the Subsidiary
<PAGE> 3
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and its subsidiaries, to any other person or persons (other than
the Corporation, the Subsidiary or one or more of its
subsidiaries); or
(v) if the Executive is primarily employed by the Corporation, the
Corporation shall issue shares of common stock from the treasury
of the Corporation in a sufficient number to affect materially
the control of the Corporation; or
(vi) if the Executive is primarily employed by a Subsidiary, (A) a
transfer of shares of the Subsidiary or (B) the issue of treasury
shares of the Subsidiary, in either case having the result that
any person or combination of persons (other than any combination
of Dundee Bancorp Inc. or any affiliate thereof and Richard L.
Lister or a corporation controlled by any one or more of such
persons) acting jointly or in concert beneficially owns shares or
other securities in excess of the number which, directly or
following conversion thereof, would entitle the holders thereof
to cast 49.9% or more of the votes attaching to all shares of the
Subsidiary which may be cast to elect directors of the
Subsidiary; or
(vii) the Incumbent Directors cease to represent a majority of the
members of the Board of Directors of the Corporation;
for the purposes of Sections 1(b)(i) and (v), a person or
combination of persons acting jointly or in concert and
beneficially owning shares or other securities in excess of the
number which, directly or following conversion thereof, would
entitle the holders thereof to cast 20% or more of the votes
attaching to all shares of the Corporation which may be cast to
elect directors of the Corporation shall be deemed to be in a
position to affect materially the control of the Corporation;
(c) "EXPIRY DATE" means 24 months after a Change in Control occurs;
(d) "INCUMBENT DIRECTORS" means the members of the Board of
Directors holding office at the date of this Agreement and any
additional Directors appointed by or with the consent of the
Incumbent Directors;
(e) "SUBSIDIARIES" means the following:
(i) Alumitech, Inc. and its subsidiaries;
(ii) Pyron Corporation and its subsidiaries; and
(iii) Zemex Industrial Minerals, Inc. and its
subsidiaries;
and "SUBSIDIARY" means any one of them with which the Executive has
employment;
<PAGE> 4
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(f) "TRIGGERING EVENT" means any one of the following events which occurs
without the express or implied agreement of the Executive:
(i) an adverse change in any of the duties, powers, rights,
discretion, salary or benefits of the Executive as they exist at
the date of this Agreement; or
(ii) a diminution of the title of the Executive as it exists at the
date of this Agreement; or
(iii) a change in the person or body to whom the Executive reports at
the date of this Agreement, except if such person or body is of
equivalent rank or stature or such change is as a result of the
resignation or removal of such person or the persons comprising
such body, as the case may be, provided that this shall not
include a change resulting from a promotion in the normal course
of business; or
(iv) a change in the municipality at which the Executive is regularly
required to carry out the terms of his employment with the
Corporation at the date of this Agreement unless the Executive's
terms of employment include the obligation to receive geographic
transfers from time to time in the normal course of business.
SECTION 2 RIGHTS UPON OCCURRENCE OF CHANGE IN CONTROL FOLLOWED BY A
TRIGGERING EVENT: If, in respect of the Executive, a Change in Control occurs
and if, in respect of the Executive, a Triggering Event occurs after the Change
of Control and on or before the Expiry Date, the Executive shall be entitled to
elect to terminate his employment with the Corporation and to receive a payment
from the Corporation in an amount equal to the aggregate of (a) 200% of his
annual base salary that was applicable immediately prior to the date of the
Triggering Event and (b) 200% of the average of the annual bonus, if any,
payable to him in respect of each of the two fiscal years of the Corporation
ended immediately prior to the date of a notice of election to terminate given
to the Corporation by such Executive pursuant to Section 3.
SECTION 3 RIGHTS CONDITIONAL: All termination rights of the Executive
provided for in Section 2 are (a) conditional upon the Executive electing to
exercise such rights by notice given to the Corporation on or before the Expiry
Date and (b) exercisable only if the Executive does not resign from his
employment with the Corporation or the Subsidiary (other than at the request of
the Corporation or the Subsidiary) and does not actively seek alternative
employment, in each case for at least three months following the date of the
Change in Control.
SECTION 4 RIGHTS UPON DISMISSAL WITHOUT CAUSE: The Executive shall be
entitled to a payment by the Corporation of an amount calculated as provided
for in Section 2 (except that his annual base salary as referred to in Section
2(a) shall be that applicable immediately prior to the date of his dismissal)
if a Triggering Event does not occur but the Executive is dismissed from his
employment with the Corporation without cause after a Change in Control and on
or before the Expiry Date. The Corporation shall not dismiss the Executive for
any reason unless such dismissal is specifically approved by the Board of
Directors of the Corporation. Likewise, the Corporation shall have the right
to dismiss the Executive from his employment
<PAGE> 5
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with the Corporation without cause after a Change in Control and on or before
the Expiry Date, subject to paying the Executive the amount calculated as
provided for in Section 2.
SECTION 5 PAYMENTS UNDER THIS AGREEMENT: Any payment to be made by the
Corporation pursuant to the terms of this Agreement shall be made by the
Corporation in cash in a lump sum within five business days of the giving of
notice by the Executive pursuant to Section 3, or within five business days of
the dismissal from the Executive's employment as referred to in Section 4, as
the case may be. Any payment to be made under Section 2 or 4 shall be
calculated, in the case of Section 2, at the date of giving notice pursuant to
Section 3 and, in the case of Section 4, at the date of dismissal.
Notwithstanding the foregoing provisions of this Section 5, at the option of
the Executive a payment, or any part thereof as shall be specified by the
Executive, to be made to the Executive shall be deferred to such date or dates
as shall be designated in writing by the Executive. Any payment so deferred
shall bear simple interest at the rate of 6% per annum calculated from the date
payment of the amount otherwise should have been made until the date of payment
in full. The Corporation shall list the items making up a payment calculated
as provided for in Section 2 and shall support the calculation of such amount.
SECTION 6 PAYMENTS IN LIEU OF ALL OTHER DAMAGE CLAIMS ETC.: All payments
provided for herein shall be in lieu of all other notice or damage claims as
regards dismissal or termination of the Executive's employment with the
Corporation or any subsidiary of the Corporation after a Change in Control and
on or before the Expiry Date. The arrangements provided for herein shall not
be considered in any judicial determination of appropriate damages at common
law for dismissal without cause, other than as provided for in this Agreement.
At the request of either party, the parties shall exchange mutual signed
releases of liability conforming to the substantive provisions of this
Agreement.
SECTION 7 AGREEMENT SUPPLEMENTAL: This Agreement shall be supplemental to
any other contract of employment or otherwise, whether written or oral, that
exists between the Corporation or any subsidiary of the Corporation and the
Executive, except insofar as any such contract relates to the termination of
the employment relationship between the Corporation or any Subsidiary of the
Corporation and the Executive, in which case this Agreement shall supersede the
termination provisions of any such other contract of employment or otherwise.
SECTION 8 BENEFIT PLANS: In the event that the Executive is entitled to a
payment pursuant to Section 2 or 4, the Executive shall be entitled to have all
Benefit Plans as constituted at the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment, as the case may be, continued for a period of 24 months after the
date of the giving of notice by the Executive pursuant to Section 3, or the
dismissal from the Executive's employment, as the case may be, or for any
longer period available under any Benefit Plans when coverage is provided from
a source other than the Corporation. Notwithstanding the foregoing provisions
of this Section 8, at the option of the Executive the cost to the Corporation
of such Benefit Plans, or any part of the benefits under any such Benefit Plans
as shall be specified by the Executive, shall be converted to a lump sum amount
and shall be paid to the Executive immediately or shall be deferred to such
date or dates as shall be designated in writing by the Executive. Any payment
so deferred shall bear simple interest at the rate of 6% per annum calculated
from the date payment of the amount otherwise should have been made until the
date of payment in full.
<PAGE> 6
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SECTION 9 STOCK OPTION AND STOCK PURCHASE PLANS: If the Executive is
entitled to a payment pursuant to Section 2 or 4, the term during which any
stock option granted to the Executive by the Corporation or any subsidiary of
the Corporation may be exercised shall be extended to the later of the expiry
date of the option or 12 months after the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment as referred to in Section 4, as the case may be; provided that the
maximum term of any such option shall not exceed six years from the date of
grant of the option or such longer period as shall be permitted under the terms
of the Corporation's stock option plan. In addition, in such event any
provisions of the stock option or the stock purchase plan restricting the
number of shares which may be purchased before a particular date shall be
waived and the options shall be fully vested immediately. If the Executive is
entitled to a payment pursuant to Section 2 or 4, all shares owned by the
Executive and held in any stock purchase plan shall immediately be released to
the Executive, subject to the Executive making any payments required under the
plan. The terms of any stock option plan, stock purchase plan or agreement
therefor shall be deemed amended to reflect the provisions of this Section 9.
SECTION 10 DESIGNATION OF BENEFICIARY: If the Executive dies prior to
satisfaction of all of the Corporation's obligations under this Agreement, any
remaining amounts payable to the Executive by the Corporation shall be paid to
the person or persons (a "Beneficiary") previously designated by the Executive
to the Corporation for such purposes. Any such designation of a Beneficiary
shall be made in writing, signed by the Executive and dated and filed with the
Secretary of the Corporation. In the event that no such designation is made,
all such remaining amounts shall be paid by the Corporation to the Estate of
the Executive. If the Executive has exercised the option pursuant to Section 5
or 8 to defer a payment, or any part thereof, to be made to or for the benefit
of the Executive, the Beneficiary or the Executor of the Estate, as the case
may be, shall have the further option to require payment in full of any such
remaining amounts to the Beneficiary or the Executor, as the case may be, by
giving notice to that effect to the Corporation.
SECTION 11 ASSIGNMENT AND ASSUMPTION: This Agreement automatically shall
be assigned by the Corporation to any successor corporation of the Corporation
and shall be binding upon such successor corporation. For the purposes of this
Section 11, "successor corporation" shall include any person referred to in
Subsection 1(b)(ii), (iii) or (iv). The Corporation shall ensure that the
successor corporation shall continue the provisions of this Agreement as if it
were the original party in place of the Corporation; provided however that the
Corporation shall not thereby be relieved of any obligation to the Executive
pursuant to this Agreement. In the event of a transaction or series of
transactions as described in Subsection 1(b)(ii), (iii) or (iv), appropriate
arrangements shall be made by the Corporation for the successor corporation to
honour this Agreement as if the Executive had exercised his maximum rights
hereunder as of the effective date of such transaction.
SECTION 12 FURTHER ASSURANCES: Each of the parties hereto agrees to do and
execute or cause to be made, done or executed all such further and other
things, acts, deeds, documents, assignments and assurances as may be necessary
or reasonably required to carry out the intent and purpose of this Agreement
fully and effectually. Without limiting the generality of the foregoing, the
Corporation shall take all reasonable steps in order to structure the payment
or payments provided for in this Agreement in the manner most advantageous to
the Executive with respect to the provisions of the Income Tax Act (Canada),
the Internal Revenue Code (United States of America) or any similar legislation
in place in any other jurisdiction of the Executive's residence.
<PAGE> 7
- 7 -
SECTION 13 REVIEW OF AGREEMENT: In the event of a threatened or pending
Change in Control of the Corporation, and following an actual Change in Control
of the Corporation, the Corporation in either case shall enter into a review of
the terms of this Agreement and shall implement any amendments hereto which are
agreed to by both parties.
SECTION 14 RE-TRANSFER: If, within 12 months prior to the date of the
Triggering Event, or the date of dismissal without cause, as the case may be,
the Executive was transferred by the Corporation or the Subsidiary to his then
place of residence and if the Executive has been resident in such location for
less than 24 months at the time that he becomes entitled to a payment pursuant
to Section 2 or 4, if the Executive exercises his rights under this Section 14
at the time of the giving of notice by the Executive pursuant to Section 3, or
upon giving notice to the Corporation within 30 days of dismissal from the
Executive's employment as referred to in Section 4, as the case may be, the
Corporation shall pay the direct moving expenses of moving the Executive and
his immediate family and their household effects to his immediately preceding
place of residence offset by any such costs paid by any new employer.
SECTION 15 OUTPLACEMENT SERVICES: If the Executive is entitled to receive
a payment pursuant to Section 2 or 4, the Corporation shall pay the reasonable
costs (to a maximum of 10% of the annual base salary of the Executive as used
for the calculation of such payment) of the services for the Executive of a
suitable outplacement counselling service selected by the Corporation.
Notwithstanding the foregoing provisions of this Section 15, at the option of
the Executive the cost to the Corporation of such outplacement services shall
be converted to a lump sum amount and shall be paid to the Executive
immediately.
SECTION 16 GENDER: Whenever the context of this Agreement so requires or
permits, the masculine gender includes the feminine gender.
SECTION 17 NOTICE: Any notice, election or designation to be made by the
Executive pursuant to this Agreement shall be in writing and shall be hand
delivered to the Corporation at the following address:
Zemex Corporation
Canada Trust Tower, BCE Place
161 Bay Street, Suite 3750
Toronto, Ontario
M5J 2S1
Telephone: (416) 365-8080
Fax: (416) 365-8094
Attention: President and
Chief Executive Officer
SECTION 18 TERM: This Agreement shall commence as of the date first above
written and shall terminate on December 31, 2004 unless extended with the
mutual agreement of the parties hereto and approved by the Board of Directors
of the Corporation; provided that if a Change of Control occurs on or before
December 31, 2004 the term of this Agreement automatically shall be extended to
the Expiry Date.
<PAGE> 8
- 8 -
SECTION 19 GOVERNING LAW: This Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario. The parties
agree to attorn to the jurisdiction of, and to submit any dispute arising out
of this Agreement to the Courts of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
as of the date first above written.
ZEMEX CORPORATION
per:
------------------------ c/s
Richard L. Lister
President and
Chief Executive Officer
SIGNED, SEALED & DELIVERED )
in the presence of )
)
)
)
)
)
- ------------------------- ) ------------------------ l/s
Witness ) Peter J. Goodwin
)
<PAGE> 1
Exhibit 10(p)
THIS AGREEMENT made as of the 1st day of October, 1999.
B E T W E E N:
ZEMEX CORPORATION (hereinafter called the
"Corporation")
- and -
TERRANCE J. HOGAN (hereinafter called the "Executive")
WITNESSES THAT:
WHEREAS the Executive is presently employed by the Corporation or a Subsidiary;
AND WHEREAS the Corporation and the Executive are desirous of having certain
rights and benefits in the event that the Executive is dismissed or the
Executive's employment relationship with the Corporation or the Subsidiary is
terminated in the manner set out herein;
AND WHEREAS the Corporation wishes to retain the benefit of the Executive's
employment with the Corporation or the Subsidiary and to ensure that the
Executive is able to carry out his responsibilities with the Corporation or the
Subsidiary free from any distractions associated with any change in the
ownership of the Corporation or its assets;
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements hereinafter contained, and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged by the parties
hereto), it is agreed by and between the parties hereto as follows:
SECTION 1 DEFINITIONS: Terms used in this Agreement but not otherwise
defined herein have the meanings set forth below:
(a) "BENEFIT PLANS" means any stock option or stock purchase plan,
employee loan, insurance, long-term disability, medical, dental and
other executive and employee benefit plans, including any pension or
similar plans, perquisites and privileges, such as club dues,
automobile expenses and similar items, as may be provided at the time
to the Executive by the Corporation or the Subsidiary;
<PAGE> 2
- 2 -
(b) "CHANGE IN CONTROL" means a transaction or series of transactions
whereby directly or indirectly:
(i) any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate
thereof and Richard L. Lister or a corporation controlled by
any one or more of such persons) acting jointly or in concert
obtains a sufficient number of securities of the Corporation
to affect materially the control of the Corporation; or
(ii) if the Executive is primarily employed by the Corporation, the
Corporation shall consolidate or merge with or into, amalgamate
with, or enter into a statutory arrangement with, any other
person (other than a subsidiary of the Corporation) or any
other person (other than a subsidiary of the Corporation) shall
consolidate or merge with or into, or amalgamate with or enter
into a statutory arrangement with, the Corporation, and, in
connection therewith, all or part of the outstanding voting
shares shall be changed in any way, reclassified or converted
into, exchanged or otherwise acquired for shares or other
securities of the Corporation or any other person or for cash
or any other property (other than a transaction which has been
approved by the Incumbent Directors); or
(iii) if the Executive is primarily employed by the Corporation, the
Corporation shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Corporation and its
subsidiaries as at the end of the most recently completed
financial year of the Corporation or (B) which during the most
recently completed financial year of the Corporation generated,
or during the then current financial year of the Corporation
are expected to generate, more than 50% of the consolidated
operating income or cash flow of the Corporation and its
subsidiaries, to any other person or persons (other than the
Corporation or one or more of its subsidiaries); or
(iv) if the Executive is primarily employed by a Subsidiary, the
Subsidiary shall be liquidated or dissolved or shall sell or
otherwise transfer, including by way of the grant of a
leasehold interest (or one or more of its subsidiaries shall
sell or otherwise transfer, including by way of the grant of a
leasehold interest) property or assets (A) aggregating more
than 50% of the consolidated assets (measured by either book
value or fair market value) of the Subsidiary and its
subsidiaries as at the end of the most recently completed
financial year of the Subsidiary or (B) which during the most
recently completed financial year of the Subsidiary generated,
or during the then current financial year of the Subsidiary are
expected to generate, more than 50% of the consolidated
operating income or cash flow of the Subsidiary
<PAGE> 3
- 3 -
and its subsidiaries, to any other person or persons (other
than the Corporation, the Subsidiary or one or more of its
subsidiaries); or
(v) if the Executive is primarily employed by the Corporation, the
Corporation shall issue shares of common stock from the
treasury of the Corporation in a sufficient number to affect
materially the control of the Corporation; or
(vi) if the Executive is primarily employed by a Subsidiary, (A) a
transfer of shares of the Subsidiary or (B) the issue of
treasury shares of the Subsidiary, in either case having the
result that any person or combination of persons (other than
any combination of Dundee Bancorp Inc. or any affiliate thereof
and Richard L. Lister or a corporation controlled by any one or
more of such persons) acting jointly or in concert beneficially
owns shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the
holders thereof to cast 49.9% or more of the votes attaching to
all shares of the Subsidiary which may be cast to elect
directors of the Subsidiary; or
(vii)the Incumbent Directors cease to represent a majority of the
members of the Board of Directors of the Corporation;
for the purposes of Sections 1(b)(i) and (v), a person or
combination of persons acting jointly or in concert and beneficially
owning shares or other securities in excess of the number which,
directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of
the Corporation which may be cast to elect directors of the
Corporation shall be deemed to be in a position to affect materially
the control of the Corporation;
(c) "EXPIRY DATE" means 24 months after a Change in Control occurs;
(d) "INCUMBENT DIRECTORS" means the members of the Board of Directors
holding office at the date of this Agreement and any additional
Directors appointed by or with the consent of the Incumbent
Directors;
(e) "SUBSIDIARIES" means the following:
(i) Alumitech, Inc. and its subsidiaries;
(ii) Pyron Corporation and its subsidiaries; and
(iii) Zemex Industrial Minerals, Inc. and its
subsidiaries;
and "SUBSIDIARY" means any one of them with which the Executive has
employment;
<PAGE> 4
- 4 -
(f) "TRIGGERING EVENT" means any one of the following events which occurs
without the express or implied agreement of the Executive:
(i) an adverse change in any of the duties, powers, rights,
discretion, salary or benefits of the Executive as they exist
at the date of this Agreement; or
(ii) a diminution of the title of the Executive as it
exists at the date of this Agreement; or
(iii) a change in the person or body to whom the Executive reports
at the date of this Agreement, except if such person or body is
of equivalent rank or stature or such change is as a result of
the resignation or removal of such person or the persons
comprising such body, as the case may be, provided that this
shall not include a change resulting from a promotion in the
normal course of business; or
(iv) a change in the municipality at which the Executive is
regularly required to carry out the terms of his employment
with the Corporation at the date of this Agreement unless the
Executive's terms of employment include the obligation to
receive geographic transfers from time to time in the normal
course of business.
SECTION 2 RIGHTS UPON OCCURRENCE OF CHANGE IN CONTROL FOLLOWED BY A
TRIGGERING EVENT: If, in respect of the Executive, a Change in Control occurs
and if, in respect of the Executive, a Triggering Event occurs after the Change
of Control and on or before the Expiry Date, the Executive shall be entitled to
elect to terminate his employment with the Corporation and to receive a payment
from the Corporation in an amount equal to the aggregate of (a) 200% of his
annual base salary that was applicable immediately prior to the date of the
Triggering Event and (b) 200% of the average of the annual bonus, if any,
payable to him in respect of each of the two fiscal years of the Corporation
ended immediately prior to the date of a notice of election to terminate given
to the Corporation by such Executive pursuant to Section 3.
SECTION 3 RIGHTS CONDITIONAL: All termination rights of the Executive
provided for in Section 2 are (a) conditional upon the Executive electing to
exercise such rights by notice given to the Corporation on or before the Expiry
Date and (b) exercisable only if the Executive does not resign from his
employment with the Corporation or the Subsidiary (other than at the request of
the Corporation or the Subsidiary) and does not actively seek alternative
employment, in each case for at least three months following the date of the
Change in Control.
SECTION 4 RIGHTS UPON DISMISSAL WITHOUT CAUSE: The Executive shall be
entitled to a payment by the Corporation of an amount calculated as provided for
in Section 2 (except that his annual base salary as referred to in Section 2(a)
shall be that applicable immediately prior to the date of his dismissal) if a
Triggering Event does not occur but the Executive is dismissed from his
employment with the Corporation without cause after a Change in Control and on
or before the Expiry Date. The Corporation shall not dismiss the Executive for
any reason unless such dismissal is specifically approved by the Board of
Directors of the Corporation. Likewise, the Corporation shall have the right to
dismiss the Executive from his employment
<PAGE> 5
- 5 -
with the Corporation without cause after a Change in Control and on or before
the Expiry Date, subject to paying the Executive the amount calculated as
provided for in Section 2.
SECTION 5 PAYMENTS UNDER THIS AGREEMENT: Any payment to be made by the
Corporation pursuant to the terms of this Agreement shall be made by the
Corporation in cash in a lump sum within five business days of the giving of
notice by the Executive pursuant to Section 3, or within five business days of
the dismissal from the Executive's employment as referred to in Section 4, as
the case may be. Any payment to be made under Section 2 or 4 shall be
calculated, in the case of Section 2, at the date of giving notice pursuant to
Section 3 and, in the case of Section 4, at the date of dismissal.
Notwithstanding the foregoing provisions of this Section 5, at the option of the
Executive a payment, or any part thereof as shall be specified by the Executive,
to be made to the Executive shall be deferred to such date or dates as shall be
designated in writing by the Executive. Any payment so deferred shall bear
simple interest at the rate of 6% per annum calculated from the date payment of
the amount otherwise should have been made until the date of payment in full.
The Corporation shall list the items making up a payment calculated as provided
for in Section 2 and shall support the calculation of such amount.
SECTION 6 PAYMENTS IN LIEU OF ALL OTHER DAMAGE CLAIMS ETC.: All payments
provided for herein shall be in lieu of all other notice or damage claims as
regards dismissal or termination of the Executive's employment with the
Corporation or any subsidiary of the Corporation after a Change in Control and
on or before the Expiry Date. The arrangements provided for herein shall not be
considered in any judicial determination of appropriate damages at common law
for dismissal without cause, other than as provided for in this Agreement. At
the request of either party, the parties shall exchange mutual signed releases
of liability conforming to the substantive provisions of this Agreement.
SECTION 7 AGREEMENT SUPPLEMENTAL: This Agreement shall be supplemental to
any other contract of employment or otherwise, whether written or oral, that
exists between the Corporation or any subsidiary of the Corporation and the
Executive, except insofar as any such contract relates to the termination of the
employment relationship between the Corporation or any Subsidiary of the
Corporation and the Executive, in which case this Agreement shall supersede the
termination provisions of any such other contract of employment or otherwise.
SECTION 8 BENEFIT PLANS: In the event that the Executive is entitled to a
payment pursuant to Section 2 or 4, the Executive shall be entitled to have all
Benefit Plans as constituted at the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment, as the case may be, continued for a period of 24 months after the
date of the giving of notice by the Executive pursuant to Section 3, or the
dismissal from the Executive's employment, as the case may be, or for any longer
period available under any Benefit Plans when coverage is provided from a source
other than the Corporation. Notwithstanding the foregoing provisions of this
Section 8, at the option of the Executive the cost to the Corporation of such
Benefit Plans, or any part of the benefits under any such Benefit Plans as shall
be specified by the Executive, shall be converted to a lump sum amount and shall
be paid to the Executive immediately or shall be deferred to such date or dates
as shall be designated in writing by the Executive. Any payment so deferred
shall bear simple interest at the rate of 6% per annum calculated from the date
payment of the amount otherwise should have been made until the date of payment
in full.
<PAGE> 6
- 6 -
SECTION 9 STOCK OPTION AND STOCK PURCHASE PLANS: If the Executive is
entitled to a payment pursuant to Section 2 or 4, the term during which any
stock option granted to the Executive by the Corporation or any subsidiary of
the Corporation may be exercised shall be extended to the later of the expiry
date of the option or 12 months after the date of the giving of notice by the
Executive pursuant to Section 3, or the dismissal from the Executive's
employment as referred to in Section 4, as the case may be; provided that the
maximum term of any such option shall not exceed six years from the date of
grant of the option or such longer period as shall be permitted under the terms
of the Corporation's stock option plan. In addition, in such event any
provisions of the stock option or the stock purchase plan restricting the number
of shares which may be purchased before a particular date shall be waived and
the options shall be fully vested immediately. If the Executive is entitled to a
payment pursuant to Section 2 or 4, all shares owned by the Executive and held
in any stock purchase plan shall immediately be released to the Executive,
subject to the Executive making any payments required under the plan. The terms
of any stock option plan, stock purchase plan or agreement therefor shall be
deemed amended to reflect the provisions of this Section 9.
SECTION 10 DESIGNATION OF BENEFICIARY: If the Executive dies prior to
satisfaction of all of the Corporation's obligations under this Agreement, any
remaining amounts payable to the Executive by the Corporation shall be paid to
the person or persons (a "Beneficiary") previously designated by the Executive
to the Corporation for such purposes. Any such designation of a Beneficiary
shall be made in writing, signed by the Executive and dated and filed with the
Secretary of the Corporation. In the event that no such designation is made, all
such remaining amounts shall be paid by the Corporation to the Estate of the
Executive. If the Executive has exercised the option pursuant to Section 5 or 8
to defer a payment, or any part thereof, to be made to or for the benefit of the
Executive, the Beneficiary or the Executor of the Estate, as the case may be,
shall have the further option to require payment in full of any such remaining
amounts to the Beneficiary or the Executor, as the case may be, by giving notice
to that effect to the Corporation.
SECTION 11 ASSIGNMENT AND ASSUMPTION: This Agreement automatically shall be
assigned by the Corporation to any successor corporation of the Corporation and
shall be binding upon such successor corporation. For the purposes of this
Section 11, "successor corporation" shall include any person referred to in
Subsection 1(b)(ii), (iii) or (iv). The Corporation shall ensure that the
successor corporation shall continue the provisions of this Agreement as if it
were the original party in place of the Corporation; provided however that the
Corporation shall not thereby be relieved of any obligation to the Executive
pursuant to this Agreement. In the event of a transaction or series of
transactions as described in Subsection 1(b)(ii), (iii) or (iv), appropriate
arrangements shall be made by the Corporation for the successor corporation to
honour this Agreement as if the Executive had exercised his maximum rights
hereunder as of the effective date of such transaction.
SECTION 12 FURTHER ASSURANCES: Each of the parties hereto agrees to do and
execute or cause to be made, done or executed all such further and other things,
acts, deeds, documents, assignments and assurances as may be necessary or
reasonably required to carry out the intent and purpose of this Agreement fully
and effectually. Without limiting the generality of the foregoing, the
Corporation shall take all reasonable steps in order to structure the payment or
payments provided for in this Agreement in the manner most advantageous to the
Executive with respect to the provisions of the Income Tax Act (Canada), the
Internal Revenue Code (United States of America) or any similar legislation in
place in any other jurisdiction of the Executive's residence.
<PAGE> 7
- 7 -
SECTION 13 REVIEW OF AGREEMENT: In the event of a threatened or pending
Change in Control of the Corporation, and following an actual Change in Control
of the Corporation, the Corporation in either case shall enter into a review of
the terms of this Agreement and shall implement any amendments hereto which are
agreed to by both parties.
SECTION 14 RE-TRANSFER: If, within 12 months prior to the date of the
Triggering Event, or the date of dismissal without cause, as the case may be,
the Executive was transferred by the Corporation or the Subsidiary to his then
place of residence and if the Executive has been resident in such location for
less than 24 months at the time that he becomes entitled to a payment pursuant
to Section 2 or 4, if the Executive exercises his rights under this Section 14
at the time of the giving of notice by the Executive pursuant to Section 3, or
upon giving notice to the Corporation within 30 days of dismissal from the
Executive's employment as referred to in Section 4, as the case may be, the
Corporation shall pay the direct moving expenses of moving the Executive and his
immediate family and their household effects to his immediately preceding place
of residence offset by any such costs paid by any new employer.
SECTION 15 OUTPLACEMENT SERVICES: If the Executive is entitled to receive a
payment pursuant to Section 2 or 4, the Corporation shall pay the reasonable
costs (to a maximum of 10% of the annual base salary of the Executive as used
for the calculation of such payment) of the services for the Executive of a
suitable outplacement counselling service selected by the Corporation.
Notwithstanding the foregoing provisions of this Section 15, at the option of
the Executive the cost to the Corporation of such outplacement services shall be
converted to a lump sum amount and shall be paid to the Executive immediately.
SECTION 16 GENDER: Whenever the context of this Agreement so requires or
permits, the masculine gender includes the feminine gender.
SECTION 17 NOTICE: Any notice, election or designation to be made by the
Executive pursuant to this Agreement shall be in writing and shall be hand
delivered to the Corporation at the following address:
Zemex Corporation
Canada Trust Tower, BCE Place
161 Bay Street, Suite 3750
Toronto, Ontario
M5J 2S1
Telephone: (416) 365-8080
Fax: (416) 365-8094
Attention: President and
Chief Executive Officer
SECTION 18 TERM: This Agreement shall commence as of the date first above
written and shall terminate on December 31, 2004 unless extended with the mutual
agreement of the parties hereto and approved by the Board of Directors of the
Corporation; provided that if a Change of Control occurs on or before December
31, 2004 the term of this Agreement automatically shall be extended to the
Expiry Date.
<PAGE> 8
- 8 -
SECTION 19 GOVERNING LAW: This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario. The parties agree to
attorn to the jurisdiction of, and to submit any dispute arising out of this
Agreement to the Courts of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be executed
as of the date first above written.
ZEMEX CORPORATION
per:
------------------------ c/s
Richard L. Lister
President and
Chief Executive Officer
SIGNED, SEALED & DELIVERED )
in the presence of )
)
)
)
)
)
- -------------------------- ) ------------------------ l/s
Witness ) Terrance J. Hogan
)
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries listed below are, directly or indirectly, wholly-owned (except
for Zemex Fabi-Benwood, LLC, of which 60% is owned by Zemex) and all are
consolidated in the financial statements.
<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE OR COUNTRY
IN WHICH
INCORPORATED OR ORGANIZED
<S> <C>
Alumitech, Inc. Delaware
Alumitech of Cleveland, Inc. Delaware
Alumitech of Wabash, Inc. Indiana
AWT Properties, Inc. Ohio
ETS Schaefer Corporation Ohio
The Feldspar Corporation North Carolina
Suzorite Mica Products Inc. Ontario, Canada
Suzorite Mineral Products, Inc. Delaware
Zemex Fabi-Benwood, LLC North Carolina
Zemex Industrial Minerals, Inc. Delaware
Zemex Mica Corporation Delaware
Zemex U.S. Corporation Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,592,000
<SECURITIES> 0
<RECEIVABLES> 20,178,000
<ALLOWANCES> (349,000)
<INVENTORY> 19,482,000
<CURRENT-ASSETS> 44,037,000
<PP&E> 145,142,000
<DEPRECIATION> (48,363,000)
<TOTAL-ASSETS> 159,528,000
<CURRENT-LIABILITIES> 16,424,000
<BONDS> 50,000,000
0
0
<COMMON> 58,560,000
<OTHER-SE> 30,487,000
<TOTAL-LIABILITY-AND-EQUITY> 159,528,000
<SALES> 77,530,000
<TOTAL-REVENUES> 77,530,000
<CGS> 50,776,000
<TOTAL-COSTS> 70,515,000
<OTHER-EXPENSES> 522,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,174,000
<INCOME-PRETAX> 2,319,000
<INCOME-TAX> 577,000
<INCOME-CONTINUING> 1,847,000
<DISCONTINUED> 3,934,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,781,000
<EPS-BASIC> 0.69
<EPS-DILUTED> 0.63
</TABLE>
