1,600,000 Shares
6.625% Series A Senior Convertible Preferred Stock
(Liquidation Amount $50.00 per Share)
AMENDMENT TO INVESTMENT AGREEMENT
October 28, 1998
Titanium Metals Corporation
TIMET Finance Management Company
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to the Investment Agreement, dated July 8, 1998 (the
"Investment Agreement"), among Special Metals Corporation, a Delaware
corporation (the "Company"), Titanium Metals Corporation, a Delaware corporation
("TMC"), and TIMET Finance Management Company, a Delaware corporation and a
wholly-owned subsidiary of TMC (the "Investor"), relating to the proposed
issuance and sale by the Company to the Investor of shares (the "Shares") of the
Company's 6.625% Series A Senior Convertible Preferred Stock, liquidation amount
$50.00 per share (the "Convertible Preferred Securities").
In consideration of the premises and mutual agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Investment Agreement pursuant to Section 19 thereof as follows:
1. Defined Terms. Except as otherwise provided herein, capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Investment Agreement. References herein to this
"Amendment" shall mean this Amendment to the Investment Agreement. Unless the
context otherwise requires, references in the Investment Agreement to
"Convertible Preferred Securities" shall refer solely to the Shares of the
Company's 6.625% Series A Senior Convertible Preferred Stock being purchased by
the Investor pursuant to the Investment Agreement, as amended hereby, and shall
not include any shares being purchased by Inco Limited pursuant to the Inco
Investment Agreement (as hereinafter defined).
2. Amendments to Investment Agreement.
(a) The first paragraph of the Investment Agreement is hereby
amended by deleting such paragraph in its entirety and replacing it with a new
paragraph as follows:
"Special Metals Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to TIMET Finance Management
Company, a Delaware corporation (the "Investor"), and a wholly-owned
subsidiary of Titanium Metals Corporation, a Delaware corporation
("TMC"), 1,600,000 shares of its 6.625% Series A Senior Convertible
Preferred Stock, liquidation amount $50.00 per share (the "Convertible
Preferred Securities"). The Convertible Preferred Securities will be
convertible into shares of the common stock, par value $.01 per share
(the "Common Stock"), of the Company initially at the conversion price
set forth herein and will rank, with respect to dividend rights and
rights upon liquidation, winding up and dissolution, senior to the
Common Stock, and each other class of capital stock or series of
preferred stock of the Company established after the original issuance
of the Convertible Preferred Securities, and PARI PASSU with the
Convertible Preferred Securities to be issued under the Certificate of
Designation referred to in Section 1 below to Inco Limited, a
corporation continued under the laws of Canada ("Inco Limited),
pursuant to the Investment Agreement to be entered into between Inco
Limited and the Company (the "Inco Investment Agreement").
(b) Section 1 of the Investment Agreement is hereby amended by
deleting such Section in its entirety and replacing it with a new Section 1 as
follows:
"1. Purchase and Sale. On the terms and subject to the
conditions and in reliance upon the representations and warranties set
forth in this Agreement, the Company agrees to issue, sell and deliver
to the Investor, and the Investor agrees to purchase from the Company,
1,600,000 Convertible Preferred Securities, at a purchase price of
$50.00 per Convertible Preferred Security, for an aggregate purchase
price of $80,000,000 (the "Purchase Price"). Each Convertible Preferred
Security shall be convertible at the option of the holder into shares
of Common Stock of the Company following the Initial Conversion Date
(as defined herein) at a conversion price equal to $16.50 per share.
Such conversion price will be subject to adjustment from time to time
as set forth in the Certificate of Designation of Rights and
Preferences establishing the terms and relative rights and preferences
of the Convertible Preferred Securities substantially in the form set
forth in Exhibit C hereto (the "Certificate of Designation"). The term
"Initial Conversion Date" shall mean the latest of (i) 90 days
following the date of original issuance of the Convertible Preferred
Securities, (ii) the date on which approval is obtained in accordance
with Regulation 14A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), by the stockholders of the Company entitled to
vote thereon (the "Stockholders Conversion Vote") of the issuance of
Common Stock
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upon the conversion of the Convertible Preferred Securities upon the
terms and conditions set forth in the Certificate of Designation and
(iii) the date upon which all waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"Xxxx-Xxxxx-Xxxxxx Act"), have expired or been terminated."
(c) Section 3 of the Investment Agreement is hereby amended by
deleting Section 3(h) in its entirety and replacing it with a new Section 3(h)
as follows:
"(h) The financing contemplated by (i) the new credit facility
to be entered into by the Company, Credit Lyonnais New York Branch as
agent and various lenders with respect to the Acquisition (the "New
Credit Agreement"), (ii) the Investor's investment in the Convertible
Preferred Securities as contemplated by this Agreement, (iii) Inco
Limited's investment in $17,000,000 aggregate liquidation amount of
Convertible Preferred Securities as contemplated by the Inco Investment
Agreement, and (iv) Inco's agreement to pay Credit Lyonnais New York
Branch, as agent, a fee of $10,000,000 pursuant to the letter agreement
dated October 5, 1998 constitute the only financing arrangements to be
entered into by or on behalf of the Company or any of its Subsidiaries
in connection with the financing of the Acquisition other than
indebtedness of Inco and/or its subsidiaries to be assumed in
connection with the Acquisition."
(d) Section 3(q) of the Investment Agreement is hereby amended
by inserting the words ", the Inco Investment Agreement" immediately after the
words "this Agreement" on the 2nd line of such Section.
(e) Section 5 of the Investment Agreement is hereby amended by
deleting such Section 5 in its entirety and replacing it with a new Section 5 as
follows:
"5. Governance. The Company agrees with the Investor and TMC
that:
(a) Immediately following the Closing Time, the Board of
Directors of the Company (the "Board") shall increase the authorized
number of Directors of the Board by a number sufficient to include as
an additional director of the Company one Investor Nominee (as defined
in Section 5(b) hereof) who has been designated by the Investor in the
Investor Nominee Notice (as defined in Section 5(b) hereof) and shall
appoint such Investor Nominees to the Board as a Class III Director in
accordance with the Company's procedures for the appointment of
directors. Such Investor Nominee shall hold office for a term expiring
at the annual meeting of stockholders at which the term of the class to
which he or she has been elected expires or until his or her successor
is duly elected and qualified. So long as the Investor (together with
TMC and any wholly-owned subsidiary of TMC) beneficially owns voting
securities of the Company representing at least 10% of the outstanding
voting securities of the
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Company (assuming for purposes of this Section 5, that any Convertible
Preferred Securities owned by the Investor, TMC or such subsidiary have
been converted into Common Stock), the Investor shall be entitled to
designate one Investor Nominee to the Board. If at any time the number
of members constituting the entire Board shall exceed 10, including the
Investor Nominee appointed pursuant to this Section 5 but excluding all
directors elected by holders of the Convertible Preferred Securities
pursuant to Section 9 of the Certificate of Designation, the Investor
shall be entitled to designate pursuant to an Investor Nominee Notice,
and the Board shall appoint to the Board, one additional Investor
Nominee in accordance with the provisions of this Section 5. In the
event of a vacancy caused by the disqualification, removal, resignation
or other cessation of service of any Investor Nominee from the Board,
the Board shall elect as a director (to serve until the Company's
immediately succeeding annual meeting of shareholders at which the term
of the class to which such Investor Nominee has been elected expires) a
new Investor Nominee who has been designated by the Investor in an
additional Investor Nominee Notice that has been provided to the
Company at least five days prior to the date of a regular meeting of
the Board. The Investor shall nominate each Investor Nominee pursuant
to an additional Investor Nominee Notice in advance of each meeting of
shareholders at which such Investor Nominee is to be elected. If the
beneficial ownership by the Investor (together with the beneficial
ownership by TMC or any wholly-owned subsidiary of TMC) of the
outstanding voting securities of the Company decreases below 10% of the
outstanding voting securities of the Company (assuming for purposes of
this Section 5, that any Convertible Preferred Securities owned by the
Investor, TMC and any such wholly-owned subsidiary of TMC have been
converted into Common Stock) the Investor shall, at the request of the
Company, cause all its Investor Nominees to resign from the Board, in
accordance with the Company's procedures for the resignation of
directors and applicable laws and regulations.
(b) The Investor shall provide a designation notice to the
Company (the "Investor Nominee Notice") as required by Section 5(a)
above for each Investor Nominee, which notice shall contain the
following information: (i) the name of the person(s) it has designated
to become director(s) of the Company (each, an "Investor Nominee"), and
(ii) all information required by Regulation 14A and Schedule 14A under
the Exchange Act with respect to each such Investor Nominee. Such
Investor Nominee may be any person designated by the Investor,
including, but not limited to, persons who are officers, directors or
employees of the Investor.
Notwithstanding the above, the Company shall not be obligated
to perform the obligations under this Section 5 with respect to any
Investor Nominee designated by the Investor if such Investor Nominee is
(i) a director, officer, employee, shareholder, controlling person or
otherwise affiliated with a Significant Competitor (as hereinafter
defined), other than TMC or its affiliates, (ii) a person that is or
theretofore has been engaged in material litigation adverse to the
Company or any of its affiliates, (iii) a person (other than TMC and/or
its wholly owned subsidiaries)
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who beneficially owns voting securities of the Company representing
more than 10% of the outstanding voting securities of the Company, or
(iv) a person (x) other than the person then serving as chief executive
officer, chief financial officer or chief operating officer of TMC
and/or as a director of TMC or (y) who the Board, after customary
investigation of such person's qualifications, reasonably determines in
good faith is not qualified or acceptable under standards applied
fairly and equally to all nominees (it being understood that any person
listed on Schedule 5(b) hereto or falling within subclause (x) of this
clause (iii) shall be deemed qualified and acceptable hereunder).
(c) The Company agrees to cause to include the Investor
Nominee which the Investor is entitled to designate pursuant to this
Agreement in the slate of nominees recommended by the Board to the
Company's shareholders for election as directors and shall use its
reasonable best efforts to cause the election or reelection of each
such Investor Nominee to the Board at each meeting of shareholders at
which such Investor Nominee is up for election, including soliciting
proxies in favor of the election of such persons. At the direction of
the Investor, the Company shall use reasonable efforts to cause the
removal from the Board of any Investor Nominee.
(d) Each Investor Nominee shall be reimbursed for his or her
out-of-pocket expenses incurred in attending regular and special Board
meetings and any meeting of any Board committee by the Company to the
extent of, and in accordance with, the policies of the Company
generally applicable to the reimbursement of expenses of directors of
the Company.
(e) The Board will not establish an executive committee
authorized to exercise the power of the Board generally unless the
Investor is granted representation on such committee proportional to
its representation on the Board, nor will the Board establish or employ
committees (unless the Investor is granted proportional representation
thereon) as a means designed to circumvent or having the effect of
circumventing the rights of the Investor under this Agreement to
representation on the Board."
(f) Section 7(c) of the Investment Agreement is hereby amended
by inserting the words ", Inco" immediately after the word "TMC."
(g) Section 7(d) of the Investment Agreement is hereby amended
by inserting the words ", Inco" immediately after the word "TMC" on the
7th line of such Section.
(h) Section 9 of the Investment Agreement is hereby amended by
inserting the words "(other than the Convertible Preferred Securities
or Conversion Shares that are to be issued under the Inco Investment
Agreement)" immediately after the words "or other voting securities" on
the 3rd line from the top of such Section.
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(i) Section 11 of the Investment Agreement is hereby amended
by adding subsection (l) thereto as follows:
"(l) The terms of the Convertible Preferred Stock to
be issued and sold to Inco Limited pursuant to the Inco
Investment Agreement, and any additional rights granted to
Inco with respect thereto or in connection therewith, shall be
in all material respects as set forth in the attached
Certificate of Designation, Inco Investment Agreement and
registration rights agreement between the Company and Inco
Limited."
(j) Section 12 of the Investment Agreement is hereby amended
by deleting Section 12(b) in its entirety.
(k) The Investment Agreement is hereby amended by adding a
Section 31 thereto as follows:
"31. Acknowledgment of Inco Investment Agreement. The
Investor hereby acknowledges that the Company has advised the
Investor that, at the Closing Time, the Company and Inco
Limited will enter into the Inco Investment Agreement pursuant
to which the Company will issue under the Certificate of
Designation, sell and deliver to Inco Limited 340,000
Convertible Preferred Securities, at a purchase price of
$50.00 per Convertible Preferred Security, for an aggregate
purchase price of $17,000,000, and the Investor has agreed to
such issuance to Inco Limited."
3. Confirmation of Investment Agreement. Except as otherwise expressly
provided herein, the Investment Agreement is and shall remain in full force and
effect and is hereby ratified and confirmed.
4. Governing Law. This Amendment shall be governed by, and construed,
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed in that state.
5. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
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If the foregoing is in accordance with your understanding of our
agreement with respect to the amendment of the Investment Agreement, please sign
and return to us the enclosed duplicate hereof, whereupon this Amendment and
your acceptance shall represent a binding agreement between the Company, on the
one hand, and the Investor and TMC, on the other hand.
Very truly yours,
SPECIAL METALS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
The foregoing Amendment is hereby confirmed and accepted as of the date first
above written:
TIMET FINANCE MANAGEMENT COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
TITANIUM METALS CORPORATION
By: /s/ J. Xxxxxx Xxxxxx
------------------------
Name: J. Xxxxxx Xxxxxx
Title: Chief Executive Officer
