Modified Earn-out Agreement

EXHIBIT 10.24


MODIFIED EARN-OUT AGREEMENT


THIS MODIFIED EARN-OUT AGREEMENT (the "Agreement"), dated as of May 31, 2000, is by and among IMCO RECYCLING INC., a Delaware corporation ("IMCO"), MIDWEST ZINC CORPORATION, formerly known as Midwest Zinc-Millington, Inc., a Delaware corporation ("Midwest"), M. RUSS ROBINSON, a resident of Harris County, Texas, and HOWARD ROBINSON, a resident of Harris County, Texas, ("Employed Sellers").


W I T N E S S E T H:
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WHEREAS, IMCO and the Employed Sellers, among others, entered into that certain Memorandum of Purchase and Sale Agreement (the "Purchase Agreement") dated as of July 21, 1998, pursuant to which IMCO acquired all of the outstanding shares of capital stock of U.S. Zinc Corporation, a Delaware corporation (the "Company"), from the Employed Sellers, among others; and


WHEREAS, in connection with the Purchase Agreement, IMCO and the Employed Sellers entered into that certain Earn-Out Agreement dated July 21, 1998, as modified by that certain Memorandum dated effective December 30, 1999 by and between IMCO and the Employed Sellers (collectively, the "1998 Earn-Out Agreement"). A copy of the 1998 Earn-Out Agreement is attached hereto as Exhibit A; and


WHEREAS, commensurate with the execution of this Agreement, Midwest has agreed to loan Weed Street L.L.C., an Illinois limited liability company ("Weed Street"), $2,440,000 as evidenced by a promissory note of even date herewith to be made by Weed Street to and in favor of Midwest in the original principal amount of $2,440,000 (the "Note") and the Employed Sellers have agreed to guaranty the obligations arising under the Note as evidenced by a guaranty of even date herewith executed by the Employed Sellers in favor of Midwest (the "Guaranty"); and


WHEREAS, to secure repayment of the "Borrower's Liabilities" (as that term is defined in the Note and Guaranty) and as an inducement to Midwest to enter into and consummate the "Put Agreement" (as that term is defined in the Note), the Employed Sellers desire to (i) direct IMCO to pay all net Earn-Out Distributions to Midwest to be applied to the Borrower's Liabilities under the Note and (ii) provide Midwest with a security interest in all of their right, title and interest in and to this Agreement including, without limitation, the Earn-Out Distributions (collectively, the "Earn-Out Property"), on the terms and conditions hereinafter provided; and


WHEREAS, IMCO, Midwest and the Employed Sellers desire that this Agreement replace and supercede the 1998 Earn-Out Agreement;


NOW, THEREFORE, in consideration of the mutual covenants contained herein and the consummation of the loan evidenced by the Note the parties hereto agree as follows:


1. Definitions. Capitalized terms used but not defined herein shall have the same meanings ascribed to such terms in the Purchase Agreement. In addition, the following terms have the meanings specified or referred to in this Section 1.


"Earn-Out Distributions", "Earn-Out Periods" and "Earn-Out Term" shall have the respective meanings ascribed to those terms in Section 2(a).


"Earn-Out Threshold" shall have the meaning ascribed to that term in Section 2(d).


"EBITDA" shall have the meaning ascribed to that term in Section 2(b).


"Initial Period" shall mean that time period commencing July 1, 1998 and ending on December 31, 1998.


"Zinc-Related Operations" means any other present or future business and operations of IMCO and its Subsidiaries (including that of Interamerican Zinc, Inc., an existing Subsidiary of IMCO) engaged principally in the business of recycling, processing and selling zinc and derivative products therefrom.


2. Earn-Out Distributions.


(a) Subject to the terms and conditions of this Agreement, the Employed Sellers shall be entitled to receive earn-out distributions, if any, as they are earned as provided herein (the "Earn-Out Distributions"). Such amounts shall be earned and shall accrue over that certain period beginning January 1, 1999 and ending June 30, 2002 (the "Earn-Out Term"). Within the Earn-Out Term, there will be four Earn-Out Periods: the first Earn-Out Period to commence on January 1, 1999 and terminate on December 31, 1999 (the "1999 Earn-Out Period"); the second Earn-Out Period to commence on January 1, 2000 and terminate on December 31, 2000 (the "2000 Earn-Out Period"); the third Earn-Out Period to commence on January 1, 2001 and terminate on December 31, 2001 (the "2001 Earn-Out Period"); and the fourth Earn-Out Period to commence on January 1, 2002 and terminate on June 30, 2002 (the "2002 Earn-Out Period").


(b) Subject to Section 2(e)(iii) below, any Earn-Out Distribution to be paid to the Employed Sellers for any Earn-Out Period shall be in an aggregate amount equal to a percentage (the "Applicable Percentage") (which, except as otherwise expressly set forth herein, shall be 60%) of the amount by which the consolidated Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for such Earn-Out Period, as determined on a consolidated basis in accordance with GAAP consistently applied from period to period ("EBITDA"), of the Company and its Subsidiaries (including that of Western Zinc, Inc. and MetalChem, Inc.) and IMCO's other Zinc-Related Operations (including any Zinc- Related Operations acquired by IMCO or any of its Subsidiaries during the Earn- Out Period) exceed the Earn-Out Threshold (as defined below).


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(c) The aggregate amount of all Earn-Out Distributions, if any, to be paid by IMCO with respect to the entire Earn-Out Term shall not in any event exceed $10,625,000; any liability of IMCO hereunder to pay any Earn-Out Distributions to the Employed Sellers shall terminate upon the payment by IMCO of aggregate Earn-Out Distributions equal to $10,625,000. In addition, the maximum amount of the Earn-Out Distributions, if any, which shall be required to be paid by IMCO with respect to each of the 1999, 2000 and 2001 Earn-Out Periods shall be $3,350,000 for the 1999 Earn-Out Period, $3,750,000 for the 2000 Earn-Out Period and $3,300,000 for the 2001 Earn-Out Period. There shall be no maximum amount of Earn-Out Distributions with respect to the 2002 Earn-Out Period.


(d) As used herein, the term "Earn-Out Threshold" shall mean:


(i) The Earn-Out Threshold prior to any adjustment described herein
shall be (w) $13,680,000 for the 1999 Earn-Out Period, (x) $12,150,000 for
the 2000 Earn-Out Period, (y) $12,320,000 for the 2001 Earn-Out Period, and
(z) $6,060,000 for the 2002 Earn-Out Period. In addition, although no Earn-
Out Distribution will be earned or paid with respect to the Initial Period,
the Earn-Out Threshold with respect to the Initial Period shall, for the
purposes of this Section 2.4(d), be $5,250,000.


(ii) For each Earn-Out Period following an Earn-Out Period or the
Initial Period in which any additional Zinc-Related Operation is acquired
by IMCO or its Subsidiaries for a purchase price equal to $25,000,000 or
less, the Earn-Out Threshold for such period shall be increased by an
amount equal to 18% (9% in the case of the 2002 Earn-Out Period) of such
purchase price of such after-acquired Zinc-Related Operation. In the event
that the purchase price with respect to any acquisition of a Zinc-Related
Operation is greater than $25,000,000, then the 18% multiplier set forth
above in this Section 2(d)(ii) shall not be applicable, and substituted in
lieu thereof with respect to any such acquisition shall be a multiplier of
15%; and the multiplier with respect to any such acquisition regarding the
2002 Earn-Out Period shall be 7.5% instead of 9%.


(iii) For the Initial Period and for each of the 1999, 2000 and 2001
Earn-Out Periods, to the extent that the consolidated EBITDA of the Company
and its Subsidiaries (including that of Western Zinc, Inc. and MetalChem,
Inc.) and IMCO's other Zinc-Related Operations for the Initial Period or
such Earn-Out Period exceeds the sum of (A) the Earn-Out Threshold (as it
may be adjusted as herein provided) with respect to the Initial Period or
such Earn-Out Period, as the case may be, plus (B) the quotient of (1) the
amount of the maximum Earn-Out Distribution allowed for such Earn-Out
Period, if any (as specified in Section 2(c)), divided by (2) the
difference between one and the Applicable Percentage as then in effect,
expressed as a decimal, such excess amount shall be carried forward to the
next succeeding Earn-Out Period (including the 2002 Earn-Out Period) and
shall thereby lower the Earn-Out Threshold for such next Earn-Out


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Period on a dollar-for-dollar basis. In addition, for the Initial Period
and for each of the 1999, 2000 and 2001 Earn-Out Periods, to the extent
that the consolidated EBITDA of the Company and its Subsidiaries and IMCO's
other Zinc-Related Operations is less than the Earn-Out Threshold with
respect to the Initial Period or such Earn-Out Period, as the case may be,
the resulting deficit shall be carried forward to the next succeeding Earn-
Out Period (including the 2002 Earn-Out Period) and thereby increase the
applicable Earn-Out Threshold with respect to such next Earn-Out Period on
a dollar-for-dollar basis.


(e) (i) Subject to Section 2(e)(ii) below, (a) Earn-Out Distributions, if
any, with respect to any Earn-Out Period shall be paid to the Employed
Sellers as they may designate in a writing signed by each of them and
received by the Company on or before that date which is thirty (30) days
before the first day of the next succeeding Earn-Out Period, and (b) if
there is no such designation, such amounts will be paid in the following
proportions: 50% to M. Russ Robinson, and 50% to Howard Robinson.


(ii) Notwithstanding anything else in this Agreement to the contrary,
as long as any Borrower's Liabilities remain outstanding under the Note,
all Earn-Out Distributions, net of any tax or other deductions to be made
under any provision of applicable law, required to be paid by IMCO to the
Employed Sellers under this Agreement shall not be payable to the Employed
Sellers, but instead, the Earn-Out Distributions shall be paid by IMCO to
Midwest and applied against the Borrower's Liabilities due under the Note
irrespective of whether the Borrower's Liabilities may then be due and
payable. Once the Borrower's Liabilities due under the Note have been paid
in full, then Earn-Out Distributions, if any, due and payable under this
Agreement which have not been previously applied against the Borrower's
Liabilities shall be paid by IMCO to the Employed Sellers in accordance
with Section 2(e)(i) above.


(iii) Except as expressly set forth herein, the Company shall not have
any liability to any person for any damages, losses, or expenses that it
may incur as a result of any action taken by M. Russ Robinson and Howard
Robinson, or either of them, with respect to any such designation or
failure to designate as contemplated above in this Section 2(e), and the
Company shall be protected in relying in good faith upon any such writing
from them in connection therewith. The Company shall not incur any
liability with respect ...