EXHIBIT 10.2.6
THE DOE RUN RESOURCES CORPORATION
0000 XXXX 000 XXXXX
XX. XXXXX, XX 00000
As of January 15, 1999
Participant
_ Doe Run Resources Corporation
0000 Xxxx 000 Xxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
RE: SECOND AMENDMENT TO NET WORTH APPRECIATION AGREEMENT
Dear Participant:
This will confirm the understanding of this Corporation (the "Company")
with you with respect to our agreed amendments to your Net Worth Appreciation
Agreement dated April 7, 1994 as amended March 12, 1998 (which, among other
things, transferred that Agreement from DR Acquisition Corp. to this Company
(collectively, the "Agreement")).
As you know, our parent company, The Renco Group, Inc. ("Renco"), has
elected to become, for Federal Internal Revenue Code purposes, a subchapter S
corporation (instead of a subchapter C corporation), effective with its fiscal
year beginning November 1, 1998, and has designated this Company and its
subsidiaries as qualified subchapter S subsidiaries (the "S election"). This
designation is also applicable for those states which recognize such election.
This letter is intended to set forth our understanding as to the changes in the
Agreement intended to accommodate such election.
It is the intent of the parties to the Agreement that the S election
not alter the benefits payable under the Agreement; therefore we agree as
follows:
A. For purposes of calculating the benefits payable under the
Agreement, the Company will continue to calculate Federal corporate income taxes
and the corporate income taxes for those jurisdictions in which the Company and
its subsidiaries do business, for fiscal periods beginning on or after November
1, 1998, as if this Company and its subsidiaries had continued to have C
corporation status, under the Federal Internal Revenue Code and under state and
local tax laws, in accordance
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with the provisions of generally accepted accounting principles and the Internal
Revenue Code and regulations thereunder and under state and local tax laws
applicable to C corporations as from time to time in effect ("C Status"). Such
tax calculations will include calculations of current and deferred tax expense
or benefit and current and non-current tax assets and liabilities ("C Taxes")
and the differences ("Tax Differences") between the C Taxes and the taxes as
recorded by the Company and its subsidiaries while being designated a qualified
subchapter S subsidiary ("S Taxes").
Cumulative Income Statement Tax Difference shall be the cumulative
difference in income tax expense or benefit between the calculation of the C
Taxes and S Taxes, in each case calculated for the tax periods beginning on or
after November 1, 1998 and through the end of the calculation period. Cumulative
Cash Flow Tax Difference shall be the cumulative difference in income tax
payments, net of refunds, between the calculation of the C Taxes and S Taxes in
each case made after November 1, 1998 or, which would be in the case of C Taxes,
or are in the case of S Taxes, immediately due and payable contemporaneously
with the payment of any Distributions, as defined below. A dividend or
management fee or any other form of distribution in excess of $2,400,000
annually to The Renco Group, Inc. ("Renco") or an affiliate, other than a
subsidiary of the Company, shall be called a "Distribution".
In connection with the annual audit of the financial statements of the
Company, the Company's Board of Directors will require that the independent
public accountants issue a special report indicating their agreement with the
Tax Differences.
B. Any payment due to you under Paragraph 2 of the Agreement (the
"Termination Benefit") shall be (A) __% of the net worth increment, as
defined, less (B) __% of the Cumulative Income Statement Tax Difference (the
calculation period shall end at the end of the Company's fiscal quarter
immediately preceding your date of termination) and excluding such Cumulative
Income Statement Tax Difference to the extent equal to Cumulative Cash Flow
Tax Difference utilized in calculating an Additional Compensation Benefit
under Paragraph 4(a).
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C. Any payment due to you under Paragraph 4(a) of the Agreement in
regard to Distributions paid by the Company (the "Additional Compensation
Benefit"), shall be (A) the excess of __% of the cumulative Distributions paid
by the Company subsequent to November 1, 1998 over __% of any positive
Cumulative Cash Flow Tax Difference less (B) the amount of Additional
Compensation Benefit previously paid to you under Paragraph 4(a) subsequent to
November 1, 1998.
D. Any payment due to you under Paragraph 4(b) of the Agreement (the
"Sale Proceeds Benefit"), shall be (A) __% of any net proceeds, as defined,
plus (B) __% of the cumulative Distributions paid by the Company subsequent
to November 1, 1998, less (C) __% of the Cumulative Income Statement Tax
Difference through the date of sale, and less (D) the amount of any
Additional Compensation Benefits previously paid to you under Paragraph 4(a)
subsequent to November 1, 1998.
E. As amended hereby, the Agreement shall continue in full force and
effect. Please confirm that the foregoing correctly sets forth our understanding
by signing and returning the enclosed duplicate of this letter.
Very truly yours,
THE DOE RUN RESOURCES CORPORATION
---------------------------------
Xxx Xxxx Xxxxxxx
Chairman of the Board
Accepted and Agreed to:
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Participant
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