Contract
EXHIBIT
10.22
Portions
of this Exhibit 10.22 have been omitted based upon a request for confidential
treatment. This Exhibit 10.22, including the non-public information, has
been
filed separately with the Securities and Exchange Commission “[*]” designates
portions of this document that have been redacted pursuant to the request
for
confidential treatment filed with the Securities and Exchange
Commission.
This
CONVERSION SERVICES AGREEMENT (this “Agreement”) is made this 17th day of
November 2006 by and between,
Xxxxxx
International, Inc., a corporation organized and duly existing under the
laws of
the State of Delaware, having its head office at 0000 Xxxx Xxxx Xxxxxx, Xxxxxx,
Xxxxxxx 00000-0000, hereinafter referred to as “XXXXXX”;
and
Titanium
Metals Corporation, a corporation organized and duly existing under the laws
of
the State of Delaware, having its head office at 0000 XXX Xxxxxxx, Xxxxx
0000,
Xxxxxx, XX 00000, hereinafter referred to as “TIMET.”
XXXXXX
and TIMET are each hereinafter individually referred to as a “Party” or
collectively as the “Parties.”
RECITALS
A. Contemporaneous
with the entry into this Agreement, XXXXXX and TIMET have entered into certain
transactions evidenced by the Transaction Documents (as hereinafter
defined);
B. TIMET
requires, and XXXXXX has agreed, to provide, the Titanium Conversion Services
(as hereinafter defined);
X. XXXXXX
is
technically capable of performing the Titanium Conversion Services;
D. In
connection with its performance hereunder, Xxxxxx will obtain know-how from
TIMET that could competitively harm TIMET if Xxxxxx were to perform Titanium
Conversion Services on behalf of a competitor of TIMET; and
E. In
order
to increase TIMET’s competitiveness for customers against fully integrated
titanium producers, TIMET needs long-term access to a guaranteed source of
Titanium Conversion Services.
NOW
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, XXXXXX and TIMET agree as
follows:
ARTICLE
1
DEFINITIONS
For
purposes of this Agreement, the following defined terms have the meanings
set
forth in this Article 1:
“Acceptance
Procedure”
shall
have the meaning set forth in Section 4.3(a).
“Access
and Security Agreement”
shall
mean that certain Access and Security Agreement of even date herewith by
and
between XXXXXX and TIMET.
“Affiliate”
shall
mean any legal corporation, entity, firm or person directly or indirectly
owned
by or under the same ownership as either Party, for so long as such ownership
lasts. Ownership shall exist through the direct or indirect: (i) ownership
or control of more than fifty percent (50%) of the nominal value of the issued
equity share capital or of more than fifty percent (50%) of the shares entitling
the holders to vote for the election of directors or officers or persons
performing similar functions, or (ii) right by any other means to elect or
appoint directors, officers or persons performing similar functions, who
have a
majority vote.
“Agreement”
shall
mean this Conversion Services Agreement, and each of the exhibits attached
hereto and forming an integral part hereof, as the foregoing may from time
to
time hereafter be amended, supplemented or modified.
“Arbitration
Demand”
shall
have the meaning set forth in Section 12.2(b).
“Arbitration
Response”
shall
have the meaning set forth in Section 12.2(c).
“Base
Prices”
shall
mean the base prices set forth and/or calculated pursuant to
Section 3.1.
“CC
Termination”
shall
have the meaning set forth in Section 13.2(c).
“Change
in Control”
shall
mean (i) a merger or consolidation of XXXXXX where XXXXXX is not the surviving
entity or the current stockholders of XXXXXX hold less than 50% of the voting
securities of XXXXXX after such merger or consolidation, (ii) any person
(as defined in the Exchange Act) (other than XXXXXX, any of its subsidiaries
or
any trustee, fiduciary or other person holding securities under any employee
share ownership plan or any other employee benefit plan of XXXXXX or any
of its
subsidiaries), together with its affiliates and associates (as such terms
are
defined in Rule 12b-2 under the Exchange Act), shall have become the beneficial
owner (as defined in Rule 13d-3 of the Exchange Act) of 50% or more of the
outstanding voting securities of XXXXXX, (iii) a sale, lease, exchange or
other
transfer (in one transaction or a series of related transactions) of all,
or
substantially all, of the assets of XXXXXX, or the Operating Assets, or
(iv) any other transaction or series of related transactions effectively
changing the control of XXXXXX to any person or entity.
“Confidential
Information”
shall
have the meaning set forth in Section 9.2.
“Damages”
shall
mean, collectively, any damage, liability, loss, or cost (including, but
not
limited to, reasonable attorneys’ fees and other costs and expenses directly
related to proceedings or investigations or the defense of any claim), but
shall
not include any consequential or incidental damages suffered directly by
a Party
hereto, except as otherwise expressly indicated.
“Direct
Cost”
shall
have the meaning set forth in Section 2.3(b).
“Dispute”
shall
mean any dispute, controversy, or claim between the Parties arising out of,
relating to, or connected with this Agreement or the breach or invalidity
hereof.
“Effective
Termination Date”
shall
have the meaning set forth in Section 13.2(c).
“Event
of Default”
shall
have the meaning set forth in Section 5.2.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended.
“Force
Majeure”
shall
have the meaning set forth in Section 8.1.
“4-High
Facility”
shall
have the meaning set forth under the term “Mill” as defined in the Access and
Security Agreement.
“XXXXXX”
shall
have the meaning set forth in the introduction hereto.
“XXXXXX
Successor”
shall
have the meaning set forth in Section 11.2.
“Joint
Proprietary Information”
shall
have the meaning set forth in Section 2.6.
“Liquidated
Damages”
shall
have the meaning set forth in Section 5.3(a).
“Loan
Date”
shall
have the meaning set forth in Section 2.1(c).
“Material”
shall
mean any and all titanium material delivered by TIMET or its designee(s)
to
XXXXXX for Titanium Conversion Services performed hereunder.
“Maximum
Annual Volume”
shall
have the meaning set forth in Section 2.1(a).
“Maximum
Cycle Time”
shall
mean the Maximum Cycle Time set forth on Exhibit A.
“Maximum
Monthly Volume”
shall
have the meaning set forth in Section 2.1(e).
“Non-Compete
Amendment”
shall
have the meaning set forth in Section 11.2.
“Non-Compete
Amendment Fee”
shall
have the meaning set forth in Section 11.2.
“On-Time
Delivery Rate”
shall
be the percentage of deliveries delivered on-time as calculated each month
according to the following formula:
OTD
= (TD
- R)/TD
Where:
“OTD”
is
the On-Time Delivery Rate (expressed as a percentage).
“R”
is
the number of orders (by Purchase Order Number) delivered after the Scheduled
Delivery Date.
“TD”
is
the total number of orders (by Purchase Order Number) scheduled for the calendar
month.
“Operating
Assets”
shall
mean the 4-High Facility, together with the “Equipment,” “Intellectual
Property,” “Contract Rights” and “Real Estate” (as such terms are defined in the
Access and Security Agreement), used in connection with the performance of
the
Titanium Conversion Services. The term “Operating Assets” as used herein shall
be deemed to have the same meaning assigned to the term “Operating Assets” in
the Access and Security Agreement.
“Option”
shall
have the meaning set forth in Section 2.1(b).
“Option
Note”
shall
have the meaning set forth in Section 2.1(d).
“Option
Notice”
shall
have the meaning set forth in Section 2.1(b).
“Parties”
shall
mean XXXXXX and TIMET.
“Party”
shall
mean XXXXXX or TIMET, as the case may be.
“Proprietary
Information”
shall
have the meaning set forth in Section 2.6.
“Purchase
Order Number”
shall
mean the unique TIMET identification associated with the complete processing
of
a single batch or heat of titanium.
“QTP
Rate”
means
the Quality Throughput Pass rate or First Time Pass rate shall be calculated
monthly in accordance with the following formula:
QTP
=
(TD-R)/TD
Where:
“QTP”
is
the Quality Throughput Pass rate (expressed as a percentage).
“R”
it
the total number of orders (measured by Purchase Order Number) rejected due
to
not meeting acceptance requirements of Section 4.3.
“TD”
is
the total number of orders (measured by Purchase Order Numbers) scheduled
for
the calendar month.
“Scheduled
Delivery Date”
shall
mean the date XXXXXX shall be required to deliver a titanium product resulting
from its provision of Titanium Conversion Services determined based on the
addition of the number of effective calendar days set forth on Exhibit A
under
the column with the heading “Maximum Cycle Times” to the date the relevant
Submission Sheet is received by XXXXXX.
“Steering
Committee”
shall
have the meaning set forth in Section 2.1(c).
“Submission
Sheet”
shall
mean a simplified order form issued for Material deemed by the Parties a
purchase order from TIMET authorizing XXXXXX to perform Titanium Conversion
Services under this Agreement. The Submission Sheet will contain a summary
listing of products required for the scheduled rolling campaign, the Purchase
Order Number, heat number, product code reference, input weight and other
relevant information.
“Termination
Fee”
shall
have the meaning set forth in Section 13.2(c).
“Titanium
Conversion Services”
shall
mean the processing of Materials performed with the Operating Assets and
related
equipment, which includes hot rolling and the related processes required
to
produce the products listed on Exhibit A.
“TIMET”
shall
have the meaning set forth in the introduction hereto.
“Transaction
Documents”
means,
collectively, the Access and Security Agreement, this Agreement and the Option
Note and any other document or instrument delivered in connection herewith
or
therewith.
ARTICLE
2
TITANIUM
CONVERSION SERVICES
| 2.1 |
Maximum
Volumes.
|
| (a) |
Upon
the terms set forth herein, XXXXXX agrees that for each year during
the
term of this Agreement, XXXXXX shall supply TIMET or its designee(s)
with
Titanium Conversion Services on the Operating Assets of up to ten
(10)
million output pounds annually (as it may be increased as set forth
in
Section 2.1(b) below, the “Maximum Annual Volume”). The foregoing
represents a capacity guarantee and XXXXXX agrees that at all times
during
the term of this Agreement it shall dedicate to TIMET adequate capacity
for the performance of Titanium Conversion Services on a timely basis
as
required herein subject to the Maximum Annual Volume and Maximum
Monthly
Volume. XXXXXX shall be responsible for all capital equipment, trained
personnel, maintenance, utilities and other expenses incurred to
produce
the products identified on Exhibit A.
|
| (b) |
TIMET
shall have the option (the “Option”), exercisable by written notice (the
“Option Notice”) from TIMET to XXXXXX, to order Titanium Conversion
Services of up to an additional ten (10) million output pounds annually
(such that the Maximum Annual Volume shall be up to twenty (20) million
output pounds annually); provided, however, that the Maximum Annual
Volume
shall not increase unless and until the occurrence of one of the
events
set forth in Section 2.1(c)(i) or (ii). After the Loan Date (as defined
below), the increased volumes will be staged into XXXXXX’ production
schedule in mutually agreeable increments, provided that (i) no later
than
eighteen (18) months after the Loan Date, the Maximum Annual Volume
shall
be up to fifteen (15) million output pounds, and (ii) not later than
thirty (30) months after the Loan Date and in all subsequent years,
the
Maximum Annual Volume shall be up to twenty (20) million output pounds.
|
| (c) |
Upon
the delivery of the Option Notice, XXXXXX and TIMET shall promptly
form a
steering committee consisting of two (2) representatives of each
of XXXXXX
and TIMET (the “Steering Committee”). The Steering Committee will
determine and approve any capital expenditures necessary to achieve
the
additional capacity. At TIMET’s option, TIMET may either (i) follow the
Steering Committee’s determination, approve the necessary capital
expenditures and offer to lend XXXXXX up to an aggregate of Twelve
Million Dollars ($12,000,000)
for such capital investments; or (ii) without seeking Steering Committee
approval, offer to lend XXXXXX Twelve Million Dollars ($12,000,000)
to use
for capital investments that are required to achieve the additional
capacity (the date XXXXXX receives written notice of TIMET’s action under
either (i) or (ii) to be referred to as the “Loan Date”).
|
| (d) |
XXXXXX
shall have up to two (2) months from the Loan Date to evaluate and
obtain
an alternative source of financing to the terms proposed by TIMET
and set
forth in Exhibit B attached hereto in order to fund the capital
expenditures necessary to achieve the additional capacity. If XXXXXX
obtains an alternative source of financing within such two-month
period,
XXXXXX will not be required to accept TIMET financing in order to
satisfy
the Option. If XXXXXX does not obtain an alternative source of financing
within such two-month period, XXXXXX shall deliver to TIMET by the
end of
such period a secured promissory note (the “Option Note”) for the amount
of the loan in the form attached hereto as Exhibit B. The Option
Note will
be secured as set forth in the Access and Security Agreement. The
Steering
Committee will continue to confer at regularly scheduled meetings
on the
needs and status of the capital expansion projects with respect to
which
the proceeds of the Option Note have been or will be utilized, to
review
progress reports of the project managers, and to develop project
milestones and project plans as necessary and appropriate. The proceeds
of
the Option Note shall be utilized only for capital expenditures approved
by the Steering Committee.
|
| (e) |
Any
delivery by XXXXXX of a product ordered during a calendar year and
delivered in the subsequent calendar year shall not count against
the
Maximum Annual Volume for such subsequent calendar year, but will
count
against the Maximum Annual Volume for the year in which the product
was
ordered.
|
| (f) |
XXXXXX
will not be obligated to provide Titanium Conversion Services for
any
one-month period in excess of one hundred and twenty percent (120%)
of one
twelfth (1/12) of the Maximum Annual Volume (the “Maximum Monthly
Volume”). Any late delivery of Titanium Conversion Services by XXXXXX
shall not count against the Maximum Monthly Volume. Any late delivery
of
Titanium Conversion Services by XXXXXX that extends past the end
of the
year in which the services were ordered shall not count against the
Maximum Annual Volume for any subsequent year. Any Titanium Conversion
Services that TIMET determines pursuant to the Acceptance Procedure
in
Section 4.3 do not comply with the warranty set forth in Section
6.1 shall
not count against the Maximum Monthly Volume or the Maximum Annual
Volume.
|
| (g) |
TIMET
will not be permitted to exercise the Option unless it has complied
with
the provisions of Section 3.4(b) for a period of at least the prior
four
months.
|
| 2.2 |
Cooperation.
XXXXXX and TIMET shall cooperate to determine XXXXXX’ production
scheduling of the Operating Assets consistent with the provisions
of this
Agreement. The Parties recognize that they need to cooperate to achieve
TIMET and TIMET customer qualifications for process practices, operating
procedures and product specifications for the Titanium Conversion
Services. In cooperation with TIMET technical resources, XXXXXX shall
provide the necessary technical personnel to further develop process
practices, operating procedures and product specifications required
to
achieve full product qualifications and performance target
initiatives.
|
| 2.3 |
Product
Codes.
|
| (a) |
Exhibit
A sets forth a product code and pricing for each titanium product
form
currently expected to be manufactured utilizing Titanium Conversion
Services. This list will be updated as required during the term of
this
Agreement.
|
| (b) |
In
the event TIMET desires to develop new process practices, operating
procedures and product specifications for Titanium Conversion Services
for
which a product code is not listed on Exhibit A, TIMET shall promptly
notify XXXXXX, and process practices, operating procedures and product
specifications for such product codes shall be jointly developed
by TIMET
and XXXXXX as promptly as reasonably practical. Once XXXXXX and TIMET
complete trials and agree upon the process practices, operating
procedures, product specifications and Maximum Cycle Time, the product
shall be assigned a product code. The Parties then promptly shall
prepare
and execute an updated Exhibit A to incorporate such new product and
its corresponding Maximum Cycle Time, Base Price and product code.
The
initial Base Price for additional services provided under this Agreement
shall be established at [ * ]. All capital costs incurred that are
required to develop such process practices, operating procedures
and
product specifications for any product codes added to Exhibit A
pursuant to this Section 2.3(b) shall be shared equally between the
Parties and, unless otherwise agreed to in writing by the head of
manufacturing of each Party, no process qualification may require
a total
capital expenditure in excess of [ * ]. TIMET shall reimburse XXXXXX
for
the cost of trial rolling services performed while developing such
process
practices, operating procedures and product specifications for new
product
codes at [ * ].
|
| 2.4 |
Forecasts.
|
| (a) |
Annual
Forecasts.
No later than December 1st each year, TIMET will provide XXXXXX with
a
forecast for the following calendar year of its anticipated monthly
volume
requirements by product code for Titanium Conversion Services. Within
five
(5) business days of receipt of TIMET’s forecast, XXXXXX will provide to
TIMET its scheduled production interruptions for holidays and maintenance.
Prior to December 15, the Parties will exchange and reconcile the
forecasts and scheduled interruptions to serve as the initial annual
forecast by month for the upcoming year.
|
| (b) |
Scheduling
of Conversion Services.
During the third week of each calendar month, TIMET will supply to
XXXXXX
a forecast of estimated Material quantities that will be scheduled
for
Titanium Conversion Services to be performed by XXXXXX in the coming
calendar month, which forecasts will be non-binding but made by TIMET
in
good faith.
|
| 2.5 |
Submission
Sheets.
|
| (a) |
TIMET
shall purchase Titanium Conversion Services from XXXXXX on the basis
of
firm Submission Sheets.
|
| (b) |
Each
Submission Sheet shall contain the
following:
|
| (i) |
reference
to this Agreement;
|
| (ii) |
the
specific product code from Exhibit A;
|
| (iii) |
a
Purchase Order Number;
|
| (iv) |
reference
to standard process practice, operating procedures and product
specifications (including but not limited to parameters associated
with
gauge, flatness, as rolled surface condition, yield and mechanical
properties), which shall include but not be limited to standard operating
procedures, rolling pass schedules, work instructions, heating practices
and similar process instructions; and
|
| (v) |
such
other information as the Parties reasonably agree is necessary or
advisable for more efficient performance of this
Agreement.
|
| 2.6 |
Ownership
of Proprietary Information.
TIMET shall retain sole and exclusive ownership of and all right,
title
and interest in and to all know-how, concepts, techniques, methodologies,
ideas, process practices, operating procedures and product specifications,
including all updates, modifications, improvements and enhancements
thereof that relate to the provision of the Titanium Conversion Services
(the “Proprietary Information”) provided or developed by TIMET prior to
and during the term of this Agreement. TIMET shall also retain sole
and
exclusive ownership of Proprietary Information developed jointly
by TIMET
and XXXXXX or any XXXXXX Successor prior to and during the term of
this
Agreement (the “Joint Proprietary Information”). TIMET hereby grants
XXXXXX or any XXXXXX Successor a non-exclusive, worldwide, fully
paid and
irrevocable license to use any Joint Proprietary Information; provided,
however, that XXXXXX cannot use such Joint Proprietary Information
in
competition with TIMET during the term of this Agreement. Furthermore,
such license to use Joint Proprietary Information shall terminate
automatically upon the occurrence of an Event of Default listed in
Section
5.2(a) or 5.2(b) hereof. All Proprietary Information shall constitute
Confidential Information within the meaning of Article 9 hereof;
provided,
however, that XXXXXX or any XXXXXX Successor shall be permitted to
disclose Joint Proprietary Information as necessary to obtain the
benefits
of the license granted hereunder.
|
ARTICLE
3
PRICES
AND PAYMENT
| 3.1 |
Base
Prices.
|
| (a) |
The
Base Prices for Titanium Conversion Services that are effective upon
commencement of this Agreement are set forth in Exhibit A (such prices
are
expressed on a per pound basis by input weight, product and
size).
|
| (b) |
Effective
January 1 of each year during the term of this Agreement commencing
in
2007, the Base Prices then in effect [ *
].
|
| 3.2 |
Calculation
of Adjustments.
As soon as the [ * ] identified in Section 3.1(b) above is available
for a calendar year, XXXXXX shall provide to TIMET its written
determination of the adjusted Base Prices for the following year
based
upon the foregoing formula, and XXXXXX shall supply TIMET with copies
of
the relevant index. In the event that TIMET finds a mistake in the
calculations provided by XXXXXX, TIMET shall notify XXXXXX as soon
as
possible with an explanation of the error, and the Parties will work
in
good faith to make an appropriate adjustment to the adjusted Base
Price.
|
| 3.3 |
Changes
to [ * ].
If during the performance of this Agreement, the [ * ] identified
in
Section 3.1(b) ceases to exist or to be published, the Parties shall
apply instead the relevant factor published by any successor to the
[ * ]
or the most compatible factor still published by the [ * ], respectively,
or in the absence of both of the foregoing, such substitute factor
or
factors upon which the Parties may mutually agree.
|
| 3.4 |
Terms
of Delivery and Payment.
|
| (a) |
Except
as otherwise set forth herein, all prices are FOB XXXXXX’
facility.
|
| (b) |
Payment
is due based on terms and conditions of the Submission Sheet
acknowledgement, and all payments will be due and payable within
thirty
(30) days of the date of the invoice. No invoice will be sent prior
to
completion of all relevant services without the prior written consent
of
TIMET. All invoices shall contain the Submission Sheet and Purchase
Order
Number and the description, quantity and unit price of the Titanium
Conversion Services provided.
|
| 3.5 |
Packaging.
Xxxxxx and TIMET shall work in good faith to package Materials with
respect to which Titanium Conversion Services have been provided
in
accordance with good commercial practice so as to protect against
damage
to such Materials that will result from weather or transportation.
In
addition, such Material will be packaged in accordance with any special
requirement of the carrier to which they will be consigned for delivery.
Any specified special packaging costs will be borne by
TIMET.
|
ARTICLE
4
PRODUCTION
AND QUALITY ASSURANCE MATTERS
| 4.1 |
TIMET’s
Technical Assistance.
In order for XXXXXX to provide Titanium Conversion Services to TIMET
hereunder, TIMET shall make available to XXXXXX technical assistance
to
help XXXXXX achieve TIMET’s standard process practice, operating
procedures and product specification as described in Section
2.5(b)(iv).
|
| 4.2 |
Documentation.
XXXXXX shall provide copies of any documentation related to
non-conformances or defects.
|
| 4.3 |
Acceptance
Procedure.
|
| (a) |
The
term “Acceptance Procedure” shall mean and refer to that procedure to be
performed by TIMET the purpose of which is to verify that the Titanium
Conversion Services have been performed by XXXXXX in accordance with
the
warranty set forth in Section 6.1. TIMET shall perform the Acceptance
Procedure on titanium products manufactured by XXXXXX under this
Agreement
[ * ] following delivery by XXXXXX to TIMET of the titanium product
resulting from the Titanium Conversion
Services.
|
| (b) |
If
TIMET determines that the Titanium Conversion Services do not comply
with
the warranty set forth in Section 6.1, TIMET shall notify XXXXXX in
writing by means of a “non-conformance form” of such failures or defects
within five (5) days of TIMET’s completion of the Acceptance Procedure
that has resulted in the discovery of the failures or defects. In
such
circumstances, TIMET shall have and be entitled to the rights and
remedies
described in Section 5.1.
|
| (c) |
Subject
to TIMET’s other rights and remedies described in Section 5.1 and
Article 6, if TIMET has not notified XXXXXX of any failures or
defects in the Titanium Conversion Services or the titanium product
resulting from the performance by XXXXXX of the Titanium Conversion
Services within [ * ] following delivery by XXXXXX to TIMET of such
titanium product, or if prior to the expiration of such [ * ] period
TIMET
shall have transferred title to such titanium product to a third
party,
TIMET shall be deemed to have accepted such
product.
|
| 4.4 |
Ownership
of Material.
XXXXXX disclaims any rights in the Materials delivered to it under
this
Agreement. All Material delivered to XXXXXX by TIMET for performance
of
Titanium Conversion Services, including all recoverable scraps generated
in the performance of the services hereunder, shall belong to and
remain
the property of TIMET or its designee(s) and shall be returned by
XXXXXX
to TIMET after performance of the Titanium Conversion
Services.
|
| 4.5 |
Risk
of Loss.
Risk of loss of the Material and products manufactured therefrom
shall
pass upon their delivery from TIMET to XXXXXX for Titanium Conversion
Services FOB XXXXXX facility. Risk of loss of the products resulting
from
the Titanium Conversion Services performed by XXXXXX shall pass from
XXXXXX to TIMET upon their delivery to TIMET FOB XXXXXX
facility.
|
| 4.6 |
Quality
Assurance Matters.
|
| (a) |
Upon
reasonable advance notice and during normal business hours, XXXXXX
shall
permit TIMET to conduct a formal audit of the 4-High Facility as
well as
all related administrative and/or support facilities for quality
assurance
and control purposes (either alone or with any TIMET customer); provided,
however, that such audit shall not disrupt materially the progress
of the
work carried out in the relevant
facilities.
|
| (b) |
XXXXXX
agrees to maintain and keep in good working order and repair, all
at its
sole cost and expense, all equipment utilized by XXXXXX to perform
Titanium Conversion Services, which shall be deemed to mean such
equipment
shall, at a minimum, meet or exceed the OEM design capability and
functionality for slab, plate and coil
production.
|
| (c) |
XXXXXX
and its Affiliates shall maintain the policies and operating practices
for
quality control and assurance processes required to evidence aerospace
and
industrial qualifications required by TIMET or TIMET’s customers. Quality
assurance processes include, without limitation, documentation, record
retention, process improvement agreements and quality assurance system
compliance and audit rights to TIMET or its customers.
|
ARTICLE
5
BREACH
OF WARRANTY; EVENTS OF DEFAULT; REMEDIES
| 5.1 |
Remedies
for Manufacturing or Product Defects Discovered by Acceptance Procedure
or
Discovery of Breach of Warranty.
If TIMET determines by performance of the Acceptance Procedure as
outlined
in Section 4.3 that any Titanium Conversion Services do not comply
with the warranty set forth in Section 6.1, then TIMET shall be
entitled to the following remedies only:
|
| (a) |
XXXXXX
shall promptly, at its choice and cost, either (i) re-perform the
defective Titanium Conversion Services (or any part thereof) as may
be
necessary to correct the failures or defects, or (ii) reimburse TIMET
the amount paid by TIMET for the defective Titanium Conversion Services
(or any part thereof), or if TIMET has not yet paid such amounts
to
XXXXXX, XXXXXX will not invoice TIMET for such
amounts.
|
| (b) |
In
addition, for any Material (in part or whole) rendered unusable as a
result of XXXXXX’ gross negligence, XXXXXX shall promptly pay to TIMET an
amount equal to the sum of the cost of the Material (as indicated
by
TIMET’s books and records) plus costs associated with scrap preparation
minus a credit for the market value of such unusable Material at
prevailing scrap prices.
|
| 5.2 |
Event
of Default.
An “Event of Default” shall mean any of the events listed below. With
respect to an Event of Default listed in Section 5.2(b) or 5.2(c),
XXXXXX shall have thirty (30) days from the date of XXXXXX’ receipt of
TIMET’s notice of default to remedy such
default.
|
| (a) |
The
occurrence of a Change in Control of XXXXXX in which the successor
to
XXXXXX or the Operating Assets does not assume all of the obligations
of
the Transaction Documents; provided, however, that a CC Termination
shall
not constitute an Event of Default.
|
| (b) |
Failure
to comply with the requirements of Section 11.1 (as such Section
may be
amended by the Non-Compete Amendment).
|
| (c) |
In
the event that the On-Time Delivery Rate and/or the QTP Rate is less
than
[ * ] for two (2) consecutive months or less than [ * ] for any one
(1)
month; provided, however, that a failure to achieve either the On-Time
Delivery Rate and/or the QTP Rate for the mutually agreed upon incremental
volume increases set forth in clauses (i) and (ii) of Section 2.1(b)
during the first month following each such agreed upon incremental
volume
increase shall not be deemed to be an Event of Default so long as
Xxxxxx
is using commercially reasonable efforts during such one-month period
to
achieve each such incremental volume increase.
|
| 5.3 |
Remedies.
|
| (a) |
Upon
the occurrence of an Event of Default that has not been remedied
within
the 30-day cure period set forth in Section 5.2 (if applicable),
TIMET may
terminate this Agreement immediately upon written notice, in which
event
(x) the outstanding principal balance of the Option Note, and all
accrued and unpaid interest thereon, and the entire unearned portion
of
the Fee (as defined in the Access and Security Agreement) shall be
immediately due and payable and (y) Xxxxxx shall pay in good funds to
TIMET within five (5) business days following such termination Twenty
Five
Million Dollars ($25,000,000) as liquidated damages (the “Liquidated
Damages”). The Parties agree and acknowledge that TIMET’s actual Damages
in the event of an Event of Default would be extremely difficult
or
impracticable to ascertain and that the Liquidated Damages represent
the
Parties’ reasonable estimate of such Damages. Upon the occurrence of an
Event of Default set forth in Section 5.2(c) that is the result of
Force
Majeure (as defined in Section 8.1), TIMET’s sole remedy shall be to
terminate this Agreement upon written notice; provided that TIMET
shall
have no obligation to terminate this Agreement in such event, but
without
waiver of such right of termination, TIMET may elect to terminate
this
Agreement at any time that an event of Force Majeure is continuing;
provided, further, that TIMET’s right to terminate this Agreement as a
result of any such event shall cease at such time as the related
event of
Force Majeure ceases. In the event that TIMET elects to terminate
this
Agreement upon an Event of Default that is the result of Force Majeure,
the outstanding principal balance of the Option Note, and all accrued
and
unpaid interest thereon, and fifty percent (50%) of the unearned
portion
of the Fee shall be immediately due and payable to TIMET; however,
no
Liquidated Damages shall be due or
payable.
|
| (b) |
Upon
the occurrence of an Event of Default listed in Section 5.2(a) or
5.2(b)
hereof that has not been remedied within the 30-day cure period set
forth
in Section 5.2 (if applicable), in addition to the remedy set forth in
Section 5.3(a), TIMET shall have all rights and remedies at law or
in
equity against XXXXXX or any XXXXXX Successor for (i) specific performance
or other equitable relief and (ii) damages in an amount equal to
the
excess, if any, of (x) TIMET’s actual, consequential and incidental
damages arising from the unremedied Event of Default, over (y) the
Liquidated Damages.
|
| (c) |
Upon
the occurrence of an Event of Default listed in Section 5.2(c) hereof,
in
addition to the remedy set forth in Section 5.3(a), the Base Prices
shall
be reduced by twenty five percent (25%) until the Event of Default
is
cured or TIMET elects to terminate the Agreement and receive repayment
of
the balance of the Option Note, and all accrued and unpaid interest
thereon, the entire unearned portion of the Fee (as defined in the
Access
and Security Agreement) and the Liquidated
Damages.
|
| (d) |
In
addition to the remedies set forth in this Agreement, the Parties
shall be
afforded the rights and remedies set forth in the Access and Security
Agreement, including the TIMET remedies set forth in Section 8 of
the
Access and Security Agreement and the Xxxxxx Remedies set forth in
Section
12 of the Access and Security Agreement.
|
ARTICLE
6
WARRANTY
| 6.1 |
XXXXXX
Warranty.
XXXXXX warrants to TIMET that the Titanium Conversion Services rendered
to
TIMET by XXXXXX shall be performed in a good and workmanlike fashion
in
accordance with industry standards and TIMET’s specified process practice,
operating procedures and product specifications consistent with the
terms
set forth in the Submission Sheet.
|
| 6.2 |
Investigation
of Claims.
The Parties agree that any claim relating to an alleged breach of
the
foregoing warranty by XXXXXX shall be investigated jointly by TIMET
and
XXXXXX.
|
| 6.3 |
Remedies
for Breach of Warranty.
TIMET shall notify XXXXXX of any breach of warranty in Section 6.1
after TIMET has discovered such breach. If it is determined that
XXXXXX
has breached the warranty in Section 6.1, TIMET shall be entitled
solely to the remedies set forth in
Section 5.1.
|
ARTICLE
7
INSURANCE;
INDEMNIFICATION
| 7.1 |
Insurance.
As long as this Agreement is in effect and for a period of six (6)
years
thereafter, XXXXXX shall maintain (or its Affiliates shall maintain
on
XXXXXX’ behalf), at their respective sole cost, the following type of
insurance with insurers reasonably acceptable to
TIMET:
|
| (a) |
Commercial
General Liability Insurance.
The policy shall have a minimum combined single limit of $1,000,000
per
occurrence for bodily injury and property damage with a minimum aggregate
limit of $2,000,000. The policy shall include products/completed
operations, contractual, fellow-employee, broad form property damage,
and
contractor-protective coverages as well as coverage for the hazards
of
explosion, collapse and underground (XCU). The policy shall include
a
cross liability/severability of interests provision and coverage
shall be
on an “occurrence” basis. The policy form shall be no less broad than the
latest version issued by the Insurance Services Office (aka
ISO).
|
| (b) |
Workers’
Compensation/Employers Liability Insurance.
The policy shall have the following
limits:
|
Workers’
Compensation - Statutory
Employers
Liability - $500,000 per occurrence
The
policy shall have alternative employer and borrowed servant
coverage.
If
XXXXXX
shall be a qualified self-insurer for purposes of state workers compensation,
evidence of such qualification shall be sufficient to waive the requirement
that
workers compensation insurance be maintained. However, XXXXXX agrees to waive
subrogation for any payments that it (or its third party administrator) may
make
as a qualified self-insurer.
| (c) |
Business
Interruptions and Property Floater.
The policy will cover all risk of loss or damage to all of the Operating
Assets from fire, theft, malicious mischief, explosion, water and
all
other hazards or risks of physical damage included within the meaning
of
the term “extended coverage.” The limit shall be at least equal to the
replacement cost of the Operating Assets. The policy will also contain
business interruption coverage.
|
| (d) |
All
the insurance policies shall provide a waiver of subrogation in favor
of
TIMET.
In addition, the general liability insurance policy or policies and
the
policy insuring against property damage shall name TIMET as an Additional
Insured.
|
| (e) |
Certificate
of Insurance.
Within a reasonable time after signing this Agreement, XXXXXX shall
provide TIMET with an insurance certificate(s) as evidence that the
required insurance is in force.
|
| (f) |
Renewals.
XXXXXX will provide renewal certificates to TIMET as long as this
Agreement is in force. Such certificates shall specify that TIMET
shall be
given thirty (30) days notice prior to cancellation, material change
or
notice of non-renewal of any of the required insurance policies.
The
certificates shall also specify that XXXXXX’ insurance shall be primary in
the event of any duplication with that of TIMET. If requested, XXXXXX
shall provide TIMET with copies of the required insurance
policies.
|
| 7.2 |
Indemnification
and Waiver.
XXXXXX agrees to defend and indemnify TIMET, its employees, directors,
stockholders officers and agents for any claims, costs, expenses
(including reasonable attorney fees) or liability arising from injury
(including death and disease) or Damage that arises out of XXXXXX’
performance of the Titanium Conversion Services under this Agreement
unless such injury or Damage shall be the result of the sole negligence
of
TIMET. TIMET shall provide XXXXXX with notice of any matters that
qualify
for indemnification as soon as practicable. The foregoing indemnity
shall
not apply to claims, costs, expenses or liability arising from injury
or
Damage resulting from products produced by XXXXXX through the performance
of Titanium Conversion Services. With the exception of TIMET’s obligations
under Section 4(b)(ii) of the Access and Security Agreement, in no
event
shall TIMET be liable for damage to, or loss of, XXXXXX’ property,
equipment or tools or that of XXXXXX’ employees or sub-contractors
regardless of the actual or alleged negligence of TIMET. XXXXXX shall
indemnify TIMET for any such claims.
|
ARTICLE
8
FORCE
MAJEURE; CONTINGENCIES
| 8.1 |
Force
Majeure.
The occurrence of an event such that delivery of the Titanium Conversion
Services is prevented by any cause, whether foreseeable or unforeseeable,
beyond XXXXXX’ reasonable control shall be deemed an event of Force
Majeure (a “Force Majeure”), including, without limitation, the following
causes: acts of God; judgments or orders of any court; a change in
the
laws that would expressly prohibit XXXXXX’ performance of the Titanium
Conversion Services; power failure; a catastrophic breakdown of the
Operating Assets; acts of war; acts of terrorism, riot, civil strife,
insurrection or rebellion; labor disputes; or fire, explosion, earthquake,
storm, flood or other severe weather condition. The term “Force Majeure”
shall not be construed, however, to include commercial
impracticability.
|
| 8.2 |
Notice;
Mitigation.
As soon as practicable after the occurrence of Force Majeure, XXXXXX
shall
give notice to TIMET of the suspension of performance (stating therein
the
nature of the suspension, the obligation(s) likely to be affected,
the
reasons therefor, and a reasonable, good faith estimate of the period
of
time during which provision of the Titanium Conversion Services is
expected to be prevented), and thereupon the contractual delivery
schedule
or dates of completion shall be extended by a period of time as necessary
to reflect the effect of the delay. XXXXXX shall take all reasonable
steps
to minimize the impact of the Force Majeure under this Agreement
and shall
resume provision of the Titanium Conversion Services as soon as reasonably
possible. The Parties agree to negotiate in good faith during the
continuance of any Force Majeure with respect to possible ways to
minimize
the effects of the Force Majeure on the
Parties.
|
ARTICLE
9
CONFIDENTIALITY
| 9.1 |
Obligations.
During the term of this Agreement and for a ten (10) year period
thereafter, no Party shall disclose to any third party (including
without
limitation, any subcontractor of such Party) any “Confidential
Information” (as defined below) of any other without such Party’s prior
written consent.
|
| 9.2 |
Confidential
Information Defined.
“Confidential Information” means all confidential or proprietary
information in whatever form furnished by or on behalf of one Party
to the
other Party, except information which the receiving Party can demonstrate
that it:
|
| (a) |
is
generally available to, or known by, the public other than by reason
of
disclosure by the receiving Party;
|
| (b) |
was
obtained by the receiving Party from a source other than the other
Party
hereto; provided, however, that such source was not bound by a duty
of
confidentiality with respect to such
information;
|
| (c) |
was
in the lawful possession of the receiving Party prior to the date
of this
Agreement without confidentiality restrictions;
or
|
| (d) |
is
intentionally made available by the disclosing Party to a third person
on
an unrestricted basis.
|
| 9.3 |
Exceptions.
The restrictions set forth in Section 9.1 above shall not be deemed
to include disclosures:
|
| (a) |
to
officers, directors, employees, agents, lenders, contractors, or
representatives of a Party or an Affiliate of such Party who need
to know
such information and agree to be bound by the terms
hereof;
|
| (b) |
required
to be made by law, rule, regulation, order of any court or regulatory
body, discovery request, civil investigative demand, or judicial
process;
or
|
| (c) |
to
report the terms of this Agreement or file this Agreement as an exhibit
as
required by applicable laws or regulations concerning financial reporting
or disclosure, subject to each Party’s requirement to seek to protect
proprietary or confidential information contained in this Agreement
by way
of protective order, confidential treatment request or similar
process.
|
ARTICLE
10
PROVISION
OF TITANIUM PRODUCTS
During
the term of this Agreement, upon request, TIMET will supply to XXXXXX titanium
sheet and plate products of up to two hundred thousand (200,000) pounds per
year
in each of 2007 through 2011, up to three hundred thousand (300,000) pounds
per
year in each of 2012 through 2016 and up to five hundred thousand (500,000)
pounds per year in each of 2017 through the end of the term of this Agreement;
provided, however, that in any year, TIMET’s supply of hot-rolled alloy sheet
products cannot exceed 25% of the total volume of titanium plate sheet products
supplied by TIMET. Each purchase and sale shall be made by separate purchase
orders placed by Xxxxxx, and acknowledged within a reasonable time by TIMET,
and
such purchases and sales shall be subject to the prevailing market prices,
lead-times, warranties and other terms and conditions applicable to TIMET
customers who place orders on an order-by-order basis. In the event of any
conflict between this Agreement and either of the XXXXXX’ conditions of purchase
or the corresponding TIMET sales acknowledgement, this Agreement shall prevail.
In the event of any conflict between a XXXXXX purchase order and the
corresponding TIMET sales acknowledgement, the documents shall be interpreted
together under the Uniform Commercial Code of the State of
Delaware.
ARTICLE
11
NON-COMPETITION
| 11.1 |
Non-Compete
Obligations.
In view of, among other things, the payment of the Fee by TIMET to
XXXXXX,
the proprietary information and technical assistance to be made available
to XXXXXX and TIMET’s provision of the titanium products as set forth in
Article 10, during the term of this Agreement, XXXXXX (including
its
Affiliates) shall not, except as contemplated in this Agreement with
respect to the performance of Titanium Conversion Services for the
benefit
of TIMET and its Affiliates or designees, directly or indirectly
through
any Affiliate or other person in which it has an equity interest,
anywhere
in the world, (i) provide, directly or indirectly, Titanium
Conversion Services with the Operating Assets to any third party,
or grant
any third party access to, or the right to use, either directly or
indirectly, the Operating Assets for purposes of performing any Titanium
Conversion Services; or (ii) engage in the manufacturing of titanium
or titanium alloys other than cold reduced titanium seamless tubing
(except as specifically permitted in this Agreement). In the event
that
TIMET has not fulfilled its obligations under Article 10 hereof relating
to TIMET’s supply of titanium sheet and plate products to XXXXXX, XXXXXX
shall be relieved of its obligations under clause (ii) of this Article
11
for the period in which such product shortfall occurred (on an annualized
basis) but only to the extent of the actual product supply
shortfall.
|
| 11.2 |
Non-Compete
Amendment.
In the event of a Change in Control, the successor to XXXXXX or its
assets
(the “XXXXXX Successor”) shall have the option to amend the provisions of
Section 11.1(i) as described below by providing written notice to
TIMET of
the exercise of such option within twelve (12) months of the effective
date of such Change in Control (the “Non-Compete Amendment”). Upon
exercise of the option, the XXXXXX Successor shall be required to
pay
TIMET a non-refundable fee (the “Non-Compete Amendment Fee”) within five
(5) business days following TIMET’s receipt of such notice of exercise in
the amount of $15,000,000 in immediately available U.S. funds. If
XXXXXX
exercises the option and pays TIMET the Non-Compete Amendment Fee,
the
unearned portion of the Fee shall be reduced by the amount of the
Non-Compete Amendment Fee.
|
| 11.3 |
Non-Compete
Amendment Provision:
Upon the XXXXXX Successor’s exercise of the option with respect to the
Non-Compete Amendment and payment of the Non-Compete Amendment Fee,
Section 11.1(i) shall be deleted in its entirety and replaced with
the
following provision:
|
(i) provide,
directly or indirectly, Titanium Conversion Services with the Operating Assets
to any third party, or grant any third party access to, or the right to use,
either directly or indirectly, the Operating Assets for purposes of performing
any Titanium Conversion Services; provided, however, that the XXXXXX Successor
shall be permitted, subject to TIMET’s rights under this Agreement, to perform
Titanium Conversion Services using the Operating Assets for itself, its
Affiliates or any third party up to a maximum aggregate amount of ten (10)
million output pounds of flat-rolled titanium products on an annual basis.
| 11.4 |
No
Further Changes; Conditions
With the exception of the provision contained in Section 11.3 hereof,
the
Non-Compete Amendment shall not be construed to amend or modify any
other
term or condition of this Agreement or the Transaction Documents.
The
XXXXXX Successor shall be permitted to exercise the option with respect
to
the Non-Compete Amendment only if such successor (i) has assumed
all of
the obligations of XXXXXX under this Agreement and the Transaction
Documents and (ii) is not in default of this Agreement or the Transaction
Documents.
|
ARTICLE
12
GOVERNING
LAW; SETTLEMENT OF DISPUTES
| 12.1 |
Governing
Law.
This Agreement shall be governed, interpreted, construed and enforced
in
accordance with the laws of the State of Delaware without recourse
to the
law regarding the conflicts of law.
|
12.2 Voluntary
Settlement of Disputes; Voluntary Arbitration.
| (a) |
If
there shall be any Dispute, the representatives of the Parties should
use
their best efforts to resolve the matter on an amicable basis and
in a
manner fair to the Parties hereto. If one Party notifies another
Party
that a Dispute has arisen and the Parties are unable the resolve
such
Dispute within a period of thirty (30) days from such notice, then
the
matter may be referred to senior executive officers (Chief Operating
Officer or its equivalent) of XXXXXX and TIMET for attempted resolution,
who shall have a further sixty (60) days from such notice (or such
time as
both Parties shall mutually agree) to attempt to resolve such Dispute.
No
recourse to arbitration under this Agreement shall take place unless
and
until such procedure has been followed.
|
| (b) |
If
a Dispute is not resolved in the manner and within the period described
in
Section 12.2(a), any Party may make a written demand that the dispute
be
resolved through binding arbitration (an “Arbitration Demand”) in
accordance with the procedures set forth
below.
|
| (c) |
Any
Arbitration Demand shall state specifically the nature of the claim(s),
the relevant time periods, the document(s) if any that are alleged
to
govern the dispute, the names of any relevant known witnesses associated
with the either of the parties, the identification of any third parties
that may be relevant to the dispute, a specific dollar amount alleged
to
be owing, if any, and any other specific information that may be
necessary
to define the nature of the dispute. The party receiving the Arbitration
Demand shall provide a written response (an “Arbitration Response”) within
ten (10) days after receiving the Arbitration Demand. The Arbitration
Response may be a simple denial or may set forth in writing any
counterclaims including the same type of information required in
an
original Arbitration Demand. If an Arbitration Response includes
any
counterclaims or proposals, then the party originally demanding the
Arbitration may reply within ten (10) days after receiving the Arbitration
Response. If any party fails to respond to any notice, the party
shall be
deemed to deny the demand.
|
| (d) |
The
arbitration shall be handled by a single neutral arbitrator. The
Arbitration Demand shall also include the name of one (1) person
proposed
to serve as an arbitrator to decide the dispute. If the designated
person
is not acceptable to the other party, then the party responding to
the
Arbitration Demand shall propose the name of one (1) arbitrator.
If that
person is unacceptable to the party seeking the Arbitration, then
both
parties shall cooperate to select a mutually agreeable arbitrator.
In the
event that the Parties cannot agree to the selection of a single
neutral
arbitrator, the Parties shall submit the selection of the arbitrator
to
the procedures for the selection of an arbitrator set forth by the
American Arbitration Association, “JAMS” or a similar recognized
alternative dispute resolution body agreed upon by the Parties. The
fees
and expenses of the neutral arbitrator shall be split by the parties
unless the Arbitration Award provides
differently.
|
| (i) |
The
Arbitration shall be held in Wilmington, Delaware as soon as possible
within ninety (90) calendar days after the selection of arbitrator
who
will hear the case.
|
| (ii) |
Each
Party shall have the right to engage in reasonable pre-arbitration
discovery in the form of requests for production of documents and
depositions as allowed by the arbitrator. Presentation of the case
shall
include: opening statements, testimony of necessary witnesses, stipulated
or properly authenticated documents, and closing statements. No documents
may be submitted as evidence unless the documents have been provided
to
the opposing party in advance of the arbitration as allowed by the
arbitrator. Either party may demand that a transcript of the hearing
be
prepared. If such a demand is made, then the parties shall each pay
one-half of the cost of the transcript.
|
| (iii) |
The
arbitrator shall issue a reasoned decision in writing within thirty
(30)
days of the arbitration. Delaware law, in conjunction with any applicable
federal law, shall be used by the arbitrator to decide all questions,
claims or disputes, notwithstanding any choice of law provisions
to the
contrary. The arbitrator shall have the authority to order the losing
party to pay some or all or the fees and expenses of the arbitration
proceeding to the prevailing party as part of the arbitration award,
including but not limited to any expert witness fees. The arbitrator
shall
not have the authority to award any incidental, consequential, special
(including multiple or punitive), or other indirect damages to the
other
party, whether such claim arises under contract, tort (including
strict
liability) or other theory of law. The decision shall be final and
binding
on the parties, except that either party may appeal as provided in
the
Delaware Arbitration Act.
|
| (iv) |
The
arbitration award reasoned decision may be enforced in any court
having
jurisdiction of the parties and the subject
matter.
|
Notwithstanding
anything to the contrary set forth herein, it is the express intention of
the
Parties that the provisions, procedures and requirements of this Section
12.2
are entirely voluntary. The alternative dispute resolution and arbitration
provisions, procedures or requirements of this Section 12.2 shall not apply
to
any Dispute between the Parties absent the Parties’ mutual written agreement to
submit a Dispute to the provisions, procedures and requirements contained
in
this Section 12.2.
ARTICLE
13
TERM
AND TERMINATION
| 13.1 |
Term.
This Agreement shall become effective commencing on the date on which
the
last of the following conditions is met and shall continue until
the date
twenty (20) years after the commencement date unless earlier terminated
pursuant to Section 13.2:
|
| (a) |
Execution
and delivery of this Agreement and the Access and Security Agreement;
and
|
| (b) |
TIMET’s
payment to XXXXXX of the Fee as described in Section 2(c) of the
Access
and Security Agreement.
|
Upon
the
commencement of the term of this Agreement, XXXXXX shall execute and deliver,
or
cause to be executed and delivered, to TIMET the non-disturbance agreement
pursuant to Section 3(c) of the Access and Security Agreement and such further
instruments and documents, and shall take such further action as TIMET may
reasonably request, for the purpose of obtaining the full benefits of this
Agreement and the Access and Security Agreement and of the rights and powers
granted herein and therein, and TIMET shall be authorized by XXXXXX to file
one
or more financing statements, and amendments thereto, relating to the Collateral
(as defined in the Access and Security Agreement).
| 13.2 |
Termination.
This Agreement may be terminated as set forth herein
below.
|
| (a) |
TIMET
may terminate this Agreement upon written notice of termination to
XXXXXX
(i) upon the occurrence of an Event of Default that has not been
remedied within the 30-day cure period set forth in Section 5.2 (if
applicable), or (ii) upon TIMET’s exercise of its rights under
Section 8(b) of the Access and Security
Agreement.
|
| (b) |
XXXXXX
may terminate this Agreement upon written notice of termination to
TIMET
if at any time more than 50% of all undisputed outstanding invoices
issued
to TIMET have been unpaid for a period of thirty (30) days following
TIMET’s receipt of written notice of default from
XXXXXX.
|
|
(c)
|
Upon
a Change in Control of XXXXXX, a XXXXXX Successor shall have the
right to
terminate this Agreement (a “CC Termination”) by providing written notice
of termination to TIMET within twelve (12) months of the effective
date of
such Change in Control, and such CC Termination shall become effective
upon the last day of the ten- (10) year period following the date
on which
the notice is received by TIMET (the “Effective Termination Date”). As a
result of its election of a CC Termination, the XXXXXX Successor
shall be
required to pay to TIMET a termination fee that is equal to (i)
Twenty
Five Million Dollars ($25,000,000) plus (ii) the entire unearned
portion
of the Fee calculated as of the Effective Termination Date (the
“Termination Fee”). The Termination Fee shall be due and payable to TIMET
in equal monthly payments during the period beginning upon TIMET’s receipt
of the notice of termination and ending upon the Effective Termination
Date. Upon its election of a CC Termination, XXXXXX shall deliver
to TIMET
a promissory note substantially in the form attached hereto as
Exhibit B
in the amount of the Termination Fee and with a payment schedule
as
reflected in this Section 13.2(c); provided, however, that the
Termination
Fee shall not bear interest prior to maturity, and, therefore,
the
interest provisions in Exhibit B (other than the Default Rate (as
defined
in Exhibit B) shall be deleted; provided, further, that upon a
default
thereunder, the Termination Fee shall bear interest at the Default
Rate.
|
| 13.3 |
Consequences
of Termination.
As a consequence of termination of this Agreement by any Party in
accordance with this Article 13, all rights and obligations of the
Parties under this Agreement shall terminate without any liability
of any
Party to the other (except for liability of any Party then in breach
under
this Agreement for such breach).
|
| 13.4 |
Waiver.
Any waiver of the option to terminate this Agreement shall not constitute
a waiver of the right to claim Damages or the right to terminate
this
Agreement for any subsequent breach or occurrence of the same or
other
events herein specified.
|
| 13.5 |
Survival.
The obligations of the Parties under Articles 5 (Breach of Warranty;
Events of Default; Remedies), 6 (Warranty), 7 (Insurance;
Indemnification), 9 (Confidentiality), 12 (Governing Law; Settlement
of Disputes) and 13 (Term and Termination) shall survive termination
or
expiration of this Agreement.
|
ARTICLE
14
GENERAL
| 14.1 |
Assignment.
All of the terms, covenants, obligations, warranties, and conditions
of
this Agreement shall be binding upon, and inure to the benefit of
and be
enforceable by, the Parties hereto and their respective successors
and
permitted assigns. This Agreement and the rights and obligations
of the
Parties hereunder may not be assigned by any Party without the prior
written consent of the other Parties. Notwithstanding the foregoing,
XXXXXX shall be permitted to assign this Agreement to its successor
in
connection with a Change in Control provided that such successor
assumes
all of XXXXXX’ obligations under this Agreement and each of the other
Transaction Documents. Except in reference to TIMET’s successor(s) and
permitted assignee(s), the term designee(s) as used in this Agreement
shall not be construed to alleviate TIMET from its obligations hereunder
or permit TIMET to assign its rights
hereunder.
|
| 14.2 |
Severability.
If any provision of this Agreement or application of any such provision
to
any person or circumstance shall be held invalid, illegal, or
unenforceable in any respect by a court of competent jurisdiction,
such
invalidity, illegality, or unenforceability shall not affect any
other
provision hereof.
|
| 14.3 |
Notices.
All notices, requests, demands and other communications required
or
permitted to be given hereunder shall be in writing and shall be
deemed to
have been duly given when delivered personally, when sent by verified
facsimile (with confirmation copy sent by courier) or three (3) business
days after being sent by courier, in each case addressed as
follows:
|
If
to
TIMET:
Titanium
Metals Corporation
XX
Xxx
000
Xxxxxxx, XX 00000
Attn:
Xxx Xxxxxx, Vice President of Manufacturing Strategy
Facsimile: (000) 000-0000
With
a
copy to:
Titanium
Metals Corporation
Three
Lincoln Centre
0000
XXX
Xxxxxxx
Xxxxx
0000
Xxxxxx,
XX 00000
Attn:
General Counsel
Facsimile:
(000) 000-0000
If
to
XXXXXX:
Xxxxxx
International, Inc.
0000
Xxxx
Xxxx Xxxxxx
X.X.
Xxx
0000
Xxxxxx,
Xxxxxxx 00000-0000
Attn:
Xxxxxx Xxxxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
Attn:
Xxxxx X. Xxxxxx, V.P. - General Counsel
Facsimile:
(000) 000-0000
With
a
copy to:
Ice
Xxxxxx LLP
Xxx
Xxxxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
XX 00000-0000
Attn:
Xxxxxxx X. Xxxxxxx
Facsimile:
(000) 000-0000
Each
Party mentioned herein may change its address or facsimile number to which
such
communications, notices, requests or demands are to be directed to it by
giving
written notice to the others in the manner described in this
Section 14.3.
| 14.4 |
Specific
Performance.
Each of the Parties hereto acknowledges and agrees that the other
Parties
would be damaged irreparably in the event any of the provisions of
this
Agreement are not performed in accordance with their specific terms
or
otherwise are breached. Accordingly, each of the Parties agrees that
the
any Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof, in addition to any
other remedy to which it may be entitled in accordance with the applicable
law set forth in Section 12.1.
|
| 14.5 |
No
Third Party Beneficiaries.
This Agreement shall not be deemed to create or confer, nor shall
the same
create or confer, any rights on or upon third
parties.
|
| 14.6 |
Amendment;
Waiver.
This Agreement may be amended, modified, supplemented, superseded
or
cancelled, and any of the terms, covenants, guarantees, warranties,
or
conditions hereof may be waived, only by a written instrument executed
by
the Parties or, in the case of a waiver, by or on behalf of the Party
waiving compliance. The failure of any Party at any time or times
to
require performance of any provision hereof shall in no manner affect
the
right at a later time to enforce the same. No waiver by any Party
of any
condition, or of any breach of any term, covenant, guarantee, or
warranty
contained in this Agreement shall be deemed to be or construed as
a
further or continuing waiver of any such condition or breach or a
waiver
of any other condition or of any breach of any other term, covenant,
guarantee, or warranty.
|
| 14.7 |
Captions.
The captions contained in this Agreement are solely for purposes
of
identification and convenient reference only and shall in no way
affect,
alter or vary the meaning, construction or interpretation hereof
or
thereof.
|
| 14.8 |
Integration.
The exhibits to this Agreement are hereby incorporated by reference
in
their entirety. If there is any inconsistency among this Agreement
or any
of its exhibits, this Agreement shall prevail over the other
documents.
|
| 14.9 |
Effectiveness
of this Agreement.
This Agreement shall be effective upon the completion of the following
conditions:
|
| (a) |
TIMET’s
perfection of its first priority interest in the Collateral (as defined
in
the Access and Security Agreement); and
|
| (b) |
TIMET’s
payment of the Fee.
|
IN
WITNESS HEREOF, the Parties have duly executed this Agreement as of the date
first written above.
TITANIUM
METALS CORPORATION
By: /s/XXXXX
X.
X'XXXXX
Name: Xxxxx
X.
X'Xxxxx
Title: Chief
Financial Officer
XXXXXX
INTERNATIONAL, INC.
By: /s/
XXXXXXX X. XXXXX
Name: Xxxxxxx
X. Xxxxx
Title: President
& CEO
Exhibit
A: Product, Price List and Maximum Cycle Times
[
* ]
EXHIBIT
B
FORM
OF
PROMISSORY NOTE
$[up
to
12,000,000.00]
__________, 20__
FOR
VALUE
RECEIVED, the undersigned, XXXXXX INTERNATIONAL, INC., a Delaware corporation
(“Maker”), hereby promises to pay to the order of TITANIUM METALS CORPORATION, a
Delaware corporation (“Payee”), at its address at 3 Lincoln Centre, 0000 XXX
Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, in lawful money of the United States
of America, the principal sum of [up to TWELVE MILLION AND NO/100 DOLLARS
($[up
to 12,000,000.00]), in installments as follows:
|
(a)
|
Twenty-three
(23) successive substantially equal quarterly installments of principal,
plus accrued and unpaid interest, shall be made quarterly on March
31,
June 30, September 30 and December 31 of each year, commencing
on the
quarter that begins eighteen (18) months from the Loan Date (as
defined in
the Conversion Services Agreement dated as of November 17, 2006
by and
between Make and Payee; and
|
|
(b)
|
A
final installment in the amount of the entire principal balance
then
remaining unpaid, plus all accrued and unpaid interest, shall be
due and
payable on ______________, 20__ [six years from the date made].
|
The
outstanding principal balance hereof shall bear interest prior to maturity
at
the rate equal to the Prime Rate plus one percent (1.00%) per annum; provided
that all past due principal and (to the fullest extent permitted by law)
interest and other amounts payable by Maker under this Note shall bear interest
at the Default Rate (hereinafter defined). Interest payable at the Default
Rate
shall be payable from time to time on demand. Interest shall be computed
on the
basis of the actual number of days elapsed in the applicable calendar year
in
which accrued.
Maker
shall have the right to prepay, at any time and from time to time without
premium or penalty, the entire unpaid principal balance of this Note or any
portion thereof, and any such prepayment to be made together with the payment
of
interest accrued on the amount of principal being prepaid through the date
of
such prepayment, and any such partial prepayments to be applied in inverse
order
of maturity to the last maturing installment(s) of principal.
Notwithstanding
anything to the contrary contained herein, no provisions of this Note shall
require the payment or permit the collection of interest in excess of the
Maximum Rate (hereinafter defined). If any excess of interest in such respect
is
herein provided for, or shall be adjudicated to be so provided, in this Note
or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the
excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted
by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and,
if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
or
payable exceeds the Maximum Rate, Maker and Payee shall, to the extent permitted
by applicable law, (i) characterize any non-principal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments
and
the effects thereof, and (iii) amortize, prorate, allocate, and spread in
equal
or unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by this Note so that the interest for
the
entire term does not exceed the Maximum Rate.
As
used
herein, the following terms shall have the following meanings:
“Default
Rate” means the lesser of (a) the Maximum Rate or (b) the sum of the Prime Rate
plus the ten percent (10.00%) per annum.
“Maximum
Rate” means the maximum nonusurious rate of interest permitted to be charged by
the holder hereof under applicable federal or Delaware laws.
“Prime
Rate” means, at any time, the rate of interest per annum reported in the “Money
Rates” column of the Wall Street Journal as the prime rate then in effect, or
such other rate of interest mutually acceptable to the Maker and the Payee.
In
the event the Wall Street Journal ceases publication or ceases to publish
the
prime rate, the Payee shall select a comparable publication and provide notice
thereof to the Maker. Each change in any interest rate provided for herein
based
upon the Prime Rate resulting from a change in the Prime Rate shall take
effect
without notice to the Maker at the time of such change in the Prime Rate.
This
Note
is secured by that certain Access and Security Agreement, dated ___________,
2006, between Maker and Payee (as the same may be amended, modified,
supplemented or restated from time to time, the “Access and Security
Agreement”).
Maker
shall be in default hereunder upon the happening of any of the following
events
or conditions (each such event or condition hereinafter referred to as an
“Event
of Default”):
|
(a)
|
Maker
shall fail to pay when due any principal of or other amount due
on this
Note and such failure shall continue for five (5) days after the
date such
payment becomes due.
|
|
(b)
|
The
occurrence of a Default under and as defined in the Access and
Security
Agreement.
|
Upon
the
occurrence of any Event of Default, the holder hereof may, at its option,
declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable without notice, demand or presentment, all of
which
are hereby waived, and upon such declaration, the same shall become and shall
be
immediately due and payable, and the holder hereof shall have the right to
foreclose or otherwise enforce all liens or security interests securing payment
hereof, or any part hereof, and offset against this Note any sum or sums
owed by
the holder hereof to Maker. Failure of the holder hereof to exercise this
option
shall not constitute a waiver of the right to exercise the same upon the
occurrence of a subsequent Event of Default.
If
the
holder hereof expends any effort in any attempt to enforce payment of all
or any
part or installment of any sum due the holder hereunder, or if this Note
is
placed in the hands of an attorney for collection, or if it is collected
through
any legal proceedings, Maker agrees to pay all collection costs and fees
incurred by the holder, including reasonable attorneys’ fees.
THIS
NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF
DELAWARE AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA WITHOUT
REGARD
TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. ANY ACTION OR PROCEEDING UNDER
OR
IN CONNECTION WITH THIS NOTE AGAINST MAKER OR ANY OTHER PARTY EVER LIABLE
FOR
PAYMENT OF ANY SUMS OF MONEY PAYABLE ON THIS NOTE MAY BE BROUGHT IN ANY STATE
OR
FEDERAL COURT IN NEW CASTLE COUNTY, DELAWARE. MAKER AND EACH SUCH OTHER PARTY
HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURTS, AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT
SUCH
COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
PAYEE
TO BRING ANY ACTION OR PROCEEDING AGAINST MAKER OR ANY OTHER PARTY LIABLE
HEREUNDER OR WITH RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT
IN ANY
OTHER JURISDICTION. ANY ACTION OR PROCEEDING BY MAKER OR ANY OTHER PARTY
LIABLE
HEREUNDER AGAINST PAYEE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN NEW CASTLE
COUNTY, DELAWARE.
Except
for notices required by the definition of “Default” in the Access and Security
Agreement, Maker and each surety, guarantor, endorser, and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive notice, presentment, demand for payment, protest, notice
of
protest and non-payment or dishonor, notice of acceleration, notice of intent
to
accelerate, notice of intent to demand, diligence in collecting, grace, and
all
other formalities of any kind, and consent to all extensions without notice
for
any period or periods of time and partial payments, before or after maturity,
and any impairment of any collateral securing this Note, all without prejudice
to the holder. The holder shall similarly have the right to deal in any way,
at
any time, with one or more of the foregoing parties without notice to any
other
party, and to grant any such party any extensions of time for payment of
any
said indebtedness, or to release or substitute part or all of the collateral
securing this Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
THIS
NOTE
AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED
BY
MAKER IN CONNECTION WITH THE INDEBTEDNESS EVIDENCED BY THIS NOTE REPRESENT
THE
FINAL, ENTIRE AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
XXXXXX
INTERNATIONAL, INC.
By:
Name:
Title:
I/1889035.2
