Exhibit 10.1

EXECUTION VERSION

 

 

EARNOUT AGREEMENT

by and among

FR ACQUISITION FINANCE SUBCO (LUXEMBOURG) S.A.R.L.,

THE SELLER REPRESENTATIVE (AS DEFINED HEREIN)

and

ALCOA INC.

Dated as of June 25, 2014

 

 

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TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     1   

Section 1.1

  Defined Terms      1   

ARTICLE II EARNOUT

     4   

Section 2.1

  Earnout Statement; Access to Information      4   

Section 2.2

  Earnout Statement Dispute Resolution      5   

Section 2.3

  Payment of Earnout Amounts      6   

Section 2.4

  Operation and Management of the Georgia Business      6   

Section 2.5

  Access and Information; Quarterly Meetings and On-Site Visits      8   

Section 2.6

  Acceleration of Earnout Payment      8   

Section 2.7

  Certain Purchaser Acknowledgements      9   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER

     9   

Section 3.1

  Authorization of Agreement      9   

Section 3.2

  No Conflict      9   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER REPRESENTATIVE

     10   

Section 4.1

  Authorization of Agreement      10   

Section 4.2

  No Conflict      10   

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     10   

Section 5.1

  Authorization of Agreement      10   

Section 5.2

  No Conflict      10   

ARTICLE VI TERMINATION, AMENDMENT AND WAIVER

     11   

Section 6.1

  Termination      11   

Section 6.2

  Fees and Expenses      11   

Section 6.3

  Amendment      11   

Section 6.4

  Extension; Waiver      11   

ARTICLE VII GENERAL PROVISIONS

     12   

Section 7.1

  Notices      12   

Section 7.2

  Headings; Table of Contents      13   

Section 7.3

  Severability      13   

Section 7.4

  Entire Agreement      13   

Section 7.5

  Assignment; Binding Effect      13   

Section 7.6

  Parties in Interest      13   

Section 7.7

  Specific Performance      13   

Section 7.8

  Failure or Indulgence Not Waiver; Remedies Cumulative      14   

Section 7.9

  Governing Law; Waiver of Jury Trial      14   

Section 7.10

  Arbitration      14   

Section 7.11

  Counterparts      14   

Section 7.12

  Interpretation      15   

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EARNOUT AGREEMENT

EARNOUT AGREEMENT, dated as of June 25, 2014 (this “Agreement”), by and among FR
Acquisition Finance Subco (Luxembourg), S.à.r.l., a private limited liability
company incorporated under the laws of Luxembourg, with its registered office
located at 6 rue Guillaume Schneider, L-2522 Luxembourg, registered with the
Register of Commerce and Companies of Luxembourg under number B 133,360 (the
“Seller”), Oak Hill Capital Partners III, L.P. and Oak Hill Capital Management
Partners III, L.P., collectively in their capacity as the Seller Representative,
and Alcoa Inc., a Pennsylvania corporation (the “Purchaser”).

WHEREAS, concurrently with the execution and delivery of this Agreement, FR
Acquisition Corporation (US), Inc., a Delaware corporation (the “US Company”),
FR Acquisitions Corporation (Europe), a limited company incorporated under the
laws of England and Wales (the “UK Company” and, together with the US Company,
the “Companies”), the Seller, the Purchaser, Alcoa IH Limited, a limited company
incorporated under the laws of England and Wales and a wholly owned Subsidiary
of the Purchaser (the “UK Purchaser”), and the Seller Representative are
entering into a Share Purchase Agreement, dated as of the date hereof (as may be
amended, modified or supplemented from time to time in accordance with its
terms, the “Share Purchase Agreement”); and

WHEREAS, the Seller, the Seller Representative and the Purchaser wish to enter
this Agreement pursuant to which the Seller shall be eligible to receive certain
additional consideration upon the terms and subject to the conditions set forth
herein.

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms.

(a) Capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Share Purchase Agreement. For all purposes
of this Agreement, the following terms shall have the following respective
meanings:

“Affiliate” shall mean, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. As used
in this definition, the term “control” (including the terms “controlling,”
“controlled by” and “under common control with”) means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

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“Arbitrator” shall mean an arbitrator selected in accordance with Section 7.10
(Arbitration) or, if the Purchaser and the Seller Representative shall otherwise
agree in writing, an independent accounting firm or other Person mutually
selected by the Purchaser and the Seller Representative.

“Business Day” shall mean each day that is not a Saturday, Sunday or other day
on which banking institutions located in New York, New York or London, England
are authorized or obligated by law or executive order to close.

“Contract” shall mean any contract, agreement, lease, license, instrument, note,
evidence of indebtedness or other legally binding commitment or undertaking.

“Earnout Amount” shall mean, with respect to any Earnout Measurement Period, the
positive amount (if any) equal to (i) the product of (A) two (2) multiplied by
(B) the excess (if any) of (x) the amount of Georgia EBITDA for such Earnout
Measurement Period over (y) One Hundred Million Dollars ($100,000,000) minus
(ii) the aggregate Earnout Amount(s) (if any) previously paid to the Seller (or
previously offset against any payment obligations of Seller pursuant to, and
subject to the terms and conditions of, Section 9.4(d) of the Share Purchase
Agreement) with respect to all prior Earnout Measurement Periods; provided, that
in no event shall the aggregate amount of all Earnout Amount(s) payable by the
Purchaser hereunder (including any such amounts offset against payment
obligations of Seller pursuant to, and subject to the terms and conditions of,
Section 9.4(d) of the Share Purchase Agreement) exceed the Maximum Earnout
Amount.

“Earnout Measurement Period” shall mean each twenty-four (24)-month period
ending on an EBITDA Measurement Date.

“Earnout Period” shall mean the period from and after the Closing Date (as
defined in the Share Purchase Agreement) to and including December 31, 2020.

“EBITDA Measurement Date” shall mean each June 30 and December 31 during the
Earnout Period.

“EBITDA Rules” shall mean the rules, principles, procedures and adjustments set
forth on Exhibit A hereto.

“Enforceability Exceptions” shall mean: (i) any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws relating to or affecting the enforcement of creditors’ rights generally;
and (ii) any legal principles of general applicability governing the
availability of equitable remedies (whether considered in a proceeding in equity
or at law or under applicable legal codes).

“GAAP” shall mean generally accepted accounting principles in the United States,
consistently applied.

“Georgia Business” shall mean all business and operations primarily relating to
the manufacturing, sale and distribution of conventional and isothermal forged
disks as conducted in accordance with this Agreement at the Georgia Facility.

“Georgia Business Subsidiary” shall mean Firth Rixson Forgings LLC.

 

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“Georgia EBITDA” shall mean, with respect to any Earnout Measurement Period or
other applicable period, the earnings (loss) before interest, income taxes,
depreciation and amortization of the Georgia Business, calculated in accordance
with the EBITDA Rules.

“Georgia Facility” shall mean that certain manufacturing facility located in
Savannah, Georgia.

“Governmental Authority” shall mean: (i) any regional, federal, state,
provincial, local, foreign or international government, governmental authority,
regulatory authority or administrative agency; (ii) any governmental commission,
department, board, bureau, agency or instrumentality; (iii) any court, tribunal,
arbitrator, arbitral body (public or private) or self-regulatory organization;
or (iv) any political subdivision of any of the foregoing.

“Law” shall mean any law, statute, ordinance, code, regulation, statutory
guidance, rule or other legal requirement issued or promulgated by any
Governmental Authority.

“Lien” shall mean any lien, mortgage, deed of trust, hypothecation, pledge,
security interest, license, charge, option, encumbrance or other similar
restriction or limitation.

“Liquidated Earnout Amount” shall mean, as of the closing date of any Sale of
the Georgia Business or Purchaser Acquisition or Special Acquisition, as the
case may be, an amount equal to the excess (if any) of (i) the Maximum Earnout
Amount over (ii) the aggregate Earnout Amount(s) (if any) previously paid to the
Seller (or previously offset against any payment obligations of Seller pursuant
to, and subject to the terms and conditions of, Section 9.4(d) of the Share
Purchase Agreement) prior to such date.

“Maximum Earnout Amount” shall mean One Hundred Fifty Million Dollars
($150,000,000).

“Organizational Documents” shall mean, with respect to any Person that is not a
natural person, such Person’s charter, certificate or articles of incorporation
or formation, bylaws, memorandum and articles of association, operating
agreement, limited liability company agreement, partnership agreement, limited
partnership agreement, limited liability partnership agreement, or other
constituent or organizational documents of such Person.

“Permit” shall mean any permit, license, franchise or authorization of any
Governmental Authority.

“Person” shall mean any individual or entity, including a partnership, a limited
partnership, a limited liability partnership, a company, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a Governmental Authority.

“Seller Representative” shall mean, collectively, Oak Hill Capital Partners III,
L.P., a Delaware limited partnership, and Oak Hill Capital Management Partners
III, L.P., a Delaware limited partnership, and their respective designees,
solely in their capacity as the representatives, agents, proxies and
attorneys-in-fact for the Seller for all purposes under this Agreement.

 

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“Subsidiary” shall mean, with respect to any Person, any corporation, company,
partnership, limited liability company, association or other business entity of
which (i) if a corporation or company, a majority of the total voting power of
capital stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by that Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, limited
liability company, association or other business entity gains or losses or shall
be or control the managing director or general partner of such partnership,
limited liability company, association or other business entity.

(b) Each capitalized term listed below is defined in the corresponding reference
in this Agreement:

 

Term

   Section

AAA

   7.10

Agreement

   Preamble

Arbitration Rules

   7.10

Companies

   Preamble

Earnout Statement

   2.1

Objections Statement

   2.2(a)

Purchaser

   Preamble

Purchaser Acquisition

   2.6

Sale of the Georgia Business

   2.6

Seller

   Preamble

Share Purchase Agreement

   Recitals

Special Acquisition

   2.6

UK Company

   Preamble

UK Purchaser

   Recitals

US Company

   Preamble

ARTICLE II

EARNOUT

Section 2.1 Earnout Statement; Access to Information. As promptly as
practicable, but in any event not later than sixty (60) days after each EBITDA
Measurement Date, the Purchaser will deliver to the Seller Representative a
statement, certified by the corporate controller of Purchaser (an “Earnout
Statement”), setting forth the Purchaser’s good faith calculation of the amount
of Georgia EBITDA for the applicable Earnout Measurement Period calculated in
accordance with the EBITDA Rules and a calculation of the resulting Earnout
Amount (if any) for such Earnout Measurement Period, together with reasonable
supporting documentation. After delivery of the Earnout Statement, the Seller
Representative and its representatives shall be permitted reasonable access
during normal business hours to

 

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review the Purchaser’s and the Georgia Business’s contracts and books and
records and any work papers (including any work papers of the Purchaser’s and
the Georgia Business’s accountants) related to the preparation of the Earnout
Statement. The Seller Representative and its representatives shall be entitled
to make reasonable inquiries of Purchaser and, subject to Purchaser’s prior
approval (which approval shall not be unreasonably withheld, conditioned or
delayed), its senior level or other highly knowledgeable employees, accountants
and other representatives regarding questions concerning or disagreements with
the Earnout Statement arising in the course of their review thereof, and the
Purchaser shall use its commercially reasonable efforts to cooperate, and to
cause its senior level or other highly knowledgeable employees, accountants and
other representatives to cooperate, with and promptly respond to such inquiries.
Notwithstanding the foregoing, Seller’s access and inquiry rights shall be
exercised in such manner as not to interfere unreasonably with the conduct of
the Georgia Business or any other business of Purchaser, and Purchaser may
withhold any document (or portions thereof) or information to the extent that
(a) it may not be disclosed pursuant to the terms of a non-disclosure agreement
with a third party, provided that Purchaser shall use reasonable efforts to
obtain a waiver of such restriction or otherwise seek to provide access to such
information in a manner that does not violate such restriction, (b) it may
constitute privileged attorney-client communications or attorney work product
and the transfer of which, or the provision of access to which, as reasonably
determined by Purchaser’s counsel, constitutes a waiver of any such privilege or
(c) the provision of access to such document (or portion thereof) or
information, as determined by Purchaser’s counsel, would reasonably be expected
to conflict with applicable Laws.

Section 2.2 Earnout Statement Dispute Resolution.

(a) If the Seller Representative has any objections to the Earnout Statement,
the Seller Representative shall deliver to the Purchaser a statement setting
forth in reasonable detail each item in dispute, the amount thereof in dispute
and the basis for its objections thereto (an “Objections Statement”). If (i) the
Seller Representative notifies the Purchaser in writing of its acceptance of the
Earnout Statement or (ii) an Objections Statement is not delivered to Purchaser
within sixty (60) days after delivery of the Earnout Statement, then the Earnout
Statement shall be final, binding and nonappealable and the Purchaser shall,
within five (5) Business Days thereafter, pay the Earnout Amount (if any) by
wire transfer of immediately available funds to one or more bank accounts
designated in writing by the Seller Representative. The Purchaser and the Seller
Representative shall negotiate in good faith to resolve any objections set forth
in the Objections Statement (and all such discussions related thereto shall,
unless otherwise agreed by the Purchaser and the Seller Representative, be
governed by Rule 408 of the Federal Rules of Evidence (and any applicable
similar state rule)), but if they do not reach a final resolution within thirty
(30) days after the delivery of the Objections Statement, either Purchaser or
Seller may elect to submit such dispute to the Arbitrator. The Purchaser shall
pay the portion of the Earnout Amount (if any) that is not in dispute by wire
transfer of immediately available funds to one or more bank accounts designated
in writing by the Seller Representative within five (5) Business Days after
delivery of the Objections Statement.

(b) If any dispute is submitted to the Arbitrator, each of the Purchaser and the
Seller Representative will furnish to the Arbitrator such work papers and other
documents and information relating to the disputed issues as the Arbitrator may
request and are

 

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reasonably available to such party or its accountants and shall otherwise
cooperate and comply with the Arbitration Rules (unless the Purchaser and the
Seller Representative agree in writing that other arbitration rules or
procedures shall apply) and each of the Purchaser and the Seller Representative
shall be entitled to present to the Arbitrator material relating to the
determination and to discuss, in the presence of the other, the determination
with the Arbitrator. The Arbitrator shall resolve only those matters that remain
in dispute after the thirty (30)-day resolution period. The Purchaser and the
Seller Representative shall instruct the Arbitrator to resolve all such
disagreements as soon as practicable but in no event later than seventy-five
(75) days after submission of the disputed issues to the Arbitrator. The
resolution of the dispute by the Arbitrator shall be final, binding and
nonappealable. The Earnout Statement shall be modified to the extent necessary
to reflect such determination.

(c) The fees and expenses of the Arbitrator shall be borne 50% by the Purchaser,
on the one hand, and 50% by the Seller Representative on behalf of the Seller,
on the other hand.

Section 2.3 Payment of Earnout Amounts. With respect to each Earnout Measurement
Period, the Purchaser shall pay the Earnout Amount (if any) by wire transfer of
immediately available funds to one or more bank accounts designated in writing
by the Seller Representative within five (5) Business Days following the date
that the Earnout Amount for such Earnout Measurement Period becomes final and
binding in accordance with Section 2.2 (Earnout Statement Dispute Resolution),
together with interest on any portion of the Earnout Amount that was not
reflected in Purchaser’s Earnout Statement but was agreed by the parties or
finally determined by the Arbitrator. Such interest shall accrue from the date
that is five (5) Business Days after delivery of the Objections Statement until
the date of payment, at a rate equal to the prime rate of Citibank, N.A. in
effect on the accrual commencement date.

Section 2.4 Operation and Management of the Georgia Business.

(a) Except as the Purchaser and the Seller Representative may otherwise agree in
writing or to the extent otherwise provided in this Agreement, the Purchaser
shall, and shall cause its Subsidiaries and their respective officers, managers
and employees to, use commercially reasonable efforts to (x) operate the Georgia
Business at all times during the Earnout Period in good faith and in an
economically rational manner consistent with reasonable business practices
(including with respect to capital expenditures), and (y) conduct substantially
all business and operations of Purchaser and its Subsidiaries primarily relating
to the manufacturing, sale and distribution of conventional and isothermal
forged disks that are within the capabilities of the Georgia Facility at and
through the Georgia Facility; provided that the foregoing shall not prohibit the
Purchaser and its Subsidiaries and the Companies and their Subsidiaries from
continuing to operate their current businesses, including all currently existing
product lines, as conducted on the date hereof. In no event shall the Purchaser,
and the Purchaser shall cause its Subsidiaries and their respective officers,
managers and employees not to, take, or fail to take, any actions with the
primary intention of reducing the amount of Georgia EBITDA during the Earnout
Period or otherwise circumventing the earnout contemplated by this Agreement.
Without limiting the foregoing, during the Earnout Period, except as the
Purchaser and the Seller Representative may otherwise agree in writing, the
Purchaser shall not, and the Purchaser shall cause its Subsidiaries and their
respective officers, managers and employees not to:

 

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(i) sell, assign, transfer, convey, lease or otherwise dispose of any material
assets, contracts, properties or business of the Georgia Business, unless
appropriate adjustments are made to the earnout contemplated by this Agreement;

(ii) sell, assign, transfer, convey, lease or otherwise dispose of any equity
interests of the Georgia Business Subsidiary, including by stock sale, merger,
consolidation, stock swap, business combination, sale of assets or similar
transaction, except to or with Purchaser or a Subsidiary of Purchaser, unless
appropriate adjustments are made to the earnout contemplated by this Agreement;

(iii) compete in any material respect with the Georgia Business as currently
conducted or as currently planned to be conducted, whether as owner, partner,
shareholder, or co-venturer, or otherwise, engage, participate or invest in any
Person that competes with the Georgia Business as currently conducted or as
currently planned to be conducted, in each case unless appropriate adjustments
are made to the earnout contemplated by this Agreement; provided, however, that
no adjustment to the earnout contemplated by this Agreement shall be required
(A) for any investment in publicly traded stock of a company representing less
than 5% of the capital stock of such company or (B) in respect of the continued
operation of the current businesses of the Companies and their Subsidiaries as
conducted on the date hereof;

(iv) provide bundled pricing or similar discounts or incentives to customers
that disadvantage the Georgia Business versus Purchaser’s other businesses;

(v) allocate to the Georgia Business any corporate-level or other overhead
expenses other than direct overhead expenses relating to the operation of the
Georgia Business; or

(vi) charge any management fees or other fees or expenses (including
sub-contracting fees or expenses) payable to the Purchaser or any of its
affiliates other than expenses for services provided at arms’ length pricing
(e.g., legal, procurement and IT) consistent in all material respects with the
pricing provided to Purchaser’s other businesses.

In the event that appropriate adjustments are required to be made to the earnout
pursuant to the foregoing provisions, the Purchaser and the Seller
Representative shall cooperate in good faith to agree on adjustments with the
objective of providing to the Seller Representative the same economic effect as
contemplated by this Agreement prior to such event.

(b) In addition, during the Earnout Period, the Purchaser shall, and shall cause
its Subsidiaries to:

(i) maintain separate books and records of the Georgia Business; and

(ii) maintain the Georgia Business’s principal place of business in the current
location of Savannah, Georgia.

 

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Section 2.5 Access and Information; Quarterly Meetings and On-Site Visits

(a) During the Earnout Period, the Purchaser shall provide to the Seller
Representative standard quarterly reports prepared in the ordinary course for
the Georgia Business consistent with the internal reports prepared in the
ordinary course the Purchaser produces for its other businesses, and shall
cooperate in responding to the Seller Representative’s reasonable inquiries
regarding such reports. The Purchaser shall use commercially reasonable efforts
to keep the Seller Representative informed on a reasonably current basis of all
material developments with respect to the Georgia Business.

(b) On an annual basis during the Earnout Period, one or more representatives of
the Seller Representative shall be entitled to meet in-person with senior
executives of Purchaser responsible for the management of the Georgia Business
and the general manager of the Georgia Facility to allow the Seller
Representative to assess the Georgia Business’s progress towards achievement of
the Maximum Earnout Amount and compliance by the Purchaser, its Subsidiaries and
the Georgia Business with the covenants set forth in this Agreement. In
connection each such annual meeting, the Seller Representative and its
representatives shall be permitted to make an on-site visit to the Georgia
Facility to observe the business and operations of the Georgia Facility;
provided, however, that Purchaser may require any such representatives to sign a
customary confidentiality agreement and shall not be required to afford such
access to any representatives who are involved in any competing business.

Section 2.6 Acceleration of Earnout Payment. If, during the Earnout Period,
there is (a) a Sale of the Georgia Business, (b) a Purchaser Acquisition or
(c) a Special Acquisition, then, not later than the closing date of such
transaction, the Purchaser shall pay the Liquidated Earnout Amount in cash by
wire transfer of immediately available funds to one or more bank accounts
designated by the Seller Representative, whereupon this Agreement (and all
rights and obligations of the parties hereto) shall terminate. As used in this
Section 2.6, (i) the term “Sale of the Georgia Business” means any transaction
or series of transactions pursuant to which any Person, other than the Purchaser
or a direct or indirect Subsidiary of the Purchaser, acquires (A) 50% or more of
the outstanding equity or voting securities of the Georgia Business Subsidiary
or of any of its Subsidiaries representing indirect ownership of more than 50%
of the consolidated assets of the Georgia Business Subsidiary and its
Subsidiaries (whether by merger, consolidation, reorganization, combination,
sale, transfer or otherwise) or (B) all or a majority of the Georgia Business’s
assets determined on a consolidated basis, (ii) the term “Purchaser Acquisition”
means (A) any acquisition or purchase, directly or indirectly, of 50% or more of
the consolidated assets of the Purchaser and its Subsidiaries, or 50% or more of
the outstanding equity or voting securities of the Purchaser or equity or voting
securities of any Subsidiary of Purchaser representing indirect ownership of
more than 50% of the consolidated assets of the Purchaser and its Subsidiaries,
(B) any tender offer or exchange offer that results in any Person or “group” (as
such term is defined in Section 13(d) of the Exchange Act)) beneficially owning
50% or more of the outstanding equity or voting securities of the Purchaser or
equity or voting securities of any Subsidiary of Purchaser representing indirect
ownership of more than 50% of the consolidated assets of the Purchaser and its
Subsidiaries, (C) a merger, consolidation, share exchange, business combination,
reorganization, recapitalization, liquidation, dissolution or other similar
transaction as a result of which (1) the shareholders of Purchaser prior to such
transaction hold less than 50% of the equity interests in the surviving entity
or (2) 50% or more of the consolidated assets of Purchaser and its Subsidiaries
would be owned by a Person that was not a

 

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Subsidiary of, or otherwise controlled by, Purchaser prior to such transaction
or (D) a change in the composition of the board of directors of Purchaser that
results in more than 50% of such directors consisting of persons whose
nomination was not approved by a majority of the existing (or any previously
approved) directors and (iii) the term “Special Acquisition” means any
transaction or series of transactions pursuant to which Purchaser, or any
Affiliate of Purchaser or any “group” (as such term is defined in Section 13(d)
of the Exchange Act) that includes Purchaser or any of its Affiliates, acquires
(A) 50% or more of the outstanding equity or voting securities of any Person to
be mutually agreed by the Purchaser and Seller, or of any of such Person’s
Subsidiaries representing indirect ownership of more than 50% of the
consolidated assets of such Person and its Subsidiaries (whether by merger,
consolidation, reorganization, combination, sale, transfer or otherwise) or
(B) all or a majority of such Person’s and its Subsidiaries’ assets determined
on a consolidated basis.

Section 2.7 Certain Purchaser Acknowledgements. The Purchaser hereby
acknowledges and agrees that any failure by the Seller Representative to deliver
an Objections Statement or otherwise object with respect to any Earnout
Statement (or item or calculation therein) for any Earnout Measurement Period
shall not impair or be construed as an acceptance of, or waiver of any rights
with respect to, any Earnout Statement (or any item or calculation therein)
delivered by the Purchaser hereunder with respect to any subsequent Earnout
Measurement Period, including with respect to any portion of the Georgia EBITDA
for any such subsequent Earnout Measurement Period which may be attributable to
any prior Earnout Measurement Period.

Section 2.8 Certain Seller and Seller Representative Acknowledgements.
Notwithstanding anything to the contrary in this Agreement, the Seller, the
Seller Representative and the Purchaser each hereby acknowledge and agree that
none of Purchaser’s covenants and agreements pursuant to this Article II shall
have any force or effect prior to the Closing.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

Section 3.1 Authorization of Agreement. The Seller has the requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by the
Seller have been duly authorized by all necessary corporate action on the part
of the Seller and no other corporate proceedings on the part of the Seller are
necessary to authorize this Agreement. This Agreement has been duly executed and
delivered by the Seller and, assuming the due authorization, execution and
delivery hereof by the Purchaser and the Seller Representative, constitutes the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, subject to the Enforceability Exceptions.

Section 3.2 No Conflict. The execution and delivery of this Agreement by the
Seller and the performance by the Seller of its obligations under this Agreement
do not and shall not (a) violate the Organizational Documents of the Seller,
(b) violate or result in a material breach of any Law or Permit applicable to
the Seller or any of its assets or properties, (c) violate or result in a
material breach of any of the terms and conditions of, cause the termination of
or give any other contracting party the right to terminate, or constitute (or
with notice or lapse of time, or both, constitute) a material default under any
material Contract to which the Seller is a party or (d) result in the creation
of any material Lien upon any of the assets or properties of the Seller pursuant
to the terms of any Contract to which the Seller is a party.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER REPRESENTATIVE

Section 4.1 Authorization of Agreement. The Seller Representative has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement by the Seller Representative have been duly authorized by all
necessary corporate action on the part of the Seller Representative and no other
corporate proceedings on the part of the Seller Representative are necessary to
authorize this Agreement. This Agreement has been duly executed and delivered by
the Seller Representative and, assuming the due authorization, execution and
delivery hereof by the Purchaser and the Seller, constitutes the legal, valid
and binding obligation of the Seller Representative, enforceable against the
Seller Representative in accordance with its terms, subject to the
Enforceability Exceptions.

Section 4.2 No Conflict. The execution and delivery of this Agreement by the
Seller Representative and the performance by the Seller Representative of its
obligations under this Agreement do not and shall not (a) violate the
Organizational Documents of the Seller Representative, (b) violate or result in
a material breach of any Law or Permit applicable to the Seller Representative
or any of its assets or properties, (c) violate or result in a material breach
of any of the terms and conditions of, cause the termination of or give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time, or both, constitute) a material default under any material
Contract to which the Seller Representative is a party or (d) result in the
creation of any material Lien upon any of the assets or properties of the Seller
Representative pursuant to the terms of any Contract to which the Seller
Representative is a party.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

Section 5.1 Authorization of Agreement. The Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by the Purchaser have been duly authorized by all necessary corporate action on
the part of the Purchaser and no other corporate proceedings on the part of the
Purchaser are necessary to authorize this Agreement. This Agreement has been
duly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery hereof by the Seller and the Seller
Representative, constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to the Enforceability Exceptions.

Section 5.2 No Conflict. The execution and delivery of this Agreement by the
Purchaser and the performance by the Purchaser of its obligations under this
Agreement do not and shall not (a) violate the Organizational Documents of the
Purchaser, (b) violate or result in a material breach of any Law or Permit
applicable to the Purchaser or any of its assets or properties, (c) violate or
result in a material breach of any of the terms and conditions of, cause

 

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the termination of or give any other contracting party the right to terminate,
or constitute (or with notice or lapse of time, or both, constitute) a material
default under any material Contract to which the Purchaser is a party or
(d) result in the creation of any material Lien upon any of the assets or
properties of the Purchaser pursuant to the terms of any Contract to which the
Purchaser is a party.

ARTICLE VI

TERMINATION, AMENDMENT AND WAIVER

Section 6.1 Termination. This Agreement shall automatically terminate upon the
earliest to occur of (a) a valid termination of the Share Purchase Agreement
prior to the Closing (as defined in the Share Purchase Agreement) in accordance
with Article XI of the Share Purchase Agreement; (b) at such time as the
Purchaser has paid the Seller Representative an aggregate amount of Earnout
Amounts (including any such amounts offset against payment obligations of Seller
pursuant to, and subject to the terms and conditions of, Section 9.4(d) of the
Share Purchase Agreement) equal to the Maximum Earnout Amount; and (c) following
the end of the Earnout Period, upon payment (if any) by the Purchaser of all
Earnout Amount(s) (if any) (including any such amounts offset against payment
obligations of Seller pursuant to, and subject to the terms and conditions of,
Section 9.4(d) of the Share Purchase Agreement) owed hereunder. Notwithstanding
the foregoing, at any time prior to the expiration of the Earnout Period,
Purchaser may elect to terminate all of its obligations hereunder by paying the
Seller Representative the Liquidated Earnout Amount.

Section 6.2 Fees and Expenses. Except as otherwise specifically provided in this
Agreement, all fees and expenses incurred in connection with this Agreement
shall be paid by the party incurring such expenses.

Section 6.3 Amendment. This Agreement may be amended by the parties hereto at
any time. This Agreement may not be amended except by an instrument in writing
signed by the Purchaser and the Seller Representative.

Section 6.4 Extension; Waiver. At any time, any party hereto entitled to the
benefits thereof, may, to the extent permitted by Law (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound
thereby. Such extension or waiver shall not be deemed to apply to any time for
performance, inaccuracy in any representation or warranty, or noncompliance with
any agreement or condition, as the case may be, other than that which is
specified in the extension or waiver. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights. For the avoidance of doubt, this Section 6.4
shall not be construed to give the Seller or the Seller Representative any right
to extend the Earnout Period or the Purchaser’s obligations hereunder without
the Purchaser’s prior written consent.

 

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ARTICLE VII

GENERAL PROVISIONS

Section 7.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given (a) upon
receipt, if delivered personally, (b) three days after being mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address) or (c) immediately when sent by
facsimile or email (so long as confirmation of transmission is electronically or
mechanically generated and kept on file by the sending party) to the facsimile
number or email address specified below (or at such other facsimile number or
email address for a party as shall be specified by like changes of facsimile
numbers or email addresses):

If to the Seller or to Seller Representative, to

Oak Hill Capital Partners III, L.P. and

Oak Hill Capital Management Partners III, L.P.

c/o Oak Hill Capital Management, LLC

65 East 55th Street, 32nd Floor

New York, New York 10022

Facsimile: (212) 527-8450

Email: jmonsky@oakhillcapital.com

Attention: John R. Monsky, Esq.

with copies (which shall not constitute notice) to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019-6064

Facsimile: (212) 757-3990

Email: rschumer@paulweiss.com

          blavin@paulweiss.com

Attention: Robert B. Schumer

                Brian C. Lavin

If to the Purchaser, to:

Alcoa Inc.

201 Isabella Street, 6th Floor

Pittsburgh, Pennsylvania 15212

Facsimile: (412) 553-4569

Email: max.laun@alcoa.com

Attention: General Counsel

 

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with copies (which shall not constitute notice) to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Facsimile: (212) 403-2000

Email: klcain@wlrk.com

Attention: Karessa L. Cain

Section 7.2 Headings; Table of Contents. The headings and table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

Section 7.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated by this Agreement are fulfilled to
the extent possible.

Section 7.4 Entire Agreement. This Agreement and the Share Purchase Agreement
constitute the entire agreement of the parties, and supersede all prior
agreements and undertakings, both written and oral, among the parties or between
any of them, with respect to the subject matter hereof.

Section 7.5 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of Law or otherwise by any of the
parties hereto without the prior written consent of the other parties, and any
such assignment without such prior written consent shall be null and void;
provided, that each of the Seller and the Seller Representative may assign any
or all of its rights to any Affiliate of the Seller Representative acting for
the benefit of the Parent Securityholders.

Section 7.6 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

Section 7.7 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party’s obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder.

 

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Section 7.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. Except as otherwise explicitly provided for
elsewhere herein, all rights and remedies existing under this Agreement are
cumulative to, and not exclusive to, and not exclusive of, any rights or
remedies otherwise available.

Section 7.9 Governing Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR
RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE
APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH
PARTY MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING ARISING HEREUNDER.

Section 7.10 Arbitration. Each of the parties hereto acknowledges, consents and
agrees that, unless otherwise mutually agreed in writing by the Purchaser and
the Seller Representative, all disputes and claims arising out of, relating to
or in connection with this Agreement shall be settled exclusively by arbitration
administered by the American Arbitration Association (the “AAA”) in accordance
with its Procedures for Large Complex Commercial Disputes (the “Arbitration
Rules”). Any such arbitration shall be conducted by a single arbitrator mutually
selected by the parties in good faith within ten (10) days following delivery of
written notice of a request or demand for arbitration by either party to the
other party or, if the parties are unable to agree in good faith within such ten
(10) day period, a single arbitrator selected by AAA in accordance with the
Arbitration Rules. The location of any such arbitration shall be in New York
City, New York. Any award or decision in any arbitration proceeding in
accordance with this Section 7.10 shall be final and binding and may be enforced
in any court of competent jurisdiction. The fees and expenses of the arbitrator
and the arbitration (other than attorneys’ fees) shall be borne 50% by the
Purchaser, on the one hand, and 50% by the Seller, on the other hand.

Section 7.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same instrument. This Agreement shall
become effective when the Purchaser and the Seller Representative shall have
executed this Agreement. This Agreement may be delivered by facsimile or .pdf
transmission.

 

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Section 7.12 Interpretation. The interpretation of this Agreement shall be
governed by the following rules of construction: (a) words in the singular shall
be held to include the plural and vice versa, and words of one gender shall be
held to include the other gender as the context requires; (b) references to the
terms Article, Section, clause, subclause, paragraph and Exhibit are references
to the Articles, Sections, clauses, subclause, paragraphs and Exhibits to this
Agreement unless otherwise specified; (c) the terms “hereof,” “herein,”
“hereby,” “hereto,” and derivative or similar words refer to this entire
Agreement, including the Schedules and Exhibits hereto; (d) references to “$”
shall mean U.S. dollars; (e) the word “including” and words of similar import
when used in this Agreement shall mean “including without limitation,” unless
otherwise specified; (f) the word “or” shall not be exclusive; (g) references to
“written” or “in writing” include in electronic form; (h) provisions shall
apply, when appropriate, to successive events and transactions; (i) the parties
have each participated in the negotiation and drafting of this Agreement and if
an ambiguity or question of interpretation should arise, this Agreement shall be
construed as if drafted jointly by the parties thereto and no presumption or
burden of proof shall arise favoring or burdening either party by virtue of the
authorship of any of the provisions in this Agreement; (j) a reference to any
Person includes such Person’s successors and permitted assigns; (k) any
reference to “days” means calendar days unless Business Days are expressly
specified; (l) when calculating the period of time before which, within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date that is the reference date in calculating such period shall be excluded
and if the last day of such period is not a Business Day, the period shall end
on the next succeeding Business Day; and (m) any reference to any Law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.

[Signature page follows]

 

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IN WITNESS WHEREOF, the Seller, the Seller Representative and the Purchaser have
caused this Agreement to be signed, all as of the date first written above.

 

THE SELLER

 

FR ACQUISITION FINANCE SUBCO

(LUXEMBOURG), S.À.R.L.

By:  

/s/ Douglas Kaden

  Name: Douglas Kaden   Title:   A Manager

THE SELLER REPRESENTATIVE

 

OAK HILL CAPITAL PARTNERS III, L.P.

By:  

OHCP GenPar III, L.P.,

        its General Partner

By:  

OHCP MGP Partners III, L.P.,

        its General Partner

By:  

OHCP MGP III, Ltd.,

        its General Partner

By:  

/s/ Denis Nayden

  Name: Denis Nayden   Title:   Vice President OAK HILL CAPITAL MANAGEMENT
PARTNERS III, L.P. By:  

OHCP GenPar III, L.P.,

        its General Partner

By:  

OHCP MGP Partners III, L.P.,

        its General Partner

By:  

OHCP MGP III, Ltd.,

        its General Partner

By:  

/s/ Denis Nayden

  Name:  Denis Nayden   Title:  Vice President

THE PURCHASER

 

ALCOA INC.

By:  

/s/ Klaus Kleinfield

  Name: Klaus Kleinfield   Title:   Chairman and Chief Executive Officer

[Signature Page to Earnout Agreement]

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EXHIBIT A

EBITDA Rules

For any Earnout Measurement Period or other applicable period, Georgia EBITDA
shall be calculated as the net income (loss) before interest, income taxes,
depreciation and amortization of the Georgia Business, calculated in accordance
with GAAP consistently applied in each Earnout Measurement Period or other
applicable period, in each case, except as otherwise expressly set forth herein.

The following items to the extent deducted in determining net income (loss) for
any applicable Earnout Measurement Period or other applicable period will be
added-back to earnings (loss) to determine the amount of Georgia EBITDA for such
Earnout Measurement Period or other applicable period:

 

1. interest expenses;

 

2. income tax expenses;

 

3. depreciation and amortization expenses;

 

4. any corporate-level or other overhead expenses other than direct overhead
expenses relating to the operation of the Georgia Business;

 

5. any management fees or other fees or expenses (including sub-contracting fees
and expenses) payable to the Purchaser or any of its affiliates other than
expenses for services provided at arms’ length pricing (e.g., legal, procurement
and IT) consistent in all material respects with the pricing provided to
Purchaser’s other businesses;

 

6. any expenses to the extent relating to new product development, new product
validation or new part introduction, including expenses of materials, labor,
scrap, testing and tooling, incurred after December 31, 2018 to the extent such
expenses would not reasonably be expected to be realized as a net benefit or
increase to Georgia EBITDA during the Earnout Period;

 

7. any reduction of net income (loss) attributable to bundled pricing or similar
discounts or incentives to customers that disadvantage the Georgia Business
versus Purchaser’s other businesses;

 

8. any expenses relating to equity or equity-linked employee or management
incentive arrangements, or bonus compensation expenses, that are inconsistent in
any material respect with equity incentive arrangements or bonus compensation
programs provided to Purchaser’s other businesses, but in either case, not in
excess of 2% of revenue of the Georgia Business, in the aggregate; and

 

9. any non-recurring or extraordinary expenses.