NOTE, THIS AGREEMENT AND ANY OTHER DOCUMENT OR
INSTRUMENT DELIVERED IN CONNECTION HEREWITH OR THEREWITH.
2.
CAPACITY COMMITMENTS, TERMINATION OF
STANDSTILL AGREEMENT, FEE AND OPTION NOTE.
(A)
CAPACITY COMMITMENTS.
HAYNES AGREES:
(I) TO RESERVE FOR THE BENEFIT OF AND DEDICATE TO TIMET OR ITS DESIGNEE(S)
ADEQUATE CAPACITY AT THE MILL AND THE OTHER OPERATING ASSETS NECESSARY TO
PROVIDE THE TITANIUM CONVERSION SERVICES IN ACCORDANCE WITH AND SUBJECT TO ALL
TERMS OF THE CONVERSION AGREEMENT, INCLUDING THE MAXIMUM MONTHLY VOLUME AND THE
MAXIMUM ANNUAL VOLUME (AS EACH SUCH TERM IS DEFINED IN THE CONVERSION
AGREEMENT); AND (II) NOT TO ENGAGE IN ANY ACTIVITY OR TRANSACTION THAT IS
PROHIBITED BY SECTION 11.1 OF THE CONVERSION AGREEMENT (AS SUCH TERM MAY BE
AMENDED BY THE NON-COMPETE AMENDMENT (AS DEFINED IN THE CONVERSION AGREEMENT)).
(B)
TERMINATION OF STANDSTILL AGREEMENT.
EFFECTIVE AS OF THE DATE HEREOF, THE PROVISIONS OF THE CARRYOVER PARAGRAPH ON
PAGES 3 AND 4 OF THE CONFIDENTIALITY AGREEMENT, DATED NOVEMBER 21, 2005, BETWEEN
TIMET AND HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL, INC. ARE HEREBY TERMINATED AND
OF NO FURTHER FORCE OR EFFECT.
6
(C)
FEE.
AS CONSIDERATION FOR (I) THE CAPACITY
RESERVATIONS AND COMMITMENTS DESCRIBED IN SECTION 2(A) ABOVE AND IN THE
CONVERSION AGREEMENT, (II) THE TERMINATION OF THE STANDSTILL PROVISIONS AS
DESCRIBED IN SECTION 2(B) ABOVE AND (III) THE OPTION TO ORDER ADDITIONAL
CONVERSION SERVICES GRANTED TO TIMET PURSUANT TO SECTION 2.1(B) OF THE
CONVERSION AGREEMENT, CONCURRENTLY HEREWITH, TIMET AGREES TO PAY TO HAYNES AN
ADVANCE FEE OF $50,000,000 (THE "FEE") IN IMMEDIATELY PAYABLE U.S. FUNDS IN
ACCORDANCE WITH THE WIRING INSTRUCTIONS PROVIDED BY HAYNES.
THE FEE SHALL BE
DEEMED EARNED BY HAYNES DURING THE TERM OF THE CONVERSION AGREEMENT IN EQUAL
AMOUNTS ON THE FIRST TWENTY (20) ANNIVERSARIES OF THE DATE HEREOF.
UPON BEING
DEEMED EARNED AS SET FORTH IN THE PRECEDING SENTENCE, THE EARNED PORTION OF THE
FEE SHALL BE NONREFUNDABLE TO TIMET.
IN THE EVENT THAT A HAYNES SUCCESSOR (AS
DEFINED IN THE CONVERSION AGREEMENT) EXERCISES THE OPTION WITH RESPECT TO THE
NON-COMPETE AMENDMENT (AS DEFINED IN THE CONVERSION AGREEMENT), THE UNEARNED
PORTION OF THE FEE SHALL BE REDUCED BY THE NON-COMPETE AMENDMENT FEE (AS DEFINED
IN THE CONVERSION AGREEMENT), AND THE AMORTIZATION OF THE REMAINING UNEARNED
PORTION OF THE FEE SHALL BE ADJUSTED BASED UPON THE REMAINING ANNIVERSARIES OF
THIS AGREEMENT.
NOTWITHSTANDING THE FOREGOING, THE FEE SHALL NOT BE DEEMED
EARNED BY HAYNES (I) FROM AND AFTER THE TIME THAT TIMET HAS EXERCISED ANY OF ITS
RIGHTS UNDER SECTION 8(B) OR (II) DURING (BUT NOT BEFORE OR AFTER) AN ACCESS
PERIOD IF FOR ANY REASON TIMET DOES NOT HAVE IN ALL MATERIAL RESPECTS ALL OF ITS
RIGHTS SET FORTH IN SECTION 4.
HAYNES SHALL BE REQUIRED TO REPAY THE UNEARNED
PORTION OF THE FEE ONLY IN ACCORDANCE WITH THE REQUIREMENTS OF THE TRANSACTION
DOCUMENTS.
(D)
OPTION NOTE.
UPON THE EXERCISE OF THE
OPTION UNDER THE CONVERSION AGREEMENT, UNDER THE TERMS AND CONDITIONS SET FORTH
IN THE CONVERSION AGREEMENT, HAYNES WILL EXECUTE THE OPTION NOTE IN THE