EXHIBIT 10.1
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "First Amendment")
reference _______, dated and effective as of this [ * ] day of [ * ] is by and
between ROLLS-ROYCE plc, whose registered office is at 65 Buckingham Gate,
London, SW1E 6AT, England, incorporated under the laws of England (Reg. No.
1003142) ("R-R"), and TITANIUM METALS CORPORATION, whose corporate headquarters
are located at 1999 Broadway, Suite 4300, Denver, CO 80202, USA, a Delaware
corporation ("TIMET"). TIMET and R-R are together referred to as the "Parties."
RECITALS
A. R-R and TIMET have executed an Agreement for Purchase and Sale of Titanium
dated as of [ * ] (the "Master Agreement"). Certain capitalized terms used
in this First Amendment but not defined herein shall have the meanings
ascribed to them in the Master Agreement or in the Exhibits and Schedules
thereto, all of which together form and constitute the Master Agreement.
B. The Master Agreement provides, among other things, that R-R will purchase
from TIMET and TIMET will sell to R-R a specified volume of certain TIMET
Titanium Products identified in the Master Agreement.
C. R-R and TIMET wish to amend the Master Agreement, to include certain
additional TIMET Titanium Products within the scope of the Master
Agreement, to provide for a new [ * ] by R-R for the newly added, together
with certain of the originally identified, TIMET Titanium Products
(collectively the [ * ]), and to set forth their mutual commitment in
regard to technical and production improvement targets for [ * ].
D. Upon execution by both Parties of this First Amendment, the Master
Agreement shall be amended by this First Amendment, and, thereafter, the
term "Master Agreement" shall mean that agreement as so amended.
NOW, THEREFORE, the Parties agree that the Master Agreement is amended follows:
AMENDMENT
1. DEFINITIONS
Section 1 of the Master Agreement shall be amended to add, in the appropriate
alphabetical order, the following new definitions:
[ * ] has the meaning given such term in Section 4.2(c) of the Master
Agreement.
[ * ].
[ * ] has the meaning given such term in Section 4.2(b) of the Master
Agreement.
[ * ] has the meaning given such term in Section 4.2(d) of the Master
Agreement.
[ * ] has the meaning given such term in Section 4.2 of the Master
Agreement.
[ * ] Pricing Schedule" has the meaning given such term in Section 7.1 of
the First Amendment.
"Non-[ * ] means all TIMET Titanium Products other than [ * ].
[ * ] has the meaning given such term in Section 6.7(h) of the Master
Agreement.
"R&D" has the meaning given such term in Section 6.7(f) of the Master
Agreement.
"Shared [ * ] Improvement [ * ] has the meaning given such term in Section
6.7of the Master Agreement.
[ * ] has the meaning given such term in Section 6.7(f) of the Master
Agreement.
2. [ * ]
The original Section 4.2 of the Master Agreement shall be renumbered as Section
4.3, and a new Section 4.2 shall be added to the Master Agreement as follows:
4.2 For certain [ * ] purchases of [ * ] by R-R from TIMET, TIMET will [ *
]the [ * ] for such purchases by an [ * ], determined in accordance
with the following provisions.
(a) In the event R-R [ * ] from TIMET [ * ] of [ * ] and [ * ], TIMET
will [ * ] the applicable [ * ] for such product(s) identified in
the [ * ] by an amount (the [ * ]) determined by the formula
described in Sections 4.2(b) through 4.2(d).
(b) The [ * ] used to determine the [ * ] is the difference between:
(i) the [ * ] of [ * ] plus [ * ] products purchased by R-R from
TIMET in a [ * ] (rounded to the nearest [ * ]), and (ii) [ * ].
Provided, however, that the maximum [ * ] in any [ * ] shall be [
* ], subject to the limitations and qualifications contained in
Section 2.12 of the Common Terms.
(c) The [ * ] used to calculate the magnitude of the [ * ] applicable
to R-R's [ * ] purchase of such [ * ] is [ * ] determined as
follows. The maximum [ * ] in any [ * ] shall be limited to [ * ]
per [ * ]. Because the maximum [ * ] per [ * ] is limited to [ *
], the [ * ] value for each [ * ] of [ * ] is [ * ].
(d) The [ * ] determined in accordance with Section 4.2(c) for each [
* ] is then multiplied by the [ * ]. The resulting product is the
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percentage (the [ * ]) by which the price paid by R-R to TIMET in
such [ * ] for all relevant products comprising the [ * ] will be
[ * ]. The amount of this [ * ] (the [ * ]) will be [ * ].
(e) In the event the [ * ] of [ * ] and [ * ] together purchased by
R-R from TIMET shall exceed [ * ] in any [ * ], the Parties agree
to negotiate in good faith to determine the appropriate
adjustments to be made to the [ * ] formula. The Parties
acknowledge that an [ * ] TIMET production of [ * ] and [ * ] in
excess of [ * ] may require an [ * ] of [ * ] by TIMET, and that
TIMET will be entitled to [ * ] the [ * ] of such [ * ] that
would have been [ * ] to be[ * ] to R-R under this provision had
the [ * ] in that [ * ] not exceeded [ * ].
(f) TIMET will use its best efforts to account for and reconcile the
[ * ] purchased during each [ * ] (either directly by R-R or
indirectly by other Purchasers under the Master Agreement) by [ *
] of the [ * ] following. TIMET will, as soon as practicable but
no later than [ * ] of such following [ * ] to R-R a [ * ] equal
to the [ * ] calculated in accordance with this Section 4.2.
3. R-R [ * ] RIGHTS
3.1 Subsection (a) of Section 5.3 of the Master Agreement shall be deleted
in its entirety, and replaced with the following new Subsection (a):
(a) (i) in its entirety as to all TIMET Titanium Products, or (ii)
only as to all TIMET Titanium Products other than [ * ], or (iii)
only as to all TIMET Titanium Products other [ * ], by giving
written notice to TIMET given not more than [ * ] following its
receipt of the results of the audit described in Section 5.2, in
the event such audit shall disclose that the [ * ] was [ * ] than
[ * ] by [ * ] than [ * ] for the period in question; in which
case this Master Agreement shall [ * ] as provided in parts (i),
(ii) or (iii) above) as of [ * ] of the calendar year following
the year in which such notice is given (e.g., [ * ] for a notice
of [ * ] given [ * ] with respect to an audit covering the years
[ * ], the results of which were provided to R-R on [ * ]; and
3.2 The following new Subsection (i) shall be added to Section 5.2 of the
Common Terms following Subsection 5.2(h) thereof:
(i) Notwithstanding anything to the contrary contained in Sections
5.2(b), 5.2(c) or 5.2(d) of these Common Terms, R-R may exercise
its [ * ] rights described in each such provision as follows: (i)
with respect to [ * ] (where the TIMET [ * ] is with respect to [
* ]); and (ii) with respect to [ * ] (where the TIMET [ * ] is
with respect to [ * ]).
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4. CUSTOMER VALUE INITIATIVES
Section 6 of the Master Agreement shall be amended by adding thereto a new
Section 6.7, as follows:
6.7 TECHNICAL AND PRODUCTION IMPROVEMENT [ * ] SPECIFICALLY APPLICABLE TO
[ * ]
The Parties shall work together through the Customer Value Task Force
in support of the following joint technical initiatives aimed at
deriving mutual technical and commercial benefits from "Shared [ * ]
Improvement [ * ]" throughout the supply chain. These Shared [ * ]
Improvement [ * ] are more fully described in the following
Subsections (a) through (i).
The Parties both acknowledge and agree that the [ * ] identified in
this Section 6.7 represent [ * ]and not [ * ], that working toward
each [ * ] will require the mutual commitment of both Parties, and
that all efforts of both Parties in furtherance of these [ * ] shall
be subject to [ * ] standards.
The Parties further agree that the provisions contained in this
Section 6.7 are specifically intended to apply to [ * ], and that if
there are any inconsistencies between Sections 6.1 through 6.6 on the
one hand and this Section 6.7 on the other hand, this Section 6.7
shall be interpreted to refer exclusively to [ * ], and Sections 6.1
through 6.6 shall be deemed to refer to all other TIMET Titanium
Products except [ * ].
(a) Targets for Process Capability Improvements. TIMET shall
establish a baseline numerate description of its process
capability with respect to each significant operation in the
method of [ * ], including the following operations: [ * ]
control, [ * ] operations, [ * ] operations, [ * ] operations, [
* ] properties, [ * ] operations, [ * ] control and [ * ]
conditions.
For operations where TIMET identifies process capabilities of [ *
], TIMET and R-R shall cooperate to undertake immediate
improvement plans with mutually agreed, targeted time-scales.
For operations where TIMET identifies process capabilities of [ *
], TIMET and R-R shall cooperate to undertake proposals for [ * ]
capability improvement in [ * ], added value to the process.
The Parties shall work together to improve capabilities, in such
of the above referenced areas in which they reach mutual
agreement and cooperation as to improvements, by a [ * ] in the [
* ], after which time [ * ] improvement [ * ] shall be
established as an ongoing function of the Customer Value Task
Force.
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(b) [ * ] for [ * ] Improvements. Specifically designated
representatives of TIMET and of R-R, including representatives
from [ * ] and any others to be designated by R-R, will work
together in an effort to achieve targeted improvements in the [ *
] levels of [ * ]. The Parties will, through their meetings and
discussions, mutually agree upon selected improvements that will
ultimately be pursued. The Parties presently anticipate that the
initial improvements will be targeted at the [ * ] in the [ * ]
in the [ * ].
The Parties will initially [ * ] an improvement [ * ]. TIMET will
contribute to the [ * ] improvements by a variety of possible
means that may include, among other things, [ * ] refinement,
modification to the [ * ] processing [ * ], and refinement to [ *
] cycles.
Consistent with other confidentiality commitments that each of
the Parties may have, the Parties agree to cooperate to the
fullest possible extent in the exchange of information, knowledge
and expertise (including both internally managed technology
programmes and external research and development activities) in
working toward these [ * ] improvements with respect to the
following goals: (i) minimizing the [ * ] throughout the total
manufacturing sequence from [ * ] to [ * ], (ii) achieving [ * ]
improvements, and (iii) developing an enhanced understanding of [
* ] sequences.
(c) [ * ] for [ * ]. TIMET will provide R-R with its best estimate of
a datum point for the [ * ] scales for both [ * ] introduction
and for [ * ] (specifically, from the [ * ] in TIMET's processing
through delivery of [ * ] to R-R's nominated machinist) [ * ].
The Parties will work toward an [ * ] in each of these [ * ] over
a [ * ] period, representing a [ * ] net, aggregate reduction of
[ * ] in these [ * ] over such [ * ] period.
The Parties understand and acknowledge that [ * ] in [ * ] for [
* ] necessarily involve commercial entities that are not party to
this Master Agreement. Therefore, the Parties each agree to work
with such other entities as are identified from time to time, in
an effort to better facilitate achieving the [ * ], but
acknowledge that such [ * ] cannot be [ * ].
TIMET further agrees to work toward providing the most rapid
possible [ * ] given the existing circumstances to specific
project activities and to short-notice changes required or
requested by R-R, with a [ * ] of [ * ] an [ * ] level of TIMET [
* ] to R-R's [ * ]. The Parties agree to work together at all
times to ensure that TIMET's [ * ] are harmonised with R-R's [ *
] and [ * ].
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(d) [ * ] for [ * ] Improvements. In the interests of [ * ] reduction
through increased [ * ] utilisation, the Parties agree to
cooperate in establishing a programme of work through which they
will jointly develop one or more means directed at achieving a [
* ] of [ * ] improvement from the [ * ] stages of [ * ]. To this
end, the Parties shall work together supporting and linking
appropriate resources to achieve the following [ * ]: (i) to
develop the consistent [ * ] of [ * ] that should optimally be
specified for the safe manufacture of each [ * ], (ii) to develop
proposals for the [ * ] with respect to both existing [ * ] and
existing [ * ], and (iii) to develop fundamental and radical
proposals for the achievement of [ * ] in [ * ].
The Parties agree to cooperate to work toward timely and
cost-effective initiation of trial work that may be required
prior to undertaking the steps necessary for testing and
validation of proposed new initiatives. The Parties shall
undertake such work in light of their due consideration for the [
* ] of [ * ] for safe [ * ] in the specified [ * ] environment.
Where R-R and TIMET are jointly successful in [ * ] the [ * ] of
[ * ], the amount of the [ * ] will be [ * ] by R-R and TIMET.
(e) [ * ] Relating to Rolls-Royce Quality Renaissance. TIMET agrees
to work together with R-R in implementing Rolls-Royce Quality
Renaissance [ * ], with a [ * ] of achieving reductions in
customer related incidents. In furtherance of these targets, the
Parties shall each cooperate to:
(i) Reduce by a [ * ] of one-half the rate of [ * ] during every
[ * ] period.
(ii) Work together to establish a mutual understanding of the
appropriate methodology for defining [ * ] and an acceptable
mechanism for evaluating and measuring [ * ] in the relevant
contexts. Thereafter, the Parties agree to work together and
each to use all commercially reasonable efforts toward the
goal of reducing the [ * ], in both [ * ] and in [ * ], by a
[ * ] factor of [ * ] during every [ * ] period.
(iii)Reduce by a [ * ] of [ * ] the [ * ] of [ * ] and [ * ]
during every [ * ] period.
(f) [ * ] for Research and Development Activities. TIMET and R-R will
each continue to [ * ] both internal and external research and
development ("R&D") work at appropriate "Centres of Excellence"
to include the appropriate [ * ], in order to work toward
improving the Parties' understanding of the effects of [ * ] and
[ * ] in [ * ] and [ * ], in the interests of [ * ]and [ * ].
Consistent with each Party's other confidentiality limitations
and its necessity of protecting its proprietary technologies, and
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providing that TIMET is not precluded from using the results of
its R&D activities in manufacturing conducted outside the scope
of any agreements with R-R, the Parties each agree, to the
greatest extent possible, to make available to the other Party
the results of such research and development work where such
results could enhance the [ * ] and [ * ].
The Parties commit to undertake regular reviews of each of their
R&D activities and to dedicate some portion of each of their
total R&D activities in support of mutually agreed upon and
mutually defined areas [ * ]. In addition to regular R&D activity
reviews, the Parties commit to at least an [ * ] review of
progress against the agreed upon R&D [ * ].
(g) Other [ * ] Initiatives. TIMET will use all commercially
reasonable efforts to pursue such additional initiatives
pertaining to [ * ] as have previously been or may in the future
be discussed, and as are mutually agreed to by the Parties.
(h) [ * ] Initiatives. The Parties will work together to establish [
* ] of [ * ] at the [ * ] of [ * ] that [ * ] that will, from
time to time provide an appropriate [ * ] of [ * ] to R-R in the
event of any [ * ] of the [ * ].
(i) Shared Understandings. The Parties will work together toward a [
* ] of achieving both shorter and longer term generic
improvements to [ * ], and to this end will each continue to
participate in Customer Value Initiatives and other regular
forums to assist in achieving these [ * ]. The Parties commit to
expanding the scope of the Customer Value Task Force as may be
reasonably necessary to accomplish such exchanges. The Parties
understand and acknowledge that all of the [ * ] and [ * ]
identified in this Section 6.7 do not represent [ * ] for [ * ]
of any specified [ * ], but, rather, represent their mutual [ *
]. The Parties further acknowledge that in the course of
developing and implementing any new technical or production
improvement [ * ], temporary [ * ] or [ * ] may inevitably result
and, therefore, it may be necessary, from time to time, for the
Parties to cooperate in agreeing upon such [ * ] as a part of the
ultimate achievement of the [ * ].
5. SEPARATE [ * ] COMMITMENT BY [ * ] GROUP
The version of Section 4.1 of the Common Terms that is applicable to R-R and
contained in Section 8.1 of the Master Agreement shall be deleted and replaced
in its entirety by the following new Section 4.1:
4.1 Subject to the other terms and conditions contained in these Common
Terms (including, but not limited to, any limitations on TIMET's
obligation to sell TIMET Titanium Products to R-R and to Section 4.5
of these Common Terms), R-R agrees that it will [ * ] from TIMET in
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each [ * ] during the term of the Purchase Agreement a [ * ] equal to
the [ * ] of the [ * ] identified in subsections (a) and (b) below:
(a) a [ * ] of TIMET Titanium Products comprised of non-[ * ] Parts
not less that the greater of the [ * ] identified in subpart (i)
or the [ * ] identified in subpart (ii) below:
(i) the difference between (A) [ * ] and (B) the [ * ] of non-[
* ] Parts for such [ * ]; or
(ii) the difference between (A) [ * ] of R-R's [ * ] for non- [ *
] Parts for such calendar year and (B) the [ * ] of non-[ *
] Parts for such [ * ];
and
(b) [ * ] of R-R's [ * ] for TIMET Titanium Products comprised of [ *
].
Subject to the other terms and conditions of the Purchase Agreement,
TIMET agrees that it will sell to Purchaser such volume of TIMET
Titanium Products actually ordered by Purchaser. For purposes of this
Section 4.1:
(x) A TIMET Titanium Product shall be deemed to have been
purchased in the [ * ] in which it is [ * ] for [ * ] as
agreed between Purchaser and TIMET (regardless of whether
actually [ * ] by TIMET during such [ * ]); provided,
however, that if payment for such TIMET Titanium Product is
not subsequently made by Purchaser, such TIMET Titanium
Product will be deducted from the [ * ] for the [ * ] in [ *
];
(y) TIMET Titanium Products with respect to which a Purchase
Order is terminated in accordance with Section 10.1 of the
Terms & Conditions shall be [ * ] only in an amount equal to
the relevant volume (in kilograms) times the [ * ] of [ * ]
as an Equitable Termination Settlement in accordance with
Sections 10.3 and 11.2 of the Terms & Conditions; and
(z) Any substitute Titanium Product purchased by Purchaser
pursuant to Sections 5.1(b) or 9.3 of the Terms & Conditions
shall be [ * ] for purposes of this Section 4.1 as if it
were a [ * ] by [ * ].
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6. [ * ] LIMITATIONS
6.1 Section 2.11 through and including Section 2.32 of the Common Terms shall
be renumbered as Sections 2.12 through 2.33, respectively, and a new
Section 2.11 shall be added to the Common Terms, as follows:
2.11 [ * ] means a limit of plus [ * ] or minus [ * ] in the [ * ]
variations between consecutive accounting periods of [ * ] each for
each TIMET Titanium Product (determined on the basis of [ * ])
contained in TIMET's [ * ] schedule. In no case shall any such
variation in [ * ] be deemed to reduce, or be construed to imply
TIMET's agreement to reduce, the [ * ] set forth in Schedule 2 to the
Common Terms.
6.2 Section 2.12 of the Common Terms shall be deleted in its entirety and
replaced with the following new Section 2.12:
2.12 [ * ] means [ * ]; providing, however, that a maximum volume
limitation of [ * ] per [ * ] accounting period shall apply to the
combined [ * ] of [ * ] and [ * ] for that [ * ] accounting period
assuming TIMET is able to [ * ] the [ * ].
7. ADDITION OF [ * ] AND PRICING TO SCHEDULE 1 TO COMMON TERMS (PRICING
SCHEDULE) AND DIVISION OF TIMET TITANIUM PRODUCTS INTO [ * ]
7.1 Schedule 1 to the Common Terms shall be amended by adding thereto the
following products, which are hereafter included within the scope of
the term "TIMET Titanium Products" as used in the Master Agreement,
with such products having the [ * ], as referred to in Section 4.1 of
the Master Agreement, set forth below ("[ * ] Pricing Schedule"):
[ * ]Pricing Schedule
[ * ]
7.2 The TIMET Titanium Products identified in Schedule 1 to Exhibit A of
the Master Agreement, as amended by the addition of the products
listed in the [ * ] contained in Section 7.1 herein, shall be divided
into [ * ], as follows:
(a) the [ * ] consisting of [ * ] and [ * ]; and
(b) [ * ] (the [ * ]).
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8. RENUMBERING OF CROSS REFERENCES TO AMENDED SECTIONS. To the extent any
sections in the Master Agreement are renumbered upon the effectiveness of
this First Amendment, all cross-references to such renumbered sections
contained in any part of the Master Agreement shall be deemed to be
revised, as appropriate, to refer to the renumbered section.
9. CONTINUING EFFECTIVENESS OF MASTER AGREEMENT. Except as expressly amended
by this First Amendment, the Master Agreement shall remain in full force
and effect.
10. COUNTERPARTS. This First Amendment may be executed in multiple, identical
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, this First Amendment to Purchase and Sale Agreement is
executed by an authorized representative of each Party to be effective as of the
date first hereinabove set forth.
ROLLS-ROYCE plc ROLLS-ROYCE plc
By: /s/ Chris Hole By: /s/ Julia King
Name: Chris Hole Name: Julia King
Title: Procurement Director Title: Managing Director
Notices to:
Rolls-Royce plc
P.O. Box 31
Derby DE24 8BJ, England
Attn: [ * ]
General Manager - Materials Supply Chain
Facsimile No.: [ * ]
TITANIUM METALS CORPORATION
By: /s/ J. Landis Martin
Name: J. Landis Martin
Title: Chairman & Chief Executive Officer
Notices to: With a copy to:
- ---------- --------------
TIMET UK Limited Titanium Metals Corporation
P.O. Box 704 1999 Broadway, Suite 4300
Witton Denver, Colorado 80202
Birmingham B6 7UR USA
England Attn: Vice President, General Counsel
Attn: Director--Sales and Marketing & Secretary
Facsimile No.: [ * ] Facsimile No.: [ * ]
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