SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the quarter ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-28538
Titanium Metals Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-5630895
(State or other (IRS Employer
jurisdiction of Identification
incorporation or No.)
organization)
<PAGE>
1999 Broadway, Suite 4300, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-5600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Number of shares of common stock outstanding on July 31, 1998: 31,459,405
<PAGE>
FORWARD - LOOKING INFORMATION
The statements contained in this Report on Form 10-Q ("Quarterly Report")
which are not historical facts, including, but not limited to, statements found
in the Notes to Consolidated Financial Statements and under the captions
"Results of Operations" and "Liquidity and Capital Resources" (both contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations), are forward-looking statements or discussions of trends which by
their nature involve substantial risks and uncertainties that could
significantly impact expected results. Actual results could differ materially
from those described in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the risks and uncertainties
discussed in this Quarterly Report, including those portions referenced above
and those described from time to time in the Company's other filings with the
Securities and Exchange Commission, such as the cyclicality of the Company's
business and its dependence on the aerospace industry, the sensitivity of the
Company's business to global industry capacity, global economic conditions,
changes in product pricing, the possibility of labor disruptions, control by
certain stockholders and possible conflicts of interest, potential difficulties
in integrating acquisitions, uncertainties associated with new product
development, the supply of raw materials and services and the possibility of
disruptions of normal business activities from Year 2000 issues.
<PAGE>
TITANIUM METALS CORPORATION
INDEX
Page
number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1997 and
June 30, 1998 2-3
Consolidated Statements of Income - Three months
and six months ended June 30, 1997 and 1998 4
Consolidated Statements of Comprehensive Income - Three
months and six months ended June 30, 1997 and 1998 5
Consolidated Statements of Cash Flows - Six months
ended June 30, 1997 and 1998 6-7
Consolidated Statement of Stockholders' Equity - Six
months ended June 30, 1998 8
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13-15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 15
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 6. Exhibits and Reports on Form 8-K. 16
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
December 31, JUNE 30,
ASSETS 1997 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,957 $ 80,326
Receivables, net 155,678 149,507
Receivable from related parties 15,844 8,823
Inventories 153,818 195,553
Prepaid expenses and other 13,253 11,087
Deferred income taxes 6,219 8,220
Total current assets 413,769 453,516
Other assets:
Investments in joint ventures 23,270 24,806
Goodwill 59,771 63,780
Other intangible assets 17,889 20,193
Deferred income taxes 593 3,586
Other 15,341 15,461
Total other assets 116,864 127,826
Property and equipment:
Land 6,545 6,541
<PAGE>
Buildings 26,823 29,125
Equipment 222,845 251,928
Construction in progress 58,740 75,365
314,953 362,959
Less accumulated depreciation 52,527 65,120
Net property and equipment 262,426 297,839
$ 793,059 $ 879,181
</TABLE>
<PAGE>
<PAGE>
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, MINORITY INTEREST AND December 31, JUNE 30,
STOCKHOLDERS' EQUITY 1997 1998
<S> <C> <C>
Current liabilities:
Notes payable $ 3,372 $ 4,220
Current maturities of long-term debt
and
capital lease obligations 1,354 1,556
Accounts payable 59,501 74,319
Accrued liabilities 46,809 46,857
Payable to related parties 1,298 863
Income taxes 11,482 20,775
Deferred income taxes - 347
Total current liabilities 123,816 148,937
Noncurrent liabilities:
Long-term debt 451 29,362
Capital lease obligations 10,996 10,051
Payable to related parties 847 1,582
Accrued OPEB cost 26,192 25,849
Deferred income taxes 11,620 14,337
Other 2,277 350
Total noncurrent liabilities 52,383 81,531
<PAGE>
Minority interest - Company-
obligated mandatorily
redeemable preferred securities of
subsidiary trust 201,250 201,250
holding solely subordinated debt
securities
("Convertible Preferred Securities")
Other minority interest 6,663 8,021
Stockholders' equity:
Preferred stock - -
Common stock 315 315
Additional paid-in capital 346,723 347,411
Retained earnings 58,001 88,848
Accumulated other comprehensive income
- - currency 3,908 2,868
translation adjustment
Total stockholders' equity 408,947 439,442
$793,059 $ 879,181
</TABLE>
<PAGE>
[FN]Commitments and contingencies (Note 1)
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<PAGE>
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $181,378 $190,821 $348,428 $377,878
Other, net 1,694 2,191 2,569 2,932
183,072 193,012 350,997 380,810
Costs and expenses:
Cost of sales 138,107 147,111 268,407 287,943
Selling, general,
administrative and 10,704 14,233 20,827 28,417
development
Restructuring charge - 6,000 - 6,000
Interest 440 533 1,086 949
149,251 167,877 290,320 323,309
Income before income taxes
and minority interest 33,821 25,135 60,677 57,501
Income tax expense 10,620 8,580 18,964 19,584
Minority interest -
Convertible 2,215 2,219 4,413 4,433
<PAGE>
Preferred Securities
Other minority interest 676 516 1,213 1,378
Net income $ 20,310 $ 13,820 $36,087 $32,106
Diluted net income $ 22,525 $ 16,039 $40,500 $36,539
Earnings per share:
Basic $ .65 $ .44 $ 1.15 $ 1.02
Diluted .61 .44 $ 1.10 $ .99
Weighted average shares
outstanding:
Basic 31,457 31,459 31,457 31,459
Diluted 36,971 36,866 36,944 36,890
</TABLE>
<PAGE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Net income $20,310 $13,820 $36,087 $32,106
Other comprehensive income -
currency
translation adjustment 1,410 (1,101) (1,972) (1,040)
Comprehensive income $21,720 $12,719 $34,115 $31,066
</TABLE>
<PAGE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1997 and 1998
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 36,087 $ 32,106
Depreciation and amortization 14,365 15,432
Restructuring charge - 6,000
Deferred income taxes 1,517 532
Other minority interest 1,213 1,378
Other, net (150) (181)
53,032 55,267
Change in assets and liabilities, net of
acquisitions:
Receivables (22,242) 12,802
Inventories (12,358) (27,591)
Prepaid expenses 2,272 2,371
Accounts payable and accrued liabilities 2,938 (4,383)
Income taxes 11,031 7,573
Accounts with related parties (1,013) 7,031
Other, net 1,658 (2,429)
Net cash provided by operating 35,318 50,641
activities
Cash flows from investing activities:
Capital expenditures (29,741) (47,328)
Business acquisitions (476) (19,277)
<PAGE>
Other, net (3,231) (700)
Net cash used by investing activities (33,448) (67,305)
Cash flows from financing activities:
Indebtedness:
Borrowings - 45,000
Repayments (3,645) (17,487)
Related party debt repayments (929) -
Refund of letters of credit collateralized - 734
Dividends paid - (1,259)
Net cash provided (used) by financing (4,574) 26,988
activities
Net cash provided (used) by operating,
financing and investing activities $ (2,704) $ 10,324
</TABLE>
<PAGE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six months ended June 30, 1997 and 1998
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Net increase (decrease) in cash and
equivalents from:
Operating, investing and financing
activities $(2,704) $ 10,324
Cash acquired - 1,187
Currency translation (119) (142)
(2,823) 11,369
Cash and cash equivalents at beginning of 86,526 68,957
period
Cash and cash equivalents at end of period $ 83,703 80,326
Supplemental disclosures:
Cash paid for:
Interest, net of capitalized interest $ 951 $ 874
Convertible Preferred Securities 6,666 6,666
dividends
Income taxes 3,606 3,553
Business acquisitions:
Cash acquired $ - $ 1,187
Receivables 736 6,574
Inventories 769 14,144
<PAGE>
Property and equipment and other 1,998 6,656
noncash assets
Goodwill and other intangibles 577 8,566
Liabilities (3,604) (17,850)
Cash paid $ 476 $ 19,277
</TABLE>
<PAGE>
<PAGE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended June 30, 1998
(In thousands)
<PAGE>
<TABLE>
<CAPTION>
Additional
Common Common paid-in
shares stock capital
<S> <C> <C> <C>
Balance at December 31, 31,458 $315 $346,723
1997
Comprehensive income - - -
Dividends paid ($.04 per - - -
share)
Other 1 - 688
Balance at June 30, 1998 31,459 $315 $347,411
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated
other
Retained comprehensive
earnings income* Total
<S> <C> <C> <C>
Balance at December 31, $ 58,001 $ 3,908 $408,947
1997
Comprehensive income 32,106 (1,040) 31,066
Dividends paid ($.04 per (1,259) - (1,259)
share)
Other - - 688
Balance at June 30, 1998 $ 88,848 $ 2,868 $439,442
*Currency translation adjustment.
</TABLE>
<PAGE>
<PAGE>
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of presentation:
The consolidated balance sheet of Titanium Metals Corporation ("TIMET") and
subsidiaries (collectively, the "Company") at December 31, 1997 has been
condensed from the Company's audited consolidated financial statements at that
date. The consolidated balance sheet at June 30, 1998 and the consolidated
statements of operations, comprehensive income, stockholders' equity and cash
flows for the interim periods ended June 30, 1997 and 1998 have been prepared by
the Company without audit. In the opinion of management, all adjustments
necessary to present fairly the consolidated financial position, results of
operations and cash flows have been made. The results of operations for interim
periods are not necessarily indicative of the operating results of a full year
or of future operations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1997 (the "1997 Annual Report").
For information concerning certain legal proceedings and certain
contingencies related to the Company, see (i) Item 2 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations," (ii)
Part II, Item 1 -- "Legal Proceedings," and (iii) the 1997 Annual Report.
Note 2 - Operating segment information:
<PAGE>
The Company is a vertically integrated producer of titanium sponge, ingot,
slab and mill products for aerospace, industrial and other applications. The
Company's production facilities are located principally in the United States,
United Kingdom and France and the Company's products are sold throughout the
world.
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1998 1997 1998
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Net sales $181,378 $190,821 $348,428 $377,878
Operating income $32,843 $23,894 $59,378 $ 55,523
General corporate 1,418 1,774 2,385 2,927
income, net
Interest expense (440) (533) (1,086) (949)
Income before income
taxes
and minority $ 33,821 $ 25,135 $ 60,677 $ 57,501
interest
</TABLE>
<PAGE>
Operating income in the 1998 periods includes a $6 million restructuring
charge. See Note 3.
Note 3 - Acquisitions and dispositions:
~Loterios~acquisition.~In April 1998, the Company completed the acquisition
of Loterios S.p.A., a leading Italy-based producer and distributor of titanium
pipe and fittings to the offshore oil and gas drilling and production markets.
The cost of the Loterios acquisition, accounted for by the purchase method, was
approximately $19 million in cash. Additional consideration of up to
approximately $7 million is contingent upon Loterios achieving certain operating
targets. The results of Loterios' operations have been reflected in the
consolidated financial statements from the date of acquisition; net sales in the
second quarter of 1998 approximated $9 million.
~Wyman-Gordon~transaction.~In July 1998, the Company completed a series of
previously-reported strategic transactions with Wyman-Gordon Company. The
principal components are: (i) the Company exchanged certain of its titanium
castings assets and $5 million in cash for Wyman-Gordon's Millbury, MA vacuum
arc remelting facility, which produces titanium ingot; (ii) Wyman-Gordon and the
Company combined their respective titanium castings businesses into a new joint
venture 80% owned by Wyman-Gordon and 20% by the Company; and (iii) the Company
and Wyman-Gordon entered into a contract pursuant to which the Company will
become the principal supplier of titanium material to Wyman-Gordon until 2008,
supplying a substantial portion of Wyman-Gordon's total titanium requirements.
The Company will account for its interest in the castings joint venture by the
equity method and does not expect to report gain or loss on the castings
business/melting facility exchange. Net sales of the Company's casting business
approximated $19 million in the first half of 1998.
<PAGE>
~Proforma~information.~The proforma effect of the Loterios acquisition and
the Wyman-Gordon castings business/melting facility exchange, assuming such
transactions had occurred at the beginning of the year, is not material.
~Restructuring~charge.~As previously reported, the Company decided in May
1998 to close its Pomona, CA castings and vacuum arc remelting facility, and
recorded a restructuring charge of $6 million. The restructuring charge
consists of approximately $5 million to write down property, equipment and
intangibles to estimated net realizable value and approximately $1 million of
other exit costs, principally severance (all jobs being eliminated) and
facilities carrying costs. At June 30, 1998, the remaining accrual for other
exit costs approximated $1 million.
Note 4 - Earnings per share:
Earnings per diluted share reflects an immaterial number of dilutive common
stock options and the assumed conversion of the Convertible Preferred Securities
into 5.4 million shares of common stock. Diluted net income is net income plus
minority interest - Convertible Preferred Securities.
Note 5 - Inventories:
<PAGE>
<TABLE>
<CAPTION>
December June
31, 30,
1997 1998
(In thousands)
<S> <C> <C>
Raw materials $ 23,925 $ 28,610
Work-in-process 91,884 107,342
Finished products 31,230 52,218
Supplies 6,779 7,383
$ 153,818 $ 195,553
</TABLE>
<PAGE>
The average cost of LIFO inventories exceeded the net carrying amount of
such inventories by approximately $32 million at December 31, 1997 and $29
million at June 30, 1998.
Note 6 - Accrued liabilities:
<PAGE>
<TABLE>
<CAPTION>
December 31, JUNE 30,
1997 1998
(In thousands)
<S> <C> <C>
Pension and OPEB costs $ 3,174 $ 3,921
Other employee benefits 25,869 21,369
Environmental costs 1,762 1,762
Taxes, other than income 3,062 5,722
Convertible Preferred Securities - 1,103 1,103
accrued dividends
Other 11,839 12,980
$ 46,809 $ 46,857
</TABLE>
<PAGE>
Note 7 - Notes payable, long-term debt and capital lease obligations:
Notes payable at December 31, 1997 and June 30, 1998 consist of borrowings
under the Company's short-term European bank credit agreements. Long-term debt
at June 30, 1998 consists principally of $25 million of borrowings under the
Company's U.S. bank credit agreement and $3 million under its U.K. bank credit
agreement. At June 30, 1998, the Company had approximately $202 million of
borrowing availability under its U.S. and European bank credit agreements.
Capital lease obligations relate principally to U.K. production facilities
held under long-term leases with IMI plc.
Note 8 - Income taxes:
The difference between the Company's provision for income tax expense
attributable to pretax income and the amounts that would be expected using the
U.S. federal statutory income tax rate of 35% is summarized below. The valuation
allowance reductions in both periods relate primarily to current utilization of
certain tax net operating loss carryforwards not previously recognized.
<PAGE>
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1998
(In thousands)
<S> <C> <C>
Expected income tax expense $21,237 $20,125
Non-U.S. tax rates (600) (500)
Adjustment of deferred tax valuation allowance
related to current year results (1,498) (100)
U.S. state income taxes, net 397 400
Other, net (572) (341)
$18,964 $19,584
</TABLE>
<PAGE>
Minority interest - Convertible Preferred Securities is stated net of
income tax benefits of $2.4 million in both the 1997 and 1998 six-month periods.
Note 9 - Ownership structure:
Tremont Corporation holds approximately 30% of TIMET's outstanding common
stock. Tremont also holds an option, acquired from IMI in 1996 and expiring in
February 1999, to purchase an additional 5% of TIMET's common stock. Valhi,
Inc. and other entities related to Harold C. Simmons hold an aggregate of
approximately 53% of Tremont's outstanding common stock. Mr. Simmons may be
deemed to control each of Valhi, Tremont and TIMET.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's results for the second quarter of 1998 (excluding the $6
million restructuring charge described in Note 3 to the Consolidated Financial
Statements), approximated those of the first quarter of 1998, as mill products
shipment volume of 3,900 metric tons and average prices of approximately $34.50
per kilogram were virtually the same in both periods. Gross margins were
hampered slightly in the second quarter by a less favorable product mix due to
previously-reported order push outs and cancellations by jet engine market
customers and certain production difficulties in the U.S. and U.K. The lower
than expected production rates were the result of problems that began in the
first quarter and continued into part of the second quarter related to the
Swansea, Wales plant, lower sheet production from equipment recently transferred
from Morristown, TN to Toronto, OH, and a temporary press outage in Witton,
<PAGE>
England. The issues at Witton and Swansea have been resolved and the Company
expects sheet production to recover by the fourth quarter.
Second quarter 1998 results fell short of the same quarter in 1997
primarily because of higher expenses related to the Company's implementation of
its enterprise-wide SAP integrated information and business system and expanded
new product/market development activities. In addition, higher sales volume in
the second quarter of 1998 was offset by a less favorable product mix than in
the comparable 1997 period.
The Company remains optimistic about the remainder of 1998 and 1999. The
capital expenditures program for new equipment to meet expected demand should be
substantially complete in early 1999. SAP and "Year 2000" expenditures should
begin to decline in the second half of 1999 as the benefits of SAP should begin
to be realized. While some titanium orders have been delayed or cancelled, as
the Company's customers are believed to be matching inventory levels with
revised forecasted aircraft production rates, the Company still expects a record
year in terms of mill product shipment levels. Firm order backlog at June 30,
1998 was $420 million, approximately 80% of which is for 1998 deliveries.
The Company has substantial operations and assets located in Europe,
principally in the United Kingdom. Approximately one-half of the Company's
European sales are denominated in currencies other than the U.S. dollar,
principally major European currencies. The U.S. dollar value of the Company's
foreign sales and operating costs are subject to currency exchange rate
fluctuations that can impact reported earnings and may affect the comparability
of period-to-period operating results. Certain purchases of raw materials for
the Company's European operations, principally titanium sponge, are denominated
in U.S. dollars, while labor and other production costs are primarily
denominated in local currencies. Certain transactions currently denominated in
various European currencies are expected to be denominated in the Euro currency
beginning in 1999.
<PAGE>
In August 1998, the Company experienced a fire in its Henderson, NV plant's
titanium sponge vacuum distillation process area. No one was injured and
operations are being restored to normal levels. The impact on the Company's
results is not expected to be material.
Interest expense in the 1998 periods is comparable to the 1997 periods as
substantially all of the additional interest related to higher borrowing levels
in 1998 was capitalized as part of major capital projects. Dividends on the
Convertible Preferred Securities are reported, net of tax benefit, as minority
interest.
The Company operates in several tax jurisdictions and is subject to various
income tax rates. As a result, the geographical mix of pretax income can impact
the Company's effective tax rate. For financial reporting purposes, the Company
has previously recognized substantially all of its net operating loss
carryforwards, resulting in a higher effective tax rate in 1998 than in 1997.
See Note 8 to the Consolidated Financial Statements.
Many of the Company's information systems have been or are being replaced
in connection with the implementation of SAP. The Company, with the help of
outside specialists and consultants, has also (i) completed an initial
assessment of potential Year 2000 issues in its manufacturing and communications
systems, as well as in those information systems that will not be replaced by
SAP, and (ii) is in process of determining and implementing remedial actions.
Excluding costs related to SAP, the Company expended approximately $1 million on
Year 2000 issues during the first half of 1998 and currently expects to incur an
additional $5 million to $6 million during the last half of 1998 and first half
of 1999, principally related to embedded system technology. The Company has
also begun an evaluation of potential Year 2000 exposures relating to key
suppliers and customers.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had net cash of $45 million ($80 million of
cash and equivalents and $35 million of notes payable and long-term debt). The
Company also had $202 million of borrowing availability under its U.S. and
European credit lines.
~Operating~activities~. Cash provided by operating activities (before
changes in assets and liabilities) of $55 million for the six months ended June
30, 1998 was comparable to the $53 million provided during the same period in
1997, reflecting the comparable operating results. Changes in assets and
liabilities reflect the timing of purchases, production and sales. Increases in
inventories used cash in 1998, principally in the second quarter, reflecting
lower than expected sales levels and the beginning of the build for the expected
higher demand levels in 1999 resulting from long-term customer agreements.
Changes in receivables, including those from related parties, generated cash in
1998, principally due to net collections in the first quarter resulting from
lower sales compared with the record levels of the fourth quarter of 1997.
~Investing~activities~. Cash used for business acquisitions in 1998
relates to Loterios. The Company estimates capital expenditures for all of 1998
to be between $110 million and $120 million, up from $66 million in calendar
1997. About 55% of capital expenditures during the 1997-1998 period relate to
capacity expansion projects to meet expected volume demands in 1999 associated
with long-term customer agreements, which projects are also expected to improve
cycle times and yields and to increase efficiency. The majority of these
significant projects in both the U.S. and Europe have or will begin to come on
line during the second half of 1998. Approximately 20% of the two-year capital
spending total relates to the major SAP information systems and information
technology project being implemented throughout the Company. The SAP system is
<PAGE>
being implemented in stages through early 1999, with the first roll-outs
accomplished in May 1998 (U.S. Service Centers and Corporate Headquarters) and
July 1998 (Henderson, NV plant). Certain costs associated with the SAP business
process and information systems project, including training and reengineering,
are expensed as incurred.
The Company has agreed with Special Metals Corporation ("SMC") to purchase
up to $125 million of SMC 6.625% convertible preferred stock (the "SMC Preferred
Stock") in connection with SMC's announced acquisition of the Inco Alloys
International high performance nickel alloys business unit of Inco Limited.
The transactions are expected to close in the third quarter of 1998. The
Company also has entered into an agreement in principle with SMC to form a
strategic alliance to pursue certain manufacturing and joint product
development and marketing arrangements. The SMC Preferred Stock would be
convertible into SMC common stock and would be subject to mandatory redemption
in 2006. The Company plans to fund the SMC investment using the available
current liquidity, principally cash and equivalents and European borrowings
to be repatriated to the U.S.
~Financing~activities~. Net borrowings in 1998 included $25 million on its
principal U.S. bank credit facility, primarily to fund capital expenditures and
the Loterios acquisition.
The Convertible Preferred Securities do not require principal amortization
and the Company has the right to defer dividend payments for one or more periods
of up to 20 consecutive quarters each.
The Company paid its first regular quarterly dividend of four cents per
share of common stock in June 1998, and in July declared the next regular
dividend of four cents payable in September 1998.
<PAGE>
The Company periodically evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things, its
alternative uses of capital, its debt service requirements, the cost of debt and
equity capital, and estimated future operating cash flows. As a result of this
process, the Company has in the past, and may in the future, seek to raise
additional capital, modify its dividend policy, restructure ownership interests,
incur, refinance or restructure indebtedness, repurchase shares of capital
stock, sell assets, or take a combination of such steps or other steps to
increase or manage its liquidity and capital resources. In the normal course of
business, the Company investigates, evaluates and discusses acquisition, joint
venture, strategic relationship and other business combination opportunities in
the titanium, specialty metal and related industries. In the event of any
future acquisition or joint venture opportunities, the Company may consider
using available liquidity, issuing additional equity securities or incurring
additional indebtedness.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the Company's 1997 Annual Report and subsequent
Quarterly Reports on From 10-Q for descriptions of certain previously-reported
legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 19, 1998, and
the only matter voted upon was the election of directors. All nominees for
director were elected. All directors are elected annually for one-year terms.
The vote with respect to each of the Company's directors was as follows:
<PAGE>
Director Votes For Votes Withheld
Andrew R. Dixey 29,348,821 136,180
Joseph S. Compofelice 29,348,321 136,680
Edward C. Hutcheson, Jr. 29,374,571 110,430
J. Landis Martin 29,349,441 135,560
Gen. Thomas P. Stafford 29,376,121 108,880
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.2 Bylaws of Titanium Metals Corporation as Amended and Restated,
effective May 19, 1998.
10.1* 1996 Amended and Restated Non-Employee Director Compensation
Plan.
10.2 First Amendment to Credit Agreement and Waiver among Titanium
Metals Corporation and various lending institutions dated as of
May 15, 1998.
10.3 Investment Agreement, dated July 9, 1998, between Titanium Metals
Corporation, TIMET Finance Management Company and Special Metals
Corporation, incorporated by reference to Exhibit 10.1 to the
Registrant Current Report on Form 8-K dated July 9, 1998.
27.1 Financial Data Schedule for the quarter ended June 30, 1998.
<PAGE>
*Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
Reports on Form 8-K filed by the Registrant for the quarter ended June
30, 1998 and through August 10, 1998:
April 8, 1998 - Reported Items 5 and 7
April 22, 1998 - Reported Items 5 and 7
May 19, 1998 - Reported Items 5 and 7
May 21, 1998 - Reported Items 5 and 7
June 25, 1998 - Reported Items 5 and 7
June 29, 1998 - Reported Items 5 and 7
June 29, 1998 - Reported Items 5 and 7
July 9, 1998 - Reported Items 2 and 7
July 23, 1998 - Reported Items 5 and 7
August 3, 1998 - Reported Items 5 and 7
August 4, 1998 - Reported Items 5 and 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<PAGE>
<TABLE>
<CAPTION>
TITANIUM METALS CORPORATION
(Registrant)
<S> <C> <C>
Date: August 11, By /s/ J. Thomas Montgomery, Jr.
1998
J. Thomas Montgomery, Jr.
Vice President - Finance and
Treasurer
(Principal Finance and Accounting
Officer)
</TABLE>
<PAGE>
<PAGE>
BY-LAWS
OF
TITANIUM METALS CORPORATION
A Delaware Corporation
As Amended and Restated Effective May 19, 1998
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle. The name of the corporation's
registered agent at such address shall be The Corporation Trust Company. The
registered office and/or registered agent of the corporation may be changed from
time to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
<PAGE>
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders for the purpose of electing directors and conducting such other
proper business as may come before the meeting. The date, time and place of the
annual meeting shall be determined by the chairman of the board or the chief
executive officer of the corporation; provided, that if neither the chairman of
the board nor the chief executive officer acts, the board of directors shall
determine the date, time and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the chairman of the board or the chief executive officer
and shall be called by the chief executive officer upon the written request of
holders of shares entitled to cast not less than 20 percent of the votes at the
meeting, such written request shall state the purpose or purposes of the meeting
and shall be delivered to the chief executive officer. On such written request,
the chief executive officer shall fix a date and time for such meeting within
thirty (30) days of the date requested for such meeting in such written request.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the chairman of the board, the chief executive
officer or the secretary, and if mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, addressed
to the stockholder at his, her or its address as the same appears on the records
of the corporation. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. At any meeting of stockholders, the holders of a
majority of the shares of capital stock entitled to vote at such meeting,
present in person or represented by proxy, shall constitute a quorum, except as
otherwise provided by statute or by the certificate of incorporation. If a
<PAGE>
quorum is not present, the holders of a majority of the shares present in person
or represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place. When a specified item of
business requires a vote by a class or series (if the corporation shall then
have outstanding shares of more than one class or series) voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum (as to such class or series) for the transaction of such item of busi-
ness.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Where a separate vote by class is required, the
affirmative vote of the majority of shares of such class present in person or
represented by proxy at the meeting shall be the act of such class.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be enti-
<PAGE>
tled to one vote in person or by proxy for each share of common stock held by
such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
<PAGE>
consented in writing. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.
Section 12. Confidential Voting. All proxies, ballots and vote
tabulations that identify the particular vote of a stockholder shall be kept
confidential, except that disclosure may be made (i) to allow the inspectors to
certify the results of the vote; (ii) as necessary to meet applicable legal
requirements, including the pursuit or defense of judicial actions; or (iii)
when expressly requested by such stockholder.
Proxy cards shall be returned in envelopes addressed to the inspectors,
which shall receive, inspect and tabulate the proxies. Comments written on
proxies, consents or ballots shall be transcribed and provided to the secretary
of the corporation with the name and address of the stockholder. The vote of
the stockholder shall not be disclosed at the time any such comment is provided
to the secretary except where such vote is included in the comment or disclosure
is necessary, in the opinion of the inspector, for an understanding of the
comment.
Nothing in this by-law shall prohibit the inspector from making available
to the corporation, during the period prior to any annual or special meeting,
information as to which stockholders have not voted and periodic status reports
on the aggregate vote.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
<PAGE>
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board of directors shall be five (5). The directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote in the election of
directors. The directors shall be elected in this manner at the annual meeting
of the stockholders, except as provided in Section 4 of this Article III. Each
director elected shall hold office until a successor is duly elected and quali-
fied or until his or her earlier death, resignation or removal as hereinafter
provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director; provided, that (a) in the event the holders of a
majority of the shares then entitled to vote to remove a director (as provided
in Section 3 of Article III of these by-laws), as a part of such removal such
majority shall also be entitled to elect a replacement therefor, and (b) if any
such vacancy has not been filled by the remaining directors within seven days of
the date such vacancy was created, the holders of a majority of the shares then
entitled to vote may fill such vacancy. Each director so chosen shall hold
office until a successor is duly elected and qualified or until his or her
<PAGE>
earlier death, resignation or removal as herein provided. Whenever holders of
any class or classes of stock or series thereof are entitled to elect one or
more directors by the provisions of the certificate of incorporation, vacancies
and newly created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the chairman of the board or the chief executive officer on at
least 24 hours notice to each director, either personally, by telephone, by
mail, by facsimile or by telegraph; in like manner and on like notice the chief
executive officer must call a special meeting on the written request of at least
two (2) of the directors.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation or other
<PAGE>
persons, which to the extent provided in such resolution or these by-laws shall
have and may exercise the powers of the board of directors in the management and
affairs of the corporation except as otherwise limited by law. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
<PAGE>
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice presidents, a secretary, a
treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person except that neither the chairman of the board nor the
president shall also hold the office of secretary. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable.
<PAGE>
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any
meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors or the chairman of the board
whenever in its or his judgment the best interests of the corporation would be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall preside
at all meetings of the board of directors and stockholders, may exercise all of
the powers of the chief executive officer or president and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or provided in these by-laws. Whenever the chief executive officer or
president is unable to serve, by reason of sickness, absence or otherwise, the
chairman of the board shall perform all the duties and responsibilities thereof.
<PAGE>
Section 7. The Chief Executive Officer. The chief executive officer shall
be the chief executive officer of the corporation and, subject to the powers of
the board of directors and the chairman of the board, shall have general charge
of the business, affairs and property of the corporation, and control over its
officers, agents and employees and shall see that all orders and resolutions of
the board of directors are carried into effect. The chief executive officer
shall have such other powers and perform such other duties as may be prescribed
by the chairman of the board or the board of directors or as may be provided in
these by-laws.
Section 8. The President. The president shall have such powers and
perform such duties as may be prescribed by the chairman of the board, the board
of directors, or these bylaws.
Section 9. Vice Presidents. The vice president, or if there shall be more
than one, the vice presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. The vice presidents
shall also perform such other duties and have such other powers as the board of
directors, the chairman of the board, the chief executive officer or these by-
laws may, from time to time, prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the chief
executive officer's supervision, the secretary shall give, or cause to be given,
all notices required to be given by these by-laws or by law; shall have such
powers and perform such duties as the board of directors, the chairman of the
board, the chief executive officer or these by-laws may, from time to time,
prescribe; and shall have custody of the corporate seal of the corporation. The
secretary, or an assistant secretary, shall have authority to affix the
<PAGE>
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors, the chairman of the board, the chief
executive officer, or secretary may, from time to time, prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the chief executive officer and the board of directors, at its
regular meeting or when the board of directors so requires, an account of the
corporation; shall have such powers and perform such duties as the board of
directors, the chairman of the board, the chief executive officer or these by-
laws may, from time to time, prescribe. If required by the board of directors,
the treasurer shall give the corporation a bond (which shall be rendered every
six years) in such sums and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of the office of treasurer and for the restoration to the corporation, in
case of death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in the possession
or under the control of the treasurer belonging to the corporation. The
assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by the board of directors, shall in the
<PAGE>
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman of the
board, the chief executive officer or treasurer may, from time to time,
prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the corporation unless prohibited from doing
so by the General Corporation Law of the State of Delaware, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation fails to respond within sixty days to a written request for
<PAGE>
indemnity, the corporation shall be deemed to have approved the request. If the
corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within 30 days, the director or officer may petition any court of
competent jurisdiction to determine his or her right to indemnification or
advances pursuant to this Article V. Such person's costs and expenses incurred
in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
permissible in the circumstances because he or she has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
<PAGE>
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents shall be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
<PAGE>
existing with respect to any state of facts or proceeding then existing. The
adoption of this Article V shall not abridge or limit any rights of any person
otherwise entitled to indemnification from the corporation pursuant to any prior
by-law provision, resolution of the directors, contract or otherwise.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK
<PAGE>
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman of the board, chief executive officer, president or a vice
president and the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by such holder in the corporation. If
such a certificate is countersigned (1) by a transfer agent or an assistant
transfer agent other than the corporation or its employee or (2) by a registrar,
other than the corporation or its employee, the signature of any such chairman
of the board, chief executive officer, president, vice president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the certificate or
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
<PAGE>
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board
of directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
next day preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
<PAGE>
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
<PAGE>
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
<PAGE>
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal that shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned by Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the chairman of
the board or the chief executive officer, unless the board of directors
specifically confers authority to vote with respect thereto, which authority may
be general or confined to specific instances, upon some other person or officer.
Any person authorized to vote securities shall have the power to appoint
proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
<PAGE>
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
<PAGE>
<PAGE>
TITANIUM METALS CORPORATION
AMENDED AND RESTATED
1996 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
AS AMENDED AND RESTATED EFFECTIVE MAY 19, 1998
1. Purpose. The purpose of the Amended and Restated 1996 Non-Employee
Director Compensation Plan is to promote the interests of the Company by
providing an inducement to obtain and retain the services of qualified persons
who are neither employees nor officers of the Company to serve as members of the
Company's Board of Directors.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any misappropriation of the assets of the
Company or any of its Subsidiaries resulting in material loss to such
entity.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Company" shall mean Titanium Metals Corporation, a Delaware
corporation.
(e) "Director" shall mean any person serving as a member of the
Board.
(f) "Disability" shall mean the condition of a Grantee who is unable
to engage in any substantial gainful activities by reason of any medically
determinable physical or mental impairment which can be expected to result
<PAGE>
in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.
(g) "Eligible Directors" shall mean those Directors eligible to
participate in the Plan pursuant to Section 4.
(h) "Fair Market Value" shall mean the last reported sale price of
Stock on the NASDAQ National Market (or other exchange upon which the Stock
is traded as of the date of determination).
(i) "Grantee" shall mean an Eligible Director who has been granted an
Option.
(j) "Ineligible Directors" shall mean those Directors who are not
Eligible Directors.
(k) "Meeting Fees" shall mean the fees to be paid to each Eligible
Director for such Eligible Director's attendance at a regular or special
meeting of the Board or Board committee, as follows:
<PAGE>
ATTENDED IN ATTENDED BY
PERSON TELEPHONE
Board Meeting $1,000 $350
Committee
Meeting-- $2,000 $700
Chair only
Committee
Meeting--Non- $1,000 $350
Chair Members
(l) "Option" shall mean an option to purchase shares of Stock,
granted pursuant to the Plan and subject to the terms and conditions
described in the Plan. Options shall not be incentive stock options within
the meaning of Code Section 422A.
(m) "Optionee" shall mean a person who holds an Option.
(n) "Parent" shall mean a corporation of the type defined in Code
Section 424(e).
(o) "Plan" shall mean this Amended and Restated 1996 Non-Employee
Director Compensation Plan, as it may be amended from time to time pursuant
to Section 9.
(p) "Retainer" shall mean a retainer paid annually to Eligible
Directors which shall equal $15,000 in cash plus 500 shares of Stock.
(q) "Stock" shall mean the Company's $.01 par value common stock.
<PAGE>
(r) "Subsidiary" shall mean a corporation of the type defined in Code
Section 424(f).
3. Administration. The Plan shall be administered by the Ineligible
Directors. The amount and nature of the awards to be granted under the Plan,
including grants of Options, shall be automatic as described in Section 7. The
Ineligible Directors, subject to the provisions of the Plan, have the power to
construe the Plan, to determine all questions thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as they may deem
desirable. Any interpretation, determination, or other action made or taken by
the Ineligible Directors shall be final, binding, and conclusive. A majority of
the total number of Ineligible Directors shall constitute a quorum for purposes
of any action by the Ineligible Directors, and the vote of a majority of the
Ineligible Directors present at a meeting of the Ineligible Directors at which a
quorum is present shall be the act of the Ineligible Directors. Any action
reduced to writing and signed by all of the Ineligible Directors shall be as
fully effective as if it had been taken by a vote at a meeting of the Ineligible
Directors duly called and held. None of the Ineligible Directors shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options.
4. Eligibility. All Directors of the Company shall be eligible to
participate in the Plan unless they are employees of the Company or any
Subsidiary or Parent of the Company.
<PAGE>
5. Shares Subject to the Plan
(a) Class. The shares which are to be made the subject of awards
granted under the Plan shall be the Company's authorized but unissued
Stock. In connection with the issuance of Stock under the Plan, the
Company may repurchase Stock in the open market or otherwise.
(b) Aggregate Amount. The total number of shares of Stock authorized
under the Plan shall not exceed 62,500 (subject to adjustment under Section
10(c)). If any outstanding Option under the Plan expires or is terminated
for any reason, then the Stock allocable to the unexercised portion of such
Option shall not be charged against the limitation of this Section 5(b) and
may again become the subject of an Option granted under the Plan.
6. Retainer\Meeting Compensation.
(a) Retainer. The cash amount of the Retainer shall be paid, and
certificates for the Stock portion of the Retainer shall be delivered, to
Eligible Directors on or as soon as practicable following the annual
meeting of the stockholders of the Company, in each such case to the
Eligible directors elected at such meeting. Such certificates shall be
registered in the name of the Eligible Director, and all Stock so issued
shall be fully paid and nonassessable. The Company shall pay any issuance
or transfer taxes with respect to the issuance of Stock.
(b) Meeting Fees. Meeting Fees shall be paid in cash on or as soon
as practicable after any regular or special meeting attended by an Eligible
Director.
7. Terms, Conditions and Form of Options. Each Option granted under the
Plan shall be evidenced by a written agreement substantially in the form
attached hereto or in such other form as the Ineligible Directors shall from
<PAGE>
time to time approve, which agreements shall be executed by a duly authorized
officer of the Company and shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates. Commencing in 1999, Options shall be granted
automatically to each Eligible Director elected at the annual meeting of
stockholders of the Company as of the date of such meeting.
(b) Option Formula. Each Eligible Director shall receive an Option
to purchase1,500 shares of Stock on the grant date of the Option without
further action by the Board or the Ineligible Directors.
(c) Period of Options. Options shall vest and become exercisable on
the first anniversary of grant date of the Option; and Options shall
terminate and cease to be exercisable on the tenth anniversary of the grant
date of the Option (subject to prior termination as provided in Sections
7(g) and (h) below).
(d) Option Price. The exercise price of each Option shall be the
Fair Market Value of a share of Stock on the date the Option is granted.
(e) Exercise of Options. Vested and exercisable Options may be
exercised (in full or in part) only by written notice of exercise delivered
to the Company at its principal executive office accompanied either (i) by
cash payment of the aggregate exercise price for all shares of Stock being
acquired upon exercise of the Option, or (ii) written direction to deliver
the shares of Stock being acquired upon exercise of the Option to a
registered broker dealer with instruction to sell such shares for the
account of Optionee, and to remit to the Company out of such sale proceeds
a cash payment equal to the aggregate exercise price for all shares of
Stock being acquired upon exercise of the Option. Such Option shall be
<PAGE>
deemed to have been exercised on the date both such required items have
been received by the Company.
(f) Transferability. No Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution;
provided, however, that the Ineligible Directors may determine to grant
Options that are transferable, without payment of consideration, to
immediate family members of the Grantee or to trusts or partnerships for
such family members, and may amend outstanding Options to provide for such
transferability. No interest of any Optionee in any Option shall be
subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process. Except as otherwise
determined by the Ineligible Directors, during the lifetime of the Grantee,
Options shall be exercisable only by the Grantee or the Grantee's guardian
or legal representative.
(g) Death or Disability of Grantee. If a Grantee dies or terminates
performance of services as a Director because of Disability, any unvested
and unexercisable Option granted to such Grantee shall immediately and
fully vest. Such Option, together with any other vested and unexercisable
Options granted to such Grantee, may be exercised, at any time, or from
time to time, prior to the earlier of (i) the termination of such Option in
accordance with Section 7(c), or (ii) one year after the date of Grantee's
death or termination of services as a Director, at which date all then-
outstanding and unexercised Options granted to such Grantee shall
terminate. In the case of death, an Option may be exercised by the person
or persons to whom the Optionee's rights under the Option pass by will or
applicable law, or if no such person has such rights, by the Optionee's
executors or administrators; provided that such person(s) consent in
writing to abide by and be subject to the terms of the Plan and the Option
and such writing is delivered to the Company.
<PAGE>
(h) Termination of Services as Director.
(i) If a Grantee's performance of services for the Company and
its Subsidiaries shall terminate for any reason other than death or
Disability or termination of services as a Director for Cause, any
unvested and unexercisable Option granted to such Grantee shall
immediately and fully vest. Such Option, together with any other
vested and exercisable Options granted to such Grantee, may be
exercised, at any time, or from time to time, prior to the earlier of
(i) the termination of such Option in accordance with Section 7(c) or
(ii) three months after the date of such Grantee's termination of
services as a Director, at which date all then-outstanding and
unexercised Options granted to such Grantee shall terminate.
(ii) If a Grantee's performance of services as a Director is
terminated for Cause, any unvested and unexercisable Option granted to
such Grantee shall terminate as of the date of such termination of
services. All Option s previously granted to such Grantee which are,
as of the date of such termination of services, vested and
exercisable, may be exercised at any time, or from time to time, prior
to the earlier of (i) the termination of such Option in accordance
with Section 7(c) or (ii) one month after the date of such Grantee's
termination of services as a Director, at which date all then-
outstanding and unexercised Options granted to such Grantee shall
terminate. For this purpose of the Plan and any Option agreement,
such Grantee's service shall be deemed to have terminated on the
earlier of (A) the date when the Grantee's service in fact terminated
or (B) the date when such Grantee received written notice that his
service is to terminate for Cause.
(i) No Rights as Shareholder. No Optionee shall have any rights as a
shareholder with respect to any Stock subject to an Option prior to the
<PAGE>
date of issuance to such Optionee of a certificate or certificates for such
shares.
8. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options under the Plan, and the obligation of the Company to
transfer shares under such Options shall be subject to all applicable federal
and state laws, rules and regulations, including those related to disclosure of
financial and other information to Optionees, and to any approvals by any
government or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange on which the Stock may then be
listed, where such listing is required under the rules or regulations of such
exchange, and (b) the compliance with applicable federal and state securities
laws and regulations relating to the issuance and delivery of such certificates;
provided, however, that the Company shall make all reasonable efforts to so list
such shares and to comply with such laws and regulations.
9. Amendment and Discontinuance. The Board may from time to time amend,
suspend or discontinue the Plan; provided, however, that, the Plan shall not be
amended without the consent of the shareholders of the Company to the extent
such consent is required under Rule 16b-3, Section 162(m) of the Code or any
stock exchange or market quotation system on which the Stock is then listed or
quoted. Except where approval of the Board is required by applicable law, the
power of the Board to amend, suspend or discontinue the Plan shall be exercised
by the Ineligible Directors.
10. General Provisions.
(a) Assignability. The rights and benefits under the Plan shall not
be assignable or transferable by an Eligible Director other than by will or
by the laws of descent and distribution, and, except as otherwise
<PAGE>
determined by the Ineligible Directors, during the lifetime of the Grantee,
Options granted under the Plan shall be exercisable only by the Grantee.
(b) Termination of Plan. No Options may be granted under the Plan
after May 18, 2006 (or if such date is not a business day, on the next
succeeding business day). The Plan shall automatically terminate on the
date all Options granted under the Plan have been exercised or have
terminated or expired.
(c) Adjustments in Event of Change in Stock. In the event of any
change in the Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination, or exchange
of shares, or of any similar change affecting the Stock, the number and
class of shares subject to outstanding Options, the exercise price per
share, and any other terms of the Plan or the Options which in the
Ineligible Directors' sole discretion require adjustment shall be
appropriately adjusted consistent with such change in such manner as the
Ineligible Directors may deem appropriate.
(d) No Right to Continue as a Director. Neither the Plan, nor the
granting of an Option nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or understanding, express
or implied, that the Company will retain a Director for any period of time,
or at any particular rate of compensation.
(e) ERISA. The Plan is not an employee benefit plan which is subject
to the provisions of the Employee Retirement Income Security Act of 1974,
and the provisions of Section 401(a) of the Code are not applicable to the
Plan.
<PAGE>
(f) Non-Statutory Options. All Options granted under the Plan shall
be non-statutory options not entitled to special tax treatment under
Section 422A of the Code.
(g) Effective Date of the Plan. The Plan originally took effect on
May 8, 1996 (ten days following last adoption by the stockholders of the
Company on May 8, 1996). The Plan was originally adopted by the Board on
March 29, 1996, was subsequently amended by the Board on April 15, 1996,
and was amended and restated by the Board on February 14, 1997, February
19, 1998 and May 19, 1998. The Plan was originally adopted by the
stockholders of the Company on March 29, 1996, and again on May 8, 1996
following the amendment of the Plan by the Board.
(h) Effect of Amendment and Restatement of the Plan. This amended
and restated version of the Plan shall amend and supersede in its entirety
previous versions of the Plan, provided, however, that such amendment and
restatement is not intended to affect the validity of any actions taken
under previous versions of the Plan, as summarized on Exhibit A hereto.
(i) Governing Law. The Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Colorado and construed accordingly.
(j) Variation of Pronouns. All pronouns and any variations thereof
contained herein shall be deemed to refer to masculine, feminine, neuter,
singular or plural, as the identity of the person or persons may require.
<PAGE>
EXHIBIT A
HISTORY OF PLAN ACTIONS/AMENDMENTS
MEETING FEES
RETAINER (In Person/By OPTIONS
Telephone)
Committee Meeting
Non-Chair Number @Price/
Amount of Cash/ # of Shares Board Committee Term/
DATE ACTION Date Paid Date Paid Meeting Member Date Issued
<PAGE>
3-29- Plan $8,000/ $8000 in $1,000/ 625 @ IPO
96 Adopted IPO shares $350 price then
closing (rounded at FMV/
then 1st to next 5 years/
business 100)/ IPO
day of IPO Closing
year closing then 3rd
then 1st business
business day after
day of earnings
year release
4-15- Plan 400
96 Amended shares/
IPO
closing
then 1st
business
day of
year
<PAGE>
2-14- Plan $8,000/ 400 1,500 @
97 Amended Annual shares/ FMV/
Meeting Annual 10 years/
Meeting 3rd
business
day after
earnings
release
2-19- Plan 1,500 @
98 Amended FMV/
10 years/
Annual
Meeting
5-19- Plan $15,000/ 500 $2,000 $1,000
98 Amended Annual shares/ / /
Meeting Annual $700 $350
Meeting
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
This FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this "Amendment and
Waiver") is dated as of May 15, 1998 and is made by and among Titanium Metals
Corporation, a Delaware corporation ("Borrower"), the undersigned financial
institutions, including Bankers Trust Company, in their capacities as lenders
under the Credit Agreement (as defined below) (collectively, the "Lenders," and
each individually, a "Lender"), Corestates Bank, N.A. and Sanwa Business Credit
Corporation, as Co-Agents ("Co-Agents"), and Bankers Trust Company, as
administrative agent ("Administrative Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, Borrower, the Lenders, Co-Agents and Administrative Agent are
party to that certain Credit Agreement, dated as of July 30, 1997 (as the same
may be amended, restated, supplemented, extended or otherwise modified in
accordance with the terms thereof, the "Credit Agreement");
WHEREAS, Borrower and TIMET Finance Management Company, a Delaware
corporation and a wholly-owned Subsidiary of Borrower ("TIMET Finance"), have
entered into a letter of intent, dated April 13, 1998, with Special Metals
Corporation, a Delaware corporation ("SMC"), relating to the proposed
acquisition (the "SMC Acquisition") by TIMET Finance of either Class A 6.625%
Senior Convertible Preferred Stock of SMC or 6.625% convertible preferred
securities of a trust formed and owned by SMC, in either case having an
aggregate stated value of $125.0 million;
<PAGE>
WHEREAS, the SMC Acquisition would constitute an Investment under the
Credit Agreement and, absent the effectiveness of this Amendment and Waiver, be
prohibited by the terms thereof;
WHEREAS, Borrower has requested that the Administrative Agent and Lenders
(i) modify the terms of the Credit Agreement to permit the SMC Acquisition and
make certain related changes to the Credit Agreement and (ii) waive certain
Events of Default existing as of the date hereof, and the Administrative Agent
and Lenders are agreeable to such modifications and waivers, in each case as and
to the extent set forth in this Amendment and Waiver;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
<PAGE>
2. Amendments to Credit Agreement.
(a) Section 1.1 of the Credit Agreement is hereby amended by
inserting into existing Section 1.1 each of the following new definitions in
their appropriate alphabetic order:
"First Amendment and Waiver" means the First Amendment to Credit
Agreement and Waiver, dated as of May 15, 1998, by and among Borrower, the
Lenders, Co-Agents and Administrative Agent.
"Pabco Road Property" means the three contiguous parcels of real
property owned by Borrower and located adjacent to and to the east of Pabco
Road northeast of Borrower's main plant in Henderson, Nevada.
"Pledge Agreement Amendment" has the meaning assigned to that term in
the First Amendment and Waiver.
"SMC" means Special Metals Corporation, a Delaware corporation.
"SMC Acquisition" means the acquisition by TIMET Finance Management
Company of SMC Convertible Preferred Securities having an aggregate stated
value of $125.0 million, substantially on the terms set forth in the Term
Sheet attached as Exhibit A to the First Amendment and Waiver .
"SMC Closing Conditions" has the meaning assigned to that term in the
First Amendment and Waiver.
"SMC Convertible Preferred Securities" means (i) Class A 6.625% Senior
Convertible Preferred Stock, par value $.01 per share, of SMC purchased in
the SMC Acquisition, and any common stock or other securities into which
such Class A 6.625% Senior Convertible Preferred Stock may from time to
time be converted or exchanged or (ii) 6.625% convertible preferred
<PAGE>
securities of a trust formed and owned by SMC, and any common stock or
other securities into which such 6.625% convertible preferred securities
may from time to time be converted or exchanged.
(b) The definition of "Adjusted Consolidated Net Worth" set forth in
Section 1.1 of the Credit Agreement is amended by deleting such existing
definition in its entirety and replacing it with the following new definition:
<PAGE>
"'Adjusted Consolidated Net Worth' of Borrower means, without
duplication, the sum of (i) the total stockholders' equity of Borrower, as
determined from a consolidated balance sheet of Borrower and its
consolidated Subsidiaries prepared in accordance with GAAP plus (ii) the
net book value of the BUCS, as determined from a consolidated balance sheet
of Borrower and its consolidated Subsidiaries prepared in accordance with
GAAP (which shall not, in any event, include accrued interest or dividends
on the BUCS) less (iii) the aggregate amount of all outstanding Investments
made by Borrower and each Domestic Subsidiary and OECD Foreign Subsidiary
of Borrower in any entity which is not a Domestic Subsidiary or an OECD
Foreign Subsidiary of Borrower plus (iv) a portion (not to exceed $80.0
million) of the net book value (or, if less, the net book value) of the SMC
Convertible Preferred Securities purchased by TIMET Finance Management
Company in the SMC Acquisition, as such net book value is determined from a
consolidated balance sheet of Borrower and its consolidated Subsidiaries
prepared in accordance with GAAP (which shall not, in any event, include
accrued dividends on the SMC Convertible Preferred Securities)."
(c) Article II of the Credit Agreement is hereby amended by
inserting, after Section 2.9 of existing Article II, a new Section 2.10, as
follows:
"2.10 Regulation U. (a) The Loans made by each Lender shall,
commencing from the date of the SMC Acquisition and ending on the date on
which none of the Loans is considered "purpose credit" within the meaning
of Regulation T, U or X of the Board, be treated for purposes of Regulation
U as two separate extensions of credit (the "Y Credit" and the "Z Credit"
of such Lender and, collectively, the "Y Credits" and the "Z Credits"), as
follows:
(i) the aggregate amount of the Y Credit of such Lender shall be
an amount equal to such Lender's Pro Rata Share of the maximum loan
<PAGE>
value (as determined in accordance with Regulation U) of the SMC
Convertible Preferred Securities pledged pursuant to the Pledge
Agreement Amendment (such SMC Convertible Preferred Securities, the
"Margin Stock Collateral"); and
(ii) the aggregate amount of the Z Credit of such Lender shall be
an amount equal to such Lender's Pro Rata Share of all Loans
outstanding under this Agreement minus such Lender's Y Credit.
In the event that any Margin Stock Collateral is acquired or sold, the
amount of the Y Credit of such Lender shall be adjusted (if necessary), to
the extent necessary through prepayment by the Borrower, to an amount equal
to such Lender's Pro Rata Share of the maximum loan value (determined in
accordance with Regulation U as of the date of such acquisition or sale) of
the Margin Stock Collateral immediately after giving effect to such
acquisition or sale. Nothing contained in this Section 2.10 shall be
deemed to permit any sale of Margin Stock Collateral in violation of the
terms of this Agreement.
(b) Each Lender will maintain its records to identify the Y Credit of
such Lender and the Z Credit of such Lender, and, solely for the purposes
of complying with Regulation U, the Y and Z Credits shall be treated as
separate extensions of credit. Each Lender hereby represents and warrants
that the loan value of the Collateral (other than the Margin Stock
Collateral) is sufficient for such Lender to lend its Pro Rata Share of the
Z Credit.
<PAGE>
(c) The benefits of the security in the Margin Stock Collateral
created by the Pledge Agreement Amendment shall be allocated first to the
benefit and security of the payment of the principal of and interest on the
Y Credits of the Lender and of all other amounts payable by Borrower under
this Agreement in connection with the Y Credits (collectively, the "Y
Credit Amounts") and second, only after the payment in full of the Y
Credit Amounts, to the benefit and security of the payment of the principal
of and interest on the Z Credits of the Lenders and of all other amounts
payable by Borrower under this Agreement in connection with Z Credits
(collectively, the "Z Credit Amounts"). The benefits of the security in
the Collateral other than Margin Stock Collateral created by the Security
Documents and the benefits of the indirect security in Collateral other
than Margin Stock Collateral created by this Agreement, shall be allocated
first to the benefit and security of the payment of the Z Credit Amounts
and second, only after the payment in full of the Z Credit Amounts, to the
benefit and security of the payment of the Y Credit Amounts.
(d) Borrower shall furnish to each Lender at the time of each
acquisition and sale of Margin Stock Collateral such information and
documents as the Administrative Agent or such Lender may require to
determine the Y and Z Credits, and at any time and from time to time, such
other information and documents as the Administrative Agent or such Lender
may reasonably require to determine compliance with Regulation U.
(e) Each Lender shall be responsible for its own compliance with and
administration of the provisions of this Section 2.10 and Regulation U, and
the Administrative Agent shall have no responsibility for any
determinations or allocations made or to be made by any Lender as required
by such provisions. The Administrative Agent shall transmit to Borrower on
behalf of a Lender any requests made by such Lender pursuant to subsection
(d) of this Section 2.10 and shall transmit from Borrower to such Lender or
the Lenders any information provided by Borrower in response to inquiries
<PAGE>
made under subsection (d) of this Section 2.10 or otherwise required to be
delivered by Borrower to the Lenders pursuant to this Section 2.10."
(d) Section 6.8(b) of the Credit Agreement is hereby amended by (i)
inserting at the beginning of such existing Section 6.8(b) the clause "Except as
specified in the next proceeding sentence," and (ii) inserting the following new
sentence at the end of such existing Section 6.8(b): "Notwithstanding the
foregoing, proceeds of Loans may be used to purchase or carry, and the Lenders
may extend credit for the purpose of purchasing or carrying, the SMC Convertible
Preferred Securities acquired in connection with the SMC Acquisition, provided
that the purpose of such Loan is indicated in the applicable Notice of
Borrowing.
(e) Section 7.4 of the Credit Agreement is hereby amended by deleting
clause (a) of such existing Section 7.4 in its entirety and replacing it with a
new clause (a) as follows: "(a) Continue to engage in the business of
producing, processing, finishing and selling titanium and other metal products,
or a business related thereto;"
<PAGE>
(f) Section 7.12 of the Credit Agreement is hereby amended by adding
a new clause (i) after existing clause (h), as follows:
"(i) Pabco Road Property. (i) as promptly as practicable and, in
any event within 90 days after the date of the First Amendment and Waiver,
Borrower shall furnish the Administrative Agent with a survey, in form and
substance satisfactory to Administrative Agent, of the Pabco Road Property,
dated a recent date acceptable to Administrative Agent, certified by a
licensed professional surveyor in a manner satisfactory to Administrative
Agent for the benefit of the Lenders;
(ii) as promptly as practicable and, in any event within 120
days after the date of the First Amendment and Waiver, Borrower shall
furnish the Administrative Agent with a duly executed Mortgage, in form and
substance reasonably satisfactory to the Administrative Agent, covering the
Pabco Road Property, together with evidence that counterparts of such
Mortgage have been delivered to the title insurance company insuring the
Lien of such Mortgage for recording in all places to the extent necessary
or desirable, in the reasonable judgment of the Administrative Agent, to
create a valid and enforceable first priority Lien on the Pabco Road
Property (subject only to Permitted Liens) in favor of Collateral Agent (or
a trustee acting on behalf of Collateral Agent required or desired under
local law), for the benefit of the Secured Creditors;
(iii) as promptly as practicable and, in any event within 120
days after the date of the First Amendment and Waiver, Borrower shall
furnish the Administrative Agent with a Mortgage Policy (or a binding
commitment to see such Mortgage Policy) which shall (A) be issued to
Collateral Agent for the benefit of the Secured Creditors by a title
insurance company satisfactory to Administrative Agent in an amount
reasonably satisfactory to Administrative Agent insuring that the Mortgage
covering the Pabco Road Property is a valid and enforceable first priority
<PAGE>
mortgage lien, free and clear of all defects, encumbrances and other Liens
except Permitted Liens, (B) be in form and substance reasonably
satisfactory to Administrative Agent, (C) include, as appropriate, an
endorsement for future advances under this Agreement, the Notes and the
Mortgage and such other endorsements that Administrative Agent in its
discretion may reasonably request, (D) not include an exception for
mechanics' liens, and (E) provide for affirmative insurance and such
reinsurance (including direct access agreements) as Administrative Agent in
its discretion may reasonably request; and
(iv) Borrower shall comply with Section 7.12(e) as if all
Security Documents relating to the Pabco Road Property were 'Additional
Security Documents' for purposes of such Section."
(g) Section 7.12(c) of the Credit Agreement is hereby amended by
inserting at the end of the first sentence of existing Section 7.12(c) an
additional proviso and a new sentence as follow:
<PAGE>
"provided, further, that, if the Capital Stock of Loterios S.p.A. is
owned directly by Borrower or a Domestic Subsidiary of Borrower, Borrower
or such Domestic Subsidiary shall not be obligated to pledge such Capital
Stock until the earlier of the following: (A) any date on which the
consolidated total assets of Loterios S.p.A. are more than $50,000,000 or
(B) the request of the Required Lenders; and thereupon, Borrower, at its
own expense, promptly (and in any event within 45 days) shall pledge 65% of
the Capital Stock of Loterios S.p.A. to Collateral Agent, for the benefit
of the Secured Creditors, pursuant to a pledge agreement in form and
substance satisfactory to Collateral Agent. Notwithstanding any provision
herein to the contrary, the Capital Stock of Loterios S.p.A. shall for
purposes of Section 8.7(g)(iii) and otherwise for purposes of this
Agreement be treated as having been pledged to the Collateral Agent for
purposes of this Agreement provided that Borrower and its Subsidiaries have
complied with this Section 7.12(c)."
(h) Section 7.12(c) of the Credit Agreement is hereby further amended
by inserting (i) in the fifth line of existing Section 7.12(c) after the words
"other than" and before the words "a Foreign Subsidiary", the words "Loterios
S.p.A. or" and (ii) in the seventh line of existing Section 7.12(c) after the
word "Subsidiaries" and before the words "owned directly by", the parenthetical
language "(other than Loterios S.p.A.)".
(i) Section 7.12(f) of the Credit Agreement is hereby amended by
deleting such existing Section 7.12(f) in its entirety and replacing it with a
new Section 7.12(f) as follows:
"(f) As promptly as practicable and in any event within 90 days
following the effectiveness of the First Amendment and Waiver, Borrower, at
its own expense, shall (i) pledge 65% of the Capital Stock of TIMET FSC,
Ltd. to Collateral Agent, for the benefit of the Secured Creditors,
pursuant to a pledge agreement in form and substance satisfactory to
<PAGE>
Administrative Agent and (ii) cause Administrative Agent to receive, with a
counterpart for each Lender, a legal opinion of Barbados counsel acceptable
to Administrative Agent covering such matters in respect of such pledge
agreement as Administrative Agent reasonably requests."
(j) Section 8.1 of the Credit Agreement is hereby amended by renaming
clauses (e) and (f) of such existing Section 8.1, clauses "(f)" and "(g)",
respectively, and inserting a new clause (e) after existing clause (d) and
before new clause (f), as follows:
<PAGE>
"(e) (i) in the case of any Person that after the Closing Date
becomes a Subsidiary of Borrower or is consolidated with or merged with or
into Borrower or a Subsidiary of Borrower in compliance with the terms of
this Agreement, Liens on the property or assets of such Person existing at
the time such Person becomes a Subsidiary or is so consolidated or merged
(and not incurred in anticipation thereof) and (ii) in the case of any
property or asset acquired by Borrower or any Subsidiary of the Borrower
after the Closing Date in compliance with the terms of this Agreement,
Liens existing on such property or asset at the time of such acquisition
(and not incurred in anticipation thereof), whether or not the Indebtedness
secured thereby is assumed by Borrower or such Subsidiary; provided,
however, that, in the case of (i) and (ii) above, (A) no such Lien extends
to or covers any other property or assets of Borrower or any other
Subsidiary, as the case may be, (B) the aggregate principal amount of the
Indebtedness secured by all such Liens in respect of any such property or
assets does not exceed 100% of the fair market value of such property or
assets at the time of such acquisition or, in the case of a Lien in respect
of property or assets existing at the time of such Person becoming a
Subsidiary or being consolidated or merged, the fair market value of such
property or assets at such time, (C) the aggregate principal amount of the
Indebtedness secured by all such Liens does not exceed $10,000,000 at any
one time outstanding, and (D) any and all such Liens secure Indebtedness
permitted to be incurred pursuant to Section 8.2;"
(k) Section 8.1 of the Credit Agreement is hereby further amended by
deleting, in the second line and sixth line of new clause (f), the language
"clauses (c) or (d)" and replacing it in both such lines with the language
"clauses (c), (d) or (e)".
(l) Section 8.4 of the Credit Agreement is hereby amended by adding
after clause (g) of existing Section 8.4, a new clause (h), as follows:
<PAGE>
"(h) Borrower's Board of Directors may declare, and Borrower may pay,
quarterly cash dividends on Borrower's Capital Stock not to exceed
$2,000,000 in the aggregate in respect of each fiscal quarter of Borrower."
(m) Section 8.7 of the Credit Agreement is hereby amended by (i)
renaming existing clause (l) of Section 8.7, clause "(n)" and (ii) deleting, in
the first line of new clause (n), the words "through (k) above" and replacing
them with the words "through (m) above".
(n) Section 8.7 of the Credit Agreement is hereby further amended by
inserting after clause (k) of existing Section 8.7, a new clause (l) as follows:
" (1) Borrower may make an Investment in SMC Convertible Preferred
Securities pursuant to the SMC Acquisition; provided, that each of the SMC
Closing Conditions has been satisfied on or prior to the consummation of
such Investment."
(o) Section 8.7 of the Credit Agreement is hereby further amended by
inserting after new clause (l) of Section 8.7, a new clause (m) as follows:
"(m) Borrower may make loans to employees and officers of Borrower and
its Subsidiaries to finance the purchase of common stock of Borrower or
BUCS by such employees and officers, which loans shall not exceed
$1,000,000 in any one calendar year or $5,000,000 in the aggregate at any
one time outstanding; and"
(p) Section 8.11 of the Credit Agreement is hereby amended by
deleting the first sentence of such existing Section 8.11 in its entirety and
replacing it with a new sentence as follows:
<PAGE>
"Borrower will not, and will not permit any Subsidiary to, enter into or
acquire any line of business which is not related to the business of
producing, processing, finishing or selling titanium or other metal
products."
(q) Section 8.13 of the Credit Agreement is hereby amended by
replacing the period at the end of clause (iii) thereof with a semi-colon and
adding a new clause (iv) after clause (iii), as follows:
" (iv) agree or consent to any amendment or modification of the
provisions of any indenture, trust declaration, agreement, instrument or
other document entered into in connection with the SMC Acquisition which is
adverse in any material respect to the interests of the Lenders or
Administrative Agent."
(r) Schedule 6.11(c) to the Credit Agreement is hereby amended by
adding to item 1, beneath the information for "Titanium Hearth Technologies",
the following new information:
"Titanium Metals Corporation Three parcels Manufacturing Plant
Fee"
northeast of
main plant
3. Waivers. (a) Under Section 6.11(c) of the Credit Agreement,
Borrower has represented and warranted that Schedule 6.11(c) contains a true and
complete list of each parcel of real property owned or leased by Borrower or the
Subsidiary Guarantors on the Closing Date. The Lenders hereby waive the Events
of Default arising from Borrower's failure to list the Pabco Road Property on
Schedule 6.11(c) prior to the Amendment Effective Date.
<PAGE>
(b) Under Section 6.13 of the Credit Agreement, Borrower has,
among other things, represented and warranted that it has granted Mortgages to
secure the Obligations on all parcels of real estate owned by Borrower or any of
its Domestic Subsidiaries and material to the operations of Borrower and its
Domestic Subsidiaries. The Lenders hereby waive the Event of Default arising
from Borrower's failure to grant a Mortgage on the Pabco Road Property prior to
the date of this Amendment and Waiver plus 120 days.
(c) Under Section 7.12(c) of the Credit Agreement, Borrower has
covenanted and agreed, among other things, to pledge (and cause its Domestic
Subsidiaries to pledge) to Collateral Agent, for the benefit of the Secured
Creditors, 65% of the Capital Stock owned by Borrower or a Domestic Subsidiary
of each new Foreign Subsidiary established, created or acquired after the
Closing Date, in each case within ten Business Days of the establishment,
creation or acquisition thereof. The Lenders hereby waive the Event of Default
arising from Borrower's failure to cause its Subsidiary, TMCA International,
Inc., to timely pledge 65% of the Capital Stock of Loterios S.p.A. in compliance
with Section 7.12(c) of the Credit Agreement prior to the Amendment Effective
Date.
<PAGE>
(d) Under Section 7.12(f) of the Credit Agreement, prior to giving
effect to this Amendment and Waiver, Borrower covenanted and agreed to, within
90 days following the Closing Date, at its own expense, (i) pledge 65% of the
Capital Stock of TIMET FSC, Ltd. to Collateral Agent, for the benefit of the
Secured Creditors, pursuant to a pledge agreement in form and substance
satisfactory to Administrative Agent and (ii) cause Administrative Agent to
receive, with a counterpart for each Lender, a legal opinion of Barbados counsel
acceptable to Administrative Agent covering such matters in respect of such
pledge agreement as Administrative Agent reasonably requests. The Lenders
hereby waive the Event of Default arising from Borrower's failure to timely
comply with the requirements of Section 7.12(f) of the Credit Agreement prior to
the Amendment Effective Date.
(e) Under Section 7.3(a) of the Credit Agreement, Borrower has
covenanted and agreed to, within three Business Days after an officer of
Borrower or of any of its Subsidiaries obtains knowledge thereof, give written
notice to Administrative Agent of any Event of Default. {tc \l3 "Event of
Default. }The Lenders hereby waive the Event of Default arising from Borrower's
not having timely provided the Administrative Agent with due notice of the
Events of Default arising from Borrower's incorrect representations and
warranties made in Sections 6.11(c) and 6.13 and non-compliance with the
covenants in Sections 7.12(c) and 7.12(f) of the Credit Agreement prior to the
Amendment Effective Date.
(f) The above waivers are only applicable and shall only be effective
in the specific instance, for the specific purpose and for the specific period
for which made. The above waivers are expressly limited to (and predicated
upon) the facts and circumstances referred to in this Amendment and Waiver and
shall not operate (i) as a waiver of or consent to non-compliance with any other
Section or provision of the Credit Agreement or any other Loan Document, (ii) as
a waiver of any right, power or remedy of either Administrative Agent,
Collateral Agent or any Lender under the Credit Agreement or any other Loan
<PAGE>
Document or (iii) as a waiver of or consent to any other Event of Default or
Unmatured Event of Default under the Credit Agreement or any other Loan
Document.
4. Conditions to Effectiveness. This Amendment and Waiver shall become
effective (with effect from the date of this Amendment and Waiver) on the date
(the "Amendment Effective Date") on which each of the following conditions has
been satisfied:
(a) Amendment and Waiver. The Administrative Agent shall have
received counterparts of this Amendment and Waiver duly executed by Borrower
and the Required Lenders.
(b) Acknowledgment and Agreement. The Administrative Agent shall
have received, with a counterpart for each Lender, the acknowledgment and
agreement (the "Acknowledgment and Agreement") attached to this Amendment and
Waiver, duly executed by each Subsidiary Guarantor.
<PAGE>
(c) Incumbency Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the Secretary or
Assistant Secretary of each Credit Party, dated the Amendment Effective Date, as
to the incumbency and signature of their respective officers executing this
Amendment and Waiver (including the Acknowledgment and Agreement), the Pledge
Agreement Amendment or any of the other Amendment Documents (as defined below),
together with satisfactory evidence of the incumbency of each such Secretary or
Assistant Secretary.
(d) Borrower Resolutions. Administrative Agent shall have received,
with a counterpart for each Lender, copies, duly certified by the Secretary or
an Assistant Secretary of Borrower, of (i) resolutions of Borrower's Board of
Directors and/or TIMET Finance's Board of Directors authorizing the execution
and delivery of this Amendment and Waiver and the other agreements, instruments
and documents contemplated hereby, and the transactions contemplated hereby,
(ii) all documents evidencing other necessary corporate action, if any, and
(iii) all approvals or consents, if any, necessary with respect to this
Amendment and Waiver and the other agreements, instruments and documents
contemplated hereby, and the transactions contemplated hereby.
(e) Opinion of Counsel. Administrative Agent shall have received,
with a copy for each Lender, the opinion of Sherman & Howard L.L.C., legal
counsel to Borrower, and Robert E. Musgraves, General Counsel of the Borrower,
each dated the Amendment Effective Date and otherwise in form and substance
satisfactory to the Administrative Agent and its counsel.
(f) Officer's Certificate. Administrative Agent shall have received,
with a signed counterpart for each Lender, a certificate executed by a
Responsible Officer of Borrower, dated the Amendment Effective Date, stating
that the representations and warranties set forth in Section 6 hereof and in the
other Loan Documents are true and correct in all material respects (or, with
respect to representations and warranties qualified by materiality, in all
<PAGE>
respects) as of the date of the certificate, that no Event of Default or
Unmatured Event of Default has occurred and is continuing, that the conditions
of this Section 4 have been fully satisfied and that no Liens (except for
Permitted Liens) have been placed against the Collateral or the Mortgaged
Property since the respective dates of the searches of financing statements
filed under the UCC and delivered pursuant to Section 5.1(c) of the Credit
Agreement.
(g) Other. Administrative Agent shall have received such other
instruments, documents, agreements and financing statements and Borrower shall
have taken such other actions as the Administrative Agent or Collateral Agent
may reasonably request.
5. SMC Closing Conditions. The Lenders' willingness to permit the SMC
Acquisition is subject to the satisfaction of each of the following conditions
(collectively, the "SMC Closing Conditions"), in addition to each of the
conditions set forth in Section 4 of this Amendment and Waiver:
<PAGE>
(a) Pledge Agreement Amendment. The Administrative Agent shall have
received, with a counterpart for each Lender, an amendment to that certain
Supplemental Domestic Pledge Agreement, dated as of August 12, 1997, by and
between TIMET Finance and Collateral Agent, or a new pledge agreement by and
between TIMET Finance and Collateral Agent, in any case duly executed by the
parties thereto and otherwise in form and substance satisfactory to the
Administrative Agent, providing for the pledge of the SMC Convertible Preferred
Securities to Collateral Agent, for the benefit of the Secured Creditors (the
"Pledge Agreement Amendment").
(b) Other SMC Collateral Documents. The Administrative Agent shall
have received, with a counterpart for each Lender, (i) a collateral assignment
of the registration rights and other rights granted by SMC or its other
stockholders to Borrower or TIMET Finance relating to the SMC Convertible
Preferred Securities, duly executed by TIMET Finance and Borrower, in form and
substance satisfactory to the Administrative Agent (the "SMC Collateral
Assignment"), (ii) a consent to and acknowledgment of (A) the SMC Collateral
Assignment and (B) the pledge of the SMC Convertible Preferred Securities
pursuant to the Pledge Agreement Amendment, duly executed by SMC and/or a trust
formed and owned by SMC, as applicable, in form and substance satisfactory to
the Administrative Agent and (iii) such other instruments, documents and
certificates reasonably required by the Administrative Agent to effectuate the
pledge of the SMC Convertible Preferred Securities and the assignment of all of
Borrower's and TIMET Finance's rights relating thereto.
(c) Pledged Securities; Stock Powers. The Administrative Agent shall
have received the certificate or certificates representing the SMC Convertible
Preferred Securities pledged pursuant to the Pledge Agreement Amendment,
together with, if applicable, an undated stock power for each such certificate
executed in blank by a duly authorized officer of TIMET Finance.
<PAGE>
(d) Opinion of Counsel. Administrative Agent shall have received,
with a copy for each Lender, the opinion of Sherman & Howard L.L.C., legal
counsel to Borrower, and of Robert E. Musgraves, General Counsel of the
Borrower, dated the closing date of the SMC Acquisition confirming (i) the due
authorization, execution and delivery of the Pledge Agreement Amendment and the
SMC Collateral Assignment, (ii) no violation of law or any material contract of
Borrower or any of its Subsidiaries by the SMC Acquisition, the Pledge Agreement
Amendment, the SMC Collateral Assignment and the transactions contemplated by
any of the foregoing, and (iii) such other matters reasonably requested by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(e) Borrower Resolutions. Administrative Agent shall have received,
with a counterpart for each Lender, copies, duly certified by the Secretary or
an Assistant Secretary of Borrower, of (i) resolutions of Borrower's Board of
Directors and/or TIMET Finance's Board of Directors authorizing the execution
and delivery of the Pledge Agreement Amendment, the SMC Collateral Assignment
and the other agreements, instruments and documents contemplated thereby, and
the transactions contemplated thereby, (ii) all documents evidencing other
necessary corporate action, if any, and (iii) all approvals or consents, if any,
necessary with respect to the Pledge Agreement Amendment, the SMC Collateral
Assignment and the other agreements, instruments and documents contemplated
thereby, and the transactions contemplated thereby.
<PAGE>
(f) Margin Regulations. All Loans shall be in full compliance with
all applicable requirements of law, including, without limitation, Regulations
T, U and X, and the Administrative Agent shall have received, for each Lender, a
properly completed and duly executed Form FR U-1.
(g) Credit Conditions. The conditions set forth in Section 5.2 of
the Credit Agreement shall have been satisfied (whether or not a Credit Event
occurs in connection with the SMC Acquisition, except with respect to Section
5.2(c)).
(h) Other. Administrative Agent shall have received such other
instruments, documents, agreements and financing statements and Borrower shall
have taken such other actions as the Administrative Agent or Collateral Agent
may reasonably request.
6. Representations and Warranties. Borrower makes the following
representations and warranties:
(a) Each of the representations and warranties contained in the
Credit Agreement and the other Loan Documents shall each be true and correct in
all material respects on and as of the Amendment Effective Date before and after
giving effect to the effectiveness of this Amendment and Waiver, as though made
on and as of the Amendment Effective Date, except to the extent such
representations and warranties are (i) expressly made as of a specified date in
which event such representations and warranties shall be true and correct as of
such specified date or (ii) qualified by materiality, in which event such
representations and warranties shall be true and correct in all respects.
(b) Each Credit Party has the corporate, partnership or other
requisite power and authority to execute, deliver and perform the terms and
provisions of this Amendment and Waiver (including the Acknowledgment and
Agreement) and each other agreement, instrument or document executed and
<PAGE>
delivered in connection herewith to which it is a party (each, an "Amendment
Document" and, collectively, the "Amendment Documents") and has taken all
necessary corporate, partnership or other action to authorize the execution,
delivery and performance by it of each Amendment Document to which it is a
party. Each Credit Party has duly executed and delivered each Amendment
Document to which it is a party. Each Amendment Document constitutes the legal,
valid and binding obligation of each Credit Party party thereto, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
(c) As of the date hereof, after giving effect to the waivers set
forth in Section 3 of this Amendment and Waiver, there exists no Event of
Default or Unmatured Event of Default under the Credit Agreement or any other
Loan Document. Immediately after giving effect to the SMC Acquisition, there
will exist no Event of Default or Unmatured Event of Default under the Credit
Agreement or any other Loan Document.
<PAGE>
7. Certain Real Property Collateral Matters. The Lenders hereby
authorize the Collateral Agent to take the following actions, in the manner and
on the terms the Collateral Agent deems appropriate in its sole discretion:
(a) the Collateral Agent may enter into amendments to the Mortgages
covering any of the Mortgaged Properties listed on Schedule 6.11(c), in form and
substance satisfactory to the Collateral Agent, to reflect the results of the
surveys delivered pursuant to Sections 7.12(i) and 7.14 of the Credit Agreement;
and
(b) the Collateral Agent may enter into amendments to the Mortgage
covering the real property of Borrower located in Henderson, Nevada, in form and
substance satisfactory to the Collateral Agent, to cover only the portion of
such property beneficially owned by Borrower or its Subsidiaries and used or
useful in Borrower's or such Subsidiaries' business.
The Lenders acknowledge that the actions taken by the Collateral Agent pursuant
to clauses (a) and (b) above may result in certain property being released from
the coverage of the Mortgages and the termination of the liens thereunder in
favor of the Collateral Agent, for the benefit of the Secured Creditors.
8. Reference to and Effect Upon the Credit Agreement and other Loan
Documents.
(a) Except as otherwise expressly provided herein, the Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect and each is hereby ratified and confirmed.
(b) The execution, delivery and effect of this Amendment and Waiver
shall be limited precisely as written and shall not be deemed to (i) be a
consent to any waiver of any term or condition or to any amendment or
modification of any term or condition of the Credit Agreement or any other Loan
<PAGE>
Document, except, upon the effectiveness, if any, of this Amendment and Waiver,
as specifically amended in Section 2 above and for the specific waivers set
forth in Section 3 above, or (ii) prejudice any right, power or remedy which the
Administrative Agent, Collateral Agent or any Lender now has or may have in the
future under or in connection with the Credit Agreement or any other Loan
Document. Upon the effectiveness, if any, of this Amendment and Waiver, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or any other word or words of similar import shall mean and be a
reference to the Credit Agreement as amended hereby, and each reference in any
other Loan Document to the Credit Agreement or any word or words of similar
import shall be and mean a reference to the Credit Agreement as amended hereby.
9. Payment of Expenses. Borrower agrees to pay all reasonable out-of-
pocket costs and expenses of Administrative Agent in connection with the
negotiation, preparation, printing, typing, reproduction, execution and delivery
of this Amendment and Waiver as more fully set forth in Section 12.4 of the
Credit Agreement.
<PAGE>
10. No Other Amendments; Confirmation. Except as expressly modified or
waived hereby, the provisions of the Credit Agreement, the Notes and the other
Loan Documents are and shall remain in full force and effect.
11. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF SAID
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
12. Counterparts This Amendment and Waiver may be executed by one or
more of the parties to this Amendment and Waiver on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This Amendment and Waiver may be
delivered by facsimile transmission of the relevant signature pages hereof.
13. Headings. Section headings in this Amendment and Waiver are included
herein for convenience of reference only and shall not constitute a part of this
Amendment and Waiver for any other purpose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed by their respective officers thereunto duly
authorized, as of the date first above written.
TITANIUM METALS CORPORATION
By:
Name: J. Thomas Montgomery, Jr.
Title: Vice President - Finance and Treasurer
BANKERS TRUST COMPANY, as a Lender and as
Administrative Agent and Collateral Agent
By:
Name:
Title:
<PAGE>
LENDERS:
CORESTATES BANK, N.A.,
AS A CO-AGENT
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
SANWA BUSINESS CREDIT CORPORATION,
AS A CO-AGENT
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
BANK OF MONTREAL
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
THE BANK OF NOVA SCOTIA
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
BANQUE NATIONALE DE PARIS
By:_________________________________
Title:________________________________
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
CREDIT LYONNAIS NEW YORK BRANCH
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
THE FIRST NATIONAL BANK OF CHICAGO
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
THE FUJI BANK, LIMITED LOS ANGELES
AGENCY
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
KEYBANK NATIONAL ASSOCIATION
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
MELLON BANK, N.A.
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
PNC BANK, N.A.
By:_________________________________
Title:________________________________
<PAGE>
LENDERS:
SOCIETE GENERALE, SOUTH WEST AGENCY
By:_________________________________
Title:________________________________
By:_________________________________
Title:________________________________
<PAGE>
Each of the undersigned hereby acknowledges and agrees to this Amendment
and Waiver, and agrees that the Subsidiary Guaranty, dated as of July 30, 1997,
the Security Agreement, dated as of July 30, 1997, the Pledge Agreement, dated
as of July 30, 1997 and each other Loan Document executed by the undersigned
shall remain in full force and effect and each is hereby ratified and confirmed
as of the Amendment Effective Date.
TIMET CASTINGS CORPORATION
By:_____________________________________
Name: __________________________________
Title: ___________________________________
TITANIUM HEARTH TECHNOLOGIES, INC.
By:_____________________________________
Name: __________________________________
Title: ___________________________________
<PAGE>
TMCA INTERNATIONAL, INC.
By:_____________________________________
Name: __________________________________
Title: ___________________________________
TIMET FINANCE MANAGEMENT COMPANY
By:_____________________________________
Name: __________________________________
Title: ___________________________________
101683.12
<PAGE>
(Attach Exhibit A)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Titanium
Metals Corporation's Consolidated Financial Statements for the six months ended
June 30, 1998 and is qualified in its entirety by reference to such Consolidated
Financial Statements.
</LEGEND>
<CIK> 0001011657
<NAME> TITANIUM METALS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 80,326
<SECURITIES> 0
<RECEIVABLES> 160,653
<ALLOWANCES> 2,323
<INVENTORY> 195,553
<CURRENT-ASSETS> 453,516
<PP&E> 362,959
<DEPRECIATION> 65,120
<TOTAL-ASSETS> 879,181
<CURRENT-LIABILITIES> 148,937
<BONDS> 0
201,250
0
<COMMON> 315
<OTHER-SE> 436,259
<TOTAL-LIABILITY-AND-EQUITY> 879,181
<SALES> 377,878
<TOTAL-REVENUES> 380,810
<CGS> 287,943
<TOTAL-COSTS> 322,360
<OTHER-EXPENSES> 5,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 949
<INCOME-PRETAX> 57,501
<INCOME-TAX> 19,584
<INCOME-CONTINUING> 32,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,106
<EPS-PRIMARY> 1.02
<EPS-DILUTED> .99
</TABLE>
