FINAL
SUPPLY AGREEMENT
BY AND AMONG
COMMONWEALTH ALUMINUM CORPORATION
IMCO RECYCLING OF OHIO INC.
AND
IMCO RECYCLING INC.
TABLE OF CONTENTS
I. Expansion of Facility .................................. 1
II. Agreement to Sell and to Purchase ........................ 1
III. Term...................................................... 2
IV. Tolling Operation......................................... 3
V. Price, Packaging and Terms and Conditions of Sale......... 4
VI. Warranty and Related Rights............................... 4
VII. Force Majeure............................................. 5
VIII. Proprietary and Confidential Information.................. 5
IX. Notices and Communication................................. 7
X. Independent Status of Parties and Limitation of Authority. 8
XI. Patent Infringement....................................... 8
XII. Indemnity................................................. 8
XIII. Option to Purchase and Right of First Refusal............. 9
XIV. Termination............................................... 9
XV. Representations........................................... 10
XVI. Miscellaneous............................................. 11
Exhibit "A" (Quality).............................................. 15
Exhibit "B" (Scrap Receiving Procedures)........................... 00
Xxxxxxx "X" (Xxxxxxxx Recoveries).................................. 26
Exhibit "D" (Volume and Price)..................................... 30
Exhibit "E" (Base Price Adjustments)............................... 34
Exhibit "F" (Waste Minimization)................................... 36
Exhibit "G" (Option to Purchase and Right of First Refusal)........ 38
Page 4
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made and entered into
effective as of this 1st day of April, 1999, by and among Commonwealth Aluminum
Corporation, a Delaware corporation with its principal place of business at 000
Xxxx Xxxxxxxxx, Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 ("Buyer"
or "Commonwealth"), IMCO Recycling of Ohio Inc., a Delaware corporation with its
principal place of business at 0000 Xxxxxxx Xxxx X.X., Xxxxxxxxxxxx, Xxxx 00000
("Supplier") and IMCO Recycling Inc., a Delaware corporation with its principle
place of business at 0000 X. X'Xxxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxx 00000
("IMCO").
WHEREAS, Buyer is engaged in the business of producing aluminum rolled
products at its rolling mill facility in Uhrichsville, Ohio (the "Mill"); and
WHEREAS, Supplier is engaged in the business of recycling and
processing aluminum at its aluminum recycling and processing facility in
Uhrichsville, Ohio (the "Facility"); and
WHEREAS, the parties desire to enter into a Supply Agreement whereby
Supplier will provide tolling services to Buyer so as to satisfy certain of
Buyer's requirements of secondary aluminum in the form of ingot and molten
metal, and Buyer will purchase said services from Supplier.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the adequacy and sufficiency of which are hereby acknowledged,
and intending to be legally bound, the parties agree as follows:
ARTICLE I. EXPANSION OF FACILITY
1.01 EXPANSION OF FACILITY BY SUPPLIER. Subject to the terms of this
Agreement, Supplier agrees to complete the installation of two (2) reverberatory
furnaces (the "Reverb Furnaces") in the Facility as soon as reasonably
practicable after all environmental and construction permits required for the
installation of the Reverb Furnaces have been procured by Supplier. Supplier
agrees to use its commercially reasonable best efforts to obtain all permits
required to construct the Reverb Furnaces. Supplier and Buyer anticipate that
the Reverb furnaces will be operational by January 1, 2000. In the event that
the Reverb furnaces are not fully operational within thirty (30) days of such
date, then the Supplier and Buyer shall negotiate in good faith appropriate
changes to this Agreement.
ARTICLE II. AGREEMENT TO SELL AND TO PURCHASE
2.01 PURCHASE OF REQUIREMENTS. Subject to the terms and provisions of
Exhibit "D" hereto, Supplier shall be Buyer's exclusive source of secondary
ingot and molten metal with respect to the Scrap Based Alloys used by the Mill
in conformance with the specifications detailed in Exhibit "A" hereto (the
"Product") up to the Target Volume. For purposes of this Agreement, "Scrap Based
Alloys" shall refer to all aluminum alloys except alloys 1100, 1350, 8111 and
5052 and any additional high purity alloys which may be excluded by mutual
agreement as listed in the Registration Record of Aluminum Association
Designation and Chemical Composition Limits for Wrought Aluminum and Wrought
Aluminum Alloys ("Green Sheet"). Buyer shall, however, be permitted to purchase
nominal quantities of primary alloys and other "sweeteners" from vendors other
than Supplier to achieve the standards set forth for Scrap Based Alloys in the
Green Sheet. In determining the source of raw materials to be used in the
production of Buyer's alloys, it is the intent of Buyer to maximize the use of
Scrap (as defined in Section 4.01(a) below) in the composition of Scrap Based
Alloys. Notwithstanding anything in this Section 2.01 to the contrary, Buyer has
arrangements for tolling with certain of its sheet customers, and such
arrangements shall not be deemed to be a violation of this Agreement; provided
however, that Buyer shall notify Supplier in writing of all such arrangements,
and provided further that the aggregate annual volume for all such third party
tolling of Scrap Based Alloys shall not exceed eight percent (8%) of the Target
Volume.
2.02 SUPPLY OBLIGATIONS. Subject to the terms of this Agreement,
Supplier shall toll/convert sufficient quantities of Buyer's Scrap (defined
below) as ordered by Buyer from time to time so as to satisfy the Target
Volume(s) as set forth in Exhibit "D". Supplier shall not be prohibited from
selling any ingot or molten metal it produces at the Facility to purchasers
other than Buyer, provided that Supplier at all times meets its supply
obligations to Buyer hereunder. Notwithstanding the foregoing, Buyer shall be
the principal customer of the Facility, and for so long as Buyer is not in
violation of this Agreement Buyer's orders shall receive priority scheduling
over Supplier's other customers at the Facility.
In the event Supplier agrees to sell or toll any ingot, molten metal or
any other product or accepts any Scrap at the Facility for any purchaser other
than Buyer, Supplier shall not comingle the scrap, waste, dunnage, or finished
products relating to any other purchasers with those of Buyer. Supplier shall
maintain and make available to Buyer accurate and complete records of the Scrap,
waste, dunnage, and finished products relating to services performed for Buyer
under this Agreement and separate records for services provided or products
produced for other purchasers. The exact content of said records shall include
such detail as may reasonably be requested by Buyer from time to time.
ARTICLE III. TERM
3.01 TERM. This Agreement shall be effective as of the date first
written above (the "Effective Date"). Subject to the installation of the Reverb
Furnaces as provided in Section 1.01, the obligations of the parties with
respect to the delivery and processing of Scrap (as defined in Section 4.01)
shall commence April 1, 1999 and shall be in effect for a ten (10) year term
thereafter. For purposes of this Agreement the term "Contract Year" shall refer
to consecutive twelve (12) month periods commencing April 1st of each calendar
year. Similarly "Contract Quarter" shall refer to each consecutive three (3)
month period during the term of this Agreement.
ARTICLE IV. TOLLING OPERATION
4.01 TOLLING OPERATION.
(a) Buyer will purchase Scrap, as defined below, to be delivered to
Supplier to be tolled/processed into Product. Upon request by Buyer, Supplier
will, at its expense, receive and accept said Scrap. For purposes of this
Agreement, Scrap shall include and be classified into the categories listed in
Part I of Exhibit "C" (the "Scrap"). Buyer shall make available for the use of
Supplier, and Supplier shall at its expense pick up or cause to be picked up,
dross from the Mill for its use in the tolling/processing of Scrap for Buyer
hereunder. The quantities of Scrap and dross supplied by Buyer shall be
sufficient so that, assuming the Supplier obtains recovery rates set forth in
Exhibit "C", Supplier will be able to process the Target Volume (defined in
Exhibit "D").
(b) Supplier shall at its expense load or cause to be loaded onto
Buyer's trucks all saltcake and rotary furnace baghouse dust generated as a
result of Supplier's tolling/converting operations for Buyer. Supplier shall be
solely responsible for disposing of all waste, impurities, refuse or other
substance or material produced as a result of the Facility operations not
otherwise required to be delivered to Buyer hereunder. Buyer shall indemnify and
hold Supplier, its officers, directors and shareholders harmless from any and
all damages, losses, liabilities, suits, actions, demands, proceedings (whether
legal or administrative), and expenses (including but not limited to attorneys'
fees) suffered by Supplier which arise directly or indirectly out of Buyer's
treatment, storage, recycling or disposal of saltcake and rotary furnace
baghouse dust. Buyer shall from time to time provide to Supplier the information
and documentation reasonably requested by Supplier regarding the disposal or
recycling of saltcake and rotary furnace baghouse dust by Buyer.
(c) Supplier shall, as part of its tolling operations, supply and at
all times maintain at its expense a sufficient number of crucibles and low
profile sow molds necessary to comply with its supply obligations under this
Agreement.
(d) Except as otherwise provided in Section 7.01, Supplier shall at all
times during its period of performance of this Agreement, provide and augment as
necessary a work force and Facility Capacity fully adequate to perform and
comply with this Agreement. The term "Facility Capacity" as used herein shall
include but shall not be limited to, engineers, skilled and unskilled workmen,
supervision, materials, supplies, tools, equipment and facilities.
4.02. TITLE. All Scrap supplied by Buyer to Supplier hereunder, as well
as the resulting Product, shall remain the sole property of and be at all times
titled in the name of Buyer, and Supplier shall execute and deliver to Buyer
upon reasonable request by and at the expense of Buyer, documentation to
evidence and/or perfect such retention of title.
ARTICLE V. PRICE, PACKAGING AND TERMS AND CONDITIONS OF SALE
5.01 PRICE. The compensation and remuneration which Buyer shall be
required to pay Supplier in consideration of Supplier's performance of its
obligations hereunder is set forth in Exhibit "D" hereto.
5.02 PACKAGING AND DELIVERY PROCEDURE. Packaging, preparation for
transport, delivery, and identification of Product items shall be in accordance
with Exhibit "A" hereto. Supplier shall, at its expense, deliver or cause to be
delivered to the Mill all Product processed pursuant to this Agreement.
5.03 TERMS AND CONDITIONS OF SALE. All orders placed and services
performed pursuant to this Agreement shall be subject to the terms of this
Agreement. Notwithstanding the fact that either party may submit purchase
orders, acknowledgments, invoices, or similar documentation, any terms or
conditions contained in said documents inconsistent with or contrary to the
terms of this Agreement shall be superseded by the terms hereof.
5.04 INSPECTION OF SUPPLIER'S FACILITY. Supplier shall grant to Buyer
access to the Facility and to its books and records during normal business hours
upon prior written notice for the purpose of verifying Supplier's compliance
with the terms of this Agreement.
ARTICLE VI. WARRANTY AND RELATED RIGHTS
6.01 WARRANTY. Supplier warrants that the Product will meet the
specifications set forth in Exhibit "A" in all material respects. In the event
Supplier fails to achieve the recovery rates set forth in Exhibit "C", Supplier
shall be obligated to pay the penalty set forth therein either in cash or such
other method acceptable to Buyer.
6.02 QUALITY. The Product shall meet the manufacturing, design,
performance, and appearance specifications as described in Exhibit "A". Should
any of the Product fail to meet said specifications, Buyer and Supplier shall
immediately initiate the procedures set forth in Exhibit "A". In no event shall
Buyer be entitled to consequential damages, but this exclusion shall in no event
limit or restrict Buyer's right to recover direct and incidental damage for
Supplier's breach and the Non-conformance Penalty described in Exhibit "A",
Paragraph 5.
6.03 DISCLAIMER OF OTHER WARRANTIES. EXCEPT FOR THE WARRANTIES
CONTAINED IN THIS ARTICLE VI, SUPPLIER MAKES NO WARRANTY THAT THE PRODUCT
COVERED BY THIS AGREEMENT IS MERCHANTABLE OR FIT FOR ANY PARTICULAR PURPOSE AND
THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THIS ARTICLE
VI.
ARTICLE VII. FORCE MAJEURE
7.01 FORCE MAJEURE. In any event, and in addition to all other
limitations stated herein, the parties hereto shall not be liable for any act,
omission, result, or consequence, including but not limited to any delay in
delivery or performance, which is due to any act of God, the prior performance
of any government order, fire, flood, or casualty, government regulation or
requirement, shortage or failure of raw material, supplies, fuel, power or
transportation, breakdown of equipment, or any other cause beyond said party's
reasonable control whether of a similar or dissimilar nature to those above
enumerated, or due to any strike, labor dispute or difference with workers,
regardless of whether or not said party is capable of settling such labor
problem.
Upon the occurrence of any of the events described in this Section
7.01, Supplier shall have the obligation to use its reasonable best efforts to
supply the Product to the Buyer from its affiliated plants if the Facility is
not able, as a result of one of the events described herein, to process the
quantities of Scrap and dross set forth on Exhibit "D" at any time during the
term of this Agreement.
ARTICLE VIII. PROPRIETARY AND CONFIDENTIAL INFORMATION
8.01 PROPRIETARY INFORMATION. Buyer and Supplier acknowledge that, in
the course of performing their duties under this Agreement, they will
necessarily be supplied with confidential and/or proprietary information of the
other party concerning business affairs, methods of operation, processes and
other information.
(a) For purposes of this Article VIII, the term "Confidential
Information" shall mean any and all proprietary, trade secret, technical and
other confidential information concerning the business or affairs of the
provider, including but not limited to:
(i) information concerning the design or method of production
of any of the provider's products or services, including but not
limited to all records, files, memorandum, reports, price lists,
customer lists, drawings, plans, sketches, documents, equipment,
production specifications, manufacturing processes and methods,
production machinery, quality assurance methods, accounting systems,
and the like;
(ii) discoveries, inventions, copyrights, whether patentable
or not, and including, without limitation, the nature and result of
research, development, manufacturing, marketing, planning and other
business activities and all designs, concepts, processes and
operational techniques in connection with Supplier's rotary furnaces;
(iii) ideas, concepts and mathematical formulas which comprise
all of said confidential information.
(b) It is agreed that the Confidential Information shall include all
information described in Section 8.01(a) except for --------------- any
information:
(i) which is already in recipient's possession, by recipient's development;
(ii) which is generally available to the public or which
becomes generally available to the public through no act or failure to
act on the part of recipient or recipient's agents or employees;
(iii) which is disclosed to recipient on a non-confidential
basis by a third party having no obligation to provide it on a
confidential basis or to refrain from so doing; or
(iv) which the recipient can demonstrate by written record was
independently developed by persons who did not have access to
provider's information.
Specific information disclosed shall not be deemed to be in recipient's
possession, or part of public knowledge or literature, or available to recipient
merely because it can be assembled by selection of information previously in
recipient's possession or part of the public knowledge or literature or
available to recipient from a source other than the provider.
8.02 NON-DISCLOSURE. The parties hereby acknowledge that all
Confidential Information has been developed or acquired at considerable expense,
and has independent economic value from not being known or readily ascertainable
by others, and hereby covenant and agree that each will not, nor permit any
subsidiary, affiliate or employee to, communicate or divulge to, or use for the
benefit of itself or any other person, firm, association, or corporation,
without the prior written consent of the other party, any Confidential
Information or Know how (as defined in Section 8.03 below) that may be
communicated to, acquired by, or learned by the other party in the course of or
as a result of this Agreement.
8.03 KNOW HOW. The parties hereby recognize that the other party has a
property interest not only in the actual Confidential Information but also in
the ideas, concepts, and mathematical formulas ("Know how") which comprises said
information. In addition to each party's duty not to disclose said Know how as
provided in Section 8.02, each party further agrees that it will not integrate
any of the Know how into any of its products or processes which it develops.
8.04 LABELING CONFIDENTIAL INFORMATION. The failure of either party to
designate or label any property or information as confidential, proprietary or
trade secret shall in no way affect the property's classification as such. In no
instance shall any information disclosed to the other party, regardless of
whether said information would constitute Confidential Information, be
reproduced by the other party in any form whatsoever.
8.05 RETURN OF INFORMATION. Each party agrees, upon request of the
other party, to promptly deliver to the other party all drawings, blueprints,
manuals, letters, notes, notebooks, reports, computer software, compilations of
information and all other material or copies thereof, in whatever form,
including without limitation, electronic media or other tangible forms of any
information, obtained from the other party, regardless of whether said
information would constitute Confidential Information, which is in said party's
possession or under said party's control.
8.06 USE BY PARTY'S EMPLOYEES AND AGENTS. The parties hereby agree to
limit the number of employees and agents that have access to the Confidential
Information to those whose knowledge of such information is essential for said
party to satisfy its obligations under this Agreement. Each party shall use its
reasonable best efforts to ensure that its employees and agents do not utilize
the Confidential Information except in the performance of their duties to said
party.
8.07 EQUITABLE RELIEF. The parties hereby acknowledge and agree that a
breach by it of the provisions of this Article VIII would cause the other party
irreparable injury and damage which could not be reasonably or adequately
compensated by damages at law. Therefore, each party expressly agrees that in
addition to any other remedies provided for by law, in equity or pursuant to
this Agreement, either party shall be entitled to injunctive or other equitable
relief to prevent a breach of this Article VIII by the other party.
ARTICLE IX. NOTICES AND COMMUNICATION
9.01 NOTICES AND COMMUNICATION. Any notice or other communication
required or permitted hereunder shall be sufficiently given if delivered in
person, sent registered mail, postage prepaid, or by electronic transmission
confirmed by the recipient addressed as follows:
As to Buyer: Commonwealth Aluminum Corporation
000 Xxxx Xxxxxxxxx
Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxx, Vice President Materials
With a copy to: Shottenstein, Zox & Xxxx
00 X. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
As to Supplier: IMCO Recycling Inc.
0000 Xxxxx X'Xxxxxx Xxxx.
Xxxxx 000
Central Tower at Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: President
The date upon which any such communication is personally delivered or,
if such communication is transmitted by mail or electronic transmission, the
date upon which it is received by the addressee, shall be deemed the effective
date of such communication. Each party shall promptly advise the other in
writing in the event of any change in their respective addresses.
ARTICLE X. INDEPENDENT STATUS OF PARTIES
10.01 INDEPENDENT STATUS OF PARTIES. This Agreement does not appoint
either party the other's agent, or partner for any purpose whatsoever, nor does
it grant to either party any right or authority to create any obligation or
responsibility, expressed or implied, on behalf of or in the name of the other
party, nor to bind the other party in any manner whatsoever. No partnership or
joint venture is intended nor is created as a result of this Agreement, but
rather the parties' relationship shall be that of a Supplier/Customer and except
as otherwise provided herein, each shall be solely answerable for the cost and
expenses, consequences and damages arising out of their own acts and from the
operation and maintenance of their respective businesses.
ARTICLE XI. PATENT INFRINGEMENT
11.01 PATENT INFRINGEMENT. Supplier shall, at its own expense, defend
any suit or proceeding brought against Buyer to the extent the same is based
upon a claim that any Product furnished by Supplier hereunder constitutes an
infringement of any patent of the United States, and Supplier shall pay all
damages and costs awarded in such action against buyer. In case any Product
furnished hereunder is in such suit held to constitute infringement and their
use or sales enjoined, Supplier shall, at its expense, either:
(a) procure for buyer the rights to continue using said Product;
(b) replace them with non-infringing Products;
(c) modify them so they become non-infringing, provided that the
Products are so modified to Buyer's satisfaction; or
(d) remove them and refund the purchase price and the transportation
costs thereof.
ARTICLE XII. INDEMNITY
12.01 BUYER'S INDEMNITY. Buyer hereby agrees to indemnify and hold
Supplier, its officers, directors and shareholders harmless from and against any
and all damages, losses, liabilities, suits, actions, demands, proceedings
(whether legal or administrative), and expenses (including but not limited to
attorneys' fees) arising, directly or indirectly, out of any action or failure
to act by Buyer, its employees or agents or any negligence, breach of this
Agreement, or misrepresentation, on the part of Buyer, its employees or agents.
Notwithstanding anything contained in this Agreement to the contrary, Supplier
shalI only be entitled to recover direct and incidental damages and not
consequential damages.
12.02 SUPPLIER'S INDEMNITY. Supplier hereby agrees to indemnify and
hold Buyer, its officers, directors and shareholders harmless from and against
any and all damages, losses, liabilities, suits, actions, demands, proceedings
(whether legal or administrative), and expenses (including but not limited to
attorneys' fees) arising, directly or indirectly, out of any action or failure
to act by Supplier, its employees or agents or any negligence, breach of this
Agreement, or misrepresentation, on the part of Supplier, its employees or
agents. Notwithstanding anything contained this Agreement to the contrary, Buyer
shall only be entitled to recover direct and incidental damages and not
consequential damages.
ARTICLE XIII. OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL
13.01 OPTION TO PURCHASE RELATING TO FACILITY. IMCO hereby reaffirms
Buyer's Option to Purchase the Facility as set forth in Exhibit "G".
13.02 RIGHT OF FIRST REFUSAL RELATING TO FACILITY. IMCO hereby
reaffirms Buyer's Right of First Refusal relating to the Facility as set forth
in Exhibit "G".
ARTICLE XIV. TERMINATION
14.01 TERMINATION. (a) Either of the parties hereto may terminate this
Agreement by notice in writing to the other party in any of the following
events:
(i) Any attempted assignment of this Agreement by the other party except as
provided in Section 16.01 of this ------------- Agreement;
(ii) Dissolution or liquidation of the other party;
(iii) Application for or appointment of a receiver by the
non-terminating party;
(iv) Assignment for the benefit of creditors by the non-terminating party;
(v) Appointment of a committee of creditors or a liquidating agent by the
non-terminating party;
(vi) An offer of composition or extension to creditors
generally by the non-terminating party;
(vii) The adjudication of the non-terminating party as
bankrupt or insolvent;
(viii) The non-terminating party files a voluntary petition
for bankruptcy or admits in writing that it is unable to pay its debts
as they become due;
(ix) Either party fails to cure a default hereunder, other
than as a result of Buyer's failure to make payments when due hereunder
or Supplier's failure to deliver the Product when said delivery is
required hereunder, within sixty (60) days after receipt of written
notice thereof; or
(x) Subject to Section 7.01, delivery or payments not made when due after
the expiration of a sixty (60) day ------------- grace period.
The grace periods provided for in Subparts (ix) and (x) shall be extended during
such period as the Parties are negotiating in good faith with regard to a
legitimate dispute with respect to the Parties' obligations hereunder.
(b) In the event of a termination of this Agreement pursuant to the
provisions of this Article XIV, except under Section 14.01(a)(x), any orders
outstanding as of the effective date of termination shall be filled in
accordance with the terms of this Agreement, and any excess inventory will be
properly picked up by Buyer.
(c) No termination of this Agreement shall in any way affect the
obligation of the other party with regard to the provisions of this Agreement
previously matured and/or in effect, including, but not limited to, the
obligations relating to confidentiality under Article VIII hereof, the right to
enforce any remedy for the breach of any terms of this Agreement or the
indemnity obligations under Article XII, and Section 4.01(b).
(d) Buyer may terminate this Agreement in accordance with the terms of
Section 5 of Exhibit "A." ------------
ARTICLE XV. REPRESENTATIONS
15.01 REPRESENTATIONS OF BUYER.
(a) Authorization and Validity of Agreement. The execution, delivery
and performance by Buyer of this Agreement have been duly authorized by its
Board of Directors. No other corporate action on the part of Buyer is necessary
for the execution, delivery and performance by Buyer of this Agreement. This
Agreement has been duly executed and delivered by Buyer and is a legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceedings therefor may be brought.
(b) No Conflict. Neither the execution and delivery of this Agreement,
nor any other agreement or instrument executed and delivered by Buyer under this
Agreement does (i) conflict with, violate or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or accelerate or
permit the acceleration of the performance under, the Certificate or Articles of
Incorporation or Bylaws, as amended, of Buyer, or any contract, judgment, order,
award or decree to which Buyer is a party or is subject to by which it is bound
or to which any of its assets is subject; (ii) require the approval, consent,
authorization or other order or action of any court, governmental authority or
regulatory body or filing or registration therewith or notice thereto; (iii)
result in the violation by Buyer of any law, rule, regulation or order of any
jurisdiction; or (iv) require the consent, approval or authorization of any
other person.
15.02 REPRESENTATIONS OF SUPPLIER.
(a) Authorization and Validity of Agreement. The execution, delivery
and performance by Supplier of this Agreement have been duly authorized by its
Board of Directors. No other corporate action on the part of Supplier is
necessary for the execution, delivery and performance by Supplier of this
Agreement. This Agreement has been duly executed and delivered by Supplier and
is a legal, valid and binding obligation of Supplier, enforceable against
Supplier in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceedings therefor may be brought.
(b) No Conflict. Neither the execution and delivery of this Agreement,
nor any other agreement or instrument executed and delivered by Supplier under
this Agreement does (i) conflict with, violate or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or accelerate
or permit the acceleration of the performance under, the Certificate of
Incorporation or Bylaws, as amended, of Supplier, or any contract, judgment,
order, award or decree to which Supplier is a party or is subject or by which it
is bound or to which any of its assets is subject; (ii) require the approval,
consent, authorization or other order or action of any court, governmental
authority or regulatory body or filing or registration therewith or notice
thereto; (iii) result in the violation by Supplier of any law, rule, regulation
or order of any jurisdiction; or (iv) except as set forth in Paragraph 5, Part C
of Exhibit "G," require the consent, approval or authorization of any other
person.
ARTICLE XVI. MISCELLANEOUS
16.01 BENEFIT AND ASSIGNMENT. Subject to the restrictions contained in
this Agreement prohibiting the assignment of this Agreement, this Agreement
shall inure to the benefit of, and be binding upon, the respective successors
and assigns of the parties hereto. This Agreement shall not be assigned by
either party without the express written consent of the other which consent
shall not be unreasonably withheld or delayed. If Buyer or Supplier proposes to
assign this Agreement in accordance with the terms of this Section 16.01 then
Buyer or Supplier, as the case may be, agrees to cause the person or entity to
whom this Agreement will be assigned or transferred to assume in writing Buyer's
or Supplier's, as the case may be, obligations under this Agreement.
Notwithstanding anything contained herein to the contrary, either party shall
have the right to assign this Agreement to its direct or indirect wholly owned
subsidiary. In addition, notwithstanding any provision herein to the contrary,
no provision in this Agreement shall affect in any way the right or power of
either Buyer or Supplier, or their respective shareholders, to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
their respective capital structure or business, or any merger or consolidation
of either of them, or any other corporate act or proceeding respecting them,
whether of a similar character or otherwise. Notwithstanding anything in this
Agreement to the contrary, the assignment of this Agreement by either party to a
direct or indirect wholly owned subsidiary or any adjustment, recapitalization,
reorganization, or other change or merger or consolidation described above shall
in no way release said assignor of its obligations and duties under this
Agreement.
16.02 NON-WAIVER. The failure of either party at any time to enforce
any provision of this Agreement shall not be construed to be a waiver of such
provision of the right of the respective party hereunder to enforce any such
provision.
16.03 SEVERABILITY. If any provision of this Agreement or the
application thereof to any party or circumstance shall for any reason and to any
extent be deemed invalid or unenforceable, the remainder of this Agreement and
application of such provision to the other parties and other circumstances shall
not be affected thereby, but rather the invalid or unenforceable provisions as
applied to the particular party or circumstance shall be modified to the extent
necessary so as to render said provision valid and enforceable while to the
greatest extent possible accomplishing the intended purpose of said provision.
16.04 ENTIRE AGREEMENT. This writing constitutes the entire Agreement
between the parties relating to the sale of the Products described herein during
the specific term, and any extensions thereof, and supersedes all previous
contracts, including but not limited to, the Supply Agreement entered into
between the parties hereto on March 2, 1992 (the "1992 Agreement"). As of the
date hereof, the 1992 Agreement is hereby terminated and shall be null, void and
of no further force and effect. Neither party to this Agreement makes any
representation to the other party except as expressly set forth in this
Agreement. No modification or waiver of any of the terms of this Agreement shall
bind either party unless in writing signed by duly authorized representatives of
both Buyer and Supplier.
16.05 CAPTIONS. Captions of the sections of this Agreement are for
convenience and reference only and the words contained therein shall in no way
be held to explain, modify, amplify, or aid in the interpretation, construction,
or meaning of the provisions of this Agreement.
16.06 GOVERNING LAW. This Agreement shall be construed under and
enforced according to the laws of the State of Ohio, without giving effect to
the conflict of law principles thereof, and any action arising out of or related
to this Agreement shall be venued in a federal or state court of appropriate
jurisdiction in the State of Ohio. The parties hereby consent to the
jurisdiction of the said courts.
16.07 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, Buyer and Supplier shall use their reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable to make effective as promptly and
practicable the transactions contemplated by this Agreement and to cooperate
with each other in connection with the foregoing.
16.08 FINDER'S AND BROKER'S FEES. Buyer and Supplier each represent and
warrant to the other that there are no claims (or any basis for any claims) for
brokerage commissions, finder's fees or like payments in connection with this
Agreement or the transactions contemplated hereby resulting from any action
taken by either of them or on behalf of either party.
16.09 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.10 SUBSTANTIATION. For purposes of substantiating each party's
financial information or data which relates to each party's obligations under
this Agreement, each party shall record and account for such items in a manner
which is consistent with its historical practice applied in a consistent manner
or if it is determined such party's independent certified public accountants
that it is appropriate to change said historical practice, then in a manner in
conformity with generally accepted accounting principles with all said changes
being fully disclosed to the other party.
16.11 PUBLICITY. Neither party shall use the name of the other in
publicity releases or advertising or for other promotional purposes, without
securing the prior written approval of the other party hereto, unless in the
opinion of counsel to such disclosing party, such disclosure is required by law
in which event a copy will be provided to the non-disclosing party.
[signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the date first written above by their duly authorized representatives.
BUYER:
COMMONWEALTH ALUMINUM CORPORATION
By:
Name:
Title:
SUPPLIER:
IMCO RECYCLING OF OHIO INC.
By:
Name:
Title:
IMCO:
IMCO RECYCLING INC.
By:
Name:
Title:
EXHIBIT "A"
QUALITY
1. PURPOSE AND INTENT.
Both parties desire to provide a system of measuring quality
requirements that is flexible over the term of this Agreement. The parties have
chosen the method set forth herein in order to be responsive to caster process
improvements and product mix changes which have occurred and are expected to
occur at the Mill.
Subject to the terms of this Agreement, Supplier intends to meet
Buyer's requirements with a combination of melting technologies. Supplier will
install the Reverb Furnaces to address Buyer's need for molten metal and for
quality improvements. Rotary salt furnaces will remain an important part of the
supply activity, and this Exhibit "A" covers both reverberatory and rotary
melting technologies. Quality targets may differ depending on the melting
technologies and furnaces used.
2. KEY END OF LINE OUTPUT ("KELO")
An initial list of KELOs is set forth on Schedule 1 to this Exhibit
"A". Schedule 1 is the prioritized list of the initial group of KELOs to be
managed using the Quality Management System ("QMS") described below in this
Exhibit "A", and sets forth the agreed upon targets and/or ranges to be used by
the Working Group as a starting point for the QMS process. Schedule 1 indicates
that some data is in "to be agreed" or "TBA" status. The parties agree to
negotiate in good faith to resolve all "TBAs" on Schedule 1 within six (6)
months from the Effective Date. The parties shall meet at least annually to
mutually review and revise the list of KELOs set forth on Schedule 1.
3. QUALITY MANAGEMENT SYSTEM
A. Exchange of Statistical Data. Supplier shall collect and provide
data on Buyer's proposed KELOs in control chart format for joint review by Buyer
and Supplier. Supplier shall provide initial run charts for each KELO within
sixty (60) days of the Effective Date.
B. Establishment of Standing Committees. The parties shall establish
two standing committees: the Working Group and the Steering Committee. The
Working Group shall be comprised of Buyer's Mill management personnel and
Supplier's Facility management personnel. Supplier shall provide weekly evidence
of process performance at a meeting to be held each week by appropriate Mill and
Facility personnel. The Working Group shall meet at least quarterly to discuss
quality status and establish action plans and timetables. The Steering Committee
shall be comprised of corporate officers from both parties. The Steering
Committee will meet at least twice annually to (1) review KELOs, and (2) resolve
disputes within the Working Group. In addition to the responsibilities described
herein, each of the Working Group and Steering Committee shall continuously
review opportunities to introduce new technology to the process and to develop
cost savings opportunities. The Steering Committee shall review annually the net
cost savings and cost increases generated as a result of QMS activites and
technology improvements. The Steering Committee may review and recommend pricing
adjustments if it determines the net change is significant.
C. Functionality. Schedule 1 is the active KELO list agreed to by the
parties. The Working Group shall promptly determine the control and capability
status of each active KELO. Some of the important quality variables may relate
to incoming Scrap quality, and would therefore be reported to by Supplier Buyer
as an opportunity to improve the Scrap supply. Selections of variables to be
monitored must be supported by "cause and effect" analysis. Other variables may
include but are not limited to:
1. KELOs; 2. Supplier process variables which directly affect KELOs; 3.
Supplier process variables which impact KELOs as a result of the mixing of
Supplier produced product with other components of the metal stream for Buyer's
continuous casting operations.
The Working Group shall have the responsibility of "translating" the
KELO targets to process variable targets for metal delivered to Buyer by
Supplier. Once the Reverb Furnaces are operating at the Facility, the parties
expect the delivery variables to be adjusted appropriately. Supplier shall
provide weekly evidence of process performance regarding active KELOs at the
Buyer-Supplier weekly meeting.
The parties shall evaluate process control status, process means and
process capability indices ("Cpk's"), relative to Buyer's stated requirements.
Key variables as selected in this process will be categorized as "in control and
capable", or "in control but not capable", or "not in control."
The initial list of variables, targets and/or ranges, measurement methods
and control tools is attached in Schedule 1 to ---------- this Exhibit "A".
-----------
4. PROCESS IMPROVEMENT AND CONFORMANCE (The Working Group)
The Working Group, once it has identified the control and capability
status of each KELO, shall develop action plans to eliminate out-of-control and
Cpk issues. Action plans shall be reviewed and updated at each meeting of the
Working Group. The Working Group shall meet formally at least once per calendar
quarter to review conformance status. "Conformance" means Supplier is managing
processes to deliver variables in statistical control and capable at the Cpk
level of 1.33. The Working Group shall agree on measurement methodology and
selection of control tools to be utilized to monitor process performance (i. e.
type of statistical process control chart). Changes to process targets or ranges
will be considered at each Working Group meeting. The party desiring the change
shall support the need for change with factual analysis.
In the event of a condition of non-conformance being discovered by
either party, a special meeting of the Working Group shall be convened. Supplier
shall either (a) correct non-conformance immediately, or (b) propose a
corrective action plan and schedule to Buyer.
5. CONSEQUENCES OF FAILURE TO MANAGE CONFORMANCE AND REGULAR OVERSIGHT (The
Steering Committee)
The Steering Committee shall meet at least twice annually to monitor
the performance of the Working Group, determine whether changes to KELOs are
appropriate based on Buyer's customer requirements and deal with the
consequences of chronic non-conformance issues.
The primary tool for addressing non-conformance shall be the activities
of the Working Group, which is expected to quickly identify, correct and monitor
non-conformance issues. "Non-conformance" is defined as a lack of maintaining
control or capability of one of the agreed active quality variables or KELOs
after control and capability have been established, or unreasonable delays which
last beyond agreed schedules for corrective action plans associated with control
and capability of active quality variables.
The existence of chronic non-conformance requires action by the
Steering Committee. The Steering Committee may recommend that Buyer and/or
Supplier budget and spend capital necessary to relieve a chronic non-conformance
situation, for example. Buyer has the right to levy a monetary penalty (the
"Non-conformance Penalty") against Supplier as a tool for focusing Supplier's
efforts on non-conformance resolution. The Non-conformance Penalty may be due in
response to either:
o Supplier's failure to notify Buyer of a non-conformance issue in a timely
manner; or o Supplier's failure to implement an agreed corrective action plan
within the mutually-agreed time limit.
The Non-conformance Penalty, if applicable, will be determined each
Contract Quarter by statistically determining the "percentage-out-of-compliance"
for each KELO using the specification limits listed in Schedule 1. Buyer has the
right to assess a penalty in an amount not to exceed the product of (x) $0.01
per pound, multiplied by (y) the total "percent-out-of-compliance," multiplied
by (z) the total pounds of Product delivered during the Contract Quarter. In no
event shall the Non-conformance Penalty amount exceed the Buyer's good faith
determination of the actual demonstrated financial impact to Buyer.
The Non-conformance Penalty shall be phased as set forth in the following
schedule:
ROTARY FURNACES
April 1, 1999 through September 30, 1999 No Non-conformance Penalties
apply.
October 1, 1999 through March 31, 2000 Fifty percent (50%) of any
Non-conformance Penalty amount shall apply.
April 1, 2000 through June 30, 2000 Sixty-seven percent (67%) of any
Non-conformance Penalty amount shall apply.
July 1, 2000 through September 30, 2000 Eighty-four percent (84%) of any
Non-conformance Penalty amount shall apply.
After September 30, 0000 Xxx hundred percent (100%) of any Non-conformance
Penalty amount shall apply.
EACH REVERB FURNACE
1st day through the 90th day after the Reverb No Non-conformance Penalties.
Furnace Commission Date
91st day through the 180th day after the Fifty percent (50%) of any Non-
Reverb Furnace Commission Date conformance Penalty amount shall apply.
After the 180th day One hundred percent (100%) of any Non-conformance
Penalty amount shall apply.
For the purposes of this Agreement, the "Reverb Furnace Commission Date" means,
for each Reverb Furnace, the date on which such Reverb Furnace enters full
production.
In the event of Supplier's chronic non-performance, then Buyer may terminate
this Agreement with one (1) year's prior written notice. If Buyer gives written
notice to Supplier that Buyer considers Supplier to be chronically
non-performing, and if Supplier disputes Buyer's determination, the parties
agree to arbitrate the sole issue whether Supplier is chronically
non-performing. The parties shall select a three (3) member arbitration panel
pursuant to, and the arbitration shall be conducted in accordance with, the
commercial arbitration rules of the American Arbitration Association ("AAA").
All costs for the arbitration shall be shared equally between the parties. The
decision of the arbitrator shall be final and binding on both parties.
6. CONFIDENTIAL INFORMATION
Neither party shall be obliged to disclose its respective Confidential
Information, except as may be set forth elsewhere in this Agreement. The parties
agree to execute the spirit of this Exhibit "A" without divulging Confidential
Information.
7. INTENT OF THE PARTIES REGARDING FUTURE INVESTMENT
As a part of this Agreement Supplier will install the Reverb Furnaces
in order to provide the quality and quantity of Product desired by Buyer. It is
the stated belief of both parties that after the Reverb Furnaces are
commissioned, Supplier can attain Buyer's quality requirements using
commercially reasonable operating practices, commercially reasonable statistical
measurement techniques and commercially reasonable cause and effect analysis.
The Quality Management System is not intended to replace or supercede the
capital expenditures programs of either party. Non-conformance Penalties, as
described above, will not accrue solely due to Supplier's failure to authorize
any additional capital expenditure after the installation of the Reverb
Furnaces. The parties shall use their commercially reasonable best efforts to
resolve future capital expenditure issues based on sound economic justification,
as practiced by the two parties in accordance with sound business judgement.
8. GENERAL QUALITY REQUIREMENTS.
A. Supplier shall operate its equipment in control, in accordance with
accepted industry practices with the intent to provide a reliable, high quality
supply of Product to Buyer.
(1) Melters.
(a) Melters shall be properly hot cleaned weekly.
(b) When filling crucibles Supplier shall minimize the
transfer of salts, skim, and salt cake into crucibles.
(2) Crucibles.
(a) Supplier shall maintain crucibles in a clean condition.
(b) Prior to weighing molten shipments, Supplier shall check
crucibles and remove any dross, salt cake, etc from the crucible.
(c) Each molten shipment is to be accompanied by chemical
analysis, sample button, and shipment weight.
(3) Sows.
(a) Ingot shall be skimmed and poured so that the surface is
free of surface and /or entrained salts, excessive skim, surface
contaminants, corrosion, or seams and folds caused by multiple pours.
(b) Ingots shall have minimum shrinkage cavities and/or
internal voids.
(c) Each ingot must be poured level so that they can be
stacked properly.
(d) There will be no excessive splashing on the sides of
ingots.
(e) Each ingot must clearly display the heat number and the
material designator on the side of the ingot.
(f) Ingots which are out of specification with respect to the
stated alloy will be clearly marked with respect to such elements.
(g) Each sow shipment is to be accompanied by chemical
analysis, sample button, and shipment weight.
(h) Ingots will be low profile.
Schedule 1 to Exhibit "A"
------------ ----------- --------- ---------------------------------
Priority KELO Process Rotary Furnace (RSF)
Variable
------------ ----------- --------- ---------------------------------
Limit, Range
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
A Mg Content Mg burnout will be limited to
meet the following remaining Mg levels
Scrap ave Mg. min
------ -------- ---
Mg
--
UBC TBA TBA
Ptd Siding 0.1 TBA
MLC 0.3 TBA
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
A Delivery 1350 F + 25 F/ - 100 F
Temp
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
A Inclusions Metal must be free of salts,
spinels, carbides, and oxides.
Supplier and Buyer shall work jointly
to establish an acceptable, practical
quantitative inclusions measurement.
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
Mg level see above
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
Furnace Limit tap temperature to 1400F
temp
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
A Timeliness Deliver molten to meet caster
of daily production requirements
Delivery given 8 hour notice of change
to molten demand and 24 hour
notice of alloy change
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
A Alloy Blend TBA
Chemistry
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
B Alkali Na 0.0075% maximum
metal
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
Ca 0.0075% maximum
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
Li 0.010% maximum
------------ ----------- --------- ---------------------------------
------------ ----------- --------- ---------------------------------
Schedule 1 to Exhibit "A"(continued)
------------------------ ------------
------------------------ ------------
------------------------ ------------
Measurement Method Control
Tool
------------------------ ------------
------------------------ ------------
Quantometer Individual
(I)
Weighted average each Moving
month, or periodic Range (MR)
sampling, or use data
from individually
melted scraps
------------------------ ------------
------------------------ ------------
T/C, chart by crucible I, MR
------------------------ ------------
------------------------ ------------
Until inclusion I, MR
measurement method is
established, the
intent is to control,
and measure key
process variables
to achieve the KELO.
------------------------ ------------
------------------------ ------------
see above see above
------------------------ ------------
------------------------ ------------
measure by handheld TC control
and log temperature chart
when tapping
------------------------ ------------
------------------------ ----------
monitor in daily supv. notify of
meetings exceptions
------------------------ ----------
------------------------ ----------
Process TBA Supplier
to blend
available
scraps to
meet Buyer
target
blend
------------ ----------- ---------
------------ ----------- ---------
chart by crucible I, MR,
report
monthly
------------ ----------- ---------
------------ ----------- ---------
chart by crucible I, MR,
report
monthly
------------ ----------- ---------
------------ ----------- ---------
monitor by crucible notify of
exceptions
------------ ----------- ---------
------------ ----------- ---------
Schedule 1 to Exhibit "A"(continued)
---------------------------------------- --------------------- --------------
Reverb Furnace
---------------------------------------- --------------------- --------------
Limit, Range Measurement Method Control Tool
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Mg burnout will be limited to meet the Same as RSF Same as RSF
following remaining Mg levels
Scrap ave Mg. min. Mg
----- ------- -------
UBC 1.1% TBA
Ptd Siding 0.5 TBA
MLC 0.8 TBA
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
1350 F +/- 25 F Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
see above see above see above
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Limit bath temperature to 1450F chart by furnace chart
using bath recorder
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
Same as RSF Same as RSF Same as RSF
---------------------------------------- --------------------- --------------
---------------------------------------- --------------------- --------------
EXHIBIT "B"
SCRAP RECEIVING PROCEDURES
I. Scope. Scrap receiving procedures are to be implemented and maintained
as agreed to by Supplier and Commonwealth. Proposed changes will be
submitted by Supplier to Commonwealth for review prior to
implementation. Supplier agrees to implement any reasonable changes to
the Scrap receiving procedures proposed by Commonwealth.
II. Purpose. The receipt, acceptance, and data entry of Scrap must be consistent
with Commonwealth's system to assure:
o Timely delivery, Scrap mix and control of raw material inventory through
delivery appointment scheduling.
o Quality of Scrap conforms to published specifications and yields expected
recoveries and chemistries.
o Open purchase order balances are managed at current status.
o Vendors are promptly advised of weight differences, rejections and/or proposed
downgrades.
o Detailed record of delivery performance, quality, and traceability
by vendor is readily accessible and such data is furnished to
Commonwealth monthly.
o Timely and accurate issuance of Scrap payments.
o Assessment of current raw material inventories by type and forecasting of
future requirements.
III. Delivery Appointment Scheduling.
A. All deliveries of raw materials must be assigned an
appointment number for a specific date and time. Appointment
numbers should be sequential (nonrepeating) and indicate the
calendar month.
1. A designated employee from Commonwealth should issue
delivery appointments to Commonwealth's vendors.
2. All appointments must be entered into the
Commonwealth mainframe computer at the time of
issuance. Any Commonwealth vendor requesting an
appointment must indicate Commonwealth's P.O. number
and applicable scrap type. No appointment will be
given without this information.
B. The delivery appointment schedule is to be printed daily.
Appointments may be made as far in advance as practical
according to Scrap mix requirements, inventory control, and
toll customer priority. Delivery appointment schedule will
include the following:
o Commonwealth Vendor (P.O. issued to)
o P.O. Number
o Appointment (Release) No.
o Type of Material
o Delivery Date and Time
IV. Delivery Documentation.
A. A complete manifest or packing list indicating the applicable
Commonwealth purchase order and a xxxx of lading must
accompany each load.
B. If load documents presented are incomplete or do not
correspond to delivery appointment information, the load is to
be held. Supplier is to notify the designated Commonwealth raw
material buyer of any discrepancies. Commonwealth will contact
its vendor for resolution.
C. Once all delivery documentation is in order, the Supplier
operator will gross weigh the vehicle and initiate internal
receiving documents (scrap report sheet and/or weight
certificate).
V. Unloading.
A. Supplier's receiving inspector should compare the physical
seal numbers to those indicated on delivery documents for
agreement and that the seal is intact. If the numbers do not
agree or the seal is broken or missing, proper notation must
be made on the Xxxx of Lading and the internal receiving
report.
B. Supplier's receiving inspector should compare actual package
type and item count to the supplier's packing list. If a
packing list is missing or a discrepancy exists in material
type and/or count, notations are to be made on the Xxxx of
Lading and the internal receiving report.
C. Each delivery lot must be identified by a tag or paint with
the corresponding Scrap receiving report or weight ticket
number. The method of marking must be sufficient to identify
the load at a future date.
D. Separate scale weights must be obtained for each Scrap type
unloaded from mixed loads. Care should be taken to record the
correct purchase order for each Scrap type. No more than two
(2) Scrap types will be allowed per load. Commonwealth will
endeavor to ensure that each Scrap type will weigh at least
ten thousand (10,000) pounds per load.
VI. Inspection.
A. Supplier's receiving inspector must ensure that the physical
Scrap (type and package) agrees with the purchase order
description.
B. Loose material packed in boxes should be dumped into storage
bins or bunkers for thorough inspection, whenever possible.
C. A hand-held magnet should be passed over as much material as
possible to detect the presence of iron or steel.
D. Each package must be manually inspected for contamination,
(i.e., chrome, plastic, dirt, rubber, radiators, wire, etc.).
Maximum allowable grease and/or oil is 1% by weight. If
present, a sample should be taken and measured by Supplier.
If sufficient contamination is evident to cause the entire lot or load
to be rejected, unloading should cease and Commonwealth's designated raw
material buyer notified immediately. The Scrap Rejection form should be
completed and faxed to Commonwealth. All packages should be put back on the
delivery vehicle.
If contamination is present, but, in the opinion of Supplier's
inspector, it is not sufficient to warrant outright rejection, the Request for
Downgrade form should be prepared and faxed to the Commonwealth. Commonwealth
will discuss with the vendor and notify Supplier of the determination. The load
is to be held until final resolution.
All Scrap loads that are downgraded will be identified for separate
processing to the extent that downgrading resulted from excessive dirt, oil or
other unmeasurable contaminants. Such scrap will be processed on a "best
efforts" basis. Where excessive contaminants are measurable, such excessive
contamination amounts will be credited to Supplier for recovery calculation
purposes.
VII. Moisture Testing (UBCs).
A. Moisture testing procedures must be approved by Commonwealth
in advance. Supplier's present testing procedure is an
approved procedure.
B. Visually inspect and verify the Scrap as specified in Part VI
(Inspection).
C. All lots or loads of UBC, tagged or marked with ID number (see
Section V.C above), must be held, intact, until the moisture
test results are known.
D. Moisture tests must be completed within twenty-four (24) hours of
load delivery.
E. Moisture test results and overall average are to be recorded on the
Moisture Test form.
In the event the average moisture content exceeds the present allowable
limit of four percent (4%), Commonwealth is to be notified. Commonwealth will
advise Supplier of the vendor's decision. Supplier and Commonwealth will from
time to time mutually review the allowable moisture content limit.
Accepted moisture deductions are to be clearly noted on the test result
form and attached to all other internal receiving documents. Excessive moisture
that, in the sole opinion of the receiving inspector, may cause a safety hazard,
is cause for rejection without testing.
VIII. Received Weights and Data Entry.
A. Supplier shall supply to Commonwealth information on received
material within twenty-four (24) hours of delivery.
B. Supplier's net received weight will be the governing payable
weight. If the net received weight is less than the shipping
claimed weight, for any item or lot, by one-half of one
percent (0.5%) or more, the load and delivery vehicle are to
be held and Commonwealth notified immediately. Commonwealth
will notify the vendor of the weight discrepancy. Commonwealth
will advise Supplier of disposition.
IX. Inventory Control.
A. Supplier shall physically inventory Commonwealth's Scrap and
Product in a manner that prevents mixing Commonwealth Scrap
and Product with Supplier's other customers' scrap and in a
manner that enables identification.
B. Commonwealth shall have the right to audit, upon reasonable
notice, Supplier's inventory records and physical inventory
that relate to Commonwealth's Scrap and Product. Commonwealth
anticipates auditing the Scrap inventory twice each calendar
year.
X. Scale Accuracy. Supplier and Commonwealth will develop a scale accuracy
program for all scales that will, at a minimum, meet the requirements of
Commonwealth's scale certification procedures. This program will contain, at a
minimum, (a) a statistically- based methodology to verify scale accuracy, (b)
the use of a mutually agreeable third party for certification, and (c)
Commonwealth's right to have audit and oversight privileges.
EXHIBIT "C"
CONTRACT RECOVERIES
I. Minimum Scrap Recovery Percentages. The following table sets forth the
minimum Scrap recovery percentages that Supplier must achieve in order to avoid
Recover Penalties:
Rotary Furnace Reverberatory Furnace
Material Type Recovery Percentage Recovery Percentage
Used Beverage Containers 88.5 88.75
Painted Siding 91.0 91.0
Xxx Xxxxxxx Xxxxxx XXX0 XXX0
Mixed Low Copper Clip 95.0 96.0
New Segregated Aluminum Scrap 95.0 97.0
Bailed Foil 96.0 96.0
Class I 95.5 95.5
Class II 93.0 93.0
Class III 92.0 92.0
Food Container 90.0 90.0
Litho Sheet (Ink Coated) XXX0 XXX0
Dross/Concentrates Best Effort Best Effort
Other Scraps Best Effort Best Effort
Filters, socks, etc. Best Effort Best Effort
II. Other Conditions.
A. All materials must be weighed going in and out of the Facility on
Supplier's scales that have been verified in accordance with Part X of Exhibit
"B."
B. All Scrap shall be inspected and rejected by Supplier if it contains
radioactive material.
C. All shredded Scrap shall be processed for iron and heavy metal
(lead, zinc, etc.) removal.
D. All Scrap, including UBCs, will be inspected for
contamination. All Scrap must pass accepted industry standards
for contamination of moisture, dirt, plastic, paper, iron,
heavy metals, and lead. Excessive contamination will result in
rejection of Scrap.
E. UBC Scrap recoveries will be adjusted by Supplier for moisture
content greater than two percent (2%). Testing methods will be
in accordance with industry standards and will be approved by
both parties in writing in advance.
F. Recoveries for Class Scrap and Bailed Foil will be adjusted by
Supplier for excess moisture and oil.
G. The parties agree that the recovery percentages set forth in
Part I of this Exhibit "C" have been established based on the
current commercially recognized composition of each Scrap type
as it relates to gauge, paints and coatings. Significant
changes in melting technologies, composition of Scrap type or
similar items will obligate both parties to review and
appropriately adjust the applicable recovery percentages upon
occurrence of such change.
III. Recovery Calculations for Each Scrap Type
A. Recovery = "Weight Out"
"Weight In"
Weight Out = net weight of actual molten aluminum and/or aluminum ingot
Weight In = scale receipt weight less Dunnage, Moisture deduct (if applicable),
and Contaminants Dunnage = skids, banding, packaging, etc. Contaminants =
magnetic separation material, heavy metals, dirt and debris, as agreed to by
Supplier and Buyer; Moisture = determined in accordance with Parts I.D. and E.
above
The definitions set forth above are consistent with the past
practice of calculating "Recovery" and shall not be changed
without each party's written agreement.
B. Supplier will be responsible for documenting deductions and
reporting them to Buyer on a timely basis.
C. Loads with obvious contaminants which do not meet the
specifications described in Exhibit "B" will be set aside for
disposition. Buyer shall have the responsibility of
negotiating adjustments with its vendors for loads which do
not meet specifications regarding contamination.
D. Supplier shall keep records by Scrap type for a period of at least two
(2) years.
E. Supplier shall report recovery percentages monthly to Buyer.
IV. Recovery Penalties and Incentives
A. Supplier will pay Buyer a penalty for overall recovery
shortfalls and Buyer will pay Supplier an incentive for
overall recovery surpluses.
B. Each reconciliation of recoveries will occur annually as of
the end of each Contract Year and shall be completed within
sixty (60) days after such date.
C. The reconciliation shall be supported by a physical inventory
observed by the Commonwealth Finance Division's designated
representative.
D. The surplus or shortfall for each Scrap type will be calculated as
follows:
If the MR>AR (shortfall), the calculation shall be
made as follows:
(MR-AR) x (V)
If the AR>MR (surplus), the calculation shall be made
as follows:
(AR-GR) x (V)
Where MR = Minimum recovery set forth in Part I. AR =
Actual recovery from Part III.A.
V = Annual Volume for that Scrap type in pounds
The incentive/penalty for recovery surpluses/shortfalls shall be
computed for each Scrap type except those processed on a "best efforts"
basis. The recovery surplus or shortfall (in pounds) for each Scrap
type will be computed and combined to result in a composite surplus or
shortfall for each Contract Year. If there is a composite shortfall,
Supplier will pay a penalty amount to Buyer. Similarly, if there is a
composite surplus, Buyer will pay an incentive amount to Supplier,
subject to the limitations of this Part IV. The value of the
surplus/shortfall shall be computed as follows:
(AVG. COST) x (VOL)
Where:
AVG. COST = Buyer's composite weighted average
acquisition cost during each Contract Year
for all Scrap types for which a minimum
recovery applies. By mutual written
agreement, Buyer and Supplier may use
another calculation method to determine
the average Scrap cost.
VOL = The sum of all surpluses less the sum of
all shortfalls as computed in this Part IV
divided by the composite MR in the case of
a composite surplus or by the composite AR
in the case of a composite shortfall. A
positive VOL indicates a composite
surplus. A negative VOL indicates a
composite shortfall.
Buyer and Supplier will evenly divide any surplus value amount. Where
actual recovery results in a shortfall, Supplier shall pay Buyer for
the entire calculated shortfall amount. Sample calculations appear on
Schedule 1 to this Exhibit "C".
EXHIBIT "D"
VOLUME AND PRICE
1. The target volume for this Agreement shall be twenty-eight (28) million
pounds of Scrap per month (the "Target Volume"). Supplier shall be
Buyer's exclusive source of Product up to the Target Volume. For the
purposes of this Agreement, "Maximum Volume" means one hundred ten
percent (110%) of the Target Volume.
2. Buyer shall furnish Supplier with a written ninety (90) day month by
month rolling forecast of Buyer's estimated volume requirements (the "Forecast")
on or before the first day of each month during the term of this Agreement. The
Forecast shall estimate Buyer's volume requirements for each of the subsequent
three months. Buyer agrees that it will purchase a minimum of ninety percent
(90%) of the volume of Product listed in the Forecast for the second month, and
Supplier agrees that it will accept orders from Buyer for a maximum of one
hundred ten percent (110%) of the volume of Product listed in the Forecast for
the second month, except for the month of February. The parties hereby
acknowledge that the forecast for the third month in each Forecast shall be
utilized for planning purposes only, and Buyer shall incur no obligation to
purchase the volume of Product set forth in the third month of each Forecast. If
the Buyer's forecast for the third month exceeds the Maximum Volume, Supplier
will endeavor to meet this short-term need, but in no event is Supplier
obligated to toll/convert more than the Maximum Volume. In the event the Buyer's
forecast for the third month exceeds the Maximum Volume, Buyer must first offer
Supplier the opportunity to toll/convert the volumes in excess of the Maximum
Volume for that month, but in the event the parties cannot agree on the terms of
such excess volume tolling/conversion, Buyer shall be able to toll/convert such
excess volumes for that month outside the scope of and not subject to the terms
of this Agreement.
3. If Buyer notifies Supplier in writing of a sustained need to increase
the Target Volume, Supplier agrees to increase the Target Volume to a
maximum of thirty-four (34) million pounds per month no later than one
hundred eighty (180) days after the date of Buyer's written request,
subject to agreement between Buyer and Seller concerning the pricing
for the pounds of Product that exceed the initial Target Volume, but in
the event the parties cannot agree on the pricing of such excess volume
tolling/conversion, Buyer shall be able to toll/convert such excess
volumes outside the scope of and not subject to the terms of this
Agreement
4. Buyer shall have an exclusive right to the melting capacity of the
Reverb Furnaces to be installed at the Facility. Supplier agrees to use its
reasonable efforts to maximize throughput of Scrap through its
shredding/delaquering system. Supplier estimates that the Reverb Furnaces will
have a capacity of approximately fourteen (14) million equivalent scrap melted
pounds per month in the aggregate. If, after installation and commissioning of
the Reverb Furnaces, Buyer is unable to provide Supplier with at least twelve
(12) million pounds of Scrap per month for melting in the Reverb Furnaces, then
Supplier will have the right to charge Buyer a penalty of $0.01 per pound for
all pounds under the forty-two (42) million pounds per Contract Quarter target
level. If, after installation and commissioning of the Reverb Furnaces, Supplier
is unable to melt available Scrap through the Reverb Furnaces at a minimum
monthly rate of twelve (12) million pounds, Buyer will have the right to charge
Supplier a penalty of $0.01 for each pound under the forty-two (42) million
pounds per Contract Quarter target level. These penalties will be kept via an
accrual system and will be reviewed and payable within thirty (30) days of the
end of each Contract Quarter. Notwithstanding anything in this paragraph to the
contrary, the penalties described in this paragraph shall be waived in the event
Buyer and Supplier have mutually agreed before hand to make adjustments so that
either party may undertake major maintenance.
5. Supplier shall provide the services described herein to Buyer,
effective April 1, 1999 in the case of rotary furnace melted scrap and,
effective upon the Reverb Furnace Commission Date in the case of
reverberatory furnace melted scrap, at the initial base tolling prices
per pound of Scrap (the "Base Prices") as follows:
Shred and Delac Non-Shred and Delac
Rotary Furnace Melted Scrap: $.06082 $.05741
Reverberatory Furnace: $.05335 $.05000
Melted Scrap
The Base Prices shall apply to input pounds processed at the Facility
for Buyer's account. However, upon written agreement between Buyer and
Seller, the Base Prices may be adjusted to a pounds out basis using the
recoveries as agreed to in Exhibit "C".
The Base Prices described above shall be adjusted from time to time as
set forth in Exhibit "E". Supplier shall invoice Buyer monthly for
services provided. Terms of payment shall be net 30 days.
6. When total pounds processed per Contract Quarter exceed the Maximum
Volume (on a quarterly basis), those pounds in excess of the Maximum
Volume (on a quarterly basis) shall receive a discount of $0.003 per
pound. If the Target Volume is subsequently revised as set forth in
Paragraph 3 above, Buyer and Seller agree to negotiate new incremental
discounts at the same time pricing for the new Target Volume is
negotiated.
7. If total pounds processed in any given Contract Quarter are below
eighty percent (80%) of the quarterly Target Volume, and Buyer has not
used a third party supplier of scrap, ingot or molten metal, Buyer
shall pay Supplier an unused capacity fee of one hundred eighty
thousand dollars ($180,000) per Contract Quarter. The unused capacity
fee described in this paragraph shall be payable within thirty (30)
days of the end of each Contract Quarter. The unused capacity fee shall
be waived in the event Buyer and Supplier have mutually agreed before
hand to make adjustments so that either party may undertake major
maintenance. If total pounds processed in any given Contract Quarter
falls below the quarterly Target Volume, and Buyer has used a third
party supplier of scrap, ingot or molten metal, then Buyer will be
deemed to be in default of this Agreement.
8. When total pounds processed through the Reverb Furnaces exceed
forty-two (42) million pounds per Contract Quarter, and quarterly total
volume at the Facility exceeds ninety (90) million pounds, those pounds
processed through the Reverb Furnaces in excess of forty-two (42)
million pounds per Contract Quarter shall receive a discount of $0.006
per pound.
9. In addition to the Base Prices described in Paragraph 3 above, Buyer
shall pay to Supplier an additional tolling fee equal to sixty thousand
dollars ($60,000) per month with respect to the period commencing on
the Effective Date through and extending until March 31, 2003. Such
additional tolling fee will be invoiced at the beginning of each month
and will be due net thirty (30) days.
10. Additional charges to Buyer over and above the Base Prices set forth above
shall be as follows:
a. Flux: Supplier shall invoice Buyer for the flux used on rotary
furnace melted Scrap volumes only at the actual demonstrated
cost of flux used each month. Buyer and Supplier may agree on
a per pound average flux price for rotary furnace melted
tonnage and quantity used based on nominal flux percentages or
actual flux used.
b. Landfill: Cost of landfilling salt cake produced from rotary
furnace production only shall be to Buyer's account based on
Exhibit "F". Buyer and Supplier may make alternative
arrangements for the handling of said salt cake by mutual
consent.
c. Other charges: Supplier will invoice Buyer for other charges
outside the scope of this Agreement as the parties may
mutually agree. Such charges include but are not limited to
excess lime charges, hazardous waste landfill charges and
excess baghouse bag costs.
11. Notwithstanding anything to the contrary in this Exhibit "D", in the
event Supplier shall at any time charge and invoice any other customer
of Supplier at the Facility at more favorable prices for substantially
similar tolling/conversion services with respect to scrap materials
substantially similar to those tolled/converted pursuant to this
Agreement, Buyer shall be entitled to the benefit of an adjustment in
the price charged by Supplier hereunder effective as of the date such
more favorable price is first charged to such other customer in order
that no customer of Supplier shall enjoy pricing for substantially
similar products and services which is more favorable than pricing
experienced by Buyer.
12. The average monthly level of magnesium in UBCs will be 0.70% or
greater. For each month that the level is below 0.70%, then Supplier
shall pay Buyer for said lost magnesium at the market price. Buyer
shall calculate the amount of the lost magnesium by using the monthly
weighted average of UBCs. This calculation, invoicing and reimbursement
shall be consistent with the past practice adopted by both parties.
EXHIBIT "E"
BASE PRICE ADJUSTMENTS
The Base Prices for both rotary melted volumes and reverberatory melted
volumes in the Agreement shall be adjusted as follows:
1. Labor. Twenty-five percent (25%) of each Base Price shall be adjusted
by the percentage of the increase or decrease in the Supplier's base
average hourly wage for hourly employees at the Facility (the "Supplier
Base Average Hourly Wage"). The Supplier Base Average Hourly Wage and
Buyer's base average hourly wage (the "Buyer Base Average Hourly Wage")
shall be the respective wage for each party used to arrive at the new
rotary rates to be effective as of April 1, 1999. After this base wage
is determined, subsequent increases or decreases shall be calculated
using the average hourly increase or decrease percentage.
Any adjustment in the Supplier Base Average Hourly Wage shall be
computed at such times as wage rates are adjusted and shall be
effective on the first day of the month following such wage rate
adjustments.
Supplier is permitted to take the full percentage of its labor increase
as long as, prior to the application of this increase, the Supplier
Base Average Hourly Wage then in effect is less than the Buyer Base
Average Hourly Wage then in effect by $1.00 or more.
2. Natural Gas. Fifteen percent (15%) of each Base Price shall be adjusted
by the percentage increase or decrease in the ------------ burner-tip price
which Supplier pays for natural gas at the Facility. The parties agree that the
natural gas price used for purposes of establishing the Base Price in the
Agreement is the average burner-tip price Supplier pays for natural gas at the
Facility during the first calendar quarter of 1999, which amount is $3.20/MCF.
Supplier agrees to coordinate its natural gas procurement with Buyer and to
appoint Buyer as its agent for such purposes if Buyer so desires. To the extent
Supplier is purchasing gas either directly or indirectly on the spot market, the
adjustment to Base Price described in this Paragraph 2 shall be calculated
quarterly by determining Supplier's weighted average gas price for each quarter
and comparing such price to the first calendar quarter 1999 gas price. Such
adjustment in the Base Prices will be effective on the first day of the
following quarter. To the extent Supplier is purchasing gas on a fixed price
basis, a change in natural gas price during any month will result in a Base
Price adjustment to be effective on the first day of the following month.
3. Materials and Supplies. Twenty percent (20%) of each Base Price shall
be adjusted by the percentage increase or decrease in the Product Price
Index - Industrial Commodities, using commodity codes (03) through
(15), as published monthly by the Untied States Department of Labor
(the "Index"). Adjustments shall be computed annually based on the
percentage change in the Index at the third month prior to the end of
each Contract Year. Such adjustment shall be effective on the first day
of the following Contract Year. However, if the percentage change in
the Index for any Contract Quarter exceeds two (2%) percent, the Base
Price adjustment will be computed at the end of such Contract Quarter
and shall be effective on the first day of the following Contract
Quarter.
4. Fixed. Forty percent (40%) of each Base Price shall remain fixed.
EXHIBIT "F"
WASTE MINIMIZATION
I. Supplier shall not be subject to the waste minimization penalties set
forth in Part II of this Exhibit "F" unless Supplier's waste generation
levels exceed the following percentages for each type of Scrap charged
by Supplier as set forth below:
Waste Generation as a
Scrap Type Percentage of Pounds Charged
All non-UBC Scrap 15
UBCs 10
Dross 52 @ 60% metallics
70 @ 50% metallics
II. Waste Minimization Penalty
A. The waste penalty volume will be calculated as follows by
determining the actual waste volume, in pounds, and
subtracting the calculated waste volume in pounds.
- "Actual" annual waste volume is determined by Supplier's statistically
certified scale weights.
- "Calculated" waste volume is determined by the sums
of the annual pounds charged multiplied by the
percentage shown in Paragraph I above for each Scrap
type.
B. If the waste penalty volume calculated in Part II.A above is
negative, there is no penalty.
If the waste penalty volume calculated in Part II.A above is
positive, Supplier will be required to provide for disposal of
such excess volume of saltcake at its expense.
III. Other Conditions
A. Waste generation will be reported to Buyer monthly.
B. The reconciliation of waste minimization will occur annually at the
end of each Contract Year.
C. The reconciliation will be supported by an annual physical
inventory audited by Buyer's Chief Financial Officer or his
designated representative.
D. Supplier will be responsible for disposal of all non-hazardous
delacquer kiln waste.
E. Supplier will be responsible for loading saltcake and rotary
baghouse dust at the Facility onto trucks designated by Buyer.
EXHIBIT "G"
RIGHT OF FIRST REFUSAL AND OPTION TO PURCHASE
A. OPTION TO PURCHASE. Subject to the provisions set forth below, IMCO
hereby grants to Commonwealth an option to purchase (the "Option")
IMCO's Uhrichsville, Ohio facility (plant, property and equipment) (the
"Facility").
1. At End of Agreement Term. Subject to Section 2 below of this
Paragraph A, the Option will be exercisable during the ninety
(90) calendar days ending on the last day of the ninth
Contract Year of the Agreement. If Commonwealth exercises the
Option, the purchase and sale of the Facility will have a
closing date effective as of the end of the tenth Contract
Year.
The price of the Facility will be an amount equal to five (5)
times the Average EBITDA. For the purposes of this Agreement,
the "Average EBITDA" is equal to the quotient of (x) the sum
of the EBITDA (earnings before interest, taxes, depreciation
and amortization) of the Facility for each of the three
calendar years ending on or before the first day of the tenth
Contract Year, divided by (y) three. The computation of
Average EBITDA will be made on a consolidated basis in
accordance with the books and records of the Facility and
IMCO, maintained in accordance with generally accepted
accounting principles, consistently applied.
2. IMCO Change of Control. In the event of an IMCO Change of Control
(defined below), the Option would become ------------------------ exercisable
for a ninety (90) calendar day period (or, if such ninety (90) period would
adversely affect the consummation of the IMCO Change in Control, the greatest
number of days that would not adversely affect such transaction; provided,
however, such period shall be at least thirty (30) calendar days) following
notification by IMCO to Commonwealth of an IMCO Change of Control. If the Option
is exercised pursuant to an IMCO Change of Control, the price of the Facility
will be an amount equal to the product of (x) the EBITDA of the Facility for the
most recently completed calendar year ended on or before the date of the IMCO
Change of Control, multiplied by (y) the Option Multiple. The "Option Multiple"
is a number determined by dividing (a) the aggregate value of the transaction
which represented or resulted in the IMCO Change of Control by (b) the
consolidated EBITDA of IMCO Recycling Inc. for the most recently completed
calendar year ended on or before the IMCO Change of Control.
For the purposes of this Agreement, an "IMCO Change of
Control" shall mean any of the following: (a) any merger or
consolidation pursuant to which shares of IMCO's Common Stock
would be converted into cash, securities, or other property,
or any sale, lease, exchange or other disposition (excluding a
disposition by way of mortgage, pledge or hypothecation), in
one transaction or a series of related transactions, of all or
substantially all of the assets of IMCO (an "IMCO Business
Combination"), in each case unless, following such IMCO
Business Combination, all or substantially all of the holders
of the outstanding Common Stock of IMCO immediately prior to
such IMCO Business Combination beneficially own, directly or
indirectly, more than 50.1% of the outstanding common stock or
equivalent equity interests of the corporation or legal entity
resulting from such IMCO Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns IMCO or all or substantially all of IMCO's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such IMCO Business Combination, of the
outstanding IMCO Common Stock, or (b) any individual or entity
(or group of individuals or entities acting in concert), other
than IMCO or any successor to IMCO or any subsidiary of IMCO,
or any employee benefit plan of IMCO or any subsidiary of IMCO
(including any trustee of such plan or plans) becomes a
beneficial owner for purposes of Section 13(d) of the
Securities Exchange Act of 1934 of 50.1% or more of IMCO's
then outstanding securities having the right to vote in an
election of directors. Expressly excepted from the definition
of IMCO Change of Control under this Section 2 shall be an
event described in clauses (a) and/or (b) of this definition
which is accomplished as a management-led buyout or
management-led purchase of all or substantially all of the
business, securities, or assets of IMCO and/or its
subsidiaries.
3. Termination of Option. In the event of a Commonwealth Change
of Control (defined below), the Option shall immediately
thereupon terminate and will not be exercisable by
Commonwealth, its successor(s) or assign(s).
For the purposes of this Agreement, a "Commonwealth Change of
Control" shall mean any of the following: (a) any merger or
consolidation pursuant to which shares of Commonwealth's
Common Stock would be converted into cash, securities, or
other property, or any sale, lease, exchange or other
disposition (excluding a disposition by way of mortgage,
pledge or hypothecation), in one transaction or a series of
related transactions, of all or substantially all of the
assets of Commonwealth (a "Commonwealth Business
Combination"), in each case unless, following such
Commonwealth Business Combination, all or substantially all of
the holders of the outstanding Common Stock of Commonwealth
immediately prior to such Commonwealth Business Combination
beneficially own, directly or indirectly, more than 50.1% of
the outstanding common stock or equivalent equity interests of
the corporation or legal entity resulting from such
Commonwealth Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns Commonwealth or all or substantially all of
Commonwealth's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Commonwealth Business
Combination, of the outstanding Commonwealth Common Stock, or
(b) any individual or entity (or group of individuals or
entities acting in concert), other than Commonwealth or any
successor to Commonwealth or any subsidiary of Commonwealth,
or any employee benefit plan of Commonwealth or any subsidiary
of Commonwealth (including any trustee of such plan or plans)
becomes a beneficial owner for purposes of Section 13(d) of
the Securities Exchange Act of 1934 of 50.1% or more of
Commonwealth's then outstanding securities having the right to
vote in an election of directors. Expressly excepted from the
definition of Commonwealth Change of Control under this
section 2. shall be an event described in clauses (a) and/or
(b) of this definition which is accomplished as a
management-led buyout or management-led purchase of all or
substantially all of the business, securities, or assets of
Commonwealth and/or its subsidiaries.
B. RIGHT OF FIRST REFUSAL. Subject to the provisions set forth below, IMCO
hereby grants to Commonwealth a right of first refusal to purchase the
Facility (the "Right of First Refusal").
1. Third Party Offer. In the event that IMCO receives an offer from a third
party (other than an affiliate of IMCO) to ----------------- purchase solely the
Facility (an IMCO Change of Control or other event pursuant to which all or
substantially all of the assets and business of IMCO are to be transferred to a
third party shall not be deemed an offer to purchase solely the Facility), which
offer IMCO finds acceptable, then IMCO will notify Commonwealth of such offer.
Commonwealth will have ninety (90) calendar days (or, if such ninety (90) day
period would adversely affect the consummation of the purchase by the third
party, the greatest number of days that would not adversely affect such
transaction; provided, however, such period shall be at least thirty (30)
calendar days) from the date of IMCO's notification to exercise its Right of
First Refusal on the same terms and conditions as the terms and conditions of
such offer. Transfers to direct or indirect wholly-owned subsidiaries of IMCO or
other affiliates of IMCO shall not be subject to this Section B.
2. IMCO Decision to Sell. In the event that IMCO decides to sell
the Facility, IMCO will notify Commonwealth of its intent to
sell and IMCO's "asking price" for the Facility. Commonwealth
may exercise its right of first refusal and enter into
negotiations to purchase the Facility. If an agreement is not
reached within ninety (90) calendar days from the date of
IMCO's notification to Commonwealth, then Commonwealth's Right
of First Refusal hereunder shall lapse, and IMCO may thereupon
terminate the negotiations with Commonwealth and enter into
negotiations with other parties; provided, however, that the
purchase price agreed to by IMCO and the third party for the
Facility shall be within five percent (5%) of IMCO's "asking
price.".
3. Termination of Right of First Refusal. In the event of a
Commonwealth Change of Control, Commonwealth's Right of First
Refusal under this Section B shall thereupon immediately
terminate and shall not be exercisable by Commonwealth, its
successor(s) or assign(s).
C. GENERAL.
1. IMCO agrees to grant to Commonwealth sufficient opportunity to
perform a due diligence review and title review of the
Facility during the respective period(s) following
notification of exercise and prior to closing of the exercise
of the Option or the Right of First Refusal, as the case may
be, including access to IMCO Facility properties and documents
during normal business hours (subject to mutually satisfactory
confidentiality agreements regarding the subject matter
thereof to be entered between IMCO and Commonwealth with
respect thereto).
2. All notices contemplated under this Exhibit "G" shall be in
writing and sent to the addresses and individuals in strict
accordance with the provisions of Article XI of the Agreement.
3. Notwithstanding any provision contained herein to the
contrary, (a) Commonwealth shall not have the right to
exercise its rights under Section A. or Section B. above in
the event that at such time, Commonwealth is in material
default of any of its material obligations under the
Agreement, and (b) the rights of Commonwealth and obligations
of IMCO under this Exhibit "G" shall terminate and expire at
the expiration of the term of the Agreement or when the
Agreement is otherwise no longer in force and effect.
4. At the option of either IMCO or Commonwealth, the parties
agree to negotiate in good faith written agreements containing
ordinary and customary terms and setting forth in additional
detail the rights and obligations of the respective parties
regarding the Option and Right of First Refusal as
contemplated hereunder, including summary memoranda or similar
notifications in recordable form to be filed with the
appropriate recording agencies, if the parties so desire.
5. IMCO's obligations hereunder are also subject in all respect
to IMCO's securing the prior written consent or waiver of its
senior secured lenders before the Option or Right of First
Refusal can become effective.
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1 For those scrap types designated "TBA", IMCO and Commonwealth will conduct
joint melt loss studies using industry accepted practices. These studies will be
conducted within six (6) months after the Effective Date for rotary salt
furnaces and within six (6) months after installation of the reverberatory
furnaces. The data from these studies will be used to establish recovery
guarantees to be mutually agreed to pursuant to good faith negotiations between
the parties.
