CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS
AMENDMENT NO. 1 TO
TOLL CONVERSION AGREEMENT
THIS AMENDMENT AGREEMENT is entered into as of May 4, 1988 by Northwest
Aluminum Company, an Oregon corporation ("NAC"), and Clarendon Ltd., a Swiss
corporation ("Clarendon").
RECITAL:
NAS and Clarendon have entered into an Aluminum Toll Conversion Agreement
dated as of September 15, 1986 (the "Tolling Agreement") and wish, by this
Amendment Agreement, to amend certain provisions of the Tolling Agreement and to
provide for the extension of the term of the Tolling Agreement.
TERMS OF AGREEMENT:
The parties hereto, intending legally to be bound by this Amendment
Agreement, hereby agree as follows:
Section 1. Definitions. Terms defined in the Tolling Agreement shall have
the same meanings in this Amendment Agreement, and the following defined terms
shall be inserted in Article I of the Tolling Agreement and shall have the
following meanings for purposes of this Amendment Agreement and the Tolling
Agreement as amended hereby:
"Off-Grade Aluminum" means Aluminum having an aluminum content
less than that of 99.7 Grade Aluminum.
"99.5 Grade Aluminum" means unalloyed aluminum (Alcoa P1535)
having an aluminum content of 99.5%
"99.7 Grade Aluminum" means unalloyed aluminum (Alcoa P1020)
having an aluminum content of 99.7%.
Section 2. Exercise of Option to Extend. Clarendon hereby exercises its
option under Section 3.1.2(i) of the Tolling Agreement to extend the term of the
Tolling Agreement by two years, through September 30, 1991, and the parties
agree that Clarendon's right to terminate Alumina Deliveries after September 30,
1991 shall be as stated in Section 3.1.2(ii) of the Tolling Agreement except
that the reference to "at least three (3) months' prior notice" is hereby
amended to read "at least six (6) month's prior notice."
Section 3. Tolling Charges.
3.1 Section 6.1.2(i) of the Tolling Agreement is amended to read in
full as follows:
"(i) *** percent (***%) of the "Aluminum Metal Price" (as
defined in Section 6.1.4) for contracts for 99.5 Grade Aluminum, or if
contracts for 99.5 Grade Aluminum cease trading on the LME (as defined
in Section 6.1.4) *** percent (***%) of the "Aluminum Metal Price"
for contracts for 99.7 Grade Aluminum, in either case as applicable
for the third calendar month immediately preceding the calendar month
in which the Aluminum Delivery occurs, as more fully provided in
Section 6.1.4, or"
3.2 Section 6.1.3 of the Tolling Agreement is amended by replacing
"fifty- five thousand (55,000) Metric Tons" in clause (i) by "sixty-five
thousand (65,000) Metric Tons."
Section 4. Potline No. 1; Off-Grade Aluminum
4.1 The parties acknowledge that Clarendon will provide Alumina for
the operation of Potline No. 1 upon its partial start-up, and agree that, for
purposes of Sections 3.1.1 and 3.1.2 of the Tolling Agreement, the amounts of
Alumina Deliveries to be made by Clarendon shall include the amounts of Alumina
required for operation of Potline No. 1 upon
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its partial start-up and the amounts of Basic Tonnage and Renewal Tonnage shall
include the amounts of Aluminum required to be produced from such Alumina
Deliveries.
4.2 In connection with the foregoing, Section 3.2.3 of the Tolling
Agreement is hereby amended to read in full as follows:
"3.2.3 Starting on January 1, 1988 NAC shall be obligated to
produce and deliver to Clarendon 99.7 Grade Aluminum (including
without limitation Aluminum Deliveries relating to Alumina delivered
to NAC for the operation of Potline No. 1), subject to the following
provisions:
"(i) Tolling Charges for any Off-Grade Aluminum delivered to
Clarendon in any calendar month shall be reduced, on a per Pound
basis, as follows:
First 500,000 Pounds of Off-Grade Aluminum
Delivered in Calendar Month
------------------------------------------
Below 99.7 Grade Aluminum to
and including Alcoa P1535 *** cents
Below Alcoa P1535 to and
including Alcoa 2060 *** cents
Below Alcoa 2060 to and including
Alcoa 2590 *** cents
Below Alcoa 2590 to and including
MT0 *** cents
Below MT0 to and including MT1 *** cents
Below MT1 to and including MT2 *** cents
Below MT2 *** cents
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Off-Grade Aluminum Delivered in a Calendar
Month Exceeding 500,000 Pounds
------------------------------------------
Below 99.7 Grade Aluminum to
and including Alcoa P1535 *** cents
Below Alcoa P1535 to and
including Alcoa 2040 *** cents
Below Alcoa 2040 to and including
Alcoa 2060 *** cents
Below Alcoa 2060 to and including
MT0 *** cents
Below MT0 *** cents
"(ii) Clarendon has agreed to waive the first $*** in
reductions of Tolling Charges under clause (i) for deliveries of
Off-Grade Aluminum made after January 1, 1998."
Section 5. Sale of Molten Metal. A new Section 4.7 is hereby added to the
Tolling Agreement, as follows:
"Section 4.7 Sale of Molten Metal. Effective from and including
May 1, 1988, Clarendon shall sell to NAC, and NAC shall purchase from
Clarendon, Aluminum in the form of molten metal subject to the
following provisions:
"4.7.1 The amount of molten metal to be purchased by NAC during
the calendar months of May through September 1998, inclusive, shall be
1,000,000 Pounds per calendar month.
"4.7.2 From October 1, 1988 through the balance of the term of
this Agreement NAC shall purchase between 1,500,000 Pounds and
2,500,000 Pounds of molten metal per calendar month, with the exact
amount of molten metal to be purchased by NAC in any calendar month
during each calendar quarter to be determined by NAC's notice to
Clarendon given at least two months prior to the beginning of that
calendar quarter. Any such notice by NAC shall be irrevocable once
given, and if NAC fails to give timely notice as to any calendar
quarter it shall be required to purchase 1,500,000 Pounds of molten
metal during each month of that quarter.
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"4.7.3 Molten metal allocable to NAC for purchase under this
Section 4.7 during any calendar month shall be determined by mutual
agreement of the parties on the understanding that, in principle, such
allocation shall be made on a pro rata basis taking into account the
Smelter's anticipated production during that month and the parties'
respective casting requirements.
"4.7.4 Aluminum products produced from the molten metal sold to
NAC shall be distinctively marked and stored separately from Aluminum
belonging to Clarendon, as provided more fully in Section 5.3.1.
"4.7.5 The per Pound purchase price for molten metal delivered to
NAC under this Section 4.7 during any calendar month shall be equal to
(a) the per Pound 'U.S. Transaction Price' quoted by Metals Week for
the calendar month preceding the month of delivery, less (b) a
discount of *** cents per Pound. NAC shall pay Clarendon for each
delivery of molten metal to NAC under this Section 4.7 within thirty
(30) days after the date of NAC's invoice to Clarendon for tolling
charges relating to such molten metal. Delivery of molten metal to be
purchased by NAC under this Section 4.7 shall be deemed to have
occurred upon completion of the conversion process for such molten
metal."
Section 6. Billet Option. Section 4.2.3 of the Tolling Agreement is hereby
renumbered "Section 4.2.2" (to correct a typographical error in the Tolling
Agreement), and a new Section 4.2.3 is added as follows:
"4.2.3 Notwithstanding anything to the contrary in this Section
4.2, the amount of billet which Clarendon shall have the right (but
not an obligation) to receive using NAC's existing facilities shall be
40,000 MT per year, evenly spread, and the upcharges payable by
Clarendon with respect to such billet shall be:
"(i) *** cents per Pound for billet to be sold by Clarendon to
Vanexco under Clarendon's existing sales agreement with Vanexco, and
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"(ii) for 6063 and 6061 billet to be sold by Clarendon to other
customers, *** cents per Pound in calendar years 1988 and 1989, and
thereafter *** cents per Pound.
It is estimated that additional billet utilizing new Smelter equipment
will be approximately 20,000 MT per annum, and upcharges for any such
additional billet capacity requested by Clarendon shall be subject to
mutual agreement."
Section 7. Entire Agreement; Governing Law. This Amendment Agreement
represents the entire agreement of the parties as to its subject matter,
supersedes all prior understandings or communications between the parties
relating to such subject matter, and shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be wholly performed within that State.
Section 8. Counterparts. This Amendment Agreement may be signed in any
number of counterparts, and any single counterpart or a set of counterparts
signed, in either case, by all the parties hereto shall constitute a full and
original agreement for all purposes.
EXECUTION:
The parties have caused this Amendment Agreement to be duly executed as of
the date first above written, whereupon it enters into full force and effect in
accordance with its terms.
NORTHWEST ALUMINUM COMPANY
By: BRETT WILCOX
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Name: Brett Wilcox
Title: President
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CLARENDON LTD.
By: S.D. TRINCA
------------------------------------------
Name: S. D. Trinca
Title: ________________________________
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