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EXHIBIT 10.22
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED AND CONFIDENTIALLY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST MADE UNDER RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
CONFIDENTIAL PORTIONS OF THE EXHIBIT THAT HAVE BEEN DELETED ARE INDICATED BY
"[***]" INSERTED IN THE PLACE OF SUCH CONFIDENTIAL INFORMATION. IN ADDITION,
EACH OF THE EXHIBITS TO THIS AGREEMENT HAVE BEEN DELETED AND CONFIDENTIALLY
FILED WITH THE COMMISSION.
REVISED JANUARY 29, 2001
SUPPLY AGREEMENT
BETWEEN
SIMCALA, INC.
AND
DOW CORNING CORPORATION
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PREAMBLE
SIMCALA and Dow Corning Corporation understand the need for continuous
"real" cost improvement. SIMCALA understands that Dow Corning Corporation is
entering into this revised contract with the intent to purchase silicon metal
between January 1, 2001, and December 31, 2005, with convincing evidence that in
so doing, Dow Corning Corporation will have significantly higher value through
lower costs, better quality, and consistent reliability of supply for the life
of the contract than it would have with short term and/or level volume supplier
arrangements. SIMCALA gains a committed long-term customer who intends to
provide consistent and dependable long-term growth. SIMCALA and Dow Corning
Corporation are committed to working together towards continuous improvement of
value in terms of the cost, price, quality, productivity, and service related to
the production and use of silicon metal. Both parties agree that the key to the
success of this contract is not in mechanics but in mutual trust that these
commitments to continuous improvement will be fully implemented.
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SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (hereinafter "Agreement") is made and entered
into as of the 1st day of January, 2001 by and between SIMCALA, INC., a Delaware
Corporation located in Montgomery, Alabama (hereinafter "Seller") and DOW
CORNING CORPORATION, a Michigan Corporation with headquarters in Midland,
Michigan (hereinafter "Buyer").
WHEREAS, Seller is a producer of silicon metal at its Montgomery,
Alabama plant and is presently producing silicon metal sold to Buyer by Seller;
and
WHEREAS, Seller and Buyer desire to enter into this Agreement to
provide for the sale and purchase of silicon metal and further cooperation
between Seller and Buyer to extend the continuous improvement in cost, quality
and performance of the product; and
WHEREAS, in entering into this Agreement, it is intended that Seller
will continue to have a committed long term customer and the opportunity to
enjoy consistent long term growth; and
WHEREAS, Buyer's aim in entering into this Agreement is to keep its
assured long term supply of silicon metal for the life of the Agreement and its
ongoing opportunity to lower costs and obtain better quality; and
WHEREAS, both Seller and Buyer remain committed to continually working
toward continuous improvement in cost, price, quality and service regarding the
sale and purchase of silicon metal, and the parties agree that the key to a
successful Agreement is still mutual trust and commitment to continuous
improvement; and
WHEREAS, the sale of silicon metal and the productivity improvement
sharing shall be carried out under and subject to the terms and conditions set
forth hereinafter and if appropriate in a separate sub-agreement(s) as needed;
NOW, THEREFORE, Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, silicon metal under and subject to the following terms and
conditions:
1. Effective Date. This Agreement shall become effective January
1, 2001. This Agreement supersedes in its entirety the previous supply contract
between the parties which had been effective since January 1, 1998 (the
"Original Supply Contract"). Seller is released from any obligation under the
original supply agreement to build a 4th furnace.
2. Cooperation and Sharing. Seller and Buyer agree to use their
best efforts to work together to generate productivity improvements resulting in
cost savings and product performance opportunities. Both Seller and Buyer
understand the need for cooperation in order obtain this goal and agree to take
commercially acceptable action,
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including appointing members to quality technical teams for handling various
subjects, in order to pursue the goal. Seller and Buyer agree that the appointed
teams will meet at least twice per year and discuss such opportunities. All such
opportunities that require a change in specifications must be real and
measurable, and the measurements involved must take account of the effect on
both Seller and Buyer. Cost savings opportunities shall be shared equitably by
Seller and Buyer net of any capital investments required. Seller and Buyer
intend to enter into separate written sub-agreements which will set forth their
mutual intentions and agreements regarding each such opportunity and necessary
capital investments.
When cooperation generates productivity improvements, the resultant
cost savings shall be reflected in the annual price adjustment provided for
under Exhibit A. In addition to the annual price changes pursuant to Exhibit A,
the price may be adjusted to reflect cost savings through the Formula Price
Adjustment as hereinafter defined in Exhibit B. Mutually developed and approved
cost savings opportunities can be implemented at any time during a "Calendar
Year" which term, as used in this Supply Agreement, shall mean a twelve (12)
month period from January 1 to December 31. The cost savings idea shall be
evaluated for a period of not less than six (6) months following its
implementation, during which time. the real and measurable savings will be
verified. Such savings shall be shared equitably between Buyer and Seller. A
Formula Price Adjustment can be made to the actual price then in effect
following the six (6) month evaluation period.
During the six (6) month evaluation period, Buyer and Seller will
monitor and review monthly performance of the cost savings idea. Once such a
Formula Price Adjustment has been made to the actual price, Buyer and Seller may
discontinue all or part of any cost savings practice by mutual agreement set
forth in a written termination agreement which shall state the reasons for such
discontinuance. If Buyer and Seller agree to discontinue a cost saving practice,
the actual price will be readjusted, as appropriate, beginning with the month
following that month during which the cost savings practice is discontinued.
3. Quantity. Seller agrees to sell and deliver to Buyer, and
Buyer agrees to purchase and receive from Seller, a minimum total quantity of
silicon metal of [***] metric tons during the initial three (3) Calendar Years
set forth on Exhibit D hereto (the "3 Year Minimum").
During each three (3) Calendar Year period ending December 31 in each
of the years 2004 and thereafter during the term hereof, Seller shall sell and
deliver to Buyer, and Buyer shall purchase and receive from Seller, a quantity
of silicon metal which complies with Buyer's specifications as set forth on
Exhibit C that is equal to the amount set forth opposite the last year of such
three (3) year period on Exhibit D under the caption "Rolling Minimum" (the "3
Year Rolling Minimum").
4. Incremental Volume. Quantities up to the Total Maximum
Purchases as defined in Exhibit D per Calendar Year shall be understood as
conventional volume
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("Conventional Volume"). Any additional quantity of silicon metal purchased by
Buyer from Seller in any Calendar Year from the production tonnages of No. 1,
No. 2 or No. 3 furnaces over and above the Conventional Volume for that Calendar
Year shall be incremental volume ("Incremental Volume"). Any such Incremental
Volume will be added to the Conventional Volume provided for in this Agreement
by means of a sub-agreement between Seller and Buyer which shall set forth the
agreed upon pricing, quantities and other specifications for such Incremental
Volume.
5. Quality. All of the silicon metal sold and delivered hereunder
by Seller shall meet the specifications which are set forth in Exhibit C
attached hereto and made a part hereof, as well as such other specifications
which may be agreed upon in writing from time to time between Seller and Buyer,
unless waived by Buyer.
6. Pricing.
[***]
7. Term. The initial term of this Agreement (the "Term") shall be
for five (5) Calendar Years commencing January 1, 2001 and, if either party
issues a "notice of termination" prior to January 1, 2004, ending December 31,
2005, unless sooner terminated as provided below. If neither party issues a
"notice of termination," the Term of this Agreement shall automatically continue
from year to year after December 31, 2005 and may be terminated under this
Section by either party submitting to the other party not less than twenty four
(24) months prior written notice of such party's election to terminate this
Agreement.
8. Confidentiality. This Supply Agreement and everything set
forth herein, all information shared pursuant hereto between Seller and Buyer,
and all related agreements and sub-agreements are and shall remain confidential
and proprietary to the parties hereto, or to the disclosing party, if
appropriate. All information disclosed by a party hereto under this Agreement
shall be subject to the same obligations of non-disclosure and limited use by
the receiving party in accordance with the terms of the Confidentiality
Agreement dated July 17, 1995, between Dow Corning Corporation, Seller and
Buyer, or in accordance with any present or future confidentiality agreements
which may be applicable between Seller and Buyer.
9. Third Parties. Seller and Buyer understand and agree that some
of the information, gains or improvements resulting from the cooperation and
productivity sharing to be carried out hereunder and under any sub-agreement
hereto will be applicable to the business of one or both of the parties as that
business relates to third parties. Therefore, despite the provision for
confidentiality set forth herein above, Seller and Buyer agree to meet and to
discuss the desire of either party hereto to use information, gains or
improvements in their business with third parties, and both Seller and Buyer
agree that all reasonable requests or permission to so share such information,
gains or improvements shall be mutually agreed to by both parties hereto and
such agreement shall not be unreasonably withheld.
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10. Right to Audit. Buyer reserves the right to have Seller's
records inspected by a certified public accountant agreed to by both parties at
reasonable times during normal business hours to verify increases or decreases
in the cost factors set forth in Exhibit A and compliance with the Best Customer
Pricing clause. The certified public accountant will be instructed to only
advise Buyer and Seller whether the increases or decreases are correct or
incorrect according to the provisions of Exhibit A, and, if incorrect, to advise
Buyer and Seller what the correct increase or decrease should be. The certified
public accountant shall be advised not to reveal the facts forming the basis of
his opinion regarding price increases or decreases to any party whatsoever,
including Buyer, without the prior written consent of Seller.
11. Delivery and Acceptance. Delivery of the silicon metal
hereunder by Seller to Buyer shall be [***] or other sources mutually approved
by both parties hereto, such approval not to be unreasonably withheld. [***]
12. Specifications and Quality Control, Weight, Patents and
Disclaimer.
A. Product Specification and Quality Control. All of the
silicon metal delivered hereunder shall conform to the specifications
which are set forth in Exhibit C attached hereto and made a part
hereof, unless waived by Buyer. Seller warrants that Buyer shall
receive a good title to the silicon metal delivered hereunder. In the
event of disqualification of the silicon metal because of failure to
conform to the specifications, Buyer may suspend this Agreement at its
discretion until the product is requalified by Buyer. Both parties will
use their respective commercially reasonable best efforts to remedy the
problems. Pending resolution of such problems, the minimum quantity of
silicon metal that Buyer is obligated to purchase hereunder may at
Buyer's option be adjusted downwards accordingly for that period of
time.
The analysis established by Seller is preliminarily binding.
However, if Buyer's own sampling analysis within sixty (60) days after
delivery states a deviation from the specification according to Exhibit
C, then Buyer in writing immediately will give Seller the opportunity
to carry out a joint sample taking. Should the parties fail to reach an
agreement as to analysis, they shall jointly appoint an independent
expert. The costs for the expert shall be borne by the party whose
results deviates the most from the expert's analysis.
B. Weight. Seller's certified weight shall govern [***].
However, Buyer reserves the right to submit any delivery to check
weighing on a certified weight immediately after receipt of the
material. If the value deviates [***] from the weight indicated by
Seller, then Buyer will inform Seller in writing immediately about the
difference, and an appropriate invoicing adjustment will be made.
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C. Patents. Notwithstanding any other limitations of
liability in this Agreement, if any suit is brought against Buyer for
infringement of any patents alleging that the silicon metal delivered
under this Agreement or that Seller's method of manufacturing it
infringes any patents, Seller shall, at its own expense, defend and
control the suit against these allegations only, and shall pay any
award of damages assessed against Buyer in the suit to the extent only
that the damages are awarded in connection specifically with the
alleged infringement, provided Buyer gives Seller prompt notice in
writing of the institution of the suit and, to the full extent of the
Buyer's power to do so, Buyer permits Seller to defend and control the
suit against these allegations. The above fully expresses Buyer's
exclusive remedy and Seller's sole liability with respect to
infringement of any patent by the silicon metal delivered under this
Agreement, and Seller expressly disclaims any express or implied
warranty against infringement with respect to such silicon metal. In no
case will Seller be liable to defend or pay any award of damages
assessed against Buyer in any suit or cause of action alleging that the
use of the silicon metal delivered under this Agreement infringes any
patent. Buyer shall not hold Seller responsible for any claim, loss or
expense arising out of Seller's compliance with any specifications
furnished by Buyer with respect to the silicon metal.
Notwithstanding any other limitations of liability in this
Agreement, if any suit is brought against Seller for infringement of
any patents alleging that Buyer's use of the silicon metal delivered
under this Agreement infringes any patents, Buyer shall, at its own
expense, defend and control the suit against these allegations only,
and shall pay any award of damages assessed against Seller in the suit
to the extent only that the damages are awarded in connection
specifically with the alleged infringement, provided that Seller gives
Buyer prompt notice in writing of the institution of the suit and, to
the full extent of the Seller's power to do so, Seller permits Buyer to
defend and control the suit against these allegations. The above fully
expresses Seller's exclusive remedy and Buyer's sole liability with
respect to infringement of any patent by Buyer's use of any silicon
metal delivered under this Agreement, and Buyer expressly disclaims any
express or implied warranty against infringement with respect to
Buyer's use of silicon metal.
D. Seller further warrants that it has taken adequate
precautions to verify that its computer systems will properly process
date calculations through the year 2000 and beyond and that its
manufacture and delivery of the Goods will not be delayed or suspended
due to the failure of its date calculations.
E. DISCLAIMER. EXCEPT AS SPECIFIED HEREINABOVE IN THIS
SECTION 12, THERE ARE NO EXPRESS WARRANTIES BY SELLER AND NO WARRANTIES
BY SELLER SHALL BE IMPLIED OR OTHERWISE CREATED UNDER APPLICABLE LAW,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR ANY
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
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13. Payment Terms. For all silicon metal sold, delivered and
accepted hereunder, Buyer shall pay Seller, [***] of the receipt of Seller's
invoice.
14. Force Majeure.
A. Neither party shall be liable for its failure to
perform hereunder (other than any failure to pay money) caused by
contingencies beyond its reasonable control, including but not limited
to acts of God, fire, floods, wars, sabotage, accidents, labor disputes
(whether or not such disputes are within the power of the party to
settle), serious equipment failure resulting in a full furnace outage
in excess of twenty-one (21) days unless caused by a misuse or failure
to perform routine maintenance or furnace power reduction in excess of
thirty percent (30%) of furnace normal power for a period of
twenty-eight (28) days, governmental actions, inability to obtain
material, equipment or transportation and any other occurrence beyond
its control. The party whose performance is prevented by such
contingencies shall have the right not to perform as herein provided
during the period of such contingency and the total amount of silicon
metal herein provided for shall be reduced accordingly.
B. If a force majeure event prohibits Seller from
delivering to Buyer the quantities of Silicon Metal provided for
hereunder, Seller shall deliver to Buyer that percentage of Seller's
production which is equal to the percentage of Seller's production
during the previous twelve (12) month period which was represented by
Buyer's purchases during that time period, at a net unit price which is
equal to the unit price which would have been paid by Buyer if its full
purchase order had been filled. If the Buyer is required to purchase
silicon metal from other sources due to a force majeure condition at
the Seller, then the Buyer may reduce the contract minimum by a like
amount.
C. If Buyer is affected by an event of force majeure,
Buyer shall purchase from Seller the quantity of silicon metal which
shall be determined on the same basis as set forth in Paragraph B
above.
15. Hardship. The intent of the parties is that the results of
this Agreement are to be favorable to both parties over the long term,
consistent with the attitude put forward in this Agreement. If during the term
of this Agreement, one or both of the parties experiences unexpected or
excessive hardship related to the performance of this Agreement, then both
parties agree to try to resolve the hardship on a reasonable basis through
mutual discussions. Hardship includes but is not limited to significant changes
in costs greater than 10%, but in no event shall be related to a change in
market conditions, such as supply/demand imbalances or market price changes.
16. Assignment/Successor. This Agreement may not be assigned by
either party without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Notwithstanding the above, Buyer may perform
any of the
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obligations undertaken by it and may exercise any of the rights granted to it
under this Agreement through Dow Corning Corporation, or any wholly owned
subsidiary thereof; provided, however, that any act or omission of any such
company with respect to this Agreement shall be deemed to be the act or omission
of the Buyer. For the avoidance of doubt, any purchases by any such company
shall be deemed to be purchases by the Buyer and counted towards meeting Buyer's
minimum purchase obligations hereunder.
In the event. of a change in the ownership or control of either party
hereto, this Agreement shall remain fully enforceable according to the present
terms and conditions; the other party will be notified accordingly by the
affected party and should any new owner or controlling body be unacceptable to
the other party, that other party may, upon notice to the affected party,
terminate this Agreement with twelve (12) months written notice of termination.
17. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed under and in accordance with the laws of the
State of Michigan.
18. Entire Agreement. As of the effective date 1 January 2001,
this Agreement, along with its Exhibits, confidentiality agreement and any
sub-agreements, contains the entire agreement of the parties, superseding any
previous understandings, commitments or agreements, oral or written, with
respect to the subject matter hereof. No modification of this Agreement or
waiver of the terms and conditions hereof shall be binding upon either party
unless approved in writing by an authorized representative of each party.
Further, no modification of this Agreement shall be effected by the
acknowledgment or acceptance of purchase order forms or releases containing
other or different terms or conditions, whether or not signed by an authorized
representative of each party.
19. Compliance with Law. Seller and Buyer hereby agree to comply
with all provisions of all present and future laws and regulations applicable to
this Agreement and its performance.
20. Relationship of the Parties. Seller and Buyer do not intend or
contemplate the formation or establishment of any partnership, joint venture,
pooling arrangement or other formal business organization of any kind. Nothing
in this Agreement is to be construed as constituting the appointment of any
party hereto as an employee or agent of the other party. Neither party shall
have any right or authority to assume or to create any obligation or
responsibility, as expressed or implied, on behalf of or in the name of the
other party. Each party is acting hereunder solely as an independent contractor.
21. Representations of Buyer. Buyer represents and warrants to
Seller that the purchase of silicon metal, including the purchase of silicon
metal in the quantities and on the terms set forth herein, is a part of the
regular and ordinary course of the business of Buyer, that this Agreement is
made and entered into in the ordinary course of the business of Buyer, that the
execution, delivery and performance of this Agreement by
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Buyer does not violate any law, rule, regulation, judicial order or decree to
which Buyer is subject, that no consent or approval of any court, judicial body,
governmental agency or third party to the execution, delivery or performance of
this Agreement by Buyer is necessary or required, and that this Agreement is the
legal, valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms.
22. Notices. Any written notice required to be provided to either
of the parties hereunder shall be effective when mailed by registered or
certified mail, postage prepaid, or when sent by facsimile or courier, in each
case addressed to the party intended to receive the same as follows:
To Seller:
Simcala, Inc.
P.0. Box 68
Ohio Farroalloys Rd.
Mt. Meigs, AL 36057
Facsimile: (334) 215-8232
Attention: President and Chief Executive Officer
To Buyer:
Dow Corning Corporation
3901 S. Saginaw Rd.
Midland, MI 48686-0995
Facsimile: (517) 496-1036
Attention: Global Procurement Director
23. Arbitration. If a dispute arises under this Supply Agreement
which cannot be resolved by the personnel directly involved, either party may
give written notice to the other designating an executive officer with
appropriate authority to be its representative in negotiations relating to the
dispute. Upon receipt of this notice, the other party shall, within five (5)
business days, designate an executive officer with similar authority to be its
representative. The designated executive officers shall, following whatever
investigation each deems appropriate, promptly enter into discussions concerning
the dispute. If the dispute is not resolved as a result of such discussions
within ninety (90) days, such dispute shall be referred to final and binding
arbitration in accordance with the commercial rules of the American Arbitration
Association. Unless the parties agree otherwise in writing, such arbitration
shall be held in a mutually acceptable location. The expense of arbitration
shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer, unless
otherwise specified in the award. Each party shall pay the fees and expenses of
its own counsel, unless otherwise specified in the award.
24. Delivery/Scheduling. Seller shall deliver silicon metal to
Buyer in approximately equal quarterly quantities starting in the year 2001.
Prior to the beginning of each Calendar Year, Buyer shall provide Seller with a
non-binding estimate of the
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quantity of silicon metal that it will purchase hereunder during each quarter of
the following Calendar Year, which non-binding estimate shall be updated on a
quarterly basis during the year.
25. Purchase Orders. Buyer may issue purchase orders to Seller
hereunder for the silicon metal, for Buyer's administrative purposes only, and
no terms and conditions contained in such purchase orders which conflict with
anything in this Supply Agreement shall be effective as between Buyer and
Seller.
26. Packaging. If any change in the herein agreed upon packaging
is requested by Buyer, Seller shall package Products in accordance with
instructions from Buyer, at Buyer's expense.
27. Counterparts. This Agreement is executed in any number of
counterparts, each of which shall be deemed an original for all purposes, and
all of which together shall constitute one agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by representatives duly authorized as of the day and year first above
written.
WITNESS: SIMCALA, INC.
By: /s/ C.E. Boardwine
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C.E. Boardwine
President and Chief Executive Officer
WITNESS: DOW CORNING CORPORATION
By: /s/ Robert P. Krasa
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Robert P. Krasa
Vice President
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