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Exhibit 10.16
SIDE AGREEMENT TO
AGREEMENT TO TOLL CONVERT ALUMINA INTO ALUMINUM
(TOLLING CONTRACT)
The parties to this Agreement are:
HYDRO ALUMINUM METAL PRODUCTS NORTH AMERICA, INC.,
a Delaware corporation, formerly known as Hydro
Aluminum Louisville, Inc. ("Hydro"), and
GOLDENDALE ALUMINUM COMPANY,
a Delaware corporation, formerly known as Columbia
Aluminum Corporation (the "Company").
Hydro and the Company are parties to and are performing a contract
dated May 22, 1996, entitled "Agreement to Toll Convert Alumina Into Aluminum
(Tolling Contract)" (the "Tolling Contract"). The Tolling Contract was amended
by the First Amendment to Agreement to Toll Convert Alumina Into Aluminum
(Tolling Contract) dated December 21, 1998 (the "First Amendment").
As a consequence of the current power market conditions in the
Pacific Northwest, the Company has curtailed production at its aluminum smelter
near Goldendale, Washington (the "Goldendale Plant") and allowed the Bonneville
Power Administration ("BPA") to remarket the excess power made available because
of the curtailment.
The Company has entered into a Remarketing Addendum to the 1996
Agreement dated December 29, 2000 (the "Remarketing Addendum") with the United
States of America, Department of Energy, acting by and through the BPA.
Hydro will incur costs and losses from curtailment of metal
production at the Goldendale Plant, including costs of reselling alumina
designated for the Goldendale Plant and costs related to the establishment of
new sources of aluminum to its customers. Such curtailment will also involve a
significant market risk for Hydro since alternative sourcing arrangements may
affect supplies to its customers and Hydro's longer term credibility in the
marketplace.
THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. INTERPRETATION
Any reference to the Tolling Contract in this Agreement shall mean
the Tolling Contract as amended by the First Amendment. This
Agreement shall be interpreted and construed in the context of and
in accordance with the provisions and defined terms of the Tolling
Contract.
2. CURTAILMENT OF METAL PRODUCTION
Hydro and the Company previously agreed, for the period from October
1, 2000 through December 31, 2002 (the "First Curtailment Period"),
to curtail the production level at the Goldendale Plant by 53,000
metric tons annually (the "First Curtailment"), to a production
level of 105,000 metric tons annually.
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For the period from December 24, 2000 through September 30, 2001
(the "Second Curtailment Period"), Hydro and the Company have agreed
to further curtail the production level at the Goldendale Plant by
an additional 83,000 metric tons annually (the "Second
Curtailment"). Consequently, during the Second Curtailment Period
the Company shall manufacture and Hydro shall take delivery of a
total of approximately 16,500 metric tons of aluminum metal. The
quantity of aluminum metal produced within the Second Curtailment
Period by the Company in any rolling three-month period from tolling
Hydro's alumina hereunder may not be less than 5,500 metric tons.
All such production shall be P1020 and, in the event that any such
production does not meet such specification, GAC shall compensate
Hdyro for any damages incurred as a result without reference to
Sections 11 or 12 of the Tolling Contract.
Hydro's obligation to deliver alumina shall be reduced accordingly
with respect to both the First Curtailment and the Second
Curtailment.
No further curtailments of the metal production at the Goldendale
Plant shall take place without Hydro's prior written approval, which
shall not be unreasonably withheld, conditioned or delayed.
3. COMPENSATION
With respect to the First Curtailment, Hydro and the Company have
entered into a separate agreement dated December 8, 2000 pursuant to
which Hydro shall be compensated for its loss in connection with
resale of alumina. In addition, the Company shall pay compensation
to Hydro of $750,000 (the "First Compensation") for other direct
costs related to the First Curtailment.
The First Compensation shall be payable in full upon execution of
this Agreement.
In addition, Hydro and the Company further agree to suspend any
shipments of metal due to Northwest Aluminum Company ("NAC") from
the Goldendale Plant during the period of curtailment, which
currently is expected to last through 2002. The parties will
negotiate in good faith regarding further suspension of deliveries
in the event the First Curtailment is extended. The agreement
whereby Hydro sells metal to NAC shall be extended to coincide with
the term of the Tolling Contract.
Hydro and the Company agree to extend the Tolling Contract through
2013 (two additional years).
With respect to Hydro's estimated losses resulting from the Second
Curtailment, the Company shall pay to Hydro compensation (the
"Second Compensation") of $38,000,000 (the "Second Compensation"),
for the period of December 24, 2000 through September 30, 2001. The
Second Compensation shall not be adjusted, regardless of whether
Hydro or the Company at a later stage can demonstrate that Hydro's
actual total losses exceeded or fell below such estimate.
The Second Compensation shall be payable as follows:
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$ 9,250,000, due March 1, 2001;
$ 3,500,000 due on the first day of each month
from and including April 1, 2001 and through
September 1, 2001; and
the remaining balance due October 1, 2001
Save as expressly set forth in this Agreement, none of the parties
shall have any liability towards the other for the consequences of
the First Curtailment and the Second Curtailment.
4. FURTHER AGREEMENTS
Golden Northwest Aluminum, Inc. shall negotiate in good faith with
Hydro an agreement regarding joint marketing of billet from the
aluminum smelter in The Dalles, Wasco County, Oregon.
Golden Northwest Aluminum, Inc. and Norsk Hydro Americas, Inc. shall
negotiate in good faith toward an amendment of the Subordinated Loan
Agreement dated December 21, 1998 between such parties so as to
permit Hydro to utilize the undrawn proceeds thereunder to purchase
from the Goldendale Aluminum Company Retirement Plan (the "Plan") up
to $10,000,000 of Goldendale Holding Company Preferred Stock held by
the Plan.
Hydro shall negotiate in good faith with GAC with regard to revision
of the casthouse base upcharge set forth in the Tolling Contract.
5. USE OF PROCEEDS FROM REMARKETING OF POWER
The Company shall use Goldendale Net Proceeds for Qualified
Expenditures as specified in the Remarketing Addendum. The Company
may change the definition of Qualified Expenditures with Hydro's
prior written consent, which if requested shall not be unreasonably
withheld, conditioned or delayed.
6. EFFECTS OF THE EXPIRY OF THE FIRST CURTAILMENT PERIOD
Upon expiry of the First Curtailment Period, the Company shall
resume full production in accordance with the provisions of the
Tolling Contract unless otherwise agreed.
7. CONDITIONS TO EFFECTIVENESS
The terms of this Agreement shall not be effective until GAC has
obtained the consent of Fleet Bank, N.A., as agent under the Credit
Agreement dated December 21, 1998 with GAC and NAC.
8. METAL FROM CLOSURE
All metal that is taken from reduction cells at the Goldendale Plant
during either Curtailment shall be used to make products as directed
and sold by Hydro.
9. GOVERNING LAW AND ARBITRATION OF DISPUTES
This Agreement shall be subject to Section 20 and Section
25 of the Tolling Contract.
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10. CAPTIONS AND COUNTERPARTS
Section captions are for convenience and are not part of the
substance of this document. This Agreement may be executed in
counterparts, each of which shall be an original and all of which
taken together shall be one and the same instrument.
11. AUDIT
As a lender and partner, Hydro reserves the right to review the
financial statements and results of expenditures as referenced above
and alumina and metal inventories.
Dated: January __, 2001
HYDRO ALUMINUM METAL PRODUCTS NORTH AMERICA, INC.
By: /s/
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Name:
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Title:
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GOLDENDALE ALUMINUM COMPANY
By: /s/
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Name:
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Title:
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Accepted with respect to the obligations set forth in Section 4:
GOLDEN NORTHWEST ALUMINUM, INC.
By: /s/
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Name:
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Title:
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NORSK HYDRO AMERICAS, INC.
By: /s/
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Name:
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Title:
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ALUMINA SETTLEMENT 2000/2001 BETWEEN
GOLDENDALE ALUMINUM COMPANY AND HYDRO ALUMINUM
We confirm our agreement to an Alumina settlement subject to the
fulfillment of the terms and conditions set out herein. The settlement is
subject to, and shall be interpreted in conjunction with, the alumina contract
between Hydro Aluminum (HAL) and Goldendale Aluminum Company (GAC), which shall
remain in full force and effect, except as amended below.
All payments to be made hereunder are subject to the payment terms of
the alumina contract.
2000:
Delivery of one cargo of 35,000 MT originally scheduled to GAC was
canceled and sold by HAL at 165 USD/MT. This gave a loss versus the purchase
price of 20.73 USD/MT, i.e., a total loss of 725,550 USD, which shall be
compensated by GAC. Payment to be made prior to 31st of December, 2001.
2001:
HAL and GAC have agreed to extend the tolling contract by one year at
prevailing contract terms. Goldendale's total capacity in year 2012 to apply.
Tolling contract shall be amended accordingly. Jim Walters/Lars Narvestad will
revert to GAC on this.
The final settlement amount to be paid by GAC to Hydro Aluminum in 2001
is 1,275,000 USD (85,000 MT x 15 USD/MT). 318,750 USD shall be invoiced each
quarter and paid to HAL prior to February 28, May 31, August 31 and December 31,
respectively.
For 2002 Hydro Aluminum and GAC have agreed to discuss a settlement
during 2001.
Goldendale Aluminum Company Hydro Aluminum a.s.
Dec 8, 2000 16/11-00
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Date: Date:
/s/ BRETT WILCOX /s/
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Sign: Sign: