CONVERSION AGREEMENT
Published on December 20, 2004
Exhibit 10.11
CONVERSION AGREEMENT
between
Bei Abschluss noch in diesem Jahr ist der Vertragspartner Alcan
Deutschland GmbH, die in Novelis Deutschland GmbH umfirmieren wird.
Hannoversche Stra(beta)e 1
37 075 Gottingen,
hereinafter referred to as "Novelis"
and
Alcan Packaging Singen GmbH
Alusingen-Platz 1
78221 Singen/Hohentwiel
Hereinafter referred to as "APS"
Collectively referred to as "the Parties"
WHEREAS:
o NOVELIS Inc. and ALCAN Inc. have agreed the terms of a Separation Agreement
('the Separation Agreement') under which NOVELIS will be separated out of
the ALCAN group of companies. Such separation shall include -- inter alia
-- the rolling businesses in Norf, Gottingen, Ludenscheid and Ohle. These
rolling businesses form part of Novelis Deutschland GmbH ("Novelis") or the
Joint Venture Alunorf GmbH, of which Novelis Deutschland GmbH will own 50%
of shares.
o Novelis carries on business in the manufacture of rolled aluminium, in
particular aluminium foilstock ("Foilstock").
o APS, which is currently a subsidiary of Alcan Inc. carries on business in
the manufacture of packaging products, which incorporate aluminium foil.
o The Parties have entered into this Agreement for the conversion of
aluminium into Foilstock by Novelis at the rolling businesses at Norf for
APS. With this Agreement the parties wish to set out the terms which they
have agreed for the supply of Foilstock by NOVELIS from the rolling
businesses at Norf to APS.
o Whilst this Agreement sets out minimum supply obligations, the Parties
expect that they may wish to negotiate terms for delivery of greater
volumes.
o Novelis in its future arm's length dealings with APS agrees to fairly
and equitably maintain throughout the term of this Agreement its support
for the business of APS
1(9)
through new material development and technical service as it would with any
third party customer.
IT IS HEREBY AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following terms shall have the following
meanings unless the context requires otherwise:
"Aluminium" Aluminium Remelt Ingot in quality 99,7% / A7E / P1020
and/or Aluminium Sheet Ingot provided by APS to Novelis
originating from such suppliers (ie. currently Alcan
ISAL) that have formally qualified their Ingot in a
qualification procedure at the Norf facility.
"Conversion" means the conversion of any aluminium into Foilstock,
but not necessarily identical Aluminium as provided by
APS.
"Conversion Price" means the price for Conversion as set out in
Appendix A.
"Day" means calendar day.
"Effective Date" means the "Effective Date" as defined in the Separation
Agreement
"First Year" means the period commencing on Effective Date and
ending on 31st December 2005
"Foilstock" means aluminium foilstock conforming to the
Specifications as set out in Appendix B
"Month" means each calendar month throughout the duration of
this Agreement
"Reasonable and Prudent
Operator" shall mean a person seeking to perform its contractual
obligations and in so doing and in the general conduct
of its undertaking including in the operation,
maintenance and repair of any manufacturing or other
facilities exercising that degree of skill, diligence,
prudence and foresight and in the maintenance and
repair of any manufacturing or other facilities using
the type of equipment, materials and parts which would
reasonably and ordinarily be expected from a skilled
and experienced operator in substantial compliance with
all applicable laws, engaged in the same type of
undertaking in the same locality and under the same or
similar circumstances and conditions.
"Second Year" means the period commencing on 1st January 2006 and
ending on 31st December 2006
"Third Year" means the period commencing on 1st January 2007 and
ending on 31st December 2007.
2(9)
"Week" means each week, commencing 00.00 European Standard
Time or European Summer Time as the case may be on
Monday
"Year" means each period of 12 consecutive Months throughout
the duration of this Agreement, commencing on the
Effective Date
"Date of Delivery" date on which Foilstock shall be delivered according to
the agreed delivery terms (Incoterms 2000).
1.2 The headings to the clauses are for convenience only, have no legal
effect, and shall not affect the construction of this Agreement.
1.3 Therefore, the foregoing being an integral part of this agreement, the
Parties have agreed:
2 SUBJECT MATTER
2.1 Objective of this Agreement is to set out the entire conditions and
terms for the provision of Aluminium by APS, Conversion into Foilstock
by Novelis at its rolling facilities at Norf and subsequent delivery
of Foilstock to APS. APS will use the Foilstock at its cold rolling
operations in Singen.
2.2 Any and all provisions of Aluminium by APS, Conversion into Foilstock
and delivery of such Foilstock by Novelis to APS, shall be governed by
the terms of this Agreement. The Parties expressly exclude the use of
their respective General Terms and Conditions of Purchase and Sale.
3 DURATION
This Agreement shall come into effect on Effective Date and shall have
an initial minimum duration of three Years. Thereafter the Agreement
shall renew automatically for another Year unless terminated in
writing by either Party observing a notice period of three months
prior to the end of a Year.
4 VOLUMES FOR CONVERSION, PROVISION OF ALUMINIUM
4.1 During each Month and each Year, Novelis shall be obliged to convert
and APS shall be obliged to provide Aluminium and purchase an
aggregate of not less than the relevant quantity of Foilstock set out
below ('the Yearly Volume' and 'the Monthly Volume" respectively).
4.2 The Yearly volume with a tolerance of +/-10 % per Year shall be as
follows:
o During the First Year, between *** and *** tons.
o For the Second and Third Year, volumes shall be agreed by
September 30 of the preceding Year. Up to that date Novelis shall
reserve a minimum capacity of *** mt for supply to APS for the
Second Year and Third Year respectively. APS will at it's sole
discretion decide by September 30 in each Year whether Novelis
has to fulfil the supply obligation of min. *** mt per Year. In
the event that the Parties do not agree on
***Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
3(9)
volumes for the following Year, the agreement will end
automatically without any prior notice at the end of the current
Year.
4.3 The volume of Foilstock provided under this Agreement will be mainly
used for the APS production of capacitor foil.
4.4 The Monthly Volume shall be in accordance with the rolling forecast of
APS
4.5 For the Conversion of Foilstock APS shall deliver and Novelis shall
take delivery of Aluminium. On Novelis request the Aluminium shall be
released either directly at Alunorf or at Rotterdam in a non LME
warehouse. In case of release at Rotterdam no further transport
charges will apply for APS. The delivery of remelt ingots shall be
made no later than 4 weeks before the delivery of the Foilstock. The
delivery of sheet ingots shall be made no later than 3 weeks before
the delivery of the Foilstock.
5 FORECASTS, ORDERS AND ORDER CONFIRMATIONS
5.1 No later than September 30 in each Year, APS will provide Novelis with
a schedule for Monthly Volumes out of the Yearly Volume for the
following Year.
5.2 No later than on the 2nd Day of each Month, APS will provide Novelis
with a rolling forecast of volumes (with a tolerance of +/- 10% four
weeks to the final delivery week) by Specification for the three
consecutive Months following the date on which the forecast is issued.
5.3 No later than one month before the desired date of delivery, APS will
place written orders for the deliveries of Foilstock. Such orders
shall be binding upon the Parties. Orders shall contain volume,
specification, delivery terms and delivery date. APS shall place such
orders for Foilstock as reasonably evenly as possible throughout each
month. Volumes forecasted for more than one month before the desired
delivery date require written confirmation by Novelis.
5.4 If APS places orders for Foilstock other than in accordance with the
above provisions, or if APS requires delivery outside the normal
delivery times, Novelis shall use reasonable endeavours to meet such
orders.
5.5 All deliveries of Foilstock pursuant to this Agreement shall unless
expressly stated to the contrary in the order and/or order
confirmation be DDP Incoterms 2000, the place of delivery will be
Alcan Packaging Singen GmbH (Germany).
5.6 Deliveries shall be made during normal working hours at the premises
of APS in Singen (unless otherwise agreed). APS agrees to ensure free
access so as not to delay or inconvenience Novelis or its agents in
making delivery.
5.7 The risk in Foilstock shall pass according to the agreed delivery
terms (DDP, Incoterms 2000). Title to Foilstock delivered shall pass
according to Sec. 6 below.
5.8 APS shall use its best endeavours to minimise the turnaround times of
Novelis transportation to the plant. To this effect APS shall unload
any Foilstock delivered as quickly as possible after arrival of
transport.
4(9)
6 RESERVATION OF TITLE
6.1 Novelis reserves title to Foilstock delivered until full payment of
Conversion Price. APS shall be entitled to process in the ordinary
course of business any Foilstock delivered. Reservation of title shall
extend to any new products created by processing the Foilstock for
which title is reserved.
6.2 In the event of processing, linking or mixing with other goods Novelis
shall acquire co-ownership equivalent to the relation of the invoice
value of the reserved-title goods to the other materials.
6.3 APS will exercise possession of the reserved-title goods with the care
of a reasonable and prudent operator as custodian on the behalf of
Novelis, insure the reserved-title goods against theft, damage caused
by nature and other risks and take all measures necessary to ensure
that the title is neither impaired nor rescinded.
6.4 To secure Novelis relevant claims under Para. 6.1, APS assigns to
Novelis all receivables from the sale of reserved-title goods,
including bills of exchange and cheques. If goods are sold in which
Novelis have a co-ownership share in accordance with Para. 6.2.,
assignment is limited to the share of the receivable that corresponds
to its co-ownership share.
6.5 In the event of default in payment, cessation of payment or if APS has
filed a petition for the commencement of insolvency proceedings, APS
shall, at Novelis request, notify its customers of the assignment,
carried out in accordance with herewith, and provide Novelis with all
necessary information and take all measures to secure Novelis'
rights. In particular, Novelis shall be notified immediately of any
attachment by creditors of the reserved-title goods or the receivables
assigned to Novelis.
6.6 If the value of the security of Novelis exceeds the value of
receivables to be secured by more than 20% Novelis shall, upon APS
request, release securities to this extent selected by APS.
6.7 The same rights and obligations as set out in 6.1. -- 6.6. shall apply
mutadis mutandis with regard to Aluminium provided by APS. Such rights
and obligations shall apply until delivery of a corresponding volume
of Foilstock by Novelis.
7 FORCE MAJEURE
7.1 'Force Majeure' for the purposes of this clause shall mean any
circumstances beyond the reasonable control of the party affected
which (in the case of Novelis) prevent Novelis from producing
Foilstock at Novelis' plant in Norf from which delivery is to be
made to APS. Force Majeure shall include breakdown of either
Novelis' plant or production unit or APS plant or production unit,
but only if and to the extent that such breakdown has not occurred as
a result of Novelis', or APS, as the case may be, having failed to
act at all relevant times a Reasonable and Prudent Operator. Force
Majeure shall not include any temporary closure or reduced production,
nor anything which is the result of a party having failed to act as a
Reasonable and Prudent Operator, nor any breakdowns or other failures
of transportation (whether carried out by the parties directly or
under contract), nor any reduction in production due to economic
circumstances, nor any other market or economic circumstances which
may make the terms of this agreement unattractive to one of the
Parties.
5(9)
7.2 If either Party is rendered unable to carry out any of its obligations
under this Agreement by reason of Force Majeure, that Party shall not
be liable for any failure to perform the obligation(s) for so long as
performance is thus affected.
7.3 As soon as a Party is aware of a threat of circumstances likely to
lead to its declaring Force Majeure (even though such circumstances
may not have occurred, or where it is not certain that they will
result in Force Majeure being declared), that Party shall notify the
other and consider with it what steps, if any, may be taken to
overcome such circumstances.
7.4 A Party wishing to invoke Force Majeure shall promptly notify the
other in writing giving details thereof, of the anticipated affect on
this Agreement and of the estimated duration of Force Majeure. Such
Party shall update such information at least once a month throughout
the duration of the Force Majeure, and shall provide as much notice as
possible of the reduction of normal supplies and/or deliveries.
7.5 The Party affected by an event of Force Majeure shall take all
reasonable steps to procure that such event ceases to exist and to
minimize the effects thereof on the performance of its obligations
hereunder; provided that nothing in this Clause 5 shall require that
Party to settle any labour dispute on terms which in its sole opinion
are not satisfactory to it.
7.6 During any period where as a result of Force Majeure the quantities of
Foilstock at the disposal of Novelis are insufficient to meet all its
contractual supply obligations, Novelis shall apportion the available
quantities of Foilstock between its contractual customers on a fair
and equitable basis. Novelis shall not in such circumstances be
compelled to purchase Foilstock from others sources to fulfil its
supply obligations hereunder.
7.7 To the extent that Novelis is prevented by an event of Force Majeure
from producing Foilstock and/or effecting deliveries to APS, or to the
extent to which APS is prevented from taking delivery of Foilstock,
the Parties' respective supply and purchase obligations shall be
reduced on a pro rata time basis, and there shall be a corresponding
reduction in the supply and purchase obligations set out in Clause 4
(it being assumed that the quantities which would otherwise have been
supplied equalled the Monthly Purchase Amount for the Month in
question).
7.8 No occurrence of Force Majeure shall operate to extend the duration of
this Agreement.
7.9 In no circumstances shall default in payment constitute Force Majeure.
8 PRICE AND PAYMENT
8.1 The Conversion Price as set out in Appendix A - shall be valid from
Effective Date until 31st December 2005. In the Second Year Conversion
Price shall consist of prices as set out in Appendix A, plus a mark up
of ***%. In the Third Year Conversion Price shall consist of prices
for the Second Year, plus a mark up of ***%.
8.2 Following the expiration of any agreement on Conversion Price, the
Parties will agree no later than September 30 of each Year the
Conversion Price for the following Year. If the Parties fail to agree
a new Conversion Price, the Agreement shall expire automatically on
June 30 of the following Year. During the period until expiration the
latest agreed price shall prevail.
***Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
6(9)
8.3 For deliveries of Foilstock in any given Month, Novelis shall issue by
the 1st working day of the following Month a written invoice. Such
invoice shall be payable at the end of the Month following date of
invoice. An invoice submitted by telex or facsimile shall be regarded
as a valid invoice for the purpose of this Agreement. Payment shall be
made to Novelis bank account details of which shall be given by
Novelis to APS from time to time in writing.
8.4 In addition to the Conversion Price calculated pursuant to Clause 8.1,
APS shall pay Value Added Tax (or other such levy required by relevant
law to be added) in respect thereof.
9 WARRANTIES, REMEDIES IN CASE OF DEFECTIVE DELIVERY
9.1 Novelis warrants for a period of eighteen (18) months from the date of
delivery that all Foilstock supplied hereunder shall conform to the
Specifications detailed in Appendix B.
9.2 APS inspection obligations shall be limited to a visual inspection of
Foilstock promptly following delivery, in order to verify the identity
and quantity of the Foilstock and that it is free of defects having
occurred during transport. In the event of defects detected during
such inspection, APS shall secure confirmation on the transport
documentation and notify Novelis immediately.
9.3 Any non-conformities detected at a later stage that were impossible to
detect by visual inspection pursuant to 9.2., shall be notified to
Novelis as soon as practicable.
9.4 In the event that Foilstock supplied by Novelis shall not conform to
Specification as set out in Appendix B, Novelis shall in consultation
with APS either
o replace the non-conforming Foilstock within a reasonable period of
time at its cost and risk, or
o refund the difference between Conversion Price paid for
non-conforming Foilstock and its scrap value, or
o discuss and agree with APS the possibilities of repair/re-working
of non-conforming Foilstock and its associated cost
9.5 In the event that Novelis chooses not to or is unable to replace
non-conforming Foilstock within a reasonable period of time, APS shall
in addition to a refund be entitled to compensation equal to the
difference between the price that it would have paid for the supplies
of Foilstock/ in question, and the best reasonably available price at
which it is able to obtain substitute supply from other sources
(including the difference in any transport costs and import duties
borne).
9.6 APS may request a change of the Specifications upon a minimum of
3 months written notice to Novelis. Novelis will use reasonable
endeavours to accommodate such change provided that it is technically
possible. In this event, the Conversion Price shall be adjusted to
reflect the resulting increase or decrease in the costs to Novelis of
conversion resulting from producing Foilstock to such amended
Specifications. If the parties are unable to agree on the amount of
such increase or reduction in the Conversion Price within 30 days
after the submission by Novelis of a formal proposal to APS, Novelis
shall provide a detailed calculation of the on-cost or cost savings to
APS. APS shall consider such detailed calculation in good faith and
accept or reject the calculation within 30 days of receipt. In the
event of rejection of calculation, Novelis shall be
7(9)
entitled to refuse the change of Specifications. Supplies shall then
continue in conformity to the latest agreed Specifications.
9.7 Novelis shall provide an ongoing delivery performance above 90%. If
Novelis does not achieve a delivery performance of more than 80% over
a period of 3 months APS shall be entitled to request the
implementation of a consignment stock free of charge in Singen with a
minimum quantity of an average 10 working day volume.
10 GENERAL LIABILITY
10.1 In the event of any breach of contractual obligations, Novelis shall
be liable according to statutory requirements for all liability
incurred in respect of death or personal injury or other liability
under the Product Liability Act.
10.2 Any and all other liability shall be limited to compensation as stated
in 9.4 and 9.5 and/or compensation for any loss resulting from
intentional or negligent breach of contract up to a total of *** per
contractual breach and year. In no event shall Novelis be liable for
loss of contract, loss of business or profits.
11 EARLY TERMINATION
11.1 Subject to Clause 11.2 and if either party shall commit a material
breach of any of the terms and conditions of this Agreement then the
other Party shall by notice in writing be entitled to require that
Party to remedy any such breach within 60 Days from the date of such
notice and should that Party fail to remedy such breach within the
period aforesaid the other Party shall be entitled to forthwith
terminate this Agreement. Such termination will be without prejudice
to the additional right of the terminating Party to claim for damages
in respect of the said material breach, and also to any claims and/or
rights or remedies which either Party may have against the other
insofar as such claims, rights or remedies accrued prior to such
termination.
11.2 If either party shall enter into compulsory or voluntary liquidation
(not being a voluntary liquidation for the purpose of reconstruction
or amalgamation), or had a receiver or administrator appointed to any
part of its assets, or becomes unable to pay its debts as they fall
due, then the other Party may terminate the Agreement forthwith by
written notice to such effect.
12 SUPPORT OF APS
Novelis in its future arm's length dealings with APS agrees to fairly
and equitably maintain throughout the term of this Agreement its
support for the business of APS through new material development and
technical service as it would with any third party customer.
13 SEVERABILITY OF PROVISIONS
In any case any provisions hereof should be held invalid or
unenforceable the validity and enforceability of the remaining
provisions shall not be affected. Any invalid or unenforceable
provision shall to the extent possible be replaced with such provision
which will allow the Parties hereto to achieve the intended economic
result in a legally valid and effective manner.
***Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
8(9)
14 NOTICES
Any formal notice to be given under this Agreement shall be in writing
and shall be deemed to have been sufficiently given if delivered in
person (against receipt), or by fax (against acknowledgement of
receipt) or by registered mail, addressed to such person at the
recipient, at such address as the recipient may notify to the other
parties from time to time (and pending the first such notification to
the relevant head office of the recipient).
15 LAW -- DISPUTES
This Agreement shall be governed by and construed exclusively in
accordance with German Law. Exclusive venue shall be the courts in
Singen.
Gottingen, ........................ Singen, ..............................
Novelis Deutschland GmbH Alcan Packaging Singen GmbH
- -----------------------
.................................... .....................................
(N. von Verschuer) (Dr. R. Neumann-Schafer/Dr. N. Wenzel)
9(9)