EXHIBIT 10.5
MANUFACTURING SERVICES AGREEMENT
--------------------------------
MANUFACTURING SERVICES AGREEMENT dated as of September 30, 1998, by and
between ▇▇▇▇▇ Corning, a Delaware corporation ("OC"), and Advanced Glassfiber
Yarns, LLC ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, OC has been engaged, in part, in the business of manufacturing
and selling glass fiber yarns and specialty materials (the "Business") at its
facility located in Huntingdon, Pennsylvania (the "Facility").
WHEREAS, Buyer on the date hereof (the "Closing Date") has purchased
substantially all of the assets of OC principally related to the operation of
the Business, except for certain equipment used in the manufacture of continuous
filament mat ("Retained Equipment").
WHEREAS, OC and Buyer have entered into a lease agreement (the "Lease"),
pursuant to which Buyer shall agree to lease the portion of the Huntingdon
property in which such continuous filament mat is manufactured to OC (the
"Leased Premises") on the terms and subject to the conditions set forth therein.
WHEREAS, at OC's request, Buyer has agreed to provide to OC certain
manufacturing services to support the business of OC at the Leased Premises on
the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
ARTICLE I
BASIC SERVICES
SECTION 1.01 Basic Services. In consideration for the payment by OC to
--------------
Buyer of a fee (which amount will be reduced proportionately for any partial
year) (the "Basic Services Fee") the method of computation of which is set forth
in Schedule A hereto, Buyer shall provide the following services in a
professional and workmanlike manner:
(a) Sufficient manufacturing and management capabilities through persons
(operators, supervisors and support personnel) of demonstrated skills and
experience to manufacture through the operation of Retained Equipment on the
Leased Premises OC continuous filament mat products in accordance with OC's
quality standards and specifications at designated manufacturing schedules and
production levels. Further terms are set forth on Schedule A.
(b) Ancillary services relating to the manufacturing process in the
Leased Premises, including but not limited to maintenance, environmental,
building and grounds, general overhead, human resource administration,
information systems, shipping, warehousing, packaging, and material movement.
(c) Such other services not specifically enumerated in (a) or (b) that
were provided by OC to the Retained Equipment line as of the date of this
Agreement.
SECTION 1.02 Additional Services.
-------------------
(a) In addition to the Basic Services, Buyer may, in its reasonable
discretion, provide to OC other services reasonably requested by OC from time to
time.
(b) Buyer shall charge OC a fee (the "Additional Services Fee") for any
such services (the "Additional Services") in an amount which shall be mutually
agreeable to the parties.
(c) Payment by OC to Buyer for all Additional Services shall be made as
follows:
(i) To the extent such Additional Services are provided by third
parties only on or with respect to the Leased Premises, OC shall remit
payment to Buyer within thirty (30) days of OC's receipt of a copy of
such third party's invoice.
(ii) To the extent such Additional Services are provided by third
parties performing such services at both the Leased Premises and at other
portions of the Facility, OC shall remit to Buyer such portion of any
such third party invoice as shall be mutually agreed upon by Buyer and OC
within 30 days of its receipt of such invoice from Buyer.
-2-
(iii) To the extent such Additional Services are provided by
personnel of Buyer, Buyer shall submit to OC a monthly invoice for all
Additional Services which are provided on a daily or weekly basis, and a
quarterly invoice for all Additional Services which are provided at
intervals of one month or more. OC shall remit the amount of each such
invoice to Buyer within 30 days of its receipt from Buyer.
(iv) Notwithstanding anything to the contrary contained herein,
the Additional Services Fee payable in connection with the delivery of
Additional Services is in addition to and not in lieu of the Basis
Services Fee payable under Section 1.01 above.
(v) The parties acknowledge and agree that the terms of this
Agreement relate solely to the provision of services by Buyer on OC's
behalf at the Leased Premises. Any services other than Services provided
under this Agreement which relate to the Leased Premises are dealt with
separately under the terms of the Lease and Buyer shall not be entitled
to payment or reimbursement for any such services by virtue of the terms
and provisions of this Agreement such that there will be no duplication
of payment for the same services.
(vi) In providing the Additional Services, Buyer covenants and
agrees to use its commercially reasonable efforts to provide and/or
obtain top quality service providers at the lowest possible cost for the
benefit of OC.
(vii) Nothing herein requires OC to obtain any Additional Services
from Buyer or otherwise precludes OC from obtaining such services
directly from any third party or its own employees.
SECTION 1.03 Operations Manager; Other Personnel.
-----------------------------------
(a) At all times during the term of this Agreement, Buyer shall cause
one of its existing employees to act as Operations Manager on a full-time basis
with respect to the services provided by Buyer under this Agreement. Such
employee shall be a manager, reasonably acceptable to OC, who is highly
experienced in all relevant aspects of manufacturing, production, quality
control, OC's continuous filament mat products, shipping, receiving, inventory
control and personnel management. As Operations Manager, such employee shall be
fully responsible on a day-to-day basis for the services provided by Buyer
hereunder. The services performed by the Operations Manager are considered Basic
Services and are not in addition to such services.
(b) It is understood that certain OC employees, specifically, the
platform leader and technical support operation personnel, will be assigned to
work on the Leased Premises for quality assurance purposes and for the oversight
of the manufacturing processes to insure compliance with all OC's product line
and quality specifications and its product mix, scheduling and volume
requirements. These OC employees shall address any issues or concerns that
relate
-3-
to compliance to the Operations Manager or his/her designee and Buyer agrees to
undertake prompt efforts to satisfy or remediate such issues or concerns. If
necessary or appropriate, the parties understand that the Operations Manager or
his/her designee may direct or authorize such OC employees to assist Buyer's
employees directly to satisfy or remediate any such issues or concerns.
ARTICLE II
EMPLOYEE MATTERS
SECTION 2.01 Buyer's Employees. Buyer shall direct the operation of its
-----------------
staff in all respects and, except as otherwise provided or required herein,
Buyer shall determine, without instruction from OC, the method, means and manner
of utilizing its employees in performing services under this Agreement. Buyer
has the exclusive right to select, retain and discharge its employees, and has
complete authority to set all terms and conditions of employment. In the event
Buyer elects to hire on the Closing Date individuals employed by OC at the
Facility ("Former OC Employees"), such employees shall cease to be employed by
OC and shall be under the sole direction, supervision and management of Buyer as
of the Closing Date.
SECTION 2.02 Compliance with Employer Obligations.
------------------------------------
(a) For the period including and subsequent to the Effective Date (as
herein defined), Buyer shall be responsible for compliance with all federal,
state and local laws, rules and regulations relating to the employment of any
Former OC Employee and any other Buyer personnel involved in performing the
services contemplated herein.
(b) For the period including and subsequent to the Effective Date (as
herein defined), Buyer shall be responsible for all compensation and benefits of
any Former OC Employee and any other Buyer personnel involved in performing the
services contemplated herein (including, without limitation, all federal, state
and local payroll, social security, unemployment, workers' compensation and
similar taxes payable for each such employee), and OC shall have no
responsibility therefor.
SECTION 2.03 Workmen; Labor Harmony. Buyer shall provide workmen and
----------------------
personnel (including supervisory personnel) as required by this Agreement and
otherwise in sufficient number and of proper skill and training for the prompt
and efficient performance of the services in the manner herein provided. The
supervisory personnel shall be experienced and competent and sufficient in
number to ensure compliance with this Agreement. Buyer shall inform OC promptly
regarding any matter, including any labor or other dispute, which may interfere
with the performance of the Agreement or the performances of any other labor,
work or service in or about the Leased Premises and shall cooperate with OC in
disposing of any such dispute. Whenever requested by OC, a written statement
setting forth the names of all supervisors and other employees of Buyer to be
used in the performance of this Agreement or
-4-
any portion thereof, and an identification of the job assignment, skills and
qualifications of each person shall be furnished by Buyer to OC.
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.01 Product Insurance. Buyer shall at all times maintain
-----------------
insurance covering the Equipment, raw materials, in-process and final Inventory
used or produced pursuant to this Agreement, which product insurance shall be
reasonably satisfactory to OC. In the event that (i) a loss occurs, (ii) Buyer
or Buyer's insurance carrier reimburses OC therefor, and (iii) OC is reimbursed
for such loss by its own insurance carrier or otherwise, OC shall promptly
forward to Buyer or Buyer's insurance carrier, as the case may be, any monies so
received to the extent of the payment made by Buyer or its own insurance carrier
to OC in connection with such loss.
SECTION 3.02 General Liability Insurance. Without limiting in any way
---------------------------
the obligations of Buyer under Section 3.01, OC shall provide such general
liability insurance as set forth in the Lease or as otherwise agreed prior to
the Closing Date. In the event that (i) a loss occurs, (ii) Buyer or Buyer's
insurance carrier reimburses OC therefor, and (iii) OC is reimbursed for such
loss by its own insurance carrier or otherwise, OC shall promptly forward to
Buyer or Buyer's insurance carrier, as the case may be, any monies so received
to the extent of the payment made by Buyer or its own insurance carrier to OC in
connection with such loss.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01 Indemnification, etc. by Buyer. Buyer agrees to indemnify
------------------------------
OC and its directors, officers, employees and agents, and agrees to hold them
harmless, from and against any loss, liability, claim, damage or expense
(including the reasonable fees, charges and disbursements of counsel)
(collectively, "Losses") suffered or incurred by any such indemnified party to
the extent arising from (i) any breach of any agreement or obligation of Buyer
contained in this Agreement, (ii) the gross negligence or willful misconduct of
Buyer or of its directors, officers, employees or agents in connection with
activities undertaken pursuant to and services provided under this Agreement,
(iii) Buyer's failure to comply with any federal, state or municipal law or
regulation applicable to the Leased Premises or Buyer's operations therein, (iv)
any injury to or claim of Buyer's employees or any third party relating to the
Leased Premises or Buyer's operations therein, or (v) any breach of any
agreement entered into by Buyer with any third party or its employees relating
to Buyer's employees, the Leased Premises or the operations therein.
SECTION 4.02 Indemnification by OC. OC agrees to indemnify Buyer and
---------------------
its directors, officers, employees and agents, and agrees to hold them harmless,
from and against
-5-
any Losses suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any agreement or obligation of OC contained in
this Agreement, (ii) the gross negligence or willful misconduct of OC or of its
directors, officers, employees or agents for activities undertaken pursuant to
and services provided under this Agreement, or (iii) OC's failure to comply with
any federal, state or municipal law or regulation applicable to the OC employees
located at the Leased Premises or OC's operations therein, (iv) any injury to or
claim of OC's employees, or (v) any breach of any agreement entered into by OC
with any third party or its employees related to OC's employees or OC's
operations on the Leased Premises.
ARTICLE V
EFFECTIVENESS; TERMINATION
SECTION 5.01 Term. This Agreement shall commence on the date hereof
----
(the "Effective Date") and shall continue in effect unless otherwise terminated
as provided in Section 5.02 for so long as OC or its Affiliates (as defined in
the Contribution Agreement between the parties) continues to hold a 49%
Membership Interest in the Buyer's Business.
SECTION 5.02 Early Termination.
-----------------
(a) At any time, OC may terminate this Agreement by giving not less than
one hundred eighty (180) days' prior written notice of such termination to
Buyer.
(b) Notwithstanding the provisions of Section 5.01 or 5.02(a), upon
termination of the Lease for any reason, this Agreement shall automatically
terminate.
SECTION 5.03 Procedures upon Termination; Survival.
-------------------------------------
(a) Promptly following any termination of this Agreement, Buyer shall (i)
deliver to OC all books, records and forms pertaining to OC's continuous
filament mat business then in the possession of Buyer, (ii) furnish OC with a
final accounting of the raw materials, work in progress and finished products
then in inventory relating to the continuous filament mat business at the
Facility, (iii) make available for pick-up by OC any and all unsold raw
materials, work in progress and finished products in the custody of Buyer
relating to the continuous filament mat business and (iv) provide services, to
be delivered either by Buyer or a third party, at the option of Buyer, if
requested by OC sufficient to dismantle and move any Equipment, raw materials,
work in progress and finished products belonging to OC from the Leased Premises
to a location designated by OC, the expenses of such services shall be assumed
by OC provided, however, that if this Agreement is terminated by OC prior to its
-------- -------
Expiration Date (as herein defined) for any reason other than the gross
negligence or willful misconduct of Buyer, these expenses shall be the
responsibility of OC. OC acknowledges and agrees that all services provided to
OC under this Section 5.03(a) shall be at OC's risk without any liability for
Buyer other than in the case of its gross negligence or willful misconduct.
-6-
(b) Notwithstanding any termination of this Agreement, each party shall
remain liable for all amounts owed by it to the other at the time of such
termination, including amounts payable in respect of the month in which such
termination occurs; provided, however, that any amount payable in respect of
-------- -------
such month shall be calculated on a prorated basis to reflect the date of
termination, except to the extent that the invoicing party demonstrates that
such proration would be commercially unreasonable.
(c) Notwithstanding anything in this Agreement to the contrary, the
agreements contained in Article V shall survive the termination or expiration of
this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Relationship of Parties; Independent Contractors. The
------------------------------------------------
relationship of the parties created by this Agreement is that of independent
contractors, and neither party, nor any of its employees, directors, officers or
agents, shall be deemed to be the representative, agent or employee of the other
party for any purpose whatsoever, nor shall they or any of them have any
authority or right to assume or create an obligation of any kind or nature,
expressed or implied, on behalf of the other party, nor to accept service of any
legal process of any kind addressed to, or intended for, the other party.
SECTION 6.02 Notices. All notices and demands of any kind which either
-------
party may be required or desire to serve upon the other under the terms of this
Agreement shall be in writing and shall be served upon the parties by personal
delivery or by certified mail, return receipt requested, at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to Buyer: Advanced Glassfiber Yarns LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Manager
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
And to: Jefferson Holdings, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-▇-
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Corporate Secretary
If to OC: ▇▇▇▇▇ Corning World Headquarters
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Law Department
With a copy to: ▇▇▇▇▇ Corning World Headquarters
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Law Department
or to such other address as any such party shall designate by written notice
to the other parties hereto.
SECTION 6.03 Successor And Assigns. This Agreement shall be binding
---------------------
upon and shall inure to the benefit of both parties and their respective
successors and assigns. Except as otherwise expressly provided herein, this
Agreement shall not be assigned by either party hereto without the express prior
written consent of the other party, and any attempted assignment, without such
consents, shall be null and void. Notwithstanding any nonassignment provisions
contained in this Section 6.03, Buyer, or any permitted assignee or transferee
of Buyer, may assign or otherwise transfer all of its rights and/or obligations
hereunder (i) to any entity or entities, or any assignee of such entity or
entities, providing financing for the transactions contemplated by this
Agreement or to any entity or entities providing to Buyer, Buyer's Affiliates,
or to any such permitted assignee of Buyer, financing relating to the Business
(collectively, the "Financing Sources"), (ii) to any Affiliate of Buyer,
provided that (x) such Affiliate shall agree with OC and its permitted assignees
or transferees, if any, in writing to assume the Buyer's obligations hereunder
and (y) any such assignment to an Affiliate of the Buyer shall not relieve the
Buyer from its obligations hereunder or (iii) to any entity to which Buyer, or
any assignee or transferee of Buyer, assigns, sells, transfers or otherwise
conveys all or substantially all of the assets constituting the Huntingdon
Facility (as such term is defined in the SPA) (a "Partial Assignment"), provided
that such acquiring entity agrees with and acknowledges in writing to OC and its
permitted assignees or transferees, if any, that this Agreement shall be binding
upon and enforceable against such entity as though such acquiring entity were
Buyer and that such entity shall perform all of Buyer's obligations hereunder.
Notwithstanding any nonassignment provisions contained in this Section 6.03, OC,
or any permitted assignee or transferee of OC, may assign or otherwise transfer
some or all of its rights and/or obligations hereunder (i) to any Affiliate of
OC, provided that (x) such Affiliate shall agree with Buyer and its permitted
assignees or transferees, if any, in writing to assume the OC's
-8-
obligations hereunder and (y) any such assignment to an Affiliate of the OC
shall not relieve the OC from its obligations hereunder or (ii) to any entity to
which OC, or any assignee or transferee of OC, assigns, sells, transfers or
otherwise conveys all or substantially all of the assets constituting the
Business, provided that such acquiring entity agrees with and acknowledges in
writing to Buyer and its permitted assignees or transferees, if any, that this
Agreement shall be binding upon and enforceable against such entity as though
such acquiring entity were OC and that such entity shall perform all of OC's
obligations hereunder. To the extent that assignment and/or transfer of any of
the rights, privileges, and/or obligations is permitted, this Agreement shall be
binding on, and except as otherwise expressly provided, shall inure to the
benefit of, the legal successors, assigns, or representatives of the parties.
SECTION 6.04 Force Majeure Neither party shall be liable to the other
-------------
for delay or failure to perform in whole or in part, by reason of contingencies
or events which: (i) are beyond the reasonable control of the party whose
performance is affected, (ii) are unforeseeable, and (iii) could not have been
reasonably prevented, whether herein specifically enumerated or not (a "Force
Majeure Event"). These contingencies include, among others, act of God, act of
war, revolution, riot, acts of public enemies, fire, explosion, breakdown of
plant, strike, lockout, labor dispute, casualty or accident, earthquake, flood,
cyclone, tornado, hurricane or other windstorm, or by reason of any law, order,
proclamation, regulation, ordinance, demand, requisition or requirement or any
other act of any governmental authority, foreign or domestic, local, state or
federal (provided that the Force Majeure Event does not arise due to or is
connected in any way with a violation by party hereto of any law, order,
proclamation, regulation, ordinance, demand, requisition or requirement of any
governmental authority) except that contingencies shall not include a downturn
in Buyer's business or general economic downturn. A party so affected by a
Force Majeure Event shall: (i) promptly give written notice to the other party
whenever such contingency or other act becomes reasonably foreseeable (including
an estimate of the expected duration of the Force Majeure Event and its probable
impact on the performance of such party's obligations hereunder); (ii) exercise
all reasonable efforts to continue to perform its obligations hereunder; (iii)
use its commercially reasonable best efforts to overcome or mitigate the effects
of the contingency as promptly as possible and (iv) promptly give written notice
to the other party of the cessation of such contingency. Neither party,
however, shall be required to resolve a strike, lockout or other labor problem
in a manner which it alone does not deem proper and advisable. In no event
shall any Force Majeure Event excuse party's failure to pay when due any
monetary obligation hereunder. In the case of any Force Majeure Event relied on
by OC, OC agrees that it shall treat Buyer no less favorably than the most
favorably treated Affiliate or customer of OC in dealing with or adjusting to
the consequences of such Force Majeure Event and in the case of any Force
Majeure Event relied on by Buyer, Buyer agrees that it shall treat OC no less
favorably than the most favorably treated Affiliate or customer of Buyer in
dealing with or adjusting to the consequences of such Force Majeure Event.
SECTION 6.05 Entire Agreement. This Agreement and the Lease are
----------------
intended to be the sole and complete statements of the obligations of the
parties relating to the subject
-9-
matter hereof and thereof and supersede all previous understandings, agreements,
negotiations and proposals with respect to such subject matters. No provision of
this Agreement shall be deemed waived, amended or modified by either party
unless such waiver, amendment or modification shall be in writing and signed by
a duly authorized officer of the party against whom the waiver, amendment or
modification is sought to be enforced.
SECTION 6.06 Authorization. Each party represents and warrants to the
-------------
other that it is legally free to enter into this Agreement, that its execution
hereof and thereof have been duly authorized and that the terms and conditions
of this Agreement do not conflict with or violate any terms or conditions of any
other agreement or commitment to which such party is a signatory or by which it
is bound.
SECTION 6.07 Confidentiality. Buyer agrees that it will use all
---------------
reasonable efforts to maintain the confidentiality of all non-public business
information belonging to OC that it obtains in performing its obligations
hereunder or under the Lease. Buyer shall agree to have all employees, vendors,
independent contractors or other persons who are exposed to any non-public
business information belonging to OC to execute individual confidentiality
agreements to be supplied by OC. If requested by OC, Buyer agrees to prosecute
all actions necessary to protect all such non-public business information
belonging to OC and Buyer shall promptly notify OC in the event there is any
suspected unauthorized disclosure of such information or breach of this Section
6.07. The obligations of confidentiality herein shall survive for a period of
eight (8) years the expiration or termination of this Agreement. All
obligations contained in this Section 6.07 with respect to any confidential
information shall cease if such confidential information:
(a) is publicly available at the time of its disclosure to the recipient;
(b) is already legally in the possession of the recipient from sources
other than the disclosing entity;
(c) has become publicly available through no fault of the recipient or
its employees; or
(d) is legally obtained by the recipient from sources independent of the
disclosing entity, including information developed by employees or agents of the
recipient who have not had direct or indirect access to the confidential
information provided by the disclosing entity.
SECTION 6.08 Waivers. The failure of either party to require
-------
performance by the other of any provision hereunder shall not affect the right
of such party to enforce the same provision thereafter. Such failure shall not
affect such party's right to enforce any of the other provisions of this
Agreement. The waiver by either party of a breach of any provision hereof
-10-
shall not be taken or held to be a waiver of any subsequent breach of such
provision or as a waiver of this provision.
SECTION 6.09 Severability. If any part of this Agreement is determined
------------
to be illegal, unenforceable or against public policy, then such part shall be
deemed deleted from this Agreement without affecting or impairing any other
part.
SECTION 6.10 Headings. All Article and Section headings in this
--------
Agreement are for convenience of reference only and are not intended to qualify
the meaning of any provision hereof.
SECTION 6.11 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
SECTION 6.12 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Pennsylvania.
SECTION 6.13 Cooperation. OC and Buyer will cooperate with each other
-----------
in effectuating the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
▇▇▇▇▇ CORNING
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
ADVANCED GLASSFIBER YARNS, LLC
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Manager
-11-