SALT LAKE CITY PET PRODUCTS SUPPLY AND LEASE OF RELATED ASSETS AGREEMENT
Confidential treatment has been requested by
Constar International Inc. pursuant to Rule 406.
All non-public information has been filed with
the Securities and Exchange Commission.
Exhibit 10.5
SALT LAKE CITY PET PRODUCTS SUPPLY AND LEASE OF RELATED ASSETS AGREEMENT
THIS IS A SALT
LAKE CITY PET PRODUCTS SUPPLY AND LEASE OF RELATED ASSETS AGREEMENT (the “Agreement”), dated as of
, 2002, by and among Crown Cork & Seal Company (USA), Inc., a Delaware corporation and an indirect subsidiary of Crown (“Supplier”) and Constar, Inc., a
Pennsylvania corporation and a direct subsidiary of Constar (“Purchaser”).
Supplier will supply directly to Purchaser or to the Constar Customers on Purchaser’s behalf and
Purchaser will purchase from Supplier on the terms and conditions set forth herein, PET preforms and containers presently manufactured at Supplier’s facility in Salt Lake City, Utah (the “SLC Facility”).
ARTICLE
1.1.1. “AAA” has the meaning set forth in Section 6.4.
1.1.2. “Affiliate” of any Person means any Person, directly or indirectly, controlling,
controlled by or under common control with such Person.
1.1.3.
“Agreement” has the meaning set forth in the preamble to the Agreement.
1.1.4. “Bankruptcy Event” means with respect to any party, as applicable, (a) the making by such party of any assignment for the benefit of creditors of all or substantially all of its assets or the
admission by such party in writing of inability to pay all or substantially all of its debts as they become due; (b) the adjudication of such party as bankrupt or insolvent or the filing by such party of a petition or application to any tribunal for
the appointment of a trustee or
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receiver for such party or any substantial part of the assets of such party; or (c) the commencement of any voluntary or involuntary bankruptcy proceedings (and, with respect to involuntary
bankruptcy proceedings, the failure to be discharged within 60 days), reorganization proceedings or similar proceeding with respect to such party or the entry of an order appointing a trustee or receiver or approving a petition in any such
proceeding.
1.1.5. “Business Day” shall mean any day other than a
Saturday, a Sunday or a day on which banks in New York City are authorized or obligated by law or executive order to not open or remain closed.
1.1.6 “Constar” means Constar International Inc., a Delaware corporation.
1.1.7. “Constar Customers” are those customers listed on Schedule B.
1.1.8. “Control,” “controlled by” and “under common control
with”, as applied to any Person, means the possession, directly or indirectly, of the power to direct the vote of a majority of the votes that may be cast in the election of directors (or other Persons acting in similar capacities) of such
Person or otherwise to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
1.1.9 “Crown” means Crown Cork & Seal Company, Inc., a Pennsylvania corporation.
1.1.10. “Employees” has the meaning set forth in Section 4.9.
1.1.11. “Force Majeure Event” has the meaning set forth in Section 5.4.
1.1.12. “Historical Volume” has the meaning set forth in Section 3.1(b).
1.1.13. “Initial Term” has the meaning set forth in Section 5.1.
1.1.14. “Lease” has the meaning set forth in Section 4.6.
1.1.15. “Person” means an individual, a corporation, a partnership,
an association, a governmental entity, a trust or other entity or organization.
1.1.16. “PET” shall mean polyethylene terephthalate.
1.1.17. “PET Products” means all existing types of PET preforms and containers manufactured at the SLC Facility as of the Initial Public Offering Date, which types of PET preforms and containers are set
forth, for the avoidance of doubt, on Schedule A hereto (the “Existing PET Products”). PET Products shall also include any other PET preforms and containers that are identified and mutually agreed upon by Supplier and
Purchaser after the Initial Public Offering Date from time to time (the “New PET Products”).
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1.1.18. “Production Request” has the
meaning set forth in Section 2.1.
1.1.19. “Purchaser” has the meaning
set forth in the preamble to the Agreement.
1.1.20. “Release Request”
has the meaning set forth in Section 2.1.
1.1.21. “SLC Assets” means
those assets set forth in Schedule C.
1.1.22. “SLC Facility”
has the meaning set forth in the Background section of this Agreement.
1.1.23. “Supplier” has the meaning set forth in the Preamble to the Agreement.
1.1.24. “Term” has the meaning set forth in Section 5.1.
1.1.25. “Transfer Date” has the meaning set forth in Section 4.6.
ARTICLE
II
(b) Purchaser shall direct the Constar Customers to submit requests to produce and release PET Products for shipment (“Release Requests”) directly to a designated employee of Supplier at the SLC
Facility. Upon receipt of a Release Request, Supplier shall use its commercially reasonable efforts to satisfy the Constar Customer’s Release Request; provided, however, that in no event shall Purchaser be obligated to utilize production
equipment other than the SLC Assets. If Supplier is able to satisfy the Release Request, Supplier shall promptly notify the Constar Customer that it has accepted the Release Request on Purchaser’s behalf. After acceptance of a Release Request,
Supplier will ship no less than [***] of the accepted releases to Constar Customers OTIF (on time, in full). The measurement of OTIF shipments shall conform to historic practices of the SLC Facility. If Supplier is unable to satisfy the Constar
Customer’s Release Request, Supplier shall promptly notify Purchaser of the Release Request and of Supplier’s inability to satisfy such request. After such notification, Purchaser may, at its option, direct Supplier to resequence
utilization of the SLC Assets to satisfy the Release Request or satisfy such Release Request through shipping PET Products from one of Purchaser’s facilities; provided, however, that Supplier shall be under no obligation to resequence
utilization of the SLC Assets if such resequencing would adversely effect Supplier’s other operations at the SLC Facility. Purchaser shall be deemed to purchase, and shall be responsible for payment to Supplier for, any PET Products
manufactured by Supplier in response to a Release Request,
[***] Confidential
treatment requested
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regardless of whether the relevant Constar Customer subsequently cancels such Release Request or ultimately pays Purchaser for such PET Products. Supplier shall not be responsible for collecting
payment from Constar Customers for PET Products manufactured and shipped hereunder.
(c) Purchaser may
from time-to-time submit requests for production of PET Products (“Production Requests”) to Supplier. Upon receipt of a Production Request, Supplier shall use its commercially reasonable efforts to satisfy the Production
Request; provided, however, that in no event shall Purchaser be obligated to utilize production equipment other than the SLC Assets, and Supplier is obligated to provide xxxxxxx as required to meet Production Requests. If
Supplier is able to satisfy the Production Request, Supplier shall promptly notify Purchaser that it has accepted the Production Request. After production, Supplier will warehouse up to [***] days of average sales of PET Products pursuant to this
Agreement (which average shall be calculated based on sales during the previous six months) at any one time without charge to Purchaser except that Purchaser may direct Supplier to store greater quantities on the condition that Purchaser pays for
the excess PET Products and pays for any incremental cash cost for outside storage. If Supplier accepts a Production Request, Purchaser will, within a reasonable period of time not to exceed 90 days, (i) direct Supplier to ship the PET Products and
Supplier will ship no less than [***] of the accepted Production Requests to the location designated by Purchaser OTIF (on time, in full) or (ii) accept an invoice from Supplier for such PET Products. If Supplier is unable to satisfy a Production
Request, Supplier shall promptly notify Purchaser. After such notification, Purchaser may, at its option, direct Supplier to resequence utilization of the SLC Assets to satisfy the Production Request; provided, however, that
Supplier shall be under no obligation to resequence utilization of the SLC Assets if such resequencing would adversely effect Supplier’s other operations at the SLC Facility. Purchaser shall be deemed to purchase, and shall be responsible for
payment to Supplier for, any PET Products manufactured by Supplier in response to a Production Request, regardless of whether the PET Products are ultimately shipped from the SLC Facility.
(d) Within 30 calendar days of the end of each three-month period ending March 31, June 30, September 30 and December 31 of each year during the Term, Purchaser
shall provide Supplier a certificate from a member of it’s senior management attesting to Purchaser’s conformance to its obligations under Section 2.1(a) of this Agreement during such three-month period. If Purchaser does not provide such
certificate to Supplier within such 30 calendar day period or upon Supplier’s request, Purchaser shall permit Supplier’s outside accountants to access to the books and records of Purchaser in order to review the books and records relating
to purchases of such PET Products by the Constar Customers.
(e) Purchaser shall provide Supplier with
colorant necessary to produce the PET Products as require colorant, subject to Supplier using such colorant at a usage rate in accordance with the applicable material specifications plus a reasonable allowance for material loss. Purchaser shall
provide to Supplier from Purchaser’s own facilities those quality inspection services consistent with historical practices of preform quality checks.
[***] Confidential treatment requested
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(f) Notwithstanding the foregoing, Supplier shall not be required to
manufacture and/or ship any specific PET Products if Supplier reasonably determines that any such manufacture or shipment will result in a material violation of any applicable governmental laws or regulations.
ARTICLE III
(b) In the event that the average monthly volume of PET Products sold pursuant to
this Agreement over a three-month period ending March 31, June 30, September 30 or December 31 is more than [***] greater or less than the average monthly volume of PET Products sold during the same three months of the immediately preceding year
(the “Historical Volume”), the parties shall review the impact of such new volume on Supplier’s operating costs and shall negotiate in good faith to mutually agree to changes in the prices of PET Products. Thereafter, any new
average monthly volume used to mutually agree to new prices for PET Products shall be deemed to be the Historical Volume for purposes of this Section 3.1(b).
(c) For New PET Products, mutually agreeable pricing will be established between Supplier and Purchaser on a case-by-case basis. Supplier shall have no
obligation to supply, and Purchaser shall have no obligation to purchase, New PET Products for which pricing cannot be agreed upon and any such New PET Products shall not be calculated in the requirements commitment set forth in Section 2.1(a). If
pricing of New PET Products is agreed upon, such New PET Products shall be calculated in such requirements commitment.
ARTICLE IV
4.1. Delivery. All PET Products sold under this Agreement shall be delivered at the designated Constar Customer
location. Title and risk of loss or damages to all PET Products shall pass to Purchaser upon acceptance by the Constar Customer. Purchaser shall pay for all freight and other costs associated with shipment of PET Products to the location of delivery
and any such costs incurred by Supplier shall be included on the invoice for the relevant PET Products. Supplier shall furnish the facilities and personnel for loading PET Products at the SLC Facility.
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Request pursuant to which such PET Products were produced or (iii) the time that such PET Products become excess warehoused products, for which the Purchaser must pay, pursuant to Section 2.1(c).
All invoices from Supplier to Purchaser for PET Products shall be paid by Purchaser (i) by the last Business Day of the month for invoices dated on or before the 14th day of any month or (ii) by the 15th day of the following month for invoices dated on or after the 15th
day of any month.
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limitation, as to operation, storage, insurance or maintenance, with respect to the SLC Assets after the Transfer Date.
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Assets without the prior written consent of Purchaser. Upon receipt of such consent, Supplier shall make, or cause to be made, such capital expenditures and shall invoice Purchaser for any
expenses incurred in undertaking such capital expenditures. If Purchaser does not consent to, or agree to reimburse Supplier for any such capital expenditures, neither Supplier nor any of its Affiliates shall have any obligation to make such capital
expenditures and none of them shall be liable for any interruptions or deficiencies if the supply of PET Products under this Agreement, any deterioration of the SLC Assets or any other liability, arising out of or resulting from the failure to make
any such capital expenditure. The parties agree that capital expenditures subject to approval and reimbursement by Purchaser shall not include costs associated with routine maintenance (other than mold refurbishments) covered by the first two
sentences of this Section 4.10.
ARTICLE V
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discovery of such event of default: (i) Purchaser fails to make timely payments for invoiced PET Products, subject to a 10-day cure period after notice regarding such breach, (ii)
Purchaser materially breaches any other applicable provision of this Agreement, subject to a 30-day cure period after notice regarding such breach or (iii) Purchaser or Constar experiences a change of Control such that Purchaser or Constar is
controlled by a competitor of either Constar or Crown (provided that such termination shall not be effective until six months from the date of the Change of Control). If Purchaser or Constar suffers a Bankruptcy Event, Supplier shall have the right
to unilaterally make reasonable modifications to the payment terms set forth in Section 4.2 of the Agreement at any time after such Bankruptcy Event. Supplier shall promptly notify Purchaser of any such modifications to the payment terms of this
Agreement.
(b) The following shall be considered events of default and shall give rise to a
right of Purchaser to terminate this Agreement within 45 days of Purchaser’s discovery of such event of default: (i) Supplier materially breaches any applicable provision of this Agreement, subject to a 30-day cure period after notice regarding
such breach or (ii) Supplier or Crown experiences a change of Control such that Supplier or Crown is controlled by a competitor of either Constar or Crown (provided that such termination shall not be effective until six months from the date of the
Change of Control).
(c) Each party shall provide the other party with prompt notice upon
discovery of a default by the other party; provided, that failure to give such notice shall not limit or restrict the ability of a party to terminate this Agreement subject to the cure periods provided in this Section 5.2.
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otherwise excuse the failure to pay any uncontested costs or fees due under this Agreement when due (including payment for PET Products produced in accordance with Section 2.1, regardless of
whether Purchaser submits a Release Request for such PET Preforms).
(b) Purchaser agrees to waive all claims for shortages in the PET Products
ordered and received hereunder unless such claims are submitted in writing to Supplier within 30 days after receiving notice from the Constar Customer of such shortage.
(c) Subject to the above provisions, Purchaser shall not bring any other action arising hereunder unless such action is brought within one year after the date
such cause of action accrues.
(d) Supplier shall not be liable for, and Purchaser assumes
responsibility for, all personal injury and property damage resulting from the handling, possession, use or resale of the PET Products produced hereunder after such PET Products are delivered to the applicable Constar Customer, whether the same is
used alone or in combination with other substances, except to the extent any such personal injury or property damage results from the willful misconduct of Supplier.
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Production Requests, tooling and equipment specifications and other information necessary to carry out the terms of
this Agreement, as the case may be (the “Confidential Information”), as secret and confidential and (b) not to disclose the Confidential Information to any third person or party (except for employees, counsel, contractors,
customers, consultants or vendors who have a need to know and are informed of the confidential nature of such information by the disclosing party). Each party shall accept responsibility and be liable for any disclosure by any third person
of any Confidential Information disclosed to such third person by such party. The parties will use the same measures to maintain the confidentiality of the Confidential Information of any other party in its possession or
control that it uses to maintain the confidentiality of its own Confidential Information of similar type and importance. Notwithstanding the foregoing, either party or their Affiliates may describe this Agreement in, and include this
Agreement with, filings with the U.S. Securities and Exchange Commission and any related prospectuses, including such filings or prospectuses in connection with any offering of securities. Confidential Information will not include information that
(i) is in or enters the public domain without breach of this Agreement, or (ii) the receiving party lawfully receives from a third party without restriction on disclosure and, to the receiving party’s knowledge, without breach of a
nondisclosure obligation.
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ARTICLE VI
All notices and other
communications required or permitted hereunder shall be in writing, shall be deemed duly given upon actual receipt, and shall be delivered (a) in person, (b) by registered or certified mail, postage prepaid, return receipt requested or (c) by
facsimile or other generally accepted means of electronic transmission (provided that a copy of any notice delivered pursuant to this clause (c) shall also be sent pursuant to clause (b)), addressed as follows:
if to Purchaser, to:
Constar, Inc.
Xxx Xxxxx Xxx
Xxxxxxxxxxxx, XX 00000-0000
Attention:
Facsimile:
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if to Supplier, to:
Crown Cork & Seal Company (USA), Inc.
Xxx Xxxxx Xxx
Xxxxxxxxxxxx, XX 00000
Attention:
Facsimile:
or to such other addresses or telecopy numbers as may be specified by like notice to the other parties.
6.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
6.4.1. The parties shall attempt to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation in good faith between executives who have authority to settle the dispute. A party shall give the other party written notice of any dispute not resolved in the ordinary course of business. Within
ten Business Days after delivery of such notice, the party receiving notice shall submit to the other a written response thereto. The notice and the response shall include: (i) a statement of each party’s position(s) regarding the matter(s) in
dispute and a summary of arguments in support thereof, and (ii) the name and title of the executive who will represent that party and any other Person who will accompany that executive.
6.4.2. Within 10 Business Days after delivery of the notice, the designated executives shall meet at a mutually acceptable time and
place, and thereafter, as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one party to any other shall be honored in a timely fashion. All negotiations conducted pursuant to
this Section 6.4 (and any of the parties’ submissions in contemplation hereof) shall be deemed Confidential Information and shall be treated by the parties and their representatives as compromise and settlement negotiations under the United
States Federal Rules of Evidence and any similar state rules.
6.4.3. If
the matter in dispute has not been resolved within 30 days after the first meeting of the executives to attempt to resolve the dispute, either party may submit the dispute to binding arbitration to the Philadelphia, Pennsylvania office of the
American Arbitration Association (“AAA”) in accordance with the procedures set forth in the Commercial Arbitration Rules of the AAA.
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6.4.4. The Commercial Arbitration Rules of
the AAA, as modified or revised by the provisions of this Section 6.4, shall govern any arbitration proceeding hereunder. The arbitration shall be conducted by three arbitrators selected pursuant to Rule 13 of the Commercial Arbitration Rules, and
pre-hearing discovery shall be permitted if and only to the extent determined by the arbitrator to be necessary in order to effectuate resolution of the matter in dispute. The arbitrator’s decision shall be rendered within 30 days of the
conclusion of any hearing hereunder and the arbitrator’s judgment and award may be entered and enforced in any court of competent jurisdiction.
6.4.5. Resolution of disputes under the procedures of this Section 6.4 shall be the sole and exclusive means of resolving disputes
arising out of or relating to this Agreement; provided, however, that nothing herein shall preclude the Parties from seeking in any court of competent jurisdiction temporary or interim injunctive relief to the extent necessary to
preserve the subject matter of the dispute pending resolution under this Section 6.4.
6.5. Consent to Jurisdiction. Supplier and Purchaser hereby agree and consent to be subject to the exclusive jurisdiction of the United States District Court for the Eastern
District of Pennsylvania, and in the absence of such Federal jurisdiction, the parties consent to be subject to the exclusive jurisdiction of any state court located in the City of Philadelphia and hereby waive the right to assert the lack of
personal or subject matter jurisdiction or improper venue in connection with any such suit, action or other proceeding. In furtherance of the foregoing, each of the parties (i) waives the defense of inconvenient forum, (ii) agrees not to commence
any suit, action or other proceeding arising out of this Agreement or any transactions contemplated hereby other than in any such court (other than the mandatory submission to arbitration in accordance with Section 6.4), and (iii) agrees that a
final judgment in any such suit, action or other proceeding shall be conclusive and may be enforced in other jurisdictions by suit or judgment or in any other manner provided by law.
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assigns any rights (including third party beneficiary rights), remedies, obligations or liabilities under or by reason of this Agreement, or (b)
constitute the parties hereto as partners or as participants in a joint venture. This Agreement shall not provide third parties with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without
reference to the terms of this Agreement.
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a mend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement.
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CONSTAR, INC. | ||
By: |
||
| ||
Name: | ||
Title: |
CROWN CORK & SEAL COMPANY (USA), INC. | ||
By: |
||
| ||
Name: | ||
Title: |
.
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Schedule A
Existing PET Products and Prices
(1) Resin $/#
$[***]
Bottles |
grams |
$/m resin |
$/m direct |
$/m fee |
$/m total |
|||||||||||||
20 oz. |
24.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
1 liter |
40.8 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
2 Liter |
47.7 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
3 liter |
77.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
48 oz. Oil |
50.6 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
32 oz. Oil |
39.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
24 oz. Oil |
30.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
Preforms |
||||||||||||||||||
20 oz. |
24.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
1 Liter |
41.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
48 oz. Oil |
50.6 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
32 oz. Oil |
39.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
73 gram |
73.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] | |||||
32 oz. Hotfill |
44.0 |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
$ |
[*** |
] |
Note:
Prices include packaging materials supplied by Supplier, returnable to Supplier.
Prices in table based on $[***] for resin. Price to be adjusted at grams x [***] x $/lb resin.
Purchaser to sell resin to Supplier at same price
included in product per above formula.
Any items added to schedule to be costed using same cost model basis used to arrive at this table.
All mold refurbishments will be paid for and arranged by the Constar Engineering group.
Supplier to be
responsible for maintenance and normal wear and tear.
If Preforms are shipped to Supplier for conversion, model cost element for preform direct costs shall be
deducted.
Price assumes rent-free use of Salt Lake City assets.
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Schedule B
Constar Customers and Products
Customer |
Ship to Location |
Product | ||
24 oz. Edible oil bottle | ||||
32 oz. Edible oil bottle | ||||
48 oz. Edible oil bottle | ||||
48 oz. Edible oil bottle | ||||
1 liter Soft drink bottle | ||||
2 liter Soft drink bottle | ||||
20 oz. Soft drink bottle | ||||
[***] |
[***] |
20 oz. Soft drink bottle | ||
500 ml Water preforms | ||||
20 oz. Soft drink bottle | ||||
20 oz. Soft drink bottle | ||||
20 oz. Soft drink bottle | ||||
2 Liter Soft drink bottle | ||||
3 Liter Soft drink bottle | ||||
2 Liter Soft drink bottle | ||||
3 Liter Soft drink bottle | ||||
32 oz. Preforms | ||||
64 oz. Preforms | ||||
500 ml. Water preforms | ||||
64 oz. 10K Preforms |
In addition to the Products and Customers listed in the
table above, this schedule shall include:
• |
With respect to products listed above and currently produced at Salt Lake City, any new customers designated by Constar. |
• |
With respect to products not currently produced by SLC, any new or existing customers designated by Constar subject to mutual agreement of Crown and Constar as
provided in Article III of this Agreement. |
[***] |
Confidential treatment requested |
Schedule C
SLC Assets
[***]
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