Exhibit 10.12
Conformed Copy
SUPPLY AGREEMENT
BETWEEN
SILGAN CONTAINERS CORPORATION
AND
DEL MONTE CORPORATION
September 3, 1993
TABLE OF CONTENTS
Page
ARTICLE I EFFECTIVENESS..........................................1
ARTICLE II PURCHASE AND SALE OF CONTAINERS.......................1
2.1 Commitment for Purchase and Sale.......................1
2.2 Right of First Negotiation.............................2
2.3 Pacific Coast Producers................................2
2.4 Other Agreements.......................................3
2.5 Schedule 2.1...........................................3
2.6 Additional Commitments of DM and Seller................4
2.7 Close of Oakland Facility..............................6
ARTICLE III SHIPMENT QUANTITIES..................................6
3.1 DM Estimates; Purchase Obligations.....................6
3.2 Shipping Arrangements..................................7
3.3 Manufacture; Transfer of Ownership; Payment Terms......7
3.4 Working Capital........................................7
3.5 DM Transportation......................................8
3.6 Unexpected Increase in Requirements....................8
3.7 Return of Nonconforming Containers.....................9
3.8 Recycling..............................................9
3.9 Class I Plate..........................................9
3.10 Warehouse Space......................................10
ARTICLE IV DELIVERY AND FREIGHT TERMS...........................10
4.1 Freight Charges.......................................10
4.2 Container Loading.....................................10
ARTICLE V PRICES AND PRICE CHANGES FOR CONTAINERS...............11
5.1 Price Changes.........................................11
5.2 Sharing of Cost Savings...............................12
5.3 Operating Reviews.....................................13
5.4 Review of Information.................................13
ARTICLE VI MEETING COMPETITION..................................13
ARTICLE VII SPECIFICATION CHANGE, NEW CONTAINERS................14
7.1 Procedure for Identification..........................14
7.2 Prices for Spec Changes and New Containers............14
7.3 Investment; Usage Percentage and Investment Cost......15
7.4 Review................................................15
7.5 Effect of Seller's Failure to Supply Spec Changes
and New Containers....................................15
ARTICLE VIII TERM OF AGREEMENT..................................16
ARTICLE IX FORCE MAJEURE........................................16
9.1 Seller's Obligations..................................16
9.2 DM's Obligations......................................16
9.3 Notice of Force Majeure...............................16
ARTICLE X DM'S RIGHT TO COVER...................................17
ARTICLE XI QUALIFICATION OF CONTAINERS; TECHNICAL SUPPORT.......17
11.1 Qualification of Containers..........................17
11.2 Inspection...........................................18
11.3 Technical Support....................................18
11.4 Research and Development Cooperation.................18
ARTICLE XII RETURNABLE PACKAGING MATERIALS......................19
12.1 Packaging Specifications.............................19
12.2 Coding...............................................19
12.3 Title to Packaging Materials.........................19
12.4 Annual Settlement of Packaging Materials.............19
12.5 Transition of 45 x 50 Two-Way Pallets................19
ARTICLE XIII CLAIMS, WARRANTIES AND LIMITATIONS OF
LIABILITY........................................................20
13.1 Container Specifications.............................20
13.2 Compliance with Laws and Regulations.................20
13.3 Title to Containers..................................20
13.4 Infringement Claims..................................20
13.5 Shelf Life Warranty..................................20
13.6 Limitations on Warranties............................21
ARTICLE XIV INSURANCE...........................................21
ARTICLE XV SALE OF REJECTED CONTAINERS..........................22
ARTICLE XVI LABOR DISPUTES......................................22
ARTICLE XVII TITLE TO DRAWINGS..................................22
ARTICLE XVIII BREACH AND WAIVER.................................22
18.1 Event of Default.....................................22
18.2 Effect of Default....................................22
18.3 Nonwaiver............................................23
ARTICLE XIX MISCELLANEOUS.......................................23
19.1 Notices..............................................23
19.2 Assignment...........................................24
19.3 Modifications........................................24
19.4 Confidentiality......................................24
19.5 Independent Contractors..............................24
19.6 Corporate Authority..................................24
19.7 Further Documentation................................25
19.8 Severability.........................................25
19.9 Dispute Resolution...................................25
19.10 Governing Law.......................................25
19.11 Entire Agreement....................................25
* * * *
SCHEDULES
2.1 Facilities Other Cost Components
5.1A Examples of Price Adjustments
7.1 Spec Change
13.1 Acceptance Criteria
SUPPLY AGREEMENT
THIS IS AN AGREEMENT (the "Agreement") made and
entered into as of September 3, 1993 by and between DEL MONTE
CORPORATION, a New York corporation ("DM"), and SILGAN CONTAINERS
CORPORATION, a Delaware corporation ("Seller").
B A C K G R O U N D
Seller has agreed to purchase certain assets and
assume certain liabilities of DM's container manufacturing
business pursuant to the terms and conditions of a Purchase
Agreement dated the date hereof between DM and Seller (the
"Purchase Agreement"). As a condition to the closing under the
Purchase Agreement and to induce the other party to consummate
the transactions contemplated by the Purchase Agreement, Seller
and DM desire to enter into a ten-year supply agreement under
which Seller will supply DM's metal container requirements for
foods and beverages in the United States and certain of DM's
metal container requirements for foods and beverages in Mexico,
subject to the terms and conditions of this Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
EFFECTIVENESS
The parties have executed this Agreement as of the
date that appears in the first paragraph of this Agreement, and
this Agreement will become effective upon the closing of the
Purchase Agreement (the "Effective Date"). This Agreement will
terminate without any obligation or liability upon the
termination of the Purchase Agreement.
ARTICLE II
PURCHASE AND SALE OF CONTAINERS
2.1 Commitment for Purchase and Sale. During the term
of this Agreement specified in Article VIII of this Agreement
(the "Term"), Seller shall sell and deliver to DM, and DM shall
purchase and accept from Seller, at DM's food processing plants
identified on Schedule 2.1 to this Agreement (the "Facilities")
or as otherwise provided in this Agreement, the ready-to-fill
sanitary cans comprised of the can bodies which are enclosed at
one end by affixing a separately manufactured end onto a welded
or tin soldered or a one piece continuously formed metal cylinder
closed at one end ("Cans") and ends which are covers to be
affixed after the Cans are filled ("Ends") (each Can and End
together constituting a "Container") described on Schedule 2.1 to
this Agreement. The annual quantities of Containers to be
purchased and sold during the Term and pursuant to the terms of
this Agreement shall be (a) 100 percent of DM's annual
requirements for such Containers to be used for the packaging of
foods and beverages in the United States and (b) not less than 65
percent of DM's annual requirements of those Containers to be
used for the packaging of foods and beverages at the Mexican
Facilities identified on Schedule 2.1 (with the actual percentage
to be determined in DM's sole discretion in connection with DM's
estimates provided pursuant to Section 3.1), subject to reduction
only in accordance with the terms of this Agreement. This
Agreement shall not apply to DM's purchase of metal containers
for pineapples, mandarin oranges, sardines and any other products
which are not packed in the United States or Mexico. In addition,
DM shall provide Seller all Polystar lids necessary for DM
Containers, which lids shall be provided by Seller to DM at the
same cost, if any, charged by DM to Seller for such lids adjusted
for actual spoilage exceeding the higher of 2% or the average
spoilage incurred by DM during the six-month period prior to the
Effective Date (based on DM's records).
2.2 Right of First Negotiation. DM hereby grants
Seller a right of first negotiation during the Term to provide
the Container requirements of any new DM food processing facility
in Mexico and Central America. If during the Term DM builds,
acquires or leases a food processing facility in Mexico or
Central America, DM shall notify Seller and shall negotiate
exclusively with Seller for a period of 60 days for the supply of
Containers for such facility. If the parties do not reach
agreement on the supply of Containers during such period, DM
shall provide Seller a written summary of the supply terms
requested by DM (the "Proposal"). Thereafter, DM shall be free to
negotiate with and enter into agreements for the supply of
Containers for such facilities with other parties; provided that
if in the aggregate the terms and conditions offered to DM by
another party are less favorable to DM than the terms set forth
in the Proposal, DM shall notify Seller prior to DM's acceptance
of such terms and Seller shall have 30 days after receipt of such
notice to accept such terms, and if Seller timely accepts such
terms, DM and Seller shall promptly enter into an agreement on
such terms. For purposes of this Agreement, the term "Central
America" shall mean Belize, Guatemala, El Salvador, Honduras,
Nicaragua, Costa Rica and Panama.
2.3 Pacific Coast Producers. The parties acknowledge
that DM purchases certain containers from, and sells certain
containers to, Pacific Coast Producers, Inc. ("PCP") and
purchases certain filled containers from PCP for resale on a
"private label basis." In any Supply Year (as defined below), DM
shall not purchase from PCP or any of PCP's affiliates more than
100 million unfilled containers, subject to adjustment as set
forth in this Agreement, for use at any of the Facilities or any
other facility or plant of DM or any other facilities or
locations in respect of any toll pack, co-pack or similar
agreements of DM. The annual requirements referred to in (a) in
the last sentence of Section 2.1 shall be exclusive of (i) any
unfilled containers purchased by DM from PCP (subject to the
limitation provided in the immediately preceding sentence) and
(ii) any filled containers purchased by DM from PCP for resale on
a private label basis, but shall be inclusive of all unfilled
containers sold by DM to PCP. Seller and DM agree to cooperate
reasonably and use reasonable efforts to identify and achieve
cost reductions for DM with respect to containers produced by PCP
and Seller for sale to DM.
2.4 Other Agreements. The parties acknowledge that it
is their intent that Seller supply all metal food containers to
DM pursuant to
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the terms of this Agreement for any food or beverage
product packed in the United States or Mexico which DM
requires pursuant to any toll-pack, co-pack or similar agreements
other than (a) such agreements with PCP (subject to Section 2.3
above), and (b) up to 50 million (subject to adjustment as set
forth below) filled containers in any Supply Year (plus that
number of filled containers which may be purchased from any party
which purchases DM's Crystal City facility as described at
Section 2.6). DM's purchases from Faribault Foods and Friday
Canning during the current packing season are examples of the
types of purchases allowed by clause (b) of the preceding
sentence. The 50 million filled containers referenced at clause
(b) above shall be adjusted for the second and each subsequent
Supply Year to such number equal to 2-1/2% of the number of
containers estimated in good faith by DM to be purchased by DM in
such Supply Year from all manufacturers. The parties further
acknowledge that any unfilled metal food containers not supplied
by Seller to DM for products pursuant to such agreements with PCP
shall apply toward DM's obligation to purchase from PCP or any of
PCP's affiliates not more than 100 million unfilled containers as
set forth in Section 2.3 above. Any such containers required for
such toll-pack, co-pack or similar agreements entered into after
the date of this Agreement ("Product Sourcing Containers") shall
be considered New Containers, and the prices for such Product
Sourcing Containers shall be established in accordance with the
terms of Section 7.2 of this Agreement; provided that if the
volume of Product Sourcing Containers in any Supply Year (as
defined below) exceeds 15% of the aggregate Containers required
in the Supply Year in which such agreement is entered into, the
parties shall negotiate in good faith the pricing for that
portion of such Product Sourcing Containers that exceeds said 15%
for that Supply Year.
2.5 Schedule 2.1. Schedule 2.1 sets forth the
following information, certain items of which may be established
(only for New Containers as defined below) or amended from time
to time in accordance with the terms of this Agreement:
(a) Container sizes;
(b) specifications (including special features and the
finished product ("Product") with which DM will fill each type of
Container) for each type of Container which
shall serve as a basis for DM's acceptance or rejection of
Containers and for determining cost savings resulting from
specification changes effected under Article VII of this
Agreement;
(c) the pallet-can configuration requirement and
packaging specification for each type of Container;
(d) DM's estimate, by type of Container and the
location to which the Containers are expected to be delivered, of
DM's annual requirements of Containers for DM's fiscal year
ending June 30, 1994 estimated as of June 18, 1993;
(e) the selling price to be charged to DM by Seller
for each thousand Cans and Ends by type of Container and delivery
location (indicating metal, labor and other costs consistent with
the format applicable to Section 5.1).
The price F.O.B. Pittsburgh, California to be charged to DM for
tin plate to be provided by DM to PCP shall be provided to DM by
Seller prior to the Effective Date. Prior to the Effective Date,
Seller will reduce the selling prices for Containers pursuant to
(e) above for the first 12 months
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after the Effective Date (and effect savings in PCP tin
plate cost for the first 12 months after the Effective Date,
based on 790,000 base boxes) in an aggregate amount of $10.9
million (holding all other items on Schedule 2.1 constant). The
packaging specifications required at (c) above shall be provided
by DM prior to the Effective Date and shall be consistent with
DM's current packaging specifications.
2.6 Additional Commitments of DM and Seller.
(a) New Facility. For purposes of this Agreement,
except as set forth in Section 2.6(d) below, (i) DM's agreement
to purchase its annual requirements of Containers to be used for
the packaging of foods and beverages by or for the account of DM
in the United States as set forth in Section 1.1 of this
Agreement shall include all Containers to be so used by or for
the account of DM at any of DM's plants or facilities in the
United States (including those plants and facilities hereafter
built, acquired, operated or leased (a "New Facility")) or any
other plant, facility or location in the United States where any
food or beverage product is packed for the account of DM at any
time during the Term of this Agreement, including, without
limitation, pursuant to any toll pack, co-pack or similar
arrangements as provided for in Section 1.3 of this Agreement,
and (ii) DM's agreement to purchase not less than 65 percent of
its annual requirements of Containers to be used for the
packaging of foods and beverages at the Mexican Facilities as set
forth in Section 1.1 of this Agreement shall include not less
than 65 percent of the aggregate of (A) all Containers to be so
used by DM at any of its plants or facilities in Mexico (owned,
leased or otherwise used) (the "Mexico Facilities") where DM
packages any food or beverage product at any time during the Term
of this Agreement and (B) if DM transfers any food processing
business from a Mexico Facility to a plant, facility or location
or another person or entity in Mexico, all Containers to be used
for the packaging of any food or beverage product for the account
of DM, the packaging for which has been transferred by DM from a
Mexico Facility to any such plant, facility or other location in
Mexico, including, without limitation, pursuant to any toll pack,
co-pack or similar arrangements as provided for in Section 1.3 of
this Agreement. Notwithstanding the above provisions, if DM packs
food or beverage products for the account of another person or
entity, (a) DM shall be required to purchase Containers from
Seller pursuant to the terms of this Agreement for such food or
beverage product if such other person or entity is not subject to
a contractual obligation to purchase containers from a person or
entity other than Seller; however, DM and Seller shall negotiate
in good faith for the supply of Containers by Seller for such
food or beverage products which may be at prices more
advantageous to Seller than those set forth in the Agreement (it
being understood that Seller is not obligated to supply such
Containers except on the terms and conditions of this Agreement)
and (b) DM shall not be required to purchase Containers from
Seller for such food or beverages if such other person or entity
is subject to a prior contractual obligation to purchase
containers from a person or entity other than Seller. In
connection with all such obligations of DM, DM shall permit
Seller's accountants reasonable access during normal business
hours to DM's books, records, plants and facilities so that
Seller may verify compliance with this Agreement.
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DM agrees to provide Seller with reasonable notice of
any New Facility and any plans to transfer DM's food processing
business from a Facility or New Facility to a facility owned or
operated by another person or entity and to take all steps
reasonably necessary and to cooperate with Seller to carry out
the intent of this Agreement.
(b) Sale of DM Business; Crystal City. Notwithstanding
anything herein to the contrary, DM shall not enter into any
transaction with any other person or entity providing for the
merger, consolidation or other similar business combination of DM
with such other person or entity or for the sale, transfer,
disposition or lease of all or substantially all of the assets of
DM to such other person or entity or for the sale, transfer,
disposition or lease of all or substantially all of the assets of
DM's vegetable, fruit or tomato business without first obtaining
the written agreement of such other person or entity to enter
into a written agreement with Seller on the same terms and
conditions contained in this Agreement and for the remainder of
the Term hereof for the purchase by such other person or entity
of its Container requirements from Seller for use with the former
DM Products and any extensions of any Product. In addition, if XX
xxxxx its Xxxxxxx City, Texas cannery, as a condition to
consummation by DM of such sale (which condition may not be
waived without Seller's consent), DM shall purchase its Container
requirements from Seller pursuant to the terms of this Agreement
for use with any Product and any extensions of any Product
produced for DM at such cannery.
(c) Trademark License. With respect to any of the
Products or any extensions of any of the Products, DM shall not
sell, transfer or license the brand name "Del Monte" or any
derivative thereof or any other brand name or trade name used by
DM without first obtaining the written agreement of such
purchaser, transferee or licensee to enter into a written
agreement with Seller on the same terms and conditions contained
in this Agreement and for the remainder of the Term hereof for
the purchase by such other person or entity of its Container
requirements from Seller to be used to package any of the
Products and any extension of any Products using the brand name
"Del Monte" or any derivative thereof of any such other brand
name or trade name used by DM.
(d) Further DM Acquisitions. This subsection shall not
apply to acquisition by DM of PCP pursuant to the PCP Option (as
defined at Section 6.2 of the Purchase Agreement) which is
subject to the terms of Section 6.2 of the Purchase Agreement.
Notwithstanding anything herein to the contrary, DM's agreement
to purchase its requirements of Containers as set forth in this
Agreement shall not include the requirements of any company or
other entity acquired by DM subsequent to the date hereof (the
"Acquired Entity") (i) where, in such acquisition, DM is required
to assume the obligations of such Acquired Entity under a written
agreement requiring such Acquired Entity to purchase containers
to be used by such Acquired Entity or (ii) where, in such
acquisition, the Acquired Entity is a captive manufacturer of a
material portion of its containers. In the case of (i) above,
upon expiration or termination of such written agreement to
purchase containers, Seller shall have the right for the
remainder of the Term to supply the Container requirements of
such Acquired Entity on the same terms and conditions contained
in this Agreement. In the case of (ii) above, DM shall notify
Seller in writing of any such acquisition five business days
after the consummation thereof. Seller shall have the right,
exercisable no later than 45 days after receipt by Seller of such
notice from DM, to purchase the can manufacturing assets of
such Acquired Entityat a purchase price equal to the fair
market value of such assets determined on the assumption that
Seller shall obtain a supply contract as set forth in the next sentence.
Additionally, in connection with any such purchase of can
manufacturing assets by Seller, DM (or the Acquired Entity)
shall enter into a supply agreement with Seller on the same
terms and conditions contained in this Agreement and for the
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remainder of the Term hereof for the supply by Seller
of all of the container requirements of such Acquired Entity. If
the purchase by Seller of such can manufacturing assets is not
consummated within 120 days after delivery by Seller of notice of
its intent to exercise this right, then DM (or the Acquired
Entity) may sell or otherwise transfer or dispose of all or
substantially all of such can manufacturing assets of such
Acquired Entity to any other party and to enter into a supply
agreement for the requirements of such Acquired Entity; provided
that if in the aggregate the terms and conditions offered to DM
by another party are less favorable to DM than those offered by
DM to Seller, DM shall notify Seller prior to DM's acceptance of
such terms and Seller shall have 30 days after receipt of such
notice to accept such terms and if Seller timely accepts such
term, DM and Seller shall promptly enter into an agreement on
such terms.
(e) Expiration of Transferee Obligations. The
obligations of DM and any other person or entity, purchaser,
transferee or licensee or Acquired Entity set forth in
subsections (b), (c) and (d) above shall terminate upon the
expiration of the initial Term unless specifically extended by
written agreement of DM, Seller and such other person or entity,
purchaser, transferee or licensee or Acquired Entity, as the case
may be.
(f) Extension of a Product. For purposes of this
Section 2.6, determination of whether a food or beverage
constitutes an extension of a Product shall be made in accordance
with DM's good faith marketing determination. By way of example,
(a) soup would not be an extension of a Product and (b) spaghetti
sauce would be an extension of DM tomato Products.
2.7 Close of Oakland Facility. Seller will have as of
the closing a lease to operate the former DM facility in Oakland,
California which will terminate on the earlier of April 30, 1995
and 12 months after notice by DM. Seller will transfer the
production of Ends currently produced at the Oakland facility to
other locations without any supply interruption or cost increase
to DM.
ARTICLE III
SHIPMENT QUANTITIES
3.1 DM Estimates; Purchase Obligations. On the date of
effectiveness of this Agreement and on October 1 of each year of
the Term thereafter, DM shall furnish Seller with DM's good faith
written estimate, by type of Container and delivery location, of
DM's proposed monthly requirements for Containers under this
Agreement for the ensuing Supply Year. "Supply Year" shall mean
the 12 month period from November 1 to October 31 of each year
during the Term of this Agreement. The annual estimate shall be
updated as follows: no later than the 20th calendar day of each
month, DM shall furnish Seller with DM's good faith written
estimate, by type of Container and delivery location, of any
revisions to DM's estimated Container requirements for the
following four months; during the packing season (which is the
period from July 1 to October 31 of each year), DM shall furnish
any such revisions as soon as practical but at least once per
calendar month. Such estimates shall supersede the Container
quantities specified in Section 2.5(d) of this Agreement. In any
Supply Year, DM shall be obligated to purchase no less than, and
Seller shall be obligated to sell no more than, that number and
type of Containers as shall equal the sum of the periodic monthly
estimates (as revised in
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accordance with this Section) for each type of
Container for that Supply Year. The parties agree to cooperate
and use their reasonable best efforts to resell any excess Cans
or Ends which DM has purchased.
3.2 Shipping Arrangements. As of the date of
effectiveness of this Agreement and on November 1 of each year of
the Term thereafter, Seller shall xxxxxxx XX with Seller's 12-
month Container Production Forecast which shall be developed in
accordance with DM's past practice. Such 12-month Container
Production Forecast will be revised monthly by Seller in
accordance with DM's requirements and shall serve DM as the basis
for DM's arrangement of shipments and space planning. Seller will
notify DM immediately if Seller anticipates that it will be
unable to provide Containers to DM in accordance with DM's most
recent estimate. Seller shall advise DM's transportation
department of transit requirements from Seller's location to the
DM delivery location for Containers manufactured by Seller as
required by Section 3.1 of this Agreement and the applicable
Container Production Forecast referred to above. DM's
transportation department will arrange for transportation of such
Containers using either DM trucks, trucks of an alternate carrier
or rail.
3.3 Manufacture; Transfer of Ownership; Payment Terms.
Seller will use reasonable efforts and cooperate with DM to
follow DM's prior practices of manufacturing smaller size Cans
after the end of the packing season and large Cans as close as
practicable to the time of their use by DM with a view to
lowering DM's working capital requirements and minimizing DM's
storage space requirements. Ownership of, title to and risk of
loss for Cans and Ends will transfer on the date that such Cans
or Ends are placed on DM trucks or other carriers (or rail) for
transit as arranged by DM or (in case of the same location for
manufacture by Seller and DM delivery location) upon Seller
placing such Cans at the palletizer exit; provided Ends will be
shipped or delivered to DM only in accordance with DM's
instructions. DM will be responsible for pickup and delivery and
storage of Cans placed at any such palletizer exit. In the case
of direct cable delivery, ownership of, title to and risk of loss
for Cans will transfer at the point at which the Cans leave
Seller's facility and enter DM's facilities. All Cans and Ends
shall be sold F.O.B. Seller's facility, and Seller will send
invoices to the DM Facility to which Cans or Ends are shipped (as
indicated by DM). DM will be responsible for all freight charges
for all Containers. Payment for Cans and Ends for which DM has
received invoices as of the close of business on Monday in any
given week shall be due on the Friday of the week following the
transfer of ownership and title for such Containers.
3.4 Working Capital. Notwithstanding the provisions of
Section 3.3, DM will not be required to make payment of invoices
(beginning with the most current invoices) for Containers on the
payment terms set forth in Section 3.3 if and to the extent that
during any period in which Average Net Working Capital relating
to Containers for the previous 9 months (or the number of
completed months during the first 9 months of the Term) plus
forecast net working capital for the next three months as
determined using DM estimates provided in Section 3.1 exceeds
$18,000,000 indexed after the first Supply Year to changes in
DM's Container Cost as calculated below (the "Cap"'). Any such
invoices not so paid by DM shall be paid upon and to the extent
that Average Net Working Capital of DM is less than $18,000,000
(with the oldest of such invoices being paid first). The Average
Net Working Capital shall be calculated by
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totaling all Container inventories of DM at the end of
each accounting month (excluding in the first Supply Year the DM
Container inventories at Closing of the Purchase Agreement) in
the previous 9 months (or the number of completed months during
the first 9 months of the Term) and the forecasted Container
inventories of DM for the next three months as determined using
DM estimates, and subtracting therefrom the accrued and unpaid
payables to Seller for such Containers at the end of such months
and the forecast accrued and unpaid payables for the next three
months assuming compliance with the payment terms in Section 3.3,
and dividing this total by 12 (or the number of completed months
during the first 9 months of the Term plus the three forecasted
months). For purposes of this Section 3.4, "month" shall mean
DM's accounting month which in any calendar quarter shall be
four, four and five weeks, respectively.
The Cap for the second and succeeding Supply Years
will be calculated on the first business day of January of each
year by DM (as reasonably agreed by Seller) at the end of each
such Supply Year by multiplying the Cap for the most recently
completed Supply Year by a fraction, the numerator of which will
be DM's estimated Container Costs from Seller for such Supply
Year as set forth on Schedule 2.1 as of the commencement of such
Supply Year and the denominator of which will be DM's Container
Costs actually incurred by DM from Seller for the most recently
completed Supply Year. The term Container Costs shall mean the
selling price for all Containers sold by Seller to DM plus
applicable freight for the applicable Supply Year.
3.5 DM Transportation. It is acknowledged that DM has
transportation capability and has established very good traffic
rates using both its own equipment and equipment of outside
carriers. It is also acknowledged that Seller has established
very good contracts for both incoming and outgoing delivery.
Seller and DM agree that the transportation departments of each
will work closely in all areas and allow, to the extent possible,
the other to make use of existing and future contract rates. Such
cooperation will ensure that both parties enjoy well controlled
freight costs.
3.6 Unexpected Increase in Requirements. If DM
experiences an unexpected increase in its production needs at any
Facility whereby (a) a calendar month's requirements at such
Facility exceed 125 percent of that month's estimate for any
Container as set forth in that month's estimate provided two
months before (e.g. estimate for month of June dated April 20) or
(b) the requirements in a 24-hour period at such Facility exceed
10 percent of that month's estimate for any Container as set
forth in that month's estimate provided two months before (e.g.,
estimate for month of June dated April 20), Seller shall use its
best efforts to fulfill those needs but shall not be considered
to have breached this Agreement if it fails to deliver any
Containers in excess of either percentage described above during
that period. In such cases, Seller shall have the option of
obtaining an alternate supply of Containers for DM at no cost
increase to DM (including freight), and DM shall be obligated to
purchase such Containers pursuant to the terms hereof. If Seller
cannot fulfill those needs, DM may purchase during the applicable
period only such Containers, Cans or Ends, as the case may be, in
excess of such applicable percentages described above and any Containers,
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Cans or Ends in excess of such percentages which DM
purchases from third parties during such applicable period as a
result of Seller's inability to
deliver such quantity shall reduce accordingly the minimum
requirements that DM must purchase from Seller under this
Agreement during the applicable Supply Year. Any Containers, Cans
or Ends in excess of such percentages which DM purchases from PCP
or its affiliates during such applicable period as a result of
Seller's inability to deliver such quantity shall increase
accordingly the 100 million Containers which DM can purchase from
PCP and its affiliates in such Supply Year only.
3.7 Return of Nonconforming Containers. If, after
application of the sampling and acceptance plan (the "AQL Plan")
referred to in Section 13.1 of this Agreement, any of the
Containers delivered to DM fails to meet the specifications for
that type of Container set out in Schedule 2.1, as that schedule
may be amended by the parties from time to time, DM shall be
entitled to refuse to use those nonconforming Containers and upon
notice of rejection to Seller, DM shall be entitled to return the
nonconforming Containers to Seller. Upon receipt of a notice of
rejection, Seller shall either (i) replace the nonconforming
Containers if such replacement can be made in a timely manner or
(ii) credit DM for the cost of such Containers. In addition,
Seller shall reimburse DM: (a) for DM's reasonable transportation
and handling costs, if any, incurred in returning those
Containers, (b) any freight cost incurred by DM for the shipment
of the Containers to DM and (c) any and all other amounts
required to be paid by Seller to DM under Section 13.6 of this
Agreement. Title and risk of loss or damage to nonconforming
Containers shall pass to Seller upon receipt by Seller of a
notice of rejection, and upon delivery of a notice of rejection
DM shall act in a commercially reasonable manner in storing and
returning to Seller such nonconforming Containers. Seller shall
provide monthly to DM a "Conformance to Specification Report" in
substantially the form used by DM as of the date immediately
preceding the date of this Agreement.
3.8 Recycling. Seller acknowledges that DM derives a
marketing benefit from the fact that as of the date immediately
preceding the date of this Agreement DM used recycled metal in
its containers and engaged in an active can recycling effort.
Seller agrees to notify DM of the approximate percentage of
recycled metal incorporated in Containers provided pursuant to
this Agreement so that DM may, at its election, make consumers
aware of such information. In addition, Seller agrees to use its
reasonable efforts to maintain DM's can recycling effort.
3.9 Class I Plate. Seller acknowledges that DM has
engaged in a Class I plate program, and Seller agrees to use its
reasonable efforts to continue such program to the extent it is
consistent with the terms and conditions of this Agreement.
3.10 Warehouse Space. Seller agrees to provide DM
storage space during the Term at the Toppenish and Xxxxxxxx can
manufacturing facilities and the Smithfield cannery, and DM
agrees to provide Seller storage space during the Term at DM's
Crystal City, Xxxxxxxx, Xxxxxxx, Kingsburg and Plover canneries,
in each case (other than Smithfield) consistent with DM's past
practice and at prevailing market rates and so long as such
facilities are owned by the respective party (or its affiliates).
DM storage at Smithfield shall be provided at no cost to DM. The
parties shall invoice each other monthly for any charges for use
of any such storage space and shall make any required net payment
for any Supply Year within 60 days after the end of such Supply
Year.
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ARTICLE IV
DELIVERY AND FREIGHT TERMS
4.1 Freight Charges. All Containers shall be sold and
delivered by Seller F.O.B. Seller's facility. DM will be
responsible for and pay all freight charges for all Containers
sold by Seller to DM: provided that if Seller moves or relocates
the manufacture of Containers to facilities (an "Other Facility")
other than those former DM container manufacturing facilities
sold or leased to Seller pursuant to the Purchase Agreement at
which such Containers were manufactured by DM or if Seller ceases
to manufacture Containers at the Plover, Modesto, Stockton,
Kingsburg or Crystal City container manufacturing facilities
leased to Seller pursuant to the Purchase Agreement (the "Shared
Facilities"), Seller shall credit DM for the difference between
the freight charge incurred by DM for delivery from Seller's
Other Facilities to DM's delivery location and the freight charge
DM would have incurred for delivery from the applicable former DM
manufacturing facility where such Containers were manufactured by
DM prior to the Effective Date to DM's delivery location and, in
the case of the Shared Facilities, shall credit DM for all
handling, warehousing and spoilage charges incurred by DM as a
result of the absence of direct cabling of Containers to DM's
food processing plant. If Seller manufactures Containers at
Seller's Other Facilities and this results in reduced freight
charges incurred by DM for delivery from such Seller's Other
Facilities to DM's delivery locations as compared to the freight
charges DM would have incurred for delivery from the applicable
former DM manufacturing facilities (where such Containers were
manufactured by DM prior to the Effective Date) to DM's delivery
locations, the sum of all such reductions shall be credited to
Seller in calculating, and shall reduce, the credit to DM
provided for in the preceding sentence for increased freight
and/or handling, warehousing and spoilage charges. The parties
shall reconcile these amounts annually within 60 days after the
end of each Supply Year.
4.2 Container Loading. Seller shall be responsible for
the proper loading of Containers onto the appropriate DM pallets
and onto shipping vehicles in accordance with DM's reasonable
shipping instructions.
ARTICLE V
PRICES AND PRICE CHANGES FOR CONTAINERS
5.1 Price Changes. Seller's selling prices for
Containers are specified in Schedule 2.1 attached hereto. The
aggregate base Monthly Rent (as defined in the leases for the
Shared Facilities and the former DM Can manufacturing plant in
Oakland) incurred by Seller pursuant to the leases at the Shared
Facilities and the former DM Can manufacturing plant in Oakland
will be separately billed to DM and shall be paid by DM. In
addition, as set forth in Schedule 2.1, the selling price for a
Container shall consist of the total of the following:
(a) Metal Costs;
(b) Labor Costs (composed of all direct and facility
indirect compensation and benefits); and
(c) Other Costs (composed of those items set forth on Schedule 0.xX).
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Seller's selling prices for Containers shall be subject
to change based on the following criteria:
(a) Metal Costs
The metal cost component of selling price for each
Container as set forth in Schedule 2.1 shall be adjusted
(increased or decreased) to reflect changes in costs of
metal actually incurred by Seller. Such metal price
adjustment (increase or decrease) shall take place 30 days
after the date Seller actually incurs a price change in the
cost of metal. Metal prices shall not be increased prior to
June 30, 1994.
(b) Labor Costs
The labor cost component selling price for each
Container as set forth in Schedule 2.1 shall be adjusted
(increased or decreased) as of July 1 of each year during
the Term (beginning July 1, 1994) based on the percentage
change during the twelve (12) month period ending the
previous March 31 of the Employee Cost Index - Private
Industry Workers, Blue Collar Workers, using a base date of
June 1989, published by the United States Department of
Labor, Bureau of Labor Statistics.
(c) Other Costs
The other cost component selling price for each
Container as set forth in Schedule 2.1 shall be adjusted
(increased or decreased) as of July 1 of each year during
the Term
(beginning July 1, 1994) based on the percentage change
during the twelve (12) month period ending the previous March 31
of the Producer Price Index (PPI) for Finished Goods (Base year - 1982)
as published by the United States Department of Labor, Bureau
of Labor Statistics.
Examples of such price adjustments are shown on Schedule 5.1B
hereto. For any price adjustment pursuant to this Section 5.1,
Seller shall notify DM and set forth with reasonable specificity
the reasons for the change in costs (a "Cost Notice"). DM shall
have 30 business days to verify any change in costs. Seller shall
provide DM with reasonable information and cost accounting
records to support any asserted increase or decrease in costs.
If, at the end of the applicable review period, DM agrees with
the price change set forth in the Cost Notice, that change will
be deemed effective from and after the dates set forth above. If
DM disagrees with the price change set forth in the Cost Notice,
the parties will negotiate in good faith to resolve the matter.
If they do not reach agreement on all disputed issues within 30
days after expiration of the applicable review period, the price
change will not go into effect until the dispute is resolved in
accordance with Section 19.9, and such price change as determined
by AA (as defined in Section 19.9) shall be deemed effective from
and after the dates set forth above. Each party shall bear
one-half of the fees and reimbursable costs of that accounting
firm.
5.2 Sharing of Cost Savings. The parties intend to
actively pursue efficiencies and cost savings in connection with
the transactions contemplated by this Agreement. For each
mutually agreed upon cost savings attempt, the parties shall
share the cost savings associated
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therewith as set forth in this Section 5.2. Any
Investment (as defined in Section 7.3) required to effect such
mutually agreed upon cost savings attempt shall be made by
Seller, and for a period of six years following such Investment
Seller shall charge DM for such Investment by subtracting from
the cost savings allocated to DM for each such year in respect of
such Investment (a) 16.7% of such Investment plus Financing Costs
(as defined in Section 7.3) multiplied by (b) the ratio of sales
to DM to total sales of Seller affected by such cost savings
attempt (such amount being herein called the "Section 5.2
Investment"). Cost savings actually resulting from a cost savings
attempt shall be shared 90% of the Allocated Cost Savings to DM
and 10% of the Allocated Cost Savings to Seller. "Allocated Cost
Savings" means the cost savings resulting from a cost savings
attempt multiplied by the ratio of sales to DM to total sales of
Seller affected by such cost savings attempt. To the extent that
the Section 5.2 Investment in respect of a cost savings attempt
is less than the cost savings allocated to DM for such cost
savings attempt for a particular Supply Year, Seller shall reduce
the selling price of Containers (per thousand) affected by such
cost savings attempt by such difference. Notwithstanding anything
to the contrary set forth in this Section 5.2, this Section 5.2
shall not apply to any cost savings affected by a Spec Change (as
defined in Section 7.1) or a New Container (as defined in Section
7.1) or to any freight, handling, warehousing or spoilage charges
as a result of any relocation of the manufacture and production
of a Container. DM shall reasonably cooperate with Seller to
achieve cost savings identified by Seller to DM prior to the
Effective Date. Notwithstanding anything in this Agreement to the
contrary, with respect to the 303 x 406 to 300 x 407 can
conversion which will be effected by Seller for DM, Seller shall
provide and pay for (with no charge to or reimbursement from DM)
all capital necessary for such conversion and DM shall be
entitled to a cost savings of $2 million (when DM is fully
converted) based on DM's volume as set forth on Schedule 2.1 for
the fiscal year ended June 30, 1994. Accordingly, the provisions
of this Section 5.2 shall not apply to the 303 x 406 to 300 x 407
can conversion to be effected by Seller for DM.
5.3 Operating Reviews. The parties shall meet
periodically during the Term and at least once in every Supply
Year to consider suggestions for efficiencies and cost savings
and to review the results of previously implemented cost savings
attempts.
5.4 Review of Information. DM and its representatives
shall have the right during normal business hours and upon at
least five business days notice to review the books and records
of Seller necessary to verify any price change set forth in a
Cost Notice and to verify the results of cost savings attempts,
Section 5.2 Investments and Allocated Cost Savings.
ARTICLE VI
MEETING COMPETITION
If, at any time after the fifth anniversary of this
Agreement, DM receives a bona fide written proposal from an
independent commercial can manufacturer (an "Offeror") having the
capability to manufacture and sell containers to DM of a type and
quality similar to the Containers that Seller is required to
xxxxxxx XX under this Agreement for the remainder of the Term for
one or more Facilities, which written proposal provides selling
prices and terms that are in DM's good faith opinion more
favorable than the selling prices and terms for Containers then
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provided by Seller and is based on not less than one hundred
percent of the annual volume of all such Containers as DM is then
purchasing from Seller hereunder for one or more Facilities for
the remainder of the Term, DM shall notify Seller of such
proposal and shall furnish Seller with a summary of all terms of
the offer with reasonable specificity, including the identity of
the Offeror. At Seller's request, such summary shall be reviewed
and confirmed in writing by DM's independent certified public
accountants as an accurate summary of terms of such offer. Seller
shall have 30 days from the date of receipt of DM's notice within
which to submit a counterproposal to such bona fide competitive
proposal. Notwithstanding anything herein to the contrary, PCP
and its affiliates shall be excluded from making any competitive
proposal during any period in which PCP is receiving metal for
cans through DM and/or Seller. If Seller's counterproposal would
result in DM paying the same net selling price for Containers
that would be paid if the competitive proposal were accepted and
if Seller meets all the other terms and conditions, including
warranties but excluding any provisions providing for meeting
competitive bidding, of the competitive proposal, then DM shall
accept Seller's counterproposal and the provisions of this
Article VI (and any meeting competitive bidding provisions
contained in the competitive proposal) will not be applicable
during the term of Seller's counterproposal for those Containers
supplied to the Facilities subject to the counterproposal. If
Seller declines to meet the competitive proposal, DM shall be
free to purchase Containers from the Offeror pursuant to the
competitive proposal commencing 60 days after the expiration of
the 30-day period; provided that, if prior to acceptance of the
competitive proposal in the aggregate the terms and conditions of
the competitive proposal are changed to be less favorable to DM,
DM shall resubmit such changed proposal to Seller for Seller's
counterproposal in accordance with this Article VI.
Notwithstanding anything herein to the contrary, the Containers
purchased from all Offerors shall not exceed, in any Supply Year,
one-half of the aggregate number of Containers to be furnished to
DM during that Supply Year from Seller and all Offerors. Subject
to the preceding sentence, any Containers purchased from the
Offerors shall reduce accordingly the minimum requirements which
DM must purchase from Seller under this Agreement.
ARTICLE VII
SPECIFICATION CHANGE; NEW CONTAINERS
7.1 Procedure for Identification. DM and Seller
acknowledge that it may be appropriate, from time to time, for
Seller to supply DM with Containers under this Agreement with a
change in specification from the version on Schedule 2.1 in
effect from time to time ("Spec Change") or of a type which were
not identified on Schedule 2.1 as of the date of this Agreement
("New Containers"). Schedule 7.1 sets forth the changes in
specification which constitute a Spec Change. If DM or Seller
desires to make a Spec Change or purchase or sell any New
Container under this Agreement, it shall submit to the other a
proposed new Schedule 2.1 identifying the Spec Change proposed to
be made or the New Container proposed to be supplied under this
Agreement (a "Proposal"). If the parties agree on the Proposal,
they shall initial the new Schedule 2.1 for that Spec Change only
and that new Schedule 2.1, as so initialed, shall thereafter
become a part of this Agreement for all purposes including, but
not limited to, the calculation of minimum volume requirements
referred to in Section 2 of this Agreement.
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7.2 Prices for Spec Changes and New Containers. The
selling price for a Container with a Spec Change shall be set so
that any decrease in Seller's manufacturing cost for such
Container resulting from such Spec Change shall be allocated 10%
plus Investment Cost as determined pursuant to Section 7.3 to
Seller and the remainder to DM. If the Spec Change results in an
increase in Seller's manufacturing cost for the Container, Seller
shall increase the price of such Container by such manufacturing
cost increase plus Investment Cost as determined pursuant to
Section 7.3. For any proposed Spec Change, Seller shall provide
DM as promptly as practical and with reasonable specificity, the
impact of such proposed Spec Change on Seller's costs. The
selling price for any New Container shall become effective upon
delivery of such New Containers and be set so that Seller's gross
profit margin on sales by Seller to DM of the New Container shall
be the same as that realized by Seller on sales to DM during the
six-month period immediately preceding the effectiveness of the
new Schedule 2.1 (the "Measurement Period") of the most nearly
comparable Container already being supplied by Seller to DM plus
Investment Cost as determined pursuant to Section 7.3. However,
if no reasonably comparable Container is then being supplied by
Seller to DM, then the gross profit margin on such New Container
shall be the same as the average gross profit margin on all
Containers being supplied by Seller to DM under this Agreement
during the Measurement Period plus Investment Cost as determined
pursuant to Section 7.3. The parties shall negotiate in good
faith to resolve any issues relating to the pricing of Spec
Changes and New Containers. If they do not reach agreement within
60 days after agreement on the Proposal, the dispute shall be
resolved in accordance with Section 19.9. For purposes of this
Agreement "gross profit margin" shall mean a fraction the
numerator of which shall be revenue recognized by Seller for the
sale of the Container to DM during the Measurement Period less
Seller's cost of goods sold for such Container during the
Measurement Period and the denominator of which shall be revenue
recognized by Seller for sale of the Container to DM during the
Measurement Period. Revenue and cost of goods sold shall be
determined in accordance with generally accepted accounting and
cost accounting principles used by Seller and consistently
applied.
7.3 Investment; Usage Percentage and Investment Cost.
In conjunction with any proposed Spec Change or New
Container Seller shall promptly provide DM with a statement of
any required Investment and Usage Percentage for each of the six
Supply Years following the required Investment. The "Investment"
shall be Seller's required investment in machinery and equipment,
inclusive of installation, delivery and implementation costs.
Investment Charge shall be 16.7% of any required Investment.
Financing Costs shall be the product of LIBOR plus 1% multiplied
by the Unamortized Investment. Unamortized Investment shall be
determined based on a six-year useful life and straight-line
amortization. For each of the six years following such required
Investment, Seller shall include in the computation of the
selling price the product of (a) Investment Charge plus Financing
Costs multiplied by (b) the Usage Percentage. which shall equal a
fraction, the numerator of which shall be the amount of
Containers manufactured for DM using such machinery and equipment
and the denominator of which shall be the amount of all
containers (including DM Containers) manufactured using such
machinery and equipment for the current Supply Year. Investment
Cost shall mean the amount calculated in the preceding sentence.
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7.4 Review. Gross profit margin calculations,
manufacturing cost savings or increases due to Spec Changes,
required Investments and Usage Percentage as described in this
Article VII shall be reviewed and confirmed in writing by
Seller's independent certified public accountants upon DM's or
Seller's request, as the case may be.
7.5 Effect of Seller's Failure to Supply Spec Changes
and New Containers. If, within 60 days after DM furnishes Seller
with a Proposal, Seller does not agree to and initial any new
Schedule 2.1 proposed by DM in good faith, DM shall be entitled
to purchase the Containers specified in the Proposal from any
third party; provided that if DM purchases the Containers
specified in the Proposal from PCP, if Seller notifies DM that it
accepts such Proposal and that Seller will supply any Containers
required by such Proposal in a timely manner and within 12 months
after DM furnished Seller with such Proposal, DM will purchase
such Containers from Seller pursuant to the terms of this
Agreement if, in fact, Seller delivers such Containers within
such 12-month period and, in such case, DM will cease purchasing
such Containers from PCP. Any such Containers DM purchases from
PCP or any other party shall reduce accordingly the minimum
requirements DM must purchase from Seller under this Agreement.
Any such Containers DM purchases from PCP or its affiliates shall
increase accordingly the 100 million Containers which DM can purchase from
PCP and its affiliates in such Supply Year.
ARTICLE VIII
TERM OF AGREEMENT
The term of this Agreement ("Term") shall commence on
the Effective Date and shall continue for a period of ten years.
The parties shall negotiate in good faith during the six-month
period commencing 18 months prior to the end of the Term (or any
extension) for an extension of the Term (or any extension), and
the Term (and any extension) shall automatically be extended for
additional five-year periods unless on or before 12 months prior
to the end of the Term (or any extension) either party notifies
the other of its intent to terminate this Agreement.
ARTICLE IX
FORCE MAJEURE
9.1 Seller's Obligations. Seller shall not be liable
to DM for any failure or delay by Seller in the performance of
any of Seller's obligations under this Agreement due to events
beyond Seller's reasonable control, including, but not limited
to, fire, storm, flood, earthquake, explosion, accident, acts of
a public enemy, wars, riots, public disorders, sabotage, strikes,
lock-outs, labor disputes, failures or delays of energy,
transportation embargoes or delays, inability to obtain materials
(except where such inability results from Seller's failure to
order sufficient quantities of materials or comply with delivery
lead times specified by suppliers), acts of God, acts or
regulations of government or inability of Seller to perform its
obligations as a result of any breach by DM of its obligations
under any of the lease agreements between DM and Seller relating
to the former DM container manufacturing facilities (the
"Leases"). However, if Seller is unable to supply the required
quantity of Containers because of any such circumstance, Seller
shall xxxxx XX a priority over all of Seller's other customers
and needs with
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respect to Containers made from the DM facilities
purchased or leased by Seller referred to in the background
Section of this Agreement.
9.2 DM's Obligations. DM shall not be liable to Seller
for any failure or delay by DM in the performance of any of DM's
obligations under this Agreement (excluding, however, the payment
of monies otherwise due under this Agreement for Containers for
which ownership has been transferred to DM), including any delay
or failure by DM to accept or use conforming Containers as
ordered, if such failure or delay is due to any event beyond DM's
reasonable control, including, but not limited to, those force
majeure events identified in Section 9.1.
9.3 Notice of Force Majeure. Either party unable to
perform due to force majeure conditions shall promptly advise the
other party of the probable extent of its inability to perform
and shall take all reasonable actions to lessen the impact on the
other party's business (including, in Seller's case, the building
of inventories in anticipation of, in Seller's reasonable belief,
labor disputes). When any force majeure event operating to excuse
performance by either party shall cease, this Agreement shall
continue in full force and effect until all deliveries have been
completed or until the earlier expiration or termination of this
Agreement in accordance with its terms.
ARTICLE X
DM'S RIGHT TO COVER
If Seller, for any reason (other than DM's breach
under this Agreement or under the Leases or as otherwise
permitted in this Agreement), including, but not limited to, a
force majeure event as described in Article 1X, fails to deliver
conforming Containers to DM at the required location by the
delivery date specified by DM to Seller, Seller will use its best
efforts to obtain an alternate supply of Containers for DM at no
cost increase to DM. If Seller cannot obtain such an alternate
supply, DM may, in addition to any other rights or remedies
available to DM under applicable law, purchase from other
sources, only during any such period of failure or delay in
performance by Seller, the type and volume of Containers that
were scheduled for delivery to DM during the period of failure or
delay in performance. Such purchases shall reduce accordingly the
minimum requirements which DM must purchase from Seller under
this Agreement. Any such Containers DM purchases from PCP or its
affiliates shall increase accordingly the 100 million Containers
which DM can purchase from PCP and its affiliates in such Supply
Year only. In addition, DM shall notify Seller of any increased
cost (including freight and handling) incurred by DM in acquiring
such Containers from other sources, and, except for any failure
by Seller due to a force majeure event described in Article IX or
due to a breach by DM under this Agreement or the Leases, Seller
shall immediately credit or reimburse DM for any such cost
increase incurred.
ARTICLE XI
QUALIFICATION OF CONTAINERS; TECHNICAL SUPPORT
11.1 Qualification of Containers. DM reserves the
right to qualify Seller's production capabilities according to
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DM's quality assurance standards. DM hereby represents and
warrants to Seller that the container production facilities of DM
immediately prior to the closing under the Purchase Agreement are
qualified according to DM'S quality assurance standards for those
Containers produced at each such Facility. DM shall have the
right to make reasonable changes to its quality assurance
standards, and if DM changes any of its quality assurance
standards, it shall notify Seller in writing of any change in
detail and shall give Seller adequate opportunity to conform its
production capabilities accordingly. DM shall not unreasonably
withhold qualification of Seller's production capabilities in
accordance with DM's quality assurance standards and shall
exercise its best efforts to qualify Seller's production
capabilities in accordance with customary industry practice.
Seller shall not change any specifications for Containers without
the prior written consent of DM. Seller shall reimburse DM for
any costs reasonably incurred by DM in performing qualifying runs
for Containers if and to the extent that such qualifying runs
result in unsalable Product.
11.2 Inspection. DM shall have the right periodically
to inspect Seller's facilities at which Containers are
manufactured. Such inspection shall be during normal business
hours and upon at least three business days' notice to Seller.
11.3 Technical Support. Upon DM's reasonable request,
Seller shall provide technical support to those canneries at
which Containers are filled in accordance with industry standards
and at no cost to DM. Upon DM's reasonable request, Seller shall
provide technical support for DM's Philippine container
manufacturing operations, PCP and any Product Sourcing Container
arrangements to which DM is a party; provided that Seller's
personnel shall not be required to visit DM's Philippine
facilities more than twice in any calendar year. DM and Seller
shall cooperate to provide technical assistance relating to
Polystar lids. Technical support shall consist of advice on
engineering reviews of new equipment, advice on line
productivity, use of laboratory facilities to research container
failures, development of container specifications and similar
matters. DM shall reimburse Seller for all of Seller's reasonable
costs, including without limitation, out-of-pocket costs, for
such support within 30 days after submission of invoices from
Seller. At DM's request, Seller will also supply DM with metal
for PCP's container manufacturing, at Seller's cost (with
freight) and on customary terms for purchases of this type.
11.4 Research and Development Cooperation. The parties
intend to cooperate in research and development relating to the
manufacture and coating of containers. In connection with such
cooperation, each party shall maintain in confidence and shall
not disclose or otherwise use for a period of five years after
disclosure any information of a confidential or business
sensitive nature disclosed by the other party. This obligation of
confidentiality shall not apply to material which
(a) is in or later enters the public domain by public
use, publication, general or public knowledge or the like,
through no fault of the receiving party;
(b) is obtained from a third party which has the legal
right to use and disclose the same to receiving party;
(c) either party already possesses, as evidenced by its
written records, predating receipt thereof from the other party;
or
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(d) is developed by either party independently of the
information disclosed.
The parties agree that ownership of all right, title and interest
to information disclosed in connection with such research and
development cooperation and the inventions and trade secrets
related thereto or based thereon shall remain the property of
the-disclosing party and that the receiving party shall not
obtain any rights to such information or related inventions or
trade secrets by way of license, shop right or otherwise. Seller
will make available to DM Seller's manufacturing facilities for a
reasonable number of test runs of containers, coatings, seals or
other items relating to containers. Such test runs shall take
place at the manufacturing facility selected by Seller and shall
be scheduled to minimize any disruption to Seller's commercial
operations. The cost to DM for such test runs shall be Seller's
labor and materials cost, including a reasonable charge for set
up and change over of any manufacturing line.
ARTICLE XII
RETURNABLE PACKAGING MATERIALS
12.1 Packaging Specifications. DM's current packaging
specifications are set forth on Schedule 2.1 to this Agreement.
DM will consider in good faith any proposed changes to these
specifications if DM's functional performance criteria (set forth
on Schedule 2.1) are satisfied.
12.2 Coding. Can identification coding and xxxx check
standards used by Seller must comply with DM's product
certification program as currently in effect and as that program
may be changed in the future. DM shall notify Seller at least 45
days before any change in DM's certification program.
12.3 Title to Packaging Materials. All packaging
materials for Containers supplied by Seller, including, but not
limited to, pallets, top frames and separators, shall remain the
property of Seller. All packaging materials for Containers
supplied by DM, including but not limited to pallets and top
frames, shall remain the property of DM. The parties shall return
all such other party's materials to the other party's closest
plant, except to the extent, if any, that such other party wishes
to exclude certain items from the provisions of this Section
12.3. Each party shall pay the transportation costs for return of
its own packaging materials.
12.4 Annual Settlement of Packaging Materials. Seller
shall maintain a daily inventory record of pallets and top frames
shipped to, and returned by, DM. DM shall maintain inventory
records of pallets and top frames shipped to, and returned by,
Seller. As of the end of each three-month period in each Supply
Year, Seller shall determine from such records the quantity (if
any) of pallets and top frames: (a) shipped by Seller or DM to
the other party during such three-month period and (b) not
returned during that period. If those records show in any Supply
Year that either party owes the other more than 10,000 pallets or
top frames (other than those excluded pursuant to Section 11.3),
such party shall pay the other $12.00 per pallet and $3.00 per
top frame for such excess shortage within 90 days after the end
of such Supply Year. The parties shall furnish a copy of such
inventory records to the other as often as such other party may
reasonably request and shall cooperate with each other to
reconcile such inventory records.
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12.5 Transition of 45 x 50 Two-Way Pallets. DM will
cooperate with Seller in the orderly transition from 45 x 50
Two-Way pallets and top frames to 44 x 56 Four-Way pallets and
top frames, with all transition costs to be paid by Seller.
ARTICLE XIII
CLAIMS, WARRANTIES AND LIMITATIONS OF LIABILITY
13.1 Container Specifications. Seller warrants that
all Containers delivered to DM will conform to the Container
specifications set forth in Schedule 2.1 to this Agreement as
that Schedule may be amended from time to time in accordance with
this Agreement. The acceptance criteria relating to Container
quality and the AQL Plan to determine quality compliance are set
forth on Schedule 13.1. If Seller supplies any Containers to DM
which fail to conform to Schedule 2.1, as determined by those
acceptance criteria and the AQL Plan, unless Seller can supply
conforming Containers in a timely manner, DM shall be entitled to
purchase substitute Containers from a third party. Such purchases
shall reduce accordingly the minimum requirements which DM must
purchase from Seller under this Agreement.
13.2 Compliance with Laws and Regulations. Seller
warrants that all Containers will be produced in accordance with
and will satisfy all applicable federal, state and local laws,
regulations and orders.
13.3 Title to Containers. Seller warrants that it will
convey to DM good title to all Containers delivered under this
Agreement, free and clear of any and all security interests and
other liens and encumbrances.
13.4 Infringement Claims. Seller shall indemnify and
hold DM harmless from and against any and all claims of patent
and other "intellectual property" infringement or misuse relating
to Containers and shall bear all costs and expenses, including
reasonable attorneys' fees, arising from or related to any such
claim, unless the claim arises from events which occurred before
the date of this Agreement or from DM's request for a Spec Change
or New Container. The term "claim" as used in the preceding
sentence includes, but is not limited to, any claim for temporary
or permanent injunctive relief. DM represents and warrants to
Seller that none of the specifications set forth on Schedule 2.1
delivered on the date hereof infringe the intellectual property
rights of any third party.
13.5 Shelf Life Warranty. DM warrants to Seller that
each container manufactured by DM prior to the effective date of
this Agreement for the Product or Products designated by DM and
listed on Schedule 2.1 to this Agreement provides the Product
packed in such container a shelf life of at least 24 months (and
at least 36 months for vegetables) at a mean temperature of
72(degree) F from time of use by DM. In reliance upon the
preceding sentence, Seller warrants that each Container delivered
by Seller to DM for the Product or Products designated by DM and
listed on Schedule 2.1 to this Agreement, as it may be modified
from time to time in accordance with this Agreement, shall assure
that the Product packed in the Container will have a shelf life
of at least 24 months (and at least 36 months for vegetables) at
a mean temperature of 72(degree) F from time of use by DM, except
for those Containers for which DM insists on a Spec Change or New
Container with which Seller reasonably disagrees in good faith in
writing before
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it manufactures the Container in question.
Seller's warranty under this Section 13.5 assumes that the
Product identified on Schedule 2.1 shall remain substantially
unchanged as to formulation and content during the Term. If DM
elects to make changes to the formulation or content of the
Product which, to DM's knowledge after due inquiry, might cause
the Container to be used for that Product to be inadequate or
inappropriate to assure the required 24-month (or 36-month for
vegetables) shelf life at a mean temperature of 72(degree) F, DM
shall notify Seller at least 60 days before the change and Seller
shall confirm the continued appropriateness of the Container for
use with the Product or to request changes in the specifications
for the Container if required in Seller's opinion by changes to
the Product. Such changes in specifications shall be in
accordance with the procedures set forth in Article VII of this
Agreement. The parties agree that tomatoes are fruits and not
vegetables.
13.6 Limitations on Warranties. Except as set forth in
this Article XIII:
SELLER EXTENDS NO WARRANTIES, EXPRESS OR
IMPLIED, AND NO WARRANTY WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
Seller's liability for Containers which do not conform
with the warranties provided in this Agreement shall be limited
(a) with respect to personal injury, to the coverage available
under the insurance policy referred to in Article XIV of this
Agreement and (b) with respect to all other damage, loss or
injury, to the sum of DM's cost of the defective Containers, DM's
cost of the contents of the Containers lost as a result of the
defects, DM's cost of recovery and disposition of the defective
Containers and DM's incremental labor and overhead cost of lost
production time caused by the Containers. DM shall exercise
reasonable diligence to discover any defects in Containers before
filling them with Products.
ARTICLE XIV
INSURANCE
Seller, at its cost, shall maintain broad form
comprehensive general liability insurance, including product
liability insurance with limits in an amount not less than
$30,000,000 in the aggregate which shall include DM as an
additional named insured and shall require the insurer to give DM
at least 30-days' advance notice of any cancellation or
expiration of the policy, or of any significant change in the
coverage, scope or amount of the policy. On or before 30 days
after the Effective Date, Seller will provide DM with a
certificate of insurance evidencing the above coverage,
additional insured endorsement, and thereafter Seller shall
promptly provide DM notice of cancellation or change in policy
conditions.
ARTICLE XV
SALE OF REJECTED CONTAINERS
Seller shall not resell, except for scrap, any
Containers rejected or not purchased by DM which bear any
trademarks or trade names of DM or DM's customers.
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ARTICLE XVI
LABOR DISPUTES
Seller agrees that, whenever an actual or potential
labor dispute delays or could be reasonably expected to delay the
timely performance of this Agreement, Seller shall promptly give
notice of such actual or potential dispute to DM.
ARTICLE XVII
TITLE TO DRAWINGS
Seller shall at all times have title to all drawings
and specifications used in connection with this Agreement
provided that DM shall at all times be entitled to retain and use
(without any further consideration) copies of all such drawings
and specifications.
ARTICLE XVIII
BREACH AND WAIVER
18.1 Event of Default. Each of the following shall
constitute an Event of
Default:
(a) the making by a party of any general assignment
for the benefit of creditors; or the filing by or against a
party of a petition to have such party adjudged a bankrupt
or a petition for reorganization or arrangement under any
bankruptcy law which, in the case of a petition filed
against a party, is not dismissed within 60 days of filing;
and
(b) the material breach of any obligation pursuant
to this Agreement.
18.2 Effect of Default. If either party commits an
Event of Default, the other party may immediately in the case of
Section 18.1(a) and 30 days after notice and failure to cure (or
such longer period if such failure cannot be reasonably cured
within 30 days of notice, so long as such defaulting party
diligently takes all steps necessary to cure such failure) in the
case of Section 18.1(b), in addition to and without prejudice to
its other lawful rights and remedies, terminate this Agreement at
any time upon notice to the other party. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR
PUNITIVE DAMAGES.
18.3 Nonwaiver. No course of conduct or delay on the
part of either party in exercising any of its rights under this
Agreement shall waive any rights of that party or modify this
Agreement.
ARTICLE XIX
MISCELLANEOUS
19.1 Notices. All notices, demands and requests
required or permitted to be given under this Agreement shall be
in writing and shall be deemed duly given three business
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days after mailing if mailed by certified or registered mail, postage
prepaid, or on the date of delivery if delivered personally or
one business day after deposit with a nationally recognized
overnight courier, in all cases subject to the subsequent
designation of another address in accordance with this Section
18.1, if addressed as follows:
If to Seller:
Silgan Containers Corporation
0000 X. Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxx
With a copy to:
Silgan Corporation
0 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: D. Xxxx Xxxxxxxx
and
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Financial Centre
000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Attention: G. Xxxxxxx Xxxxxx, Esq.
If to DM:
Del Monte Corporation
Xxx Xxxxxx
X.X. Xxx 000000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxx Xxxxxx
With a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: August X. Xxxxxxx
19.2 Assignment. This Agreement shall not be assigned
by any party without the prior written consent of the other
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party, except that either party may transfer or assign this
Agreement to any Affiliate (as defined in the Purchase Agreement)
of such party upon any merger, consolidation, sale of all or
substantially all of the assets of such party (or, in the case of
Seller only, all or substantially all of the Assets (as defined
in the Purchase Agreement) of the Business (as defined in the
Purchase Agreement) or, in the case of DM only, all or
substantially all of the assets of all of the Facilities) or
other similar business combination with or to such Affiliate of
such party without the prior written consent of the other party.
This Agreement shall be binding upon and shall inure to the
benefit of the successors and permitted assigns of both parties
and upon all persons or corporations succeeding to their
respective businesses.
19.3 Modifications. This Agreement may not be modified
and no provision of this Agreement may be waived unless the
modification or waiver is in writing and is signed by an
authorized representative of each party.
19.4 Confidentiality. Each party to this Agreement
shall hold in confidence and use only for its benefit in
performing this Agreement, any confidential technical information
(including, without limitation, specifications, drawings, designs
and samples), pricing information, raw material sources, the data
on Schedule 2.1 and any other information, whether conveyed
orally or in writing, furnished by one to the other in connection
with this Agreement. No party to this Agreement shall have
liability for disclosures of information made in accordance with
requirements imposed by any applicable law, rule or regulation or
by any court or regulatory agency with proper jurisdiction if the
party of whom disclosure is required reasonably assists and
cooperates with the other party in attempting to preserve the
confidentiality of the information, including, without
limitation, notifying the other party upon learning of any such
disclosure requirement and not disclosing the information earlier
than is required.
19.5 Independent Contractors. The parties acknowledge
that the relationship established under this Agreement shall be
that of independent contractors. Seller and DM shall not be
deemed partners, joint venturers or agents for one another for
any purpose whatsoever.
19.6 Corporate Authority. Each party warrants to the
other that it has the corporate power and authority to enter into
this Agreement and to carry out the transactions contemplated by
this Agreement and that this Agreement has been duly executed and
delivered on its behalf.
19.7 Further Documentation. Each of the parties agrees
to furnish to the other such additional documents and instruments
as shall be reasonably requested to effectuate the purposes of
this Agreement.
19.8 Severability. If any provision of this Agreement
is determined by a court of competent jurisdiction to be null and
void or unenforceable, that provision shall be deemed to be
severed, and the remaining provisions of this Agreement shall
remain in full force and effect.
19.9 Dispute Resolution. Any disputes arising pursuant
to this Agreement and relating to cost, Cost Notices, Investment,
Allocated Cost Savings, manufacturing cost, gross profit margin
or similar matters shall be submitted to the accounting firm of
Xxxxxx Xxxxxxxx & Co. ("AA"), and its determinations shall be
final and binding on all parties. Determinations of such matters
shall be made in accordance with United States Generally Accepted
Accounting Principles and, United States Generally Accepted Cost
Accounting Principles, in each case, consistently applied, in
each case as modified by the specific provisions of this
Agreement. All costs of AA shall be shared equally by the
parties. All other disputes arising pursuant to this Agreement
shall be submitted to binding arbitration in San Francisco,
California pursuant to the then applicable rules of the American
Arbitration Association.
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19.10 Governing Law. This Agreement shall be governed
by the laws of the State of California applicable to contracts
between California residents and wholly to be performed in
California.
19.11 Entire Agreement. This Agreement, including its
Schedules as they may be modified from time to time in accordance
with this Agreement, contains all the terms agreed upon by the
parties with respect to its subject matter and supersedes any and
all prior and contemporaneous agreements, representations and
warranties of the parties regarding that subject matter.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date that appears in the first paragraph of
this Agreement.
DEL MONTE CORPORATION
By /s/ Xxxxx X. Xxxxxx
Title Executive Vice President & CFO
SILGAN CONTAINERS CORPORATION
By /s/ D. Xxxx Xxxxxxxx
Title /s/ Chairman of the Board
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AMENDMENT TO SUPPLY AGREEMENT
THIS AMENDMENT TO SUPPLY AGREEMENT (this "Amendment")
is made and entered into as of December 21, 1993 by and between
DEL MONTE CORPORATION, a New York corporation ("DM"), and SILGAN
CONTAINERS CORPORATION, a Delaware corporation ("Seller").
B A C K G R O U N D
DM and Seller are parties to that Supply Agreement
made and entered into as of September 3, 1993 (the "Supply
Agreement"). DM and Seller desire to amend the Supply Agreement
as set forth in this Amendment. Accordingly, the parties agree as
follows:
ARTICLE I
DEFINITIONS
Any terms used in this Amendment without definition
shall have the meanings set forth in the Supply Agreement.
ARTICLE II
MEXICAN FACILITIES
Schedule 2.1 to the Supply Agreement is hereby amended
to clarify that the Mexican Facility referred to in such Schedule
2.1(a) is the DM cannery located in Irapuato, Mexico.
ARTICLE III
SCHEDULE 2.1(e)
Schedule 2.1(e) to the Supply Agreement is hereby
amended by deleting such Schedule 2.1(e) in its entirety and
replacing it with Schedule 2.1(e) set forth in Exhibit 2 hereto.
By January 15, 1994, Seller shall revise and reissue
to DM Schedule 2.1(e) to the Supply Agreement (which shall
replace the Schedule 2.1(e) attached hereto). Such revised
Schedule 2.1(e) shall effect the following: (i) the Metal Cost
component of selling price and the Labor Cost component of
selling price for each Container will be reduced by the amount of
margin contained in those components, and (ii) the Other Cost
component of selling price of each Container will be increased by
such amount of price reduction in the Metal Cost and Labor Cost
components. The result, therefore, will be no change in the
individual or aggregate selling price for all Containers as set
forth in Schedule 2.1(e) attached hereto.
ARTICLE IV
AMENDMENT TO SECTION 2.3
The phrase "the last sentence in Section 2.1" that is
contained in the third sentence of Section 2.3 of the Supply
Agreement is hereby amended by deleting such phrase in its
entirety and inserting in place therefor "the second sentence in
Section 2.1."
ARTICLE V
CONTAINER REQUIREMENTS PLAN; SUPPLY SCHEDULE; WORKING CAPITAL
1. Sections 3.1 and 3.2 of the Supply Agreement are
hereby amended by deleting such Sections 3.1 and 3.2 in their
entirety and inserting in place therefor the following:
3.1 Container Requirements Plan. On the date of
effectiveness of this Agreement (for the 1994 Supply Year)
and prior to November 15 before each subsequent Supply Year
thereafter, DM shall furnish Seller with a "Container
Requirements Plan" for such Supply Year, which Container
Requirements Plan shall set forth DM's good faith written
estimate, by type of Container and delivery location, of
the quantity of Cans estimated to be needed for such Supply
Year and the Quantity of Ends to be affixed to such Cans.
"Supply Year" shall mean a calendar year during the Term of
this Agreement (based on DM's accounting month). The
Container Requirements Plan for a Supply Year shall be
adjusted by DM as follows: no later than the 20th calendar
day of each month during such Supply Year, DM shall furnish
Seller with DM's good faith written estimate of the revised
Container Requirements Plan, by type of Container and
delivery location, for the remaining months of such Supply
Year, provided that during the packing season (which is the
period from July 1 to October 31 of each year) DM shall
revise such Container Requirements Plan as soon as
practical but at least no later than the 20th calendar day
of each such month.
3.2 Supply Schedule. On the date of effectiveness of
this Agreement (for the 1994 Supply Year) and prior to
December 15 before each subsequent Supply Year thereafter,
Seller shall xxxxxxx XX with a "Supply Schedule" for such
Supply Year, which Supply Schedule shall indicate the
estimated quantity and type of Cans and Ends to be supplied
by Seller by DM accounting month for each DM Facility and
which shall satisfy the Container Requirements Plan for
such Supply Year. Such Supply Schedule shall be revised
monthly on or before the 30th calendar day of each month in
which Seller receives a revised Container Requirements Plan
and shall serve as the basis for DM's arrangement of
shipments and space planning. In any Supply Year, DM shall
be obligated to purchase no less than, and Seller shall be
obligated to sell no more than, that number and type of
Containers as shall equal the sum of the periodic monthly
estimates set forth in the Supply Schedule (as revised in
accordance with this Section) for each type of Container
for that Supply Year. The parties agree to cooperate and
use their reasonable best efforts to resell any excess Cans
or Ends which DM has purchased.
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Seller will notify DM immediately if Seller anticipates
that it will be unable to provide Containers to DM in
accordance with DM's most recent Container Requirements
Plan. Seller shall advise DM's transportation department of
transit requirements from Seller's location to the DM
delivery location for Containers supplied by Seller as
required by this Section 3.2 and the most recent Supply
Schedule for the current Supply Year. DM's transportation
department will arrange for transportation of such
Containers.
2. Section 3.4 of the Supply Agreement is hereby
amended by deleting such Section 3.4 in its entirety and
inserting in place therefor the following:
On the date of effectiveness of this Agreement (for
the 1994 Supply Year) and prior to December 15 before each
subsequent Supply Year thereafter, Seller shall formulate
and deliver to DM a Working Capital Plan for such Supply
Year (a sample of which is attached hereto as Schedule
3.4(a)) which shall be based on the Containers Requirements
Plan and Supply Schedule for such Supply Year and shall
indicate the estimated Container Costs for Cans and Ends to
be supplied by Seller and purchased by DM (resulting in
inventory of DM) in accordance with this Agreement for all
Container Requirements Plan requirements for each month of
such Supply Year. Such amount of inventory for each such
month (revised as provided below), less the estimated
amount of accrued and unpaid payables owing to Seller for
such Cans and Ends at the end of each such month (as set
forth in the Working Capital Plan), shall equal DM's
working capital for each such month. The monthly average of
such amount of inventory for such Supply Year less the
monthly average of such payables for such Supply Year
(excluding the average amount of Payables Extension Memos
outstanding at each such month end) shall equal DM's
"Average Working Capital" for such Supply Year. If DM's
Average Working Capital for such Supply Year exceeds the
"Cap" for such Supply Year, then Seller shall issue to DM a
Payables Extension Memo in such amount, which Payables
Extension Memo shall entitle DM to maintain (beyond the
terms provided in Section 3.3 hereof) an outstanding
payable to Seller in such amount. Each month (within ten
days after DM's month end (the "Delivery Date")) the
Container Requirements Plan, Supply Schedule and Working
Capital Plan for the current Supply Year shall be updated
and adjusted by the parties, respectively, for actual
information for the prior month (which actual information
shall include Container Costs for Containers filled, ending
DM Inventory (as hereinafter defined), ending inventory of
unfilled Containers supplied by Seller, purchases of Cans
and Ends from Seller, and ending payables balance of DM)
and, if necessary, as the Container Requirements Plan and
Supply Schedule for such Supply Year are adjusted. Each
time the Working Capital Plan for a Supply Year is adjusted
as provided above: (i) if DM's Average Working Capital for
such Supply Year (calculated as provided above) is
increased from the amount last calculated for such Supply
Year, then, one business day after the Delivery Data,
Seller shall issue a new Payables Extension Memo which
shall replace the Payables Extension Memo last previously
issued for such Supply Year and DM shall be entitled to
maintain (beyond the terms provided in Section 3.3 hereof)
an outstanding payable to Seller in such new amount or (ii)
if DM's Average Working Capital for such Supply Year
(calculated as provided above) is decreased from the amount
last calculated for such Supply Year, then, one
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business day after the Delivery Date, Seller shall issue a
new Payables Extension Memo which shall replace the
Payables Extension Memo last previously issued for such
Supply Year and DM (A) shall pay to Seller (such payment to
be made with the next payment by DM of payables to Seller
in accordance with Section 3.3 hereof) an amount equal to
such decrease and (B) shall be entitled to maintain (beyond
the terms provided in Section 3.3 hereof) an outstanding
payable to Seller in the amount set forth in such new
Payables Extension Memo. Examples of adjustments to the
sample Working Capital Plan attached hereto as Schedule
3.4(a) and, accordingly, adjustments to DM's Average
Working Capital are attached hereto as Schedule 3.4(b).
At the end of the Term or this Agreement, the
aggregate amount of all outstanding Payable Extension Memos
shall be paid by DM to Seller.
At the end of each Supply Year during the Term of this
Agreement, (i) Seller shall pay to DM an interest charge in
an amount equal to the Interest Factor multiplied by the
amount by which DM's actual Average Net Working Capital for
such Supply Year exceeded the Cap for such Supply Year, or
(ii) if DM's actual Average Working Capital for such Supply
Year exceeded the Cap and DM's Average Net Working Capital
for such Supply Year was less than the Cap, then DM shall
pay to Seller an interest charge in an amount equal to the
Interest Factor multiplied by the amount by which DM's
actual Average Net Working Capital for such Supply Year was
less than the Cap for such Supply Year. For purposes
hereof, the term "Average Net Working Capital" for a Supply
Year shall mean the Average Working Capital for such Supply
Year less the average amount of Payables Extension Memos
outstanding for such Supply Year and the term "Interest
Factor" shall mean LIBOR (or any successor interest rate)
at December 31 of the applicable Supply Year plus 2 1/2%.
For the 1994 Supply Year, the "Cap" shall be
$18,000,000.
The Working Capital Plan for the 1994 Supply Year is
attached hereto as Schedule 3.4(c). For the 1994 Supply
Year, the parties acknowledge that DM will have an
inventory of cans not supplied by Seller. DM shall provide
Seller with an estimate (to be adjusted for actual and
updated monthly) of such inventory as soon as possible
(such cans being the "DM Inventory"). For purposes of
calculating DM's Average Working Capital, DM Inventory
shall not be used in the inventory of Cans used to
calculate DM's Average Working Capital. However, the
Working Capital Plan shall assume that DM Inventory by
Container specification will be used to meet fill
requirements before any such Container specification
supplied by Seller is used. For all Supply Years other than
the 1994 Supply Year, the Working Capital Plan shall assume
the following: if all containers purchased by DM other than
from Seller (as provided for herein) are expected to be
used for a certain percent of the total fill requirements
for such Supply Year, then each month's fill requirements
for such Supply Year will be assumed to be met using such
certain percent of such containers and the remaining
percent using Cans supplied by Seller, unless DM can
account for such container usage (excluding any containers
purchased from PCP which shall be accounted for as provided
above) to the reasonable
-4-
satisfaction of Seller, in which case each month's fill
requirements for such Supply Year will be assumed to be met
in accordance with such accounting method.
For purposes of this Section 3, "month" shall mean
DM's accounting month, which in any calendar quarter shall
be four, four and five weeks, respectively.
The Cap for the second and succeeding Supply Years
will be calculated on the last business day of January of
each Supply Year by DM (as reasonably agreed to by Seller)
by multiplying the Cap for the most recently completed
Supply Year by a fraction, the numerator of which will be
DM's estimated Container Costs from Seller for such Supply
Year as set forth on Schedule 2.1 as of the commencement of
such Supply Year and the denominator of which will be
Container Costs actually incurred by DM from Seller for the
most recently completed Supply Year Plus the DM Inventory
used in such recently completed Supply Year. Until the Cap
for each of the second and succeeding Supply
Years is calculated as provided above, the parties shall
use a Cap for each such Supply for purposes hereof which is
DM's good faith estimate of the Cap for such Supply Year.
The term Container Costs shall mean the aggregate of the
selling price for each Container as set forth in Schedule
2.1 multiplied by the number of units of such Container
Supplied by Seller to DM plus applicable freight for the
applicable Supply Year.
ARTICLE VI
METAL COSTS
Subparagraph (a) of Section 5.1 of the Supply
Agreement (which subparagraph begins "The metal cost component of
selling price . . .") is hereby amended by deleting such
subparagraph in its entirety and inserting in place therefor the
following:
At July 1, 1994, the metal cost component of selling
price for each Container as set forth in Schedule 2.1 shall
be adjusted (increased or decreased) to Seller's actual
cost of metal as of that date from the "Base Cost" (as set
forth in the letter dated December 16, 1993 from Xxxxx Xxxx
of Seller to Xxxxx XxXxx of DM). Thereafter, the metal cost
component of selling price for each Container as set forth
in Schedule 2.1 shall be adjusted (increased or decreased)
to reflect changes in costs of metal actually incurred by
Seller. Such metal price adjustment (increase or decrease)
referred to in the immediately preceding sentence shall
take place thirty (30) days after the date Seller actually
incurs a price change in the cost of metal. Metal prices
shall not be increased prior to July 1, 1994.
ARTICLE VII
XXXXXXX & XXXXXX
The Supply Agreement is hereby amended by adding the
following new Section to the Supply Agreement immediately
following Section 2.7 and immediately before Article III:
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2.8 Procter & Xxxxxx. DM hereby agrees that it will not
cancel or terminate that certain Containers Purchase
Agreement dated as of March 2, 1990 (the "Container
Purchase Agreement") between DM and The Procter & Xxxxxx
Company ("P & G") prior to March 2, 1995 and that it will
purchase from Seller in accordance with this Agreement all
Containers (as defined in such Containers Purchase
Agreement) that it is required to sell to P & G under the
Containers Purchase Agreement.
ARTICLE VIII
COST SAVINGS
The Supply Agreement is hereby amended by adding the
following to Section 5.2 immediately before the penultimate
sentence of Section 5.2:
Attached hereto as Schedule 5.2 is a list of cost
savings items (from which DM and Seller agree to reasonably
cooperate to achieve and to work together to test and approve as
quickly as possible), it being understood that the cost savings
associated with all such items which accrue to Seller are
included in the selling prices for Containers set forth in
Schedule 2.1(e) and shall not be shared or allocated pursuant to
this Section 5.2 or Article VII.
ARTICLE IX
REAFFIRMATION
The parties hereby reaffirm all of the other terms and
conditions of the Supply Agreement. This Amendment amends the
Supply Agreement only to the extent specified herein and shall
not constitute an amendment to any other provision of the Supply
Agreement. From and after the date hereof, all references to the
Supply Agreement in the Supply Agreement and other documents
referred to therein shall be references to the Supply Agreement
as amended hereby.
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IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly signed and delivered as of the date that
appears in the first paragraph of this Amendment.
DEL MONTE CORPORATION
By /s/ Xxxxxx X. Xxxxxxx
Its Vice President
SILGAN CONTAINERS CORPORATION
By /s/ [signature illegible]
Its Vice President
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