EXHIBIT 10.26
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 affect 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."
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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
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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. 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
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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
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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
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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 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 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
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).
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At the end of the Term of 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
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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 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.
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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.
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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 froth 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.
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ARTICLE VII
PROCTER & 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:
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
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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.
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 MONTH CORPORATION
By /s/ XXXXXX X. XXXXXXX
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Its Vice President
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SILGAN CONTAINERS CORPORATION
By
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Its Vice President
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