1
CONFIDENTIAL
TREATMENT
REQUESTED*
Exhibit 10.1
ALUMINUM PURCHASE/SUPPLY AGREEMENT
This Agreement is made this 5th day of July, 1995 between American
National Can Company (ANC) and Alcan Rolled Products Company (ALCAN).
Whereas, ANC and ALCAN entered into a Memorandum of Agreement dated
December 21, 1992 (the "framework agreement") providing for ALCAN's supply of
aluminum can stock to ANC on a worldwide basis over a three year term expiring
at the end of 1995; and
Whereas, the parties are desirous of entering into a new long-term
Supply Agreement (the "LTSA") covering ANC's North American requirements to take
affect upon the expiration of the framework agreement; and
Whereas, the parties are desirous of establishing in the LTSA pricing
within a cost-based "band" which the parties expect will, over time, (a) provide
a reasonable return to ALCAN for metal over the business cycle, while also
eliminating extreme market volatility, and (b) when combined with market-based
fabrication conversion charges, will allow ANC to negotiate can pricing with its
customers within specified predictable parameters.
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* Terms for which confidential treatment has been requested have been
omitted and are marked with an asterisk [*]. Confidential material has
been separately filed with the U.S. Securities and Exchange Commission
under an application for confidential treatment.
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Now, therefore, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. GENERAL PROVISIONS
1.1 DEFINITIONS: Aluminum can-stock means aluminum beverage can body-stock and
aluminum beverage can end-stock that comply with ANC's standards and
specifications applied in a consistent manner to all its aluminum can-stock
suppliers.
1.2 TERM AND TERMINATION: This LTSA will be effective with shipments beginning
January 1, 1996, will run through December 31, 2000 (five years) and will be
subject to successive three-year extensions, provided that both parties agree on
terms and conditions to be applicable during such extension periods at least
twelve (12) months prior to the termination of the initial five-year term or any
extension period, and provided further that if, during at least 3/4 of the
period of six months preceding the time limit for agreement at the end of the
initial term (i.e., between July 1, 1999 and December 31, 1999), the Midwest
delivered metal price is out of the "band" defined in Article 3.4, Sub-section
c, or, if during the initial term of this Agreement, ALCAN should request a
fabrication increase substantially beyond the initial 32ct. and 70ct.
fabrication components including adjustments for the applicable cost increases
and PPI increases which were previously incorporated as described in Section
3.4d of this Agreement, then the Agreement will automatically be extended for
one additional year beyond the initial five-year term. In addition, ANC shall
have the right to extend, at its sole option, this Agreement for a period of one
additional year following the automatic extension year, provided that they
exercise this additional option year no later than October 1 of the automatic
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extension year and also that the band prices in existence in the year 2000
average at least 70ct./lb. on the metal component floor plus applicable cost and
PPI increases covered in Section 3.4c and that the fabrication component on CBS
is at least 32ct./lb. and CES is at least 72ct./lb. plus applicable cost and PPI
increases covered in Section 3.4d and, further, that all of these specific terms
and conditions have been and continue to be adhered to by ANC. Should ANC invoke
this additional unilateral extension year, it shall be limited to a maximum of
one-third (1/3) of the annual volume of the 50% share of ANC's business sourced
with ALCAN in the prior contract year. The terms and conditions of the remaining
two-thirds (2/3) of the volume would be decided upon by negotiations between the
parties. The intent of this extension is to preclude a major "run up" in the
price of aluminum can sheet at the end of the Agreement without providing ANC
and their customers with time to elect other options or alternative materials.
1.3 GLOBAL SUPPLY: The intent of this Agreement is for ALCAN to supply a minimum
of 50% of ANC's can-stock purchases in Xxxxx Xxxxxxx (Xxxxxx Xxxxxx, Xxxxxx and
Mexico). In addition, ALCAN shall have a right of first refusal for up to 50% of
the can stock requirements of ANC, its subsidiaries and affiliates in Central
and South America. Conditions of eventual supply in Central and South America
will be discussed on a case-by-case basis, and the parties shall be free to
reach an agreement on competitive terms and conditions as to such other
locations which may be different than the agreements set forth herein.
1.4 COST INITIATIVES: ALCAN and ANC will work aggressively (and cooperatively,
where appropriate) to lower system costs wherever possible without injury or
hardship to each other.
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1.5 FORCE MAJEURE: The obligations of each party hereunder shall be excused in
the event that party's performance is prevented or impeded by strikes, work
stoppages and slowdowns, war, insurrection, government action (including levies,
etc.), casualty (including, without limitation, fire, flood, accident and
explosion), acts of God and any other similar or different circumstance beyond
the reasonable control of such party (any of the foregoing events being referred
to as an event of "force majeure"). The party affected by an event of force
majeure shall promptly notify the other party, identifying the event and
estimated duration.
2. QUALITY
2.1 ALCAN warrants that all can-stock delivered under the LTSA will meet or
exceed ANC standards, which standards are being reasonably applied in a
consistent manner to all of its can-stock suppliers.
2.2 ALCAN and ANC commit to work together to continually improve system quality
and service.
2.3 In the event that ALCAN is disqualified at any plant, ANC commits to work
with due diligence with ALCAN to requalify. If the parties are not successful in
achieving requalification in a reasonable time and the supply pattern cannot be
altered to other plants, ANC's volume and commitments hereunder for the period
when ALCAN was disqualified may be, at ANC's option, reduced accordingly until
ALCAN is able to requalify its material.
3. PURCHASE AND SALE OF CAN-STOCK
3.1 QUANTITIES: ANC will purchase from ALCAN, and ALCAN will supply to ANC,
annually, a minimum of 50% of ANC's North American (United States, Canada, and
Mexico) aluminum
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can-stock requirements designated for processing in ANC's facilities for that
year. It is the intent of the parties to include in such requirements the needs
of all of ANC's aluminum beverage-can facilities in North America. However,
ALCAN recognizes that specific circumstances (joint ventures, acquisitions
subject to previous supply commitments, new facilities outside the continental
United States, etc.) may prevent ANC, during a period of time, from including
certain facilities in the requirements covered by the 50%. It is the intent of
the parties to include the volumes corresponding to such specific circumstances
into the requirements covered by the 50% as soon as practically possible. The
parties agree that, in the event that ANC's overall volume is reduced (for
whatever reason), the initial ten percentage points of lost volume will not
affect ALCAN's volume. Thereafter, should additional volume be lost, ANC will
reduce supplier share on whatever basis it feels is appropriate, provided that
ALCAN will not be cut more than 50% of any additional lost volume.
3.2 SCHEDULING: ANC will advise ALCAN no later than November 15 of the preceding
year of its estimated aluminum can-stock requirements for the following year, by
type, based on the 50% supply commitment. Should ANC require additional volumes
substantially above the 50% supply commitment, a request for such additional
volumes shall be transmitted to ALCAN prior to November 15 of the preceding year
(but as soon as possible), in order for ALCAN to attempt to accommodate it. The
parties agree that, as far as practically possible, they will dedicate specific
entire lines (ANC) to specific xxxxx (ALCAN), and specific xxxxx (ALCAN) to
specific entire lines (ANC). Each calendar month (M), ANC will provide ALCAN
with an estimate of its requirements by type of can-stock and by delivery
location for months M + 2 and M + 3.
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3.3 TOLLING:
a. To lessen the amount of metal which is required to be hedged, ANC agrees that
a minimum of [*] of ALCAN's annual North American aluminum can-sheet shipments
to ANC will be provided by toll conversion of Class I and Class III process
scrap supplied by ANC. The parties agree that some portion of Class II and Class
IV scrap may be utilized to fulfill such [*] requirement. If ALCAN is not in a
position to toll Class II and Class IV directly, it shall offer to toll it in
slab form. If process recovery at ANC's facility improves, the parties will meet
to decrease the [*] figure accordingly. Scrap will be returned to ALCAN and
tolled in proportion to its generation by ANC facilities (i.e., [*] Class I, [*]
Class II, [*] Class III and Class IV).
b. Due to the nature of the pricing conditions below, the only other tolling
options available to ANC are limited to UBC and ingot, as indicated in paragraph
3.4 or 3.5 below (ingot toll would apply on the non-banded portion of ANC's
business unless mutually agreed upon). ANC must advise ALCAN, no later than
November 15 of the preceding year, of the amount of UBC and/or ingot tolling (if
any) ANC elects to undertake during the subsequent year. Once a toll option is
selected by ANC, the volume of the toll and the toll price become firm and are
part of the annual supply agreement and not subject to change during the
corresponding year.
c. Toll conversion into aluminum can-stock shall be made on a pound-for-pound
basis with all in-bound freight paid by ANC.
3.4 PRICES:
a. Prices for non toll-converted can-stock hereunder shall consist of a metal
component plus a fabrication conversion component.
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b. The metal component price for that portion of the volume to be purchased
under the "band" concept described in Sub-paragraph (c) below will be derived
from the average of the daily Xxxxx'x Metals Week transaction prices (the
average official LME cash settlement price and the midwest premium) for a
six-month period. This average price shall be established twice each year during
the term of this Agreement as follows: (i) during the period January 1 to April
1 of the initial contract year (1996), the metal component price will be the
average of the transaction settlement prices for the period June 1 to November
30, 1995; (ii) during the period April 1 to September 30, the metal component
price will be the average of the daily Xxxxx'x Metals Week transaction prices
for the September 1 to February 28 of the preceding period immediately prior to
the April 1 date; and (iii) during the period October 1 to March 31, the metal
component price will be the average of the daily Xxxxx'x Metals Week transaction
prices for the March 1 to August 31 period immediately preceding the October 1
date. Once established, volume and price for the relevant six-month period shall
become firm for both parties, provided that ANC's actual releases and
corresponding receipts during the period may vary between 95% (minimum) and 100%
(maximum) of the committed "band" volume. The parties recognize that significant
volume shifts from one six-month period to another would be costly and
disruptive and, to avoid this, the parties agree that ALCAN will not be required
to provide ANC more than 55% of ANC's annual volume in either of the six-month
periods.
c. Notwithstanding Sub-paragraph (b) above, the metal component price (as
defined above) will be "banded" within the range of not less than 70ct./lb. and
not more than [*] during the initial five-year period of this contract, except
as outlined below. As the parties have discussed, this is strategic
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to both parties and constitutes a critical component of this LTSA. Specifically,
it is understood that ALCAN will forego metal increases beyond the top of the
"band" throughout the contract duration, and ANC will forego metal decreases
below the bottom of the "band" throughout the contract duration. It is
specifically understood that the terms and conditions of the "band" are binding
on both parties, regardless of the approach taken by other aluminum can-stock
suppliers or can makers regarding "band" pricing. Prior to August 31, 1995,
should Alcoa (and this applies only to Alcoa) establish a metal band which is
different from the 70-[*] metal component, which ALCAN and ANC have adopted,
then the parties will meet to discuss the Alcoa band vs. the ALCAN band. It is
understood that neither ALCAN nor ANC would be obligated to adopt the Alcoa
band. Further, ANC will discuss with and obtain from its customers an agreement
of support for the terms and conditions of this band concept. The form and
substance of the agreement of support must be acceptable to both ALCAN and ANC.
On or before August 31, 1995, ANC will advise ALCAN of the percentage of
business to be purchased under the "band" concept based on the commitments that
it has received up to that date from its beverage can customers for the
five-year period of this Agreement. ANC will only purchase under the "band"
concept the volumes of metal necessary to fulfill these customer commitments.
Any and all other volumes of metal not covered by the "band" will be purchased
by ANC to fulfill its 50% purchase commitment to ALCAN either (i) from ALCAN at
the prevailing first-tier market prices and terms and pricing methodologies
existing during the term of this Agreement, subject to the provisions hereof; or
(ii) from other metal sources (such as UBC, process scrap, ingot, etc.) and then
provided to ALCAN for tolling subject to the tolling terms and conditions of
this Agreement.
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For each successive year following the initial year, the upper and
lower levels of the "band" (i.e., initially [*] and 70ct./lb.) will be subject
to an inflation adjustment to cover substantial noncontrollable cost increases.
The parties agree that one-half (1/2) of the year-over-year changes in the
Producer Price Index for Intermediate Materials (PPI) will be added to both the
upper and lower limits of the "band" each year, beginning on January 1, 1997 and
continuing thereafter on January 1 of 1998, 1999 and 2000.
d. The price for the conversion component for body stock for the year 1996 will
be 32ct./lb. based on 0.0114" gauge; different gauged body stock will be priced
based on ALCAN's current published conversion price list at the date of the
execution hereof. The 32ct./lb. fabrication conversion charge will be adjusted
after 1996 based on one-half of the previous year's changes in the PPI (i.e.,
1997 adjustment will be based on one-half of the 1996 over 1995 PPI changes).
(In the event of significant increases in cost items which were not included in,
or a component of, the change in the PPI, the parties agree to make appropriate
adjustments for these items in the conversion component.) Notwithstanding the
foregoing, the conversion component shall in no event be higher than the price
charged for conversion of similar products from other first-tier aluminum
suppliers to ANC on a weighted average basis. First-tier suppliers shall mean,
for the purposes of this agreement, ALCOA, XXXXXXXX and XXXXXX ALUMINUM (DC cast
and rolled material) and shall only apply while they are pricing under a
multi-year band pricing concept containing metal plus fabrication pricing.
The price for the conversion component for end stock for the year 1996
will be our current 70ct./lb. based on 0.0110 gauge, clear soft drink beverage;
different gauged end stock or beer end
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stock will be priced based on ALCAN's current published conversion price list at
the date of the execution hereof. However, both parties agreed that fabrication
conversion charges for 1996 are anticipated to increase to 72ct. per pound based
on coating cost increases to be made effective January 1, 1996 or on January 1,
1996, should coating costs increase prior to that date. Should such coating
increases occur, the conversion component will reflect them on their effective
date. Adjustments to this price after 1996 will be handled in the same manner as
adjustments to body stock described above. Notwithstanding the foregoing, the
conversion component shall in no event be higher than the price charged for
conversion of similar products from other first-tier aluminum suppliers to ANC
on a weighted average basis. First-tier suppliers shall mean, for the purposes
of this agreement, ALCOA, XXXXXXXX and XXXXXX ALUMINUM (DC cast and rolled
material) and shall only apply while they are pricing under a long-term band
price of metal plus fabrication.
e. Tolling prices into can body-stock (gauge 0.0114") (and in the case of Class
II below can end stock toll at 0.0110" gauge clear soft drink) for the year 1996
are as follows:
Toll and Metal Component
Metal Component: [*] [*] [*]
Class I Scrap [*] [*] [*]
Class III Scrap [*] [*] [*]
UBC [*] [*] [*]
Class 11 Scrap [*] [*] [*]
CBS Sheet Ingot [*] [*] [*]
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Metal component shall be calculated based on the average of the daily
Xxxxx'x Metals Week transaction prices for the month of product shipment.
Tolling prices into can end stock (gauge 0.0110" clear soft drink
beverage) for the year 1996 are as follows:
P1020* [*]**
CES Sheet Ingot [*]**
* P1020, for the purpose of this Agreement, shall be defined as good western
production in T or sow form (1,500 pounds).
** Tolling prices into can end stock for 1996 are anticipated to increase to
72ct./lb. and 64ct./lb. respectively based on coating cost increases to be made
effective January 1, 1996.
Metal units for tolling are to be delivered to Midwest locations agreed
upon by ALCAN and ANC, freight prepaid by ANC. Exact tolling prices will be
based on the specification ordered with differentials based on ALCAN's published
fabrication conversion price list. In the event that ANC desires to toll end
stock with ALCAN from sheet ingot and ALCAN is short of sheet ingot in its
system and desires to toll the sheet ingot, then ANC and ALCAN will meet to
agree upon the appropriate market spread to be charged by ALCAN.
The toll conversion prices listed above will be adjusted after 1996
based on one-half of the previous year's changes in the PPI for intermediate
materials (i.e., 1997 adjustment will be based on one-half of the 1996 over 1995
PPI changes). In the event of significant increases in cost items which were not
included in, or a component of, the change in the PPI, the parties agree to make
appropriate adjustments for these items in the toll conversion component.
Notwithstanding the foregoing,
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the toll conversion price shall in no event be higher than the price charged for
toll conversion of similar products from other first-tier aluminum suppliers to
ANC on a weighted average basis. First-tier suppliers shall mean, for the
purposes of this agreement, ALCOA, XXXXXXXX and XXXXXX ALUMINUM (DC cast and
rolled material) and shall only apply while they are pricing under a long-term
band price of metal plus fabrication.
f. ALCAN agrees to provide ANC with conversion and tolling prices equal to or
less than any such prices provided by ALCAN to any other can stock customer for
delivery in North America. ALCAN will certify to ANC at the beginning of each
year, by letter from ALCAN Rolled Products' Chief Financial Officer, that this
provision has been met during the preceding year. This certification will be
applicable to the conversion/tolling component only and will exclude any
investment-oriented discounts. Should ALCAN's total can sheet sales to its North
American can stock customers be greater than 90% under "band" pricing, and
should ALCAN quote any incremental business opportunities at a price which is
lower than ANC is paying hereunder, then ALCAN agrees to offer such lower prices
to ANC. Incremental business opportunities shall mean any sales to North
American can sheet users for North American consumption other than "annual"
volume contracts.
g. PAYMENT TERMS: ANC's payment terms are net 30 days with payment as follows:
Invoices shall be grouped from the 10th of the month to the 9th of the following
month and paid by wire transfer on the first working day of the month next
following.
3.5 UBC ACQUISITION: ANC will provide ALCAN with UBCs equal to [*] of its can
body sheet (CBS) purchases from ALCAN each year (i.e., CBS sales of 400 MM lbs.
= [*] of UBC). The parties agree that the price will be the market price;
however, the price on UBCs equal to [*] of the
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CBS will be capped at [*] delivered during the term of the contract (i.e., CBS
sales of 400 MM lbs. @ [*] of UBCs price capped). The remaining UBCs shall be
purchased at market price; however, ALCAN shall have the right, at its sole
option, to refuse to buy UBCs above the cap price. It is agreed that ANC shall
not be obligated, in any month, to provide ALCAN with UBCs, at a capped price of
[*] delivered, any more than 1/12th of ANC's annual obligation stated above.
Should ANC wish to toll UBC volume, subject to the conditions listed in
paragraph 3.3b., the toll pounds would first displace the ANC capped UBCs.
UBC volumes, if a toll option has been selected, must be reasonably
level on a monthly basis throughout the period. If the UBC toll option is
selected, both the toll volume and toll price shall become firm for the
following year.
Each year, the parties will review the situation of the spread between
UBC and ingot. If the evolution of the spread during a calendar year has changed
substantially enough to create an economic problem to one of the parties, the
parties will meet to find a way to reduce the magnitude of the problem,
including but not limited to reducing the quantity of UBCs to be processed by
ALCAN under this Article 3.5. If this is not practical, the parties will meet to
decide how to reasonably share in the temporary burden created by the spread
situation. If sharing is required, it is the intent of the parties that they
share on a 50-50 basis.
BENCHMARK
METAL [*] [*] [*] [*]
SPREAD REQUIRED* [*] [*] [*] [*]
* Delivered price would include freight and administration fee.
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4. SUCCESSION CLAUSE All of the covenants, obligations, terms, provisions and
conditions of this Agreement shall apply to, bind, and inure to the benefit of
any successor, assign, or ultimate transferee through the transfer (by sale,
merger, consolidation, conveyance or otherwise) of all or substantially all of
the assets of ANC for which aluminum can stock is used in production ("the
Assets") or the transfer of securities of ANC, and ANC shall transfer this
Agreement and all of the covenants, obligations, terms, provisions and
conditions of this Agreement as a part of any agreement providing for any
transfer of all or substantially all of the Assets or securities of ANC. In
connection therewith, ANC shall obtain the written assumption by the ultimate
transferee of all of the obligations of ANC under this Agreement, provided that
ANC shall not be relieved from those obligations should such transferee not
perform.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio, USA without giving effect to the
principles of conflict of laws thereof.
5. CONFIDENTIALITY Except to the extent that disclosures to other persons of
confidential information relating to this Agreement may be required by law or
such confidential information becomes public, ANC and ALCAN agree to keep
strictly secret and confidential and not to disclose to any person, any or all
pricing and cost information or other confidential or proprietary information
provided pursuant to this Agreement.
6. NOTICES All legal notices and other legal communications provided for
hereunder shall be in writing and given by registered or certified mail, or
responsible overnight courier, addressed as provided below, with acknowledgment
of receipt requested, or by telex, telegram, cable or facsimile, sent or
delivered to the addressee below, or, as to each party, at such addresses as
shall be designated
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by such party hereafter in a written notice to the other. All such legal notices
and legal communications shall be effective when hand delivered or, in the case
of notice by facsimile, on the day of receipt if received prior to 5:00 p.m. EST
on a working day or on the next working day if received after 5:00 p.m. EST on a
working day, provided that the sender's copy includes the appropriate
acknowledgment of receipt by the receiver's facsimile machine.
If to ALCAN: IF to ANC:
Alcan Rolled Products Company American National Can Company
000 Xxxxxxxx Xxxxx 0000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000 Xxxxxxx, Xxxxxxxx 00000
Attn: Vice President and Attn: Corporate Secretary
General Manager - Sheet Products
7. AUDITS ANC shall be entitled to make physical inventory audits of its metal
units in ALCAN's possession for toll conversion at any time, upon reasonable
notice, during ALCAN's normal business hours. ALCAN manages its scrap/metal
units on a fully integrated, system-wide (multi-plant) basis. As a result, this
inventory is in no way segregated, once it enters the system. Therefore, the
metal units delivered by ANC must be viewed as fungible, from an
access-at-a-later-date perspective. Due to the multi-location ALCAN system and
fungible inventory, ALCAN could provide access to ANC at a location other than
where the physical metal was originally delivered.
In addition, ANC may perform reasonable quality audits of ALCAN's
systems, procedures, and processes to assure than can stock produced hereunder
meets the specifications and other requirements contained in this Agreement.
The foregoing Memorandum of Agreement has been accepted and agreed to
by the parties as of this 5th day of July, 1995.
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ALCAN ALUMINUM LIMITED AMERICAN NATION CAN COMPANY
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxx-Xxxxxx Xxxxxx
---------------------------- ---------------------------------
Xxxxxxx Xxxxxx Xxxx-Xxxxxx Xxxxxx
President and CEO Chairman and CEO
Alcan Aluminum Limited American National Can Company
ALCAN ROLLED PRODUCTS COMPANY
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxx Xxxxxx
---------------------------- ---------------------------------
Xxxxxx X. Xxxx Xxxxxx Xxxxxx
Executive VP, Alcan Aluminum Ltd. COO, Beverage Sector
President, Alcan Aluminum American National Can Company
Corporation
President, Alcan Rolled Products
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
---------------------------- ---------------------------------
Xxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx
Vice President and General Manager Senior Vice President
Alcan Rolled Products Beverage Cans Americas
American National Can Company
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(AMERICAN NATIONAL CAN LETTERHEAD)
XXXX X. XXXXXXX
Vice President, Purchasing
Beverage Cans Americas
January 29, 1996
Xx. Xxxxx Xxxxxxxx
ALCAN ROLLED PRODUCTS COMPANY
0000 Xxxxxxxx Xxxx.
Xxxxxxxx Xxxxxxx, XX 00000-0000
Dear Xxxxx:
Subject: 1998 - 2000 BAND VOLUME OFFER
Now that we have finalized our sales commitments under the band concept, we need
to insure that the offered can sheet volume flexibility for the years 1998
through 2000 remains in place.
Please confirm by signing below that Alcan has an ongoing offer to supply to
ANC, additional can sheet under the band program based on the following
commitment timeframes: If up to
1) 200 - 250mm pounds required per year, ANC must declare by April 1, 1997,
and
2) 150 - 200mm pounds declare by July 1, 1997, and
3) 100 - 150mm pounds declare by October 1, 1997.
This additional volume is understood by both parties to be above and beyond the
percentage of band volume currently contracted for the 5 year period beginning
January 1, 1996 and the band requirements and provisions would be the same.
Very truly yours,
Xxxx X. Xxxxxxx
cc: Xx. X. Xxxxxxxxx - Alcan Rolled Products Company
Xx. X. Xxxx - American National Can
Xxxxx X. Xxxxxxxx
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ADDENDUM TO ALUMINUM PURCHASE/SUPPLY AGREEMENT
DATED JULY 5,1995
WHEREAS, Coca-Cola Enterprises ("CCE") and The Coca-Cola
Company ("TCCC") have requested that the current five year can supply agreement
(the "can supply agreement") between ANC and CCE be modified for the years 1998
through 2000 to provide for the awarding by CCE/TCCC to ANC of can volumes
(incremental volumes) in excess of the 7 billion cans (the base volume) which
CCE is required to purchase annually under the can supply agreement. CCE/TCCC
has requested that the can sheet required for any such incremental volume be
awarded in its entirety to Alcan Rolled Products ("Alcan") under the same terms
and conditions as the base volume. Since the purchase of the can sheet for this
incremental volume is being directed by and credited to CCE/TCCC, the purchase
of this volume will be, in essence, a soft toll, which is to say that it will be
purchased by ANC, but negotiated by and credited to CCE/TCCC; and
WHEREAS, ANC is willing to modify its can supply agreement
with CCE effective January 1, 1998 for the remaining term of such supply
agreement (i.e., through December 31, 2000) based on ANC's knowledge and belief
that the arrangements relating to the purchase of such incremental can sheet and
the modifications to ANC's agreement with CCE have been reviewed with and
approved by Alcan. However, ANC believes that the purchase by ANC from Alcan of
100% of such incremental volume in the years 1998 through 2000 would result in
ANC's breach of its agreements with its other can sheet suppliers; and
WHEREAS, ANC does not intend to break its other can sheet
supply agreements for the 1998 through 2000 period, but nonetheless wishes to
satisfy the CCE/TCCC requests delineated above; and
WHEREAS, Alcan is willing to accommodate ANC's concerns by
entering into the agreements set forth below.
NOW, THEREFORE, in consideration of the mutual promises set
forth hereinbelow and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Alcan and ANC agree to the
following addendum to the Aluminum Purchase/Supply Agreement dated July 5, 1995:
1. ANC agrees to award to Alcan 50% of any incremental volume in
excess of 7 billion cans which may be awarded to ANC by CCE/TCCC in the years
1998 through 2000. The remaining 50% of such incremental can sheet volume will
be accrued and awarded to Alcan in the first quarter of the calendar year 2001
prior to any other volume commitments made by ANC in that year. It is understood
that such accrued volume will be incremental to whatever volume commitment is
negotiated between ANC and Alcan for the year 2001. Tolling and pricing terms
and conditions for such accrued volume will be those in effect at the time of
shipment with the metal component to be equal to that charged for aluminum ingot
in the fourth quarter of the year 2000. If the parties
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mutually agree to spread the volume accrued over the first half of the year
2001, metal pricing during the second quarter of 2001 would be based on the
average of the daily Xxxxx'x Metals Week U.S. transaction prices for the period
September 1, 2000 through February 28, 2001. Any investment related discount to
ANC for the accrued volume would only be rebated to ANC if there is an agreement
in place between ANC and Alcan regarding such a discount during the year 2001.
2. Providing that ANC does receive incremental volume during the period
January 1, 1998 through December 31, 2000, Alcan agrees to (a) provide to ANC
50% of such incremental volume in each year that such incremental volume is
awarded by CCE/TCCC; (b) accrue the remaining 50% until the year 2001 as
provided above; and (c) credit CCE/TCCC annually for 100% of the incremental
(i.e., soft toll) volume awarded to ANC. ANC will advise Alcan by November 15 of
each year beginning in 1997 of the forecasted incremental can volume awarded to
ANC by CCE/TCCC for the following year and the corresponding can sheet tonnages
involved. ANC will then advise Alcan by January 15 of each year beginning in
1999 of the actual incremental can volume shipped to CCE/TCCC in excess of 7
billion cans during the previous year and the corresponding can sheet volume.
3. Alcan and ANC hereby confirm to one another that the conditions
spelled out in this Agreement are to be kept confidential and not shared with
anyone outside either the Alcan or ANC organizations unless specifically
approved in advance by both parties hereto.
4. Except as expressly stated above, and except as previously amended,
all other terms and conditions in the Aluminum Purchase/Supply Agreement dated
July 5, 1995 remain unchanged and in full force and effect.
EXECUTED and ACKNOWLEDGED this 9th day of July, 1997.
AMERICAN NATIONAL CAN COMPANY ALCAN ROLLED PRODUCTS
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ R.E. Xxxxxxxxx
-------------------------------- ----------------------------
Title: Senior Executive Vice Title: Vice President -
----------------------------- --------------------------
President and Chief Worldwide Can
Operating Officer Sales
Beverage Worldwide
20
(AMERICAN NATIONAL CAN LETTERHEAD)
May 6,1997
Mr. R. Xxxxxx Xxxxxxxxx
Vice-President, Sales
Alcan Rolled Products Company
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
Dear Ed:
With the transfer of the UBC acquisition activity from American National Can
Company ("ANC") to Pechiney World Trade ("PWT") now complete, we want to
reconfirm the required changes to the can sheet supply contract dated July 5,
1995 related to this transfer, now that PWT will act as ANC's agent in securing
and supplying the UBC metal units. The contract should be amended as follows:
3.3 Tolling: The original contract provided that ANC would supply annually a
minimum of [*] of the total Aluminum can-stock purchased (body, end and tab) as
class scrap metal units (combination of CL1, CL2 and CL3) and another [*] of the
total Aluminum can-stock as UBC metal units. We have mutually agreed to revise
this as follows:
The total metal unit minimum requirement of 40% annually of the total
Aluminum can-stock purchased will be a combination of:
o UBC's of [*] regardless of total Aluminum can-stock purchases.
o Class Scrap of [*]. Percentage is fixed regardless of UBC's
returned.
o ANC may supply a greater percentage of combined metal units by
increasing the amount of Class Scrap to be tolled by mutual
agreement with Alcan.
3.5 UBC Acquisition: The original agreement under which ANC would supply band
priced UBC for [*] of the total Aluminum can-stock purchased needs to be amended
as follows:
ANC will, through PWT, supply ALCAN with UBC's under band pricing
equal to [*] per year [*] per month).
ALCAN will retain the option to purchase from PWT additional
non-banded UBC's up to [*] of ANC's annual total Aluminum can-stock
purchases.
Pricing of UBC: The intent of our original agreement regarding pricing of the
banded UBC's had four components:
21
- 2 -
> formula pricing with a ceiling provided for in Section 3.5,
> floor price per the 9/18/95 amendment,
> a sharing review in each year if the pricing created an economic
problem for one party per Section 3.5,
> formula sharing beyond the one xxxxx in actual gains or losses
per X. Xxxxxxx'x 1/11/96 fax and the minutes of our 1/24/96 joint
meeting.
Although PWT has expressed concern regarding the formula used, the
ceiling and floor concept will be retained as well as the annual
review of each others economic problems. However, since PWT will be
hedging this activity both in their premium book and in their LME
book, the computation of gains or losses will ultimately require some
modifications. Alcan and PWT, as ANC's UBC agent, will discuss and
attempt to agree upon a modification to this computation and will
provide a further written amendment to the can sheet supply agreement
once this modification has been agreed upon.
[*]
If you are in agreement with the above delineated changes to our can sheet
supply contract, please so indicate by signing the copy of this letter in the
space provided below, and return to ANC Purchasing.
Yours truly,
/s/ Xxxx X. Xxxxxxx
-------------------
Xxxx X. Xxxxxxx
Enclosure
cc: X. Xxxx -08Z
X. Xxxxx -08Z
X. Xxxxxxx-Alcan/Xxxxxxxxx
X-X. Lacor-PWT
ACCEPTED AND AGREED TO:
ALCAN ROLLED PRODUCTS COMPANY AMERICAN NATIONAL CAN COMPANY
BY: /s/ XXXXX XXXXXXXX BY: /s/ XXXXXX X. XXXXXXX
---------------------------- ----------------------
XXXXX XXXXXXXX XXXXXX X. XXXXXXX
22
(AMERICAN NATIONAL CAN LETTERHEAD)
July 25, 1995
Xx. Xxxxx X. Xxxxxxxx
ALCAN ROLLED PRODUCTS COMPANY
000 Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000
Subject: AMERICAN NATIONAL CAN GLOBAL SOURCING STRATEGY
Dear Xxxxx:
This is to confirm that it is the intent of American National Can Company (ANC)
to source approximately 40% of its worldwide can sheet requirements from Alcan
Rolled Products Company (Alcan).
With the signing of the North American Supply Agreement, ANC and Alcan have
shown their willingness to enter into a mutually beneficial multi-year
commitment. It is the intent of ANC to enter into a similar kind of an agreement
with your Alcan Deutschland group covering our European can sheet requirements.
The realization of such an agreement for our European operations will be
predicated on the mutual acceptability of the terms and conditions required in
that market.
ANC also intends to offer Alcan an opportunity to supply up to 40% of its can
sheet requirements in South and Central America, as that market develops, under
conditions and terms which are competitive in those specific markets.
Sincerely,
/s/ Xxxxxx Xxxxxx
-----------------------------
Xxxxxx Xxxxxx
C.O.O. Beverage Sector
American National Can Company
cc: Xx. X. Xxxx - Alcan
Xx. X. Xxxxxx - American National Can
Xx. X. Xxxxxxx - American National Can
Xx. X. Xxxxxxx - American National Can
23
(ALCAN ROLLED PRODUCTS COMPANY'S LETTERHEAD)
December 12, 1995
Xx. Xxxxxxx X. Xxxxxx
Senior Vice President
Beverage Cans, North America
American National Can
0000 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Dear Xxxx:
This is to confirm that, for purposes of the multi-year can sheet supply
contract with Alcan, American National Can has elected to take advantage of the
"band" concept, as outlined in Paragraph C of the pricing provisions of that
contract, with respect to a volume equivalent to 50% of their annual usage of
can sheet. American National Can understands that, based on its decision to take
advantage of the "band" concept for this volume, Alcan will be taking steps to
secure metal positions or otherwise will be acting in reliance on that decision.
While American National Can's contracting decisions with its customers are
matters that have been negotiated solely between American National Can and its
customers, American National Can nonetheless confirms that it is contractually
committed to one or more of its customers in ways that provide American National
Can the comfort to make the foregoing commitment to Alcan. In that regard,
American National Can is ordering under the band concept only the metal that is
supported by such customer contracts.
I would appreciate your confirming this commitment by countersigning the
enclosed extra copy of this letter and returning it to me. By doing so, American
National Can reaffirms its commitment to the multi-year can sheet supply
contract, including the pricing provisions of that contract.
Sincerely,
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxxxx
----------------------------------- ------------------------------
Xxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxx
Vice President and General Manager Senior Vice President
Sheet Products Beverage Cans, North America
American National Can
24
(ALCAN ROLLED PRODUCTS COMPANY LETTERHEAD)
CONFIDENTIAL
August 7, 1995
Xx. Xxxx X. Xxxxxxx
American National Can
0000 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
RE: Aluminum RCS Support
Dear Xxxx:
This letter is to confirm our agreement that Alcan Rolled Products will support
American National Can's plans to grow the use of aluminum cans in North, Central
and South America by expanding the current market and developing new markets.
Specifically, Alcan agrees to provide financial support to ANC, to partially
offset the ANC costs associated with growing and developing the aluminum can,
during the five-year agreement between the parties, while Alcan holds a 50% can
sheet supply position with ANC in the North American region.
In order to continue to grow and develop the aluminum can business, Alcan will
provide financial support [*] per pound on all can sheet pounds sold to ANC in
North America. This support shall be payable to ANC at the end of the first year
of the agreement and at the end of each year of the initial contract duration
thereafter, provided that:
o ANC has invested in the growth and development of the aluminum
can during the year in question such that the volume of ANC's
business to Alcan (50%) will be increased as a direct result of
the investment during that year from what it otherwise would have
been had the investment by ANC not been made during that year
(i.e., tooling for new can sizes, expansion of a can plant to
meet demand, new can designs for marketing purposes, etc.).
o ANC continues to give Alcan a minimum of 50% of their can sheet
(body and end) business in North, Central and South America,
unless Alcan elects not to participate in any particular piece of
business, which would then reduce accordingly the 50% share in
that region.
o The fabrication component being charged by Alcan to ANC is at
market or at 32ct./lb. on body sheet and 72ct./lb. on coated
beverage end sheet throughout the year in
25
question, adjusted by cost increases or by PPI, as described in
Section 3.4d of the agreement.
o The metal price component being charged to ANC is 70ct./lb. or
greater throughout the year.
o It is understood that this support would not apply to
expenditures by ANC which involve cost reduction,
rationalization, etc., but would apply to expenditures to grow
and develop the can market in North, Central and South America.
These conditions having been met, Alcan will support ANC's growth plans with
financial support [*] per pound on all can sheet sales in North America sold to
ANC by Alcan.
An example would be that on a 50% market share of [*] million pounds sold by
Alcan to ANC in North America ([*] billion ANC total volume x 50% to Alcan),
Alcan would pay, subject to the above conditions, [*] with proper documentation
to verify the Alcan market share as well as the amount and nature of the
investment support. It is understood between the parties that if any one of the
above conditions is not satisfied throughout the calendar year in question,
Alcan will not be required to pay the support during that year of the contract.
This agreement is to be held in strict confidence between the parties.
Sincerely,
/s/ R. Xxxxxx Xxxxxxxxx
R. Xxxxxx Xxxxxxxxx
Vice President - Sales
RED/kjd
