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Aluminum Beverage Cans supply agreement

Supply Agreement

Aluminum Beverage Cans supply agreement | Document Parties: DR PEPPER SNAPPLE GROUP, INC. | American Bottling Company | CROWN Cork & Seal USA, Inc You are currently viewing:
This Supply Agreement involves

DR PEPPER SNAPPLE GROUP, INC. | American Bottling Company | CROWN Cork & Seal USA, Inc

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Title: Aluminum Beverage Cans supply agreement
Date: 5/13/2009

Aluminum Beverage Cans supply agreement, Parties: dr pepper snapple group  inc. , american bottling company , crown cork & seal usa  inc
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Exhibit 10.3

April 8, 2009

AGREEMENT : The American Bottling Company

CROWN Cork & Seal USA, Inc. (“Crown”) is pleased to offer the following agreement for the supply of aluminum [...***...] beverage cans and ends (“Containers”), consistent with standard soft drink specifications and standard specifications for ABC Containers attached as Exhibit A, and printed with up to six color decoration. End units supplied shall be 202 diameter standard “LOE” or Crown’s 202 diameter “Super-Ends®”.

TERM OF AGREEMENT : The term of the Agreement shall be for a period of [...***...] years beginning [...***...] and extending through [...***...]

LOCATIONS & VOLUMES : Crown shall supply and The American Bottling Company (“ABC”) agrees to purchase from Crown, [...***...] of ABC’s Container requirements (except as discussed below) for the sizes specifically indicated with “Xs” below and at the indicated filling locations:

[...***...]

It is understood and agreed that at the Buena Park, CA Louisville, KY, Jacksonville, FL and Sacramento, CA locations, Crown’s can and/or end supply shall be less than [...***...], to the extent that ABC fills Containers for [...***...] and [...***...] designates an alternative can maker to supply its Container (can and end ) requirements. [...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

1


 

[...***...]

* Pending completion and operation of the Victorville, CA location, the parties will discuss the supply of Containers at that facility.

[...***...]

PRICING :

Effective January 1, 2009, pricing will be based upon the 2008 Base Price for can bodies and ends as set forth below. [...***...]. The 2009 Base Price includes aluminum ingot, conversion, and delivery charges, and will be used as the benchmark for ingot to sheet conversion price changes, and non-metal sheet to can adjustments for the Term of this Agreement as set forth below.

2008 BASE PRICE

 

 

 

 

 

 

 

 

 

 

 

 

 

$/MEA (‘000)

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

Can Body

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

202 SuperEnd

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

202 LOE

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

2009 BASE PRICE

 

 

 

 

 

 

 

 

 

 

 

 

 

$/MEA (‘000)

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

Can Body

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

202 SuperEnd

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

202 LOE

 

 

[...***...]

 

 

 

[...***...]

 

 

 

[...***...]

 

Base Price assumptions:

1.

 

Base Prices include standard inks with up to 6-color graphics.

 

2.

 

Aluminum London Metals Exchange plus Mid-West Premium for ingot price of [...***...] per pound.

 

3.

 

Base Price includes charge for delivery on [...***...]. Delivery on [...***...] may or may not be included (depending on the location) and is outlined under the “Freight” section of this Agreement.

*** CONFIDENTIAL TREATMENT REQUESTED

2


 

Additional Pricing Considerations:

1.

 

Color Tabs — Additional charge for color tabs (standard colors), add $ [...***...]/MEA ends. The minimum order quantity for color tabs is [...***...] million units.

 

2.

 

Cans requiring white basecoat: ADD [...***...]/MEA

CONVERSION FACTORS (LBS PER MEA):

Throughout the term of this Agreement, Container prices shall be adjusted based on Net and Gross metal conversion factors outlined in the chart below.

 

 

 

 

 

 

 

 

 

 

 

Gross Weight

 

 

Net Weight

 

 

 

(pounds per

 

 

(pounds per

 

 

 

MEA)

 

 

MEA)

 

[...***...]

 

 

[...***...]

 

 

 

[...***...]

 

[...***...]

 

 

[...***...]

 

 

 

[...***...]

 

[...***...]

 

 

[...***...]

 

 

 

[...***...]

 

202 SuperEnd® ends

 

 

[...***...]

 

 

 

[...***...]

 

Shell

 

 

[...***...]

 

 

 

[...***...]

 

Tab

 

 

[...***...]

 

 

 

[...***...]

 

202 LOE ends

 

 

[...***...]

 

 

 

[...***...]

 

Shell

 

 

[...***...]

 

 

 

[...***...]

 

Tab

 

 

[...***...]

 

 

 

[...***...]

 

PRICE ADJUSTMENT :

During the Term of this Agreement, the Base Prices for [...***...] and ends shall be adjusted to reflect [...***...]

 

[...***...]

 

 

The [...***...] component of the price adjustment factor is based on [...***...]

 

 

 

[...***...]

 

 

 

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

3


 

[...***...]

 

Aluminum Ingot to Sheet Conversion Costs

 

 

The Base Prices as of January 1, 2009 are the benchmark for price adjustments beginning in 2010. The Base Prices for each calendar year will be the basis for price adjustments in the next calendar year.

 

 

 

[...***...]

 

 

 

[...***...]

 

 

[...***...]

 

 

The Base Prices as of January 1, 2009 are the benchmark for price adjustments beginning in 2010. The Base Prices for each calendar year will be the basis for price adjustments in the next calendar year.

 

 

 

On [...***...] each contract year, [...***...]. The first such adjustment shall be [...***...] and will reflect the [...***...] and subsequent adjustments shall be made each [...***...] thereafter [...***...]. An example is provided in Appendix I [...***...]

 

 

Freight Adjustments on [...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

4


 

[...***...]

 

 

[...***...] are sold on an ex works basis and freight is prepaid and added to the invoice. The pick-up allowances for 2009 are included in Appendix II. The base freight costs are detailed in the “Freight” section of the Agreement.

 

 

 

[...***...]

 

Other Adjustments

 

 

 

Except for the price adjustments noted above, there will be no “Other Adjustments” for metal or non-metal inflation during the Term of this Agreement.

[...***...]

MONTHLY RECONCILIATION: [...***...]. Crown also shall provide any final hedge reconciliations by the end of the third (3rd) business day of the next month.

*** CONFIDENTIAL TREATMENT REQUESTED

5


 

PAYMENT TERMS : Payment for Containers supplied under this Agreement shall be due net [...***...] days from the date of invoice. No cash discounts will be allowed.

[...***...]

FREIGHT : Cans and ends are packaged and loaded in order to maximize trailer utilization (i.e. pin-wheeled loads) and minimize freight costs. The prices herein include freight delivery costs for [...***...]

[...***...]

ABC may use its own fleet of trucks to pick up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Appendix II includes the appropriate freight allowances by location. Crown intends to supply can bodies to the various ABC filling locations from the following can manufacturing facilities:

 

 

 

 

 

Crown’s Current Can Supply

[...***...]

 

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

6


 

[...***...]. Crown reserves the right to recalculate the freight component of the Container price if ABC relocates the delivery sites for substantial quantities of Containers or establishes new delivery locations.

WAREHOUSING: Crown intends to ship all Containers directly to each ABC filling location where applicable. At Crown’s discretion, it may choose to establish and ship can bodies through warehouses in close proximity to ABC filling locations where shipping miles may be too far for reliable direct service. If such warehouses are established, ABC would be offered freight pick-up allowances if can bodies are picked-up by ABC trucks.

During the Term of this Agreement, Crown agrees to provide, at [...***...] ABC, warehouse storage space of [...***...] square feet in the Los Angeles, CA area at a location that is mutually acceptable to both parties. Such warehouse space is to be appropriate for the storage of filled beverage cans and bottles.

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

7


 

[...***...]

PACKAGING EQUIPMENT : In the prior agreement for the purchase and supply of [...***...] Containers between Crown and ABC’s predecessor, in consideration for ABC purchasing [...***...] Containers from Crown, Crown agreed to obtain certain [...***...] can packaging equipment at a cost (inclusive of installation costs) not to exceed [...***...] (the “Equipment”) to be installed at [...***...]. The Equipment remains the property of Crown until [...***...] at which time ownership of the Equipment shall be transferred to ABC; provided, however, that ABC shall not obtain ownership of the Equipment if this Agreement terminates prior to [...***...] because of a breach by ABC. ABC agrees that only [...***...] Containers manufactured by Crown may be packaged using the Equipment during Crown’s ownership of the Equipment. ABC shall keep the Equipment in good order and repair at its sole cost in accordance with industry standards, normal wear and tear excepted. [...***...]. ABC shall obtain and maintain for the term of Crown’s ownership of the Equipment, property insurance for the full replacement value of the Equipment from a carrier reasonably acceptable to Crown. Such policy shall name Crown as loss payee until ownership transfers to ABC. The commercial general liability and property insurance policies shall contain a clause that Crown will be notified of any cancellation or material adverse change thereto at least 30 days prior to the effective date of the cancellation or material change to the policies. ABC shall provide Crown with a certificate of insurance upon Crown’s reasonable request. Crown shall not be responsible for any damage to ABC caused by reason of the use or by reason of any defects in the Equipment, unless caused by Crown. WITHOUT LIMITING THE FOREGOING, CROWN MAKES NO WARRANTY, WITHER EXPRESS OR IMPLIED IN FACT OR BY LAW WITH RESPECT TO THE EQUIPMENT, [...***...]. Crown does agree however, to transfer any manufacturer’s warranties to ABC and ABC shall look solely to the manufacturer of the Equipment for any manufacturing defects in the Equipment.

FORECASTING AND INVENTORY TURNOVER

*** CONFIDENTIAL TREATMENT REQUESTED

8


 

1.

 

Forecasts of Requirements — ABC shall supply Crown with a rolling 12 month forecast of Container requirements. Such forecast shall be for planning purposes only and shall not be binding on ABC. [...***...]. The parties agree to work together to mitigate forecast issue and to continually improve forecasting accuracy. [...***...]

 

2.

 

Assured Supply — If any of the Crown plants encounter difficulties meeting the needs for the Containers required by this Agreement, Crown will make commercially reasonable efforts to source such Containers from other facilities of Crown. The obligations of Crown in the preceding sentence shall not apply in the case of difficulties relating to Force Majeure. Crown will make commercially reasonable efforts to resume production at the supply facility affected by the Force Majeure event under the terms and conditions of this Agreement in a timely manner.

 

3.

 

[...***...]

GRAPHICS AND ARTWORK :

1.

 

Standard Can Graphics — Normal and customary engraving costs and standard [...***...] press plate costs will be absorbed by Crown; provided that the engravings and press plates are actually used to produce for shipment a minimum of [...***...] during the first [...***...] day period following completion of the engravings. If the [...***...] minimum can quantity is not shipped in that period, the total engraving and press plate costs of [...***...] will be invoiced to ABC.

 

2.

 

High Quality Graphics — More complex can designs require additional separation work, higher resolution printing plates [...***...], and incremental set-up time on the press and entail greater spoilage. Crown reviews each design submitted and will advise which designs, if any would benefit from its High Quality Graphics process, which would then be subject to an additional up-charge negotiated at the time of order.

 

3.

 

Proof Cans — Crown will send samples for each color on the can, which must be approved by ABC. In addition, sample cans will need to be supplied to the appropriate Crown plant(s) for use as color targets. If Crown will need to run the color target cans, either on the proofing press or on-line, there will be a cost of [...***...] per design.

CONFIDENTIALITY : ABC and Crown agree to maintain strict confidentiality regarding the contents of this Agreement including all pricing and other terms set forth herein.

PREVIOUS AGREEMENTS : This Agreement shall supersede and replace any previous agreement between the parties [...***...] and the Supply Agreement dated June 15, 2004 as amended in its entirety (including the paragraph 8 reference to employees or consultants).

*** CONFIDENTIAL TREATMENT REQUESTED

9


 

TERMS AND CONDITIONS : The attached Terms of Business executed by the parties of even date herewith shall be incorporated herein by reference and govern the supply of Containers from Crown to ABC. To the extent there is a conflict between the Terms of Business and the terms specified in this Agreement, the terms of this Agreement shall supersede and take precedence.

If you are in agreement with the terms and conditions set forth above, please sign in the space provided below and return one original copy to Crown.

 

 

 

 

 

CROWN Cork & Seal USA, Inc.
 

 

 

By:  

/s/ Thomas T. Fischer  

 

 

 

(Authorized Representative) 

 

 

 

 

 

 

 

THE AMERICAN BOTTLING COMPANY
 

 

 

By:  

/s/ Derry Hobson  

 

 

 

(Authorized Representative) 

 

 

 

 

 

 

10


 

 

 

 

 

 

Appendix I: Aluminum Ingot to Sheet Conversion and Sheet to Can Conversion Price Adjustment Examples

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

11


 

2010 Producer Price Inflation Example

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED ON 5 PAGES

12


 

Appendix II: ABC Freight Allowances for Customer Pick-Up (CPU)

[...***...]

*** CONFIDENTIAL TREATMENT REQUESTED

 


 

TERMS OF BUSINESS
(GOODS)

INTRODUCTION .

These Terms of Business are signed in consideration of the mutual agreements herein and other consideration, the receipt and adequacy of which is hereby acknowledged, and with the understanding that the undersigned companies are bound by their terms.

As used in these Terms of Business, “we”, “our”, “us” (and like terms) refers to Purchaser. “You”, “yours” means you, the Supplier.

PURCHASER . American Bottling Company

SUPPLIER . Crown Cork & Seal USA, Inc.

GOODS . “Goods” has the same meaning in these Terms of Business as “Containers” in the letter agreement.

QUANTITIES. Unless expressly specified in the letter agreement, Purchaser will have no obligation to order, purchase or use any quantity of Goods, except for those quantities ordered in its written purchase order or expressly committed to in a hedging order or, in the case of a blanket purchase order, releases issued thereunder and not the entirety of the blanket purchase order.

SUBCONTRACTORS . You may not subcontract the manufacturing of Goods unless otherwise specified in the Agreement or with our prior written approval. We specifically acknowledge that your wholly-owned subsidiaries may manufacture Goods or components thereof as part of your performance of this Agreement. Notwithstanding the foregoing and regardless of whether subcontracting was specified or otherwise approved, including if we pay directly for such Goods, you remain fully responsible for the payment and performance of all of your subcontractors, suppliers and vendors.

PRICES FOR GOODS . The price(s) for Goods (the “ Prices ”) and any applicable pricing adjustments are set forth in the letter agreement (the “ Price ”).

TAXES . We will pay those sales, use, excise or other similar taxes (excluding taxes based on your net income or business enterprise) assessed on the Prices paid hereunder. Unless we provide you a valid exemption certificate, we will pay you those taxes you actually paid or are required to collect or pay. Such taxes must be invoiced along with the Prices, and we will pay them, in accordance with the Payment Terms Section above.

SPECIFICATIONS FOR GOODS . All delivered Goods (and their packaging) must comply with any and all applicable Specifications or as we may have mutually agreed with you in the Agreement or otherwise in writing. If no such Specifications exist for their containers, the containers must be recognized standard containers suitable for their transportation, handling and storage and sufficient to prevent any leakage, spillage or damage. In addition, you may not modify the Goods in any way without notice to, and prior written approval from, us prior to shipment so that we may evaluate and consent to any modification of the Goods. If we receive any modified Goods without our consent, we may return them at your expense, and you will reimburse us for all losses, damages and expenses we incur as a result of the modification.

BACKUP DOCUMENTATION . You will maintain, and upon our request, promptly provide complete and accurate backup documentation sufficient to substantiate all transactions with us and charges claimed on each invoice. [...***...]. You will otherwise cooperate with all reasonable requests in connection with such review. You shall promptly refund to us any overcharge resulting from such review. This Section shall survive for 12 months after the later of the last transaction between us or the expiration or termination of any applicable agreement between us.

FORECASTS . We may, from time to time, provide you with good faith forecasts/estimates and/or blanket purchase orders for our anticipated needs for Goods. These may be for annual and/or monthly rolling

*** CONFIDENTIAL TREATMENT REQUESTED

 


 

periods. These are separate and apart from any hedging requests we may issue pursuant to the letter agreement and will create no obligation or liability for Purchaser. They are provided solely so that you can plan your production, inventory and capacity in order to supply Purchaser in the normal course of your business and in accordance with the terms herein.

ORDERING . We will notify you of any and all required quantities, delivery dates (“ Delivery Dates ”), delivery locations, shipping instructions and other terms for Goods via our written purchase order. This purchase order, once accepted, will be binding upon you. Any pre-printed terms and conditions contained in forms used by either you or us to implement this Agreement, including any purchase order, acknowledgment, invoice or other correspondence will be disregarded.

DELIVERY OF CONFORMING GOODS . You agree to deliver all ordered Goods, undamaged, without substitution, and in compliance with our accepted Purchase Order, the Specifications, all warranties and other terms and conditions of this Agreement.

Failure to Deliver Goods . If you fail to deliver or if you deliver non-conforming Goods as required above, Purchaser may do any or all of the following: cancel shipment, reject, return or hold them for you (for full credit and at your expense and risk), and/or require replacement (but only with our written authorization). [...***...]

Removal of Insignia/Destruction of Goods . For any rejected, returned or unpurchased Goods, you will remove any evidence of our name, trademarks or the like before selling or otherwise disposing of them, destroy any food or beverage product not fit for human consumption, and indemnify us against any claim, loss or damage arising out of your failure to do so.

INSPECTION/ACCEPTANCE . We may inspect Goods prior to payment or acceptance to verify compliance with the terms of this Agreement and applicable criteria or Specifications. Payment will not constitute acceptance thereof. However, neither our inspection, approval or acceptance, nor lack thereof, nor anything else in this Agreement, will relieve or limit any of your obligations and warranties under this Agreement (including for testing, inspection, and quality control), whether or not a defect or nonconformity is apparent on examination.

TITLE AND RISK OF LOSS OF GOODS . Title and risk of loss w


 
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