Exhibit 10.24
TRANSITION AGREEMENT
THIS AGREEMENT made and entered into as of May, 1996 by
Buenos Aires Embotelladora S.A., a corporation organized and existing under
the laws of Argentina ("BAESA"), PepsiCo, Inc., a company organized and
existing under the laws of the State of North Carolina ("PepsiCo"), Pepsi-
Cola Puerto Rico Bottling Company, a company organized and existing under
the laws of the State of Delaware ("PCPRB") and Xxxxxxx X. Beach, currently
the Chief Executive Officer of BAESA and of PCPRB.
W I T N E S S E T H :
WHEREAS, the purpose of this Agreement is to set forth the
agreements of certain of the indirect principal shareholders of BAESA with
respect to certain changes in their previous agreements regarding the
voting of BAESA shares owned or controlled by them and regarding changes in
the management of BAESA and fostering closer cooperation between BAESA and
PepsiCo;
WHEREAS, PepsiCo, which owns approximately 24% of the outstanding
capital stock of BAESA and is the franchisor of the Pepsi-Cola Bottling
franchises held by BAESA, desires to improve BAESA's profitability and is
willing to make certain commitments in order to facilitate the accelerated
transition to PepsiCo's exercise of majority voting control of BAESA,
subject to certain management rights to be retained by Xxxxxxx Xxxxx (the
period immediately following such transition while Xxxxxxx Xxxxx retains
such rights being hereinafter referred to as "Phase II");
WHEREAS, PCPRB, which is the owner of approximately 17% of the
outstanding capital stock of BAESA, also desires to improve the
profitability of BAESA and in consideration of the commitments made by
PepsiCo in this Agreement is willing to cooperate with and take steps to
facilitate the contemplated transition to Phase II; and
WHEREAS, Xxxxxxx Xxxxx, who is designated as one of the two
Essential Shareholders of BAESA in the Exclusive Bottling Appointments
between BAESA and PepsiCo pursuant to which BAESA has obtained franchise
rights to bottle and distribute PepsiCo products in its franchise
territories, and who is also the controlling shareholder of PCPRB, desires
to facilitate certain steps contemplated by this Agreement which he
believes are in the best interest of the shareholders of BAESA, including
PCPRB, and accordingly is willing to exercise his right to cause the
transition to Phase II in consideration of the commitments made by the
other parties contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties agree as follows:
ARTICLE I
AGREEMENTS OF BAESA
1.01 COST SAVINGS. BAESA agrees that it will continue its current
program of reducing expenditures wherever possible (as described in BAESA's
current annual report on Form 20-F) in order to improve BAESA's
profitability. BAESA and PepsiCo currently are working together diligently
to improve the profitability of BAESA. In particular, BAESA and PepsiCo
will work to reduce the divisional offices and corporate overhead of BAESA.
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1.02 HUMAN RESOURCES. (a) BAESA recognizes that, in connection
with the accelerated transition to Phase II, and the transfer of majority
voting control to PepsiCo, and consistent with its agreement contained herein
to effect further cost savings, certain of BAESA's existing senior executives,
and senior executives of its operating subsidiaries, may be terminated. In
connection with any such termination, BAESA will provide such senior executives
reasonable and customary severance payments and health and other benefits,
if appropriate under the circumstances or legally required.
(b) Certain of BAESA's senior executives have been awarded
options on BAESA's Class B shares pursuant to the BAESA Stock Option Plan
(the "Option Plan"). BAESA agrees that in connection with the transition
to Phase II, it will consider adjusting the terms of the options previously
issued under the Option Plan to certain of the key individuals who will be
continuing as employees of BAESA during Phase II and it will consider
adjusting the vesting and exercise periods of the options for the other
employees who received options under the Option Plan.
1.03 CONTINUATION OF EMPLOYMENT OF XXXXXXX XXXXX.
In connection with the transition to Phase II, and effective July 1,
1996, BAESA shall enter into an employment agreement (the "Employment
Agreement") with Xxxxxxx Xxxxx providing for his employment by BAESA as
Chairman of its Board of Directors for a period of two years after such
date. The Employment Agreement shall contain the following terms and
conditions for the duration of such two-year period:
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(a) Xxxxxxx Xxxxx shall be entitled to receive his current
compensation (based on prior year bonus) from BAESA (as Chief Executive
Officer) subject to adjustment for inflation during the term of his
employment.
(b) BAESA shall provide to Xxxxxxx Xxxxx in Boca Raton,
Florida, suitable office space and accounting services during the term of
his employment and shall employ for him a secretary and a combined
clerk/driver on a full-time basis, with the individuals to be hired for
such positions to be selected by Xxxxxxx Xxxxx. The individuals employed
by BAESA for these positions shall receive salaries and benefit packages
equivalent to the current salaries and benefit packages received by the
current BAESA employees in these positions.
(c) Xxxxxxx Xxxxx shall be entitled to receive
reimbursement for reasonable out-of-pocket expenses incurred in connection
with performing his duties under the Employment Agreement, including
travel, lodging and entertainment expenses.
(d) Xxxxxxx Xxxxx'x duties under the Employment Agreement
shall be limited to providing consultation and advice to the management and
board of directors of BAESA with respect to BAESA's business operations.
Xxxxxxx Xxxxx shall not have any direct responsibility for the day-to-day
management or operations of BAESA.
(e) Xxxxxxx Xxxxx shall be entitled to receive under the
Employment Agreement the benefit package currently received byhim as the
Chief Executive Officer of BAESA.
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(f) In addition to any rights which shall be retained by
Xxxxxxx Xxxxx under the amended Franchise Commitment Letter as provided in
Section 1.05 hereof, Xxxxxxx Xxxxx shall have the right and authority at
any time to require BAESA to retain at its expense independent legal
counsel selected by him to advise him and BAESA on matters which he
believes require the advice of such counsel, particularly involving
securities law disclosure issues and issues relating to transactions
between BAESA and any of its affiliates; PROVIDED, HOWEVER, that
all legal
bills shall be reasonable and subject to the approval of BAESA.
1.04 COOPERATION WITH PCPRB. BAESA acknowledges that the transition
to Phase II will result in PCPRB no longer indirectly controlling BAESA and
possibly resulting in PCPRB no longer qualifying for the exemption from
registration under the Investment Company Act of 1940 (the "1940 Act")
provided by Rule 3a-1 thereunder. In consideration of the agreement of
PCPRB to facilitate the transition to Phase II contemplated by this
Agreement, BAESA agrees that it will use its best efforts in the future, at
the request of PCPRB, to assist PCPRB in effecting transactions which PCPRB
considers necessary or advisable in order to avoid the requirement that
PCPRB register as an investment company under the 1940 Act; PROVIDED,
HOWEVER, that such transactions will only be done as an accommodation to
PCPRB and BAESA shall not assume any cost, expense or liability (tax or
otherwise) as a result of any such transaction. Subject to the foregoing
proviso, the transactions may include the transaction proposed in Xxxxx
Xxxxx'x memo dated April 17, 1996 to Xxxxxx X. Xxxxxxx. Inaddition, BAESA
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agrees that it will take whatever steps are necessary under the
circumstances to register for resale under the Securities Act of 1933 any
BAESA shares held by PCPRB (including any newly issued BAESA shares, as
contemplated by the previous sentence) in connection with a decision by
PCPRB to dispose of such shares or to distribute BAESA shares to its
shareholders so that after such disposition or distribution they will be
freely tradable shares. Notwithstanding the foregoing, other than a
registration statement to be filed at PCPRB's expense for BAESA shares
issued in such transaction, BAESA shall not be obligated to file
registration statements (with the SEC or the Argentine Comision Nacional de
Valores), expend management time or incur expense in connection with the
performance of any other registration obligation beyond that contemplated
by Section 5.02(h) of the BSA Partnership Agreement. BAESA also agrees to
provide in the future to PCPRB any and all financial information on a
timely basis which is required by PCPRB to complete its annual or quarterly
financial statements as required under Securities and Exchange Commission
and New York Stock Exchange rules and regulations.
1.05 AMENDMENT TO FRANCHISE COMMITMENT LETTER. In
connection with the transition to Phase II, BAESA agrees that it will enter
into an amendment of the Master Franchise Commitment Letter dated November
1, 1993 among PepsiCo, Seven-Up International, BAESA and Argentine Bottling
Associates (the "Franchise Commitment Letter") which will amend and restate
Section 9 "Approval Rights of Controlling Shareholders" of such Franchise
Commitment
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Letter as set forth in Schedule 1.05 hereto. In addition, such amendment
shall provide that Xxxxxxx Xxxxx shall become a third party beneficiary of
such Franchise Commitment Letter with the right to enforce the provisions
of such Section 9. Also, such amendment shall set forth (i) the agreement
(during Phase II and thereafter) of BAESA and PepsiCo with respect to the
price of concentrate purchased by BAESA from PepsiCo for use in BAESA's
Brazilian franchise territories and (ii) the amount of any payables owed by
PCI to BAESA or BAESA to PCI on July 1, 1996. The agreement relating to
Net Invoicing which is due to expire at the end of June 1996 shall be
extended or terminated at PepsiCo's option; provided that if PepsiCo
extends this agreement, (x) the provision which gives PepsiCo the right to
increase the concentrate price at its direction shall be eliminated and (y)
PepsiCo shall have the right to terminate such extension at any time (and
return to the original concentrate pricing and marketing spending levels).
In addition, the Franchise Commitment Letter and each of the Exclusive
Bottling Appointments between PepsiCo and BAESA shall be amended as of July
1, 1996 to eliminate any references to Xxxxxxx Xxxxx or Xxxxxxx Xxxxxxx as
Essential Shareholders of BAESA and to remove all restrictions contained in
such agreements with respect to any required shareholdings by such
individuals in BAESA or on the disposition of their BAESA shares.
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ARTICLE I.
AGREEMENTS OF PEPSICO
2.01 AMENDMENT TO FRANCHISE COMMITMENT LETTER. PepsiCo agrees to
execute and deliver to BAESA and to Xxxxxxx Xxxxx and the other parties
thereto the amendment to the Franchise Commitment Letter and the amendments
to the BAESA Exclusive Bottling Appointments contemplated by that Section
1.06 hereof.
2.02 RESTRICTIONS ON TRANSFER OF BAESA SHARES. PepsiCo agrees that
all restrictions on dispositions of BAESA shares contained in Sections 5.01
and 5.02 of the Amended and Restated General Partnership Agreement dated
November 1, 1993, as amended (the "BSA Partnership Agreement") of Baesa
Shareholder Associates ("BSA") (by Argentine Bottling Associates ("ABA"),
the Essential Shareholders, the Non-Essential Shareholders or the PepsiCo
Partners, as such parties are defined therein) shall be removed. On July
1, 1996 the parties to the BSA Partnership Agreement shall amend the BSA
Partnership Agreement to eliminate these restrictions. ABA shall
thereafter be free without restriction to withdraw from BSA its interest in
the BAESA shares owned by BSA provided that such withdrawals must be only
BAESA Class B Shares. To the extent that ABA wishes to withdraw more BAESA
Class B Shares than BSA owns, BAESA Class A Shares owned by BSA shall be
converted to BAESA Class B Shares before they are withdrawn. As a result,
no BAESA Class A shares shall be withdrawn from BSA by ABA.
Notwithstanding the foregoing, PCPRB agrees that it shall not cause ABA to
withdraw from BSA the BAESA shares owned by PCPRB until the earlier of (i)
the completion of any offering during 1996 of BAESA shares or (ii) October
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1, 1996. PepsiCo also agrees to the termination effective July 1, 1996 of
the Voting Trust Agreement dated November 1, 1993 between BSA and Riverside
S.A. and the distribution of the BAESA Class A shares held thereunder
(following an exchange of such BAESA Class A shares into BAESA Class B
shares) to Riverside S.A.
2.03 USE OF PEPSICO VOTING CONTROL. PepsiCo agrees to use its voting
control of BAESA, which PepsiCo will acquire as a result of the transition
to Phase II, to cause BAESA to perform all of its agreements contained in
this Agreement. In addition, PepsiCo shall cause BAESA to be operated
solely with a view to the long-term best interests of BAESA shareholders.
2.04 TRANSITION CHIEF EXECUTIVE OFFICER. During the period from the
execution of this Agreement until July 1, 1996, PepsiCo shall designate an
individual to act as Co-Chief Executive Officer of BAESA who will, working
with Xxxxxxx Xxxxx during this transition period, share with Xxxxxxx Xxxxx
responsibility for the day-to-day operations of BAESA. In addition,
PepsiCo will use its best efforts to ensure, using its voting control, that
in the future the Chief Executive of BAESA and the principal country
managers for Brazil and Argentina shall be employed by BAESA and its
subsidiaries (and shall not be employees of PepsiCo) and shall be provided
with appropriate incentives consistent with the longterm best interest of
BAESA's shareholders.
2.05 AGREEMENTS WITH RESPECT TO PCPRB. In consideration of PCPRB's
agreement to facilitate the transition to Phase II, PepsiCo agrees to
support and encourage PCPRB's effort to identify and acquire additional
PepsiCo franchise territories in the Caribbean and other appropriate
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regions. If and when PepsiCo is legally able to grant a new Pepsi-Cola
franchise in Cuba, PCPRB will be considered as one of the preferred
possible candidates for this territory. PepsiCo's consideration in
granting this franchise will be based on all relevant factors including
past performance, management strength and financial ability and commitment
to invest in the market. If PCPRB meets these criteria, in PepsiCo's
judgment, PCPRB will be considered the preferred possible candidate.
ARTICLE III.
AGREEMENTS OF XXXXXXX XXXXX
3.01 In consideration of the agreements of the parties in this
Agreement, Xxxxxxx Xxxxx shall, effective July 1, 1996, resign as the Chief
Executive Officer of BAESA and shall enter into the Employment Agreement
with BAESA described in Section 1.05 hereof.
3.02 TRANSITION TO PHASE II. Xxxxxxx Xxxxx hereby notifies PepsiCo of
the commencement of Phase II, effective July 1, 1996, subject to the terms
and conditions set forth in this agreement. During Phase II, PepsiCo shall
have voting control over BAESA as a result of its acquisition of Class A
shares in connection with the liquidation of BSA. In addition, during the
term of the Employment Agreement, Xxxxxxx Xxxxx shall have the Management
Rights set forth in the amended Franchise Commitment Letter as contemplated
by Section 1.06 hereof.
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ARTICLE IV.
AGREEMENTS OF PCPRB
4.01 TRANSITION TO PHASE II. In consideration of the agreements of
the other parties under this Agreement, PCPRB will, as the controlling
partner of ABA (and through ABA, the controlling partner of BSA), cooperate
to facilitate the transition to Phase II contemplated by this Agreement and
the partial liquidation of BSA.
ARTICLE V.
MISCELLANEOUS
5.01 NOTICES. Any notice to be given under this Agreement shall be
deemed sufficiently served when in writing and delivered in person, by
facsimile transmission (to be confirmed promptly by registered airmail),
telex, courier or by prepaid, registered airmail, addressed as follows:
IF TO BAESA:
___________
000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier: (000) 000-0000
IF TO PEPSICO:
_____________
PepsiCo, Inc.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Secretary
Telecopier: (000) 000-0000
IF TO PCPRB:
___________
26 Simn Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xx Xxxxxxx
Xxxxxx Xxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
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IF TO XXXXXXX XXXXX:
___________________
c/o Buenos Aires Embotelladora S.A.
000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier: (000) 000-0000
Any party may change its address provided above for the purpose of this
Agreement by giving written notice to the other parties of such change in
the manner hereinabove provided.
5.02 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York without regard to its principles of
conflicts of laws.
5.03 ASSIGNMENT. The rights and obligations under this Agreement may
not be assigned by any party to any third party without the prior written
consent of all other parties.
5.04 ENTIRE AGREEMENT. This Agreement, together with all Schedules
hereto, represents the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement and supersedes
any other agreement or understanding, written or verbal, that the parties
may have had.
5.05 AMENDMENTS. Any modification, amendment, supplement, or waiver
of any provision of this Agreement shall be effective if, but only if, in
writing and signed by an authorized representative of each of the parties.
5.06 CAPTIONS. The title headings of the respective articles and
sections of this Agreement are inserted for convenience and shall not be
deemed to be a part of this Agreement or considered in construing this
Agreement.
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5.07 SEVERABILITY. If any article, section or paragraph, or part
thereof, of this Agreement, or any agreement or document appended hereto or
made a part hereof is invalid, ruled illegal by any court of competent
jurisdiction, or unenforceable under present or future laws effective
during the term of this Agreement, then it is the intention of the parties
that the remainder of the Agreement, or any agreement or document appended
hereto or made a part hereof, shall not be affected thereby unless the
deletion of such provision shall cause this Agreement to become materially
adverse to any party in which case such party shall have the right to cause
the Agreement to be terminated.
5.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by each party on the same or different counterparts, but
all of such counterparts shall together constitute one and the same
instrument.
5.09 FURTHER ASSURANCES. Each party shall take such actions and
execute such papers, documents, and instruments as the other party may
reasonably request to evidence and effectuate the rights and obligations of
the parties hereunder and the transactions contemplated hereby.
5.10 WAIVERS. No failure by a party to take any action with respect
to a breach of this Agreement or a default by any other party shall
constitute a waiver of the former party's right to enforce any provision of
this Agreement or to take action with respect to such breach or default or
any subsequent breach or default. Waiver by any party of any breach or
failure to comply with any provision of this Agreement by a party shall not
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be construed as, or constitute, a continuing waiver of such provision, or a
waiver of any other breach of or failure to comply with any other provision
of this Agreement.
5.11 PUBLIC ANNOUNCEMENTS. All press releases and other public
announcements made by any party disclosing the terms of this Agreement
shall be subject to the approval of all parties, except to the extent
required by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
BUENOS AIRES EMBOTELLADORA S.A.
By:__________________________
Name:
Title:
PEPSICO, INC.
By:__________________________
Name:
Title:
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By:__________________________
Name:
Title:
XXXXXXX XXXXX
By:__________________________
Name:
Title:
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SCHEDULE 1.05
9. APPROVAL RIGHTS OF XXXXXXX XXXXX
During Phase II (which will commence on July 1, 1996 and continue
for a period of two years thereafter, unless sooner terminated by the
resignation as Chairman of BAESA or incapacity of Xxxxxxx Xxxxx) PepsiCo,
Inc. will appoint the Chief Executive Officer of the Bottling Companies who
will have full management authority to conduct the Bottling Companies'
business subject to Xxxxxxx Xxxxx'x right to approve certain management
decisions described in the following sentence. During Phase II Xxxxxxx
Xxxxx will be Chairman of the Board of the Bottling Companies and have the
following approval rights:
(a) appointment of BAESA's Chief Executive Officer.
(b) any individual capital expenditure or series of related
expenditures in excess of U.S.$3,500,000.
(c) sale of significant assets, meaning any asset or related
assets in excess of U.S.$3,500,000.
(d) production, sale or distribution of any non-PCI brands
(other than those currently being produced, sold or distributed by the
Bottling Companies).
(e) engage in any non beverage business, to the extent not
already conducted or agreed upon.
(f) enter into any transaction between BAESA and the Company or
any company affiliated with the Company.
(g) any capital increase or new share and other equity security
issuances other than pursuant to outstanding options.
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(h) any capital reduction or share repurchase.
(i) any dividends less than or in excess of 30% of BAESA's
consolidated after tax net income each year.
(j) merge with any other business.
(k) change the By-Laws (Estatutos) of BAESA.
(l) change outside auditors.
(m) liquidate BAESA.
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