Exhibit 10.16
INTERNATIONAL MASTER BOTTLING AGREEMENT
BETWEEN
PEPSICO, INC.
AND
PEPSI-GEMEX, S.A. DE C.V.
INTERNATIONAL MASTER BOTTLING AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of ___________, 2002, is
made and entered into by and between PEPSICO, INC., a corporation organized and
existing under the laws of the State of North Carolina having its principal
place of business in Purchase, New York (the "Company"), and Pepsi-Gemex S.A. de
C.V., a corporation organized and existing under the laws of Mexico having its
principal place of business in Mexico City, Mexico (the "Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the "Concentrates")
for the Beverages (as hereinafter defined). The Company authorizes others
to manufacture the syrups prepared from the Concentrates for the Beverages
(the "Syrups") and to manufacture from the Syrups and sell the soft drinks
identified on Schedule A (the Syrups and the soft drinks identified on
Schedule A, as modified from time to time under paragraphs 21 and 22, are
together referred to herein as the "Beverages"). The formulas for the
Concentrates, Syrups and Beverages constitute trade secrets owned by the
Company;
B. The Company is the owner of certain proprietary intellectual property,
including, without limitation, trademarks, trade dress, logos, designs and
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slogans, used in connection with the brands listed in Schedule A (together with
such other trademarks as may be authorized by the Company from time to time for
current use by the Bottler under this Agreement, the "Trademarks"), which, among
other things, identify and distinguish the Concentrates and the Beverages;
C. The Bottler had been authorized by Company to bottle Beverages in Mexico
pursuant to certain agreements with the Company (collectively, together
with all amendments thereto, the "Existing Bottling Appointments"), either
directly or indirectly through one or more persons controlling, controlled
by or under common control with the Bottler (the "Bottler Affiliates");
D. The reputation of the Beverages as being of consistently superior quality
has been a major factor in stimulating and sustaining demand for the
Beverages, and special technical skill and constant diligence on the part
of the Bottler and the Company are required in order for the Beverages to
maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Beverages
have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Bottling Appointments,
and as a consequence, the Company and the Bottler desire to amend the
Existing Bottling Appointments, the terms of the Existing Bottling
Appointments, as so amended, being replaced and restated in the form of
this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and
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sufficiency of which are hereby acknowledged, the Company and the Bottler agree
as follows:
ARTICLE I
The Authorization
1. The Company authorizes the Bottler, and the Bottler undertakes, to
manufacture and package the Beverages and to distribute and sell the
Beverages only in Authorized Containers, as hereinafter defined, under the
Trademarks in and throughout the territory described in Schedule B
(together with any territories added under paragraph 31, and subject to
the possible elimination of subterritories under paragraph 29, the
"Territory").
2. The Company will, from time to time, in its discretion, approve containers
of certain types, sizes, shapes and other distinguishing characteristics
(collectively, subject to any additions, deletions and modifications by
the Company, the "Authorized Containers"). A list of Authorized Containers
for each Beverage will be provided by the Company to the Bottler, which
list may be amended by the Company from time to time by additions,
deletions or modifications. The Bottler is authorized to use only
Authorized Containers in the manufacture, distribution and sale of the
Beverages. The Company reserves the right to withdraw from time to time
its approval of any of the Authorized Containers upon six (6) months
notice to the Bottler, and, in such event, the repurchase provisions of
subparagraph 28(e) shall apply to containers so disapproved that are owned
by the Bottler. The Company will exercise its right to approve, and to
withdraw its approval of,
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specific Authorized Containers in good faith so as to permit the Bottler
to continue to fully meet the demand in the Territory as a whole for
Beverages.
ARTICLE II
Exclusive Authorization
3. The Company appoints the Bottler as its sole and exclusive purchaser of
the Concentrates for the purpose of manufacture, packaging and
distribution of the Beverages under the Trademarks in Authorized
Containers for sale in the Territory;
4. The Company agrees not to authorize any other party whatsoever to use the
Trademarks on Beverages in Authorized Containers for purposes of resale in
the Territory.
5. The Bottler shall purchase its entire requirements of Concentrates
exclusively from the Company and shall not use any other syrup, beverage
base, concentrate or other ingredient in the Beverages than as specified
by the Company.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
6. The Bottler acknowledges that the Company is the sole and exclusive owner
of the Trademarks, and the Bottler agrees not to question or dispute the
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validity of the Trademarks or their exclusive ownership by the Company. By
this Agreement, the Company extends to the Bottler only: (i) a
nonexclusive license to use the trademark "Pepsi-Cola" as part of the
corporate name of the Bottler; and (ii) an exclusive license to use the
Trademarks solely in connection with the manufacture, packaging,
distribution, and sale of the Beverages in Authorized Containers in the
Territory subject to the rights reserved to the Company under this
Agreement. Nothing herein, nor any act or failure to act by the Bottler or
the Company, shall give the Bottler any proprietary or ownership interest
of any kind in the Trademarks or in the goodwill associated therewith.
7. The Bottler agrees during the term of this Agreement and in accordance
with any requirements imposed upon the Bottler under applicable laws that
neither it nor any Bottler Affiliate will:
(a) Produce, manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any "Cola Product" (herein defined
to mean any soft drink beverage which is generally marketed as a
cola product or which is generally perceived as being a cola
product) other than a soft drink manufactured, packaged, distributed
or sold by the Bottler under authority of the Company;
(b) Manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any concentrate, beverage base, syrup,
beverage or any other product which is similar to, likely to be
confused with, or passed off for, any of the Concentrates or
Beverages;
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(c) Manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trade dress or in any
container that is an imitation of a trade dress or container in
which the Company claims a proprietary interest or which is likely
to be confused or cause confusion or be confusingly similar to or be
passed off as such trade dress or container;
(d) Manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trademark or other
designation that is an imitation, counterfeit, copy or infringement
of, or confusingly similar to, any of the Trademarks; or
(e) Acquire or hold, directly or indirectly, any ownership interest in,
or, directly or indirectly, enter into any contract or arrangement
with respect to, the management or control of, any person within or
without the Territory that engages in any of the activities
prohibited by subparagraphs (a), (b), (c) or (d) of this paragraph
7.
ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Beverages
8.
(a) The Bottler represents and warrants that the Bottler possesses, or
will possess, in the Territory, prior to the manufacture, packaging
and distribution of the Beverages, and will maintain during the term
of this Agreement, such plant or plants, machinery and equipment,
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trained staff, and distribution and vending facilities as are
capable of manufacturing, packaging and distributing the Beverages
in Authorized Containers in accordance with this Agreement, in
compliance with all applicable governmental and administrative
requirements, and in sufficient quantities to fully meet the demand
for the Beverages in Authorized Containers in the Territory.
(b) The Company and the Bottler acknowledge that each is or may become a
party to one or more agreements authorizing a bottler or other
Company-authorized entity to produce Beverages for sale by another
bottler. Such agreements include, but are not limited to (i)
agreements permitting bottlers, subject to certain conditions, to
commence or continue to manufacture the Beverages for other
bottlers, and (ii) agreements pursuant to which bottlers may have
the Beverages manufactured for them by other Company-authorized
entities. It is hereby agreed that the Company shall not
unreasonably withhold (i) any consents required by such agreements,
or (ii) approval of Bottler's participation in such agreements. All
such existing agreements shall remain in full force and effect in
accordance with their terms.
9. The Bottler recognizes that increases in the demand for the Beverages, as
well as changes in the list of Authorized Containers, may, from time to
time, require adaptation of its existing manufacturing, packaging or
delivery equipment or the purchase of additional manufacturing, packaging
and delivery equipment. The Bottler agrees to make such modifications and
adaptations as necessary and to purchase and install such equipment, in
time to permit the introduction and manufacture, packaging and delivery of
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sufficient quantities of the Beverages in the Authorized Containers, to
fully meet the demand for the Beverages in Authorized Containers in the
Territory.
10. The Bottler warrants that the handling and storage of the Concentrates;
and the manufacture, handling, storage, and packaging of the Beverages
shall be accomplished in accordance with the Company's quality control and
sanitation standards, as reasonably established by the Company and
communicated to the Bottler from time to time, and shall, in any event,
conform with all food, labeling, health, packaging and other relevant laws
and regulations applicable in the Territory.
11. The Bottler, in accordance with such instructions as may be given from
time to time by the Company, shall submit to the Company, at the Bottler's
expense, samples of the Beverages and the raw materials used in the
manufacture of the Beverages. The Bottler shall permit representatives of
the Company to have access to the premises of the Bottler during ordinary
business hours to inspect the plant, equipment, and methods used by the
Bottler in order to ascertain whether the Bottler is complying with the
instructions and standards prescribed for the manufacturing, handling,
storage and packaging of the Beverages.
12.
(a) For the packaging, distribution and sale of the Beverages, the
Bottler shall use only such Authorized Containers, closures, cases,
cartons and other packages and labels as shall be authorized from
time to time by the Company for the Bottler and shall purchase such
items only from manufacturers approved by the Company, which
approval
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shall not be unreasonably withheld. Such approval by the Company
does not relieve the Bottler of the Bottler's independent
responsibility to assure that the Authorized Containers, closures,
cases, cartons and other packages and labels purchased by the
Bottler are suitable for the purpose intended, and in accordance
with the good reputation and image of excellence of the Trademarks
and Beverages.
(b) The Bottler shall maintain at all times a stock of Authorized
Containers, closures, labels, cases, cartons, and other essential
related materials bearing the Trademarks, sufficient to fully meet
the demand for Beverages in Authorized Containers in the Territory,
and the Bottler shall not use or permit the use of Authorized
Containers, or such closures, labels, cases, cartons and other
materials, if they bear the Trademarks or contain any Beverages, for
any purpose other than the packaging and distribution of the
Beverages. The Bottler further agrees not to refill or otherwise
reuse nonreturnable containers.
13. If the Company determines the existence of quality or technical
difficulties with any Beverage, or any package used for such product, the
Company shall have the right, immediately and at its sole option, to
withdraw such product or any such package from the market. The Company
shall notify the Bottler in writing of such withdrawal, and the Bottler
shall, upon receipt of notice, immediately cease distribution of such
product or such package therefor. If so directed by the Company, the
Bottler shall recall and reacquire the product or package involved from
any purchaser thereof. If any recall of any product or any of the packages
used therefor is caused by
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(i) quality or technical defects in the Concentrate, or other materials
prepared by the Company from which the product involved was prepared by
the Bottler, or (ii) quality or technical defects in the Company's designs
and design specifications of packages which it has imposed on the Bottler
or the Bottler's third party suppliers if such designs and specifications
were negligently established by the Company (and specifically excluding
designs and specifications of other parties and the failure of other
parties to manufacture packages in strict conformity with the designs and
specifications of the Company), the Company shall reimburse the Bottler
for the Bottler's total expenses incident to such recall. Conversely, if
any recall is caused by the Bottler's failure to comply with instructions,
quality control procedures or specifications for the preparation,
packaging and distribution of the product involved, the Bottler shall bear
its total expenses of such recall and reimburse the Company for the
Company's total expenses incident to such recall.
ARTICLE V
Conditions of Purchase and Sale
14. The Company reserves the right to establish and to revise at any time, in
its sole discretion, the price of any of the Concentrates, the terms of
payment, and the other terms and conditions of supply, any such revision
to be effective immediately upon notice to the Bottler. If Bottler rejects
a change in price or the other terms and conditions contained in any such
notice, then the Bottler shall so notify the Company within thirty (30)
days of receipt of the Company's notice, and this Agreement will terminate
ninety (90) days after the date of such notification by the Bottler,
without further liability of
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the Company or the Bottler. The change in price or other terms and
conditions so rejected by the Bottler shall not apply to purchases of such
Concentrate by the Bottler during such ninety (90) day period preceding
termination. Failure by the Bottler to notify the Company of its rejection
of the changes in price or such other terms and conditions shall be deemed
acceptance thereof by the Bottler.
15. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Beverages. The Bottler
shall not sell or otherwise transfer any Concentrate or permit the same to
get into the hands of third parties.
16.
(a) The Bottler agrees not to distribute or sell any Beverage outside
the Territory except pursuant to another Exclusive Bottling
Appointment granted by the Company. The Bottler shall not sell any
Beverage to any person (other than another Bottler pursuant to
subparagraph 8(b)) for ultimate sale outside the Territory. If any
Beverage distributed by the Bottler is found outside of the
Territory, Bottler shall be deemed to have transshipped such
Beverage and shall be deemed to be a "Transshipping Bottler" for
purposes hereof. For purposes of this Agreement, "Offended Bottler"
shall mean a Bottler in any territory into which any Beverage is
transshipped.
(b) In addition to all other remedies the Company may have against any
Transshipping Bottler for violation of this paragraph 16, the
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Company may impose upon any Transshipping Bottler a charge for each case
of Beverage transshipped by such Bottler. The per-case amount of such
charge shall be determined by the Company in its sole discretion. The
Company and the Bottler agree that the amount of such charge shall be
deemed to reflect the damages to the Company, the Offended Bottler and the
bottling system. In addition, the Company may directly charge the
Transshipping Bottler the full amount of all investigative and other costs
incurred by the Company in connection with the transshipment and such
Transshipping Bottler shall be obligated to pay such amount. The Company
shall forward to the Offended Bottler, upon receipt from the Transshipping
Bottler, the full amount of the per case charge so received (but not
including investigative and other costs charged to the Transshipping
Bottler by the Company). If the Company or its agent recalls any Beverage
which has been transshipped, the Transshipping Bottler shall, in addition
to any other obligation it may have hereunder, reimburse the Company for
its costs of purchasing, transporting, and/or destroying such Beverage.
ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
17. The continuing responsibility to increase and fully meet the demand for
the Beverages in Authorized Containers within the Territory rests upon the
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Bottler. The Bottler agrees to use all approved means as may be reasonably
necessary to meet this responsibility.
18.
(a) The Bottler will push vigorously the sale of the Beverages in
Authorized Containers throughout the entire Territory. Without in
any way limiting the Bottler's obligation under this Paragraph 18,
the Bottler must fully meet and increase the demand for the
Beverages throughout the Territory and secure full distribution up
to the maximum sales potential therein through all distribution
channels or outlets available to soft drinks, using any and all
equipment reasonably necessary to secure such distribution; must
service all accounts with frequency adequate to keep them at all
times fully supplied with the Beverages and must use its own
salesmen and trucks, (or salesmen and trucks of independent
distributors, of whom the Company approves), in quantity adequate
for all seasons.
(b) The parties agree that to fully meet and increase demand for the
Beverages in Authorized Containers advertising and other forms of
marketing activities are required. Therefore, the Bottler will spend
such funds in advertising and marketing the Beverages as may be
reasonably required to increase, as well as maintain, demand for the
Beverages in Authorized Containers in the Territory. The Bottler
shall fully cooperate in and vigorously push all cooperative
advertising and sales promotion programs and campaigns that may be
reasonably established by the Company for the Territory. The Bottler
will use and publish only such advertising, promotional materials or
other items bearing the Trademarks relating to the
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Beverages as the Company has approved and authorized. The
expenditures required by this Article VI shall be made by the
Bottler. The Company may, in its sole discretion, contribute to such
expenditures. The Company may also undertake, at its expense,
independently of the Bottler's marketing programs, any advertising
or promotional activity that the Company deems appropriate to
conduct in the Territory, but this shall in no way affect the
responsibility of the Bottler for increasing the demand for the
Beverages in Authorized Containers in the Territory.
19. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and all
Bottler Affiliates directly or indirectly controlled by the Bottler will
be financially able to perform their respective duties and obligations
under this Agreement and under all other agreements between the Company
and Bottler Affiliates regarding the manufacture, packaging, distribution
and sale of the Beverages in "authorized containers" (as defined in such
agreements).
20.
(a) The Company and the Bottler have agreed upon a business plan for the
first three years occurring during the term of this Agreement. Since
periodic planning is essential for the proper implementation of this
Agreement, the Bottler and the Company shall meet each year at such
date as the parties may set (but no later than ninety (90) days
prior to the commencement of any calendar year during the term of
this Agreement beginning with the commencement of the calendar
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year closest to the anniversary date of this Agreement), to discuss
the Bottler's plans for the ensuing three (3) year period. At such
meeting, the Bottler shall present a plan that sets out in
reasonable detail satisfactory to the Company: (i) the marketing
plans, management plans and advertising plans of the Bottler with
respect to the Beverages for the ensuing year, including a financial
plan showing that the Bottler and all Bottler Affiliates have the
consolidated financial capacity to perform their respective duties
and obligations under this Agreement and any other agreement with
the Company regarding the manufacture, packaging, distribution and
sale of the Beverages in "authorized containers" (as defined in such
agreements) and specifically setting forth the projected cash flows,
income and balance sheet (including any capitalization plans) of the
Bottler and the Bottler Affiliates for such ensuing year and (ii)
the projected sales, marketing and advertising plans and related
capital expenditures for the two years immediately following such
year. Senior management of the Company and the Bottler shall discuss
this plan and this plan, upon approval by the Company (represented
by such senior management), which shall not be unreasonably
withheld, shall define the Bottler's obligation herein to maintain
such consolidated financial capacity and to increase and fully meet
the demand for the Beverages in Authorized Containers in the
Territory for the period of time covered by the plan.
(b) The Bottler shall report to the Company periodically, but not less
than quarterly, as to its implementation of the approved plan; it is
understood, however, that the Bottler shall report sales on a
regular basis as requested by the Company and in such format and
detail,
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and containing such information as may be reasonably requested by
the Company. The failure by the Bottler to carry out the plan, or if
the plan is not presented or is not approved, will constitute a
primary consideration for determining whether the Bottler has
fulfilled its obligation to maintain the consolidated financial
capacity required under paragraph 19 and to push vigorously the sale
of Beverages in Authorized Containers throughout the Territory and
to increase and fully meet the demand for the Beverages in
Authorized Containers in the Territory. If the Bottler carries out
the plan in all material respects, it shall be deemed to have
satisfied the obligations of the Bottler under paragraphs 17, 18, 19
and 20 for the period of time covered by the plan.
(c) Neither the Bottler nor any Bottler Affiliate shall make any
significant change in the capitalization, debt level or methods of
financing the operations of the Bottler and Bottler Affiliates set
forth in any projected balance sheet of the Bottler and Bottler
Affiliates approved under Paragraph 20(a) hereof without the consent
of the Company.
ARTICLE VII
Reformulation, New Products and Related Matters
21. The Company has the sole and exclusive right and discretion to reformulate
any of the Beverages. In addition, the Company has the sole and exclusive
right and discretion to discontinue any of the Beverages under this
Agreement, provided (i) such Beverage is discontinued in Mexico in
Authorized Containers and in such other containers as may have been
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authorized for use by other Bottlers under their respective bottle
contracts, and (ii) the Company does not discontinue all Beverages under
this Agreement. In the event that the Company discontinues any Beverage,
Schedule A to this Agreement shall be deemed amended by deleting the
discontinued Beverage from the list of Beverages set forth on Schedule A.
22. In the event that the Company introduces any new beverage in the Territory
under the trademarks "Pepsi-Cola" or "Pepsi" or any modification thereof
(herein defined to mean the addition of a prefix, suffix or other modifier
used in conjunction with the trademarks "Pepsi-Cola" or "Pepsi"), the
Bottler shall be obligated to manufacture, package, distribute and sell
such new beverage in Authorized Containers in the Territory pursuant to
the terms and conditions of this Agreement, and Schedule A to this
Agreement shall be deemed amended by adding such new beverage to the list
of beverages set forth on Schedule A.
23. The Company has the unrestricted right to use the Trademarks on the
Beverages and on all other products and merchandise other than the
Beverages in Authorized Containers in the Territory.
ARTICLE VIII
Term and Termination of the Agreement
24. The term of this Agreement shall commence on the effective date hereof
and, unless earlier terminated in accordance with its provisions, will
continue perpetually.
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25. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to manufacture,
package, distribute and sell the Beverages under this Agreement shall be
suspended during any period when any of the following conditions exist:
(a) There shall occur a change in the law or regulation (including,
without limitation, any government permission or authorization
regarding customs, health or manufacturing) in such a manner as to
render unlawful or commercially impracticable:
(i) the importation of Concentrate or any of its essential
ingredients, which cannot be produced in quantities sufficient
to satisfy the demand therefor by existing Company facilities;
or
(ii) the manufacture and distribution of the Concentrates or
Beverages; or
(b) There shall occur any inability or commercial impracticability of
either of the parties to perform resulting from an act of god, or
"force majeure," public enemies, boycott, quarantine, riot, strike,
or insurrection, or due to a declared or undeclared war,
belligerency or embargo, sanctions, blacklisting, or other hazard or
danger incident to the same, or resulting from any other cause
whatsoever beyond its control.
If any of the conditions described in this paragraph 25 persists so that
either party's obligation to perform is suspended for a period of six (6)
months or
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more, the other party may terminate this Agreement forthwith, upon notice
to the party whose obligation to perform is suspended.
26.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or any Bottler Affiliate becomes insolvent; if
a petition in bankruptcy is filed against or on behalf of the
Bottler or Bottler Affiliate which is not stayed or dismissed
within sixty (60) days; if the Bottler or Bottler Affiliate is
put in liquidation or placed under sequester; if a receiver is
appointed to manage the business of the Bottler or Bottler
Affiliate; or if the Bottler or Bottler Affiliate enters into
any judicial or voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with them or
makes an assignment for the benefit of creditors;
(ii) If the Bottler or Bottler Affiliate adopts a plan of dissolution or
liquidation other than a plan of dissolution or liquidation that
results in the transfer or other disposition of assets from the
Bottler or Bottler Affiliate to one or more wholly-owned subsidiary
of such Bottler or Bottler Affiliate;
(iii) If any person or any Affiliated Group (as hereinafter defined),
other than any person or any Affiliated Group acting with the
consent of the Company, acquires, or obtains any contract, option,
conversion privilege or other right to acquire, directly or
indirectly, Beneficial
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Ownership (as hereinafter defined) of more than fifteen percent
(15%) of any class or series of voting securities of the Bottler or
Bottler Affiliate and if such person or Affiliated Group does not
divest itself of Beneficial Ownership of such voting securities or
otherwise terminate any such contract, option, conversion privilege
or other right to a level equal to or below fifteen percent (15%)
within thirty (30) days after the Company notifies the Bottler that
the failure of such person or Affiliated Group to thus divest or
terminate may result in termination of this Agreement;
(iv) If any Disposition (as hereinafter defined) is made without the
consent of the Company by Bottler or by any Bottler Affiliate of any
voting securities of Bottler or any Bottler Affiliate;
(v) If any agreement regarding the manufacture, packaging, distribution
or sale of the Beverages in "authorized containers" (as defined in
such agreement) between the Company and Bottler or any Bottler
Affiliate is terminated, unless the Company agrees in writing that
this subparagraph 26(a)(v) will not be applied by the Company to
such termination;
(vi) If the Bottler, any Bottler Affiliate or any person in which the
Bottler or any Bottler Affiliate has Beneficial Ownership of any
equity or voting securities, or in which the Bottler or any Bottler
Affiliate has a right or control of management, or which controls or
is under common control with the Bottler, should engage directly or
indirectly in the manufacture, distribution or marketing of any
product specified in subparagraphs (a), (b), (c) or (d) of paragraph
7 above,
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or should obtain a right or license to do the same, and if the
Company has given the Bottler notice that such condition exists and
that the Company will terminate this Agreement within six (6) months
if such condition is not eliminated, and if such condition has not
been eliminated within the six (6) month period.
(vii) If all or substantially all of the Bottler's or any Bottler
Affiliate's bottling assets are sold, transferred or otherwise
disposed of (including any transfer by operation of law) other than
sales, transfers or other dispositions of assets by the Bottler or
one or more Bottler Subsidiaries or Bottler Affiliates to one or
more wholly-owned subsidiaries of such Bottler, Bottler Subsidiary
or Bottler Affiliate.
(viii)If the Bottler or any Bottler Affiliate shall engage in any business
other than (x) the business of manufacturing, selling or
distributing non-alcoholic beverages or (y) any business which is
directly related and incidental to such beverage business.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or upon
obtaining knowledge of any third party action which may or
will result in any change in ownership described in Section
26(a)(iii) above;
(ii) to make available from time to time and at the request of the
Company complete records of current ownership of the
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Bottler and all Bottler Affiliates and full information
concerning any entities or parties by whom it is controlled
directly or indirectly or which it controls; and
(iii) to the extent the Bottler has any legal control over changes
in the ownership of the Bottler or any entity having direct or
indirect ownership or control of the Bottler as described in
Section 26(a)(iii) above, not to initiate or implement,
consent to or acquiesce in any such change without the prior
written consent of the Company.
(c) For the purposes of this Agreement:
(i) "Affiliated Group" shall mean two or more persons acting as a
partnership, limited partnership, syndicate or other group, or
who agrees to act together, for the purpose of acquiring,
holding, voting or making any Disposition of any voting
securities of the Bottler or any Bottler Affiliate; provided
further that the Affiliated Group formed thereby shall be
deemed to have acquired Beneficial Ownership of all voting
securities of the Bottler or any Bottler Affiliate
beneficially owned by any such persons.
(ii) "Beneficial Ownership" shall mean (i) voting power which
includes the power to vote, or to direct the voting of, any
securities, or (ii) investment power which includes the power
to dispose, or to direct the Disposition of, any securities;
provided further Beneficial Ownership shall include any such
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voting power or investment power which any person has or
shares, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise;
provided, however, that the following persons shall not be
deemed to have acquired Beneficial Ownership under the
circumstances described: (a) a person engaged in business as
an underwriter of securities who acquires securities through
his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall
not be deemed to be the Beneficial Owner of such securities
until such time as such underwriter completes his
participation in the underwriting and shall not thereupon or
thereafter be deemed to be the Beneficial Owner of the
securities acquired by other members of any underwriting
syndicate or selected dealers in connection with such
underwriting solely by reason of customary underwriting or
selected dealer arrangements; (b) a member of a national
securities exchange shall not be deemed to be a Beneficial
Owner of securities held directly or indirectly by it on
behalf of another person solely because such member is the
record holder of such securities and, pursuant to the rules of
such exchange, may direct the vote of such securities, without
instruction, on other than contested matters or matters that
may affect substantially the rights or privileges of the
holders of the securities to be voted, but is otherwise
precluded by the rules of such exchange from voting without
instruction; and (c) the holder of a proxy solicited by the
Board of Directors of the Bottler for the voting of securities
of such Bottler at any
24
annual or special meeting and any adjournment or adjournments
thereof of the stockholders of such Bottler shall not be
deemed to be a Beneficial Owner of the securities that are the
subject of the proxy solely for such reason.
(iii) "Bottler Subsidiary" shall mean any person that is controlled
directly or indirectly by the Bottler and either participates
in the manufacture, packaging, distribution or sale of the
Beverages in Authorized Containers or has a direct or indirect
equity interest in another Bottler Subsidiary that does so
participate;
(iv) "Disposition" shall mean any sale, merger, issuance of
securities, or other transaction in which, or as a result of
which, any person other than Bottler or a wholly owned
subsidiary of Bottler, acquires, or obtains any contract,
option, conversion privilege or other right to acquire
Beneficial Ownership of any securities.
(d) Upon the occurrence of any of the events of default specified in
subparagraphs 26(a) and (b), the Company may terminate this
Agreement by giving the Bottler notice to that effect, effective
immediately.
27.
(a) In addition to the events of a default described in paragraph 26,
the Company may also terminate this Agreement, subject to the
25
limitations of subparagraph 27(b), in the event of the occurrence of
any of the following events of default:
(i) If the Bottler or a Bottler Affiliate fails to make timely
payment for Concentrate or of any other debt owing to the
Company;
(ii) If the condition of the plant or equipment used by the Bottler
in manufacturing, packaging or distributing the Beverages
fails to meet the sanitary standards reasonably established by
the Company;
(iii) If the Beverages manufactured by the Bottler fail to meet the
quality control standards reasonably established by the
Company;
(iv) If the Beverages are not manufactured in strict conformity
with such standards and instructions as the Company may
reasonably establish;
(v) If the Bottler fails to present or carry out a plan approved
under paragraph 20 in all material respects; or
(vi) If the Bottler materially breaches any of the Bottler's other
obligations under this Agreement.
The standards and instructions of the Company comprise privately
published information concerning the manufacture, handling and
26
storage of the Beverages under good manufacturing practices, as well
as technical instructions, bulletins and other communications issued
or amended from time to time by the Company.
(b) Upon the occurrence of any of the foregoing events of default, the
Company shall, as a condition to termination of this Agreement under
this paragraph 27, give the Bottler notice thereof. The Bottler
shall then have a period of sixty (60) days within which to cure the
default, including, at the instruction of the Company and at the
Bottler's expense, by the prompt withdrawal from the market and
destruction of any Beverage that fails to meet the quality control
standards of the Company or any Beverage that is not manufactured in
accordance with the instructions of the Company. If such default has
not been cured within such period, then the Company may, by giving
the Bottler further notice to such effect, suspend sales to the
Bottler of Concentrates and require the Bottler to cease production
of the Beverages and the packaging and distribution of Beverages in
Authorized Containers. During such second period of sixty (60) days,
the Company also may supply, or cause or permit others to supply,
the Beverages in Authorized Containers under the Trademarks in the
Territory. If such default has not been cured during such second
period of sixty (60) days, then the Company may terminate this
Agreement, by giving the Bottler notice to such effect, effective
immediately.
28. Upon the termination of this Agreement:
27
(a) The Bottler shall forthwith take such action as necessary to
eliminate the trademark "Pepsi-Cola" from its corporate name;
(b) Any other agreement between the Company and the Bottler or any
Bottler Affiliate regarding the manufacture, packaging,
distribution, sale or promotion of soft drinks in "authorized
containers" (as defined in such agreement) may, at the election of
the Company, be automatically terminated and thereby become of no
further force or effect.
(c) Thereafter, neither the Bottler nor any Bottler Affiliate will
continue to manufacture, package, distribute or sell any of the
Beverages in Authorized Containers or to make any use of the
Trademarks or Authorized Containers, or any closures, cases, labels
or advertising material bearing the Trademarks;
(d) The Bottler and the Bottler Affiliate shall forthwith remove and
efface all reference to the Company, the Beverages and the
Trademarks from the business premises and equipment of the Bottler
and the Bottler Affiliate and from all business papers and
advertising used or maintained by the Bottler and the Bottler
Affiliate; and they shall not thereafter hold forth in any manner
whatsoever that they have any connection with the Company or the
Beverages; and,
(e) The Bottler shall forthwith deliver all Concentrate, Beverage,
usable returnable or any nonreturnable containers, cases, closures,
labels, and advertising material bearing the Trademarks, still in
the Bottler's or a Bottler Affiliate's possession or under the
Bottler's or a Bottler
28
Affiliate's control, to the Company or the Company's nominee, as
instructed, and, upon receipt, the Company shall pay to the Bottler
or the Bottler Affiliate a sum equal to the reasonable market value
of such supplies or materials. The Company will accept and pay for
only such articles as are, in the opinion of the Company, in
first-class and usable condition, and all other such articles shall
be destroyed at the Bottler's or the Bottler Affiliate's expense.
Containers, closures and advertising material and all other items
bearing the name of the Bottler or a Bottler Affiliate, in addition
to the Trademarks, that have not been purchased by the Company shall
be destroyed without cost to the Company, or otherwise disposed of
in accordance with instructions given by the Company, unless the
Bottler or Bottler Affiliate can remove or obliterate the Trademarks
therefrom to the satisfaction of the Company. The provisions for
repurchase contained in subparagraph 28(e) shall apply with regard
to any Authorized Container, approval of which has been withdrawn by
the Company under paragraph 2; upon termination by either party
under paragraph 25; and upon termination by the Bottler under
subparagraph 14. In all other cases, the Company shall have the
right, but not the obligation, to purchase the aforementioned items
from the Bottler or Bottler Affiliate.
29.
(a) Subject to the limitations set forth in subparagraph 29(b), in the
event that the Bottler at any time fails to carry out a plan
approved under paragraph 20 in all material respects in any segment
of the Territory, whether defined geographically or by type of
market or outlet, which segment shall be defined by the Company
(hereinafter
29
"Subterritory"), the Company may reduce the Territory covered by
this Agreement, and thereby restrict the Bottler's authorization
hereunder to the remainder of the Territory, by eliminating the
Subterritory from the Territory covered by this Agreement.
(b) In the event of such failure, the Company may eliminate
Subterritories from the Territory covered by this Agreement by
giving the Bottler notice to that effect, which notice shall define
the Subterritory or Subterritories to which the notice applies. The
Bottler shall then have a period of six (6) months within which to
cure such failure. If the Bottler has not cured such failure in such
six (6) month period, the Company may eliminate such Subterritory or
Subterritories from the Territory by giving the Bottler further
notice to that effect, effective immediately.
(c) Upon elimination of any Subterritory from the Territory:
(i) Schedule B to this Agreement shall be deemed amended by
eliminating such Subterritory from the Territory described on
Schedule B;
(ii) The Company may manufacture, package, distribute and sell the
Beverages in Authorized Containers under the Trademarks in
such Subterritory, or authorize others to do so;
(iii) Any other agreement between the Bottler, a Bottler Affiliate
and the Company regarding the manufacture, packaging,
distribution or sale of soft drinks in "authorized containers"
30
(as defined in such agreement) in such Subterritory may, at
the election of the Company, be automatically terminated and
thereby become of no further force or effect in such
Subterritory;
(iv) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in Authorized
Containers in such Subterritory, or to make any use of the
Trademarks, Authorized Containers, closures, cases, labels or
advertising material bearing the Trademarks in connection with
the sale or distribution of the Beverages in such
Subterritory; and
(v) The Bottler shall not thereafter hold forth in such
Subterritory in any manner whatsoever that it has any
connection with the Beverages.
ARTICLE IX
Transferability/Worldwide and Regional Accounts/Additional Territories
30. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance standards
applicable to the Bottler, the dependence of the Trademarks on proper
quality control, the level of marketing effort required of the Bottler to
increase demand for the Beverages in Authorized Containers, and the
confidentiality required for protection of the Company's trade secrets and
confidential information. In recognition of the personal nature of these
and
31
other obligations of the Bottler under this Agreement, the Bottler may not
assign, transfer or pledge this Agreement or any interest therein, in
whole or in part, whether voluntarily, involuntarily, or by operation of
law (including, but not limited to, by merger or liquidation), or delegate
any material element of the Bottler's performance thereof, or sublicense
its rights hereunder, in whole or in part, to any third party or parties,
without the prior consent of the Company. Any attempt to take such action
without such consent shall be void and shall be deemed to be a material
breach of this Agreement.
31.
(a) The Bottler understands that from time to time the Company
negotiates worldwide or regional agreements to sell the Syrups to
certain hotel chains, restaurant chains, movie theaters and similar
on premise accounts which operate in multiple countries. The Company
will submit to the Bottler for its review the terms of these
worldwide or regional agreements to sell the Syrups (the "Chain
Agreements"). The Bottler agrees to use its best efforts to support
the Company in the Chain Agreements by supplying the Syrups to these
accounts based on the terms of the Chain Agreements negotiated by
the Company. In the event that the Bottler declines to participate
in any Chain Agreement, the Bottler agrees that the Company shall
have the right to find alternative ways to supply the Syrups to
these accounts through other authorized bottlers or distributors of
the Beverages, without any obligation to compensate the Bottler with
respect to these sales; provided, however, that the Company's right
to supply the Beverages to these accounts will not affect in any way
the Bottler's exclusive rights to sell and distribute the Beverages
to all
32
other accounts within the Territory. With respect to the Chain
Agreements, the Bottler also agrees to use its best efforts to
support the Company by supplying Beverages in packages other than
the Syrups to these accounts.
(b) In the event that the Bottler acquires the right to manufacture and
sell any of the Beverages in any container that has been designated
as an Authorized Container in any territory outside of the Territory
but within Mexico, such additional territory shall automatically be
deemed to be included within the Territory covered by this Agreement
for all purposes. Any separate agreement that may exist concerning
such additional territory shall be ipso facto amended to conform to
the terms of this Agreement. In addition, if the Bottler acquires
control, directly or indirectly, of any person which is a party, or
which controls directly or indirectly a party, to an agreement
whereby such party has the right to manufacture and sell any of the
Beverages in any territory in Mexico in any container that has been
designated as an Authorized Container, the Bottler shall cause such
party to amend such agreement, effective as of the date of
acquisition of control of such party, to conform to the terms of
this Agreement with respect to all such territory within Mexico.
ARTICLE X
Litigation
32.
(a) The Company reserves the right to institute any civil,
administrative or criminal proceeding or action, and generally to
take or seek any
33
available legal remedy it deems desirable, for the protection of its
good reputation and industrial property rights (including, but not
limited to, the Trademarks), as well as for the protection of the
Concentrates, the Beverages and the formulas therefor, and to defend
any action affecting these matters. At the request of the Company,
the Bottler will render reasonable assistance in any such action.
The Bottler may not claim any right against the Company as a result
of such action or for any failure to take such action. The Bottler
shall promptly notify the Company of any litigation or proceeding
instituted or threatened affecting these matters. The Bottler shall
not institute any legal or administrative proceeding against any
third party which may affect the interests of the Company in
connection with this Agreement without the Company's prior consent.
(b) The Company has the sole and exclusive right and responsibility to
prosecute and defend all suits relating to the Trademarks. The
Company may prosecute or defend any suit relating to the Trademarks
in the name of the Bottler whenever an issue in such suit involves
the Territory and therefore it is appropriate to act in the
Bottler's name, or may proceed alone in the name of the Company,
provided that the Company shall take no action in the Bottler's name
which the Company knows or should know will materially prejudice or
impair the rights or interests of the Bottler under this Agreement.
(c) The Bottler recognizes the importance and benefit to itself and all
other bottlers of the Beverages of protecting the interest of the
Company in the Beverages, Authorized Containers and the goodwill
associated with the trademarks. Therefore, the Bottler agrees to
34
consult with the Company on all products liability claims or
lawsuits brought against the Bottler in connection with the
Beverages or Authorized Containers and to take such action with
respect to the defense of any such claim or lawsuit as the Company
may reasonably request in order to protect the interest of the
company in the Beverages, Authorized Containers and goodwill
associated with the Trademarks. Further, the Bottler shall
supervise, control and direct the defense of all such products
liability claims and lawsuits brought against them whether
individually or jointly, provided, however, that the Bottler and the
Company expressly reserve all rights of contribution and indemnity
as prescribed by law.
ARTICLE XI
Automatic Amendment
33. In the event that bottlers, which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Beverages purchased
for the account of all bottlers who are parties to agreements with the
Company containing substantially the same terms as this Agreement, agree
with the Company to any different provisions to be included in this
Agreement, then the Bottler hereby agrees to include an amendment
containing such different provisions in this Agreement. The gallons of
Concentrate purchased by such bottlers shall be determined based on the
most recently-ended calendar year prior to the date such amendment was
first offered to bottlers.
ARTICLE XII
35
General
34. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "person" means an individual, a corporation, a limited liability
company, a partnership, a limited partnership, an association, a
joint-stock company, a trust, any unincorporated organization, or a
government or political subdivision thereof.
(b) "control" (including terms "controlling", "controlled by" and "under
common control with") means: (i) Beneficial Ownership of a majority
of any class or series of voting securities of a person; or (ii) the
power or authority, directly or indirectly, to elect or designate a
majority of the members of the board of directors, or other
governing body of a person.
35. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
36.
(a) Without relieving the Bottler of any of its responsibilities under
this Agreement, the Company, from time to time during the term of
this Agreement, at its option and either free of charge or on such
terms and conditions as the Company may propose, may offer
technology to the Bottler which the Company possesses, develops or
acquires
36
(and is free to furnish to third parties without obligation)
relating to the design, installation, operation and maintenance of
the plant and equipment appropriate for the maintenance of product
quality, sanitation and safety as well as for the efficient
manufacture and packaging of the Beverages; or relating to personnel
training, accounting methods, electronic data processing and
marketing and distribution techniques.
(b) The Bottler covenants and agrees that, so long as this agreement is
in effect the Bottler shall install and maintain management
information systems that are capable of interfacing and sharing
required data with the management information systems of the Company
in accordance with standards established by the Company.
37. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic information
whatsoever concerning the composition of the Concentrates or the
Beverages, without the prior consent of the Company, and it will use
any such information solely to perform its obligations hereunder;
(b) It will at all times treat and maintain as confidential, all
nonpublic information that it may receive at any time from the
Company, including, but not limited to:
(i) Information or instructions of a technical or other nature,
relating to the mixing, sale, marketing and distribution of
the product.
37
(ii) Information about projects or plans worked out in the course
of this Agreement; and
(iii) Information constituting manufacturing or commercial trade
secrets.
The Bottler, further agrees to disclose such information, as necessary to
perform its obligations hereunder, only to employees of its enterprise:
(i) who have a reasonable need to know such information; (ii) who have
agreed to keep such information secret; and (iii) whom the Bottler has no
reason to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all photocopies
or other reproductions in its possession (including, but not limited
to, any extracts or digests thereof) containing or relating to any
nonpublic information described in this paragraph 37. Following such
termination, and the surrender of such materials, the Bottler and
its employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure thereof
whatsoever, provided that such obligation shall expire as to any
nonpublic information that does not constitute trade secrets ten
(10) years following such termination.
38. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
38
39. The Bottler is an independent manufacturer and not the agent of the
Company. The Bottler agrees that it will not represent that it is an agent
of the Company nor hold itself out as such.
40. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
(i) Quarterly Statements. As soon as such statements are made available
to the public, or if such statements are not regularly made
available to the public, within thirty days after such fiscal
quarter, an unaudited income and expense statement and balance sheet
for the Bottler certified as correct by the chief financial officer
of the Bottler; and
(ii) Annual Audit Statement. As soon as such statements are made
available to the public, or if such statements are not regularly
made available to the public, within 120 days after the end of each
fiscal year, statements of income and retained earnings of the
Bottler for the just-ended fiscal year, and a balance sheet of the
Bottler as of the end of such year, accompanied by an opinion from
the independent public accountants of the Bottler; and
(iii) Other information. With reasonable promptness such other financial
information as the Company may reasonably request in such format as
the Company may reasonably request.
39
41. The Bottler shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any person
designated in writing by the Company to visit and inspect any of its
properties, corporate books and financial records (including, but not
limited to, auditor's workpapers), and make copies thereof and take
extracts therefrom, and to discuss the accounts and finances of the
Bottler with the principal officers thereof, all at such times as the
Company may reasonably request. The Company's rights of inspection under
this paragraph 41 shall be exercised reasonably, and only for purposes of
determining Bottler's compliance with its obligations under paragraph 19,
so as not to interfere with the normal operation of the Bottler's
business. The Company will treat and maintain as confidential for a period
of one year all nonpublic financial information received from the Bottler.
42. The parties agree:
(a) All Existing Bottling Appointments or related franchise agreement
with respect to the Territory are hereby superseded and restated in
their entirety, and all rights, duties and obligations of the
Company and the Bottler regarding the Trademarks and the
manufacture, packaging, distribution and sale of the Beverages in
Authorized Containers shall be determined under this Agreement,
without regard to the terms of any prior agreement and without
regard to any prior course of conduct between the parties;
(b) As to all matters addressed herein, this Agreement sets forth the
entire agreement between the Company and the Bottler, and all prior
understandings, commitments or agreements relating to such matters
40
between the parties or their predecessors -in-interest are of no
force or effect; and
(c) Any waiver or modification of this Agreement or any of its
provisions, and any notices given or consents made under this
Agreement shall not be binding upon the Bottler or the Company
unless made in writing, signed by an officer of the Company or by a
duly qualified and authorized representative of the Bottler, and
personally delivered or sent by telegram, telex or certified mail to
an officer of the Company (if from the Bottler) or a duly qualified
and authorized representative of the Bottler (if from the Company)
at the principal address of such party.
43. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right shall
not be deemed to be a waiver of such option or right, or of the right to
demand subsequent performance of any and all obligations herein imposed
upon the Bottler.
44. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company upon
notice to the Bottler, but no such delegation shall relieve the Company of
its obligations hereunder.
45. If any provision of this Agreement, or the application thereof to any
party or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any
other provision
41
hereof, or the application of such provision to other parties or
circumstances.
46. This Agreement shall be governed, construed and interpreted under the laws
of the State of New York.
42
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. Pepsi-Gemex S.A. de C.V.
By: By:
---------------------------------- -------------------------------------
Title: Title:
------------------------------- ----------------------------------
Date: Date:
-------------------------------- -----------------------------------
43
Schedule A
44
SCHEDULE B
45
