EXHIBIT 10.16
MEMBERS' AGREEMENT
for PSMT Caribe, Inc.
between
PRICESMART, INC.
and
PSC, S.A.
MEMBERS' AGREEMENT
This Members' Agreement (this "Agreement") is entered into as of
September 14, 1998 by and between PriceSmart, Inc., a corporation organized
and existing under the laws of the State of Delaware, U.S.A. ("PriceSmart"),
and PSC, S.A., a company organized and existing under the laws of Panama
("PSC"). Each of PriceSmart and PSC are referred to in this Agreement as a
"Shareholder," and collectively as the "Shareholders."
RECITALS
WHEREAS, the Shareholders intend to establish and invest in an
International Business (Exempt) Company ("Newco") under the laws of the
British Virgin Islands to be utilized as their joint venture vehicle for the
establishment and operation of a business in Costa Rica, the Dominican
Republic, El Salvador, Honduras and Nicaragua, said business being engaged in
the sale of general merchandise, food and related products and services (the
"Merchandise Business System"), pursuant to the agreement described below;
WHEREAS, PriceSmart and its Affiliate intend to enter into, and the
Shareholders intend to cause Newco or its Affiliates to enter into, a
Licensing, Technology Transfer, Training and Sourcing Agreement (the
"Licensing Agreement"), in the form attached hereto as Attachment A, pursuant
to which PriceSmart will transfer a license to utilize certain intellectual
property owned by PriceSmart for the establishment and operation of the
Merchandise Business System, and PriceSmart and its Affiliate will provide
certain training, management support and product sourcing services; and
WHEREAS, in order to set forth certain rights and obligations of
the Shareholders relating to Newco, the parties desire to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth
in this Agreement, the parties agree as follows:
1. DEFINED TERMS. Capitalized terms not defined herein have
the respective meanings ascribed to them in the Licensing Agreement.
2. FORMATION OF NEWCO.
2.1 The Shareholders shall form Newco under the laws of
the British Virgin Islands no later than November 1, 1998, under the name
PSMT Caribe, Inc. or if this name is not acceptable to the authorities of the
British Virgin Islands, such other name as may be approved by the
Shareholders.
2.2 All costs involved in the formation of Newco shall
be borne by Newco. Newco shall reimburse each Shareholder for any formation
costs incurred by such Shareholder and approved by the Board of Directors of
Newco (the "Board").
3. CAPITALIZATION.
3.1 AUTHORIZED AND ISSUED CAPITAL. Newco shall have an
authorized share capital consisting of one million two hundred fifty
thousand (1,250,000) total shares, par value $1.00 per share. Such shares
shall be issued as seven hundred fifty thousand (750,000) shares of Class A
stock ("Class A Shares") and five hundred thousand (500,000) shares of Class
B stock ("Class B Shares," and, together with Class A Shares, hereinafter
referred to as the "Shares").
3.2 CAPITALIZATION.
3.2.1 The seven hundred fifty thousand (750,000)
Class A Shares shall be issued to PriceSmart. The initial capital
contributed by PriceSmart shall be three million seven hundred fifty thousand
United States Dollars (US $3,750,000), which amount shall be deposited into
an Escrow Account, in accordance with Section 3.2.3.1, below, on or before
September 18,1998. Thereafter, PriceSmart shall contribute directly to Newco
on or before November 1, 1998 and upon notification from the Board of Director
of Newco, eleven million two hundred fifty thousand United States Dollars
(US $11,250,000) and five million two hundred fifty thousand United States
Dollars (US $5,250,000), respectively.
3.2.2 The five hundred thousand (500,000) Class
B Shares shall be issued to PSC. The initial capital contributed by PSC
shall be two million five hundred thousand United States Dollars (US
$2,500,000) which amount shall be deposited into an Escrow Account in
accordance with Section 3.2.3.1, below, on or before September 18, 1998.
Thereafter, PSC shall contribute directly to Newco on or before November 1,
1998 and April 1, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Dollars (US $7,500,000) and three million five hundred thousand United
States Dollars (US $3,500,000), respectively.
3.2.3 The initial capitalization as set forth in
Sections 3.2.1 and 3.2.2 shall be paid according to the procedures set forth
below, provided however, that in the event the incorporation and registration
of Newco is not completed prior to November 1, 1998 each party shall be
entitled to the return of the capital it has so paid plus applicable interest
(net of its portion of the Escrow fees) and to terminate all obligations
arising under this Agreement.
3.2.3.1 ESCROW ACCOUNT. On or before
September 18, 1998, PriceSmart and PSC shall place three million seven
hundred fifty thousand United States Dollars (US $3,750,000) and two million
five hundred thousand United States Dollars (US $2,500,000) respectively, in
an Escrow Account managed by Chicago Title Insurance Co.
3.2.3.2 REGISTERED CAPITAL. From the funds
deposited into the aforementioned Escrow Account, the Registered Capital
shall be as to PriceSmart and PSC, seven hundred fifty thousand United States
Dollars (US $750,000) and five hundred thousand United States Dollars (US
$500,000) respectively. Concurrent with the registration of Newco, Newco
shall have all rights to the Registered Capital.
3.2.3.3 BACK TO BACK LOANS. The funds
deposited into the aforementioned Escrow Account totaling six million two
hundred fifty thousand United States
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Dollars ($6,250,000) shall be deposited in an account ("Time Deposit
Account") at a bank mutually agreeable to the Shareholders ("The Lender"),
concurrent with the incorporation and registration of Newco. Funds
contributed by PriceSmart and PSC on November 1, 1998 and when requested by the
Board of Newco as set forth in Section 3.2.1 and Section 3.2.2 above will also
be deposited in the Time Deposit Account. The Lender shall make loans to Newco
and/or OpCos (as defined in Section 4, below) in an amount equal to the funds
in the Time Deposit Account, as and when requested by Newco. The funds
deposited in the Time Deposit Account shall serve as collateral for such loans.
Interest will be paid to each Shareholder in proportion to each Shareholder's
deposit, less any and all fees and commissions owed to the Lender.
3.3 CAPITAL CALLS. In the event either Shareholder does
not (i) pay the full consideration pursuant to Section 3.2 or (ii) make full
payment in response to any future capital call by Newco, the proportionate
interest in the registered capital of Newco of such Shareholder shall be
diluted accordingly by increasing the registered capital and issuing
additional Class A Shares or Class B Shares, as appropriate, to the
Shareholder which provides the required capital. The amount of the increase
of the registered capital shall be equal to the amount of additional capital
paid in and the number of additional shares issued to the Shareholder which
provides the capital shall be increased by sufficient additional shares to
reflect each Shareholders' proportionate contribution to the capital of Newco.
3.4 ADDITIONAL FINANCING. The Shareholders acknowledge
and agree that they intend to cause and shall cause Newco and/or Landco(s)
(as defined in Section 4, below) to secure one or more loans, in the total
principal sum of approximately fifty million six hundred thousand United
States Dollars (US $50,600,000), the proceeds thereof to be used for the
anticipated construction in the Territory of nine buildings for nine
Territory Outlets.
4. PURPOSE OF NEWCO AND ANTICIPATED NEWCO AFFILIATES. The
purpose of Newco shall be to carry out the License Agreement in accordance
with the terms thereof, directly, or through Affiliates of Newco as provided
herein. The Shareholders agree to cause Newco to form two separate companies
("OpCo" and "Landco") in each of Costa Rica, the Dominican Republic, El
Salvador, Honduras and Nicaragua, to be wholly-owned (or virtually
wholly-owned where an additional owner is required by law) by Newco. The
five OpCo companies will be the entities operating the Merchandise Business
System and the five Landco companies will own or lease real estate in each
respective country.
5. LICENSING AGREEMENT. As promptly as practicable after the
formation and capitalization of Newco pursuant to this Agreement, the
Shareholders shall cause Newco to enter into the Licensing Agreement; Newco
shall then sub-license the License Agreement to each OpCo of the applicable
country, for such country (said country being the Territory under such
sublicense). Alternatively, at the request of PriceSmart, each OpCo shall
enter into the License Agreement as the direct Licensee of and for the
applicable country (which country would then be the Territory under such
direct License).
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6. ADHERENCE BY NEWCO. As promptly as practicable after the
formation and capitalization of Newco pursuant to this Agreement, the
Shareholders shall cause Newco to execute this Agreement and abide by its
terms.
7. COOPERATION; BEST EFFORTS. The Shareholders agree to
cooperate and use their best efforts to take all actions necessary or
advisable to carry out all the provisions contained in, and transactions
contemplated by, this Agreement.
8. OFFICE. The registered office of Newco shall be situated in
the British Virgin Islands The principal place of business (which may act as
the registered office as well) shall be located at an address mutually
agreeable to the Shareholders.
9. MANAGEMENT AND MANAGEMENT RESPONSIBILITIES.
9.1 THE BOARD.
9.1.1 GENERAL. The responsibility for the
overall policy direction of Newco shall be vested in the Board, which shall
be comprised of five (5) directors (the "Directors"). Three (3) Directors
shall be nominees nominated by the holders of a majority of Class A Shares
(the "Class A Directors") and two (2) Directors shall be nominees nominated
by the holders of a majority of Class B Shares (the "Class B Directors").
Each director may appoint an alternate. All Directors shall be elected by the
majority vote of all the Shareholders. The holders of Class A Shares shall
vote their Shares in favor of the election of the Class B Directors, and the
holders of Class B Shares shall vote their Shares in favor of the election
of the Class A Directors. If any percentage of Share holdings by a class
decreases relative to that of the other class, then the number of such
class's Directors shall be decreased in a direct proportion to its percentage
holdings and the number of the other class's Directors shall be increased
accordingly (e.g., if Class B's percentage Share holdings decrease to less
than 40% but not less than 20% of the outstanding Shares, there would be one
(1) Class B Director and four (4) Class A Directors.) A quorum for meetings
of the Board shall exist when a majority of Directors are present.
9.1.2 TERM OF DIRECTORS. Class A Directors
shall serve at the pleasure of the holders of a majority of Class A Shares,
and Class B Directors shall serve at the pleasure of the holders of a
majority of Class B Shares.
9.1.3 VACANCIES AND REAPPOINTMENTS. In the
event that a vacancy is created on the Board at any time (including any
Director being unable to act at any time for any reason), such vacancy shall
be filled by the alternate director designated to fill the vacancy. In the
event that the designated alternate can not fill the vacancy, if the
Director whose position becomes vacant was a Class A Director the holders of
Class A Shares shall vote their Shares to elect a new Class A Director, and
if the Director whose position has become vacant was a Class B Director the
holders of a majority of Class B Shares shall vote their Shares to elect a
new Class B Director.
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9.1.4 REMOVAL OF DIRECTOR. Class A Directors
shall be removed at any time with or without cause upon written demand to the
Board from the holder of a majority of Class A Shares. Class B Directors
shall be removed at any time upon written demand to the Board from the
holders of a majority of Class B Shares.
9.1.5 POWERS OF THE BOARD. The Board shall have
all of the powers permitted to be exercised by the Board, pursuant to
applicable law, except as otherwise limited or restricted in the Articles of
Association of Newco or this Agreement.
9.1.6 ACTIONS OF THE BOARD. Actions of the
Board may be taken at any meeting at which a quorum of Directors is present
and of which notice was given to each Director at least ten (10) days prior
to such meeting. Any two Directors can require the President to call a
meeting. For purposes of this Section 9.1.6, notice is considered given to a
Director on the day in which such notice is either (i) transmitted via
facsimile to the facsimile number of such Director registered with Newco, or
(ii) deposited in overnight mail addressed to the address of such Director
registered with Newco. Except for super-majority actions required to be taken
according to the requirements set forth in Section 9.1.7 below, actions taken
by the Board at a duly noticed and called meeting shall require the
affirmative vote of a majority of the Directors present at such meeting. In
the event of an even split of votes in favor of, and opposed to, any matter
submitted for a vote of the Board, the President or, in his absence, his
designee, shall have a second, or deciding, vote. Any action which may be
taken at a duly noticed and called meeting of the Board may be taken without
a meeting if a consent in writing, setting forth the action so taken, is
signed by all then-serving Directors. The Minutes of the Board shall not be
valid and effective unless signed by the President and Secretary.
9.1.7 SUPER-MAJORITY ACTIONS. The foregoing
notwithstanding, the following actions by the Board require an affirmative
vote of at least four (4) Directors of the Board:
9.1.7.1 Approval of the Annual Business Plan,
referenced in Section 9.5 of this Agreement;
9.1.7.2 Purchases or leases of real estate by
Newco or by any Landco (or OpCo);
9.1.7.3 With the exception of the capital
required to be provided pursuant to Section 3.2 of this Agreement, calling
for capital contributions (alone or in the aggregate) exceeding Five Hundred
Thousand U.S. Dollars ($500,000);
9.1.7.4 Providing collateral or guarantees in
favor of third parties, including Shareholders;
9.1.7.5 Entering into any transactions
between Newco and any Shareholder or Affiliate of a Shareholder (not
including any Landco or OpCo);
9.1.7.6 Issuing dividends to Shareholders, in
accordance with the Dividend Policy set forth in Section 10.4; and
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9.1.7.7 Opening more than nine Territory
Outlets.
9.2 SHAREHOLDERS.
9.2.1 MEETINGS. Meetings of holders of Shares
shall be held at such times, and pursuant to such procedures (including
without limitation, with respect to notice), as are contained therefor in the
Articles of Association. The Minutes of the Shareholder Meetings and the
entries in the Shareholders Registry Book shall not be valid and effective
unless signed by both the President and the Secretary.
9.2.2 QUORUM. The quorum necessary for the
transaction of business at a duly noticed and called meeting of the holders
of Shares shall be the presence (in person or by proxy) of the holders of a
majority of all outstanding Shares.
9.2.3 ACTIONS BY THE SHAREHOLDERS. Any actions
permitted or required to be taken by the holders of Shares may be taken at
any duly noticed and called meeting of the holders of Shares at which a
quorum is present, in person or by proxy. Except as required by applicable
law, such actions shall require the approval of a majority of the Shares
present, in person or by proxy, at such meeting.
9.2.4 SUPER-MAJORITY APPROVAL. The foregoing
notwithstanding, the following actions by Newco shall require the affirmative
vote of the holders of a majority of Class A Shares and the affirmative vote
of the majority of holders of Class B Shares:
(a) Offering to sell Shares to the public; and
(b) Amending the Articles of Association.
9.3 OFFICERS.
9.3.1 PRESIDENT. Newco shall at all times
maintain a President, appointed by the Class A Directors, who shall be a
member of the Board and serve as its Chairman. The President shall coordinate
and direct the general policies of the Company. Under the authority of the
Board, the President shall have the sole discretion to conduct the business
of Newco within the parameters established in the Annual Business Plan (as
defined in Section 9.5). The President shall serve at the pleasure of the
Board. Upon removal or withdrawal of the President for any reason, the
Class A Directors shall then, and from time to time thereafter as necessary,
appoint a successor President . Among his other duties, the President shall
vote all the shares of the OpCos and Landcos, consistent with the direction
of the Board of Newco.
9.3.2 VICE PRESIDENT. Newco shall at all times
maintain a Vice President , appointed by the Class B Directors. The Vice
President shall be delegated by the President with such powers and
responsibilities as shall be required for the Vice President to fulfill all
of his obligations under applicable law. The Vice President shall serve at
the pleasure of the Board. Upon removal or withdrawal of the Vice President
for any reason, the Class B
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Directors shall then, and from time to time thereafter as necessary, appoint
a successor Vice President.
9.3.3 SECRETARY. Newco shall at all times
maintain a Secretary, appointed by the Class B Directors, who shall be a
member of the Board. The Secretary shall be delegated by the President with
such powers and responsibilities as shall be required for the Secretary to
fulfill all of his obligations under applicable law. The Secretary shall
serve at the pleasure of the Board. Upon removal or withdrawal of the
Secretary for any reason, the Class B Directors shall then, and from time to
time thereafter as necessary, appoint a successor Secretary.
9.3.4 TREASURER. Newco shall at all times
maintain a Treasurer, appointed by the Class A Directors. The Treasurer
shall be delegated by the President with such powers and responsibilities as
shall be required for the Treasurer to fulfill all of his obligations under
applicable law. The Treasurer shall serve at the pleasure of the Board.
Upon removal or withdrawal of the Treasurer for any reason, the Class A
Directors shall then, and from time to time thereafter as necessary, appoint
a successor Treasurer. The Treasurer shall file all tax returns and make all
elections required, consistent with the direction of the Board.
9.4 Intentionally Omitted.
9.5 ANNUAL BUSINESS PLAN. Annually, prior to June 30,
the President shall present to the Board a detailed business plan for Newco
(the "Annual Business Plan"). Such Annual Business Plan shall show, among
other things, as to the ensuing year, a budget for capital investment for
future projects, a budget for capital and operating expenditures in
connection with projects already underway, revenue projections and a
marketing strategy. Such Annual Business Plan shall also show, as to the
ensuing three years, the projected working capital and capital investment
needs of Newco, OpCos and Landcos. The Board shall endeavor to approve each
year's Annual Business Plan by July 31 of the preceding year. In the event
that the Annual Business Plan for any fiscal year (the "Current Year") of
Newco is not approved by the Board, for any reason, on or before July 31 of
the preceding year, then the prior year's Annual Business plan shall
automatically be deemed approved for each month of the Current Year (with a
PRO RATA portion of such plan in effect for any partial months until such
time as the Current Year's Annual Business Plan is approved).
9.6 COMPTROLLER. The Class B Shareholders may appoint a
Comptroller, who shall be entitled to attend and observe all meetings of the
Board, provided, however, that the Comptroller shall not be a member of the
Board (and accordingly shall not have the right to vote nor be counted when
determining whether a quorum exists).
10. ACCOUNTING AND REPORTS; DIVIDEND POLICY.
10.1 ACCOUNTING AND RECORDS. Newco shall keep accurate
accounting records of all operations and, in addition to any rights to
inspection granted under British Virgin Islands law, such records shall be
open to inspection by either Shareholder, or by either Shareholder's duly
authorized representative, during business hours, so long as such Shareholder
or its Affiliate continues to hold at least Twenty-Five percent (25%) of the
Shares. Newco's
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financial records shall be audited annually pursuant to generally accepted
accounting principles at the expense of Newco by the outside auditing firm
named pursuant to Section 10.2 below. Such auditing firm shall furnish
copies of its report to Newco and to each Shareholder within thirty (30) days
after the completion thereof. The copy furnished to PriceSmart shall be in
the English language and shall be certified as accurate.
10.2 AUDITORS. The statutory auditors for Newco shall be
an internationally recognized firm of certified public accountants. The
statutory auditors for Newco initially shall be Ernst and Young.
10.3 REPORTS. Newco shall file or otherwise submit to
any government body all financial and other statements and reports required
to be so filed or submitted under applicable law.
10.4 DIVIDEND POLICY. Within ninety (90) days of the end
of each fiscal year the Board shall review the working capital and capital
investment needs of Newco, OpCos and Landcos (collectively "Capital
Requirements") as set forth in the Annual Business Plan, and the Board may
declare cash dividends to Shareholders to the extent of available funds in
excess of such Capital Requirements.
11. TRANSFERS OF SHARES.
11.1 CONSENT AND REFUSAL RIGHTS. No Shareholder may
sell, assign, or otherwise transfer (collectively, "transfer") any of its
Shares in Newco (the Shares subject to transfer being the "Subject Shares")
to any entity (a "Third Party Transfer") unless:
11.1.1 such Shareholder obtains the prior written
consent of the other Shareholder of Newco, such consent not to be
unreasonably withheld; and
11.1.2 such Shareholder first makes an
irrevocable offer (the "Transfer Offer") in writing to the other Shareholder
of Newco to transfer the Subject Shares to such other Shareholder, at the
same purchase price and on the same terms and conditions as the proposed
Third Party Transfer (the "Price, Terms and Conditions"). If within thirty
(30) days of receipt of the Transfer Offer, the offeree Shareholder notifies
the offering Shareholder in writing of its intention to accept the Transfer
Offer, the Shareholders shall promptly consummate the transfer with respect
to the Subject Shares. If the offeree Shareholder does not so notify the
offering Shareholder within such thirty (30) day period, the offering
Shareholder may, during the succeeding thirty (30) day period, consummate the
Third Party Transfer on the Price, Terms and Conditions. If at the
expiration of such succeeding thirty (30) day period the Third Party Transfer
is not so consummated, all the obligations to comply with this Section 11.1
shall again be in effect with respect to the Subject Shares.
11.2 TAG-ALONG RIGHTS. Subject to Section 11.1 and 11.5,
if, at any time, PriceSmart proposes to transfer any Shares owned by
PriceSmart to any proposed purchaser, PriceSmart shall afford PSC (and any
transferees of PSC's Shares) the opportunity to participate in such transfer
in accordance with the procedures set forth in Exhibit A.
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11.3 DRAG-ALONG RIGHTS. Notwithstanding Section 11.1,
if, at any time, PriceSmart proposes to transfer to any proposed purchaser
(including transfers to purchasers under Section 11.5 (ii) and (iii)) all of
the Shares owned by PriceSmart, PriceSmart may require, at its sole
discretion, that PSC (and any transferees of its Shares) sell all of the
Shares owned by PSC (and any transferees of its Shares) to the same proposed
purchaser for the same proportionate consideration and otherwise on the same
terms and conditions as PriceSmart proposes to transfer its Shares, in
accordance with the procedures set forth in Exhibit A.
11.4 PROHIBITED TRANSFERS. Except as provided in Section
11.5 below, no Shareholder may transfer any Shares of Newco to any of
Wal-mart Stores, Inc., SHV Holdings, N.V. (Makro), ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation,
Kmart Corporation, The Home Depot, Inc., Office Depot, Inc., Costco
Companies, Inc., Carrefour, S.A., BJ's Wholesale Club, Inc. or their
respective Affiliates.
11.5 PERMITTED TRANSFERS. The restrictions on transfers
of Shares contained in this Section 11 (i.e., in Sections 11.1, 11.2 and
11.4) shall not apply to any transfer or series of transfers of Shares (i) by
any Shareholder to an Affiliate of such Shareholder, (ii) by PriceSmart to an
entity into which or with which PriceSmart is merged or consolidated, or
(iii) by PriceSmart to an entity acquiring substantially all the assets of
PriceSmart.
11.6 SHAREHOLDERS' AGREEMENT. No transfer of Shares
shall be permitted unless and until the transferee has become a party hereto
and assumed all applicable obligations of a "Shareholder" hereunder. The
Shareholders shall negotiate in good faith to make any amendments to this
Agreement required to reflect the change in the nature of Newco's ownership
caused by a transfer of Shares.
11.7 PLEDGES OF SHARES. No Shareholder may pledge,
mortgage, create or provide for a security interest in, or convey in trust
any Shares without the prior written consent of the other Shareholder;
provided, however, that Shares may be pledged to Banco Promerica, S.A.-Costa
Rica, Banco Promerica, S.A.-El Salvador, Banco de la Produccion, S.A., St.
Georges Bank & Trust Co. Ltd. (or to any other Bank if first approved by the
Board of Newco) as collateral for funds borrowed by a Shareholder when (but
only when) those funds are thereupon contributed as capital to Newco.
11.8 CONSEQUENCES OF INAPPROPRIATE TRANSFERS. Each
Shareholder hereby renounces any rights under any applicable law which may
preclude the enforcement of Sections 11.1, 11.2, 11.3 or 11.4. If
notwithstanding the provisions of this Section 11 a Shareholder transfers any
of its Shares in violation of Sections 11.1, 11.2. 11.3 or 11.4, then, in
addition to and not in lieu of any other available remedies, such Shareholder
shall be required to pay to the other Shareholder the sum of one million
dollars ($1,000,000) or 10% of the total capitalization of Newco, whichever
amount is greater.
12. BUY-SELL RIGHTS UPON IMPASSE.
12.1 IMPASSES. As provided in Sections 9.1.7 and 9.2.4
of this Agreement, action by the Board and by the Shareholders with respect
to certain specified matters
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require super-majority approval. Any such proposition which does not receive
super-majority approval shall be deemed defeated, except that if at any time
the Board or Shareholders (as applicable) reaches such an impasse on an issue
with respect to Newco's rights or obligations (as distinguished from the
rights or obligations between the Shareholders themselves) which impasse, if
unresolved, precludes the continuing performance by Newco under any contract
to which it is a party or the operation of any significant part of Newco's
business and such impasse is not resolved within five (5) days thereafter,
the issue shall immediately be referred jointly to the chief executive of
PriceSmart and the chief executive of PSC for resolution. If these
individuals are unable to agree upon a resolution within five (5) days after
referral of such impasse to them, then an impasse is deemed to have been
reached and the Buy-Sell provisions of this Section 12 of this Agreement
shall become applicable.
12.2 At any time ten (10) days after an impasse is
reached either Shareholder (the "Offeror Shareholder") shall have the right,
exercisable by written notice (the "Buy-Sell Offer") to the other Shareholder
(the "Offeree Shareholder"), to offer to buy all of the Offeree Shareholder's
Shares at the Fair Market Value (as described in Exhibit B) and upon the
terms and conditions specified in the Buy-Sell Offer.
12.3 The Offeree Shareholder must elect by written notice
to the Offeror Shareholder within thirty (30) days after receipt of the
Buy-Sell Offer, either (i) to sell the Offeree Shareholder's Shares to the
Offeror Shareholder at the Fair Market Value and upon the terms and
conditions specified in the Buy-Sell Offer, or (ii) to purchase the Offeror
Shareholder's Shares at a per Share purchase price equal to the per Share
price contemplated in the Buy-Sell Offer, plus 5% of such per Share price.
12.4 If the Offeree Shareholder elects clause (i) of
Section 12.3, the Shareholders will, as promptly as practicable, prepare,
execute and deliver such documents and take such other actions as may be
required to effect the sale of Shares contemplated in clause (i) of Section
12.3.
12.5 If the Offeree Shareholder elects clause (ii) of
Section 12.3, the offer made thereunder shall be deemed to be a new Buy-Sell
Offer by the Offeree Shareholder under Section 12.2. If the Offeror
Shareholder then elects clause (i) of Section 12.3, the Offeror Shareholder
will sell its Shares to the Offeree Shareholder under Section 12.4. If,
however, the Offeror Shareholder elects under clause (ii) of Section 12.3 to
offer to purchase the Offeree Shareholder's Shares at a per Share price equal
to 105% of the Offeree Shareholder's proposed per Share purchase price, such
offer shall be deemed a new Buy-Sell Offer by the Offeror Shareholder under
Section 12.2, whereupon the Offeree Shareholder shall have the right either
to sell or to offer to buy at a per Share price equal to 105% of the Offeror
Shareholder's new per Share price. This process will continue until one
Shareholder, in response to a Buy-Sell Offer, elects clause (i) of Section
12.3 and sells its Shares to the other Shareholder hereunder.
13. OPTION TO PURCHASE UPON TERMINATION.
13.1 At any time within (30) days following the
termination of this Agreement by a Shareholder pursuant to Section 14.2, such
Shareholder or its nominee shall
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have the right, but not the obligation, to elect to purchase all of the other
Shareholder's Shares, said election to be made by the service of written
notice thereof to such other Shareholder (the "Option Notice"). The purchase
price for such Shares shall be at the lower of their (i) Fair Market Value
(as described in Exhibit B) or (ii) stock purchase price paid by such other
Shareholder plus other total contributed capital by such other Shareholder
plus interest on such amount accruing from the date of such other
Shareholder's acquisition of such Shares at a rate per annum equal to the
prime lending rate of Bank of America, N.A. as of the Option Notice date.
13.2 Upon delivery by a Shareholder of the Option Notice
under this Section 13, the Shareholders will, as promptly as practicable,
prepare, execute and deliver such documents and take such other actions as
may be required to promptly effect the transfer of Shares contemplated hereby.
14. TERMINATION.
14.1 TERMINATION OF LICENSING AGREEMENT. This Agreement
shall terminate immediately upon termination of the Licensing Agreement for
any reason. Upon termination of this Agreement pursuant to this Section
14.1, Newco shall dissolve and liquidate its assets.
14.2 TERMINATION BY SHAREHOLDER. This Agreement may be
terminated upon written notice, effective immediately, by either Shareholder
(in which event Section 13 of this Agreement shall become applicable) if any
of the following occur:
14.2.1 A receiver is appointed for the other
Shareholder or its property; the other Shareholder becomes unable to pay its
debts as they mature in the ordinary course of business or makes an
assignment for the benefit of creditors; or any proceedings are commenced
against the other Shareholder under any bankruptcy, insolvency or debtor
relief law and such proceedings are not vacated or set aside within sixty
(60) days from the date of commencement thereof;
14.2.2 The other Shareholder materially breaches
or fails to perform any obligation or covenant in this Agreement and fails to
cure such breach or failure within ten (10) days following notice thereof by
the Shareholder; provided, that if such breach or failure cannot be cured
within such ten (10) day period, then the other Shareholder shall not be
deemed to be in breach hereunder if it has commenced a cure within such ten
(10) day period and the other Shareholder diligently completes such cure as
soon as possible, and within a thirty (30) day period; or
14.2.3 The other Shareholder materially breaches
or fails to perform any obligation or covenant in this Agreement for the
third time during any twelve (12) month period.
14.2.4 Any Shareholder elects to terminate this
Agreement under Section 3.2.3, above.
11
14.3 ACQUISITION OF ALL SHARES. This Agreement shall
terminate immediately upon the acquisition of all of the outstanding Shares
of Newco by either Shareholder.
14.4 EFFECT OF TERMINATION. Upon termination or
expiration of this Agreement for any reason, all obligations of the parties
hereunder shall terminate prospectively forthwith (other than those set forth
in Sections 13, 14, 15, 16 and 19, which shall survive indefinitely or as
specified therein).
15. CONFIDENTIALITY. During the term of the Licensing Agreement
and for three (3) years thereafter, PSC and its Affiliates shall maintain in
strict confidence all information they have obtained or shall obtain from
Newco or PriceSmart or its Affiliates, pursuant to this Agreement, the
Licensing Agreement or otherwise, relating to the business, operations,
properties, assets, products, condition (financial or otherwise),
liabilities, employee relations, customers, suppliers, prospects, technology,
or trade secrets of Newco or PriceSmart or its Affiliates; except to the
extent such information (i) is in the public domain through no act or
omission of the disclosing party, (ii) is required to be disclosed by law, or
(iii) is independently learned by the disclosing party outside of this
relationship ("Confidential Information"). PSC agrees to (i) cause its
directors, officers, senior management personnel, as well as its employees,
agents or representatives who may have access to Confidential Information
relating to Newco or PriceSmart to enter into an appropriate written
confidentiality and proprietary rights agreement, in the form attached hereto
as Exhibit C, prior to disclosing to such individuals any such Confidential
Information, and (ii) immediately deny access to such Confidential
Information to any individual who breaches such agreement. Newco and
PriceSmart shall each be a third party beneficiary of each such agreement.
PSC shall use its best efforts to protect the Confidential Information, and
shall not use the Confidential Information for its own benefit or the benefit
of any other person or entity, except as may be specifically permitted in
this Agreement or the Licensing Agreement.
16. NON-COMPETITION. In order to preserve for the benefit of
PriceSmart the value of Confidential Information relating to PriceSmart, PSC
agrees that neither it, its shareholders, its Affiliates nor their respective
directors, officers and other management personnel ("Key Employees") shall
engage in, be employed by, consult for or invest in a business which is
similar to or competes with the Merchandise Business System, including, among
other things, discount stores, warehouse stores, and hypermarkets, during the
term of the Licensing Agreement and for three (3) years thereafter; provided,
however, that: (i) Key Employees and the shareholders of PSC may continue to
engage in, be employed by, consult for and invest in any business where such
engagement, employment, consultation or investing relationship exists as of
the date of this Agreement. It shall be the obligation of PSC, no later than
ninety (90) days following the date hereof, to procure from all of its
shareholders, Affiliates and Key Employees their written agreement to abide
by this covenant in the form attached hereto as Exhibit D or in another form
acceptable to PriceSmart, and PriceSmart shall be a third party beneficiary
of each such agreement.
17. PUBLIC OFFERING. In the event the Shareholders vote, in
accordance with Section 9.2.4 of this Agreement, to offer to sell the Shares
of Newco to the public, all Shares
12
(whether Class A Shares or Class B Shares) shall be offered for sale on an
equal basis, and upon the effective date of the public offering all Shares
shall be deemed to be Class A Shares and all Directors shall be deemed to be
Class A Directors. PriceSmart and PSC agree that at least once per year they
will in good faith review the status of the business of Newco as well as the
public market to determine whether appropriate financial circumstances exist to
offer the Shares of Newco to the public; if so they will take all appropriate
action to so offer the Shares to the public.
18. CONFORMITY WITH LAWS. No Shareholder shall, or shall cause
Newco to, through or by their respective agents, employees, representatives
or otherwise, directly or indirectly make, give or promise any payment or
other thing of value to any person for any purpose, or commit any other act,
which is unlawful under the laws of the United States, including without
limitation, the U.S. Foreign Corrupt Practices Act.
19. DISPUTE RESOLUTION; ARBITRATION.
19.1 All disputes and claims concerning the validity,
interpretation, performance, termination and/or breach of this Agreement
("Dispute(s)") shall be referred for final resolution to arbitration in
Miami, Florida, USA under the UNCITRAL Rules ("Rules") as administered by the
American Arbitration Association. All proceedings shall be conducted in the
English language. The parties hereby agree that arbitration hereunder shall
be the parties' exclusive remedy and that the arbitration decision and award,
if any, shall be final, binding upon, and enforceable against, the parties,
and may be confirmed by the judgment of a court of competent jurisdiction.
In the event of any conflict between the Rules and this paragraph, the
provisions of this paragraph shall govern.
19.2 Notwithstanding the above, a party may bring court
proceedings against any other party (i) to obtain preliminary injunctive
relief pending completion of arbitration, or (ii) as part of litigation
commenced by a third party. The parties hereby submit to personal
jurisdiction in the State of Florida, U.S.A.
19.3 The prevailing party in any arbitration or court
proceeding shall be awarded its reasonable attorneys' fees against the
non-prevailing party or parties.
20. NO WITHHOLDINGS AND DEDUCTIONS. All payments to be made by
a Shareholder under this Agreement shall be made free and clear and without
subtraction of any taxes, deductions, withholdings, conversion fees, wire
transfer fees or offset of any kind. All such taxes and fees shall be the
responsibility of the entity making the payment. No party may offset, deduct
or withhold amounts owed it by the other party. Any withholding taxes
imposed by any jurisdiction are the responsibility of, and shall be paid by,
the entity making the payment.
21. CONFLICT. If there occurs a conflict between or among this
Agreement or the Bylaws, the prevailing provisions, as between the parties,
shall be: FIRST, those contained in the Agreement and, SECOND, those
contained in the Articles of Association to the extent not inconsistent with
this Agreement.
22. RELATIONSHIP OF THE PARTIES. This Agreement shall not make
any party an agent of any other party for any purpose, and Newco shall not be
deemed an agent for either party, or either party an agent for Newco. This
Agreement does not create a partnership and the Shareholders are not liable
as partners. No party shall have the right or authority to assume,
13
create or enlarge any obligation or commitment on behalf of any other party
and shall not represent itself having the authority to bind any other party
in any manner.
23. ASSIGNMENT. Except as expressly permitted by this
Agreement, no party shall assign, delegate, or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent
of the other party. PSC may, without the prior written consent of
PriceSmart, assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement to an Affiliate of PSC. PriceSmart may,
without the prior written consent of PSC assign, delegate, or otherwise
transfer any of its rights or obligations under this Agreement to (i) an
Affiliate, (ii) an entity into which or with which PriceSmart is merged or
consolidated, or (iii) an entity acquiring substantially all the assets of
PriceSmart.
24. AMENDMENTS. Amendments to or modifications of this
Agreement may be made only by mutual agreement of the parties in writing and
shall be subject to whatever Governmental Approvals are required by
applicable law.
25. EXPENSES. Each of the parties shall bear its own expenses
incurred in connection with the negotiation, execution and delivery of this
Agreement.
26. NO WAIVER. The failure of any party to insist upon the
strict observance and performance of the terms of this Agreement shall not be
deemed a waiver of other obligations hereunder, nor shall it be considered a
future or continuing waiver of the same terms.
27. NOTICE. All notices and other communications under the
Agreement shall be in writing, shall be delivered by facsimile transmission,
air courier service, in person or by registered or certified mail with return
receipt requested, and shall be deemed to have been duly given on the date of
any receipt or record maintained by the service or person making delivery.
Delivery shall be to the address set forth below or such other address or
facsimile number as may hereafter be furnished in writing by either party to
the other. The current address for each party is set forth below the
signatures, hereinbelow.
28. VALIDITY OF AGREEMENT. In the event any provision of this
Agreement is held by a court having proper jurisdiction to be for any reason
unenforceable or invalid, the remaining provisions of this Agreement shall
continue to remain in full force and effect.
29. APPLICABLE LAW. This Agreement shall be interpreted in
accordance with, and all questions concerning the validity, performance or
breach of this Agreement shall be governed by, the laws of the State of
Florida, U.S.A.
30. LANGUAGE. The official version of this Agreement is in the
English language, and shall govern over any non-English translations.
31. INTERESTED PARTY TRANSACTIONS. The Shareholders agree that
Newco may negotiate and enter into agreements with, and otherwise deal with,
a Shareholder or its Affiliate (each, an "Interested Party Transaction").
The Shareholders agree that (a) the involvement of the interested party in
the Interested Party Transaction shall not be, and shall not be deemed to be,
a conflict of interest vis-a-vis such Shareholder's participation in the
business and management of
14
Newco, and (b) the participation of the interested party, with respect to
Newco's negotiation, execution and performance of such Interested Party
Transaction, shall not be prohibited or otherwise hindered by virtue of its
interest in such transaction. In particular, the Shareholders acknowledge
and agree that Newco shall enter the Licensing Agreement with PriceSmart and
that PriceSmart's rights under Section 6.3 of the License Agreement include
the exclusive right to determine the schedule (including the timing and
country location) of the establishment and opening of certain Territory
Outlets. In addition, each of the Shareholders acknowledge and agree that
when it is necessary for PriceSmart to purchase goods or services for the
Merchandise Business Systems, which goods or services are produced by a
shareholder of PSC to the standards required by PriceSmart, such shareholder
shall have the right to provide such goods or services provided that the
price thereof meets or beats any competitive bid. Further, PriceSmart will
allow the shareholders of PSC to purchase merchandise from PriceSmart, for
sale within a particular country (where such merchandise is available in
PriceSmart's inventory), with the purchase price being the same net landed
cost which is charged to the OpCo in the subject country; provided, however,
that the law permits the shareholders to agree, and the shareholders shall
agree not to sell such merchandise below that OpCo's selling prices..
32. PRESS RELEASES. No Shareholder or Affiliate thereof shall
issue any press release or make any public announcement concerning the
transactions contemplated hereby without the prior written consent of the
other Shareholder.
33. INTEGRATION. This Agreement is the only agreement between
the parties with respect to the subject matter contained herein. This
Agreement supersedes all prior oral or written understandings, agreements and
offers between the parties related to such subject matter.
34. AUTHORIZATION.
34.1 PRICESMART, INC. PriceSmart represents and warrants
that it is a corporation duly organized and existing and is in good standing
under the laws of the State of Delaware, U.S.A.; that the persons signing
this agreement in behalf of PriceSmart have been validly authorized to do so;
that no other action is requisite to the execution and delivery of this
Agreement by PriceSmart; that no consents or waivers of or by any third party
are necessary to permit consummation by PriceSmart of the transactions
contemplated herein; and that this Agreement has been, and all documents to
be delivered by PriceSmart, will be authorized and properly executed and
constitute or will constitute, as appropriate, the valid and binding
obligations of PriceSmart, enforceable in accordance with their terms.
34.2 PSC, S.A. PSC represents and warrants that it is a
sociedad anonomia, duly organized and existing and is in good standing under
the laws of the country of Panama; that the persons signing this agreement in
behalf of PSC have been validly authorized to do so; that no other action is
requisite to the execution and delivery of this Agreement by PSC; that no
consents or waivers of or by any third party are necessary to permit
consummation by the PSC of the transactions contemplated herein; that this
Agreement has been and all documents to be delivered by PSC, will be
authorized and properly executed and constitute or will constitute, as
appropriate, the valid and binding obligations of PSC, enforceable in
accordance with their terms; that the shareholders of PSC are those persons
and entities identified in Schedule 1 to this
15
Agreement; and that each shareholder of PSC shall not be permitted to sell,
assign or otherwise transfer any of its shares in PSC: (i) to any person or
entity which engages in a business which is similar to or competes with the
Merchandise Business System; and (ii) without the prior written consent of
PriceSmart, said consent not be unreasonably withheld and being premised upon
the proposed transferee's: a) financial ability and status; b) moral
character and standing in the proposed transferee's business community; and
c) relationship with the countries in which Newco (or its subsidiaries)
intends to conduct business.
IN WITNESS WHEREOF the parties hereto have executed this Members'
Agreement as of the date first written above.
PRICESMART: PSC:
PRICESMART, INC. PSC, S.A.
By: ______________________________ By: ______________________________
Print Name: ___________________ Print Name:_______________________
Print Title: ___________________ Print Title:______________________
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇:________________________
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ________________________
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇ ________________________
Fax Number: ___________________
WITNESSETH:
____________________________________
Mario ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇ de ▇▇▇▇▇ ▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇
NEWCO:
PSMT Caribe, Inc.
By: ______________________________
Print Name:_______________________
Print Title:______________________
Address:_______________________
_______________________
Fax Number:____________________
16
SCHEDULE 1
SHAREHOLDERS OF PSC, S.A.
Caribbean Capital Corporation 9.09%
Los Minos, Santo ▇▇▇▇▇▇▇
Dominican Republic
▇▇▇▇▇ ▇▇▇▇▇▇▇ 9.09%
C1, ▇▇▇▇▇▇▇ ▇ & ▇▇
▇▇. ▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
Inversiones San Sebastian, S.A. 9.09%
Santo ▇▇▇▇▇▇▇ 150 Baras Arriba
Managua, Nicaragua
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 9.09%
Managua, Nicaragua
Tiendas ▇▇▇▇▇▇▇, ▇.▇. 9.09%
▇/▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ Calle Noroeste
San ▇▇▇▇▇ Sula, Honduras
▇▇▇▇▇ Investment Inc. 9.09%
▇/▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ Calle Noroeste
San ▇▇▇▇▇ Sula, Honduras
Promerica Capital Market, S.A. 45.46%
Apto ▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
17
EXHIBIT A
I. PROCEDURE APPLICABLE TO TAG-ALONG RIGHTS
1. PSC (and any transferees of its Shares) shall have the right to
transfer, at the same price per share and upon identical terms and
conditions as the proposed transfer by PriceSmart, any or all of the
Shares owned by PSC (and any transferees of its Shares). At the time
any transfer to a proposed purchaser is proposed, PriceSmart shall
give notice to PSC (and any transferees of its Shares) of its right to
sell Shares hereunder (the "TAG-ALONG TRANSFER NOTICE") which notice
shall set forth the name and address of the proposed purchaser and
state the number of Shares proposed to be transferred, the proposed
offering price, the proposed date of any such transfer (the "TAG-ALONG
TRANSFER DATE") and any other material terms and conditions of the
proposed transfer.
2. In the event that PSC (and any transferees of its Shares) wishes to
participate in the transfer, it shall provide written notice (the
"TAG-ALONG NOTICE") to PriceSmart no less than ten (10) days prior to
the Tag-Along Transfer Date; PROVIDED PriceSmart shall deliver the
Tag-Along Transfer Notice at least twenty (20) days prior to the
Tag-Along Transfer Date. The Tag-Along Notice shall set forth the
number of Shares that PSC (and any transferees of its Shares) elects
to include in the transfer. The Tag-Along Notice given by PSC (and
any transferees of its Shares) shall constitute its binding agreement
to transfer such Shares on the terms and conditions and for the same
consideration per Share applicable to the transfer by PriceSmart.
3. If a Tag-Along Notice is not received by PriceSmart prior to the
expiration of the ten-day period specified above, then PriceSmart
shall have the right to transfer the number of Shares specified in the
Tag-Along Transfer Notice to the proposed purchaser without any
participation by PSC (or any transferees of its Shares), but only on
terms and conditions which are no more favorable to PriceSmart in any
material respect than as stated in the Tag-Along Transfer Notice and
only if such transfer occurs on a date within one hundred twenty (120)
days of the Tag-Along Transfer Date.
4. In connection with a transfer of Shares under Section 11.2, PSC (and
any transferees of its Shares) shall not be required to make any
representation or warranty other than as to (i) ownership and the
absence of liens with respect to its Shares and as to its existence
and the authority for, and the validity and binding effect of, any
agreements entered into by PSC (and any transferees of its Shares) in
connection with such transfer, and (ii) the same representations and
warranties with regard to the company and its businesses as are made
by PriceSmart in connection with such transfer.
A-1
II. PROCEDURE APPLICABLE TO DRAG-ALONG RIGHTS
1. At the time any transfer to a proposed purchaser is proposed and
PriceSmart intends to require PSC (and any transferees of its Shares)
to transfer its Shares pursuant to Section 11.3, PriceSmart shall give
notice to PSC (and any transferees of its Shares) of its intent to
require PSC (and any transferees of its Shares) to sell its Shares
hereunder (the "DRAG-ALONG TRANSFER NOTICE"), which notice shall set
forth the name and address of the proposed purchaser and state the
number of Shares proposed to be transferred by each of PriceSmart and
PSC (and any transferees of its Shares), the proposed offering price,
the proposed date of any such transfer (the "DRAG-ALONG TRANSFER
DATE") and any other material terms and conditions of the proposed
transfer.
2. PriceSmart shall deliver the Drag-Along Transfer Notice at least
twenty (20) days prior to the Drag-Along Transfer Date. Upon the
closing of the transaction, PSC (and any transferees of its Shares)
shall be obligated to transfer its Shares on the terms and conditions
set forth in the Drag-Along Transfer Notice.
3. In connection with a transfer of Shares under Section 11.3, PSC (and
any transferees of its Shares) shall not be required to make any
representation or warranty other than as to (i) ownership and the
absence of liens with respect to its Shares and as to the existence of
PSC (and any transferees of its Shares) and the authority for, and the
validity and binding effect of, any agreements entered into by PSC
(and any transferees of its Shares) in connection with such transfer,
and (ii) the same representations and warranties with regard to the
Company and its businesses as are made by PriceSmart in connection
with such transfer.
4. PSC (and any transferees of its Shares) shall not be obligated to
participate in any such transfer unless PSC (and any transferees of
its Shares) is provided an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to PSC (and any transferees
of its Shares) (x) to the effect that such transfer is not in
violation of applicable laws and (y) as to any other matters to PSC
(and any transferees of its Shares) may reasonably request that are
customary in such transactions, or, if PSC (and any transferees of its
Shares) is not provided with an opinion with respect to any matters
contemplated by this clause (y), then PriceSmart shall (in addition to
the indemnification contemplated below) indemnify PSC (and any
transferees of its Shares) for such matters contemplated by this
clause (y) as PSC (and any transferees of its Shares) shall reasonably
request.
A-2
EXHIBIT B
FAIR MARKET VALUE
APPRAISAL PROCEDURE. For purposes of Section 12 and Section 13
above, the value of the Shares (the "Fair Market Value") shall be determined
as set forth below:
(i) Within seven (7) days after a Shareholder makes a Buy-Sell
Offer under Section 12, or serves the Option Notice under
Section 13, each Shareholder will appoint one independent
and qualified appraiser to appraise the value of the Shares;
(ii) The Fair Market Value of the Shares will be the average of
the two appraisals.
B-1
EXHIBIT C
EMPLOYEE'S CONFIDENTIAL INFORMATION AGREEMENT ("AGREEMENT")
In consideration of my employment or continued employment by
_______________ _______________ (hereinafter "the company") and in
consideration of the salary, wages or other compensation to be paid for my
services during such employment, I hereby agree as follows:
1. As used in this Agreement the term "confidential information" means
information relating to the business, operations, properties, assets,
products, condition (financial or otherwise), liabilities, employee
relations, customers, suppliers, prospects, technology, or trade secrets of
Newco and PriceSmart, Inc. or its affiliates; except to the extent such
information (i) is in the public domain through no act or omission by me;
(ii) is required to be disclosed by law, or (iii) is independently learned
by me outside of my employment by the company.
2. During the term of my employment by the company, I will not, except as my
duties to the company may require, disclose any confidential information to
others.
3. After the term of my employment by the company, I will not disclose any
confidential information to others unless such disclosure first has been
authorized in writing by Newco and PriceSmart, Inc.
4. On termination of my employment by the company, or at any time it may so
request, I will promptly deliver to the company all copies of any
memoranda, notes, records, reports, manuals, catalogs, price lists or other
documents relating to or containing any confidential information which I
possess or may have under my control.
5. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns, and to the benefit of Newco
and PriceSmart, Inc., each of whom may enforce it as a "third party
beneficiary."
6. Damages are an inadequate remedy for a breach of this Agreement. I,
therefore, agree that should a breach or threatened breach of this
Agreement occur, the company and/or Newco and/or PriceSmart, Inc. may
without prejudice to any other remedies which they may have, immediately
obtain and enforce injunctive relief prohibiting me from violating this
Agreement.
C-1
7. This is the only agreement between these parties on this subject matter.
8. This Agreement can be modified or rescinded only by a writing signed by
both parties, as well as by Newco and PriceSmart, Inc.
I have read the foregoing, agree thereto, and hereby acknowledge receipt
of a copy of this Agreement.
_____________________________
Signature of Employee
WITNESS:
________________________________
By _____________________________
Title _________________________ Date __________________
C-2
EXHIBIT D
KEY EMPLOYEE'S CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
("AGREEMENT")
In consideration of my employment or continued employment by
________________ ________________ (hereinafter "the company") and in
consideration of the salary, wages or other compensation to be paid for my
services during such employment, I hereby agree as follows:
1. As used in this Agreement the term "confidential information" means
information relating to the business, operations, properties, assets,
products, condition (financial or otherwise), liabilities, employee
relations, customers, suppliers, prospects, technology, or trade secrets of
PriceSmart, Inc. or its affiliates; except to the extent such information
(i) is in the public domain through no act or omission by me; (ii) is
required to be disclosed by law, or (iii) is independently learned by me
outside of my employment by the company.
2. During the term of my employment by the company, I will not, except as my
duties to the company may require, disclose any confidential information to
others.
3. After the term of my employment by the company, I will not disclose any
confidential information to others unless such disclosure first has been
authorized in writing by the company and by PriceSmart, Inc.
4. On termination of my employment by the company, or at any time it may so
request, I will promptly deliver to the company all copies of any
memoranda, notes, records, reports, manuals, catalogs, price lists or other
documents relating to or containing any confidential information which I
possess or may have under my control.
5. I am familiar with the Merchandise Business System licensed by PriceSmart
to Newco under the agreement between them dated [__________], 1998. I
agree that during the term of my employment by the company and for three
years thereafter, I shall not engage in, be employed by, consult for or
invest in a business which is similar to or competitive with the
Merchandise Business System, including among other things, discount stores,
warehouse stores, and hypermarkets.
6. This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns, and to the benefit of
PriceSmart, Inc. who may enforce it as a "third party beneficiary."
7. Damages are an inadequate remedy for a breach of this Agreement. I,
therefore, agree that should a breach or threatened breach of this
Agreement occur, the company
D-1
and/or PriceSmart, Inc. may without prejudice to any other remedies
which they may have, immediately obtain and enforce injunctive relief
prohibiting me from violating this Agreement.
8. This is the only agreement between these parties on this subject matter.
9. This Agreement can be modified or rescinded only by a writing signed by
both parties and by PriceSmart, Inc.
I have read the foregoing, agree thereto, and hereby acknowledge receipt
of a copy of this Agreement.
_____________________________
Signature of Employee
WITNESS:
______________________________
By ___________________________
Title _______________________ Date __________________
D-2
ATTACHMENT A
TO
MEMBERS' AGREEMENT
FOR
PSMT CARIBE, INC.
LICENSING, TECHNOLOGY TRANSFER,
TRAINING AND SOURCING AGREEMENT
among
PRICESMART, INC., VENTURES SERVICES, INC.
and
PSMT Caribe, Inc.
LICENSING, TECHNOLOGY TRANSFER, TRAINING
AND SOURCING AGREEMENT
TABLE OF CONTENTS
Page
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. COMPUTER SOFTWARE SYSTEMS . . . . . . . . . . . . . . . . . . . . . . 3
4. TECHNICAL SUPPORT SERVICE . . . . . . . . . . . . . . . . . . . . . . 5
5. CONSIDERATION FOR LICENSE AND RIGHTS AND REIMBURSEMENT OF EXPENSES. . 5
6. ADDITIONAL DUTIES OF LICENSEE . . . . . . . . . . . . . . . . . . . . 6
7. MERCHANDISING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS. . . . . . . . . . . . . . 10
9. INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. CONFIDENTIAL INFORMATION AND NON-COMPETITION. . . . . . . . . . . . . 11
11. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
14. REPRESENTATIONS AND WARRANTIES OF LICENSEE. . . . . . . . . . . . . . 14
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
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LICENSING, TECHNOLOGY TRANSFER, TRAINING
AND SOURCING AGREEMENT
This Licensing, Technology Transfer, Training and Sourcing Agreement
(this "Agreement") is entered into by and among PriceSmart, Inc., a corporation
organized and existing under the laws of the State of Delaware, U.S.A.
("PriceSmart"), Ventures Services, Inc., a corporation organized and existing
under the laws of the State of Delaware, U.S.A., and a wholly-owned subsidiary
of PriceSmart ("VSI"), and PSMT Caribe, Inc., an International Business
(Exempt) Company organized and existing under the laws of the British Virgin
Islands ("Licensee"), effective as of _____________ ("Effective Date").
RECITALS
WHEREAS, PriceSmart owns the rights to certain intellectual property
for the design, establishment and operation of a business engaged in the sale of
general merchandise, food and related products and services (the "Merchandise
Business System");
WHEREAS, PriceSmart and PSC, S.A, a company organized and existing
under the laws of Panama, have entered into a Shareholders' Agreement (the
"Shareholders' Agreement") establishing Licensee as their joint venture vehicle
to implement the Merchandise Business System in Costa Rica, the Dominican
Republic, El Salvador, Honduras and Nicaragua (collectively, the "Territory");
WHEREAS, in order to accomplish such implementation, Licensee desires
that PriceSmart and VSI provide to Licensee a license to establish the
Merchandise Business System in the Territory and the right to receive certain
merchandising and technical support from PriceSmart and VSI, and PriceSmart and
VSI are willing to provide such rights to Licensee, subject to the terms and
conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth in
this Agreement, the parties to this Agreement agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "AFFILIATE" of any Person shall mean any entity or person
which is owned directly or indirectly fifty percent (50%) or more by the Person,
which holds an interest, directly or indirectly of fifty percent (50%) or more
in the Person, or which has a common owner with the Person which owner has
directly or indirectly, fifty percent (50%) or more of both the Person and the
Affiliate.
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1.2 "BUSINESS PLAN" shall mean a three (3) PriceSmart Year
operating plan, prepared by Licensee with assistance from PriceSmart or its
Affiliates, for the establishment and operation of the Merchandise Business
System in the Territory, including projections of financing, capital investment,
revenues, cash flows and expenses.
1.3 "COMPUTER SOFTWARE SYSTEMS" means certain computer software
systems for merchandising, membership, point of sale, and accounting
applications, capable of performing management information systems functions for
the operation of the Merchandise Business System.
1.4 "GOVERNMENTAL APPROVAL" means any permission, authorization,
order or expiration of waiting period following filing or notification, of any
instrumentality of the government(s) of the Territory that is required in order
for the parties to this Agreement to carry out all provisions of this Agreement.
1.5 "PERSON" shall mean any individual, organization
(unincorporated or incorporated), association, trust, entity or partnership.
1.6 "PRICESMART INTELLECTUAL PROPERTY" means all intangible
proprietary rights owned by or controlled by PriceSmart relating to the
ownership and operation of the Merchandise Business System or affinity programs,
with respect to the Territory, including, PriceSmart Trademarks, copyrights,
trade dress, trademarks or service marks, private labels and brand names,
whether registered or unregistered, trade secrets and technical expertise.
1.7 "PRICESMART QUARTER" means, during a PriceSmart Year, the
following periods: September 1 through November 30 (the "First Quarter");
December 1 through February 28 (or February 29 if a leap year) (the "Second
Quarter"); March 1 through May 31 (the "Third Quarter"); and June 1 through
August ▇▇ (▇▇▇ "▇▇▇▇▇▇ ▇▇▇▇▇▇▇").
1.8 "PRICESMART TRADEMARKS" means the trademarks and service
marks, whether registered or unregistered, or the subject of pending
applications, listed on Exhibit A, and all counterparts thereof in the language
of the Territory.
1.9 "PRICESMART YEAR" means the period which begins on September
1 of each calendar year and ends on August 31 of the following calendar year.
1.10 "TERRITORY OUTLET" means a store established and operated in
the Territory by Licensee using the Merchandise Business System.
1.11 "YEAR" means each twelve-month period from the Effective
Date and from each anniversary thereof.
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2. LICENSE.
2.1 EXCLUSIVE LICENSE; CONDITIONS. Subject to the terms and
conditions of this Agreement, and to the terms of existing agreements to which
PriceSmart and its Affiliates may be parties, PriceSmart hereby grants to
Licensee an exclusive license to use in the Territory and for the Merchandise
Business System only, such of the PriceSmart Intellectual Property as is
required, in the reasonable judgment of PriceSmart, to develop and operate the
Territory Outlets for so long as this Agreement shall remain in effect;
PROVIDED, the use of PriceSmart Trademarks is only in the manner and format as
provided in the PriceSmart Identity Guidelines (the "Guidelines") constituting
Exhibit B, or in such other manner and format as PriceSmart may advise Licensee
in writing. PriceSmart reserves the right to change at any time and from time
to time the PriceSmart Trademarks licensed hereunder, as required by law or in
response to a bona fide claim against the PriceSmart Trademarks, and in such
event will reimburse Licensee for its costs incurred in effecting such change.
2.2 RESTRICTIONS. All rights of PriceSmart not granted by
PriceSmart hereunder are reserved to PriceSmart. Any use by Licensee of
PriceSmart Intellectual Property beyond the rights herein granted shall be a
material breach of this Agreement by Licensee. This license shall remain in
effect for the term of this Agreement only. Licensee shall not sub-license any
PriceSmart Intellectual Property or any other rights granted in this Agreement,
provided, however, that with the prior written consent of PriceSmart (not to be
unreasonably withheld), Licensee may sub-license the rights and obligations
arising under this Agreement to wholly-owned or virtually wholly-owned
subsidiaries of Licensee.
2.3 BUSINESS EXPANSION. PriceSmart will from time to time
review expansion of the Merchandise Business System, to include new products and
services (including but not limited to banking and the sale of pharmaceuticals)
and the exclusive license granted herein shall be applicable to new products and
services so included.
3. COMPUTER SOFTWARE SYSTEMS.
3.1 ACCESS. Subject to the terms of PriceSmart's agreement with
▇.▇. ▇▇▇▇▇▇▇ & Company, PriceSmart shall provide to Licensee, for use solely in
connection with the operation of Territory Outlets during the term of this
Agreement, access to the Computer Software Systems for the purposes of data
entry and report generation. The access provided to Licensee under this Section
3.1 shall not be deemed to be a sub-license of the Computer Software Systems.
Licensee shall not have access to the source code and object code for the
Computer Software Systems.
In addition to access to the Computer Software Systems,
PriceSmart shall provide the following supplemental services related to the San
Diego-based Computer Software Systems:
- Processing with systems support and software maintenance;
- Disaster recovery services;
- Offsite data storage for back-up data;
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- Hard disk data storage capacity;
- English language help desk 8 hours daily on working days;
and
- Ten concurrent users on ▇.▇. ▇▇▇▇▇▇▇ & Company system.
Licensee shall reimburse the expenses incurred by PriceSmart
in providing such services as follows:
----------------------------------------------------------------------
Number of Territory Outlets Annual Reimbursement Sum (US$)
----------------------------------------------------------------------
1 Territory Outlet $ 30,000
2-5 Territory Outlets Add $ 15,000 per Territory Outlet
----------------------------------------------------------------------
Payment of the reimbursement sum for each Territory Outlet shall be due and
payable on the opening date of such Territory Outlet. At each subsequent annual
anniversary of such date, the reimbursement sum for each such Territory Outlet
shall be due and payable on such anniversary date based on the number of
Territory Outlets operating on such anniversary date. PriceSmart may increase
the amount of the reimbursement sums payable on any anniversary date by an
amount not exceeding 5% of the sums payable on the previous anniversary date.
3.2 MODIFICATIONS. As between PriceSmart and Licensee, the
Computer Software Systems and all modifications, enhancements and derivative
works made to or based on the Computer Software Systems or applicable computer
hardware by either party shall at all times remain the property of PriceSmart.
All modifications, enhancements or derivative works made to or based on the
Computer Software Systems as may be desired by Licensee shall be made by
PriceSmart in its sole discretion.
3.3 INITIAL INSTALLATION AND TRAINING. PriceSmart shall assist
in the initial installation of equipment to access the Computer Software
Systems. Licensee shall pay all costs relating to such installation.
Additionally, as part of the initial training described in Section 4.1 below,
VSI will train Licensee's users of the Computer Software Systems.
3.4 REIMBURSEMENT. Licensee shall reimburse PriceSmart for any
amounts which it is required to pay to the licensor of the Computer Software
Systems in order to allow Licensee to access such Computer Software Systems.
Licensee shall pay for any and all changes, modifications and enhancements made
to the Computer Software Systems after the initial installation of such systems,
whether by PriceSmart or its agents, to customize them for Licensee's use.
3.5 DATA LINK. Licensee shall be solely responsible for
providing and maintaining the data communications link to provide remote access,
as approved by PriceSmart,
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between the computer system in San Diego, California which operates the Computer
Software Systems and the Licensee computer terminal equipment in the Territory.
Licensee shall bear the costs associated with obtaining, installing and
maintaining such data communications link and computer terminal equipment in the
Territory.
3.6 CONFIDENTIALITY AND OTHER TERMS. Subject to the consent of
▇.▇. ▇▇▇▇▇▇▇ & Company, on the Effective Date Licensee shall execute a
confidentiality/non-disclosure agreement with ▇.▇. ▇▇▇▇▇▇▇ & Company concerning
the Computer Software Systems in the form attached hereto as Exhibit C, if
required by ▇.▇. ▇▇▇▇▇▇▇ & Company. Licensee agrees that it shall be bound by
the terms and conditions of the Software License Agreement attached hereto as
Exhibit D (as may be revised or amended from time to time) with respect to the
Computer Software Systems; PROVIDED, that Licensee shall not be deemed to
receive any rights or benefits under such agreement by agreeing to be bound by
its terms. All of Licensee's rights to access the Computer Software Systems
shall arise pursuant to this Agreement.
3.7 LIMITATION OF DAMAGES. PriceSmart shall in no event be
liable to Licensee for any loss of profits, incidental damages or consequential
damages arising from or relating to the Computer Software Systems.
4. TECHNICAL SUPPORT SERVICE.
4.1 VSI and/or its Affiliates shall supply to Licensee such
training and management support as is outlined on Exhibit E. Licensee shall
reimburse the costs and expenses of such training and management support, as is
set forth in Exhibit E.
5. CONSIDERATION FOR LICENSE AND RIGHTS AND
REIMBURSEMENT OF EXPENSES.
5.1 REIMBURSEMENT OF EXPENSES. Any expenses reasonably required
in connection with the implementation and support of the Merchandise Business
System (other than expenses referenced in Section 3 and 4 of this Agreement)
shall be subject to the mutual consent of PriceSmart and Licensee, which consent
shall not be unreasonably withheld. To the extent PriceSmart advances such
expenses, Licensee shall promptly reimburse PriceSmart for such advances. In
addition, PriceSmart (or VSI, as the case may be) shall invoice Licensee each
month for any reimbursement of expenses owed under Section 3 or Section 4, and
Licensee shall remit payment to PriceSmart (or VSI, as the case may be) within
fourteen (14) days of receipt of each such invoice.
5.2 GROSS SALES ROYALTY. For the exclusive right to use the
PriceSmart Intellectual Property in the Territory pursuant to the license
granted in Section 2.1 above, Licensee shall pay to PriceSmart one-half of one
percent (0.5%) of the Gross Sales of all Territory Outlets and all other
applications of the Merchandise Business System (the "Gross Sales Royalty").
"Gross Sales" shall mean all receipts from sales of products, services, affinity
programs and memberships, rental of products, and all revenue otherwise received
by Licensee in
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connection with the Merchandise Business System (including gross receipts on
consigned goods and services).
5.3 DAILY SALES INFORMATION. At the end of every business day
(I.E., every day on which any Territory Outlet is open), Licensee will transmit
information for each warehouse gathered by the Point of Sale System to the MIS
Department of PriceSmart. Information to be transmitted daily will include:
sales by department and in total, transaction counts and item counts.
5.4 PAYMENT OF ROYALTIES. Based on the aggregate of the daily
sales information transmitted to PriceSmart for each PriceSmart Quarter,
Licensee shall pay the Gross Sales Royalty for such PriceSmart Quarter in United
States Dollars, with local currency being converted to United States Dollars in
accordance with Section 5.6. Payment by Licensee shall be made in full no later
than the fifteenth (15th) day of the PriceSmart Quarter subsequent to the
particular PriceSmart Quarter for which the Gross Sales Royalty is being
remitted.
5.5 METHOD OF PAYMENT. All payments made by Licensee to
PriceSmart under this Agreement shall be made by wire transfer, as PriceSmart
shall direct in United States Dollars. Any amounts not paid when due shall bear
interest at a rate that is four percent (4%) per annum above the prime lending
rate of Bank of America, N.A., compounded daily until paid in full.
5.6 CURRENCY EXCHANGE. For purposes of payment of the Gross
Sales Royalty pursuant to Section 5.4, the sales amounts for each business day
shall be converted between the local currency and the United States Dollar at
the prevailing sell rate on such day, as quoted by Bloomberg L.P. at 9:00 a.m.
New York City time on such day. For all other purposes under this Agreement,
conversion between the local currency and the United States Dollar shall be at
the prevailing sell rate on the day payment is due (or, if earlier, on the day
payment is made), as quoted by Bloomberg L.P. at 9:00 a.m. New York City time on
such day: provided, however, that if the payment due is reimbursement for
expenses paid by PriceSmart, VSI or their Affiliates, then such reimbursement
shall be at the prevailing sell rate on the date such expenses were incurred.
6. ADDITIONAL DUTIES OF LICENSEE.
6.1 COMPLIANCE WITH BUSINESS PLAN. Within thirty (30) days
following the Effective Date, with the assistance of PriceSmart or its
Affiliates, Licensee shall complete the Business Plan and provide it to
PriceSmart. In addition, during the final month of each PriceSmart Year,
Licensee shall provide to PriceSmart (i) the Business Plan, updated and revised
to cover the subsequent three (3) PriceSmart Years, and (ii) the budget of
Licensee for the subsequent one (1) PriceSmart Year, and Licensee shall use its
best efforts to comply with the Business Plan and such budget.
6.2 TERRITORY OUTLETS' NAME. Subject to Section 2.1, all
Territory Outlets shall be operated under the name "PriceSmart." The name and
its counterpart in the language of the
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Territory shall remain the exclusive property of PriceSmart, and shall be
considered part of the PriceSmart Intellectual Property.
6.3 OBSERVANCE OF PRICESMART SCHEDULE, POLICIES AND CORRECTIVE
ACTION. PriceSmart shall have the exclusive right to determine the schedule for
the establishment and opening dates of Territory Outlets and the location of
each Territory Outlet, it being understood that PriceSmart intends to establish
and open two stores in each of Costa Rica, the Dominican Republic, El Salvador
and Honduras, with the establishment and opening of a ninth store in Nicaragua
as an additional objective, subject to further review and analysis..
Additionally, in so establishing and operating Territory Outlets, and to protect
the goodwill of the PriceSmart Trademarks, Licensee shall comply with all
reasonable policies and standards established by PriceSmart for operation of a
Territory Outlet, including, but not limited to, the Guidelines, and those
Policies, Procedures, Construction Guidelines and Quality Standards described in
Exhibit F, as may be supplemented and amended from time to time by PriceSmart in
its reasonable discretion.
6.4 COMPLIANCE WITH LAWS; TAXES. In establishing and operating
Territory Outlets, Licensee shall observe and abide by all applicable laws,
ordinances, regulations, and licensing requirements of any governmental or
quasi-governmental entity. Licensee shall prepare and file, at its own expense,
all filings required by applicable tax and other laws in the Territory, and
shall pay all taxes required to be paid in connection with the establishment and
operation of Territory Outlets, their property and the income derived therefrom.
Licensee shall be responsible for the registration of this Agreement, if
required by law. Licensee agrees to comply with PriceSmart's policies on
ethical business conduct. Licensee shall not give anything of value to any
government official to obtain or retain business. Licensee understands the
provisions of the United States Foreign Corrupt Practices Act, and shall comply
with such law. Any failure to so comply shall be a material breach of this
Agreement.
6.5 INSURANCE. Licensee will obtain and maintain, at its
expense, a policy or policies of property, general liability and products
liability insurance, with endorsements naming as an additional insured
PriceSmart and its Affiliates. The policy or policies shall be in such amounts,
with such companies and containing such other provisions which shall be
satisfactory to PriceSmart. All such policies shall provide that the coverage
thereunder shall not be terminated without at least thirty (30) days' prior
written notice to PriceSmart and the other additional insureds. Licensee shall
provide copies of certificates of insurance to PriceSmart evidencing compliance
with this Section.
6.6 RECORDS. Licensee will maintain, in the English language,
complete financial and other records of all transactions involving the Territory
Outlets and this Agreement for at least five (5) years after each such record
has been created. All records shall be filed in such a way that PriceSmart
shall be able to access and use such records.
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6.7 INSPECTIONS. Licensee shall allow PriceSmart to inspect the
Territory Outlets from time to time to ensure the quality of the services
offered in connection with the PriceSmart Trademarks. At least once each
PriceSmart Year at the reasonable request of PriceSmart, Licensee shall submit
to PriceSmart for its approval a representative array of Licensee's goods,
advertisements and promotional materials ("Materials") bearing the PriceSmart
Trademarks. PriceSmart shall have two (2) weeks after receipt of such Materials
to approve or reject such Materials. If PriceSmart does not approve or reject
such Materials within such two (2) week period, the Materials shall be deemed
approved. After approval of any Materials by PriceSmart, the quality of all
goods, advertisements or promotional materials bearing the PriceSmart Trademarks
shall not materially depart from such approved quality.
6.8 INJUNCTIVE RELIEF. Licensee acknowledges that damages would
be an inadequate remedy for any breach of the provisions of Section 6.3.
Therefore, the obligations of Licensee hereunder shall be specifically
enforceable and PriceSmart shall be entitled to an injunction, or other
equitable relief from any court of competent jurisdiction, restraining any party
from committing any violations of the provisions of Section 6.3, and should such
injunction or decree issue in favor of any party, such party shall also be
entitled to all costs, expenses, and fees (including, without limitation,
attorneys' fees) incurred in connection with such action. Such remedies shall
be cumulative and not exclusive, and shall be in addition to any other remedy
any party may have.
6.9 VISAS AND WORK PERMITS. Licensee shall be responsible to
assure availability of visas and work permits from the governments of the
Territory to enable personnel of PriceSmart and VSI to perform their respective
rights and obligations hereunder.
6.10 MEMBERSHIP CARDS; RECIPROCAL MEMBERSHIPS. In the event that
Licensee utilizes memberships for its customers at the Territory Outlets,
Licensee shall issue membership cards to its members, and shall design its
membership cards in the manner as described in the Guidelines. PriceSmart and
Licensee agree to permit reciprocal shopping privileges between members of the
Territory Outlets and members of any other outlets licensed or operated by
PriceSmart.
7. MERCHANDISING.
7.1 PRODUCT SOURCING. PriceSmart shall be Licensee's exclusive
supplier of merchandise purchased from suppliers located in the United States or
from suppliers elsewhere with which PriceSmart deals and which are on a written
list of suppliers provided by PriceSmart to Licensee on an annual basis.
Licensee agrees to resell merchandise purchased hereunder in the Territory only.
7.2 OTHER SUPPLIERS. The foregoing notwithstanding, Licensee
may purchase merchandise directly from U.S. suppliers or from the listed non
U.S. suppliers on the following conditions:
7.2.1 Licensee must provide to PriceSmart a written
notice and a copy of an open bona fide written offer from such suppliers to sell
such merchandise on a landed basis,
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specifying the identity of the proposed supplier, the exact product description,
quality and manufacturing specifications and the exact proposed price and terms
of sale and payment; and
7.2.2 PriceSmart shall have the right to match such
offer to Licensee with merchandise meeting or beating such product description,
quality, price and terms from the same or another source of supply, by written
notice given to Licensee within forty eight (48) hours of receipt by PriceSmart
of Licensee's notice and such offer to sell. If PriceSmart fails to give such
written notice that it will match the offer, Licensee may purchase directly,
with no payment to PriceSmart on such sale.
7.3 PRECLUDED SUPPLIERS. Licensee agrees not to deal with any
supplier which does business with PriceSmart without PriceSmart's prior written
consent. Licensee shall not purchase merchandise or services from an entity
owned in any part, directly or indirectly, by any of Walmart Stores, Inc., SHV
Holdings, N.V. (Makro), ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation, Kmart Corporation, The Home
Depot, Inc., Office Depot, Inc., Costco Companies, Inc., Carrefour, S.A., BJ's
Wholesale Club, Inc. and each of their receptive affiliates, without
PriceSmart's prior written consent.
7.4 RELATED SERVICES. In connection with sales of merchandise
to Licensee, PriceSmart will also: provide a menu of products to be approved by
Licensee for import into the Territory and will establish pricing and terms with
the vendors of such products; provide replenishment services to manage planned
inventory levels; assist in developing plans, controlling inventories, and
presenting new products and/or programs; negotiate ocean shipments on behalf of
Licensee, as requested by Licensee; assist in preparation and sourcing of
documents required to import to the Territory products sold by PriceSmart;
assist in the selection of an import broker and in establishing an in-Territory
distribution, storage and handling system for imported goods, as requested by
Licensee; utilize its systems to assist Licensee in assuring net landed costs
are accurate and include all costs; and recommend selling prices and initial
▇▇▇▇-ups on individual products designed to achieve overall margin goals
(however, Licensee shall set its resale prices in its own discretion).
7.5 ADDITIONAL SERVICES. In the event Licensee requests
PriceSmart to assist Licensee in the sourcing or shipment of merchandise not
sold by PriceSmart (pursuant to Section 7.2) Licensee shall pay to PriceSmart a
reasonable fee for such service, the amount of such fee to be agreed upon at the
time of such request.
7.6 PRICES; TERMS OF SALE. All prices for merchandise shall be
set by PriceSmart to constitute reimbursement of all of PriceSmart's direct
costs to deliver the merchandise to Buyer at the agreed location of an FCA
basis, as described herein, plus a services payment equal to two percent (2%) of
such costs. Each billing for goods sold to Licensee by PriceSmart shall include
the services payment charge. All sales will be on FCA terms, as defined in
Incoterms, 1990 edition.
7.7 ORDERING OF MERCHANDISE AND PAYMENT. Licensee shall order
and pay for merchandise purchased from PriceSmart in accordance with procedures
set forth in Exhibit G.
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8. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.
8.1 FILINGS. PriceSmart shall have the exclusive right to file
and maintain any and all trademark and other registrations required to protect
PriceSmart Intellectual Property and the Computer Software Systems in the
Territory. Licensee shall cooperate with PriceSmart in such filings.
8.2 OWNERSHIP. Licensee acknowledges that, as between it and
PriceSmart, the Computer Software Systems, all PriceSmart Trademarks and all
other PriceSmart Intellectual Property are owned by PriceSmart. Any use by
Licensee of PriceSmart Intellectual Property shall inure to the exclusive
benefit of PriceSmart.
8.3 DERIVATIVE WORKS. Licensee shall not, and will not permit
any other person under its control to, copy, make derivations of or adapt any
portion of the Computer Software Systems or any PriceSmart Intellectual
Property, except with the prior written consent of PriceSmart.
8.4 USE. Licensee shall not use, and will not permit any other
person to use, any PriceSmart Trademarks or PriceSmart's trade names, or any
service marks, trade names or trademarks confusingly similar thereto, except
with the express prior written consent of PriceSmart, and then solely in
connection with Licensee's establishment and operation of Territory Outlets and
the advertising and promotion of such Territory Outlets.
8.5 NOTICE. Licensee shall use any PriceSmart Trademarks in
compliance with PriceSmart's instructions, and with the "TM" or "-Registered
Trademark-" designation or such other notice or identification as is specified
by PriceSmart.
8.6 THIRD PARTY INFRINGEMENT.
8.6.1 In the event that any person or entity is
infringing or is making any use of any portion of the Computer Software Systems
or any PriceSmart Intellectual Property, PriceSmart shall promptly decide
whether or not to institute any legal action against any alleged infringer of
PriceSmart's Intellectual Property or the Computer Software Systems in the
Territory (an "Infringer").
8.6.2 Licensee shall cooperate fully with PriceSmart in
any legal action taken by PriceSmart and, if requested by PriceSmart, and at
PriceSmart's expense, be a co-plaintiff, assign its right to PriceSmart, or take
such steps to allow PriceSmart to enforce the legal rights of both parties;
PriceSmart shall reimburse Licensee for any losses incurred by Licensee as a
result of Licensee being a co-plaintiff at PriceSmart's request, except to the
extent such losses arise out of or relate to the conduct of the Territory
Outlets or any other activity of Licensee. Licensee shall not take action on
behalf of PriceSmart Intellectual Property against an Infringer without
PriceSmart's prior written consent.
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9. INDEMNITIES.
9.1 LICENSEE INDEMNITY AND HOLD HARMLESS. Licensee hereby
indemnifies PriceSmart, its Affiliates, officers, directors, shareholders,
employees and representatives (each, a "PriceSmart Indemnified Party") against,
and releases and holds each PriceSmart Indemnified Party harmless from, any and
all claims, costs, losses, damages, liabilities and expenses incurred by such
party, including, without limitation, settlement costs and reasonable attorneys'
fees and disbursements, arising out of or relating to the conduct of Territory
Outlets or any other activity of Licensee.
9.2 PRICESMART INDEMNITY AND HOLD HARMLESS. PriceSmart hereby
indemnifies Licensee, its Affiliates, officers, directors, shareholders,
employees and representatives (each, a "Licensee Indemnified Party") against,
and releases and holds each Licensee Indemnified Party harmless from, any and
all claims, costs, losses, damages, liabilities and expenses incurred by such
party, including, without limitation, settlement costs and reasonable attorneys'
fees and disbursements, arising out of activities of PriceSmart unrelated to the
Territory Outlets.
9.3 SURVIVAL. The indemnity obligations in this Section 9 shall
survive expiration or termination of this Agreement for any reason.
10. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
10.1 CONFIDENTIALITY. During the term of the Agreement and for
three (3) years thereafter, Licensee and its Affiliates shall maintain in strict
confidence all information Licensee or its Affiliates have obtained or shall
obtain from PriceSmart or its Affiliates, pursuant to this Agreement or
otherwise, relating to the business, operations, properties, assets, products,
condition (financial or otherwise), liabilities, employee relations, customers,
suppliers, prospects, technology, or trade secrets of PriceSmart or its
respective Affiliates; except to the extent such information (i) is in the
public domain through no act or omission of the disclosing party; (ii) is
required to be disclosed by law, or (iii) is independently learned by the
disclosing party outside of this relationship ("Confidential Information").
Neither Licensee nor its Affiliates shall issue any press release or make any
public announcement concerning the transactions contemplated hereby without the
prior written consent of PriceSmart. Licensee agrees to (i) cause the
employees, agents or representatives of Licensee who may have access to
Confidential Information relating to PriceSmart to enter into an appropriate
written confidentiality and proprietary rights agreement, in a form reasonably
acceptable to PriceSmart prior to disclosing any such Confidential Information
to such employees, agents or representatives, and (ii) immediately deny access
to such Confidential Information to any individual who breaches such agreement.
PriceSmart shall be a third party beneficiary of each such agreement. Licensee
shall use its best efforts to protect the Confidential Information, and shall
not use the Confidential Information for its own benefit or the benefit of any
other person or entity, except as may be specifically permitted in this
Agreement.
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10.2 NON-COMPETITION.
10.2.1 In order to preserve for the benefit of PriceSmart
the value of Confidential Information relating to PriceSmart, Licensee agrees
that neither it, its Affiliates nor the Key Employees shall engage in, be
employed by, consult for or invest in a business which is similar to or competes
with the Merchandise Business System, including, among other things, discount
stores, warehouse stores, and hypermarkets, during the term of this Agreement
and for three (3) years thereafter; provided, however, that: (i) Key Employees
and the Affiliates of Licensee may continue to engage in, be employed by,
consult for and invest in any business where such engagement, employment,
consultation or investing relationship exists as of the date of this Agreement.
"Key Employees" as used herein means employees who hold the following positions:
Operations/Store Manager, Administrative/Accounting Supervisor, Merchandise
Buyer, Information Systems Supervisor, Front End Manager, Receiving Manager,
Membership/Marketing Manager and Merchandise Manager.
10.2.2 It shall be the obligation of Licensee, no later
than ninety (90) days following the Effective Date, to procure from all Key
Employees and Affiliates their written agreement to abide by the covenant set
forth in Section 10.2.1 in a form reasonably acceptable to PriceSmart, and
PriceSmart shall be a third party beneficiary of each such agreement.
11. TERM.
11.1 Unless terminated earlier pursuant to Section 12, this
Agreement shall have a term consisting of twenty (20) years commencing on the
Effective Date.
12. TERMINATION.
12.1 TERMINATION BY EITHER PARTY. This Agreement may be
terminated upon written notice, immediately, by either party if any of the
following occur:
12.1.1 The other party becomes unable to pay its
debts as they mature in the ordinary course of business or makes an assignment
for the benefit of creditors;
12.1.2 The other party materially breaches or fails
to perform any obligation or covenant in this Agreement and fails to cure such
breach or failure within ten (10) days following notice thereof by the party;
provided, that if such breach or failure cannot be cured within such ten (10)
day period, then the other party shall not be deemed to be in breach hereunder
if it has commenced a cure within such ten (10) day period and the other party
diligently completes such cure as soon as possible, and within a sixty (60) day
period; or
12.1.3 The other party materially breaches or fails
to perform any obligation or covenant in this Agreement for the third time
during any twelve (12) month period.
12.2 TERMINATION BY PRICESMART. This Agreement may be terminated
upon written notice, effective immediately, by PriceSmart if either of the
following shall occur:
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12.2.1 The Shareholders' Agreement is terminated by
PriceSmart; or
12.2.2 Licensee fails for any reason in any
PriceSmart Year to have average Gross Sales per Territory Outlet, for those
Territory Outlets which are at least 4,000 square meters in size and which
have been open for at least twelve (12) consecutive months, of at least
US$20,000,000; provided, however, that a Territory Outlet may be excluded
from the determination of average Gross Sales per Territory Outlet where such
Territory Outlet has been materially affected by fire, flood, earthquake,
war, epidemic, freight embargoes, or unusually severe weather.
12.3 EFFECT OF TERMINATION. Subject to the other provisions of
this Section 12, upon termination or expiration of this Agreement for any
reason:
12.3.1 The licenses referred to in Section 2.1, the
rights of access referred to in Section 3.1 and the services referred to in
Sections 4 and 7 shall terminate forthwith and automatically;
12.3.2 Each party shall return to the other all
proprietary and confidential information obtained from such other party in
connection with this Agreement and shall forthwith pay to the other all amounts
due hereunder;
12.3.3 Licensee shall cease forthwith to use any
Computer Software Systems, PriceSmart Trademarks, and other PriceSmart
Intellectual Property and shall return all materials, written or otherwise,
delivered by PriceSmart to Licensee in connection with this Agreement; and
12.3.4 All obligations of the parties hereunder
shall terminate prospectively forthwith (other than those set forth in
Sections 5, 6.6, 6.7, 6.8, 8, 9, 10, 13 and 15, which shall survive indefinitely
or as specified therein).
12.4 LEGAL REMEDIES. The termination or expiration of this
Agreement shall not affect the legal rights or remedies of either party arising
from any material breach of this Agreement prior to such termination.
13. ARBITRATION.
13.1 Except for injunctive relief under Sections 6.8, 9 and
10, all disputes and claims concerning the validity, interpretation,
performance, termination and/or breach of this Agreement ("Dispute(s)") shall be
referred for final resolution to arbitration in Miami, Florida, U.S.A. under
UNCITRAL Rules as administered by the American Arbitration Association (the
"Rules"). All proceedings shall be conducted in the English language. The
parties hereby agree that arbitration hereunder shall be the parties' exclusive
remedy and that the arbitration decision and award, if any, shall be final,
binding upon, and enforceable against, the parties, and may be
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confirmed by the judgment of a court of competent jurisdiction. In the event of
any conflict between the Rules and this paragraph, the provisions of this
paragraph shall govern.
13.2 Notwithstanding the above, a party may bring court
proceedings against any other party (i) to obtain preliminary injunctive relief
pending completion of arbitration, or (ii) as part of litigation commenced by a
third party. The parties hereby submit to personal jurisdiction in the State of
Florida. The prevailing party in any arbitration or court proceeding shall be
awarded its reasonable attorneys' fees against the non-prevailing party or
parties.
14. REPRESENTATIONS AND WARRANTIES.
14.1 Licensee represents and warrants to PriceSmart as follows:
Licensee is a corporation duly organized, validly existing and in good standing
under the laws of the British Virgin Islands is qualified to operate a retail
sales business in the Territory and is qualified to lease and own real estate in
the Territory under the laws of the Territory. Licensee has full corporate
power and authority to execute and deliver this Agreement, consummate the
transactions contemplated hereby and perform its obligations hereunder.
15. GENERAL PROVISIONS.
15.1 NO WITHHOLDINGS AND DEDUCTIONS. Licensee shall make all
payments free and clear and without subtraction of any taxes, deductions,
withholdings, conversion fees, wire transfer fees or offset of any kind. All
such taxes and fees shall be Licensee's responsibility. Licensee may not
offset, deduct or withhold amounts owed it by PriceSmart. Any withholding taxes
imposed by any jurisdiction are the responsibility of Licensee and shall be paid
by Licensee. Time is of the essence on all payments due under this Agreement.
15.2 RELATIONSHIP OF THE PARTIES. Neither party hereto is an
agent or representative of the other party. Both parties acknowledge that the
relationship of Licensee to PriceSmart shall be and at all times remain one of
an independent contractor. Except as otherwise provided herein, neither party
shall have the right or authority to assume, create or enlarge any obligations
or commitment on behalf of the other party and shall not represent itself as
having the authority to bind the other party in any manner.
15.3 ASSIGNMENT. Neither party shall assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party, PROVIDED, that PriceSmart may,
without Licensee's prior written consent, assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement to (i) an Affiliate, (ii)
an entity into which or with which PriceSmart is merged or consolidated, or
(iii) an entity acquiring substantially all the assets of PriceSmart.
15.4 AMENDMENTS. Amendments to this Agreement may be made only
by mutual agreement of the parties in writing.
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15.5 EXPENSES. Each of the parties shall bear its own expenses
incurred in connection with the negotiation, execution and delivery of this
Agreement.
15.6 NO WAIVER. The failure of either party to insist upon the
strict observance and performance of the terms of this Agreement shall not be
deemed a waiver of other obligations hereunder, nor shall it be considered a
future or continuing waiver of the same terms.
15.7 NOTICE. All notices and other communications under the
Agreement shall be in writing, shall be delivered by facsimile transmission, air
courier service, in person or by registered or certified mail with return
receipt requested, and shall be deemed to have been duly given on the date of
any receipt or record maintained by the service or person making delivery.
Delivery shall be to the address set forth below or such other address or
facsimile number as may hereafter be furnished in writing by either party to the
other. The current address for each party is set forth below the signatures,
hereinbelow.
15.8 VALIDITY OF AGREEMENT. In the event any provision, or
portion thereof, of this Agreement is held by a court having proper jurisdiction
to be for any reason unenforceable or invalid, the remaining provisions, or
portions thereof, of this Agreement shall continue to exist and shall remain in
full force and effect.
15.9 APPLICABLE LAW. This Agreement shall be interpreted in
accordance with, and all questions concerning the validity, interpretation,
performance or breach of this Agreement shall be governed by, the laws of the
State of Florida, U.S.A.
15.10 LANGUAGE. The official version of this Agreement is in
the English language, and shall govern over any non-English translations.
15.11 INTEGRATION. This Agreement is the only agreement
between the parties with respect to the subject matter contained herein. This
Agreement supersedes all prior oral or written understandings, agreements and
offers between the parties related to such subject matter.
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IN WITNESS WHEREOF, the parties, having full power and authority to enter
into this Agreement, have executed this Agreement as of the following Effective
Date: [_________], 1998.
LICENSEE: PSMT Caribe, Inc.
By
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(Print Name and Title)
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Fax Number:
PRICESMART: PRICESMART, INC.
By
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(Print Name and Title)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
VSI:
(As to Sections 1, 4, 5.1, 5.5,
5.6, 6.8, 12, 13 and 15) VENTURES SERVICES, INC.
By
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(Print Name and Title)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
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