EXHIBIT 10.16
Puerto Rico
All Brands
INTERNATIONAL MASTER BOTTLING AGREEMENT
Between
PEPSICO, INC.
and
PEPSIAMERICAS, INC.
INTERNATIONAL MASTER BOTTLING AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of October 15, 1999, is
made and entered into by and between PEPSICO, INC., a corporation organized and
existing under the laws of the State of North Carolina having its principal
place of business in Purchase, New York (the "Company"), and PepsiAmericas,
Inc., a corporation organized and existing under the laws of the State of
Delaware having its principal place of business in Memphis, Tennessee (the
"Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the "Concentrates")
for the Beverages (as hereinafter defined). The Company authorizes others
to manufacture the syrups prepared from the Concentrates for the Beverages
(the "Syrups") and to manufacture from the Syrups and sell the fountain
syrup and the bottle and canned soft drinks identified on Schedule A (the
fountain syrup and the bottle and canned soft drinks identified on Schedule
A, as modified from time to time under paragraphs 21 and 22, are together
referred to herein as the "Beverages"). The formulas for the Concentrates,
Syrups and Beverages constitute trade secrets owned by the Company;
B. The Company is the owner of certain proprietary intellectual property,
including, without limitation, trademarks, trade dress, logos, designs and
slogans, used in connection with the brands listed in Schedule A (together
with such other trademarks as may be authorized by the Company from time to
time for current use by the Bottler under this Agreement, the
"Trademarks"), which, among other things, identify and distinguish the
Concentrates and the Beverages;
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C. The primary business of the Bottler is to act as a Bottler of the
Beverages, either directly pursuant to certain agreements with the Company
(collectively, together with all amendments thereto, the "Existing Bottling
Appointments"), or indirectly through one or more persons controlling,
controlled by or under common control with the Bottler (the "Bottler
Affiliates");
D. The reputation of the Beverages as being of consistently superior quality
has been a major factor in stimulating and sustaining demand for the
Beverages, and special technical skill and constant diligence on the part
of the Bottler and the Company are required in order for the Beverages to
maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Beverages
have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Bottling Appointments,
and as a consequence, the Company and the Bottler desire to amend the
Existing Bottling Appointments, the terms of the Existing Bottling
Appointments, as so amended, being replaced and restated in the form of
this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Bottler agree as follows:
ARTICLE I
The Authorization
1. The Company authorizes the Bottler, and the Bottler undertakes, to
manufacture and package the Beverages and to distribute and sell the
Beverages only in Authorized Containers, as hereinafter defined, under the
Trademarks in and throughout the territory described in Schedule B
(together with any territories added under paragraph 31, and subject to the
possible elimination of subterritories under paragraph 29, the
"Territory"). The Bottler may conduct any of the activities with respect to
which it is authorized or appointed and satisfy any duty or obligation
imposed upon it under this Agreement through subsidiaries in which Bottler
owns at least fifty-one percent (51%) of the outstanding stock and voting
power (whether such ownership is direct or indirect) provided that the
Bottler shall remain responsible for all obligations imposed under this
Agreement
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2. The Company will, from time to time, in its discretion, approve containers
of certain types, sizes, shapes and other distinguishing characteristics
(collectively, subject to any additions, deletions and modifications by the
Company, the "Authorized Containers"). A list of Authorized Containers for
each Beverage will be provided by the Company to the Bottler, which list
may be amended by the Company from time to time by additions, deletions or
modifications. The Bottler is authorized to use only Authorized Containers
in the manufacture, distribution and sale of the Beverages. The Company
reserves the right to withdraw from time to time its approval of any of the
Authorized Containers upon six (6) months notice to the Bottler, and, in
such event, the repurchase provisions of subparagraph 28(e) shall apply to
containers so disapproved that are owned by the Bottler. The Company will
exercise its right to approve, and to withdraw its approval of, specific
Authorized Containers in good faith so as to permit the Bottler to continue
to fully meet the demand in the Territory as a whole for Beverages.
ARTICLE II
Exclusive Authorization
3. The Company appoints the Bottler as its sole and exclusive purchaser of the
Concentrates for the purpose of manufacture, packaging and distribution of
the Beverages under the Trademarks in Authorized Containers for sale in the
Territory.
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4. The Company agrees not to authorize any other party whatsoever to use the
Trademarks on Beverages in Authorized Containers for purposes of resale in
the Territory.
5. The Bottler shall purchase its entire requirements of Concentrates
exclusively from the Company and shall not use any other syrup, beverage
base, concentrate or other ingredient in the Beverages than as specified by
the Company.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
6. The Bottler acknowledges that the Company is the sole and exclusive owner
of the Trademarks, and the Bottler agrees not to question or dispute the
validity of the Trademarks or their exclusive ownership by the Company. By
this Agreement, the Company extends to the Bottler only: (i) a nonexclusive
license to use the trademark "Pepsi-Cola" as part of the corporate name of
the Bottler; and (ii) an exclusive license to use the Trademarks solely in
connection with the manufacture, packaging, distribution, and sale of the
Beverages in Authorized Containers in the Territory subject to the rights
reserved to the Company under this Agreement. Nothing herein, nor any act
or failure to act by the Bottler or the Company, shall give the Bottler any
proprietary or ownership interest of any kind in the Trademarks or in the
goodwill associated therewith.
7. The Bottler agrees during the term of this Agreement and in accordance with
any requirements imposed upon the Bottler under applicable laws:
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(a) Not to produce, manufacture, package, sell, deal in or otherwise use
or handle, directly or indirectly, in the Territory any beverage
products other than the Beverages authorized hereunder and the
following non PepsiCo brands: Seven-Up, Diet Seven-Up, Welsh's Grape,
Cristalia Water, Sunkist, Fruit Bunch, Schweppes tonic water, club
soda and ginger ale and Seagram's tonic water, club soda and ginger
ale. No other brands will be sold by the Bottler in the Territory
without the prior approval of the Pepsi-Cola International ("PCI"), or
failing agreement of PCI and the Bottler as to the introduction of new
brands, the approval of the Chief Executive Officer of the Pepsi-Cola
Company;
(b) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any concentrate, beverage base, syrup,
beverage or any other product which is likely to be confused with, or
passed off for, any of the Concentrates or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trade dress or in any
container that is an imitation of a trade dress or container in which
the Company claims a proprietary interest or which is likely to be
confused or cause confusion or be confusingly similar to or be passed
off as such trade dress or container;
(d) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trademark or other
designation that is an imitation, counterfeit, copy or infringement
of, or confusingly similar to, any of the Trademarks; and
(e) Not to acquire or hold, directly or indirectly, any ownership interest
in, or, directly or indirectly, enter into any contract or arrangement
with respect to, the management or control of, any person within or
without the Territory that engages in any of the activities prohibited
by subparagraphs (a), (b), (c) or (d) of this paragraph 7.
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ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Beverages
8.
(a) The Bottler represents and warrants that the Bottler possesses, or
will possess, in the Territory, prior to the manufacture, packaging
and distribution of the Beverages, and will maintain during the term
of this Agreement, such plant or plants, machinery and equipment,
trained staff, and distribution and vending facilities as are capable
of manufacturing, packaging and distributing the Beverages in
Authorized Containers in accordance with this Agreement, in compliance
with all applicable governmental and administrative requirements, and
in sufficient quantities to fully meet the demand for the Beverages in
Authorized Containers in the Territory.
(b) The Company and the Bottler acknowledge that each is or may become a
party to one or more agreements authorizing a bottler or other
Company-authorized entity to produce Beverages for sale by another
bottler. Such agreements include, but are not limited to (i)
agreements permitting bottlers, subject to certain conditions, to
commence or continue to manufacture the Beverages for other bottlers,
and (ii) agreements pursuant to which bottlers may have the Beverages
manufactured for them by other Company-authorized entities. It is
hereby agreed that the Company shall not unreasonably withhold (i) any
consents required by such agreements, or (ii) approval of Bottler's
participation in such agreements. All such existing agreements shall
remain in full force and effect in accordance with their terms.
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9. The Bottler recognizes that increases in the demand for the Beverages, as
well as changes in the list of Authorized Containers, may, from time to
time, require adaptation of its existing manufacturing, packaging or
delivery equipment or the purchase of additional manufacturing, packaging
and delivery equipment. The Bottler agrees to make such modifications and
adaptations as necessary and to purchase and install such equipment, in
time to permit the introduction and manufacture, packaging and delivery of
sufficient quantities of the Beverages in the Authorized Containers, to
fully meet the demand for the Beverages in Authorized Containers in the
Territory.
10. The Bottler warrants that the handling and storage of the Concentrates; and
the manufacture, handling, storage, and packaging of the Beverages shall be
accomplished in accordance with the Company's quality control and
sanitation standards, as reasonably established by the Company and
communicated to the Bottler from time to time, and shall, in any event,
conform with all food, labeling, health, packaging and other relevant laws
and regulations applicable in the Territory.
11. The Bottler, in accordance with such instructions as may be given from time
to time by the Company, shall submit to the Company, at the Bottler's
expense, samples of the Beverages and the raw materials used in the
manufacture of the Beverages. The Bottler shall permit representatives of
the Company to have access to the premises of the Bottler during ordinary
business hours to inspect the plant, equipment, and methods used by the
Bottler in order to ascertain whether the Bottler is complying with the
instructions and standards prescribed for the manufacturing, handling,
storage and packaging of the Beverages.
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12.
(a) For the packaging, distribution and sale of the Beverages, the Bottler
shall use only such Authorized Containers, closures, cases, cartons
and other packages and labels as shall be authorized from time to time
by the Company for the Bottler and shall purchase such items only from
manufacturers approved by the Company, which approval shall not be
unreasonably withheld. Such approval by the Company does not relieve
the Bottler of the Bottler's independent responsibility to assure that
the Authorized Containers, closures, cases, cartons and other packages
and labels purchased by the Bottler are suitable for the purpose
intended, and in accordance with the good reputation and image of
excellence of the Trademarks and Beverages.
(b) The Bottler shall maintain at all times a stock of Authorized
Containers, closures, labels, cases, cartons, and other essential
related materials bearing the Trademarks, sufficient to fully meet the
demand for Beverages in Authorized Containers in the Territory, and
the Bottler shall not use or permit the use of Authorized Containers,
or such closures, labels, cases, cartons and other materials, if they
bear the Trademarks or contain any Beverages, for any purpose other
than the packaging and distribution of the Beverages. The Bottler
further agrees not to refill or otherwise reuse nonreturnable
containers.
13. If the Company determines the existence of quality or technical
difficulties with any Beverage, or any package used for such product, the
Company shall have the right, immediately and at its sole option, to
withdraw such product or any such package from the market. The Company
shall notify the Bottler in writing of such withdrawal, and the Bottler
shall, upon receipt of notice, immediately cease distribution of such
product or such package therefor. If so directed by the Company, the
Bottler shall recall and reacquire the product or package involved from any
purchaser thereof. If any recall of any product or any of the packages used
therefor is caused by (i) quality or technical defects in the Concentrate,
or other materials prepared by the Company from which the product involved
was prepared by the Bottler, or (ii) quality or technical defects in the
Company's designs and design specifications of packages which it has
imposed on the Bottler or the Bottler's third party suppliers if such
designs and specifications were negligently established by the Company (and
specifically excluding designs and specifications of other parties and the
failure of other parties to manufacture packages in strict conformity with
the designs and specifications of the Company), the Company shall reimburse
the Bottler for the Bottler's total expenses incident to such recall.
Conversely, if any recall is caused by the Bottler's failure to comply with
instructions, quality control procedures or specifications for the
preparation, packaging and distribution of the product involved, the
Bottler shall bear its total expenses of such recall and reimburse the
Company for the Company's total expenses incident to such recall.
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ARTICLE V
Conditions of Purchase and Sale
14. The Company reserves the right to establish and to revise at any time, in
its sole discretion, the price of any of the Concentrates, the terms of
payment, and the other terms and conditions of supply, any such revision to
be effective immediately upon notice to the Bottler. If Bottler rejects a
change in price or the other terms and conditions contained in any such
notice, then the Bottler shall so notify the Company within thirty (30)
days of receipt of the Company's notice, and this Agreement will terminate
ninety (90) days after the date of such notification by the Bottler,
without further liability of the Company or the Bottler. The change in
price or other terms and conditions so rejected by the Bottler shall not
apply to purchases of such Concentrate by the Bottler during such ninety
(90) day period preceding termination. Failure by the Bottler to notify the
Company of its rejection of the changes in price or such other terms and
conditions shall be deemed acceptance thereof by the Bottler.
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15. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Beverages. The Bottler
shall not sell or otherwise transfer any Concentrate or permit the same to
get into the hands of third parties.
16.
(a) The Bottler agrees not to distribute or sell any Beverage outside the
Territory except pursuant to another bottling agreement granted by the
Company. The Bottler shall not sell any Beverage to any person (other
than another Bottler pursuant to subparagraph 8(b)) for ultimate sale
outside the Territory. If any Beverage distributed by the Bottler is
found outside of the Territory, Bottler shall be deemed to have
transshipped such Beverage and shall be deemed to be a "Transshipping
Bottler" for purposes hereof. For purposes of this Agreement,
"Offended Bottler" shall mean a Bottler in any territory into which
any Beverage is transshipped.
(b) In addition to all other remedies the Company may have against any
Transshipping Bottler for violation of this paragraph 16, the Company
may impose upon any Transshipping Bottler a charge for each case of
Beverage transshipped by such Bottler. The per-case amount of such
charge shall be determined by the Company in its sole discretion. The
Company and the Bottler agree that the amount of such charge shall be
deemed to reflect the damages to the Company, the Offended Bottler and
the bottling system. In addition, the Company may directly charge the
Transshipping Bottler the full amount of all investigative and other
costs incurred by the Company in connection with the transshipment and
such Transshipping Bottler shall be obligated to pay such amount. The
Company shall forward to the Offended Bottler, upon receipt from the
Transshipping Bottler, the full amount of the per case charge so
received (but not including investigative and other costs charged to
the Transshipping Bottler by the Company). If the Company or its agent
recalls any Beverage which has been transshipped, the Transshipping
Bottler shall, in addition to any other obligation it may have
hereunder, reimburse the Company for its costs of purchasing,
transporting, and/or destroying such Beverage.
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ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
17. The continuing responsibility to increase and fully meet the demand for the
Beverages in Authorized Containers within the Territory rests upon the
Bottler. The Bottler agrees to use all approved means as may be reasonably
necessary to meet this responsibility.
18.
(a) The Bottler will push vigorously the sale of the Beverages in
Authorized Containers throughout the entire Territory. Without in any
way limiting the Bottler's obligation under this Paragraph 18, the
Bottler must fully meet and increase the demand for the Beverages
throughout the Territory and secure full distribution up to the
maximum sales potential therein through all distribution channels or
outlets available to soft drinks, using any and all equipment
reasonably necessary to secure such distribution; must service all
accounts with frequency adequate to keep them at all times fully
supplied with the Beverages and must use its own salesmen and trucks,
(or salesmen and trucks of independent distributors, of whom the
Company approves), in quantity adequate for all seasons.
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(b) The parties agree that to fully meet and increase demand for the
Beverages in Authorized Containers advertising and other forms of
marketing activities are required. Therefore, the Bottler will spend
such funds in advertising and marketing the Beverages as may be
reasonably required to increase, as well as maintain, demand for the
Beverages in Authorized Containers in the Territory. The Bottler shall
fully cooperate in and vigorously push all cooperative advertising and
sales promotion programs and campaigns that may be reasonably
established by the Company for the Territory. The Bottler will use and
publish only such advertising, promotional materials or other items
bearing the Trademarks relating to the Beverages as the Company has
approved and authorized. The expenditures required by this Article VI
shall be made by the Bottler. The Company may, in its sole discretion,
contribute to such expenditures. The Company may also undertake, at
its expense, independently of the Bottler's marketing programs, any
advertising or promotional activity that the Company deems appropriate
to conduct in the Territory, but this shall in no way affect the
responsibility of the Bottler for increasing the demand for the
Beverages in Authorized Containers in the Territory.
19. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and all
Bottler Affiliates directly or indirectly controlled by the Bottler will be
financially able to perform their respective duties and obligations under
this Agreement and under all other agreements between the Company and
Bottler Affiliates regarding the manufacture, packaging, distribution and
sale of the Beverages in "authorized containers" (as defined in such
agreements).
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20.
(a) The Company and the Bottler have agreed upon a business plan for the
first three years occurring during the term of this Agreement. Since
periodic planning is essential for the proper implementation of this
Agreement, the Bottler and the Company shall meet each year at such
date as the parties may set (but no later than ninety (90) days prior
to the commencement of any calendar year during the term of this
Agreement beginning with the commencement of the calendar year closest
to the anniversary date of this Agreement), to discuss the Bottler's
plans for the ensuing three (3) year period. At such meeting, the
Bottler shall present a plan that sets out in reasonable detail
satisfactory to the Company: (i) the marketing, management and
advertising plans of the Bottler with respect to the Beverages for the
ensuing year, including a financial plan showing that the Bottler and
all Bottler Affiliates have the consolidated financial capacity to
perform their respective duties and obligations under this Agreement
for such ensuing year and (ii) the projected sales, marketing and
advertising plans and related equipment placements for the two years
immediately following such year. The Company and the Bottler shall
discuss this plan and this plan, upon approval by the Company which
shall not be unreasonably withheld, shall define the Bottler's
obligation herein to maintain such consolidated financial capacity,
and to increase and fully meet the demand for the Beverages in
Authorized Containers in the Territory for the period of time covered
by the plan.
(b) The Bottler shall report to the Company periodically, but not less
than quarterly, as to its implementation of the approved plan; it is
understood, however, that the Bottler shall report sales on a regular
basis as requested by the Company and in such format and detail, and
containing such information as may be reasonably requested by the
Company. The failure by the Bottler to carry out the plan, or if the
plan is not presented or is not approved, will constitute a primary
consideration for determining whether the Bottler has fulfilled its
obligation to maintain the consolidated financial capacity required
under paragraph 19, to push vigorously the sale of Beverages in
Authorized Containers throughout the Territory and to increase and
fully meet the demand for the Beverages in Authorized Containers in
the Territory. If the Bottler carries out the plan in all material
respects, it shall be deemed to have satisfied the obligations of the
Bottler under paragraphs 17, 18, 19 and 20 for the period of time
covered by the plan.
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ARTICLE VII
Reformulation, New Products and Related Matters
21. The Company has the sole and exclusive right and discretion to reformulate
any of the Beverages. In addition, the Company has the sole and exclusive
right and discretion to discontinue any of the Beverages under this
Agreement, provided (i) such Beverage is discontinued in the United States
in Authorized Containers and in such other containers as may have been
authorized for use by other bottlers under their respective bottle
contracts and (ii) the Company does not discontinue all Beverages under
this Agreement. In the event that the Company discontinues any Beverage,
Schedule A to this Agreement shall be deemed amended by deleting the
discontinued Beverage from the list of Beverages set forth on Schedule A.
22. In the event that the Company introduces any new beverage in the Territory
under the trademarks of the Beverages or any modification thereof (herein
defined to mean the addition of a prefix, suffix or other modifier used in
conjunction with the trademarks of the Beverages), the Bottler shall be
obligated to manufacture, package, distribute and sell such new beverage in
Authorized Containers in the Territory pursuant to the terms and conditions
of this Agreement, and Schedule A to this Agreement shall be deemed amended
by adding such new beverage to the list of beverages set forth on Schedule
A.
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23. The Company has the unrestricted right to use the Trademarks on the
Beverages and on all other products and merchandise other than the
Beverages in Authorized Containers in the Territory.
ARTICLE VIII
Term and Termination of the Agreement
24. The term of this Agreement shall commence on the effective date hereof and,
unless earlier terminated in accordance with its provisions, will continue
perpetually.
25. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to manufacture,
package, distribute and sell the Beverages under this Agreement shall be
suspended during any period when any of the following conditions exist:
(a) There shall occur a change in the law or regulation (including,
without limitation, any government permission or authorization
regarding customs, health or manufacturing) in such a manner as to
render unlawful or commercially impracticable:
(i) the importation of Concentrate or any of its essential
ingredients, which cannot be produced in quantities sufficient to
satisfy the demand therefor by existing Company facilities; or
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(ii) the manufacture and distribution of the Concentrates or
Beverages; or
(b) There shall occur any inability or commercial impracticability of
either of the parties to perform resulting from an act of god, or
"force majeure," public enemies, boycott, quarantine, riot, strike, or
insurrection, or due to a declared or undeclared war, belligerency or
embargo, sanctions, blacklisting, or other hazard or danger incident
to the same, or resulting from any other cause whatsoever beyond its
control.
If any of the conditions described in this paragraph 25 persists so that
either party's obligation to perform is suspended in any substantial
respect for a period of six (6) months or more, the other party may
terminate this Agreement forthwith, upon notice to the party whose
obligation to perform is suspended.
26.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or Bottler Subsidiary becomes insolvent; if a
petition in bankruptcy is filed against or on behalf of the
Bottler or Bottler Subsidiary which is not stayed or dismissed
within sixty (60) days; if the Bottler or Bottler Subsidiary is
put in liquidation or placed under sequester; if a receiver is
appointed to manage the business of the Bottler or Bottler
Subsidiary; or if the Bottler or Bottler Subsidiary enters into
any judicial or voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with them or
makes an assignment for the benefit of creditors;
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(ii) If the Bottler or Bottler Subsidiary adopts a plan of dissolution
or liquidation;
(iii)If any person or any Affiliated Group, other than any person or
any Affiliated Group acting with the consent of the Company,
acquires, or obtains any contract, option, conversion privilege
or other right to acquire, directly or indirectly, Beneficial
Ownership of more than fifteen percent (15%) of any class or
series of voting securities of the Bottler and if such person or
Affiliated Group does not divest itself of Beneficial Ownership
of such voting securities or otherwise terminate any such
contract, option, conversion privilege or other right to a level
equal to or below fifteen percent (15%) within thirty (30) days
after the Company notifies the Bottler that the failure of such
person or Affiliated Group to thus divest or terminate may result
in termination of this Agreement;
(iv) If any Disposition is made without the consent of the Company by
Bottler or by any Bottler Subsidiary of any voting securities of
any Bottler Subsidiary;
(v) If any agreement regarding the manufacture, packaging,
distribution or sale of the Beverages in "authorized containers"
(as defined in such agreement) between the Company and any person
that controls, directly or indirectly, the Bottler is terminated,
unless the Company agrees in writing that this subparagraph
26(a)(v) will not be applied by the Company to such termination;
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(vi) If the Bottler or any person in which the Bottler has Beneficial
Ownership of any equity or voting securities, or in which the
Bottler has a right or control of management, or which controls
or is under common control with the Bottler, should engage
directly or indirectly in the manufacture, distribution or
marketing of any product specified in subparagraphs (a), (b), (c)
or (d) of paragraph 7 above, or should obtain a right or license
to do the same, and if the Company has given the Bottler notice
that such condition exists and that the Company will terminate
this Agreement within six (6) months if such condition is not
eliminated, and if such condition has not been eliminated within
the six (6) month period.
(vii)If all or substantially all of the Bottler's or Bottler
Subsidiary's bottling assets are sold, transferred or otherwise
disposed of (including any transfer by operation of law) other
than sales, transfers or other dispositions of Assets by the
Bottler or one or more Bottler Subsidiary to one or more wholly
owned Bottler Subsidiary.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or
upon obtaining knowledge of any third party action
which may or will result in any change in ownership
described in Section 26(a)(iii) above; and
(ii) to make available from time to time and at the
request of the Company complete records of current
ownership of the Bottler and full information
concerning any entities or parties by whom it is
controlled directly or indirectly.
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(c) For the purposes of this Agreement:
(i) "Affiliated Group" shall mean two or more persons acting as a
partnership, limited partnership, syndicate or other group, or
who agrees to act together, for the purpose of acquiring,
holding, voting or making any Disposition of any voting
securities of the Bottler; provided further that the Affiliated
Group formed thereby shall be deemed to have acquired Beneficial
Ownership of all voting securities of the Bottler beneficially
owned by any such persons.
(ii) "Beneficial Ownership" shall mean (i) voting power which includes
the power to vote, or to direct the voting of, any securities, or
(ii) investment power which includes the power to dispose, or to
direct the Disposition of, any securities; provided further
Beneficial Ownership shall include any such voting power or
investment power which any person has or shares, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise; provided, however, that the following
persons shall not be deemed to have acquired Beneficial Ownership
under the circumstances described: (a) a person engaged in
business as an underwriter of securities who acquires securities
through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall
not be deemed to be the Beneficial Owner of such securities until
such time as such underwriter completes his participation in the
underwriting and shall not thereupon or thereafter be deemed to
be the Beneficial Owner of the securities acquired by other
members of any underwriting syndicate or selected dealers in
connection with such underwriting solely by reason of customary
underwriting or selected dealer arrangements; (b) a member of a
national securities exchange shall not be deemed to be a
Beneficial Owner of securities held directly or indirectly by it
on behalf of another person solely because such member is the
record holder of such securities and, pursuant to the rules of
such exchange, may direct the vote of such securities, without
instruction, on other than contested matters or matters that may
affect substantially the rights or privileges of the holders of
the securities to be voted, but is otherwise precluded by the
rules of such exchange from voting without instruction; and (c)
the holder of a proxy solicited by the Board of Directors of the
Bottler for the voting of securities of the Bottler at any annual
or special meeting and any adjournment or adjournments thereof of
the stockholders of the Bottler shall not be deemed to be a
Beneficial Owner of the securities that are the subject of the
proxy solely for such reason.
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(iii)"Bottler Subsidiary" shall mean any person that is controlled
directly or indirectly by the Bottler, and either participates in
the manufacture, packaging, distribution or sale of the Beverages
in "authorized containers" or has a direct or indirect equity
interest in another Bottler Subsidiary that does so participate;
(iv) "Disposition" shall mean any sale, merger, issuance of
securities, or other transaction in which, or as a result of
which, any person other than Bottler or a wholly owned subsidiary
of Bottler, acquires, or obtains any contract, option, conversion
privilege or other right to acquire Beneficial Ownership of any
securities.
21
(d) Upon the occurrence of any of the events of default specified in
subparagraphs 26(a) and (b), the Company may terminate this Agreement
by giving the Bottler notice to that effect, effective immediately.
27.
(a) In addition to the events of a default described in paragraph 26, the
Company may also terminate this Agreement, subject to the limitations
of subparagraph 27(b), in the event of the occurrence of any of the
following events of default:
(i) If the Bottler fails to make timely payment for Concentrate or of
any other debt owing to the Company;
(ii) If the condition of the plant or equipment used by the Bottler in
manufacturing, packaging or distributing the Beverages fails to
meet the sanitary standards reasonably established by the
Company;
(iii)If the Beverages manufactured by the Bottler fail to meet the
quality control standards reasonably established by the Company;
(iv) If the Beverages are not manufactured in strict conformity with
such standards and instructions as the Company may reasonably
establish;
(v) If the Bottler fails to present or carry out a plan approved
under paragraph 20 in all material respects; or
22
(vi) If the Bottler materially breaches any of the Bottler's other
obligations under this Agreement.
The standards and instructions of the Company comprise privately
published information concerning the manufacture, handling and storage
of the Beverages under good manufacturing practices, as well as
technical instructions, bulletins and other communications issued or
amended from time to time by the Company.
(b) Upon the occurrence of any of the foregoing events of default,
the Company shall, as a condition to termination of this
Agreement under this paragraph 27, give the Bottler notice
thereof. The Bottler shall then have a period of sixty (60) days
within which to cure the default, including, at the instruction
of the Company and at the Bottler's expense, by the prompt
withdrawal from the market and destruction of any Beverage that
fails to meet the quality control standards of the Company or any
Beverage that is not manufactured in accordance with the
instructions of the Company. If such default has not been cured
within such period, then the Company may, by giving the Bottler
further notice to such effect, suspend sales to the Bottler of
Concentrates and require the Bottler to cease production of the
Beverages and the packaging and distribution of Beverages in
Authorized Containers. During such second period of sixty (60)
days, the Company also may supply, or cause or permit others to
supply, the Beverages in Authorized Containers under the
Trademarks in the Territory. If such default has not been cured
during such second period of sixty (60) days, then the Company
may terminate this Agreement, by giving the Bottler notice to
such effect, effective immediately.
28. Upon the termination of this Agreement:
23
(a) The Bottler shall forthwith take such action as necessary to eliminate
the trademark "Pepsi-Cola" from its corporate name;
(b) Any other agreement between the Company and the Bottler regarding the
manufacture, packaging, distribution, sale or promotion of soft drinks
in "authorized containers" (as defined in such agreement) may, at the
election of the Company, be automatically terminated and thereby
become of no further force or effect.
(c) The Bottler shall not thereafter continue to manufacture, package,
distribute or sell any of the Beverages in Authorized Containers or to
make any use of the Trademarks or Authorized Containers, or any
closures, cases, labels or advertising material bearing the
Trademarks;
(d) The Bottler shall forthwith remove and efface all reference to the
Company, the Beverages and the Trademarks from the business premises
and equipment of the Bottler and from all business papers and
advertising used or maintained by the Bottler; and it shall not
thereafter hold forth in any manner whatsoever that it has any
connection with the Company or the Beverages; and,
(e) The Bottler shall forthwith deliver all Concentrate, Beverage, usable
returnable or any nonreturnable containers, cases, closures, labels,
and advertising material bearing the Trademarks, still in the
Bottler's possession or under the Bottler's control, to the Company or
the Company's nominee, as instructed, and, upon receipt, the Company
shall pay to the Bottler a sum equal to the reasonable market value of
such supplies or materials. The Company will accept and pay for only
such articles as are, in the opinion of the Company, in first-class
and usable condition, and all other such articles shall be destroyed
at the Bottler's expense. Containers, closures and advertising
material and all other items bearing the name of the Bottler, in
addition to the Trademarks, that have not been purchased by the
Company shall be destroyed without cost to the Company, or otherwise
disposed of in accordance with instructions given by the Company,
unless the Bottler can remove or obliterate the Trademarks therefrom
to the satisfaction of the Company. The provisions for repurchase
contained in subparagraph 28(e) shall apply with regard to any
Authorized Container, approval of which has been withdrawn by the
Company under paragraph 2; upon termination by either party under
paragraph 25; and upon termination by the Bottler under subparagraph
14. In all other cases, the Company shall have the right, but not the
obligation, to purchase the aforementioned items from the Bottler.
24
29.
(a) Subject to the limitations set forth in subparagraph 29(b), in the
event that the Bottler at any time fails to carry out a plan approved
under paragraph 20 in all material respects in any segment of the
Territory, whether defined geographically or by type of market or
outlet, which segment shall be defined by the Company (hereinafter
"Subterritory"), the Company may reduce the Territory covered by this
Agreement, and thereby restrict the Bottler's authorization hereunder
to the remainder of the Territory, by eliminating the Subterritory
from the Territory covered by this Agreement.
(b) In the event of such failure, the Company may eliminate Subterritories
from the Territory covered by this Agreement by giving the Bottler
notice to that effect, which notice shall define the Subterritory or
Subterritories to which the notice applies. The Bottler shall then
have a period of six (6) months within which to cure such failure. If
the Bottler has not cured such failure in such six (6) month period,
the Company may eliminate such Subterritory or Subterritories from the
Territory by giving the Bottler further notice to that effect,
effective immediately.
25
(c) Upon elimination of any Subterritory from the Territory:
(i) Schedule B to this Agreement shall be deemed amended by
eliminating such Subterritory from the Territory described on
Schedule B;
(ii) The Company may manufacture, package, distribute and sell the
Beverages in Authorized Containers under the Trademarks in such
Subterritory, or authorize others to do so;
(iii)Any other agreement between the Bottler and the Company
regarding the manufacture, packaging, distribution or sale of
soft drinks in "authorized containers" (as defined in such
agreement) in such Subterritory may, at the election of the
Company, be automatically terminated and thereby become of no
further force or effect in such Subterritory;
(iv) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in Authorized
Containers in such Subterritory, or to make any use of the
Trademarks, Authorized Containers, closures, cases, labels or
advertising material bearing the Trademarks in connection with
the sale or distribution of the Beverages in such Subterritory;
and
(v) The Bottler shall not thereafter hold forth in such Subterritory
in any manner whatsoever that it has any connection with the
Beverages.
26
ARTICLE IX
Transferability/Worldwide and Regional Accounts/Additional Territories
30. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance standards
applicable to the Bottler, the dependence of the Trademarks on proper
quality control, the level of marketing effort required of the Bottler to
increase demand for the Beverages in Authorized Containers, and the
confidentiality required for protection of the Company's trade secrets and
confidential information. In recognition of the personal nature of these
and other obligations of the Bottler under this Agreement, the Bottler may
not assign, transfer or pledge this Agreement or any interest therein, in
whole or in part, whether voluntarily, involuntarily, or by operation of
law (including, but not limited to, by merger or liquidation), or delegate
any material element of the Bottler's performance thereof, or sublicense
its rights hereunder, in whole or in part, to any third party or parties,
without the prior consent of the Company. Any attempt to take such action
without such consent shall be void and shall be deemed to be a material
breach of this Agreement.
31.
(a) The Bottler understands that from time to time the Company negotiates
worldwide or regional agreements to sell fountain syrup for the brands
identified in Schedule A (the "Fountain Syrup") to certain hotel
chains, restaurant chains, movie theaters and similar on premise
accounts which operate in multiple countries. The Company will submit
to the Bottler for its review the terms of these worldwide or regional
agreements to sell Fountain Syrup (the "Chain Agreements"). The
Bottler agrees to use its best efforts to support the Company in the
Chain Agreements by supplying the Fountain Syrup to these accounts
based on the terms of the Chain Agreements negotiated by the Company.
In the event that the Bottler declines to participate in any Chain
Agreement, the Bottler agrees that the Company shall have the right to
find alternative ways to supply the Fountain Syrup to these accounts
through other authorized bottlers or distributors of the Beverages,
without any obligation to compensate the Bottler with respect to these
sales; provided, however, that the Company's right to supply the
Fountain Syrup to these accounts will not affect in any way the
Bottler's exclusive rights to sell and distribute the Beverages to all
other accounts within the Territory. With respect to the Chain
Agreements, the Bottler also agrees to use its best efforts to support
the Company by supplying Beverages in packages other than the Syrups
to these accounts.
27
(b) In the event that the Bottler acquires the right to manufacture and
sell any of the Beverages in any container that has been designated as
an Authorized Container in any territory outside of the United States
and outside of the Territory, such additional territory shall
automatically be deemed to be included within the Territory covered by
this Agreement for all purposes. Any separate agreement that may exist
concerning such additional territory shall be ipso facto amended to
conform to the terms of this Agreement. In addition, if the Bottler
acquires control, directly or indirectly, of any person which is a
party, or which controls directly or indirectly a party, to an
agreement whereby such party has the right to manufacture and sell any
of the Beverages in any territory outside of the United States in any
container that has been designated as an Authorized Container, the
Bottler shall cause such party to amend such agreement, effective as
of the date of acquisition of control of such party, to conform to the
terms of this Agreement with respect to all such territory outside of
the United States.
28
ARTICLE X
Litigation
32.
(a) The Company reserves the right to institute any civil, administrative
or criminal proceeding or action, and generally to take or seek any
available legal remedy it deems desirable, for the protection of its
good reputation and industrial property rights (including, but not
limited to, the Trademarks), as well as for the protection of the
Concentrates, the Beverages and the formulas therefor, and to defend
any action affecting these matters. At the request of the Company, the
Bottler will render reasonable assistance in any such action. The
Bottler may not claim any right against the Company as a result of
such action or for any failure to take such action. The Bottler shall
promptly notify the Company of any litigation or proceeding instituted
or threatened affecting these matters. The Bottler shall not institute
any legal or administrative proceeding against any third party which
may affect the interests of the Company in connection with this
Agreement without the Company's prior consent.
(b) The Company has the sole and exclusive right and responsibility to
prosecute and defend all suits relating to the Trademarks. The Company
may prosecute or defend any suit relating to the Trademarks in the
name of the Bottler whenever an issue in such suit involves the
Territory and therefore it is appropriate to act in the Bottler's
name, or may proceed alone in the name of the Company, provided that
the Company shall take no action in the Bottler's name which the
Company knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
29
(c) The Bottler recognizes the importance and benefit to itself and all
other bottlers of the Beverages of protecting the interest of the
Company in the Beverages, Authorized Containers and the goodwill
associated with the trademarks. Therefore, the Bottler agrees to
consult with the Company on all products liability claims or lawsuits
brought against the Bottler in connection with the Beverages or
Authorized Containers and to take such action with respect to the
defense of any such claim or lawsuit as the Company may reasonably
request in order to protect the interest of the company in the
Beverages, Authorized Containers and goodwill associated with the
Trademarks. Further, the Bottler shall supervise, control and direct
the defense of all such products liability claims and lawsuits brought
against them whether individually or jointly, provided, however, that
the Bottler and the Company expressly reserve all rights of
contribution and indemnity as prescribed by law.
ARTICLE XI
Automatic Amendment
33. In the event that bottlers, which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Beverages purchased for
the account of all bottlers who are parties to agreements with the Company
containing substantially the same terms as this Agreement, agree with the
Company to any different provisions to be included in this Agreement, then
the Bottler hereby agrees to include an amendment containing such different
provisions in this Agreement. The gallons of Concentrate purchased by such
bottlers shall be determined based on the most recently-ended calendar year
prior to the date such amendment was first offered to bottlers.
30
ARTICLE XII
General
34. For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "person" means an individual, a corporation, a partnership, a limited
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision
thereof.
(b) "control" (including terms "controlling", "controlled by" and "under
common control with") means: (i) Beneficial Ownership of a majority of
any class or series of voting securities of a person; or (ii) the
power or authority, directly or indirectly, to elect or designate a
majority of the members of the board of directors, or other governing
body of a person.
35. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
36.
(a) Without relieving the Bottler of any of its responsibilities under
this Agreement, the Company, from time to time during the term of this
Agreement, at its option and either free of charge or on such terms
and conditions as the Company may propose, may offer technology to the
Bottler which the Company possesses, develops or acquires (and is free
to furnish to third parties without obligation) relating to the
design, installation, operation and maintenance of the plant and
equipment appropriate for the maintenance of product quality,
sanitation and safety as well as for the efficient manufacture and
packaging of the Beverages; or relating to personnel training,
accounting methods, electronic data processing and marketing and
distribution techniques.
31
(b) The Bottler covenants and agrees that, so long as this agreement is in
effect the Bottler shall install and maintain management information
systems that are capable of interfacing and sharing required data with
the management information systems of the Company in accordance with
standards established by the Company.
37. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic information
whatsoever concerning the composition of the Concentrates or the
Beverages, without the prior consent of the Company, and it will use
any such information solely to perform its obligations hereunder;
(b) It will at all times treat and maintain as confidential, all nonpublic
information that it may receive at any time from the Company,
including, but not limited to:
(i) Information or instructions of a technical or other nature,
relating to the mixing, sale, marketing and distribution of the
product.
(ii) Information about projects or plans worked out in the course of
this Agreement; and
(iii)Information constituting manufacturing or commercial trade
secrets.
32
The Bottler, further agrees to disclose such information, as necessary
to perform its obligations hereunder, only to employees of its
enterprise: (i) who have a reasonable need to know such information;
(ii) who have agreed to keep such information secret; and (iii) whom
the Bottler has no reason to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all photocopies or
other reproductions in its possession (including, but not limited to,
any extracts or digests thereof) containing or relating to any
nonpublic information described in this paragraph 37. Following such
termination, and the surrender of such materials, the Bottler and its
employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure thereof
whatsoever, provided that such obligation shall expire as to any
nonpublic information that does not constitute trade secrets ten (10)
years following such termination.
38. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
39. The Bottler is an independent manufacturer and not the agent of the
Company. The Bottler agrees that it will not represent that it is an agent
of the Company nor hold itself out as such.
40. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
(i) Quarterly Statements. As soon as such statements are made available to
the public, or if such statements are not regularly made available to
the public, an unaudited income and expense statement and balance
sheet for the Bottler;
33
(ii) Annual Audit Statement. As soon as such statements are made available
to the public, statements of income and retained earnings of the
Bottler for the just-ended fiscal year, and a balance sheet of the
Bottler as of the end of such year, accompanied by an opinion from the
independent public accountants of the Bottler; and
(iii)Other information. With reasonable promptness such other financial
information as the Company may reasonably request in such format as
the Company may reasonably request.
41. The Bottler shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any person
designated in writing by the Company to visit and inspect any of its
properties, corporate books and financial records (including, but not
limited to, auditor's workpapers), and make copies thereof and take
extracts therefrom, and to discuss the accounts and finances of the Bottler
with the principal officers thereof, all at such times as the Company may
reasonably request. The Company's rights of inspection under this paragraph
41 shall be exercised reasonably, and only for purposes of determining
Bottler's compliance with its obligations under paragraph 19, so as not to
interfere with the normal operation of the Bottler's business. The Company
will treat and maintain as confidential for a period of one year all
nonpublic financial information received from the Bottler.
42. The parties agree:
(a) The existing Beverage Exclusive Bottling Appointments for the
Territory and waivers, authorizations or other agreements related to
such existing Exclusive Bottling Appointments are hereby superseded
and restated in their entirety, and all rights, duties and obligations
of the Company and the Bottler regarding the Trademarks and the
manufacture, packaging, distribution and sale of the Beverages in
Authorized Containers shall be determined under this Agreement,
without regard to the terms of any prior agreement and without regard
to any prior course of conduct between the parties;
34
(b) As to all matters addressed herein, this Agreement sets forth the
entire agreement between the Company and the Bottler, and all prior
understandings, commitments or agreements relating to such matters
between the parties or their predecessors -in-interest are of no force
or effect; provided, however, that this subparagraph (b) shall not
terminate the Franchise Commitment Letter dated July 17, 1998 among
P-PR Transfer LLP, the Bottler and PepsiCo which shall remain in full
force and effect; and
(c) Any waiver or modification of this Agreement or any of its provisions,
and any notices given or consents made under this Agreement shall not
be binding upon the Bottler or the Company unless made in writing,
signed by an officer of the Company or by a duly qualified and
authorized representative of the Bottler, and personally delivered or
sent by telegram, telex or certified mail to an officer of the Company
(if from the Bottler) or a duly qualified and authorized
representative of the Bottler (if from the Company) at the principal
address of such party.
43. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right shall
not be deemed to be a waiver of such option or right, or of the right to
demand subsequent performance of any and all obligations herein imposed
upon the Bottler.
35
44. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company upon
notice to the Bottler, but no such delegation shall relieve the Company of
its obligations hereunder.
45. If any provision of this Agreement, or the application thereof to any party
or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any
other provision hereof, or the application of such provision to other
parties or circumstances.
46. This Agreement shall be governed, construed and interpreted under the laws
of the State of New York.
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. PEPSIAMERICAS, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------ -----------------------------
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
Title: Assistant Secretary Title: Chief Executive Officer
Date: October 15, 1999 Date: October 15, 1999
------------------------------ -----------------------------
36
SCHEDULE A
Pepsi-Cola
Diet Pepsi-Cola
Pepsi-Cola Free
Diet Pepsi-Cola Free
Teem
Diet Teem
Mountain Dew
All Sport
Wonder Kola
Mandarin Orange Slice
Diet Mandarin Orange Slice
Lemon Lime Slice
Diet Lemon Lime Slice
Grape Slice
SCHEDULE B
Puerto Rico