Exhibit 10.20
MASTER FOUNTAIN SYRUP AGREEMENT
Between
PEPSICO, INC.
and
PEPSIAMERICAS, INC.
MASTER FOUNTAIN SYRUP AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of November 30, 2000,
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 Rolling Meadows, Illinois
(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 manufacture of fountain beverage syrups (the
"Fountain Syrups"). The Company authorizes others to manufacture the
Fountain Syrups from the Concentrates and to distribute and sell the
Fountain Syrups to certain customers for use in preparing the fountain
soft drinks identified on Schedule A (as modified from time to time
under paragraphs 18 and 19, the "Beverages"). The formulas for the
Concentrates, Fountain Syrups and the Beverages constitute trade
secrets owned by the Company;
B. The Company is the owner of the trademarks identified on Schedule B
(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 Fountain Syrups;
C. A significant business of the Bottler is the manufacture and
distribution of the Fountain Syrups either pursuant to certain
agreements previously entered into with the Company, (collectively,
together with all amendments thereto, the "Existing Syrup
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 Fountain Syrups as being of consistently superior
quality has been a major factor in stimulating and sustaining demand
for the Fountain Syrups, and special technical skill and constant
diligence on the part of the Bottler and the Company are required in
order for the Fountain Syrups to maintain the excellence that consumers
expect; and
E. Conditions affecting the production, sale and distribution of Fountain
Syrups have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Syrup Appointments,
and as a consequence, the Company and the Bottler desire to amend the
Existing Syrup Appointments, the terms of the Existing Syrup
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. (a) The Company authorizes the Bottler, and the Bottler
undertakes, to: (i) manufacture and package the Fountain
Syrups and (ii) distribute and sell the Fountain Syrups under
the Trademarks in and throughout the Territories (as
hereinafter defined) for Local Account Customers (as
hereinafter defined) only.
(b) The Company appoints the Bottler as its sole and exclusive
purchaser of the Concentrates for the purpose of manufacturing
and packaging the Fountain Syrups under the Trademarks for
distribution and sale in the Territories to Local Account
Customers.
(c) (i) "Territories" means each of the territories identified
Schedule C hereto subject to the possible elimination of
Subterritories under paragraph 26 hereof and including any
Territories added in accordance with paragraph 28 hereof.
(ii) "Local Account Customers" means a single outlet, chain or
multiple outlet operations and cup vending machine operators
that have all of their outlets located within only one of the
Territories.
(iii) "National Account Customers" means chain or multiple
outlet operations and cup vending machine operators that have
outlets in (x) more than one of the Territories or (y) in at
least one of the Territories and in one or more other PepsiCo
licensed territories.
(iv) "Program Customer" means any of the following (a) any
National Account Customer that enters into an agreement with
the Company's Fountain Beverage Division or National Sales
Business Unit (or successors thereto) after the date hereof,
(b) any National Account Customer listed on Schedule D annexed
hereto and made a part hereof, (c) any existing National
Account Customer, not otherwise designated as a Program
Customer hereunder, if and when such National Account Customer
converts from DSD (as defined below) to Commissary (as defined
below) delivery, or (d) any National Account Customer, not
otherwise designated as a Program Customer hereunder, that
Bottler and Company agree should be deemed to be a Program
Customer.
(v) "Commissary" means a distributor of food or beverage or
related items to restaurants, hotels, theatres, stadiums or
any other entity serving food or beverages that do not receive
beverage shipments to their outlets through DSD.
ARTICLE II
Reservation of Company's Rights; Agency Arrangements
2. (a) The Company reserves the right to (i) manufacture and
package the Fountain Syrups and (ii) distribute and sell the
Fountain Syrups under the Trademarks in and throughout the
Territories for all National Account Customers.
Notwithstanding the foregoing, if a National Account Customer
elects to receive shipments of Fountain Syrup through direct
store door delivery ("DSD") in one or more of the Territories,
the Company shall appoint the Bottler, and upon appointment
the Bottler hereby undertakes to serve, as the Company's
exclusive agent in such Territories for the (i) manufacture
and packaging of the Fountain Syrups and (ii) distribution of
the Fountain Syrup under the Trademarks to such National
Account Customer. In the event the National Account Customer
elects to discontinue DSD of the Fountain Syrups at any time,
or if the bottler refuses to serve as the Company's exclusive
agent, the exclusive agency granted to the Bottler pursuant to
this paragraph shall immediately terminate without any
liability whatsoever to the Company in connection therewith.
If a National Account Customer does not elect DSD, the Company
may in its sole discretion appoint the Bottler as its
non-exclusive agent for manufacturing and packaging Fountain
Syrups for the Company's sale to National Account Customers.
(b) The Company authorizes the Bottler, and the Bottler
undertakes, to maintain and service the equipment used to
dispense the Beverages located at the premises of all National
Account Customers (unless the National Account Customer elects
to handle its service requirements independently) in and
throughout the Territories provided that the Bottler complies
with all of the Company's requirements and service performance
standards.
(c) The Company and the Bottler agree that the rights and
authorizations set forth in Article I and Article II
paragraphs 2(a) and (b) are necessary to effectively promote
the development and growth of the Fountain Syrup business in
the Territories. In this regard the Company and the Bottler
agree to certain fees and incentive payments as set forth in
Schedules E-1 through E-6 hereto, as may be amended by the
parties from time to time. The categories addressed by
Schedules E-1 through E-6 are as follows: Bottler Delivery
Remittance, Brand Development Fee, Equipment Service Standards
and Fees, New Equipment Program, Production Fee, and Service
Incentive.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
3. 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) an exclusive license to use the Trademarks solely in
connection with the manufacture, packaging and sale of the Fountain
Syrups for distribution and sale to Local Account Customers in the
Territories as set forth in Article I hereof; (ii) an exclusive license
to use the Trademarks solely in connection with the manufacture,
packaging and sale of the Fountain Syrups for distribution and sale to
National Account Customers in the Territories who elect DSD, as set
forth in paragraph 2(a) hereof; and (iii) a non-exclusive license to
use the Trademarks solely in connection with the manufacture and
packaging of the Fountain Syrups for distribution to National Account
Customers in the Territories, who do not elect DSD, as set forth in
subparagraph 2(a) hereof. 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.
4. The Bottler agrees during the term of this Agreement and in accordance
with any requirements imposed upon the Bottler under applicable laws:
(a) Not to manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any "Cola Product" (herein
defined to mean any soft drink beverage or syrup which is
generally marketed as a cola product or which is generally
perceived as being a cola product) other than a soft drink or
syrup manufactured, packaged, distributed or sold by the
Bottler under authority of the 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,
Fountain Syrups or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any product or syrup under any
trademark or other designation that is an imitation,
counterfeit, copy or infringement of, or confusingly similar
to, any of the Trademarks; and
(d) 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 Territories that
engages in any of the activities prohibited by subparagraphs
(a), (b), (c) or (d) of this paragraph 4.
ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Fountain Syrups
5. (a) The Bottler represents and warrants that the Bottler
possesses, or will possess, in the Territories, prior to the
manufacture, packaging and distribution of the Fountain
Syrups, and will maintain during the term of this Agreement,
such plant or plants, machinery and equipment, trained staff,
and distribution and fountain vending facilities as are
capable of manufacturing, packaging and distributing the
Fountain Syrups 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 Fountain Syrups in the Territories.
(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 Fountain Syrups
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
Fountain Syrups for other bottlers, and (ii) agreements
pursuant to which bottlers may have the Fountain Syrups
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.
6. The Bottler recognizes that increases in the demand for the Fountain
Syrups, as well as changes in the packaging used for the Fountain
Syrups, 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
Fountain Syrups, to fully meet the demand for the Fountain Syrups in
the Territories.
7. The Bottler warrants that the handling and storage of the Concentrates
and the manufacture, handling, storage, and packaging of the Fountain
Syrups 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 Territories.
8. 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 Fountain Syrups and the raw materials
used in the manufacture of the Fountain Syrups. 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 Fountain Syrups.
9. (a) For the packaging, distribution and sale of the Fountain
Syrups, the Bottler shall use only such packaging 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 packaging 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 packages,
labels, and other essential related materials bearing the
Trademarks, sufficient to fully meet the demand for Fountain
Syrups in the Territories, and the Bottler shall not use or
permit the use of any packages, labels or other materials, if
they bear the Trademarks or contain any Fountain Syrups, for
any purpose other than the packaging and distribution of the
Fountain Syrups. The Bottler further agrees not to refill or
otherwise reuse nonreturnable containers.
10. If the Company determines the existence of quality or technical
difficulties with any Fountain Syrup, or any package used for the
Fountain Syrup, the Company shall have the right, immediately and at
its sole option, to withdraw the Fountain Syrup 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 the Fountain Syrup or such package
therefor. If so directed by the Company, the Bottler shall recall and
reacquire the Fountain Syrup 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
Fountain Syrup 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 Fountain Syrup involved,
the Bottler shall bear its total expenses of such recall and reimburse
the Company for the Company's total expenses incident to such recall.
ARTICLE V
Conditions of Purchase and Sale
11. 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.
12. 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 Fountain Syrups.
The Bottler shall not sell or otherwise transfer any Concentrate or
permit the same to get into the hands of third parties.
13. (a) The Bottler agrees not to distribute or sell any Fountain
Syrups outside the Territories. The Bottler shall not
distribute or sell any Fountain Syrups to any person (other
than another Bottler pursuant to subparagraph 5(b) and other
than as a delivery agent for the Company to National Account
Customers outside of the Territories which elect to receive
Fountain Syrup through distribution methods other than direct
store delivery as provided in subparagraph 2(a) hereof) for
ultimate sale outside the Territories. If any Fountain Syrup
distributed by the Bottler is found outside of the Territories
in violation of this paragraph 13, Bottler shall be deemed to
have transshipped such Fountain Syrup 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 Territories into which any Fountain Syrup is transshipped.
(b) In addition to all other remedies the Company may have against
any Transshipping Bottler for violation of this paragraph 13,
the Company may impose upon any Transshipping Bottler a charge
for each gallon of Fountain Syrup transshipped by such
Bottler. The per-gallon 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 gallon
charge so received (but not including investigative and other
costs charged to the Transshipping Bottler by the Company). If
the Company or its agent recalls any Beverage which has been
transshipped, the Transshipping Bottler shall, in addition to
any other obligation it may have hereunder, reimburse the
Company for its costs of purchasing, transporting, and/or
destroying such Beverage.
ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
14. The continuing responsibility to increase and fully meet the demand for
the Fountain Syrups within the Territories rests upon the Bottler. The
Bottler agrees to use all approved means as may be reasonably necessary
to meet this responsibility.
15. (a) The Bottler will push vigorously the sale of the Fountain
Syrups throughout all of the Territories. Without in any way
limiting the Bottler's obligation under this Paragraph 15, the
Bottler must (i) fully meet and increase the demand for the
Fountain Syrups throughout the Territories and secure full
distribution up to the maximum sales potential therein through
all channels or outlets available to fountain beverages, using
any and all equipment reasonably necessary to secure such
distribution; (ii) service all accounts with frequency
adequate to keep them at all times fully supplied with the
Fountain Syrups and (iii) keep the fountain dispensing
equipment located at such channels and outlets in good working
order in accordance with requirements and performance
standards established by the Company.
(b) The parties agree that to fully meet and increase demand for
the Fountain Syrups advertising and other forms of marketing
activities are required. Therefore, the Bottler will spend
such funds in advertising and marketing the Fountain Syrups as
may be reasonably required to increase, as well as maintain,
demand for the Fountain Syrups in the Territories. 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
Territories. The Bottler will use and publish only such
advertising, promotional materials or other items bearing the
Trademarks relating to the Fountain Syrups 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 Territories, but this shall in no way affect
the responsibility of the Bottler for increasing the demand
for the Fountain Syrups.
(c) The obligations set forth in Paragraphs 14, 15(a)(i) and 15(b)
above shall be modified as follows. In the case of Program
Customers only, the Bottler and the Company agree that such
obligations shall be joint obligations of both the Bottler and
the Company.
16. 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 Fountain Syrups.
17. (a) The Company and the Bottler have agreed upon a business
plan for the first three years of 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 plans,
management plans and advertising plans of the Bottler with
respect to the Fountain Syrups for the ensuing year, including
a financial plan showing that the Bottler and all Bottler
Affiliates have the consolidated financial capacity to perform
their respective duties and obligations under this Agreement,
and (ii) the projected sales 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 Fountain Syrups in the
Territories 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 16 to push vigorously the sale of the
Fountain Syrups throughout the Territories and to increase and
fully meet the demand for the Fountain Syrups in the
Territories as set forth in Paragraphs 14 and 15 hereof. 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 14, 15 and 16 for the period of time
covered by the plan.
ARTICLE VII
Reformulation, New Products and Related Matters
18. The Company has the sole and exclusive right and discretion to
reformulate any of the Fountain Syrups. In addition, the Company has
the sole and exclusive right and discretion to discontinue any of the
Fountain Syrups under this Agreement, provided such Fountain Syrups are
discontinued on a national basis. In the event that the Company
discontinues any Fountain Syrup, Schedule A to this Agreement shall be
deemed amended by deleting the discontinued Fountain Syrups from the
list of Fountain Syrups set forth on Schedule A.
19. In the event that the Company introduces any new Fountain Syrup in the
Territories under the trademarks "Pepsi-Cola" or "Pepsi" or any
modification thereof (herein defined to mean the addition of a prefix,
suffix or other modifier used in conjunction with the trademarks
"Pepsi-Cola" or "Pepsi"), the Bottler shall be obligated to
manufacture, package, distribute and sell such new Fountain Syrup in
the Territories pursuant to the terms and conditions of this Agreement,
and Schedule A to this Agreement shall be deemed amended by adding such
new Fountain Syrup to the list of beverages set forth on Schedule A.
20. The Company has the unrestricted right to use the Trademarks on the
Fountain Syrups and on all other products and merchandise other than
the Fountain Syrups in the Territories.
ARTICLE VIII
Term and Termination of the Agreement
21. (a) The term of this Agreement shall commence on the effective
date hereof and, unless earlier terminated in accordance with
its provisions, will end on the fifth anniversary of the
effective date hereof (the "Initial Term"). The Initial Term
thereafter shall be extended automatically for additional
periods of five (5) years (each a "Renewal Term").
Notwithstanding the foregoing, the Company may terminate this
Agreement without cause at any time during any Renewal Term
upon twenty-four (24) months notice.
(b) Upon termination of this Agreement in accordance with
subparagraph 21(a) hereof and completion of the valuation
process referred to in subparagraph 21(c) below, the Company
shall make a payment to the Bottler in an amount equal to the
fair market value of the business conducted by the Bottler
pursuant to the rights and authorizations set forth in
Articles I and II hereof, referred to collectively as the
"Bottler's Fountain Business".
(c) In the event that the Company must compensate the Bottler
under the circumstance described in Paragraph 21(b) hereof,
the procedures set forth on Schedule F shall apply.
22. 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 Fountain Syrups 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 in the United States;
or
(ii) the manufacture and distribution of the Concentrates
or Fountain Syrups; 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 22 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.
23. (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;
(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 the Master Bottling Agreement between the Company
and the Bottler or any person that controls, directly
or indirectly, the Bottler is terminated, unless the
Company agrees in writing that this subparagraph
23(a)(v) will not be applied by the Company to such
termination;
(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 4
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 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 23(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 or which it
controls.
(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.
(iii) "Bottler Subsidiary" shall mean any person that is
controlled directly or indirectly by the Bottler, and
either participates in the manufacture, packaging,
distribution or sale of the Beverages in "authorized
containers" or has a direct or indirect equity
interest in another Bottler Subsidiary that does so
participate;
(iv) "Disposition" shall mean any sale, merger, issuance
of securities, or other transaction in which, or as a
result of which, any person other than Bottler or a
wholly owned subsidiary of Bottler, acquires, or
obtains any contract, option, conversion privilege or
other right to acquire Beneficial Ownership of any
securities.
(d) Upon the occurrence of any of the events of default specified
in subparagraph 23(a), the Company may terminate this
Agreement by giving the Bottler notice to that effect,
effective immediately.
24. (a) In addition to the events of a default described in
paragraph 23, the Company may also terminate this Agreement,
subject to the limitations of subparagraph 24(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 Fountain Syrups fails to meet the
sanitary standards reasonably established by the
Company;
(iii) If the Fountain Syrups manufactured by the Bottler
fail to meet the quality control standards reasonably
established by the Company;
(iv) If the Fountain Syrups 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 17 in all material respects;
or
(vi) If the Bottler materially breaches any of the
Bottler's other obligations under this Agreement.
The standards and instructions of the Company comprise
privately published information concerning the manufacture,
handling and storage of the Fountain Syrups 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 24, 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
Fountain Syrup 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 Fountain Syrups 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 Territories. 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.
25. Upon the termination of this Agreement:
(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 Fountain Syrups 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 Fountain Syrups or to
make any use of the Trademarks or any packaging, labels or
advertising material bearing the Trademarks;
(d) The Bottler shall forthwith remove and efface all reference to
the Company, the Fountain Syrups 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, Fountain
Syrup, usable returnable or any nonreturnable containers,
packaging, 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 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 25(e) shall apply upon termination
by either party under paragraph 22; and upon termination by
the Bottler under subparagraph 11. In all other cases, the
Company shall have the right, but not the obligation, to
purchase the aforementioned items from the Bottler.
26. (a) Subject to the limitations set forth in subparagraph
26(b), in the event that the Bottler at any time fails to
carry out a plan approved under paragraph 17 in all material
respects in any segment of the Territories, whether defined
geographically or by type of market or outlet, which segment
shall be defined by the Company (hereinafter a
"Subterritory"), the Company may reduce the Territories
covered by this Agreement, and thereby restrict the Bottler's
authorization hereunder to the remainder of the Territories,
by eliminating the Subterritory from the Territories covered
by this Agreement.
(b) In the event of such failure, the Company may eliminate the
Subterritory from the Territories 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 Territories by giving the Bottler further notice to that
effect, effective immediately.
(c) Upon elimination of any Subterritory from the Territories:
(i) Schedule C to this Agreement shall be deemed amended
by eliminating such Subterritory from the
Territories;
(ii) The Company may manufacture, package, distribute and
sell the Fountain Syrups 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 Fountain Syrups 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
Fountain Syrups in such Subterritory, or to make any
use of the Trademarks, packaging, labels or
advertising material bearing the Trademarks in
connection with the sale or distribution of the
Fountain Syrups 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 Fountain Syrups.
ARTICLE IX
Transferability/Additional Territories
27. 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 Fountain Syrups, 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.
28. (a) The Bottler hereby agrees that it will not acquire or
attempt to acquire, directly or indirectly, without the prior
written consent of the Company, the right to manufacture and
sell any of the Fountain Syrups or any equity or economic
interest in any entity having such rights in any territory
located outside the Specified Area (the term "Specified Area"
shall have the meaning as set forth in the Master Bottling
Agreement between the parties hereto). Any acquisition of such
rights by the Bottler within the Specified Area shall be
subject to the approval of the Company, which approval shall
not be withheld if (i) the Bottler has successfully negotiated
the acquisition of such rights for any such territories with
the holder thereof and (ii) in the reasonable judgment of the
Company, the Bottler has satisfactorily performed its
obligations under this Agreement.
(b) In the event that the Bottler acquires the right to
manufacture and sell any of the Fountain Syrups in any
territories in the United States outside of the Territories,
such additional territories shall automatically be deemed to
be included within the Territories covered by this Agreement
for all purposes, except as set forth below. Any separate
agreement that may exist concerning such additional
territories shall be ipso facto amended to conform to the
terms of this Agreement, except as set forth below. 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
Fountain Syrups in any territory in the United States, 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 in the United States, except as set
forth below. Notwithstanding the foregoing, in the event the
Bottler makes any such acquisition after the date hereof, the
Bottler's right to receive the Brand Development Fee and the
Bottler Delivery Remittance applicable to such acquired
territories shall continue to be governed by the agreement
that existed between the Company and the former bottler on the
date of acquisition, provided however that (i) such agreement
shall be deemed to expire five years from the date such
territory was acquired after which date this Agreement shall
become applicable as if it were in effect from the date of the
acquisition and (ii) such agreement shall only be applicable
to those National Account Customers under contract with the
former bottler or the Company on the date of the acquisition.
ARTICLE X
Litigation
29. (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
and the Fountain Syrups, 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 Territories and therefore
it is appropriate to act in the Bottler's name, or may proceed
alone in the name of the Company, provided that the Company
shall take no action in the Bottler's name which the Company
knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
(c) The Bottler recognizes the importance and benefit to itself
and all other licensed manufacturers and distributors of the
Fountain Syrups of protecting the interest of the Company in
the Fountain Syrups 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 Fountain Syrups 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 Fountain
Syrups 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
30. In the event that bottlers which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Fountain Syrups
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. Such gallons of
Concentrate purchased shall include purchases which were concluded in
any bottler's territory through Commissary delivery or otherwise to
National Account Customers.
ARTICLE XII
General
31. 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.
32. 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.
33. (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 Fountain Syrups; or relating to personnel
training, accounting methods, electronic data processing and
marketing and distribution techniques.
(b) The Bottler covenants and agrees that, so long as this
agreement is in effect the Bottler shall install and maintain
management information systems that are capable of interfacing
and sharing required data with the management information
systems of the Company in accordance with standards
established by the Company.
34. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic
information whatsoever concerning the composition of the
Concentrates or the Fountain Syrups, 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.
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 34. 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.
35. 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.
36. The Bottler is an independent manufacturer and not the agent of the
Company except with regard to its provision of certain services to
National Account Customers.
37. 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; and
(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.
38. 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 38 shall be exercised reasonably,
and only for purposes of determining Bottler's compliance with its
obligations under paragraph 16, 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.
39. The parties agree:
(a) All Existing Syrup Appointments and other waivers,
authorizations, or similar documents related to such existing
Syrup Appointments, to the extent they are inconsistent with
this Agreement, 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 Fountain
Syrups shall be determined under this Agreement, without
regard to the terms of any prior agreement and without regard
to any prior course of conduct between the parties;
(b) As to all matters addressed herein, this Agreement sets forth
the entire agreement between the Company and the Bottler, and
all prior understandings, commitments or agreements relating
to such matters between the parties or their
predecessors-in-interest are of no force or effect; and
(c) Any waiver or modification of this Agreement or any of its
provisions, and any notices given or consents made under this
Agreement shall not be binding upon the Bottler or the Company
unless made in writing, signed by an officer of the Company or
by a duly qualified and authorized representative of the
Bottler, and personally delivered or sent by telegram, telex
or certified mail to an officer of the Company (if from the
Bottler) or a duly qualified and authorized representative of
the Bottler (if from the Company) at the principal address of
such party.
40. 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.
41. 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.
42. 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.
43. 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:_______________________ By:______________________
Title:______________________ Title:_____________________
Date:______________________ Date:_____________________
SCHEDULE A
BEVERAGES - COLAS
Pepsi
Diet Pepsi
Pepsi One
Caffeine Free Pepsi
Caffeine Free Diet Pepsi
Wild Cherry Pepsi
SCHEDULE B
TRADEMARKS - COLAS
Pepsi
Pepsi-Cola
Diet Pepsi
Diet Pepsi-Cola
Pepsi One
Caffeine Free Pepsi
Caffeine Free Pepsi-Cola
Caffeine Free Diet Pepsi
Caffeine Free Diet Pepsi-Cola
Wild Cherry Pepsi
SCHEDULE C
TERRITORIES
Master Fountain Syrup Agreement
STATE TERRITORY FORMER BOTTLING ENTITY
----- --------- ----------------------
AR Camden PepsiAmericas, Inc.
AR Jonesboro PepsiAmericas, Inc.
AR Little Rock PepsiAmericas, Inc.
IA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
IA Cedar Rapids ▇▇▇▇▇▇▇ Corp.
IA Des Moines ▇▇▇▇▇▇▇ Corp.
IA Estherville PepsiAmericas, Inc.
IA ▇▇▇▇▇ City ▇▇▇▇▇▇▇ Corp.
IA Waterloo ▇▇▇▇▇▇▇ Corp.
IL ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
IL Bloomington ▇▇▇▇▇▇▇ Corp.
IL Chicago ▇▇▇▇▇▇▇ Corp.
IL Danville ▇▇▇▇▇▇▇ Corp.
IL Havana ▇▇▇▇▇▇▇ Corp.
IL Peoria ▇▇▇▇▇▇▇ Corp.
IN Brookville ▇▇▇▇▇▇▇ Corp.
IN Evansville ▇▇▇▇▇▇▇ Corp.
IN Fort ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
IN Indianapolis ▇▇▇▇▇▇▇ Corp.
IN Muncie ▇▇▇▇▇▇▇ Corp.
IN Munster ▇▇▇▇▇▇▇ Corp.
IN South Bend ▇▇▇▇▇▇▇ Corp.
IN Vincennes ▇▇▇▇▇▇▇ Corp.
KY Hopkinsville ▇▇▇▇▇▇▇ Corp.
KY Louisville ▇▇▇▇▇▇▇ Corp.
▇▇ ▇▇▇▇▇▇ PepsiAmericas, Inc.
LA New Orleans PepsiAmericas, Inc.
LA Shreveport PepsiAmericas, Inc.
MI ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
MN Ortonville PepsiAmericas, Inc.
MN Thief River Falls PepsiAmericas, Inc.
MS Carthage PepsiAmericas, Inc.
MS Columbus PepsiAmericas, Inc.
MS Greenville PepsiAmericas, Inc.
MS Tupelo PepsiAmericas, Inc.
MS Winona PepsiAmericas, Inc.
MO Albany ▇▇▇▇▇▇▇ Corp.
MO Columbia ▇▇▇▇▇▇▇ Corp.
MO Excelsior Springs ▇▇▇▇▇▇▇ Corp.
MO Flat River ▇▇▇▇▇▇▇ Corp.
MO Kansas City ▇▇▇▇▇▇▇ Corp.
MO St. ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
MO ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
STATE TERRITORY FORMER BOTTLING ENTITY
----- --------- ----------------------
MO Springfield ▇▇▇▇▇▇▇ Corp.
ND Bismark PepsiAmericas, Inc.
ND Fargo PepsiAmericas, Inc.
ND Grand Forks PepsiAmericas, Inc.
OH Akron ▇▇▇▇▇▇▇ Corp.
OH Ashtabula ▇▇▇▇▇▇▇ Corp.
OH ▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
OH Cincinnati ▇▇▇▇▇▇▇ Corp.
OH ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
OH ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
OH Dover ▇▇▇▇▇▇▇ Corp.
OH Lima ▇▇▇▇▇▇▇ Corp.
OH Springfield ▇▇▇▇▇▇▇ Corp.
OH Toledo ▇▇▇▇▇▇▇ Corp.
OH Youngstown ▇▇▇▇▇▇▇ Corp.
SD Aberdeen PepsiAmericas, Inc.
SD Sioux Falls PepsiAmericas, Inc.
TN ▇▇▇▇▇▇▇ PepsiAmericas, Inc.
TN Memphis PepsiAmericas, Inc.
TX Texarkana PepsiAmericas, Inc.
WI Beloit ▇▇▇▇▇▇▇ Corp.
WI Kenosha ▇▇▇▇▇▇▇ Corp.
WI Milwaukee ▇▇▇▇▇▇▇ Corp.
WI Oshkosh ▇▇▇▇▇▇▇ Corp.
WI Wisconsin Rapids ▇▇▇▇▇▇▇ Corp.
SCHEDULE D
NATIONAL ACCOUNT/PROGRAM CUSTOMERS
Acupulco Restaurants ▇▇▇▇▇▇ Companies Planet Hollywood
Ala Foods, Inc. Discovery Zone Pollo Tropical
Alfy's Pizza & Pasta Doctor's Associates Popeyes
Alternative Retail Concept ▇▇▇▇▇▇ Donuts QuickTrip
Amoco Oil Durango Steakhouse R&J Concessions
Aramark Corporation Equiva Services Red ▇▇▇▇▇
Arby's, Inc. Flash Foods Roasters, Inc.
Arco Frontier Enterprises Rodizio Grill-
▇▇▇▇▇▇ Teachers ▇▇▇▇▇▇▇ Group Runza Drive Inns of America
Au Bon Pain Gateway Foods of Altoona ▇▇▇▇▇ Pelican
Auto Vendors of America General Cinema Sbarro's
AVI GZK, Inc. Shoney's, Inc.
Azteca Hard Rock Cafe Sizzler Restaurants
Backyard Burgers Hardees Sonic Industries
Best Beef High Nooner Southland Corp.
Big K Oil Co. Hilton Hotels Steak and Ale
Biscuitville, Inc. Hot N Now Taco ▇▇▇▇
Bojangles ▇▇▇▇ ▇ ▇▇▇▇▇/Rolla Texaco
Boston Concessions Kerasotes Theatres Travel Port
Brueggers Bagel Bakery KFC Tubby's Sub Shops
Buca Di Beppo La Pizza Loca Una Mas
California Pizza Kitchen ▇▇▇'▇ Famous Chicken Valentino's
▇▇▇▇▇▇▇ Enterprises Long ▇▇▇▇ ▇▇▇▇▇▇ Vendors Supply of America
Captain D's Marriott Corp. Villa Enterprises
Casey's Gerneral Stores Metro Media Wal-Mart Stores
Chevron Stores Metropolitan Theatres Corp. WaWa
Church's Chicken Mobil Oil Wendy's
Cinamerica ▇▇▇▇▇▇▇▇ Hospitality Western Sizzlin
Circle K National Amusements White Swan
Clearview Cinema National JIB Purchasing Woody's Hot Dogs
Coastal Mart Inc. O'Charlyes ▇▇▇▇▇▇'▇ Food Service
Coffee Beanery ▇'▇▇▇▇ Yoshinoya West
Compass Group Pacific Basin Foods
Culver's Franchising System Panda Express
Cumberland Farms Panera Bread
Dairy Queen Papa Gino's
Daka International People Feeders/Square Pan
D'Angel, Inc. Pick Up Stix, Inc.
Dari-Mart Stores Pizza Hut
Delaware Valley Purchase Group Pizza Inn
SCHEDULE E-1
BOTTLER DELIVERY REMITTANCE
The Company will pay a per-gallon fee (the "Bottler Delivery
Remittance" as hereinafter defined) to the Bottler as the
Company's agent for manufacturing and delivering the Fountain
Syrup to National Account Customers electing DSD in accordance
with the provisions of paragraph 2(a) above. Such fees shall
be established by the Company on an annual basis in accordance
with the terms of this agreement. If the Bottler, as agent of
the Company, collects payments from a National Account
Customer for Fountain Syrup it has delivered to a National
Account Customer, the amount due and payable by the Bottler to
the Company with respect to such Fountain Syrup (the "Bottler
Delivery Fee Charge") shall be equal to the difference between
(i) the price per gallon of such Fountain Syrup for National
Account Customers as established by the Company (the "National
Account List Price") and (ii) the amount of the corresponding
Bottler Delivery Remittance.
Subject to paragraph 28(b) of the Master Fountain Syrup
Agreement, the Company and the Bottler agree that for those
National Account Customers included in the categories listed
below, the Company will reduce the amount of the Bottler
Delivery Remittance paid to the Bottler by a specified per
gallon amount.
CATEGORIES:
I. National Account Customers that are not under contract
on the date hereof and are sold during the Initial Term or
any Renewal Term by the Company's Fountain Beverage
Division or National Sales Business Unit (or successors)
and that elect DSD. The Bottler Delivery Remittance
applicable to such National Account Customers shall be
reduced by $0.40 per gallon.
SCHEDULE E-1 (continued)
II. A reduced Bottler Delivery Remittance will apply to
any National Account Customer described at Paragraph
1(c)(iv) (b) and (d) of this Agreement, if and when such
National Account Customer enters into a new National
Account agreement or extends or renews its current
agreement with the Company. The Bottler Delivery
Remittance applicable to such National Account Customers
shall be reduced by $0.10 per gallon during the first 12
months following such new agreement, extension or renewal
and such reduction shall increase by $0.10 per gallon in
each 12 month period following the date the initial
reduction became applicable to such National Account
Customer, to a maximum of $0.40 per gallon.
If during the Initial Term or any Renewal Term there is an
increase in the National Account List Price for any Fountain
Syrup (a "National Account Price Increase") that exceeds any
corresponding increase in the cost of concentrate for the
manufacture of a gallon of such Fountain Syrup (a "Concentrate
Cost Increase"), the amount of the Bottler Delivery Remittance
shall be increased by at least an amount equal to the sum of
the Concentrate Cost Increase plus 25% of the amount by which
the National Account Price Increase exceeds the Concentrate
Cost Increase.
If during the Initial Term and the Renewal Term there is a
National Account price increase for any Fountain Syrup that is
no more than any corresponding Concentrate Cost Increase, the
amount of the Bottler Delivery Remittance shall be increased
by the National Account Price Increase.
SCHEDULE E-1 (continued)
By way of examples, the following chart sets forth adjustments
to the Bottler Delivery Remittance and the Bottler Delivery
Fee Charge under various scenarios (all amounts in cents per
gallon):
Minimum Increase in Maximum Increase in
National Account Concentrate Cost Bottler Delivery Bottler Delivery Fee
Price Increase Increase Remittance Charge
---------------- ---------------- ------------------- --------------------
0 0 0 0
5 8 5 0
10 10 10 0
20 8 11* 9
*8(cent)Concentrate Cost Increase plus 3(cent)(i.e. 25% of the 12(cent)excess of
the 20(cent)National Account Price Increase over the 8(cent)Concentrate Cost
Increase)
SCHEDULE E-2
BRAND DEVELOPMENT FEE
The Company will pay a fee (hereafter called the "Brand
Development Fee") to the Bottler for each gallon of Fountain
Syrup sold by the Company to National Account Customers (other
than National Account Customers serviced through DSD as set
forth in Paragraph 2(a) above). The Brand Development Fee will
be equal to eight percent (8%) of the Company's list price for
Fountain Syrup.
For those National Account Customers included in the
categories listed below, the Company will reduce the Brand
Development Fee paid to the Bottler by a specified per gallon
amount.
CATEGORIES:
I. New National Account Customers that are not under
contract on the date hereof and are sold by the
Company's Fountain Beverage Division or National
Sales Business Unit (or successors) during the
Initial Term or any Renewal Term. The Bottler will
not receive any Brand Development Fee or National
Account Customers in this category.
SCHEDULE E-2 (continued)
II. Any National Account Customer described at
Paragraph 1(c)(iv)(b), (c) and (d) of this Agreement
will be subject to a reduced Brand Development Fee if
and when the National Account Customer enters into a
new National Account agreement or extends or renews
its current agreement with the Company, or in the
case of those accounts listed on Exhibit E-2 hereto
converts from DSD to commissary delivery. The Brand
Development Fee applicable to such National Account
Customers shall be reduced from 8% to 6% of the
Company's list price in the first 12 months following
such and shall decrease by an equal amount in each 12
month new agreement extension or renewal service
following the date the initial reduction became
applicable to such National Account Customer until
such Brand Development Fee no longer applies.
Exhibit E-2
Taco ▇▇▇▇
KFC
Pizza Hut
SCHEDULE E-3
EQUIPMENT SERVICE STANDARDS AND FEES
Company has established a service program as set forth
hereafter (the "Service Program") for the Initial Term and any
Renewal Term, which applies to Program Customers. The Service
Program contains the following elements:
(i) The Bottler (assuming it is in compliance with the
Company's reasonable service standards) shall have a right of
first refusal to provide service as the Company's service
agent.
(ii) If the Bottler agrees to act as the Company's service
agent the Bottler will provide service according to the
existing Sudden Service standards attached hereto as Exhibit
E-3(i).
(iii) If the Company adopts new or revised service standards,
any such new standards must be reasonable. In the event any
such new or revised service standards result in increases or
decreases to the Bottler's costs, the Company's payments in
Exhibit E-3(ii) (described in sub-paragraph (iv) below) will
be increased or decreased accordingly.
(iv) The Bottler, as the Company's service agent will be paid
a fee for service calls at regional market rates established
by the Company on an annual basis, which in no event shall be
less than set forth in Exhibit E-3(ii) (subject to
modification in accordance with paragraph (iii) above). The
Company will make such payments if and to the extent that such
payments are not made by a Program Customer. This program will
apply to all Program Customers regardless of whether the
Program Customer is receiving delivery through a Commissary or
through DSD.
Exhibit E-3(i)
Sudden Service Standards -- Bottler Coverage
24 hour - 7 day/week repair answering service
7 a.m. to 11 p.m. dispatching - 7 days per week
4 hour response time during regular dispatching hours
Reimbursement for service call will be computed on the basis of a one
hour minimum plus fifteen minute increment (or portion thereof) in
excess of one hour. Drive time will not be included in the above
computation except where special circumstances related to an outlet
location apply.
One preventative maintenance check per outlet every 6 months (taking
20-30 minutes to complete).
Exhibit E-3(ii)
Bottler Service Rates
---------------------
Rate per Call Geography
------------- ---------
$65 Los Angeles, Miami, Chicago, Boston,
Baltimore/Washington D.C., Alaska, New York City
$55 HI, CA, WA, MD, IL, SC, AR, NV
$50 CT, FL, GA, VA, MN, OR, NY, IN, NJ, WI, ME, NC,
OH, AZ, DL, MA, LA, PA, RI, WV, MO, ND, AL, MS
$45 NE, MI, CO, IA, TX, TN, SD, KS, MT, OK, UT, KY,
NH, VT
$40 WY, ID, NM
SCHEDULE E-4
NEW EQUIPMENT PROGRAM
The Company has established a new equipment program for the
Initial Term and any Renewal Term which will be applicable
only to the Program Customers. The equipment program contains
the following elements:
(i) The Company will provide equipment to National
Account Customers that enter into agreements with the
Company's Fountain Beverage Division or National Sales
Business Unit (or successors thereto) after the date hereof.
(ii) The Company will offer to purchase from the
Bottler any equipment on loan from the Bottler to a National
Account Customer that converts from DSD to commissary
delivery. The purchase price will be the fair market value of
such equipment. As used herein, fair market value will take
into account cost, age, condition, and resale opportunities.
The Bottler will grant the Company such reasonable access to
the Bottler's books and records as is necessary to determine
identity, age, and cost of equipment.
(iii) If the Company and the Bottler fail to agree on
the amount of the purchase price, the Bottler will retain
title to such equipment, but agrees not to remove such
equipment from the outlets of such National Account Customer
for a period of at least 90 days after which time the Company
and Bottler will agree on a reasonable equipment replacement
schedule.
SCHEDULE E-5
PRODUCTION FEE
During the Initial Term and any Renewal Term the Company will
pay a fee to the Bottler for production of all Fountain Syrup
produced by the Bottler for delivery to a Commissary at brand
specific per gallon rates reasonably established by the
Company. The rates shall be calculated to include a margin
that is 3.3% above product average variable costs, adjusted
for concentrate increases and cumulative increases or
decreases in the price of high fructose corn syrup which
exceed $0.05 per gallon of Fountain Syrup. Transportation will
be reimbursed separately according to a regional delivery rate
table to be reasonably established by the Company on an annual
basis.
SCHEDULE E-6
SERVICE INCENTIVE
The Company has established an equipment service incentive
fund, to be paid to the Bottler in accordance with the
following formula. Initially, this fund will be paid at the
rate of $0.15 per gallon on all Fountain Syrup delivered by a
Commissary to those National Account Customers in the
Territories whose gallons do not qualify the Bottler to
receive any Brand Development Fee provided that the Bottler
meets the service criteria set forth in Schedule E-3, as
amended from time to time. This fund may be adjusted in
subsequent years at the sole discretion of the Company.
Schedule F
Compensation Upon Termination
1. At least 90 days prior to the end of a period for which a notice of
termination is delivered by the Company to the Bottler, the Company and the
Bottler shall decide on a mutually acceptable appraiser for determining the
amount of the Exit Value (as defined below). If the parties cannot agree, each
party shall choose a recognized, experienced independent appraiser, which
appraisers shall in turn choose a third appraiser who shall be responsible for
conducting the appraisal and determining the Exit Value (any such appraiser is
referred to herein as the "Appraiser").
2. The parties shall provide the Appraiser with a letter setting forth the
guidelines for the conduct of the appraisal proceedings. Such guidelines shall
specify (a) that the Appraiser utilize 5 years of Projected Cash Flow (as
defined below), (b) that the Appraiser assume that such cash flows would be
derived from the value of the Bottler's Fountain Business, with normal capital
expenditures and investments in the Bottler's Fountain Business.
3. The Appraiser shall deliver a preliminary report of the Exit Value within 90
days of appointment.
Schedule F (continued)
4. Definitions:
(a) "Projected Cash Flow" means the projected After-Tax Cash Flow of
the Bottler's Fountain Business, based on (i) the actual After-Tax Cash Flow (as
defined below) of the Bottler's Fountain Business for the four (4) 12-month
periods ending six months prior to termination, and (ii) revenue, cost and
gallon sales growth trends for each segment of the Bottler's Fountain Business.
(b) "After-Tax Cash Flow" means net income, after taxes, plus reversal
of any provisions for depreciation or amortization and plus or minus net
interest expense or income, as the case may be, all determined in accordance
with generally accepted accounting principles then in effect.
(c) "Exit Value" shall mean five (5) years of discounted Projected Cash
Flow (as defined below); plus, in either case, the net book value (determined in
accordance with U.S. generally accepted accounting principles then in effect) of
the tangible assets of the Bottler used in the conduct of Bottler's Fountain
Business, less related liabilities assumed by the Company. The discount factor
to be used in connection with any calculation of Exit Value shall be the
Company's weighted average after-tax cost of capital calculated in accordance
with Exhibit F-1 attached hereto.
Exhibit F-1
WEIGHTED AVERAGE COST OF CAPITAL
--------------------------------
(WACC)
PepsiCo's WACC is determined by taking the average of the long term expected
return on debt and equity, weighted by their proportion in PepsiCo's capital
structure:
WACC = Rd x D% + Rd x E%
Rd = Expected after-tax return on debt
D% = Percentage of Net Debt to Total Capital
Re = Expected return on Equity
E% = Percentage of Equity to Total Capital
Rd is the after-tax yield on a 30-year PepsiCo bond.
Re is determined by using the Capital Asset Pricing Model.
Re = Rf + Beta x (Rm-Rf)
Rf = 30-year Treasury yield
Beta = PepsiCo's Beta, (value line)
Rf-Rm = Market risk premium, (Alcar)