RESTATED CORPORATE JOINT VENTURE AGREEMENT
THIS AGREEMENT is between (1) THE PRICE COMPANY, a corporation organized
under the laws of the State of California, United States of America ("PRICE")
and (2) PRICE VENTURE MEXICO, a corporation organized under the laws of the
State of California, United States of America ("PRIMEX"), on the one hand, and
(3) CONTROLADORA COMERCIAL MEXICANA, S.A. de C.V., a corporation organized under
the laws of the United Mexican States ("COMERCIAL"), on the other, and is made
with reference to the following facts and other recitals:
A. PRICE is in the business of operating membership warehouse club
outlets and has substantial and valuable experience in such business.
PRIMEX is or is about to become a wholly-owned subsidiary of PRICE.
B. COMERCIAL is in the business of operating retail department stores and
has substantial and valuable experience in such business.
C. The parties hereto entered into a Corporate Joint Venture Agreement
dated June 21, 1991 and amendments thereto ("Original Joint Venture
Agreement").
D. Execution of this Agreement is a condition to the Price Enterprises
Transaction and is intended to take effect only upon Closing of the
Price Enterprises Transaction.
E. Upon becoming effective, this Agreement is intended to supersede and
replace the Original Joint Venture Agreement in all respects.
F. Pursuant to the Original Joint Venture Agreement, PRIMEX and COMERCIAL
established Price Club de Mexico, S.A. de C.V. ("Price Club de
Mexico"), of which they each own 50% of the outstanding capital stock,
to engage in membership warehouse club operations in the United
Mexican States. PRICE has licensed Price Club de Mexico INTER ALIA to
use the service ▇▇▇▇ "Price Club" pursuant to a Service ▇▇▇▇ License
Agreement dated February 1, 1992 ("Original Service ▇▇▇▇ Agreement").
G. As part of the activities contemplated by the Original Joint Venture
Agreement, PRIMEX and COMERCIAL also established (i) CONTROLADORA
PRICE CLUB, S.A. de C.V. (the "Holding Company"), of which they each
own 50% of the outstanding capital stock, and (ii) IMPORTADORA PRIMEX,
S.A. de C.V. ("Importadora"), of which PRIMEX owns 49% and COMERCIAL
51% of the outstanding capital stock. The Holding Company in turn
owns a number of subsidiaries, including companies which own real
property upon which Warehouses operated by Price Club de Mexico are
located.
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H. In connection with the Price Enterprises Transaction, the parties have
agreed that PRICE's parent Price/Costco, Inc. ("PriceCostco") or an
Affiliate will take over management of Price Club de Mexico,
Importadora and the Holding Company and its subsidiaries (hereinafter
sometimes collectively referred to as the "Pricemex Group").
PriceCostco is willing to do so subject to certain conditions,
including without limitation the execution of this Agreement and the
execution of management agreements between PriceCostco and each of
Price Club de Mexico, the Holding Company and Importadora (the
"Management Agreements").
I. The parties also wish to reorganize the Pricemex Group so that the
Holding Company, owned 50% each by PRIMEX and COMERCIAL, in turn owns
all of the other companies in the Pricemex Group (the
"Reorganization").
J. "Joint Venture Companies" mean the Holding Company and, until the
Reorganization occurs, also Price Club de Mexico and Importadora.
K. "Pricemex Group Companies" mean the Joint Venture Companies and all
subsidiaries of these companies.
L. A glossary of terms used with initial capital letters and other terms
defined for purposes of this Agreement is set forth in Exhibit "A"
hereto.
THEREFORE, in consideration of the foregoing and the mutual promises
contained in this Agreement, the parties hereto agree as follows:
1. PURPOSE OF THIS AGREEMENT; THE REORGANIZATION.
1.1 PURPOSE. This Agreement is intended to govern the present and future
business relationship of the parties, and to provide for the future
management and operation of the Pricemex Group Companies. Those
companies have been formed to engage in Mexico in the Club Business
and to own and operate related real estate and related businesses.
1.2 REORGANIZATION.
1.2.1 Promptly following the execution of this Agreement, the
parties shall cause the Reorganization to occur, so that
Price Club de Mexico and Importadora are wholly owned
subsidiaries of the Holding Company.
1.2.2 The Reorganization shall be accomplished in a tax-free
manner. The parties' ownership interests in the Holding
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Company and the Holding Company's ownership interests in its
subsidiaries shall not change.
1.2.3 All costs of the Reorganization shall be borne by the Holding
Company.
1.2.4 In connection with the Reorganization, PRIMEX shall pay
COMERCIAL the sum of N$1,000 as compensation for the
equalization of the ownership of Importadora. (As used
hereinafter, "N$" denominates currency in new Mexican pesos
and "U.S.$" denominates currency in U.S. dollars.)
1.3 AMENDED CHARTER. The parties agree that the charter (including the
articles of incorporation and bylaws) of the Holding Company and of
all other Pricemex Group Companies, and of any direct or indirect
subsidiaries the Holding Company creates in the future, shall be
substantially the same as those attached hereto as Exhibit 1.3. To
the extent the charter of any company in the Pricemex Group does not
now conform to Exhibit 1.3, the parties shall forthwith cause them to
be amended to so conform.
1.4 REQUIRED FILINGS. Each of the parties hereto shall make, execute,
register and file, and shall cause the Holding Company and the other
Pricemex Group Companies to make, execute, register and file, all
charter documents, certificates, deeds, agreements and other
instruments as may be necessary or appropriate for the Reorganization
and the management and operation of the business of the Pricemex
Group as contemplated by this Agreement.
2. CAPITALIZATION, SHARE ISSUANCE, GUARANTIES.
2.1 COMPOSITION OF CAPITAL STOCK.
2.1.1 The capital stock of the Holding Company shall consist of
both fixed shares and variable shares. The minimum fixed
capital stock of the Holding Company without the right of
withdrawal shall be N$50,000, represented by 50,000 totally
subscribed shares of capital stock.
2.1.2 Each share of capital stock of the Holding Company and
(pending the Reorganization) of Price Club de Mexico and
Importadora (the "Shares") will each have one vote and shall
otherwise be alike in all respects, and the holders thereof
shall be entitled, in proportion to their respective holdings
of such Shares, to identical ownership rights and privileges,
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except as otherwise provided herein or in the Articles of
Incorporation and Bylaws of such companies.
2.2 OWNERSHIP OF SHARES. The current ownership of the Shares of the
Joint Venture Companies is as set forth in Exhibit 2.2.
2.3 CASH PAYMENTS. All payments for Shares hereunder shall be in cash,
unless in-kind payments are agreed upon by COMERCIAL and PRIMEX.
2.4 PREEMPTIVE RIGHTS TO ACQUIRE NEW SHARES. If the capital stock of any
company in the Pricemex Group is increased by contribution of new
capital, the stockholders of such company shall have preemptive
rights to subscribe for any new shares; provided such rights will not
exist when new Shares are issued under Section 2.6.2 below.
2.5 ADDITIONAL CAPITAL CONTRIBUTIONS.
2.5.1 The parties shall make additional capital contributions
and/or loans to any of the Joint Venture Companies in the
amounts and at the times decided by the shareholders.
2.5.2 The Shareholders of Price Club de Mexico have decided and
agreed and they shall make additional capital contributions
in the aggregate amount of U.S. $45,000,000 (respectively
U.S. $22,500,000 from PRIMEX and U.S. $22,500,000 from
COMERCIAL), in the time and manner specified in the initial
plan in Exhibit 3.11.
2.6 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS. In the event that
either PRIMEX or COMERCIAL (the "Non-Contributing Party") fails to
make or advance all or any portion of an additional capital
contribution such party is required to make under Section 2.5
("Delinquent Advance"), such party shall be in breach of its
obligations hereunder and, provided that the other party (the
"Contributing Party") has advanced the full amount that the
Contributing Party was obligated to make, the Contributing Party
shall have the following remedies exercisable by written notice
within thirty (30) Days following the date of delinquency:
2.6.1 The Contributing Party may give notice of an election to
invoke immediately the Buy-Out provisions of Section 8.3
hereof ("Buy-Out Notice") and Section 8.3 shall then apply,
or
2.6.2 The Contributing Party may advance to the company in cash an
amount equal to the Delinquent Advance, and treat the
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advance either as (i) a capital contribution for stock, in
which event such party shall be issued additional Shares in
the company at the subscription value determined at the time
the additional capital contribution was decided (or, if no
subscription value was so determined, at the par value), or
(ii) a loan to the company, in which event the loan shall be
repayable upon demand and shall bear interest, in the case of
a loan by COMERCIAL at its Specified Borrowing Rate plus two
percent (2%), or in the case of a loan by PRIMEX at the then
current borrowing rate of PriceCostco from its principal
lender plus two percent (2%).
2.7 LOANS, CREDITS AND GUARANTIES.
2.7.1 All loans or credits required by any of the Pricemex Group
Companies shall be structured to be financeable solely to
such company and, if possible, on a non-recourse basis.
2.7.2 Neither PRICE nor COMERCIAL shall be required to provide
leasing, mortgage or other guaranties in favor of third-party
creditors of such company.
2.7.3 However, if approved in writing by both PRICE and COMERCIAL,
such guaranties shall be provided in the same proportion
(1) as to PRICE, in which PRIMEX owns the fixed and variable
capital of the Holding Company and (2) as to COMERCIAL, in
which COMERCIAL owns the fixed and variable capital of the
Holding Company, and shall not terminate without the written
agreement of PRICE and COMERCIAL.
2.8 FAILURE TO PROVIDE OR MAINTAIN GUARANTIES. If either party fails to
provide or to maintain a guaranty as required by Section 2.7.3 and
the other party has provided or maintained such a guaranty, the other
party may give notice of an election to invoke immediately the Buy-
Out provisions of Section 8.3 hereof ("Buy-Out Notice") and Section
8.3 shall then apply.
2.9 NON-TRANSFERABILITY OF SHARES.
2.9.1 Neither COMERCIAL nor PRIMEX shall voluntarily sell,
transfer, assign, pledge or otherwise dispose of all or any
portion of its Shares in any of the Joint Venture Companies,
or permit or cause the transfer of any capital stock of any
of the Pricemex Group Companies, without the prior approval
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of the company's Board of Directors under Section 4.3.5
below, except (1) to a wholly-owned subsidiary of PriceCostco
or of COMERCIAL, as the case may be, that has assumed and
agreed to be bound by the provisions of this Agreement by an
assumption agreement in form and substance satisfactory to
the other party, or (2) in connection with a "Buy-Out"
pursuant to Section 8.3 hereof.
2.9.2 If a party violates or attempts to violate Section 2.9.1, the
other party may give notice of an election to invoke
immediately the Buy-Out provisions of Section 8.3 hereof
("Buy-Out Notice") and Section 8.3 shall then apply.
2.10 OTHER REMEDIES. The exercise by any party of any remedy provided in
Sections 2.6, 2.8 or 2.9 shall be cumulative and in addition to any
other remedy available to the company or to such party, such as in an
arbitration under Section 12.8 hereof.
2.11 AMENDMENT TO CAPITALIZATION. If PRIMEX and COMERCIAL mutually agree
to sell any Shares to the public, as a precondition to any such sale,
PRIMEX and COMERCIAL shall agree on such amendments to the
capitalization of the Holding Company as may be necessary or
desirable.
2.12 GOVERNMENTAL CONSENTS. The Joint Venture Companies and the parties
hereto shall file such notices and shall obtain, or cause to be
obtained, any permits, consents, approvals, authorizations,
qualifications or registrations required by any governmental
authority (whether in the United States of America or in the United
Mexican States) to issue any Shares and/or Capital Notes to COMERCIAL
or PRIMEX.
2.13 SECURITIES LAW MATTERS. The Joint Venture Companies and the parties
hereto shall make, or cause to be made, to one another or to third
parties, any filings, notices or representations required for any
Shares and/or Capital Notes issued by any of the Joint Venture
Companies to comply with applicable securities laws.
2.14 NOTICES AND LEGENDS. The certificates representing the Shares and
the Capital Notes shall bear a legend reflecting the restrictions on
transfer provided for in Section 2.9.1 above as well as any other
notices or written legends required by applicable securities laws or
by the charters of the Pricemex Group Companies.
2.15 SHAREHOLDER ADVANCES. A party may make a voluntary advance to any of
the Joint Venture Companies at any time, but solely to the fund
working capital needs of the company's operations incurred in the
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ordinary course of business. Such advance will be made in U.S.
Dollars and treated as a loan, and it will earn interest at the
applicable rate provided under Section 2.6.2(ii).
3. OPERATIONS.
3.1 MANNER OF OPERATION. The Holding Company, Price Club de Mexico, and
each other company in the Pricemex Group shall be operated in
accordance with the Management Agreements and the objectives of the
Business Plan.
3.2 LOCATION OF PRINCIPAL OFFICE. The principal office of the Holding
Company and of Price Club de Mexico shall be located in Mexico City,
D.F., Mexico or its greater metropolitan area. Other offices of the
Pricemex Group Companies shall be located at such places as the Board
of Directors or Executive Committee shall determine.
3.3 MANAGEMENT AGREEMENTS. Contemporaneously with the Effective Date of
this Agreement, the parties will cause Price Club de Mexico, the
Holding Company and Importadora to enter into the Management
Agreements in form the same as that attached hereto as Exhibit 3.3.
At the request of PRICE, the parties shall cause any other company in
the Pricemex Group also to enter into a Management Agreement.
3.4 ACCOUNTING.
3.4.1 If and to the extent required by Mexican law, the fiscal year
of the Pricemex Group Companies will begin on January 1 and
end on December 31 of each calendar year.
3.4.2 The Pricemex Group Companies shall also keep accounts by a
fiscal year that begins on the Monday nearest September 1 of
each year, and by successive accounting periods of four weeks
beginning with the first Day of each such fiscal year.
3.4.3 The accounting methods and systems employed by each of the
companies shall conform to generally accepted accounting
principles in the United Mexican States as customarily
employed by corporations of a similar nature, but the Joint
Venture Companies shall cause to be prepared and delivered to
PRICE, at no cost to PRICE, (i) regular periodic financial
statements of each company in the Pricemex Group prepared in
accordance with those generally accepted accounting
principles then currently employed by PRICE in the United
States of America, in such form and detail, and certified if
so requested, as may be required by the
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independent certified accountants of PRICE, and
(ii) documents and information necessary to prepare U.S.
income tax filings and returns during the term of this
Agreement and for a period of three years thereafter.
3.5 PAYMENT OF EXPENSES. All expenses of the business and operations of
the Joint Venture Companies shall be paid out of the capital or
earnings of the company concerned or their subsidiaries and shall not
be the responsibility of the parties hereto.
3.6 INSURANCE. Each of the Pricemex Group Companies shall maintain in
force policies of insurance, insuring its assets and business against
such losses and risks in such amounts as its Board of Directors or
Executive Committee shall determine and in accordance with the laws
of the United Mexican States.
3.7 LAREDO CLOSURE. The parties shall promptly cause Price Club de
Mexico to pay or reimburse PRICE all of the costs and expenses
incurred in closing PRICE's distribution facility located at Laredo,
Texas, including, but not be limited to, lease payments (rent and
common areas), utility payments, employee severance, and all other
costs arising from such termination and wind-up.
3.8 MANAGEMENT PERSONNEL BUDGET. The budget of Price Club de Mexico for
Management Personnel to be provided under its Management Agreement
shall be U.S. $1,500,000 per calendar year, or such greater amount
approved under Section 4 below.
3.9 RECONCILIATION OF ACCOUNTS. The parties agree that the accounts and
balances of all Indebtedness of each of the Pricemex Group Companies
to COMERCIAL, PRIMEX, PRICE and each of its Affiliates, and Price
Enterprises, Inc. are accurately stated, accounted for and reconciled
in Exhibit 3.9 hereof. The parties shall cause all such accounts and
balances to be accurately stated, accounted for and reconciled at the
end of each month hereafter. The existing letter of credit in favor
of Price Enterprises, Inc. shall be reissued in favor of PRICE and
extended through May 31, 1995.
3.10 PURCHASE COMMITMENTS. The parties agree that Exhibit 3.10 hereof
sets forth an accurate listing of merchandise that has been ordered
by Price Club de Mexico from PRICE or its Affiliates, and of Price
Club de Mexico's commitment to purchase and pay for such merchandise,
subject to any merchandise having been delivered under the applicable
terms of sale.
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3.11 BUSINESS PLAN.
3.11.1 The parties hereby agree to the Business Plan, which shall
consist of the initial plan set forth in Exhibit 3.11 hereof,
the additional capital contributions established under
Section 2.5.2 above, and the other matters set forth in
Sections 3.7, 3.8, 3.9, and 3.10 above.
3.11.2 The General Director will communicate to the Board of
Directors of Price Club de Mexico no later than March 31,
1995 a more detailed plan which, if adopted by the Board of
Directors, will become part of, or modify, the Business Plan.
3.12 INITIAL AUDITORS. The external auditors, shall be a major
international accounting firm with offices in Mexico City. The
parties agree that the initial external auditors shall be ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. (whose current member in Mexico City is ▇▇▇▇, ▇▇▇▇▇▇▇
y Cia., S.C.)
3.13 COMISARIOS. PRIMEX and COMERCIAL shall each be entitled respectively
to appoint one examiner (comisario), or may for any period agree to
appoint the other party's examiner.
4. MANAGEMENT.
4.1 BOARD OF DIRECTORS.
4.1.1 Subject to the Management Agreements, the Holding Company and
Price Club de Mexico shall each be managed by a six member
Board of Directors, three of whom shall be designated by
COMERCIAL and three of whom shall be designated by PRIMEX.
The parties may mutually agree to name alternates.
4.1.2 The other Pricemex Group Companies shall each have a six
member Board of Directors, consisting of the same members as
the Board of Directors of the Holding Company. As used
herein, unless the context otherwise so requires, "Board of
Directors" refers to the Board of Directors of such company
in the Pricemex Group as is involved in the matter in
question.
4.1.3 At each meeting of shareholders held for the purpose of
electing members to the Board of Directors, COMERCIAL and
PRIMEX shall vote their shares to ensure such designees shall
be elected.
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4.1.4 The Chairman of the Board of Directors of the Holding Company
and of Price Club de Mexico shall always be chosen from among
the directors designated by COMERCIAL, but the Chairman shall
not have a tie-breaking vote. The Secretary shall always be
chosen from among the directors designated by PRIMEX.
4.1.5 The Board of Directors of the Holding Company and Price Club
de Mexico shall meet not less than quarterly. The powers and
duties, indemnification and other terms and conditions of
Board membership shall be as set forth in the charters of the
Pricemex Group Companies.
4.2 BOARD QUORUM & VOTING. No meeting of any Board of Directors of the
Pricemex Group Companies shall occur unless four directors are
present and unless at least two of the directors designated by PRIMEX
and at least two of the directors designated by COMERCIAL are
present. All decisions of the Board of Directors of any company in
the Pricemex Group shall require the affirmative majority vote of the
entire Board of Directors (at least four directors).
4.3 MATTERS REQUIRING SPECIAL CONSENT. Each Board of Directors shall
delegate its authority (i) to the officers who are Management
Personnel under the Management Agreements as provided in Section 4.5
below, and (ii) to an Executive Committee as provided in Section 4.4
below, except for the following matters which shall be decided by the
full Board of Directors:
4.3.1 BUSINESS PLAN, BUDGETS. The approval of revisions and
modifications to the Business Plan, including operating and
capital budgets. In order that operations may continue, if
there is no agreement on any budget as a whole, the items
that can be agreed upon within the budget may be approved,
but for those items upon which there is no agreement, the
previous budget for those items shall continue until approved
under this Agreement.
4.3.2 UNBUDGETED OBLIGATIONS. If not provided for in the Business
Plan, the approval of any contract, expenditure, loan,
credit, indebtedness, guaranty, or acquisition or disposition
of real estate, interests in real estate or other fixed
assets (hereinafter an "Obligation"), (i) that will result in
a specific liability or expense in excess of U.S. $2,000,000
or its equivalent, or (ii) that the Executive Committee has
authority to approve, but has not approved, under Section 4.5
below.
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4.3.3 MANAGEMENT AGREEMENT CHANGES. The rescission, termination,
modification or amendment of any of the Management Agreements
or the removal or replacement of any of the Management
Personnel (it being understood and agreed that PriceCostco or
its assignee may replace or rotate Management Personnel from
time to time or any time pursuant to the terms of the
Management Agreements as it deems appropriate).
4.3.4 OFFICER ELECTIONS. Subject to Section 4.5.1 below, the
election and removal of officers.
4.3.5 SHARE TRANSFERS. The transfer of any Shares of any of the
Joint Venture Companies, except (1) to a wholly-owned
subsidiary of PriceCostco or of COMERCIAL, as the case may
be, that has assumed and agreed to be bound by the provisions
of this Agreement by an assumption agreement in form and
substance satisfactory to the other party, or (2) in
connection with a "Buy-Out" pursuant to Section 8.3 hereof.
4.3.6 AUDITORS. The appointment of new external auditors or
removal of the existing auditors.
4.3.7 OTHER MATTERS. The approval of any other matter referred to
the Board of Directors by the Executive Committee.
4.4 EXECUTIVE COMMITTEES.
4.4.1 The Boards of Directors of the Pricemex Group Companies shall
each delegate the authority described below to an Executive
Committee to be composed of the chief executive officer of
COMERCIAL and the chief executive officer of PRIMEX.
4.4.2 If not provided for in the Business Plan, the Executive
Committee shall have full authority to approve any Obligation
that will result in a specific liability or expense in excess
of U.S. $250,000 or its equivalent but not greater than U.S.
$2,000,000 or its equivalent.
4.4.3 The Executive Committees shall have full authority to take
any other actions which the Board of Directors would
otherwise have authority to take (other than those matters
described in Section 4.3 hereof).
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4.4.4 The authority delegated to each Executive Committee shall be
exercised by the affirmative vote of both of its members.
4.5 OFFICERS.
4.5.1 At each meeting of the Board or Directors of any of the
Pricemex Group Companies at which officers are elected, the
parties shall cause their designees on the Board of Directors
to vote for the Management Personnel provided under the
Management Agreements and, thus, to elect these persons to
the positions for which they have been designated by
PriceCostco.
4.5.2 Officers who are Management Personnel under the Management
Agreements shall have authority to undertake and enter into
any Obligation (i) that is provided for in the Business Plan,
(ii) that has been approved by the Board of Directors or
Executive Committee, or (iii) that will result in a specific
liability or expense that is no greater than U.S.$250,000 or
its equivalent. They shall also be given Powers of Attorney
in the form of Exhibit 4.5.
4.6 SHAREHOLDER MEETINGS. Ordinary shareholder meetings of any company
in the Pricemex Group shall deal only with the matters mentioned in
Article 181 of the General Corporation Law of Mexico. Extraordinary
shareholder meetings shall deal with all other matters to be
considered by the shareholders. The affirmative vote of at least
sixty percent (60%) of the total capital stock of such company shall
be required for action by the shareholders at an extraordinary
shareholders meeting.
4.7 CORPORATE RESOLUTIONS. To give effect to the purposes of the
Management Agreements and this Agreement, the parties shall promptly
cause shareholder resolutions and Board of Directors resolutions in a
form substantially the same as set forth in Exhibit 4.7 to be adopted
respectively by the shareholders and Boards of Directors of the
Pricemex Group Companies designated in Exhibit 4.7.
4.8 ACCESS TO INFORMATION. The officers of each company in the Pricemex
Group shall keep its Board of Directors or Executive Committee (as
applicable) informed of the material financial, business, marketing
and other general information necessary for the Board of Directors or
Executive Committee to fulfill their responsibilities and duties.
4.9 AUDITS. Each of PRIMEX and COMERCIAL shall have the right, at its
own expense, to have an independent audit of the financial condition
of any company in the Primex Group performed by auditors of its own
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selection at any time during the term of this Agreement and for a
period of three years thereafter.
4.10 WEEKLY MEETINGS. PRICE will cause the General Director to meet upon
request once per week with COMERCIAL's chief executive officer in a
meeting at a mutually convenient time and place.
4.11 STATEMENTS TO PUBLIC OR GOVERNMENT.
4.11.1 PRIMEX will cause the General Director to consult with
COMERCIAL's chief executive officer before Price Club de
Mexico issues any statement to the public or to the
Government of the United Mexican States or other governmental
entity.
4.11.2 The parties will use reasonable efforts under the
circumstances to advise each other in advance of public
statements (but not including filings that must be promptly
made under applicable securities laws) that relate to Price
Club de Mexico and to provide copies of such statements after
they are issued.
4.12 SERVICE ▇▇▇▇ AGREEMENT. Contemporaneously with the Effective Date of
this Agreement, the parties will cause Price Club de Mexico to enter
into a Restated Service ▇▇▇▇ License Agreement in the form of
Exhibit 4.12, to replace and supersede the Original Service ▇▇▇▇
Agreement.
4.13 TRAINING OF EMPLOYEES. PRICE and COMERCIAL will jointly and
cooperatively train employees of Price Club de Mexico (1) in the
conduct of membership warehouse club operations and (2) in the
discharge of that Company's administrative, financial, marketing and
related needs. Any training will first be determined by the
Management Personnel under the Management Agreements. Price Club de
Mexico will reimburse PRICE and COMERCIAL for the expenses associated
with such training pursuant to jointly approved employee training
budgets and supporting documentation. Such expenses shall include,
without limitation, all withholding taxes required to be paid in the
U.S.A. and the United Mexican States.
4.14 PURCHASE OF MERCHANDISE.
4.14.1 If merchandise is purchased from PRICE or COMERCIAL, the
purchase price and related overhead expenses will be set
forth in invoices or other written documents agreed upon
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between Price Club de Mexico and PRICE or COMERCIAL, as the
case may be, in advance.
4.14.2 Contemporaneously with the Effective Date of this Agreement,
the parties will cause Price Club de Mexico to enter into a
Merchandise Sourcing Agreement in the form of Exhibit 4.14
under which PRICE and its Affiliate will act as purchasing
agent for, and thereby supply merchandise to, Price Club de
Mexico.
4.14.3 The inventory purchase prices payable by Price Club de Mexico
to COMERCIAL will be COMERCIAL's direct costs which shall be
(1) the F.O.B. factory cost (less all discounts and rebates)
and (2) the Buying Services Costs (as defined in the
Merchandise Sourcing Agreement) incurred by COMERCIAL on the
transaction.
4.15 REAL ESTATE SUBDIVISION AGREEMENT. Contemporaneously with the
Effective Date of this Agreement, COMERCIAL and certain subsidiaries
of the Holding Company will enter into an agreement, in the form of
Exhibit 4.15, to subdivide real estate jointly owned by COMERCIAL and
those subsidiaries. The parties will use best efforts to effect
promptly those subdivisions.
4.16 OTHER AGREEMENTS. Other agreements between any of the Pricemex Group
Companies and PRICE, PRIMEX or any their Affiliates ("Prior
Agreements") that are listed in Exhibit 4.16 hereof will remain in
effect after the date of this Agreement. Any Prior Agreements not
listed in Exhibit 4.16 are hereby terminated.
5. REPRESENTATIONS AND WARRANTIES OF PRICE AND PRIMEX. PRICE and PRIMEX
hereby represent and warrant to COMERCIAL that:
5.1 ORGANIZATION AND STANDING. Each of PRICE and PRIMEX is a corporation
organized, existing and in good standing under the laws of the State
of California with the requisite power to enter this Agreement and to
fulfill its obligations hereunder; and PriceCostco is the parent
company of PRICE and is a corporation organized, existing and in good
standing under the laws of the State of Delaware.
5.2 AUTHORITY. Each of PRICE and PRIMEX has the right, power and
authority to execute, deliver and perform this Agreement and has
taken all required corporate action to approve this Agreement.
Subject to Section 13 below, this Agreement constitutes a valid and
binding obligation of each of PRICE and PRIMEX enforceable in
accordance with its terms, except to the extent that enforcement may
be subject to
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bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
5.3 ABSENCE OF CONFLICTS. Entering this Agreement and performing all of
their obligations hereunder does not (1) violate or conflict with the
Articles of Incorporation or Bylaws of PRICE or PRIMEX or any
agreement or instrument binding on either of them, (2) violate or
conflict with any law, rule, judgment, order or the like applicable
to PRICE or PRIMEX, or (3) require the consent or approval of any
other person or entity.
5.4 PENDING PROCEEDINGS. There is no dispute, investigation, litigation
or other proceeding pending or overtly threatened against PRICE or
PRIMEX which, if unfavorably concluded, would adversely affect the
ability of either of them to enter this Agreement or to fulfill its
obligations hereunder.
6. REPRESENTATIONS AND WARRANTIES OF COMERCIAL. COMERCIAL hereby represents
and warrants to PRICE and PRIMEX that:
6.1 ORGANIZATION AND STANDING. COMERCIAL is a corporation duly
organized, existing and in good standing under the laws of the United
Mexican States with the requisite power to enter this Agreement and
to fulfill its obligations hereunder.
6.2 AUTHORITY. COMERCIAL has the right, power and authority to execute,
deliver and perform this Agreement and has taken all required
corporate action to approve this Agreement. Subject to Section 13
below, this Agreement constitutes a valid and binding obligation of
COMERCIAL enforceable in accordance with its terms, except to the
extent that enforcement may be subject to bankruptcy, insolvency, and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
6.3 ABSENCE OF CONFLICTS. Entering this Agreement and performing all of
its obligations hereunder does not (1) violate or conflict with the
charter of COMERCIAL or any agreement or instrument binding on it,
(2) violate or conflict with any law, rule, judgment, order or the
like applicable to COMERCIAL, or (3) require the consent or approval
of any other person or entity.
6.4 PENDING PROCEEDINGS. There is no dispute, investigation, litigation
or other proceeding pending or overtly threatened against COMERCIAL
which, if unfavorably concluded, would adversely affect the ability
of COMERCIAL to enter this Agreement or to fulfill its obligations
hereunder.
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6.5 INFORMATION ABOUT PRICEMEX GROUP. All information concerning the
Pricemex Group Companies as stated in Exhibit 6.5 hereof is accurate,
true and correct. COMERCIAL will provide to PRICE on the Effective
Date, a certificate signed by COMERCIAL's chief executive officer,
certifying the accuracy of this information.
7. NON-COMPETITION AND OTHER COVENANTS.
7.1 NONCOMPETE BY COMERCIAL. Without the prior written approval of
PRICE, during the term of this Agreement (and, if it is a defaulting
party under Sections 8.2 and 9.4, for a period of five years
thereafter), neither COMERCIAL nor any of its Affiliates shall
directly or indirectly, in Mexico or in the United States of America
or elsewhere, other than by way of their interest in the Joint
Venture Companies,
7.1.1 own, operate, manage, license or assist, any Club Business or
company that engages in a Club Business, or
7.1.2 engage in any business with any of the Specified Companies
(except non-continuous purchases of goods where it has a
reasonable basis to believe the goods are being sold by a
Specified Company below cost).
7.2 NONCOMPETE BY PRICE. Without the prior written approval of
COMERCIAL, during the term of this Agreement (and, if it is a
defaulting party under Sections 8.2 and 9.4, for a period of five
years thereafter), neither PRICE nor any of its Affiliates shall
directly or indirectly, in Mexico, other than by way of their
interest in the Joint Venture Companies,
7.2.1 own, operate, manage, license or assist any Club Business or
company that engages in a Club Business, or
7.2.2 engage in any business with any of the Specified Companies
(except non-continuous purchases of goods where it has a
reasonable basis to believe the goods are being sold by a
Specified Company below cost).
7.3 BEST EFFORTS. The parties shall use best efforts to carry out the
terms and purposes of this Agreement and the Management Agreements.
7.4 COOPERATION. PRIMEX and COMERCIAL shall cooperate with each other
and shall cause their employees to cooperate to support the
businesses and operations of the Pricemex Group Companies.
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7.5 TAX REIMBURSEMENT. The parties will cause the Pricemex Group
Companies to indemnify and hold harmless PRICE and its Affiliates
from, and reimburse PRICE and its Affiliates and COMERCIAL and its
Affiliates respectively for, all Liabilities in connection with any
determination by tax authorities in the United States of America or
in the United Mexican States (i) that any amount paid for
merchandise, services, technical assistance or intellectual property
rights under this Agreement or the Associated Agreements is
insufficient under applicable "transfer pricing" laws and
regulations, or (ii) that PRICE or its Affiliates or COMERCIAL and
its Affiliates have a tax liability with respect to this Agreement,
the Associated Agreements or their subject matter other than from the
amounts actually paid.
8. DEADLOCK, DEFAULT, & BUY-OUT.
8.1 DEADLOCK OF SHAREHOLDERS OR DIRECTORS.
8.1.1 DEADLOCK NOTICE. If at any time after December 31, 1996, the
shareholders or Board of Directors of any of the Primex Group
Companies become (or remain) deadlocked over or, because of a
lack of a quorum or a required majority, are unable to act or
agree upon any matter including any inability to agree on
additional capital requirements or the provisions of
guaranties for such company (a "Deadlock"), any party may
give a notice of deadlock to the other parties ("Deadlock
Notice").
8.1.2 CONSULTATION PERIOD. Within sixty (60) Days after any
Deadlock Notice is given ("Consultation Period"), the chief
executive officers of PRICE and of COMERCIAL shall meet
personally and attempt to resolve the Deadlock, and any
resolution shall be set forth in a written agreement among
the parties.
8.1.3 MEDIATION PERIOD. If the Deadlock is not resolved by a
written agreement during the Consultation Period, then within
the immediately following sixty (60) Days ("Mediation
Period") the parties will attempt to have the Deadlock
resolved by non-binding mediation under Section 8.5 below.
8.1.4 BUY-OUT NOTICE. If the Deadlock is not resolved by a written
agreement during the Consultation Period and Mediation
Period, either may give notice of an election to invoke the
Buy-Out provisions of Section 8.3 hereof ("Buy-Out Notice")
and Section 8.3 shall apply.
-17-
8.1.5 PRE-1997 DEADLOCKS. If any Deadlock exists on or before
December 31, 1996, the parties shall continue to operate the
Pricemex Group Companies in accordance with all matters that
have been agreed upon including this Agreement, the
Management Agreements and the Business Plan.
8.2 DEFAULT AND INSOLVENCY.
8.2.1 DEFAULT NOTICE. Upon a Default either by PRICE or PRIMEX or
by COMERCIAL (the "Defaulting Party"), the other party may
give written notice of the Default ("Default Notice") to the
Defaulting Party specifying the Default. The Default Notice
shall be given within a reasonable time (but in any event
within 90 Days) after discovery of the Default.
8.2.2 CONSULTATION PERIOD. Within sixty (60) Days after any
Default Notice is given ("Consultation Period"), the chief
executive officers of PRICE and of COMERCIAL shall meet
personally and attempt to resolve the Default, and any
resolution shall be set forth in a written agreement among
the parties.
8.2.3 MEDIATION PERIOD. If the Deadlock is not resolved by a
written agreement during the Consultation Period, then within
the immediately following sixty (60) Days ("Mediation
Period") the parties will attempt to have the Deadlock
resolved by non-binding mediation under Section 8.5 below
8.2.4 BUY-OUT NOTICE. If the Default (i) is not resolved by a
written agreement during the Consultation Period and
Mediation Period and (ii) is not cured within 90 Days of the
Default Notice, the non-defaulting party may give notice of
an election to invoke the Buy-Out provisions of Section 8.3
hereof ("Buy-Out Notice") and Section 8.3 shall apply.
8.2.5 ARBITRATION REMEDY. Either party may in any case seek a
remedy by arbitration under Section 12.8 below. Any bona
fide dispute between the parties over the existence or nature
of a Default or the cure thereof shall be resolved pursuant
to the terms of Section 12.8.
8.2.6 INSOLVENCY NOTICE. If a party is insolvent, has been
declared bankrupt, has had a receiver or trustee appointed to
manage its assets or affairs, or is the subject of a petition
for insolvency or bankruptcy that has not been discharged
within sixty (60) Days of its filing ("Insolvent Party"), any
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other party may give the Insolvent Party written notice
thereof and elect to invoke the Buy-Out provisions of
Section 8.3 hereof ("Insolvency Notice") and Section 8.3
shall apply.
8.3 BUY-OUT.
8.3.1 DETERMINE FMV. In the event of a Buy-Out Notice under
Sections 2.6.1, 2.8, 2.9, 8.1.4, 8.2.4 or 8.8, or an
Insolvency Notice under Section 8.2.6 above, the Fair Market
Value of the Pricemex Group Companies as of the date the Buy-
Out Notice is given shall be determined under Section 8.4
below.
8.3.2 PRIMEX ELECTION. PRIMEX shall then have thirty (30) Days
from the date upon which the Fair Market Value shall have
been determined in which to elect (for itself or an
Affiliate), by written notice, to purchase all of the Shares
of COMERCIAL in the Joint Venture Companies for a price equal
to one hundred percent (100%) of the Fair Market Value
multiplied by COMERCIAL's percentage ownership of the Shares
of the Holding Company.
8.3.3 COMERCIAL ELECTION. If within the 30-Day period described in
Section 8.3.2 PRIMEX has not elected to purchase COMERCIAL's
Shares, COMERCIAL shall thereupon have a further thirty (30)
Days in which to elect (for itself or an Affiliate), by
written notice, to purchase all of the Shares of PRIMEX in
the Joint Venture Companies for a price equal to one hundred
percent (100%) of the Fair Market Value multiplied by
PRIMEX's percentage ownership of the Shares of the Holding
Company.
8.3.4 ADJUSTMENT OF FMV. If no election has been made under
Sections 8.3.2 or 8.3.3 above, then, immediately upon
expiration of the 30-Day period described in Section 8.3.3,
the Fair Market Value shall become an amount that is ninety
percent (90%) of the previous Fair Market Value, and the
procedures of Sections 8.3.2, 8.3.3 and this 8.3.4 will
continue to be repeated in sequence until an election is made
under Section 8.3.2 or Section 8.3.3.
8.3.5 PURCHASE TERMS. Once an election is made under Section 8.3.2
or Section 8.3.3, then (i) the parties shall promptly perform
all acts required of them and use their best efforts to cause
third parties to perform all acts required to enable
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the purchaser to consummate forthwith its purchase of the
Shares (the "Required Acts"), and (ii) the purchaser shall
pay the purchase price in cash and in U.S. Dollars within 120
Days after the date of the election or within twenty (20)
Days after completion of the Required Acts, whichever occurs
earlier.
8.4 FAIR MARKET VALUE.
8.4.1 PROPOSED & AGREED VALUES. Within thirty (30) Days after any
Buy-Out Notice is given under Section 8.1 or Section 8.2
above, the parties shall communicate to each other by written
notice a proposed fair market value in U.S. dollars (the
"Proposed Value") and attempt to arrive at an agreed Fair
Market Value in U.S. dollars for the Pricemex Group
Companies. Any such agreed-upon value, when approved in
writing by the parties, shall be deemed to be the Fair Market
Value.
8.4.2 APPRAISER DETERMINES FMV. If no such agreement has been
reached within the 30-Day period described in Section 8.4.1,
then the Fair Market Value in U.S. dollars shall be
determined in writing by an independent appraiser.
8.4.3 SELECTION OF APPRAISER. The Holding Company's external
auditors shall serve as the appraiser or, if unwilling to do
so, appoint the appraiser or, if no appraiser has been
appointed within sixty (60) Days after the Buy-Out Notice is
given, the President of Mexico's Association of Charted
Accountants or other authority agreed on in writing by the
parties shall at request of any party appoint the appraiser.
The appraiser shall in all cases be a member of a major
international accounting firm with offices in Mexico City.
8.4.4 COST. The fees and expenses of the appraiser shall be borne
equally by the parties.
8.4.5 BASIS OF APPRAISAL. The appraiser is to make his or her own
determination in writing of the fair market value in U.S.
dollars of the Shares of the Joint Venture Companies, based
on what an arm's length purchaser would pay for the Shares
taking into account the going concern value of the Pricemex
Group Companies (if still carrying on business).
8.4.6 ASSISTANCE. The parties shall give all reasonable assistance
to the appraiser, and require the officers, directors and
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auditors of the Pricemex Group Companies to give such
assistance. The parties may make written representations to
the appraiser, but the appraiser will not be obligated to
agree with them.
8.4.7 APPRAISED VALUE. Within sixty (60) Days after the
appointment of the appraiser (or as soon thereafter as it can
be accomplished), the appraiser shall submit to the parties
the fair market value as determined by the appraiser (the
"Appraised Value") together with a copy of a written
appraisal report prepared by such appraiser with respect to
such value.
8.4.8 USE OF PROPOSED OR APPRAISED VALUE. If the Appraised Value
is higher than the higher of either party's Proposed Value or
lower than the lower of either party's Proposed Value (or, if
only one Proposed Value was timely communicated, that
Proposed Value), then the nearest Proposed Value shall be the
Fair Market Value. Otherwise, the Appraised Value determined
by the appraiser shall be the Fair Market Value.
8.4.9 DATE FMV DETERMINED. The Fair Market Value shall be deemed
determined on (i) the date of any written approval of an
agreed Fair Market Value under Section 8.4.1, or (ii) the
date the written appraisal report prepared by the appraiser
under Section 8.4.7 is given to the last party to receive it,
or (iii) if the Fair Market Value has been reduced under
Section 8.3.4, the time described in Section 8.3.4.
8.5 MEDIATION PROCEDURE. Mediation under this Agreement shall occur
under the then current Center for Public Resources ("CPR") Model
Procedure for Mediation of Business Disputes (Model Procedure). The
mediator will be selected from the CPR Panels of Neutrals under the
Model Procedure, unless the parties have first selected a different
mediator.
8.6 INTERIM OPERATION. During any period of Deadlock, Default, Dispute,
existence of an Insolvent Party, Consultation Period, Mediation
Period, Buy-Out and any period thereafter until a sale is concluded
under Section 8.3, the parties shall continue to operate the Pricemex
Group Companies in accordance with all matters that have been agreed
upon including this Agreement, the Management Agreements and the
Business Plan, and otherwise in the best interests of the
shareholders.
8.7 OTHER REMEDIES UPON DEFAULT OR SALE. The provisions of this
Section 8 are not intended to be penal clauses, and the rights
therein shall be in
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addition to and not in substitution for any other remedies that may
be available to a non-defaulting party. No sale under Section 8.4
shall relieve any party from any obligations accrued to the date of
such sale or relieve a defaulting party from liability and damages to
any other party for breach of this Agreement.
8.8 CHANGE IN CONTROL. If there is a Change in Control Event with
respect either to PriceCostco or to COMERCIAL, the other party may
within thirty days of receiving notice of the Change in Control Event
elect by written notice to invoke immediately the Buy-Out provisions
of Section 8.3 hereof ("Buy-Out Notice") and Section 8.3 shall then
apply; PROVIDED THAT
8.8.1 The election must be made within five (5) years of the
Effective Date of this Agreement, and
8.8.2 The party making the election may not be in Default under
this Agreement and the Deadlock, Default and Buy-Out
procedures of Sections 8.1, 8.2 or 8.3 shall not otherwise
have commenced, and
8.8.3 If the election is properly made by COMERCIAL, COMERCIAL will
have the first right to purchase under Section 8.3.2 hereof
and, if COMERCIAL fails to elect to purchase under Section
8.3.2, then PRIMEX will have a right to elect to purchase
under Section 8.3.3.
8.9 STANDBY LICENSE AGREEMENT. If COMMERCIAL completes a Buy-Out (i)
under Section 8.3.3 after PRIMEX fails to elect to purchase under
Section 8.3.2 or (ii) under Section 8.8, the parties shall cause a
Standby License Agreement substantially in the form of Exhibit 8.9
hereof to be executed.
8.10 PUBLIC OFFERING LIMITATION. If pursuant to the mutual agreement of
the parties Shares of the Holding Company have been offered and sold
to the public, the parties intend that this Agreement will be
appropriately amended and that the Buy-Out provisions hereof will be
similarly amended.
9. TERM, TERMINATION & DISSOLUTION.
9.1 TERM. The term of this Agreement shall be from the Effective Date
until terminated under Section 9.2.
9.2 TERMINATION OF AGREEMENT. This Agreement shall be terminated on the
date:
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9.2.1 PRICE, PRIMEX and COMERCIAL agree in writing to terminate the
Agreement;
9.2.2 A sale is completed by either party of all its Shares in the
Joint Venture Companies by written agreement or under the
"Buy-Out" provisions of Section 8.3 above;
9.2.3 120 Days after the charter of the Holding Company expires, or
is revoked, provided it is not reinstated (or a new charter
is not issued) within these 120 Days.
9.3 SURVIVAL OF PROVISIONS. Sections 7, 8.5, 8.7, 10, 9.4, 9.5, 12, any
other provision hereof which specifically so provides, and any
provision hereof where the context so requires, shall survive any
termination of this Agreement. Termination shall not affect any
liability or obligation accrued before the date of termination.
9.4 POST-TERMINATION COMPETITION. After the date of a termination, PRICE
and its Affiliates and COMERCIAL and its Affiliates may compete with
one another in the United States of America and the United Mexican
States subject to the provisions of this Agreement including the
provisions of Section 10 hereof relating to confidentiality and
return of materials embodying Confidential Information (as defined in
Section 10.3); provided, however, that in the event of termination of
this Agreement upon a Buy-Out of a party's Shares following a Default
or other breach hereof, the defaulting or breaching party shall
remain bound by the provisions of Section 7.1 or 7.2 hereof (as
applicable) for a period of five years following the date of
termination.
9.5 DISSOLUTION. Dissolution of the Holding Company shall occur only in
accordance with the applicable provisions of law and the charter of
the Holding Company.
10. CONFIDENTIALITY.
10.1 DUTY OF CONFIDENTIALITY. Each of PRICE, PRIMEX and COMERCIAL
acknowledges that it will be made aware of and have access to
Confidential Information (as defined in Section 10.3). No party
hereto shall disclose, during the term of this Agreement or
thereafter, any Confidential Information to any person other than an
Affiliate, agent or employee of PRICE, PRIMEX or COMERCIAL, and then
only in furtherance of the interests of the Pricemex Group Companies,
unless prior written consent to such disclosure has been obtained
from each other party.
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10.2 CONFIDENTIAL INFORMATION. For purpose of this Section 10,
Confidential Information shall mean all confidential or proprietary
information owned, possessed or used by PRICE, PRIMEX or COMERCIAL or
their Affiliates, including, but not limited to, trade secrets and
know-how and other such information or data which is declared to be
confidential or proprietary by any party to this Agreement prior to
its disclosure. Confidential Information for purposes of this
Section 10 shall not include information which: (1) was in the
public domain at the time it was disclosed, (2) was already validly
in a recipient's possession at the time it was disclosed, and the
evidence of such possession is reasonably satisfactory to the party
seeking to restrict disclosure, (3) was independently developed by
the recipient, (4) or becomes known to the recipient from a source
other than a disclosing party without the disclosing party breaching
its obligations hereunder.
10.3 MEASURES BY AFFILIATES. The parties shall cause their Affiliates,
the Pricemex Group Companies, and the employees and agents of each of
the foregoing, not to disclose, and to exercise the same degree of
care to protect, the Confidential Information of PRICE, PRIMEX and
COMERCIAL that it would use to preserve and safeguard its own
confidential information. Such care shall include, but not be
limited to, requiring any such entities, or their agents and
employees, to execute a reasonable confidentiality agreement in a
form submitted by one party to any other party.
10.4 RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of this
Agreement, each of PRICE, PRIMEX and COMERCIAL shall return to the
others of them, and shall cause the Pricemex Group Companies to so
return, all materials embodying Confidential Information which such
party has received from any of the others since April 1, 1991.
11. FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS.
11.1 FCPA COMPLIANCE. The parties hereto acknowledge their familiarity
with the United States Foreign Corrupt Practices Act ("FCPA") and
will comply fully with the FCPA.
11.2 LEGAL COMPLIANCE. The parties shall cause all of the Pricemex Group
Companies to comply with all applicable laws and regulations in
Mexico, to comply with the FCPA, and to assist PRICE and PRIMEX in
complying with any applicable law of Mexico or the United States.
12. MISCELLANEOUS.
12.1 ASSIGNMENT. No party to this Agreement may assign, transfer or
otherwise convey any or all of its rights or obligations hereunder
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without the prior written consent of the others, except to an
Affiliate to whom the Shares have been conveyed as permitted by
Section 2.9 above. No such assignment to an Affiliate shall relieve
the assigning party of any of its obligations hereunder.
12.2 ENTIRE AGREEMENT. This Agreement (including all exhibits hereto),
together with the Management Agreements, sets forth the entire
agreement among the parties with respect to the subject matter hereof
and supersedes the Original Joint Venture Agreement, which is hereby
terminated, and supersedes all prior discussions, understandings and
agreements relating to the subject matter hereof.
12.3 SEVERABILITY. If any one or more of the provisions contained in this
Agreement or in any document executed in connection herewith shall be
held invalid, illegal or unenforceable in any respect under
applicable law, the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired; provided, however, that in such case the
parties shall use their best efforts to achieve the purpose of the
affected provision in a manner which is not invalid, illegal or
unenforceable.
12.4 GOVERNING LAW. This Agreement and all actions and arbitrations
contemplated hereby shall be governed by and construed and enforced
in accordance with the internal laws of the State of Texas, United
States of America, excluding the principles of conflict of laws
thereof.
12.5 GOVERNING TEXT AND LANGUAGE. The parties shall execute three English
language originals of this Agreement, one to be held by each party.
The parties understand and agree that this document has been prepared
in the English language and that the English language is the official
language of this Agreement. The parties shall also promptly cause an
official, certified Spanish language text to be prepared, but should
any discrepancy of interpretation occur between the English original
and the Spanish text, the English original shall be controlling.
12.6 NO WAIVER OF RIGHTS. Except as otherwise provided herein, no failure
or delay on the part of either party in the exercise of any power or
right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude other
or further exercise thereof or of any other right or power.
12.7 FORCE MAJEURE.
12.7.1 Failure on the part of a party to perform any of its
obligations hereunder will not be deemed to be a breach of
the Agreement to the extent that such failure arises from
force
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majeure. If through force majeure the fulfillment by either
party of any obligation set forth in this Agreement will be
delayed, the period of such delay will not be counted in
computing periods prescribed by this Agreement.
12.7.2 Any party failing to perform its obligations under this
Agreement because of force majeure shall give notice in
writing of such force majeure as soon as possible after the
occurrence to the other party.
12.7.3 Force majeure will mean any war, civil commotion, strike,
lockout, accident, epidemic, or other event that is fully
beyond the control of the parties, and that directly prevents
a party from performing an obligation hereunder.
12.7.4 Any party hereto who fails because of force majeure to
perform an obligation hereunder will upon the cessation of
the force majeure take all reasonable steps within its power
to resume with the least possible delay compliance with that
obligation.
12.8 DISPUTE RESOLUTION.
12.8.1 The parties shall attempt to settle any Dispute between them
by consultation and non-binding mediation, during a
Consultation Period and Mediation Period, as provided by
Sections 8.1.2, 8.1.3, 8.2.2, 8.2.3 and 8.5 above. If no
Notice of Deadlock or Notice of Default has been given, a
party shall first give a written notice specifying the
Dispute and the Consultation Period will begin with that
notice.
12.8.2 If the Dispute is not resolved by written agreement within
the Consultation Period and the Mediation Period, it shall be
resolved by binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association
("AAA"), in English at San Diego, California, before one
neutral arbitrator who may be a national of any party and who
shall be a lawyer with at least 15 years experience in
commercial law and a member of the AAA's Large Complex Case
Panel. All documents and information relevant to the claim
or dispute in the possession of any party shall be made
available to the other party not later than sixty (60) Days
after the demand for arbitration is served, and the
arbitrator may permit such depositions or other discovery
deemed necessary for a fair hearing. The hearing may not
exceed two Days. The award shall be rendered within 120 Days
of
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the demand. The arbitrator may award interim and final
injunctive relief and other remedies, but may not award
punitive damages. No time limit herein is jurisdictional.
Any award of the arbitrator (including awards of interim or
final remedies) shall be final and not subject to appeal or
review, and may be confirmed or enforced in any court having
jurisdiction and under the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.
12.8.3 Notwithstanding Sections 12.8.1 and 12.8.2 above, the parties
may bring court proceedings or claims against each other only
(i) as part of separate litigation commenced by an unrelated
third party, or (ii) if not first sought from the arbitrator,
solely to obtain preliminary injunctive relief or other
interim remedies pending conclusion of the arbitration.
12.8.4 The prevailing party in any arbitration or legal action
involving any Dispute shall be awarded its reasonable
attorney's fees against the non-prevailing party.
12.9 NOTICES. All notices and other communications hereunder shall be in
writing in the English language and may be personally delivered or
sent by telefax and then confirmed by certified or registered first
class air mail. Any such notice or other communication shall be
deemed effectively given (a) on the date of delivery if personally
delivered; or (b) on the first business day after being sent by
telefax. All such notices and communications shall be delivered or
sent to the addresses below or such other address(es) as a party may
specify in a written notice:
If to PRICE or PRIMEX:
PRICE/COSTCO, INC.
▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇.▇.▇.
Telefax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
with a copy to:
PRICE/COSTCO, INC.
10809 - ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇.▇.▇.
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Telefax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to COMERCIAL:
Controladora Comercial Mexicana, S.A. de C.V.
27 ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ Ixtlixochitl
Colonia Obrera
Mexico, D.F.
C.P. 06800
Telefax Number: (▇▇-▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Zabalegui
Chief Executive Officer
with copies to:
Lic. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Legal Director Controladora Comercial
Mexicana, S.A. de C.V.
27 ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ Ixtlixochitl
Colonia Obrera
Mexico, D.F.
C.P. 06800
Telefax Number: (▇▇-▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telefax Number: (▇▇▇) ▇▇▇-▇▇▇▇, 280-6226
Attention: Lic. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ O.
12.10 EXHIBITS. The Exhibits hereto are an integral part of this
Agreement and all references herein to this Agreement shall
encompass such Exhibits.
12.11 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
12.12 HEADINGS. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and
do not constitute a part of this Agreement.
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12.13 AMENDMENT AND MODIFICATION. This Agreement may be amended or
modified only by a writing executed by all parties.
12.14 TRADE AND TAX LAW CHANGES. PRICE, PRIMEX and COMERCIAL acknowledge
that the governments of their respective countries from time to time
consider changes in their respective trade and tax laws. It is the
intention of the parties that, in the event of any such changes
which are major and which are to become effective during the term
hereof, they will consult with each other and consider whether it
would be mutually beneficial to make any revisions hereto.
12.15 FURTHER INSTRUMENTS AND ACTS. The parties hereto will execute and
deliver such further instruments and do such further acts as may be
necessary or proper to carry out more effectively the purposes of
this Agreement.
13. CONDITION TO VALIDITY.
13.1 This Agreement is conditioned on, and will enter to effect, only if
the Closing of the Price Enterprises Transaction occurs on or before
March 31, 1995 or such later date that the parties hereto agree upon
in writing (the "Nullity Date").
13.2 If the Closing of the Price Enterprises Transaction has not occurred
on or before the Nullity Date, this Agreement will be null and void.
If,
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however, that Closing occurs on or before the Nullity Date, this
Agreement enter into effect simultaneously with the conclusion of
that Closing.
INTENDING TO BE LEGALLY BOUND subject to Section 13 above, the parties have
caused this Agreement to be executed by their duly authorized officers as of the
_____ day of _________________, 1995.
CONTROLADORA COMERCIAL MEXICANA, THE PRICE COMPANY
S.A. DE C.V.
By By
----------------------------- ----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer Chief Executive Officer
By PRICE VENTURE MEXICO
-----------------------------
Its Director of Foreign Trade
By
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
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LIST OF EXHIBITS:
Exhibit A: Definitions & Glossary of Terms
Exhibit 1.3: Amended Charters (Articles and Bylaws)
Exhibit 2.2: Share Ownership of Joint Venture Companies
Exhibit 3.3: Management Agreements
Exhibit 3.9: Statement and Reconciliation of Accounts
Exhibit 3.10: Purchase Commitments
Exhibit 3.11: Initial Plan
Exhibit 4.5: Powers of Attorney for Management Personnel
Exhibit 4.7: Corporate Resolutions
Exhibit 4.12: Restated Service ▇▇▇▇ License Agreement
Exhibit 4.14: Merchandise Sourcing Agreement
Exhibit 4.15: Real Estate Subdivision Agreement
Exhibit 4.16: Other Agreements
Exhibit 6.5: Information About the Pricemex Group Companies
Exhibit 8.9: Standby License Agreement
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EXHIBIT "A"
DEFINITIONS & GLOSSARY OF TERMS
"Affiliate" of a party means (1) a parent corporation of a party; (2) a
subsidiary corporation of a party, or a partnership, joint venture, business
trust or other association or entity in which a party directly or indirectly
owns or controls at least twenty-five percent of the voting stock, partnership
interests, or other equity interests, or which a party controls by way of
contract, covenant or otherwise; (3) an entity which is under the common control
of a parent of a party; (4) any officer, director, shareholder, partner or other
controlling person of any of the foregoing entities; and (5) any family member
of the family of any of the foregoing persons. Notwithstanding the foregoing,
the Pricemex Group Companies shall not be deemed to be affiliates of PRICE,
PRIMEX or COMERCIAL.
"Appraised Value" has the meaning set forth in Section 8.4.7 hereof.
"Associated Agreements" means those other agreements referred to in, or
contemplated by, this Agreement.
"Board of Directors" has the meaning set forth in Section 4.1.2 hereof.
"Business Plan" means the operating and capital expansion plan beginning
January 1, 1995 and continuing five years thereafter (including any budget for
estimated capital and pre-opening expenditures, revenue and expense projections
for Warehouse operations and membership, cash flow estimates, financing plans,
and marketing strategies) and shall consist of (i) the initial plan, additional
capital contributions and other matters mentioned in Section 3.11, and (ii) any
modifications or revisions adopted under Sections 3.11.2 or 4.3.1 hereof.
"Buy-Out" means the process and procedure described in Section 8.3 hereof,
under which PRIMEX or COMERCIAL may purchase all Shares of the other party in
the Joint Venture Companies.
"Buy-Out Notice" has the meaning set forth in Sections 8.1.3 and 8.2.4
hereof.
"Change in Control Event" means that the ownership of more than fifty
percent (50%) of the voting shares of COMERCIAL or of PriceCostco has been
acquired by a third party or a third party has acquired the power to appoint a
majority of such Company's board of directors, or an agreement has been
concluded by COMERCIAL or by PriceCostco to do any of the foregoing.
"Club Business" means any merchandising activity utilizing 4,000 square
meters or more in a single location, operated with membership and selling food
and non-food items through a central check-out.
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"Closing" means the closing of the Price Enterprises Transaction.
"COMERCIAL" means Controladora Comercial Mexicana, S.A. de C.V., a
corporation organized under the laws of the United Mexican States.
"Confidential Information" has the meaning set forth in Section 10.3
hereof.
"Consultation Period" has the meaning set forth in Sections 8.1.2, 8.2.2
and 12.8.1 hereof.
"Days" means calendar days.
"Deadlock" has the meaning set forth in Section 8.1.1 hereof.
"Deadlock Notice" has the meaning set forth in Section 8.1.1 hereof.
"Default" means any breach or failure to perform an obligation under this
Agreement, except a failure to make additional capital contributions or a
failure to provide or maintain a guaranty under Sections 2.5 through 2.8 or a
transfer of shares or other Act in violation of Section 2.9 hereof (which are
considered major defaults and create a right immediately to invoke the Buy-Out
provisions of Section 8.3).
"Default Notice" has the meaning set forth in Section 8.2.1 hereof.
"Defaulting Party" has the meaning set forth in Section 8.2.1 hereof.
"Dispute" means (1) any differences in the interpretation of this
Agreement, (2) any controversy or claim arising out of or relating to this
Agreement (including Section 12.8 hereof) or the validity, breach or termination
of this Agreement, or (3) any controversy or claim arising out of or relating to
one or more of the Pricemex Group Companies, including without limitation any
Deadlock, Default, failure to make additional capital contributions or a failure
to provide or maintain a guaranty under Sections 2.5 through 2.8 hereof, or a
transfer of shares or other act in violation of Section 2.9 hereof.
"Effective Date" means the date of the Closing of the Price Enterprises
Transaction, provided that such Closing occurs on or before March 31, 1995 or
such later date that the parties hereto agree upon in writing.
"Executive Committee(s)" has the meaning set forth in Section 4.4 hereof.
"Fair Market Value" means the value of the Shares of the Joint Venture
Companies as determined under Section 8.4 and (if applicable) under Section
8.3.4.
A-2
"General Director" means the General Director of Price Club de Mexico under
the Management Agreements.
"Holding Company" means Controladora Price Club S.A. de C.V.
"Importadora" means Importadora Primex, S.A. de C.V.
"Indebtedness means any amount owed including without limitation notes
payable, merchandise payables, liabilities for merchandise in transit, and any
other amount owed of any nature.
"Insolvency Notice" has the meaning set forth in Section 8.2.6 hereof.
"Joint Venture Companies" means The Holding Company and, until the
Reorganization occurs, also Price Club de Mexico and Importadora.
"Liabilities" shall have the same meaning as in Section 7.1 of the Restated
Service ▇▇▇▇ Agreement."
"Management Agreements" means the Management Agreements described in
Recital "F" and Section 3.3 hereof.
"Mediation Period" has the meaning set forth in Sections 8.1.3, 8.2.3 and
12.8.1 hereof.
"Obligation" has the meaning set forth in Section 4.3.6 hereof.
"Original Joint Venture Agreement" means the Agreement between The Price
Company, Price Venture Mexico and Controladora Comercial Mexicana, S.A. de C.V.
to Form a Corporate Joint venture, dated June 21, 1991, and all amendments
thereto including without limitation an Amendment to Corporate Joint Venture
Agreement dated June 21, 1991, executed as of July 15, 1991 and an Amendment to
a certain Corporate Joint Venture Agreement dated June 21, 1991 etc. executed in
San Diego, California on January 29, 1992 and in Mexico City on January 28,
1992.
"Original Service ▇▇▇▇ Agreement" has the meaning set forth in Recital "D"
hereof.
"PRICE" means The Price Company, a corporation organized under the laws of
the State of California.
"Price Club de Mexico" means Price Club de Mexico S.A. de C.V.
"PriceCostco" means Price/Costco, Inc., a Delaware corporation, and parent
company of PRICE.
A-3
"Price Enterprises Transaction" means the transaction in which PRICE will
acquire the interest of Price Enterprises, Inc. in the immediate parent of
PRIMEX.
"PRIMEX" means Price Venture Mexico, a corporation organized under the laws
of the State of California.
"Pricemex Group" means Price Club de Mexico, Importadora, and The Holding
Company and subsidiaries of the foregoing.
"Pricemex Group Companies" means all companies in the Pricemex Group.
"Proposed Value" has the meaning set forth in Section 8.4.1 hereof.
"Reorganization" means the reorganization described in Recital "G" and
Section 1.2.1 hereof.
"Shares" means the shares of capital stock of the Holding Company and
(pending the Reorganization) also of Price Club de Mexico and Importadora, as
set forth in Section 2.1.2 hereof.
"Specified Companies" means Wal-Mart Stores, Inc., Cifra, Gigante, Kmart
Corporation, Home Depot, Inc., Office Depot, Inc., and their respective
subsidiaries.
"Specified Borrowing Rate" means the borrowing rate (1) under COMERCIAL's
then current commercial paper program, or (2) if there is no such program, under
COMERCIAL's then current Eurobond borrowing, or (3) if there is neither, equal
to the prime rate published in the WALL STREET JOURNAL on the first business day
after the loan in question is made.
"Warehouse Business" means any wholesale or retail merchandising activity,
selling food items, non-food items or both through a central check out, and
operated out of facilities with warehouse-style fixtures and furnishings or with
products displayed in their shipping cartons or pallets, with or without
membership.
"Warehouses" means locations at which Club Business is operated.
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