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NO. 1-14893
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 25, 1999
THE PEPSI BOTTLING GROUP, INC.
ONE PEPSI WAY
SOMERS, NEW YORK 10589
(914) 767-6000
INCORPORATED IN DELAWARE 13-4038356
(JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
-------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES
EXCHANGE ACT OF 1934:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $.01 per share New York Stock Exchange
7% Series B Senior Notes due 2029 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
THE NUMBER OF SHARES OF THE PEPSI BOTTLING GROUP, INC. CAPITAL
STOCK OUTSTANDING AS OF MARCH 10, 2000 WAS 148,370,179. THE AGGREGATE MARKET
VALUE OF THE PEPSI BOTTLING GROUP, INC. CAPITAL STOCK HELD BY NON-AFFILIATES OF
THE PEPSI BOTTLING GROUP, INC. AS OF MARCH 10, 2000 WAS $1,849,784,156.
DOCUMENTS OF WHICH PORTIONS PARTS OF FORM 10-K INTO WHICH PORTION OF
ARE INCORPORATED BY REFERENCE DOCUMENTS ARE INCORPORATED
ANNUAL REPORT TO SHAREHOLDERS I, II
PROXY STATEMENT FOR THE PEPSI
BOTTLING GROUP, INC.
MAY 24, 2000 ANNUAL MEETING OF
SHAREHOLDERS III
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Pepsi Bottling Group, Inc. ("PBG") was incorporated in Delaware in
January, 1999 as a wholly-owned subsidiary of PepsiCo, Inc. ("PepsiCo") to
effect the separation of most of PepsiCo's company-owned bottling businesses.
PBG became a publicly traded company on March 31, 1999. At February 22, 2000,
PepsiCo's ownership represented 36.9% of the outstanding common stock and 100%
of the outstanding Class B common stock together representing 45.0% of the
voting power of all classes of PBG's voting stock. PepsiCo also owns 7.1% of the
equity of Bottling Group, LLC, PBG's principal operating subsidiary, giving
PepsiCo economic ownership of 41.4% of PBG's combined operations. We refer to
our publicly traded common stock as "Common Stock" and together with our Class B
common stock as our "Capital Stock". When used in this Report, "PBG," "we," "us"
and "our" each refers to The Pepsi Bottling Group, Inc. and, where appropriate,
to Bottling Group, LLC, which we refer to as "Bottling LLC."
PRINCIPAL PRODUCTS
PBG is the world's largest manufacturer, seller and distributor of
Pepsi-Cola beverages. Pepsi-Cola beverages sold by us include PEPSI-COLA, DIET
PEPSI, MOUNTAIN DEW, LIPTON BRISK, LIPTON'S ICED TEA, 7UP outside the U.S.,
PEPSI MAX, PEPSI ONE, SLICE, MUG, AQUAFINA, STARBUCKS FRAPPUCCINO and KAS. We
have the exclusive right to manufacture, sell and distribute Pepsi-Cola
beverages in all or a portion of 41 states, the District of Columbia, eight
Canadian provinces, Spain, Greece and Russia. In some of our territories, we
also have the right to manufacture, sell and distribute soft drink products of
other companies, including DR PEPPER and 7UP in the U.S. Approximately 91% of
our volume is sold in North America, which consists of the United States and
Canada, and the remaining 9% is sold in Spain, Greece and Russia. We have an
extensive distribution system in North America. In Russia, Spain and Greece, we
use a combination of direct store distribution and distribute through
wholesalers, depending on local marketplace considerations.
RAW MATERIALS AND OTHER SUPPLIES
PBG purchases its concentrate to manufacture Pepsi-Cola beverages and other
soft drink products from PepsiCo and other soft-drink companies.
In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials and carbon
dioxide. We generally purchase our raw materials, other than concentrates, from
multiple suppliers. PepsiCo acts as our agent for the purchase of such raw
materials. The Pepsi beverage agreements provide that, with respect to the soft
drink products of PepsiCo, all authorized containers, closures, cases, cartons
and other packages and labels may be purchased only from manufacturers approved
by PepsiCo. There are no materials or supplies used by PBG which are currently
in short supply. The supply or cost of specific materials could be adversely
affected by price changes, strikes, weather conditions, governmental controls or
other factors.
PATENTS, TRADEMARKS, LICENSES AND FRANCHISES
Our portfolio of beverage products includes some of the best recognized
trademarks in the world and include PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW, LIPTON
BRISK, LIPTON'S ICED TEA, 7UP outside the U.S., PEPSI MAX, PEPSI ONE, SLICE,
MUG, AQUAFINA, STARBUCKS FRAPPUCCINO and
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KAS. The majority of our volume is derived from brands licensed from PepsiCo or
PepsiCo joint ventures. In some of our territories, we also have the right to
manufacture, sell and distribute soft drink products of other companies,
including DR PEPPER and 7UP in the U.S.
PBG conducts its business primarily under agreements with PepsiCo. These
agreements give us the exclusive right to market, distribute, and produce
beverage products of PepsiCo in authorized containers in specified territories.
Set forth below is a description of the Pepsi beverage agreements and other
bottling agreements to which we are a party.
Terms of the Master Bottling Agreement. The master bottling agreement under
which we manufacture, package, sell and distribute the cola beverages bearing
the PEPSI-COLA and PEPSI trademarks was entered into in March 1999. The master
bottling agreement gives us the exclusive and perpetual right to distribute cola
beverages for sale in specified territories in authorized containers of the
nature currently used by us. The master bottling agreement provides that we will
purchase our entire requirements of concentrates for the cola beverages from
PepsiCo at prices, and on terms and conditions, determined from time to time by
PepsiCo. PepsiCo may determine from time to time what types of containers to
authorize for use by us. PepsiCo has no rights under the master bottling
agreement with respect to the prices at which we sell our products.
Under the master bottling agreement we are obligated to:
(1) maintain such plant and equipment, staff, and distribution and
vending facilities that are capable of manufacturing,
packaging and distributing the cola beverages in sufficient
quantities to fully meet the demand for these beverages in our
territories;
(2) undertake adequate quality control measures prescribed by
PepsiCo;
(3) push vigorously the sale of the cola beverages in our
territories;
(4) increase and fully meet the demand for the cola beverages in
our territories;
(5) use all approved means and spend such funds on advertising and
other forms of marketing beverages as may be reasonably
required to meet the objective; and
(6) maintain such financial capacity as may be reasonably
necessary to assure performance under the master bottling
agreement by us.
The master bottling agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan, including the introduction of any new beverage product or
any change in the geographic area in which existing beverage products are
distributed, our management plan and advertising plan with respect to the cola
beverages for the year. We must also present a financial plan showing that we
have the financial capacity to perform our duties and obligations under the
master bottling agreement for that year, as well as sales, marketing,
advertising and capital expenditure plans for the two years following such year.
PepsiCo has the right to approve such plans, which approval shall not be
unreasonably withheld. In 1999, PepsiCo approved our annual plan.
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If we carry out our annual plan in all material respects, we will be deemed
to have satisfied our obligations to push vigorously the sale of the cola
beverages and to increase and fully meet the demand for the cola beverages in
our territories and to maintain the financial capacity required under the master
bottling agreement. Failure to present a plan or carry out approved plans in all
material respects would constitute an event of default that, if not cured within
120 days of notice of the failure, would give PepsiCo the right to terminate the
master bottling agreement.
If we present a plan that PepsiCo does not approve, such failure shall
constitute a primary consideration for determining whether we have satisfied our
obligations to maintain our financial capacity and to push vigorously the sale
of the cola beverages and to increase and fully meet the demand for the cola
beverages in our territories.
If we fail to carry out our annual plan in all material respects in any
segment of our territory, whether defined geographically or by type of market or
outlet, and if such failure is not cured within six months of notice of the
failure, PepsiCo may reduce the territory covered by the master bottling
agreement by eliminating the territory, market or outlet with respect to which
such failure has occurred.
PepsiCo has no obligation to participate with us in advertising and
marketing spending, but it may contribute to such expenditures and undertake
independent advertising and marketing activities, as well as cooperative
advertising and sales promotion programs that would require our cooperation and
support. Although PepsiCo has advised us that it intends to continue to provide
cooperative advertising funds, it is not obligated to do so under the master
bottling agreement.
The master bottling agreement provides that PepsiCo may in its sole
discretion reformulate any of the cola beverages or discontinue them, with some
limitations, so long as all cola beverages are not discontinued. PepsiCo may
also introduce new beverages under the PEPSI-COLA trademarks or any modification
thereof. If that occurs, we will be obligated to manufacture, package,
distribute and sell such new beverages with the same obligations as then exist
with respect to other cola beverages. We are prohibited from producing or
handling cola products, other than those of PepsiCo, or products or packages
that imitate, infringe or cause confusion with the products, containers or
trademarks of PepsiCo. The master bottling agreement also imposes requirements
with respect to the use of PepsiCo's trademarks, authorized containers,
packaging and labeling.
If we acquire control, directly or indirectly, of any bottler of cola
beverages, we must cause the acquired bottler to amend its bottling appointments
for the cola beverages to conform to the terms of the master bottling agreement.
Under the master bottling agreement, PepsiCo has agreed not to withhold
approval for any acquisition of rights to manufacture and sell PEPSI trademarked
cola beverages within a specific area--currently representing approximately
13.9% of PepsiCo's U.S. bottling system in terms of volume--if we have
successfully negotiated the acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the master bottling agreement. We
have agreed not to acquire or attempt to acquire any rights to manufacture and
sell PEPSI trademarked cola beverages outside of that specific area without
PepsiCo's prior written approval.
The master bottling agreement is perpetual, but may be terminated by
PepsiCo in the event of our default. Events of default include:
(1) our insolvency, bankruptcy, dissolution, receivership or the
like;
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(2) any disposition of any voting securities of one of our
bottling subsidiaries or substantially all of our bottling
assets without the consent of PepsiCo;
(3) our entry into any business other than the business of
manufacturing, selling or distributing non-alcoholic beverages
or any business which is directly related and incidental to
such beverage business; and
(4) any material breach under the contract that remains uncured
for 120 days after notice by PepsiCo.
An event of default will also occur if any person or affiliated group
acquires any contract, option, conversion privilege, or other right to acquire,
directly or indirectly, beneficial ownership of more than 15% of any class or
series of our voting securities without the consent of PepsiCo. As of February
22, 2000, AXA Financial, Inc., formerly known as The Equitable Companies
Incorporated, and its parent, AXA Assurances I.A.R.D. Mutuelle (collectively,
"AXA"), held 12.9% of our Common Stock and PepsiCo has consented to AXA
acquiring up to 20% of our Common Stock. If the master bottling agreement is
terminated, PepsiCo also has the right to terminate its other bottling
agreements with us.
We are prohibited from assigning, transferring or pledging the master
bottling agreement, or any interest therein, whether voluntarily, or by
operation of law, including by merger or liquidation, without the prior consent
of PepsiCo.
The master bottling agreement was entered into by us in the context of
our separation from PepsiCo and, therefore, its provisions were not the result
of arm's-length negotiations. Consequently, the agreement contains provisions
that are less favorable to us than the exclusive bottling appointments for cola
beverages currently in effect for independent bottlers in the United States.
Terms of the Non-Cola Bottling Agreements. The beverage products
covered by the non-cola bottling agreements are beverages licensed to us by
PepsiCo, consisting of MOUNTAIN DEW, DIET MOUNTAIN DEW, SLICE, MUG root beer and
cream soda and ALL SPORT. The non-cola bottling agreements contain provisions
that are similar to those contained in the master bottling agreement with
respect to pricing, territorial restrictions, authorized containers, planning,
quality control, transfer restrictions, term, and related matters. Our non-cola
bottling agreements will terminate if PepsiCo terminates our master bottling
agreement. The exclusivity provisions contained in the non-cola bottling
agreements would prevent us from manufacturing, selling or distributing beverage
products which imitate, infringe upon, or cause confusion with, the beverage
products covered by the non-cola bottling agreements. PepsiCo may also elect to
discontinue the manufacture, sale or distribution of a non-cola beverage and
terminate the applicable non-cola bottling agreement upon six months notice to
us.
We also have an agreement with PepsiCo granting us the exclusive right
to distribute AQUAFINA in our territories. We have the right to manufacture
AQUAFINA in certain locations depending on the availability of appropriate
equipment. The distribution agreement contains provisions generally similar to
those in the master bottling agreement as to use of trademarks, trade names,
approved containers and labels and causes for termination. However, the
distribution agreement does not prevent us from distributing other bottled
waters. The distribution agreement is for a limited term. Prior to the
expiration of this term, PepsiCo and PBG will negotiate a renewal agreement.
Terms of the Master Syrup Agreement. The master syrup agreement grants
us the exclusive right to manufacture, sell and distribute fountain syrup to
local customers in our territories. The master
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syrup agreement also grants us the right to act as a manufacturing and delivery
agent for national accounts within our territories that specifically request
direct delivery, without using a middleman. In addition, PepsiCo may appoint us
to manufacture and deliver fountain syrup to national accounts that elect
delivery through independent distributors. Under the master syrup agreement, we
will have the exclusive right to service fountain equipment for all of the
national account customers within our territories. The master syrup agreement
provides that the determination of whether an account is local or national is in
the sole discretion of PepsiCo.
The master syrup agreement contains provisions that are similar to those
contained in the master bottling agreement with respect to pricing, territorial
restrictions with respect to local customers and national customers electing
direct-to-store delivery only, planning, quality control, transfer restrictions
and related matters. The master syrup agreement has an initial term of five
years and is automatically renewable for additional five year periods unless
PepsiCo terminates it for cause. PepsiCo has the right to terminate the master
syrup agreement without cause at the conclusion of the initial five year period
or at any time during a renewal term upon twenty-four months notice. In the
event PepsiCo terminates the master syrup agreement without cause, PepsiCo is
required to pay us the fair market value of our rights under such agreement.
Our master syrup agreement will terminate if PepsiCo terminates our master
bottling agreement.
Terms of Other U.S. Bottling Agreements. The bottling agreements between us
and other licensors of beverage products, including Cadbury Schweppes plc-- for
DR PEPPER, 7UP, SCHWEPPES and CANADA DRY, the Pepsi/Lipton Tea Partnership-- for
LIPTON BRISK and LIPTON'S ICED TEA and the North American Coffee
Partnership--for STARBUCKS FRAPPUCCINO, contain provisions generally similar to
those in the master bottling agreement as to use of trademarks, trade names,
approved containers and labels, sales of imitations, and causes for termination.
Some of these beverage agreements have limited terms and, in most instances,
prohibit us from dealing in similar beverage products.
Terms of the Country Specific Bottling Agreements. The country specific
bottling agreements contain provisions similar to those contained in the master
bottling agreement and the non-cola bottling agreements and, in Canada, the
master syrup agreement with respect to authorized containers, planning, quality
control, transfer restrictions, causes for termination and related matters.
These bottling agreements differ from the master bottling agreement because,
except for Canada, they include both fountain syrup and non-fountain beverages.
These bottling agreements also differ from the master bottling agreement with
respect to term and contain certain provisions that have been modified to
reflect the laws and regulations of the applicable country. For example, the
bottling agreements in Spain do not contain a restriction on the sale and
shipment of Pepsi-Cola beverages into our territory by others in response to
unsolicited orders.
SEASONALITY
Our peak season is the warm summer months beginning with Memorial Day and
ending with Labor Day. Approximately 90% of our operating income is typically
earned during the second and third quarters. Over 75% of cash flow from
operations is typically generated in the third and fourth quarters.
COMPETITION
The carbonated soft drink market and the non-carbonated beverage market are
highly competitive. Our competitors in these markets include bottlers and
distributors of nationally
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advertised and marketed products, bottlers and distributors of regionally
advertised and marketed products, as well as bottlers of private label soft
drinks sold in chain stores. We compete primarily on the basis of advertising
and marketing programs to create brand awareness, price and price promotions,
retail space management, customer service, consumer points of access, new
products, packaging innovations and distribution methods. We believe that brand
recognition, availability and consumer and customer goodwill are primary factors
affecting our competitive position.
GOVERNMENTAL REGULATION APPLICABLE TO PBG
Our operations and properties are subject to regulation by various federal,
state and local governmental entities and agencies as well as foreign government
entities. As a producer of food products, we are subject to production,
packaging, quality, labeling and distribution standards in each of the countries
where we have operations, including, in the United States, those of the federal
Food, Drug and Cosmetic Act. The operations of our production and distribution
facilities are subject to various federal, state and local environmental laws.
These laws and regulations include, in the United States, the Occupational
Safety and Health Act, the Unfair Labor Standards Act, the Clean Air Act, the
Clean Water Act and laws relating to the maintenance of fuel storage tanks. We
believe that our current legal and environmental compliance programs adequately
address such concerns and that we are in substantial compliance with applicable
laws and regulations. We do not anticipate making any material expenditures in
connection with environmental remediation and compliance. However, compliance
with, or any violation of, current and future laws or regulations could require
material expenditures by us or otherwise have a material adverse effect on our
business, financial condition and results of operations.
Bottle and Can Legislation
In all but a few of our United States and Canadian markets, we offer our
bottle and can beverage products in non-returnable containers. Legislation has
been enacted in certain states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages unless a deposit is charged
for the container. These include Connecticut, Delaware, Maine, Massachusetts,
Michigan, New York, Oregon, California, British Columbia, Alberta, Saskatchewan,
Manitoba, New Brunswick, Nova Scotia and Quebec.
Maine, Massachusetts and Michigan have statutes that require us to pay all
or a portion of unclaimed container deposits to the state and California imposes
a levy on beverage containers to fund a waste recovery system.
In addition to the Canadian deposit legislation described above, Ontario,
Canada currently has a regulation requiring that 30% of all soft drinks sold in
Ontario be bottled in refillable containers. This regulation is currently being
reviewed by the Ministry of the Environment.
The European Commission has issued a packaging and packing waste directive
which is in the process of being incorporated into the national legislation of
the member states. This will result in targets being set for the recovery and
recycling of household, commercial and industrial packaging waste and impose
substantial responsibilities upon bottlers and retailers for implementation.
We are not aware of similar material legislation being proposed or enacted
in any other areas served by us. We are unable to predict, however, whether such
legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.
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Soft Drink Excise Tax Legislation
Specific soft drink excise taxes have been in place in certain states for
several years. The states in which we operate that currently impose such a tax
are West Virginia, Arkansas, North Carolina, South Carolina, Tennessee and, with
respect to fountain syrup only, Washington. Although soft drink excise tax
legislation is currently in place in North Carolina and South Carolina, new
legislation has been enacted that phases out such taxes by the end of the year
2000 in North Carolina and 2002 in South Carolina.
Value-added taxes on soft drinks vary in our territories located in Canada,
Spain, Greece and Russia, but are consistent with the value-added tax rate for
other consumer products.
We are not aware of any material soft drink taxes that have been enacted in
any other market served by us. We are unable to predict, however, whether such
legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.
Trade Regulation
As a manufacturer, seller and distributor of bottled and canned soft drink
products of PepsiCo and other soft drink manufacturers in exclusive territories
in the United States and internationally, we are subject to antitrust laws.
Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating
in the United States, such as us, may have an exclusive right to manufacture,
distribute and sell a soft drink product in a geographic territory if the soft
drink product is in substantial and effective competition with other products of
the same class in the same market or markets. We believe that there is such
substantial and effective competition in each of the exclusive geographic
territories in which we operate.
California Carcinogen and Reproductive Toxin Legislation
A California law requires that any person who exposes another to a
carcinogen or a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below which a warning is
not required, virtually all manufacturers of food products are confronted with
the possibility of having to provide warnings due to the presence of trace
amounts of defined substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be demonstrated that
the defined substances occur naturally in the product or are present in
municipal water used to manufacture the product. We have assessed the impact of
the law and its implementing regulations on our beverage products and have
concluded that none of our products currently require a warning under the law.
We cannot predict whether or to what extent food industry efforts to minimize
the law's impact on food products will succeed. We also cannot predict what
impact, either in terms of direct costs or diminished sales imposition of the
law may have.
EMPLOYEES
As of December 25, 1999, we employed approximately 38,700 full-time
workers, of whom approximately 35,000 were employed in North America.
Approximately 10,500 of our full-time workers in North America are union
members. We consider relations with our employees to be good and have not
experienced significant interruptions of operations due to labor disagreements.
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FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
For financial information on industry segments and operations in geographic
areas, see Note 15 to PBG's Consolidated Financial Statements, found on page 48
of our Annual Report to Shareholders for the year ended December 25, 1999, which
is incorporated herein by reference and is included as Exhibit 13 hereto.
ITEM 2. PROPERTIES
We operate 67 soft drink production facilities worldwide, of which 60 are
owned and 7 are leased. Of PBG's 320 distribution facilities, 258 are owned and
62 are leased. We believe that our bottling, canning and syrup filling lines and
our distribution facilities are sufficient to meet present needs.
We also own or lease and operate approximately 18,000 vehicles, including
delivery trucks, delivery and transport tractors and trailers and other trucks
and vans used in the sale and distribution of our soft drink products. We also
own more than 1 million soft drink dispensing and vending machines.
With a few exceptions, leases of plants in North America are on a long-term
basis, expiring at various times, with options to renew for additional periods.
Most international plants are leased for varying and usually shorter periods,
with or without renewal options. We believe that our properties are in good
operating condition and are adequate to serve our current operational needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time we are a party to various litigation matters incidental
to the conduct of our business. There is no pending or, to PBG's best knowledge,
threatened legal proceeding to which we are a party that, in the opinion of
management, is likely to have a material adverse effect on our future financial
results.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information pertaining to the executive officers of
PBG as of February 22, 2000:
CRAIG E. WEATHERUP, 54, is currently the Chairman of our Board and our Chief
Executive Officer. Mr. Weatherup served on the Board of Directors of PepsiCo
from 1996 until March 1999. Prior to becoming our Chairman and Chief Executive
Officer, he served as Chairman and Chief Executive Officer of the Pepsi-Cola
Company since July 1996. He was appointed President of the Pepsi-Cola Company in
1988, President and Chief Executive Office of Pepsi-Cola North America in 1991,
and served as PepsiCo's president in 1996. Mr. Weatherup is also a director of
Federated Department Stores, Inc. and Starbucks Corporation.
JOHN T. CAHILL, 42, is our Executive Vice President, Chief Financial Officer and
a member of our Board of Directors. He was Executive Vice President and Chief
Financial Officer of the Pepsi-Cola Company from April 1998 until November 1998.
Prior to that, Mr. Cahill was Senior Vice President and Treasurer of PepsiCo,
having been appointed to that position in April 1997. In 1996 he became Senior
Vice President and Chief Financial Officer of Pepsi-Cola North America. Mr.
Cahill joined PepsiCo in 1989 and held several other senior financial positions
through 1996.
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PETER A. BRIDGMAN, 47, is our Senior Vice President and Controller. Mr. Bridgman
was Vice President and Controller of the Pepsi-Cola Company from 1992 to 1999,
and had previously been Controller and Finance Director at Pepsi-Cola
International.
ERIC J. FOSS, 41, is our Senior Vice President, U.S. Sales and Field Operations,
a position he assumed in October 1999 after serving as our Senior Vice
President, Sales and Field Marketing since March 1999. From 1994 to 1996 Mr.
Foss was General Manager of Pepsi-Cola North America's Great West Business Unit.
Mr. Foss joined Pepsi-Cola in 1982, and has held a variety of other field and
headquarters-based sales, marketing and general management positions, including
General Manager for the Central Europe Region for Pepsi-Cola International.
PAMELA C. MCGUIRE, 52, has been our Senior Vice President, General Counsel and
Secretary since November 1998. Ms. McGuire joined PepsiCo in 1977 and served as
Vice President and Division Counsel of Pepsi-Cola from 1989 to March 1998, when
she was named Vice President and Associate General Counsel of the Pepsi-Cola
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Stock Trading Symbol - PBG.
Stock Exchange Listings - PBG's Common Stock is listed on The New York
Stock Exchange. Our Class B common stock is not publicly traded.
Shareholders - At March 10, 2000, there were approximately 36,000
registered and beneficial shareholders of Common Stock. PepsiCo is the holder
of all of the outstanding shares of Class B common stock.
Dividend Policy - Quarterly cash dividends are usually declared in
January, March, July and November and paid at the end of March, June, September
and at the beginning of January. The dividend record dates for 2000 are expected
to be March 10, June 9, September 8 and December 8.
Cash Dividends Declared Per Share on Capital Stock:
Quarter 1999
1 NA
2 $.02
3 $.02
4 $.02
----
Total $.06
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Stock Prices - The high, low and closing prices for a share of PBG
Common Stock on the New York Stock Exchange, as reported by Bloomberg Service,
for the last three fiscal quarters of 1999 were as follows (in dollars):
<TABLE>
<CAPTION>
1999 High Low Close
---- ---- --- -----
<S> <C> <C> <C>
First Quarter NA NA NA
Second Quarter 24 1/8 20 22
Third Quarter 24 1/2 18 15/16 19 7/8
Fourth Quarter 19 3/16 15 13/16 16 1/8
</TABLE>
On December 22, 1999, PBG sold 234,000 shares of its Common Stock for
$3.75 million to a defined contribution trust, which will hold such shares for
the benefit of certain senior executives in connection with a one-time
supplemental executive incentive compensation award under PBG's Executive
Incentive Compensation Plan. This sale of Common Stock was effected through a
private placement in accordance with Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial and Operating Data" for the years 1995 through 1999, on page
54 of our Annual Report to Shareholders for the year ended December 25, 1999 is
incorporated into this report by reference and is included as Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
"Management's Financial Review" on pages 25 through 36 of PBG's Annual Report to
Shareholders for the year ended December 25, 1999 is incorporated into this
report by reference and is included as Exhibit 13 hereto.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
"Management's Financial Review -- Market Risks and Cautionary Statements" on
pages 35 and 36 of our Annual Report to Shareholders for the year ended December
25, 1999 is incorporated herein by reference and is included as Exhibit 13
hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of PBG and its subsidiaries are
incorporated herein by reference to our Annual Report to Shareholders for the
year ended December 25, 1999, included as Exhibit 13 hereto, at the pages
indicated:
Consolidated Statements of Operations - Fiscal years ended December 25, 1999,
December 26, 1998 and December 27, 1997 (page 29)
Consolidated Statements of Cash Flows - Fiscal years ended December 25, 1999,
December 26, 1998 and December 27, 1997 (page 32)
Consolidated Balance Sheets - December 25, 1999 and December 26, 1998 (page 33)
11
<PAGE> 12
Consolidated Statements of Changes in Shareholders' Equity - Fiscal years ended
December 25, 1999, December 26, 1998 and December 27, 1997 (page 37)
Notes to Consolidated Financial Statements (pages 38-51)
Report of Independent Auditors (page 53)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF PBG
The name, age and background of each of the PBG's directors nominated
for election are contained under the caption "Election of Directors" in PBG's
Proxy Statement for its 2000 Annual Meeting of Shareholders and are incorporated
herein by reference. Pursuant to Item 401(b) of Regulation S-K, the executive
officers of PBG are reported in Part I of this Report.
Executive officers are elected by PBG's Board of Directors, and
their terms of office continue until the next annual meeting of the Board or
until their successors are elected and have qualified. There are no family
relationships among our executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Information on compensation of PBG's directors and executive officers
is contained in PBG's Proxy Statement for its 2000 Annual Meeting of
Shareholders under the captions "Directors' Compensation" and "Executive
Compensation", respectively, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on the number of shares of PBG Common Stock beneficially
owned by each director and by all directors and officers as a group is contained
under the captions "Ownership of Common Stock by Directors and Executive
Officers" and "Stock Ownership of Certain Beneficial Owners" in PBG's Proxy
Statement for its 2000 Annual Meeting of Shareholders and is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain transactions between PBG, PepsiCo and
their affiliates and certain other persons is set forth under the caption
"Certain Relationships and Related Transactions" in PBG's 2000 Proxy Statement,
and is incorporated herein by reference.
12
<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. The following consolidated financial
statements of PBG and its subsidiaries, included in our Annual Report to
Shareholders for the year ended December 25, 1999, are incorporated by reference
into Part II, Item 8 of this report:
Consolidated Statements of Operations - Fiscal years ended December 25,
1999, December 26, 1998 and December 27, 1997.
Consolidated Statements of Cash Flows - Fiscal years ended December 25,
1999, December 26, 1998 and December 27, 1997.
Consolidated Balance Sheets - December 25, 1999 and December 26, 1998.
Consolidated Statements of Changes in Shareholders' Equity - Fiscal
years ended December 25, 1999, December 26, 1998 and December 27, 1997.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Financial Statement Schedule. The following financial
statement schedule of PBG and its subsidiaries is included in this report on the
page indicated:
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report on Schedule and Consent.........................F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
December 25, 1999, December 26, 1998 and December 27,
1997..........................................................F-3
</TABLE>
3. Exhibits
See Index to Exhibits on pages E-1 - E-3.
(b) Reports on Form 8-K
None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, The Pepsi Bottling Group, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 3, 2000
The Pepsi Bottling Group, Inc.
By: /s/ Craig E. Weatherup
Craig E. Weatherup
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of The
Pepsi Bottling Group, Inc. and in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Craig E. Weatherup Chairman of the Board and March 3, 2000
Craig E. Weatherup Chief Executive Officer
/s/ John T. Cahill Executive Vice President, Chief March 3, 2000
John T. Cahill Financial Officer and Director
/s/ Peter A. Bridgman Senior Vice President and March 3, 2000
Peter A. Bridgman Controller (Principal Accounting
Officer)
/s/ Linda G. Alvarado Director March 3, 2000
Linda G. Alvarado
/s/ Barry H. Beracha Director March 3, 2000
Barry H. Beracha
/s/ Thomas W. Jones Director March 3, 2000
Thomas W. Jones
/s/ Thomas H. Kean Director March 2, 2000
Thomas H. Kean
/s/ Susan D. Kronick Director March 3, 2000
Susan D. Kronick
/s/ Robert F. Sharpe, Jr. Director March 3, 2000
Robert F. Sharpe, Jr.
/s/ Karl M. von der Heyden Director March 3, 2000
Karl M. von der Heyden
S-1
<PAGE> 15
INDEX TO FINANCIAL STATEMENT SCHEDULE
PAGE
Independent Auditors' Report on Schedule and Consent..................... F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal
years ended December 25, 1999, December 26, 1998
and December 27, 1997................................................ F-3
F-1
<PAGE> 16
INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT
The Board of Directors and Shareholders
The Pepsi Bottling Group, Inc.:
Under date of January 25, 2000, we reported on the Consolidated Balance Sheets
of The Pepsi Bottling Group, Inc., (the Company) as of December 25, 1999 and
December 26, 1998, and the related Consolidated Statements of Operations, Cash
Flows and Changes in Shareholders' Equity for each of the fiscal years in the
three-year period ended December 25, 1999, which are incorporated by reference
in this Form 10-K. In connection with our audits of the aforementioned
Consolidated Financial Statements, we also audited the related financial
statement schedule included in this Form 10-K. This financial statement schedule
is the responsibility of Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic Consolidated Financial Statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We consent to incorporation by reference in the registration statements (Nos.
333-79357, 333-79369, 333-79375, 333-79365, 333-80647) on Form S-8 of The Pepsi
Bottling Group, Inc. of our report, dated January 25, 2000, relating to the
Consolidated Financial Statements of The Pepsi Bottling Group, Inc. as of
December 25, 1999, and for each of the fiscal years in the three-year period
ended December 25, 1999, and related schedule, which is incorporated by
reference in the December 25, 1999 Annual Report on Form 10-K of The Pepsi
Bottling Group, Inc.
/s/ KPMG LLP
New York, New York
March 21, 2000
F-2
<PAGE> 17
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE PEPSI BOTTLING GROUP, INC.
IN MILLIONS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------
Balance At Charged To Charged To Other
Beginning Cost And Accounts (a) Balance At End
DESCRIPTION Of Period Expenses Deductions (b) Of Period
----------- ---------- ---------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
DECEMBER 25, 1999
Allowance for losses on
trade accounts
receivable........... $46 $ 6 $ 3 $ 7 $48
DECEMBER 26, 1998
Allowance for losses on
trade accounts
receivable........... $45 $13 $-- $12 $46
DECEMBER 27, 1997
Allowance for losses on
trade accounts
receivable............... $65 $ 6 $ 2 $28 $45
</TABLE>
- ------------------------
(a) Represents recoveries of amounts previously written off.
(b) Charge off of uncollectable accounts.
F-3
<PAGE> 18
INDEX TO EXHIBITS
ITEM 14(a)(3)
EXHIBIT
3.1 Articles of Incorporation of The Pepsi Bottling Group, Inc.,
which is incorporated herein by reference from Exhibit 3.1 to
PBG's Registration Statement on Form S-1 (Registration No.
333-70291)
3.2 By-Laws of The Pepsi Bottling Group, Inc., which are
incorporated herein by reference from Exhibit 3.2 to PBG's
Registration Statement on Form S-1 (Registration No.
333-70291).
3.3 Amendment to Articles of Incorporation of The Pepsi Bottling
Group, Inc., which is incorporated herein by reference from
Exhibit 3.3 to PBG's Registration Statement on Form S-1
(Registration No. 333-70291).
4.1 Form of common stock certificate, which is incorporated herein
by reference from Exhibit 4 to PBG's Registration Statement
on Form S-1 (Registration No. 333-70291).
4.2 Indenture dated as of February 8, 1999 among Pepsi Bottling
Holdings, Inc., PepsiCo, Inc. and The Chase Manhattan Bank, as
trustee, relating to $1,000,000,000 5 3/8% Senior Notes due
2004 and $1,300,000,000 5 5/8% Senior Notes due 2009
incorporated herein by reference to Exhibit 10.9 to PBG's
Registration Statement on Form S-1 (Registration No.
333-70291).
4.3 First Supplemental Indenture dated as of February 8, 1999
among Pepsi Bottling Holdings, Inc., Bottling Group, LLC,
PepsiCo, Inc. and The Chase Manhattan Bank, as trustee,
supplementing the Indenture dated as of February 8, 1999 among
Pepsi Bottling Holdings, Inc., PepsiCo, Inc. and The Chase
Manhattan Bank, as trustee is incorporated herein by reference
to Exhibit 10.10 to PBG's Registration Statement on Form S-1
(Registration No. 333-70291).
4.4 Indenture, dated as of March 8, 1999, by and among The Pepsi
Bottling Group, Inc., as obligor, Bottling Group, LLC, as
guarantor, and The Chase Manhattan Bank, as trustee, relating
to $1,000,000,000 7% Series B Senior Notes due 2029 which is
incorporated herein by reference to Exhibit 10.14 to PBG's
Registration Statement on Form S-1 (Registration No.
333-70291).
4.5 U.S. $250,000,000 364 Day Credit Agreement, dated as of April
22, 1999 among The Pepsi Bottling Group, Inc., Bottling Group,
LLC, The Chase Manhattan Bank, Bank of America National Trust
and Savings Association, Citibank, N.A., Credit Suisse First
Boston, UBS AG, Lehman Commercial Paper Inc., Royal Bank of
Canada, Banco Bilbao Vizcaya, Deutsche Bank AG New York
Branch and/or Cayman Islands Branch, Fleet National Bank,
Hong Kong & Shanghai
E-1
<PAGE> 19
Banking Corp., The Bank of New York, The Northern Trust
Company, The Chase Manhattan Bank, as Agent, Chase Securities
Inc. as Arranger and Nationsbanc Montgomery Securities LLC and
Solomon Smith Barney Inc. as Co-Syndication Agents.
4.6 U.S. $250,000,000 5 Year Credit Agreement, dated as of April
22, 1999 among The Pepsi Bottling Group, Inc., Bottling
Group, LLC, The Chase Manhattan Bank, Bank of America
National Trust and Savings Association, Citibank, N.A.,
Credit Suisse First Boston, UBS AG, Lehman Commercial Paper
Inc., Royal Bank of Canada, Banco Bilbao Vizcaya, Deutsche
Bank AG New York Branch and/or Cayman Islands Branch, Fleet
National Bank, Hong Kong & Shanghai Banking Corp., The Bank
of New York, The Northern Trust Company, The Chase Manhattan
Bank, as Agent, Chase Securities Inc. as Arranger and
Nationsbanc Montgomery Securities LLC and Solomon Smith
Barney Inc. as Co-Syndication Agents.
10.1 Form of Master Bottling Agreement, which is incorporated
herein by reference from Exhibit 10.1 to PBG's Registration
Statement on Form S-1 (Registration No. 333-70291)
10.2 Form of Master Syrup Agreement, which is incorporated herein
by reference from Exhibit 10.2 to PBG's Registration Statement
on Form S-1 (Registration No. 333-70291)
10.3 Form of Non-Cola Bottling Agreement, which is incorporated
herein by reference from Exhibit 10.3 to PBG's Registration
Statement on Form S-1 (Registration No. 333-70291)
10.4 Form of Separation Agreement, which is incorporated herein by
reference from Exhibit 10.4 to PBG's Registration Statement on
Form S-1 (Registration No. 333-70291)
10.5 Form of Shared Services Agreement, which is incorporated
herein by reference from Exhibit 10.5 to PBG's Registration
Statement on Form S-1 (Registration No. 333-70291)
10.6 Form of Tax Separation Agreement, which is incorporated herein
by reference from Exhibit 10.6 to PBG's Registration Statement
on Form S-1 (Registration No. 333-70291).
10.7 Form of Employee Programs Agreement, which is incorporated
herein by reference from Exhibit 10.7 to PBG's Registration
Statement on Form S-1 (Registration No. 333-70291).
10.8 PBG Executive Income Deferral Plan.
10.9 PBG 1999 Long-Term Incentive Plan.
10.10 PBG Directors' Stock Plan.
10.11 PBG Stock Incentive Plan.
12 Statement re Computation of Ratios
E-2
<PAGE> 20
13 The Pepsi Bottling Group, Inc. 1999 Annual Report to
Shareholders (Pages 25 through 54)
21 Subsidiaries of PBG.
24 Copy of Power of Attorney.
27 Financial Data Schedule for PBG for the fiscal year ended
December 25, 1999.
E-3
<PAGE> 1
EXHIBIT 4.5
CONFORMED COPY
U.S. $250,000,000
364 DAY CREDIT AGREEMENT
Dated as of April 22, 1999
among
THE PEPSI BOTTLING GROUP, INC.
BOTTLING GROUP, LLC
THE LENDERS NAMED HEREIN
THE CHASE MANHATTAN BANK,
as Agent,
CHASE SECURITIES INC.,
as Arranger
and
NATIONSBANC MONTGOMERY SECURITIES LLC AND
SALOMON SMITH BARNEY INC.
as Co-Syndication Agents
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
SECTION 1.01 Certain Defined Terms...............................................1
SECTION 1.02 Computation of Time Periods........................................12
SECTION 1.03 Accounting Terms...................................................12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Revolving Credit Advances......................................13
SECTION 2.02 Making the Revolving Credit Advances...............................13
SECTION 2.03 The Competitive Bid Advances.......................................15
SECTION 2.04 Fees...............................................................18
SECTION 2.05 Termination, Reduction or Increase of the Commitments..............19
SECTION 2.06 Repayment of Revolving Credit Advances; Evidence of
Indebtedness; Extension of Termination Date...............22
SECTION 2.07 Interest on Revolving Credit Advances..............................23
SECTION 2.08 Interest Rate Determination........................................24
SECTION 2.09 Optional Conversion of Revolving Credit Advances...................25
SECTION 2.10 Optional Prepayments of Revolving Credit Advances..................25
SECTION 2.11 Increased Costs....................................................26
SECTION 2.12 Illegality.........................................................27
SECTION 2.13 Payments and Computations..........................................27
SECTION 2.14 Taxes..............................................................28
SECTION 2.15 Sharing of Payments, Etc...........................................31
SECTION 2.16 Use of Proceeds....................................................31
SECTION 2.17 Borrowings by Borrowing Subsidiaries; Substitution of Borrower.....31
SECTION 2.18 Mitigation Obligations.............................................33
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effectiveness of Sections 2.01 and 2.03....33
SECTION 3.02 Conditions Precedent to Each Revolving Credit Borrowing............35
SECTION 3.03 Conditions Precedent to Each Competitive Bid Borrowing.............35
SECTION 3.04 Determinations Under Section 3.01..................................36
</TABLE>
i
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
SECTION 4.01 Representations and Warranties of the Loan Parties.................36
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants..............................................38
SECTION 5.02 Negative Covenants.................................................39
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default..................................................42
ARTICLE VII
THE AGENT............................................................................44
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc....................................................46
SECTION 8.02 Notices, Etc.......................................................46
SECTION 8.03 No Waiver; Remedies................................................47
SECTION 8.04 Costs and Expenses.................................................47
SECTION 8.05 Right of Set-off...................................................48
SECTION 8.06 Binding Effect.....................................................49
SECTION 8.07 Assignments and Participations.....................................49
SECTION 8.08 Confidentiality....................................................51
SECTION 8.09 Governing Law......................................................52
SECTION 8.10 Execution in Counterparts..........................................52
SECTION 8.11 Jurisdiction, Etc..................................................52
SECTION 8.12 WAIVER OF JURY TRIAL...............................................52
ARTICLE IX
COMPANY GUARANTEE
SECTION 9.01 Guarantee..........................................................53
SECTION 9.02 Obligations Unconditional..........................................53
SECTION 9.03 Reinstatement......................................................54
SECTION 9.04 Subrogation........................................................54
SECTION 9.05 Remedies...........................................................54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9.06 Continuing Guarantee...............................................54
ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.01 Subsidiary Guarantee...............................................54
SECTION 10.02 Limitation of Guarantor's Liability................................56
SCHEDULE I
SCHEDULE 2 APPLICABLE MARGIN
EXHIBIT A-1 FORM OF NOTICE OF REVOLVING CREDIT BORROWING
EXHIBIT A-2 FORM OF NOTICE OF COMPETITIVE BID BORROWING
EXHIBIT A-3 FORM OF EXTENSION AGREEMENT
EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT C FORM OF OPINION OF COUNSEL FOR THE COMPANY
AND THE GUARANTOR
EXHIBIT D FORM OF DESIGNATION LETTER
EXHIBIT E FORM OF SUBSTITUTION LETTER
EXHIBIT F FORM OF TERMINATION LETTER
</TABLE>
iii
<PAGE> 5
CREDIT AGREEMENT
Dated as of April 22, 1999
THE PEPSI BOTTLING GROUP, INC., a Delaware corporation (the
"Company"), BOTTLING GROUP, LLC, a Delaware limited liability company (the
"Guarantor"), the banks, financial institutions and other institutional lenders
(the "Initial Lenders") listed on the signature pages hereof, and THE CHASE
MANHATTAN BANK ("Chase"), as administrative agent (in such capacity, the
"Agent") for the Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Agent's Account " means the account of the Agent maintained
by the Agent at Chase with its office at 270 Park Avenue, New York, New York
10017.
"Alternate Covenant Date" means any day on which the Index
Debt of Pepsi shall be rated less than A- by S&P or less than A3 by Moody's.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of the Base Rate
Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Agent as Applicable Lending Office with
respect to such Competitive Bid Advance.
"Applicable Margin" means with respect to any Eurodollar Rate
Advance or with respect to the facility fees payable hereunder, as the case may
be, for any day, the applicable rate
<PAGE> 6
per annum set forth in Schedule 2; provided, that, for purposes of calculating
the Applicable Margin, (i) if either Moody's or S&P shall not have in effect a
rating for the Company, then the Applicable Margin shall be determined based on
the highest applicable facility fee or LIBOR Margin in Schedule 2, (ii) if the
ratings established or deemed to have been established by Moody's and S&P for
the Company shall fall within different categories, the Applicable Margin shall
be based on the higher of the two ratings unless one of the two ratings is two
or more categories lower than the other, in which case the Applicable Margin
shall be determined by reference to the category next below that of the higher
of the two ratings; and (iii) if the ratings established or deemed to have been
established by Moody's and S&P for the Company shall be changed (other than as a
result of a change in the rating system of Moody's or S&P), such change shall be
effective as of the date on which it is first announced by the applicable rating
agency, irrespective of when notice of such change shall have been furnished by
the Borrower to the Agent and the Lenders. Each change in the Applicable Margin
shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such
change.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit B hereto.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
the higher of:
(a) the rate of interest announced publicly by Chase in New
York, New York, from time to time, as Chase's base rate; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a).
"Borrowers" means, at any time, collectively, the Company
unless the Substitution Date has occurred pursuant to Section 2.17, each
Borrowing Subsidiary and, on and after the Substitution Date has occurred
pursuant to Section 2.17, the Guarantor.
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
2
<PAGE> 7
"Borrowing Subsidiary" means any Subsidiary of the Company, as
to which a Designation Letter has been delivered to the Agent and as to which a
Termination Letter has not been delivered to the Agent in accordance with
Section 2.17.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Change of Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than Pepsi, of shares representing more than 25% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of the
Company; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Company by Persons who were neither (i) nominated
by the board of directors of the Company nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Company
by any Person or group other than Pepsi.
"Commitment" has the meaning specified in Section 2.01.
"Competitive Bid Advance" means an advance by a Lender to a
Borrower as part of a Competitive Bid Borrowing resulting from the auction
bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance
or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose offer to
make one or more Competitive Bid Advances as part of such borrowing has been
accepted under the auction bidding procedure described in Section 2.03.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Confidential Information" means information that the Company
furnishes to the Agent or any Lender in a writing designated as confidential,
but does not include any such information that is or becomes generally available
to the public or that is or becomes rightfully available to the Agent or such
Lender from a source other than the Company.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period plus, without duplication and to the extent reflected as
a charge in the statement of such Consolidated Net Income for such period, the
sum of (a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount with respect to Debt (including the Advances), (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not
3
<PAGE> 8
limited to, goodwill) and organization costs, (e) any extraordinary expenses or
losses (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business), and (f) any other non-cash
charges, and minus, to the extent included in the statement of such Consolidated
Net Income for such period, the sum of (a) any extraordinary income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (b) any other non-cash
income, all as determined on a Consolidated basis; in each case exclusive of the
cumulative effect of foreign currency gains or losses. For the purposes of
calculating Consolidated EBITDA for any period pursuant to any determination of
the Consolidated Leverage Ratio, if during such period the Company or any
Subsidiary, including the Guarantor, shall have made an acquisition or incurred
or assumed (without duplication of any Debt incurred to refinance such assumed
Debt) any Debt, Consolidated EBITDA for such period shall be calculated after
giving pro forma effect thereto as if such acquisition occurred and such Debt
had been incurred or assumed or refinanced on the first day of such period.
"Consolidated Leverage Ratio" means, as at the last day of any
Fiscal Quarter, the ratio of (a) Consolidated Total Debt on such day to (b)
Consolidated EBITDA for the four consecutive fiscal quarters then ended (taken
as one accounting period).
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted
Subsidiaries, including the Guarantor, determined on a consolidated basis in
accordance with GAAP, before deduction of any minority interests in the
Guarantor and excluding the cumulative effect of any foreign currency gains or
losses.
"Consolidated Net Tangible Assets" means the total assets of
the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization, and other valuation reserves), except to the extent resulting from
write-ups of capital assets (other than writeups in connection with accounting
for acquisitions, in accordance with GAAP), less all current liabilities
(excluding intercompany liabilities) and all intangible assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recent
Consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in accordance with GAAP, but before deduction of any minority interests
in the Guarantor and exclusive of any foreign currency translation adjustments.
"Consolidated Net Worth" means, as of any date of
determination, all items which in conformity with GAAP would be included under
shareholders' equity on a Consolidated balance sheet of the Company and its
Subsidiaries, including the Guarantor, at such date plus amounts representing
mandatorily redeemable preferred securities issued by Subsidiaries of the
Company, including the Guarantor, but before deduction of any minority interests
in the Guarantor and exclusive of any foreign currency translation adjustments.
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<PAGE> 9
"Consolidated Total Debt" means, at any date (i) the aggregate
principal amount of all Debt of the Company and its Subsidiaries, including the
Guarantor minus (ii) the aggregate amount (not in excess of $500,000,000) of all
cash and cash equivalents of the Company and its Subsidiaries, in each case at
such date and determined on a Consolidated basis in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving Credit
Advances of the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than trade
accounts payable arising in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all obligations (other than trade accounts payable
arising in the ordinary course of business) of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all Debt of others referred to in clauses (a)
through (c) above or clause (g) below guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through (i) an agreement (1) to pay or purchase such Debt or to advance
or supply funds for the payment or purchase of such Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such Debt or
to assure the holder of such Debt against loss, (3) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (4) otherwise to assure a creditor against loss, or (ii) a
standby letter of credit and (g) all Debt referred to in clauses (a) through (f)
above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Debt.
"Debt to Capitalization Ratio" means at any time the ratio of
(x) Consolidated Total Debt to (y) the sum of (i) Consolidated Total Debt plus
(ii) Consolidated Net Worth.
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<PAGE> 10
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Designation Letter" has the meaning specified in Section
2.17(a).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule 1 hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such Lender may
from time to time specify to the Company and the Agent.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United States,
or any State thereof, and having total assets in excess of $15,000,000,000 and a
combined capital and surplus of at least $1,000,000,000; (iv) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having total assets in excess of $15,000,000,000 and a
combined capital and surplus of at least $1,000,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development or has concluded special
lending arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow or of the Cayman Islands, or a political
subdivision of any such country, and having total assets in excess of
$l5,000,000,000 and a combined capital and surplus of at least $1,000,000,000 so
long as such bank is acting through a branch or agency located in the United
States or in the country in which it is organized or another country that is
described in this clause (v); (vi) the central bank of any country that is a
member of the Organization for Economic Cooperation and Development; provided,
however, that each Person described in clauses (ii) through (vi) shall have a
short term public debt rating of not less than A by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. or shall be approved by the Company;
and (vii) any other Person approved by the Company, such approval not to be
unreasonably withheld or delayed; provided, however, that neither the Company
nor an Affiliate of the Company shall qualify as an Eligible Assignee.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial or agency interpretation, policy or guidance relating to the
environment, health, safety or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule 1 hereto or in the Assignment and Acceptance pursuant to
which it became a Lender (or, if no such office is
6
<PAGE> 11
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Company and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing,
an interest rate per annum appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to Dollar deposits in the London interbank market) as of 11:00 A.M. (London
time) on the date two Business Days prior to the first day of such Interest
Period as the rate for Dollar deposits having a term comparable to such Interest
Period, or in the event such offered rate is not available from said Page 3750,
the average (rounded to the nearer whole multiple of 1/16 of 1% per annum, if
such average is not such a multiple) of the rate per annum at which deposits in
U.S. dollars are offered by the principal office of each of the Reference Banks
in London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to such Reference Bank's Eurodollar Rate Advance
comprising part of such Revolving Credit Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period. If the
Eurodollar Rate does not appear on said Page 3750 (or any successor page), the
Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing shall be determined by
the Agent on the basis of applicable rates furnished to and received by the
Agent from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(b).
"Events of Default" has the meaning specified in Section 6.01.
"Extension Agreement" means an Extension Agreement
substantially in the form contained in Exhibit A-3 hereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Quarter" means a period of 13 or (or 14) weeks treated
by the Company as a fiscal quarter.
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<PAGE> 12
"Fiscal Year" means the period of 52 (or 53) weeks ending on
the last Saturday of any calendar year and treated by the Company as its fiscal
year.
"5-Year Facility" means the 5 Year Credit Agreement dated as
of the date hereof among each of the parties hereto.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" means generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited Consolidated financial statements of the Borrower and its
Subsidiaries delivered to the Lenders.
"Granting Lender" has the meaning specified in Section
8.07(e).
"Guaranteed Party" has the meaning specified in Section 9.01.
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials, radon gas and any other chemicals, materials or substances
designated, classified or regulated as being "hazardous" or "toxic", or words of
similar import, under any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, judgment, decree or judicial or agency
interpretation, policy or guidance.
"Index Debt" of any Person means senior, unsecured, long term
indebtedness for borrowed money of such Person that is not guaranteed by any
other Person (other than, in the case of the Company, the Guarantor) or subject
to any other credit enhancement.
"Information Memorandum" means the information memorandum
dated March 1999 used by the Agent in connection with the syndication of the
Commitments.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing, the period commencing on
the date of such Eurodollar Rate Advance or the date of the Conversion of any
Base Rate Advance into such Eurodollar Rate Advance and ending on the last day
of the period selected by the Company pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period selected by
the Company pursuant to the provisions below. The duration of each such Interest
Period shall be one, two, three, six or, to the extent available from all the
Lenders, nine [or twelve] months, as the Company may, upon notice received by
the Agent not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided, however,
that:
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<PAGE> 13
(i) the Company may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving Credit Borrowing
shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, however, that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically corresponding
day in the calendar month that succeeds such initial calendar month by the
number of months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such succeeding calendar
month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Sections 2.05(c) or 8.07.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor.
"Loan Documents" means, collectively, this Agreement, each
promissory note issued thereunder, each Designation Letter and each Termination
Letter.
"Loan Party" has the meaning specified in Section 4.01.
"Master Bottling Agreement" means the Master Bottling
Agreement dated March 30, 1999, between the Company and Pepsi or any successor
or replacement agreement that confers substantially the same benefits on the
Company as the Master Bottling Agreement conferred on the date hereof.
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<PAGE> 14
"Material Adverse Change" means any material adverse change in
the financial condition, operations or properties of the Company or the Company
and its Subsidiaries (including the Guarantor) taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition, operations or properties of the Company and its
Subsidiaries (including the Guarantor) taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any promissary note
or (c) the ability of the Company to perform its obligations under this
Agreement or any promissary note.
"Material Subsidiary" means each Subsidiary of the Company
which is a "significant subsidiary" as that term is defined in Rule 1-02(w) of
the Regulation S-X under the Securities Act of 1933, as such rule is in effect
as of the date hereof.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto.
"New Lender" means, for purposes of Section 2.05(c), an
Eligible Assignee (which may be a Lender) selected by the Company with (in the
case of a New Lender that is not already a Lender) prior consultation with the
Agent.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.13(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Pepsi" means PepsiCo, Inc., a North Carolina corporation.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Principal Property" means any single manufacturing or
processing plant, office building, or warehouse owned or leased by the Company
or a Restricted Subsidiary other than a plant, warehouse, office building, or
portion thereof which, in the opinion of the Company's Board of Directors, is
not of material importance to the business conducted by the Company and its
Restricted Subsidiaries as an entirety.
"Rating" means the rating of the Company's Index Debt by S&P
or Moody's, as the case may be.
"Reference Banks" means Chase, Citibank N.A. and Bank of
America (and any successors thereof).
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<PAGE> 15
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Register" has the meaning specified in Section 8.07(d).
"Required Lenders" means at any time Lenders owed more than
50% of the then aggregate unpaid principal amount of the Revolving Credit
Advances (excluding Competitive Bid Advances) owing to Lenders, or, if no such
principal amount is then outstanding, Lenders having more than 50% of the
aggregate amount of the Commitments.
"Restricted Subsidiary" means at any time any Subsidiary of
the Company except a Subsidiary which is at the time an Unrestricted Subsidiary.
"Revolving Credit Advance" means an advance by a Lender to a
Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of
Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of the
Lenders pursuant to Section 2.01.
"S&P" means Standard & Poors Rating Services or any successor
thereto.
"Short Term Facilities" means (i) the $750,000,000 Series A
Senior Notes due 2000 issued pursuant to the Indenture dated as of February 25,
1999 between Pepsi and The Chase Manhattan Bank, as Trustee, as modified by the
First Supplemental Indenture dated as of February 26, 1999 among the Company,
the Guarantor, Pepsi and The Chase Manhattan Bank, as Trustee, and (ii) the
$2,500,000,000 Series B Senior Notes due 2000 issued pursuant to the Indenture
dated as of March 5, 1999 among the Company, the Guarantor and The Chase
Manhattan Bank, as Trustee.
"SPC" has the meaning specified in Section 8.07(e).
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership or
joint venture or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries or by one or more of such Person's
other Subsidiaries.
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<PAGE> 16
"Substitution Date" has the meaning specified in Section
2.17(c).
"Substitution Letter" has the meaning specified in Section
2.17(c).
"Termination Date" means April 20, 2000 or, if earlier, the
date of termination in whole of the Commitments pursuant to Section 2.05(a) or
6.01 or, in the case of any Lender whose Commitment is extended pursuant to
Section 2.06(b), the date to which such Commitment is extended; provided in each
case that if any such date is not a Business Day, the relevant Termination Date
of such Lender shall be the immediately preceding Business Day.
"Termination Letter" has the meaning specified in Section
2.17(b).
"364 Day Facility" means the 364 Day Credit Agreement dated as
of the date hereof among each of the parties hereto.
"Type" has the meaning specified in the definition of
"Revolving Credit Advance."
"Unrestricted Subsidiary" means any Subsidiary of the Company
(not at the time designated a Restricted Subsidiary) other than the Guarantor
(i) the major part of whose business consists of finance, banking, credit,
leasing, insurance, financial services, or other similar operations, or any
continuation thereof, (ii) substantially all the assets of which consist of the
capital stock of one or more such Subsidiaries, or (iii) designated as such by
the Company's Board of Directors. Any Subsidiary designated as a Restricted
Subsidiary may be designated as an Unrestricted Subsidiary.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar actions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
SECTION 1.02 Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03 Accounting Terms. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP; provided that,
if the Company notifies the Agent that the Company wishes to amend any
provisions hereof to eliminate the effect of any change in GAAP (or if the Agent
notifies the Company that the Required Lenders wish to amend any provision
hereof for such purpose), then such provision shall be applied on the basis of
GAAP in effect immediately
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<PAGE> 17
before the relevant change in GAAP became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory to the Company
and the Required Lenders.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to the Company and any Borrowing Subsidiary from time
to time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
the amount set forth opposite such Lender's name on the signature pages hereof
or, if such Lender has entered into any Assignment and Acceptance, set forth for
such Lender in the Register maintained by the Agent pursuant to Section 8.07(c),
as such amount may be reduced pursuant to Section 2.05(a) or increased pursuant
to Section 2.05(c) (such Lender's "Commitment"), provided that the aggregate
amount of the Commitments of the Lenders shall be deemed used from time to time
to the extent of the aggregate amount of the Competitive Bid Advances then
outstanding and such deemed use of the aggregate amount of the Commitments shall
be allocated among the Lenders ratably according to their respective Commitments
(such deemed use of the aggregate amount of the Commitments being a "Competitive
Bid Reduction"). Each Revolving Credit Borrowing shall be in an aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if
less, (i) an aggregate amount equal to the amount by which the aggregate amount
of a proposed Competitive Bid Borrowing requested by the Company exceeds the
aggregate amount of Competitive Bid Advances offered to be made by the Lenders
and accepted by the Company in respect of such Competitive Bid Borrowing, if
such Competitive Bid Borrowing is made on the same date as such Revolving Credit
Borrowing or (ii) the aggregate amount of the unused Commitments, after giving
effect to any Competitive Bid Reductions then in effect) and shall consist of
Revolving Credit Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment, each Borrower may borrow under this Section 2.01, prepay
pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02 Making the Revolving Credit Advances.
(a) Each Revolving Credit Borrowing shall be made on notice,
given not later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Revolving Credit Borrowing in the case of a
Revolving Credit Borrowing consisting of Eurodollar Rate Advances, or the date
of the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Base Rate Advances, by the Company (on its own behalf
and on behalf of any Borrowing Subsidiary) to the Agent, which shall give to
each Lender prompt notice thereof by telecopier or telex. Each such notice of a
Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be
by telecopier or telex, confirmed promptly
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<PAGE> 18
in writing, in substantially the form of Exhibit A-1 hereto, specifying therein
the requested (i) date of such Revolving Credit Borrowing, (ii) Type of Advances
comprising such Revolving Credit Borrowing, (iii) aggregate amount of such
Revolving Credit Borrowing, (iv) in the case of a Revolving Credit Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Revolving Credit Advance and (v) the name of the relevant Borrower (which shall
be the Company or a Borrowing Subsidiary). Each Lender shall, before 11:00 A.M.
(New York City time), in the case of a Revolving Credit Borrowing consisting of
Eurodollar Rate Advances, or before 1:00 P.M. (New York City time), in the case
of a Revolving Credit Borrowing consisting of Base Rate Advances, on the date of
such Revolving Credit Borrowing, make available for the account of its
Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such same day funds
available to the relevant Borrower at such Borrower's account at the Agent's
address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Company may not select Eurodollar Rate Advances for any
Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 and
(ii) the Eurodollar Rate Advances may not be outstanding as part of more than
six separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on the relevant Borrower. In the case of any Revolving
Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies
is to be comprised of Eurodollar Rate Advances, the Company shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Revolving Credit
Advance to be made by such Lender as part of such Revolving Credit Borrowing
when such Revolving Credit Advance, as a result of such failure, is not made on
such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the relevant Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Agent, such Lender and such
Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
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<PAGE> 19
such amount is made available to such Borrower until the date such amount is
repaid to the Agent, at (i) in the case of a Borrower, the interest rate
applicable at the time to Revolving Credit Advances comprising such Revolving
Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Revolving Credit Advance as part of such
Revolving Credit Borrowing for purposes of this Agreement and shall be made
available in same day funds to the relevant Borrower's account at the Agent's
address referred to in Section 8.02.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03 The Competitive Bid Advances.
(a) Each Lender severally agrees that each Borrower may make
Competitive Bid Borrowings under this Section 2.03 from time to time on any
Business Day during the period from the date hereof until the date occurring 7
days prior to the Termination Date in the manner set forth below; provided that,
following the making of each Competitive Bid Borrowing, the aggregate amount of
the Advances then outstanding shall not exceed the aggregate amount of the
Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction).
(i) The Company (on its own behalf and on behalf of any
Borrowing Subsidiary) may request a Competitive Bid Borrowing under this Section
2.03 by delivering to the Agent, by telecopier or telex, confirmed promptly in
writing, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid
Borrowing"), in substantially the form of Exhibit A-2 hereto, specifying therein
(u) the date of such proposed Competitive Bid Borrowing, (v) the aggregate
amount of such proposed Competitive Bid Borrowing, (w) the maturity date for
repayment of each Competitive Bid Advance to be made as part of such Competitive
Bid Borrowing (which maturity date may not be earlier than the date occurring 7
days after the date of such Competitive Bid Borrowing or later than the
Termination Date), (x) the interest payment date or dates relating thereto, (y)
the name of the Borrower, and (z) any other terms to be applicable to such
Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at
least one Business Day prior to the date of the proposed Competitive Bid
Borrowing, if the Company shall specify in the Notice of Competitive Bid
Borrowing that the rates of interest to be offered by the Lenders shall be fixed
rates per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least four
Business Days prior to the date of the proposed Competitive Bid Borrowing, if
the Company shall instead specify in the Notice of Competitive Bid Borrowing
another basis to be used by the Lenders in determining the rates of interest to
be offered by them (the Advances comprising such Competitive Bid Borrowing being
referred to herein as "LIBO Rate Advances"). The Agent shall in turn promptly
notify
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each Lender of each request for a Competitive Bid Borrowing received by
it from the Company by sending such Lender a copy of the related Notice of
Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances to the
relevant Borrower as part of such proposed Competitive Bid Borrowing at a rate
or rates of interest specified by such Lender in its sole discretion, by
notifying the Agent (which shall give prompt notice thereof to the Company),
before 10:00 A.M. (New York City time) on the date of such proposed Competitive
Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed
Rate Advances and three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of LIBO Rate Advances, of the minimum amount and maximum amount of each
Competitive Bid Advance which such Lender would be willing to make as part of
such proposed Competitive Bid Borrowing (which amounts may, subject to the
proviso to the first sentence of this Section 2.03(a), exceed such Lender's
Commitment, if any), the rate or rates of interest therefor and such Lender's
Applicable Lending Office with respect to such Competitive Bid Advance; provided
that if the Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Company of such offer before
9:00 A.M. (New York City time) on the date on which notice of such election is
to be given to the Agent by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify the Agent, before 10:00 A.M.
(New York City time) on the date on which notice of such election is to be given
to the Agent by the other Lenders, and such Lender shall not be obligated to,
and shall not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice shall not
cause such Lender to be obligated to make any Competitive Bid Advance as part of
such proposed Competitive Bid Borrowing.
(iii) The Company shall, in turn, before 11:00 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of Fixed Rate Advances and before 1:00
P.M. (New York City time) three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving
the Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, by giving
notice to the Agent of the amount of each Competitive Bid
Advance (which amount shall be equal to or greater than the
minimum amount, and equal to or less than the maximum amount,
notified to the Company by the Agent on behalf of such Lender
for such Competitive Bid Advance pursuant to paragraph (ii)
above) to be made by each Lender as part of such Competitive
Bid Borrowing, and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving the Agent notice to
that effect. If the
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Company accepts any offers made by Lenders pursuant to
paragraph (ii) above, such offers shall be accepted in the
order of the lowest to highest interest rates or, if two or
more Lenders offer to make Competitive Bid Advances at the
same interest rate, such offers, if any, shall be accepted in
proportion to the amount offered by each such Lender at such
interest rate notwithstanding any minimum specified by such
Lender in its notice given pursuant to Section 2.03(a)(ii).
The Company may not accept offers in excess of the amount
specified in accordance with paragraph (i)(v) above.
(iv) If the Company notifies the Agent that such Competitive
Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent shall
give prompt notice thereof to the Lenders and such Competitive Bid Borrowing
shall not be made.
(v) If the Company accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
turn promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above, of the date and aggregate amount of such Competitive Bid
Borrowing and whether or not any offer or offers made by such Lender pursuant to
paragraph (ii) above have been accepted by the Company, (B) each Lender that is
to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of
the amount of each Competitive Bid Advance to be made by such Lender as part of
such Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt,
that the Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before
12:00 noon (New York City time) on the date of such Competitive Bid Borrowing
specified in the notice received from the Agent pursuant to clause (A) of the
preceding sentence or any later time when such Lender shall have received notice
from the Agent pursuant to clause (C) of the preceding sentence, make available
for the account of its Applicable Lending Office to the Agent at the Agent's
Account, in same day funds, such Lender's portion of such Competitive Bid
Borrowing. Upon fulfillment of the applicable conditions set forth in Article
III and after receipt by the Agent of such funds, the Agent will make such same
day funds available to the relevant Borrower at such Borrower's account at the
Agent's address referred to in Section 8.02. Promptly after each Competitive Bid
Borrowing the Agent will notify each Lender of the amount of the Competitive Bid
Borrowing, the consequent Competitive Bid Reduction and the dates upon which
such Competitive Bid Reduction commenced and will terminate.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Competitive Bid Borrowing, the Company shall
be in compliance with the limitation set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, each Borrower may from time to time borrow under this Section
2.03, repay or prepay pursuant to
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subsection (d) below, and reborrow under this Section 2.03, provided that a
Competitive Bid Borrowing shall not be made within three Business Days of the
date of any other Competitive Bid Borrowing.
(d) Each Borrower shall repay to the Agent for the account of
each Lender that has made a Competitive Bid Advance to such Borrower, on the
maturity date of such Competitive Bid Advance (such maturity date being that
specified by the Company for repayment of such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and provided in the promissory note, if any, evidencing such
Competitive Bid Advance), the then unpaid principal amount of such Competitive
Bid Advance. No Borrower shall have any right to prepay any principal amount of
any Competitive Bid Advance unless (x) such Borrower obtains the prior written
consent of the Lender which made such Competitive Bid Advance, or (y), such
prepayment is made on the terms, specified by the Company for such Competitive
Bid Advance in the related Notice of Competitive Bid Borrowing delivered
pursuant to subsection (a)(i) above and set forth in the promissory note, if
any, evidencing such Competitive Bid Advance.
(e) Each Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance to such Borrower from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by such Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the promissory
note, if any, evidencing such Competitive Bid Advance.
(f) At its option, the Company (on its own behalf and on
behalf of any Borrower) may request a Competitive Bid Borrowing directly from
the Lenders; provided that it follows the procedures set forth in this Section
2.03 and promptly delivers, by telecopier or telex, a copy of the Notice of
Competitive Bid Borrowing and notice in writing of the results of such request
to the Agent.
(g) The indebtedness of each Borrower resulting from each
Competitive Bid Advance made to such Borrower as part of a Competitive Bid
Borrowing shall, if requested by the applicable Lender, be evidenced by a
separate promissory note of such Borrower payable to the order of the Lender
making such Competitive Bid Advance.
SECTION 2.04 Fees.
(a) Facility Fee. The Company agrees to pay to the Agent for
the account of each Lender a facility fee on the aggregate amount of such
Lender's Commitment irrespective of usage from the Effective Date in the case of
each Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each
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<PAGE> 23
other Lender until the Termination Date (on a daily basis) at the Applicable
Margin, payable in arrears quarterly on the last day of each March, June,
September and December, commencing June 30, 1999, and ending on the Termination
Date.
(b) Agent's Fees. The Company shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Company and
the Agent.
(c) Usage Fees. The Company shall pay to the Agent for the
account of each Lender, a usage fee of 10 basis points per annum on the amount
of such Lender's Commitment for each day on which the outstanding amount of the
Advances exceeds 33 1/3% of the aggregate Commitments from the Effective Date in
the case of each Initial Lender and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender in the case of
each other Lender until the Termination Date (on a daily basis) payable in
arrears quarterly on the last day of each March, June, September and December
commencing June 30, 1999 and ending on the Termination Date.
SECTION 2.05 Termination, Reduction or Increase of the
Commitments.
(a) The Company shall have the right, upon at least three
Business Days' notice to the Agent, to terminate in whole or reduce ratably in
part the unused portions of the respective Commitments of the Lenders, provided
that each partial reduction shall be in the aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and provided further that (x)
the aggregate amount of the Commitments of the Lenders shall not be reduced to
an amount that is less than the aggregate principal amount of the Competitive
Bid Advances then outstanding, and (y) once terminated, a portion of a
Commitment shall not be reinstated except pursuant to Section 2.05(c).
(b) If any Lender shall make a demand under Section 2.11 or
2.14 or if the obligation of any Lender to make Eurodollar Rate Advances shall
have been suspended pursuant to Section 2.12, the Company shall have the right,
upon at least ten Business Days' notice, to terminate in full the Commitment of
such Lender or to demand that such Lender assign to one or more Persons all of
its rights and obligations under this Agreement in accordance with Section 8.07.
If the Company shall elect to terminate in full the Commitment of any Lender
pursuant to this Section 2.05(b), the Company shall pay to such Lender, on the
effective date of such Commitment termination, an amount equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, whereupon such Lender
shall cease to be a party hereto.
(c) (i) Not more than once in any calendar year, the Company
may propose to increase the aggregate amount of the Commitments by an aggregate
amount of $25,000,000 or an integral multiple of $1,000,000 in excess thereof (a
"Proposed Aggregate Commitment Increase") in the manner set forth below,
provided that:
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(1) no Default shall have occurred and be continuing either as
of the date on which the Company shall notify the Agent of its request
to increase the aggregate amount of the Commitments or as of the
related Increase Date (as hereinafter defined); and
(2) after giving effect to any such increase, the aggregate
amount of the Commitments shall not exceed $500,000,000.
(ii) The Company may request an increase in the aggregate
amount of the Commitments by delivering to the Agent a notice (an "Increase
Notice"; the date of delivery thereof to the Agent being the "Increase Notice
Date") specifying (1) the Proposed Aggregate Commitment Increase, (2) the
proposed date (the "Increase Date") on which the Commitments would be so
increased (which Increase Date may not be fewer than 30 nor more than 60 days
after the Increase Notice Date) and (3) the New Lenders, if any, to whom the
Company desires to offer the opportunity to commit to all or a portion of the
Proposed Aggregate Commitment Increase. The Agent shall in turn promptly notify
each Lender of the Company's request by sending each Lender a copy of such
notice.
(iii) Not later than the date five days after the Increase
Notice Date, the Agent shall notify each New Lender, if any, identified in the
related Increase Notice of the opportunity to commit to all or any portion of
the Proposed Aggregate Commitment Increase. Each such New Lender may irrevocably
commit to all or a portion of the Proposed Aggregate Commitment Increase (such
New Lender's "Proposed New Commitment") by notifying the Agent (which shall give
prompt notice thereof to the Company) before 11:00 A.M. (New York City time) on
the date that is 10 days after the Increase Notice Date; provided that:
(1) the Proposed New Commitment of each New Lender shall be in
an amount not less than $25,000,000; and
(2) each New Lender that submits a Proposed New Commitment
shall enter into an agreement in form and substance satisfactory to the
Company and the Agent pursuant to which such New Lender shall undertake
a Commitment (and, if any such New Lender is already a Lender, its
Commitment shall be in addition to such Lender's Commitment hereunder
on such date), and shall pay to the Agent a processing and recordation
fee of $3,500.
(iv) If the aggregate Proposed New Commitments of all of the
New Lenders shall be less than the Proposed Aggregate Commitment Increase, then
(unless the Company otherwise requests) the Agent shall, on or prior to the date
that is 15 days after the Increase Notice Date, notify each Lender of the
opportunity to so commit to all or any portion of the Proposed Aggregate
Commitment Increase not committed to by New Lenders pursuant to Section
2.05(c)(iii). Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to commit to all or a portion of such remainder (such Lender's
"Proposed Increased Commitment") by notifying the
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Agent (which shall give prompt notice thereof to the Company) no later than
11:00 A.M. (New York City time) on the date five days before the Increase Date.
(v) If the aggregate amount of Proposed New Commitments and
Proposed Increased Commitments (such aggregate amount, the "Total Committed
Increase") equals or exceeds $25,000,000, then, subject to the conditions set
forth in Section 2.05(c)(i):
(1) effective on and as of the Increase Date, the aggregate
amount of the Commitments shall be increased by the lesser of the
proposed aggregate Committed Increase and the Total Committed Increase
and shall be allocated among the New Lenders and the Lenders as
provided in Section 2.05(c)(vi); and
(2) on the Increase Date, if any Revolving Loans are then
outstanding, the Company shall borrow Revolving Loans from all or
certain of the Lenders and/or (subject to compliance by the Company
with Section 8.04(c)) prepay Revolving Loans of all or certain of the
Lenders such that, after giving effect thereto, the Revolving Loans
(including, without limitation, the Types and Interest Periods thereof)
shall be held by the Lenders (including for such purposes New Lenders)
ratably in accordance with their respective Commitments.
If the Total Committed Increase is less than $25,000,000, then the aggregate
amount of the Commitments shall not be changed pursuant to this Section 2.05(c).
(vi) The Total Committed Increase shall be allocated among New
Lenders having Proposed New Commitments and Lenders having Proposed Increased
Commitments as follows:
(1) If the Total Committed Increase shall be at least
$25,000,000 and less than or equal to the Proposed Aggregate Commitment
Increase, then (x) the initial Commitment of each New Lender shall be
such New Lender's Proposed New Commitment and (y) the Commitment of
each Lender shall be increased by such Lender's Proposed Increased
Commitment.
(2) If the Total Committed Increase shall be greater than the
Proposed Aggregate Commitment Increase, then the Total Committed
Increase shall be allocated:
(x) first to New Lenders (to the extent of their
respective Proposed New Commitments) in such a manner
as the Company shall agree; and
(y) then to Lenders on a pro rata basis based on
the ratio of each Lender's Proposed Increased
Commitment (if any) to the aggregate amount of the
Proposed Increased Commitments of all of the Lenders.
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(vii) No increase in the Commitments contemplated hereby shall
become effective until the Agent shall have received (x) promissory notes in
respect of the Revolving Loans payable to each New Lender and each other Lender
whose Commitment is being increased that, in either case, shall have requested
such promissory notes at least two Business Days prior to the Increase Date, and
(y) evidence satisfactory to the Agent (including an update of the opinion of
counsel provided pursuant to Section 3.01 (g)(iv)) that such increases in the
Commitments, and borrowings thereunder, have been duly authorized.
SECTION 2.06 Repayment of Revolving Credit Advances; Evidence
of Indebtedness; Extension of Termination Date.
(a) The Company and each Borrower shall repay to the Agent for
the ratable account of the Lenders on the Termination Date the aggregate
principal amount of the Revolving Credit Advances then outstanding.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrowers to
such Lender resulting from each Advance made by such Lender, including the
amounts of principal and interest payable and paid to such Lender from time to
time hereunder. The Agent shall maintain accounts in which it shall record (i)
the amount of each Advance made hereunder, the Type thereof and the Interest
Period, if any, applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder for
the account of the Lenders and each Lender's share thereof. The entries made in
the accounts maintained pursuant to this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of any Lender or the Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of any Borrower to repay
the Advances in accordance with the terms of this Agreement. Any Lender may
request that Advances made by it be evidenced by a promissory note. In such
event, the applicable Borrower shall prepare, execute and deliver to such Lender
a promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) and in a form approved by the
Agent. Thereafter, the Advances evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section 8.07)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).
(c) The Company may by written notice to the Agent, not more
than 45 nor less than 30 days prior to the first anniversary of the date hereof
(such anniversary date following such notice, the "Extension Date"), request
that the Termination Date then in effect be extended for a further period of 364
days. Such request shall be irrevocable and binding upon the Company. The Agent
shall promptly notify each Lender of such request. If a Lender agrees, in its
individual and sole discretion, to so extend its Commitment (an "Extending
Lender"), it will notify the Agent, in writing, of its decision to do so not
more than 30 nor less than 20 days before
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such anniversary date. The Commitment of any Lender that fails to accept (or
fails to respond to) the Company's request for extension of the Termination Date
(a "Declining Lender") shall be terminated on the Termination Date theretofore
in effect (without regard to extension by other Lenders). The Extending Lenders,
or any of them, shall then have the right to increase their respective
Commitments by an aggregate amount up to the amount of all Declining Lenders'
Commitments, and, to the extent of any shortfall, the Company shall have the
right to require any Declining Lender to assign in full its rights and
obligations under this Agreement to an Eligible Assignee designated by the
Company that agrees to accept all of such rights and obligations (a "Replacement
Lender"), provided that (i) such increase and/or such assignment is otherwise in
compliance with Section 8.07, (ii) such Declining Lender receives payment in
full of an amount equal to the principal amount of all Advances owing to such
Declining Lender, together with accrued interest thereon to the date of such
assignment and all other amounts payable to such Declining Lender under this
Agreement and (iii) any such increase shall be effective on the Extension Date
and any such assignment shall be effective on the date specified by the Company
and agreed to by the Replacement Lender and the Agent. If (i) Extending Lenders
and/or Replacement Lenders provide Commitments in an aggregate amount equal to
51% of the aggregate amount of the Commitments outstanding immediately prior to
the Extension Date in effect at the time the Company requests such extension,
and (ii) no Default shall have occurred and be continuing immediately prior to
the Extension Date, the Termination Date shall be extended by 364 days (except
that, if the date on which the Termination Date is to be extended is not a
Business Day, such Termination Date as so extended shall be the next preceding
Business Day) from the effective date set forth in an Extension Agreement, in
substantially the form in Exhibit A-3 hereto, which has been duly completed and
signed by the Company, the Agent and the Extending Lenders and Replacement
Lenders party thereto. Such Extension Agreement shall be executed and delivered
no earlier than 30 days prior to the Extension Date and the effective date shall
be no earlier than 29 days prior to the Termination Date then in effect. No
extension of the Commitments pursuant to this Section 2.06(c) shall be legally
binding on any party hereto unless and until such party executes and delivers a
counterpart of such Extension Agreement.
SECTION 2.07 Interest on Revolving Credit Advances. Each
Borrower shall pay interest on the unpaid principal amount of each Revolving
Credit Advance made to such Borrower owing to each Lender from the date of such
Revolving Credit Advance until such principal amount shall be paid in full, at
the following rates per annum:
(a) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all times to
the Base Rate in effect from time to time, payable in arrears quarterly on the
last day of each March, June, September and December during such periods and on
the date such Base Rate Advance shall be Converted or paid in full.
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(b) Eurodollar Rate Advances. During such periods as such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Revolving Credit Advance to the
sum of (x) the Eurodollar Rate for such Interest Period for such Revolving
Credit Advance plus (y) the Applicable Margin, payable in arrears on the last
day of such Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period every
three months from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full.
SECTION 2.08 Interest Rate Determination.
(a) If the Eurodollar Rate does not appear on Page 3750 of the
Telerate Service (or any successor page), each Reference Bank agrees to furnish
to the Agent timely information for the purpose of determining each Eurodollar
Rate. If the Eurodollar Rate does not appear on said Page 3750 (or any successor
page), and if any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks. The Agent shall give
prompt notice to the Company and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07, and the rate, if any,
furnished by each Reference Bank for the purpose of determining the interest
rate under Section 2.07(b).
(b) If, due to a major disruption in the interbank funding
market with respect to any Eurodollar Rate Advances, the Required Lenders notify
the Agent that the Eurodollar Rate for any Interest Period for such Advances
will not adequately reflect the cost to such Required Lenders of making, funding
or maintaining their respective Eurodollar Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance,
and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit
Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Company and the Lenders that the circumstances causing such
suspension no longer exist.
(c) If the Company shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Company and the Lenders and the Company will
be deemed to have selected an Interest Period of one month.
(d) If the aggregate unpaid principal amount of Eurodollar
Rate Advances comprising any Borrowing shall be reduced, by payment or
prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances on the last day of the Interest
Period applicable thereto.
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(e) Upon the occurrence and during the continuance of any
Event of Default, (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance and (ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended.
(f) If the Eurodollar Rate does not appear on Page 3750 of the
Telerate Service (or any successor page) and fewer than two Reference Banks
furnish timely information to the Agent for determining the Eurodollar Rate for
any Eurodollar Rate Advances,
(i) the Agent shall forthwith notify the Company and the
Lenders that the interest rate cannot be determined for such Eurodollar Rate
Advances,
(ii) each such Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance (or
if such Advance is then a Base Rate Advance, will continue as a Base Rate
Advance), and
(iii) the obligation of the Lenders to make, or to Convert
Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Company and the Lenders that the circumstances
causing such suspension no longer exist.
SECTION 2.09 Optional Conversion of Revolving Credit Advances.
The Company may on any Business Day, upon notice given to the Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.08 and
2.12, Convert all Revolving Credit Advances of one Type comprising the same
Borrowing into Revolving Credit Advances of the other Type; provided, however,
that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be
made only on the last day of an Interest Period for such Eurodollar Rate
Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than the minimum amount specified in Section
2.02(b) and no Conversion of any Revolving Credit Advances shall result in more
separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each
such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to
be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Company.
SECTION 2.10 Optional Prepayments of Revolving Credit
Advances. The Company may, upon notice not later than 11:00 A.M. (New York City
time) on the date of such payment, in the case of Base Rate Advances, and two
Business Days' notice, in the case of Eurodollar Rate Advances, to the Agent
stating the proposed date and aggregate principal amount of the prepayment, and
if such notice is given the Company shall, prepay the outstanding principal
amount of the Revolving Credit Advances comprising part of the same Revolving
Credit Borrowing in whole or ratably in part, together with accrued interest to
the date of such prepayment
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on the principal amount prepaid; provided, however, that (x) each partial
prepayment shall be in an aggregate principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and (y) in the event of any
such prepayment of a Eurodollar Rate Advance, the Company shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(d).
SECTION 2.11 Increased Costs.
(a) If, due to either (i) the introduction of or any change in
any law or regulation or in the interpretation or administration of any law or
regulation by any governmental authority charged with the interpretation or
administration thereof or (ii) the compliance with any guideline or request from
any central bank or other governmental authority that would be complied with
generally by similarly situated banks acting reasonably (whether or not having
the force of law), there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining Eurodollar Rate Advances or
LIBO Rate Advances by an amount deemed by such Lender to be material, then the
Company shall from time to time, upon demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Company
and the Agent by such Lender, shall be conclusive and binding for all purposes,
absent manifest error. Notwithstanding the foregoing, no Lender shall be
entitled to request compensation under this paragraph with respect to any
Competitive Bid Advance if the change giving rise to such request was applicable
to such Lender at the time of submission of such Lender's offer to make such
Competitive Bid Advance.
(b) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other governmental or regulatory
authority which becomes effective after the date hereof, there shall be any
increase in the amount of capital required or expected to be maintained by any
Lender or any corporation controlling such Lender and the amount of such capital
is increased by or based upon the existence of such Lender's Advances or
commitment to lend hereunder and other commitments of this type by an amount
deemed by such Lender to be material, then, upon demand by such Lender (with a
copy of such demand to the Agent), the Company shall pay to the Agent for the
account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's Advances or commitment to lend hereunder. A certificate as to such
amounts submitted to the Company and the Agent by such Lender shall be
conclusive and binding for all purposes as to the calculations therein, absent
manifest error. Such certificate shall be in reasonable detail and shall certify
that the claim for additional amounts referred to therein is generally
consistent with such Lender's treatment of similarly situated customers of such
Lender whose transactions with such Lender are similarly affected by the change
in circumstances giving rise to such payment, but such Lender shall not be
required to disclose any confidential or proprietary information therein.
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SECTION 2.12 Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent (and provide to the
Company an opinion of counsel to the effect) that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for such Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or LIBO Rate Advances or to fund or
maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder, (i) each
Eurodollar Rate Advance or LIBO Rate Advance, as the case may be, of such Lender
will automatically, upon such demand, Convert into a Base Rate Advance or an
Advance that bears interest at the rate set forth in Section 2.07(a), as the
case may be, and (ii) the obligation of such Lender to make, or to Convert
Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Company and such Lender that the circumstances
causing such suspension no longer exist and such Lender shall make the Base Rate
Advances in the amount and on the dates that it would have been requested to
make Eurodollar Rate Advances had no such suspension been in effect.
SECTION 2.13 Payments and Computations.
(a) Each Borrower shall make each payment hereunder not later
than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the
Agent at the Agent's Account in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility fees or usage fees ratably (other than amounts
payable pursuant to Section 2.03, 2.04(b), 2.05(b), 2.11, 2.14 or 8.04(c)) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its acceptance of
an Assignment and Acceptance and recording of the information contained therein
in the Register pursuant to Section 8.07(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) All computations of interest based on the Base Rate and of
facility fees and of usage fees shall be made by the Agent on the basis of a
year of 365 or 366 days, as the case may be, and all computations of interest
based on the Eurodollar Rate or the Federal Funds Rate shall be made by the
Agent on the basis of a year of 360 days, in each case for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest or facility fees or usage fees are payable. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
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(c) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or facility fee or usage fee, as the case may
be; provided, however, that, if such extension would cause payment of interest
on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day.
(d) Unless the Agent shall have received notice from the Company
prior to the date on which any payment is due to the Lenders hereunder that a
Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent such Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.14 Taxes.
(a) Each Lender is exempt from any withholding imposed under the
laws of the United States in respect of any fees, interest or other payments to
which it is entitled pursuant to this Agreement or any promissory notes issued
hereunder (the "Income") because (i) the Lender is organized under the laws of
the United States; (ii) the Income is effectively connected with the conduct of
a trade or business within the United States within the meaning of Section 871
of the Internal Revenue Code of 1986, as amended or any successor thereto (the
"Code"); or (iii) the Income is eligible for an exemption by reason of a tax
treaty. The Agent is exempt from any withholding tax imposed under the laws of
the United States in respect of the Income because the Agent is organized under
the laws of the United States.
(b) Each Lender organized under the laws of a jurisdiction outside
the United States (each, a "Foreign Lender") shall, on or prior to the date of
its execution and delivery of this Agreement in the case of each Initial Lender,
and on the date of the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Foreign Lender and from time to time thereafter
if requested in writing by the Company or the Agent, provide the Agent and the
relevant Borrower with Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Foreign Lender is exempt or entitled to a reduced
rate of United States withholding tax on any Income that is the subject of such
forms. If the form provided by a Foreign Lender at the time such Foreign Lender
first becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, or in excess of the rate applicable to
the Foreign Lender assignor on the date of the Assignment and Acceptance
pursuant to which it became a Foreign
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Lender, in the case of each other Foreign Lender, withholding tax at such rate
shall be considered excluded from Taxes as defined in Section 2.14(c).
(c) Based on Section 2.14(a) and (b), any and all payments by any
Borrower hereunder or under any promissory notes issued hereunder shall be made
free and clear of and without deduction for any present United States federal
income withholding taxes imposed on a Foreign Lender under the Code (such
withholding taxes being hereinafter referred to as "Taxes").
(d) If, as a result of the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any United States law or any
tax treaty (or in the application or official interpretation of any law or any
tax treaty) that occurs on or after the date a Foreign Lender first becomes a
party to this Agreement (a "Change in Law"), a Foreign Lender cannot comply with
Section 2.14(b) or, if despite such compliance, any Borrower shall be required
to deduct any Taxes from or in respect of any Income, then: (i) the sum payable
to such Foreign Lender shall be increased as may be necessary so that after
making all required deductions for such Taxes (including deductions applicable
to additional sums payable under this Section 2.14) such Foreign Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. Notwithstanding the foregoing, each
Borrower shall be entitled to pay any Taxes in any lawful manner so as to reduce
any deductions and such Foreign Lender shall to the extent it is reasonably able
provide any documentation or file any forms as may be required by the Internal
Revenue Service or any other foreign governmental agency. In addition, if any
Foreign Lender or the Agent (in lieu of such Foreign Lender), as the case may
be, is required to pay directly any Taxes as a result of a Change in Law because
a Borrower cannot or does not legally or timely do so, the Company shall
indemnify such Foreign Lender or Agent for payment of such Taxes, without
duplication of, or increase in, the amount of Taxes otherwise due to the Foreign
Lender.
(e) In addition, the Company agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies (excluding any income or franchise taxes, business taxes or
capital taxes of any nature) that arise from the execution, delivery or
registration of, or otherwise with respect to, this Agreement (hereinafter
referred to as "Other Taxes"). If a Lender is required to pay directly Other
Taxes because a Borrower cannot or does not legally or timely do so, the Company
shall indemnify such Lender for such payment of Other Taxes.
(f) Within 30 days after the date of any payment of Taxes or foreign
withholding taxes, the Company shall furnish to the Agent, at its address
referred to in Section 8.02, the original or a certified copy of a receipt
evidencing payment thereof. Prior to making any payment hereunder by or on
behalf of any Borrower through an account or branch outside the United States or
on behalf of any Borrower by a payor that is not a United States person (a
"Foreign Payment"), such Borrower shall determine that no foreign withholding
taxes are payable in
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respect thereof, and at its expense, shall furnish, or shall cause such payor to
furnish, to the Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Agent, in either
case stating that such Foreign Payment is exempt from or not subject to foreign
withholding taxes. Each Lender shall cooperate with each Borrower's efforts
described in this subsection by providing to the extent reasonably within its
means any forms requested by such Borrower substantiating an exemption from
foreign withholding taxes required by any governmental agency. For purposes of
this subsection (f), the terms "United States" and "United States person" shall
have the meaning specified in Section 7701 of the Code. If, as a result of the
enactment, promulgation, execution or ratification of, or any change in or
amendment to, any applicable foreign law or any tax treaty (or in the
application or official interpretation of any law or any tax treaty) that occurs
on or after the date a tax opinion is rendered pursuant to the terms of this
subsection, and which renders such tax opinion incorrect as to the absence of
any foreign withholding tax (a "Foreign Change in Law"), any Borrower shall be
required to deduct any foreign withholding taxes from or in respect of any
Income, then: (i) the sum payable to the applicable Lender shall be increased as
may be necessary so that after making all required deductions for foreign
withholding taxes (including deductions applicable to additional sums payable
under this Section 2.14) such Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. Notwithstanding the foregoing, each Borrower shall be entitled
to pay any foreign withholding taxes in any lawful manner so as to reduce any
deductions and such Lender shall to the extent it is reasonably able provide any
documentation or file any forms as may be required by the Internal Revenue
Service or any other foreign governmental agency. In addition, if any Lender is
required to pay directly any foreign withholding tax in respect of any Foreign
Payments made pursuant to this Agreement because a Borrower cannot or does not
legally or timely do so, the Company shall indemnify such Lender for payment of
such tax.
(g) For any period with respect to which a Lender has failed to
comply with the requirements of subsection (b) or (f) relating to certain forms
intended to reduce withholding taxes (other than if such failure is due to a
Change in Law or a Foreign Change in Law), such Lender shall not be entitled to
indemnification under subsection (d) or (f).
(h) Upon a Change in Law or the imposition of any foreign
withholding tax in respect of Foreign Payments, a Lender shall, upon the written
request of and at the expense of the Company, use reasonable efforts to change
the jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such taxes that may
thereafter accrue and would not, in the reasonable judgment of such Lender,
cause the imposition on such Lender of any material legal or regulatory burdens.
(i) Without prejudice to the survival of any other agreement of any
Borrower hereunder, the agreements and obligations of the Company contained in
this Section 2.14 shall
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survive the payment in full of principal and interest hereunder until the
applicable statute of limitations relating to the payment of any Taxes under
Section 2.14(d) has expired.
(j) Any request by any Lender for payment of any amount under this
Section 2.14 shall be accompanied by a certification that such Lender's claim
for said amount is generally consistent with such Lender's treatment of
similarly situated customers of such Lender whose transactions with such Lender
are similarly affected by the change in circumstances giving rise to such
payment, but such Lender shall not be required to disclose any confidential or
proprietary information therein.
SECTION 2.15 Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Revolving Credit Advances owing to
it (other than pursuant to Section 2.05(b), 2.11, 2.14 or 8.04(c)) in excess of
its ratable share of payments on account of the Revolving Credit Advances
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Revolving Credit Advances owing to them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Each Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.16 Use of Proceeds. The proceeds of the Advances shall be
available (and the Company agrees that such proceeds shall be used) for general
corporate purposes of the Company and its Subsidiaries, including commercial
paper backstop.
SECTION 2.17 Borrowings by Borrowing Subsidiaries; Substitution
of Borrower.
(a) The Company may, at any time or from time to time, designate one
or more Subsidiaries (including the Guarantor) as Borrowers hereunder by
furnishing to the Agent a letter (a "Designation Letter") in duplicate, in
substantially the form of Exhibit D, duly completed and executed by the Company
and such Subsidiary. Upon any such designation of a Subsidiary, such Subsidiary
shall be a Borrowing Subsidiary and a Borrower entitled to borrow Revolving
Credit Advances and Competitive Bid Advances on and subject to the terms and
conditions of this Agreement.
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(b) If all principal of and interest on all Advances made to any
Borrowing Subsidiary have been paid in full, the Company may terminate the
status of such Borrowing Subsidiary as a Borrower hereunder by furnishing to the
Agent a letter (a "Termination Letter") in substantially the form of Exhibit F,
duly completed and executed by the Company. Any Termination Letter furnished
hereunder shall be effective upon receipt by the Agent, which shall promptly
notify the Lenders, whereupon the Lenders shall, upon payment in full of all
amounts owing by such Borrower hereunder, promptly deliver to the Company
(through the Agent) the promissory notes, if any, of such former Borrower.
Notwithstanding the foregoing, the delivery of a Termination Letter with respect
to any Borrower shall not terminate (i) any obligation of such Borrower that
remains unpaid at the time of such delivery (including without limitation any
obligation arising thereafter in respect of such Borrower under Section 2.11 or
2.14) or (ii) the obligations of the Company under Article IX with respect to
any such unpaid obligations; provided, that if the status of such Borrowing
Subsidiary has been terminated as aforesaid because the Company has sold or
transferred its interest in such Subsidiary, and the Company so certifies to the
Agent at the time of delivery of such Termination Letter, and subject to payment
of said principal and interest, (i) such Subsidiary shall, automatically upon
the effectiveness of the delivery of such Termination Letter and certification,
cease to have any obligation under this Agreement and (ii) the Company shall
automatically be deemed to have unconditionally assumed, as primary obligor, and
hereby agrees to pay and perform, all of such obligations.
(c) In addition to the foregoing, the Company may, at any time when
there are no Advances outstanding hereunder and upon not less than 10 Business
Days' notice, irrevocably elect to terminate its right to be a Borrower
hereunder as of the date (which shall be a Business Day) specified in such
Substitution Letter (the "Substitution Date") and designate the Guarantor as a
Borrower hereunder by furnishing to the Agent (x) a letter (a "Substitution
Letter"), in substantially the form of Exhibit E duly completed and executed by
the Company and the Guarantor, (y) a certificate signed by a duly authorized
officer of the Company, and a certificate signed by a duly authorized officer of
the Guarantor, each dated the Substitution Date, stating that:
(i) the representations and warranties contained in Section 4.01
(except the representations set forth in the last sentence of subsection (e)
thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the Substitution Date, as though
made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such designation, that constitutes a Default;
and (z) the Agent shall have received such other corporate documents,
resolutions and legal opinions relating to the foregoing as it, or any Lender
through the Agent, may reasonably request.
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SECTION 2.18 Mitigation Obligations. If any Lender requests
compensation under Section 2.11, or if the obligation of any Lender to make or
continue Advances as, or Convert Advances into, Eurodollar Rate Advances is
suspended pursuant to Section 2.12, then, upon the written request of the
Company, such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designations or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.11 or would
cause such Lender not to be subject to such suspension, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not, in the reasonable judgment of such Lender, cause
imposition on such Lender of any material legal or regulatory burdens or
otherwise be disadvantageous to such Lender. The Company hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effectiveness of Sections 2.01
and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and
as of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied:
(a) As of the Effective Date, there shall have occurred no Material
Adverse Change since December 26, 1998 that has not been publicly disclosed.
(b) As of the Effective Date, there shall exist no action, suit,
investigation, litigation or proceeding affecting the Company, or any of its
Subsidiaries (including the Guarantor) pending or, to the knowledge of the
Company's or the Guarantor's executive officers, threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect or (ii) could reasonably be likely to affect the
legality, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby.
(c) As of the Effective Date, nothing shall have come to the
attention of the Lenders during the course of their due diligence investigation
to lead them to believe that the Information Memorandum was or has become
misleading, incorrect or incomplete in any material respect.
(d) As of the Effective Date, all governmental and third party
consents and approvals necessary in connection with the transactions
contemplated hereby shall have been obtained (without the imposition of any
conditions that are not acceptable to the Lenders) and shall remain in effect.
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(e) As of the Effective Date, the Company shall have paid all
accrued fees and expenses of the Agent and the Lenders (including the accrued
fees and expenses of counsel to the Agent, to the extent invoiced at least one
Business Day prior to the Effective Date).
(f) On the Effective Date, the following statements shall be true
and the Agent shall have received for the account of each Lender a certificate
signed by a duly authorized officer of the Company dated the Effective Date,
stating that:
(i) The representations and warranties contained in Section 4.01 are
correct in all material aspects on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a
Default.
(g) The Agent shall have received on or before the Effective Date
the following, each dated such day, in form and substance satisfactory to the
Agent and (except for any notes requested by the Lenders) in sufficient copies
for each Lender:
(i) To the extent any Lender shall have requested, at least one
Business day prior to the Effective Date that its Revolving Credit Advances be
evidenced by a promissory note, a note payable to the order of such Lender.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company and of the Guarantor approving this Agreement, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement.
(iii) A certificate of the Secretary or an Assistant Secretary of
the Company certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement and the other documents to be
delivered hereunder.
(iv) A certificate of the Secretary or an Assistant Secretary of the
Guarantor certifying the names and true signatures of the officers of the
Guarantor authorized to sign this Agreement and the other documents to be
delivered hereunder.
(v) An opinion of Pamela O'Brien, General Counsel of each of the
Company and the Guarantor, substantially in the form of Exhibit C hereto and as
to such other matters as any Lender through the Agent may reasonably request.
(vi) A favorable opinion of Skadden, Arps, Slate, Meagher & Flom,
LLP, counsel for the Agent.
(vii) The Agent shall have received such other approvals, opinions
or documents as any Lender through the Agent may reasonably request.
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(h) On or prior to the Effective Date, the Company shall have
completed the initial public offering of its common stock and shall have
received net proceeds thereof in a minimum amount of $2,300,000,000.
SECTION 3.02 Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Revolving Credit Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Revolving Credit Borrowing
and the acceptance by any Borrower of the proceeds of such Revolving Credit
Borrowing shall constitute a representation and warranty by the Company and such
Borrower that on the date of such Borrowing such statements are true):
(i) The representations and warranties contained in Section 4.01
(except the representations set forth in the last sentence of subsection (e)
thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the date of such Revolving Credit
Borrowing, before and after giving effect to such Revolving Credit Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date, and
(ii) No event has occurred and is continuing, or would result from
such Revolving Credit Borrowing or from the application of the proceeds
therefrom, that constitutes a Default;
and (b) in the case of the first Borrowing by a Borrowing Subsidiary, the Agent
shall have received such corporate documents, resolutions and legal opinions
relating to such Borrowing Subsidiary as the Agent may reasonably require.
SECTION 3.03 Conditions Precedent to Each Competitive Bid Borrowing.
The obligation of each Lender that is to make a Competitive Bid Advance on the
occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as
part of such Competitive Bid Borrowing is subject to the conditions precedent
that (i) the Agent shall have received the written confirmatory Notice of
Competitive Bid Borrowing with respect thereto, and (ii) on the date of such
Competitive Bid Borrowing the following statements shall be true (and each of
the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by any Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Company and such Borrower
that on the date of such Competitive Bid Borrowing such statements are true):
(a) The representations and warranties contained in Section 4.01
(except the representations set forth in the last sentence of subsection (e)
thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the date of such Competitive Bid
Borrowing, before and after giving effect to such Competitive Bid Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date; and
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(b) No event has occurred and is continuing, or would result from
such Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
SECTION 3.04 Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the proposed Effective
Date, as notified by the Company to the Lenders, specifying its objection
thereto. The Agent shall promptly notify the Lenders of the occurrence of the
Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Loan Parties.
Each of the Company and the Guarantor (each, a "Loan Party") represents and
warrants as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and the Guarantor
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by each Loan Party of
this Agreement and the consummation of the transactions contemplated hereby, are
within such Loan Party's powers, have been duly authorized by all necessary
corporate or other action, and do not contravene (i) its charter, by-laws or
other organizational documents or (ii) any law or contractual restriction
binding on or materially affecting such Loan Party.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery and performance by
either Loan Party of this Agreement.
(d) This Agreement has been duly executed and delivered by each Loan
Party. This Agreement is the legal, valid and binding obligation of each Loan
Party enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and equitable principles of general applicability.
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(e) The combined balance sheet of the Company as at December 26,
1998, and the related combined statements of operations and cash flows of the
Company for the fiscal year then ended, accompanied by an opinion of KPMG Peat
Marwick, independent public accountants, fairly present the financial condition
of the Company as at such date and the results of the operations of the Company
for the period ended on such date, all in accordance with generally accepted
accounting principles consistently applied. Since December 26, 1998, there has
been no Material Adverse Change that has not been publicly disclosed.
(f) There is no pending or threatened action, suit, investigation,
litigation or proceeding affecting either Loan Party before any court,
governmental agency or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) would reasonably be likely to affect the
legality, validity or enforceability of this Agreement or any promissory note
issued under this Agreement, if any, or the consummation of the transactions
contemplated hereby.
(g) It is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock, in either case in a manner that would cause the Advances or any Lender to
be in violation of Regulation U.
(h) Following application of the proceeds of each Advance, not more
than 25 percent of the value of the assets (either of any Borrower only or of
the Company and its Subsidiaries or the Guarantor and its Subsidiaries, in each
case on a Consolidated Basis) subject to the provisions of Section 5.02(a) or
(b)(ii) or subject to any restriction contained in any agreement or instrument
between it and any Lender or any Affiliate of any Lender relating to Debt and
within the scope of Section 6.01 (d) will be margin stock.
(i) Neither Loan Party is an "investment company", a company
"controlled by", or "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended. Neither the making of any Advances nor the application of the proceeds
or repayment thereof by any Borrower will violate any provision of such Act or
any rule, regulation or order of the Securities and Exchange Commission
thereunder.
(j) Any reprogramming required to permit the proper functioning, in
and following the year 2000, of (i) the Company's and the Subsidiaries',
including the Guarantor's, computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Company's or such Subsidiaries' systems interface) and the testing of
all such systems and equipment, as so reprogrammed, will be completed within
such period of time as is required to avoid the occurrence of a Material Adverse
Effect as a result of the failure to complete such reprogramming. The cost to
the Company and such Sub-
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sidiaries of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Company and such Subsidiaries (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Material Adverse Effect.
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, each Loan Party
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
compliance with ERISA and Environmental Laws, except where failure so to comply
would not, and would not be reasonably likely to, have a Material Adverse
Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property and (ii) all lawful claims that, if unpaid, might by law
become a Lien upon its property; provided, however, that neither Loan Party nor
any of its Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained, unless
and until any Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors and such Lien would be reasonably likely
to have a Material Adverse Effect.
(c) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that each Loan Party and its Material Subsidiaries may consummate any
merger or consolidation permitted under Section 5.02(b) and provided further
that neither Loan Party nor any of its Material Subsidiaries shall be required
to preserve any right or franchise if the Board of Directors of such Loan Party
or such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of such Loan Party or such Subsidiary,
as the case may be, and that the loss thereof is not disadvantageous in any
material respect to such Loan Party, such Subsidiary or the Lenders.
(d) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Company, the Consolidated balance
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sheet of the Company and its Subsidiaries as of the end of such quarter and
Consolidated statements of operations and cash flows of the Company and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter, duly certified (subject to
year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with GAAP, it being agreed that delivery of
the Company's Quarterly Report on Form 10-Q will satisfy this requirement;
(ii) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the Company, a copy of the annual audit report for
such year for the Company and its Subsidiaries, containing the Consolidated
balance sheet of the Company and its Subsidiaries as of the end of such Fiscal
Year and Consolidated statements of operations and cash flows of the Company and
its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion by
KPMG Peat Marwick or other independent public accountants of nationally
recognized standing, it being agreed that delivery of the Company's Annual
Report on Form 10-K will satisfy this requirement;
(iii) as soon as possible and in any event within five days after
the occurrence of each Default continuing on the date of such statement, a
statement of the chief financial officer of the Company setting forth details of
such Default and the action that the Company has taken and proposes to take with
respect thereto; and
(iv) promptly after the sending or filing thereof, copies of all
annual reports and proxy solicitations that the Company sends to any of its
securityholders, and copies of all reports on Form 8-K that the Company or any
Subsidiary files with the Securities and Exchange Commission.
(e) Repayment of Short Term Facilities. Repay all Debt outstanding
under the Short Term Facilities on or before May 29, 1999.
SECTION 5.02 Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, neither Loan Party
will:
(a) Secured Debt. Create or suffer to exist, or permit any of its
Restricted Subsidiaries to create or suffer to exist, any Debt secured by a Lien
on any Principal Property or on any shares of stock of or Debt of any Restricted
Subsidiary unless such Loan Party or such Restricted Subsidiary secures or
causes such Restricted Subsidiary to secure the Advances and all other amounts
payable under this Agreement equally and ratably with such secured Debt, so long
as such secured Debt shall be so secured, unless after giving effect thereto the
aggregate amount of all such Debt so secured does not exceed 15% of Consolidated
Net Tangible Assets, provided that the foregoing restriction does not apply to
Debt secured by:
(i) Liens existing prior to the date hereof;
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(ii) Liens on property of, or on shares of stock of or Debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary;
(iii) Liens in favor of a Loan Party or any Restricted Subsidiary;
(iv) Liens in favor of any governmental bodies to secure progress or
advance payments;
(v) Liens on property, shares of stock or Debt existing at the time
of acquisition thereof (including acquisition through merger or consolidation)
or liens securing Debt incurred to finance all or any part of the purchase price
or cost of construction of property (or additions, substantial repairs,
alterations or substantial improvements thereto), provided that such Lien and
the Debt secured thereby are incurred within 365 days of the later of
acquisition or completion of construction (or addition, repair, alteration or
improvement) and full operation thereof; and
(vi) any extension, renewal or refunding of Debt referred to in the
foregoing clauses (i) to (v), inclusive.
(b) Mergers, Etc. (i) Merge or consolidate with or into any
corporation or (ii) sell, lease, transfer or otherwise dispose of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, unless the Company or the Guarantor would be the acquiring or surviving
party in such transaction and no Event of Default shall have occurred and be
continuing at the time of such proposed transaction or would result therefrom.
(c) Subsidiary Debt. Permit any Restricted Subsidiary to create,
incur, assume or permit to exist any Debt, except:
(i) Debt of the Guarantor and Borrowing Subsidiaries, if any,
created hereunder and under the 5-Year Facility;
(ii) Debt existing on the Effective Date;
(iii) Debt of the Guarantor constituting guaranties of Debt of the
Company;
(iv) Debt of any Subsidiary to any Loan Party or any other
Subsidiary;
(v) Debt of any Person that becomes a Subsidiary after the date
hereof; provided that such Debt exists at the time such Person becomes a
Subsidiary and is not created in contemplation of or in connection with such
Person becoming a Subsidiary;
(vi) any refinancing, refunding or replacement of any Debt permitted
under clause (ii) through (v) above; and
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(vii) other Debt in an aggregate principal amount not exceeding 15%
of Consolidated Net Tangible Assets at any time outstanding;
provided, that the foregoing provisions of this Section 5.02(c) shall cease to
apply to the Guarantor from and after the occurrence of the Substitution Date as
provided in Section 2.17.
(d) Restrictive Agreements. Neither Loan Party will enter into,
incur or permit to exist any agreement or other arrangement that prohibits or
restricts the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to, or otherwise transfer assets to the Company; provided that the
foregoing shall not apply to (i) restrictions and conditions imposed by law or
by this Agreement or the 5-Year Facility, (ii) customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iii)
restrictions or conditions imposed by any agreement relating to secured Debt
permitted by this Agreement if such restrictions or conditions apply only to the
property or assets securing such Debt, (iv) customary provisions in leases and
other contracts restricting the assignment thereof, (v) any agreement in effect
on the Effective Date, as any such agreement is in effect on such date, (vi) any
agreement binding upon such Subsidiary prior to the date on which such
Subsidiary was acquired by the Company and outstanding on such date, (vii)
customary net worth and other financial maintenance covenants in an agreement
relating to Debt or other obligations incurred in compliance with this
Agreement, and (viii) any agreement refinancing, renewing or replacing any
agreement or Debt referred to in (i) through (vii) above, provided that the
relevant provisions are no more restrictive than those in the agreement or Debt
being refinanced, renewed or replaced.
(e) Ownership. In the case of the Company, cease to own, legally and
beneficially, 75% or more of the membership interests in the Guarantor.
SECTION 5.03 Financial Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Company
will not:
(a) Debt to Capitalization Ratio. Permit the Debt to Capitalization
Ratio as at the last day of any Fiscal Quarter that is not an Alternate Covenant
Date to exceed 0.75 to 1.0.
(b) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as at the last day of any Fiscal Quarter that is an Alternate Covenant
Date to exceed 5.0 to 1.0.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of, or interest on,
any Advance or to make any other payment under this Agreement, in each case
within five days after the same becomes due and payable; or
(b) Any representation or warranty made by any Loan Party herein or
by any Borrower (or any of its officers) in connection with this Agreement
(including without limitation by any Borrowing Subsidiary pursuant to any
Designation Letter) shall prove to have been incorrect in any material respect
when made; or
(c) (i) Any Loan Party shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d), 5.02 or 5.03, or (ii) any
Loan Party shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed if
such failure shall remain unremedied for 30 days after written notice thereof
shall have been given to either Loan Party by the Agent or any Lender; or
(d) Either Loan Party or any of its Subsidiaries shall fail to pay
any principal of or premium or interest on any Debt that is outstanding in a
principal or notional amount of at least $50,000,000 in the aggregate (but
excluding Debt outstanding hereunder) of such Loan Party or such Subsidiary (as
the case may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate the maturity of such Debt or permit (with or without
the giving of notice, the lapse of time or both) the holder or holders of such
Debt or any trustee or agent on its or their behalf to cause any such Debt to
become due prior to its scheduled maturity; or any such Debt shall be declared
to be due and payable, or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased or defeased,
or an offer to prepay, redeem, purchase or defease such Debt shall be required
to be made, in each case prior to the stated maturity thereof; or
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(e) Either Loan Party or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against such Loan
Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
such Loan Party of any of its Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$50,000,000 shall be rendered against either Loan Party or any of its Material
Subsidiaries and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; provided,
however, that any such judgment or order shall not be an Event of Default under
this Section 6.01(f) if and for so long as (i) the amount of such judgment or
order is covered by a valid and binding policy of insurance between the
defendant and the insurer covering payment thereof and (ii) such insurer, which
shall be rated at least "A" by A.M. Best Company, has been notified of, and has
not disputed the claim made for payment of, the amount of such judgment or
order; or
(g) Any event, action or condition with respect to an employee
benefit plan of the Company subject to Title IV of ERISA results in any penalty
or action pursuant to ERISA that has a material adverse effect on the business
or financial condition of either Loan Party and its Subsidiaries, taken as a
whole; or
(h) The Master Bottling Agreement ceases to be valid and binding and
in full force and effect; or Pepsi denies that it has any liability or
obligation under the Master Bottling Agreement and Pepsi ceases performance
thereunder; or
(i) A Change of Control shall occur;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Company, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Company, declare the
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Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company; provided, however, that in the event
of an actual or deemed entry of an order for relief with respect to any Loan
Party or any Borrowing Subsidiary under the Federal Bankruptcy Code, (A) the
obligation of each Lender to make Advances shall automatically be terminated and
(B) the Advances, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, protest or any notice of any
kind, all of which are hereby expressly waived by each Loan Party.
ARTICLE VII
THE AGENT
Each of the Lenders hereby irrevocably appoints the Agent as its
agent and authorizes the Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Agent by the terms hereof, together
with such actions and powers as are reasonably incidental thereto.
The bank serving as the Agent hereunder shall have the same rights
and powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not the Agent, and such bank and its Affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with the Loan Parties or any Subsidiary or other Affiliate thereof as if it were
not the Agent hereunder.
The Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Agent shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing, (b) the Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Agent is required to exercise in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 8.01), and (c) except
as expressly set forth herein, the Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating to
the Loan Parties or any if their Subsidiaries that is communicated to or
obtained by the bank serving as Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 8.01) or in the absence of its own gross negligence or
wilful misconduct. The Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Agent by a Loan
Party or a Lender, and the Agent shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with this
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Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article III or elsewhere herein,
other than to confirm receipt of items expressly required to be delivered to the
Agent.
The Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Agent may consult with legal counsel (who may be counsel for any
Loan Party), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
The Agent may perform any and all of its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Agent. The Agent and any such sub-agent may perform any and all of its duties
and exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of the Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, the Agent may resign at any time by notifying the
Lenders and the Company. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor agent approved by the Company, which
approval will not be unreasonably withheld or delayed; provided that such
approval shall not be required if an Event of Default has occurred and is
continuing. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States or any State thereof, having a combined
capital and surplus of at least $50,000,000 with an office in New York, New
York, or an Affiliate of any such bank. Upon the acceptance of its appointments
as Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Company to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Company and such successor. After the Agent's resignation hereunder, the
provisions of this Article and Section 8.04 shall continue in effect for the
benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Agent.
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Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any related agreement or any document
furnished hereunder or thereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) except
pursuant to Section 2.05(b), 2.05(c), 2.15 or 2.17, increase the Commitments of
the Lenders or subject the Lenders to any additional obligations, (b) reduce the
principal of, or interest on, the Revolving Credit Advances or any fees or other
amounts payable hereunder, (c) postpone any date fixed for any payment of
principal of, or interest on, the Revolving Credit Advances or any fees or other
amounts payable hereunder, (d) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Revolving Credit Advances, or the
number of Lenders, that shall be required for the Lenders or any of them to take
any action hereunder, (e) release the guarantee as set forth in Section 9.01 or
10.01, or (f) amend this Section 8.01; and provided further that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement.
SECTION 8.02 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Company, any Borrower or the Guarantor, to the Company at its address
at One Pepsi Way, Somers, New York 10589, Attention: General Counsel, Telecopier
No. (914) 767-1161, with a copy to Secretary, Telecopier No. (914) 767-1161; if
to any Initial Lender, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; if to any other Lender, at its Domestic Lending
Office specified in the Assignment and Acceptance pursuant to which it became a
Lender; and if to the Agent, at The Chase Manhattan Bank, Loan and Agency
Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York, 10081,
Attention of Nina Wang (Telecopy No. (212) 552-5658), with a copy to The Chase
Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Karen
Sharf (Telecopy No. (212) 270-5120); or, as to the Company, any Borrower, the
Guarantor or the Agent, at such other address as shall be designated by such
party in a written
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notice to the other parties and, as to each other party, at such other address
as shall be designated by such party in a written notice to the Company and the
Agent. All such notices and communications shall, when mailed, telecopied,
telegraphed or telexed, be effective when deposited in the mails, telecopied,
delivered to the telegraph company or confirmed by telex answer back,
respectively, except that notices and communications to the Agent pursuant to
Article II, III or VII shall not be effective until received by the Agent.
SECTION 8.03 No Waiver; Remedies. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 8.04 Costs and Expenses.
(a) The Company agrees to pay on demand all costs and expenses of
the Agent as set forth in the fee letter between the Company and the Agent dated
March 4, 1999. The Company further agrees to pay on demand all reasonable costs
and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement and the other documents to be delivered hereunder, including,
without limitation, reasonable fees and expenses of counsel for the Agent and
each Lender in connection with the enforcement of rights under this Section
8.04(a).
(b) The Company agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with this Agreement, any promissory
note issued hereunder, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances, whether or not such
investigation, litigation or proceeding is brought by any Borrower, the
Guarantor, their directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(c) To the extent that the Company fails to pay any amount required
to be paid by it to the Agent under paragraph (a) or (b) of this Section 8.04,
each Lender severally agrees to pay to the Agent such Lenders' Applicable
Percentage (determined as of the time that
47
<PAGE> 52
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agent in its capacity as such.
(d) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or LIBO Rate Advance is made by any Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10
or 2.12, acceleration of the maturity of the Advances pursuant to Section 6.01
or for any other reason, the Company shall, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain such Advance.
(e) Without prejudice to the survival of any other agreement of any
Borrower hereunder, the agreements and obligations of the Company contained in
Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder.
SECTION 8.05 Right of Set-off. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Advances due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of any Loan Party or any Borrower
against any and all of the obligations of such Loan Party or such Borrower now
or hereafter existing under this Agreement, whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Company after any such
set-off and application, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
and its Affiliates under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender and its Affiliates may have.
SECTION 8.06 Binding Effect. This Agreement shall become effective
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Loan Parties and the Agent and when the Agent
shall have been notified by each Initial Lender that such Initial Lender has
executed it and thereafter shall be binding upon and inure to the benefit of the
Loan Parties, each Subsidiary Borrower (if any), the Agent and each Lender and
their respective
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<PAGE> 53
successors and assigns, except that no Borrower shall have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Lenders.
SECTION 8.07 Assignments and Participations.
(a) Each Lender may, upon ten days' notice to the Agent and with the
consent of the Company (which shall not be unreasonably withheld) and, if
demanded by the Company (following a demand by such Lender pursuant to Section
2.11 or Section 2.14 or a suspension of such Lender's obligation to make or
continue Advances as, or convert Advances into, Eurodollar Rate Advances
pursuant to Section 2.12) upon at least ten days' notice to such Lender and the
Agent, will assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Revolving Credit Advances owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all rights and obligations under this Agreement (other
than any right to make Competitive Bid Advances or Competitive Bid Advances
owing to it), (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than the lesser of (x)
$25,000,000 and (y) the smallest initial Commitment of any Initial Lender, (iii)
each such assignment shall be to an Eligible Assignee, (iv) each such assignment
made as a result of a demand by the Company pursuant to this Section 8.07(a)
shall be arranged by the Company after consultation with the Agent and shall be
either an assignment of all of the rights and obligations of the assigning
Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such
assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Company pursuant to this
Section 8.07(a) unless and until such Lender shall have received one or more
payments from either the Company or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement and (vi) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in the
Register (as defined in clause (d) below), an Assignment and Acceptance,
together with a processing and recordation fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or
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<PAGE> 54
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit B hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company.
(d) The Agent shall maintain at its address referred to in Section
8.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders
and, with respect to Lenders, the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and each Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Loan Parties or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
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<PAGE> 55
(e) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle (a
"SPC"), identified as such in writing from time to time by the Granting Lender
to the Agent and the Company, the option to provide to the Company all or any
part of any Advance that such Granting Lender would otherwise be obligated to
make to the Company pursuant to this Agreement; provided that (i) nothing herein
shall constitute a commitment by any SPC to make any Advance, (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any part
of such Advance, the Granting Lender shall be obligated to make such Advance
pursuant to the terms hereof. The making of an Advance by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Advance were made by such Granting Lender. Each party hereto agrees that no
SPC shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender). In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute against, or
join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any State thereof. In addition, notwithstanding
anything to the contrary contained in this Section 8.07(e), any SPC may (i) with
notice to, but without the prior written consent of, the Company and the Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Advances to the Granting Lender or to any financial
institutions (consented to by the Company and the Agent) providing liquidity
and/or credit support to or for the account of any SPC to support the funding or
maintenance of Advances and (ii) disclose on a confidential basis any non-public
information relating to its Advances to any rating agency, commercial paper
dealer or provider of any surety, guarantee or credit or liquidity enhancement
to such SPC.
(f) Each Lender may, upon notice to the Agent and the Company, sell
participations to one or more banks or other entities in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances owing to it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any promissory note issued or assigned to it hereunder, (iv) the
Borrowers, the Guarantor, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement, or any consent to any departure by any Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Advances or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Advances or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
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<PAGE> 56
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to any Loan Party or any Borrower furnished
to such Lender by or on behalf of any Loan Party or any Borrower; provided that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree to preserve the confidentiality of any Confidential
Information relating to the Loan Parties or the Borrowers received by it from
such Lender.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement or any promissory note issued to such Lender
hereunder (including, without limitation, the Advances owing to it) in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 8.08 Confidentiality. Neither the Agent nor any Lender shall
disclose any Confidential Information to any Person without the consent of the
Company, other than (a) to the Agent's or such Lender's Affiliates and their
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process, (c) to any rating
agency when required by it, provided that, prior to any such disclosure, such
rating agency shall undertake to preserve the confidentiality of any
Confidential Information relating to the Loan Parties or the Borrowers received
by it from such Lender and (d) as requested or required by any state, federal or
foreign authority or examiner regulating banks or banking.
SECTION 8.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 8.10 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11 Jurisdiction, Etc.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal
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<PAGE> 57
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement in the courts
of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or federal court sitting in New York City. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
SECTION 8.12 WAIVER OF JURY TRIAL. EACH BORROWER, THE GUARANTOR, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE
AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
ARTICLE IX
COMPANY GUARANTEE
SECTION 9.01 Company Guarantee. Subject to the provisions of this
Article IX, the Company unconditionally and irrevocably guarantees to each
Lender and the Agent and their respective successors and assigns, that: (i) the
principal of, premium, if any, and interest on the Advances to each Borrowing
Subsidiary and, following the Substitution Date, the Guarantor (each a
"Guaranteed Party") and any promissory notes issued by any Guaranteed Party
hereunder will be duly and punctually paid in full when due, whether at
maturity, by acceleration, by redemption or otherwise, and interest on overdue
principal, and premium, if any, and (to the extent permitted by law) interest on
any interest, if any, on the Advances and all other obligations of the
Guaranteed Parties to the Lenders or the Agent hereunder (including fees and
expenses) will be promptly paid in full, all in accordance with the terms
hereof; and (ii) in case of any extension of time of payment or renewal of any
of the Advances to any Guaranteed Party or any of such other obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Guaranteed Parties to the Lenders or
the Agent, for whatever reason, the Company will be obligated to pay, or to
perform or to cause the performance of, the same immediately. An Event of
Default under this Agreement shall constitute an event of
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<PAGE> 58
default under this Guarantee, and shall entitle the Lenders to accelerate the
obligations of the Company under this Guarantee in the same manner and to the
same extent as the obligations of the Guaranteed Parties.
The Company hereby agrees that its obligations under this Guarantee shall
be unconditional, irrespective of the validity, regularity or enforceability of
this Agreement, any Designation Letter or the Substitution Letter, the absence
of any action to enforce the same, any waiver or consent by any Lender or the
Agent of this Agreement any Designation Letter or the Substitution Letter, with
respect to any thereof, the entry of any judgment against any Guaranteed Party,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of the Company. The Company
hereby waives and relinquishes: (a) any right to require the Agent, the Lenders
or any Guaranteed Party (each, a "Benefitted Party") to proceed against any
Guaranteed Party or any other Person or to proceed against or exhaust any
security held by a Benefitted Party at any time or to pursue any other remedy in
any secured party's power before proceeding against the Company; (b) any defense
that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of a Benefitted Party
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of any other Person or Persons; (c) demand, protest and
notice of any kind (except as expressly required by this Agreement), including
but not limited to notice of the existence, creation or incurring of any new or
additional Debt or obligation or of any action or non-action on the part of the
Company, any Benefitted Party, any creditor of the Company or any Guaranteed
Party or on the part of any other Person whomsoever in connection with any
obligations the performance of which are guaranteed under this Guarantee; (d)
any defense based upon an election of remedies by a Benefitted Party, including
but not limited to an election to proceed against the Company or any other
Guaranteed Party for reimbursement; (e) any defense based upon any statute or
rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Company hereby covenants that this Guarantee will not be discharged
except by payment in full of all principal, premium, if any, and interest on the
Advances made to each Guaranteed Party and all other costs provided for under
this Agreement in respect thereof. This is a Guarantee of payment and not of
collectibility.
If any Lender or the Agent is required by any court or otherwise to return
to either the Company or any Guaranteed Party, or any trustee or similar
official acting in relation to either the Company or any Guaranteed Party, any
amount paid by the Company or any Guaranteed Party to the Agent or such Lender,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. The Company agrees that it will not be entitled to any
right of subrogation in relation to the Lenders or the Agent in respect of any
obligations guaranteed under this Guarantee until payment in full of all
obligations guaranteed hereby. The Company agrees that, as between it, on the
one hand, and the Lenders and the Agent, on the other hand, (x) the
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<PAGE> 59
maturity of the obligations guaranteed under this Guarantee may be accelerated
as provided in Article VI hereof for the purposes hereof, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article VI hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by such Company for
the purpose of this Guarantee.
ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.01 Subsidiary Guarantee. Subject to the provisions of
this Article X, the Guarantor unconditionally and irrevocably guarantees to each
Lender and the Agent and their respective successors and assigns, that: (i) the
principal of, premium, if any, and interest on the Advances and any promissory
note issued hereunder will be duly and punctually paid in full when due, whether
at maturity, by acceleration, by redemption or otherwise, and interest on
overdue principal, and premium, if any, and (to the extent permitted by law)
interest on any interest, if any, on the Advances, any promissory note issued
hereunder and all other obligations of the Company to the Lenders or the Agent
hereunder (including fees and expenses) will be promptly paid in full, all in
accordance with the terms hereof; and (ii) in case of any extension of time of
payment or renewal of any of the Advances or any of such other obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Company to the Lenders or the Agent,
for whatever reason, the Guarantor will be obligated to pay, or to perform or to
cause the performance of, the same immediately. An Event of Default under this
Agreement shall constitute an event of default under this Guarantee, and shall
entitle the Lenders to accelerate the obligations of the Guarantor under this
Guarantee in the same manner and to the same extent as the obligations of the
Company.
The Guarantor hereby agrees that its obligations under this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of this Agreement, the absence of any action to enforce the same,
any waiver or consent by any Lender or the Agent of this Agreement with respect
to any thereof, the entry of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of the Guarantor. The Guarantor hereby
waives and relinquishes: (a) any right to require the Agent, the Lenders or the
Company (each, a "Benefitted Party") to proceed against the Company or any other
Person or to proceed against or exhaust any security held by a Benefitted Party
at any time or to pursue any other remedy in any secured party's power before
proceeding against the Guarantor; (b) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind (except as
ex-
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<PAGE> 60
pressly required by this Agreement), including but not limited to notice of the
existence, creation or incurring of any new or additional Debt or obligation or
of any action or non-action on the part of the Guarantor, the Company, any
Benefitted Party, any creditor of the Guarantor, the Company or on the part of
any other Person whomsoever in connection with any obligations the performance
of which are guaranteed under this Guarantee; (d) any defense based upon an
election of remedies by a Benefitted Party, including but not limited to an
election to proceed against the Guarantor for reimbursement; (e) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (f) any defense arising because of a Benefitted
Party's election, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense
based on any borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code. The Guarantor hereby covenants that this Guarantee will not be
discharged except by payment in full of all principal, premium, if any, and
interest on the Advances and all other costs provided for under this Agreement.
This is a Guarantee of payment and not of collectibility.
If any Lender or the Agent is required by any court or otherwise to return
to either the Company or the Guarantor, or any trustee or similar official
acting in relation to either the Company or the Guarantor, any amount paid by
the Company or the Guarantor to the Agent or such Lender, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect. The
Guarantor agrees that it will not be entitled to any right of subrogation in
relation to the Lenders or the Agent in respect of any obligations guaranteed
under this Guarantee until payment in full of all obligations guaranteed hereby.
The Guarantor agrees that, as between it, on the one hand, and the Lenders and
the Agent, on the other hand, (x) the maturity of the obligations guaranteed
under this Guarantee may be accelerated as provided in Article VI hereof for the
purposes hereof, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article VI hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purpose of this
Guarantee.
SECTION 10.02 Limitation of Guarantor's Liability. The Guarantor,
and by its acceptance hereof, each Lender, hereby confirms that it is the
intention of the parties hereto that this Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Code, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or State law. To effectuate the foregoing intention, the Lenders and the
Guarantor hereby irrevocably agree that the obligations of the Guarantor under
this Article X shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of the Guarantor, result in
the obligations of the Guarantor under the Guarantee not constituting a
fraudulent transfer or conveyance under federal or state law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
THE PEPSI BOTTLING GROUP, INC., as Borrower
By /s/ Christopher Langhoff
-----------------------------------------
Title: Assistant Treasurer
BOTTLING GROUP, LLC, as Guarantor
By /s/ Pamela C. McGuire
-----------------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK, as Agent
By /s/ Karen M. Sharf
-----------------------------------------
Title: Vice President
<PAGE> 62
<TABLE>
<CAPTION>
Commitment Initial Lenders
- ---------- ---------------
<S> <C>
$30,000,000.00 THE CHASE MANHATTAN BANK, as
an Initial Lender
By /s/ Karen M. Sharf
-----------------------------
Title: Vice President
$30,000,000.00 BANK OF AMERICA
NATIONAL TRUST AND SAVINGS
ASSOCIATION, as an Initial
Lender
By /s/ W. L. Hess
-----------------------------
Title: Managing Director
$30,000,000.00 CITIBANK, N.A., as an Initial
Lender
By /s/ Laura A. Siracuse
-----------------------------
Title: Vice President
$25,000,000.00 CREDIT SUISSE FIRST BOSTON
CORPORATION, as an Initial
Lender
By /s/ David Kratovil
-----------------------------
Title: Director
By /s/ Robert Hetu
-----------------------------
Title: Vice President
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
$25,000,000.00 UBS AG as an Initial Lender
By /s/ Paula Mueller
-----------------------------
Title: Director
By /s/ Roman Edelmann
-----------------------------
Title: Director
$20,000,000.00 LEHMAN COMMERCIAL PAPER INC.,
as an Initial Lender
By /s/ Michele Swanson
-----------------------------
Title: Authorized Signatory
$15,000,000.00 ROYAL BANK OF CANADA, as an
Initial Lender
By /s/ John Crawford
-----------------------------
Title: Senior Manager
$12,500,000.00 BANCO BILBAO VIZCAYA, as an
Initial Lender
By /s/ Pilar Fernadez
-----------------------------
Title: Vice President
By /s/ Eduardo Martinez
-----------------------------
Title: Assistant Vice President
</TABLE>
<PAGE> 64
<TABLE>
<S> <C>
$12,500,000.00 DEUTSCHE BANK AG, as an
Initial Lender
By /s/ Alexander Karow
Title: Assistant Vice President
By /s/ Stephan Wiedemann
-----------------------------
Title: Director
$12,500,000.00 FLEET NATIONAL BANK, as an
Initial Lender
By /s/ Christopher Criswell
-----------------------------
Title: Senior Vice President
$12,500,000.00 HONG KONG & SHANGHAI BANKING
CORP., as an Initial Lender
By /s/ Kim Leary
-----------------------------
Title: Vice President
$12,500,000.00 THE BANK OF NEW YORK, as an
Initial Lender
By /s/ Eliza S. Adams
-----------------------------
Title: Vice President
$12,500,000.00 THE NORTHERN TRUST COMPANY,
as an Initial Lender
By /s/ Nicole Boehm
-----------------------------
Title: Commercial Banking
Officer
$250,000,000 Total of the Commitments
</TABLE>
<PAGE> 65
SCHEDULE I
<TABLE>
<CAPTION>
Lender Domestic Lending Office Eurodollar Lending Office
- ------ ----------------------- -------------------------
<S> <C> <C>
THE CHASE MANHATTAN 270 Park Avenue 270 Park Avenue
BANK New York, New York 10017 New York, New York 10017
BANK OF AMERICA 1850 Gateway Blvd. 1850 Gateway Blvd.
NATIONAL TRUST Concord, CA 94520 Concord, CA 94520
AND SAVINGS
ASSOCIATION
CITIBANK, N.A. 399 Park Avenue 399 Park Avenue
New York New York 10043 New York New York 10043
CREDIT SUISSE FIRST 11 Madison Avenue Credit Suisse First Boston
BOSTON New York, New York, 10010 Cayman Islands Branch
c/-11 Madison Avenue
New York, New York 10010
UBS AG 677 Washington Blvd. 677 Washington Blvd
Stamford, CT 06912 Stamford, CT 06912
LEHMAN COMMERCIAL c/- Bankers Trust Company c/- Bankers Trust Company
PAPER INC. 130 Liberty Street 130 Liberty Street
9th Floor 9th Floor
New York, New York 10006 New York, New York 10006
cc Lehman Commercial cc Lehman Commercial Paper
Paper Inc. Inc.
101 Hudson Street 101 Hudson Street
30th Floor 30th Floor
Jersey City, New Jersey Jersey City, New Jersey
07302 07302
ROYAL BANK OF CANADA One Liberty Plaza One Liberty Plaza
New York, New York New York, New York
10006-1404 10006-1404
BANCO BILBAO VIZCAYA 1345 Avenue of the 1345 Avenue of the Americas
Americas New York, New York 10105
New York, New York 10105
DEUTSCHE BANK AG NEW 31 West 52nd Street Cayman Islands Branch
YORK BRANCH AND/OR New York, New York 10019 c/-31 West 52nd Street
CAYMAN ISLANDS BRANCH New York, New York 10019
FLEET NATIONAL BANK One Landmark Sq. One Landmark Sq.
Stamford, CT 06904 Stamford, CT 06904
HONG KONG & SHANGHAI HSBC Center HSBC Center
BANKING CORP. 26th Floor 26th Floor
Buffalo, New York, 14206 Buffalo, New York, 14206
THE BANK OF NEW YORK One Wall Street, One Wall Street,
New York, New York 10286 New York, New York 10286
THE NORTHERN TRUST 50 South La Salle Street, 50 South La Salle St.
COMPANY Chicago, Ill. 60675 Chicago, Ill. 60675
</TABLE>
-2-
<PAGE> 66
SCHEDULE 2
APPLICABLE MARGIN
<TABLE>
<CAPTION>
364-Day 364-Day 364-Day
Rating Facility Fee LIBOR Margin Drawn Cost
------ ------------ ------------ ----------
<S> <C> <C> <C>
A/A2 6.0 bps 29.0 bps 35.0 bps
A-/A3 7.0 bps 33.0 bps 40.0 bps
BBB+/Baa1 10.0 bps 40.0 bps 50.0 bps
BBB/Baa2 15.0 bps 47.5 bps 62.5 bps
(less than or
equal to) BBB-/Baa3 20.0 bps 55.0 bps 75.0 bps
</TABLE>
-3-
<PAGE> 67
EXHIBIT A-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
The Chase Manhattan Bank, as Agent
for the Lenders parties
to the 364-Day Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 [Date]
Attention: Nina Wang
Ladies and Gentlemen:
The undersigned, The Pepsi Bottling Group, Inc. (the
"Company"), refers to the 364-Day Credit Agreement, dated as of April 22, 1999
(as amended or modified from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
Bottling Group, LLC (the "Guarantor"), certain Lenders parties thereto and The
Chase Manhattan Bank, as administrative agent for said Lenders, and hereby gives
you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that
the undersigned hereby requests a Revolving Credit Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit Borrowing is
__________, ____.
(ii) The Type of Advances comprising the Proposed Revolving Credit
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit
Borrowing is $______.
(iv) The identity of the Borrower is __________, a ____________
corporation.
[(v)] [The initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Revolving Credit Borrowing is ___
month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Revolving Credit Borrowing:
A-1-1
<PAGE> 68
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f) thereof (other than clause (ii)
thereof)) are correct in all material respects, on and as of the date of the
Proposed Revolving Credit Borrowing, before and after giving effect to the
Proposed Revolving Credit Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Revolving Credit Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
THE PEPSI BOTTLING GROUP, INC.
By
Title:
A-1-2
<PAGE> 69
EXHIBIT A-2 - FORM OF NOTICE
OF COMPETITIVE
BID BORROWING
The Chase Manhattan Bank, as Agent
for the Lenders parties
to the 364-Day Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 [Date]
Attention: Nina Wang
Ladies and Gentlemen:
The undersigned, The Pepsi Bottling Group, Inc. (the
"Company"), refers to the 364-Day Credit Agreement, dated as of April 22, 1999
(as amended or modified from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
Bottling Group, LLC (the "Guarantor"), certain Lenders parties thereto and The
Chase Manhattan Bank, as administrative agent for said Lenders, and hereby gives
you notice pursuant to Section 2.03 of the Credit Agreement that the undersigned
hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in
that connection sets forth the terms on which such Competitive Bid Borrowing
(the "Proposed Competitive Bid Borrowing") is requested to be made:
(A) Date of Proposed
Competitive Bid Borrowing ___________________
(B) Aggregate Amount of Proposed
Competitive Bid Borrowing ___________________
(C) Maturity Date ___________________
(D) Interest Rate Basis ___________________
(E) Interest Payment Date(s) ___________________
(F) Identity of Borrower ___________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f) thereof (other than clause
(ii) thereof)) are correct in all material respects, on and as of the
A-2-1
<PAGE> 70
date of the Proposed Competitive Bid Borrowing, before and after giving
effect to the Proposed Competitive Bid Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date; and
(b) no event has occurred and is continuing, or would result
from the Proposed Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default.
The undersigned hereby confirms that the Proposed
Competitive Bid Borrowing is to be made available to it in accordance
with Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
THE PEPSI BOTTLING GROUP, INC.
By
Title:
A-2-2
<PAGE> 71
EXHIBIT A-3 - FORM OF
EXTENSION AGREEMENT
EXTENSION AGREEMENT
The Pepsi Bottling Group, Inc.
One Pepsi Way
Somers, New York 10589
Attention: Treasurer
The Chase Manhattan Bank, as Agent
under the 364-Day Credit Agreement referred to below
270 Park Avenue
New York, New York 10017
Attention: Nina Wang
Gentlemen:
Each undersigned Lender hereby agrees to extend, effective on
[insert effective date, which shall be no more than 29 days prior to the
existing Termination Date] (the "Extension Date"), the Termination Date under
the 364-Day Credit Agreement dated as of April 22, 1999 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") among The Pepsi Bottling Group, Inc., Bottling Group, LLC, the
Lenders and agents party thereto and The Chase Manhattan Bank, as administrative
agent for the Lenders, to [364 days from the effective date of this Extension
Agreement]. Terms defined in the Credit Agreement are used herein as therein
defined.
This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
[Remainder of this page intentionally left blank]
A-3-1
<PAGE> 72
EXHIBIT B - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the 364-Day Credit Agreement dated as of
April 22, 1999 (as amended or modified from time to time, the "Credit
Agreement"), among THE PEPSI BOTTLING GROUP, INC., a Delaware corporation (the
"Company"), Bottling Group, LLC (the "Guarantor"), the Lenders (as defined in
the Credit Agreement) and The Chase Manhattan Bank, as administrative agent for
the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein
with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Competitive Bid Advances) equal to the
percentage interest specified on Schedule 1 hereto of all outstanding rights and
obligations under the Credit Agreement (other than in respect of Competitive Bid
Advances). After giving effect to such sale and assignment, the Assignee's
Commitment and the amount of the Revolving Credit Advances owing to the Assignee
will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Company or the performance or observance by the
Company of any of its obligations or the obligations of any Borrower under the
Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to
B-1
<PAGE> 73
the Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service forms required under Section 2.14 of the Credit
Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and facility fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
B-2
<PAGE> 74
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: ___%
Assignee's Commitment: $__________
Aggregate outstanding principal
amount of Revolving Credit Advances assigned: $__________
Effective Date(1): _______________, ____
[NAME OF ASSIGNOR], as Assignor
By
Title:
Dated: ,
[NAME OF ASSIGNEE], as Assignee
By
Title:
Dated: ,
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
- -------------------
(1) This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
<PAGE> 75
Accepted and Approved this
____ day of ________, ____
THE CHASE MANHATTAN BANK, as Agent
By ___________________________________
Title:
Approved this ____ day
of ________, ____
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
2
<PAGE> 76
EXHIBIT C - FORM OF
OPINION OF COUNSEL
FOR THE COMPANY
AND THE GUARANTOR
[Effective Date]
To each of the Lenders parties
to the 364-Day Credit Agreement dated
as of April 22, 1999
among The Pepsi Bottling Group, Inc.,
said Lenders and The Chase Manhattan Bank,
as Agent for said Lenders, and
to The Chase Manhattan Bank, as Agent
The Pepsi Bottling Group, Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section
3.01(g)(v) of the 364-Day Credit Agreement, dated as of April 22, 1999 (the
"Credit Agreement"), among The Pepsi Bottling Group, Inc. (the "Company"),
Bottling Group, LLC, (the "Guarantor"), the Lenders parties thereto and The
Chase Manhattan Bank, as Agent for said Lenders, providing for extensions of
credit to be made by said Lenders to the Company in an aggregate principal
amount at any one time outstanding of up to $250,000,000. Terms defined in the
Credit Agreement are used herein as therein defined.
I am the General Counsel of the Company and have acted as
counsel to the Company and the Guarantor in connection with the Credit
Agreement. In connection with this opinion, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Company and the Guarantor
pursuant to subsections 3.01(g)(i)-(iv) of the Credit Agreement.
(3) The Articles of Incorporation of the Company and all
amendments thereto (the "Charter").
C-1
<PAGE> 77
(4) The by-laws of the Company and all amendments thereto (the
"By-laws").
(5) A certificate of the Secretary of State of Delaware, dated
_______________, 1999, attesting to the continued corporate existence
and good standing of the Company in that State.
(6) The Amended and Restated Limited Liability Company
Agreement of the Guarantor, dated as of March 30, 1999, and all
amendments thereto (the "LLC Agreement").
(7) The Certificate of Formation of the Guarantor and all
amendments thereto (the "Certificate of Formation").
(8) A certificate of the Secretary of State of Delaware dated
_________, 1999, attesting to the continued existence and good standing
of the Guarantor in that State.
(9) Resolutions of the Board of Directors of the Company
adopted on March 30, 1999.
(10) Resolutions of the Managing Directors of the Guarantor
adopted on , 1999.
In addition, I have examined the originals, or copies
certified or otherwise identified to my satisfaction, of such other corporate
records of the Company and the Guarantor, certificates of public officials and
of officers of the Company and the Guarantor, and agreements, instruments and
other documents, as I have deemed necessary as a basis for the opinions
expressed below. I have assumed the due execution and delivery, pursuant to due
authorization, of the Credit Agreement by the Initial Lenders and the Agent.
The opinions expressed below are limited to the law of the
State of New York, the Delaware corporate law, the Federal law of the United
States and, with respect to paragraphs 1 and 2 and clauses (i), (ii) and
(iii)(a) of paragraph 3 only, the Delaware General Corporation Law and the
Delaware Limited Liability Company Act.
Based upon the foregoing and upon such investigation as I have
deemed necessary and subject to the qualifications set forth herein, I am of the
following opinion:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware.
2. The Guarantor is a limited liability company validly
existing and in good standing under the laws of the state of Delaware.
C-2
<PAGE> 78
3. The execution, delivery and performance by the Company and
the Guarantor of the Credit Agreement (i) are within the Company's
corporate, and the Guarantor's limited liability company, powers, (ii)
have been duly authorized by all necessary corporate, or limited
liability company, action, and (iii) do not contravene (a) the Charter
or the Bylaws of the Company or the LLC Agreement or Certificate of
Formation of the Guarantor or (b) to the best of my knowledge (1) any
United States Federal or New York State law, rule or regulation
applicable to the Company or the Guarantor (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or (2) any contractual or legal restriction contained
in any material judgment, decree, mortgage, agreement, indenture or
other instrument to which the Company or the Guarantor is a party. The
Credit Agreement has been duly executed and delivered on behalf of the
Company and the Guarantor.
4. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
of the State of New York or the Federal government of the United States
is required for the due execution, delivery and performance by the
Company or the Guarantor of the Credit Agreement.
5. The Credit Agreement is a valid and binding obligation of
the Company and the Guarantor enforceable against the Company and the
Guarantor in accordance with its terms.
6. To the best of my knowledge and except as disclosed in the
Company's consolidated financial statements, there are no pending or
overtly threatened actions or proceedings against the Company or any of
its Subsidiaries, before any court, governmental agency or arbitrator
that purport to affect the legality, validity, binding effect or
enforceability of the Credit Agreement or that are likely to have a
materially adverse effect upon the financial condition or operations of
the Company or any of its Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) My opinion in paragraph 5 above is subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally.
(b) My opinion in paragraph 5 above is subject to the effect
of general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
(c) I express no opinion as to the effect (if any) of the law
of any jurisdiction (other than the State of New York) wherein any
Lender may be located or wherein en-
C-3
<PAGE> 79
forcement of the Credit Agreement may be sought that limits the rates
of interest that such Lender may charge or collect.
(d) I express no opinion as to the effect of Section 548 of
the United States Bankruptcy Code or any similar provision of State
law.
I am aware that Skadden, Arps, Slate Meagher & Flom LLP will
rely upon the opinions set forth in paragraphs 1, 2 and 3 of this opinion in
rendering their opinion furnished pursuant to Section 3.01 of the Credit
Agreement. In all other respects and for all other purposes, this opinion is
given solely for the benefit of the Agent and the Lenders and may not be relied
upon by any other person or entity without my prior written consent.
Very truly yours,
C-4
<PAGE> 80
EXHIBIT D
FORM OF DESIGNATION LETTER
------------, ----
To The Chase Manhattan Bank
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 364-Day Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 among The Pepsi Bottling Group, Inc. (the
"Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan Bank, as
administrative agent (the "Agent"), and the banks party thereto (the "Initial
Lenders"). Terms defined in the Credit Agreement are used herein as defined
therein.
The Company hereby designates [______________] (the "Borrowing
Subsidiary"), a Subsidiary of the Company and a corporation duly incorporated
under the laws of [_______________] as a Borrower in accordance with Section
2.17 of the Credit Agreement until such designation is terminated in accordance
with said Section 2.17.
The Borrowing Subsidiary hereby accepts the above designation
and hereby expressly and unconditionally accepts the obligations of a Borrower
under the Credit Agreement, adheres to the Credit Agreement and agrees and
confirms that, upon your execution and return to the Company of the enclosed
copy of this letter, such Borrowing Subsidiary shall be a Borrower for purposes
of the Credit Agreement and agrees to be bound by and perform and comply with
the terms and provisions of the Credit Agreement applicable to it as if it had
originally executed the Credit Agreement as a Borrower. The Borrowing Subsidiary
hereby authorizes and empowers the Company to act as its representative and
attorney-in-fact for the purposes of signing documents and giving and receiving
notices (including notices of Borrowing under the Credit Agreement) and other
communications in connection with the Credit Agreement and the transactions
contemplated thereby and for the purposes of modifying or amending any provision
of the Credit Agreement and further agrees that the Agent and each Lender may
conclusively rely on the foregoing authorization.
D-1
<PAGE> 81
The Borrowing Subsidiary represents and warrants that each of
the representations and warranties set forth in Section 4.01 (a) (as if the
reference therein to Delaware were a reference to its jurisdiction of
organization), (b), (c) and (d) of the Credit Agreement are true as if each
reference therein to the Company were a reference to the Borrowing Subsidiary
and as if each reference therein to the Loan Documents were a reference to this
Designation Letter.
The Borrowing Subsidiary hereby agrees that this Designation
Letter and the Credit Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. The Borrowing Subsidiary
hereby submits to the nonexclusive jurisdiction of any New York state court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Designation Letter, the Credit Agreement or for recognition or
enforcement of any judgment. The Borrowing Subsidiary irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The Borrowing Subsidiary further agrees that service
of process in any such action or proceeding brought in New York may be made upon
it by service upon the Borrower at the "Address for Notices" specified below its
name on the signature pages to the Credit Agreement.
Without limiting the foregoing, the Borrowing Subsidiary joins
in the submission, agreements, waivers and consents in Section 8.11 and 8.12 of
the Credit Agreement.
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
[NAME OF BORROWING SUBSIDIARY]
By ___________________________________
Title:
D-2
<PAGE> 82
ACCEPTED
THE CHASE MANHATTAN BANK
as Agent
By ___________________________________
Title:
D-3
<PAGE> 83
EXHIBIT E
FORM OF SUBSTITUTION LETTER
------------, ----
To The Chase Manhattan Bank
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 364-Day Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 among The Pepsi Bottling Group, Inc. (the
"Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan Bank, as
administrative agent (the "Agent"), and the banks party thereto (the "Initial
Lenders"). Terms defined in the Credit Agreement are used herein as defined
therein.
The Company hereby elects to terminate its rights as a
Borrower under the Credit Agreement and designates the Guarantor as the
exclusive Borrower thereunder, in accordance with Section 2.17 of the Credit
Agreement.
The Guarantor hereby accepts the above substitution and hereby
expressly and unconditionally accepts the obligations of the Company under the
Credit Agreement, adheres to the Credit Agreement and agrees and confirms that,
as of the date hereof, the Guarantor shall become a Borrower for purposes of the
Credit Agreement and agrees to be bound by and perform and comply with the terms
and provisions of the Credit Agreement applicable to it as if it had originally
executed the Credit Agreement as the Company.
The Company and the Guarantor hereby represent and warrant to
the Agent and each Lender that, before and after giving effect to this
Substitution Letter, (i) the representations and warranties set forth in Section
4.01 of the Credit Agreement (except the representations set forth in the last
sentence of subsection (e) thereof and in subsection (f) thereof (other than
clause (ii) thereof)) are true and correct in all material respects on the date
hereof and after giving effect to the substitution contemplated hereby as if
made on and as of the date hereof and (ii) no Default has occurred and is
continuing.
E-1
<PAGE> 84
The Company and the Guarantor hereby agree that this
Substitution Letter shall be governed by, and construed in accordance with, the
law of the State of New York. The Company and the Guarantor hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Substitution Letter or the transactions contemplated hereby.
THE PEPSI BOTTLING GROUP, INC.
By
---------------------------
Title:
BOTTLING GROUP, LLC
By
---------------------------
Title:
E-2
<PAGE> 85
EXHIBIT F
FORM OF TERMINATION LETTER
____________, ____
To The Chase Manhattan Bank,
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 364-Day Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 by and among The Pepsi Bottling Group,
Inc. (the "Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan
Bank, as administrative agent, and the banks party thereto. Terms defined in the
Credit Agreement are used herein as defined therein.
The Company hereby terminates the status as a Borrowing
Subsidiary of [_______________], a corporation incorporated under the laws of
[_______________], in accordance with Section 2.17 of the Credit Agreement,
effective as of the date of receipt of this notice by the Agent. The undersigned
hereby represents and warrants that all principal of and interest on any Advance
of the above-referenced Borrowing Subsidiary and all other amounts payable by
such Borrowing Subsidiary pursuant to the Credit Agreement have been paid in
full on or prior to the date hereof. Notwithstanding the foregoing, this
Termination Letter shall not affect any obligation which by the terms of the
Credit Agreement survives termination thereof
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
F-1
<PAGE> 1
EXHIBIT 4.6
CONFORMED COPY
================================================================================
U.S. $250,000,000
5 YEAR CREDIT AGREEMENT
Dated as of April 22, 1999
among
THE PEPSI BOTTLING GROUP, INC.
BOTTLING GROUP, LLC
THE LENDERS NAMED HEREIN
THE CHASE MANHATTAN BANK,
as Agent,
CHASE SECURITIES INC.,
as Arranger
and
NATIONSBANC MONTGOMERY SECURITIES LLC AND
SALOMON SMITH BARNEY INC.
as Co-Syndication Agents
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms.................................................... 1
SECTION 1.02 Computation of Time Periods.............................................. 12
SECTION 1.03 Accounting Terms......................................................... 12
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Revolving Credit Advances............................................ 13
SECTION 2.02 Making the Revolving Credit Advances..................................... 13
SECTION 2.03 The Competitive Bid Advances............................................. 15
SECTION 2.04 Fees .................................................................... 18
SECTION 2.05 Termination, Reduction or Increase of the Commitments ................... 19
SECTION 2.06 Repayment of Revolving Credit Advances; Evidence
of Indebtedness; Extension of Termination Date.................. 22
SECTION 2.07 Interest on Revolving Credit Advances.................................... 23
SECTION 2.08 Interest Rate Determination.............................................. 24
SECTION 2.09 Optional Conversion of Revolving Credit Advances......................... 25
SECTION 2.10 Optional Prepayments of Revolving Credit Advances........................ 25
SECTION 2.11 Increased Costs.......................................................... 26
SECTION 2.12 Illegality............................................................... 27
SECTION 2.13 Payments and Computations................................................ 27
SECTION 2.14 Taxes ................................................................... 28
SECTION 2.15 Sharing of Payments, Etc................................................. 31
SECTION 2.16 Use of Proceeds.......................................................... 31
SECTION 2.17 Borrowings by Borrowing Subsidiaries; Substitution of Borrower .......... 31
SECTION 2.18 Mitigation Obligations................................................... 33
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effectiveness of Sections 2.01 and 2.03.......... 33
SECTION 3.02 Conditions Precedent to Each Revolving Credit Borrowing.................. 35
SECTION 3.03 Conditions Precedent to Each Competitive Bid Borrowing................... 35
SECTION 3.04 Determinations Under Section 3.01........................................ 36
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Loan Parties....................... 36
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants.................................................... 38
SECTION 5.02 Negative Covenants....................................................... 39
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default........................................................ 42
ARTICLE VII
THE AGENT.................................................................................. 44
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc.......................................................... 46
SECTION 8.02 Notices, Etc............................................................. 46
SECTION 8.03 No Waiver; Remedies...................................................... 47
SECTION 8.04 Costs and Expenses....................................................... 47
SECTION 8.05 Right of Set-off......................................................... 48
SECTION 8.06 Binding Effect........................................................... 49
SECTION 8.07 Assignments and Participations........................................... 49
SECTION 8.08 Confidentiality.......................................................... 51
SECTION 8.09 Governing Law............................................................ 52
SECTION 8.10 Execution in Counterparts................................................ 52
SECTION 8.11 Jurisdiction, Etc........................................................ 52
SECTION 8.12 WAIVER OF JURY TRIAL..................................................... 52
ARTICLE IX
COMPANY GUARANTEE
SECTION 9.01 Guarantee................................................................ 53
SECTION 9.02 Obligations Unconditional................................................ 53
SECTION 9.03 Reinstatement............................................................ 54
SECTION 9.04 Subrogation.............................................................. 54
SECTION 9.05 Remedies ................................................................ 54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 9.06 Continuing Guarantee..................................................... 54
ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.01 Subsidiary Guarantee..................................................... 54
SECTION 10.02 Limitation of Guarantor's Liability...................................... 56
</TABLE>
SCHEDULE I
SCHEDULE 2 APPLICABLE MARGIN
EXHIBIT A-1 FORM OF NOTICE OF REVOLVING CREDIT BORROWING
EXHIBIT A-2 FORM OF NOTICE OF COMPETITIVE BID BORROWING
EXHIBIT A-3 FORM OF EXTENSION AGREEMENT
EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT C FORM OF OPINION OF COUNSEL FOR THE COMPANY AND THE GUARANTOR
EXHIBIT D FORM OF DESIGNATION LETTER
EXHIBIT E FORM OF SUBSTITUTION LETTER
EXHIBIT F FORM OF TERMINATION LETTER
iii
<PAGE> 5
CREDIT AGREEMENT
Dated as of April 22, 1999
THE PEPSI BOTTLING GROUP, INC., a Delaware corporation (the
"Company"), BOTTLING GROUP, LLC, a Delaware limited liability company (the
"Guarantor"), the banks, financial institutions and other institutional lenders
(the "Initial Lenders") listed on the signature pages hereof, and THE CHASE
MANHATTAN BANK ("Chase"), as administrative agent (in such capacity, the
"Agent") for the Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the Voting
Stock of such Person or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Agent's Account " means the account of the Agent maintained
by the Agent at Chase with its office at 270 Park Avenue, New York, New York
10017.
"Alternate Covenant Date" means any day on which the Index
Debt of Pepsi shall be rated less than A- by S&P or less than A3 by Moody's.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of the Base Rate
Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Agent as Applicable Lending Office with
respect to such Competitive Bid Advance.
"Applicable Margin" means with respect to any Eurodollar Rate
Advance or with respect to the facility fees payable hereunder, as the case may
be, for any day, the applicable rate
<PAGE> 6
per annum set forth in Schedule 2; provided, that, for purposes of calculating
the Applicable Margin, (i) if either Moody's or S&P shall not have in effect a
rating for the Company, then the Applicable Margin shall be determined based on
the highest applicable facility fee or LIBOR Margin in Schedule 2, (ii) if the
ratings established or deemed to have been established by Moody's and S&P for
the Company shall fall within different categories, the Applicable Margin shall
be based on the higher of the two ratings unless one of the two ratings is two
or more categories lower than the other, in which case the Applicable Margin
shall be determined by reference to the category next below that of the higher
of the two ratings; and (iii) if the ratings established or deemed to have been
established by Moody's and S&P for the Company shall be changed (other than as a
result of a change in the rating system of Moody's or S&P), such change shall be
effective as of the date on which it is first announced by the applicable rating
agency, irrespective of when notice of such change shall have been furnished by
the Borrower to the Agent and the Lenders. Each change in the Applicable Margin
shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such
change.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit B hereto.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal to
the higher of:
(a) the rate of interest announced publicly by Chase in New
York, New York, from time to time, as Chase's base rate; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a).
"Borrowers" means, at any time, collectively, the Company
unless the Substitution Date has occurred pursuant to Section 2.17, each
Borrowing Subsidiary and, on and after the Substitution Date has occurred
pursuant to Section 2.17, the Guarantor.
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
2
<PAGE> 7
"Borrowing Subsidiary" means any Subsidiary of the Company, as
to which a Designation Letter has been delivered to the Agent and as to which a
Termination Letter has not been delivered to the Agent in accordance with
Section 2.17.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Change of Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than Pepsi, of shares representing more than 25% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of the
Company; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Company by Persons who were neither (i) nominated
by the board of directors of the Company nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Company
by any Person or group other than Pepsi.
"Commitment" has the meaning specified in Section 2.01.
"Competitive Bid Advance" means an advance by a Lender to a
Borrower as part of a Competitive Bid Borrowing resulting from the auction
bidding procedure described in Section 2.03 and refers to a Fixed Rate Advance
or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose offer to
make one or more Competitive Bid Advances as part of such borrowing has been
accepted under the auction bidding procedure described in Section 2.03.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Confidential Information" means information that the Company
furnishes to the Agent or any Lender in a writing designated as confidential,
but does not include any such information that is or becomes generally available
to the public or that is or becomes rightfully available to the Agent or such
Lender from a source other than the Company.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period plus, without duplication and to the extent reflected as
a charge in the statement of such Consolidated Net Income for such period, the
sum of (a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount with respect to Debt (including the Advances), (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not
3
<PAGE> 8
limited to, goodwill) and organization costs, (e) any extraordinary expenses or
losses (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, losses on sales of
assets outside of the ordinary course of business), and (f) any other non-cash
charges, and minus, to the extent included in the statement of such Consolidated
Net Income for such period, the sum of (a) any extraordinary income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (b) any other non-cash
income, all as determined on a Consolidated basis; in each case exclusive of the
cumulative effect of foreign currency gains or losses. For the purposes of
calculating Consolidated EBITDA for any period pursuant to any determination of
the Consolidated Leverage Ratio, if during such period the Company or any
Subsidiary, including the Guarantor, shall have made an acquisition or incurred
or assumed (without duplication of any Debt incurred to refinance such assumed
Debt) any Debt, Consolidated EBITDA for such period shall be calculated after
giving pro forma effect thereto as if such acquisition occurred and such Debt
had been incurred or assumed or refinanced on the first day of such period.
"Consolidated Leverage Ratio" means, as at the last day of any
Fiscal Quarter, the ratio of (a) Consolidated Total Debt on such day to (b)
Consolidated EBITDA for the four consecutive fiscal quarters then ended (taken
as one accounting period).
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted
Subsidiaries, including the Guarantor, determined on a consolidated basis in
accordance with GAAP, before deduction of any minority interests in the
Guarantor and excluding the cumulative effect of any foreign currency gains or
losses.
"Consolidated Net Tangible Assets" means the total assets of
the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization, and other valuation reserves), except to the extent resulting from
write-ups of capital assets (other than writeups in connection with accounting
for acquisitions, in accordance with GAAP), less all current liabilities
(excluding intercompany liabilities) and all intangible assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recent
Consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in accordance with GAAP, but before deduction of any minority interests
in the Guarantor and exclusive of any foreign currency translation adjustments.
"Consolidated Net Worth" means, as of any date of
determination, all items which in conformity with GAAP would be included under
shareholders' equity on a Consolidated balance sheet of the Company and its
Subsidiaries, including the Guarantor, at such date plus amounts representing
mandatorily redeemable preferred securities issued by Subsidiaries of the
Company, including the Guarantor, but before deduction of any minority interests
in the Guarantor and exclusive of any foreign currency translation adjustments.
4
<PAGE> 9
"Consolidated Total Debt" means, at any date (i) the aggregate
principal amount of all Debt of the Company and its Subsidiaries, including the
Guarantor minus (ii) the aggregate amount (not in excess of $500,000,000) of all
cash and cash equivalents of the Company and its Subsidiaries, in each case at
such date and determined on a Consolidated basis in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving Credit
Advances of the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than trade
accounts payable arising in the ordinary course of business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all obligations (other than trade accounts payable
arising in the ordinary course of business) of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all Debt of others referred to in clauses (a)
through (c) above or clause (g) below guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through (i) an agreement (1) to pay or purchase such Debt or to advance
or supply funds for the payment or purchase of such Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such Debt or
to assure the holder of such Debt against loss, (3) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (4) otherwise to assure a creditor against loss, or (ii) a
standby letter of credit and (g) all Debt referred to in clauses (a) through (f)
above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Debt.
"Debt to Capitalization Ratio" means at any time the ratio of
(x) Consolidated Total Debt to (y) the sum of (i) Consolidated Total Debt plus
(ii) Consolidated Net Worth.
5
<PAGE> 10
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Designation Letter" has the meaning specified in Section
2.17(a).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule 1 hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such Lender may
from time to time specify to the Company and the Agent.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United States,
or any State thereof, and having total assets in excess of $15,000,000,000 and a
combined capital and surplus of at least $1,000,000,000; (iv) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having total assets in excess of $15,000,000,000 and a
combined capital and surplus of at least $1,000,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development or has concluded special
lending arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow or of the Cayman Islands, or a political
subdivision of any such country, and having total assets in excess of
$l5,000,000,000 and a combined capital and surplus of at least $1,000,000,000 so
long as such bank is acting through a branch or agency located in the United
States or in the country in which it is organized or another country that is
described in this clause (v); (vi) the central bank of any country that is a
member of the Organization for Economic Cooperation and Development; provided,
however, that each Person described in clauses (ii) through (vi) shall have a
short term public debt rating of not less than A by Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. or shall be approved by the Company;
and (vii) any other Person approved by the Company, such approval not to be
unreasonably withheld or delayed; provided, however, that neither the Company
nor an Affiliate of the Company shall qualify as an Eligible Assignee.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial or agency interpretation, policy or guidance relating to the
environment, health, safety or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule 1 hereto or in the Assignment and Acceptance pursuant to
which it became a Lender (or, if no such office is
6
<PAGE> 11
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Company and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit Borrowing,
an interest rate per annum appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to Dollar deposits in the London interbank market) as of 11:00 A.M. (London
time) on the date two Business Days prior to the first day of such Interest
Period as the rate for Dollar deposits having a term comparable to such Interest
Period, or in the event such offered rate is not available from said Page 3750,
the average (rounded to the nearer whole multiple of 1/16 of 1% per annum, if
such average is not such a multiple) of the rate per annum at which deposits in
U.S. dollars are offered by the principal office of each of the Reference Banks
in London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to such Reference Bank's Eurodollar Rate Advance
comprising part of such Revolving Credit Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period. If the
Eurodollar Rate does not appear on said Page 3750 (or any successor page), the
Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing shall be determined by
the Agent on the basis of applicable rates furnished to and received by the
Agent from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(b).
"Events of Default" has the meaning specified in Section 6.01.
"Extension Agreement" means an Extension Agreement
substantially in the form contained in Exhibit A-3 hereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Quarter" means a period of 13 or (or 14) weeks treated
by the Company as a fiscal quarter.
7
<PAGE> 12
"Fiscal Year" means the period of 52 (or 53) weeks ending on
the last Saturday of any calendar year and treated by the Company as its fiscal
year.
"5-Year Facility" means the 5 Year Credit Agreement dated as
of the date hereof among each of the parties hereto.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" means generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited Consolidated financial statements of the Borrower and its
Subsidiaries delivered to the Lenders.
"Granting Lender" has the meaning specified in Section
8.07(e).
"Guaranteed Party" has the meaning specified in Section 9.01.
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials, radon gas and any other chemicals, materials or substances
designated, classified or regulated as being "hazardous" or "toxic", or words of
similar import, under any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, judgment, decree or judicial or agency
interpretation, policy or guidance.
"Index Debt" of any Person means senior, unsecured, long term
indebtedness for borrowed money of such Person that is not guaranteed by any
other Person (other than, in the case of the Company, the Guarantor) or subject
to any other credit enhancement.
"Information Memorandum" means the information memorandum
dated March 1999 used by the Agent in connection with the syndication of the
Commitments.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing, the period commencing on
the date of such Eurodollar Rate Advance or the date of the Conversion of any
Base Rate Advance into such Eurodollar Rate Advance and ending on the last day
of the period selected by the Company pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period selected by
the Company pursuant to the provisions below. The duration of each such Interest
Period shall be one, two, three, six or, to the extent available from all the
Lenders, nine [or twelve] months, as the Company may, upon notice received by
the Agent not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided, however,
that:
8
<PAGE> 13
(i) the Company may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving Credit Borrowing
shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, however, that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically corresponding
day in the calendar month that succeeds such initial calendar month by the
number of months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such succeeding calendar
month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Sections 2.05(c) or 8.07.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor.
"Loan Documents" means, collectively, this Agreement, each
promissory note issued thereunder, each Designation Letter and each Termination
Letter.
"Loan Party" has the meaning specified in Section 4.01.
"Master Bottling Agreement" means the Master Bottling
Agreement dated March 30, 1999, between the Company and Pepsi or any successor
or replacement agreement that confers substantially the same benefits on the
Company as the Master Bottling Agreement conferred on the date hereof.
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"Material Adverse Change" means any material adverse change in
the financial condition, operations or properties of the Company or the Company
and its Subsidiaries (including the Guarantor) taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the financial condition, operations or properties of the Company and its
Subsidiaries (including the Guarantor) taken as a whole, (b) the rights and
remedies of the Agent or any Lender under this Agreement or any promissary note
or (c) the ability of the Company to perform its obligations under this
Agreement or any promissary note.
"Material Subsidiary" means each Subsidiary of the Company
which is a "significant subsidiary" as that term is defined in Rule 1-02(w) of
the Regulation S-X under the Securities Act of 1933, as such rule is in effect
as of the date hereof.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto.
"New Lender" means, for purposes of Section 2.05(c), an
Eligible Assignee (which may be a Lender) selected by the Company with (in the
case of a New Lender that is not already a Lender) prior consultation with the
Agent.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.13(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Pepsi" means PepsiCo, Inc., a North Carolina corporation.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Principal Property" means any single manufacturing or
processing plant, office building, or warehouse owned or leased by the Company
or a Restricted Subsidiary other than a plant, warehouse, office building, or
portion thereof which, in the opinion of the Company's Board of Directors, is
not of material importance to the business conducted by the Company and its
Restricted Subsidiaries as an entirety.
"Rating" means the rating of the Company's Index Debt by S&P
or Moody's, as the case may be.
"Reference Banks" means Chase, Citibank N.A. and Bank of
America (and any successors thereof).
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"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Register" has the meaning specified in Section 8.07(d).
"Required Lenders" means at any time Lenders owed more than
50% of the then aggregate unpaid principal amount of the Revolving Credit
Advances (excluding Competitive Bid Advances) owing to Lenders, or, if no such
principal amount is then outstanding, Lenders having more than 50% of the
aggregate amount of the Commitments.
"Restricted Subsidiary" means at any time any Subsidiary of
the Company except a Subsidiary which is at the time an Unrestricted Subsidiary.
"Revolving Credit Advance" means an advance by a Lender to a
Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of
Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of the
Lenders pursuant to Section 2.01.
"S&P" means Standard & Poors Rating Services or any successor
thereto.
"Short Term Facilities" means (i) the $750,000,000 Series A
Senior Notes due 2000 issued pursuant to the Indenture dated as of February 25,
1999 between Pepsi and The Chase Manhattan Bank, as Trustee, as modified by the
First Supplemental Indenture dated as of February 26, 1999 among the Company,
the Guarantor, Pepsi and The Chase Manhattan Bank, as Trustee, and (ii) the
$2,500,000,000 Series B Senior Notes due 2000 issued pursuant to the Indenture
dated as of March 5, 1999 among the Company, the Guarantor and The Chase
Manhattan Bank, as Trustee.
"SPC" has the meaning specified in Section 8.07(e).
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership or
joint venture or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries or by one or more of such Person's
other Subsidiaries.
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<PAGE> 16
"Substitution Date" has the meaning specified in Section
2.17(c).
"Substitution Letter" has the meaning specified in Section
2.17(c).
"Termination Date" means April 22, 2004 or, if earlier, the
date of termination in whole of the Commitments pursuant to Section 2.05(a) or
6.01 or, in the case of any Lender whose Commitment is extended pursuant to
Section 2.06(b), the date to which such Commitment is extended; provided in each
case that if any such date is not a Business Day, the relevant Termination Date
of such Lender shall be the immediately preceding Business Day.
"Termination Letter" has the meaning specified in Section
2.17(b).
"364 Day Facility" means the 364 Day Credit Agreement dated as
of the date hereof among each of the parties hereto.
"Type" has the meaning specified in the definition of
"Revolving Credit Advance."
"Unrestricted Subsidiary" means any Subsidiary of the Company
(not at the time designated a Restricted Subsidiary) other than the Guarantor
(i) the major part of whose business consists of finance, banking, credit,
leasing, insurance, financial services, or other similar operations, or any
continuation thereof, (ii) substantially all the assets of which consist of the
capital stock of one or more such Subsidiaries, or (iii) designated as such by
the Company's Board of Directors. Any Subsidiary designated as a Restricted
Subsidiary may be designated as an Unrestricted Subsidiary.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar actions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
SECTION 1.02 Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03 Accounting Terms. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP; provided that,
if the Company notifies the Agent that the Company wishes to amend any
provisions hereof to eliminate the effect of any change in GAAP (or if the Agent
notifies the Company that the Required Lenders wish to amend any provision
hereof for such purpose), then such provision shall be applied on the basis of
GAAP in effect immediately
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<PAGE> 17
before the relevant change in GAAP became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory to the Company
and the Required Lenders.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Credit Advances to the Company and any Borrowing Subsidiary from time
to time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
the amount set forth opposite such Lender's name on the signature pages hereof
or, if such Lender has entered into any Assignment and Acceptance, set forth for
such Lender in the Register maintained by the Agent pursuant to Section 8.07(c),
as such amount may be reduced pursuant to Section 2.05(a) or increased pursuant
to Section 2.05(c) (such Lender's "Commitment"), provided that the aggregate
amount of the Commitments of the Lenders shall be deemed used from time to time
to the extent of the aggregate amount of the Competitive Bid Advances then
outstanding and such deemed use of the aggregate amount of the Commitments shall
be allocated among the Lenders ratably according to their respective Commitments
(such deemed use of the aggregate amount of the Commitments being a "Competitive
Bid Reduction"). Each Revolving Credit Borrowing shall be in an aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if
less, (i) an aggregate amount equal to the amount by which the aggregate amount
of a proposed Competitive Bid Borrowing requested by the Company exceeds the
aggregate amount of Competitive Bid Advances offered to be made by the Lenders
and accepted by the Company in respect of such Competitive Bid Borrowing, if
such Competitive Bid Borrowing is made on the same date as such Revolving Credit
Borrowing or (ii) the aggregate amount of the unused Commitments, after giving
effect to any Competitive Bid Reductions then in effect) and shall consist of
Revolving Credit Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment, each Borrower may borrow under this Section 2.01, prepay
pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02 Making the Revolving Credit Advances.
(a) Each Revolving Credit Borrowing shall be made on notice,
given not later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Revolving Credit Borrowing in the case of a
Revolving Credit Borrowing consisting of Eurodollar Rate Advances, or the date
of the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Base Rate Advances, by the Company (on its own behalf
and on behalf of any Borrowing Subsidiary) to the Agent, which shall give to
each Lender prompt notice thereof by telecopier or telex. Each such notice of a
Revolving Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be
by telecopier or telex, confirmed promptly
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<PAGE> 18
in writing, in substantially the form of Exhibit A-1 hereto, specifying therein
the requested (i) date of such Revolving Credit Borrowing, (ii) Type of Advances
comprising such Revolving Credit Borrowing, (iii) aggregate amount of such
Revolving Credit Borrowing, (iv) in the case of a Revolving Credit Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Revolving Credit Advance and (v) the name of the relevant Borrower (which shall
be the Company or a Borrowing Subsidiary). Each Lender shall, before 11:00 A.M.
(New York City time), in the case of a Revolving Credit Borrowing consisting of
Eurodollar Rate Advances, or before 1:00 P.M. (New York City time), in the case
of a Revolving Credit Borrowing consisting of Base Rate Advances, on the date of
such Revolving Credit Borrowing, make available for the account of its
Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such same day funds
available to the relevant Borrower at such Borrower's account at the Agent's
address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Company may not select Eurodollar Rate Advances for any
Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 and
(ii) the Eurodollar Rate Advances may not be outstanding as part of more than
six separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be
irrevocable and binding on the relevant Borrower. In the case of any Revolving
Credit Borrowing that the related Notice of Revolving Credit Borrowing specifies
is to be comprised of Eurodollar Rate Advances, the Company shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Revolving Credit
Advance to be made by such Lender as part of such Revolving Credit Borrowing
when such Revolving Credit Advance, as a result of such failure, is not made on
such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's ratable portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Revolving Credit Borrowing in
accordance with subsection (a) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the relevant Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Agent, such Lender and such
Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
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<PAGE> 19
such amount is made available to such Borrower until the date such amount is
repaid to the Agent, at (i) in the case of a Borrower, the interest rate
applicable at the time to Revolving Credit Advances comprising such Revolving
Credit Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Revolving Credit Advance as part of such
Revolving Credit Borrowing for purposes of this Agreement and shall be made
available in same day funds to the relevant Borrower's account at the Agent's
address referred to in Section 8.02.
(e) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03 The Competitive Bid Advances.
(a) Each Lender severally agrees that each Borrower may make
Competitive Bid Borrowings under this Section 2.03 from time to time on any
Business Day during the period from the date hereof until the date occurring 7
days prior to the Termination Date in the manner set forth below; provided that,
following the making of each Competitive Bid Borrowing, the aggregate amount of
the Advances then outstanding shall not exceed the aggregate amount of the
Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction).
(i) The Company (on its own behalf and on behalf of any
Borrowing Subsidiary) may request a Competitive Bid Borrowing under this Section
2.03 by delivering to the Agent, by telecopier or telex, confirmed promptly in
writing, a notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid
Borrowing"), in substantially the form of Exhibit A-2 hereto, specifying therein
(u) the date of such proposed Competitive Bid Borrowing, (v) the aggregate
amount of such proposed Competitive Bid Borrowing, (w) the maturity date for
repayment of each Competitive Bid Advance to be made as part of such Competitive
Bid Borrowing (which maturity date may not be earlier than the date occurring 7
days after the date of such Competitive Bid Borrowing or later than the
Termination Date), (x) the interest payment date or dates relating thereto, (y)
the name of the Borrower, and (z) any other terms to be applicable to such
Competitive Bid Borrowing, not later than 10:00 A.M. (New York City time) (A) at
least one Business Day prior to the date of the proposed Competitive Bid
Borrowing, if the Company shall specify in the Notice of Competitive Bid
Borrowing that the rates of interest to be offered by the Lenders shall be fixed
rates per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least four
Business Days prior to the date of the proposed Competitive Bid Borrowing, if
the Company shall instead specify in the Notice of Competitive Bid Borrowing
another basis to be used by the Lenders in determining the rates of interest to
be offered by them (the Advances comprising such Competitive Bid Borrowing being
referred to herein as "LIBO Rate Advances"). The Agent shall in turn promptly
notify
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<PAGE> 20
each Lender of each request for a Competitive Bid Borrowing received by it from
the Company by sending such Lender a copy of the related Notice of Competitive
Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances to the
relevant Borrower as part of such proposed Competitive Bid Borrowing at a rate
or rates of interest specified by such Lender in its sole discretion, by
notifying the Agent (which shall give prompt notice thereof to the Company),
before 10:00 A.M. (New York City time) on the date of such proposed Competitive
Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed
Rate Advances and three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of LIBO Rate Advances, of the minimum amount and maximum amount of each
Competitive Bid Advance which such Lender would be willing to make as part of
such proposed Competitive Bid Borrowing (which amounts may, subject to the
proviso to the first sentence of this Section 2.03(a), exceed such Lender's
Commitment, if any), the rate or rates of interest therefor and such Lender's
Applicable Lending Office with respect to such Competitive Bid Advance; provided
that if the Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Company of such offer before
9:00 A.M. (New York City time) on the date on which notice of such election is
to be given to the Agent by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify the Agent, before 10:00 A.M.
(New York City time) on the date on which notice of such election is to be given
to the Agent by the other Lenders, and such Lender shall not be obligated to,
and shall not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice shall not
cause such Lender to be obligated to make any Competitive Bid Advance as part of
such proposed Competitive Bid Borrowing.
(iii) The Company shall, in turn, before 11:00 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of Fixed Rate Advances and before 1:00
P.M. (New York City time) three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the
Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender
or Lenders pursuant to paragraph (ii) above, by giving notice
to the Agent of the amount of each Competitive Bid Advance
(which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified
to the Company by the Agent on behalf of such Lender for such
Competitive Bid Advance pursuant to paragraph (ii) above) to
be made by each Lender as part of such Competitive Bid
Borrowing, and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving the Agent notice to
that effect. If the
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Company accepts any offers made by Lenders pursuant to
paragraph (ii) above, such offers shall be accepted in the
order of the lowest to highest interest rates or, if two or
more Lenders offer to make Competitive Bid Advances at the
same interest rate, such offers, if any, shall be accepted in
proportion to the amount offered by each such Lender at such
interest rate notwithstanding any minimum specified by such
Lender in its notice given pursuant to Section 2.03(a)(ii).
The Company may not accept offers in excess of the amount
specified in accordance with paragraph (i)(v) above.
(iv) If the Company notifies the Agent that such Competitive
Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent shall
give prompt notice thereof to the Lenders and such Competitive Bid Borrowing
shall not be made.
(v) If the Company accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
turn promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above, of the date and aggregate amount of such Competitive Bid
Borrowing and whether or not any offer or offers made by such Lender pursuant to
paragraph (ii) above have been accepted by the Company, (B) each Lender that is
to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of
the amount of each Competitive Bid Advance to be made by such Lender as part of
such Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt,
that the Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing shall, before
12:00 noon (New York City time) on the date of such Competitive Bid Borrowing
specified in the notice received from the Agent pursuant to clause (A) of the
preceding sentence or any later time when such Lender shall have received notice
from the Agent pursuant to clause (C) of the preceding sentence, make available
for the account of its Applicable Lending Office to the Agent at the Agent's
Account, in same day funds, such Lender's portion of such Competitive Bid
Borrowing. Upon fulfillment of the applicable conditions set forth in Article
III and after receipt by the Agent of such funds, the Agent will make such same
day funds available to the relevant Borrower at such Borrower's account at the
Agent's address referred to in Section 8.02. Promptly after each Competitive Bid
Borrowing the Agent will notify each Lender of the amount of the Competitive Bid
Borrowing, the consequent Competitive Bid Reduction and the dates upon which
such Competitive Bid Reduction commenced and will terminate.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Competitive Bid Borrowing, the Company shall
be in compliance with the limitation set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, each Borrower may from time to time borrow under this Section
2.03, repay or prepay pursuant to
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subsection (d) below, and reborrow under this Section 2.03, provided that a
Competitive Bid Borrowing shall not be made within three Business Days of the
date of any other Competitive Bid Borrowing.
(d) Each Borrower shall repay to the Agent for the account of
each Lender that has made a Competitive Bid Advance to such Borrower, on the
maturity date of such Competitive Bid Advance (such maturity date being that
specified by the Company for repayment of such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and provided in the promissory note, if any, evidencing such
Competitive Bid Advance), the then unpaid principal amount of such Competitive
Bid Advance. No Borrower shall have any right to prepay any principal amount of
any Competitive Bid Advance unless (x) such Borrower obtains the prior written
consent of the Lender which made such Competitive Bid Advance, or (y), such
prepayment is made on the terms, specified by the Company for such Competitive
Bid Advance in the related Notice of Competitive Bid Borrowing delivered
pursuant to subsection (a)(i) above and set forth in the promissory note, if
any, evidencing such Competitive Bid Advance.
(e) Each Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance to such Borrower from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive Bid
Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by such Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the promissory
note, if any, evidencing such Competitive Bid Advance.
(f) At its option, the Company (on its own behalf and on
behalf of any Borrower) may request a Competitive Bid Borrowing directly from
the Lenders; provided that it follows the procedures set forth in this Section
2.03 and promptly delivers, by telecopier or telex, a copy of the Notice of
Competitive Bid Borrowing and notice in writing of the results of such request
to the Agent.
(g) The indebtedness of each Borrower resulting from each
Competitive Bid Advance made to such Borrower as part of a Competitive Bid
Borrowing shall, if requested by the applicable Lender, be evidenced by a
separate promissory note of such Borrower payable to the order of the Lender
making such Competitive Bid Advance.
SECTION 2.04 Fees.
(a) Facility Fee. The Company agrees to pay to the Agent for
the account of each Lender a facility fee on the aggregate amount of such
Lender's Commitment irrespective of usage from the Effective Date in the case of
each Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each
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other Lender until the Termination Date (on a daily basis) at the Applicable
Margin, payable in arrears quarterly on the last day of each March, June,
September and December, commencing June 30, 1999, and ending on the Termination
Date.
(b) Agent's Fees. The Company shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Company and
the Agent.
(c) Usage Fees. The Company shall pay to the Agent for the
account of each Lender, a usage fee of 10 basis points per annum on the amount
of such Lender's Commitment for each day on which the outstanding amount of the
Advances exceeds 33 1/3% of the aggregate Commitments from the Effective Date in
the case of each Initial Lender and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender in the case of
each other Lender until the Termination Date (on a daily basis) payable in
arrears quarterly on the last day of each March, June, September and December
commencing June 30, 1999 and ending on the Termination Date.
SECTION 2.05 Termination, Reduction or Increase of the
Commitments.
(a) The Company shall have the right, upon at least three
Business Days' notice to the Agent, to terminate in whole or reduce ratably in
part the unused portions of the respective Commitments of the Lenders, provided
that each partial reduction shall be in the aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and provided further that (x)
the aggregate amount of the Commitments of the Lenders shall not be reduced to
an amount that is less than the aggregate principal amount of the Competitive
Bid Advances then outstanding, and (y) once terminated, a portion of a
Commitment shall not be reinstated except pursuant to Section 2.05(c).
(b) If any Lender shall make a demand under Section 2.11 or
2.14 or if the obligation of any Lender to make Eurodollar Rate Advances shall
have been suspended pursuant to Section 2.12, the Company shall have the right,
upon at least ten Business Days' notice, to terminate in full the Commitment of
such Lender or to demand that such Lender assign to one or more Persons all of
its rights and obligations under this Agreement in accordance with Section 8.07.
If the Company shall elect to terminate in full the Commitment of any Lender
pursuant to this Section 2.05(b), the Company shall pay to such Lender, on the
effective date of such Commitment termination, an amount equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, whereupon such Lender
shall cease to be a party hereto.
(c) (i) Not more than once in any calendar year, the Company
may propose to increase the aggregate amount of the Commitments by an aggregate
amount of $25,000,000 or an integral multiple of $1,000,000 in excess thereof (a
"Proposed Aggregate Commitment Increase") in the manner set forth below,
provided that:
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(1) no Default shall have occurred and be continuing either as
of the date on which the Company shall notify the Agent of its request
to increase the aggregate amount of the Commitments or as of the
related Increase Date (as hereinafter defined); and
(2) after giving effect to any such increase, the aggregate
amount of the Commitments shall not exceed $500,000,000.
(ii) The Company may request an increase in the aggregate
amount of the Commitments by delivering to the Agent a notice (an "Increase
Notice"; the date of delivery thereof to the Agent being the "Increase Notice
Date") specifying (1) the Proposed Aggregate Commitment Increase, (2) the
proposed date (the "Increase Date") on which the Commitments would be so
increased (which Increase Date may not be fewer than 30 nor more than 60 days
after the Increase Notice Date) and (3) the New Lenders, if any, to whom the
Company desires to offer the opportunity to commit to all or a portion of the
Proposed Aggregate Commitment Increase. The Agent shall in turn promptly notify
each Lender of the Company's request by sending each Lender a copy of such
notice.
(iii) Not later than the date five days after the Increase
Notice Date, the Agent shall notify each New Lender, if any, identified in the
related Increase Notice of the opportunity to commit to all or any portion of
the Proposed Aggregate Commitment Increase. Each such New Lender may irrevocably
commit to all or a portion of the Proposed Aggregate Commitment Increase (such
New Lender's "Proposed New Commitment") by notifying the Agent (which shall give
prompt notice thereof to the Company) before 11:00 A.M. (New York City time) on
the date that is 10 days after the Increase Notice Date; provided that:
(1) the Proposed New Commitment of each New Lender shall be in
an amount not less than $25,000,000; and
(2) each New Lender that submits a Proposed New Commitment
shall enter into an agreement in form and substance satisfactory to the
Company and the Agent pursuant to which such New Lender shall undertake
a Commitment (and, if any such New Lender is already a Lender, its
Commitment shall be in addition to such Lender's Commitment hereunder
on such date), and shall pay to the Agent a processing and recordation
fee of $3,500.
(iv) If the aggregate Proposed New Commitments of all of the
New Lenders shall be less than the Proposed Aggregate Commitment Increase, then
(unless the Company otherwise requests) the Agent shall, on or prior to the date
that is 15 days after the Increase Notice Date, notify each Lender of the
opportunity to so commit to all or any portion of the Proposed Aggregate
Commitment Increase not committed to by New Lenders pursuant to Section
2.05(c)(iii). Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to commit to all or a portion of such remainder (such Lender's
"Proposed Increased Commitment") by notifying the
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Agent (which shall give prompt notice thereof to the Company) no later than
11:00 A.M. (New York City time) on the date five days before the Increase Date.
(v) If the aggregate amount of Proposed New Commitments and
Proposed Increased Commitments (such aggregate amount, the "Total Committed
Increase") equals or exceeds $25,000,000, then, subject to the conditions set
forth in Section 2.05(c)(i):
(1) effective on and as of the Increase Date, the aggregate
amount of the Commitments shall be increased by the lesser of the
proposed aggregate Committed Increase and the Total Committed Increase
and shall be allocated among the New Lenders and the Lenders as
provided in Section 2.05(c)(vi); and
(2) on the Increase Date, if any Revolving Loans are then
outstanding, the Company shall borrow Revolving Loans from all or
certain of the Lenders and/or (subject to compliance by the Company
with Section 8.04(c)) prepay Revolving Loans of all or certain of the
Lenders such that, after giving effect thereto, the Revolving Loans
(including, without limitation, the Types and Interest Periods thereof)
shall be held by the Lenders (including for such purposes New Lenders)
ratably in accordance with their respective Commitments.
If the Total Committed Increase is less than $25,000,000, then the aggregate
amount of the Commitments shall not be changed pursuant to this Section 2.05(c).
(vi) The Total Committed Increase shall be allocated among New
Lenders having Proposed New Commitments and Lenders having Proposed Increased
Commitments as follows:
(1) If the Total Committed Increase shall be at least
$25,000,000 and less than or equal to the Proposed Aggregate Commitment
Increase, then (x) the initial Commitment of each New Lender shall be
such New Lender's Proposed New Commitment and (y) the Commitment of
each Lender shall be increased by such Lender's Proposed Increased
Commitment.
(2) If the Total Committed Increase shall be greater than the
Proposed Aggregate Commitment Increase, then the Total Committed
Increase shall be allocated:
(x) first to New Lenders (to the extent of their
respective Proposed New Commitments) in such a manner
as the Company shall agree; and
(y) then to Lenders on a pro rata basis based on
the ratio of each Lender's Proposed Increased
Commitment (if any) to the aggregate amount of the
Proposed Increased Commitments of all of the Lenders.
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(vii) No increase in the Commitments contemplated hereby shall
become effective until the Agent shall have received (x) promissory notes in
respect of the Revolving Loans payable to each New Lender and each other Lender
whose Commitment is being increased that, in either case, shall have requested
such promissory notes at least two Business Days prior to the Increase Date, and
(y) evidence satisfactory to the Agent (including an update of the opinion of
counsel provided pursuant to Section 3.01 (g)(iv)) that such increases in the
Commitments, and borrowings thereunder, have been duly authorized.
SECTION 2.06 Repayment of Revolving Credit Advances; Evidence
of Indebtedness; Extension of Termination Date.
(a) The Company and each Borrower shall repay to the Agent for
the ratable account of the Lenders on the Termination Date the aggregate
principal amount of the Revolving Credit Advances then outstanding.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrowers to
such Lender resulting from each Advance made by such Lender, including the
amounts of principal and interest payable and paid to such Lender from time to
time hereunder. The Agent shall maintain accounts in which it shall record (i)
the amount of each Advance made hereunder, the Type thereof and the Interest
Period, if any, applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder for
the account of the Lenders and each Lender's share thereof. The entries made in
the accounts maintained pursuant to this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of any Lender or the Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of any Borrower to repay
the Advances in accordance with the terms of this Agreement. Any Lender may
request that Advances made by it be evidenced by a promissory note. In such
event, the applicable Borrower shall prepare, execute and deliver to such Lender
a promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) and in a form approved by the
Agent. Thereafter, the Advances evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section 8.07)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).
(c) The Company may by written notice to the Agent, not more
than 90 nor less than 60 days prior to the Termination Date then in effect (such
Termination Date following such notice, the "Extension Date"), request that the
Termination Date then in effect be extended for a further period of one year.
Such request shall be irrevocable and binding upon the Company. The Agent shall
promptly notify each Lender of such request. If a Lender agrees, in its
individual and sole discretion, to so extend its Commitment (an "Extending
Lender"), it will notify the Agent, in writing, of its decision to do so not
more than 30 nor less than 20 days before
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<PAGE> 27
the Termination Date then in effect. The Commitment of any Lender that fails to
accept (or fails to respond to) the Company's request for extension of the
Termination Date (a "Declining Lender") shall be terminated on the Termination
Date theretofore in effect (without regard to extension by other Lenders). The
Extending Lenders, or any of them, shall then have the right to increase their
respective Commitments by an aggregate amount up to the amount of all Declining
Lenders' Commitments, and, to the extent of any shortfall, the Company shall
have the right to require any Declining Lender to assign in full its rights and
obligations under this Agreement to an Eligible Assignee designated by the
Company that agrees to accept all of such rights and obligations (a "Replacement
Lender"), provided that (i) such increase and/or such assignment is otherwise in
compliance with Section 8.07, (ii) such Declining Lender receives payment in
full of an amount equal to the principal amount of all Advances owing to such
Declining Lender, together with accrued interest thereon to the date of such
assignment and all other amounts payable to such Declining Lender under this
Agreement and (iii) any such increase shall be effective on the Extension Date
and any such assignment shall be effective on the date specified by the Company
and agreed to by the Replacement Lender and the Agent. If (i) Extending Lenders
and/or Replacement Lenders provide Commitments in an aggregate amount equal to
51% of the aggregate amount of the Commitments outstanding immediately prior to
the Extension Date in effect at the time the Company requests such extension,
and (ii) no Default shall have occurred and be continuing immediately prior to
the Extension Date, the Termination Date shall be extended by one year (except
that, if the date on which the Termination Date is to be extended is not a
Business Day, such Termination Date as so extended shall be the next preceding
Business Day) from the effective date set forth in an Extension Agreement, in
substantially the form in Exhibit A-3 hereto, which has been duly completed and
signed by the Company, the Agent and the Extending Lenders and Replacement
Lenders party thereto. Such Extension Agreement shall be executed and delivered
no earlier than 30 days prior to the Extension Date. No extension of the
Commitments pursuant to this Section 2.06(c) shall be legally binding on any
party hereto unless and until such party executes and delivers a counterpart of
such Extension Agreement.
SECTION 2.07 Interest on Revolving Credit Advances. Each
Borrower shall pay interest on the unpaid principal amount of each Revolving
Credit Advance made to such Borrower owing to each Lender from the date of such
Revolving Credit Advance until such principal amount shall be paid in full, at
the following rates per annum:
(a) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all times to
the Base Rate in effect from time to time, payable in arrears quarterly on the
last day of each March, June, September and December during such periods and on
the date such Base Rate Advance shall be Converted or paid in full.
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(b) Eurodollar Rate Advances. During such periods as such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Revolving Credit Advance to the
sum of (x) the Eurodollar Rate for such Interest Period for such Revolving
Credit Advance plus (y) the Applicable Margin, payable in arrears on the last
day of such Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period every
three months from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full.
SECTION 2.08 Interest Rate Determination.
(a) If the Eurodollar Rate does not appear on Page 3750 of the
Telerate Service (or any successor page), each Reference Bank agrees to furnish
to the Agent timely information for the purpose of determining each Eurodollar
Rate. If the Eurodollar Rate does not appear on said Page 3750 (or any successor
page), and if any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks. The Agent shall give
prompt notice to the Company and the Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07, and the rate, if any,
furnished by each Reference Bank for the purpose of determining the interest
rate under Section 2.07(b).
(b) If, due to a major disruption in the interbank funding
market with respect to any Eurodollar Rate Advances, the Required Lenders notify
the Agent that the Eurodollar Rate for any Interest Period for such Advances
will not adequately reflect the cost to such Required Lenders of making, funding
or maintaining their respective Eurodollar Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance,
and (ii) the obligation of the Lenders to make, or to Convert Revolving Credit
Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Company and the Lenders that the circumstances causing such
suspension no longer exist.
(c) If the Company shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Company and the Lenders and the Company will
be deemed to have selected an Interest Period of one month.
(d) If the aggregate unpaid principal amount of Eurodollar
Rate Advances comprising any Borrowing shall be reduced, by payment or
prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances on the last day of the Interest
Period applicable thereto.
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(e) Upon the occurrence and during the continuance of any
Event of Default, (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance and (ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended.
(f) If the Eurodollar Rate does not appear on Page 3750 of the
Telerate Service (or any successor page) and fewer than two Reference Banks
furnish timely information to the Agent for determining the Eurodollar Rate for
any Eurodollar Rate Advances,
(i) the Agent shall forthwith notify the Company and the
Lenders that the interest rate cannot be determined for such Eurodollar Rate
Advances,
(ii) each such Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance (or
if such Advance is then a Base Rate Advance, will continue as a Base Rate
Advance), and
(iii) the obligation of the Lenders to make, or to Convert
Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Company and the Lenders that the circumstances
causing such suspension no longer exist.
SECTION 2.09 Optional Conversion of Revolving Credit Advances.
The Company may on any Business Day, upon notice given to the Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.08 and
2.12, Convert all Revolving Credit Advances of one Type comprising the same
Borrowing into Revolving Credit Advances of the other Type; provided, however,
that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be
made only on the last day of an Interest Period for such Eurodollar Rate
Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances
shall be in an amount not less than the minimum amount specified in Section
2.02(b) and no Conversion of any Revolving Credit Advances shall result in more
separate Revolving Credit Borrowings than permitted under Section 2.02(b). Each
such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Revolving Credit Advances to
be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Company.
SECTION 2.10 Optional Prepayments of Revolving Credit
Advances. The Company may, upon notice not later than 11:00 A.M. (New York City
time) on the date of such payment, in the case of Base Rate Advances, and two
Business Days' notice, in the case of Eurodollar Rate Advances, to the Agent
stating the proposed date and aggregate principal amount of the prepayment, and
if such notice is given the Company shall, prepay the outstanding principal
amount of the Revolving Credit Advances comprising part of the same Revolving
Credit Borrowing in whole or ratably in part, together with accrued interest to
the date of such prepayment
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on the principal amount prepaid; provided, however, that (x) each partial
prepayment shall be in an aggregate principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and (y) in the event of any
such prepayment of a Eurodollar Rate Advance, the Company shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(d).
SECTION 2.11 Increased Costs.
(a) If, due to either (i) the introduction of or any change in
any law or regulation or in the interpretation or administration of any law or
regulation by any governmental authority charged with the interpretation or
administration thereof or (ii) the compliance with any guideline or request from
any central bank or other governmental authority that would be complied with
generally by similarly situated banks acting reasonably (whether or not having
the force of law), there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining Eurodollar Rate Advances or
LIBO Rate Advances by an amount deemed by such Lender to be material, then the
Company shall from time to time, upon demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Company
and the Agent by such Lender, shall be conclusive and binding for all purposes,
absent manifest error. Notwithstanding the foregoing, no Lender shall be
entitled to request compensation under this paragraph with respect to any
Competitive Bid Advance if the change giving rise to such request was applicable
to such Lender at the time of submission of such Lender's offer to make such
Competitive Bid Advance.
(b) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other governmental or regulatory
authority which becomes effective after the date hereof, there shall be any
increase in the amount of capital required or expected to be maintained by any
Lender or any corporation controlling such Lender and the amount of such capital
is increased by or based upon the existence of such Lender's Advances or
commitment to lend hereunder and other commitments of this type by an amount
deemed by such Lender to be material, then, upon demand by such Lender (with a
copy of such demand to the Agent), the Company shall pay to the Agent for the
account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's Advances or commitment to lend hereunder. A certificate as to such
amounts submitted to the Company and the Agent by such Lender shall be
conclusive and binding for all purposes as to the calculations therein, absent
manifest error. Such certificate shall be in reasonable detail and shall certify
that the claim for additional amounts referred to therein is generally
consistent with such Lender's treatment of similarly situated customers of such
Lender whose transactions with such Lender are similarly affected by the change
in circumstances giving rise to such payment, but such Lender shall not be
required to disclose any confidential or proprietary information therein.
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SECTION 2.12 Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent (and provide to the
Company an opinion of counsel to the effect) that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for such Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or LIBO Rate Advances or to fund or
maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder, (i) each
Eurodollar Rate Advance or LIBO Rate Advance, as the case may be, of such Lender
will automatically, upon such demand, Convert into a Base Rate Advance or an
Advance that bears interest at the rate set forth in Section 2.07(a), as the
case may be, and (ii) the obligation of such Lender to make, or to Convert
Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Company and such Lender that the circumstances
causing such suspension no longer exist and such Lender shall make the Base Rate
Advances in the amount and on the dates that it would have been requested to
make Eurodollar Rate Advances had no such suspension been in effect.
SECTION 2.13 Payments and Computations.
(a) Each Borrower shall make each payment hereunder not later
than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the
Agent at the Agent's Account in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility fees or usage fees ratably (other than amounts
payable pursuant to Section 2.03, 2.04(b), 2.05(b), 2.11, 2.14 or 8.04(c)) to
the Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its acceptance of
an Assignment and Acceptance and recording of the information contained therein
in the Register pursuant to Section 8.07(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) All computations of interest based on the Base Rate and of
facility fees and of usage fees shall be made by the Agent on the basis of a
year of 365 or 366 days, as the case may be, and all computations of interest
based on the Eurodollar Rate or the Federal Funds Rate shall be made by the
Agent on the basis of a year of 360 days, in each case for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest or facility fees or usage fees are payable. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
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(c) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee or usage fee,
as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate
Advances to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
(d) Unless the Agent shall have received notice from the
Company prior to the date on which any payment is due to the Lenders hereunder
that a Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent such Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14 Taxes.
(a) Each Lender is exempt from any withholding imposed under
the laws of the United States in respect of any fees, interest or other payments
to which it is entitled pursuant to this Agreement or any promissory notes
issued hereunder (the "Income") because (i) the Lender is organized under the
laws of the United States; (ii) the Income is effectively connected with the
conduct of a trade or business within the United States within the meaning of
Section 871 of the Internal Revenue Code of 1986, as amended or any successor
thereto (the "Code"); or (iii) the Income is eligible for an exemption by reason
of a tax treaty. The Agent is exempt from any withholding tax imposed under the
laws of the United States in respect of the Income because the Agent is
organized under the laws of the United States.
(b) Each Lender organized under the laws of a jurisdiction
outside the United States (each, a "Foreign Lender") shall, on or prior to the
date of its execution and delivery of this Agreement in the case of each Initial
Lender, and on the date of the Assignment and Acceptance pursuant to which it
became a Lender in the case of each other Foreign Lender and from time to time
thereafter if requested in writing by the Company or the Agent, provide the
Agent and the relevant Borrower with Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor or other form prescribed by the Internal
Revenue Service, certifying that such Foreign Lender is exempt or entitled to a
reduced rate of United States withholding tax on any Income that is the subject
of such forms. If the form provided by a Foreign Lender at the time such Foreign
Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, or in excess of the rate
applicable to the Foreign Lender assignor on the date of the Assignment and
Acceptance pursuant to which it became a Foreign
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<PAGE> 33
Lender, in the case of each other Foreign Lender, withholding tax at such rate
shall be considered excluded from Taxes as defined in Section 2.14(c).
(c) Based on Section 2.14(a) and (b), any and all payments by
any Borrower hereunder or under any promissory notes issued hereunder shall be
made free and clear of and without deduction for any present United States
federal income withholding taxes imposed on a Foreign Lender under the Code
(such withholding taxes being hereinafter referred to as "Taxes").
(d) If, as a result of the enactment, promulgation, execution
or ratification of, or any change in or amendment to, any United States law or
any tax treaty (or in the application or official interpretation of any law or
any tax treaty) that occurs on or after the date a Foreign Lender first becomes
a party to this Agreement (a "Change in Law"), a Foreign Lender cannot comply
with Section 2.14(b) or, if despite such compliance, any Borrower shall be
required to deduct any Taxes from or in respect of any Income, then: (i) the sum
payable to such Foreign Lender shall be increased as may be necessary so that
after making all required deductions for such Taxes (including deductions
applicable to additional sums payable under this Section 2.14) such Foreign
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii)
such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. Notwithstanding
the foregoing, each Borrower shall be entitled to pay any Taxes in any lawful
manner so as to reduce any deductions and such Foreign Lender shall to the
extent it is reasonably able provide any documentation or file any forms as may
be required by the Internal Revenue Service or any other foreign governmental
agency. In addition, if any Foreign Lender or the Agent (in lieu of such Foreign
Lender), as the case may be, is required to pay directly any Taxes as a result
of a Change in Law because a Borrower cannot or does not legally or timely do
so, the Company shall indemnify such Foreign Lender or Agent for payment of such
Taxes, without duplication of, or increase in, the amount of Taxes otherwise due
to the Foreign Lender.
(e) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies (excluding any income or franchise taxes, business taxes or
capital taxes of any nature) that arise from the execution, delivery or
registration of, or otherwise with respect to, this Agreement (hereinafter
referred to as "Other Taxes"). If a Lender is required to pay directly Other
Taxes because a Borrower cannot or does not legally or timely do so, the Company
shall indemnify such Lender for such payment of Other Taxes.
(f) Within 30 days after the date of any payment of Taxes or
foreign withholding taxes, the Company shall furnish to the Agent, at its
address referred to in Section 8.02, the original or a certified copy of a
receipt evidencing payment thereof. Prior to making any payment hereunder by or
on behalf of any Borrower through an account or branch outside the United States
or on behalf of any Borrower by a payor that is not a United States person (a
"Foreign Payment"), such Borrower shall determine that no foreign withholding
taxes are payable in
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respect thereof, and at its expense, shall furnish, or shall cause such payor to
furnish, to the Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Agent, in either
case stating that such Foreign Payment is exempt from or not subject to foreign
withholding taxes. Each Lender shall cooperate with each Borrower's efforts
described in this subsection by providing to the extent reasonably within its
means any forms requested by such Borrower substantiating an exemption from
foreign withholding taxes required by any governmental agency. For purposes of
this subsection (f), the terms "United States" and "United States person" shall
have the meaning specified in Section 7701 of the Code. If, as a result of the
enactment, promulgation, execution or ratification of, or any change in or
amendment to, any applicable foreign law or any tax treaty (or in the
application or official interpretation of any law or any tax treaty) that occurs
on or after the date a tax opinion is rendered pursuant to the terms of this
subsection, and which renders such tax opinion incorrect as to the absence of
any foreign withholding tax (a "Foreign Change in Law"), any Borrower shall be
required to deduct any foreign withholding taxes from or in respect of any
Income, then: (i) the sum payable to the applicable Lender shall be increased as
may be necessary so that after making all required deductions for foreign
withholding taxes (including deductions applicable to additional sums payable
under this Section 2.14) such Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. Notwithstanding the foregoing, each Borrower shall be entitled
to pay any foreign withholding taxes in any lawful manner so as to reduce any
deductions and such Lender shall to the extent it is reasonably able provide any
documentation or file any forms as may be required by the Internal Revenue
Service or any other foreign governmental agency. In addition, if any Lender is
required to pay directly any foreign withholding tax in respect of any Foreign
Payments made pursuant to this Agreement because a Borrower cannot or does not
legally or timely do so, the Company shall indemnify such Lender for payment of
such tax.
(g) For any period with respect to which a Lender has failed
to comply with the requirements of subsection (b) or (f) relating to certain
forms intended to reduce withholding taxes (other than if such failure is due to
a Change in Law or a Foreign Change in Law), such Lender shall not be entitled
to indemnification under subsection (d) or (f).
(h) Upon a Change in Law or the imposition of any foreign
withholding tax in respect of Foreign Payments, a Lender shall, upon the written
request of and at the expense of the Company, use reasonable efforts to change
the jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such taxes that may
thereafter accrue and would not, in the reasonable judgment of such Lender,
cause the imposition on such Lender of any material legal or regulatory burdens.
(i) Without prejudice to the survival of any other agreement
of any Borrower hereunder, the agreements and obligations of the Company
contained in this Section 2.14 shall
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survive the payment in full of principal and interest hereunder until the
applicable statute of limitations relating to the payment of any Taxes under
Section 2.14(d) has expired.
(j) Any request by any Lender for payment of any amount under
this Section 2.14 shall be accompanied by a certification that such Lender's
claim for said amount is generally consistent with such Lender's treatment of
similarly situated customers of such Lender whose transactions with such Lender
are similarly affected by the change in circumstances giving rise to such
payment, but such Lender shall not be required to disclose any confidential or
proprietary information therein.
SECTION 2.15 Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Revolving Credit Advances
owing to it (other than pursuant to Section 2.05(b), 2.11, 2.14 or 8.04(c)) in
excess of its ratable share of payments on account of the Revolving Credit
Advances obtained by all the Lenders, such Lender shall forthwith purchase from
the other Lenders such participations in the Revolving Credit Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Each Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.16 Use of Proceeds. The proceeds of the Advances
shall be available (and the Company agrees that such proceeds shall be used) for
general corporate purposes of the Company and its Subsidiaries, including
commercial paper backstop.
SECTION 2.17 Borrowings by Borrowing Subsidiaries;
Substitution of Borrower.
(a) The Company may, at any time or from time to time,
designate one or more Subsidiaries (including the Guarantor) as Borrowers
hereunder by furnishing to the Agent a letter (a "Designation Letter") in
duplicate, in substantially the form of Exhibit D, duly completed and executed
by the Company and such Subsidiary. Upon any such designation of a Subsidiary,
such Subsidiary shall be a Borrowing Subsidiary and a Borrower entitled to
borrow Revolving Credit Advances and Competitive Bid Advances on and subject to
the terms and conditions of this Agreement.
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(b) If all principal of and interest on all Advances made to
any Borrowing Subsidiary have been paid in full, the Company may terminate the
status of such Borrowing Subsidiary as a Borrower hereunder by furnishing to the
Agent a letter (a "Termination Letter") in substantially the form of Exhibit F,
duly completed and executed by the Company. Any Termination Letter furnished
hereunder shall be effective upon receipt by the Agent, which shall promptly
notify the Lenders, whereupon the Lenders shall, upon payment in full of all
amounts owing by such Borrower hereunder, promptly deliver to the Company
(through the Agent) the promissory notes, if any, of such former Borrower.
Notwithstanding the foregoing, the delivery of a Termination Letter with respect
to any Borrower shall not terminate (i) any obligation of such Borrower that
remains unpaid at the time of such delivery (including without limitation any
obligation arising thereafter in respect of such Borrower under Section 2.11 or
2.14) or (ii) the obligations of the Company under Article IX with respect to
any such unpaid obligations; provided, that if the status of such Borrowing
Subsidiary has been terminated as aforesaid because the Company has sold or
transferred its interest in such Subsidiary, and the Company so certifies to the
Agent at the time of delivery of such Termination Letter, and subject to payment
of said principal and interest, (i) such Subsidiary shall, automatically upon
the effectiveness of the delivery of such Termination Letter and certification,
cease to have any obligation under this Agreement and (ii) the Company shall
automatically be deemed to have unconditionally assumed, as primary obligor, and
hereby agrees to pay and perform, all of such obligations.
(c) In addition to the foregoing, the Company may, at any time
when there are no Advances outstanding hereunder and upon not less than 10
Business Days' notice, irrevocably elect to terminate its right to be a Borrower
hereunder as of the date (which shall be a Business Day) specified in such
Substitution Letter (the "Substitution Date") and designate the Guarantor as a
Borrower hereunder by furnishing to the Agent (x) a letter (a "Substitution
Letter"), in substantially the form of Exhibit E duly completed and executed by
the Company and the Guarantor, (y) a certificate signed by a duly authorized
officer of the Company, and a certificate signed by a duly authorized officer of
the Guarantor, each dated the Substitution Date, stating that:
(i) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of subsection
(e) thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the Substitution Date, as though
made on and as of such date, and
(ii) No event has occurred and is continuing, or would result
from such designation, that constitutes a Default;
and (z) the Agent shall have received such other corporate documents,
resolutions and legal opinions relating to the foregoing as it, or any Lender
through the Agent, may reasonably request.
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SECTION 2.18 Mitigation Obligations. If any Lender requests
compensation under Section 2.11, or if the obligation of any Lender to make or
continue Advances as, or Convert Advances into, Eurodollar Rate Advances is
suspended pursuant to Section 2.12, then, upon the written request of the
Company, such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designations or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.11 or would
cause such Lender not to be subject to such suspension, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not, in the reasonable judgment of such Lender, cause
imposition on such Lender of any material legal or regulatory burdens or
otherwise be disadvantageous to such Lender. The Company hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effectiveness of Sections
2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective
on and as of the first date (the "Effective Date") on which the following
conditions precedent have been satisfied:
(a) As of the Effective Date, there shall have occurred no
Material Adverse Change since December 26, 1998 that has not been publicly
disclosed.
(b) As of the Effective Date, there shall exist no action,
suit, investigation, litigation or proceeding affecting the Company, or any of
its Subsidiaries (including the Guarantor) pending or, to the knowledge of the
Company's or the Guarantor's executive officers, threatened before any court,
governmental agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect or (ii) could reasonably be likely to affect the
legality, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby.
(c) As of the Effective Date, nothing shall have come to the
attention of the Lenders during the course of their due diligence investigation
to lead them to believe that the Information Memorandum was or has become
misleading, incorrect or incomplete in any material respect.
(d) As of the Effective Date, all governmental and third party
consents and approvals necessary in connection with the transactions
contemplated hereby shall have been obtained (without the imposition of any
conditions that are not acceptable to the Lenders) and shall remain in effect.
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(e) As of the Effective Date, the Company shall have paid all
accrued fees and expenses of the Agent and the Lenders (including the accrued
fees and expenses of counsel to the Agent, to the extent invoiced at least one
Business Day prior to the Effective Date).
(f) On the Effective Date, the following statements shall be
true and the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the Company dated the
Effective Date, stating that:
(i) The representations and warranties contained in Section
4.01 are correct in all material aspects on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes
a Default.
(g) The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance satisfactory to
the Agent and (except for any notes requested by the Lenders) in sufficient
copies for each Lender:
(i) To the extent any Lender shall have requested, at least
one Business day prior to the Effective Date that its Revolving Credit Advances
be evidenced by a promissory note, a note payable to the order of such Lender.
(ii) Certified copies of the resolutions of the Board of
Directors of the Company and of the Guarantor approving this Agreement, and of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement.
(iii) A certificate of the Secretary or an Assistant Secretary
of the Company certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement and the other documents to be
delivered hereunder.
(iv) A certificate of the Secretary or an Assistant Secretary
of the Guarantor certifying the names and true signatures of the officers of the
Guarantor authorized to sign this Agreement and the other documents to be
delivered hereunder.
(v) An opinion of Pamela O'Brien, General Counsel of each of
the Company and the Guarantor, substantially in the form of Exhibit C hereto and
as to such other matters as any Lender through the Agent may reasonably request.
(vi) A favorable opinion of Skadden, Arps, Slate, Meagher &
Flom, LLP, counsel for the Agent.
(vii) The Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may reasonably request.
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(h) On or prior to the Effective Date, the Company shall have
completed the initial public offering of its common stock and shall have
received net proceeds thereof in a minimum amount of $2,300,000,000.
SECTION 3.02 Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Revolving Credit Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Revolving Credit Borrowing
and the acceptance by any Borrower of the proceeds of such Revolving Credit
Borrowing shall constitute a representation and warranty by the Company and such
Borrower that on the date of such Borrowing such statements are true):
(i) The representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of subsection
(e) thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the date of such Revolving Credit
Borrowing, before and after giving effect to such Revolving Credit Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date, and
(ii) No event has occurred and is continuing, or would result
from such Revolving Credit Borrowing or from the application of the proceeds
therefrom, that constitutes a Default;
and (b) in the case of the first Borrowing by a Borrowing Subsidiary, the Agent
shall have received such corporate documents, resolutions and legal opinions
relating to such Borrowing Subsidiary as the Agent may reasonably require.
SECTION 3.03 Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, and (ii)
on the date of such Competitive Bid Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Competitive Bid
Borrowing and the acceptance by any Borrower of the proceeds of such Competitive
Bid Borrowing shall constitute a representation and warranty by the Company and
such Borrower that on the date of such Competitive Bid Borrowing such statements
are true):
(a) The representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of subsection
(e) thereof and in subsection (f) thereof (other than clause (ii) thereof)) are
correct in all material respects on and as of the date of such Competitive Bid
Borrowing, before and after giving effect to such Competitive Bid Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date; and
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(b) No event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
SECTION 3.04 Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the proposed Effective
Date, as notified by the Company to the Lenders, specifying its objection
thereto. The Agent shall promptly notify the Lenders of the occurrence of the
Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Loan
Parties. Each of the Company and the Guarantor (each, a "Loan Party") represents
and warrants as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and the
Guarantor is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by each Loan Party
of this Agreement and the consummation of the transactions contemplated hereby,
are within such Loan Party's powers, have been duly authorized by all necessary
corporate or other action, and do not contravene (i) its charter, by-laws or
other organizational documents or (ii) any law or contractual restriction
binding on or materially affecting such Loan Party.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery and performance by
either Loan Party of this Agreement.
(d) This Agreement has been duly executed and delivered by
each Loan Party. This Agreement is the legal, valid and binding obligation of
each Loan Party enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and equitable principles of general applicability.
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(e) The combined balance sheet of the Company as at December
26, 1998, and the related combined statements of operations and cash flows of
the Company for the fiscal year then ended, accompanied by an opinion of KPMG
Peat Marwick, independent public accountants, fairly present the financial
condition of the Company as at such date and the results of the operations of
the Company for the period ended on such date, all in accordance with generally
accepted accounting principles consistently applied. Since December 26, 1998,
there has been no Material Adverse Change that has not been publicly disclosed.
(f) There is no pending or threatened action, suit,
investigation, litigation or proceeding affecting either Loan Party before any
court, governmental agency or arbitrator that (i) would be reasonably likely to
have a Material Adverse Effect or (ii) would reasonably be likely to affect the
legality, validity or enforceability of this Agreement or any promissory note
issued under this Agreement, if any, or the consummation of the transactions
contemplated hereby.
(g) It is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock, in either case in a manner that would cause the Advances or
any Lender to be in violation of Regulation U.
(h) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of any Borrower only or
of the Company and its Subsidiaries or the Guarantor and its Subsidiaries, in
each case on a Consolidated Basis) subject to the provisions of Section 5.02(a)
or (b)(ii) or subject to any restriction contained in any agreement or
instrument between it and any Lender or any Affiliate of any Lender relating to
Debt and within the scope of Section 6.01 (d) will be margin stock.
(i) Neither Loan Party is an "investment company", a company
"controlled by", or "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended. Neither the making of any Advances nor the application of the proceeds
or repayment thereof by any Borrower will violate any provision of such Act or
any rule, regulation or order of the Securities and Exchange Commission
thereunder.
(j) Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Company's and the
Subsidiaries', including the Guarantor's, computer systems and (ii) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which the Company's or such Subsidiaries' systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed within such period of time as is required to avoid the occurrence of a
Material Adverse Effect as a result of the failure to complete such
reprogramming. The cost to the Company and such Sub-
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sidiaries of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Company and such Subsidiaries (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a Material Adverse Effect.
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, each Loan
Party will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
compliance with ERISA and Environmental Laws, except where failure so to comply
would not, and would not be reasonably likely to, have a Material Adverse
Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if unpaid,
might by law become a Lien upon its property; provided, however, that neither
Loan Party nor any of its Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being maintained,
unless and until any Lien resulting therefrom attaches to its property and
becomes enforceable against its other creditors and such Lien would be
reasonably likely to have a Material Adverse Effect.
(c) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Material Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that each Loan Party and its Material Subsidiaries may
consummate any merger or consolidation permitted under Section 5.02(b) and
provided further that neither Loan Party nor any of its Material Subsidiaries
shall be required to preserve any right or franchise if the Board of Directors
of such Loan Party or such Subsidiary shall determine that the preservation
thereof is no longer desirable in the conduct of the business of such Loan Party
or such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to such Loan Party, such Subsidiary or
the Lenders.
(d) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of the
Company, the Consolidated balance
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sheet of the Company and its Subsidiaries as of the end of such quarter and
Consolidated statements of operations and cash flows of the Company and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter, duly certified (subject to
year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with GAAP, it being agreed that delivery of
the Company's Quarterly Report on Form 10-Q will satisfy this requirement;
(ii) as soon as available and in any event within 90 days
after the end of each Fiscal Year of the Company, a copy of the annual audit
report for such year for the Company and its Subsidiaries, containing the
Consolidated balance sheet of the Company and its Subsidiaries as of the end of
such Fiscal Year and Consolidated statements of operations and cash flows of the
Company and its Subsidiaries for such Fiscal Year, in each case accompanied by
an opinion by KPMG Peat Marwick or other independent public accountants of
nationally recognized standing, it being agreed that delivery of the Company's
Annual Report on Form 10-K will satisfy this requirement;
(iii) as soon as possible and in any event within five days
after the occurrence of each Default continuing on the date of such statement, a
statement of the chief financial officer of the Company setting forth details of
such Default and the action that the Company has taken and proposes to take with
respect thereto; and
(iv) promptly after the sending or filing thereof, copies of
all annual reports and proxy solicitations that the Company sends to any of its
securityholders, and copies of all reports on Form 8-K that the Company or any
Subsidiary files with the Securities and Exchange Commission.
(e) Repayment of Short Term Facilities. Repay all Debt
outstanding under the Short Term Facilities on or before May 29, 1999.
SECTION 5.02 Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, neither Loan
Party will:
(a) Secured Debt. Create or suffer to exist, or permit any of
its Restricted Subsidiaries to create or suffer to exist, any Debt secured by a
Lien on any Principal Property or on any shares of stock of or Debt of any
Restricted Subsidiary unless such Loan Party or such Restricted Subsidiary
secures or causes such Restricted Subsidiary to secure the Advances and all
other amounts payable under this Agreement equally and ratably with such secured
Debt, so long as such secured Debt shall be so secured, unless after giving
effect thereto the aggregate amount of all such Debt so secured does not exceed
15% of Consolidated Net Tangible Assets, provided that the foregoing restriction
does not apply to Debt secured by:
(i) Liens existing prior to the date hereof;
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(ii) Liens on property of, or on shares of stock of or Debt
of, any corporation existing at the time such corporation becomes a Restricted
Subsidiary;
(iii) Liens in favor of a Loan Party or any Restricted
Subsidiary;
(iv) Liens in favor of any governmental bodies to secure
progress or advance payments;
(v) Liens on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation) or liens securing Debt incurred to finance all or any part of the
purchase price or cost of construction of property (or additions, substantial
repairs, alterations or substantial improvements thereto), provided that such
Lien and the Debt secured thereby are incurred within 365 days of the later of
acquisition or completion of construction (or addition, repair, alteration or
improvement) and full operation thereof; and
(vi) any extension, renewal or refunding of Debt referred to
in the foregoing clauses (i) to (v), inclusive.
(b) Mergers, Etc. (i) Merge or consolidate with or into any
corporation or (ii) sell, lease, transfer or otherwise dispose of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, unless the Company or the Guarantor would be the acquiring or surviving
party in such transaction and no Event of Default shall have occurred and be
continuing at the time of such proposed transaction or would result therefrom.
(c) Subsidiary Debt. Permit any Restricted Subsidiary to
create, incur, assume or permit to exist any Debt, except:
(i) Debt of the Guarantor and Borrowing Subsidiaries, if any,
created hereunder and under the 364-Day Facility;
(ii) Debt existing on the Effective Date;
(iii) Debt of the Guarantor constituting guaranties of Debt of
the Company;
(iv) Debt of any Subsidiary to any Loan Party or any other
Subsidiary;
(v) Debt of any Person that becomes a Subsidiary after the
date hereof; provided that such Debt exists at the time such Person becomes a
Subsidiary and is not created in contemplation of or in connection with such
Person becoming a Subsidiary;
(vi) any refinancing, refunding or replacement of any Debt
permitted under clause (ii) through (v) above; and
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(vii) other Debt in an aggregate principal amount not
exceeding 15% of Consolidated Net Tangible Assets at any time outstanding;
provided, that the foregoing provisions of this Section 5.02(c) shall cease to
apply to the Guarantor from and after the occurrence of the Substitution Date as
provided in Section 2.17.
(d) Restrictive Agreements. Neither Loan Party will enter
into, incur or permit to exist any agreement or other arrangement that prohibits
or restricts the ability of any Subsidiary to pay dividends or other
distributions with respect to any shares of its capital stock or to make or
repay loans or advances to, or otherwise transfer assets to the Company;
provided that the foregoing shall not apply to (i) restrictions and conditions
imposed by law or by this Agreement or the 364-Day Facility, (ii) customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iii) restrictions or conditions imposed by any agreement relating to secured
Debt permitted by this Agreement if such restrictions or conditions apply only
to the property or assets securing such Debt, (iv) customary provisions in
leases and other contracts restricting the assignment thereof, (v) any agreement
in effect on the Effective Date, as any such agreement is in effect on such
date, (vi) any agreement binding upon such Subsidiary prior to the date on which
such Subsidiary was acquired by the Company and outstanding on such date, (vii)
customary net worth and other financial maintenance covenants in an agreement
relating to Debt or other obligations incurred in compliance with this
Agreement, and (viii) any agreement refinancing, renewing or replacing any
agreement or Debt referred to in (i) through (vii) above, provided that the
relevant provisions are no more restrictive than those in the agreement or Debt
being refinanced, renewed or replaced.
(e) Ownership. In the case of the Company, cease to own,
legally and beneficially, 75% or more of the membership interests in the
Guarantor.
SECTION 5.03 Financial Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Company
will not:
(a) Debt to Capitalization Ratio. Permit the Debt to
Capitalization Ratio as at the last day of any Fiscal Quarter that is not an
Alternate Covenant Date to exceed 0.75 to 1.0.
(b) Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio as at the last day of any Fiscal Quarter that is an Alternate
Covenant Date to exceed 5.0 to 1.0.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of, or
interest on, any Advance or to make any other payment under this Agreement, in
each case within five days after the same becomes due and payable; or
(b) Any representation or warranty made by any Loan Party
herein or by any Borrower (or any of its officers) in connection with this
Agreement (including without limitation by any Borrowing Subsidiary pursuant to
any Designation Letter) shall prove to have been incorrect in any material
respect when made; or
(c) (i) Any Loan Party shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(d), 5.02 or 5.03, or (ii)
any Loan Party shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed if
such failure shall remain unremedied for 30 days after written notice thereof
shall have been given to either Loan Party by the Agent or any Lender; or
(d) Either Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt that is outstanding in a
principal or notional amount of at least $50,000,000 in the aggregate (but
excluding Debt outstanding hereunder) of such Loan Party or such Subsidiary (as
the case may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid or redeemed (other
than by a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof; or
(e) Either Loan Party or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
such Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment
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of a receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or such Loan Party of any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $50,000,000 shall be rendered against either Loan Party or any of its
Material Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; provided, however, that any such judgment or order shall not be an Event
of Default under this Section 6.01(f) if and for so long as (i) the amount of
such judgment or order is covered by a valid and binding policy of insurance
between the defendant and the insurer covering payment thereof and (ii) such
insurer, which shall be rated at least "A" by A.M. Best Company, has been
notified of, and has not disputed the claim made for payment of, the amount of
such judgment or order; or
(g) Any event, action or condition with respect to an employee
benefit plan of the Company subject to Title IV of ERISA results in any penalty
or action pursuant to ERISA that has a material adverse effect on the business
or financial condition of either Loan Party and its Subsidiaries, taken as a
whole; or
(h) The Master Bottling Agreement ceases to be valid and
binding and in full force and effect; or Pepsi denies that it has any liability
or obligation under the Master Bottling Agreement and Pepsi ceases performance
thereunder; or
(i) A Change of Control shall occur;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Company, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Company, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company; provided, however, that in the event
of an actual or deemed entry of an order for relief with respect to any Loan
Party or any Borrowing Subsidiary under the Federal Bankruptcy Code, (A) the
obligation of each Lender to make Advances shall automatically be terminated and
(B) the Advances, all such interest and
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all such amounts shall automatically become and be due and payable, without
presentment, protest or any notice of any kind, all of which are hereby
expressly waived by each Loan Party.
ARTICLE VII
THE AGENT
Each of the Lenders hereby irrevocably appoints the Agent as
its agent and authorizes the Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Agent by the terms hereof, together
with such actions and powers as are reasonably incidental thereto.
The bank serving as the Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Loan Parties or any Subsidiary or other Affiliate
thereof as if it were not the Agent hereunder.
The Agent shall not have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) the
Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Agent is required to exercise in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 8.01), and (c) except
as expressly set forth herein, the Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating to
the Loan Parties or any if their Subsidiaries that is communicated to or
obtained by the bank serving as Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 8.01) or in the absence of its own gross negligence or
wilful misconduct. The Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Agent by a Loan
Party or a Lender, and the Agent shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith, (iii)
the performance or observance of any of the covenants, agreements or other terms
or conditions set forth herein, (iv) the validity, enforceability, effectiveness
or genuineness of this Agreement or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in Article III or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Agent.
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The Agent shall be entitled to rely upon, and shall not incur
any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Agent may consult with legal counsel (who may be counsel for any
Loan Party), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
The Agent may perform any and all of its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the
Agent. The Agent and any such sub-agent may perform any and all of its duties
and exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of the Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor Agent
as provided in this paragraph, the Agent may resign at any time by notifying the
Lenders and the Company. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor agent approved by the Company, which
approval will not be unreasonably withheld or delayed; provided that such
approval shall not be required if an Event of Default has occurred and is
continuing. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States or any State thereof, having a combined
capital and surplus of at least $50,000,000 with an office in New York, New
York, or an Affiliate of any such bank. Upon the acceptance of its appointments
as Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Company to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Company and such successor. After the Agent's resignation hereunder, the
provisions of this Article and Section 8.04 shall continue in effect for the
benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Agent.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appro-
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priate, continue to make its own decisions in taking or not taking action under
or based upon this Agreement, any related agreement or any document furnished
hereunder or thereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) except
pursuant to Section 2.05(b), 2.05(c), 2.15 or 2.17, increase the Commitments of
the Lenders or subject the Lenders to any additional obligations, (b) reduce the
principal of, or interest on, the Revolving Credit Advances or any fees or other
amounts payable hereunder, (c) postpone any date fixed for any payment of
principal of, or interest on, the Revolving Credit Advances or any fees or other
amounts payable hereunder, (d) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Revolving Credit Advances, or the
number of Lenders, that shall be required for the Lenders or any of them to take
any action hereunder, (e) release the guarantee as set forth in Section 9.01 or
10.01, or (f) amend this Section 8.01; and provided further that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement.
SECTION 8.02 Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed
or delivered, if to the Company, any Borrower or the Guarantor, to the Company
at its address at One Pepsi Way, Somers, New York 10589, Attention: General
Counsel, Telecopier No. (914) 767-1161, with a copy to Secretary, Telecopier No.
(914) 767-1161; if to any Initial Lender, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any other Lender, at its
Domestic Lending Office specified in the Assignment and Acceptance pursuant to
which it became a Lender; and if to the Agent, at The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New
York, 10081, Attention of Nina Wang (Telecopy No. (212) 552-7500), with a copy
to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017,
Attention of Karen Sharf (Telecopy No. (212) 270-5120); or, as to the Company,
any Borrower, the Guarantor or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Company and the Agent. All such notices and
communications shall, when mailed, telecopied, telegraphed or telexed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by telex answer back, respec-
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tively, except that notices and communications to the Agent pursuant to Article
II, III or VII shall not be effective until received by the Agent.
SECTION 8.03 No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04 Costs and Expenses.
(a) The Company agrees to pay on demand all costs and expenses
of the Agent as set forth in the fee letter between the Company and the Agent
dated March 4, 1999. The Company further agrees to pay on demand all reasonable
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement and the other documents to be delivered hereunder, including,
without limitation, reasonable fees and expenses of counsel for the Agent and
each Lender in connection with the enforcement of rights under this Section
8.04(a).
(b) The Company agrees to indemnify and hold harmless the
Agent and each Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with
the preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with this Agreement, any promissory
note issued hereunder, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances, whether or not such
investigation, litigation or proceeding is brought by any Borrower, the
Guarantor, their directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(c) To the extent that the Company fails to pay any amount
required to be paid by it to the Agent under paragraph (a) or (b) of this
Section 8.04, each Lender severally agrees to pay to the Agent such Lenders'
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Agent in its capacity as such.
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(d) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or LIBO Rate Advance is made by any Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or Conversion pursuant to Section 2.08(d)
or (e), 2.10 or 2.12, acceleration of the maturity of the Advances pursuant to
Section 6.01 or for any other reason, the Company shall, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment or Conversion, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance.
(e) Without prejudice to the survival of any other agreement
of any Borrower hereunder, the agreements and obligations of the Company
contained in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of
principal, interest and all other amounts payable hereunder.
SECTION 8.05 Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Advances due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of any Loan Party
or any Borrower against any and all of the obligations of such Loan Party or
such Borrower now or hereafter existing under this Agreement, whether or not
such Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Company
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender and its Affiliates may have.
SECTION 8.06 Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Loan Parties and the Agent and when the Agent
shall have been notified by each Initial Lender that such Initial Lender has
executed it and thereafter shall be binding upon and inure to the benefit of the
Loan Parties, each Subsidiary Borrower (if any), the Agent and each Lender and
their respective successors and assigns, except that no Borrower shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
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SECTION 8.07 Assignments and Participations.
(a) Each Lender may, upon ten days' notice to the Agent and
with the consent of the Company (which shall not be unreasonably withheld) and,
if demanded by the Company (following a demand by such Lender pursuant to
Section 2.11 or Section 2.14 or a suspension of such Lender's obligation to make
or continue Advances as, or convert Advances into, Eurodollar Rate Advances
pursuant to Section 2.12) upon at least ten days' notice to such Lender and the
Agent, will assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Revolving Credit Advances owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all rights and obligations under this Agreement (other
than any right to make Competitive Bid Advances or Competitive Bid Advances
owing to it), (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than the lesser of (x)
$25,000,000 and (y) the smallest initial Commitment of any Initial Lender, (iii)
each such assignment shall be to an Eligible Assignee, (iv) each such assignment
made as a result of a demand by the Company pursuant to this Section 8.07(a)
shall be arranged by the Company after consultation with the Agent and shall be
either an assignment of all of the rights and obligations of the assigning
Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such
assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Company pursuant to this
Section 8.07(a) unless and until such Lender shall have received one or more
payments from either the Company or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement and (vi) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in the
Register (as defined in clause (d) below), an Assignment and Acceptance,
together with a processing and recordation fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
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(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, the Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit B hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Company.
(d) The Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and, with respect to Lenders, the Commitment of, and principal amount of
the Advances owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and each Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Loan Parties or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Notwithstanding anything to the contrary contained herein,
any Lender (a "Granting Lender") may grant to a special purpose funding vehicle
(an "SPC"), identified as such
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in writing from time to time by the Granting Lender to the Agent and the
Company, the option to provide to the Company all or any part of any Advance
that such Granting Lender would otherwise be obligated to make to the Company
pursuant to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Advance, (ii) if an SPC elects not to exercise
such option or otherwise fails to provide all or any part of such Advance, the
Granting Lender shall be obligated to make such Advance pursuant to the terms
hereof. The making of an Advance by an SPC hereunder shall utilize the
Commitment of the Granting Lender to the same extent, and as if, such Advance
were made by such Granting Lender. Each party hereto agrees that no SPC shall be
liable for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender). In furtherance of
the foregoing, each party hereto hereby agrees (which agreement shall survive
the termination of this Agreement) that, prior to the date that is one year and
one day after the payment in full of all outstanding commercial paper or other
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary contained in this Section 8.07(e), any SPC may (i) with notice to, but
without the prior written consent of, the Company and the Agent and without
paying any processing fee therefor, assign all or a portion of its interests in
any Advances to the Granting Lender or to any financial institutions (consented
to by the Company and the Agent) providing liquidity and/or credit support to or
for the account of any SPC to support the funding or maintenance of Advances and
(ii) disclose on a confidential basis any non-public information relating to its
Advances to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC.
(f) Each Lender may, upon notice to the Agent and the Company,
sell participations to one or more banks or other entities in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Advances owing to it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any promissory note issued or assigned to it hereunder, (iv) the
Borrowers, the Guarantor, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement, or any consent to any departure by any Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Advances or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Advances or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or
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participant or proposed assignee or participant any information relating to any
Loan Party or any Borrower furnished to such Lender by or on behalf of any Loan
Party or any Borrower; provided that, prior to any such disclosure, the assignee
or participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information relating to the Loan Parties or
the Borrowers received by it from such Lender.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement or any promissory note issued to such
Lender hereunder (including, without limitation, the Advances owing to it) in
favor of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System.
SECTION 8.08 Confidentiality. Neither the Agent nor any Lender
shall disclose any Confidential Information to any Person without the consent of
the Company, other than (a) to the Agent's or such Lender's Affiliates and their
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process, (c) to any rating
agency when required by it, provided that, prior to any such disclosure, such
rating agency shall undertake to preserve the confidentiality of any
Confidential Information relating to the Loan Parties or the Borrowers received
by it from such Lender and (d) as requested or required by any state, federal or
foreign authority or examiner regulating banks or banking.
SECTION 8.09 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.10 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11 Jurisdiction, Etc.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any
52
<PAGE> 57
other manner provided by law. Nothing in this Agreement shall affect any right
that any party may otherwise have to bring any action or proceeding relating to
this Agreement in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or federal court sitting in New York City. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
SECTION 8.12 WAIVER OF JURY TRIAL. EACH BORROWER, THE
GUARANTOR, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
ARTICLE IX
COMPANY GUARANTEE
SECTION 9.01 Company Guarantee. Subject to the provisions of
this Article IX, the Company unconditionally and irrevocably guarantees to each
Lender and the Agent and their respective successors and assigns, that: (i) the
principal of, premium, if any, and interest on the Advances to each Borrowing
Subsidiary and, following the Substitution Date, the Guarantor (each a
"Guaranteed Party") and any promissory notes issued by any Guaranteed Party
hereunder will be duly and punctually paid in full when due, whether at
maturity, by acceleration, by redemption or otherwise, and interest on overdue
principal, and premium, if any, and (to the extent permitted by law) interest on
any interest, if any, on the Advances and all other obligations of the
Guaranteed Parties to the Lenders or the Agent hereunder (including fees and
expenses) will be promptly paid in full, all in accordance with the terms
hereof; and (ii) in case of any extension of time of payment or renewal of any
of the Advances to any Guaranteed Party or any of such other obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed, or failing
performance of any other obligation of the Guaranteed Parties to the Lenders or
the Agent, for whatever reason, the Company will be obligated to pay, or to
perform or to cause the performance of, the same immediately. An Event of
Default under this Agreement shall constitute an event of default under this
Guarantee, and shall entitle the Lenders to accelerate the obligations of the
53
<PAGE> 58
Company under this Guarantee in the same manner and to the same extent as the
obligations of the Guaranteed Parties.
The Company hereby agrees that its obligations under this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of this Agreement, any Designation Letter or the Substitution
Letter, the absence of any action to enforce the same, any waiver or consent by
any Lender or the Agent of this Agreement any Designation Letter or the
Substitution Letter, with respect to any thereof, the entry of any judgment
against any Guaranteed Party, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of the Company. The Company hereby waives and relinquishes: (a) any
right to require the Agent, the Lenders or any Guaranteed Party (each, a
"Benefitted Party") to proceed against any Guaranteed Party or any other Person
or to proceed against or exhaust any security held by a Benefitted Party at any
time or to pursue any other remedy in any secured party's power before
proceeding against the Company; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind (except as
expressly required by this Agreement), including but not limited to notice of
the existence, creation or incurring of any new or additional Debt or obligation
or of any action or non-action on the part of the Company, any Benefitted Party,
any creditor of the Company or any Guaranteed Party or on the part of any other
Person whomsoever in connection with any obligations the performance of which
are guaranteed under this Guarantee; (d) any defense based upon an election of
remedies by a Benefitted Party, including but not limited to an election to
proceed against the Company or any other Guaranteed Party for reimbursement; (e)
any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (f) any defense arising because of a
Benefitted Party's election, in any proceeding instituted under the Bankruptcy
Code, of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g)
any defense based on any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code. The Company hereby covenants that this Guarantee
will not be discharged except by payment in full of all principal, premium, if
any, and interest on the Advances made to each Guaranteed Party and all other
costs provided for under this Agreement in respect thereof.
This is a Guarantee of payment and not of collectibility.
If any Lender or the Agent is required by any court or otherwise to
return to either the Company or any Guaranteed Party, or any trustee or similar
official acting in relation to either the Company or any Guaranteed Party, any
amount paid by the Company or any Guaranteed Party to the Agent or such Lender,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. The Company agrees that it will not be entitled to any
right of subrogation in relation to the Lenders or the Agent in respect of any
obligations guaranteed under this Guarantee until payment in full of all
obligations guaranteed hereby. The Company agrees that, as between it, on the
one hand, and the Lenders and the Agent, on the other hand, (x) the maturity of
the obligations guaranteed under this Guarantee may be accelerated as provided
in
54
<PAGE> 59
Article VI hereof for the purposes hereof, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article VI hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Company for the purpose
of this Guarantee.
ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.01 Subsidiary Guarantee. Subject to the provisions
of this Article X, the Guarantor unconditionally and irrevocably guarantees to
each Lender and the Agent and their respective successors and assigns, that: (i)
the principal of, premium, if any, and interest on the Advances and any
promissory note issued hereunder will be duly and punctually paid in full when
due, whether at maturity, by acceleration, by redemption or otherwise, and
interest on overdue principal, and premium, if any, and (to the extent permitted
by law) interest on any interest, if any, on the Advances, any promissory note
issued hereunder and all other obligations of the Company to the Lenders or the
Agent hereunder (including fees and expenses) will be promptly paid in full, all
in accordance with the terms hereof; and (ii) in case of any extension of time
of payment or renewal of any of the Advances or any of such other obligations,
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed,
or failing performance of any other obligation of the Company to the Lenders or
the Agent, for whatever reason, the Guarantor will be obligated to pay, or to
perform or to cause the performance of, the same immediately. An Event of
Default under this Agreement shall constitute an event of default under this
Guarantee, and shall entitle the Lenders to accelerate the obligations of the
Guarantor under this Guarantee in the same manner and to the same extent as the
obligations of the Company.
The Guarantor hereby agrees that its obligations under this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of this Agreement, the absence of any action to enforce the same,
any waiver or consent by any Lender or the Agent of this Agreement with respect
to any thereof, the entry of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of the Guarantor. The Guarantor hereby
waives and relinquishes: (a) any right to require the Agent, the Lenders or the
Company (each, a "Benefitted Party") to proceed against the Company or any other
Person or to proceed against or exhaust any security held by a Benefitted Party
at any time or to pursue any other remedy in any secured party's power before
proceeding against the Guarantor; (b) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind (except as
expressly required by this Agreement), including but not limited to notice of
the existence, creation
55
<PAGE> 60
or incurring of any new or additional Debt or obligation or of any action or
non-action on the part of the Guarantor, the Company, any Benefitted Party, any
creditor of the Guarantor, the Company or on the part of any other Person
whomsoever in connection with any obligations the performance of which are
guaranteed under this Guarantee; (d) any defense based upon an election of
remedies by a Benefitted Party, including but not limited to an election to
proceed against the Guarantor for reimbursement; (e) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Guarantor hereby covenants that this Guarantee will not be discharged
except by payment in full of all principal, premium, if any, and interest on the
Advances and all other costs provided for under this Agreement. This is a
Guarantee of payment and not of collectibility.
If any Lender or the Agent is required by any court or otherwise to
return to either the Company or the Guarantor, or any trustee or similar
official acting in relation to either the Company or the Guarantor, any amount
paid by the Company or the Guarantor to the Agent or such Lender, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. The Guarantor agrees that it will not be entitled to any right
of subrogation in relation to the Lenders or the Agent in respect of any
obligations guaranteed under this Guarantee until payment in full of all
obligations guaranteed hereby. The Guarantor agrees that, as between it, on the
one hand, and the Lenders and the Agent, on the other hand, (x) the maturity of
the obligations guaranteed under this Guarantee may be accelerated as provided
in Article VI hereof for the purposes hereof, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Article VI hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by such Guarantor for
the purpose of this Guarantee.
SECTION 10.02 Limitation of Guarantor's Liability. The
Guarantor, and by its acceptance hereof, each Lender, hereby confirms that it is
the intention of the parties hereto that this Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or State law. To effectuate the foregoing intention, the Lenders
and the Guarantor hereby irrevocably agree that the obligations of the Guarantor
under this Article X shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of the Guarantor,
result in the obligations of the Guarantor under the Guarantee not constituting
a fraudulent transfer or conveyance under federal or state law.
56
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
THE PEPSI BOTTLING GROUP,
INC., as Borrower
By /s/ Christopher Langhoff
-------------------------------
Title: Assistant Treasurer
BOTTLING GROUP, LLC, as Guarantor
By /s/ Pamela C. McGuire
-------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK, as Agent
By /s/ Karen M. Sharf
-------------------------------
Title: Vice President
<PAGE> 62
<TABLE>
<CAPTION>
Commitment Initial Lenders
- ---------- ---------------
<S> <C>
$30,000,000.00 THE CHASE MANHATTAN BANK, as an Initial
Lender
By /s/ Karen M. Sharf
----------------------------------------
Title: Vice President
$30,000,000.00 BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as
an Initial Lender
By /s/ W. L. Hess
----------------------------------------
Title: Managing Director
$30,000,000.00 CITIBANK, N.A., as an Initial Lender
By /s/ Laura A. Siracuse
----------------------------------------
Title: Vice President
$25,000,000.00 CREDIT SUISSE FIRST BOSTON CORPORATION, as
an Initial Lender
By /s/ David Kratovil
----------------------------------------
Title: Director
By /s/ Robert Hetu
----------------------------------------
Title: Vice President
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
$25,000,000.00 UBS AG as an Initial Lender
By /s/ Paula Mueller
----------------------------------------
Title: Director
By /s/ Roman Edelmann
----------------------------------------
Title: Director
$20,000,000.00 LEHMAN COMMERCIAL PAPER INC., as an Initial
Lender
By /s/ Michele Swanson
----------------------------------------
Title: Authorized Signatory
$15,000,000.00 ROYAL BANK OF CANADA, as an Initial Lender
By /s/ John Crawford
----------------------------------------
Title: Senior Manager
$12,500,000.00 BANCO BILBAO VIZCAYA, as an Initial Lender
By /s/ Pilar Fernadez
----------------------------------------
Title: Vice President
By /s/ Eduardo Martinez
----------------------------------------
Title: Assistant Vice President
</TABLE>
<PAGE> 64
<TABLE>
<S> <C>
$12,500,000.00 DEUTSCHE BANK AG, as an Initial Lender
By /s/ Alexander Karow
----------------------------------------
Title: Assistant Vice President
By /s/ Stephan Wiedemann
----------------------------------------
Title: Director
$12,500,000.00 FLEET NATIONAL BANK, as an Initial Lender
By /s/ Christopher Criswell
----------------------------------------
Title: Senior Vice President
$12,500,000.00 HONG KONG & SHANGHAI BANKING CORP., as an
Initial Lender
By /s/ Kim Leary
----------------------------------------
Title: Vice President
$12,500,000.00 THE BANK OF NEW YORK, as an Initial Lender
By /s/ Eliza S. Adams
----------------------------------------
Title: Vice President
$12,500,000.00 THE NORTHERN TRUST COMPANY, as an Initial
Lender
By /s/ Nicole Boehm
----------------------------------------
Title: Commercial Banking Officer
$250,000,000 Total of the Commitments
</TABLE>
<PAGE> 65
SCHEDULE I
<TABLE>
<CAPTION>
Lender Domestic Lending Office Eurodollar Lending Office
- ------ ----------------------- -------------------------
<S> <C> <C>
THE CHASE MANHATTAN BANK 270 Park Avenue 270 Park Avenue
New York, New York 10017 New York, New York 10017
BANK OF AMERICA NATIONAL TRUST 1850 Gateway Blvd. 1850 Gateway Blvd.
AND SAVINGS ASSOCIATION Concord, CA 94520 Concord, CA 94520
CITIBANK, N.A. 399 Park Avenue 399 Park Avenue
New York New York 10043 New York New York 10043
CREDIT SUISSE FIRST BOSTON 11 Madison Avenue Credit Suisse First Boston Cayman
New York, New York, 10010 Islands Branch
c/-11 Madison Avenue
New York, New York 10010
UBS AG 677 Washington Blvd. 677 Washington Blvd
Stamford, CT 06912 Stamford, CT 06912
LEHMAN COMMERCIAL PAPER INC. c/- Bankers Trust Company c/- Bankers Trust Company
130 Liberty Street 130 Liberty Street
9th Floor 9th Floor
New York, New York 10006 New York, New York 10006
cc Lehman Commercial Paper Inc. cc Lehman Commercial Paper Inc.
101 Hudson Street 101 Hudson Street
30th Floor 30th Floor
Jersey City, New Jersey 07302 Jersey City, New Jersey 07302
ROYAL BANK OF CANADA One Liberty Plaza One Liberty Plaza
New York, New York 10006-1404 New York, New York 10006-1404
BANCO BILBAO VIZCAYA 1345 Avenue of The Americas 1345 Avenue of The Americas
New York, New York, 10105 New York, New York, 10105
DEUTSCHE BANK AG NEW 31 West 52nd Street Cayman Islands Branch
YORK BRANCH AND/OR New York, New York, 10019 c/-31 West 52nd Street
CAYMAN ISLANDS BRANCH New York, New York, 10019
FLEET NATIONAL BANK One Landmark Sq. One Landmark Sq.
Stamford, CT 06904 Stamford, CT 06904
HONG KONG & SHANGHAI BANKING HSBC Center HSBC Center
CORP. 26th Floor 26th Floor
Buffalo, New York, 14206 Buffalo, New York, 14206
THE BANK OF NEW YORK One Wall Street, One Wall Street,
New York, New York 10286 New York, New York 10286
THE NORTHERN TRUST COMPANY 50 South La Salle Street, 50 South La Salle St.
Chicago, Ill. 60675 Chicago, Ill. 60675
</TABLE>
- 2 -
<PAGE> 66
SCHEDULE 2
APPLICABLE MARGIN
<TABLE>
<CAPTION>
5-Year 5-Year 5-Year
Rating Facility Fee LIBOR Margin Drawn Cost
------ ------------ ------------ ----------
<S> <C> <C> <C>
A/A2 8.0 bps 27.0 bps 35.0 bps
A-/A3 9.0 bps 31.0 bps 40.0 bps
BBB+/Baa1 12.5 bps 37.5 bps 50.0 bps
BBB/Baa2 17.5 bps 45.0 bps 62.5 bps
less than or
equal to BBB-/Baa3 25.0 bps 50.0 bps 75.0 bps
</TABLE>
- 3 -
<PAGE> 67
EXHIBIT A-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
The Chase Manhattan Bank, as Agent
for the Lenders parties
to the 5-Year Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 [Date]
Attention: Nina Wang
Ladies and Gentlemen:
The undersigned, The Pepsi Bottling Group, Inc. (the
"Company"), refers to the 5-Year Credit Agreement, dated as of April 22, 1999
(as amended or modified from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
Bottling Group, LLC (the "Guarantor"), certain Lenders parties thereto and The
Chase Manhattan Bank, as administrative agent for said Lenders, and hereby gives
you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that
the undersigned hereby requests a Revolving Credit Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit Borrowing is
__________, ____.
(ii) The Type of Advances comprising the Proposed Revolving Credit
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit Borrowing
is $______.
(iv) The identity of the Borrower is __________, a ____________
corporation.
[(v)] [The initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Revolving Credit Borrowing is ___
month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Revolving Credit Borrowing:
A-1-1
<PAGE> 68
(A) the representations and warranties contained in Section 4.01 of the
Credit Agreement (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f) thereof (other than clause (ii)
thereof)) are correct in all material respects, on and as of the date of the
Proposed Revolving Credit Borrowing, before and after giving effect to the
Proposed Revolving Credit Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Revolving Credit Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
THE PEPSI BOTTLING GROUP, INC.
By
Title:
A-1-2
<PAGE> 69
EXHIBIT A-2 - FORM OF NOTICE
OF COMPETITIVE
BID BORROWING
The Chase Manhattan Bank, as Agent
for the Lenders parties
to the 5-Year Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 [Date]
Attention: Nina Wang
Ladies and Gentlemen:
The undersigned, The Pepsi Bottling Group, Inc. (the
"Company"), refers to the 5-Year Credit Agreement, dated as of April 22, 1999
(as amended or modified from time to time, the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
Bottling Group, LLC (the "Guarantor"), certain Lenders parties thereto and The
Chase Manhattan Bank, as administrative agent for said Lenders, and hereby gives
you notice pursuant to Section 2.03 of the Credit Agreement that the undersigned
hereby requests a Competitive Bid Borrowing under the Credit Agreement, and in
that connection sets forth the terms on which such Competitive Bid Borrowing
(the "Proposed Competitive Bid Borrowing") is requested to be made:
(A) Date of Proposed
Competitive Bid Borrowing ___________________
(B) Aggregate Amount of Proposed
Competitive Bid Borrowing ___________________
(C) Maturity Date ___________________
(D) Interest Rate Basis ___________________
(E) Interest Payment Date(s) ___________________
(F) Identity of Borrower ___________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section
4.01 (except the representations set forth in the last sentence of
subsection (e) thereof and in subsection (f) thereof (other than clause
(ii) thereof)) are correct in all material respects, on and as of the
A-2-1
<PAGE> 70
date of the Proposed Competitive Bid Borrowing, before and after giving
effect to the Proposed Competitive Bid Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date; and
(b) no event has occurred and is continuing, or would result
from the Proposed Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default.
The undersigned hereby confirms that the Proposed
Competitive Bid Borrowing is to be made available to it in accordance
with Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
THE PEPSI BOTTLING GROUP, INC.
By
Title:
A-2-2
<PAGE> 71
EXHIBIT A-3 - FORM OF
EXTENSION AGREEMENT
EXTENSION AGREEMENT
The Pepsi Bottling Group, Inc.
One Pepsi Way
Somers, New York 10589
Attention: Treasurer
The Chase Manhattan Bank, as Agent
under the 5-Year Credit Agreement referred to below
270 Park Avenue
New York, New York 10017
Attention: Nina Wang
Gentlemen:
Each undersigned Lender hereby agrees to extend, effective on
[insert effective date, (the "Extension Date"), the Termination Date under the
5-Year Credit Agreement dated as of April 22, 1999 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among The Pepsi Bottling Group, Inc., Bottling Group, LLC, the Lenders and
agents party thereto and The Chase Manhattan Bank, as administrative agent for
the Lenders, to_________________ date which is one year from the existing
Termination Date. Terms defined in the Credit Agreement are used herein as
therein defined.
This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
[Remainder of this page intentionally left blank]
A-3-1
<PAGE> 72
EXHIBIT B - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the 5-Year Credit Agreement dated as of
April 22, 1999 (as amended or modified from time to time, the "Credit
Agreement"), among THE PEPSI BOTTLING GROUP, INC., a Delaware corporation (the
"Company"), Bottling Group, LLC (the "Guarantor"), the Lenders (as defined in
the Credit Agreement) and The Chase Manhattan Bank, as administrative agent for
the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein
with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Competitive Bid Advances) equal to the
percentage interest specified on Schedule 1 hereto of all outstanding rights and
obligations under the Credit Agreement (other than in respect of Competitive Bid
Advances). After giving effect to such sale and assignment, the Assignee's
Commitment and the amount of the Revolving Credit Advances owing to the Assignee
will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Company or the performance or observance by the
Company of any of its obligations or the obligations of any Borrower under the
Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to
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the Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service forms required under Section 2.14 of the Credit
Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and facility fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
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Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: ___%
Assignee's Commitment: $__________
Aggregate outstanding principal
amount of Revolving Credit Advances assigned: $__________
Effective Date (1): _______________, ____
[NAME OF ASSIGNOR], as Assignor
By
Title:
Dated: ,
[NAME OF ASSIGNEE], as Assignee
By
Title:
Dated: ,
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
- -------------------
(1) This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
<PAGE> 75
Accepted and Approved this
____ day of ________, ____
THE CHASE MANHATTAN BANK, as Agent
By ___________________________________
Title:
Approved this ____ day
of ________, ____
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
2
<PAGE> 76
EXHIBIT C - FORM OF
OPINION OF COUNSEL
FOR THE COMPANY
AND THE GUARANTOR
[Effective Date]
To each of the Lenders parties
to the Credit Agreement dated
as of April 22, 1999
among The Pepsi Bottling Group, Inc.,
said Lenders and The Chase Manhattan Bank,
as Agent for said Lenders, and
to The Chase Manhattan Bank, as Agent
The Pepsi Bottling Group, Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section
3.01(g)(v) of the 5-Year Credit Agreement, dated as of April 22, 1999 (the
"Credit Agreement"), among The Pepsi Bottling Group, Inc. (the "Company"),
Bottling Group, LLC, (the "Guarantor"), the Lenders parties thereto and The
Chase Manhattan Bank, as Agent for said Lenders, providing for extensions of
credit to be made by said Lenders to the Company in an aggregate principal
amount at any one time outstanding of up to $250,000,000. Terms defined in the
Credit Agreement are used herein as therein defined.
I am the General Counsel of the Company and have acted as
counsel to the Company and the Guarantor in connection with the Credit
Agreement. In connection with this opinion, I have examined:
(1) The Credit Agreement.
(2) The documents furnished by the Company and the Guarantor
pursuant to subsections 3.01(g)(i)-(iv) of the Credit Agreement.
(3) The Articles of Incorporation of the Company and all
amendments thereto (the "Charter").
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(4) The by-laws of the Company and all amendments thereto (the
"By-laws").
(5) A certificate of the Secretary of State of Delaware, dated
_______________, 1999, attesting to the continued corporate existence
and good standing of the Company in that State.
(6) The Amended and Restated Limited Liability Company
Agreement of the Guarantor, dated as of March 30, 1999, and all
amendments thereto (the "LLC Agreement").
(7) The Certificate of Formation of the Guarantor and all
amendments thereto (the "Certificate of Formation").
(8) A certificate of the Secretary of State of Delaware dated
_________, 1999, attesting to the continued existence and good standing
of the Guarantor in that State.
(9) Resolutions of the Board of Directors of the Company
adopted on March 30, 1999.
(10) Resolutions of the Managing Directors of the Guarantor
adopted on ___________, 1999.
In addition, I have examined the originals, or copies
certified or otherwise identified to my satisfaction, of such other corporate
records of the Company and the Guarantor, certificates of public officials and
of officers of the Company and the Guarantor, and agreements, instruments and
other documents, as I have deemed necessary as a basis for the opinions
expressed below. I have assumed the due execution and delivery, pursuant to due
authorization, of the Credit Agreement by the Initial Lenders and the Agent.
The opinions expressed below are limited to the law of the
State of New York, the Delaware corporate law, the Federal law of the United
States and, with respect to paragraphs 1 and 2 and clauses (i), (ii) and
(iii)(a) of paragraph 3 only, the Delaware General Corporation Law and the
Delaware Limited Liability Company Act.
Based upon the foregoing and upon such investigation as I have
deemed necessary and subject to the qualifications set forth herein, I am of the
following opinion:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware.
2. The Guarantor is a limited liability company validly
existing and in good standing under the laws of the state of Delaware.
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<PAGE> 78
3. The execution, delivery and performance by the Company and
the Guarantor of the Credit Agreement (i) are within the Company's
corporate, and the Guarantor's limited liability company, powers, (ii)
have been duly authorized by all necessary corporate, or limited
liability company, action, and (iii) do not contravene (a) the Charter
or the Bylaws of the Company or the LLC Agreement or Certificate of
Formation of the Guarantor or (b) to the best of my knowledge (1) any
United States Federal or New York State law, rule or regulation
applicable to the Company or the Guarantor (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or (2) any contractual or legal restriction contained
in any material judgment, decree, mortgage, agreement, indenture or
other instrument to which the Company or the Guarantor is a party. The
Credit Agreement has been duly executed and delivered on behalf of the
Company and the Guarantor.
4. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
of the State of New York or the Federal government of the United States
is required for the due execution, delivery and performance by the
Company or the Guarantor of the Credit Agreement.
5. The Credit Agreement is a valid and binding obligation of
the Company and the Guarantor enforceable against the Company and the
Guarantor in accordance with its terms.
6. To the best of my knowledge and except as disclosed in the
Company's consolidated financial statements, there are no pending or
overtly threatened actions or proceedings against the Company or any of
its Subsidiaries, before any court, governmental agency or arbitrator
that purport to affect the legality, validity, binding effect or
enforceability of the Credit Agreement or that are likely to have a
materially adverse effect upon the financial condition or operations of
the Company or any of its Subsidiaries.
The opinions set forth above are subject to the following qualifications:
(a) My opinion in paragraph 5 above is subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally.
(b) My opinion in paragraph 5 above is subject to the effect
of general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
(c) I express no opinion as to the effect (if any) of the law
of any jurisdiction (other than the State of New York) wherein any
Lender may be located or wherein en-
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<PAGE> 79
forcement of the Credit Agreement may be sought that limits the rates
of interest that such Lender may charge or collect.
(d) I express no opinion as to the effect of Section 548 of
the United States Bankruptcy Code or any similar provision of State
law.
I am aware that Skadden, Arps, Slate Meagher & Flom LLP will
rely upon the opinions set forth in paragraphs 1, 2 and 3 of this opinion in
rendering their opinion furnished pursuant to Section 3.01 of the Credit
Agreement. In all other respects and for all other purposes, this opinion is
given solely for the benefit of the Agent and the Lenders and may not be relied
upon by any other person or entity without my prior written consent.
Very truly yours,
C-4
<PAGE> 80
EXHIBIT D
FORM OF DESIGNATION LETTER
____________, ____
To The Chase Manhattan Bank
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 5-Year Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 among The Pepsi Bottling Group, Inc. (the
"Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan Bank, as
administrative agent (the "Agent"), and the banks party thereto (the "Initial
Lenders"). Terms defined in the Credit Agreement are used herein as defined
therein.
The Company hereby designates [______________] (the "Borrowing
Subsidiary"), a Subsidiary of the Company and a corporation duly incorporated
under the laws of [_______________] as a Borrower in accordance with Section
2.17 of the Credit Agreement until such designation is terminated in accordance
with said Section 2.17.
The Borrowing Subsidiary hereby accepts the above designation
and hereby expressly and unconditionally accepts the obligations of a Borrower
under the Credit Agreement, adheres to the Credit Agreement and agrees and
confirms that, upon your execution and return to the Company of the enclosed
copy of this letter, such Borrowing Subsidiary shall be a Borrower for purposes
of the Credit Agreement and agrees to be bound by and perform and comply with
the terms and provisions of the Credit Agreement applicable to it as if it had
originally executed the Credit Agreement as a Borrower. The Borrowing Subsidiary
hereby authorizes and empowers the Company to act as its representative and
attorney-in-fact for the purposes of signing documents and giving and receiving
notices (including notices of Borrowing under the Credit Agreement) and other
communications in connection with the Credit Agreement and the transactions
contemplated thereby and for the purposes of modifying or amending any provision
of the Credit Agreement and further agrees that the Agent and each Lender may
conclusively rely on the foregoing authorization.
D-1
<PAGE> 81
The Borrowing Subsidiary represents and warrants that each of
the representations and warranties set forth in Section 4.01 (a) (as if the
reference therein to Delaware were a reference to its jurisdiction of
organization), (b), (c) and (d) of the Credit Agreement are true as if each
reference therein to the Company were a reference to the Borrowing Subsidiary
and as if each reference therein to the Loan Documents were a reference to this
Designation Letter.
The Borrowing Subsidiary hereby agrees that this Designation
Letter and the Credit Agreement shall be governed by, and construed in
accordance with, the law of the State of New York. The Borrowing Subsidiary
hereby submits to the nonexclusive jurisdiction of any New York state court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Designation Letter, the Credit Agreement or for recognition or
enforcement of any judgment. The Borrowing Subsidiary irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The Borrowing Subsidiary further agrees that service
of process in any such action or proceeding brought in New York may be made upon
it by service upon the Borrower at the "Address for Notices" specified below its
name on the signature pages to the Credit Agreement.
Without limiting the foregoing, the Borrowing Subsidiary joins
in the submission, agreements, waivers and consents in Section 8.11 and 8.12 of
the Credit Agreement.
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
[NAME OF BORROWING SUBSIDIARY]
By ___________________________________
Title:
D-2
<PAGE> 82
ACCEPTED
THE CHASE MANHATTAN BANK
as Agent
By ___________________________________
Title:
D-3
<PAGE> 83
EXHIBIT E
FORM OF SUBSTITUTION LETTER
__________, ____
To The Chase Manhattan Bank
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 5-Year Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 among The Pepsi Bottling Group, Inc. (the
"Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan Bank, as
administrative agent (the "Agent"), and the banks party thereto (the "Initial
Lenders"). Terms defined in the Credit Agreement are used herein as defined
therein.
The Company hereby elects to terminate its rights as a
Borrower under the Credit Agreement and designates the Guarantor as the
exclusive Borrower thereunder, in accordance with Section 2.17 of the Credit
Agreement.
The Guarantor hereby accepts the above substitution and hereby
expressly and unconditionally accepts the obligations of the Company under the
Credit Agreement, adheres to the Credit Agreement and agrees and confirms that,
as of the date hereof, the Guarantor shall become a Borrower for purposes of the
Credit Agreement and agrees to be bound by and perform and comply with the terms
and provisions of the Credit Agreement applicable to it as if it had originally
executed the Credit Agreement as the Company.
The Company and the Guarantor hereby represent and warrant to
the Agent and each Lender that, before and after giving effect to this
Substitution Letter, (i) the representations and warranties set forth in Section
4.01 of the Credit Agreement (except the representations set forth in the last
sentence of subsection (e) thereof and in subsection (f) thereof (other than
clause (ii) thereof)) are true and correct in all material respects on the date
hereof and after giving effect to the substitution contemplated hereby as if
made on and as of the date hereof and (ii) no Default has occurred and is
continuing.
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<PAGE> 84
The Company and the Guarantor hereby agree that this
Substitution Letter shall be governed by, and construed in accordance with, the
law of the State of New York. The Company and the Guarantor hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Substitution Letter or the transactions contemplated hereby.
THE PEPSI BOTTLING GROUP, INC.
By ______________________________
Title:
BOTTLING GROUP, LLC
By ______________________________
Title:
E-2
<PAGE> 85
EXHIBIT F
FORM OF TERMINATION LETTER
______________, _____
To The Chase Manhattan Bank,
as Agent
Attention: Nina Wang
Ladies and Gentlemen:
We make reference to the 5-Year Credit Agreement (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement") dated as of April 22, 1999 by and among The Pepsi Bottling Group,
Inc. (the "Company"), Bottling Group, LLC (the "Guarantor"), The Chase Manhattan
Bank, as administrative agent, and the banks party thereto. Terms defined in the
Credit Agreement are used herein as defined therein.
The Company hereby terminates the status as a Borrowing
Subsidiary of [_______________], a corporation incorporated under the laws of
[_______________], in accordance with Section 2.17 of the Credit Agreement,
effective as of the date of receipt of this notice by the Agent. The undersigned
hereby represents and warrants that all principal of and interest on any Advance
of the above-referenced Borrowing Subsidiary and all other amounts payable by
such Borrowing Subsidiary pursuant to the Credit Agreement have been paid in
full on or prior to the date hereof. Notwithstanding the foregoing, this
Termination Letter shall not affect any obligation which by the terms of the
Credit Agreement survives termination thereof.
THE PEPSI BOTTLING GROUP, INC.
By ___________________________________
Title:
F-1
<PAGE> 1
EXHIBIT 10.8
EXECUTIVE INCOME
DEFERRAL PROGRAM
AS EFFECTIVE
APRIL 7, 1999
<PAGE> 2
PBG
EXECUTIVE INCOME DEFERRAL PROGRAM
TABLE OF CONTENTS
ARTICLE I: INTRODUCTION.......................................................1
ARTICLE II: DEFINITIONS.......................................................2
2.1 Account.........................................................2
2.2 Base Compensation...............................................2
2.3 Beneficiary.....................................................2
2.4 Bonus Compensation..............................................3
2.5 Code............................................................3
2.6 Company.........................................................3
2.7 Deferral Subaccount.............................................3
2.8 Disability......................................................3
2.9 Effective Date..................................................3
2.10 Election Form...................................................3
2.11 Employer........................................................3
2.12 ERISA...........................................................3
2.13 Executive.......................................................4
2.14 Fair Market Value...............................................4
2.15 Participant.....................................................4
2.16 PBG.............................................................4
2.17 Performance Unit Payout.........................................4
2.18 Plan............................................................4
2.19 Plan Administrator..............................................4
2.20 Plan Year.......................................................5
2.21 Prior Plan......................................................5
2.22 Retirement......................................................5
2.23 Risk of Forfeiture Subaccount...................................5
2.24 Stock Option Gains..............................................5
2.25 Termination of Employment.......................................5
2.26 Valuation Date..................................................6
ARTICLE III: PARTICIPATION....................................................7
3.1 Eligibility to Participate.......................................7
3.2 Deferral Election................................................8
3.3 Time and Manner of Deferral Election.............................8
3.4 Period of Deferral..............................................10
-i-
<PAGE> 3
ARTICLE IV: INTERESTS OF PARTICIPANTS........................................11
4.1 Accounting for Participants' Interests..........................11
4.2 Vesting of a Participant's Account..............................13
4.3 Risk of Forfeiture Subaccounts..................................14
4.4 Distribution of a Participant's Account.........................15
4.5 Acceleration of Payment in Certain Cases........................18
ARTICLE V: PLAN ADMINISTRATOR................................................19
5.1 Plan Administrator..............................................19
5.2 Action..........................................................19
5.3 Rights and Duties...............................................19
5.4 Compensation, Indemnity and Liability...........................20
5.5 Taxes...........................................................20
ARTICLE VI: CLAIMS PROCEDURE.................................................21
6.1 Claims for Benefits.............................................21
6.2 Appeals.........................................................21
ARTICLE VII: AMENDMENT AND TERMINATION.......................................22
7.1 Amendments......................................................22
7.2 Termination of Plan.............................................22
ARTICLE VIII: MISCELLANEOUS..................................................23
8.1 Limitation on Participant's Rights..............................23
8.2 Unfunded Obligation of Individual Employer......................23
8.3 Other Plans.....................................................23
8.4 Receipt or Release..............................................23
8.5 Governing Law...................................................24
8.6 Adoption of Plan by Related Employers...........................24
8.7 Gender, Tense, Headings and Examples............................24
8.8 Successors and Assigns; Nonalienation of Benefits...............24
8.9 Facility of Payment.............................................25
8.10 Separate Plans..................................................25
APPENDIX
ARTICLE A INITIAL PUBLIC OFFERING OF PBG.............................2
-ii-
<PAGE> 4
ARTICLE I
INTRODUCTION
The Pepsi Bottling Group, Inc. (the "Company") established the PBG
Executive Income Deferral Program (the "Plan") to permit eligible executives to
defer base pay, certain cash awards made under its executive compensation
programs, and certain gains on stock options. The Plan is a successor to the
PepsiCo Executive Income Deferral Program.
Except as otherwise provided, this document sets forth the terms of the
Plan as in effect on the Effective Date. As of that date, it specifies the group
of executives of the Company and certain affiliated employers eligible to make
deferrals, the procedures for electing to defer compensation and the Plan's
provisions for maintaining and paying out amounts that have been deferred.
Additional provisions applicable to certain executives are set forth in the
Appendix, which modifies and supplements the general provisions of the Plan.
The Plan is unfunded and unsecured. Amounts deferred by an executive
are an obligation of that executive's individual employer. With respect to his
or her employer, the executive has the rights of a general creditor.
1
<PAGE> 5
ARTICLE II
DEFINITIONS
When used in this Plan, the following underlined terms shall have the
meanings set forth below unless a different meaning is plainly required by the
context:
2.1 Account: The account maintained for a Participant on the books of
his or her Employer to determine, from time to time, the Participant's interest
under this Plan. The balance in such Account shall be determined by the Plan
Administrator. Each Participant's Account shall consist of at least one Deferral
Subaccount for each separate deferral under Section 3.2. In accordance with
Section 4.3, some or all of a separate deferral may be held in a Risk of
Forfeiture Subaccount. The Plan Administrator may also establish such additional
subaccounts as it deems necessary for the proper administration of the Plan.
Where appropriate, a reference to a Participant's Account shall include a
reference to each applicable subaccount that has been established thereunder.
2.2 Base Compensation: An eligible Executive's adjusted base salary, as
determined by the Plan Administrator and to the extent paid in U.S. dollars from
an Employer's U.S. payroll. For any applicable payroll period, an eligible
Executive's adjusted base salary shall be determined after reductions for
applicable tax withholdings, Executive authorized deductions (including
deductions for the PBG 401(k) Plan, Benefits Plus and charitable donations), tax
levies, garnishments and such other amounts as the Plan Administrator recognizes
as reducing the amount of base salary available for deferral.
2.3 Beneficiary: The person or persons (including a trust or trusts)
properly designated by a Participant, as determined by the Plan Administrator,
to receive the amounts in one or more of the Participant's subaccounts in the
event of the Participant's death. To be effective, any Beneficiary designation
must be in writing, signed by the Participant, and filed with the Plan
Administrator prior to the Participant's death, and it must meet such other
standards (including any requirement for spousal consent) as the Plan
Administrator shall require from time to time. If no designation is in effect at
the time of a Participant's death or if all designated Beneficiaries have
predeceased the Participant, then the Participant's Beneficiary shall be his or
her estate. A Beneficiary designation of an individual by name (or name and
relationship) remains in effect regardless of any change in the designated
individual's relationship to the Participant. A Beneficiary designation solely
by relationship (for example, a designation of "spouse," that does not give the
name of the spouse) shall designate whoever is the person in that relationship
to the Participant at his or her death. An individual who is otherwise a
Beneficiary with respect to a Participant's Account ceases to be a Beneficiary
when all payments have been made from the Account.
2.4 Bonus Compensation: An eligible Executive's adjusted annual
incentive award under his or her Employer's annual incentive plan or the PBG
Executive Incentive
2
<PAGE> 6
Compensation Plan, as determined and adjusted by the Plan Administrator and to
the extent paid in U.S. dollars from an Employer's U.S. payroll. An eligible
Executive's annual incentive awards shall be adjusted to reduce them for
applicable tax withholdings, Executive authorized deductions (including
deductions for the PBG 401(k) Plan, Benefits Plus and charitable donations), tax
levies, garnishments and such other amounts as the Plan Administrator recognizes
as reducing the amount of such awards available for deferral.
2.5 Code: The Internal Revenue Code of 1986, as amended from time to
time.
2.6 Company: The Pepsi Bottling Group, Inc., a corporation organized
and existing under the laws of the State of Delaware, or its successor or
successors.
2.7 Deferral Subaccount: A subaccount of a Participant's Account
maintained to reflect his or her interest in the Plan attributable to each
deferral (or separately tracked portion of a deferral) of Base Compensation,
Bonus Compensation, Performance Unit Payout and Stock Option Gains,
respectively, and earnings or losses credited to such subaccount in accordance
with Section 4.1(b).
2.8 Disability: A Participant who is entitled to receive benefits under
the PBG Long Term Disability Plan shall be deemed to suffer from a disability.
Participants who are not eligible to participate in the PBG Long Term Disability
Plan shall be deemed to suffer from a disability if, in the judgment of the Plan
Administrator, they satisfy the standards for disability under the PBG Long Term
Disability Plan.
2.9 Effective Date: 12:00 A.M., Eastern Daylight Time, on the day after
the Offering Date as that term is defined in the 1999 Separation Agreement
between PepsiCo, Inc. and the Company.
2.10 Election Form: The form prescribed by the Plan Administrator on
which a Participant specifies the amount of his or her Base Compensation, Bonus
Compensation, Performance Unit Payout or Stock Option Gains to be deferred
pursuant to the provisions of Article III.
2.11 Employer: Each division of the Company and each of the Company's
subsidiaries and affiliates (if any) that is currently designated as an Employer
by the Plan Administrator.
2.12 ERISA: Public Law 93-406, the Executive Retirement Income Security
Act of 1974, as amended from time to time.
2.13 Executive: Any person in an executive classification of an
Employer who (i) is receiving remuneration for personal services rendered in the
employment of the Employer, and (ii) is paid in U.S. dollars from the Employer's
U.S. payroll.
3
<PAGE> 7
2.14 Fair Market Value: For purposes of converting a Participant's
deferrals to PBG Common Stock or PepsiCo Capital Stock as of any date, the Fair
Market Value of such stock is determined as the average of the high and low
price on such date (or if such date is not a trading date, the immediately
preceding date that is a trading date) for PBG or PepsiCo Stock (as applicable)
as reported on the composite tape for securities listed on the New York Stock
Exchange, Inc., rounded to four decimal places. For purposes of determining the
value of a Plan distribution or for reallocating amounts between phantom
investment options under the Plan, the Fair Market Value of PBG Common Stock or
PepsiCo Capital Stock is determined as the closing price on the applicable
Valuation Date (identified based on the Plan Administrator's current procedures)
for PBG or PepsiCo stock (as applicable) as reported on the composite tape for
securities listed on the New York Stock Exchange, Inc., rounded to four decimal
places.
2.15 Participant: Any Executive who is qualified to participate in this
Plan in accordance with Section 3.1 and who has an Account. A Participant
includes any individual who deferred compensation under the Prior Plan prior to
the Effective Date and for whom any Employer maintains on its books an Account
for such deferred compensation as of the Effective Date. An active Participant
is one who is currently deferring under Section 3.2.
2.16 PBG: The Pepsi Bottling Group, Inc.
2.17 Performance Unit Payout: The adjusted performance unit award
payable to an Executive under the Company's Long Term Incentive Plan during a
Plan Year, to the extent paid in U.S. dollars from an Employer's U.S. payroll.
An eligible Executive's performance unit award shall be adjusted to reduce it
for applicable tax withholdings, Executive authorized deductions, tax levies,
garnishments and such other amounts as the Plan Administrator recognizes as
reducing the amount of such awards available for deferral.
2.18 Plan: The PBG Executive Income Deferral Program, the plan set
forth herein, as it may be amended from time to time.
2.19 Plan Administrator: The Compensation and Management Development
Committee of the Board of Directors of the Company or its delegate or delegates,
which shall have the authority to administer the Plan as provided in Article V.
2.20 Plan Year: Except with respect to the first Plan Year, which
begins on the Effective Date and ends on December 31, 1999, the 12-consecutive
month period beginning on January 1 and ending on December 31.
2.21 Prior Plan: The PepsiCo Executive Income Deferral Program, as in
effect for periods before the Effective Date.
4
<PAGE> 8
2.22 Retirement: Termination of service with the Company and its
affiliates after attaining eligibility for retirement. A Participant attains
eligibility for retirement when he or she attains (i) at least age 55 with 10 or
more years of service, (ii) at least age 65 with 5 or more years of service, or
(iii) such other eligibility requirement for retirement under the PBG Salaried
Executives Retirement Plan as may apply to the Participant (whichever occurs
earliest) while in the employment of the Company or any of its affiliates that
are determined by the Plan Administrator to qualify for this purpose. A
Participant's service is determined under the terms of the PBG Salaried
Executives Retirement Plan.
2.23 Risk of Forfeiture Subaccount: The subaccount provided for by
Section 4.3 to contain the portion of each separate deferral that is subject to
forfeiture.
2.24 Stock Option Gains: The gains on an eligible Executive's 1990
PepsiCo Performance Share Stock Options and PBG Long Term Incentive Plan Stock
Options that are available for deferral under the Plan pursuant to Section
3.3(c). With respect to any options that are made subject to a Stock Option Gain
deferral election, the gains on such options shall be determined through a sale
of related shares by the issuer of the underlying shares net of: (i) the
exercise price of the options, (ii) any transaction costs incurred when such
gains are captured through the sale of related shares, and (iii) any related
taxes that the issuer determines will not otherwise be satisfied by the
Participant. For purposes of such sales, the issuer may aggregate shares related
to the options of different Participants, sell them over one or more days and
divide the net proceeds from such aggregate sales between the Participants in a
reasonable manner. The issuer shall have absolute discretion with respect to the
timing and aggregation of such sales.
2.25 Termination of Employment: A Participant's cessation of employment
with the Company, all Employers and all other Company subsidiaries and
affiliates (as defined for this purpose by the Plan Administrator). For purposes
of determining forfeitures under Section 4.3 and distributing a Participant's
Account under Section 4.4, the following shall apply:
(a) A Participant does not have a Termination of
Employment when the business unit or division of the Company that
employs him is sold if the Participant and substantially all employees
of that entity continue to be employed by the entity or its successor
after the sale. A Participant also does not have a Termination of
Employment when the subsidiary of the Company that employs him is sold
if: (i) the Participant continues to be employed by the entity or its
successor after the sale, and (ii) the Participant's interest in the
Plan continues to be carried as a liability by that entity or its
successor after the sale through a successor arrangement. In each case,
the Participant's Termination of Employment shall occur upon the
Participant's post-sale termination of employment from such entity or
its successor (and their related organizations, as determined by the
Plan Administrator).
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(b) With respect to any individual deferral, the term
"Termination of Employment" may encompass a Participant's death or
death may be considered a separate event, depending upon the convention
the Plan Administrator follows with respect to such deferral.
2.26 Valuation Date: Each date as of which Participant Accounts are
valued in accordance with procedures of the Plan Administrator that are
currently in effect. As of the Effective Date, the Valuation Dates are March 31,
June 30, September 30 and December 31. Values are determined as of the close of
a Valuation Date or, if such date is not a business day, as of the close of the
immediately preceding business day.
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ARTICLE III
PARTICIPATION
3.1 Eligibility to Participate.
(a) An Executive shall be eligible to defer
compensation under the Plan while employed by an Employer as an
Executive classified (or grandfathered) as Band II or above (or an
equivalent level for employees not under the band system).
Notwithstanding the preceding sentence, from time to time the Plan
Administrator may modify, limit or expand the class of Executives
eligible to defer hereunder, pursuant to criteria for eligibility that
need not be uniform among all or any group of Executives. During the
period an individual satisfies all of the eligibility requirements of
this section, he or she shall be referred to as an eligible Executive.
(b) Each eligible Executive becomes an active
Participant on the date an amount is first withheld from his or her
compensation pursuant to an Election Form submitted by the Executive to
the Plan Administrator under Section 3.3.
(c) An individual's eligibility to participate
actively by making deferrals under Section 3.2 shall cease upon the
election termination date (as defined below) occurring after the
earlier of:
(1) The date he or she ceases to be an
Executive who is described in the first sentence of subsection
(a) above (unless a less restrictive eligibility standard has
been adopted in accordance with the second sentence of
subsection (a), in which case only Paragraph (2) below shall
apply); or
(2) The date the Executive ceases to be
eligible under criteria described in the second sentence of
subsection (a) above.
For purposes of this subsection, an individual's election termination
date shall be a date as soon as administratively practicable following
the cessation of eligibility (or such other date as may be determined
in accordance with rules of the Plan Administrator).
(d) An individual, who has been an active Participant
under the Plan, ceases to be a Participant on the date his or her
Account is fully paid out.
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3.2 Deferral Election.
(a) Each eligible Executive may make an election to
defer under the Plan any whole percentage (up to 100%) of his or her
Base Compensation, Bonus Compensation and Performance Unit Payout (and
the Stock Option Gains on specified options) in the manner described in
Section 3.3. The Plan Administrator may also permit the Participant to
specify a dollar amount cap on his or her deferral in the case of Bonus
Compensation. Any percentage of Base Compensation deferred by an
eligible Executive for a Plan Year will be deducted each pay period
during the Plan Year for which he or she has Base Compensation and is
an eligible Executive. The percentage of Bonus Compensation or
Performance Unit Payout deferred by an eligible Executive for a Plan
Year will be deducted from his or her payment under the applicable
compensation program at the time it would otherwise be made, provided
he or she remains an eligible Executive at such time. Any Stock Option
Gains deferred by an eligible Executive shall be captured as of the
date or dates applicable for the category of underlying options under
procedures adopted by the Plan Administrator, provided that the Plan
Administrator determines the eligible Executive's rights in such
options may still be recognized at such time.
(b) To be effective, an eligible Executive's Election
Form must set forth the percentage of Base Compensation, Bonus
Compensation or Performance Unit Payout to be deferred (or for a
deferral of Stock Option Gains, the specific options on which any gains
are to be deferred), the investment choice under Section 4.1 (which
investment must be stated in multiples of 5 percent), the deferral
period under Section 3.4, the eligible Executive's Beneficiary
designation, and any other information that may be requested by the
Plan Administrator from time to time. In addition, the Election Form
must meet the requirements of Section 3.3 below.
3.3 Time and Manner of Deferral Election.
(a) Deferrals of Base Compensation. Subject to the
next sentence, an eligible Executive must make a deferral election for
a Plan Year with respect to Base Compensation at least two months prior
to the Plan Year in which the Base Compensation would otherwise be
paid. An individual who newly becomes an eligible Executive will have
30 days from the date the individual becomes an eligible Executive to
make an election with respect to compensation for payroll cycles that
begin after the election is received (if this 30-day period is a longer
election period than applies under the preceding sentence).
(b) Deferrals of Bonuses and Performance Unit
Payouts. Subject to the next two sentences, an eligible Executive must
make a deferral election for a Plan Year with respect to his or her
Bonus Compensation or
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Performance Unit Payout at least six months prior to the Plan Year in
which the Bonus Compensation or Performance Unit Payout would otherwise
be paid. The election deadline for such compensation payable in 2000
shall be July 15, 1999. An individual who newly becomes an eligible
Executive may make a deferral election with respect to his or her Bonus
Compensation or Performance Unit Payout to be paid during the
succeeding Plan Year later than the date applicable under the previous
sentence so long as the deferral election is made: (i) within 30 days
of the date the individual becomes an eligible Executive, and (ii)
sufficiently prior to the first day of such succeeding Plan Year to
ensure, in the discretionary judgment of the Plan Administrator, that
the amount to be deferred will not have been constructively received
(under all the facts and circumstances).
(c) Deferrals of Stock Option Gains. From time to
time, the Plan Administrator shall notify eligible Executives with
outstanding 1990 PepsiCo Performance Share Stock Options or PBG Long
Term Incentive Plan Options which options then qualify for deferral of
their related Stock Option Gains. Subject to the next sentence, an
eligible Executive who has qualifying options must make a deferral
election with respect to his or her related Stock Option Gains at least
6 months before such qualifying options' proposed capture date (as
defined below) or, if earlier, in the calendar year preceding the year
of the proposed capture date. In the case of an election with respect
to 1990 PepsiCo Performance Share Stock Options, the election deadline
shall be July 15, 1999. The "proposed capture date" for a set of
options shall be the earliest date that the issuer of the underlying
stock would capture a Participant's Stock Option Gains in accordance
with the deferral agreement prepared for such purpose by the Plan
Administrator.
(d) General Provisions. A separate deferral election
under (a), (b) or (c) above must be made by an eligible Executive for
each category of a Plan Year's compensation that is eligible for
deferral. If an eligible Executive fails to file a properly completed
and executed Election Form with the Plan Administrator by the
prescribed time, he or she will be deemed to have elected not to defer
any Base Compensation, Bonus Compensation, Performance Unit Payout or
Stock Option Gains, as the case may be, for the applicable Plan Year.
An election is irrevocable once received and determined by the Plan
Administrator to be properly completed. Increases or decreases in the
amount or percentage a Participant elects to defer shall not be
permitted during a Plan Year. Notwithstanding the preceding three
sentences, to the extent necessary because of extraordinary
circumstances, the Plan Administrator may grant an extension of any
election period and may permit (to the extent necessary to avoid undue
hardship to an eligible Executive) the complete revocation of an
election with respect to future deferrals. Any such extension or
revocation shall be available only if the Plan Administrator determines
that it shall not trigger constructive receipt of income and is
desirable for plan administration, and only upon such conditions as may
be required by the Plan Administrator.
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(e) Beneficiaries. A Participant designates on the
Election Form a Beneficiary to receive payment in the event of his or
her death of amounts credited to his or her subaccount for such
deferral. A Beneficiary is paid in accordance with the terms of a
Participant's Election Form, as interpreted by the Plan Administrator
in accordance with the terms of this Plan. At any time, a Participant
may change a Beneficiary designation for any or all subaccounts in a
writing that is signed by the Participant and filed with the Plan
Administrator prior to the Participant's death, and that meets such
other standards as the Plan Administrator shall require from time to
time.
3.4 Period of Deferral. An eligible Executive making a
deferral election shall specify a deferral period on his or her Election Form by
designating a specific payout date, one or more specific payout events or both a
date and one or more specific events from the choices that are made available to
the eligible Executive by the Plan Administrator. From time to time in its
discretion, the Plan Administrator may condition a Participant's right to
designate one or more specific payout events on the Participant's also
specifying a payout date. Subject to the next sentence, an eligible Executive's
elected period of deferral shall run until the earliest occurring date or event
specified on his or her Election Form. Notwithstanding an eligible Executive's
actual election, an eligible Executive shall be deemed to have elected a period
of deferral of not less than:
(a) For Base Compensation, at least until January 1
of the second Plan Year following the Plan Year during which the Base
Compensation would have been paid absent the deferral (until 6 months
after the Plan Year during which the Base Compensation would have been
paid for deferral elections made before the Effective Date);
(b) For Bonus Compensation, at least 2 years after
the date the Bonus Compensation would have been paid absent the
deferral (1 year for deferral elections made before the Effective
Date);
(c) For Performance Unit Payouts, at least 2 years
after the date the Performance Unit Payout would have been paid absent
the deferral (1 year for deferral elections made before the Effective
Date); and
(d) For Stock Option Gains, at least 2 years after
the date the Stock Option Gain is credited to a Deferral Subaccount for
the benefit of the Participant (1 year for deferral elections made
before the Effective Date).
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ARTICLE IV
INTERESTS OF PARTICIPANTS
4.1 Accounting for Participants' Interests.
(a) Deferral Subaccounts. Each Participant shall have
at least one separate Deferral Subaccount for each separate deferral of
Base Compensation, Bonus Compensation, Performance Unit Payout or Stock
Option Gains made by the Participant under this Plan. A Participant's
deferral shall be credited to his or her Account as soon as practicable
following the date when the deferral of compensation actually occurs,
as determined by the Plan Administrator. A Participant's Account is a
bookkeeping device to track the value of his or her deferrals (and his
or her Employer's liability therefor). No assets shall be reserved or
segregated in connection with any Account, and no Account shall be
insured or otherwise secured.
(b) Account Earnings or Losses. As of each Valuation
Date, a Participant's Account shall be credited with earnings and gains
(and shall be debited for expenses and losses) determined as if the
amounts credited to his or her Account had actually been invested as
directed by the Participant in accordance with this section (as
modified by Section 4.3, if applicable). The Plan provides only for
"phantom investments," and therefore such earnings, gains, expenses and
losses are hypothetical and not actual. However, they shall be applied
to measure the value of a Participant's Account and the amount of his
or her Employer's liability to make deferred payments to or on behalf
of the Participant.
(c) Investment Options. Each of a Participant's
Subaccounts (other than those containing Stock Option Gains) shall be
invested on a phantom basis in any combination of phantom investment
options specified by the Participant (or following the Participant's
death, by his or her Beneficiary) from those offered by the Plan
Administrator for this purpose from time to time. Subsection (e) below
governs the phantom investment options available for deferrals of Stock
Option Gains. The Plan Administrator may discontinue any phantom
investment option with respect to some or all Accounts, and it may
provide for shifting a Participant's phantom investment from the
discontinued option to a specified replacement option (unless the
Participant selects another replacement option in accordance with such
requirements as the Plan Administrator may apply). As of the Effective
Date, the phantom investment options are:
(1) Phantom Interest Bearing Cash Account.
Participant Accounts invested in this phantom option accrue a
return based upon the prime rate of interest announced from
time to time by Citibank, N.A. (or another bank designated by
the Plan Administrator from time to time). Returns accrue
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during the period since the last Valuation Date based on the
prime rate in effect on the first business day after such
Valuation Date and are compounded annually. An amount deferred
or transferred into this option is credited with the
applicable rate of return beginning with the date as of which
the amount is treated as invested in this option by the Plan
Administrator.
(2) Phantom PBG Stock Account. Participant
Accounts invested in this phantom option are adjusted to
reflect an investment in PBG Common Stock. An amount deferred
or transferred into this option is converted to phantom shares
of PBG Common Stock of equivalent value by dividing such
amount by the Fair Market Value of a share of PBG Common Stock
on the date as of which the amount is treated as invested in
this option by the Plan Administrator. Only whole shares are
determined. Any remaining amount (and all amounts that would
be received by the Account as dividends, if dividends were
paid on phantom shares of PBG Common Stock as they are on
actual shares) are credited to a dividend subaccount that is
invested in the phantom option in paragraph (1) above (the
Phantom Interest Bearing Account).
(i) A Participant's interest in the
Phantom PBG Stock Account is valued as of a Valuation
Date by multiplying the number of phantom shares
credited to his or her Account on such date by the
Fair Market Value of a share of PBG Common Stock on
such date, and then adding the value of the
Participant's dividend subaccount.
(ii) If shares of PBG Common Stock
change by reason of any stock split, stock dividend,
recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other any other
corporate change treated as subject to this provision
by the Plan Administrator, such equitable adjustment
shall be made in the number and kind of phantom
shares credited to an Account or subaccount as the
Plan Administrator may determine to be necessary or
appropriate.
In no event will shares of PBG Common Stock actually be
purchased or held under this Plan, and no Participant shall
have any rights as a shareholder of PBG Common Stock on
account of an interest in this phantom option.
(3) PBG 401(k) Accounts. From time to time,
the Plan Administrator shall designate which (if any) of the
investment options under the Company's Long Term Savings Plan
(401(k) Plan) shall be available as phantom investment options
under this Plan. As of the Effective Date, such available
phantom options are the Equity-Index Account, Equity-Income
Account, and the Security Plus Account. Participant Accounts
invested in
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these phantom options are adjusted to reflect an investment in
the corresponding investment options under the PBG 401(k)
Plan. An amount deferred or transferred into one of these
options is converted to phantom units in the applicable PBG
401(k) fund of equivalent value by dividing such amount by the
value of a unit in such fund on the date as of which the
amount is treated as invested in this option by the Plan
Administrator. Thereafter, a Participant's interest in each
such phantom option is valued as of a Valuation Date by
multiplying the number of phantom units credited to his or her
Account on such date by the value of a unit in the applicable
PBG 401(k) fund.
(4) Other Accounts: Any other phantom
investment accounts shall be administered under procedures
implemented from time to time by the Plan Administrator.
(d) Method of Allocation. With respect to any
deferral election by a Participant, the Participant must use his or her
Election Form to allocate the deferral in 5 percent increments among
the phantom investment options then offered by the Plan Administrator.
Thereafter, a Participant may reallocate previously deferred amounts in
a subaccount by properly completing and submitting a fund transfer form
provided by the Plan Administrator and specifying, in 5 percent
increments, the reallocation of his or her Subaccount among the phantom
investment options then offered by the Plan Administrator for this
purpose. Any such transfer form shall be effective as of the first
Valuation Date that follows its receipt by at least the number of days
that the Plan Administrator specifies for this purpose from time to
time. If more than one transfer form is received on a timely basis for
a subaccount, the transfer form that the Plan Administrator determines
to be the most recent shall be followed.
(e) Investment Choices for Stock Option Gains.
Deferrals of Stock Option gains initially may be invested only in the
Phantom PBG Stock Account. In the case of a Participant who has
attained his or her Retirement, the Plan Administrator may make
available some or all of the other phantom investment options described
in subsection (c) above. In this case, any election to reallocate the
balance in the Participant's applicable Deferral Subaccount shall be
governed by the foregoing provisions of this section.
4.2 Vesting of a Participant's Account. Except as provided in Section
4.3, a Participant's interest in the value of his or her Account shall at all
times be 100 percent vested, which means that it will not forfeit as a result of
his or her Termination of Employment.
4.3 Risk of Forfeiture Subaccounts. A Participant may elect to
defer Base Compensation, Bonus Compensation or Performance Unit Payouts to a
Risk of Forfeiture
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Subaccount only if: (i) he or she had, as of June 1, 1994, a deferred
compensation subaccount under the Prior Plan maintained under a forfeiture
agreement (as defined below), and (ii) he or she has not yet attained
eligibility for Retirement when the first amount would be deferred pursuant to
his or her current risk-of-forfeiture election. A "forfeiture agreement" is an
agreement with the Company, any Employer, or one of their predecessors providing
that the subaccount would be forfeited if the employee terminated employment
voluntarily or on account of misconduct prior to Retirement. A Participant who
meets these requirements may elect under Article III to defer some or all of his
or her eligible compensation to a Risk of Forfeiture Subaccount subject to the
following terms. (The date when a Participant attains eligibility for Retirement
is specified in the definition of "Retirement.")
(a) A Risk of Forfeiture Subaccount will be
terminated and forfeited in the event that the Participant has a
Termination of Employment that is voluntary or because of his or her
misconduct prior to the earliest of:
(1) The end of the deferral period
designated in his or her Election Form for such deferral (or
if later, the end of such minimum period as may be required
under Section 3.4);
(2) The date the Participant attains
eligibility for Retirement; or
(3) The date indicated on his or her
Election Form as the end of the risk of forfeiture condition
(but not before completing the minimum risk of forfeiture
period required by the Plan Administrator from time to time).
(b) A Risk of Forfeiture Subaccount shall become
fully vested (and shall cease to be a Risk of Forfeiture Subaccount)
when:
(1) The Participant reaches any of the dates
in subsection (a) above while still employed by the Company or
one of its affiliates (as defined by the Plan Administrator
for this purpose), or
(2) On the date the Participant terminates
involuntarily from his or her Employer (including death and
termination for Disability), provided that such termination is
not for his or her misconduct.
(c) No amounts credited to a Risk of Forfeiture
Subaccount may be transferred to a subaccount of the Participant that
is not a Risk of Forfeiture Subaccount. No amounts credited to a
subaccount of the Participant that is not a Risk of Forfeiture
Subaccount may be transferred to a Risk of Forfeiture Subaccount.
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(d) A Participant may initially direct and then
reallocate his or her Risk of Forfeiture Subaccount to any of the
phantom investment options under the Plan that are currently available
for such direction or reallocation, whichever applies. During the
period before a Risk of Forfeiture Subaccount ceases to be a Risk of
Forfeiture Subaccount, the return under any such phantom investment
option shall be supplemented as follows.
(1) In the case of the Phantom PBG Stock
Account, the Participant's dividend subaccount thereunder
shall be credited with an additional year-end dividend amount
equal to 2 percent of the average closing price of PBG Common
Stock for the 30 business days preceding the end of the
Company's fiscal year multiplied by the number of phantom
shares of PBG Common Stock credited to the Participant's
Account as of the end of the year. If the Participant's
subaccount was not a Risk of Forfeiture Subaccount for the
entire year (or if the Participant reallocated amounts to the
Phantom PBG Stock Account after the beginning of the year),
this 2 percent additional dividend will be prorated down
appropriately, as determined by the Plan Administrator. In
addition, the Participant's dividend subaccount shall earn
interest at a rate that is 2 percent above the rate ordinarily
applicable under the Phantom Interest Bearing Account for the
period that it is contained within a Risk of Forfeiture
Subaccount.
(2) In the case of any other available
phantom investment option, the return on each such option
shall be supplemented with an additional 2% annual return for
the period that it is held within a Risk of Forfeiture
Subaccount (but prorated for periods of such investment of
less than a year).
4.4 Distribution of a Participant's Account. A Participant's Account
shall be distributed as provided in this Section 4.4. The portion of any
subaccount that is invested in the Phantom PBG Stock Account may be distributed,
at the option of the Plan Administrator, either in the form of cash or in whole
shares of PBG Common Stock (with cash for any partial share and the value of the
dividend account). The Plan Administrator may also adopt a rule that eliminates
the option to pay out cash under the prior sentence (except for any partial
share and the value of the dividend account). All other subaccount balances
shall be distributed in cash.
(a) Scheduled Payout Date. With respect to a
specific deferral, a Participant's "Scheduled Payout Date" shall be the
earlier of:
(1) The date selected by the Participant for
such deferral in accordance with Section 3.4, or
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(2) The first day of the calendar quarter
that follows the earliest to occur event selected by the
Participant for such deferral in accordance with Section 3.4.
Notwithstanding the prior sentence, in the case of a deferral of Stock
Option Gains (and at the Plan Administrator's discretion, any other
deferral), a Participant's Scheduled Payout Date for such deferral
shall be first day of the calendar quarter following his or her
Termination of Employment other than for death, Disability or
Retirement (or if later, the first day of the calendar quarter on or
after completing: (i) for deferrals of stock option gains, 1 year
following when the gain is credited to a Deferral Subaccount, and (ii)
for other deferrals, the minimum periods of deferral specified in
Section 3.4(a), (b) and (c)). The discretion authorized in the
preceding sentence shall be exercised consistently by Participant class
(as identified by the Plan Administrator from time to time), rather
than Participant-by-Participant. In addition, with respect to any
deferral, if a Participant selects only a payout event that might not
occur (such as Retirement) and then terminates employment before the
occurrence of the event, the Plan Administrator may adopt rules to
specify the Scheduled Payout Date that shall apply to the deferral,
notwithstanding the terms of the Participant's election. Unless an
election has been made in accordance with subsection (b) below, the
Participant's subaccount containing the deferral shall be distributed
to the Participant in a single lump sum as soon as practicable
following the Scheduled Payout Date.
(b) Payment Election. A Participant may delay receipt
of a subaccount beyond its Scheduled Payout Date, or elect to receive
installments rather than a lump sum, by making a payment election under
this subsection. A payment election must be made by the calendar year
before the year containing the Scheduled Payout Date (or if earlier, at
least 6 months before the Scheduled Payout Date). This deadline applies
without regard to whether the Participant has received any notice of
the deadline or the availability of a payment election. Any payment
election to receive a lump sum at a later time must specify a revised
payout date that is at least 2 years after the Scheduled Payout Date.
Any payment election to receive installment payments in lieu of a lump
sum shall specify the amount (or method for determining) each
installment and a set of revised payout dates, the last of which must
be at least 2 years after the Scheduled Payout Date. With respect to
any subaccount, only one election may be made under this subsection.
Beneficiaries are not permitted to make elections under this
subsection. In addition, an election under this subsection may not
delay the distribution of a deferral of Stock Option Gains made by a
Participant whose employment has terminated other than for death,
Disability or Retirement. Actual payments shall be made as soon as
practicable following a revised payout date.
(c) Valuation. In determining the amount of any
individual distribution pursuant to subsection (a) or (b) above, the
Participant's subaccount shall
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continue to be credited with earnings and gains (and debited for
expenses and losses) under Sections 4.1 and 4.3 until the Valuation
Date preceding the Scheduled Payout Date or revised payout date for
such distribution (whichever is applicable). In determining the value
of a Participant's remaining subaccount following an installment
distribution, such installment distribution shall reduce the value of
the Participant's subaccount as of the close of the Valuation Date
preceding the revised payout date for such installment.
(d) Limitations. The following limitations apply to
distributions from the Plan.
(1) Installments may only be made quarterly,
semi-annually or annually, for a period of no more than 20
years, and not later than the Participant's 80th birthday (or
what would have been his or her 80th birthday, if the
Participant dies earlier).
(2) If a Participant has elected a Scheduled
Payout Date that would be after his or her 80th birthday, the
Participant shall be deemed to have elected his or her 80th
birthday as his or her Scheduled Payout Date.
(3) If a Participant has elected to defer
income, which would qualify as performance-based compensation
under Code section 162(m), into a Risk of Forfeiture
Subaccount, then such subaccount may not be paid out at any
time while the Participant is a covered employee under Code
section 162(m)(3), to the extent the Plan Administrator
determines it would result in compensation being paid to the
Participant in such year that would not be deductible under
Code section 162(m). The payout of any such amount shall be
deferred until a year when the Participant is no longer a
section 162(m) covered employee. The Plan Administrator may
waive the foregoing provisions of this paragraph to the extent
necessary to avoid an undue hardship to the Participant. This
paragraph shall apply notwithstanding any provision of the
Plan to the contrary.
(e) Upon a Participant's death, his or her
Beneficiary shall be paid each subaccount still standing to the
Participant's credit under the Plan in accordance with the terms of the
Participant's payout election for such subaccount under Section 3.4, or
his or her payment election under subsection (b) above, whichever is
applicable. Any claim to be paid any amounts standing to the Credit of
a Participant in connection with the Participant's death must be
received by the Plan Administrator at least 14 days before any such
amount is paid out by the Plan Administrator. Any claim received
thereafter is untimely, and it shall not lie against the Plan, the
Company, any Employer, the Plan Administrator or any other party acting
for one or more of them.
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4.5 Acceleration of Payment in Certain Cases. Except as expressly
provided in this Section 4.5, no payments shall be made under this Plan prior to
the date (or dates) applicable under Section 4.4.
(a) A Participant who is suffering severe financial
hardship resulting from extraordinary and unforeseeable events beyond
the control of the Participant (and who does not have other funds
reasonably available that could satisfy the severe financial hardship)
may file a written request with the Plan Administrator for accelerated
payment of all or a portion of the amount credited to his or her
Account. A committee composed of representatives from the Company's
Compensation Department, Tax Department and Law Department, or such
other parties as the Plan Administrator may specify from time to time,
shall have sole discretion to determine whether a Participant satisfies
the requirements for a hardship request and the amount that may be
distributed (which shall not exceed the amount reasonably necessary to
alleviate the Participant's hardship).
(b) After a Participant has filed a written request
pursuant to this section, along with all supporting material, the
committee shall grant or deny the request within 60 days (or such other
number of days as is customarily applied from time to time) unless
special circumstances warrant additional time.
(c) The Plan Administrator may adjust the standards
for hardship withdrawals from time to time to the extent it determines
such adjustment to be necessary to avoid triggering constructive
receipt of income under the Plan.
(d) A Beneficiary may also request a hardship
distribution upon satisfaction of the foregoing requirements and
subject to the foregoing limitations.
(e) When determined to be necessary in the interest
of sound plan administration, the Plan Administrator may accelerate the
payment of a class of Participants' subaccounts hereunder. This shall
only occur to the extent the Plan Administrator determines that such
acceleration will not trigger constructive receipt of subaccounts that
are not paid out.
(f) When some or all of a Participant's subaccount is
distributed pursuant to this section, the distribution and the
subaccount shall be valued as provided by the Plan Administrator, using
rules patterned after those in Section 4.4(c) above, on the Valuation
Date coincident with or immediately preceding the date on which the
decision to make accelerated payment is made (or if later, the date on
which it is deemed to be effective).
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ARTICLE V
PLAN ADMINISTRATOR
5.1 Plan Administrator. The Plan Administrator is the Compensation and
Management Development Committee of the Company's Board of Directors (the
"Committee") or its delegate or delegates, who shall act within the scope of
their delegation pursuant to such operating guidelines as the Committee shall
establish from time to time. The Plan Administrator is responsible for the
administration of the Plan.
5.2 Action. Action by the Committee may be taken in accordance with
procedures that the Committee adopts from time to time or that the Company's Law
Department determines are legally permissible.
5.3 Rights and Duties. The Plan Administrator shall administer and
manage the Plan and shall have all powers necessary to accomplish that purpose,
including (but not limited to) the following:
(a) To exercise its discretionary authority to
construe, interpret, and administer this Plan;
(b) To exercise its discretionary authority to make
all decisions regarding eligibility, participation and deferrals, to
make allocations and determinations required by this Plan, and to
maintain records regarding Participants' Accounts;
(c) To compute and certify to the Employer the amount
and kinds of payments to Participants or their Beneficiaries, and to
determine the time and manner in which such payments are to be paid;
(d) To authorize all disbursements by the Employer
pursuant to this Plan;
(e) To maintain (or cause to be maintained) all the
necessary records for administration of this Plan;
(f) To make and publish such rules for the regulation
of this Plan as are not inconsistent with the terms hereof;
(g) To delegate to other individuals or entities from
time to time the performance of any of its duties or responsibilities
hereunder;
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(h) To establish or to change the phantom investment
options or arrangements under Article IV; and
(i) To hire agents, accountants, actuaries,
consultants and legal counsel to assist in operating and administering
the Plan.
The Plan Administrator has the exclusive and discretionary authority to construe
and to interpret the Plan, to decide all questions of eligibility for benefits,
to determine the amount and manner of payment of such benefits and to make any
determinations that are contemplated by (or permissible under) the terms of this
Plan, and its decisions on such matters will be final and conclusive on all
parties. Any such decision or determination shall be made in the absolute and
unrestricted discretion of the Plan Administrator, even if (A) such discretion
is not expressly granted by the Plan provisions in question, or (B) a
determination is not expressly called for by the Plan provisions in question,
and even though other Plan provisions expressly grant discretion or call for a
determination. In the event of a review by a court, arbitrator or any other
tribunal, any exercise of the Plan Administrator's discretionary authority shall
not be disturbed unless it is clearly shown to be arbitrary and capricious.
5.4 Compensation, Indemnity and Liability. The Plan
Administrator will serve without bond and without compensation for services
hereunder. All expenses of the Plan and the Plan Administrator will be paid by
the Employer. To the extent deemed appropriate by the Plan Administrator, any
such expense may be charged against specific Participant Accounts, thereby
reducing the obligation of the Employer. No member of the Committee, and no
individual acting as the delegate of the Committee, shall be liable for any act
or omission of any other member or individual, nor for any act or omission on
his or her own part, excepting his or her own willful misconduct. The Employer
will indemnify and hold harmless each member of the Committee and any employee
of PBG (or a PBG affiliate, if recognized as an affiliate for this purpose by
the Plan Administrator) acting as the delegate of the Committee against any and
all expenses and liabilities, including reasonable legal fees and expenses,
arising out of his or her membership on the Committee (or his or her serving as
the delegate of the Committee), excepting only expenses and liabilities arising
out of his or her own willful misconduct.
5.5 Taxes. If the whole or any part of any Participant's
Account becomes liable for the payment of any estate, inheritance, income, or
other tax which the Employer may be required to pay or withhold, the Employer
will have the full power and authority to withhold and pay such tax out of any
moneys or other property in its hand for the account of the Participant. To the
extent practicable, the Employer will provide the Participant notice of such
withholding. Prior to making any payment, the Employer may require such releases
or other documents from any lawful taxing authority as it shall deem necessary.
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ARTICLE VI
CLAIMS PROCEDURE
6.1 Claims for Benefits. If a Participant, Beneficiary or
other person (hereafter, "Claimant") does not receive timely payment of any
benefits which he or she believes are due and payable under the Plan, he or she
may make a claim for benefits to the Plan Administrator. The claim for benefits
must be in writing and addressed to the Plan Administrator or to the Company. If
the claim for benefits is denied, the Plan Administrator will notify the
Claimant in writing within 90 days after the Plan Administrator initially
received the benefit claim. However, if special circumstances require an
extension of time for processing the claim, the Plan Administrator will furnish
notice of the extension to the Claimant prior to the termination of the initial
90-day period and such extension may not exceed one additional, consecutive
90-day period. Any notice of a denial of benefits should advise the Claimant of
the basis for the denial, any additional material or information necessary for
the Claimant to perfect his or her claim, and the steps which the Claimant must
take to have his or her claim for benefits reviewed.
6.2 Appeals. Each Claimant whose claim for benefits has been
denied may file a written request for a review of his or her claim by the Plan
Administrator. The request for review must be filed by the Claimant within 60
days after he or she received the written notice denying his or her claim. The
decision of the Plan Administrator will be made within 60 days after receipt of
a request for review and will be communicated in writing to the Claimant. Such
written notice shall set forth the basis for the Plan Administrator's decision.
If there are special circumstances which require an extension of time for
completing the review, the Plan Administrator's decision may be rendered not
later than 120 days after receipt of a request for review.
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ARTICLE VII
AMENDMENT AND TERMINATION
7.1 Amendments. The Compensation and Management Development
Committee of the Board of Directors of the Company, or its delegate, has the
right in its sole discretion to amend this Plan in whole or in part at any time
and in any manner; provided, however, that no such amendment shall reduce the
amount credited to the Account of any Participant as of the date such amendment
is adopted. Any amendment shall be in writing and adopted by the Committee or an
officer of the Company who is authorized by the Committee for this purpose. All
Participants shall be bound by such amendment.
7.2 Termination of Plan. The Company expects to continue this
Plan, but does not obligate itself to do so. The Company, acting by the
Compensation and Management Development Committee of its Board of Directors (or
its delegate), reserves the right to discontinue and terminate the Plan at any
time, in whole or in part, for any reason (including a change, or an impending
change, in the tax laws of the United States or any State). Termination of the
Plan will be binding on all Participants (and a partial termination shall be
binding upon all affected Participants), but in no event may such termination
reduce the amounts credited at that time to any Participant's Account. If this
Plan is terminated (in whole or in part), amounts theretofore credited to
affected Participants' Accounts may either be paid in a lump sum immediately, or
distributed in some other manner consistent with this Plan, as determined by the
Plan Administrator in its sole discretion.
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ARTICLE VIII
MISCELLANEOUS
8.1 Limitation on Participant's Rights. Participation in this
Plan does not give any Participant the right to be retained in the Employer's or
Company's employ (or any right or interest in this Plan or any assets of the
Company or Employer other than as herein provided). The Company and Employer
reserve the right to terminate the employment of any Participant without any
liability for any claim against the Company or Employer under this Plan, except
for a claim for payment of deferrals as provided herein.
8.2 Unfunded Obligation of Individual Employer. The benefits
provided by this Plan are unfunded. All amounts payable under this Plan to
Participants are paid from the general assets of the Participant's individual
Employer. Nothing contained in this Plan requires the Company or Employer to set
aside or hold in trust any amounts or assets for the purpose of paying benefits
to Participants. Neither a Participant, Beneficiary, nor any other person shall
have any property interest, legal or equitable, in any specific Employer asset.
This Plan creates only a contractual obligation on the part of a Participant's
individual Employer, and the Participant has the status of a general unsecured
creditor of this Employer with respect to amounts of compensation deferred
hereunder. Such a Participant shall not have any preference or priority over,
the rights of any other unsecured general creditor of the Employer. No other
Employer guarantees or shares such obligation, and no other Employer shall have
any liability to the Participant or his or her Beneficiary. In the event, a
Participant transfers from the employment of one Employer to another, the former
Employer shall transfer the liability for deferrals made while the Participant
was employed by that Employer to the new Employer (and the books of both
Employers shall be adjusted appropriately).
8.3 Other Plans. This Plan shall not affect the right of any
eligible Executive or Participant to participate in and receive benefits under
and in accordance with the provisions of any other employee benefit plans which
are now or hereafter maintained by any Employer, unless the terms of such other
employee benefit plan or plans specifically provide otherwise or it would cause
such other plan to violate a requirement for tax favored treatment.
8.4 Receipt or Release. Any payment to a Participant in
accordance with the provisions of this Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Plan Administrator, the Employer and
the Company, and the Plan Administrator may require such Participant, as a
condition precedent to such payment, to execute a receipt and release to such
effect.
8.5 Governing Law. This Plan shall be construed, administered,
and governed in all respects in accordance with applicable federal law and, to
the extent not preempted by
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<PAGE> 27
federal law, in accordance with the laws of the State of New York. If any
provisions of this instrument shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
8.6 Adoption of Plan by Related Employers. The Plan
Administrator may select as an Employer any division of the Company, as well as
any corporation related to the Company by stock ownership, and permit or cause
such division or corporation to adopt the Plan. The selection by the Plan
Administrator shall govern the effective date of the adoption of the Plan by
such related Employer. The requirements for Plan adoption are entirely within
the discretion of the Plan Administrator and, in any case where the status of an
entity as an Employer is at issue, the determination of the Plan Administrator
shall be absolutely conclusive.
8.7 Gender, Tense, Headings and Examples. In this Plan,
whenever the context so indicates, the singular or plural number and the
masculine, feminine, or neuter gender shall be deemed to include the other.
Headings and subheadings in this Plan are inserted for convenience of reference
only and are not considered in the construction of the provisions hereof.
Whenever an example is provided or the text uses the term "including" followed
by a specific item or items, or there is a passage having a similar effect, such
passage of the Plan shall be construed as if the phrase "without limitation"
followed such example or term (or otherwise applied to such passage in a manner
that avoids limitation on its breadth of application).
8.8 Successors and Assigns; Nonalienation of Benefits. This
Plan inures to the benefit of and is binding upon the parties hereto and their
successors, heirs and assigns; provided, however, that the amounts credited to
the Account of a Participant are not (except as provided in Section 5.5) subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any right to
any benefits payable hereunder, including, without limitation, any assignment or
alienation in connection with a separation, divorce, child support or similar
arrangement, will be null and void and not binding on the Plan or the Company or
Employer. Notwithstanding the foregoing, the Plan Administrator reserves the
right to make payments in accordance with a divorce decree, judgment or other
court order as and when cash payments are made in accordance with the terms of
this Plan from the subaccount of a Participant. Any such payment shall be
charged against and reduce the Participant's Account.
8.9 Facility of Payment. Whenever, in the Plan Administrator's
opinion, a Participant or Beneficiary entitled to receive any payment hereunder
is under a legal disability or is incapacitated in any way so as to be unable to
manage his or her financial affairs, the Plan Administrator may direct the
Employer to make payments to such person or to the legal representative of such
person for his or her benefit, or to apply the payment for
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<PAGE> 28
the benefit of such person in such manner as the Plan Administrator considers
advisable. Any payment in accordance with the provisions of this section shall
be a complete discharge of any liability for the making of such payment to the
Participant or Beneficiary under the Plan.
8.10 Separate Plans. This Plan document encompasses two
separate plans of deferred compensation for all legal purposes (including ERISA,
federal tax law, and state tax law) as set forth in subsections (a) and (b)
below.
(a) The portion of the Plan that provides for
deferrals of Base Compensation, Bonus Compensation and Performance Unit
Payouts (which shall be known as the "PBG Executive Income Deferral
Plan").
(b) The portion of the Plan that provides for
deferrals of Stock Option Gains (which shall be known as the "PBG
Option Gains Deferral Plan").
Together, these two separate plans of deferred compensation are referred to as
the PBG Executive Income Deferral Program.
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The above restated Plan is hereby adopted and approved by the Company's
duly authorized officer to be effective as stated herein.
THE PEPSI BOTTLING GROUP, INC.
Submitted by: _________________________________
Mr. David Kasiarz
Vice President, Compensation & Benefits
Consented to by: _________________________________
Ms. Pamela McGuire
Senior Vice President, General Counsel
& Secretary
Executed by: _________________________________
Mr. Kevin Cox
Senior Vice President & Chief
Personnel Officer
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<PAGE> 30
PBG EXECUTIVE INCOME DEFERRAL PROGRAM
APPENDIX
The following Appendix article or articles modify or supplement the
general terms of the Plan as it applies to certain executives.
Except as specifically modified in the Appendix, the foregoing
provisions of the Plan shall fully apply. In the event of a conflict between
this Appendix and the foregoing provisions of the Plan, the Appendix shall
govern with respect to the conflict.
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ARTICLE A
INITIAL PUBLIC OFFERING OF PBG
This Article sets forth provisions that apply in connection
with the Company's initial public offering.
A.1 Definitions: When used in this Article, the following
underlined terms shall have the meanings set forth below. Except as otherwise
provided in this Article, all terms that are defined in Article II of the Plan
shall have the meaning assigned to them by Article II.
(a) Employee Programs Agreement: The 1999 Employee
Programs Agreement between PepsiCo and PBG.
(b) Offering Date: The "Offering Date" as that term
is defined in the 1999 Separation Agreement between PepsiCo and PBG.
(c) PepsiCo: PepsiCo, Inc., a North Carolina
Corporation.
(d) PepsiCo Group: PepsiCo and its subsidiaries and
affiliates, as determined by the Plan Administrator.
(e) Transferred Individual: A nonterminated
"Transferred Individual" as that term is defined in the Employee
Programs Agreement. For this purpose, a Transferred Individual shall be
considered "nonterminated" if he or she is actively employed by (or on
a leave of absence from and expected to return to) the Company and any
of its affiliates, as of the end of the day on the Offering Date.
(f) Transition Individuals: A "Transition Individual"
as that term is defined in the Employee Programs Agreement.
A.2 Assumption of Benefits and Liabilities. Effective as of
the beginning of the day on the Effective Date, all interests in the Prior Plan
of (and Prior Plan liabilities with respect to) Transferred Individuals shall be
assumed by this Plan.
(a) In the case of a Transferred Individual,
effective as of the beginning of the day on the Effective Date, his or
her Account shall be credited with the amount that stood to his or her
credit under the Prior Plan immediately prior to the Effective Date.
The allocation of this amount to phantom investment options under this
Plan shall mirror the allocation then in effect for the Transferred
Individual under
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the Prior Plan (except to the extent the Plan Administrator permits,
and an authorized Executive makes, an investment change at a special
Valuation Date offered to such Executive in connection with PBG's
initial public offering).
(b) Any deferral election made under the Prior Plan
for a Transferred Individual shall be carried over and continued under
this Plan, subject to the provisions of this Plan (as interpreted by
the Plan Administrator). Notwithstanding the prior sentence, following
the Effective Date, to the extent permitted by the Plan Administrator,
a Transferred Individual may revise any Prior Plan deferral election
during the period before the deadline for making such election has been
reached.
(c) A Transferred Individual who has made a deferral
election with respect to a performance unit award payable to him under
the PepsiCo Long Term Incentive Plan shall, once the deferral occurs,
be credited with such deferral solely under this Plan. Any designation
to have some or all of this deferral invested in the PepsiCo capital
stock account under the Prior Plan shall be converted to a designation
for investment in a phantom investment option under this Plan (other
than the Phantom PepsiCo Stock Account) which is designated by the Plan
Administrator for this purpose.
A.3 Special PepsiCo Stock Investment Option. As of the
Effective Date, the Plan Administrator shall establish a temporary phantom
investment option under the Plan, the Phantom PepsiCo Stock Account. In no event
will shares of PepsiCo capital stock actually be purchased or held under this
Plan, and no Participant shall have any rights as a shareholder of PepsiCo
capital stock on account of an interest in the Phantom PepsiCo Stock Account.
(a) General Principles: the Phantom PepsiCo Stock
Account shall be administered under rules that are similar to those
applicable to the Phantom PBG Stock Account, but with such
modifications as the Plan Administrator may apply from time to time.
(b) Valuation and Adjustment: A Participant's
interest in the Phantom PepsiCo Stock Account is valued as of a
Valuation Date by multiplying the number of phantom shares credited to
his or her Account on such date by the fair market value of a share of
PepsiCo capital stock on such date, and then adding the value of the
Participant's dividend subaccount. If shares of PepsiCo capital stock
change by reason of any stock split, stock dividend, recapitalization,
merger, consolidation, spin-off, combination or exchange of shares,
complete or partial liquidation or other corporate change treated as
subject to this provision by the Plan Administrator, such equitable
adjustment shall be made in the number and kind of phantom shares
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<PAGE> 33
credited to an Account or subaccount as the Plan Administrator may
determine to be necessary or appropriate.
(c) Investment Allocations and Reallocations. No
deferrals may be directed for investment in the Phantom PepsiCo Stock
Account, except for a deferral of a Transferred Individual's 1999 base
salary that he or she directed for investment in the Phantom PepsiCo
Stock Account prior to the Effective Date. In accordance with Section
4.1(e), a Participant with an interest in the Phantom PepsiCo Stock
Account may reallocate amounts from his or her Subaccounts in the
Phantom PepsiCo Stock Account to other phantom investment options under
the Plan that are available for this purpose. No Participant may
reallocate amounts into the Phantom PepsiCo Stock Account.
(d) Termination of the Phantom PepsiCo Stock Account.
Effective as of the end of the day on December 31, 2000, the Phantom
PepsiCo Stock Account shall cease to be available under the Plan. Any
amount under the Plan still standing to the credit of a Participant on
such date shall automatically be reallocated to the phantom investment
option or options specified for this purpose by the Plan Administrator,
unless the Participant selects a different phantom investment option or
options in accordance with such requirements as the Plan Administrator
may apply.
A.4 Employment Transfers by Transition Individuals. This
section shall apply to individuals who transfer between PBG and PepsiCo under
circumstances that cause them to be Transition Individuals.
(a) Transfers to PepsiCo. If a Participant, who is a
Transition Individual, is transferred to the PepsiCo Group, such
transfer to the PepsiCo Group shall not be considered a Termination of
Employment or other event that could trigger distribution of the
Participant's interest in the Plan. In this case, the Participant's
interest in the Plan (and all Plan liabilities with respect to the
Participant) may be retained by the Plan, or they may be transferred to
the PepsiCo Executive Income Deferral Program as determined by the Plan
Administrator in its discretion. If a transfer of the Participant's
interest occurs, this transfer shall constitute a complete payout of
the Participant's Account for purposes of determining who is a
Participant or Beneficiary under the Plan. If a transfer does not
occur, for purposes of determining the distribution of such
Participant's interest in the Plan, the Participant's Termination of
Employment shall not be deemed to occur before his or her termination
of employment with the PepsiCo Group.
(b) Transfers from PepsiCo. If an individual is
transferred by the PepsiCo Group to an Employer under circumstances
that cause him to be a Transition
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<PAGE> 34
Individual and such individual's interest in the PepsiCo Executive Income
Deferral Program is transferred to this Plan, such Transition Individual shall
become a Participant in this Plan. In connection with any such transfer of the
individual's interest, the individual's phantom investment in PepsiCo capital
stock under the PepsiCo Executive Income Deferral Program shall be carried over
and replicated hereunder until December 31, 2000 (except to the extent the Plan
Administrator permits, and an authorized Executive makes, an investment change
at a special Valuation Date offered to such Executive in connection with the
transfer). Any other phantom investment of the individual under the PepsiCo
Executive Income Deferral Program may be carried over and replicated hereunder,
or it may be converted to a phantom investment available under the Plan
(depending upon the procedures then applied by the Plan Administrator). In
determining the time of payout of a Transition Individual who has an interest
transferred to this Plan, the elections of the Participant under the PepsiCo
Executive Income Deferral Program shall be given effect, subject to this Plan's
provisions on payouts (as interpreted by the Plan Administrator).
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<PAGE> 1
EXHIBIT 10.9
THE PEPSI BOTTLING GROUP, INC.
1999 LONG TERM INCENTIVE PLAN
1. PURPOSE.
The purposes of the 1999 Long Term Incentive Plan (the "Plan") are :
(1) to provide long term incentives to those persons with significant
responsibility for the success and growth of The Pepsi Bottling Group, Inc.
("PBG") and its subsidiaries, divisions and affiliated businesses (collectively,
the "Company"); (2) to assist the Company in attracting and retaining key
employees on a competitive basis; and (3) to associate the interests of such
employees with those of PBG shareholders.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a committee (the "Committee"),
which (i) prior to the date on which PBG becomes a separately held public
company, shall be the Compensation Committee of the Board of Directors of
PepsiCo, Inc.; and (ii) after the date on which PBG becomes a separately held
public company, shall be the Compensation and Management Development Committee
(and any subcommittee thereof) of the Board of Directors of PBG (the "Board").
The committee described in the foregoing clause (ii) shall be appointed by the
Board and shall consist of two or more outside members of the Board.
(b) The Committee shall have all powers vested in it by the terms of
the Plan, such powers to include the authority (within the limitations described
herein) to select the persons to be granted awards under the Plan, to determine
the type, size and terms of awards to be made to each employee selected, to
determine the time when awards will be granted and any conditions which must be
satisfied by employees before an award is made, to establish objectives and
conditions for earning awards, to determine whether such conditions have been
met and whether awards will be paid at the end of the award period, or when the
award is exercised, or deferred, to determine whether payment of an award should
be reduced or eliminated, and to determine whether such awards should qualify,
regardless of their amount, as deductible in their entirety for federal income
tax purposes.
(c) The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements, guidelines
and instruments for the administration of the Plan and for the conduct
<PAGE> 2
of its businesses as the Committee deems necessary or advisable. The Committee's
interpretations of the Plan, and all actions taken and determinations made by
the Committee pursuant to the powers vested in it hereunder, shall be conclusive
and binding on all parties concerned, including the Company, PBG shareholders
and any person receiving an award under the Plan.
(d) The Committee may delegate to the Chief Executive Officer of PBG
any or all of its authority under Sections 2(b) and 2(c).
3. ELIGIBILITY.
Each executive of the Company who is Salary Band I or above (or the
equivalent) may, in the Committee's discretion, be granted any of the awards
available under the Plan.
4. AWARDS.
(a) Types. Awards under the Plan include stock options, incentive stock
options, performance units, stock appreciation rights, restricted stock and
share awards.
(i) Stock Options. Stock options are rights to purchase shares
of PBG Common Stock ("Common Stock") at a fixed price for a specified period of
time. The purchase price per share of Common Stock covered by a stock option
awarded pursuant to this Plan, including any incentive stock options, shall (A)
for options granted on and after the date PBG becomes a separately held public
company, be equal to or greater than the "Fair Market Value" of a share of PBG
Common Stock on the date the stock option is awarded; and (B) for options
granted prior to the date PBG becomes a separately held public company, be the
price per share at which Common Stock is initially offered for sale to the
public. "Fair Market Value" means an amount equal to the average of the high and
low sales prices for Common Stock as reported on the composite tape for
securities listed on The New York Stock Exchange, Inc. on the date in question
(or, if no sales of Common Stock were made on said Exchange on such date, on the
next preceding day on which sales were made on such Exchange), except that such
average price shall be rounded up to the nearest one-fourth.
(ii) Performance Units. Performance units are rights to
receive up to 100% of the value of shares of Common Stock as of the date of
grant, which value may be paid in cash or Common Stock, without payment of any
amounts to PBG. The full and/or partial payment of performance unit awards
granted under this Plan will be made only upon certification by the Committee of
the attainment by PBG, over a performance period established by the Committee,
of any one or more performance targets, which have been established by the
Committee and which are based on objective criteria,
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<PAGE> 3
including (without limitation) one or more of the following: EBITDA, earnings
per share, revenue growth, corporate earnings, return on investment, total
shareholder return, profits, cash flow, market value added, economic value added
or any of the foregoing against industry and peer comparisons. No payment will
be made if the targets are not met.
(iii) Stock Appreciation Rights. Stock appreciation rights
("SARs") are rights to receive the difference between (A) for SARs granted on
and after the date PBG becomes a separately held public company, the Fair Market
Value of a share of PBG Common Stock on the grant date, and for SARs granted
prior to the date PBG becomes a separately held public company, the price per
share at which Common Stock is initially offered for sale to the public, and (B)
the Fair Market Value of a share of Common Stock on the date the SAR is
exercised.
(iv) Restricted Stock. The full and/or partial vesting of any
restricted stock award made to key employees under this Plan will occur in
accordance with a vesting schedule established by the Committee or upon the
attainment by PBG of primary or secondary targets established by the Committee
at the time the award is made. These targets shall be based on objective
criteria, including (without limitation) one or more of the following: EBITDA,
earnings per share, revenue growth, corporate earnings, return on investment,
total shareholder return, profits, cash flow, market value added, economic value
added or any of the foregoing against industry and peer comparisons.
(v) Share Awards. Share awards are grants of shares of Common
Stock. The Committee may grant a share award to any eligible employee on such
terms and conditions as the Committee may determine in its sole discretion.
Share awards may be made as additional compensation for services rendered by the
eligible employee or may be in lieu of cash or other compensation to which the
eligible employee is entitled from the Company.
(b) Supplemental Awards. Employees who are newly hired or promoted into
eligible status or certain eligible employees who are promoted during the
vesting period may be granted supplemental pro rata grants or supplemental
incremental grants of stock options and/or performance units, as determined by
the Committee in its sole discretion.
(c) Negative Discretion. Notwithstanding the attainment by PBG of any
target specified under this Plan, the Committee has the discretion, by
participant, to reduce some or all of an award that would otherwise be paid.
(d) Guidelines. The Committee may, from time to time, adopt written
policies for its implementation of the Plan. Any such policies shall be
consistent
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<PAGE> 4
with the Plan and may include, but need not be limited to, the type, size and
term of awards to be made, and the conditions for payment of such awards.
(e) Maximum Awards. An eligible employee may be granted multiple awards
under the Plan, but no one employee may be granted awards which would result in
his or her receiving, in the aggregate, during the term of the Plan, more than
25% of the maximum number of shares available for award under the Plan. Solely
for the purposes of determining whether this maximum is met, a performance unit
or SAR shall be treated as entitling the holder thereof to one share of Common
Stock.
(f) Employment by the Company. To the extent the vesting, exercise, or
term of any stock option award is conditioned on employment by the Company, an
award recipient whose Company employment terminates through a Company-approved
transfer to an allied organization (i) shall vest in and be entitled to exercise
any stock option award immediately prior to the transfer, (ii) shall have
employment with the allied organization treated as employment by the Company in
determining the term of such award and the period for exercise, and (iii) shall
have the allied organization considered part of the Company for purposes of
applying the misconduct provisions of Section 8. The Chief Personnel Officer
shall specify the entities that are considered allied organizations as of any
time.
5. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be delivered or purchased under the Plan shall not
exceed an aggregate of 15,000,000 shares of Common Stock, as adjusted, if
appropriate, pursuant to Section 7 hereof.
6. DEFERRED PAYMENTS.
The Committee may determine that all or a portion of a payment to a
participant under the Plan, whether it is to be made in cash, shares of Common
Stock or a combination thereof, shall be deferred. Deferrals shall be for such
periods and upon such terms as the Committee may determine in its sole
discretion.
7. DILUTION AND OTHER ADJUSTMENTS.
In the event of (i) any change in the outstanding shares of Common
Stock by reason of any split, stock dividend, recapitalization, merger,
reorganization, consolidation, combination or exchange of shares, (ii) any
separation of a corporation (including a spin-off or other distribution of
assets of the Company to its shareholders), (iii) any partial or complete
liquidation, or (iv) other similar corporate change, such equitable adjustments
shall be made in the Plan and the
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awards thereunder as the Committee determines are necessary and appropriate,
including, if necessary, an adjustment in the maximum number or kind of shares
subject to the Plan or which may be or have been awarded to any participant
(including the conversion of shares subject to awards from Common Stock to stock
of another entity). Such adjustment shall be conclusive and binding for all
purposes of the Plan.
8. MISCONDUCT.
If the Committee or its delegate determines that a participant has, at
any time prior to, or within twelve months after, the exercise of any option
granted hereunder or the vesting of any other award made hereunder committed
"Misconduct", then the Committee may, in its sole discretion: (i) cancel any
outstanding option or other award granted hereunder and (ii) require the
participant to pay to the Company any and all gains realized from any options or
awards granted hereunder which were exercised, in the case of options, or
vested, in the case of other awards, within the twelve month period immediately
preceding the date of such cancellation (or if there is no cancellation, the
date on which such claim for payment is made). A participant commits Misconduct
if the Committee or its delegate determines that the participant: (a) Competed
(as defined below) with the Company; (b) engaged in any act which is considered
by the Committee to be contrary to the Company's best interests, including, but
not limited to, recruiting or hiring away employees of the Company; (c) violated
the Company's Code of Conduct or engaged in any other activity which constitutes
gross misconduct; (d) engaged in unlawful trading in the securities of PBG or of
any other company based on information gained as a result of his or her
employment with the Company; or (e) disclosed to an unauthorized person or
misused confidential information or trade secrets of the Company. This paragraph
shall also apply in the case of a former Company employee (including, without
limitation, a retired or disabled employee) who commits Misconduct after his or
her employment with the Company terminated.
"Competed" shall mean (i) worked for, managed, operated, controlled or
participated in the ownership, arrangement, operation, or control of, or be
connected with or served on the board of directors of any company or entity
which engages in the production, marketing or sale of any product or service
produced, marketed or sold by the Company; or (ii) any action or omission which
is injurious to the Company or which diverts customers or suppliers from the
Company.
9. MISCELLANEOUS PROVISIONS.
(a) Rights as Shareholder. A participant in the Plan shall have no
rights as a holder of Common Stock with respect to awards hereunder, unless and
until certificates for shares of Common Stock are issued to such participant.
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(b) Assignment or Transfer. Unless the Committee shall specifically
determine otherwise, no award granted under the Plan or any rights or interests
therein shall be assignable or transferable by a participant, except by will or
the laws of descent and distribution.
(c) Agreements. All awards granted under the Plan shall be evidenced by
agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall approve.
(d) Requirements for Transfer. No share of Common Stock shall be issued
or transferred under the Plan until all legal requirements applicable to the
issuance or transfer of such shares have been complied with to the satisfaction
of the Committee. The Committee shall have the right to condition any issuance
of shares of Common Stock made to any participant upon such participant's
written undertaking to comply with such restrictions on his subsequent
disposition of such shares as the Committee or PBG shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions.
(e) Withholding Taxes. PBG shall have the right to deduct from all
awards hereunder paid in cash any federal, state, local or foreign taxes
required by law to be withheld with respect to such awards, and with respect to
awards paid in stock or upon exercise of stock options, to require the payment
(through withholding from the participant's salary or otherwise) of any such
taxes. The obligations of PBG to make delivery of awards in cash or Common Stock
shall be subject to currency or other restrictions imposed by any government.
(f) No Rights to Awards. Except as set forth herein, no employee or
other person shall have any claim or right to be granted an award under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company.
(g) Costs and Expenses. The cost and expenses of administering the Plan
shall be borne by PBG and not charged to any award nor to any employee receiving
an award.
(h) Funding of Plan. The Plan shall be unfunded. PBG shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any award under the Plan.
10. EFFECTIVE DATE, AMENDMENTS AND TERMINATION.
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(a) Effective Date. The Plan was approved by the Board and shall be
effective as of March 30, 1999.
(b) Amendments. The Committee may at any time terminate or from time to
time amend the Plan in whole or in part, but no such action shall adversely
affect any rights or obligations with respect to any awards theretofore granted
under the Plan.
In the event the Plan is approved by shareholders of PBG after
the date PBG becomes a separately held public company (the "initial approval"),
then (unless prior approval by the shareholders of PBG is obtained) no amendment
of the Plan adopted after such initial approval shall be effective which would
(i) increase the maximum number of shares of Common Stock which may be delivered
under the Plan or to any one individual, except to the extent such amendment is
made pursuant to Section 7 hereof, (ii) extend the maximum period during which
awards may be granted under the Plan or (iii) modify the requirements as to
eligibility for participation in the Plan.
The Committee may, at any time, amend outstanding agreements
evidencing awards under the Plan in a manner not inconsistent with the terms of
the Plan; provided, however, that if such amendment is adverse to the
participant, the amendment shall not be effective unless and until the
participant consents, in writing, to such amendment.
(c) Termination. No awards shall be made under the Plan after December
31, 2004.
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EXHIBIT 10.10
THE PBG DIRECTORS' STOCK PLAN
(Effective as of March 30, 1999)
1. PURPOSES
The principal purposes of The PBG Directors' Stock Plan (the "Plan")
are to provide compensation to those members of the Board of Directors of The
Pepsi Bottling Group, Inc. ("PBG") who are not also employees of PBG, to assist
PBG in attracting and retaining outside directors with experience and ability on
a basis competitive with industry practices, and to associate more fully the
interests of such directors with those of PBG's shareholders.
2. EFFECTIVE DATE
The Plan was unanimously approved by the Board of Directors of PBG and
became effective on March 30, 1999.
3. ADMINISTRATION
The Plan shall be administered and interpreted by the Directors of PBG
who are also employed by PBG ("Employee Directors"). The Employee Directors
shall have full power and authority to administer and interpret the Plan and to
adopt such rules, regulations, guidelines and instruments for the administration
of the Plan and for the conduct of its business as the Employee Directors deem
necessary or advisable. The Employee Directors' interpretations of the Plan, and
all actions taken and determinations made by the Employee Directors pursuant to
the powers vested in them hereunder, shall be conclusive and binding on all
parties concerned, including PBG, its Directors and shareholders and any
employee of PBG. The costs and expenses of administering the Plan shall be borne
by PBG and not charged against any award or to any Non-Employee Director.
4. ELIGIBILITY
Directors of PBG who are not employees of PBG ("Non-Employee
Directors") are eligible to receive awards under the Plan. The Employee
Directors are not eligible to participate in the Plan, but shall be eligible to
participate in other PBG benefit and compensation plans.
5. INITIAL AWARD
Under the Plan, each Non-Employee Director shall, on the first day of
the month after commencing service as a Director of PBG, receive a formula grant
of restricted stock ("Restricted Stock"); provided, however, that individuals
serving as Non-Employee Directors on March 30, 1999 shall receive their initial
award of Restricted Stock on March 30, 1999. The number of shares of Restricted
Stock to be included in each such award shall be determined by dividing $25,000
by the Fair Market Value (as defined below) of a share of PBG Common Stock on
the date of grant (the "Stock Grant Date"), or if such day is not a trading day
on the New York Stock Exchange, on the immediately preceding trading day. The
number of shares so determined shall be rounded to the nearest number of whole
shares. If the recipient of the Restricted Stock continuously remains a Director
of PBG, the Restricted Stock granted hereunder shall vest and any restrictions
thereon shall lapse on the first anniversary of the Stock Grant Date; provided,
however, that, in the event of a Non-Employee Director's death or Disability (as
defined in Section 6(c)), the Restricted Stock granted to such Non-Employee
Director shall vest and any restrictions thereon shall lapse immediately.
Notwithstanding the foregoing, a Non-Employee Director may not sell or otherwise
transfer any Restricted Stock granted to him or her prior to the date such
Non-Employee Director ceases to serve
<PAGE> 2
as a Director for any reason. The Non-Employee Director shall have all of the
rights of a stockholder with respect to such Restricted Stock, including the
right to receive all dividends or other distributions paid or made with respect
to the stock. Any such dividends or distributions shall be subject to the same
restrictions as the Restricted Stock in respect of which such dividends or
distributions were made. Each Restricted Stock award shall be evidenced by an
agreement setting forth the terms and conditions thereof, which terms and
conditions shall not be inconsistent with those set forth in this Plan.
6. ANNUAL AWARD
(a) Under the Plan, each Non-Employee Director shall receive an annual
formula grant of options to purchase shares of PBG Common Stock ("Options") at a
fixed price (the "Exercise Price"). Such grant shall be made annually on April
1; provided, however, that the grant to be made in 1999 grant shall be made on
March 30, 1999 (the "Option Grant Date"); provided further, however, that each
individual who becomes a Non-Employee Director after April 1, 1999 and in a
month other than March shall receive a pro-rated annual formula grant of options
(a "Pro-Rated Grant") on the first day of the month following the date he or she
commences service as a Director of PBG (the "Pro-Rated Option Grant Date"). To
receive a grant of Options, a Non-Employee Director must be actively serving as
a Director of PBG on the Option Grant Date or the Pro-Rated Option Grant Date,
as applicable.
(b) The number of Options to be included in each option award shall be
determined by dividing the Grant Amount (as defined below) by the Fair Market
Value (as defined below) of a share of PBG Common Stock on the Option Grant Date
or Pro-Rated Option Grant Date, as applicable, or if such day is not a trading
day on the New York Stock Exchange, on the immediately preceding trading day.
Grant Amount shall mean $225,000, except that, in the case of a Pro-Rated Grant,
Grant Amount shall mean the following: (i) $168,750 in the case of an individual
who commences service as a Director on or after April 2 and on or before June
30; (ii) $112,500 in the case of an individual who commences service as a
Director on or after July 1 and on or before September 30; (iii) $56,250 in the
case of an individual who commences service as a Director on or after October 1
and on or before December 31; and (iv) $0 in the case of an individual who
commences service as a Director on or after January 1 and on or before March 31.
The number of Options so determined shall be rounded to the nearest number of
whole Options. "Fair Market Value" shall mean the average of the high and low
per share sale prices for PBG Common Stock on the composite tape for securities
listed on the New York Stock Exchange for the day in question, except that such
average price shall be rounded up to the nearest one-fourth; provided, however,
that "Fair Market Value" on March 30, 1999 shall mean $23.00, the initial
offering price per share of PBG Common Stock.
(c) Options shall vest and become immediately exercisable on the Option
Grant Date or Pro-Rated Option Grant Date, as applicable; provided, however,
that Options granted on March 30, 1999 shall vest on the earliest of (i) June 1,
1999, (ii) the Non-Employee Director's death, or (iii) the Non-Employee
Director's Disability (as defined below). Each Option shall have an Exercise
Price equal to the Fair Market Value of PBG Common Stock on the Option Grant
Date or Pro-Rated Option Grant Date, as applicable, or if such day is not a
trading day on the New York Stock Exchange, on the immediately preceding trading
day. Each Option shall have a term of ten years; provided, however, in the event
the holder thereof shall cease to be a director of PBG, or its successor, for a
reason other than death or Disability (as defined below), such Options shall
thereupon immediately terminate and expire. A Non-Employee Director has a
"Disability" if he or she is totally and permanently disabled as determined
using the standards PBG applies under its long term disability program.
(d) Non-Employee Directors may exercise their Options by giving an
exercise notice to PBG in the manner specified from time to time by the Employee
Directors. Options may be exercised by using either a standard cash exercise
procedure or a cashless exercise procedure. From time to time, the Board of
Directors may change or adopt the procedures relating to Option exercises. If,
at any time, a Non-Employee Director suffers a Disability or is otherwise
incapable of exercising his or
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her Options before the expiration thereof, the Employee Directors may take any
steps they deem appropriate to prevent such Options from lapsing prior to being
exercised.
(e) Each Option award shall be evidenced by a written agreement setting
forth the terms and conditions thereof, which terms and conditions shall not be
inconsistent with those set forth in this Plan.
(f) With respect to each Option award, Non-Employee Directors may elect
to convert up to one hundred percent (100%) of their Options into shares of PBG
Common Stock at the ratio of three Options for one share. The number of shares
so determined shall be rounded to the nearest number of whole shares. If less
than one hundred percent (100%) of the Options are converted, Options shall be
converted in increments of thirty (30) Options.
7. SHARE AWARDS
Each individual who is a Non-Employee Director as of March 30, 1999
shall be granted a share award of one share of PBG Common Stock on that date.
Each individual who becomes a Non-Employee Director thereafter shall be granted
a share award of one share of PBG Common Stock on the first day of the month
following the date on which he or she commences service as a Director of PBG.
8. SHARES OF STOCK SUBJECT TO THE PLAN
The shares that may be delivered under this Plan shall not exceed an
aggregate of 200,000 shares of PBG Common Stock, adjusted, if appropriate, in
accordance with Section 10 below. The shares granted or delivered under the Plan
may be newly issued shares of Common Stock or treasury shares.
9. DEFERRAL
Non-Employee Directors may elect to defer into PBG phantom stock units
(i) all of the shares of Restricted Stock granted under Section 5 and/or (ii)
all of the shares resulting from an election made under Section 6(f).
Non-Employee Directors who elect to defer receipt of such shares shall be
credited with a number of phantom stock units equal to that number of shares of
Restricted Stock or PBG Common Stock which they would have received had they not
elected to defer. During the deferral period, the value of the phantom stock
units will fluctuate based on the market value of PBG Common Stock. Non-Employee
Directors will be credited with dividends on phantom stock units at the same
rate and time as dividends are declared on PBG Common Stock. Any such dividends
shall be credited as additional phantom stock units. At the end of the deferral
period, Non-Employee Directors will receive the aggregate value of the PBG
phantom stock units credited to them. The value of PBG phantom stock units will
be determined by multiplying the number of PBG phantom stock units by the Fair
Market Value of PBG Common Stock on the last trading day of the deferral period.
All payments of deferred awards shall, in the discretion of the Employee
Directors, be made in cash, shares of PBG Common Stock or any combination
thereof. Unless otherwise determined by the Employee Directors, (i) the deferral
period with respect to shares of Restricted Stock granted under Section 5 shall
equal the Non-Employee Director's period of service as a Director of PBG (i.e.,
such deferral period shall end on the date the Non-Employee Director ceases to
be a Director of PBG), and (ii) the deferral period with respect to shares
resulting from an election made under Section 6(f) shall not be less than two
(2) years.
10. DILUTION AND OTHER ADJUSTMENTS
The number and kind of shares of PBG Common Stock issuable under the
Plan, or which may or have been awarded to any Non-Employee Director, may be
adjusted proportionately by the
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Employee Directors to reflect stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, any spin off or
other distribution of assets of the Company to its shareholders, any partial or
complete liquidation, or other similar corporate changes. Such adjustment shall
be conclusive and binding for all purposes of the Plan.
11. EFFECT OF MISCONDUCT
Notwithstanding anything to the contrary herein, if a Non-Employee
Director commits "Misconduct," he or she shall forfeit all rights to any
unexercised Options, Restricted Stock and phantom stock units credited to him or
her under Section 9. For purposes of this Plan, Misconduct occurs if a majority
of the Board of Directors determines that a Non-Employee Director has: (a)
engaged in any act which is considered to be contrary to the Company's best
interests; (b) violated the Company's Code of Conduct or engaged in any other
activity which constitutes gross misconduct; (c) engaged in unlawful trading in
the securities of PBG or of any other company based on information gained as a
result of his or her service as a Director of PBG; or (d) disclosed to an
unauthorized person or misused confidential information or trade secrets of the
Company.
12. WITHHOLDING TAXES
PBG shall have the right to require the payment (through withholding
from any amount payable from PBG to the Non-Employee Director or otherwise) of
any withholding taxes required by federal, state, local or foreign law in
respect of any award.
13. RESALE RESTRICTIONS, ASSIGNMENT AND TRANSFER
Options (unless the Board of Directors specifically determines
otherwise), Restricted Stock and PBG phantom stock units may not be sold,
transferred or assigned, except in the event of the Non-Employee Director's
death, in which case his or her Options, Restricted Stock or PBG phantom stock
units may be transferred by will or by the laws of descent and distribution. All
restrictions on Restricted Stock granted to a Non-Employee Director shall lapse
upon his or her death. Options may be exercised by the decedent's personal
representative, or by whomever inherits the Options, at any time, through and
including their original expiration date.
Once awarded, the shares of PBG Common Stock received by Non-Employee
Directors may be freely transferred, assigned, pledged or otherwise subjected to
lien, subject to restrictions imposed by the Securities Act of 1933, as amended,
and subject to the trading restrictions imposed by Section 16 of the Securities
Exchange Act of 1934, as amended. PBG phantom stock units may not be transferred
or assigned except by will or the laws of descent and distribution.
14. FUNDING
The Plan shall be unfunded. PBG shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any award under the Plan.
15. DURATION, AMENDMENTS AND TERMINATIONS
The Board of Directors may terminate or amend the Plan in whole or in
part; provided, however, that the Plan may not be amended more than once every
six (6) months, other than to comport with changes in the Internal Revenue Code
or the rules and regulations thereunder; provided further, however, that no such
action shall adversely affect any rights or obligations with respect to any
awards theretofore granted under the Plan, unless consented to by the recipients
of such awards. The Plan shall continue until terminated.
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EXHIBIT 10.11
PBG STOCK INCENTIVE PLAN
1. Purposes. The principal purposes of the PBG Stock Incentive Plan
(the "Plan") are: (a) to improve individual employee performance by providing
long-term incentives and rewards to employees of the Company; (b) to assist the
Company in attracting, retaining and motivating employees with experience and
ability; and (c) to associate the interests of such employees with those of
PBG's shareholders.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms, when used in this Plan, shall have the meanings set forth
below:
(a) "Award" means the grant of an Option, Restricted Stock or
Share Award, or any or all of them.
(b) "Board" means the Board of Directors of The Pepsi Bottling
Group, Inc.
(c) "Committee" means the Executive Development and
Compensation Committee of the Board, as appointed from time to time by
the Board, consisting of two or more members of the Board who are not
eligible to participate in the Plan and who have not, within one year
prior to their appointment to the Committee, participated in the Plan;
provided, however, that prior to the date PBG becomes a separately held
public company, the Compensation Committee of the Board of Directors of
PepsiCo, Inc. shall serve as the Committee for purposes of this Plan.
(d) "Common Stock" or "Stock" means PBG Common Stock, par
value $0.01 per share.
(e) "Company" means The Pepsi Bottling Group, Inc., its
divisions, direct and indirect subsidiaries and affiliates.
(f) "Fair Market Value" means an amount equal to the average
of the high and low sales prices for Common Stock as reported on the
composite tape for securities listed on The New York Stock Exchange,
Inc. on the date in question (or, if no sales of Stock were made on
said Exchange on such date, on the next preceding day on which sales
were made on such Exchange), except that such average price shall be
rounded up to the nearest one-fourth.
(g) "Grant Date" means the date an Award is granted under the
Plan. The date of grant of an Award shall be the date as of which the
Committee determines that such Award shall become effective.
(h) "Grantee" means an eligible employee of the Company who
has been granted Restricted Stock or a Share Award under the Plan.
(i) "Option" or "Stock Option" means a right granted under the
Plan to an Optionee to purchase a share of Common Stock at a fixed
price for a specified period of time.
(j) "Option Exercise Price" means the price at which a share
of Common Stock covered by an Option granted hereunder may be
purchased.
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(k) "Optionee" means an eligible employee of the Company who
has received a Stock Option granted under the Plan.
(l) "PBG" means The Pepsi Bottling Group, Inc., a Delaware
corporation.
(m) "Restricted Stock" means Stock issued to an eligible
employee pursuant to Section 7 of this Plan.
(n) "Retirement" means a termination of employment with the
Company after the employee has (i) fulfilled the requirements for
either a normal, early or disability retirement pension (as defined
under the Company's retirement program applicable to such employee at
the date of termination of employment) and (ii) affirmatively elected
to retire from employment.
(o) "Share Award" means Stock issued to an eligible employee
pursuant to Section 8 of this Plan.
(p) "Totally Disabled" shall have the meaning set forth in the
Company's long-term disability program applicable to such employee.
3. Administration. The Plan shall be administered by the Committee,
which shall have full power and authority to administer and interpret the Plan
and to adopt such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan as the Committee deems necessary or advisable.
The Committee's powers include, but are not limited to (subject to the specific
limitations described herein), authority to determine the employees to be
granted Awards under the Plan, to determine the size and applicable terms and
conditions of grants to be made to such employees, to determine the time when
Awards will be granted and to authorize grants to eligible employees. The
Committee's interpretations of the Plan, and all actions taken and
determinations made by the Committee concerning any matter arising under or with
respect to the Plan or any Awards granted hereunder, shall be final, binding and
conclusive on all interested parties, including PBG, its shareholders and all
former, present and future employees of the Company. The Committee may delegate
some or all of its power and authority hereunder to the Chief Executive Officer
of PBG, such delegation to be subject to such terms and conditions as the
Committee in its discretion shall determine. The Committee may as to all
questions of accounting rely conclusively upon any determinations made by the
independent public accountants of PBG.
4. Stock Available for Awards. The shares that may be delivered or
purchased under the Plan shall not exceed an aggregate number of shares of
Common Stock to be determined from time to time by the Committee, subject to any
adjustments which may be made pursuant to Section 12 hereof. Shares of Stock
used for purposes of the Plan may be either shares of authorized but unissued
Common Stock or treasury shares or both. Stock covered by Awards which have
terminated or expired prior to exercise or have been surrendered or canceled
shall be available for further grants of Awards hereunder.
5. Eligibility. All those employees of the Company who shall be
determined from time to time by the Committee to be eligible shall participate
in the Plan; provided, however, that no employee may be granted Awards in the
aggregate which, if exercised, would result in that employee receiving more than
10% of the maximum number of shares available for issuance under the Plan.
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<PAGE> 3
6. Options. Each Option granted hereunder shall be in writing and shall
contain such terms and conditions as the Committee may determine, subject to the
following:
(a) Option Exercise Price. The Option Exercise Price shall be
equal to the Fair Market Value of a share of Common Stock on the Grant
Date; provided, however, that the Option Exercise Price of Options
granted to eligible employees as of the date PBG becomes a separate
publicly held company shall be the price per share at which Stock is
initially offered for sale to the public.
(b) Term and Exercise Dates. Options granted hereunder shall
have a term of no longer than ten (10) years from the Grant Date and
shall become exercisable in accordance with the terms of their grant. A
grant of Options may become exercisable in installments. To the extent
that Stock Options are not exercised when they become initially
exercisable, they shall be carried forward and be exercisable until the
expiration of the term of such Stock Options, subject to the provisions
of Sections 6(e) and (f) hereof.
(c) Exercise of Option. To exercise an Option, the holder
thereof shall give notice of his or her exercise to PBG, or its agent,
specifying the number of shares of Common Stock to be purchased and
identifying the specific Options that are being exercised. The
Committee may, from time to time, establish procedures relating to
effecting such exercises. Stock Options must be exercised for full
shares of Common Stock; no fractional shares shall be issued as a
result of exercising an Option. Notwithstanding anything to the
contrary herein, an employee of the Company shall be permitted to
exercise his or her Options only if he or she is: (i) actively at work;
(ii) on vacation; (iii) receiving disability benefits; (iv) receiving
benefits from a severance plan which explicitly provides for the
exercise of options; (v) on layoff; or (vi) on medical (including leave
under the Family and Medical Leave Act), child care/parental, funeral,
military or jury duty leave. An Option is exercisable during an
Optionee's lifetime only by the Optionee; provided, however, that in
the event the Optionee is incapacitated and unable to exercise Options,
such Options may be exercised by such Optionee's legal guardian, legal
representative, fiduciary or other representative who the Committee
deems appropriate based on applicable facts and circumstances.
(d) Payment of Option Exercise Price. The Option Exercise
Price for the Options being exercised must be paid in full at time of
issuance of the Common Stock.
(e) Effect of Termination of Employment, Disability or Death.
Unless the Committee shall determine otherwise, no Option may be
exercised by an Optionee after the termination of his or her employment
with the Company, except that: (i) if such termination occurs by reason
of the Optionee's death, all Options then held by the Optionee shall
become immediately exercisable as of the date of death and may be
exercised by such Optionee's executor (or, if none, his or her legal
representative) until the expiration of such Options in accordance with
their terms; (ii) if such termination occurs by reason of the
Optionee's becoming Totally Disabled, all Options then held by the
Optionee shall continue to become exercisable and shall be able to be
exercised by the Optionee (or his or her legal representative) in
accordance with their terms; (iii) if such termination occurs by reason
of the Optionee's Retirement, all Options then held by the Optionee
shall become immediately exercisable as of the date of such Retirement
and may be exercised by the Optionee until the expiration of such
Options in accordance with their terms; and (iv) if such termination is
voluntary by the employee or is by action of the Company (except as
described in Section 6(f) hereof), all Options then held by the
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<PAGE> 4
Optionee which are exercisable at the date of termination shall
continue to be exercisable by the Optionee until the earlier of ninety
(90) calendar days after such date or the expiration of such Options in
accordance with their terms. Unless the Committee shall determine
otherwise, all Options which are not exercisable as of the date of the
Optionee's termination of employment shall automatically terminate and
lapse ninety (90) calendar days after such date of termination and
shall not be permitted to vest during such ninety-day period, unless
the registered owner is re-employed by the Company prior to the date on
which such Options terminate and lapse.
(f) Misconduct. In the event that an Optionee has (i) used for
profit or disclosed to unauthorized persons, confidential information
or trade secrets of the Company, (ii) breached any contract with or
violated any fiduciary obligation to the Company, (iii) engaged in
unlawful trading in the securities of PBG or of another company based
on information gained as a result of that Optionee's employment with
the Company, or (iv) committed a felony or other serious crime, then
that Optionee shall forfeit all rights to any unexercised Options
granted under the Plan and all of that Optionee's outstanding Options
shall automatically terminate and lapse, unless the Committee shall
determine otherwise.
(g) Nontransferability of Options. During an Optionee's
lifetime, his or her Options shall not be transferable and shall only
be exercisable by the Optionee (or his or her legal representative) and
any purported transfer shall be null and void. No Option shall be
transferable other than by will or the laws of descent and
distribution.
(h) Buy Out of Option Gains. At any time after any Stock
Option becomes exercisable, the Committee shall have the right to
elect, in its sole discretion and without the consent of the holder
thereof, to cancel such Option and to cause PBG to pay to the Optionee
the excess of the Fair Market Value of the shares of Common Stock
covered by such Option over the Option Exercise Price of such Option at
the date the Committee provides written notice (the "Buy Out Notice")
of its intention to exercise such right. Buy outs pursuant to this
provision shall be effected by PBG as promptly as possible after the
date of the Buy Out Notice. Payments of buy out amounts may be made in
cash, in shares of Common Stock, or partly in cash and partly in Common
Stock, as determined by the Committee in its discretion. To the extent
payment is made in shares of Common Stock, the number of shares shall
be determined by dividing the amount of the payment to be made by the
Fair Market Value of a share of Common Stock at the date of the Buy Out
Notice. In no event shall PBG be required to deliver a fractional share
of Common Stock in satisfaction of this buy out provision. Payments of
any such buy out amount shall be made net of any applicable foreign,
federal (including FICA), state and local withholding taxes.
(i) Employment by the Company. To the extent the vesting,
exercise, or term of any stock option award is conditioned on
employment by the Company, an award recipient whose Company employment
terminates through a Company-approved transfer to an allied
organization: (i) shall vest in and be entitled to exercise any stock
option award immediately prior to the transfer, (ii) shall have
employment with the allied organization treated as employment by the
Company in determining the term of such award and the period for
exercise, and (iii) shall have the allied organization considered part
of the Company for purposes of applying the misconduct provisions of
subsection (f) above. The Chief Personnel Officer shall specify the
entities that are considered allied organizations as of any time. This
subsection shall be given effect in applying the fourth sentence of
subsection (c) above and notwithstanding subsection (e) above.
4
<PAGE> 5
7. Restricted Stock. Each Award of Restricted Stock granted hereunder
shall be in writing and shall contain such terms and conditions as the Committee
may determine, subject to the following:
(a) Rights of Grantee. Shares of Restricted Stock granted
hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the
Grantee has executed any and all documents which the Committee may, in
its discretion, require as a condition to the issuance of Stock (e.g.,
an Award agreement, blank stock powers or an escrow agreement). At the
discretion of the Committee, Stock issued in connection with a
Restricted Stock Award shall be deposited together with the stock
powers with an escrow agent (which may be the Company) designated by
the Committee. Unless the Committee determines otherwise, upon delivery
of the Stock to the escrow agent, the Grantee shall have all of the
rights of a stockholder with respect to such Stock, including the right
to vote the Stock and to receive all dividends or other distributions
paid or made with respect to the Stock.
(b) Non-Transferability. Until all restrictions upon the
Restricted Stock awarded to a Grantee have lapsed in the manner set
forth in Section 7(c), such Stock shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise
hypothecated.
(c) Lapse of Restrictions. Restrictions upon Restricted Stock
shall lapse at such time or times and on such terms and conditions as
the Committee may determine. The written terms and conditions governing
the Award shall set forth any such restrictions. Unless the Committee
shall determine otherwise, such terms and conditions shall provide that
upon a Grantee's termination of employment (including Retirement), all
Restricted Stock held by the Grantee which remains subject to
restrictions as of the date of termination shall be returned to, or
canceled by, the Company and shall be deemed to have been forfeited by
the Grantee, except that: (i) if such termination occurs by reason of
the Grantee's death, all restrictions on such Restricted Stock shall
lapse on the date of death; and (ii) if such termination occurs by
reason of the Grantee's becoming Totally Disabled, all restrictions on
such Restricted Stock shall continue to lapse in accordance with their
terms.
(d) Dividends. At the time an Award of Restricted Stock is
granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends declared or paid on such Stock by
the Company shall be (i) deferred until the lapsing of the restrictions
imposed upon such Restricted Stock and (ii) held by the Company for the
account of the Grantee until such time. In the event that dividends are
to be deferred, the Committee shall determine whether such dividends
are to be reinvested in Stock (which shall be held as additional shares
of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited periodically interest on the amount
of the account at a rate per annum as the Committee, in its discretion,
may determine. Payment of deferred dividends in respect of shares of
Restricted Stock (whether in cash or additional Stock), together with
interest accrued thereon, if any, shall be made upon the lapsing of
restrictions imposed on the Restricted Stock in respect of which the
deferred dividends were paid, and any dividends deferred (together with
any interest accrued thereon) in respect of any Restricted Stock shall
be forfeited upon the forfeiture of such Restricted Stock.
(e) Delivery of Shares. Upon the lapse of restrictions on
Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Stock, free of all
restrictions hereunder.
5
<PAGE> 6
8. Share Awards. The Committee may grant a Share Award to any eligible
employee on such terms and conditions as the Committee may determine in its sole
discretion. Share Awards may be made as additional compensation for services
rendered by the eligible employee or may be in lieu of cash or other
compensation to which the eligible employee is entitled from the Company.
9. Amendment. The Committee may, at any time, amend, suspend or
terminate the Plan, in whole or in part, provided that no such action shall
adversely affect any rights or obligations with respect to any Awards granted
under the Plan prior to such action. The Committee may amend the terms and
conditions of outstanding Awards; provided, however, that (i) no such amendment
shall be adverse to the holders of the Awards, (ii) no such amendment shall
extend the period for exercise of an Option, and (iii) the amended terms of the
Award would be permitted under this Plan.
10. Foreign Employees. Without amending the Plan, the Committee may
grant Awards to eligible employees who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of the
purposes of the Plan, and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries in
which the Company operates or has employees.
11. Registration, Listing and Qualification of Shares. Each Award shall
be subject to the requirement that, if at any time the Committee shall determine
that the registration, listing or qualification of the shares covered thereby
upon any securities exchange or under any foreign, federal, state or local law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Award
or the purchase of shares thereunder, no such Award may be exercised or sold
unless and until such registration, listing, qualification, consent or approval
shall have been effected or obtained free of any condition not acceptable to the
Committee. Any person exercising an Option shall make such representations and
agreements and furnish such information as the Committee may request to assure
compliance with the foregoing or any other applicable legal requirements.
12. Adjustment for Change in Stock Subject to Plan. In the event of any
change in the outstanding shares of Common Stock by reason of any stock split,
stock dividend, recapitalization, spin-off, merger, consolidation, combination
or exchange of shares or other similar corporate change, such equitable
adjustments may be made in the Plan and the Awards granted hereunder as the
Committee determines are necessary or appropriate, including, if necessary, an
adjustment in the number of shares applicable to Awards then outstanding, the
Option Exercise Prices applicable to Options then outstanding and the number of
shares which are reserved for issuance under the Plan. Any such adjustment shall
be conclusive and binding for all purposes of the Plan.
13. No Rights to Awards or Employment. No employee or other person
shall have any claim or right to be granted an Award under the Plan. Having
received an Award under the Plan shall not give an employee any right to receive
any other grant under the Plan. No person who has received an Award shall have
any rights to or interest in any Award except as set forth herein. Neither the
Plan nor any action taken hereunder shall be construed as giving any person any
right to be retained in the employ of the Company.
14. Withholding. In order to enable the Company to meet any applicable
foreign, federal (including FICA), state and local withholding tax requirements,
an Optionee or Grantee shall be required to pay the amount of tax to be withheld
at the time such Optionee or Grantee recognizes taxable income
6
<PAGE> 7
in connection with the receipt of Stock or cash hereunder. No share of Stock
shall be delivered to any Optionee or Grantee until all such amounts have been
paid.
15. Rights as Shareholder. No Optionee or Grantee shall have any rights
as a holder of Common Stock with respect to Awards granted hereunder, unless and
until certificates for shares of Common Stock are issued to such Optionee or
Grantee.
16. Other Actions. This Plan shall not restrict the authority of the
Committee or of PBG, for proper corporate purposes, to grant or assume stock
options, other than under the Plan, to or with respect to any employee or other
person.
17. Costs and Expenses. Except as provided in Sections 6 and 14 hereof
with respect to taxes and except for certain other fees and commissions related
to the exercise of Options, the costs and expenses of administering the Plan
shall be borne by PBG and shall not be charged to any Award nor to any Optionee
or Grantee.
18. Plan Unfunded. The Plan shall be unfunded. Except for reserving a
sufficient number of authorized shares to the extent required by law to meet the
requirements of the Plan, PBG shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the delivery
of Common Stock pursuant to an Award granted under the Plan.
19. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
20. Effectiveness and Duration of the Plan. This Plan is effective as
of March 30, 1999. No Award shall be granted hereunder after April 1, 2009.
7
<PAGE> 1
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
We have calculated PBG's ratio of earnings to fixed charges in the
following table by dividing earnings by fixed charges. For this purpose,
earnings include pre-tax income plus fixed charges and losses recognized from
equity investments reduced by undistributed income from equity investments.
Fixed charges include interest expense, capitalized interest and one-third of
net rent expense, which is the portion of rent deemed representative of the
interest factor.
<TABLE>
<CAPTION>
FISCAL YEAR
($ IN MILLIONS)
1999(B) 1998(B) 1997 1996 1995
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST .................................. $ 209 $(192) $ 115 $ 138 $ 110
Undistributed (income) loss from equity
investments ......................................... -- 5 12 1 (3)
Fixed charges excluding capitalized interest ........... 227 245 238 238 256
----- ----- ----- ----- -----
EARNINGS AS ADJUSTED ................................... $ 436 $ 58 $ 365 $ 377 $ 363
===== ===== ===== ===== =====
FIXED CHARGES:
Interest expense .................................... $ 209 $ 230 $ 226 $ 224 $ 243
Capitalized interest ................................ 1 1 1 1 1
Interest portion of rental expense .................. 18 15 12 14 13
----- ----- ----- ----- -----
TOTAL FIXED CHARGES .................................... $ 228 $ 246 $ 239 $ 239 $ 257
===== ===== ===== ===== =====
RATIO OF EARNINGS TO FIXED CHARGES ..................... 1.91 (A) 1.53 1.58 1.41
</TABLE>
(A) As a result of the losses incurred in the fiscal year ended December 26,
1998, PBG was unable to fully cover the indicated fixed charges. Earnings
did not cover fixed charges by $188 million in 1998.
(B) Excluding the impact of unusual impairment and other charges and credits
of $16 million of income in 1999 and $222 million of expense in 1998, the
ratio of earnings to fixed charges would have been 1.85 and 1.14 in 1999
and 1998, respectively.
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S FINANCIAL REVIEW
OVERVIEW
- --------
The Pepsi Bottling Group, Inc. (collectively referred to as "PBG," "we,"
"our" and "us") became a public company through an initial public offering of
100,000,000 shares on March 31, 1999, marking our separation from PepsiCo, Inc.
and our beginning as a company focused solely on the bottling business. As an
independent bottling company, we set objectives aimed at profitably growing our
business and building shareholder value. We are proud to report that we have
exceeded our goals for 1999:
- We delivered 13% constant territory EBITDA growth in 1999,
significantly higher than the 8-10% growth target we had set for
ourselves at the time of our initial public offering.
- We generated $161 million of operating cash flow in 1999, exceeding
our original projections by approximately $200 million.
- We delivered $0.71 in earnings per share, an increase of $0.54 over
1998 after adjusting for one-time items and the number of shares
outstanding.
- We made 142,000 net placements of cold drink equipment in North
America, approximately 36,000 pieces ahead of prior year.
- We increased our return on invested capital by 1% in 1999.
- We made six acquisitions during the year for approximately $185
million in cash and assumed debt, increasing our share of
Pepsi-Cola's North American market approximately 1% to more than
55%.
The following discussion and analysis covers the key drivers behind our
success in 1999 and is broken down into five major sections. The first two
sections provide an overview and focus on items that affect the comparability of
historical or future results. The next two sections provide an analysis of our
results of operations and liquidity and financial condition. The last section
contains a discussion of our market risks and cautionary statements. The
discussion and analysis throughout management's financial review should be read
in conjunction with the Consolidated Financial Statements and the related
accompanying notes.
25
<PAGE> 2
Constant Territory
We believe that constant territory performance results are the most
appropriate indicators of operating trends and performance, particularly in
light of our stated intention of acquiring additional bottling territories, and
are consistent with industry practice. Constant territory operating results are
achieved by adjusting current year results to exclude current year acquisitions
and adjusting prior year results to include the results of prior year
acquisitions as if they had occurred on the first day of the prior fiscal year.
Constant territory results also exclude any unusual impairment and other charges
and credits.
Use of EBITDA
EBITDA, which is computed as operating income plus the sum of depreciation
and amortization, is a key indicator management and the industry use to evaluate
operating performance. It is not, however, required under generally accepted
accounting principles and should not be considered an alternative to
measurements required by GAAP such as net income or cash flows. In addition,
EBITDA for 1999 and 1998 excludes the impact of the non-cash portion of the
unusual impairment and other charges and credits discussed below and in Note 4
of the Consolidated Financial Statements.
ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY
- ----------------------------------------------------
Initial Public Offering
PBG was incorporated in Delaware in January 1999 and, prior to our
formation, we were an operating unit of PepsiCo. Our initial public offering
consisted of 100,000,000 shares of common stock sold to the public, equivalent
to 65% of our outstanding common stock, leaving PepsiCo the owner of the
remaining 35% of outstanding common stock. PepsiCo's ownership has increased to
36.7% as a result of net repurchases of 5.3 million shares under our share
repurchase program. In addition, in conjunction with our initial public
offering, PBG and PepsiCo contributed bottling businesses and assets used in the
bottling businesses to Bottling Group, LLC, our principal operating subsidiary.
As a result of the contribution of these assets, PBG owns 92.9% of Bottling
Group, LLC and PepsiCo owns the remaining 7.1%, giving PepsiCo economic
ownership of 41.2% of our combined operations. We fully consolidate the results
of Bottling Group, LLC and present PepsiCo's share as minority interest in our
Consolidated Financial Statements.
For the periods prior to our initial public offering we prepared our
Consolidated Financial Statements as a "carve-out" from the financial statements
of PepsiCo using the historical results of operations and assets and liabilities
of our business. Certain costs reflected in the Consolidated Financial
Statements may not necessarily be indicative of the costs that we would have
incurred had we operated as an independent, stand-alone entity for all periods
presented. These costs include an allocation of PepsiCo corporate overhead and
interest expense, and income taxes:
- We included corporate overhead related to PepsiCo's corporate
administrative functions based on a specific identification of
PepsiCo's administrative costs relating to the bottling operations
and, to the extent that such identification was not practicable,
based upon the percentage of our revenues to PepsiCo's consolidated
net revenues. These costs are included in selling, delivery and
administrative expenses in our Consolidated Statements of
Operations.
- We allocated $3.3 billion of PepsiCo debt to our business and
charged interest expense on this debt using PepsiCo's
weighted-average interest rate. Once we issued $3.3 billion of
third-party debt in the first quarter of 1999, our actual interest
rates were used to determine interest expense for the remainder of
the year.
- We reflected income tax expense in the Consolidated Financial
Statements as if we had actually filed a separate income tax
return.
The amounts, by year, of the historical allocations described above are as
follows:
<TABLE>
<CAPTION>
1999* 1998 1997
----- ---- ----
dollars in millions
<S> <C> <C> <C>
Corporate overhead expense........................... $ 3 $ 40 $ 42
Interest expense..................................... $ 28 $210 $205
PepsiCo weighted-average interest rate............... 5.8% 6.4% 6.2%
* Prior to our initial public offering.
</TABLE>
26
<PAGE> 3
Unusual Impairment and Other Charges and Credits
Our operating results were affected by the following unusual charges and credits
in 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998*
---- -----
dollars in millions
<S> <C> <C>
Non-cash compensation charge .............. $ 45 $ --
Vacation policy change .................... (53) --
Asset impairment and restructuring charges (8) 222
----- -----
$ (16) $ 222
===== =====
After minority interest and income taxes $ (9) $ 218
===== =====
</TABLE>
* Does not include tax settlement with the Internal Revenue Service
discussed on this page.
- - Non-cash Compensation Charge
In connection with the completion of our initial public offering,
PepsiCo vested substantially all non-vested PepsiCo stock options held by
PBG employees. As a result, we incurred a $45 million non-cash compensation
charge in the second quarter of 1999, equal to the difference between the
market price of the PepsiCo capital stock and the exercise price of these
options at the vesting date.
- - Vacation Policy Change
As a result of changes to our employee benefit and compensation plans,
employees will now earn vacation time evenly throughout the year based upon
service rendered. Previously, employees were fully vested at the beginning
of each year. As a result of this change, we have reversed an accrual of
$53 million into income.
- - Asset Impairment and Restructuring Charges
In the fourth quarter of 1998, we recorded $222 million of charges
relating to the following:
- A charge of $212 million for asset impairment of $194 million
and other charges of $18 million related to restructuring our
Russian operations.
- A charge of $10 million for employee-related and other costs,
mainly relocation and severance, resulting from the separation
of Pepsi-Cola bottling and concentrate organizations.
In the fourth quarter of 1999, $8 million of the remaining 1998
restructuring reserves was reversed into income, as actual costs incurred
to renegotiate manufacturing and leasing contracts in Russia and to reduce
the number of employees were less than the amounts originally estimated.
- - Tax Settlement with the Internal Revenue Service
In 1998, we settled a dispute with the Internal Revenue Service
regarding the deductibility of the amortization of acquired franchise
rights, resulting in a $46 million tax benefit.
Comparability of our operating results may also be affected by the following:
Concentrate Supply
We buy concentrate, the critical flavor ingredient for our products, from
PepsiCo, its affiliates and other brand owners who are the sole authorized
suppliers. Concentrate prices are typically determined annually.
In February 1999, PepsiCo announced an increase of approximately 5% in the
price of U.S. concentrate. The cost of this increase was offset in substantial
part with increases in the level of marketing support and funding we received
from PepsiCo. PepsiCo has recently announced a further increase of approximately
7%, effective February 2000, which will be available for use by PepsiCo to
support brand-building initiatives aimed at driving volume. Amounts paid or
payable to PepsiCo and its affiliates for concentrate were $1,418 million,
$1,283 million and $1,135 million in 1999, 1998 and 1997, respectively.
Bottler Incentives
PepsiCo and other brand owners provide us with various forms of marketing
support. The level of this support is negotiated annually and can be increased
or decreased at the discretion of the brand owners. This marketing support is
intended to cover a variety of programs and initiatives, including direct
marketplace support, capital equipment funding and shared media and advertising
support. Direct marketplace support is primarily funding by PepsiCo and other
brand owners of sales discounts and similar programs, and is recorded as an
adjustment to net revenues. Capital equipment funding is designed to support the
purchase and placement of marketing equipment and is recorded as a reduction to
selling, delivery and administrative expenses. Shared media and advertising
support is recorded as a
27
<PAGE> 4
reduction to advertising and marketing expense within selling, delivery and
administrative expenses.
The total bottler incentives we received from PepsiCo and other brand
owners were $563 million, $536 million and $463 million for 1999, 1998 and 1997,
respectively. Of these amounts, we recorded $263 million, $247 million and $235
million for 1999, 1998 and 1997, respectively, in net revenues, and the
remainder as a reduction to selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
total bottler incentives in each of the three years, with the balance received
from the other brand owners. We negotiate the level of funding with PepsiCo and
other brand owners as part of the annual planning process.
Our Investment in Russia
In recent years, we have invested in Russia to build infrastructure and to
fund start-up manufacturing and distribution costs. During the first half of
1998, our volumes were growing at approximately 50% over 1997 levels. However,
following the August 1998 devaluation of the ruble, we experienced a significant
drop in demand, resulting in lower net revenues and increased operating losses.
As a result of the economic crisis and the under-utilization of assets, we
incurred a charge of $212 million in the fourth quarter of 1998 to write down
our assets and reduce our fixed-cost structure. The economic conditions in 1999
have been more stable. However, volumes and revenues have not yet returned to
levels achieved immediately prior to the devaluation as Russian consumers have
switched from branded products to lower-cost alternatives. In response to this
environment, we have focused on developing alternative means of leveraging our
existing asset base while significantly reducing costs. Most notably, we have
begun to distribute Frito-Lay(R) snack products throughout all of Russia, except
Moscow. In addition, we have recently launched our own value brand beverage
products.
We anticipate that our Russian operations will continue to incur losses and
require cash to fund operations for at least the fiscal year 2000. However,
capital requirements will be minimal because our existing infrastructure is
adequate for current operations. Cash requirements for investing activities and
to fund operations were $45 million, $156 million and $71 million in 1999, 1998
and 1997, respectively. Volume in Russia accounted for 1%, 2% and 1% of our
total volume in 1999, 1998 and 1997, respectively. We will continue to review
our Russian operations on a regular basis and to consider changes in our
distribution systems and other operations as circumstances dictate.
Employee Benefit Plan Changes
We are making several changes to our employee benefit plans that will take
effect in fiscal year 2000. Our objective is to ensure that the overall
compensation and benefit plans offered to our employees are competitive with our
industry. The changes that have been made to our vacation policy, pension and
retiree medical plans include some benefit enhancements as well as cost
containment provisions. We do not believe that the net impact of these changes
will be material to our financial results in fiscal year 2000.
In addition, as previously disclosed at the time of our initial public
offering, we are not continuing the broad-based stock option program provided by
PepsiCo. In its place our Board of Directors has approved a matching company
contribution to our 401(k) plan to begin in 2000. The match will be made in PBG
stock and the amount will depend upon the employee's contribution and years of
service. We anticipate that the matching company contribution will cost
approximately $12 million in fiscal year 2000.
Finally, in the fourth quarter of 1999 we recognized a $16 million
compensation charge related to full-year 1999 performance. This expense is
one-time in nature and is for the benefit of our management employees,
reflecting our successful operating results as well as providing certain
incentive-related features.
Fiscal Year
Our fiscal year ends on the last Saturday in December and, as a result, a
fifty-third week is added every five or six years. Fiscal years 1999, 1998 and
1997 consisted of 52 weeks. Fiscal year 2000 will have 53 weeks.
28
<PAGE> 5
THE PEPSI BOTTLING GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
Fiscal years ended December 25, 1999, December 26, 1998 and December 27, 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET REVENUES ........................................ $ 7,505 $ 7,041 $ 6,592
Cost of sales ....................................... 4,296 4,181 3,832
------- ------- -------
GROSS PROFIT ........................................ 3,209 2,860 2,760
Selling, delivery and administrative expenses ....... 2,813 2,583 2,425
Unusual impairment and other charges and credits .... (16) 222 --
------- ------- -------
OPERATING INCOME .................................... 412 55 335
Interest expense, net ............................... 202 221 222
Foreign currency loss (gain) ........................ 1 26 (2)
Minority interest ................................... 21 -- --
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES ................... 188 (192) 115
Income tax expense (benefit) ........................ 70 (46) 56
------- ------- -------
NET INCOME (LOSS) ................................... $ 118 $ (146) $ 59
======= ======= =======
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ......... $ 0.92 $ (2.65) $ 1.07
WEIGHTED-AVERAGE BASIC AND DILUTED SHARES OUTSTANDING 128 55 55
See accompanying notes to Consolidated Financial Statements.
</TABLE>
Management's Financial Review
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
<CAPTION>
FISCAL 1999 VS. 1998 FISCAL 1998 VS. 1997
-------------------- --------------------
CONSTANT CONSTANT
REPORTED TERRITORY REPORTED TERRITORY
CHANGE CHANGE CHANGE CHANGE
------ ------ ------ ------
<S> <C> <C> <C> <C>
EBITDA................................ 25% 13% (7)% 0%
Volume................................ 4% 0% 7 % 5%
Net Revenue per Case.................. 3% 3% (1)% 0%
</TABLE>
EBITDA
Reported EBITDA was $901 million in 1999, representing a 25% increase over
1998. On a constant territory basis, EBITDA growth of 13% was driven by a strong
pricing environment particularly in the U.S. take-home segment, solid volume
growth in our higher-margin cold drink segment and reduced operating losses in
Russia.
In 1998, EBITDA declined 7% on a reported basis and was flat on a constant
territory basis. Strong volume gains were more than offset by higher raw
material costs in North America, increased selling and delivery expenses
associated with our investment in the cold drink segment and higher losses in
our Russian operations. The reported decline in 1998 was also impacted by $28
million of cash restructuring charges.
VOLUME
Our worldwide raw case volume grew 4% on a reported basis in 1999, and was
flat on a constant territory basis. Raw cases are physical cases sold,
regardless of the volume contained in these cases. In North America, which
consists of the U.S. and Canada, constant territory volume improved 1%. Growth
in our cold drink segment was offset by declines in the take-home business as we
raised prices in the take-home segment. Outside North America, our constant
territory volumes declined 6%, driven by the continued impact of the economic
conditions in Russia, which began to deteriorate in August 1998 with the
devaluation of the ruble.
In 1998, worldwide case volume grew 7% compared to 1997, with North America
increasing 6% and countries outside North America increasing 18%. Constant
territory volume increased 5% in the North American markets, 6% outside North
America and 5% worldwide. North American results were driven by solid growth in
our cold drink segment, modest gains in the take-home segment and the favorable
impact of the launch of Pepsi ONE in the fourth quarter of 1998. Constant
territory volume growth outside North America was positive in all of our
markets, led by Russia, which increased 21%.
29
<PAGE> 6
NET REVENUES
On a reported basis, net revenues were $7,505 million in 1999, representing
a 7% increase over 1998. On a constant territory basis, net revenues increased
3%, with increases in North America offsetting a revenue decline outside North
America. North American constant territory growth was driven by a 1% increase in
volume and a 4% increase in net revenue per case. The net revenue per case
increase was driven by strong pricing, led by advances in the take-home segment
and an increased mix of higher-revenue cold drink volume. Initial volume
declines partially offset the revenue impact of higher take-home pricing,
although volumes rebounded in the fourth quarter of 1999. Outside North
America, revenue declines were impacted by the August 1998 ruble devaluation in
Russia. On a worldwide basis, constant territory revenue per physical case was
up 3%.
Worldwide net revenues grew 7% from 1997 to 1998 on a reported basis and
5% on a constant territory basis. Volume gains contributed five percentage
points to constant territory revenue growth while pricing remained essentially
flat. Flat pricing reflected an increased mix of higher-priced single-serve
cold drink packages sold, offset by lower take-home package pricing in North
American markets, and promotional pricing relating to the U.S. introduction of
Pepsi ONE in the fourth quarter of 1998.
COST OF SALES
Cost of sales as a percentage of net revenues decreased from 59.4% in 1998
to 57.3% in 1999. This trend was driven by higher net revenue per case and
relatively flat cost of sales per case as higher concentrate prices were offset
by lower packaging costs and the favorable effect of renegotiating our raw
material contracts in Russia to a ruble denomination instead of U.S. dollars.
Cost of sales as a percentage of net revenues increased from 58.1% in 1997
to 59.4% in 1998. This increase was primarily a result of margin declines in the
take-home segment and increases in concentrate costs. An increased mix of
revenues in the higher-margin cold drink segment in 1998 was insufficient to
offset margin declines in the take-home segment.
SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES
Selling, delivery and administrative expenses increased $230 million, or
9%, in 1999. This increase was driven by acquisitions and higher selling and
delivery costs, which resulted from our continued investment in our North
American cold drink infrastructure. Additional headcount, delivery routes and
depreciation increases resulted from this initiative in 1999. We anticipate that
the investments we are making in the cold drink business will be more than
recovered through the resulting revenue growth in this higher-margin business.
In addition, higher advertising and marketing spending was offset by reduced
operating costs in Russia, as our cost structure benefited from our fourth
quarter 1998 restructuring actions. Administrative costs were impacted by
increased performance-related compensation due to our stronger operating results
in 1999 compared to 1998. Excluding the impact of performance-related
compensation, our administrative costs were relatively flat year-over-year.
In 1998, selling, delivery and administrative expenses increased $158
million, or 7%. Selling and delivery costs grew at a rate faster than volume
while our other administrative costs grew less than 1% in 1998. The costs
associated with selling and delivery grew faster than volume largely because of
our heavy investment in vending machines and coolers, consistent with our
long-term strategy to increase our presence in the cold drink segment of the
industry in North America. Spending on vending machines and coolers at customer
locations in the North American markets was approximately 20% higher in 1998
than in 1997, driving increases in the costs associated with placing,
depreciating and providing service for these assets.
FOREIGN CURRENCY EXCHANGE GAINS/LOSSES
Our foreign currency exchange gains and losses arise from our operations in
Russia. Since Russia is considered a highly inflationary economy for accounting
purposes, we are required to remeasure the net monetary assets of our Russian
operations in U.S. dollars and reflect any resulting gain or loss in the
Consolidated Statements of Operations. The August 1998 devaluation of the
Russian ruble resulted in a significant foreign exchange loss in 1998. In 1999,
foreign exchange losses have been minimized due to a more stable ruble exchange
rate.
30
<PAGE> 7
INTEREST EXPENSE, NET
Net interest expense decreased by $19 million to $202 million in 1999, due
primarily to a lower average interest rate on PBG's $3.3 billion of long-term
debt. Our average interest rate decreased from 6.4% in 1998, when we used
PepsiCo's average interest rate, to 6.1% in the current year when we issued our
own debt in the first quarter of 1999. Our lower 1999 interest rates reflect
market conditions at the time we issued our debt. In addition, we had reduced
levels of external debt outside North America.
In 1998, interest expense decreased $1 million compared to 1997, reflecting
higher interest income in Spain, offset by an increase in PepsiCo's average
borrowing rate from 6.2% to 6.4%.
PROVISION FOR INCOME TAXES
Our full-year effective tax rate for 1999 was an expense of 37.4%, compared
to a benefit of 24.0% in 1998 and an expense of 48.7% in 1997. In 1999, the
impact of non-deductible goodwill and other expenses on the effective tax rate
was offset in part by lower tax rates in our markets outside the U.S., and by
higher overall pre-tax income. In 1998, we settled a dispute with the Internal
Revenue Service regarding the deductibility of the amortization of acquired
franchise rights, resulting in a $46 million tax benefit in the fourth quarter.
Also in 1998, our effective tax rate was increased due to the unusual charges
relating to Russia restructuring and asset write-offs for which we did not
recognize a tax benefit. The 1997 tax rate was driven by the effect of
non-deductible goodwill and other expenses, offset in part by lower tax rates
outside the U.S.
Our effective tax rate, excluding the unusual impairment and other charges
and credits, would have been 38.0%, 0.9% and 48.7% in 1999, 1998 and 1997,
respectively.
EARNINGS PER SHARE
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Earnings (loss) per share on reported net income (loss)....... $0.92 $(2.65) $1.07
Average shares outstanding (millions)......................... 128 55 55
</TABLE>
Our historical capital structure is not representative of our current
structure due to our initial public offering. In 1999, immediately preceding the
offering, and in 1998 and 1997, we had 55 million shares of common stock
outstanding. In connection with the offering, we sold 100,000,000 shares of
common stock to the public and used the $2.2 billion of proceeds to repay
obligations to PepsiCo and to fund acquisitions.
The table below sets forth earnings per share adjusted for the initial
public offering and the impact of our unusual impairment and other charges and
credits as previously discussed. In 1999, we assumed 155 million shares were
outstanding from the beginning of the year and adjusted for our share repurchase
program, which began in October and under which we made net repurchases of
approximately 5.3 million shares. Similarly, the 1998 and 1997 earnings per
share amounts in the table below have been adjusted, assuming 155 million shares
had been outstanding for the entire period presented.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Earnings (loss) per share on reported net income (loss) $ 0.76 $ (0.94) $ 0.38
Unusual impairment and other charges and credits .......... (0.05) 1.41 --
Tax settlement ............................................ -- (0.30) --
------- ------- -------
Adjusted earnings per share ............................... $ 0.71 $ 0.17 $ 0.38
======= ======= =======
Assumed shares outstanding (millions) ..................... 155 155 155
</TABLE>
31
<PAGE> 8
THE PEPSI BOTTLING GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Fiscal years ended December 25, 1999, December 1998 and December 27,1997
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -----
CASH FLOWS -- OPERATIONS
<S> <C> <C> <C>
Net income (loss) .................................... $ 118 $ (146) $ 59
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation ....................................... 374 351 316
Amortization ....................................... 131 121 123
Non-cash unusual impairment and other charges and
credits........................................... (32) 194 --
Non-cash portion of tax settlement ................. -- (46) --
Deferred income taxes .............................. (27) 47 17
Other non-cash charges and credits, net ............ 141 88 12
Changes in operating working capital, excluding
effects of acquisitions and dispositions:
Trade accounts receivable ........................ (30) 46 26
Inventories ...................................... 3 (25) --
Prepaid expenses, deferred income taxes and other
current assets ................................. 4 8 (54)
Accounts payable and other current liabilities ... 41 39 63
Income taxes payable ............................. (5) (52) (14)
------- ------- -----
Net change in operating working capital ........ 13 16 21
------- ------- -----
NET CASH PROVIDED BY OPERATIONS ...................... 718 625 548
------- ------- -----
CASH FLOWS -- INVESTMENTS
Capital expenditures ................................. (560) (507) (472)
Acquisitions of bottlers and investments in affiliates (176) (546) (49)
Sales of bottling operations and property, plant and
equipment .......................................... 22 31 23
Other, net ........................................... (19) (24) (66)
------- ------- -----
NET CASH USED FOR INVESTMENTS ........................ (733) (1,046) (564)
------- ------- -----
CASH FLOWS -- FINANCING
Short-term borrowings -- three months or less ........ (58) 52 (90)
Proceeds from third-party debt ....................... 3,260 50 3
Replacement of PepsiCo allocated debt ................ (3,300) -- --
Net proceeds from initial public offering ............ 2,208 -- --
Payments of third-party debt ......................... (90) (72) (11)
Dividends paid ....................................... (6) -- --
Treasury stock transactions, net ..................... (90) -- --
Increase (decrease) in advances from PepsiCo ......... (1,750) 340 161
------- ------- -----
NET CASH PROVIDED BY FINANCING ....................... 174 370 63
------- ------- -----
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS ........................................ (5) 1 (1)
------- ------- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . 154 (50) 46
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR ....... 36 86 40
------- ------- -----
CASH AND CASH EQUIVALENTS -- END OF YEAR ............. $ 190 $ 36 $ 86
======= ======= =====
SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Liabilities incurred and/or assumed in conjunction
with acquisitions of bottlers .................. $ 65 $ 161 $ 3
======= ======= =====
</TABLE>
See accompanying notes to Consolidated Financial Statements.
32
<PAGE> 9
THE PEPSI BOTTLING GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
December 25, 1999 and December 26, 1998
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................. $ 190 $ 36
Trade accounts receivable, less allowance of $48 and
$46, in 1999 and 1998, respectively ....................... 827 808
Inventories ................................................ 293 296
Prepaid expenses, deferred income taxes and other
current assets ........................................... 183 178
------- -------
TOTAL CURRENT ASSETS ........................................ 1,493 1,318
Property, plant and equipment, net ......................... 2,218 2,055
Intangible assets, net ..................................... 3,819 3,806
Other assets ............................................... 89 143
------- -------
TOTAL ASSETS ............................................. $ 7,619 $ 7,322
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities ............. $ 924 $ 904
Income taxes payable ....................................... -- 9
Short-term borrowings ...................................... 23 112
------- -------
TOTAL CURRENT LIABILITIES ................................ 947 1,025
Allocation of PepsiCo long-term debt ....................... --- 3,300
Long-term debt due to third parties ........................ 3,268 61
Other liabilities .......................................... 385 367
Deferred income taxes ...................................... 1,178 1,202
Minority interest .......................................... 278 --
Advances from PepsiCo ...................................... -- 1,605
------- -------
TOTAL LIABILITIES............................................. 6,056 7,560
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share:
Authorized 300 shares, issued 155 shares ................. 2 --
Treasury stock: 5 shares ................................... (90) --
Additional paid-in capital ................................. 1,736 --
Retained earnings .......................................... 138 --
Accumulated other comprehensive loss ....................... (223) (238)
------- -------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) ........................ 1,563 (238)
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................ $ 7,619 $ 7,322
======= =======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
33
<PAGE> 10
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Liquidity Prior to our Separation from PepsiCo and our Initial Public
Offering
We financed our capital investments and acquisitions through cash flow from
operations and advances from PepsiCo prior to our separation from PepsiCo and
our initial public offering. Under PepsiCo's centralized cash management system,
PepsiCo deposited sufficient cash in our bank accounts to meet our daily
obligations, and withdrew excess funds from those accounts. These transactions
are included in advances from PepsiCo in our Consolidated Balance Sheets and
Consolidated Statements of Cash Flows.
Liquidity After our Initial Public Offering
Subsequent to our initial public offering, we have financed our capital
investments and acquisitions substantially through cash flow from operations. We
believe that our future cash flow from operations and borrowing capacity will be
sufficient to fund capital expenditures, acquisitions, dividends and other
working capital requirements.
Financing Transactions
On February 9, 1999, $1.3 billion of 5 5/8% senior notes and $1.0 billion of
5 3/8% senior notes were issued by Bottling Group, LLC and are guaranteed by
PepsiCo. On March 8, 1999, we issued $1 billion of 7% senior notes, which are
guaranteed by Bottling Group, LLC. During the second quarter of 1999, we
executed an interest rate swap converting 3% of our fixed-rate debt to
floating-rate debt.
On March 31, 1999, we offered 100,000,000 shares of PBG common stock for
sale to the public in an underwritten initial public offering generating $2.2
billion of net proceeds.
In April 1999, we entered into a $500 million commercial paper program that
is supported by a credit facility. The credit facility consists of two $250
million components, one of which is one year in duration and the other of which
is five years in duration. There were no borrowings outstanding under this
program at December 25, 1999.
The proceeds from the above financing transactions were used to repay
obligations to PepsiCo and fund acquisitions.
Capital Expenditures
We have incurred and will require capital for ongoing infrastructure,
including acquisitions and investments in developing market opportunities.
- - Our business requires substantial infrastructure investments to maintain
our existing level of operations and to fund investments targeted at
growing our business. Capital infrastructure expenditures totaled $560
million, $507 million and $472 million during 1999, 1998 and 1997,
respectively. We believe that capital infrastructure spending will
continue to be significant, driven by our investments in the cold drink
segment.
- - We intend to continue to pursue acquisitions of independent PepsiCo
bottlers in the U.S. and Canada, particularly in territories
contiguous to our own. These acquisitions will enable us to provide
better service to our large retail customers, as well as to reduce
costs through economies of scale. We also plan to evaluate
international acquisition opportunities as they become available. Cash
spending on acquisitions was $176 million, $546 million and $49
million in 1999, 1998 and 1997, respectively.
CASH FLOWS
Fiscal 1999 Compared to Fiscal 1998
Operating cash flow in 1999 grew $36 million, or 29%, to $161 million from
1998. Operating cash flow is defined as net cash provided by operations less net
cash used for investments, excluding cash used for acquisitions of bottlers and
investments in affiliates.
Net cash provided by operations in 1999 improved to $718 million from $625
million in 1998, due primarily to strong growth in EBITDA and favorable working
capital cash flows resulting from the timing of cash payments and our continued
focus on working capital management.
Net cash used for investments was $733 million in 1999 compared to $1,046
million in 1998. In 1999, $176 million was utilized for the acquisition of
bottlers in the U.S., Canada and Russia, compared to $546 million in 1998. In
addition, we continued to invest heavily in cold drink equipment in North
America, resulting in increased capital spending from $507 million in 1998 to
$560 million in 1999.
34
<PAGE> 11
Net cash provided by financing decreased by $196 million from $370 million
to $174 million during 1999, mainly due to the net pay-down of $58 million of
short-term borrowings in 1999, the payment in the first quarter of 1999 of
borrowings in Russia related to the purchase of Pepsi International Bottlers,
LLC and $90 million of share repurchases in the fourth quarter of 1999. Net IPO
proceeds of $2.2 billion and proceeds from the issuance of third-party debt of
$3.3 billion were used to repay obligations to PepsiCo and fund acquisitions.
Fiscal 1998 Compared to Fiscal 1997
Net cash provided by operations in 1998 improved to $625 million from $548
million in 1997 due primarily to the favorable effect of a three-year insurance
prepayment to a PepsiCo affiliate in 1997, and our continued focus on working
capital management.
Net cash used for investments was $1,046 million in 1998 compared to $564
million in 1997. In 1998, $546 million was utilized for the acquisition of
bottlers and investments in affiliates in the U.S., Canada and Russia, compared
to $49 million in 1997. In addition, we continued to increase our investment in
cold drink equipment in North America.
The net cash used for financing in 1998 was provided by normal operating
activities, advances from PepsiCo and proceeds from short-term borrowings. The
total net cash from financing activities in 1998 was $370 million.
MARKET RISKS AND CAUTIONARY STATEMENTS
- --------------------------------------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks including commodity prices, interest
rates on our debt and foreign exchange rates.
Commodity Price Risk
We are subject to market risks with respect to commodities because our
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate.
We use futures contracts and options on futures in the normal course of
business to hedge anticipated purchases of certain raw materials used in our
manufacturing operations. Currently we have various contracts outstanding for
aluminum purchases in 2000, which establish our purchase price within defined
ranges.
Interest Rate Risk
Historically, we have had no material interest rate risk associated with
debt used to finance our operations due to limited third-party borrowings. We
intend to manage our interest rate exposure using both financial derivative
instruments and a mix of fixed and floating interest rate debt. During the
second quarter of 1999, we executed an interest rate swap converting 3% of our
fixed-rate debt to floating-rate debt.
Foreign Currency Exchange Rate Risk
Operating in international markets involves exposure to movements in
currency exchange rates. Currency exchange rate movements typically also affect
economic growth, inflation, interest rates, government actions and other
factors. These changes can cause us to adjust our financing and operating
strategies. The discussion below of changes in currency exchange rates does not
incorporate these other economic factors. For example, the sensitivity analysis
presented in the foreign exchange discussion below does not take into account
the possibility that the impact of an exchange rate movement may or may not be
offset by the impact of changes in other categories.
Operations outside the U.S. constitute approximately 15% of our net
revenues. As currency exchange rates change, translation of the statements of
operations of our international businesses into U.S. dollars affects
year-over-year comparability. We have not hedged translation risks because cash
flows from international operations have generally been reinvested locally, nor
historically have we entered into hedges to minimize the volatility of reported
earnings. We estimate that a 10% change in foreign exchange rates would affect
reported operating income by less than $10 million.
Foreign exchange gains and losses reflect transaction and translation gains
and losses arising from the re-measurement into U.S. dollars of the net monetary
assets of businesses in highly inflationary countries. Russia is considered a
highly inflationary economy for accounting purposes and all foreign exchange
gains and losses are included in the Consolidated Statements of Operations.
35
<PAGE> 12
The table below presents information on contracts outstanding at December
25, 1999:
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE
-------- -------- -----
dollars in millions
<S> <C> <C> <C>
Raw material futures contracts............ $91 $-- $6
Raw material options...................... 61 1 12
Interest rate swap........................ 100 -- (2)
</TABLE>
EURO
On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between existing currencies and one common
currency, the Euro. Beginning in January 2002, new Euro-denominated bills and
coins will be issued, and existing currencies will be withdrawn from
circulation. Spain is one of the member countries that instituted the Euro, and
we have established plans to address the issues raised by the Euro currency
conversion. These issues include, among others, the need to adapt computer and
financial systems, business processes and equipment such as vending machines to
accommodate Euro-denominated transactions and the impact of one common currency
on cross-border pricing. Since financial systems and processes currently
accommodate multiple currencies, we do not expect the system and equipment
conversion costs to be material. Due to numerous uncertainties, we cannot
reasonably estimate the long-term effects one common currency may have on
pricing, costs and the resulting impact, if any, on our financial condition or
results of operations.
YEAR 2000
Over the past three years, we have taken a number of steps to minimize any
potential disruption from the transition of computerized systems and
microprocessors to the Year 2000. Such steps included the inventory and
assessment of our key information technology systems, together with any
necessary remediation and testing. In addition, we contacted and surveyed
suppliers critical to our production process and significant customers as to
their compliance status. Finally, we established an Event Management Center to
monitor the status of key business processes during and after the year-end
crossover. The Center was available to all of our locations and key suppliers
and customers in the event of any breakdown in processing.
We are pleased to report that as a result of these precautions, we
experienced no disruption to our business in any of the countries in which we
operate. This included no external infrastructure issues such as disruption to
utilities and telecommunications, nor any indication of problems with any of our
key suppliers or customers. Our own production and selling activities commenced
in the new year as originally scheduled.
We have spent $51 million in costs directly related to Year 2000 issues.
This included $18 million in 1999, $26 million in 1998 and $7 million in 1997.
These costs did not necessarily increase our normal level of spending on
information technology due to the deferral of other projects that enabled us to
focus on Year 2000 remediation. Consequently, in fiscal year 2000, resources
dedicated to Year 2000 projects are now being redirected to support initiatives
that had previously been postponed. Any carryover costs to fiscal year 2000 for
expenses such as the Event Management Center are not expected to be significant.
CAUTIONARY STATEMENTS
Except for the historical information and discussions contained herein,
statements contained in this annual report on Form 10-K may constitute
forward-looking statements as defined by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on currently
available competitive, financial and economic data and PBG's operating plans.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to be materially different. Among the events and
uncertainties that could adversely affect future periods are lower-than-expected
net pricing resulting from marketplace competition, material changes from
expectations in the cost of raw materials and ingredients, an inability to
achieve the expected timing for returns on cold drink equipment and related
infrastructure expenditures, material changes in expected levels of marketing
support payments from PepsiCo, an inability to meet projections for performance
in newly acquired territories, unexpected costs associated with conversion to
the common European currency and unfavorable interest rate and currency
fluctuations.
36
<PAGE> 13
THE PEPSI BOTTLING GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in millions)
Fiscal years ended December 25, 1999 December 26 ,1998 and December 27, 1997
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON TREASURY PAID-IN RETAINED COMPREHENSIVE COMPREHENSIVE
STOCK STOCK CAPITAL EARNINGS LOSS TOTAL INCOME/(LOSS
------- -------- ---------- -------- ------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28, 1996 . $ -- $ -- $ -- $ -- $(102) $ (102)
Comprehensive income:
Net income ............... -- -- -- -- -- -- $ 59
Currency translation
adjustment ............. -- -- -- -- (82) (82) (82)
------- ------- ------- ----- ----- ------- -----
Total comprehensive loss ... $ (23)
=====
BALANCE AT DECEMBER 27, 1997 . -- -- -- -- (184) (184)
Comprehensive loss:
Net loss ................. -- -- -- -- -- -- $(146)
Currency translation
adjustment.............. -- -- -- -- (35) (35) (35)
Minimum pension liability
adjustment ............. -- -- -- -- (19) (19) (19)
------- ------- ------- ----- ----- ------- -----
Total comprehensive loss ... $(200)
=====
BALANCE AT DECEMBER 26, 1998 . -- -- -- -- (238) (238)
Comprehensive income:
Net loss before IPO ...... -- -- -- -- -- -- $ (29)
Net income after IPO ..... -- -- -- 147 -- 147 147
Currency translation
adjustment.............. -- -- -- -- (4) (4) (4)
Minimum pension liability
adjustment ............. -- -- -- -- 19 19 19
-----
Total comprehensive income . $ 133
=====
Initial public offering (100
shares) net of settlement
of advances from PepsiCo . 2 -- 1,736 -- -- 1,738
Treasury stock transactions,
net (5 shares) ........... -- (90) -- -- -- (90)
Cash dividends declared on
common stock ............. -- -- -- (9) -- (9)
------- ------- ------- ----- ----- -------
BALANCE AT DECEMBER 25, 1999 . $ 2 $ (90) $ 1,736 $ 138 $(223) $ 1,563
======= ======= ======= ===== ===== =======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
37
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in millions, except per share data)
NOTE 1 -- BASIS OF PRESENTATION
The Pepsi Bottling Group, Inc. ("PBG") consists of bottling operations
located in the United States, Canada, Spain, Greece and Russia. These bottling
operations manufacture, sell and distribute Pepsi-Cola beverages including
Pepsi-Cola, Diet Pepsi, Mountain Dew and other brands of carbonated soft drinks
and other ready-to-drink beverages. Approximately 90% of PBG's 1999 net revenues
were derived from the sale of Pepsi-Cola beverages. References to PBG throughout
these Consolidated Financial Statements are made using the first-person
notations of "we," "our" and "us."
Prior to our formation, we were an operating unit of PepsiCo, Inc.
("PepsiCo"). On March 31, 1999, we offered 100,000,000 shares of PBG common
stock for sale at $23 per share in an initial public offering generating $2,208
million in net proceeds. These proceeds were used to fund acquisitions and repay
obligations to PepsiCo. Subsequent to the offering, PepsiCo owned and continues
to own 55,005,679 shares of common stock, consisting of 54,917,329 shares of
common stock and 88,350 shares of Class B common stock. PepsiCo's ownership at
December 25, 1999, represents 36.7% of the outstanding common stock and 100% of
the outstanding Class B common stock, together representing 44.8% of the voting
power of all classes of our voting stock. Subsequent to the offering, PepsiCo
also owns 7.1% of the equity of Bottling Group, LLC, our principal operating
subsidiary, giving PepsiCo economic ownership of 41.2% of our combined
operations at December 25, 1999.
The 154,917,354 common shares and 88,350 Class B common shares are
substantially identical, except for voting rights. Holders of our common stock
are entitled to one vote per share and holders of our Class B common stock are
entitled to 250 votes per share. Each share of Class B common stock held by
PepsiCo is, at PepsiCo's option, convertible into one share of common stock.
Holders of our common stock and holders of our Class B common stock share
equally on a per share basis in any dividend distributions.
The accompanying Consolidated Financial Statements include information that
has been presented on a "carve-out" basis for the periods prior to our initial
public offering. This information includes the historical results of operations
and assets and liabilities directly related to PBG, and has been prepared from
PepsiCo's historical accounting records. Certain estimates, assumptions and
allocations were made in determining such financial statement information.
Therefore, these Consolidated Financial Statements may not necessarily be
indicative of the results of operations, financial position or cash flows that
would have existed had we been a separate, independent company from the first
day of all periods presented.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of net revenues and expenses during the
reporting period. Actual results could differ from our estimates.
BASIS OF CONSOLIDATION The accounts of all of our wholly and majority-owned
subsidiaries are included in the accompanying Consolidated Financial Statements.
We have eliminated intercompany accounts and transactions in consolidation.
FISCAL YEAR Our fiscal year ends on the last Saturday in December and, as a
result, a fifty-third week is added every five or six years. Fiscal years 1999,
1998 and 1997 consisted of 52 weeks. Fiscal year 2000 will have 53 weeks.
REVENUE RECOGNITION We recognize revenue when goods are delivered to
customers. Sales terms do not allow a right of return unless product freshness
dating has expired. Reserves for returned product were $2 million at fiscal
year-end 1999, 1998 and 1997, respectively.
ADVERTISING AND MARKETING COSTS We are involved in a variety of programs to
promote our products. We include advertising and marketing costs in selling,
delivery and administrative expenses and expense such costs in the year
incurred. Advertising and marketing costs were $298 million, $233 million and
$210 million in 1999, 1998 and 1997, respectively.
BOTTLER INCENTIVES PepsiCo and other brand owners, at their sole discretion,
provide us with various forms of marketing support. This marketing support is
intended to cover a variety of programs and initiatives, including direct
marketplace support, capital equipment funding and shared media and advertising
support. Based on the objective of the programs and initiatives, we record
marketing support
38
<PAGE> 15
as an adjustment to net revenues or as a reduction of selling, delivery and
administrative expenses. Direct marketplace support is primarily funding by
PepsiCo and other brand owners of sales discounts and similar programs and is
recorded as an adjustment to net revenues. Capital equipment funding is designed
to support the purchase and placement of marketing equipment and is recorded as
a reduction to selling, delivery and administrative expenses. Shared media and
advertising support is recorded as a reduction to advertising and marketing
expense within selling, delivery and administrative expenses. There are no
conditions or other requirements that could result in a repayment of marketing
support received.
The total bottler incentives we received from PepsiCo and other brand
owners, were $563 million, $536 million and $463 million for 1999, 1998 and
1997, respectively. Of these amounts, we recorded $263 million, $247 million and
$235 million for 1999, 1998 and 1997, respectively, in net revenues, and the
remainder as a reduction to selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
bottler incentives in each of the three years, with the balance received from
the other brand owners.
STOCK-BASED EMPLOYEE COMPENSATION We measure stock-based compensation
expense in accordance with Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees," and its related interpretations. Accordingly,
compensation expense for stock option grants to PBG employees is measured as the
excess of the quoted market price of common stock at the grant date over the
amount the employee must pay for the stock. Our policy is to grant stock options
at fair value on the date of grant.
CASH EQUIVALENTS Cash equivalents represent funds we have temporarily
invested with original maturities not exceeding three months.
INVENTORIES We value our inventories at the lower of cost computed on the
first-in, first-out method or net realizable value.
PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment
("PP&E") at cost, except for PP&E that has been impaired, for which we write
down the carrying amount to estimated fair-market value, which then becomes the
new cost basis.
INTANGIBLE ASSETS Intangible assets include both franchise rights and
goodwill arising from the allocation of the purchase price of businesses
acquired. Goodwill represents the residual purchase price after allocation of
all identifiable net assets. Franchise rights and goodwill are evaluated at the
date of acquisition and amortized on a straight-line basis over their estimated
useful lives, which in most cases is between 20 to 40 years.
RECOVERABILITY OF LONG-LIVED ASSETS We review all long-lived assets,
including intangible assets, when facts and circumstances indicate that the
carrying value of the asset may not be recoverable. When necessary, we write
down an impaired asset to its estimated fair value based on the best information
available. Estimated fair value is generally based on either appraised value or
measured by discounting estimated future cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows. Accordingly,
actual results could vary significantly from such estimates.
MINORITY INTEREST PBG and PepsiCo contributed bottling businesses and
assets used in the bottling businesses to Bottling Group, LLC, our principal
operating subsidiary, in connection with the formation of Bottling Group, LLC.
As a result of the contribution of these assets, PBG owns 92.9% of Bottling
Group, LLC and PepsiCo owns the remaining 7.1%. Accordingly, the Consolidated
Financial Statements reflect PepsiCo's share of consolidated net income of
Bottling Group, LLC as minority interest in our Consolidated Statements of
Operations, and PepsiCo's share of consolidated net assets of Bottling Group,
LLC as minority interest in our Consolidated Balance Sheets from our initial
public offering through the end of the year.
TREASURY STOCK We record the repurchase of shares of our common stock at
cost and classify these shares as treasury stock within shareholders' equity.
Repurchased shares are included in our authorized shares but not included in our
shares outstanding. We record shares reissued using an average cost. During
1999, our Board of Directors authorized the repurchase of 10 million shares of
common stock under which we made net repurchases of 5.3 million shares for $90
million.
39
<PAGE> 16
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We use futures contracts and
options on futures to hedge against the risk of adverse movements in the price
of certain commodities used in the manufacture of our products. In order to
qualify for deferral hedge accounting of unrealized gains and losses, such
instruments must be designated and effective as a hedge of an anticipatory
transaction. Changes in the value of instruments that we use to hedge commodity
prices are highly correlated to the changes in the value of the purchased
commodity.
We review the correlation and effectiveness of these financial instruments
on a periodic basis. Gains and losses on futures contracts that are designated
and effective as hedges of future commodity purchases are deferred and included
in the cost of the related raw materials when purchased. Financial instruments
that do not meet the criteria for hedge accounting treatment are
marked-to-market with the resulting unrealized gain or loss recorded as other
income and expense within selling, delivery and administrative expenses.
Realized gains and losses that result from the early termination of financial
instruments used for hedging purposes are deferred and are included in cost of
sales when the anticipated transaction actually occurs. Premiums paid for the
purchase of options on futures are recorded as a prepaid expense in the
Consolidated Balance Sheets and are amortized as an adjustment to cost of sales
over the duration of the contract.
From time to time, we utilize interest rate swaps to hedge our exposure to
fluctuations in interest rates. The interest differential to be paid or received
on an interest rate swap is recognized as an adjustment to interest expense as
the differential occurs. The interest differential not yet settled in cash is
reflected in the accompanying Consolidated Balance Sheets as a receivable or
payable within the appropriate current asset or liability captions. If we
terminate an interest rate swap position, the gain or loss realized upon
termination would be deferred and amortized to interest expense over the
remaining term of the underlying debt instrument it was intended to modify, or
would be recognized immediately if the underlying debt instrument was settled
prior to maturity.
FOREIGN EXCHANGE GAINS AND LOSSES We translate the balance sheets of our
foreign subsidiaries that do not operate in highly inflationary economies at the
exchange rates in effect at the balance sheet date, while we translate the
statements of operations at the average rates of exchange during the year. The
resulting translation adjustments of our foreign subsidiaries are recorded
directly to accumulated other comprehensive loss. Foreign exchange gains and
losses reflect transaction and translation gains and losses arising from the
re-measurement into U.S. dollars of the net monetary assets of businesses in
highly inflationary countries. Russia is considered a highly inflationary
economy for accounting purposes and we include all foreign exchange gains and
losses in the Consolidated Statements of Operations.
NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for hedging activities and derivative
instruments, including certain derivative instruments embedded in other
contracts, which are collectively referred to as derivatives. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
are currently assessing the effects of adopting SFAS 133, and have not yet made
a determination of the impact on our financial position or results of
operations.
In July 1999, the FASB issued Statement of Financial Accounting Standard
137, delaying the implementation of SFAS 133 for one year. SFAS 133 will now be
effective for our first quarter of fiscal year 2001.
EARNINGS PER SHARE We compute basic earnings per share by dividing net
income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock that would then share in net income.
NOTE 3 -- INITIAL PUBLIC OFFERING AND COMPARABILITY OF RESULTS
For the periods prior to our initial public offering, our Consolidated
Financial Statements have been carved out from the financial statements of
PepsiCo using the historical results of operations and assets and liabilities of
our
40
<PAGE> 17
business. The Consolidated Financial Statements reflect certain costs that may
not necessarily be indicative of the costs we would have incurred had we
operated as an independent, stand-alone entity for all periods presented. These
costs include an allocation of PepsiCo corporate overhead and interest expense,
and income taxes.
- We included corporate overhead related to PepsiCo's corporate
administrative functions based on a specific identification of
PepsiCo's administrative costs relating to the bottling operations
and, to the extent that such identification was not practicable, based
upon the percentage of our revenues to PepsiCo's consolidated net
revenues. These costs are included in selling, delivery and
administrative expenses in our Consolidated Statements of Operations.
- We allocated $3.3 billion of PepsiCo debt to our business. We charged
interest expense on this debt using PepsiCo's weighted-average
interest rate. Once we issued $3.3 billion of third-party debt in the
first quarter of 1999, our actual interest rates were used to
determine interest expense for the remainder of the year.
- We reflected income tax expense in our Consolidated Financial
Statements as if we had actually filed a separate income tax return.
The amounts, by year, of the historical allocations described above are as
follows:
<TABLE>
<CAPTION>
1999* 1998 1997
----- ---- ----
<S> <C> <C> <C>
Corporate overhead expense............................... $ 3 $ 40 $ 42
Interest expense......................................... $ 28 $210 $205
PepsiCo weighted-average interest rate................... 5.8% 6.4% 6.2%
*Prior to our initial public offering.
</TABLE>
In addition, our historical capital structure is not representative of our
current structure due to our initial public offering. In 1999, immediately
preceding the offering and in 1998 and 1997, we had 55,000,000 shares of common
stock outstanding. In connection with the offering, we sold 100,000,000 shares
to the public.
NOTE 4 -- UNUSUAL IMPAIRMENT AND OTHER CHARGES AND CREDITS
<TABLE>
<CAPTION>
1999 1998*
---- -----
<S> <C> <C>
Non-cash compensation charge............................ $ 45 $ --
Vacation policy change.................................. (53) --
Asset impairment and restructuring charges.............. (8) 222
---- ----
$(16) $222
==== ====
After minority interest and income taxes.................. $ (9) $218
==== ====
</TABLE>
*Does not include tax settlement with the Internal Revenue Service
discussed on the next page.
The 1999 unusual items comprise the following:
- In connection with the completion of our initial public offering,
PepsiCo vested substantially all non-vested PepsiCo stock options held
by PBG employees. As a result, we incurred a $45 million non-cash
compensation charge in the second quarter, equal to the difference
between the market price of the PepsiCo capital stock and the exercise
price of these options at the vesting date.
- Employees will now earn vacation time evenly throughout the year based
upon service rendered. Previously, employees were fully vested for the
current year at the beginning of each year. As a result of this
change, we have reversed an accrual of $53 million into income.
- In the fourth quarter, $8 million of the remaining 1998 restructuring
reserve was reversed into income, as actual costs incurred to
renegotiate manufacturing and leasing contracts in Russia and to
reduce the number of employees were less than the amounts originally
estimated.
The 1998 unusual items comprise the following:
- A fourth-quarter charge of $212 million for asset impairment of $194
million and other charges of $18 million related to the restructuring
of our Russian bottling operations. The economic turmoil in Russia,
which accompanied the devaluation of the ruble in August 1998, had an
41
<PAGE> 18
adverse impact on our operations. Consequently, in the fourth quarter
we experienced a significant drop in demand, resulting in lower net
revenues and increased operating losses. Additionally, since net
revenues in Russia are denominated in rubles, whereas a substantial
portion of costs and expenses at that time were denominated in U.S.
dollars, our operating margins were further eroded. In response to
these conditions, we reduced our cost structure primarily through
closing four of our 26 distribution facilities, renegotiating
manufacturing and leasing contracts and reducing the number of
employees, primarily in sales and operations, from approximately 4,500
to 2,000. We also evaluated the resulting impairment of long-lived
assets, triggered by the reduction in utilization of assets caused by
the lower demand, the adverse change in the business climate and the
expected continuation of operating losses and cash deficits in that
market. The impairment charge reduced the net book value of these
assets from $245 million to $51 million, their estimated fair market
value based primarily on values paid for similar assets in Russia.
A fourth-quarter charge of $10 million for employee-related and other
costs, mainly relocation and severance, resulting from the separation
of Pepsi-Cola North America's concentrate and bottling organizations.
At year-end 1999, $3 million remained in accounts payable and other
current liabilities relating to remaining lease termination costs on
facilities and employee costs to be paid in 2000.
- We recognized an income tax benefit of $46 million in the fourth
quarter of 1998 upon the settlement of a disputed claim with the
Internal Revenue Service relating to the deductibility of the
amortization of acquired franchise rights. The settlement also
resulted in the reduction of goodwill and income taxes payable by $194
million.
NOTE 5 -- INVENTORIES
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Raw materials and supplies........... $ 110 $ 120
Finished goods....................... 183 176
----- -----
$ 293 $ 296
===== =====
</TABLE>
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Land .............................. $ 145 $ 151
Buildings and improvements ........ 852 813
Production and distribution
equipment ......................... 2,112 1,989
Marketing equipment ............... 1,596 1,368
Other ............................. 84 95
------- -------
4,789 4,416
Accumulated depreciation .......... (2,571) (2,361)
------- -------
$ 2,218 $ 2,055
======= =======
</TABLE>
We calculate depreciation on a straight-line basis over the estimated lives
of the assets as follows:
<TABLE>
<S> <C>
Building and improvements............................. 20-33 years
Production equipment.................................. 10 years
Distribution equipment................................ 5-8 years
Marketing equipment................................... 3-7 years
</TABLE>
NOTE 7 -- INTANGIBLE ASSETS, NET
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Franchise rights and other identifiable intangibles $ 3,565 $ 3,460
Goodwill ........................................... 1,582 1,539
------- -------
5,147 4,999
Accumulated amortization ........................... (1,328) (1,193)
------- -------
$ 3,819 $ 3,806
======= =======
</TABLE>
Identifiable intangible assets arise principally from the allocation of the
purchase price of businesses acquired, and consist primarily of territorial
franchise rights. Our franchise rights are typically perpetual in duration,
subject to compliance with the underlying franchise agreement. We assign amounts
to such identifiable intangibles based on their estimated fair value at the date
of acquisition. Goodwill represents the residual purchase price after allocation
to all identifiable net assets.
NOTE 8 -- ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accounts payable ............................... $334 $328
Accrued compensation and benefits .............. 147 174
Trade incentives ............................... 201 163
Accrued interest ............................... 69 --
Other current liabilities ...................... 173 239
---- ----
$924 $904
==== ====
</TABLE>
42
<PAGE> 19
NOTE 9 -- SHORT-TERM BORROWINGS AND LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Short-term borrowings
Current maturities of long-term debt .............. $ 10 $ 48
Borrowings under lines of credit .................. 13 64
------ ------
$ 23 $ 112
====== ======
Long-term debt due to third parties
5 5/8% senior notes due 2009 ...................... $1,300 $ --
5 3/8% senior notes due 2004 ...................... 1,000 --
7% senior notes due 2029 .......................... 1,000 --
Other ............................................. 13 102
------ ------
3,313 102
Capital lease obligations ......................... 2 7
------ ------
3,315 109
Less: Unamortized discount ........................ 37 --
Current maturities of long-term debt ........ 10 48
------ ------
$3,268 $ 61
====== ======
Allocation of PepsiCo long-term debt ................. $ -- $3,300
</TABLE> ====== ======
Maturities of long-term debt as of December 25, 1999 are: 2000 -- $9
million, 2001 -- $1 million, 2002 -- $0, 2003 -- $0, 2004 -- $1,000 million and
thereafter, $2,303 million.
The $1.3 billion of 5 5/8% senior notes and the $1.0 billion of 5 3/8%
senior notes were issued on February 9, 1999, by our subsidiary Bottling Group,
LLC and are guaranteed by PepsiCo. We issued the $1.0 billion of 7% senior
notes, which are guaranteed by Bottling Group, LLC, on March 8, 1999. During the
second quarter we executed an interest rate swap converting 3% of our fixed-rate
debt to floating-rate debt.
We allocated $3.3 billion of PepsiCo long-term debt in our financial
statements prior to issuing the senior notes referred to above. Our interest
expense includes the related allocated interest expense of $28 million in 1999,
$210 million in 1998 and $205 million in 1997, and is based on PepsiCo's
weighted-average interest rate of 5.8%, 6.4% and 6.2% in 1999, 1998 and 1997,
respectively.
In April 1999, we entered into a $500 million commercial paper program that
is supported by a credit facility. The credit facility consists of two $250
million components, one of which is one year in duration and the other of which
is five years in duration. There were no borrowings outstanding under this
program at December 25, 1999.
We have available short-term bank credit lines of approximately $121
million and $95 million at December 25, 1999 and December 26, 1998,
respectively. These lines are denominated in various foreign currencies to
support general operating needs in their respective countries. The
weighted-average interest rate of these lines of credit outstanding at December
25, 1999, December 26, 1998 and December 27, 1997 was 12.0%, 8.7% and 8.6%,
respectively.
Amounts paid to third parties for interest were $108 million, $20 million
and $21 million in 1999, 1998 and 1997, respectively. In 1998 and 1997,
allocated interest expense was deemed to have been paid to PepsiCo, in cash, in
the period in which the cost was incurred.
NOTE 10 -- LEASES
We have noncancellable commitments under both capital and long-term
operating leases. Capital and operating lease commitments expire at various
dates through 2023. Most leases require payment of related executory costs,
which include property taxes, maintenance and insurance.
Our future minimum commitments under noncancellable leases are set forth
below:
<TABLE>
<CAPTION>
COMMITMENTS
--------------------
CAPITAL OPERATING
------- ---------
<S> <C> <C>
2000................................................. $ 1 $ 33
2001................................................. -- 29
2002................................................. -- 25
2003................................................. -- 14
2004................................................. -- 12
Later years.......................................... 3 58
---- ----
$ 4 $171
==== ====
</TABLE>
At December 25, 1999, the present value of minimum payments under capital
leases was $2 million, after deducting $2 million for imputed interest. Our
rental expense was $55 million, $45 million and $35 million for 1999, 1998 and
1997, respectively.
43
<PAGE> 20
NOTE 11 -- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
As of December 25, 1999, our use of derivative instruments was limited to
interest rate swaps entered into with financial institutions, and commodity
futures and options contracts traded on national exchanges. Our corporate policy
prohibits the use of derivative instruments for trading purposes, and we have
procedures in place to monitor and control their use.
FAIR VALUE Financial assets with carrying values approximating fair value
include cash and cash equivalents and trade accounts receivable. Financial
liabilities with carrying values approximating fair value include accounts
payable and other accrued liabilities and short-term debt. The carrying value of
these financial assets and liabilities approximates fair value due to the short
maturity of our financial assets and liabilities, and since interest rates
approximate fair value for short-term debt.
Long-term debt at December 25, 1999 has a carrying value and fair value of
$3.3 billion and $3.0 billion, respectively.
COMMODITY PRICES We use futures contracts and options on futures in the
normal course of business to hedge anticipated purchases of certain raw
materials used in our manufacturing operations.
Deferred gains and losses at year-end 1999 and 1998, as well as gains and
losses recognized as part of the cost of sales in 1999, 1998 and 1997, were not
significant. At year-end 1999 and 1998, we had commodity contracts involving
notional amounts of $152 million and $71 million outstanding, respectively.
These notional amounts do not represent amounts exchanged by the parties and
thus are not a measure of our exposure; rather, they are used as the basis to
calculate the amounts due under the agreements.
INTEREST RATE RISK Prior to the initial public offering, we had minimal
external interest rate risk to manage. Subsequent to the offering, as interest
rate risk has grown, we have begun to manage interest rate exposure through the
use of an interest rate swap, which converted 3% of our fixed-rate debt to
floating-rate debt. Credit risk from the swap agreement is dependent both on the
movement in interest rates and the possibility of non-payment by the swap
counterparty. We mitigate credit risk by only entering into swap agreements with
high credit-quality counterparties and by netting swap payments within each
contract.
<TABLE>
<CAPTION>
AT DECEMBER 25, 1999
--------------------------------
NOTIONAL CARRYING FAIR
AMOUNT AMOUNT VALUE
-------- -------- -----
<S> <C> <C> <C>
Raw material futures contracts ......... $ 91 $ -- $ 6
Raw material options ................... 61 1 12
Interest rate swap ..................... 100 -- (2)
</TABLE>
NOTE 12 -- PENSION AND POSTRETIREMENT BENEFIT PLANS
PENSION BENEFITS
Prior to the initial public offering, our U.S. employees participated in
PepsiCo sponsored noncontributory defined benefit pension plans, which covered
substantially all full-time salaried employees, as well as most hourly
employees. In conjunction with the offering, we assumed the sponsorship of the
PepsiCo plan covering most hourly employees and established a plan for the
salaried employees mirroring the PepsiCo-sponsored plan. In 2000, the related
pension assets will be transferred from the PepsiCo trust to a separate trust
for our pension plans.
Benefits generally are based on years of service and compensation, or
stated amounts for each year of service. All of our qualified plans are funded
and contributions are made in amounts not less than minimum statutory funding
requirements nor more than the maximum amount that can be deducted for U.S.
income tax purposes. Our net pension expense for the defined benefit pension
plans for our operations outside the U.S. was not significant.
POSTRETIREMENT BENEFITS
PepsiCo has historically provided postretirement health care benefits to
eligible retired employees and their dependents, principally in the United
States. Employees are eligible for benefits if they meet age and service
requirements and qualify for retirement benefits. The plans are not funded and
since 1993 have included retiree cost sharing. With our initial public offering,
we have assumed the related obligations from PepsiCo for our employees, as we
are providing benefits similar to those previously provided by PepsiCo.
44
<PAGE> 21
<TABLE>
<CAPTION>
PENSION
--------------------------
Components of net periodic benefit costs 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service cost .................................. $ 30 $ 24 $ 22
Interest cost ................................. 42 37 35
Expected return on plan assets ................ (49) (45) (41)
Amortization of transition asset .............. -- (2) (4)
Amortization of net loss ...................... 4 -- --
Amortization of prior service amendments ...... 5 4 4
---- ---- ----
Net periodic benefit cost ..................... 32 18 16
Settlement loss ............................... -- 1 --
---- ---- ----
Net periodic benefit cost including settlements $ 32 $ 19 $ 16
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
--------------------------
Components of net periodic benefit costs: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service cost .................................. $ 4 $ 4 $ 3
Interest cost ................................. 12 12 15
Expected return on plan assets ................ -- -- --
Amortization of transition asset .............. -- -- --
Amortization of net loss ...................... -- -- --
Amortization of prior service amendments ...... (5) (5) (5)
---- ---- ----
Net periodic benefit cost ..................... 11 11 13
Settlement loss ............................... -- -- --
---- ---- ----
Net periodic benefit cost including settlements $ 11 $ 11 $ 13
==== ==== ====
</TABLE>
We amortize prior service costs on a straight-line basis over the average
remaining service period of employees expected to receive benefits.
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
----------------- -----------------
Changes in the benefit obligation: 1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Obligation at beginning of year $ 648 $ 545 $ 187 $ 164
Service cost ................... 30 24 4 4
Interest cost .................. 42 37 12 12
Plan amendments ................ 3 5 -- --
Actuarial (gain)/loss .......... (57) 78 14 19
Benefit payments ............... (38) (36) (11) (12)
Acquisitions and other ......... 19 -- -- --
Settlement gain ................ -- (5) -- --
----- ----- ----- -----
Obligation at end of year ...... $ 647 $ 648 $ 206 $ 187
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
---------------- ---------------
Changes in the fair value of assets: 1999 1998 1999 1998
----- ----- ---- ----
<S> <C> <C> <C> <C>
Fair value at beginning of year ... $ 541 $ 602 $ -- $ --
Actual return on plan assets ...... 85 (26) -- --
Employer contributions ............ -- 5 11 12
Benefit payments .................. (38) (36) (11) (12)
Acquisitions and other ............ 9 -- -- --
Settlement gain ................... -- (4) -- --
----- ----- ---- ----
Fair value at end of year ......... $ 597 $ 541 $ -- $ --
===== ===== ==== ====
</TABLE>
Selected information for the plans with accumulated benefit obligations in
excess of plan assets:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
----------------- -----------------
1999 1998 1999 1998
----- ---- ---- -----
<S> <C> <C> <C> <C>
Projected benefit obligation ............ $ (32) $(648) $(206) $(187)
Accumulated benefit obligation .......... (12) (575) (206) (187)
Fair value of plan assets ............... -- 541 -- --
</TABLE>
Funded status recognized on the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
----------------- -----------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Funded status at end of year ............ $ (50) $(107) $(206) $(187)
Unrecognized prior service cost ......... 33 34 (17) (22)
Unrecognized (gain)/loss ................ (14) 84 35 20
Unrecognized transition asset ........... -- (1) -- --
Unrecognized special termination benefits (2) (2) -- --
Employer contributions .................. -- -- 3 --
----- ----- ----- -----
Net amounts recognized .................. $ (33) $ 8 $(185) $(189)
===== ===== ===== =====
</TABLE>
45
<PAGE> 22
The weighed-average assumptions used to compute the above information are
set forth below:
<TABLE>
<CAPTION>
PENSION
----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate for benefit obligation ....... 7.8% 6.8% 7.2%
Expected return on plan assets ............. 10.0 10.0 10.0
Rate of compensation increase .............. 4.3 4.8 4.8
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate for benefit obligation ....... 7.8% 6.9% 7.4%
</TABLE>
COMPONENTS OF PENSION ASSETS
The pension plan assets are principally invested in stocks and bonds.
HEALTH CARE COST TREND RATES
We have assumed an average increase of 6.0% in 2000 in the cost of
postretirement medical benefits for employees who retired before cost sharing
was introduced. This average increase is then projected to decline gradually to
5.5% in 2005 and thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for postretirement medical plans. A one-percentage point change
in assumed health care costs would have the following effects:
<TABLE>
<CAPTION>
1% 1%
INCREASE DECREASE
-------- --------
<S> <C> <C>
Effect on total fiscal year 1999 service and interest cost components.............. $ 1 $(1)
Effect on the fiscal year 1999 accumulated postretirement benefit obligation....... 6 (6)
</TABLE>
OTHER EMPLOYEE BENEFIT PLANS
In the fourth quarter of 1999, we contributed $16 million to a defined
contribution plan as a one-time payment for the benefit of management employees.
The amount was based on full-year 1999 performance and included other
incentive-related features.
Our Board of Directors has also approved a matching company contribution to
our 401(k) plan to begin in 2000. The match will be made in PBG stock and the
amount will depend upon the employee's contribution and years of service. We
anticipate that the matching company contribution will cost approximately $12
million in fiscal year 2000.
NOTE 13 -- EMPLOYEE STOCK OPTION PLANS
In connection with the completion of our initial public offering, PepsiCo
vested substantially all non-vested PepsiCo stock options held by PBG employees.
As a result, we incurred a $45 million non-cash compensation charge in the
second quarter, equal to the difference between the market price of the PepsiCo
capital stock and the exercise price of these options at the vesting date.
Also at the time of our initial public offering, we issued a one-time
founders' grant of options to all full-time non-management employees to purchase
100 shares of PBG stock. These options have an exercise price equal to the
initial public offering price of $23 per share, are exercisable after three
years, and expire in 10 years. At December 25, 1999, approximately 3 million
options were outstanding.
In addition, we have adopted a long-term incentive stock option plan for
middle and senior management employees. We issued an option grant to middle and
senior management employees that varied according to salary and level within
PBG. These options' exercise prices range from $19.25 per share to $23 per share
and, with the exception of our chairman's options, are exercisable after three
years and expire in 10 years. Our chairman's options are exercisable ratably
over the three years following our initial public offering date. At December 25,
1999, approximately 8.2 million options were outstanding.
46
<PAGE> 23
The following table summarizes option activity during 1999:
<TABLE>
<CAPTION>
1999
----------------------
WEIGHTED-
AVERAGE
(OPTIONS IN MILLIONS) EXERCISE
OPTIONS PRICE
------- ---------
<S> <C> <C>
Outstanding at beginning of year ............................. -- $ --
Granted ................................................... 12.1 22.98
Exercised ................................................. -- --
Forfeited ................................................. (0.9) 23.33
------ ------
Outstanding at end of year ................................... 11.2 $22.98
====== ======
Exercisable at end of year ................................... -- $ --
====== ======
Weighted-average fair value of options granted during the year $10.29
======
</TABLE>
We adopted the disclosure provisions of Statement of Financial Accounting
Standard 123, "Accounting for Stock-Based Compensation," but continue to measure
stock-based compensation cost in accordance with the Accounting Principles Board
Opinion 25 and its related interpretations. If we had measured compensation cost
for the stock options granted to our employees in 1999 under the fair value
based method prescribed by SFAS 123, net income would have been changed to the
pro forma amounts set forth below:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Net Income
Reported.......................................................... $ 118
Pro forma......................................................... 102
</TABLE>
The fair value of PBG stock options used to compute pro forma net income
disclosures was estimated on the date of grant using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999
-------
<S> <C>
Risk-free interest rate.............................................. 5.8%
Expected life........................................................ 7 years
Expected volatility.................................................. 30%
Expected dividend yield.............................................. 0.09%
</TABLE>
NOTE 14 -- INCOME TAXES
The details of our income tax provision are set forth below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current: Federal ............... $ 79 $(84) $ 31
Foreign ............... (1) 4 3
State ................. 19 (13) 5
---- ---- ----
97 (93) 39
---- ---- ----
Deferred: Federal ............. (17) 45 17
Foreign ............. -- (5) (2)
State ............... (10) 7 2
---- ---- ----
(27) 47 17
---- ---- ----
$ 70 $(46) $ 56
==== ==== ====
</TABLE>
Our U.S. and foreign income (loss) before income taxes is set forth below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. ..................... $ 188 $ 116 $ 177
Foreign .................. -- (308) (62)
---- ---- ----
$ 188 $(192) $ 115
==== ==== ====
</TABLE>
Our reconciliation of income taxes calculated at the U.S. federal statutory
rate to our provision for income taxes is set forth below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ----- ----
<S> <C> <C> <C>
Income taxes computed at the U.S. federal statutory rate 35.0% (35.0)% 35.0%
State income tax, net of federal tax benefit ........... 3.2 -- 4.4
Impact of foreign results .............................. (9.1) (12.2) (9.5)
U.S. goodwill and other nondeductible expenses ......... 7.8 7.5 14.8
U.S. franchise rights tax settlement ................... -- (24.0) --
Unusual impairment and other charges and credits ....... (0.6) 38.7 --
Other, net ............................................. 1.1 1.0 4.0
---- ----- ----
Total effective income tax rate ........................ 37.4% (24.0)% 48.7%
==== ===== ====
</TABLE>
47
<PAGE> 24
The details of our 1999 and 1998 deferred tax liabilities (assets) are set
forth below:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Intangible assets and property, plant and equipment ............ $ 1,231 $ 1,252
Other .......................................................... 90 112
------- -------
Gross deferred tax liabilities ................................. 1,321 1,364
------- -------
Foreign net operating loss carryforwards ....................... (132) (123)
Employee benefit obligations ................................... (77) (85)
Bad debts ...................................................... (21) (20)
Various liabilities and other .................................. (157) (164)
------- -------
Gross deferred tax assets ...................................... (387) (392)
Deferred tax asset valuation allowance ......................... 147 135
------- -------
Net deferred tax assets ........................................ (240) (257)
------- -------
Net deferred tax liability ..................................... $ 1,081 $ 1,107
======= =======
Included in:
Prepaid expenses, deferred income taxes and other current assets $ (97) $ (95)
Deferred income taxes .......................................... 1,178 1,202
------- -------
$ 1,081 $ 1,107
======= =======
</TABLE>
We have net operating loss carryforwards totaling $465 million at December
25, 1999, which are available to reduce future taxes in Spain, Greece and
Russia. Of these carryforwards, $37 million expire in 2000 and $428 million
expire at various times between 2001 and 2006. We have established a full
valuation allowance for these net operating loss carryforwards based upon our
projection that these losses will expire before they can be used.
Our valuation allowances, which reduce deferred tax assets to an amount
that will more likely than not be realized, have increased by $12 million and
$55 million in 1999 and 1998, respectively.
Amounts paid to taxing authorities for income taxes were $111 million in
1999. In 1998 and 1997 our allocable share of income taxes was deemed to have
been paid to PepsiCo, in cash, in the period in which the cost was incurred.
NOTE 15 -- GEOGRAPHIC DATA
We operate in one industry, carbonated soft drinks and other ready-to-drink
beverages. We do business in 41 states and the District of Columbia in the U.S.
Outside the U.S., we do business in eight Canadian provinces, Spain, Greece and
Russia.
<TABLE>
<CAPTION>
NET REVENUES
------------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
U.S. .............................. $6,352 $5,886 $5,584
Other countries ................... 1,153 1,155 1,008
------ ------ ------
$7,505 $7,041 $6,592
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
LONG-LIVED ASSETS
------------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
U.S. .............................. $5,139 $5,024 $4,918
Other countries ................... 987 980 934
------ ------ ------
$6,126 $6,004 $5,852
====== ====== ======
</TABLE>
We have included in other assets on the Consolidated Balance Sheets $2
million, $1 million and $64 million of investments in joint ventures at December
25, 1999, December 26, 1998 and December 27, 1997, respectively. Our equity loss
in such joint ventures was $0 million, $5 million and $12 million in 1999, 1998
and 1997, respectively, which is included in selling, delivery and
administrative expenses.
NOTE 16 -- RELATIONSHIP WITH PEPSICO
At the time of the initial public offering we entered into a number of
agreements with PepsiCo. The most significant agreements that govern our
relationship with PepsiCo consist of:
(1) the master bottling agreement for cola beverages bearing the
"Pepsi-Cola" and "Pepsi" trademark, including Pepsi, Diet Pepsi and
Pepsi ONE in the United States; bottling and distribution agreements
for non-cola products in the United States, including Mountain Dew;
and a master fountain syrup agreement in the United States;
48
<PAGE> 25
(2) agreements similar to the master bottling agreement and the non-cola
agreements for each specific country, including Canada, Spain, Greece
and Russia, as well as a fountain syrup agreement similar to the
master syrup agreement for Canada;
(3) a shared services agreement whereby PepsiCo provides us with certain
administrative support, including procurement of raw materials,
transaction processing, such as accounts payable and credit and
collection, certain tax and treasury services, and information
technology maintenance and systems development. Beginning in 1998, a
PepsiCo affiliate has provided casualty insurance to us; and
(4) transition agreements that provide certain indemnities to the parties,
and provide for the allocation of tax and other assets, liabilities
and obligations arising from periods prior to the initial public
offering. Under our tax separation agreement, PepsiCo maintains full
control and absolute discretion for any combined or consolidated tax
filings for tax periods ending on or before the initial public
offering. PepsiCo has contractually agreed to act in good faith with
respect to all tax audit matters affecting us. In addition, PepsiCo
has agreed to use their best efforts to settle all joint interests in
any common audit issue on a basis consistent with prior practice.
We purchase concentrate from PepsiCo that is used in the production of
carbonated soft drinks and other ready-to-drink beverages. We also produce or
distribute other products and purchase finished goods and concentrate through
various arrangements with PepsiCo or PepsiCo joint ventures. We reflect such
purchases in cost of sales.
We share a business objective with PepsiCo of increasing the availability
and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo provides us with
various forms of marketing support to promote its beverages. This support covers
a variety of initiatives, including marketplace support, marketing programs,
capital equipment investment and shared media expense. Based on the objective of
the programs and initiatives, we record marketing support as an adjustment to
net revenues or as a reduction of selling, delivery and administrative expense.
We manufacture and distribute fountain products and provide fountain
equipment service to PepsiCo customers in some territories in accordance with
the Pepsi beverage agreements. We pay a royalty fee to PepsiCo for the AQUAFINA
trademark.
The Consolidated Statements of Operations include the following income
(expense) amounts as a result of transactions with PepsiCo and its affiliates:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net revenues .................................. $ 236 $ 228 $ 216
Cost of sales ................................. (1,488) (1,396) (1,235)
Selling, delivery and administrative expenses . 285 260 254
</TABLE>
We are not required to make any minimum fees or payments to PepsiCo, nor
are we obligated to PepsiCo under any minimum purchase requirements. There are
no conditions or requirements that could result in the repayment of any
marketing support payments received by us from PepsiCo.
Net amounts receivable from PepsiCo and its affiliates were $5 million and
net amounts payable to PepsiCo and its affiliates were $23 million at December
25, 1999 and December 26, 1998, respectively. Such amounts are recorded within
accounts payable and other current liabilities in our Consolidate Balance
Sheets.
NOTE 17 -- CONTINGENCIES
We are subject to various claims and contingencies related to lawsuits,
taxes, environmental and other matters arising out of the normal course of
business. We believe that the ultimate liability arising from such claims or
contingencies, if any, in excess of amounts already recognized is not likely to
have a material adverse effect on our results of operations, financial condition
or liquidity.
49
<PAGE> 26
NOTE 18 -- ACQUISITIONS
During 1999 and 1998, we acquired the exclusive right to manufacture, sell
and distribute Pepsi-Cola beverages from several independent PepsiCo franchise
bottlers. These acquisitions were accounted for by the purchase method. During
1999, the following acquisitions occurred for an aggregate purchase price of
$185 million in cash and assumed debt:
- - Jeff Bottling Company, Inc. of New York in January.
- - Pepsi-Cola General Bottlers of Princeton, Inc. and Pepsi-Cola General
Bottlers of Virginia, Inc. of West Virginia and Virginia in March.
- - Pepsi-Cola General Bottlers of St. Petersburg, Russia in March.
- - Leader Beverage Corporation of Connecticut in April.
- - Guillemette & Frere, Ltee. of Quebec, Canada in September.
- - The Pepsi-Cola Bottling Company of Bainbridge, Inc. of Georgia in
December.
During 1998, the following acquisitions occurred for an aggregate cash
purchase price of $546 million:
- - The remaining 75% interest in our Russian bottling joint venture, Pepsi
International Bottlers, LLC in February.
- - Gray Beverages, Inc. of Alberta and British Columbia, Canada in May.
- - Pepsi-Cola Allied Bottlers, Inc. of New York and Connecticut in
November.
The 1999 and 1998 aggregate purchase price exceeded the fair value of net
assets acquired, including the resulting tax effect, by approximately $174
million and $474 million, respectively. The excess was recorded in intangible
assets.
The following table presents the unaudited pro forma consolidated results
of PBG and the acquisitions noted above as if they had occurred at the beginning
of the year in which they were acquired. The pro forma information does not
necessarily represent what the actual results would have been for these periods
and is not intended to be indicative of future results.
<TABLE>
<CAPTION>
Unaudited
----------------
1999 1998
------ -------
<S> <C> <C>
Pro forma net revenues ..................................... $7,522 $ 7,248
====== =======
Pro forma net income (loss) ................................ 117 (135)
====== =======
Pro forma earnings (loss) per share (155 million shares) ... 0.76 (0.87)
====== =======
</TABLE>
NOTE 19 -- COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
(shares in thousands)
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Number of shares on which basic earnings (loss)
per share is based:
Average outstanding during period ............... 128,426 55,000 55,000
Add - Incremental shares under stock
compensation plans ............................ -- -- --
-------- -------- --------
Number of shares on which diluted
earnings (loss) per share is based .............. 128,426 55,000 55,000
Basic and diluted net earnings (loss) applicable to
common shareholders ............................ $ 118 $ (146) $ 59
Basic and diluted earnings (loss) per share ....... $ 0.92 $(2.65) $ 1.07
</TABLE>
We issued a one-time founders' grant of options in connection with our
initial public offering to all non-management employees to purchase 100 shares
of PBG common stock. We also issued options during the second quarter to all
management employees as part of our long-term incentive plan.
In October, our Board of Directors authorized the repurchase of up to 10
million shares of our common stock. As of December 25, 1999, we made net
repurchases of approximately 5.3 million shares.
50
<PAGE> 27
NOTE 20 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER FULL YEAR
- ---- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues .... $ 1,452 $ 1,831 $ 2,036 $ 2,186 $ 7,505
Gross profit .... 617 785 874 933 3,209
Operating income 42 92(1) 205 73(2) 412
Net income (loss) (3) 20 92 9 118
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1998 QUARTER QUARTER QUARTER QUARTER FULL YEAR
- ---- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues .......... $ 1,340 $ 1,686 $ 1,963 $ 2,052 $ 7,041
Gross profit .......... 563 696 794 807 2,860
Operating income (loss) 39 103 156 (243)(3) 55
Net income (loss) ..... (6) 22 45 (207)(4) (146)
</TABLE>
(1) Includes a $45 million non-cash compensation charge ($29 million after
tax).
(2) Includes $61 million of income for vacation policy changes and
restructuring accrual reversal ($38 million after tax).
(3) Includes $222 million for asset impairment and restructuring costs ($218
million after tax).
(4) Includes a $46 million tax benefit as a result of reaching final agreement
to settle a disputed claim with the Internal Revenue Service.
The first, second and third quarters of each year consist of 12 weeks, while the
fourth quarter consists of 16 weeks.
See Note 4 of the Consolidated Financial Statements for further information
regarding unusual impairment and other charges and credits included in the table
above.
51
<PAGE> 28
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
To Our Shareholders:
We are responsible for the preparation, integrity and fair presentation of
the Consolidated Financial Statements, related notes and other information
included in this annual report. The Consolidated Financial Statements were
prepared in accordance with generally accepted accounting principles and include
certain amounts based upon our estimates and assumptions, as required. Other
financial information presented in the annual report is derived from the
Consolidated Financial Statements.
We maintain a system of internal control over financial reporting, designed
to provide reasonable assurance as to the reliability of the Consolidated
Financial Statements, as well as to safeguard assets from unauthorized use or
disposition. The system is supported by formal policies and procedures,
including an active Code of Conduct program intended to ensure employees adhere
to the highest standards of personal and professional integrity. Our internal
audit function monitors and reports on the adequacy of and compliance with the
internal control system, and appropriate actions are taken to address
significant control deficiencies and other opportunities for improving the
system as they are identified.
The Consolidated Financial Statements have been audited and reported on by
our independent auditors, KPMG LLP, who were given free access to all financial
records and related data, including minutes of the meetings of the Board of
Directors and Committees of the Board. We believe that management
representations made to the independent auditors were valid and appropriate.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, provides oversight to our financial reporting process and our
controls to safeguard assets through periodic meetings with our independent
auditors, internal auditors and management. Both our independent auditors and
internal auditors have free access to the Audit Committee.
Although no cost-effective internal control system will preclude all errors
and irregularities, we believe our controls as of December 25, 1999 provide
reasonable assurance that our assets are safeguarded.
John T. Cahill Peter A. Bridgman
Executive Vice President Senior Vice President
and Chief Financial Officer and Controller
52
<PAGE> 29
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Pepsi Bottling Group, Inc.
We have audited the accompanying Consolidated Balance Sheets of The Pepsi
Bottling Group, Inc. as of December 25, 1999 and December 26, 1998 and the
related Consolidated Statements of Operations, Cash Flows and Changes in
Shareholders' Equity for each of the fiscal years in the three-year period ended
December 25, 1999. These Consolidated Financial Statements are the
responsibility of management of The Pepsi Bottling Group, Inc. Our
responsibility is to express an opinion on these Consolidated Financial
Statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above
present fairly, in all material respects, the financial position of The Pepsi
Bottling Group, Inc. as of December 25, 1999 and December 26, 1998, and the
results of its operations and its cash flows for each of the fiscal years in the
three-year period ended December 25, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
New York, New York
January 25, 2000
53
<PAGE> 30
SELECTED FINANCIAL AND OPERATING DATA
(in millions, except per share data)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues ........................................ $ 7,505 $ 7,041 $ 6,592 $ 6,603 $ 6,393
Cost of sales ....................................... 4,296 4,181 3,832 3,844 3,771
------- ------- ------- ------- -------
Gross profit ........................................ 3,209 2,860 2,760 2,759 2,622
Selling, delivery and administrative expenses ....... 2,813 2,583 2,425 2,392 2,273
Unusual impairment and other charges and credits (1) (16) 222 -- -- --
------- ------- ------- ------- -------
Operating income .................................... 412 55 335 367 349
Interest expense, net ............................... 202 221 222 225 239
Foreign currency loss (gain) ........................ 1 26 (2) 4 --
Minority interest ................................... 21 -- -- -- --
------- ------- ------- ------- -------
Income (loss) before income taxes ................... 188 (192) 115 138 110
Income tax expense (benefit) (2) .................... 70 (46) 56 89 71
------- ------- ------- ------- -------
Net income (loss) ................................... $ 118 $ (146) $ 59 $ 49 $ 39
======= ======= ======= ======= =======
PER SHARE DATA:
Basic and diluted earnings (loss) per share ......... $ 0.92 $ (2.65) $ 1.07 $ 0.89 $ 0.71
Cash dividend per share ............................. $ 0.06 -- -- -- --
Weighted-average basic and diluted shares outstanding 128 55 55 55 55
OTHER FINANCIAL DATA:
EBITDA (3) .......................................... $ 901 $ 721 $ 774 $ 792 $ 767
Cash provided by operations ......................... 718 625 548 451 431
Capital expenditures ................................ (560) (507) (472) (418) (358)
BALANCE SHEET DATA (AT PERIOD END):
Total assets ........................................ $ 7,619 $ 7,322 $ 7,188 $ 7,052 $ 7,082
Long-term debt:
Allocation of PepsiCo long-term debt ............. -- 3,300 3,300 3,300 3,300
Due to third parties ............................. 3,268 61 96 127 131
------- ------- ------- ------- -------
Total long-term debt ........................... 3,268 3,361 3,396 3,427 3,431
Minority interest ................................... 278 -- -- -- --
Advances from PepsiCo ............................... -- 1,605 1,403 1,162 1,251
Accumulated other comprehensive loss ................ (223) (238) (184) (102) (66)
Shareholders' equity (deficit) ...................... 1,563 (238) (184) (102) (66)
</TABLE>
(1) Unusual impairment and other charges and credits is comprised of the
following:
- - $45 million non-cash compensation charge in the second quarter of 1999.
- - $53 million vacation accrual reversal in the fourth quarter of 1999.
- - $8 million restructuring reserve reversal in the fourth quarter of 1999.
- - $222 million charge related to the restructuring of our Russian bottling
operations and the separation of Pepsi-Cola North America's concentrate and
bottling organizations in the fourth quarter of 1998.
(2) 1998 includes a $46 million income tax benefit in the fourth quarter for
the settlement of a disputed claim with the Internal Revenue Service
relating to the deductibility of the amortization of acquired franchise
rights.
(3) Excludes the non-cash component of unusual impairment and other charges and
credits.
54
<PAGE> 1
Exhibit 21
Subsidiaries of The Pepsi Bottling Group, Inc.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ ----------------
<S> <C>
AJN Holdings, Inc. Delaware
Alistar Beverages Corporation Washington
Allied Acquisition Company of Delaware, Inc. Delaware
Arrobi, S.L. Spain
Atlantic Holding Company California
Atlantic Soft Drink Company, Inc. South Carolina
Beverage Products Corporation Oklahoma
Bottling Group Holdings, Inc. Delaware
Bottling Group, LLC Delaware
C & I Leasing, Inc. Maryland
Canada Bottling Group Holdings ULC Nova Scotia
Catalana de Bebidas Carbonicas, S.A. Spain
Centran, Inc. Pennsylvania
Centro-Mediterranea de Bebidas Carbonicas PepsiCo S.A. Spain
Compania de Bebidas PepsiCo, S.A. Spain
CSD Sawgrass, Inc. Florida
Desormeau Vending Corp. New York
Dornfell Ireland
GB Russia, LLC Delaware
General Cinema Beverages of North Florida, Inc. Delaware
General Cinema Beverages of Virginia, Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
General Cinema Beverages of Washington, D.C., Inc. Delaware
Graves Beverages, Inc. Delaware
Gray Bern Holdings, Inc. Delaware
Grayhawk Leasing Company Delaware
Hillwood Bottling, LLC Delaware
International Bottlers Employment Co. LLC Delaware
International Bottlers LLC Delaware
International Bottlers Management Co. LLC Delaware
KAS, S.L. Spain
Neva Holdings, LLC Delaware
New Bern Transport Corporation Delaware
PBG Canada Finance, LLC Delaware
PBG Canada Global Holdings ULC Nova Scotia
PBG Canada Holdings, Inc. Delaware
PBG Commerce, Inc. Delaware
PBG Spirituosen Holdings, LLC Delaware
PepsiCo IVI S.A. Greece
PepsiCo Holdings OOO Russia
PepsiCo Ventas Andalucia, S.A. Spain
Pepsi-Cola Allied Bottlers, Inc. Delaware
Pepsi-Cola Bottling Finance B.V. Netherlands
Pepsi-Cola Bottling Global B.V. Netherlands
Pepsi-Cola Commodities, Inc. Delaware
Pepsi-Cola de Espana, S.L. Spain
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Pepsi-Cola General Bottlers of Princeton, Inc. West Virginia
Pepsi-Cola General Bottlers of Virginia, Inc. Virginia
Pepsi-Cola Laurel Bottling Company Pennsylvania
Pepsi-Cola Russia Beteiligungs Gmbh Germany
Pepsi-Cola Soft Drink Factory of Sochi Russia
Pepsi International Bottlers LLC Delaware
Pepsi International Bottlers (Novosibirsk) Russia
Pepsi International Bottlers (Ekaterinburg) Russia
Pepsi International Bottlers (Samara) Russia
Pet-Iberia, S.A. Spain
Rice Bottling Enterprises, Inc. Tennessee
Seven-Up Espana S.A. Spain
Spirituosen e Compania Comercio E Distribucas de Bebidas Portugal
Spirituosen, S.A. Spain
TGCC, Inc. Delaware
The Pepsi Bottling Group (Canada), Co. Canada
The Pepsi Bottling Group NRO Ltd. Canada
White Co., Inc. Delaware
</TABLE>
3
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The Pepsi Bottling Group, Inc. ("PBG") and each of the undersigned officers
or directors of PBG do hereby appoint Pamela C. McGuire and Steven M. Rapp, as
true and lawful attorneys-in-fact to execute and file on behalf of PBG and the
undersigned, any amendment or supplement to PBG's Annual Report on Form 10-K for
the fiscal year ended December 25, 1999, with the Securities and Exchange
Commission, any stock exchange or any governmental official or agency, with all
exhibits thereto and other documents in connection therewith, and each of such
attorneys-in-fact shall have the power to act hereunder with or without the
other.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
March 3, 2000.
The Pepsi Bottling Group, Inc.
By: /s/ Pamela C. McGuire
Pamela C. McGuire
Senior Vice President, General
Counsel and Secretary
/s/ Craig E. Weatherup/s/ Thomas W. Jones
Craig E. Weatherup Thomas W. Jones
Chairman and Chief Executive Officer Director
/s/ Peter A. Bridgman /s/Thomas H. Kean
Peter A. Bridgman Thomas H. Kean
Senior Vice President and Controller Director
(Chief Accounting Officer)
/s/ John T. Cahill /s/ Susan D. Kronick
John T. Cahill Susan D. Kronick
Executive Vice President, Chief Director
Financial Officer and Director
/s/ Linda G. Alvarado__ /s/ Robert F. Sharpe, Jr.
Linda G. Alvarado Robert F. Sharpe, Jr.
Director Director
/s/ Barry H. Beracha /s/ Karl M. von der Heyden
Barry H. Beracha Karl M. von der Heyden
Director Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PEPSI
BOTTLING GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 25, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001076405
<NAME> THE PEPSI BOTTLING GROUP, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> DEC-25-1999
<CASH> 190
<SECURITIES> 0
<RECEIVABLES> 875
<ALLOWANCES> 48
<INVENTORY> 293
<CURRENT-ASSETS> 1,493
<PP&E> 4,789
<DEPRECIATION> 2,571
<TOTAL-ASSETS> 7,619
<CURRENT-LIABILITIES> 947
<BONDS> 3,268
0
0
<COMMON> 2
<OTHER-SE> 1,561
<TOTAL-LIABILITY-AND-EQUITY> 7,619
<SALES> 7,505
<TOTAL-REVENUES> 7,505
<CGS> 4,296
<TOTAL-COSTS> 4,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 202
<INCOME-PRETAX> 188
<INCOME-TAX> 70
<INCOME-CONTINUING> 118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118
<EPS-BASIC> .92
<EPS-DILUTED> .92
</TABLE>
