<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 95-4284699 2086
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION IDENTIFICATION NO.) INDUSTRIAL
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
3220 EAST 26TH STREET
VERNON, CALIFORNIA 90023
TELEPHONE: 213-268-7779
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
MR. RICK FERGUSON
CHIEF FINANCIAL OFFICER
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
3220 EAST 26TH STREET
VERNON, CALIFORNIA 90023
TELEPHONE: 213-268-7779
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
LANCE C. BALK, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
TELEPHONE: 212-446-4800
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share....... 1,904,805 Shares $10.875 $20,714,754.38 $6,227.20
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c), using the average of the high and low prices
reported in the over-the-counter market on November 19, 1996.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 22, 1996
PROSPECTUS
, 1996
1,904,805 SHARES
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
COMMON STOCK
-----------
This Prospectus relates to the offer and sale of up to 1,904,805 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Seven-Up/RC Bottling Company of Southern California, Inc. (the "Company"). The
Shares are being offered by certain stockholders of the Company (the "Selling
Stockholders"). The distribution of the Shares by the Selling Stockholders may
be effected from time to time in one or more transactions for their own
accounts (which may include block transactions) in the over-the-counter market,
on the Nasdaq Stock Market ("Nasdaq"), or on any exchange on which the Common
Stock may then be listed, in negotiated transactions, through the writing of
options on shares (whether such options are listed on an options exchange or
otherwise), or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of Shares for whom such broker-dealers may act as agent or to whom
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions). The Selling Stockholders
and any participating brokers and dealers may be deemed to be "underwriters" as
defined in the Securities Act of 1933, as amended (the "Securities Act"). See
"Principal and Selling Stockholders" and "Plan of Distribution."
The Common Stock of the Company is traded on the over-the-counter market
under the symbol "SURC." The last sale price as reported in the over-the-
counter market for the Common Stock on November 19, 1996 was $10.50 per share.
None of the proceeds from the sale of the Shares by the Selling Stockholders
will be received by the Company. The Company has agreed to bear all expenses in
connection with the registration of the Shares being offered by the Selling
Stockholders. See "Plan of Distribution."
-----------
SEE "RISK FACTORS," BEGINNING ON PAGE 6, FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. All information provided herein as of a
date or dates prior to July 1, 1996 reflects the inclusion of Seven-Up/RC
Bottling Company of Puerto Rico, Inc. ("Puerto Rico").
The Company is among the largest beverage distributors in the United States
and is the largest bottler of Seven-Up in the United States. The Company
manufactures and distributes a broad range of beverage products in Southern
California, Central California, and in portions of Nevada and New Mexico. The
Company has the exclusive right within its territories to manufacture and/or
distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream
soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes
(ginger-ale and mixers), Evian (imported still water), Perrier (imported
mineral water), Welch's (grape, strawberry and pineapple), and Yoo-Hoo
(chocolate drink). The Company's net sales in 1995 were $396,725,000.
The Company competes as an independent bottler on the basis of its large
portfolio of franchised brands, its significant combined market share, its
ability to market, distribute and merchandise its products effectively and
favorable demographics within its territories. The Company's portfolio of
franchised brands consists of highly recognizable trademarks that are in almost
all cases the first ranking brand in their respective beverage flavor
categories. The Company's combined market share of its franchised brands and
other products enables the Company to realize purchasing, manufacturing,
marketing, and delivery efficiencies. In addition, the Company's territories
have many attributes that contribute to revenue growth in the beverage
industry, including a favorable climate and a high density of retail outlets in
populous areas.
The Company's products are made available to its customers through a network
of distribution facilities positioned within major population areas. The
Company distributes almost all of its products directly to retail outlets
through its core direct-store-door ("DSD") distribution system. Through its DSD
distribution channel, the Company provides efficient, high-quality services to
more than 35,000 retail outlets. These retail outlets include supermarkets,
warehouse clubs, convenience stores, and other retail establishments that serve
a combined population of over 30 million consumers.
The Company's business strategy is to manufacture and distribute a franchised
portfolio of leading trademarked beverages in each beverage flavor category and
to create additional sources of revenue through contract manufacturing. In
accordance with this strategy, the Company's Liquitrend division ("Liquitrend")
engages in contract manufacturing, which utilizes the Company's excess
production capacity by manufacturing carbonated soft drink products for a
variety of small, independent franchisors and retailers selling private label
products. As part of the Company's restructuring effort, the Liquitrend
division was significantly downsized and the Company's Avalon Food and Beverage
division ("Avalon"), which provided a wide array of beverage products primarily
to large retail grocers who picked up the products from the Company's warehouse
facilities and distributed these products through their internal distribution
systems, was discontinued.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling
Stockholders....................... 1,904,805 shares
Common Stock to be outstanding after
the Offering(1).................... 5,000,000 shares
Use of Proceeds..................... The Company is not selling shares in the
Offering and is not receiving any proceeds
from the Offering. See "Use of Proceeds."
</TABLE>
- --------
(1) Excludes 263,158 shares issuable upon the exercise of a warrant held by WB
Bottling Corporation. See "Principal and Selling Stockholders."
2
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
consider the "Risk Factors" immediately following this Prospectus Summary.
RECENT DEVELOPMENTS
Reorganization. On August 15, 1996, the Joint Plan of Reorganization of the
Company and its then parent Beverage Group Acquisition Corporation (the "Plan
of Reorganization") was consummated and the Company emerged from bankruptcy.
The Company believes that because the Plan of Reorganization was consensual,
the bankruptcy will not adversely affect the Company's relationships with its
trade creditors, franchisors, employees and customers. However, if such
relationships are adversely affected, the Company's operations could be
materially affected.
Puerto Rico Disposition. On June 30, 1996, the Company consummated a sale of
all the stock of Puerto Rico for approximately $74 million to an investor group
led by Center Street Capital Partners, L.P. and certain members of the current
Puerto Rico management (the "Puerto Rico Disposition"). The net proceeds from
the sale of Puerto Rico that were distributed pursuant to the Plan of
Reorganization to the holders of the Senior Secured Notes was approximately $55
million. See "Business--Sale of the Stock of Seven-Up/RC Bottling Company of
Puerto Rico."
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
The following table summarizes selected consolidated historical operating and
financial data of the Company for the five fiscal years ended December 31, 1995
which were derived, except as otherwise noted, from the consolidated financial
statements of the Company audited by Arthur Andersen LLP. The table also
summarizes selected unaudited consolidated historical operating and financial
data for the nine month period ended September 30, 1995, the seven month and
fifteen day period ended August 15, 1996 and the forty-six day period ended
September 30, 1996, derived from unaudited interim condensed consolidated
financial statements of the Company, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim
periods. The following table also includes certain pro forma unaudited
financial data that reflect adjustments necessary to give effect to the
transactions in connection with the consummation of the Plan of Reorganization
on August 15, 1996. The pro forma unaudited financial data do not purport to
represent the Company's results of operations or financial condition had the
Company's reorganization been effective for the periods indicated and do not
purport to project the Company's results of operations and financial condition
for any future period. This table should be read in conjunction with, and is
qualified in its entirety by reference to, "Selected Consolidated Financial
Data", "Management's Discussion and Analysis of Results of Operations and
Financial Condition", the Company's historical Consolidated Financial
Statements and notes thereto, and the "Pro Forma Unaudited Financial
Information" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
REORGANIZED
PREDECESSOR COMPANY(A) COMPANY(A)
---------------------------------------------------------------- -----------
UNAUDITED
SEVEN UNAUDITED UNAUDITED
UNAUDITED MONTHS FORTY- PRO FORMA
NINE AND 15 SIX NINE
MONTHS DAYS DAYS MONTHS
ENDED ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, SEPT. 30, AUG. 15, SEPT. 30, SEPT. 30,
------------------------------------------- --------- --------- ----------- ---------
1991 1992 1993 1994 1995 1995 1996 1996 1996(B)
------- ------- ------- ------- ------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................ 364,436 374,460 371,062 413,840 396,725 306,473 202,844 33,518 198,427
Cost of goods sold....... 289,795 295,481 299,735 342,336 334,942 260,698 164,320 27,418 161,806
Administrative, marketing
and general expenses.... 48,980 49,876 47,342 48,437 47,935 36,111 28,011 5,362 29,681
Depreciation and
amortization............ 17,460 18,428 17,983 17,251 18,180 13,398 10,399 1,461 5,289
Restructure charges (c).. 0 0 0 0 5,015 2,646 547 0 547
------- ------- ------- ------- ------- ------- ------- ------ -------
Operating income (loss).. 8,201 10,675 6,002 5,816 (9,347) (6,380) (433) (723) 1,104
Interest expense......... 24,575 21,222 19,938 21,626 23,057 17,349 12,871 267 2,464
Other income, net (d).... 2,682 1,236 418 95 210 171 33,712 4 2,001
------- ------- ------- ------- ------- ------- ------- ------ -------
(Loss) Income before
income taxes,
reorganization expenses
and extraordinary items. (13,692) (9,311) (13,518) (15,715) (32,194) (23,558) 20,408 (986) 641
Reorganization expenses
(e)....................... 0 0 0 0 0 0 35,369 0 0
Provision for income
taxes................... 0 0 0 185 0 0 345 28 28
------- ------- ------- ------- ------- ------- ------- ------ -------
(Loss) income before
extraordinary items..... (13,692) (9,311) (13,518) (15,900) (32,194) (23,558) (15,306) (1,014) 613
Extraordinary Items (f).. 0 (11,233) (826) 0 0 0 77,239 0 (510)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net (loss) income........ (13,692) (20,544) (14,344) (15,900) (32,194) (23,558) 61,933 (1,014) 103
------- ------- ------- ------- ------- ------- ------- ------ -------
Net (loss) income per
common share............ N/A N/A N/A N/A N/A N/A N/A (0.20) 0.02
======= ======= ======= ======= ======= ======= ======= ====== =======
Weighted average of
shares outstanding...... N/A N/A N/A N/A N/A N/A N/A 5,000 5,000
SELECTED FINANCIAL RATIOS
AND OTHER FINANCIAL DATA:
Capital expenditures..... 5,051 4,742 5,466 5,138 5,208 3,020 4,402 746 4,451
EBITDA (g)............... 25,661 29,103 23,985 23,067 13,848 9,664 10,513 738 6,940
Cash flows provided by
(used in) operating
activities.............. 7,861 16,260 372 1,670 5,767 (3,294) 18,374 (3,294) N/A
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
REORGANIZED
COMPANY(a)
------------------
AS OF
SEPTEMBER 30, 1996
(UNAUDITED)
------------------
<S> <C>
BALANCE SHEET DATA:
Cash........................................................ 3,291
Property, plant and equipment, net.......................... 33,551
Total assets................................................ 96,463
Total current liabilities (h)............................... 49,231
Total debt (i).............................................. 18,246
Stockholders' equity........................................ 28,986
</TABLE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA
(a) On May 13, 1996, the Company and its immediate holding company parent,
Beverage Group Acquisition Corporation, filed voluntary petitions for
reorganization relief under Chapter 11 of the bankruptcy code in the U.S.
Bankruptcy Court for the District of Delaware. On August 15, 1996, the
Plan of Reorganization was consummated and the Company emerged as a
reorganized company from Chapter 11. Due to the reorganization and
implementation of fresh start reporting, the Condensed Consolidated
Financial Statements for the new reorganized company (period starting
August 15, 1996) are not comparable to those of the predecessor company.
The predecessor company included the Company and Puerto Rico through the
date of disposition, June 30, 1996. The reorganized company includes the
operations of the Company subsequent to the consummation date.
(b) Pro forma operating data, other financial data and balance sheet data give
effect to (i) the transactions in connection with the consummation of the
Plan of Reorganization on August 15, 1996, and (ii) the Puerto Rico
Disposition on June 30, 1996, as if they had occurred on January 1, 1996.
(c) Restructuring charges for the year ended December 31, 1995 represent
$906,000 for severance pay, $1,660,000 for lease terminations and
$2,449,000 related to the negotiation of the potential restructuring of
the senior secured notes. The restructuring charges for the seven months
and fifteen days ended August 15, 1996 relate to the termination of a
capital lease.
(d) Other income, net consists of income associated with a joint venture in
Puerto Rico and non-recurring contractual income. The seven months and
fifteen days ended August 15, 1996, reflect the gain resulting from the
Puerto Rico Disposition of approximately $32 million.
(e) Reorganization expenses represent costs and fees for professionals in
conjunction with the Plan of Reorganization and $29.7 million for the
adjustment of assets to fair market value.
(f) The 1992 extraordinary item represents the write-off of debt issuance
costs and a prepayment premium as a result of the issuance of the senior
secured notes on August 12, 1992. The 1993 extraordinary item consists of
a prepayment premium and the write-off of deferred financing charges to
the replacement of revolving credit facilities in February 1994. The seven
months and fifteen days ended August 15, 1996 extraordinary items
represent the write-off of debt issuance costs related to the predecessor
company revolving credit facility and the gain resulting from the
discharge of indebtedness of the senior secured notes.
(g) EBITDA represents earnings before interest income and expense, financial
restructuring costs, reorganization items, other income, income taxes,
depreciation and amortization. EBITDA should not be considered as an
alternative to net income (as determined in accordance with GAAP). EBITDA
is presented because it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness.
(h) Total current liabilities exclude current portion of long-term debt.
(i) Total debt includes current portion of long-term debt.
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
before making an investment in the Common Stock offered hereby.
EFFECT OF BANKRUPTCY ON RELATIONSHIPS WITH CREDITORS, CUSTOMERS AND SUPPLIERS
On August 15, 1996, the Plan of Reorganization was consummated and the
Company emerged from bankruptcy. The Company believes that because the Plan of
Reorganization was consensual, the bankruptcy will not adversely affect the
Company's relationships with its trade creditors, franchisors, employees and
customers. However, if such relationships are adversely affected, the
Company's operations could be materially affected.
COMPETITION
The soft drink industry is highly competitive. In order to maintain its
market share, the Company must generally remain price competitive. See
"Business--Marketing." Market conditions over the past several years have
limited the Company's ability to increase the prices of many of its products.
The Company's profitability has been, and may continue to be, adversely
affected by its commitment to maintaining market share. The Company's
principal competitors are Coca-Cola Enterprises Inc. ("CCE") and the company-
owned bottling operations of the Pepsi-Cola Company ("COBO"), both of which
are affiliated with their respective syrup franchisors. Price competition
between CCE and COBO has resulted in a market-wide erosion of per case
margins. Both CCE and COBO have greater financial resources than the Company
and may be influenced by their respective syrup franchisors to reduce prices
in order to increase the volume of syrup sales. See "Business--Competition."
Furthermore, the Company relies to a substantial degree upon advertising and
promotional funds provided by its franchisors (the "Franchisors"). These
support funds are negotiated on an annual basis and may be reduced or
terminated. The Company may not have adequate financial resources, alone or
with support funds provided by the Franchisors, to meet future competitive
challenges.
RELATIONSHIP WITH FRANCHISORS
The Company's agreements with the Franchisors cover all of the Company's
present bottling territories and most of its products. Under such agreements,
the Franchisors are entitled to set the price for their concentrate
unilaterally. The agreements generally contain certain covenants and provide
that the Company may not transfer control of its bottling rights without the
consent of the Franchisor. Upon the occurrence of an event of default under
any such agreement and in certain other limited circumstances, the Franchisor
may terminate the Company's bottling rights with respect to the product of
such Franchisor. Termination of the Company's bottling rights with respect to
its principal products would constitute an event of default under the
Company's credit facilities and, might have a material adverse effect on the
financial position of the Company.
LOCAL ECONOMIES; WEATHER
The Company's sales are dependent on the condition of the local economies in
the Company's territories. In addition, the Company's sales are also
substantially dependent on weather conditions existing in its territories.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL FACTORS
The Company's business could be significantly affected if certain
legislative proposals are adopted, including soft drink taxes and mandatory
container deposit laws. In that connection, a proposal for a national
container deposit law was recently re-introduced and defeated in Congress. In
addition, costs of compliance with existing and future environmental laws and
regulations cannot be predicted with any degree of certainty and may
significantly affect the Company's operations. See "Business--Governmental
Regulations."
6
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on its executive
management team, including the Company's President, Chief Executive Officer
and Chairman of the Board, Bart S. Brodkin. Although the Company has entered
into employment agreements with certain of the Company's executive officers,
it is possible that members of executive management may leave the Company, and
such departures could have a negative impact on the business of the Company.
The Company does not maintain key-man life insurance on any of its executive
officers. See "Management."
LIMITED TRADING MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
The Company's Common Stock is thinly traded and as such could be subject to
price fluctuations to a greater degree than heavily traded securities for
which there is a well established trading market.
POSSIBLE ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE
All of the outstanding shares of the Company's Common Stock, including the
shares offered hereby, were issued under the Plan of Reorganization pursuant
to Section 1145 of the Bankruptcy Code of 1986 which provides an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") and are freely tradeable without restriction or further
registration under the Securities Act unless held by an "affiliate" of the
Company, as that term is defined under Rule 144 of the Securities Act, which
shares will be subject to the resale limitations of Rule 144.
No prediction can be made as to the effect, if any, that market sales of
Common Stock or the availability of shares of Common Stock for sale will have
on the market price of the Common Stock from time to time. The sale of a
substantial number of shares held by the existing stockholders, whether
pursuant to a subsequent public offering or otherwise, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock and could materially impair the Company's future ability to raise
capital through an offering of equity securities.
ANTITAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain certain provisions that could make more difficult the acquisition of
the Company by means of a tender offer, a proxy contest or otherwise. These
provisions include advance notice procedures for stockholders to submit
proposals for consideration at stockholders' meetings. See "Description of
Capital Stock."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. Such
statements are subject to various risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a number of
factors, including those identified under "Risk Factors" and elsewhere in this
Prospectus.
7
<PAGE>
THE COMPANY
GENERAL
The Company is among the largest beverage distributors in the United States
and is the largest bottler of Seven-Up in the United States. The Company
manufactures and distributes a broad range of beverage products in Southern
California, Central California, and in portions of Nevada and New Mexico. The
Company has the exclusive right within its territories to manufacture and/or
distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream
soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes
(ginger-ale and mixers), Evian (imported still water), Perrier (imported
mineral water), Welch's (grape, strawberry and pineapple), and Yoo-Hoo
(chocolate drink). The Company's net sales in 1995 were $396,725,000.
The Company competes as an independent bottler on the basis of its large
portfolio of franchised brands, its significant combined market share, its
ability to market, distribute and merchandise its products effectively and
favorable demographics within its territories. The Company's portfolio of
franchised brands consists of highly recognizable trademarks that are in
almost all cases the first ranking brand in their respective beverage flavor
categories. The Company's combined market share of its franchised brands and
other products enables the Company to realize purchasing, manufacturing,
marketing, and delivery efficiencies. In addition, the Company's territories
have many attributes that contribute to revenue growth in the beverage
industry, including a favorable climate and a high density of retail outlets
in populous areas.
The Company's products are made available to its customers through a network
of distribution facilities positioned within major population areas. The
Company distributes almost all of its products directly to retail outlets
through its core DSD distribution system. Through its DSD distribution
channel, the Company provides efficient, high-quality services to more than
35,000 retail outlets. These retail outlets include supermarkets, warehouse
clubs, convenience stores, and other retail establishments that serve a
combined population of over 30 million consumers.
The Company's business strategy is to manufacture and distribute a
franchised portfolio of leading trademarked beverages in each beverage flavor
category and to create additional sources of revenue through contract
manufacturing. In accordance with this strategy, the Company's Liquitrend
division ("Liquitrend") engages in contract manufacturing, which utilizes the
Company's excess production capacity by manufacturing carbonated soft drink
products for a variety of small, independent franchisors and retailers selling
private label products. As part of the Company's restructuring effort, the
Liquitrend division was significantly downsized and the Company's Avalon Food
and Beverage division ("Avalon"), which provided a wide array of beverage
products primarily to large retail grocers who picked up the products from the
Company's warehouse facilities and distributed these products through their
internal distribution systems, was discontinued.
The Company's executive offices are located at 3220 East 26th Street,
Vernon, California 90023. The telephone number at the Vernon location is (213)
268-7779.
RECENT DEVELOPMENTS
Reorganization. On August 15, 1996, the Joint Plan of Reorganization of the
Company and its then parent Beverage Group Acquisition Corporation was
consummated and the Company emerged from bankruptcy. The Company believes that
because the Plan of Reorganization was consensual, the bankruptcy will not
adversely affect the Company's relationships with its trade creditors,
franchisors, employees and customers. However, if such relationships are
adversely affected, the Company's operations could be materially affected.
Puerto Rico Disposition. On June 30, 1996, the Company consummated a sale of
all the stock of Puerto Rico for approximately $74 million to an investor
group led by Center Street Capital Partners, L.P. and certain members of the
current Puerto Rico management. The net proceeds from the sale of Puerto Rico
that were distributed pursuant to the Plan of Reorganization to the holders of
the Senior Secured Notes was approximately $55 million. See "Business--Sale of
the Stock of Seven-Up/RC Bottling Company of Puerto Rico."
8
<PAGE>
USE OF PROCEEDS
The Company is not selling shares in the Offering and is not receiving any
proceeds from the Offering.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the over-the-counter market under the symbol
"SURC." The following table sets forth on a per share basis, for the periods
indicated, the high and low sales price of the Common Stock as reported on the
over-the-counter market. Such over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions. See "Risk Factors--Limited
Trading Market and Possible Volatility of Stock Price."
<TABLE>
<CAPTION>
PRICE RANGE
------------
HIGH LOW
------ -----
<S> <C> <C>
FISCAL 1996:
Third Quarter (since August 15, 1996).............................. 10 1/2 8
Fourth Quarter (as of November 20, 1996)........................... 11 7/8 9 5/8
</TABLE>
Prior to the consummation of the Plan of Reorganization, the Company's
Common Stock was not publicly traded. A recent closing price as reported on
the over-the-counter market is set forth on the cover page of this Prospectus.
Since the reorganization, the Company has not declared or paid any cash or
other dividends on its Common Stock and does not expect to pay dividends for
the foreseeable future.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
The following table sets forth the selected consolidated historical operating
and financial data of the Company for the five fiscal years ended December 31,
1995, and as of December 31, 1995, which were derived, except as otherwise
noted, from the consolidated financial statements of the Company audited by
Arthur Andersen, LLP. The table also sets forth selected unaudited consolidated
historical operating and financial data for the nine month period ended
September 30, 1995, the seven month and fifteen day period ended August 15,
1996, the forty-six day period ended September 30, 1996 and as of September 30,
1996, derived from unaudited interim condensed consolidated financial
statements of the Company, which in the opinion of management, include all
adjustments consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the unaudited interim periods. The following
table also includes certain pro forma unaudited financial data that reflect
adjustments necessary to give effect to the transactions in connection with the
consummation of the Plan of Reorganization on August 15, 1996. The pro forma
financial data do not purport to represent the Company's results of operations
or financial condition had the Company's reorganization been effective for the
periods indicated and do not purport to project the Company's results of
operations and financial condition for any future period. This table should be
read in conjunction with, and is qualified in its entirety by reference to,
"Summary Consolidated Financial Data," "Management's Discussion and Analysis of
Results of Operations and Financial Condition," the Company's historical
Consolidated Financial Statements and notes thereto and the "Pro Forma
Unaudited Financial Information" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
REORGANIZED
PREDECESSOR COMPANY(a) COMPANY (a)
----------------------------------------------------------------- -----------
UNAUDITED
UNAUDITED SEVEN UNAUDITED UNAUDITED
NINE MONTHS FORTY-SIX PRO FORMA
MONTHS AND 15 DAYS NINE MONTHS
ENDED DAYS ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, SEPT. 30, AUG. 15, SEPT. 30, SEPT. 30,
------------------------------------------- --------- ---------- ----------- -----------
1991 1992 1993 1994 1995 1995 1996 1996 1996(b)
------- ------- ------- ------- ------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... 364,436 374,460 371,062 413,840 396,725 306,473 202,844 33,518 198,427
Cost of goods sold.......... 289,795 295,481 299,735 342,336 334,942 260,698 164,320 27,418 161,806
Administrative, marketing
and general expenses....... 48,980 49,876 47,342 48,437 47,935 36,111 28,011 5,362 29,681
Depreciation and
amortization............... 17,460 18,428 17,983 17,251 18,180 13,398 10,399 1,461 5,289
Restructure charges (c)..... 0 0 0 0 5,015 2,646 547 0 547
------- ------- ------- ------- ------- ------- ------- ------ -------
Operating income (loss)..... 8,201 10,675 6,002 5,816 (9,347) (6,380) (433) (723) 1,104
Interest expense............ 24,575 21,222 19,938 21,626 23,057 17,349 12,871 267 2,464
Other income, net (d)....... 2,682 1,236 418 95 210 171 33,712 4 2,001
------- ------- ------- ------- ------- ------- ------- ------ -------
(Loss) income before income
taxes, reorganization
expenses and extraordinary
items...................... (13,692) (9,311) (13,518) (15,715) (32,194) (23,558) 20,408 (986) 641
Reorganization expenses (e). 0 0 0 0 0 0 35,369 0 0
Provision for income taxes.. 0 0 0 185 0 0 345 28 28
------- ------- ------- ------- ------- ------- ------- ------ -------
(Loss) income before
extraordinary items........ (13,692) (9,311) (13,518) (15,900) (32,194) (23,558) (15,306) (1,014) 613
Extraordinary Items (f)..... 0 (11,233) (826) 0 0 0 77,239 0 (510)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net (loss) income........... (13,692) (20,544) (14,344) (15,900) (32,194) (23,558) 61,933 (1,014) 103
======= ======= ======= ======= ======= ======= ======= ====== =======
Net (loss) income per common
share...................... N/A N/A N/A N/A N/A N/A N/A (0.20) 0.02
Weighted average of shares
outstanding................ N/A N/A N/A N/A N/A N/A N/A 5,000 5,000
SELECTED FINANCIAL RATIOS AND
OTHER FINANCIAL DATA:
Capital expenditures........ 5,051 4,742 5,466 5,138 5,208 3,020 5,252 746 4,451
EBITDA (g).................. 25,661 29,103 23,985 23,067 13,848 9,664 10,513 738 6,940
Cash flows provided by (used
in) operating activities... 7,861 16,260 372 1,670 5,767 (3,294) 18,374 (3,294) N/A
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
REORGANIZED
PREDECESSOR COMPANY(a) COMPANY(a)
-------------------------------------------------------- -------------
AS OF AS OF
AS OF DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------- ------------- -------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................... 3,820 4,148 3,746 6,982 5,949 4,360 3,291
Property, plant and
equipment, net........ 90,464 87,496 83,447 87,388 79,945 81,555 33,551
Total assets........... 227,493 212,407 210,198 243,834 192,133 204,595 96,463
Total current
liabilities (h)....... 33,868 42,429 49,554 81,312 63,512 61,983 49,231
Total debt (i)......... 176,009 168,873 173,883 191,661 189,954 195,309 18,246
Stockholders' equity... 17,616 1,105 (13,239) (29,139) (61,333) (52,697) 28,986
</TABLE>
NOTES TO SELECTED FINANCIAL DATA
(a) On May 13, 1996 the Company and its immediate holding company parent,
Beverage Group Acquisition Corporation, filed voluntary petitions for
reorganization relief under Chapter 11 of the bankruptcy code in the U.S.
Bankruptcy Court for the District of Delaware. On August 15, 1996, the
Plan of Reorganization was consummated and the Company emerged as a
reorganized company from Chapter 11. Due to the reorganization and
implementation of fresh start reporting, the Condensed Consolidated
Financial Statements for the new reorganized company (period starting
August 15, 1996) are not comparable to those of the predecessor company.
The predecessor company included the Company and Puerto Rico through the
date of disposition, June 30, 1996. The reorganized company includes the
operations of the Company subsequent to the consummation date.
(b) Pro forma operating data and other financial data give effect to (i) the
transactions in connection with the consummation of the Plan of
Reorganization on August 15, 1996, and (ii) the Puerto Rico Disposition
on June 30, 1996, as if they had occurred on January 1, 1996.
(c) Restructuring charges for the year ended December 31, 1995 represent
$906,000 for severance pay, $1,660,000 for lease terminations and
$2,449,000 related to the negotiation of the potential restructuring of
the senior secured notes. The restructuring charges for the seven months
and fifteen days ended August 15, 1996 relate to the termination of a
capital lease.
(d) Other income (expense), net consists of income associated with a joint
venture in Puerto Rico and non-recurring contractual income. The seven
months and fifteen days ended August 15, 1996, reflect the gain resulting
from the Puerto Rico Disposition of approximately $32 million.
(e) Reorganization expenses represent costs and fees for professionals in
conjunction with the Plan of Reorganization and $29.7 million for the
adjustment of asset to fair market value.
(f) The 1992 extraordinary item represents the write-off of debt issuance
costs and a prepayment premium as a result of the issuance of the senior
secured notes on August 12, 1992. The 1993 extraordinary item consists of
a prepayment premium and the write-off of deferred financing charges
related to the replacement of revolving credit facilities in February
1994. The seven months and fifteen day period ended August 15, 1996
extraordinary items represent the write-off of debt issuance costs
related to the predecessor company revolving credit facility and the gain
resulting from the discharge of indebtedness of the senior secured notes.
(g) EBITDA represents earnings before interest income and expense, financial
restructuring costs, reorganization items, other income, income taxes,
depreciation and amortization. EBITDA should not be considered as an
alternative to net income (as determined in accordance with GAAP). EBITDA
is presented because it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness.
(h) Total current liabilities exclude current portion of long-term debt.
(i) Total debt includes current portion of long-term debt.
11
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1996 and the Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1995 have been
prepared giving effect to the sale of Puerto Rico and the consummation of the
Reorganization, including the costs related thereto (collectively, the "Pro
Forma Adjustments"), in accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7").
The Company has accounted for the Reorganization using the principles of
"fresh start" reporting as required by SOP 90-7. Pursuant to such principles,
the reorganization value of $30.0 million was derived from various valuation
methods, including discounted cash flows, selected company multiplies,
selected acquisition transaction multiplies and other applicable ratios and
valuation techniques believed by management and its financial advisors to be
representative of the Company's business and industry. In accordance with SOP
90-7, the reorganization value was allocated to specific identifiable assets
and liabilities based upon fair market value.
The unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1996, was prepared as if the Pro Forma Adjustments
had occurred on January 1, 1996. The Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1995, was prepared as
if the Pro Forma Adjustments had occurred on January 1, 1995.
The Unaudited Pro Forma Consolidated Financial Information does not purport
to be indicative of the results which would have been obtained had such
transactions in fact been completed as of the date hereof and for the periods
presented or that may be obtained in the future.
12
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales............................. $236,362 $(37,935)(a) $198,427
Cost of goods sold.................... 191,738 (29,932)(a) 161,806
-------- -------- --------
Gross profit........................ 44,624 (8,003) 36,621
Administrative, marketing and general
expenses............................. 33,373 (3,692)(a) 29,681
Depreciation and amortization......... 11,860 (6,571)(a),(e) 5,289
Restructure charges................... 547 -- 547
-------- -------- --------
Operating (loss) income............. (1,156) 2,260 1,104
Interest expense...................... 13,138 (10,674)(b) 2,464
Other income, net..................... 33,716 (31,715)(a) 2,001
-------- -------- --------
Income before income taxes,
reorganization expenses and
extraordinary items.................. 19,422 (18,781) 641
Reorganization expenses............... 35,369 (35,369)(c) 0
Provision for income taxes............ 373 (345)(a) 28
-------- -------- --------
(Loss) Income before extraordinary
items.............................. (16,320) 16,933 613
Extraordinary items................... 77,239 (77,749)(f) (510)
-------- -------- --------
Net income.......................... $ 60,919 $(60,816) $ 103
======== ======== ========
Net income per common share........... $ 0.02(d)
========
Weighted average common shares
outstanding.......................... 5,000(d)
========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations.
13
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
The following notes set forth the explanations and assumptions used in
preparing the Unaudited Pro Forma Consolidated Statement of Operations.
(a) The Company sold Puerto Rico during the nine-month period ended September
30, 1996 at a net gain to the Company of $31,715. The Pro Forma Adjustments
represent the exclusion of Puerto Rico's operating activities, revenues and
expenses, and the one-time gain during the period.
(b) Net reduction of interest expense as a result of the Reorganization and
the sale of Puerto Rico has been calculated as follows:
<TABLE>
<S> <C>
Reversal of interest on $140,000 Senior Secured Notes............... $10,063
Reversal of interest on Puerto Rico Revolving Credit Facility....... 611
-------
Pro Forma Adjustment................................................ $10,674
=======
</TABLE>
(c) Represents costs incurred during fiscal 1996 related to the
Reorganization which are being excluded from the pro forma results for the
nine-month period ended September 30, 1996.
(d) Pro forma loss per common share is computed based upon 5,000,000 average
shares of common stock assumed to be outstanding during the nine-month period
ended September 30, 1996.
(e) In accordance with SOP 90-7, the Reorganization Value is allocated to
identifiable assets and liabilities based upon fair value. The amount reflects
an adjustment of $3,968 for the restatement of depreciation and amortization
expense related to the write down of assets and liabilities to the fair value.
(f) Reflects the elimination of the extraordinary gain recognized in
connection with the Plan of Reorganization. The extraordinary gain resulting
from the Reorganization has been calculated as follows:
<TABLE>
<S> <C>
Historical carrying value of Senior Secured Notes.................. $140,000
Historical carrying value of related accrued interest.............. 24,756
Write-off of old deferred financing costs.......................... (2,607)
Market value of securities exchanged for old debt.................. (29,400)
Cash used from proceeds from the sale of Puerto Rico............... (55,000)
--------
Extraordinary gain................................................. $ 77,749
========
</TABLE>
The Company believes that it will not recognize any gain for tax purposes due
to cancellation of indebtedness resulting from the reorganization. The gain
related to cancellation of debt will result in a reduction of the Company's
end-of-the-year tax attributes (net operating and capital loss carryovers) and
then, to the extent the amount of such cancellation of indebtedness income
exceeds the Company's tax attributes, a reduction of the Company's adjusted tax
basis in its assets. It is anticipated that the cancellation of indebtedness
income will result in the reduction of all of the Company's net operating
losses remaining after the sale of Puerto Rico and a portion of the Company's
adjusted tax basis in its assets.
14
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales............................. $396,725 $(82,256)(a) $314,469
Cost of goods sold.................... 334,942 (65,925)(a) 269,017
-------- -------- --------
Gross profit........................ 61,783 (16,331) 45,452
Administrative, marketing and general
expenses............................. 47,935 (6,383)(a) 41,552
Depreciation and amortization......... 18,180 (10,450)(a)(d) 7,730
Restructure charges................... 5,015 -- 5,015
-------- -------- --------
Operating income (loss)............. (9,347) 502 (8,845)
Interest expense...................... 23,057 (17,380)(b) 5,677
Other income, net..................... 210 0 210
-------- -------- --------
Net loss............................ $(32,194) $(17,882) $(14,312)
======== ======== ========
Net loss per common share............. $ (2.86)(c)
========
Weighted average common shares
outstanding.......................... 5,000 (c)
========
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations.
15
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLAR AMOUNTS IN THOUSANDS)
The following notes set forth the explanations and assumptions used in
preparing the Unaudited Pro Forma Consolidated Statement of Operations.
(a) The Company sold Puerto Rico during the nine-month period ended
September 30, 1996 at a net gain to the Company of $31,715. The Pro Forma
Adjustments represent the exclusion of Puerto Rico's operating activities, for
fiscal year 1995.
(b) Net reduction of interest expense as a result of the Reorganization and
the sale of Puerto Rico has been calculated as follows:
<TABLE>
<S> <C>
Reversal of interest on $140,000 Senior Secured Notes............... $16,100
Reversal of interest on Puerto Rico Revolving Credit Facility....... 1,280
-------
Pro Forma Adjustment................................................ $17,380
=======
</TABLE>
(c) Pro Forma loss per common share is computed based upon 5,000,000 average
shares of common stock assumed to be outstanding during the year ended
December 31, 1995.
(d) In accordance with SOP 90-7, the Reorganization Value is allocated to
identifiable assets and liabilities based upon fair value. The amount reflects
an adjustment of $5,494 for the restatement of depreciation and amortization
expense related to the write down of assets and liabilities to fair value.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
On May 13, 1996, the Company and its immediate holding company parent,
Beverage Group Acquisition Corporation ("BGAC") filed a petition for
reorganization relief under Chapter 11 of the Bankruptcy Code. On August 2,
1996, the Bankruptcy Court confirmed the Plan and on August 15, 1996, the Plan
was consummated.
Due to the Reorganization and implementation of fresh start reporting, the
Condensed Consolidated Financial Statements for the new reorganized company
(period starting August 16, 1996) are not comparable to those of the
predecessor company. The predecessor company included the operations of the
Company and Puerto Rico, through the date of disposition, June 30, 1996. The
reorganized company includes the operations of the Company subsequent to the
consummation date.
The Company's primary measurement of unit volume is DSD cases. Case sales are
defined as physical cases of beverages sold, including both ready-to-serve
premix and postmix fountain products that are sold in bulk (tanks or boxes).
Avalon (warehouse distribution) and Liquitrend (contract manufacturing) are not
combined in the Company's physical case sales, but are included in net sales,
cost of goods sold, and operating income. Liquitrend's net sales fluctuate from
year to year and generate gross margins that are less than gross margins for
DSD sales.
RESTRUCTURING AND REORGANIZATION CHARGES
As a result of the debt restructuring negotiations and the Company's effort
to reduce its cost and overhead structure, the Company incurred a restructuring
charge of $5,015,000 in 1995. The restructuring charge represented $906,000
related to employee severance, $1,660,000 related to lease terminations and
$2,449,000 related to the negotiation of the potential restructuring of the
Senior Secured Notes. The Company incurred a restructuring charge of $547,000
during the seven month and fifteen day period ended August 15, 1996. In
addition, the Company incurred reorganization expenses of $35,369,000
consisting of $29,735,000 related to the adjustment of assets to fair market
value and $5,634,000 related to financial restructuring costs during the seven
month and fifteen day period ended August 15, 1996.
BANKRUPTCY PETITIONS
As a result of severe liquidity problems, on July 31, 1995, the Company
suspended payment of interest on its $140,000,000 11.5% Senior Secured Notes
due 1999 (the "Senior Secured Notes"). The Company entered into negotiations
with financial and legal advisors of an unofficial committee of the holders of
the Senior Secured Notes (the "Committee") and announced on November 9, 1995
that it reached an agreement in principle with the Committee.
At the end of the second quarter of 1995 through the first quarter of 1996,
the Company was also in violation of certain of its revolving credit facility
covenants, including tangible net-worth, interest coverage and fixed charge
coverage. At the request of the Company, the revolving credit lender executed
forbearance agreements extending through May 15, 1996.
On May 13, 1996, the Company and BGAC filed voluntary petitions for
reorganization relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy
Court for the District of Delaware. Following commencement of the Chapter 11
cases, all actions and proceedings against the Company and BGAC and all acts to
obtain any property of the bankruptcy estate were automatically stayed under
section 362 of the Bankruptcy Code. Subsequent to the filing of the bankruptcy
petitions and until the effective date of the Plan of Reorganization, the
Company and BGAC continued to operate the business as debtors-in-possession.
17
<PAGE>
Under the terms of the Plan of Reorganization, consistent with the agreement
in principle reached with the Committee, the holders of the Senior Secured
Notes exchanged their Notes for approximately 98% of the equity of the Company
and received the net proceeds from the sale of Puerto Rico.
On May 13, 1996, the Bankruptcy Court entered an order (the "Trade Order")
authorizing the Company to, among other things, make payments to its trade
suppliers on account of pre-bankruptcy claims provided that such suppliers
continue to provide goods to the Company on the same credit terms as were in
effect on the day before the Company announced the suspension of interest
payments on the Senior Secured Notes.
The Company and BGAC filed their Plan of Reorganization (and accompanying
Disclosure Statement) with the Bankruptcy Court on May 20, 1996. The Bankruptcy
Court approved the Disclosure Statement on June 19, 1996.
On June 30, 1996, the Company consummated a sale of all the stock of Puerto
Rico for approximately $74 million to an investor group led by Center Street
Capital Partners, L.P. and certain members of the current Puerto Rico
management. The net proceeds from the sale of Puerto Rico that were distributed
pursuant to the Plan of Reorganization to the holders of the Senior Secured
Notes was approximately $55 million. In 1995, Puerto Rico's operating profit
was approximately $4,992,000 and its depreciation and amortization charges were
approximately $4,956,000. During the first six months of 1996, Puerto Rico's
operating profit was approximately $2,279,000 and its depreciation and
amortization charges were approximately $2,603,000.
On August 2, 1996, the Bankruptcy Court confirmed the Plan of Reorganization.
On August 15, 1996 the Plan of Reorganization was consummated and the Company
emerged from bankruptcy.
The bankruptcy, although the Plan of Reorganization was consensual, could
adversely affect the Company's relationships with its trade creditors,
franchisors, employees and customers, although, in light of the recovery by the
Company's creditors under the Plan of Reorganization, the bankruptcy is not
expected to have an adverse effect on such relationships. If such relationships
are adversely affected, the Company's operations could be materially affected.
RESULTS OF OPERATIONS (UNAUDITED)
Comparison of the Company's Nine Months Ended September 30, 1996, with the
Nine Months Ended September 30, 1995.
The table below sets forth sales for the nine months ended September 30, 1996
and 1995. For purposes of analysis below the operations of the predecessor
company and the reorganized company have been combined. As a result of the
Reorganization and recent restructuring resulting in the elimination and
downsizing of several product lines, the operations of Puerto Rico, Avalon and
Snapple DSD distribution have been eliminated to arrive at comparable sales.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Consolidated net sales.............................. $236,362 $306,473
Less:
Puerto Rico....................................... 37,931 59,354
Avalon............................................ 1,564 20,781
Snapple DSD....................................... -- 13,200
Snapple Liquitrend................................ -- 6,946
-------- --------
Comparable Sales................................ $196,867 $206,192
======== ========
</TABLE>
18
<PAGE>
Net sales decreased to $236,362,000 for the nine months ending September 30,
1996, from $306,473,000 for the comparable 1995 period, or 22.9%. This
decrease is the result of (i) the Puerto Rico Disposition ($21,423,000 of the
net sales decrease); (ii) reduced sales of the Company's Liquitrend division
($6,946,000 of the net sales decrease); (iii) the elimination of the Company's
warehouse distribution product division, Avalon, ($19,217,000 of the net sales
decrease); and (iv) the elimination of a Snapple distribution agreement,
Snapple DSD ($13,200,000 of the net sales decrease).
Net sales for the Company's DSD product line decreased to $172,390,000 from
$177,390,000 or 2.7% for the nine months ending September 30, 1996 and 1995,
respectively. This decrease is the direct result of the termination of a
temporary Snapple product distribution agreement for portions of Southern
California ($13,200,000 in net sales). Excluding the impact on 1995 net sales
for this distribution agreement termination, comparable net sales for Southern
California would have increased 5.5%.
Liquitrend contract packing net sales decreased to $24,268,000 for the nine
month period ending September 30, 1996, from $47,424,000 for the nine month
period ending September 30, 1995, or 48.8%. This net sales decrease is the
direct result of the Company's previously announced strategic decision to
downsize this division resulting in the elimination of Snapple Liquitrend in
1995 ($6,946,000 in sales).
Costs of goods sold decreased to $191,738,000 for the nine months ending
September 30, 1996, from $260,698,000 for the comparable 1995 period, or
26.5%. This decrease is primarily the result of the sale of Puerto Rico at the
end of the second quarter of 1996 (24.9% of the decrease) and reduced fixed
costs in the Company, such as warehouse expense and labor costs that were
eliminated as a result of the third quarter 1995 restructuring.
Administrative, marketing and general expenses decreased to $33,373,000 for
the nine months ending September 30, 1996, from $36,111,000 for the comparable
1995 period or 7.6%. This decrease is primarily the result of the sale of
Puerto Rico (61.4% of the decrease) and the result of workforce reductions
during the third quarter of 1995 in the Company.
Interest expense decreased to $13,138,000 for the nine months ending
September 30, 1996, from $17,349,000 for the comparable 1995 period, or 24.3%.
This decrease was the result of the discontinuance of accrued interest related
to the retirement of the senior secured notes, the elimination of interest
expense during the third quarter for Puerto Rico, and lower average balance of
the Company's working capital facility.
For the reasons set forth above, net loss before income taxes and
extraordinary items (net of restructuring and reorganization charges and the
gain from the Puerto Rico Disposition) decreased to $12,293,000 for the nine
months ending September 30, 1996 from $23,558,000 for the comparable 1995
period.
On a comparable pro-forma basis, EBITDA increased to $6,940 from $2,683, or
159%, for the nine months ending September 30, 1996. This increase was the
combined result of higher DSD case sales, improved volume mix of packages that
contribute a greater percentage of margin contribution, lower raw material
costs and a decrease in variable and fixed expenses due to the Company's
reorganization efforts. EBITDA represents earnings before interest income and
expense, financial restructuring costs, reorganization items, other income,
income taxes, depreciation and amortization, EBITDA should not be considered
as an alternative to net income (as determined in accordance with GAAP).
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to service and/or incur indebtedness.
Comparison of the Company's 1995 Results of Operations with the Company's
1994 Results of Operations
Total net sales decreased to $396,725,000 in 1995 from $413,840,000 in 1994,
or 4.1%. This decrease was due to a net sales decrease of $29,163,000 at the
Company that was partially offset by a $12,048,000 net sales increase at
Puerto Rico. The Company's performance in 1995 was negatively impacted by a
reduction in DSD case volume, reduced hot-fill contract packing sales and
reduced sales of private label products. Puerto Rico's net sales increase was
primarily the result of increased New Age beverage sales.
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<PAGE>
Net sales of the Company's DSD product line decreased to $235,466,000 in 1995
from $252,96 1,000 in 1994, or 6.9%, due to a case sales decrease of 13.0%,
which was greater than the market-wide reduction of measured carbonated soft
drink ("CSD") sales. This decrease was primarily the result of (i) the
Company's decision to increase its pricing during 1995 to offset raw material
price increases, (ii) reduced levels of franchisor-supported price promotions,
and (iii) aggressive competitive CSD pricing and promotional activity in this
market. DSD net sales at Puerto Rico increased to $80,625,000 in 1995 from
$69,768,000 in 1994, or 15.6%. This net sales increase was primarily the result
of an approximate $12,500,000 increase in New Age and malta beverage sales,
offset by a carbonated DSD soft drink sales decrease of approximately
$1,643,000.
Liquitrend's net sales increased to $56,149,000 in 1995 from $54,075,000 in
1994, or 3.8%. Restated to reflect approximately $13,683,000 of contractual raw
material purchase increases, which had no impact on operating results because
cost of goods sold was increased by a like amount, net sales decreased to
$42,466,000, or 21.5%. As part of the Company's restructuring effort,
Liquitrend's operations will be downsized, which will lower sales in the
future.
Avalon's net sales decreased to $24,485,000 in 1995 from $37,036,000 in 1994,
or 33.9%. This decrease was due to the Company's decision to discontinue
Avalon's DSD operation during the second quarter of 1995 and significantly
lower sales of the Company's value-priced Royal Island and Nehi products.
Management believes that the factors that caused the Company's net sales to
decrease in 1995 are likely to continue in the foreseeable future.
Cost of goods sold decreased to $334,942,000 in 1995 from $342,336,000 in
1994, or 2.2%. This decrease was primarily the result of variable
transportation and production expenses associated with the net sales reduction
in the Company's operations, and the fourth quarter impact of the Company's
permanent work force reduction implemented in the third quarter of 1995.
Offsetting this decrease were significant direct material increases at the
Company and Puerto Rico, Puerto Rico's net sales increase and Liquitrend's
$13,683,000 contractual raw material cost increase offset by its corresponding
sales increase.
Administrative, marketing and general expenses decreased to $47,935,000 in
1995 from $48,437,000 in 1994, or 1.0%. This decrease was primarily the result
of the fourth quarter impact of the Company's permanent 205 employee work force
reduction. Partially offsetting this decrease were increased legal and
litigation expenses, higher worker's compensation expense and increased
expenses related to customer required implementation of delivery and invoicing
information systems in the Company. Puerto Rico's administrative, marketing and
general expenses increased, primarily the result of variable marketing expenses
related to its New Age and malta product sales increase.
Interest expense increased to $23,057,000 in 1995 from $21,626,000 in 1994,
or 6.6%, the result of higher interest rates on the Company's revolving credit
facilities and an increase in the average borrowings outstanding.
For the reasons set forth above, the Company's consolidated net loss before
restructuring charges of $5,015,000, increased to $27,179,000 in 1995 from
$15,900,000 in 1994, or 70.9%.
Comparison of the Company's 1994 Results of Operations with the Company's 1993
Results of Operations
Net sales increased to $413,840,000 in 1994 from $371,062,000 in 1993, or
11.5%. The increase was due to an improving economy in Southern California,
increases in brand Seven-Up DSD sales and Puerto Rico Snapple DSD sales and
significant sales increases in the Company's Liquitrend and Avalon divisions.
DSD net sales increased to $322,729,000 in 1994 from $309,664,000 in 1993, or
4.2%, a function of increased franchisor support to maintain core brand market
share in spite of aggressive competitive pricing in Southern California and
significant Snapple product sales increases in the Company's Puerto Rico and
New Mexico franchise territories. Liquitrend's net sales increased to
$54,075,000 in 1994 from $32,503,000 in 1993, or 66.4%. The sales increase was
due to a significant increase in orders for Snapple, Lipton and Mistic
pasteurized teas and
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<PAGE>
flavored beverage products manufactured on the Company's recently installed
hot-fill manufacturing equipment located in Vernon and Buena Park, California,
increased private label carbonated soft drink production for the Cott
Corporation and increased carbonated soft drink export sales to the Far East.
The Avalon division increased its net sales to $37,036,000 in 1994 from
$28,895,000 in 1993, or 28.2%. These increases were the result of increased
sales of the Company's Royal Island trademark to independent regional chain
outlets and the introduction of Stroh's alcoholic and non-alcoholic products
to large retail chain customers.
Costs of goods sold increased to $342,336,000 in 1994 from $299,735,000 in
1993, or 14.2%. This increase is attributable to higher manufacturing labor
and factory expense associated with Liquitrend's significant sales increase,
higher transportation and manufacturing costs resulting from DSD and Avalon
increased sales volume and higher material and distribution costs related to
increased two liter bottle and Snapple product sales to retail customers.
These increases were partially offset by annual cost containment programs put
in place by the Company that reduced selected material costs through
negotiations with suppliers, reduced manufacturing and distribution
compensation and increased productive labor and overhead efficiencies
resulting from newly installed manufacturing capital equipment.
Administrative, marketing and general expenses increased to $48,437,000 in
1994 from $47,342,000 in 1993, or 2.3%. Administrative and marketing variable
expenses increased at a rate significantly less than the 11.5% sales increase
and as a percent of sales, decreased to 11.7% of sales in 1994 from 12.8% of
sales in 1993. Administrative and general compensation expense decreased as a
result of reduced management compensation programs and annual cost containment
programs designed to reduce discretionary spending, partially offset by higher
bad debt expense and employee benefit cost increases.
Interest expense increased to $21,626,000 in 1994 from $19,938,000 in 1993,
or 8.5%. This increase is the result of increased short term interest rates,
increased borrowings under the Company's working capital facility and interest
related to the term loan and capital leases which the Company entered into
during 1994.
Other income, net, decreased to $95,000 of income in 1994 from $418,000 of
income in 1993, due primarily to scheduled reductions in nonrecurring
contractual support.
For the reasons set forth above, the Company's consolidated net loss before
extraordinary items increased to $15,900,000 in 1994 from $13,518,000 in 1993.
LIQUIDITY AND CAPITAL RESOURCES
To facilitate comparison of cash flow activity for the first nine months of
1996 to the comparable 1995 period, Predecessor Company and Reorganized
Company have been combined.
Operating activities provided $4,993,000 in cash for the first nine months
of 1996 as compared to the first nine months of 1995 when operating activities
used $3,294,000 of cash. This change was primarily the result of the
suspension of interest payments related to the Senior Secured Notes.
During the first nine months of 1996, $66,611,000 was provided by investing
activities as compared to a use of $2,974,000 for the comparable 1995 period.
This change was primarily the result of the proceeds of approximately $74
million related to the sale of Puerto Rico in the second quarter of 1996 and
an increase in capital additions from $3,020,000 in the first nine months in
1995 to $5,148,000 in the first nine months of 1996 related to costs incurred
in 1996 for the installation of a major management information system and a
required water reclamation project at the Vernon, California production
facility in Southern California.
Upon consummation of the Plan of Reorganization, on August 15, 1996, the
Company entered into a credit facility in the amount of $35 million, with GE
Capital. This facility will provide the Company a revolving financing facility
for general corporate purposes, including working capital and capital
expenditures. Borrowings under this facility will be secured by substantially
all of the Company's assets.
The Company believes that cash available under its revolving financing
facility, and cash provided by future operations should enable it to continue
to pay its creditors in the ordinary course of business.
21
<PAGE>
BUSINESS
GENERAL
The Company is among the largest beverage distributors in the United States
and is the largest bottler of Seven-Up in the United States. The Company
manufactures and distributes a broad range of beverage products in Southern
California, Central California, and in portions of Nevada and New Mexico. The
Company has the exclusive right within its territories to manufacture and/or
distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream
soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes
(ginger-ale and mixers), Evian (imported drinking water), Perrier (imported
mineral water), Welch's (grape, strawberry and pineapple) and Yoo-Hoo
(chocolate drink). The Company's net sales in 1995 were $396,725,000.
The Company competes as an independent bottler on the basis of its large
portfolio of franchised brands, its significant combined market share, its
ability to market, distribute and merchandise its products effectively and
favorable demographics within its territories. The Company's portfolio of
franchised brands consists of highly recognizable trademarks that are in
almost all cases the first ranking brand in their respective beverage flavor
categories. The Company's combined market share of its franchised brands and
other products enables the Company to realize purchasing, manufacturing,
marketing, and delivery efficiencies. In addition, the Company's territories
have many attributes that contribute to revenue growth in the beverage
industry, including a favorable climate and a high density of retail outlets
in populous areas.
The Company's products are made available to its customers through a network
of distribution facilities positioned within major population areas. The
Company distributes almost all of its products directly to retail outlets
through its core direct-store-door ("DSD") distribution system. Through its
DSD distribution channel, the Company provides efficient, high-quality
services to more than 35,000 retail outlets. These retail outlets include
supermarkets, warehouse clubs, convenience stores, and other retail
establishments that serve a combined population of over 30 million consumers.
The Company's business strategy is to manufacture and distribute a
franchised portfolio of leading trademarked beverages in each beverage flavor
category and to create additional sources of revenue through contract
manufacturing. In accordance with this strategy, the Company's Liquitrend
division ("Liquitrend") engages in contract manufacturing, which utilizes the
Company's excess production capacity by manufacturing carbonated soft drink
products for a variety of small, independent franchisors and retailers selling
private label products. As part of the Company's restructuring effort, the
Liquitrend division was significantly downsized and the Company's Avalon Food
and Beverage division ("Avalon"), which provided a wide array of beverage
products primarily to large retail grocers who picked up the products from the
Company's warehouse facilities and distributed these products through their
internal distribution systems, was discontinued.
RESTRUCTURING
In the third and fourth quarter of 1995, the Company began the
implementation of a restructuring of its operations, including a reduction of
its work force, rationalization of its operations, an consolidation of certain
of its distribution facilities.
REORGANIZATION
On August 15, 1996, the Joint Plan of Reorganization of the Company and its
then parent Beverage Group Acquisition Corporation (the "Plan of
Reorganization") was consummated and the Company emerged from bankruptcy.
Although the Company believes that because the Plan of Reorganization was
consensual, the bankruptcy will not adversely affect the Company's
relationships with its trade creditors, franchisors, employees and customers.
However, if such relationships are adversely affected, the Company's
operations could be materially affected.
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<PAGE>
BEVERAGE INDUSTRY
Soft drinks are the most widely consumed beverage in the United States.
Retail sales for the American soft drink industry in 1995 were estimated to be
approximately $52 billion, of which approximately 58% were cola sales.
Historically, the soft drink industry has been an industry of continual change
and evolution. It is characterized by relative absence of technological risk,
lack of foreign competition and significant barriers to entry, primarily due
to geographic exclusivity agreements with franchisors. Its competitive climate
requires bottlers and franchisors to adapt quickly to mark challenges,
including changes in consumer tastes and package preferences and continuing
developments in manufacturing and distribution methods.
The Company believes that social concerns, including the quality of tap
water and the reduced level of alcohol consumption, have contributed to a
shift in beverage consumption preferences. The growth of cold, sweet
beverages, the largest component of which is soft drinks, appears to have been
at the expense of tap water. The acceptance and success of the bottled water
category also appears to have been at the expense of tap water. Per capita
consumption of certain "traditional" beverages, including hot drinks such as
tea and coffee, and alcoholic beverages such as beer, wine, and distilled
spirits, has declined since 1980.
Although consumers are expected to maintain their preference for
caffeinated, naturally sweetened soft drinks, it is likely that future market
growth will be influenced by the continuing increase in health consciousness.
Sales of products that have taken advantage of these trends, such as diet soft
drinks and pasteurized teas and juices, have experienced significant sales
growth.
TERRITORIES AND PRODUCTS
The warm climate in the Company's territories contributes favorably to
consumption of cold beverages. In addition, the high density of retail outlets
in populous areas in the Company's territories results in lower distribution
costs.
Unlike its principal competitors, the Company does not rely on the products
of any single franchisor for a substantial majority of its sales. This
diversification results in each brand receiving significant attention from the
Company thereby providing the franchisor with the marketing and merchandising
benefits of a large bottler. The Company is committed to the profitability of
its core DSD business and prefers not to seek to gain market share at the
expense of profitability. The following table shows the percentage of DSD case
sales for 1995 for each of the brands distributed by the Company in its
territories:
<TABLE>
<CAPTION>
BRAND %
----- -----
<S> <C>
Seven-Up............................................................... 46.4
Royal Crown............................................................ 9.8
A&W Brands............................................................. 7.9
Sunkist................................................................ 6.9
Evian.................................................................. 5.5
Hawaiian Punch......................................................... 4.8
Snapple (see Note A)................................................... 4.3
Schweppes.............................................................. 3.3
Welch's................................................................ 2.9
Perrier................................................................ 1.8
Other (including fountain)............................................. 6.4
-----
100.0
=====
</TABLE>
- --------
Note A--Sales of Snapple products in 1995 included those related to a
temporary distribution agreement for Orange Country and inland
territory that was terminated during the fourth quarter of 1995.
23
<PAGE>
Liquitrend manufactures a variety of products pursuant to short-term and
long-term contracts. Liquitrend also exports products to Mexico and the Far
East. As part of the Company's restructuring effort, Avalon's warehouse
distribution was discontinued and Liquitrend's hot-fill manufacturing
capabilities were significantly downsized during 1996.
The Company's portfolio of franchised brands consists of highly recognizable
trademarks that are market leaders in their respective beverage flavor
categories. The Company believes that it is able to achieve a competitive
number of promotional displays and a competitive amount of shelf space in
retail outlets because of the breadth and strength of its brand portfolio.
The Company's portfolio has a significant combined market share of the
beverages sold in its territories. However, Pepsi-Cola and Coca-Cola together
account for over 60% of the soft drinks sold in the Company's territories. The
Company believes that it is able to compete in these markets because its
combined market share gives the Company marketing and merchandising advantages
that it would not have with a smaller or less diversified portfolio.
BOTTLING RIGHTS
The Company has agreements with franchisors pursuant to which the Company
has the exclusive right to manufacture and/or distribute certain beverage
products in specified territories. The Company generally has non-exclusive
rights to produce, distribute and market certain soft drink syrups in premix
(ready-to-use) and postmix (concentrated) form for fountain sales.
Concentrates are the primary ingredient of beverage products. Concentrate
formulas are highly proprietary and are owned solely by the respective
franchisors. The franchisors manufacture and sell to the Company concentrates
from which the beverage products are produced. The franchisors are entitled to
set the price for their concentrate unilaterally. Under the franchise
agreements, in connection with the marketing and distribution of the beverage
products, the Company has the right to use the trade names and trademarks and
associated patents, copyrights, designs and labels, all of which are owned by
the respective franchisors.
The Company considers its franchise agreements with Cadbury Beverages, Royal
Crown Cola Co., and Great Brands of Europe, Inc. (Evian Water) to be material
to the Company's operations. These and the Company's other franchise
agreements generally contain certain affirmative obligations of the Company
that include, but are not limited to, maintenance of sufficient production and
distribution facilities to satisfy fully the demand for the various beverage
products in its territories, maintenance of quality control standards that are
prescribed by the franchisor, maintenance of sound financial capacity, use of
best efforts to promote sales, submission of annual marketing, management, and
advertising plans for approval (which approval may not be unreasonably
withheld) and the submission of reports as to the implementation of these
plans. The agreements generally prohibit the Company from engaging in specific
activities, including, but not limited to, distributing or selling the
beverage products outside the specified territories, producing or handling
competing products or other products or packages that would imitate, infringe
upon or cause confusion with the beverage products, trade dress, containers or
trademarks of the franchisor and assigning, transferring or pledging an
agreement, or any interest therein, whether voluntarily, involuntarily or by
operation of law, without prior consent. No franchisor has ever terminated any
of the Company's franchise agreements as a result of the Company breaching any
provisions thereof and the Company considers its relationship with each of the
franchisors to be satisfactory. However, on July 28, 1995, the Company
received a notice of termination of the distribution agreement dated September
12, 1990 (the "Distribution Agreement") with Great Brands of Europe, Inc.
("GBE"). The Distribution Agreement grants the Company the exclusive right to
distribute Evian Water in Southern California. In its notice of termination,
GBE stated its belief that termination was justified, based on the Company's
decision to suspend interest payments on its Senior Secured Notes.
Additionally, the termination notice stated that the Company would be allowed
to distribute Evian Water on an at will basis. GBE's notice of termination was
not effective until the expiration of the contractually specified cure period.
Before the cure period (as extended by agreement between the parties) expired,
the Company and GBE reached a settlement pursuant to which the
24
<PAGE>
termination notice was withdrawn and the Distribution Agreement was amended.
The Distribution Agreement, as amended on January 12, 1996, grants certain
termination rights to GBE in the event that certain execution performance
standards are not met.
The franchise agreements are either perpetual or for several years with
automatic renewals. A franchisor may terminate the Company's rights to
produce, market and distribute products upon an event of default by the
Company and in certain other limited circumstances. Events of default by the
Company include, but are not limited to, failure to fulfill the affirmative
obligations or violations of the prohibited activities as described above. The
Company generally may terminate an agreement at any time without cause by
giving proper notice to the franchisor. Termination of the Company's bottling
rights with respect to its principal products would constitute an event of
default under the Company's revolving credit facilities and might have a
material adverse effect on the financial position of the Company.
MANUFACTURING
The Company has manufacturing plants in Vernon and Buena Park, California,
and Albuquerque, New Mexico.
The Company's largest manufacturing plant is located in Vernon, California,
which is a combination manufacturing and distribution facility built in 1977.
The Vernon plant operates two bottle lines and two can lines that can produce
42 million cases annually. The Company's Buena Park plant is diversified with
four separate lines that produce cans, bottles and fountain products, and the
capability for manufacturing pasteurized products. The Buena Park facility has
a 27 million annual case capacity. The Albuquerque plant is a combined
manufacturing and distribution facility that is capable of producing 3 million
cases annually with one can and one bottle line.
The manufacturing process consists of receiving, batching, filling and
packaging product. Containers are received in bulk and are moved from the
supplier's trailers to "de-palletizing" equipment, which automatically places
the containers on conveyors that feed them to the filling equipment. Treated
water, concentrate, sugar and additives are combined in large stainless steel
tanks and mixed, or "batched," into syrup with a motorized impeller. The syrup
is then mixed with additional purified water and carbonated. Finished product
is then sent to the filling equipment. At the same time, containers arrive by
conveyor and are rinsed. At the Vernon and Buena Park facilities, the
containers are "air-rinsed" using ionized air and vacuums to remove dust
particles. The filling equipment fills the cleaned containers with finished
product at extremely high speeds. At the Vernon and Buena Park facilities, the
containers are filled with finished product at ambient water temperature. This
warm-fill process eliminates costs associated with refrigeration of the
product (to reduce foaming in the filling process) and its subsequent warming
(to reduce packaging damage caused by condensation). The filled cans and
bottles are then automatically scanned or manually inspected to test filling
level and cap and top placement. Cans are either placed in corrugated trays
and fastened with plastic rings or placed in multi-pack cartons. Bottles are
usually placed in plastic containers for stability. Each case is then
automatically transported to a "palletizer" where it is stacked on a wood
pallet to be stored before distribution.
The Company purchases concentrate for its franchised brands directly from
franchisors in accordance with franchise agreements. Price increases for
concentrate are not limited by such agreements, but are imposed unilaterally
by franchisors and have been historically 3 to 5% annually. The majority of
the Company's other raw materials are purchased through a national cooperative
of "non-Coke/Pepsi" bottlers that meet minimum case volume requirements. The
cooperative leverages the combined purchasing volume of its members in the
negotiation of raw material costs. Most raw materials contracts are for a
period of one year or less. As a member of the cooperative, the Company
believes that its costs for raw materials are comparable to those of its
competitors. Key raw materials and their approximate percentage of material
costs for 1995 include: concentrate (22.4%); aluminum cans (21.3%); finished
products (including Evian, Perrier and Yoo-Hoo) (25.0%); plastic bottles
(9.8%); liquid corn sugar (9.9%); glass bottles (3.7%); packaging (1.7%); and
other (including bottle
25
<PAGE>
closures and additives) (6.2%). The Company believes that adequate alternative
sources exist for all of its raw materials other than concentrate and finished
products.
The Company maintains a stringent quality control program. Automatic quality
testing is performed on all of the Company's products prior to bottling. A
microbiologist and skilled technicians are kept on staff to further test
product, containers and packaging.
The Company also maintains an inventory management program that minimizes
raw material inventory carrying costs and potential spoilage. In addition,
only one day's supply of certain raw materials are kept on hand, including
sugar, cans and bottles.
SALES AND DISTRIBUTION
The Company's sales are oriented towards high-volume customers such as large
retail chains, which results in economies of scale in selling and distribution
expenses. Product orders are generally taken in advance by a salesperson.
Orders are generally delivered and merchandised within 24 hours by other
Company employees.
The Company utilizes its distribution channels to maximize market
penetration. The Company's principal method of distribution is DSD delivery.
DSD delivery represents over 85% of the Company's case sales. It is also the
Company's preferred method of distribution because the Company has greater
control over the sales, marketing and merchandising of products. Deliveries
are made from distribution facilities by the Company's fleet of trucks.
Liquitrend manufactures products for beverage or retail grocery companies
that lack sufficient volume to justify the capital investment of a
manufacturing plant. Liquitrend utilizes the Company's excess manufacturing
capacity to participate in other geographic markets and to enhance its
presence in its local markets. As part of the restructuring effort, the
Company has significantly downsized the Liquitrend division's operations, but
will continue to use its excess production capacity to produce carbonated soft
drinks when appropriate.
The Company makes cold drinks available to consumers through vending
machines, fountain equipment and visi-coolers (bottler identified refrigerated
cabinets). Vending machines are either sold, leased or loaned to retail
outlets or distributors who are responsible for machine maintenance and
product restocking. Fountain equipment dispenses products in restaurants,
bars, amusement parks, theaters and other similar locations. The Company sells
either premix, a ready-to-use product, or postmix, a concentrated product, to
retailers in stainless steel or disposable containers for use in fountain
equipment. However, the Company's fountain market share is not significant.
Visi-coolers are generally loaned to large retail outlets and convenience
stores.
During 1995, no single customer accounted for 10% or more of the Company's
sales, and the Company is not dependent on any single customer. A significant
portion of the Company's sales are made to large retail chains. However,
because consumer demand requires these chains to stock the Company's products
and because the Company is the only distributor of its products within its
territories, the Company does not anticipate the loss of any significant
number of these customers.
MARKETING
The marketing of beverage products is the primary basis of competition among
soft drink bottlers. Successful bottlers most competitively price products,
creatively advertise in their territories and effectively execute promotional
programs. The Company's marketing efforts are directed towards brand
management, key account management, promotional activities and merchandising.
The Company believes that its marketing program allows it to compete
effectively in its markets.
Marketing programs for each of the Company's franchised brands are
coordinated with the franchisors by the Company's brand management group.
National advertising campaigns are developed by the franchisors. Brand
managers develop local advertising campaigns, implement brand development
strategies, direct
26
<PAGE>
promotional activities on a Company-wide basis and monitor marketing support
in accordance with annual marketing agreements with the franchisors.
The Company's success is closely tied to its on-going relationships with its
key accounts. Key account managers are responsible for coordinating
promotional activities for a select group of accounts. The activities include
placing "feature" newspaper advertisements that coincide with competitive
pricing programs, obtaining authorization from the customer for new products
and packages, and designing customer promotional programs to meet specific
customer needs.
A significant portion of the Company's promotional efforts focus on off-
invoice allowances, newspaper advertising and coupons. The goal of these
activities is to competitively position the Company's brands in the
marketplace and to obtain "feature" retail advertisements and end-aisle
displays in high volume retail outlets. End-aisle and secondary displays are
important marketing tools because they are tied to special promotions and
feature advertisements that stimulate sales and encourage impulse purchases.
The Company's merchandising activities seek to maintain high visibility and
availability of the Company's products in large grocery chains. Merchandisers
are responsible for building displays in conjunction with promotional programs
and restocking products on the beverage aisle of grocery stores. The Company
assists its customers in obtaining maximum space utilization of the beverage
aisle by employing a state-of-the-art computer program. This program
determines the most efficient use of shelf space based on sales volume and
consumer preferences for product and packaging. This service is provided by
the Company to its key accounts as a means of enhancing its relationship with
these customers.
Marketing expenditures are incurred by the Company, by the Company's
franchisors and by cooperative arrangements between the two. Retail
promotional programs are the Company's most significant marketing expenditures
and are paid for by the Company and supported through cooperative arrangements
with the Company's franchisors. National media advertising is funded by the
Company's franchisors, while local media advertising is funded by the Company
or through cooperative arrangements.
COMPETITION
The soft drink industry is highly competitive. Historically, bottlers were
independently-owned entities that purchased syrup from franchisors and
competed against other bottlers in their territory for market share. Over the
past decade, the bottling industry has witnessed significant horizontal and
vertical consolidation. Competition among bottlers is dependent on price,
volume, advertising, promotional incentives and franchisor subsidies.
The Company's principal competitors are Coca-Cola Enterprises, Inc. ("CCE")
and the Pepsi-Cola Company ("COBO"), each of which is affiliated with its
respective syrup company. Price competition between CCE and COBO has resulted
in a market-wide erosion of earnings.
The Company competes in its markets by efficiently balancing the various
components that affect market share and profitability. The Company believes
that long-term profitability is closely tied to its market share and requires
efficient execution of marketing programs and investments in manufacturing and
distribution technology to assure a low overhead cost structure.
EMPLOYEES
In the third quarter of 1995, as part of its restructuring, the Company
implemented a permanent reduction in its work force of 205 employees, divided
almost equally between salaried and hourly employees.
As of December 31, 1995, the Company employed 1,352 employees. A majority of
these employees (59%) are hourly workers covered by collective bargaining
agreements. The United Industrial Workers covers most of the Company's
employees under contracts that expire in 1997. Various local chapters of the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
of America represent employees at Las
27
<PAGE>
Vegas, Santa Maria and San Diego under contracts expiring in 1998, 1999, and
2001, respectively. The Company has not had any strikes or work stoppages in
the past 20 years and considers its relationship with its employees to be
satisfactory.
GOVERNMENT REGULATION
The production, distribution and sale of many of the Company's products are
subject to the Federal Food, Drug and Cosmetic Act, the Occupational Safety
and Health Act, various Federal environmental statutes and various other
Federal, state and local statutes regulating the production, sale, safety,
advertising, labeling and franchising of beverages.
California imposes a recycling fee on all containers of carbonated
beverages. The fee is $0.025 per container holding 24 ounces or less and $.05
per container holding 25 ounces or more, which may automatically be increased
if target recycling rates are not reached. Containers of carbonated beverages
must clearly display specific information, which informs consumers that the
fee will be used exclusively for recycling efforts. The Company is required to
pay the fee, but it is included on the invoice for products and assessed on
the consumer at the retail level. The Company believes that future fee
increases will be minimal because of the success of California's recycling
program. However, a significant increase in the fee could materially decrease
consumption of carbonated beverages in California.
Substantially all of the Company's facilities are subject to Federal, state
and local laws regulating the environment. Compliance with these laws has not
had any material effect upon the capital expenditures, net income or
competitive position of the Company. Costs of compliance with existing and
future environmental laws cannot be predicted with any degree of certainty and
may significantly affect the Company's operations.
The Company does not presently sell products in any state that requires
deposits on bottle or can containers. The Company's operating costs could be
significantly affected if a national container deposit law were to be
implemented.
SALE OF THE STOCK OF SEVEN-UP/RC BOTTLING COMPANY OF PUERTO RICO.
Following the agreement-in-principle on the terms of a restructuring of the
Senior Secured Notes, the Company retained Whitman Heffernan Rhein & Co., Inc.
and Houlihan Lokey Howard & Zukin (collectively, the "Brokers") to handle the
sale of Puerto Rico (the "Puerto Rico Disposition"). Before the Brokers began
contacting parties with respect to the Puerto Rico Disposition, the Company
received an unsolicited offer from Center Street Capital Partners, L.P.
("Center Street") in December of 1995. Thereafter, Center Street submitted an
amended offer on January 5, 1996 for $75 million, which included a $10 million
cash payment in exchange for the Company's entering into a non-competition and
consulting agreement with Center Street and providing management and
operations consulting services to Center Street for a period of five years
from closing (the "Consulting Fee"). On January 17, 1996, the Company and
Center Street signed a letter of intent, pursuant to which the Puerto Rico
Disposition would be consummated for $74.2 million, including the Consulting
Fee and the assumption of certain liabilities of Puerto Rico (the "Letter of
Intent"). Certain members of management of Puerto Rico are investors with
Center Street with respect to the Puerto Rico Disposition.
Following the execution of the Letter of Intent and pursuant to their
retention, the Brokers contacted approximately seventy-eight strategic or
financial parties concerning the Puerto Rico Disposition. The contacted
parties included beverage bottlers in addition to financial buyers with an
interest in the bottling industry. In addition, at the time that the
restructuring proposal was accepted, the Company had issued a press release in
which it announced that the Company and the Noteholders Committee had reached
agreement on the principal economic terms of the restructuring and that one of
the key components of the restructuring proposal was the Puerto Rico
Disposition.
The Company, with the assistance of the Brokers, prepared a package of
confidential information (the "Confidential Memorandum") in January 1996. The
Brokers distributed the Confidential Memorandum to
28
<PAGE>
approximately thirty-five interested parties that had executed and returned
confidentiality agreements. Each of the parties that received the Confidential
Memorandum was asked to submit an indication of interest (with an approximate
purchase price) for the Puerto Rico Disposition. The Company received eight
indications of interest in mid-February that were sufficiently significant as
to justify further discussions.
After receiving the indications of interest, the Center Street proposal
reflected in the Letter of Intent remained, in the opinion of the Company and
the Brokers, the most attractive proposal and the most likely proposal to
proceed to a closing. Therefore, while Center Street conducted its due
diligence investigation, the Company and Center Street negotiated, over a
fifteen-week period, the terms of the Stock Purchase Agreement. During the
course of the negotiations, the Company and Center Street agreed to decrease
Center Street's purchase price to approximately $74 million. On May 3, 1996,
the Company and Center Street executed the Stock Purchase Agreement. On May 6,
1996, the Company issued a press release announcing that it had entered into
the Stock Purchase Agreement with Center Street and stated expressly that the
offer contained therein was subject to approval by the Bankruptcy Court and
higher and better offers. In addition to Center Street, the Company and the
Brokers permitted two additional parties to conduct due diligence. All parties
that submitted an indication of interest were given notice of the proposed
Puerto Rico Disposition and of the hearing scheduled by the Bankruptcy Court
for June 19, 1996, to approve such sale to Center Street, and had an
opportunity to submit higher and better offers.
On May 13, 1996, the Bankruptcy Court entered an order approving, among
other things, certain provisions of the Stock Purchase Agreement, including a
topping fee of $1,750,000, and a minimum overbid requirement of $2 million. On
May 14, 1996, Center Street deposited the sum of $2 million with an escrow
agent, in accordance with the terms of the Stock Purchase Agreement.
The Bankruptcy Court set June 17, 1996 as the last date on which potential
bidders could submit alternative bids with respect to the Puerto Rico
Disposition. No alternative bids were received. On June 19, 1996, the
Bankruptcy Court entered an order approving the Puerto Rico Disposition to
Center Street. Closing of the Puerto Rico Disposition occurred on June 28,
1996.
29
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Bart S. Brodkin...... 55 Chief Executive Officer, President and Chairman of
the Board
Richard Ferguson..... 40 Executive Vice President/Chief Financial Officer
Roy S. Breneman...... 55 Executive Vice President/Chief Sales and Marketing
Officer
Louis Janicich....... 59 Senior Vice President of Administration/Legal
Services, Chief Human Resources Officer
F.L. Joseph Chalmers. 54 Senior Vice President of Operations
Jack R. Attwood...... 67 Director
William C. Langley... 58 Director
Monroe L. Lowenkron.. 65 Director
Daniel D. Villanueva. 58 Director
</TABLE>
Barton S. Brodkin began his career in the soft drink industry in 1967 with
the Pepsi-Cola Bottling Company, where he held various sales and marketing
positions, ultimately becoming Group Marketing Manager. He joined
Westinghouse's Beverage Group in 1973 as Vice President of the Western
Division and in 1980 was promoted to Business Unit President and General
Manager. He is a director of and has served as President of the Seven-Up
Bottlers Association and is current Treasurer of the National Soft Drink
Association and a director of the RC Bottlers Association.
Richard Ferguson has been with the Company since 1979 and has held various
positions of increasing importance in accounting and finance. He has held the
position of Executive Vice President, Chief Financial Officer since October
1996 and was previously the Vice President of Financial and Business Planning
since 1981.
Roy S. Breneman began his career in the soft drink industry in 1968 as a
merchandising manager with the Pepsi-Cola Company. He served as Vice
President, General Manager for the Dr. Pepper bottler in Dallas and was
National Sales Manager for the Country Time ready-to-drink division of General
Foods Corporation. He joined Westinghouse's Beverage Group as Vice President
of Marketing Services and became Senior Vice President of Sales and Marketing
in 1986.
Louis Janicich has been involved in human resources in the soft drink
industry since 1967 as Director of Industrial Relations with the Pepsi-Cola
Bottling Company of Los Angeles. He joined Westinghouse's Beverage Group as
Director of Industrial Relations in 1970 and in 1987 assumed his current
position of Senior Vice President of Human Resources.
F.L. Joseph Chalmers joined Westinghouse in 1969 and held various positions
in purchasing and operations. He joined Westinghouse's Beverage Group in 1976
and has held various positions of increasing importance in purchasing, sales
and operations. He assumed his current position as Senior Vice President of
Operations in June 1996.
Jack R. Attwood, a director of the Company since 1990, joined the Coca-Cola
Bottling Company of Los Angeles in 1953 and served in various positions until
his retirement in 1986. From 1966 to 1970 he was Vice President of Advertising
and from 1970 to 1971 he was Vice President of Marketing. In 1971, he was
named Senior Vice President and General Manager of the soft drink division. In
1976, he was appointed Executive Vice President, and in 1981 was pointed
President and Chief Operating Officer. In 1984, he was appointed Corporate
Senior Vice President of the Beverage Group, US Food Segment of Beatrice
Companies, Inc. and became Chairman of the Board of the Coca-Cola Bottling
Company of Los Angeles. He is a director of Sports Chalet, Inc. and several
private companies.
30
<PAGE>
William Langley became a director of the Company in August 1996. From 1991
to 1996, Mr. Langley was Executive Vice President, Chief Credit and Risk
Policy Officer, Chemical Bank and Chemical Banking Corporation and Executive
Vice President of Chase Manhattan Corporation from April to July 1996. Mr.
Langley is a director of the Chase Preferred Capital Corporation and Morrison
Knudsen Corporation.
Monroe L. Lowenkron became a director of the Company in August 1996. From
1980 to 1993 Mr. Lowenkron was President and Chief Executive Officer of A&W
Brands, Inc. and from 1995 to June 1996 President and Chief Executive Officer
of A. Heileman Brewing Co. Inc. Mr. Lowenkron is a director of Hat Brands,
Inc., Triarc Companies and DePux, Inc.
Daniel D. Villanueva became a director of the Company in August 1996. Since
1990, Mr. Villanueva has been Chairman and Managing Director of Bastion
Capital Corporation and from 1988 to 1990 was General Manager of a Los Angeles
Univision affiliate, KMEX-TV.
At present, all Directors are elected and serve until a successor is duly
elected and qualified or until his or her earlier death, resignation or
removal. There are no family relationships between any of the Directors or
executive officers of the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summarizes the principal components of compensation of the
Company's Chief Executive Officer and the four highest compensated executive
officers. The compensation set forth below fully reflects compensation for
work performed on behalf of the Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ---------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2)
------------------ ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Barton S. Brodkin......... 1995 $300,000 $54,000 $ 7,933
Director, Chief Executive
Officer, 1994 275,580 53,573 12,120
and President 1993 274,698 28,523 7,572
Roy S. Breneman........... 1995 $138,960 $ -- $ 14,785
Chief Sales and Marketing
Officer, and 1994 133,920 -- 17,740
Executive Vice President 1993 133,490 -- 17,014
Louis Janicich............ 1995 $128,295 $ -- $165,413(4)
Senior Vice President of
Human Resources 1994 123,660 -- 22,421
and Secretary 1993 123,265 -- 21,771
Donald G. Coppersmith..... 1995 $123,360 $ -- $234,620(3)
Senior Vice President of
Operations(3) 1994 116,640 -- 15,559
1993 116,265 -- 15,669
</TABLE>
- --------
(1) Represents annual incentive compensation earned during the prior calendar
year but paid in the subsequent year.
(2) Represents amounts paid by the Company for life insurance premiums,
automobile reimbursement and employer matched 401(k) payments. Includes
contributions by the Company to the Company's target benefit defined
contribution plan on behalf of each of the named executives for 1993 and
1994.
(3) Mr. Coppersmith retired as of June 30, 1996.
(4) Includes funds received from termination of the 401-E program that was
previously reported as bonus for these employees.
DIRECTOR COMPENSATION
Non-employee directors are paid an annual retainer of $20,000 plus an
additional fee of $1,000 for each meeting of the Board of Directors attended
and are reimbursed for expenses incurred in attending meetings of the Board.
31
<PAGE>
MANAGEMENT AGREEMENT
The Company has entered into a management agreement with Mr. Barton Brodkin,
dated as of September 25, 1995 and amended as of May 8, 1996. The management
agreement is scheduled to terminate on September 25, 1998, subject to
automatic one-year renewals unless terminated upon written notice by either
party at least 90 days prior to the end of the year or earlier upon Mr.
Brodkin's death, Disability, resignation, retirement or removal for Cause (as
such capitalized terms are defined in the management agreement) or at the
discretion of the Board of Directors.
PRINCIPAL AND SELLING STOCKHOLDERS
The Company's authorized equity consists of Common Stock. All shares of
Common Stock are identical and entitle the holders thereof to the same rights
and privileges. The holders of Common Stock are entitled to one vote per share
on all matters to be voted upon by the stockholders.
The table below sets forth certain information regarding ownership of Common
Stock as of November 13, 1996. The information set forth below with respect to
the ownership of 5% Stockholders is derived solely from the Company's review
of Schedules B, D and 13G on file with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
SHARE BENEFICIALLY OWNED
SHARES BENEFICIALLY OWNED AFTER
PRIOR TO THE OFFERING THE OFFERING
----------------------------- --------------------------
SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------ --------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Dean Witter Intercapital
Inc.(a)................. 1,904,805 38.1% 1,904,805 0 *
2 World Trade Center
New York, New York 10048
Merrill Lynch & Co.,
Inc.(b)................. 763,000 15.2% -- 763,000 15.2%
World Financial Center,
North Tower
250 Vesey Street
New York, New York 10281
Metropolitan Life
Insurance Company(c).... 605,500 12.1% -- 605,500 12.1%
One Madison Avenue
New York, New York 10010
Bart S. Brodkin(d)....... 0 * -- 0 *
Richard Ferguson(d)...... 0 * -- 0 *
Roy S. Breneman(d)....... 0 * -- 0 *
Louis Janicich(d)........ 0 * -- 0 *
F.L. Joseph Chalmers (d). 0 * -- 0 *
Jack R. Attwood(d)....... 0 * -- 0 *
William Langley(d)....... 0 * -- 0 *
Monroe L. Lowenkron(d)... 0 * -- 0 *
Daniel D. Villanueva(d).. 0 * -- 0 *
All executive officers
and directors as a Group
(9 Persons)............. 0 * -- 0 *
</TABLE>
- --------
* Less than 1%.
(a) All shares are owned by the following funds for which Dean Witter
Intercapital Inc. acts as investment advisor: Dean Witter High Yield
Securities (489,055 shares); Dean Witter High Income Securities (495,000
shares); High Income Advantage Trust (140,000 shares); High Income
Advantage Trust II (175,000 shares); High Income Advantage Trust III
(70,000 shares); Dean Witter Diversified Income Trust (332,675 shares);
Dean Witter Diversified Income Trust--Select Shares (7,000 shares); and
Variable Investment Series--High Yield (201,075 shares).
32
<PAGE>
(b) All shares may also be deemed to be beneficially owned by Merrill Lynch
Group, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc.,
Princeton Services, Inc., a wholly owned subsidiary of Merrill Lynch
Group, Inc., Fund Asset Management, L.P., a limited partnership of which
Princeton Services, Inc. is a general partner, and Merrill Lynch Corporate
Bond Fund, Inc. (High Income Portfolio), a registered investment company
advised by Fund Asset Management, L.P.
(c) All shares may also be deemed to be beneficially owned by State Street
Research & Management Company, a wholly-owned subsidiary of Metropolitan
Life Insurance Company and a registered investment advisor.
(d) The address of such person is c/o Seven-Up/RC Bottling Company of Southern
California, Inc., 3220 East 26th Street, Vernon, California 90023.
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of the Company consists of
6,000,000 shares of Common Stock, par value $0.01 per share, of which
5,000,000 shares are currently outstanding. The discussion herein describes
the Company's capital stock, the Certificate of Incorporation and By-laws as
anticipated to be in effect upon consummation of the Offering. The following
summary of certain provisions of the Company's capital stock describes all
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, the Certificate of Incorporation and the By-
laws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.
COMMON STOCK
As of November 13, 1996, there were 5,000,000 shares of Common Stock
outstanding. The issued and outstanding shares of Common Stock are validly
issued, fully paid and nonassessable. The holders of outstanding shares of
Common Stock are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts as the Board may from time to time
determine. See "Dividend Policy."
Following consummation of the Offering, the shares of Common Stock will not
be redeemable or convertible, and the holders thereof will have no preemptive
or subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata, along with the holders of Common
Stock, the assets of the Company which are legally available for distribution,
after payment of all debts and other liabilities.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND AMENDED AND RESTATED BY-LAWS
The Amended and Restated Certificate of Incorporation and the Amended and
Restated By-laws provide that stockholder action can be taken only at an
annual or special meeting of stockholders and can be taken by written consent
in lieu of a meeting. The Amended and Restated Certificate of Incorporation
and the Amended and Restated By-laws provide that special meetings of the
stockholders can be called pursuant to a resolution adopted by a majority of
the Board of Directors, the chief executive officer of the Company, and
stockholders entitled to cast 25% of the votes at the meeting.
The Amended and Restated By-laws establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders
of the Company, including proposed nominations of persons for election to the
Board. Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before the meeting
by or at the direction of the Board or by a stockholder who was a stockholder
of record on the record date for the meeting, who is entitled to vote at the
meeting and who has given to the Company's Secretary timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. Although the Amended and Restated By-laws do not give the Board the
power to approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or annual
meeting, the Amended and Restated By-laws
33
<PAGE>
may have the effect of precluding the conduct of certain business at a meeting
if the proper procedures are not followed or may discourage or defer a
potential acquiror from conducting a solicitation of proxies to elect its own
slate of directors or otherwise attempting to obtain control of the Company.
The Company is not subject to the "business combination" provisions of the
Delaware General Corporation Law.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General
Corporation Law. In addition, the Amended and Restated By-laws provides that
the Company shall indemnify directors and officers of the Company to the
fullest extent permitted by such law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Fleet National
Bank.
REGISTRATION RIGHTS
The Company is party to a Registration Rights Agreement with certain funds
advised by Dean Witter Intercapital, Inc. pursuant to which such stockholders
have the right to cause the Company to register shares of Common Stock (the
"registrable securities") under Rule 415 of the Securities Act (the "Shelf
Registration"). The Company is obligated to pay all registration expenses
(other than underwriting discounts and commissions and subject to certain
limitations) incurred in connection with the Shelf Registration.
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Stockholders may be effected
from time to time in one or more transactions for their own accounts (which
may include block transactions) in the over-the-counter market, on the Nasdaq
Stock Market ("Nasdaq"), or on any exchange on which the Common Stock may then
be listed, in negotiated transactions, through the writing of options on
shares (whether such options are listed on an options exchange or otherwise),
or a combination of such methods of sale, at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders and/or
the purchasers of Shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders and any participating brokers and dealers may be deemed to be
"underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act").
LEGAL MATTERS
The validity of the Common Stock being offered hereby and certain other
legal matters relating to the Offering will be passed upon for the Company by
Kirkland & Ellis (a partnership which includes professional corporations), New
York, New York.
EXPERTS
The audited consolidated financial statements and schedules included in this
Prospectus and elsewhere in the Registration Statement to the extent and for
the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
34
<PAGE>
ADDITIONAL INFORMATION
The Company has filed the Registration Statement on Form S-1 with respect to
the Common Stock being offered hereby with the Commission under the Securities
Act. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement,
certain items of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained in this Prospectus
concerning the provisions of documents filed with the Registration Statement
as exhibits are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661- 2511; and at its New York Regional Office, 75
Park Place, 14th Floor, New York, New York 10007. Copies of such material can
be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may
also be accessed electronically at the Commission's world wide web site on the
Internet at http://www.sec.gov. For further information pertaining to the
Company and the Common Stock being offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
AUDITED FINANCIAL STATEMENTS
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993...................................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993...................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1995, 1994 and 1993................................... F-6
Notes to Consolidated Financial Statements as of December 31, 1995........ F-7
UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995........................................................ F-18
Condensed Consolidated Statements of Operations for the 46 days ending
September 30, 1996, the 46 days ending August 15, 1996, and the three
months ending September 30, 1995......................................... F-19
Condensed Consolidated Statements of Operations for the 46 days ending
September 30, 1996, the seven months and 15 days ending August 15, 1996,
and the nine months ending September 30, 1995............................ F-20
Condensed Consolidated Statements of Cash Flows for the 46 days ending
September 30, 1996, the seven months and 15 days ending August 15, 1996,
and the nine months ending September 30, 1995............................ F-21
Condensed Consolidated Statements of Stockholders' Equity (Deficit) for
the 46 days ending September 30, 1996, the seven months and 15 days
ending August 15, 1996, and the nine months ending September 30, 1995.... F-22
Notes to Condensed Consolidated Financial Statements (unaudited).......... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTS
To the Board of Directors and Stockholder of
Seven-UP/RC Bottling Company of Southern California, Inc.:
We have audited the accompanying consolidated balance sheets of Seven-Up/RC
Bottling Company of Southern California, Inc. (a Delaware corporation)
("Southern California") and its subsidiary (collectively, "the Company") as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholder's equity (deficit) and cash flows for the years ended
December 31, 1995, 1994 and 1993. These consolidated financial statements are
the responsibility of the management of the Company. 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 Seven-
Up/RC Bottling Company of Southern California, Inc. and its subsidiary as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for the years ended December 31, 1995, 1994 and 1993, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, Southern California has
suffered recurring losses from operations and has defaulted under the terms of
its $140 million Senior Secured Notes. These factors, among others discussed
in Note 1, raise substantial doubt about Southern California's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Arthur Andersen LLP
Los Angeles, California
March 20, 1996
F-2
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 5,949 $ 6,982
Accounts receivable:
Trade, net.............................................. 42,261 57,709
Other................................................... 9,450 13,259
Inventories............................................. 24,947 44,418
Prepaid expenses........................................ 2,908 2,164
--------- --------
Total current assets.................................. 85,515 124,532
--------- --------
Investment in joint venture............................... 1,422 1,333
Property, plant and equipment, net........................ 79,945 87,388
Other assets:
Intangible and other assets............................... 21,422 25,583
Debt issuance costs....................................... 3,829 4,998
--------- --------
Total assets.......................................... $ 192,133 $243,834
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................ $ 29,141 $ 53,388
Accrued expenses........................................ 34,371 27,924
Current portion of long-term debt and capital lease
obligations............................................ 189,954 2,219
--------- --------
Total current liabilities............................. 253,466 83,531
--------- --------
Long-term debt:
Revolving credit facilities............................. -- 38,463
Term loan............................................... -- 3,571
Capital lease obligations............................... -- 7,408
Senior secured notes.................................... -- 140,000
--------- --------
Total long-term debt.................................. -- 189,442
--------- --------
Stockholder's equity (deficit):
Capital stock $0.01 par value; 1,000 shares authorized,
issued and outstanding................................. -- --
Additional paid-in capital.............................. 42,557 42,557
Retained deficit........................................ (103,890) (71,696)
--------- --------
Total stockholder's equity (deficit).................. (61,333) (29,139)
--------- --------
Total liabilities and stockholder's equity (deficit).. $ 192,133 $243,834
========= ========
</TABLE>
F-3
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $396,725 $413,840 $371,062
Cost of goods sold............................... 334,942 342,336 299,735
-------- -------- --------
Gross profit..................................... 61,783 71,504 71,327
Administrative, marketing and general expenses... 47,935 48,437 47,342
Depreciation and amortization.................... 18,180 17,251 17,983
Restructure charges.............................. 5,015 -- --
-------- -------- --------
Operating (loss) income.......................... (9,347) 5,816 6,002
Interest expense................................. 23,057 21,626 19,938
Other income, net................................ 210 95 418
-------- -------- --------
Loss before provision for income taxes and
extraordinary item.............................. (32,194) (15,715) (13,518)
Provision for income taxes....................... -- 185 --
-------- -------- --------
Loss before extraordinary item................... (32,194) (15,900) (13,518)
Extraordinary item............................... -- -- (826)
-------- -------- --------
Net loss....................................... $(32,194) $(15,900) $(14,344)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before extraordinary item................. $(32,194) $(15,900) $(13,518)
Adjustments to reconcile loss before
extraordinary item to net cash provided by
operating activities:
Depreciation and amortization.................. 20,048 19,209 19,016
Equity in earnings of joint venture............ (103) (42) (124)
(Gain) loss on sales of fixed assets........... (8) 117 (45)
Provision for doubtful accounts................ 715 1,025 25
Cash dividend from investment in joint venture. -- 225 --
Changes in assets and liabilities:
Accounts receivable............................ 18,542 (16,616) (5,217)
Inventories.................................... 19,471 (17,737) 1,907
Prepaids and other............................. (2,904) (370) (7,993)
Accounts payable............................... (24,247) 24,345 3,158
Accrued expenses............................... 6,447 7,414 3,163
-------- -------- --------
Net cash used in operating activities........ 5,767 1,670 372
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and
equipment..................................... 117 48 96
Additions to property, plant and equipment..... (5,208) (5,138) (5,446)
-------- -------- --------
Net cash used in investing activities........ (5,091) (5,090) (5,350)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) borrowings of revolving loans,
net........................................... (616) 3,687 4,576
Repayments of capital leases................... (1,003) (1,317) --
(Repayments of) proceeds from term loan........ (90) 4,286 --
-------- -------- --------
Net cash (used in) provided by financing
activities.................................. (1,709) 6,656 4,576
-------- -------- --------
NET (DECREASE) INCREASE IN CASH.................. (1,033) 3,236 (402)
Cash, beginning of year.......................... 6,982 3,746 4,148
-------- -------- --------
Cash, end of year................................ $ 5,949 $ 6,982 $ 3,746
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash interest paid............................... $ 13,342 $ 19,811 $ 17,478
======== ======== ========
Purchases of property, plant and equipment
through issuance of capital lease obligation.... $ 555 $ 10,229 $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL STOCK
-------------
TOTAL
STOCKHOLDER'S
PAID-IN RETAINED EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------ ------ ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992..... 1,000 $ -- $42,557 $ (41,452) $ 1,105
Net loss......................... -- -- -- (14,344) (14,344)
----- ----- ------- --------- --------
Balance at December 31, 1993..... 1,000 -- 42,557 (55,796) (13,239)
Net loss......................... -- -- -- (15,900) (15,900)
----- ----- ------- --------- --------
Balance at December 31, 1994..... 1,000 -- 42,557 (71,696) (29,139)
Net loss......................... -- -- -- (32,194) (32,194)
----- ----- ------- --------- --------
Balance at December 31, 1995..... 1,000 $ -- $42,557 $(103,890) $(61,133)
===== ===== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995
(1) NATURE OF BUSINESS AND PRESENTATION OF FINANCIAL INFORMATION
General
Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware
corporation ("Southern California"), is a among the largest beverage
distributions in the United States, selling over two billion equivalent eight-
ounce servings in 1995, and is the largest bottler of Seven-Up in the United
States. Southern California manufactures and distributes a broad range of
beverage products in Southern California, Central California, portions of
Nevada and New Mexico, and, through its wholly-owned subsidiary Seven-Up/RC
Bottling Company of Puerto Rico, Inc. ("Puerto Rico"), Puerto Rico and the
Virgin Islands (Southern California and Puerto Rico are collectively referred
to as "the Company"). The Company has the exclusive right within its
territories to manufacture and/or distribute Seven-Up (lemon-lime), Royal
Crown (cola), A&W (root beer and cream soda), Sunkist (orange and citrus),
Hawaiian Punch (tropical punch), Schweppes (tonics and mixtures), Evian
(imported drinking water), Perrier (imported mineral water), Welch's (grape,
strawberry and pineapple), Country Time (lemonade), Yoo-Hoo (chocolate drink)
and Snapple (teas and flavors) in the Puerto Rico and New Mexico franchise
territories. The Company's consolidated net sales in 1995 were $396,725,000,
of which Puerto Rico contributed approximately 21%.
The Company's business strategy is to manufacture and distribute a
franchised portfolio of leading trademarked beverages in each beverage flavor
category and to create additional sources of revenue through warehouse
distribution and contract manufacturing. In accordance with this strategy, the
primary focus of Southern California's Avalon Food and Beverage division
("Avalon") is warehouse distribution: providing a wide array of beverage
products primarily to large retail grocers who pick up the products from
Southern California's warehouse facilities and distribute these products
through their internal distribution systems. Southern California's Liquitrend
division ("Liquitrend") engages in contract manufacturing, which utilizes the
Company's excess production capacity by manufacturing carbonated soft drink
products for a variety of small, independent franchisors and retailers selling
private label products. As part of Southern California's restructuring effort,
the Avalon division will be discontinued and the Liquitrend division will be
significantly downsized.
Basis of Presentation
Southern California is a wholly-owned subsidiary of Beverage Group
Acquisition Corporation ("BGAC"); BGAC has no independent operations and no
liabilities, and its only asset is its investment in the Southern California's
common stock. BGAC is wholly-owned by WB Bottling Corporation, a privately-
held Delaware corporation ("WB Bottling"). The Company is not a guarantor of
any obligations of WB Bottling nor are any of its assets pledged as security
for such obligations. The Company is not obligated to pay, nor does it
anticipate paying in 1996, dividends to WB Bottling.
Default on Senior Secured Notes
The Company has incurred consolidated net losses of $32.2 million, $15.9
million and $14.3 million in its three most recent fiscal years and has a
stockholder's deficit of $61.3 million at December 31, 1995. Due to Southern
California's net losses in the first half of 1995, certain financial covenants
under its revolving credit facility were not met. Subsequently, Southern
California received a waiver of this event of default; the waiver contained
certain requirements, one of which prohibited Southern California from making
the interest payment due in August, 1995 on its $140 million Senior Secured
Notes (the Senior Secured Notes). The non-payment of the Senior Secured Notes'
interest caused a default under the terms of the related Indenture. As
discussed in Note 5, Southern California and the lender entered into an
agreement which extends through April 30, 1996,
F-7
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
whereby the lender agreed to not exercise its remedies in regards to the
financial covenant defaults provided that no other defaults occur.
Southern California has announced that it had reached an agreement in
principle, subject to certain conditions, on the terms of a restructuring of
the Senior Secured Notes with an unofficial committee of holders of the Senior
Secured Notes. The principal terms of the restructuring proposal provide that
the stock of Puerto Rico would be sold and that the holders of the Senior
Secured Notes would receive 98% of Southern California's equity (subject to
dilution to the extent certain warrants and options to be granted by Southern
California as part of the restructuring are exercised) and certain net cash
proceeds from the sale of the stock of Puerto Rico for their notes. Southern
California would retain approximately $10 million of the net proceeds from the
sale of the stock of Puerto Rico to pay down a portion of Southern
California's revolving credit facility, with the balance of the net proceeds
(after payment of, among other things, closing and restructuring costs) being
paid to the holders of the Senior Secured Notes. Southern California's trade
suppliers would be paid in full pursuant to the restructuring proposal.
Southern California, in conjunction with the professional advisors to the
Bondholders' Committee, is currently working on the implementation of the
restructuring proposal announced in the fourth quarter of 1995. In that
regard, Southern California is considering the means of implementing the
restructuring proposal, including the possible commencement of a Chapter 11
case and the filing of a pre-negotiated plan of reorganization.
Southern California expects that its operations will continue in the normal
course prior to, during and after the above mentioned planned transactions.
No assurances can be given that the restructuring proposal can be
successfully implemented by Southern California.
Southern California has received offers for the stock of Puerto Rico that
exceed the net book value of Puerto Rico.
The accompanying consolidated financial statements present Southern
California's long-term debt as due currently, as a result of the defaults
under the indenture governing the Senior Secured Notes and the revolving
credit facility. No other adjustments have been made to the accompanying
consolidated financial statements to reflect the outcome of the Southern
California's financial uncertainty.
Restructuring Charge
In order to reduce overhead costs, Southern California decided to
discontinue the operations of its Avalon division, which distributed lower-
volume beverage products, and to downsize the hot-fill operations of its
Liquitrend division, which primarily bottled products for companies who did
not distribute their products throughout Southern California's distribution
system. As a result, Southern California terminated 205 employees in
September, 1995; a reserve of $906,000 was set up for severance pay, of which
$850,000 was paid out by December 31, 1995. Also, Southern California
determined that certain leased facilities and equipment were no longer needed
and a reserve of $1,660,000 was established to reflect the projected cost of
terminating these leases, of which $324,000 was paid out by December 31, 1995.
These reserves are included in the restructuring charge in the accompanying
1995 consolidated statement of operations.
Southern California incurred costs of $2,449,000 in 1995 in relation to the
negotiation of the potential restructuring of Southern California's
obligations under the Senior Secured Notes and the revolving credit facility;
these costs are included in the restructuring charge in the accompanying 1995
consolidated statement of operations.
F-8
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements of the Company reflect the consolidated financial
statements of Seven-Up/RC Bottling Company of Southern California, Inc. and
its wholly-owned subsidiary, Seven-Up/RC Bottling Company of Puerto Rico, Inc.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
Cash
Included in accounts payable are $9,459,000 and $7,966,000 of checks
outstanding in excess of cash balances at December 31, 1995 and 1994,
respectively.
For purposes of the statement of cash flows, cash and cash equivalents are
defined as cash deposits with original maturities of less than 90 days.
Trade Receivables, Net
Trade receivables, net, include allowances for doubtful accounts of
$1,814,000 and $1,428,000 at December 31, 1995 and 1994, respectively.
Other Receivables
Other receivables consist principally of amounts due from franchisors under
the terms of marketing and/or purchasing contracts.
Inventories
Inventories are recorded at cost, determined on the first-in, first-out
method. Elements of cost include direct materials, direct labor and bottling
overhead.
Investment in Joint Venture
The Company has a 50% ownership interest in Porta Pack, a joint venture in
Puerto Rico. Porta Pack packages non-carbonated juices using a process known
as "aseptic packaging." The Company accounts for this investment using the
equity method.
Property, Plant and Equipment, Net
Property, plant and equipment is stated at cost. Depreciation is provided
for under the straight-line method using the following lives:
<TABLE>
<S> <C>
Building and improvements..................................... 31.5 years
Machinery and equipment....................................... 7 to 8 years
Equipment held under capital leases........................... 6 to 7 years
</TABLE>
F-9
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred. The cost and
accumulated depreciation of property, plant and equipment retired or otherwise
disposed of are eliminated and any resulting gain or loss recognized at the
time of disposal.
Other Assets
Intangible assets include the appraised value of specific intangible assets
acquired, including advertising libraries, beverage franchises and trademarks.
The intangible assets are amortized over their useful lives, which range from
2 to 40 years. The Company continually evaluates whether events or
circumstances have occurred that indicate the remaining estimated useful life
of intangible assets may warrant revisions or that the remaining balances of
intangible assets may not be recoverable. When factors indicate that
intangible assets should be evaluated for possible impairment, the Company
uses an estimate of the related business segment's undiscounted net income
over the remaining life of the intangible assets in measuring whether the
intangible assets are recoverable. The net balance recorded at December 31,
1995 and 1994, includes accumulated amortization of $14,820,000 and
$17,205,000, respectively.
The Company incurred debt issuance costs in connection with the arrangement
of various long-term debt facilities. These costs are amortized over the
individual lives of the various debt facilities using the effective interest
method. The net balance at December 31, 1995 and 1994, includes accumulated
amortization of $3,493,000 and $2,322,000, respectively.
The Company recorded an extraordinary loss of $826,000 for the year ended
December 31, 1993, due to the accrual of $562,000 for a prepayment premium
associated with the repayment of a prior revolving loan agreements and the
write-off of $264,000 of related debt issuance costs.
Accrued Expenses
Accrued expenses as of December 31, 1995 and 1994 include accrued interest
of $15,060,000 and $7,003,000, respectively.
Income Taxes
The Company accounted for income taxes using the method prescribed by
Statement of Financial Accounting Standard No. 109 (SFAS 109). Under the asset
and liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date. The measurement of deferred income tax assets is adjusted by a
valuation reserve, if necessary, so that the net tax assets are recognized
only to the extent they are expected to be realized. The adoption of SFAS 109
had no effect on the Company's financial position.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets" (SFAS 121). The Company will be required to adopt SFAS 121 in the
first quarter of 1996. The Company does not expect that the adoption of SFAS
121 will be material to its financial position or its results of operation in
1996, assuming that the proposed restructuring is completed.
F-10
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
(3) INVENTORIES
Inventories at December 31, 1995 and 1994, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Raw materials................................................ $ 6,198 $18,628
Finished goods............................................... 18,749 25,790
------- -------
$24,947 $44,418
======= =======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, at December 31, 1995 and 1994, consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Land..................................................... $ 22,477 $ 22,682
Building and improvements................................ 23,994 23,052
Machinery and equipment.................................. 71,911 70,225
Equipment held under capital leases...................... 12,816 10,229
Construction in progress................................. 480 866
-------- --------
131,678 127,054
Accumulated depreciation................................. (49,246) (38,786)
Capital lease depreciation............................... (2,487) (880)
-------- --------
$ 79,945 $ 87,388
======== ========
</TABLE>
(5) LONG-TERM DEBT
At December 31, 1995, the components of current portion of long-term debt
were (in thousands):
<TABLE>
<S> <C>
Revolving loans.................................................. $ 37,847
Senior Secured Notes............................................. 140,000
Term loans....................................................... 3,571
Capital lease obligations........................................ 8,536
--------
Total.......................................................... 189,954
========
</TABLE>
Revolving Credit Facility
Southern California's revolving credit facility consists of a $45.0 million
revolving loan commitment; $29.2 million was outstanding at December 31, 1995.
The Puerto Rico revolving loan consists of a $10.0 million revolving loan
commitment; $8.6 million was outstanding at December 31, 1995. Interest on
these revolving loans is charged monthly at the GE Commercial Paper rate (5.68
percent at December 31, 1995) plus 3.5 percent. The average interest rate on
the revolving loans in 1995 was 9.34 percent. The Company is charged a
commitment fee for the unused portion of the revolving loan commitments plus
an annual administration fee and other facility fees. Borrowings under the
revolving loan commitments are based on a percentage of certain eligible trade
and franchisor receivables and inventory. The Company has a lockbox agreement
where by all cash receipts are used to pay down the revolving loans.
F-11
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
Southern California, at the end of the second quarter and through the
remainder of 1995, was in violation of certain of its revolving credit
facility covenants, including tangible net worth, interest coverage and fixed-
charge coverage. At the request of Southern California, the lender agreed to
waive all defaults for the months of June and July 1995. Subsequently, a
forbearance agreement was entered into whereby the lender agreed, for a period
ending on April 30, 1996, to not exercise its remedies in regard to the
financial covenant defaults, provided that no other defaults occur.
Term Loan Agreement
Southern California's secured amortizing term loan is collateralized by
certain specified equipment. Scheduled principal payments and interest, which
is calculated three months in arrears and computed at the same rate and basis
as the Revolving Loan Agreement, are required each January, April, July and
November, through January 31, 1998.
Senior Secured Notes
On August 11, 1992, Southern California issued the Senior Secured Notes. The
net proceeds of approximately $133,500,000 were used to repay indebtedness of
the Company.
The Senior Secured Notes are senior obligations of Southern California and
are secured by a lien on and security interest in all of the issued and
outstanding capital stock of Southern California and 66.5% of the issued and
outstanding capital stock of Puerto Rico. The Senior Secured Notes are
unconditionally guaranteed by BGAC. Interest on the notes is payable semi-
annually, on February 1 and August 1. The fair value of the Company's Senior
Secured Notes at December 31, 1995 was approximately $84,000,000 based on
quoted market prices.
On August 1, 1995, Southern California suspended payments of interest on its
Senior Secured Notes pending negotiations of a financial restructuring. The
indenture governing the Senior Secured Notes gives the indenture trustee,
among other remedies and if certain requirements are met, the holders of the
Senior Secured Notes, the right to accelerate and demand payment of the
outstanding principal amount of the Senior Secured Notes. Because of the right
to accelerate, the aggregate amount of the outstanding Senior Secured Notes,
term loans and capital leases which are cross collateralized, are reflected as
current liabilities in the accompanying consolidated balance sheet at December
31, 1995.
Capital Lease Obligations
Southern California intends to terminate $3,690,000 of its capital lease
obligations in 1996 since the equipment held under these agreements is used in
the hot-fill production process, which will not be continued. Southern
California will be required to return the related equipment to the lessors and
has recorded a reserve for the estimated lease termination payments.
Puerto Rico has several capital lease obligations that are secured by
certain specified vehicles and office equipment and are payable through 1999
in monthly installments of approximately $23,000, including interest.
F-12
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
(6) EMPLOYEE BENEFIT PLANS
The Company sponsors two defined contribution plans for all employees other
than union members, unless specifically negotiated. The Target Benefit Plan
was created effective September 1, 1990, and allows participants to make
contributions of 2% of their eligible compensation, as defined. The Company's
annual contribution is determined by an actuary based upon assumptions of the
participant's highest five year average pay, their years of eligible service
with the Company, and their vesting status as of their termination date. The
401(k) Plan entitles all employees other than union members, unless
specifically negotiated, to participate. The Company matches one-quarter of
each participant's contribution up to 6% of the participant's eligible
compensation. In September of 1995, the Company suspended its contribution
relate to the Target Benefit Plan and the 401(k) Plan. The following table
summarizes the 1995 estimated contributions, and 1994 and 1993 actual
contributions for each plan for the applicable periods (in thousands):
<TABLE>
<CAPTION>
TARGET BENEFIT 401(K) PLAN
-------------- -----------
<S> <C> <C>
Year ended December 31, 1995...................... $306 $160
1994.............................................. $380 $210
1993.............................................. $345 $212
</TABLE>
Under labor contracts between the Company and certain of its employee
unions, the Company contributes to multi-employer union benefit plans which
are administered by the applicable unions. The Company has no liability to
these plans in excess of the contractually agreed to contribution, which is
usually equal to a set charge per hour of eligible service by the union
members to the Company. The Company contributed the following amounts to
unions on behalf of its employees during the applicable periods (in
thousands):
<TABLE>
<S> <C>
Year ended December 31, 1995......................................... $ 972
1994................................................................. $1,017
1993................................................................. $ 989
</TABLE>
Puerto Rico Pension Plan
The Company sponsors the Seven-Up/RC Bottling Company of Puerto Rico, Inc.
Pension Plan (the "Puerto Rico Plan"), a contributory defined benefit pension
plan for union employees of Puerto Rico. Employees are eligible to participate
in the Puerto Rico Plan the first year of the Plan year following the date of
employment. Participating employees are required to contribute 3% of their
compensation in excess of $9,000 in a given calendar year. The following table
indicates the actual net pension expense components for the years ended
December 31, 1995 and 1994, respectively (in thousands):
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Service cost component......................................... $ 48 $ 85
Interest cost component........................................ 248 268
Expected return on plan assets................................. (184) 82
Net amortization and deferral.................................. 34 (226)
----- -----
Net pension expense.......................................... $ 146 $ 209
===== =====
</TABLE>
F-13
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
The assumptions used to develop the components of the above amounts were as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate.................................................... 7.50% 8.50%
Rate of increase in compensation levels.......................... 4.00% 4.00%
Expected long-term rate of return on plan assets................. 9.00% 9.00%
</TABLE>
The funded status of the Puerto Rico Plan as of January 1, 1995 and 1994 was
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated benefit obligation............................ $ 2,952 $ 2,504
Vested.................................................. 133 5
------- -------
Non-vested.............................................. $ 3,085 $ 2,509
======= =======
Present value of projected benefit obligation............. $(3,739) $(2,830)
Fair value of plan assets................................. 2,472 2,012
------- -------
Present value of projected benefit obligation in excess of
plan assets.............................................. (1,267) (818)
Remaining unrecognized net obligation..................... 271 305
Unrecognized net gain..................................... 439 74
------- -------
Accrued pension costs..................................... $ (557) $ (439)
======= =======
</TABLE>
The Company contributed approximately $25,000 to the Puerto Rico Plan during
1995 and $23,000 during 1994.
(7) OPERATING LEASES
The Company leases certain office and warehouse facilities, machinery,
vehicles and computer equipment under various renewable long-term leases
expiring from 1996 to 1999. Rental expense under operating lease agreements
was approximately $4,481,000, $3,415,000 and $3,550,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Following are the future
minimum lease payments under operating leases that have initial or remaining
noncancellable lease terms in excess of one year from December 31, 1995 (in
thousands):
<TABLE>
<S> <C>
Year ended December 31, 1996........................................ $ 2,368
1997................................................................ 2,433
1998................................................................ 2,431
1999................................................................ 2,480
2000................................................................ 2,516
Thereafter.......................................................... --
-------
$12,228
=======
</TABLE>
Litigation
The Company is involved in various lawsuits and claims incidental to its
business. Management believes that any potential liabilities arising from
these matters will not have a material effect on its financial position or
future results of operations.
F-14
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
(8) INCOME TAXES
The Company is included in the consolidated Federal and state income tax
returns of WB Bottling. Effective September 1, 1990, the Company and WB
Bottling entered into a tax sharing agreement, whereby the Company calculates
its tax provision on a separate entity basis. In the future, the Company will
be required to make cash payments if WB Bottling is required to pay income
taxes.
The differences between the total income tax expense (benefit) and the
income tax expense (benefit) computed using the Federal income tax rate were
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
U.S. Federal income tax provision (benefit) at
statutory rate on income (loss) from
operations..................................... $(11,072) $(3,765) $(3,298)
Foreign income tax provision.................... -- 185 --
Losses for which no benefit is recognizable..... 11,072 3,765 3,298
-------- ------- -------
Provision (benefit) for income taxes............ $ -- $ 185 $ --
======== ======= =======
</TABLE>
The temporary differences and tax attribute carryforwards which gave rise to
deferred tax assets and (liabilities) at December 31, 1995 and 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Current deferred tax assets and (liabilities):
Difference in inventory basis................... $ 880 $ 1,778
Deferred compensation, pension and other
arrangements................................... 169 526
Accrued vacation and sick pay................... 814 820
Accrued expenses................................ 811 338
Reserve for Workers' Compensation............... 1,729 1,110
Coupon reserve.................................. 221 1,029
Capital lease expense........................... (829)
Restructuring charges........................... 548
Other........................................... 579 263
-------- --------
$ 4,922 $ 5,864
Less: Valuation allowance......................... (4,922) (5,864)
-------- --------
Net current deferred tax assets and (liabilities). $ -- $ --
Non-current deferred tax assets and (liabilities):
Net operating loss carryforward................. $ 28,415 $ 15,185
Accelerated depreciation and amortization....... (410) 2,060
Other........................................... (212) (171)
-------- --------
$ 27,793 $ 17,074
Less: Valuation allowance......................... (27,793) (17,074)
Net current deferred tax assets and (liabilities). $ -- $ --
======== ========
</TABLE>
F-15
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
The components of income (loss) from operations before the provision for
income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Domestic....................................... $(32,566) $(15,975) $(12,472)
Foreign........................................ 372 260 (1,872)
-------- -------- --------
Total........................................ $(32,194) $(15,715) $(14,344)
======== ======== ========
</TABLE>
The Company has net operating loss carryforwards as of December 31, 1995 in
the following jurisdictions (in thousands):
<TABLE>
<CAPTION>
JURISDICTION AMOUNT PERIOD OF EXPIRATION
------------ ------ --------------------
<S> <C> <C>
U.S. Federal..................................... 77,840 2005 to 2010
Puerto Rico...................................... 13,200 1997 to 2002
State............................................ 31,765 1997 to 2000
</TABLE>
The Internal Revenue Code of 1986 contains provisions which may limit the
net operating loss carryforwards available to be used in any given year in the
event of certain events including significant changes in ownership interests.
(9) SEGMENT DATA
The Company operates in the beverage production and distribution business in
two separate geographic segments. Information about the Company's operations
in these two geographic segments is summarized below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net Sales for the years ended December 31:
Southern California.......................... $314,469 $343,632 $316,560
Puerto Rico.................................. 82,256 70,208 54,502
-------- -------- --------
$396,725 $413,840 $371,062
======== ======== ========
Operating Profit for the years ended December
31:
Southern California.......................... $(14,339) $ 1,290 $ 3,915
Puerto Rico.................................. 4,992 4,526 2,087
-------- -------- --------
$ (9,347) $ 5,816 $ 6,002
======== ======== ========
Identifiable Assets as of December 31:
Southern California.......................... $140,931 $194,545
Puerto Rico.................................. 51,202 49,289
-------- --------
$192,133 $243,834
======== ========
</TABLE>
F-16
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF DECEMBER 31, 1995
10. EVENTS SUBSEQUENT TO THE DATE OF AUDITOR'S REPORT (UNAUDITED)
On May 13, 1996 Southern California and its immediate holding company
parent, Beverage Group Acquisition Company ("BGAC"), filed voluntary petitions
for reorganization relief under Chapter 11 of the bankruptcy code in the U.S.
Bankruptcy Court for the District of Delaware. The bankruptcy court entered an
order authorizing Southern California to make payments to its trade suppliers
for pre-bankruptcy claims provided that such suppliers continued to provide
goods to Southern California on the same credit terms as were in effect on the
day before Southern California announced the suspension of interest payments
on the Senior Secured Notes. Additionally, Southern California entered into a
Debtor in Possession Loan Agreement (the "DIP" agreement) to obtain revolving
credit advances and letter of credit obligations in the aggregate principal
amount of $54 million during the pendence of the Chapter 11 case.
On May 20, 1996, Southern California and BGAC filed the First Amended Joint
Plan of Reorganization (the "Plan") and accompanying disclosure statement with
the bankruptcy court. The bankruptcy court approved the disclosure statement
on June 19, 1996.
On July 1, 1996, the sale of the stock of Puerto Rico was consummated for
approximately $74 million. A portion of the net proceeds from the sale,
approximately $55 million, were distributed pursuant to the Plan to holders of
the Senior Secured Notes.
On August 2, 1996, the bankruptcy court confirmed the Plan. On August 15,
1996 the Plan was consummated and Southern California emerged from Chapter 11.
Pursuant to the Plan, Southern California entered into a post-consummation
revolving credit and letter of credit facility in the aggregate principal
amount of $35 million in order to refinance obligations under the DIP
agreement.
F-17
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR
COMPANY COMPANY
------------- ------------
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(NOTES 2 & 3)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................... $ 3,291 $ 5,949
Accounts receivable:
Trade, net....................................... 24,609 42,261
Other............................................ 5,049 9,450
Inventories:
Finished goods................................... 15,486 18,749
Raw materials.................................... 6,244 6,198
Prepaids........................................... 1,626 2,908
------- ---------
Total current assets........................... 56,305 85,515
------- ---------
Investment in joint venture.......................... -- 1,422
Property, plant and equipment, net................... 33,551 79,945
Other assets:
Intangible and other assets........................ 6,508 21,422
Debt issuance costs................................ 99 3,829
------- ---------
Total assets................................... $96,463 $ 192,133
======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................... $15,935 $ 29,141
Accrued expenses................................... 33,296 34,371
Current portion of long-term debt.................. 549 189,954
------- ---------
Total current liabilities...................... 49,780 253,466
------- ---------
Long-term debt:
Revolving credit facilities........................ 14,590 --
Term loan.......................................... 527 --
Capital leases..................................... 2,580 --
------- ---------
Total long-term debt........................... 17,697 --
------- ---------
Stockholders' equity (deficit):
Capital stock $0.01 par value, 6,000,000 and
1,000 shares authorized and 5,000,000 and
1,000 issued and outstanding, respectively......... -- --
Additional paid-in capital......................... 30,000 42,557
Retained deficit................................... (1,014) (103,890)
------- ---------
Total stockholders' equity (deficit)........... 28,986 (61,333)
------- ---------
Total liabilities and stockholders' equity..... $96,463 $ 192,133
======= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-18
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR
COMPANY COMPANY
------------- -----------------
7/1-
8/16-9/30 8/15 7/1-9/30
1996 1996 1995
------------- ------- --------
(NOTES 2 & 3)
<S> <C> <C> <C>
Net sales..................................... $33,518 $38,788 $106,035
Cost of goods sold............................ 27,418 31,406 90,814
------- ------- --------
Gross profit................................ 6,100 7,382 15,221
Administrative, marketing and general
expenses..................................... 5,362 4,568 12,550
Depreciation and amortization................. 1,461 1,612 4,410
Restructure charges (Note 4).................. -- -- 2,646
------- ------- --------
Operating (loss) income..................... (723) 1,202 (4,385)
Interest expense.............................. 267 2,216 5,842
Other income, net............................. 4 31,817 35
------- ------- --------
(Loss) income before income taxes,
reorganization expenses and extraordinary
items...................................... (986) 30,803 (10,192)
Reorganization expenses (Note 2).............. -- 32,212 --
Provision for income taxes.................... 28 300 --
------- ------- --------
Loss before extraordinary items............. (1,014) (1,709) (10,192)
Extraordinary items (Notes 2 & 3)............. -- 77,749 --
------- ------- --------
Net (loss) income........................... $(1,014) $76,040 $(10,192)
======= ======= ========
Loss per common share:
Net loss per common share................... $ (0.20) -- --
======= ======= ========
Weighted average common shares outstanding.. 5,000 -- --
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-19
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR
COMPANY COMPANY
------------- ------------------
8/16-9/30 1/1-8/15 1/1-9/30
1996 1996 1995
------------- -------- --------
(NOTES 2 & 3)
<S> <C> <C> <C>
Net sales.................................... $33,518 $202,844 $306,473
Cost of goods sold........................... 27,418 164,320 260,698
------- -------- --------
Gross profit............................... 6,100 38,524 45,775
Administrative, marketing and general
expenses.................................... 5,362 28,011 36,111
Depreciation and amortization................ 1,461 10,399 13,398
Restructure charges (Note 4)................. -- 547 2,646
------- -------- --------
Operating loss............................. (723) (433) (6,380)
Interest expense............................. 267 12,871 17,349
Other income, net (Note 2)................... 4 33,712 171
------- -------- --------
(Loss) income before income taxes,
reorganization expenses and extraordinary
items..................................... (986) 20,408 (23,558)
Reorganization expenses (Note 2)............. -- 35,369 --
Provision for income taxes................... 28 345 --
------- -------- --------
Loss before extraordinary items............ (1,014) (15,306) (23,558)
Extraordinary items (Notes 2 & 3)............ -- 77,239 --
------- -------- --------
Net (loss) income.......................... $(1,014) $ 61,933 $(23,558)
======= ======== ========
Loss per common share:
Net loss per common share.................. $ (0.20) -- --
======= ======== ========
Weighted average common shares outstanding. 5,000 -- --
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-20
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR
COMPANY COMPANY
------------- ------------------
8/16-9/30 1/1-8/15 1/1-9/30
1996 1996 1995
------------- -------- --------
(NOTES 2 & 3)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before extraordinary item.............. $ (1,014) $(15,306) $(23,558)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization.............. 1,461 10,997 14,768
Equity in earnings of joint venture........ -- (5) (77)
Gain on sales of fixed assets.............. -- (169) 6
Non cash reorganization expenses........... -- 29,735 --
Disposition of capital lease............... -- 1,192 --
Provision for doubtful accounts............ 100 783 565
Gain on sale of Puerto Rico................ -- (31,715) --
Changes in assets and liabilities:
Accounts receivable....................... 5,529 (1,671) 19,103
Inventories............................... (5,156) 227 10,247
Prepaids and other........................ (948) 1,877 (5,019)
Accounts payable.......................... (14,240) 11,505 (22,083)
Accrued expenses.......................... 887 10,924 2,754
-------- -------- --------
Net cash (used in) provided by operating
activities............................. (13,381) 18,374 (3,294)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of Puerto Rico........... -- 71,626 --
Proceeds from sales of property, plant and
equipment.................................. -- 133 46
Cash additions to property, plant and
equipment.................................. (746) (4,402) (3,020)
-------- -------- --------
Net cash (used in) provided by investing
activities............................. (746) 67,357 (2,974)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolving
loans...................................... 14,590 (30,290) 4,136
Payment to Senior Secured Note holders...... -- (55,000) --
(Repayment of) proceeds from term loan...... (11) (2,852) 114
Payment of debt issuance costs.............. -- (88) (2)
Repayment of capital lease.................. (37) (638) (602)
-------- -------- --------
Net cash provided by (used in) financing
activities............................. 14,542 (88,868) 3,646
-------- -------- --------
NET INCREASE (DECREASE) IN CASH............... 415 (3,137) (2,622)
Cash, beginning of period..................... 2,876 6,013 6,982
-------- -------- --------
Cash, end of period........................... $ 3,291 $ 2,876 $ 4,360
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash interest paid.......................... $ 257 $ 1,957 $ 11,912
======== ======== ========
Purchase of property, plant and equipment
through issuance of capital lease
obligation................................. $ -- $ -- $ 555
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ---------- --------- ----------------
<S> <C> <C> <C> <C> <C>
REORGANIZED (Notes 2 & 3)
August 16 to September 30,
1996
Balance, August 16,
1996................... 5,000 $ -- $ 30,000 $ -- $ 30,000
Net loss for the period. -- -- -- (1,014) (1,014)
----- ----- -------- --------- ---------
Balance, September 30,
1996................. 5,000 $ -- $ 30,000 $ (1,014) $ 28,986
===== ===== ======== ========= =========
PREDECESSOR
January 1 to August 15,
1996
Balance December 31,
1995................... 1 $ -- $ 42,557 $(103,890) $ (61,333)
Reorganization.......... 99 -- (41,957) 41,957 --
New issue............... 4,900 -- 29,400 -- 29,400
Net income for the
period................. -- -- -- 61,933 61,933
----- ----- -------- --------- ---------
Balance, August 15,
1996................. 5,000 $ -- $ 30,000 $ -- $ 30,000
===== ===== ======== ========= =========
PREDECESSOR
January 1 to September 30,
1995
Balance, December 31,
1994................... 1 $ -- $ 42,557 $ (71,696) $ (29,139)
Net loss for the period. -- -- -- (23,558) (23,558)
----- ----- -------- --------- ---------
Balance, September 30,
1995................. 1 $ -- $ 42,557 $ (95,254) $ (52,697)
===== ===== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-22
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) PRESENTATION OF FINANCIAL INFORMATION
The accompanying condensed consolidated financial statements include the
accounts of Seven-Up/RC Bottling Company of Southern California, Inc.
("Southern California") and Southern California's wholly-owned subsidiary,
Seven-Up/RC Bottling Company of Puerto Rico, Inc. ("Puerto Rico"). Except as
otherwise indicated, Southern California and Puerto Rico are referred to
collectively as the "Company". On May 13, 1996, Southern California and its
immediate holding company parent, Beverage Group Acquisition Corporation,
filed voluntary petitions for reorganization relief under Chapter 11 of the
Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. On
August 15, 1996, the Plan was consummated and Southern California emerged as a
reorganized company from Chapter 11. Due to the reorganization and
implementation of fresh start reporting, the Condensed Consolidated Financial
Statements for the new Reorganized Company (period starting August 16, 1996)
are not comparable to that of Predecessor Company. Predecessor Company
included Southern California and Puerto Rico through the date of disposition,
June 30, 1996. Reorganized Company includes the operations of Southern
California subsequent to the consummation date.
During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Users of financial information produced for interim periods are
encouraged to refer to the footnotes contained in the Annual Report on Form
10-K when reviewing interim financial results.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial condition, the results
of operations, cash flows, and stockholders' equity of the Company for interim
periods.
Certain reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation.
(2) BANKRUPTCY FILINGS
As a result of severe liquidity problems, on July 31, 1995, Southern
California suspended payments of interest on its $140,000,000, 11.5% Senior
Secured Notes due 1999 (the "Senior Secured Notes"). At the end of the second
quarter of 1995 through the first quarter of 1996, Southern California was in
violation of certain of its revolving credit facility covenants, including
tangible net-worth, interest coverage and fixed charge coverage. At the
request of Southern California, the revolving credit lender executed
forbearance agreements extending through May 15, 1996.
On November 9, 1995, Southern California announced that it had reached an
agreement in principle on the terms of a restructuring of the Senior Secured
Notes with an unofficial committee (the "Committee") of holders of such notes.
The agreement contemplated, among other things, (i) the exchange of the Senior
Secured Notes for approximately 98% of the equity of Southern California, and
(ii) the sale of Puerto Rico and the payment to the holders of the Senior
Secured Notes of the net proceeds from such sale.
On May 13, 1996, Southern California and its immediate holding company
parent, Beverage Group Acquisition Corporation ("BGAC"), filed voluntary
petitions for reorganization relief under Chapter 11 of the Bankruptcy Code to
implement the terms of the restructuring agreement with the Committee.
On July 1, 1996, Southern California sold its wholly owned subsidiary,
Puerto Rico, for approximately $74 million which resulted in a net gain of
approximately $32 million. The proceeds from this sale were used to repay
holders of the Senior Secured Notes and reduce Southern California's revolving
credit facility.
F-23
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
On August 2, 1996 (the "Confirmation Date"), the U.S. Bankruptcy Court of
the District of Delaware, confirmed the Company's First Amended Joint Plan of
Reorganization (the "Reorganization"), and on August 16, 1996, the Company
emerged from bankruptcy. Pursuant to the Reorganization, on such date certain
indebtedness of the Company was canceled in exchange for cash and new equity
interests. The Company distributed to holders of its Senior Secured Notes
approximately $55 million in cash and equity securities consisting of 5.0
million shares of common stock.
As a result of the bankruptcy filing and the resulting debtor-in-possession
working capital facility, Southern California wrote off $510,000 of debt
issuance costs related to its previous working capital facility. In addition,
in the third quarter Southern California realized an extraordinary gain of $78
million relating to the discharge of the Senior Secured Notes and related
accrued interest in accordance with the Reorganization.
Upon emerging from bankruptcy, the Company's $54 million Debtor-In-
Possession Revolving Credit Facility was canceled and replaced by a $35
million facility.
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code," ("SOP 90-7") expenses resulting from the
Reorganization should be reported separately as reorganization items in the
Condensed Consolidated Statements of Operations, and are summarized below:
<TABLE>
<CAPTION>
JULY 1, 1996 JANUARY 1, 1996
TO TO
AUGUST 15, 1996 AUGUST 15, 1996
--------------- ---------------
<S> <C> <C>
Adjustment of assets to fair market value... $ 29,735 $ 29,735
Financial restructuring costs............... 2 ,477 5,634
-------- --------
Total..................................... $ 32,212 $ 35,369
======== ========
</TABLE>
(3) FRESH START ACCOUNTING
As of August 15, 1996, the Company adopted Fresh Start Reporting in
accordance with SOP 90-7. Fresh Start Reporting resulted in material changes
to the Condensed Consolidated Balance Sheet, including valuation of real,
intangible and other assets and the valuation of equity based on the appraised
reorganization value of the ongoing business.
The reorganization value of $30 million (the approximate fair value) was
established based upon analysis by an independent valuation firm and
considered many factors and various valuation methods, including discounted
cash flows, selected comparable company multiples, selected acquisition
transaction multiples and other applicable ratios and valuation techniques
believed by management and its financial advisors to be representative of the
Company's business and industry.
F-24
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
The Reorganization and adoption of Fresh Start Reporting resulted in the
following adjustments to the Company's Condensed Consolidated Balance Sheet
for the period ending August 15, 1996 (dollar amounts in thousands).
<TABLE>
<CAPTION>
PREDECESSOR REORGANIZED
COMPANY COMPANY
----------- -----------
AT REORGANIZATION AND AT
AUGUST 15, FRESH START ADJUSTMENTS AUGUST 15,
----------- ------------------------------ -----------
1996 DEBIT CREDIT 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Total current assets.... $119,733 $ -- $ 63,836(f) $55,897
Property, plant and
equipment, net......... 55,918 -- 22,030(a) 33,888
Other assets:
Intangible and other
assets............... 14,038 -- 6,414(b) 7,624
Debt issuance costs... 2,695 -- 2,607(c) 88
-------- ----------- ----------- -------
Total assets........ $192,384 $ -- $ 94,887 $97,497
======== =========== =========== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable...... $ 30,176 $ -- $ -- $30,176
Accrued expenses...... 57,087 23,465(d) -- 33,622
Current portion of
long-term debt....... 544 -- -- 544
-------- ----------- ----------- -------
Total current
liabilities........ 87,807 23,465 -- 64,342
-------- ----------- ----------- -------
Long-term debt.......... 151,991 148,836(e)(f) -- 3,155
-------- ----------- ----------- -------
Stockholders' equity
(deficit):
Additional paid-in
capital.............. 42,557 41,957(g) 29,400(g) 30,000
Retained deficit...... (89,971) -- 77,749(h) --
12,222(i)
-------- ----------- ----------- -------
Total (deficit)
equity............. (47,414) 41,957 119,371 30,000
-------- ----------- ----------- -------
Total liabilities
and stockholders'
equity............. $192,384 $ 214,258 $ 119,371 $97,497
======== =========== =========== =======
</TABLE>
Explanations of adjustment columns of the balance sheet are as follows:
(a) To adjust property and equipment to estimated current market value. The
market value of property and equipment has been determined by independent
third party appraisal.
(b) To primarily reflect the write-off of intangibles and adjust other assets
to current market value.
(c) To write-off remaining debt issuance costs for the Senior Secured Notes.
(d) To primarily reflect the cancellation of accrued interest related to the
Senior Secured Notes.
(e) To reflect the cancellation of the Senior Secured Notes.
(f) To reflect the paydown of the debtor-in-possession revolving credit
facility.
(g) To reflect the issuance of 5,000,000 shares of new common stock (par value
$0.01).
F-25
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(h) To reflect the extraordinary gain resulting from the discharge of
indebtedness. This extraordinary gain is calculated below:
<TABLE>
<S> <C>
Historical carrying value of old debt securities................... $140,000
Historical carrying value of related accrued interest.............. 24,756
Unamortized old deferred financing costs........................... (2,607)
Market Value of consideration exchanged for old debt:
Plan securities (face value $29,400)............................. (29,400)
Senior securities principal payment.............................. (55,000)
--------
Extraordinary gain............................................. $ 77,749
========
</TABLE>
(i) To reflect the elimination of stockholders' equity of the Predecessor
Company.
The following Unaudited Pro Forma Condensed Financial Information for the
nine months ended September 30, 1996 and 1995, have been prepared giving
effect to the sale of Puerto Rico and the consummation of the Reorganization
including adjustments to interest, depreciation expense and asset
amortization. The Pro Forma financial information was prepared as if the
adjustments had occurred on January 1, 1996 and 1995, respectively. This
information does not purport to be indicative of the results which would have
been obtained had such transaction in fact been completed as of the date
hereof and for the periods presented or that may be obtained in the future.
Unaudited Pro Forma Financial Information (dollar amounts in thousands):
<TABLE>
<CAPTION>
PRO FORMA NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Total revenue................................. $198,427 $247,119
Operating costs and expenses.................. 197,323 251,903
-------- --------
Income (loss) before interest, other income,
reorganization expenses and income taxes..... 1,104 (4,784)
Interest, other income, income taxes and
reorganization expenses...................... 1,001 (4,210)
-------- --------
Net income (loss)............................. $ 103 $ (8,994)
======== ========
</TABLE>
(4) RESTRUCTURING CHARGES
During the second quarter of 1996, the Company recorded approximately
$547,000 of restructuring charges related to the termination of a capital
lease. Annual lease payments related to the terminated lease were $1,328,000
in 1996, and $759,000 in 1997.
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OF-
FER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 2
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 9
Dividend Policy........................................................... 9
Selected Consolidated Financial Data...................................... 10
Unaudited Pro Forma Financial Data........................................ 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
Business.................................................................. 22
Management................................................................ 30
Principal and Selling Stockholders........................................ 32
Description of Capital Stock.............................................. 33
Plan of Distribution...................................................... 34
Legal Matters............................................................. 34
Experts................................................................... 34
Additional Information.................................................... 35
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,904,805 SHARES
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................... S-2
Schedule II--Valuation and Qualifying Accounts............................. S-3
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Seven-Up/RC Bottling Company of Southern California, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Seven-Up/RC Bottling Company of
Southern California, Inc. and its subsidiary included in this Form 10-K, and
have issued our report thereon dated March 20, 1996. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the Company's ability to continue as a going concern as discussed
in Note 1 of the financial statements. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the index on page S-1 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Los Angeles, California
March 20, 1996
S-2
<PAGE>
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
PERIOD ADDITIONS DEDUCTIONS PERIOD
------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts for the year ended
December 31, 1995................................ $1,428 $ 715 $(329) $1,814
====== ====== ===== ======
Allwance for doubtful accounts for the year ended
December 31, 1994................................ $1,192 $1,025 $(789) $1,428
====== ====== ===== ======
Allowance for doubtful accounts for the year ended
December 31, 1993................................ $1,281 $ 25 $(114) $1,192
====== ====== ===== ======
</TABLE>
S-3
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation:
<TABLE>
<S> <C>
SEC registration fee............................................... $ 6,312
Printing and engraving expenses.................................... 50,000
Accounting fees and expenses....................................... 75,000
Legal fees and expenses............................................ 100,000
Miscellaneous expenses............................................. 43,688
--------
Total............................................................ $275,000
========
</TABLE>
All amounts are estimated except for the SEC registration fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any person who is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any person who is, or is
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
The Company's Certificate of Incorporation provides for the indemnification
of directors and officers of the Company to the fullest extent permitted by
Section 145.
In that regard, the Certificate of Incorporation provides that the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was
a director or officer of such corporation, or is or was serving at the request
of such corporation as a director, officer or member of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of such corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Indemnification in connection with an action
or suit by or in the right of such corporation
II-1
<PAGE>
to procure a judgment in its favor is limited to payment of settlement of such
an action or suit except that no such indemnification may be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the indemnifying corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine that, despite the adjudication of liability but in
consideration of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the consummation of the Plan of Reorganization on August
15, 1996, the Company issued 5,000,000 shares of Common Stock to certain
creditors and equityholders of the Company. Pursuant to an exemption from
registration under Section 1145 of the Bankruptcy Code of 1986, as amended.
See the Plan of Reorganization filed as an exhibit to this registration
statement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
2.1 First Amended Joint Plan of Reorganization of the Company and
Beverage Group Acquisition Corporation, dated as of June 19, 1996
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-Laws of the Company
5.1 Opinion of Kirkland & Ellis
10.1 Stock Purchase and Sale Agreement among Seven-Up Acquisition
Corporation, the Company and Seven-Up/RC Bottling Company of Puerto
Rico, Inc., dated as of May 3, 1996*
10.2 Amended and Restated Management Agreement dated as of May 8, 1996
among the Company and Bart S. Brodkin.*
10.3 Registration Rights Agreement, dated as of August 15, 1996, among
the Company and certain of its Stockholders.
10.4 Credit Agreement, dated as of August 2, 1996 among the Company,
General Electric Capital Corporation, and certain other lenders
party thereto.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit
5.1)
24.1 Powers of attorney (included in signature page included in this
part II)
27.1 Financial Data Schedule
</TABLE>
- --------
* Incorporated by reference to the Company's Form 10-Q for the period ended
June 30, 1996.
(b) Financial Statement Schedules:
II
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF VERNON, STATE OF
CALIFORNIA ON NOVEMBER 22, 1996.
Seven-Up/RC Bottling Company of
Southern California, Inc.
/s/ Bart S. Brodkin
By: _________________________________
Name:Bart S. Brodkin
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bart S. Bodkin and Rick Ferguson and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Seven-Up/RC Bottling Company of Southern California, Inc.), to sign any or all
amendments (including post-effective amendments) to this registration
statement and any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON NOVEMBER 22,
1996, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH RESPECT TO
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.:
SIGNATURE CAPACITY
/s/ Bart S. Brodkin President, Chief Executive
- ------------------------------------- Officer, and Director
BART S. BRODKIN (Principal Executive Officer)
/s/ Richard Ferguson Executive Vice President and
- ------------------------------------- Chief Financial Officer
RICHARD FERGUSON (Principal Financial and
Accounting Officer)
/s/ Jack R. Attwood Director
- -------------------------------------
JACK R. ATTWOOD
/s/ William C. Langley Director
- -------------------------------------
WILLIAM C. LANGLEY
/s/ Monroe L. Lowenkron Director
- -------------------------------------
MONROE L. LOWENKRON
/s/ Daniel D. Villanueva Director
- -------------------------------------
DANIEL D. VILLANUEVA
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
2.1 First Amended Joint Plan of Reorganization of the Company and Beverage
Group Acquisition Corporation, dated as of June 19, 1996
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-Laws of the Company
5.1 Opinion of Kirkland & Ellis
10.1 Stock Purchase and Sale Agreement among Seven-Up Acquisition
Corporation, the Company and Seven-Up/RC Bottling Company of Puerto
Rico, Inc., dated as of May 3, 1996*
10.2 Amended and Restated Management Agreement dated as of May 8, 1996 among
the Company and Bart S. Brodkin.*
10.3 Registration Rights Agreement, dated as of August 15, 1996, among the
Company and certain of its Stockholders.
10.4 Credit Agreement, dated as of August 2, 1996 among the Company, General
Electric Capital Corporation, and certain other lenders party thereto.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1)
24.1 Powers of attorney (included in signature page included in this part
II)
27.1 Financial Data Schedule
</TABLE>
- --------
* Incorporated by reference to the Company's Form 10-Q for the period ended
June 30, 1996.
<PAGE>
EXHIBIT 2.1
INTRODUCTION
Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware
corporation, and Beverage Group Acquisition Corporation, a Delaware
corporation, jointly propose the Debtors' First Amended Joint Plan of
Reorganization (as may be amended, the "Plan") for the resolution of their
outstanding creditor claims and equity interests.
All holders of Claims are encouraged to read the Plan and the Disclosure
Statement in their entirety before voting to accept or reject the Plan.
Subject to the restrictions on modifications set forth in section 1127 of
the Bankruptcy Code and those restrictions on modifications set forth in
Article X of the Plan, the Debtors reserve their right to alter, amend, or
modify the Plan one or more times before its substantial consummation.
ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME
A. SCOPE OF DEFINITIONS
For purposes of this Plan, except as expressly provided or unless the
context otherwise requires, all capitalized terms not otherwise defined shall
have the meanings ascribed to them in Article I of the Plan. Any term used in
the Plan that is not defined herein, but is defined in the Bankruptcy Code or
the Bankruptcy Rules, shall have the meaning ascribed to that term in the
Bankruptcy Code or the Bankruptcy Rules. Whenever the context requires, such
terms shall include the plural as well as the singular, the masculine gender
shall include the feminine, and the feminine gender shall include the
masculine.
B. DEFINITIONS
1.1 "Administrative Claim" means a Claim for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code,
including, but not limited to, the actual, necessary costs and expenses
incurred after the Petition Date of preserving the Estates and operating the
business of Seven-Up/RC, including wages, salaries, or commissions for
services rendered after the commencement of these Chapter 11 Cases,
Professional Fees, and all fees and charges assessed against the Estates under
chapter 123 of title 28 of the United States Code.
1.2 "Allowed Claim" means a Claim or any portion thereof (a) that has been
allowed by a Final Order, (b) for which a proof of claim bar date has been
established and a proof of claim has been timely filed with the Bankruptcy
Court pursuant to the Bankruptcy Code, Bankruptcy Rules, or any Final Order of
the Bankruptcy Court, and as to which either (i) no objection to its allowance
has been filed within the periods of limitation fixed by the Bankruptcy Code,
Bankruptcy Rules or by any Final Order of the Bankruptcy Court, or (ii) any
objection to its allowance has been settled, withdrawn, or has been denied by
a Final Order, or (c) that is expressly allowed in the Plan; provided,
however, that all Claims for which no proof of claim bar date has been
established shall be treated for all purposes as if the Chapter 11 Cases had
not been commenced and, subject to the provisions of section VII.G. hereof,
the determination of whether any such Claim shall be allowed and/or the amount
thereof shall be determined, resolved or adjudicated, as the case may be, in
the procedural manner in which such Claim would have been determined, resolved
or adjudicated if the Chapter 11 Cases had not been commenced.
1.3 "Allowed Class . . . Claim" means an Allowed Claim in the particular
Class described.
1.4 "Bankruptcy Code" means title 11 of the United States Code, 11 U.S.C.
(S)(S) 101-1330, as in effect on the date hereof.
<PAGE>
1.5 "Bankruptcy Court" means the Bankruptcy Court of the United States
District Court for the District of Delaware or such other court as may have
jurisdiction over these Chapter 11 Cases.
1.6 "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure and
the Official Bankruptcy Forms, as amended, the Federal Rules of Civil
Procedure, as amended, as applicable to these Chapter 11 Cases or proceedings
therein, and the Local Rules of the Bankruptcy Court, as applicable to these
Chapter 11 Cases or proceedings therein, as the case may be.
1.7 "BGAC" means Beverage Group Acquisition Corporation, a Delaware
corporation and a debtor and debtor-in-possession in Chapter 11 Case No. 96-
739 (HSB). BGAC will be merged and substantively consolidated with and into
Seven-Up/RC prior to Consummation. BGAC also means Reorganized Seven-Up/RC on
and after Consummation.
1.8 "BGAC Common Stock" means the common stock of BGAC with a par value of
$0.01 per share, authorized and outstanding as of the Petition Date.
1.9 "Business Day" means any day, excluding Saturdays, Sundays, and legal
holidays, on which commercial banks are open for business in New York, New
York.
1.10 "Cash" means legal tender of the United States or its equivalent.
1.11 "Chapter 11 Cases" means the Chapter 11 cases of Seven-Up/RC and BGAC
pending in the Bankruptcy Court.
1.12 "Claim" means a claim against Seven-Up/RC or BGAC, whether or not
asserted, as defined in section 101(5) of the Bankruptcy Code.
1.13 "Class" means a category of holders of Claims or Interests described in
Article II hereof.
1.14 "Class 4 New Common Stock" means 98% of the New Common Stock.
1.15 "Class 4 Proceeds" means all proceeds realized by Seven-Up/RC from the
Stock Purchase Agreement and the Consulting Agreement minus (i) federal, state
and Puerto Rico gains, income, transfer, repatriation, or similar taxes, (ii)
the commissions, legal fees, accounting fees, retention program payments to
employees of Seven-Up/RC of PR and all other costs applicable to the sale
transaction, (iii) outstanding principal, accrued but unpaid interest, and any
other fees or costs associated with the payment of all amounts owed by Seven-
Up/RC of PR to GE Capital of PR, and (iv) $10 million, which sum shall be
applied either (a) to reduce the outstanding pre-petition and post-petition
obligations owed by Seven-Up/RC to GE Capital in the manner provided, and
pursuant to, the DIP Facility or (b) as a credit against borrowings of
Reorganized Seven-Up/RC under the GE Capital Post-Consummation Facility.
1.16 "Class 5 Note" means the note to be distributed to the holder of the
Allowed Class 5 GE Capital Term Loan Secured Claim, a copy of which is
attached as Exhibit "D" hereto.
1.17 "Committee" means the creditors' committee appointed by the United
States Trustee on May 24, 1996, to represent unsecured creditors of Seven-
Up/RC, as such committee may be constituted from time to time.
1.18 "Confirmation" means confirmation of the Plan pursuant to section 1129
of the Bankruptcy Code.
1.19 "Confirmation Hearing" means the hearing on confirmation of the Plan
under section 1128 of the Bankruptcy Code.
1.20 "Confirmation Order" means the order, entered by the Bankruptcy Court,
confirming the Plan.
2
<PAGE>
1.21 "Consulting Agreement" means the Non-Competition and Consulting
Agreement, between Seven-up Acquisition Corp. and Seven-Up/RC.
1.22 "Consummation" means the Business Day on which all conditions to the
consummation of the Plan set forth in Section IX.B. hereof have been satisfied
or waived as provided in Section IX.C. hereof.
1.23 "Cure" means the distribution of Cash, or such other property as may be
agreed upon by the parties and ordered by the Bankruptcy Court, with respect
to the assumption of an executory contract or unexpired lease, pursuant to
section 365(b) of the Bankruptcy Code, in an amount equal to all unpaid
monetary obligations, without interest, or such other amount as may be agreed
upon by the parties, under such executory contract or unexpired lease, to the
extent such obligations are enforceable under the Bankruptcy Code and
applicable non-bankruptcy law.
1.24 "Debtors" means Seven-Up/RC and BGAC collectively, including Seven-
Up/RC and BGAC in their capacity as debtors-in-possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
1.25 "DIP Facility" means the Debtor-in-Possession Credit Agreement, dated
as of May 13, 1996, between Seven-Up/RC, as borrower, the lenders party
thereto, and GE Capital, as agent, as approved by the Bankruptcy Court
pursuant to the terms of the orders with respect thereto, dated May 13, 1996
and May 21, 1996, and as may be amended from time to time.
1.26 "DIP Facility Claim" means a claim pursuant to or arising under the DIP
Facility.
1.27 "Disallowed Claim" means (a) a Claim, or any portion thereof, that has
been disallowed by a Final Order or (b) a Claim as to which a proof of claim
bar date has been established by the Bankruptcy Code, Bankruptcy Rules or
Final Order of the Bankruptcy Court but no proof of claim has been filed or
deemed timely filed with the Bankruptcy Court pursuant to either the
Bankruptcy Code or any Final Order of the Bankruptcy Court.
1.28 "Disbursing Agent" means the Indenture Trustee, who shall make
distributions to holders of Allowed Class 4 Noteholders Claims.
1.29 "Disclosure Statement" means the written disclosure statement relating
to the Plan and approved by the Bankruptcy Court, as such disclosure statement
may be amended, modified, or supplemented from time to time.
1.30 "Disputed Claim" means a Claim, or any portion thereof, that is neither
an Allowed Claim nor a Disallowed Claim; provided, however, that, for purposes
of the Plan, any Claim for which no proof of claim bar date has been
established shall not be treated as a Disputed Claim unless Seven-Up/RC
disputes such claim in accordance with the provisions of section VII.G.
hereof.
1.31 "Distribution Date" means the date, occurring as soon as practicable
after Consummation but in no event more than 10 days after Consummation, upon
which the first distributions are made to holders of Allowed Class 4
Noteholders Claims and to holders of Allowed Class 5 GE Capital Term Loan
Secured Claims in accordance with Section III.C. hereof.
1.32 "Estates" means, collectively, the estates of Seven-Up/RC and BGAC in
the Chapter 11 Cases, pursuant to section 541 of the Bankruptcy Code.
1.33 "Face Amount" means (a) when used in reference to a Disputed or
Disallowed Claim, the full stated amount claimed by the holder of such Claim
in any proof of Claim timely filed with the Bankruptcy Court or otherwise
deemed timely filed by any Final Order of the Bankruptcy Court or other
applicable bankruptcy law, and (b) when used in reference to an Allowed Claim,
the allowed amount of such Claim.
3
<PAGE>
1.34 "Final Order" means an order or judgment, the operation or effect of
which has not been stayed, reversed, or amended and as to which order or
judgment (or any revision, modification, or amendment thereof) the time to
appeal or to seek review or rehearing has expired and as to which no appeal or
petition for review or rehearing was filed or, if filed, remains pending.
1.35 "GE Capital" means General Electric Capital Corporation, a corporation
organized under the banking laws of the State of New York.
1.36 "GE Capital Commitment Letter" means the commitment letter, dated May
21, 1996 issued by GE Capital, and attached to the Disclosure Statement as
Exhibit "2", or a commitment by another financial institution on the same, or
substantially similar, terms.
1.37 "GE Capital Credit Agreement" means the credit agreement, as amended,
dated as of February 1, 1994, between Seven-Up/RC, as borrower, the lenders
party thereto, and GE Capital, as agent.
1.38 "GE Capital Credit Agreement Collateral" means the property as
described in the Collateral Documents (as defined in the GE Capital Credit
Agreement), in which Seven-Up/RC granted GE Capital, as agent under the GE
Capital Credit Agreement, a lien or security interest to secure its
obligations under the GE Capital Credit Agreement to the extent that such
property remains encumbered by a valid, enforceable and perfected lien or
security interest of GE Capital, as agent under the GE Capital Credit
Agreement, that has neither been avoided nor is the subject of an action
pending on Consummation to avoid such lien or security interest under the
Bankruptcy Code or applicable non-bankruptcy law.
1.39 "GE Capital of PR" means General Electric Capital Corporation of Puerto
Rico, a Puerto Rico corporation.
1.40 "GE Capital of PR Collateral" means the property as described in the GE
Capital of PR Guaranty, in which Seven-Up/RC granted GE Capital of PR a lien
or security interest to secure its obligations under the GE Capital of PR
Guaranty to the extent that such property remains encumbered by a valid,
enforceable and perfected lien or security interest of GE Capital of PR that
has neither been avoided nor is the subject of an action pending as of
Consummation to avoid such lien or security interest under the Bankruptcy Code
or applicable non-bankruptcy law.
1.41 "GE Capital of PR Guaranty" means the Continuing Guaranty Agreement,
dated as of February 1, 1994, between Seven-Up/RC and GE Capital of PR,
pursuant to which Seven-Up/RC guaranteed the payment and performance of Seven-
Up/RC of PR's obligations under the credit agreement, dated as of February 1,
1994, between GE Capital of PR, and the lender parties thereto, and Seven-
Up/RC of PR.
1.42 "GE Capital Post-Consummation Facility" means the credit agreement and
related documents to be entered into by Seven-Up/RC and the lender parties
thereto, in accordance with the GE Capital Commitment Letter.
1.43 "GE Capital Term Loan" means the loan evidenced by the Promissory Note,
dated April 3, 1995, by Seven-Up/RC, as maker, in favor of GE Capital, as
payee, in the original principal amount of $693,166.18.
1.44 "GE Capital Term Loan Collateral" means the property as described in
the Master Security Agreement, made as of March 31, 1995, by and between
Seven-Up/RC, as debtor, and GE Capital, as secured party, the Collateral
Schedule dated April 3, 1996, and the Amendment No. 1 to Master Security
Agreement, dated March 31, 1995, between Seven-Up/RC, as debtor, and GE
Capital, as secured party, in which Seven-Up/RC granted GE Capital a lien or
security interest to secure its obligations under the GE Capital Term Loan to
the extent that such property remains encumbered by a valid, enforceable and
perfected lien or security interest of GE Capital that has neither been
avoided nor is the subject of an action pending as of Consummation to avoid
such lien or security interest under the Bankruptcy Code or applicable non-
bankruptcy law.
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1.45 "Indenture Trustee" means The Bank of New York, as indenture trustee
under the Senior Secured Notes Indenture, or any successor or replacement
trustee.
1.46 "Interest" means the rights of the holder and owner of issued and
outstanding shares of Old Common Stock or BGAC Common Stock, as the case may
be.
1.47 "Management Option" means the option agreement between Seven-Up/RC and
certain members of Seven-Up/RC management designated therein, pursuant to
which such designated members of management will be granted the right to
purchase 6% of the equity of Reorganized Seven-Up/RC, which form of option
agreement is attached as Exhibit "B" hereto.
1.48 "Merger Agreement" means the merger agreement between Seven-Up/RC and
BGAC, pursuant to which BGAC will merge into Seven-Up/RC immediately prior to
Consummation of the Plan, a copy of which is attached as Exhibit "E" hereto.
1.49 "New Common Stock" means the shares of common stock of Reorganized
Seven-Up/RC, par value $0.01 per share, to be authorized and issued by
Reorganized Seven-Up/RC on Consummation pursuant to this Plan. The New Common
Stock shall have such rights with respect to dividends, liquidation, voting,
and other matters as set forth in Reorganized Seven-Up/RC's amended and
restated certificate of incorporation, a copy of which is attached as Exhibit
"A" hereto and as provided under applicable law.
1.50 "Noteholders" means those Persons holding the Senior Secured Notes.
1.51 "Old Common Stock" means the common stock of Seven-Up/RC with a par
value of $0.01 per share, authorized and outstanding as of the Petition Date.
1.52 "Old Securities" means the Senior Secured Notes and the Old Common
Stock.
1.53 "Other Priority Claim" means a Claim entitled to priority pursuant to
section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim, an
Administrative Claim, or a DIP Facility Claim.
1.54 "Other Secured Claims" means a Secured Claim other than (i) a Secured
Claim in subclasses 2.01 GE Capital Working Capital Secured Claims or 2.02 GE
Capital of PR Secured Claims, (ii) a Class 4 Noteholders Claim, (iii) a Class
5 GE Capital Term Loan Secured Claim, and (iv) a DIP Facility Claim.
1.55 "Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, trust, estate, unincorporated organization,
or other entity.
1.56 "Petition Date" means May 13, 1996, the date on which Seven-Up/RC and
BGAC filed their petitions for reorganization commencing these Chapter 11
Cases.
1.57 "Plan" has the meaning ascribed to that term in the Introduction to
this Plan.
1.58 "Porta Pack" means Porta Pack Corporation, a Delaware corporation.
1.59 "Principal Agreements" means those franchise, license, and distribution
agreements with Cadbury Schweppes Inc., Royal Crown Cola Co., and Great Brands
of Europe, Inc.
1.60 "Priority Tax Claim" means a Claim entitled to priority pursuant to
section 507(a)(8) of the Bankruptcy Code.
1.61 "Professional Fees" means a Claim of a professional, retained in these
Chapter 11 Cases, or either Chapter 11 Case, pursuant to sections 327 and 1103
of the Bankruptcy Code or otherwise, for compensation or reimbursement of
costs and expenses relating to services incurred prior to and including the
date of Confirmation,
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when and to the extent any Claim described above is approved by a Final Order
entered pursuant to sections 330, 331, 503(b), or 1103 of the Bankruptcy Code.
1.62 "Pro Rata" means, at any time, the proportion that the Face Amount of a
Claim in a particular Class bears to the aggregate Face Amount of all Claims
(including Disputed Claims, but excluding Disallowed Claims) in such Class,
unless the Plan provides otherwise.
1.63 "Record Date" means the record date for purposes of making
distributions under the Plan on account of Allowed Claims, which date shall be
the fifth (5th) Business Day following Confirmation.
1.64 "Registration Rights Agreement" means the registration rights agreement
to be in a form reasonably acceptable to the Committee.
1.65 "Reinstated" or "Reinstatement" means leaving unaltered the legal,
equitable, and contractual rights to which a Claim entitles the holder of such
Claim so as to leave such Claim unimpaired in accordance with section 1124 of
the Bankruptcy Code, thereby entitling the holder of such Claim to, but not
more than, (a) reinstatement of the original maturity of the obligations on
which such Claim is based, and (b) payment, as provided herein, of an amount
of Cash consisting solely of the sum of (i) matured but unpaid principal
installments, without regard to any acceleration of maturity, accruing prior
to Consummation, (ii) accrued but unpaid interest as of the Petition Date, and
(iii) reasonable fees, expenses, and charges, to the extent such fees,
expenses, and charges are allowed under the Bankruptcy Code and are provided
for in the agreement or agreements on which such Claim is based; provided,
however, that any contractual right that does not pertain to the payment when
due of principal and interest on the obligation on which such Claim is based,
including, but not limited to, financial covenant ratios, negative pledge
covenants, covenants or restrictions on merger or consolidation, and
affirmative covenants regarding corporate existence prohibiting certain
transactions or actions contemplated by the Plan, or conditioning such
transactions or actions on certain factors, shall not be reinstated in order
to accomplish Reinstatement.
1.66 "Rejection Schedule" means the schedule of executory contracts and
unexpired leases designated by Seven-Up/RC to be rejected, as of Confirmation
of the Plan, pursuant to sections 365 and 1123(b)(2) of the Bankruptcy Code
and section VIII.A. of the Plan, which schedule will be filed with the
Bankruptcy Court on or before July 15, 1996.
1.67 "Reorganized Seven-Up/RC" means Seven-Up/RC as reorganized on and after
Consummation and after giving affect to the merger with, and substantive
consolidation into, BGAC.
1.68 "Secured Claim" means a Claim, secured by a valid, binding and
enforceable security interest in or lien upon property of the Estates to the
extent of the value as is established by the Bankruptcy Court, of such
interest or lien as determined by a Final Order of the Bankruptcy Court, after
notice to the Committee, pursuant to section 506 of the Bankruptcy Code or as
otherwise agreed upon in writing by Seven-Up/RC and the holder of such Claim
after notice to the Committee and subject to the approval of the Bankruptcy
Court.
1.69 "Senior Secured Notes" means the 11.5% Senior Secured Notes due 1999 of
Seven-Up/RC, issued and outstanding under the Senior Secured Notes Indenture.
1.70 "Senior Secured Notes Collateral" means the Old Common Stock and 66.5%
of the issued and outstanding capital stock of Seven-Up/RC of PR in which BGAC
and Seven-Up/RC granted the Noteholders liens and security interests to secure
BGAC's obligations under its guarantee of the Senior Secured Notes and Seven-
Up/RC's obligations under the Senior Secured Notes.
1.71 "Senior Secured Notes Indenture" means the indenture dated as of August
1, 1992, by and among Seven-Up/RC, BGAC and the Indenture Trustee, pursuant to
which the Senior Secured Notes were issued, as such indenture may heretofore
have been amended, modified, or supplemented.
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1.72 "Seven-Up/RC" means Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation, a wholly-owned subsidiary of BGAC
and a debtor and debtor-in-possession in Chapter 11 Case No. 96-738 (HSB).
Seven-Up/RC also means Reorganized Seven-Up/RC on and after Consummation.
1.73 "Seven-Up/RC of PR" means Seven-Up/RC Bottling Company of Puerto Rico,
Inc, the direct wholly-owned subsidiary of Seven-Up/RC.
1.74 "Stock Purchase Agreement" means the Stock Purchase and Sale Agreement,
dated May 3, 1996, among Seven-Up Acquisition Corporation, Seven-Up/RC and
Seven-Up/RC of PR, or such other agreement between Seven-Up/RC and the party
offering a higher and better offer.
1.75 "Unofficial Noteholders Committee" means the ad hoc unofficial
committee of holders of Senior Secured Notes, which was formed after the
August 1, 1995 suspension of interest payments on the Senior Secured Notes.
1.76 "Unsecured Claim" means a Claim against Seven-Up/RC that is not a DIP
Facility Claim, Administrative Claim, Priority Tax Claim, or Class 1 Other
Priority Claim, Class 2 Secured Claim, Class 4 Noteholders Claim, or Class 5
GE Capital Term Loan Secured Claim.
1.77 "Westinghouse" means Westinghouse Electric Corporation and its
affiliates.
1.78 "WB" means WB Bottling Corporation, a Delaware corporation and the
holder of 100% of the BGAC Common Stock.
1.79 "WB Warrant" means the warrant to be issued under the warrant agreement
by and between Seven-Up/RC and WB, pursuant to which WB will be granted the
right to purchase five percent (5%) of New Common Stock, which warrant
agreement is attached as Exhibit "C" hereto.
C. RULES OF INTERPRETATION
For purposes of the Plan (a) any reference in the Plan to a contract,
instrument, release, indenture, or other agreement or document being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions, (b) any reference in the Plan to an existing document or exhibit
filed or to be filed means such document or exhibit as it may have been or may
be amended, modified, or supplemented, (c) unless otherwise specified, all
references in the Plan to Sections, Articles, Schedules, and Exhibits are
references to Sections, Articles, Schedules, and Exhibits of or to the Plan,
(d) the words "herein" and "hereto" refer to the Plan in its entirety rather
than to a particular portion of the Plan, (e) any reference to the number or
percentage of shares of New Common Stock, unless otherwise specified, reflects
the actual distribution of such New Common Stock but does not reflect any
dilution due to the exercise of the Management Option or the WB Warrant, (f)
captions and headings to Articles and Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the
interpretation of the Plan, and (g) the rules of construction set forth in
section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall apply.
D. COMPUTATION OF TIME
In computing any period of time prescribed or allowed by the Plan, unless
otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a) shall
apply.
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ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
A. INTRODUCTION
All Claims and Interests, except DIP Facility Claims, Administrative Claims,
and Priority Tax Claims, are placed in the Classes set forth below. In
accordance with section 1123(a)(1) of the Bankruptcy Code, DIP Facility
Claims, Administrative Claims, and Priority Tax Claims, as described below,
have not been classified.
A Claim or Interest is placed in a particular Class only to the extent that
the Claim or Interest falls within the description of that Class, and is
classified in other Classes to the extent that any portion of the Claim or
Interest falls within the description of such other Classes.
A Claim or Interest is also placed in a particular Class for the purpose of
receiving distributions pursuant to the Plan only to the extent that such
Claim or Interest is an Allowed Claim in that Class and such Claim or Interest
has not been paid, released, or otherwise settled prior to Consummation.
B. UNCLASSIFIED CLAIMS (NOT ENTITLED TO VOTE ON THE PLAN)
1. DIP Facility Claims
2. Administrative Claims Against Seven-Up/RC
3. Priority Tax Claims Against Seven-Up/RC
C. CLASSES OF CLAIMS THAT ARE NOT IMPAIRED (NOT ENTITLED TO VOTE ON THE PLAN)
1. Class 1: Other Priority Claims
Class 1 consists of all Other Priority Claims against Seven-Up/RC.
2. Class 2: Secured Claims
Class 2 consists of separate subclasses for each Secured Claim secured by
a security interest in or lien upon property in which Seven-Up/RC's Estate has
an interest. Each subclass is deemed to be a separate class for all purposes
under the Bankruptcy Code.
Class 2.01: GE Capital Working Capital Secured Claims
Class 2.01 consists of all Claims against Seven-Up/RC, secured by and to
the extent of the value of the GE Capital Credit Agreement Collateral,
directly or indirectly arising from or under, or relating in any way to the GE
Capital Credit Agreement.
Class 2.02: GE Capital of PR Secured Claims
Class 2.02 consists of all Claims secured by and to the extent of the
value of the GE Capital of PR Collateral, directly or indirectly arising from
or under, or relating in any way to the GE Capital of PR Guaranty.
Class 2.03: Other Secured Claims
Class 2.03 consists of all Other Secured Claims against Seven-Up/RC.
3. Class 3: General Unsecured Claims
Class 3 consists of all Unsecured Claims against Seven-Up/RC.
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D. IMPAIRED CLASSES OF CLAIMS (ENTITLED TO VOTE ON THE PLAN)
1. Class 4: Noteholders Claims
Class 4 consists of all Claims directly or indirectly arising from or
under, or relating in any way to, the Senior Secured Notes Indenture, the
Senior Secured Notes or the Senior Secured Notes Collateral.
2. Class 5: GE Capital Term Loan Secured Claims
Class 5 consists of all Claims directly or indirectly arising from or
under, or relating in any way to, the GE Capital Term Loan or the GE Capital
Term Loan Collateral.
E. IMPAIRED CLASS OF INTEREST (ENTITLED TO VOTE ON THE PLAN BUT DEEMED TO HAVE
ACCEPTED PURSUANT TO ORDER OF BANKRUPTCY COURT)
1. Class 6: Old Common Stock Interest
Class 6 consists of all Interest arising from or in any way associated
with the Old Common Stock.
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS
A. UNCLASSIFIED CLAIMS
1. DIP Facility Claims
On the Distribution Date, the holder of all Claims pursuant to or arising
under the DIP Facility shall receive, in full satisfaction, settlement,
release and discharge of and in exchange for such Allowed DIP Facility Claim,
(a) Cash equal to the amount of such Allowed Claim and all the rights,
benefits, and protections provided it under the order or orders of the
Bankruptcy Court approving the DIP Facility or (b) such other treatment as to
which Seven-Up/RC and such holder shall have agreed upon in writing as
announced at or prior to the Confirmation Hearing.
2. Administrative Claims
On the Distribution Date, a holder of an Allowed Administrative Claim shall
receive in full satisfaction, settlement, release, and discharge of and in
exchange for such Allowed Administrative Claim (a) Cash equal to the unpaid
portion of such Allowed Administrative Claim or (b) such other treatment as to
which Seven-Up/RC and such holder shall have agreed upon in writing; provided,
however, that Allowed Administrative Claims with respect to liabilities
incurred by Seven-Up/RC in the ordinary course of its business during these
Chapter 11 Cases shall be paid in the ordinary course of business in
accordance with the terms and conditions of any agreements relating thereto.
3. Priority Tax Claims
On the Distribution Date, a holder of an Allowed Priority Tax Claim shall be
entitled to receive in full satisfaction, settlement, release, and discharge
of and in exchange for such Allowed Priority Tax Claim (a) deferred Cash
payments in an aggregate principal amount equal to the amount of such Allowed
Priority Tax Claim plus interest on the unpaid portion thereof at the rate of
five (5) percent per annum from Consummation through the date of payment
thereof or (b) such other treatment as to which Seven-Up/RC and such holder
shall have agreed upon in writing, with the approval of the Bankruptcy Court,
after notice to the Committee. If deferred Cash payments are made to a holder
of an Allowed Priority Tax Claim, payments of principal shall be made in
annual installments, each such installment amount being equal to ten (10)
percent of such Allowed Priority Tax Claim plus accrued and unpaid interest,
with the first payment to be due on the first anniversary of
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the Distribution Date, and subsequent payments to be due on each successive
anniversary of the first payment date or as soon thereafter as is practicable;
provided, however, that any installments remaining unpaid on the date that is
six years after the date of assessment of the tax that is the basis of the
Allowed Priority Tax Claim shall be paid on the first Business Day following
such date, together with any accrued and unpaid interest to the date of
payment; provided, further, that Seven-Up/RC reserves the right to pay any
Allowed Priority Tax Claim, or any remaining balance of such Allowed Priority
Tax Claim, in full at any time on or after Consummation without premium or
penalty.
B. CLASSES OF CLAIMS THAT ARE NOT IMPAIRED
1. Class 1: Other Priority Claims
On the Distribution Date, a holder of an Allowed Class 1 Other Priority
Claim shall receive, in the sole discretion of Seven-Up/RC, in full
satisfaction, settlement, release, and discharge of and in exchange for such
Allowed Class 1 Other Priority Claim (a) Cash equal to the amount of such
Allowed Class 1 Other Priority Claim or (b) such other treatment as to which
Seven-Up/RC and such holder shall have agreed upon in writing.
2. Class 2: Secured Claims
Each subclass of Class 2 Secured Claims shall be treated as a separate class
for purposes of implementing and consummating the Plan and each holder of an
Allowed Class 2 Secured Claim shall receive the treatment set forth below. To
the extent, if any, that the value of the collateral securing a Class 2
Secured Claim is less than the amount of such Allowed Claim, the difference
shall be treated as a Class 3 General Unsecured Claim.
Class 2.01: GE Capital Working Capital Secured Claims
On the Distribution Date, a holder of an Allowed Class 2.01 GE Capital
Working Capital Secured Claim shall, in the sole discretion of Seven-Up/RC,
and in full satisfaction, settlement, release, and discharge of and in
exchange for such Allowed Class 2.01 GE Capital Working Capital Secured Claim,
receive (a) Cash in an amount equal to such Allowed Class 2.01 GE Capital
Working Capital Claim or (b) such other treatment as Seven-Up/RC and such
holder shall have agreed in writing as announced at or prior to the
Confirmation Hearing.
Class 2.02: GE Capital of PR Secured Claims
On the Distribution Date, a holder of an Allowed Class 2.02 GE Capital of PR
Secured Claim shall, in the sole discretion of Seven-Up/RC, and in full
satisfaction, settlement, release, and discharge of and in exchange for such
Allowed Class 2.02 GE Capital of PR Secured Claim, receive (a) Cash in an
amount equal to such Allowed Class 2.02 GE Capital of PR Secured Claim or (b)
such other treatment as Seven-Up/RC and such holder shall have agreed in
writing as announced at or prior to the Confirmation Hearing.
Class 2.03: Other Secured Claims
On the Distribution Date, a holder of an Allowed Class 2.03 Other Secured
Claim shall, in the sole discretion of Seven-Up/RC, and in full satisfaction,
settlement, release, and discharge of and in exchange for such Allowed Class
2.03 Other Secured Claim, (a) receive Cash in an amount equal to such Allowed
Class 2.03 Other Secured Claim, (b) have its Allowed Class 2.03 Other Secured
Claim Reinstated, (c) have the collateral, to the extent it secures the
payment obligations of Seven-Up/RC or BGAC to such holder, returned to it or
(d) receive such other treatment as Seven-Up/RC and such holder shall have
agreed in writing as announced at or prior to the Confirmation Hearing;
provided, however, that notwithstanding any provision of this Plan to the
contrary, nothing herein shall affect the right or ability of Seven-Up/RC to
avoid any purported lien or security interest.
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3. Class 3: General Unsecured Claims
A holder of an Allowed Class 3 General Unsecured Claim, shall be paid in
full in the ordinary course of business. Such Allowed Class 3 General
Unsecured Claim will become an obligation of Reorganized Seven-Up/RC, and, if
applicable, be paid in accordance with the terms of any invoice or agreement
relating to such Allowed Class 3 General Unsecured Claim.
C. IMPAIRED CLASSES OF CLAIMS
1. Class 4: Noteholders Claims
On the Distribution Date, a holder of an Allowed Class 4 Noteholders Claim,
in full satisfaction, settlement, release, and discharge of, and in exchange
for, such Allowed Class 4 Noteholders Claim, shall receive, its Pro Rata share
of (x) Class 4 New Common Stock and (y) Class 4 Proceeds. For all purposes
associated herewith, including voting and distributions, the Class 4
Noteholders Claims are hereby allowed in the aggregate principal amount of
$140,000,000 plus accrued and unpaid interest through and including the
Petition Date at the rate provided for in the Senior Secured Notes Indenture.
Each Noteholder may apply the distributions received hereunder to either
unpaid principal or accrued and unpaid interest, at the discretion of such
Noteholder. On the Distribution Date, Seven-Up/RC shall pay the reasonable and
actual costs and expenses of the Unofficial Noteholders Committee, including
without limitation the fees of the legal and financial advisors to the
Unofficial Noteholders Committee.
Notwithstanding the foregoing or anything in the Plan to the contrary, in
the event that Class 4 Proceeds are less than $55 million but more than $54
million, Seven-Up/RC shall make an additional distribution to the Disbursing
Agent in the amount by which $55 million exceeds the Class 4 Proceeds. In the
event that Class 4 Proceeds are more than $55 million but less than $56
million, Class 4 Proceeds shall be deemed to be $55 million and the difference
between the actual amount of Class 4 Proceeds and $55 million shall be
retained by Seven-Up/RC to pay its indebtedness under the DIP Facility or the
GE Post-Consummation Facility, as the case may be.
2. Class 5: GE Capital Term Loan Secured Claims
On the Distribution Date, a holder of an Allowed Class 5 GE Capital Term
Loan Secured Claim, in full satisfaction, settlement, release, and discharge
of, and in exchange for, such Allowed Class 5 GE Capital Term Loan Secured
Claims, shall receive either (i) Cash equal to 100% of the outstanding and
unpaid principal amount of the GE Capital Term Loan, accrued and unpaid
interest under the GE Capital Term Loan (including post-petition interest to
the extent allowable under the Bankruptcy Code), and the fees and costs
provided for under the terms of the GE Capital Term Loan or (ii) the Class 5
Note.
D. IMPAIRED CLASS OF INTEREST (ENTITLED TO VOTE ON THE PLAN BUT DEEMED TO HAVE
ACCEPTED PURSUANT TO ORDER OF BANKRUPTCY COURT)
1. Class 6: Old Common Stock Interest
WB, as holder on or after Consummation of the Allowed Class 6 Old Common
Stock Interest, shall receive the WB Warrant and 2% of the New Common Stock on
account of such Class 6 Old Common Stock Interest.
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ARTICLE IV
MEANS FOR IMPLEMENTATION OF THE PLAN
A. SUBSTANTIVE CONSOLIDATION AND CONTINUED CORPORATE EXISTENCE OF SEVEN-UP/RC
On Consummation, BGAC will be substantively consolidated into, and merged
(pursuant to the Merger Agreement) with, Seven-Up/RC, with Seven-Up/RC as the
surviving corporation. For purposes of the Plan, all Claims against BGAC shall
be deemed to be Claims against Seven-Up/RC and all property of BGAC shall be
deemed to be property of Seven-Up/RC. Seven-Up/RC will continue to exist as a
separate corporate entity in accordance with the laws of Delaware and pursuant
to the certificate of incorporation and by-laws in effect prior to
Consummation, except to the extent such certificate of incorporation and by-
laws are amended and restated as provided for by this Plan.
Both the amended and restated certificate of incorporation and by-laws shall
include, among other things, pursuant to section 1123(a)(6) of the Bankruptcy
Code, a provision prohibiting the issuance of nonvoting equity securities. The
amended and restated certificate of incorporation and by-laws of Reorganized
Seven-Up/RC is attached as Exhibit "A" hereto.
B. DIRECTORS AND OFFICERS
The officers of Seven-Up/RC before Consummation shall serve as the officers
of Reorganized Seven-Up/RC after Consummation. On Consummation, the current
directors of Seven-Up/RC shall resign and be replaced by the directors whose
names will be listed on a schedule that is filed with the Bankruptcy Court on
or before July 15, 1996. These directors shall serve as the initial board of
directors of Reorganized Seven-Up/RC. Any right or obligation of Seven-Up/RC
pursuant to its certificate of incorporation, by-laws, applicable state law or
specific agreement to indemnify its shareholders or its officers, directors or
employees who either (i) served Seven-Up/RC in one or more such capacities as
of March 15, 1996 or (ii) have ceased to serve because of death or physical or
mental disability, with respect to or arising out of events that occurred
prior to the Petition Date, shall be an obligation of Reorganized Seven-Up/RC.
C. OPERATIONS OF DEBTORS BETWEEN CONFIRMATION AND CONSUMMATION
The Debtors shall continue to operate as debtors-in-possession, subject to
the supervision of the Bankruptcy Court, pursuant to the Bankruptcy Code
during the period from Confirmation through and until Consummation, and any
obligation incurred by the Debtors during that period shall constitute an
Administrative Claim; provided, however, that nothing herein shall preclude
the Debtors from taking any step they deem necessary or desirable to prepare
for and effect the Consummation of the Plan.
D. EXCLUSIVITY PERIOD
The Debtors shall retain the exclusive right to amend the Plan and solicit
acceptances thereof until Consummation.
E. TERM OF INJUNCTIONS OR STAYS
Unless otherwise provided herein or in the Confirmation Order, all
injunctions or stays provided for in the Chapter 11 Cases under Section 105 or
362 of the Bankruptcy Code, or otherwise, and extant immediately prior to
Confirmation shall remain in full force and effect until Consummation.
F. REVESTING OF ASSETS
Pursuant to section 1141(b) of the Bankruptcy Code, the property of the
Estates shall revest in Seven-Up/RC on Consummation of the Plan. Thereafter,
Reorganized Seven-Up/RC may operate its business and may use, acquire, and
dispose of property free of any restrictions of the Bankruptcy Code, the
Bankruptcy Rules, and the
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Bankruptcy Court. As of Consummation, all property of Seven-Up/RC and BGAC
shall be free and clear of all Claims and Interests, including liens and
security interests, except as specifically provided in the Plan or in the
Confirmation Order. Without limiting the foregoing, Seven-Up/RC may, without
application to or approval by the Bankruptcy Court, pay professional fees and
expenses that it may incur after Confirmation.
G. CREDITORS' COMMITTEE
The Committee shall cease to exist after Consummation.
H. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS
The Chairman of the Board of Directors, the President, the Chief Operating
Officer, the Chief Financial Officer, or any other appropriate officer of the
Debtors, shall be, and hereby are, authorized to execute, deliver, file, or
record such contracts, instruments, releases, indentures, certificates, and
other agreements or documents, and take such actions as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of the
Plan. The Secretary or Assistant Secretary of the Debtors shall be authorized
to certify or attest to any of the foregoing actions, if necessary.
I. PROCEDURE FOR MAKING DISTRIBUTIONS TO HOLDERS OF NOTEHOLDERS CLAIMS
Each holder of an Allowed Class 4 Noteholders Claim shall tender its Senior
Secured Notes to the Indenture Trustee in accordance with written instructions
to be provided to such holders by the Indenture Trustee as promptly as
possible following Consummation. Such instructions shall specify that delivery
of such Senior Secured Notes will be effected, and the risk of loss and title
thereto will pass, only upon the proper delivery of such Senior Secured Notes
with a letter of transmittal in accordance with such instructions. All
surrendered Senior Secured Notes shall be marked as canceled and delivered by
the Indenture Trustee to Reorganized Seven-Up/RC. All distributions of Class 4
New Common Stock or Class 4 Proceeds on account of Allowed Class 4 Noteholders
Claims shall be made by the Indenture Trustee, who shall have sole
responsibility for distributing shares or Cash to holders of Allowed Class 4
Noteholders Claims and for calculating the amount of shares or Cash to be
distributed to such holders out of the shares and Cash distributed to the
Indenture Trustee. It shall be a condition to the making of any distribution
of shares and Cash to any holder of an Allowed Class 4 Noteholders Claim that
such holder shall have tendered to the Indenture Trustee such holder's Senior
Secured Notes or, in the event that any such Senior Secured Notes are lost,
stolen, mutilated or destroyed, evidence satisfactory to the Indenture Trustee
of the loss, mutilation or destruction of such Senior Secured Notes or, at the
Indenture Trustee's option, an affidavit of such holder in accordance with
Article 8 of the Uniform Commercial Code. Distributions under this Plan to any
Person in respect of Senior Secured Notes shall not be made if such Person has
not complied with the provisions of the foregoing sentence within two (2)
years following Consummation, and any such Person shall be deemed to have no
further Claim and shall not participate in any distribution under this Plan.
J. FRACTIONAL SHARES
Notwithstanding any other provision of the Plan to the contrary, no
fractional shares shall be issued pursuant to the Plan. Whenever any payment
of a fraction of a share under the Plan would otherwise be required, the
actual distribution made shall reflect a rounding of such fraction to the
nearest whole share (up or down), with half shares or less being rounded down
and fractions in excess of half of a share being rounded up.
K. FRACTIONAL CENTS
Notwithstanding any other provision of the Plan to the contrary, no payment
of fractional cents shall be made pursuant to the Plan. Whenever any payment
of a fraction of a cent under the Plan would otherwise be required, the actual
distribution made shall reflect a rounding of such fraction to the nearest
whole penny (up or down), with half pennies or less being rounded down and
fractions in excess of half of a penny being rounded up.
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L. DE MINIMIS DISTRIBUTIONS
No Cash distribution of less than twenty-five dollars ($25.00) shall be made
by the Indenture Trustee or Seven-Up/RC in respect of any Allowed Claim unless
a request therefor is made in writing to the Indenture Trustee.
M. MANAGEMENT OPTION
Upon Consummation of the Plan, certain members of management of Seven-Up/RC
shall be granted the right, subject to the conditions contained in the
Management Option, to purchase up to 6% of New Common Stock at a purchase
price per share equal to the Exercise Price (as defined in the Management
Option).
ARTICLE V
ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY IMPAIRED CLASSES OF CLAIMS
A. CLASSES ENTITLED TO VOTE
Each impaired Class that will receive or retain property or any interest in
property under the Plan shall be entitled to vote to accept or reject the
Plan. Any Class of Claims that is not impaired shall be deemed to have
accepted the Plan and shall not be entitled to vote to accept or reject the
Plan.
B. CLASS ACCEPTANCE REQUIREMENT
Under section 1126(c) of the Bankruptcy Code, an impaired Class of Claims
has accepted the Plan if the holders of at least two-thirds ( 2/3) in dollar
amount and more than one-half ( 1/2) in number of the Allowed Claims of such
Class who have voted on the Plan, have voted to accept the Plan.
C. CRAMDOWN
The Debtors reserve their right to request Confirmation of the Plan, as it
may be modified from time to time, under section 1129(b) of the Bankruptcy
Code.
ARTICLE VI
PRESERVATION OF LITIGATION CLAIMS
A. RETAINED LITIGATION CLAIMS
In accordance with section 1123(b)(3) of the Bankruptcy Code, and except as
otherwise provided herein or in the Confirmation Order, Reorganized Seven-Up
shall retain and may expressly, in its sole discretion, enforce, sue on,
settle, or compromise (or decline to do any of the foregoing) all claims,
rights of action, suits, and proceedings, whether in law or in equity, whether
known or unknown, that Seven-Up/RC, BGAC, or their Estates may hold against
any Person. Reorganized Seven-Up/RC or any of its successors may pursue such
retained litigation claims in accordance with the best interests of
Reorganized Seven-Up/RC or its successors who hold such rights of action.
B. PRESERVATION OF INSURANCE
The Debtors' discharge and release from all Claims as provided herein,
except as necessary to be consistent with the Plan, shall not diminish or
impair the enforceability of any insurance policy that may cover Claims
against Seven-Up/RC, BGAC or any other Person.
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ARTICLE VII
PROVISIONS GOVERNING DISTRIBUTIONS
A. DATE OF DISTRIBUTIONS
Distributions under the Plan shall be made on the Distribution Date, except
as otherwise provided for herein or ordered by the Bankruptcy Court.
B. INTEREST ON CLAIMS
Except (i) as specifically provided for in the Plan or the Confirmation
Order or (ii) with respect to an Allowed DIP Facility Claim, an Allowed Class
2.01 GE Capital Working Capital Secured Claim, an Allowed Class 2.02 GE
Capital of PR Secured Claim, or an Allowed Class 5 GE Capital Term Loan Claim,
interest shall not accrue on Claims, and no holder of a Claim shall be
entitled to interest accruing on or after the Petition Date on any Claim.
Interest shall not accrue or be paid upon any Disputed Claim in respect of the
period from the Petition Date to the date a final distribution is made thereon
if and after such Disputed Claim becomes an Allowed Claim; provided, however,
that, if Seven-Up/RC objects to the allowance of a Claim after the
Distribution Date and such Claim becomes an Allowed Claim, Seven-Up/RC shall
pay interest on such Allowed Claim from the date of the objection through the
date of the initial distribution on such Allowed Claim at a rate of 6% per
annum.
C. DISBURSING AGENT
As to all distributions to holders of Allowed Claims in classes other than
Class 4 Noteholders Claims, Seven-Up/RC shall make all distributions required
under this Plan. The Indenture Trustee shall make all distributions to holders
of Allowed Class 4 Noteholders Claims. Distributions to holders of Allowed
Class 4 Noteholders Claims shall be deemed delivered and accepted when Class 4
Proceeds and Class 4 New Common Stock are delivered to the Indenture Trustee.
D. MEANS OF CASH PAYMENT
Cash payments made pursuant to this Plan shall be in U.S. funds, by the
means agreed to by the payor and the payee, including by check or wire
transfer, or, in the absence of an agreement, such commercially reasonable
manner as the payor shall determine in its sole discretion.
E. DELIVERY OF DISTRIBUTIONS
Distributions to holders of Allowed Claims shall be made by the Indenture
Trustee or Seven-Up/RC, as the case may be, (a) at the addresses set forth on
the list of record holders of the Senior Secured Notes as of the Record Date
or (b) at the addresses reflected in Seven-Up/RC's books and records.
If any holder's distribution is returned to the Indenture Trustee, Seven-
Up/RC, or such other agent as Seven-Up/RC may designate, as the case may be,
no further distributions to such holder shall be made unless and until the
Indenture Trustee, Seven-Up/RC, or such other agent as Seven-Up/RC may
designate, as the case may be, is notified of such holder's then current
address, at which time all missed distributions shall be made to such holder
without interest; provided, however, that to the extent Seven-Up/RC or the
Indenture Trustee earns interest on the Class 4 Proceeds, such interest less
any applicable bank charges shall be distributed Pro Rata to the holders of
Allowed Class 4 Noteholders Claims. Amounts in respect of undeliverable
distributions made through the Indenture Trustee, Seven-Up/RC, or such other
agent as Seven-Up/RC may designate, as the case may be, shall be returned to
Reorganized Seven-Up/RC until such distributions are claimed. All claims for
undeliverable distributions shall be made on or before the fifth (5th)
anniversary of Consummation. After such date, all unclaimed property shall
revert to Reorganized Seven-Up/RC and the claim of any holder or successor to
such holder with respect to such property shall be discharged and forever
barred.
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F. CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS
Upon Consummation, except as otherwise provided for herein and except with
respect to the obligations, if any, arising under the DIP Facility that
survive Consummation of the Plan, (i) the Old Securities and any other note,
bond, indenture, or other instrument or document evidencing or creating any
indebtedness, equity interest or obligation of Seven-Up/RC, except such notes
or other instruments evidencing indebtedness or obligations of Seven-Up/RC
that are Reinstated under the Plan, shall be canceled, and (ii) the
obligations of Seven-Up/RC under any agreements, indentures, or certificates
of designations governing the Old Securities and any other note, bond,
indenture, or other instrument or document evidencing or creating any
indebtedness, equity interest or obligation of Seven-Up/RC, except such notes
or other instruments evidencing indebtedness or obligations of Seven-Up/RC
that are Reinstated under the Plan, as the case may be, shall be discharged;
provided, however, that each indenture or other agreement that governs the
rights of the holder of a Claim and that is administered by the Indenture
Trustee shall continue in effect solely for the purposes of (i) allowing the
Indenture Trustee to make the distributions to be made on account of such
Claims under the Plan as provided in Article VII hereof and (ii) governing the
agency relationship between the Indenture Trustee and the Noteholders, which
provisions shall remain in effect according to the terms of the Senior Secured
Notes Indenture; provided, further, that the provisions of this paragraph
shall not affect the discharge of the Debtors' liabilities under the
Bankruptcy Code and the Confirmation Order or result in any expense or
liability to Reorganized Seven-Up/RC. Reorganized Seven-Up/RC shall not have
any obligations to the Indenture Trustee for any fees, costs, or expenses,
except as expressly provided in this Section VII.F.; provided, further, that
Reorganized Seven-Up/RC shall be liable for the payment of the reasonable fees
and expenses of the Indenture Trustee under the Senior Secured Notes,
including attorneys fees outstanding on the Petition Date and amounts incurred
in connection with this Plan and in making the distributions to holders of
Allowed Class 4 Noteholders Claims in accordance with the provisions hereof,
in an aggregate amount not to exceed $75,000.
G. RESOLUTION OF CLAIMS
Any Claim, other than a Claim for Professional Fees, that is not an Allowed
Claim shall be determined, resolved, or adjudicated in the manner in which
such Claim would have been determined, resolved or adjudicated if this Chapter
11 case had not been commenced, unless, at Seven-Up/RC's election, the amount,
validity or priority of such Claim is determined, resolved, or adjudicated by
the Bankruptcy Court. Seven-Up/RC may file an objection with the Bankruptcy
Court to the allowance of any Claim (whether or not a proof of claim has been
filed) at any time on or before November 1, 1996, unless such time period is
extended by order of the Bankruptcy Court.
H. ORDINARY COURSE LIABILITIES
Subject to the terms hereof, holders of Claims against Seven-Up/RC based on
liabilities incurred before or after the Petition Date in the ordinary course
of Seven-Up/RC's business shall not be required to file any request for
payment of such Claims. Such Claims shall be assumed and paid by Seven-Up/RC
in accordance with the terms of this Plan, without any further action by the
holders of such Claims.
I. RECORD DATE FOR DISTRIBUTIONS TO HOLDERS OF SENIOR SECURED NOTES
At the close of business on the Record Date, the transfer ledgers of the
Indenture Trustee shall be closed, and there shall be no further changes in
the record holders of the Senior Secured Notes. Reorganized Seven-Up/RC and
the Indenture Trustee shall have no obligation to recognize any transfer of
such Senior Secured Notes occurring after the Record Date. Reorganized Seven-
Up/RC and the Indenture Trustee shall be entitled instead to recognize and
deal for all purposes hereunder with only those record holders stated on the
transfer ledgers as of the close of business on the Record Date.
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ARTICLE VIII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
All executory contracts and unexpired leases of Seven-Up/RC specifically
listed on the Rejection Schedule shall be deemed automatically rejected upon
Confirmation. The Confirmation Order shall constitute an order of the
Bankruptcy Court approving such rejections, pursuant to section 365(a) of the
Bankruptcy Code.
B. ASSUMED IF NOT REJECTED
All executory contracts and unexpired leases of Seven-Up/RC, including any
and all franchise, distribution, licensing, or cooperative association
agreements, not specifically listed on the Rejection Schedule shall be deemed
to be automatically assumed as of Confirmation. The Confirmation Order shall
constitute an order of the Bankruptcy Court approving such assumptions,
pursuant to section 365(a) of the Bankruptcy Code, as of Confirmation.
Each assumed executory contract and unexpired lease of Seven-Up/RC that
relates to the use or occupancy of real property shall include (a) all
modifications, amendments, supplements, restatements, or other agreements made
directly or indirectly by any agreement, instrument, or other document that in
any manner affects such executory contract or unexpired lease, and (b) all
executory contracts or unexpired leases appurtenant to the premises, including
all easements, licenses, permits, rights, privileges, immunities, options,
rights of first refusal, powers, uses, usufructs, reciprocal easement
agreements, vaults, tunnel or bridge agreements, or franchises, and any other
interests in real estate or rights in rem related to such premises, unless any
of the foregoing agreements has been rejected pursuant to a Final Order of the
Bankruptcy Court or is listed on the Rejection Schedule.
All executory contracts and unexpired leases of BGAC, if any, shall be
deemed automatically rejected as of Confirmation.
C. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Any monetary amounts by which each executory contract and unexpired lease to
be assumed under the Plan may be in default shall be satisfied by Cure, under
section 365(b)(1) of the Bankruptcy Code, at the option of Seven-Up/RC or the
assignee of Seven-Up/RC assuming such contract or lease. In the event of a
dispute regarding (i) the nature or the amount of any Cure, (ii) the ability
of Reorganized Seven-Up/RC or any assignee to provide "adequate assurance of
future performance" (within the meaning of section 365 of the Bankruptcy Code)
under the contract or lease to be assumed, or (iii) any other matter
pertaining to assumption, Cure shall occur following the entry of a Final
Order resolving the dispute and approving the assumption and, as the case may
be, assignment.
D. BAR DATE FOR REJECTION DAMAGES
If the rejection by Seven-Up/RC or BGAC, pursuant to the Plan, of an
executory contract or unexpired lease results in a Claim, then such Claim
shall be barred forever and shall not be enforceable against Seven-Up/RC or
Reorganized Seven-Up/RC, or its property unless a proof of claim is filed with
the clerk of the Bankruptcy Court and served upon counsel to Seven-Up/RC and
counsel to the Committee within thirty (30) days after service of a notice
that the executory contract or unexpired lease has been rejected.
E. COMPENSATION AND BENEFIT PROGRAMS
All employment and severance agreements, and all employee compensation and
benefit programs of Seven-Up/RC, including agreements and programs subject to
sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or
after the Petition Date and not since terminated, shall be deemed to be, and
shall be treated as though they are, executory contracts that are assumed
under this Plan, but only to the extent that rights under
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such agreements and programs are held by Seven-Up/RC or Persons who are Seven-
Up/RC employees as of Confirmation, and Seven-Up/RC's obligations under such
agreements and programs to persons who are employees of Seven-Up/RC on
Confirmation shall survive Confirmation of this Plan, except for (i) such
executory contracts or plans specifically rejected pursuant to the Plan (to
the extent such rejection does not violate sections 1114 and 1129(a)(13) of
the Bankruptcy Code) and (ii) such executory contracts or plans as have
previously been rejected, pursuant to a Final Order, or specifically waived by
the beneficiaries of such plans or contracts or programs.
F. ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO REORGANIZED
SEVEN-UP/RC
On Consummation, each of the executory contracts and unexpired leases that
is being, or previously has been, assumed shall be assigned to Reorganized
Seven-Up/RC. The Confirmation Order shall approve such assignments pursuant to
section 365 of the Bankruptcy Code.
ARTICLE IX
CONDITIONS PRECEDENT
A. CONDITIONS TO CONFIRMATION
The following are conditions precedent to Confirmation of the Plan that must
be satisfied unless waived in accordance with Section IX.C. of the Plan:
1. The Confirmation Order shall be in form and substance reasonably
acceptable to Seven-Up/RC, the Committee, and GE Capital.
2. The GE Capital Commitment Letter shall be in effect and shall not have
been terminated.
3. The Bankruptcy Court shall have entered an order approving the Stock
Purchase Agreement, which agreement shall have been executed and
delivered, shall be in effect and shall not have been terminated.
B. CONDITIONS TO CONSUMMATION
The following are conditions precedent to the occurrence of Consummation,
each of which must be satisfied unless waived in accordance with Section IX.C.
of the Plan:
1. Confirmation Order shall have been entered.
2. The Confirmation Order shall have become a Final Order and provide,
among other things, that:
a.The provisions of the Confirmation Order are nonseverable and mutually
dependent.
b. All executory contracts or unexpired leases assumed by Seven-Up/RC
during these Chapter 11 Cases or under the Plan shall be assigned and
transferred to, and remain in full force and effect for the benefit
of, Reorganized Seven-Up/RC notwithstanding any provision in such
contract or lease (including those described in sections 365(b)(2) and
(f) of the Bankruptcy Code) that prohibits such assignment or transfer
or that enables or requires termination of such contract or lease.
c. The transfers of property by Seven-Up/RC and, to the extent
applicable, BGAC (a) to Reorganized Seven-Up/RC (i) are or shall be
legal, valid, and effective transfers of property, (ii) vest or shall
vest Reorganized Seven-Up/RC with good title to such property free and
clear of all liens, charges, Claims, encumbrances, or interests,
except as expressly provided in the Plan or Confirmation Order, (iii)
do not and shall not constitute avoidable transfers under the
Bankruptcy Code or under applicable bankruptcy or non-bankruptcy law,
and (iv) do not and shall not subject Reorganized Seven-Up/RC to any
liability by reason of such transfer under the Bankruptcy Code or
under applicable non-bankruptcy law, including, without limitation,
any laws affecting successor or transferee liability, and
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(b) to holders of Claims under the Plan are for good consideration and
value and are in the ordinary course of Seven-Up/RC's business.
d. Except as expressly provided in the Plan, Seven-Up/RC and BGAC are
discharged effective upon Confirmation from any "debt" (as that term
is defined in section 101(12) of the Bankruptcy Code), and the
Debtors' liability in respect thereof is extinguished completely,
whether reduced to judgment or not, liquidated or unliquidated,
contingent or noncontingent, asserted or unasserted, fixed or unfixed,
matured or unmatured, disputed or undisputed, legal or equitable, or
known or unknown, or that arose from any agreement of Seven-Up/RC or
BGAC that has either been assumed or rejected in these Chapter 11
Cases or pursuant to the Plan, or obligation of Seven-Up/RC or BGAC
incurred before Confirmation, or from any conduct of Seven-Up/RC or
BGAC prior to Confirmation, or that otherwise arose before
Confirmation, including, without limitation, all interest, if any, on
any such debts, whether such interest accrued before or after the
Petition Date.
e. The Plan does not provide for the liquidation of all or substantially
all of the property of Seven-Up/RC or BGAC and its Confirmation is not
likely to be followed by the liquidation of Reorganized Seven-Up/RC or
the need for further financial reorganization.
f. Any objection, not previously withdrawn or settled, to the adequacy of
the information contained in the Disclosure Statement is overruled,
and the information contained in the Disclosure Statement was adequate
for the purpose of soliciting ballots for Confirmation of the Plan.
g. The substantive consolidation of BGAC with and into Seven-Up/RC is
approved and authorized, and such substantive consolidation is in the
best interests of the Estates.
3. The Bankruptcy Court shall have entered one or more orders (which may be
the Confirmation Order), which have become Final Orders authorizing the
assumption and assignment of all unexpired leases and executory
contracts, including the Principal Agreements, to Reorganized Seven-
Up/RC.
4. No request for revocation of the Confirmation Order under section 1144
of the Bankruptcy Code shall have been made, or, if made, shall remain
pending.
5. The sale of the stock of Seven-Up/RC of PR, pursuant to the Stock
Purchase Agreement or substantially similar agreement, and the
Consulting Agreement shall have closed.
6. The documents implementing the GE Capital Post-Consummation Facility
shall have been executed and delivered to Seven-Up/RC and the conditions
to funding thereunder, except for those conditions relating to
Consummation of the Plan and payments to be made in the Chapter 11
Cases, shall have been satisfied or waived.
7. Seven-Up/RC's amended and restated certificate of incorporation shall
have been filed with the secretary of state of Delaware and shall be in
effect.
8. Seven-Up/RC shall have adopted its amended and restated by-laws and such
by-laws shall be in effect.
9. Seven-Up/RC shall have reserved (a) the Class 4 Proceeds for payment to
holders of Allowed Class 4 Noteholders Claims and (b) the funds (if any)
that must be distributed to the Disbursing Agent pursuant to the second
paragraph of Section III.C.1. hereof.
10. Seven-Up/RC shall have reserved $10 million of the gross proceeds
received from the Stock Purchase Agreement and the Consulting Agreement
for payment to GE Capital either to satisfy the outstanding obligations
of Seven-Up/RC under the DIP Facility, in accordance with the terms of
the DIP Facility, or as a credit against borrowings of Reorganized
Seven-Up/RC under the GE Capital Post-Consummation Facility.
11. The Merger Agreement shall have been executed, delivered and filed with
the secretary of state of Delaware.
12. The Registration Rights Agreement shall have been executed and
delivered.
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C. WAIVER OF CONDITIONS TO CONFIRMATION AND CONSUMMATION
The conditions set forth in Sections IX.A. and IX.B.2. through B.4. of the
Plan may be waived by Seven-Up/RC without notice or a hearing; provided,
however, that Seven-Up/RC shall provide the Committee and GE Capital with
notice of any waiver under this Section IX.C. The conditions set forth in
Sections IX.B.1. and IX.B.5. through B.12. may not be waived by Seven-Up/RC
and BGAC.
ARTICLE X
MODIFICATIONS AND AMENDMENTS
A. MODIFICATION OF THE PLAN
The Debtors may alter, amend, or modify the Plan or any Exhibits thereto
under section 1127(a) of the Bankruptcy Code at any time prior to
Confirmation. The Debtors shall provide parties-in-interest with notice of
such amendments or modifications as may be required by the Bankruptcy Rules or
order of the Bankruptcy Court and shall, in any event, provide such notice to
counsel for the Committee and GE Capital.
After Confirmation and prior to substantial consummation of the Plan as
defined in section 1101(2) of the Bankruptcy Code, Seven-Up/RC may, under
section 1127(b) of the Bankruptcy Code, institute proceedings in the
Bankruptcy Court to remedy any defect or omission or to reconcile any
inconsistencies in the Plan, the disclosure statement approved with respect to
the Plan, or the Confirmation Order, and such matters as may be necessary to
carry out the purpose and effect of the Plan so long as such proceedings do
not adversely affect the treatment of holders of Claims or holders of
Interests under the Plan; provided, however, that prior notice of such
proceedings shall be served in accordance with the Bankruptcy Rules or order
of the Bankruptcy Court.
ARTICLE XI
RETENTION OF JURISDICTION
A. JURISDICTION OF BANKRUPTCY COURT
The Bankruptcy Court shall have exclusive jurisdiction, under sections
105(a) and 1142 of the Bankruptcy Code, of all matters arising out of, and
related to, these Chapter 11 Cases and the Plan including, among other things,
the following matters:
1. To hear and determine any and all pending or future objections to the
allowance of Claims relating to events or transactions occurring on or
prior to Consummation;
2. To consider and rule on the compromise and settlement of any Claim
against or cause of action on behalf of Seven-Up/RC or its Estate;
3. To hear and determine all pending or future controversies, suits, and
disputes that may arise in connection with the interpretation of the
Plan or any documents intended to implement the provisions of the Plan;
4. To hear and determine any and all applications for the allowance of
Professional Fees;
5. To hear and determine, if necessary, or to estimate or liquidate any and
all claims arising from the rejection of executory contracts or
unexpired leases pursuant to the Plan or otherwise;
6. To consider any modifications of the Plan permitted by the Bankruptcy
Code;
7. To correct any defect, cure any omission or reconcile any inconsistency
in the Plan, including any exhibit thereto, or in any order of the
Bankruptcy Court, including the Confirmation Order, as may be necessary
to carry out the purposes and intent of the Plan and to implement and
effectuate the Plan;
8. To determine such other matters as may be provided for in the
Confirmation order or other orders of the Bankruptcy Court as may be
authorized under the provisions of the Bankruptcy Code or any other
applicable law;
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9. To enforce all orders, judgments, injunctions, and rulings entered in
the Chapter 11 Cases;
10. To issue such orders as may be necessary or appropriate in aid of
Confirmation and/or to facilitate Consummation of the Plan;
11. To enter an order closing these Chapter 11 Cases;
12. To recover all assets of Seven-Up/RC, or property of its Estate,
wherever located; and
13. To hear and determine (a) all motions, applications, adversary
proceedings, and contested and litigated matters pending on
Consummation, and (b) all claims by or against Seven-Up/RC arising
under the Bankruptcy Code or non-bankruptcy law, if made applicable by
the Bankruptcy Code, including claims to avoid fraudulent transfers
under section 548 of the Bankruptcy Code, whether such claims are
commenced before or after Consummation.
ARTICLE XII
MISCELLANEOUS PROVISIONS
A. SETOFF
Seven-Up/RC may, but shall not be required to, set off against any Claim and
the payments or other distributions to be made pursuant to the Plan in respect
of such Claim, claims of any nature whatsoever that Seven-Up/RC may have
against the holder of such Claim; however, neither the failure to do so nor
the allowance of any Claim hereunder shall constitute a waiver or release by
Seven-Up/RC of any such claim that Seven-Up/RC may have against such holder.
B. WITHHOLDING AND REPORTING REQUIREMENTS
In connection with the Plan and all instruments issued in connection
therewith and distributions thereon, Seven-Up/RC shall comply with all
withholding and reporting requirements imposed by any federal, state, local,
or foreign taxing authority, and all distributions hereunder shall be subject
to any such withholding and reporting requirements.
C. DISCHARGE OF DEBTORS
All property distributed under the Plan shall be in exchange for, and in
complete satisfaction, settlement, discharge, and release of, all Claims of
any nature whatsoever against the Debtors or any of their respective assets or
properties, and, except as otherwise provided herein or in the Confirmation
Order, upon Confirmation, Seven-Up/RC and BGAC shall each be deemed discharged
and released under section 1141(d)(1)(A) of the Bankruptcy Code from any and
all debts. The Confirmation Order shall be a judicial determination of
discharge of all liabilities of Seven-Up/RC and BGAC, subject to the
occurrence of Consummation.
D. RELEASES
Except as otherwise specifically provided for by this Plan, any Person
accepting any distribution pursuant to this Plan shall be presumed
conclusively to have released the (i) Debtors, (ii) Reorganized Seven-Up/RC,
(iii) successors and assigns of the Debtors, (iv) Affiliates of the Debtors
and such Persons, successors and assigns of such Affiliates, (v) present and
former stockholders of the Debtors or an Affiliate of the Debtors and such
stockholder's Affiliates, and (vi) directors, officers, agents, attorneys,
accountants, advisors, financial advisors of the foregoing (collectively, the
"Released Parties"), and the employees of any Released Party, and any Person
claimed to be liable derivatively through any of the foregoing, from any cause
of action based on, arising from, or in any way connected with the same
subject matter as the Claim or Interest on which the distribution is
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received. The release described in the preceding sentence shall be enforceable
as a matter of contract law against any Person that accepts any distribution
pursuant to this Plan.
Upon Consummation, the Debtors will conclusively be deemed to release (i)
the following parties and their members and representatives, including but not
limited to all professionals (such as accountants, financial advisors and
attorneys) retained by such parties:
(a) Seven-Up/RC and BGAC;
(b) GE Capital;
(c) the Committee;
(d) the Unofficial Noteholders Committee;
(e) the Indenture Trustee;
(f) the lenders under the DIP Facility;
(g) all stockholders and their Affiliates of the Debtors or of an Affiliate
of the Debtors; and
(h) all directors and officers of the Debtors and their Affiliates holding
such offices at any time during the period from and including March 15,
1996 through and including Confirmation
from any and all liability based upon any act or omission related to past
service with, for, or on behalf of the Debtors, including but not limited to
the prosecution of this Chapter 11 Case, except for:
1. any indebtedness of any such person to the Debtors for money borrowed
by such person;
2. any setoff or counterclaim the Debtors may have or assert against any
such person, provided that the aggregate amount thereof shall not
exceed the aggregate amount of any Claims held or asserted by such
person against the Debtors;
3. the uncollected amount of any claim made by the Debtors (whether in a
filed pleading, by letter or otherwise asserted in writing) prior to
the Consummation against such person which claim has not been
adjudicated to Final Order, settled, or compromised; or
4. claims arising from the fraud, willful misconduct, or gross negligence
of such persons.
Notwithstanding the foregoing or anything in the Plan to the contrary,
nothing herein shall be deemed to release Westinghouse from any claim (as
defined in section 101(5) of the Bankruptcy Code) of Seven-Up/RC, BGAC, WB, or
Seven-UP/RC of PR against Westinghouse arising under that certain Asset and
Stock Purchase Agreement dated as of March 30, 1990.
The releases embodied in this Plan are in addition to, and not in lieu of,
any other release separately given, conditionally or unconditionally.
E. INJUNCTION
The satisfaction, release, and discharge pursuant to Section XII.C. hereof
shall also act as an injunction against any Person commencing or continuing
any action, employment of process, or act to collect, offset, or recover any
Claim or cause of action satisfied, released, or discharged under this Plan to
the fullest extent authorized or provided by the Bankruptcy Court, including,
without limitation, to the extent provided for or authorized by sections 524
and 1141 thereof.
F. EXCULPATION AND LIMITATION OF LIABILITY
Neither Seven-Up/RC, Reorganized Seven-Up/RC, the Committee, the Unofficial
Noteholders Committee, GE Capital nor any of their respective present or
former members, officers, directors, employees, advisors, attorneys, or
agents, shall have or incur any liability to any holder of a Claim or an
Interest, or any other party in interest, or any of their respective agents,
employees, representatives, financial advisors, attorneys, or affiliates,
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or any of their successors or assigns, for any act or omission in connection
with, relating to, or arising out of, these Chapter 11 Cases, the pursuit of
Confirmation of the Plan, the Consummation of the Plan, or the administration
of the Plan or the property to be distributed under the Plan, except for their
willful misconduct, and in all respects shall be entitled to rely reasonably
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.
Notwithstanding any other provision of this Plan, any holder of a Claim or
an Interest, any other party in interest, and any of their respective agents,
employees, representatives, financial advisors, attorneys, or affiliates, and
any successors or assigns of the foregoing, shall have no right of action
against Seven-Up/RC, Reorganized Seven-Up/RC, the Committee, the Unofficial
Noteholders Committee, GE Capital or any of their respective present or former
members, officers, directors, employees, advisors, attorneys, or agents, for
any act or omission in connection with, relating to, or arising out of, these
Chapter 11 Cases, the pursuit of Confirmation of the Plan, the Consummation of
the Plan, or the administration of the Plan or the property to be distributed
under the Plan, except for their willful misconduct.
G. BINDING EFFECT
The Plan shall be binding upon and inure to the benefit of BGAC, Seven-
Up/RC, Reorganized Seven-Up/RC, the holders of Claims, the holders of
Interests, and their respective successors and assigns.
H. WITHDRAWAL OR NON-CONSUMMATION
If the Debtors withdraw the Plan prior to Confirmation, or if Confirmation
or Consummation does not occur, then the Plan, any settlement or compromise
embodied in the Plan (including the fixing or limiting to an amount certain
any Claim or Class of Claims), assumption or rejection of executory contracts
or leases affected by the Plan, and any document or agreement executed
pursuant to the Plan, shall be deemed null and void. In such event, nothing
contained herein, and no acts taken in preparation for Consummation of the
Plan, shall be deemed to constitute a waiver or release of any Claims by or
against Seven-Up/RC, BGAC or any other Person, to prejudice in any manner the
rights of Seven-Up/RC, BGAC or any Person in any further proceedings involving
Seven-Up/RC or BGAC, or to constitute an admission of any sort by Seven-Up/RC,
BGAC or any other Person.
I. MODIFICATION OF TREATMENT OF CLAIMS.
The Debtors reserve the right to modify the treatment of any Allowed Claim
in any manner adverse only to the holder of such Claim at any time after
Consummation upon the consent of the creditor whose Allowed Claim is being
adversely affected.
J. CONTINUED CONFIDENTIALITY OBLIGATIONS.
Pursuant to the terms thereof, members of and advisors to any Committee, any
other holder of a Claim or Interest and their respective predecessors and
successors shall continue to be obligated and bound by the terms of any
confidentiality agreement executed by them in connection with these Chapter 11
Cases or the Debtors, to the extent that such agreement, by its terms, may
continue in effect after Confirmation.
K. SECTION 1145 EXEMPTION.
Pursuant to, in accordance with, and solely to the extent provided under,
section 1145 of the Bankruptcy Code, the issuance of the New Common Stock
under this Plan is exempt from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, and any state or local law requiring
registration or licensing of an issuer, underwriter, broker, or dealer in such
New Common Stock and is deemed to be a public offering of the New Common
Stock.
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L. SECTION 1146 EXEMPTION.
To the extent permitted by section 1146(c) of the Bankruptcy Code, the
issuance, transfer, or exchange of any security under the Plan, or the
execution, delivery, or recording of an instrument of transfer pursuant to, in
implementation of, or as contemplated by the Plan, or the revesting, transfer,
or sale of any property of the Debtors, including but not limited to the stock
of Seven-Up of PR and Porta Pack held by Seven-Up/RC and sold under the Stock
Purchase Agreement, pursuant to, in implementation of, or as contemplated by
the Plan shall not be taxed under any state or local law imposing a stamp tax,
transfer tax, or similar tax or fee. Consistent with the foregoing, each
recorder of deeds or similar official for any county, city, or governmental
unit in which any instrument hereunder or of the type referred to above is to
be recorded shall, pursuant to the Confirmation Order, be ordered and directed
to accept such instrument, without requiring the payment of any documentary
stamp tax, deed stamps, stamp tax, transfer tax, intangible tax, or similar
tax.
M. NOTICES.
Any notice required or permitted to be provided to Seven-Up/RC and the
Committee under the Plan shall be in writing and served by (a) certified mail,
return receipt requested, (b) hand delivery, or (c) overnight delivery
service, to be addressed as follows:
KIRKLAND & ELLIS
Attorneys for Seven-Up/RC Bottling Company of
Southern California, Inc. and Beverage Group
Acquisition Corporation
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Attn: Luc A. Despins
- and -
WACHTELL, LIPTON, ROSEN & KATZ
Attorneys for the Committee
51 West 52nd Street
New York, New York 10019
Attn: Chaim J. Fortgang
N. GOVERNING LAW.
Unless a rule of law or procedure is supplied by federal law (including the
Bankruptcy Code and Bankruptcy Rules), the laws of the State of New York shall
govern the construction and implementation of the Plan and any agreements,
documents, and instruments executed in connection with the Plan. The laws of
the State of Delaware shall govern corporate governance matters.
Dated: New York, New York
June 19, 1996
SEVEN-UP/RC BOTTLING COMPANY OF
SOUTHERN CALIFORNIA, INC., BEVERAGE
GROUP ACQUISITION CORPORATION
Debtors-in-Possession
/s/ Barton S. Brodkin
By: _________________________________
Barton S. Brodkin
Chief Executive Officer and
President
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EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
ARTICLE FIRST
The name of the corporation is Seven-Up/RC Bottling Company of Southern
California, Inc.
ARTICLE SECOND
The address of the corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
The total number of shares of stock which the corporation has authority to
issue to six million (6,000,000) shares of Common Stock, with a par value of
one cent ($.01) per share. Notwithstanding anything to the contrary contained
herein, the Corporation shall not issue any shares of nonvoting stock.
ARTICLE FIFTH
The corporation is to have perpetual existence.
ARTICLE SIXTH
In furtherance and not in limitation of the powers conferred by statute, the
board of directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation except that no provision of Sections
2 and 11 of ARTICLE II, Section 4 of ARTICLE VI and ARTICLE VIII of the by-
laws as of the date hereof of the corporation may be altered, amended or
repealed in any respect, nor may any provision inconsistent therewith be
adopted, unless such alteration, amendment, repeal or adoption is approved by
the affirmative vote of holders of shares entitled to cast not less than a
majority of the votes at an annual meeting of stockholders at which all
holders of Common Stock are entitled to vote.
ARTICLE SEVENTH
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places
as may be designated from time to time by the board of directors or in the by-
laws of the corporation. Election of directors need not be by written ballot
unless the by-laws of the corporation so provide.
<PAGE>
ARTICLE EIGHTH
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHTH shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
ARTICLE NINTH
The corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE TENTH
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
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EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.
A DELAWARE CORPORATION
(AS AMENDED AND RESTATED ON JUNE , 1996)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle. The name of the corporation's registered
agent at such address shall be The Corporation Trust Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders
shall be held each year within one hundred twenty days after the close of the
immediately preceding fiscal year of the corporation for the purpose of
electing directors and conducting such other proper business as may come
before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be called
for any purpose and may be held at such time and place, within or without the
State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the president or the holders of shares entitled to
cost not less than twenty-five (25%) percent of the votes at the meeting. No
provision of this Section 2 of ARTICLE II of these by-laws may be altered,
amended or repealed in any respect, nor may any provision inconsistent
therewith be adopted, unless such alteration, amendment, repeal or adoption is
approved by the affirmative vote of holders of shares entitled to cast not
less than a majority of the votes at an annual meeting of stockholders at
which all holders of the Company's common stock are entitled to vote.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the stockholder at his, her
or its address as the same appears on the records of the corporation.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends for the express purpose of
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objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
of the corporation shall make, at least ten days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares required registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present,
the holders of a majority of the shares present in person or represented by
proxy at the meeting, and entitled to vote at the meeting, may adjourn the
meeting to another time and/or place. When a quorum is once present to
commence a meeting of stockholders, it is not broken by the subsequent
withdrawal of any stockholders or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of
an applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of
incorporation of the corporation or any amendments thereto and subject to
Section 3 of Article VI hereof, every stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for each share
of common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or
her by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if its states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether
the interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to
vote, except that when such proxy is coupled with an interest and the fact of
the interest appears on the face of the proxy, the agent named in the proxy
shall have all voting and other rights referred to in the proxy,
notwithstanding the presence of the person executing the proxy. At each
meeting of the stockholders, and before any voting commences, all proxies
filed at or before the meeting shall be submitted to and examined by the
secretary or a person designated by the secretary, and no shares may be
represented or voted under a proxy that has been found to be invalid or
irregular.
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Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates
of signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the corporation by delivery to its registered office
in the state of Delaware, or the corporation's principal place of business, or
an officer or agent of the corporation having custody of the book or books in
which proceedings of meetings of the stockholders are recorded. Delivery made
to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. All consents properly delivered in
accordance with this section shall be deemed to be recorded when so delivered.
No written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered to
the corporation as required by this section, written consents signed by the
holders of a sufficient number of shares to take such corporate action are so
recorded. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof. No provision
of this Section 11 of ARTICLE II of these by-laws may be altered, amended or
repealed in any respect, nor may any provision inconsistent therewith be
adopted, unless such alteration, amendment, repeal or adoption is approved by
the affirmative vote of holders of shares entitled to cast not less than a
majority of the votes at a regular meeting of stockholders at which all
holders of the Company's common stock are entitled to vote.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall
be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
shall be established from time to time by resolution of the board or by the
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. The directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote in the election of directors. The directors shall be
elected in this manner at the annual meeting of the stockholders, except as
provided in Section 4 of this Article III. Each director elected shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon
written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
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Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution
of the board. Special meetings of the board of directors may be called by or
at the request of the president or any director on at least 24 hours notice to
each director, either personally, by telephone, by mail or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same
to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may fix
its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the
committee shall be necessary to constitute a quorum. In the event that a
member and that member's alternate, if alternates are designated by the board
of directors as provided in Section 8 of this Article III, of such committee
is or are absent or disqualified, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in place of any such absent or
disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall
be conclusively presumed to have waived notice of such meeting, except when
such member attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Such member shall be conclusively presumed to
have assented to any action taken unless his or her dissent shall be entered
in the minutes of the meeting or unless his or her written dissent to such
action shall be filed with the person acting as the secretary of the meeting
before the adjournment thereof or shall be forwarded by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to any member who voted in favor of such
action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof,
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may be taken without a meeting if all members of the board or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board or committees.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and shall consist of a president, one or more vice-
presidents, a secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors.
Any number of offices may be held by the same person. In its discretion, the
board of directors may choose not to fill any office for any period as it may
deem advisable, except that the offices of president and secretary shall be
filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created and filled
at any meeting of the board of directors. Each officer shall hold office until
a successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president shall be the chief executive officer
of the corporation; shall preside at all meetings of the stockholders and
board of directors at which he or she is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent
of the corporation. The president shall have such other powers and perform
such other duties as may be prescribed by the board of directors or as may be
provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, act with all
of the powers and be subject to all the restrictions of the president. The
vice-presidents shall also perform such other duties and have such other
powers as the board of directors, the president or these by-laws may, from
time to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such
powers and perform such duties as the board of directors, the president or
these by-laws may, from
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time to time, prescribe; and shall have custody of the corporate seal of the
corporation. The secretary, or an assistant secretary, shall have the
authority to affix the corporate seal to any instrument requiring it and when
so affixed, it may be attested by his or her signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his or her signature. The assistant secretary, or if there be more
than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall have
the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the corporation as may be ordered by the board of
directors; shall cause the funds of the corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements; and shall render to the president and the board of directors at
its regular meeting or when the board of directors so requires, an account of
the corporation; shall have such powers and perform such duties as the board
of directors, the president or these by-laws may, from time to time,
prescribe. If required by the board of directors, the treasurer shall give the
corporation a bond (which shall be rendered every six tears) in such sums and
with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of the office of
treasurer and for the restoration to the corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in the possession or
under the control of the treasurer belonging to the corporation. The assistant
treasurer, or if there shall be more than one, the assistant treasurers in the
order determined by the board of directors, shall in the absence or disability
of the treasurer, perform the duties and exercise the powers of the treasurer.
The assistant treasurers shall perform such other duties and have such other
powers as the board of directors, the president or treasurer may, from time to
time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the board of
directors.
Section 11. Absence or Disability of Officers. In the case of the absence or
disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any
other person whom it may select.
Section 12. Signing Authority. Any of the president, any vice president, the
treasurer, the secretary or any assistant thereto, or any other officer of the
corporation is authorized on the corporation's behalf to execute, swear to and
or file with the United States Bureau of Alcohol, Tobacco and Firearms, the
California Department of Alcoholic Beverage Control and any other authority or
agency which such officer may deem appropriate any application, statement,
request for approval or other document which such officer deems appropriate to
the conduct of the corporation's business.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer, of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint
6
<PAGE>
venture, trust or other enterprise, shall be indemnified and held harmless by
the corporation to the fullest extent which it is empowered to do so unless
prohibited from doing so by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 2 hereof, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors of the corporation. The right to
indemnification conferred in this Article V shall be a contract right and,
subject to Sections 2 and 5 hereof, shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance
of its final disposition. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors
and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within days, upon the written request of
the director or officer. If a determination by the corporation that the
director or officer is entitled to indemnification pursuant to this Article V
is required, and the corporation fails to respond within sixty days to a
written request for indemnity, the corporation shall be deemed to have
approved the request. If the corporation denies a written request for
indemnification or advancing of expenses, in whole or in part, or if payment
in full pursuant to such request is not made within thirty days, the right to
indemnification or advances as granted by this Article V shall be enforceable
by the director or officer in any court of competent jurisdiction. Such
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance on
its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify
such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section 1
of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless
7
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otherwise determined by the board of specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the
corporation as employees or agents of another corporation, partnership, joint
venture, trust or other enterprise, may be indemnified to the extent
authorized at any time or from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be deemed
to be a contract right between the corporation and each director or officer
who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
V with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation of its separate existence
had continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2)
by a registrar, other than the corporation or its employee, the signature of
any such president, vice-president, secretary, or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the books of the corporation. Shares of stock of
the corporation shall only be transferred on the books of the corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
8
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Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificates
previously issued by the corporation alleged to have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the board of directors may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be
made against the corporation on account of the loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors,
and which record date shall not be more than sixty nor less than ten days
before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
next day preceding the day on which notice is given, or if notice is waive, at
the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjoined
meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order that
the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors prior to the date upon
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of
directors is required by statute, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the board of directors adopts the
resolution taking such prior action. No provision of this Section 4 of ARTICLE
VI of these by-laws may be altered, amended or repealed in any respect, nor
may any provision inconsistent therewith be adopted, unless such alteration,
amendment, repeal or adoption is approved by the affirmative vote of holders
of shares entitled to cast not less than a majority of the votes at a regular
meeting of stockholders at which all holders of the Company's common stock are
entitled to vote.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purposes of any other lawful action, the board
of directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the date on which the board
of directors adopts the resolution relating thereto.
9
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Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share of shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice
thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any
installment or call when such payment is due, the corporation may proceed to
collect the amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the certificate of incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or any other purpose and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for
the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation, and in
such manner, as shall be determined by resolution of the board of directors or
a duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares
of stock of the corporation. Nothing in this section contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the corporation and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
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Section 7. Voting Securities Owned By Corporation. Voting securities in any
other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for
business to inspect for any proper purpose the corporation's stock ledger, a
list of its stockholders, and its other books and records, and to make copies
or extracts therefrom. A proper purpose shall mean any purpose reasonably
related to such person's interest as a stockholder. In every instance where an
attorney or other agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of attorney or such
other writing which authorizes the attorney or other agent to so act on behalf
of the stockholder. The demand under oath shall be directed to the corporation
at its registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote except that no
provision of Sections 2 and 11 of ARTICLE II, Section 4 of ARTICLE VI and this
ARTICLE VIII of these by-laws may be altered, amended or repealed in any
respect, nor may any provision inconsistent therewith be adopted, unless such
alteration, amendment, repeal or adoption is approved by the affirmative vote
of holders of shares entitled to cast not less than a majority of the votes at
a regular meeting of stockholders at which all holders of the Company's common
stock are entitled to vote. The fact that the power to adopt, amend, alter, or
repeal the by-laws has been conferred upon the board of directors shall not
divest the stockholders of the same powers.
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EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
November 15, 1996
Seven-Up/RC Bottling Company of Southern California, Inc.
3220 East 26th Street
Vernon, California 90023
Re: Shares of Common Stock, $0.01 par value
---------------------------------------
Ladies and Gentlemen:
We are acting as counsel to Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), of a Registration
Statement on Form S-1 (Registration No. 333- ______________ (the "Registration
Statement") pertaining to the registration of a proposed offering of up to
1,904,805 shares of the Company's Common Stock, $0.01 par value per share
("Common Stock")) which are proposed to be offered by certain stockholders of
the Company (the "Selling Stockholder Shares").
We have examined originals, or copies certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary for the purposes of this opinion, including the following:
(a) a form of Amended and Restated Certificate of Incorporation (the "Restated
Charter"); (b) the Amended and Restated Bylaws of the Company; and (c) certain
resolutions adopted by the Board of Directors of the Company. In addition, we
have made such other and further investigations as we have deemed necessary to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing and having regard to legal considerations that we
deem relevant, and subject to the comments and qualifications set forth below,
it is our opinion that the Common Stock has been duly authorized and the Selling
Stockholder Shares have been duly and validly issued and are fully paid and
nonassessable.
<PAGE>
November 15, 1996
Page 2
For purposes of this opinion, we have with your permission made the following
assumptions, in each case without independent verification: (1) the
authenticity of all documents submitted to us as originals, (2) the conformity
to the originals of all documents submitted to us as copies, (3) the
authenticity of the originals of all documents submitted to us as copies, (4)
the genuineness of the signatures of persons signing all documents in connection
with which this opinion is rendered, (5) the authority of such persons signing
all documents on behalf of the parties thereto, and (6) the due authorization,
execution and delivery of all documents by the parties thereto.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the section
entitled "Legal Matters" in the prospectus included in the Registration
Statement. In giving such consent, we do not thereby concede that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations promulgated thereunder.
We do not find it necessary for purposes of this opinion to cover, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the offering and sale of the Common
Stock.
This opinion shall be limited to the laws of the State of Delaware.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of August 1996 (this
"Agreement"), by and among Seven-UP/RC Bottling Company of Southern California,
Inc., a Delaware corporation (the "Company"), and [insert names of holders of,
or affiliated groups of holders that collectively hold, at least 5% of the
Common Stock outstanding as of confirmation of the Plan] (the "Named Holders").
WHEREAS, this Agreement is being entered into in accordance with the
Plan (as hereinafter defined) in connection with the acquisition of Registrable
Shares (as hereinafter defined) by the Original Holders pursuant to the Plan;
and
WHEREAS, the Company has undertaken to register the Registrable Shares
under the Securities Act (as hereinafter defined) and to take certain other
actions with respect to the Registrable Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
-----------
shall have the meanings ascribed to them below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined);
"Affiliate" shall mean with respect to any Person, any other Person
---------
which, directly or indirectly, is in control of, is controlled by or is under
common control with such Person. For purposes of this definition, "control"
means the ability of one Person to direct the management and policies of another
Person.
"Agreement" shall have the meaning ascribed thereto in the preamble
---------
hereof.
"Business Day" shall mean any day except a Saturday, Sunday or other day
------------
on which commercial banks in New York City are authorized or required by law to
be closed.
"Commission" shall mean the United States Securities and Exchange
----------
Commission, or any successor agency thereto.
"Common Stock" shall mean the shares of the Company's Common Stock, par
------------
value $0.01 per share, to be issued pursuant to the Plan and any such shares
issued after confirmation of
<PAGE>
the Plan, and includes any securities of the Company issued or issuable with
respect to such shares by way of a stock split, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Company" shall have the meaning ascribed thereto in the preamble
-------
hereof.
"Company Indemnities" shall have the meaning ascribed thereto in Section
-------------------
9(a) hereof.
"Disadvantageous Condition" shall have the meaning ascribed thereto in
-------------------------
Section 4 hereof.
"Effectiveness Period" shall have the meaning ascribed thereto in
--------------------
Section 3(d) hereof.
"Effective Date" shall mean the effective date of the Plan pursuant to
--------------
the terms thereof.
"Electing Holders" shall have the meaning ascribed thereto in Section
----------------
2(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations thereunder, or any similar or successor
statute thereto.
"Expenses" shall mean all expenses incident to the Company's performance
--------
of or compliance with its obligations under this Agreement, including, without
limitation, all registration, filing, listing, securities exchange and NASD
fees, all fees and expenses of complying with state securities or blue sky laws
(including fees, disbursements and other charges of counsel for the
underwriters, if any, in connection with blue sky filings), all word processing,
duplicating and printing expenses, messenger and delivery expenses, all rating
agency fees, the fees, disbursements and other charges of counsel for the
Company and of its independent public accountants, including the expenses
incurred in connection with "comfort" letters required by or incident to such
performance and compliance, any fees and disbursements of underwriters, if any
customarily paid by issuers and sellers of securities and the reasonable fees
and disbursements at Holders' Counsel, but excluding underwriting discounts and
commissions and applicable transfer taxes, if any, which discounts, commissions
and transfer taxes shall be borne by the seller or sellers of Registrable
Shares in all cases.
"Holder" shall mean (i) the Original Holders and the Electing Holders
------
(ii) any direct or indirect transferees of the
- 2 -
<PAGE>
Original Holders and/or the Electing Holders where (x) such shares as owned by
such transferees continue to be Registrable Shares and (y) such transferees have
been assigned the rights of the immediate predecessor holder of such shares in
accordance with Section 15 hereof; provided, however, that at any given time,
Holder shall mean only the Persons among those listed in the preceding clause
that as of such time own Registrable Shares.
"Holders' Counsel" shall mean one firm of counsel chosen by Holders of a
----------------
majority of the outstanding Registrable Shares as of the date hereof, and where
such counsel is to act as counsel to the Holders in connection with this
Agreement.
"Holder Indemnitee" shall have the meaning ascribed thereto in Section
-----------------
9(b) hereof.
"Initial Shelf Registration" shall have the meaning ascribed thereto in
--------------------------
Section 3(a) hereof.
"Loss" shall have the meaning ascribed thereto in Section 9(a) hereof.
----
"Named Holders" shall have the meaning ascribed thereto in the preamble
-------------
hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Notified Persons" shall have the meaning ascribed thereto in Section
----------------
2(a) hereof.
"Offering Documents" shall have the meaning ascribed thereto in Section
------------------
9(a) hereof.
"Original Holders" shall mean the Named Holders and the Electing
----------------
Holders.
"Person" shall mean any natural person, corporation, limited
------
partnership, general partnership, limited liability company, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any government or agency or political subdivision thereof.
"Plan" shall mean the "Debtors' First Amended Joint Plan of
----
Reorganization", filed under Chapter 11 of the United States Bankruptcy Code in
connection with the reorganization of Seven-Up/RC Bottling Company of Southern
California, Inc. and Beverage Group Acquisition Corporation. Case Nos. 96-738
and
- 3 -
<PAGE>
96-739(HSB), and filed with the United States Bankruptcy Court for the District
or Delaware and confirmed by such court on August 2, 1996, as the same may be
amended, modified or supplemented from time to time in accordance with the
terms thereof.
"Public Offering" shall mean a public offering and sale of securities
---------------
pursuant to an effective Registration Statement.
"Registrable Shares" shall mean the shares of Common Stock held by the
------------------
Holders; provided, however, that Registrable Shares shall not include any shares
-------- -------
of Common Stock (i) that have been sold or distributed pursuant to a
Registration Statement, upon such sale or distribution of such shares; (ii) that
have been sold or distributed to a recipient of such shares that is allowed to
sell such shares without restriction under the Securities Act and any state
securities laws, upon such time as such recipient is so allowed pursuant to
applicable law; or (iii) with respect to which a Holder has received an opinion,
reasonably satisfactory in form and substance to such Holder, by legal counsel,
reasonably acceptable to such Holder, to the effect that the public sale of
such shares without restriction under the Securities Act and any state
securities laws does not require the registration of such shares under the
Securities Act and any state securities laws, upon the receipt of such opinion
by such Holder.
"Registration Notification" shall have the meaning ascribed thereto in
-------------------------
Section 2(a) hereof.
"Registration Statement" shall mean a registration statement filed on
----------------------
any appropriate form with the Commission providing for the registration of
securities under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations thereunder, or any similar or successor statute thereof.
"Shelf Registration" and "Shelf Registrations" shall have the meanings
------------------ -------------------
ascribed thereto in Section 3(b) hereof.
"Subsequent Shelf Registration" shall have the meaning ascribed thereto
-----------------------------
in Section 3(b) hereof.
- 4 -
<PAGE>
Section 2. Notice of Registration Rights.
-----------------------------
(a) Within 20 days after the Effective Date (exclusive of the
Effective Date), the Company shall provide written notice, along with a copy of
the form of this Agreement ("Registration Notification"), to all Persons, or
-------------------------
group of Persons where each is an Affiliate of each other member of such group
and is identified as such to the Company in writing, who each, pursuant to the
Plan, received at least 5% of the Common Stock outstanding immediately after the
Effective Date, of the right of each such Person to have the Common Stock
received by such Person pursuant to the Plan registered pursuant to, and in
conformity with, the terms of this Agreement (each, a "Notified Person").
---------------
Each such Notified Person shall have 20 days after receipt of such Registration
Notification to notify the Company, of such Notified Person's election to have
sales of the Common Stock received by it pursuant to the Plan registered
pursuant to, and in conformity with, the terms of this Agreement by delivering
to the Company, in conformity with the provisions of Section 17(e) hereof, a
counterpart to this Agreement signed by such Notified Person (each Notified
Person so signing and delivering to the Company such counterpart, an "Electing
--------
Holder"). Upon receipt by the Company of a counterpart to this Agreement signed
- ------
by an Electing Holder, each such Electing Holder has been deemed a vary to this
Agreement as of the date hereof.
(b) This Agreement expressly contemplates that each Notified
Person and each Electing Holder is a third-party beneficiary hereunder, entitled
to enforce the rights granted to Notified Persons and Electing Holders hereunder
in accordance with the terms hereof.
Section 3. Registration Under the Securities Act.
-------------------------------------
(a) Initial Shelf Registration. The Company shall (i) cause to
--------------------------
be filed as promptly as practicable but not later than 90 days after the
Effective Date, a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act (the "Initial
-------
Shelf Registration") covering all of the Registrable Shares as of the date
- ------------------
hereof and providing for the sale of the Registrable Shares by the Holders and
(ii) use its best efforts to have such Initial Shelf Registration declares
effective by the Commission as promptly as practicable thereafter.
(b) Subsequent Shelf Registrations. If the Company determines to
------------------------------
terminate the effectiveness of the
- 5 -
<PAGE>
Initial Shelf Registration prior to the end of the Effectiveness Period (as
hereinafter defined) where such termination may be effected only in compliance
with the provisions of Section 4 hereof, then prior to such termination the
Company shall file, and shall use its best efforts to cause the Commission to
declare effective, a subsequent Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities Act (a
"Subsequent Shelf Registration" and any such Registration Statement filed
-----------------------------
thereafter, also a Subsequent Shelf Registration) covering all of the
Registrable Shares which are outstanding as of the date of such filing. (Each of
the Initial Shelf Registration and any Subsequent Shelf Registration are
referred to herein individually as a "Shelf Registration", and collectively as
------------------
the "Shelf Registrations"). The Subsequent Shelf Registration shall be filed
-------------------
by the Company at such time prior to the termination of the effectiveness of the
Shelf Registration then in effect which is reasonably calculated to cause the
Subsequent Shelf Registration to become effective on or before the date on which
the effectiveness of the Shelf Registration then in effect terminates.
(c) Amendments to Initial Shelf Registration or Subsequent Shelf
-------------------------------------------------------------
Registrations. If any Shelf Registration fails to be effective for any reason
- -------------
(except as provided in Section 3(b)) at any time during the Effectiveness Period
(as hereinafter defined) for any reason (other than because of the sale of all
of the Registrable Shares covered thereby), the Company shall use its best
efforts to obtain, as promptly as possible, the withdrawal of any order
suspending the effectiveness thereof or to take, as promptly as possible, such
other actions as may be necessary to reinstate the effectiveness thereof, and in
any event shall, within 60 days of such cessation of effectiveness, either (i)
amend such Shelf Registration in a manner reasonably calculated to obtain the
withdrawal of the order suspending the effectiveness thereof, or (ii) file a
Subsequent Shelf Registration covering all Registrable Shares as of the date of
such filing.
(d) Effectiveness Period. Subject to this Section 3 and Section 4
--------------------
hereof, the Company shall use its best efforts to keep a Shelf Registration, or
Shelf Registrations, continuously effective under the Securities Act for a
period of three (3) years following the date on which the Initial Shelf
Registration became effective (the "Effectiveness Period"), or such shorter
--------------------
period ending on the date when there are no Registrable Shares; provided,
--------
however, that the Effectiveness Period shall be extended
- -------
- 6 -
<PAGE>
by any period during which a Shelf Registration is not in effect or
during which sales have been suspended, whether pursuant to Sections 4
or 6(g) hereof or otherwise. If a Subsequent Shelf Registration is
filed, pursuant to Sections 3(b) or 3(c) hereof, the Company shall use
its best efforts to cause the Subsequent Shelf Registration to be
declared effective promptly as practicable after such filing and to keep
such Registration Statement continuously effective for a period equal to
the Effectiveness Period less the aggregate number of days during which
the Initial Shelf Registration or any Subsequent Shelf Registration was
previously in effect. The intent of this provision is that the Shelf
Registration (including the Initial Shelf Registration and any
Subsequent Shelf Registration) shall be in effect for a number of days,
in aggregate, equal to three (3) years; provided, however, that
-------- -------
a Shelf Registration shall not be required to be maintained in effect
after the date when (i) there are no Registrable Shares or (ii) at least
two years have elapsed in the Effectiveness Period and the Registrable
Shares in the Effectiveness Period and the Registrable Shares represent
less than 3% of the then outstanding Common Stock.
(e) Supplements and Amendments. The Company shall supplement or
--------------------------
amend the Shelf Registration as promptly as practicable, if (i) required
by the rules, regulations or instructions applicable to the registration
form used for such Shelf Registration, (ii) otherwise required by the
Commission, or (iii) requested to do so by any Holder to the extent
necessary to list such Holder as a selling securityholder in such Shelf
Registration.
Section 4. Blackout Periods. With respect to a Shelf
----------------
Registration filed or to be filed pursuant to Section 3 hereof, if the Board of
Directors of the Company shall determine, in its good faith reasonable judgment,
that to maintain the continued effectiveness of such Shelf Registration or to
permit such Shelf Registration to become effective (or if no Shelf Registration
has yet been filed, to file such Shelf Registration) would be significantly
disadvantageous to the Company's financial condition, business or prospects (a
"Disadvantageous Condition") in light of the existence, or in anticipation, of
-------------------------
(i) any acquisition or financing activity involving the Company, or any
subsidiary of the Company, including a proposed public offering, (ii) an
undisclosed material event, the public disclosure of which would have a material
event, the public disclosure of which would have a material adverse effect on
the Company, (iii) a proposed material transaction involving the Company or a
substantial amount of its assets, or (iv) any other circumstance or condition
the disclosure of which would materially disadvantage the Company, and the
existence of which
- 7 -
<PAGE>
renders any Shelf Registration to be filed, or any Shelf Registration then filed
or effective, inadequate as failing to include material information, then the
Company may, until such Disadvantageous Condition no longer exists (but not with
respect to more than four occasions, nor for more than 105 days in the
aggregate, nor involving more than 45 days in the aggregate during any
continuous 12-month period) cause the right of Holders to make dispositions of
Registrable Shares pursuant to such Shelf Registration to be suspended, or in
the case of a Shelf Registration that has not yet been filed, elect not to file
such Shelf Registration; provided, however, that the Company may not take any
-------- -------
such action unless it simultaneously takes the same action with respect to any
other Registration Statements of the Company that are then effective or that are
contemplated or required to be filed. If the Company determines to take any
action pursuant to the preceding sentence, the Company shall deliver a notice to
all Holders of Registrable Shares covered or to be covered under such Shelf
Registration, which indicates that the Shelf Registration is no longer effective
or useable or will not be filed. Upon the receipt of any such notice, such
Persons shall forthwith discontinue any sale of Registrable Shares pursuant to
such Shelf Registration and any use of the prospectus contained in such Shelf
Registration. If any Disadvantageous Condition shall cease to exist, the Company
shall promptly notify all Holders of Registrable Shares covered by such Shelf
Registration indicating such cessation and disclosing in reasonable detail the
nature and outcome of such Disadvantageous Condition. The Company shall, if any
Shelf Registration required to be filed or maintained under this Agreement has
been not filed, file promptly, at such time as it in good faith deems the
earliest practicable time, a new Shelf Registration covering the Registrable
Shares which are outstanding as of the date of such filing.
Section 5. Expenses. The Company shall promptly pay all Expenses, and
--------
reimburse all Expenses incurred by any Holders, incurred in connection with any
registration initiated pursuant to Section 3 or Section 4 hereof, whether or not
such registration becomes effective.
Section 6. Registration Procedures. If and whenever the Company is
-----------------------
required to effect any registration under the Securities Act as provided in
Section 3 hereof, the Company shall, as expeditiously as possible (subject to
Section 4 hereof):
(a) promptly prepare and file with the Commission on the
requisite form a Shelf Registration to effect such registration and
thereafter use its reasonable best
- 8 -
<PAGE>
efforts to cause such Shelf Registration to be declared effective by the
commission as promptly as practicable thereafter; provided, however, that
-------- -------
the Company may discontinue any registration of its securities that are not
Registrable Shares at any time prior to the effective date of the Shelf
Registration relating thereto;
(b) prepare and file with the Commission such amendments and supplements
to such Shelf Registration and the prospectus used in connection therewith as
may be necessary to keep such Shelf Registration effective and to comply with
the provisions of the Securities Act with respect to the offering of all
Registrable Shares covered by such Shelf Registration until such time as all of
such Registration Shares have been disposed of in accordance with such
registration statement;
(c) furnish to each seller of Registrable Shares covered by such Shelf
Registration such number of copies of such Shelf Registration and of each
amendment and supplement thereto (in each case including all exhibits and any
documents incorporated by reference, if any), such number of copies of the
prospectus contained in such Shelf Registration (including each preliminary
prospectus, each final prospectus and any supplement to any prospectus) and any
other prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as such
seller may reasonably request in writing;
(d) use its best efforts (i) to register or qualify all Registrable
Shares and other securities covered by such Shelf Registration under such other
securities or blue sky laws of such states or other jurisdictions of the United
States of America as the Holders of a majority of the Registrable Shares covered
by such Shelf Registration shall reasonably request in writing, (ii) to keep
such registration or qualification in effect for so long as such Shelf
Registration remains in effect and (iii) to take any other action that may be
reasonably necessary or advisable to enable the sellers of Registrable Shares to
consummate to disposition in such jurisdictions of the securities to be sold by
sellers, except that the company shall not for any such purpose be required to
do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of the Section 6(d) be obligated to be so qualified, to
subject itself to taxation in such jurisdiction or to consent to general service
of process in any such jurisdiction;
-9-
<PAGE>
(e) use its best efforts to cause all Registrable Shares covered by such
Shelf Registration to be registered with or approved by such other federal or
state governmental agencies or authorities as may be necessary in the opinion of
counsel to the Company and Holders' Counsel to enable such sellers to consummate
the offering of such Registrable Shares;
(f) use its good faith efforts to obtain and if obtained, furnish a copy
to each seller of Registrable Shares of
(i) an opinion of counsel for the Company, dated the effective
date of such Shelf Registration, reasonably satisfactory in form and
substance to Holder's Counsel, and
(ii) a "comfort" letter, dated the effective date of such Shelf
Registration, signed by the independent public accountants who have
certified the Company's financial statements included or incorporated by
reference in such Shelf Registration, reasonably satisfactory in form
and substance to Holders' Counsel,
in each case, covering substantially the same matters with respect to such Shelf
Registration (and the prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements and matters contained in such Shelf Registration, as
are customarily covered in opinions of issuer's counsel and in accountant's
comfort letters delivered to selling securityholders in connection with the sale
of securities pursuant to "shelf" registration statements;
(g) notify the sellers of Registrable Shares (providing, if requested by
any such Persons, confirmation in writing) as promptly as practicable after
becoming aware of: ()A) the filing of any prospectus or prospectus supplement or
the filing or effectiveness (or anticipated date of effectiveness) of such Shelf
Registration or any post-effective amendment thereto; (B) any request by the
Commission for amendments or supplements to such Shelf Registration or the
related prospectus or for additional information; (C) the issuance by the
Commission of any stop order suspending the effectiveness of such Shelf
Registration or the initiation of any proceedings for the purpose; (D) the
receipt by the Company of any notification with respect to the suspension of the
qualification
- 10 -
<PAGE>
or registration (or exemption therefrom) of any Registrable Securities for sale
in any jurisdiction in the United States or the initiation or threatening of any
proceeding for such purposes; or (E) the happening of any event that makes any
statement made in such Shelf Registration or in any related prospectus,
prospectus supplement, amendment or document incorporated therein by reference
untrue in any material respect or that requires the making of any changes in
such Shelf Registration or in any such prospectus, supplement, amendment or
other such document so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein (in the case of any prospectus in
the light of the circumstances under which they were made) not misleading;
(h) otherwise comply with all applicable rules and regulations of the
Commission and any other governmental agency or authority having jurisdiction
over the offering, and make available to its security holders, as promptly as
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such Shelf Registration, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;
(i) enter into customary agreements and take all such other reasonable
actions in connection therewith in order to expidite or facilitate the
disposition of the Registrable Shares included in such Shelf Registration;
(j) make every reasonable effort to obtain the withdrawal of any order
or other action suspending the effectiveness of any such Shelf Registration or
suspending the qualification or registration (or exemption therefrom) of the
Registrable Securities for sale in any jurisdiction;
(k) if any event described in Section 6(g) hereof occurs, use its best
efforts (subject to Section 4 hereof) to cooperate with the Commission to
prepare as promptly as practicable, any amendment or supplement to such Shelf
Registration or such related prospectus in order that such Shelf Registration
and prospectus, as so amended or supplemented, shall not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances
- 11 -
<PAGE>
under they were made, not misleading, or to take other action that may have been
requested by the Commission; and
(l) use its best efforts to cause all such Registrable Shares covered by
such Shelf Registration to be listed on any national securities exchange or
included in any automated quotation system on which securities of the same class
issued by the Company are then listed or included (if the listing or inclusion
of such Registrable Shares is then permitted under the rules of such exchange or
interdealer quotation system).
Section 7. Holders' Obligations.
---------------------
(a) It shall be a condition precedent to the obligations of the Company
to take action pursuant to this Agreement that the selling Holders shall furnish
to the Company such information regarding themselves and the Registrable Shares
held by them, and the intended method of disposition of such securities, as
shall be required to effect the registration of their Registrable Shares.
(b) Following a registration pursuant to Section 3 hereof, each Holder
agrees that as of the date that a final prospectus is made available to it for
distribution to prospective purchasers of registrable Shares it shall cease to
distribute copies of any preliminary prospectus prepared in connection with the
offer and sale of such Registrable Shares. Each Holder further agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 6(g) hereof, such Holder shall forthwith discontinue such
Holder's disposition of Registrable Shares pursuant to the Shelf Registration
relating to such Registrable Shares until such Holder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 6(k) hereof and,
if so directed by the Company, shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the prospectus relating to such Registrable Shares outstanding at
the time of receipt of such notice.
(c) Should any Holder or Holders employ any underwriter or underwriters
in connection with the sale of any Registrable Shares, each such underwriter
shall be a nationally recognized securities firm selected by such Holder or
Holders with the approval of the Company, which such approval shall not be
unreasonable withheld.
- 12 -
<PAGE>
Section 8. Preparation; Reasonable Investigation. In connection with
-------------------------------------
the preparation and filing of each Shelf Registration under the Securities Act
pursuant to this Agreement, the Company shall give each Holder of Registrable
Shares registered under such Shelf Registration, the underwriters, if any,
selected such Holders and such underwriters' respective counsel and accountants
the reasonable opportunity to participate in the preparation of such Shelf
Registration, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and shall give each of them such
reasonable access to its books and records and such reasonable opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of any such Holders' Counsel and such underwriters',
if any, counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
Section 9. Indemnification.
---------------
(a) Indemnification by the Company. In connection with any
------------------------------
Shelf Registration filed by the Company pursuant to Section 3 hereof,
the Company shall, and hereby agrees to, indemnify and hold harmless,
each Holder and seller of any Registrable Shares covered by such
registration statement and each other Person, if any, who controls such
Holder or seller, and their respective directors, officers, partners,
investment advisers, agents, and Affiliates (each, a "Company
-------
Indemnitee"), against any losses, claims, damages, liabilities (or
----------
actions or proceedings, whether commenced or threatened, in respect
thereof and whether or not such Company Indemnitee is a party thereto),
joint or several, and expenses, including, without limitation, the
reasonable fees, disbursements and other changes of legal counsel and
reasonable out-of-pocket costs of investigation, to which such Company
Indemnitee may become subject under the Securities Act or otherwise
("each a Loss"), insofar as such Loss arises out of or is based upon any
----
untrue statement or alleged untrue statement of any material fact
contained in any Shelf Registration, any preliminary prospectus, final
prospectus or supplement thereto (collectively, "Offering Documents"),
------------------
or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein in the light of circumstances in which they were made not
misleading; provided, however, that the Company shall not liable in any
-------- -------
such case to the extent that any such Loss arises out of or is based
upon an untrue statement or alleged untrue statement
-13-
<PAGE>
or omission or alleged omission made in such Offering Documents in
reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by or on behalf of such
Company Indemnitee specifically stating that it is expressly for use
therein; and provided, further, that the Company shall not be liable
-------- -------
to any Holder or seller of Registrable Shares or any other Person, if
any, who controls such Person, in any such case to the extent that any
such Loss arises out of such Person's failure to send or give a copy of
the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation
of the sale of Registrable Shares to such Person if such statement or
omission was corrected in such final prospectus; provided, however, that
-------- -------
copies of such final prospectus, as supplemented or amended, shall have
been delivered to such Company Indemnitee. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of such Company Indemnitee and shall survive the transfer of such
securities by such Company Indemnitee as provided for in Section 6(c)
hereof.
(b) Indemnification by the Sellers. In connection with any
------------------------------
registration statement filed by the Company pursuant to Section 3 hereof
in which a Holder has registered for sale Registrable Shares, each such
Holder or seller of Registrable Shares, severally and not jointly,
shall, and hereby agrees to, indemnify and hold harmless the Company and
each of its directors, officers, employees and agents, each other
Person, if any, who participates as an underwriter in the offering or
sale of such securities, each other Person, if any, who controls the
Company, any such underwriter and each other seller and such
underwriter's or other seller's directors, officers, stockholders,
partners, employees, agents and affiliates (each a "Holder Indemnitee"),
-----------------
against all Losses insofar as such Losses arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in any Offering Documents (or any document incorporated by
reference therein) or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein in the light of circumstances in which they were made
not misleading, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company through an instrument
duly executed by such
-14-
<PAGE>
Holder or seller of Registrable Shares specifically stating that it is
expressly for use therein; provided, however, that the liability of such
-------- -------
indemnifying party under this Section 9(b) shall be limited to the
amount of the net proceeds received by such indemnifying party in the
offering giving rise to such liability. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on
behalf of the Holder Indemnitee and shall survive the transfer of the
Registrable Shares by such Holder.
(c) Notices of Losses, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or
proceeding involving a Loss referred to in Section 9(a) & (b) hereof,
such indemnified party will, if a claim in respect thereof is to made
against an indemnifying party, give written notice to the latter be of
the commencement of such action; provided, however, that the failure of
-------- -------
any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 9(a) &
(b) hereof, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party shall be
entitled to participate in and, unless in such indemnified party's
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such Loss, to assume and
control the defense thereof, in each case at its own expense, jointly
with any other indemnifying party similarly notified, to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from such indemnifying party of its assumption
of the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall be liable
for any settlement of any such action or proceeding effected without its
written consent, which shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability
in respect of such Loss or which requires action on the part of such
indemnified party or otherwise subjects the indemnified party to any
obligation or restriction to which it would not otherwise be subject.
-15-
<PAGE>
(d) Contribution. If the indemnification provided for in this
------------
Section 9 shall for any reason be unavailable to an indemnified party
under Section 9(a) or 9(b) hereof in respect of any Loss, then, in lieu
of the amount paid or payable under Section 9(a) or 9(b) hereof the
indemnified party and the indemnifying party under Section 9(a) or 9(b)
hereof shall contribute to the aggregate Losses (including legal or
other expenses reasonably incurred in connection with investigating the
same) in such proportion as is appropriate to reflect the relative fault
of the Company and the sellers of Registrable Shares covered by the
Shelf Registration which resulted in such Loss or action in respect
thereof, with respect to the statements, omissions or action which
resulted in such Loss or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that
it would not be just or equitable if contributions were to be determined
by any method of allocation which does not take account of the equitable
considerations referred to in this paragraph. The amount paid by an
indemnified party as a result of the Losses referred to in the first
sentence of this paragraph shall be deemed to include any local and
other expenses reasonably incurred by such indemnified party in
connection with the investigation of or defending against any Loss which
is the sugject of this Section 9(d). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for
any settlement of any action or Loss affected without such Person's
consent.
(e) Other Indemnification. The Company and, in connection with
---------------------
any Shelf Registration filed by the Company pursuant to Section 3, each
Holder shall with respect to any required registration or other
qualifiction of securities under any Federal or state law or regulation
of any governmental authority other than the Securities Act, indemnify
Holder Indemnitees and Company Indemnitees respectively, against Losses
or, to the extent that indemnification shall be unavailable to a Holder
Indemnitee or
-16-
<PAGE>
Company Indemnitee, contribute to the reimbursement of the aggregate
Losses of such Holder Indemnitee or Company Indemnitee in a manner
similar to that specified in Sections 9(a), (b), (c), (d) and (f) hereof
(with, appropriate modifications).
(f) Indemnification Payments. The indemnification and
------------------------
contribution required by this Section 9 shall be made by periodic
payments of the amount thereof during the course of any investigation or
defense, as and when bills are received or any Loss is incurred.
Section 10. Registration Rights to Others. If the Company shall at any
-----------------------------
time hereafter provide to any holder of any securities of the Company rights
with respect to the registration of such securities under the Securities Act or
the Exchange Act, such rights shall not be in conflict with or adversely affect
any of the rights provided in this Agreement to the Holders with respect to the
Registrable Shares.
Section 11. Adjustments Affecting Registrable Shares. The Company
----------------------------------------
shall not affect or permit to occur any combination, subdivision or
reclassification of Registrable Shares that would materially adversely affect
the ability of the Holders to include such Registrable Shares in any
registration of its securities under the Securities Act contemplated by this
Agreement or the marketability of such Registrable Shares under any such
registration or other offering.
Section 12. Rule 144 and Rule 144A. Prior to the expiration of the
----------------------
Effectiveness Period, the Company shall take all actions reasonably necessary to
enable Holders to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions, if applicable, provided
by (a) Rule 144 under the Securities Act, as such Rule may be amended from time
to time, (b) Rule 144A under the Securities Act, as such Rule may be amended
from time to time, or (c) any similar rules or regulations hereafter adopted by
the Commission, including, without limiting the generality of the foregoing,
filing on a timely basis all reports required to be filed under the Exchange
Act. Upon the request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
Section 13. Amendments and Waivers. Except as otherwise provided
----------------------
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company shall have obtained the prior written
consent of both (a) the Holders of at least a majority of the
-17-
<PAGE>
Registrable Shares affected by such amendment, modification or waiver and (b)
each Holder of Registrable Shares owning more than 5% of the Company's then
outstanding Common Stock.
Section 14. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Share is held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the Holder of such registrable Shares for purposes of any
request or other action by any Holder or Holders pursuant to this Agreement or
any determination of the number or percentage of Registrable Shares held by any
Holder or Holders contemplated by this Agreement. If the beneficial owner of any
Registrable Shares so elects, the Company may require assurances reasonable
satisfactory to it of such owner's beneficial ownership of such Registrable
Shares.
Section 15. Assignment. The provisions of this Agreement shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns including, without limitation and without the need
for an express assignment, any successor by merger to the Company, and any
Holders of the Registrable Shares.
Section 16. Calculation of Percentage of Outstanding Registrable Shares.
-----------------------------------------------------------
For purposes of this Agreement, all references to an aggregate number of
Registrable Shares or a percentage thereof shall be calculated based upon the
aggregate number of Registrable Shares outstanding at the time such calculation
is made and shall exclude any Registrable Shares or shares of Common Stock, as
the case may be, owned by the Company or any subsidiary of the Company.
Section 17. Miscellaneous.
-------------
(a) Further Assurances. Each of the parties hereto shall execute
------------------
such documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions of this
Agreement and the transactions contemplated hereby.
(b) Headings. The headings in this agreement are for convenience
--------
of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
(c) Remedies. Each Holder, in addition to being entitled to
--------
exercise all rights granted by law, including recovery of damages, will
be entitled to specific
- 18 -
<PAGE>
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate for any loss incurred by reason of a breach by it
of the provisions of this Agreement and the Company hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(d) Entire Agreement. This Agreement constitutes the entire agreement
----------------
and understanding of the parties hereto in respect of the subject matter
contained herein, and there are no restrictions, promises, representations,
covenants, or undertakings with respect to the subject matter hereof, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties hereto with respect to
the subject matter hereof.
(e) Notices. Any notices or other communications to be given hereunder
-------
by any party to another party shall be in writing, shall be delivered
personally, by telecopy, by certified or registered mail, postage prepaid,
return receipt requested, or by Federal Express or other comparable delivery
service, to the address of the party set forth on Schedule A hereto or to such
other address as the party to whom notice is to be given may provide in a
written notice to the other parties hereto, a copy of which shall be on file
with the Secretary of the Company. Notice shall be effective when delivered if
given personally, when receipt is acknowledged if telecopied, three days after
mailing if given by registered or certified mail as described above, and one
business day after deposit if given by overnight courier service.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to agreements
made to be performed entirely in such State, without regard to principles of
conflicts of law. The Company and the parties each hereby irrevocably submit to
the jurisdiction of any New York State court sitting in the City of New York or
any Federal Court sitting in the City of New York in respect of any suit, action
or proceeding arising out of or relating to this Agreement, and each irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Nothing herein shall
affect the right of any party to serve process in any manner permitted by law or
to commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction.
- 19 -
<PAGE>
(g) Severability. If one or more of the provisions contained herein,
------------
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect, for any reason, the validity, legality and
enforceability or the remaining provisions contained herein shall not be in any
way affected or impaired thereby, and the provision held to be invalid, illegal
or unenforceable shall be reformed to the minimum extent necessary, and in a
manner as consistent with the purposes thereof as is practicable, so as to
render it valid, legal and enforceable it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
(h) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SEVEN-UP/RC BOTTLING COMPANY OF
SOUTHERN CALIFORNIA, INC.
By:
------------------------
Name:
-------------------
Title:
-------------------
Accepted and Agreed to as of the date first above written:
Dean Witter High Yield
Securities
By:
---------------------
Peter M. Avelar
Vice President
Dean Witter High Income
Securities
By:
---------------------
Peter M. Avelar
Vice President
High Income Advantage Trust
By:
---------------------
Peter M. Avelar
Vice President
High Income Advantage Trust II
By:
---------------------
Peter M. Avelar
Vice President
-21-
<PAGE>
High Income Advantage Trust III
By:
---------------------
Peter M. Avelar
Vice President
Dean Witter Diversified
Income Trust
By:
---------------------
Peter M. Avelar
Vice President
Dean Witter Select Series
Dimensions - Diversified
Income
By:
---------------------
Peter M. Avelar
Vice President
Variable Investment Series -
High Yield
By:
---------------------
Peter M. Avelar
Vice President
-22-
<PAGE>
EXHIBIT 10.4
================================================================================
CREDIT AGREEMENT
Dated as of August 2, 1996
between
SEVEN-UP/RC BOTTLING COMPANY OF
SOUTHERN CALIFORNIA, INC.,
as Reorganized Debtor,
as Borrower,
THE LENDERS PARTY HERETO
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. AMOUNT AND TERMS OF CREDIT............................... 2
1.1 Revolving Credit Advances......................... 2
1.2 Repayment; Termination of Commitment.............. 4
1.3 Use of Proceeds................................... 5
1.4 Letters of Credit................................. 5
1.5 Interest.......................................... 5
1.6 Eligible Accounts and Inventory................... 6
1.7 Fees.............................................. 7
1.8 Cash Management System............................ 7
1.9 Receipt of Payments............................... 7
1.10 Pro Rata Treatment................................ 7
1.11 Application and Allocation of Payments............ 7
1.12 Non-Receipt of Funds by Agent..................... 8
1.13 Sharing of Payments, Etc.......................... 9
1.14 Settlement Procedures............................. 10
1.15 Accounting........................................ 12
1.16 Indemnity......................................... 12
1.17 Access............................................ 13
1.18 Taxes............................................. 14
1.19 Capital Adequacy.................................. 16
2. CONDITIONS PRECEDENT..................................... 17
2.1 Conditions to the Initial Revolving Credit
Advance and Letter of Credit Obligation........... 17
2.2 Further Conditions to Each Revolving Credit
Advance and Each Letter of Credit Obligation...... 19
3. REPRESENTATIONS AND WARRANTIES........................... 20
3.1 Corporate Existence; Compliance with Law.......... 20
3.2 Executive Offices; Collateral Locations;
Corporate or Other Names.......................... 20
3.3 Corporate Power; Authorization; Enforceable
Obligations....................................... 20
3.4 Financial Statements and Projections.............. 21
3.5 Material Adverse Change........................... 21
3.6 Ownership of Property; Liens...................... 21
3.7 Restrictions; No Default; Material Contracts...... 22
3.8 Labor Matters..................................... 22
3.9 Ventures and Subsidiaries; Outstanding Stock and
Indebtedness...................................... 23
3.10 Government Regulation............................. 23
3.11 Margin Regulations................................ 23
3.12 Taxes............................................. 24
3.13 ERISA............................................. 24
3.14 No Litigation..................................... 26
3.15 Brokers........................................... 26
3.16 Patents, Trademarks, Copyrights and Licenses...... 26
3.17 Full Disclosure................................... 27
3.18 Hazardous Materials............................... 27
i
<PAGE>
TABLE OF CONTENTS CONT'D
Section Page
- ------- ----
3.19 Insurance Policies................................ 28
3.20 Deposit and Disbursement Accounts................. 28
4. FINANCIAL STATEMENTS AND INFORMATION..................... 28
4.1 Reports and Notices............................... 28
4.2 Communication with Accountants.................... 28
5. AFFIRMATIVE COVENANTS.................................... 29
5.1 Maintenance of Existence and Conduct of
Business.......................................... 29
5.2 Payment of Charges and Claims..................... 29
5.3 Books and Records................................. 30
5.4 Litigation........................................ 30
5.5 Insurance......................................... 30
5.6 Compliance with Laws.............................. 31
5.7 Agreements........................................ 31
5.8 Supplemental Disclosure........................... 32
5.9 Environmental Matters............................. 33
5.10 Landlord's Agreements............................. 33
5.11 Certain Obligations Respecting Subsidiaries....... 33
5.12 Application of Proceeds........................... 33
5.13 Fiscal Year....................................... 34
5.14 Casualty and Condemnation......................... 34
6. NEGATIVE COVENANTS....................................... 35
6.1 Mergers, Subsidiaries, Etc........................ 35
6.2 Investments....................................... 35
6.3 Indebtedness...................................... 35
6.4 Affiliate and Employee Loans and Transactions;
Employment Agreements............................. 36
6.5 Capital Structure and Business.................... 36
6.6 Guaranteed Indebtedness........................... 36
6.7 Liens............................................. 37
6.8 Sale of Assets.................................... 37
6.9 ERISA............................................. 38
6.10 Financial Covenants............................... 38
6.11 Hazardous Materials............................... 39
6.12 Sale-Leasebacks................................... 39
6.13 Cancellation of Indebtedness...................... 39
6.14 Restricted Payments............................... 39
6.15 Real Property Leases.............................. 39
6.16 Bank Accounts..................................... 39
6.17 No Speculative Transactions....................... 39
6.18 Margin Regulations................................ 39
6.19 Limitation on Negative Pledge Clauses............. 40
6.20 Accounting Changes................................ 40
7. TERM..................................................... 40
7.1 Duration.......................................... 40
7.2 Survival of Obligations........................... 40
ii
<PAGE>
TABLE OF CONTENTS CONT'D
Section Page
- ------- ----
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES................... 41
8.1 Events of Default................................. 41
8.2 Remedies.......................................... 43
8.3 Waivers by Borrower............................... 44
9. AGENT.................................................... 44
9.1 Appointment, Powers and Immunities................ 44
9.2 Reliance by Agent................................. 45
9.3 Defaults.......................................... 45
9.4 Rights as a Lender................................ 45
9.5 Indemnification................................... 46
9.6 Non-Reliance on Agent and Other Lenders........... 46
9.7 Failure to Act.................................... 47
9.8 Resignation of Agent.............................. 47
9.9 Consents under Loan Documents..................... 47
9.10 Collateral Matters................................ 48
10. SUCCESSORS AND ASSIGNS................................... 48
10.1 Successors and Assigns............................ 48
10.2 Assignments and Participations.................... 49
11. MISCELLANEOUS............................................ 51
11.1 Complete Agreement; Modification of Agreement..... 51
11.2 Fees and Expenses................................. 51
11.3 No Waiver......................................... 53
11.4 Remedies.......................................... 53
11.5 Severability...................................... 53
11.6 Conflict of Terms................................. 53
11.7 Right of Set-off.................................. 53
11.8 Authorized Signature.............................. 54
11.9 Notices........................................... 54
11.10 Section Titles.................................... 56
11.11 Counterparts...................................... 56
11.12 Time of the Essence............................... 56
11.13 Publicity......................................... 56
11.14 GOVERNING LAW..................................... 56
11.15 WAIVER OF JURY TRIAL.............................. 57
iii
<PAGE>
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
----------------------------------------
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Documents
Annex D - Schedule of Certain Fees
Annex E - Financials, Projections and Notices
Annex F - Insurance Requirements
Annex G - Letters of Credit
Annex H - Financial Covenants
Schedule 3.2 - Executive Offices; Trade Names
Schedule 3.4 - Financials and Projections
Schedule 3.5 - Dividends; Material Changes
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.12 - Tax Matters; FEIN
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and
Licenses
Schedule 3.18 - Hazardous Materials
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Loans to and Transactions with Employees
Schedule 6.7 - Liens
Schedule 11.8 - Authorized Signatures
Exhibit A - Form of Notice of Revolving Credit
Advance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Security Agreement
Exhibit E - Form of Pledged Account Agreement
Exhibit F - Form of Confidentiality Agreement
iv
<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT ("Agreement") is entered into as of August 2, 1996
---------
by and between SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., a
Delaware corporation, as reorganized debtor ("Borrower"), each of the lenders
--------
listed on the signature pages hereof or which pursuant to Section 10.2 becomes a
------------
"Lender" hereunder (each individually a "Lender" and collectively "Lenders"),
------ -------
and GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital"), a corporation organized
----------
under the banking laws of the State of New York, as agent hereunder for Lenders
(in such capacity, together with its successors in such capacity, "Agent"), with
-----
reference to the following facts:
RECITALS
--------
A. On May 13, 1996 (the "Petition Date"), Seven-Up/RC Bottling Company
-------------
of Southern California, Inc. ("Seven-Up/RC") and its parent, Beverage Group
-----------
Acquisition Corporation ("BGAC"), commenced Chapter 11 cases numbered 96-738
----
(HSB) and 96-739 (HSB), respectively (the "Chapter 11 Cases"), by filing
----------------
voluntary petitions for reorganization under Chapter 11 of Title 11 of the
United States Code with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court").
----------------
B. Since the Petition Date, Seven-Up/RC and BGAC have continued to
operate their businesses and manage their properties as debtors and debtors in
possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code.
C. GE Capital has been financing Seven-Up/RC during the pendency of its
Chapter 11 Case under the terms of that certain Debtor In Possession Credit
Agreement dated as of May 13, 1996 (the "DIP Agreement"). All of Seven-Up/RC's
-------------
obligations under the DIP Agreement will become due and payable upon
"Consummation," as such term is defined in the Debtors' First Amended Joint Plan
of Reorganization Dated June 19, 1996 (the "Plan of Reorganization") in the
----------------------
Chapter 11 Cases.
D. Seven-Up/RC has requested that Lenders provide a post-confirmation
senior secured revolving credit facility to Borrower as of Consummation in the
aggregate principal amount of up to $35,000,000 to fund Borrower's post-
confirmation working capital and letter of credit requirements.
E. Lenders are willing to provide the requested post-confirmation
financing to Borrower in accordance with and on the terms and conditions set
forth in, this Agreement and the other Loan Documents.
F. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for purposes of
-------
this Agreement and the other Loan
1
<PAGE>
Documents, the rules of construction set forth in Annex A shall govern. Unless
-------
otherwise indicated, all references in this Agreement or in the Annexes to this
Agreement to sections, subsections, recitals, schedules, exhibits, annexes, and
attachments shall refer to the corresponding sections, subsections, recitals,
schedules, exhibits, annexes and attachments of or to this Agreement. All
schedules, exhibits, annexes and attachments hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Closing Date. These Recitals shall be construed as part of this
Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Advances.
-------------------------
(a) Upon and subject to the terms and conditions hereof, each Lender
severally agrees to make available, from time to time from the Closing Date
until the Commitment Termination Date, for Borrower's use and upon the request
of Borrower therefor to Agent, advances (each, a "Revolving Credit Advance") in
------------------------
an aggregate principal amount at any time outstanding up to but not exceeding
the Revolving Credit Commitment of such Lender, provided that in no event shall
the aggregate principal amount of the Revolving Credit Loan and Letter of Credit
Obligations at any time exceed the Borrowing Availability as reflected on the
most recent Borrowing Base Certificate delivered to Agent and Lenders. Borrower
may from time to time borrow, repay and reborrow Revolving Credit Advances under
this Section 1.1.
-----------
(b) Borrower shall give Agent (which shall promptly notify Lenders)
notice of each borrowing hereunder as provided in Section 1.1(c) and, subject to
--------------
Section 1.14, on the date specified for such borrowing each Lender shall make
- ------------
available the amount of the Revolving Credit Advance or Revolving Credit
Advances to be made by it on such date to Agent to such account of Agent as
Agent may designate, in immediately available funds, for the account of
Borrower.
(c) Each notice of a borrowing of a Revolving Credit Advance shall be
given in writing (by telecopy, hand delivery, or U.S. mail) by Borrower to Agent
at its address at 350 South Beverly Drive, Suite 200, Beverly Hills, California
90212, to the attention of Mr. Mark E. Gudis, or such other Person as may be
2
<PAGE>
designated in writing by Agent, Telephone No. (310) 203-0335, Telecopy No. (310)
785-0644, given no later than 10:00 a.m. (Los Angeles time) on the Business Day
of the proposed Revolving Credit Advance. Each such notice of borrowing (a
"Notice of Revolving Credit Advance") shall be substantially in the form of
- -----------------------------------
Exhibit A, specifying therein the requested date, the amount of such Revolving
- ---------
Credit Advance, the Disbursement Account into which such Revolving Credit
Advance shall be made, and such other information as may be required by Agent.
Agent and Lenders shall be entitled to rely upon and shall be fully protected
under this Agreement in relying upon any Notice of Revolving Credit Advance
believed by Agent to be genuine and to assume that the persons executing and
delivering the same were duly authorized unless the responsible individual
acting thereon for Agent shall have actual knowledge to the contrary.
(d) The Revolving Credit Advances made by each Lender shall be
evidenced by a single promissory note of Borrower for such Lender substantially
in the form of Exhibit B, dated the date hereof, payable to such Lender in a
---------
principal amount equal to the amount of its Revolving Credit Commitment as
originally in effect and otherwise duly completed. The date and amount of each
Revolving Credit Advance made by each Lender and each payment of principal with
respect thereto shall be recorded on the books and records of such Lender, which
books and records shall constitute prima facie evidence of the accuracy of the
information therein recorded. The entire unpaid balance of the Revolving Credit
Loan and all other Obligations shall be immediately due and payable on the
Commitment Termination Date.
(e) Borrower shall furnish to Agent and each Lender a Borrowing Base
Certificate substantially in the form of Exhibit C, completed and signed by
---------
Borrower's Chief Executive Officer, Chief Financial Officer, Director of Banking
and Investor Relations or Director of Accounting Services which sets forth a
calculation of the Borrowing Base at the times and for the periods set forth in
Annex E. Borrower agrees that in making any Revolving Credit Advance hereunder
- -------
(or incurring any Letter of Credit Obligations) Agent and each Lender shall be
entitled to rely upon the most recent Borrowing Base Certificate delivered to
Agent and Lenders by Borrower. Borrower further agrees that if Borrower shall
have failed to deliver a Borrowing Base Certificate to Agent and Lenders within
the specified period Lenders shall be under no obligation to make any further
Revolving Credit Advances (or incur any additional Letter of Credit Obligations)
until such time, subject to the other terms and conditions contained herein, as
such Borrowing Base Certificate is delivered to Agent and Lenders.
(f) The failure of any Lender (such Lender, a "Non-Funding Lender") to
------------------
make any Revolving Credit Advance to be made by it on the date specified
therefor shall not relieve any other Lender (each such other Lender, an "Other
-----
Lender") of its obligation to make its Revolving Credit Advance on such date,
- ------
but
3
<PAGE>
neither any Other Lender nor Agent shall be responsible for the failure of any
Non-Funding Lender to make a Revolving Credit Advance to be made by such Non-
Funding Lender, and no Non-Funding Lender shall have any obligation to Agent or
any Other Lender for the failure by such Non-Funding Lender. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" (or be included in the calculation of "Required Lenders"
hereunder) for any voting or consent rights under or with respect to any Loan
Document. Anything in this Agreement to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement, the Revolving
Credit Notes and the other Loan Documents (including exercising any rights of
offset) without first obtaining the prior written consent of Agent and Required
Lenders, it being the agreement of Lenders that any such action to protect or
enforce rights under this Agreement, the Revolving Credit Notes and the other
Loan Documents shall be taken in concert and at the direction or with the
consent of Agent and Required Lenders and not individually by a single Lender.
1.2 Repayment; Termination of Commitment.
------------------------------------
(a) Borrower hereby promises to pay to Agent, for the account of each
Lender, the entire outstanding principal amount of the Revolving Credit Loan and
Letter of Credit Obligations and the Revolving Credit Loan shall mature on the
Commitment Termination Date.
(b) If on any day the outstanding balance of the Revolving Credit
Loan, when added to the then outstanding Letter of Credit Obligations, shall at
any time exceed the Borrowing Availability as reflected on the most recent
Borrowing Base Certificate delivered to Agent and Lenders, Borrower shall repay
the Revolving Credit Loan in the amount of such excess on such day (or if such
day is not a Business Day, on the next succeeding Business Day). Such excess
balance shall nevertheless constitute Obligations that are secured by the
Collateral and entitled to all of the benefits thereof and of the Loan Documents
and shall be evidenced by the Revolving Credit Notes.
(c) Borrower shall have the right at any time, upon at least forty-
five (45) days prior written notice to Agent, to voluntarily terminate the
Revolving Credit Commitments (in whole but not in part) without premium or
penalty other than payment of the Termination Fee, if any. On the date of such
termination, Borrower shall pay to Agent in immediately available funds all of
the Obligations, including the Termination Fee, if any, and any accrued and
unpaid interest, and make arrangements, in accordance with the terms and
conditions of Annex G, for satisfaction with respect to any outstanding Letter
-------
of Credit Obligations. Upon such termination, Borrower's right to receive
Revolving Credit Advances and the benefit of Letter of Credit Obligations shall
4
<PAGE>
simultaneously terminate and Borrower's obligation to pay the Non-Use Fee, the
Collateral Monitoring Fee and, upon such payment of the Obligations, the
Collateral Examination Charge arising after such termination shall terminate,
and notwithstanding anything to the contrary contained herein or in any
Revolving Credit Note, the entire outstanding balance of the Revolving Credit
Loan shall be immediately due and payable.
1.3 Use of Proceeds. Borrower shall use the proceeds of the Revolving
---------------
Credit Loan for (a) the repayment in full of all outstanding obligations under
the DIP Agreement on Consummation, (b) the payment of costs and expenses of the
financing transactions contemplated by this Agreement that are payable by
Borrower and (c) other corporate purposes permitted by the terms of this
Agreement and the other Loan Documents.
1.4 Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, Borrower shall have the right to request, and Lenders agree to incur,
from the Closing Date until the Commitment Termination Date, the Letter of
Credit Obligations in accordance with the terms and conditions set forth in
Annex G.
- -------
1.5 Interest.
--------
(a) Borrower shall pay interest on the Revolving Credit Loan to Agent
for the account of each Lender: (i) in arrears for the preceding calendar
month, on the first day of each calendar month, commencing on September 1, 1996;
(ii) on the Commitment Termination Date; and (iii) if any interest accrues or
remains payable after the Commitment Termination Date, upon demand. If any
interest or other payment under this Agreement becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Borrower shall be obligated to pay interest to Agent for the
account of each Lender on the outstanding balance of the Revolving Credit Loan
from the date any Revolving Credit Advance is made until it is paid in full at a
floating rate equal to the CP Rate (as in effect from time to time) plus three
----
percent (3%) per annum (the "Stated Rate"). All computations of interest shall
-----------
be made by Agent and on the basis of a three hundred and sixty (360) day year,
in each case for the actual number of days occurring in the period for which
such interest is payable. Each determination by Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(c) Upon the occurrence and during the continuance of any Event of
Default, the interest rate applicable to all of the Obligations, including the
Revolving Credit Loan, may in the sole discretion of Required Lenders be
increased, effective as of the
5
<PAGE>
date of the Default giving rise to such Event of Default, to the Default Rate;
provided, that upon the occurrence of an Event of Default specified in Sections
- -------- --------
8.1(f), (g) or (h), the interest rate applicable to all of the Obligations shall
- ------------------
be increased automatically to the Default Rate without the necessity of any
action on the part of Required Lenders.
(d) Notwithstanding anything to the contrary set forth in this Section
-------
1.5, if, at any time until payment in full of all of the Obligations, the rate
- ---
of interest payable hereunder exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such
-------------------
event and so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable hereunder shall be equal to the Maximum Lawful Rate; provided,
--------
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time as the total interest received by
each Lender from the making of Revolving Credit Advances hereunder is equal to
the total interest which such Lender would have received had the interest rate
payable hereunder been (but for the operation of this paragraph) the interest
rate payable since the Closing Date as otherwise provided in this Agreement.
Thereafter, the interest rate payable hereunder shall be the rate of interest
provided in Sections 1.5(a) through (c), unless and until the rate of interest
---------------------------
again exceeds the Maximum Lawful Rate, in which event this Section 1.5(d) shall
--------------
again apply. In no event shall the total interest received by any Lender
pursuant to the terms hereof exceed the amount which such Lender could lawfully
have received had the interest due hereunder been calculated for the full term
hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is
calculated pursuant to this paragraph, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made. In the event that a court of competent
jurisdiction, notwithstanding the provisions of this Section 1.5(d), shall make
--------------
a final determination that a Lender has received interest hereunder or under any
of the Loan Documents in excess of the Maximum Lawful Rate, such Lender shall,
to the extent permitted by applicable law, promptly apply such excess in the
manner set forth in Section 1.11, and thereafter shall refund any excess to
------------
Borrower or as a court of competent jurisdiction may otherwise order.
1.6 Eligible Accounts and Inventory. Based on the most recent
-------------------------------
Borrowing Base Certificate delivered by Borrower to Agent and Lenders and on
other information available to Agent, Agent shall determine in accordance with
the terms and provisions of this Agreement which Accounts shall be deemed to be
"Eligible Accounts" and which Inventory shall be deemed to be "Eligible
----------------- --------
Inventory" for purposes of determining the amounts, if any, to be advanced to
- ---------
Borrower under the Revolving Credit Loan.
6
<PAGE>
1.7 Fees. As compensation for Agent's and Lender's costs, skills,
----
services and efforts incurred and expended in making the Revolving Credit Loan
and the Letters of Credit available to Borrower, Borrower agrees to pay to Agent
for its own account or the account of Lenders, as the case may be, the fees set
forth in Annex D in accordance with the terms set forth therein. All of the
-------
Fees described in Annex D shall be non-refundable and shall be fully-earned as
-------
and when such Fees become due and payable.
1.8 Cash Management System. On or prior to the Closing Date, Borrower
----------------------
will establish and maintain until the Termination Date, the cash management
system described in Annex B.
-------
1.9 Receipt of Payments. Borrower shall make each payment under this
-------------------
Agreement not later than 11:00 a.m. (Los Angeles time) on the day when due in
Dollars in immediately available funds to the Collection Account. For purposes
of computing interest and Fees and determining the Borrowing Availability: (a)
all payments (including cash sweeps) consisting of cash, wire, or electronic
transfers in immediately available funds shall be deemed received by Agent upon
deposit in the Collection Account and notice to Agent of such deposit; and (b)
all payments consisting of checks, drafts, or similar non-cash items shall be
deemed received upon receipt of good funds following deposit in the Collection
Account (together with notice to Agent of such deposit). Subject to Section
-------
1.14, each payment received by Agent under this Agreement or any Revolving
- ----
Credit Note for the account of any Lender shall be paid by Agent promptly to
such Lender, in the same funds received, for application to the Revolving Credit
Loan or other obligation in respect of which such payment is made.
1.10 Pro Rata Treatment. Except to the extent otherwise provided herein:
------------------
(a) each Revolving Credit Advance (including any Revolving Credit Advance
pursuant to Section 1.14(b)) shall be incurred and made by the relevant Lenders,
---------------
and each payment of the Non-Use Fee and the Termination Fee shall be made for
the account of the relevant Lenders, pro rata according to the amounts of their
respective Revolving Credit Commitments; (b) each payment or prepayment of
principal of the Revolving Credit Loan by Borrower shall be made for the account
of the relevant Lenders pro rata in accordance with the respective unpaid
principal amounts of the Revolving Credit Loan held by Lenders; and (c) each
payment of interest on the Revolving Credit Loan by Borrower shall be made for
the account of the relevant Lenders pro rata in accordance with the amounts of
interest on the Revolving Credit Loan then due and payable to the respective
Lenders.
1.11 Application and Allocation of Payments. Borrower irrevocably
--------------------------------------
waives the right to direct the application of any and all payments at any time
or times hereafter received from or on behalf of Borrower, and Borrower
irrevocably agrees that Agent and Lenders shall have the continuing exclusive
right to apply
7
<PAGE>
any and all such payments against the then due and payable Obligations of
Borrower and in repayment of the Revolving Credit Loan and the Letter of Credit
Obligations as Lenders may deem advisable. In the absence of a specific
determination by Agent with respect thereto, the same shall be applied in the
following order: (a) then due and payable Fees, expenses and other Obligations
(including Revolving Credit Advances made by Agent in its capacity as Agent)
owing to Agent; (b) then due and payable Fees and expenses of Lenders; (c) then
due and payable interest payments; (d) then due and payable Obligations to
Lenders other than Fees, expenses and interest and principal payments; and (e)
then due and payable principal payments on the Revolving Credit Loan. Agent, on
behalf of Lenders, is authorized to, and at its option may, make or cause to be
made Revolving Credit Advances by Lenders on behalf of Borrower for payment of
all Fees, expenses, charges, costs, principal, interest, or other Obligations
then due and payable by Borrower under this Agreement or any of the Loan
Documents, even if the making of such Revolving Credit Advance causes the
outstanding balance of the Revolving Credit Loan, when added to the then
outstanding Letter of Credit Obligations, to exceed the Borrowing Availability,
in which case the terms of Section 1.2(b) shall apply.
--------------
1.12 Non-Receipt of Funds by Agent. Unless Agent shall have been
-----------------------------
notified by a Lender or Borrower (in either case, "Payor") prior to the date on
-----
which such Payor is to make payment to Agent of (in the case of a Lender) the
proceeds of a Revolving Credit Advance to be made by such Lender hereunder or
(in the case of Borrower) a payment to Agent for account of one or more of
Lenders hereunder (such payment being herein called the "Required Payment"),
----------------
which notice shall be effective upon receipt by Agent, that such Payor does not
intend to make the Required Payment to Agent, Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if such Payor has not in fact made the Required Payment to
Agent, the recipient(s) of such payment shall, on demand, repay to Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was so
------------
made available by Agent until the date Agent recovers such amount, at a rate per
annum equal to the CP Rate for such day and, if such recipient(s) shall fail
promptly to make such payment, Agent shall be entitled to recover such amount,
on demand, from such Payor, together with interest as aforesaid; provided, that
--------
if neither the recipient(s) nor such Payor shall return the Required Payment to
Agent within three (3) Business Days of the Advance Date, then, retroactively to
the Advance Date, such Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(a) if the Required Payment shall represent a payment to be made by
Borrower to Lenders, Borrower and the recipient(s) shall (without
duplication) each be obligated
8
<PAGE>
retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Default Rate (and, in case the recipient(s) shall
return the Required Payment to Agent, without limiting the obligation of
Borrower hereunder to pay interest to such recipient(s) at the Default Rate
in respect of the Required Payment); and
(b) if the Required Payment shall represent proceeds of a Revolving
Credit Advance to be made by Lenders to Borrower, such Payor and Borrower
shall (without duplication) each be obligated retroactively to the Advance
Date to pay interest in respect of the Required Payment at the rate of
interest provided for such Required Payment pursuant hereto (and, in case
Borrower shall return the Required Payment to Agent, without limiting any
claim Borrower may have against Payor in respect of the Required Payment).
Nothing in this Section 1.12 or elsewhere in this Agreement or the other Loan
------------
Documents shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Revolving
Credit Commitment hereunder or to prejudice any rights that Borrower may have
against any Lender as a result of any default by such Lender hereunder.
1.13 Sharing of Payments, Etc.
-------------------------
(a) Borrower agrees that, in addition to (and without limitation of)
any right of setoff, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option (but subject, as between Lenders,
to the provisions of the last sentence of Section 1.1(f)), to offset balances
--------------
held by it for the account of Borrower at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Lender's
pro rata portion of the Revolving Credit Loan (including any Revolving Credit
Advances deemed made by such Lender under Section 1.14(b)) or any other amount
---------------
payable to such Lender hereunder, that is not paid when due (regardless of
whether such balances are then due to Borrower), in which case it shall promptly
notify Borrower and Agent thereof; provided, that such Lender's failure to give
--------
such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from Borrower payment of any principal
of or interest on the Revolving Credit Loan owing to it or payment of any other
amount under this Agreement or any Revolving Credit Note held by it, or any
other Loan Document through the exercise of any right of setoff, banker's lien
or counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received a
greater percentage of the principal of or interest on the Revolving Credit Loan
or such other amounts then due hereunder or thereunder by Borrower to such
Lender than the percentage received by any other Lender, it
9
<PAGE>
shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in
(or, if and to the extent specified by such Lender, direct interests in) the
Revolving Credit Loan or such other amounts, respectively, owing to such other
Lenders (or in interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be equitable, to the end
that all Lenders shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Lender in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal of and/or
interest on the Revolving Credit Loan or such other amounts, respectively, owing
to each Lender. Amounts received by Agent under this Section 1.13(b) shall be
---------------
treated as a payment by Borrower under Section 1.9. To such end all Lenders
-----------
shall make appropriate adjustments among themselves (by the resale of any
participation sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) Borrower agrees that any Lender so purchasing such a participation
(or direct interest) may exercise, in a manner consistent with Section 1.13(a),
---------------
all rights of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender were a direct holder of
the Revolving Credit Loan or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
right as against Borrower as described in this Section 1.13 or shall affect the
------------
right of any Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of Borrower. If,
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff or right as against Borrower to
which this Section 1.13 applies, such Lender shall, to the extent practicable,
------------
assign such rights to Agent for the benefit of Lenders and, in any event,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of Lenders entitled under this Section 1.13 to share in the benefits
------------
of any recovery on such secured claim.
1.14 Settlement Procedures.
---------------------
(a) The Revolving Credit Loan balance may fluctuate from day to day
from Agent's disbursement of funds to, and receipt of funds from, Borrower. In
order to minimize the frequency of transfers of funds between Agent and Lenders,
Revolving Credit Advances may be made by Agent and payments in respect thereof
will be settled according to the procedures set forth in this Section 1.14.
------------
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any Revolving Credit Advance made to Borrower will commence on the date such
Revolving Credit Advances are made. Such payments will be made
10
<PAGE>
by each Lender without setoff, counterclaim or reduction of any kind.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Agent may elect, at its sole option, to fund the entire amount of any
Revolving Credit Advance requested by Borrower. In the event Agent makes such
election, such Revolving Credit Advance made by Agent shall be deemed, and shall
constitute, as of the date of making thereof, a Revolving Credit Advance made by
each of Lenders in an amount equal to such Lender's pro rata share thereof, and
each Lender shall be obligated to deliver to Agent such share of such Revolving
Credit Advance on the Weekly Settlement Date in accordance with the procedure
for weekly settlement set forth in Section 1.14(c) or as otherwise provided in
---------------
Section 1.14(d). Notwithstanding anything to the contrary contained in this
- ---------------
Agreement, for purposes of calculating interest payable to any Lender (i) Agent
shall be deemed a "Lender" with respect to any outstanding Revolving Credit
Advances funded by Agent, and (ii) the amount of Revolving Credit Advances of
any Lender that are outstanding on any day shall be equal to the amount of such
Lender's Revolving Credit Advances outstanding on such day (A) excluding any
Revolving Credit Advances that have been funded entirely by Agent with respect
to which such Lender has not funded its pro rata share and (B) including
Revolving Credit Advances of such Lender which have been repaid by Borrower to
Agent but not yet received by such Lender from Agent.
(c) Each Lender shall settle with Agent, upon Agent's request, on the
third Business Day of each week (or on such other day of the week as may be
designated from time to time by Agent) in each successive week (the "Weekly
------
Settlement Date"), on the net Revolving Credit Advances and payments since the
- ---------------
date of the last settlement. On each Weekly Settlement Date, prior to 9:00 a.m.
(Los Angeles time), Agent shall notify each Lender by telephone or by telex,
telecopy or other form of teletransmission, of such Lender's pro rata share of
the outstanding Revolving Credit Advances and the amount of the payment
necessary to adjust such Lender's outstanding Revolving Credit Advances to such
Lender's pro rata share of such Revolving Credit Advances as of such Weekly
Settlement Date (on a net basis taking into account any funds in the Collection
Account which Agent determines are available). Any such payment shall be made
by the party from which such payment is due to the other party, in same day
funds, not later than 11:00 a.m. (Los Angeles time) on such Weekly Settlement
Date. If any Lender shall, for any reason, not settle with Agent within one
Business Day after the Weekly Settlement Date, such Lender agrees to pay and
Borrower agrees to repay, severally, to Agent forthwith on demand the amount due
Agent on such Weekly Settlement Date together with interest thereon for each day
from such Weekly Settlement Date until the day such amount is paid to Agent, at
(i) in the case of such Lender, the CP Rate for the first three (3) days for
which such amount remains unpaid and thereafter at the Stated Rate, and
11
<PAGE>
(ii) in the case of Borrower, the Stated Rate for each day after the date of
demand that such amount remains unpaid. If such Lender shall pay to Agent such
corresponding amount, such amount so paid shall constitute such Lender's
Revolving Credit Advance and, if both such Lender and Borrower shall have paid
and repaid, respectively, such corresponding amount, Agent shall promptly pay
over to Borrower such corresponding amount in same day funds, but Borrower shall
remain obligated for all interest thereon.
(d) As an alternative to the weekly settlement provided for in Section
-------
1.14(c) , Agent may elect at its sole option, to use the following same day
- -------
settlement procedure for borrowings of Revolving Credit Advances. Prior to 9:00
a.m. (Los Angeles time) on any date specified for a borrowing of a Revolving
Credit Advance in a Notice of Revolving Credit Advance, Agent may notify each
Lender by telephone or by telex, telecopy or other form of teletransmission, of
the requested Revolving Credit Advance. Not later than 11:00 a.m. (Los Angeles
time) on the date of such proposed Revolving Credit Advance, each Lender shall
make available to Agent, in same day funds, to such account of Agent as Agent
may designate, such Lender's pro rata share of such Revolving Credit Advance.
Notwithstanding the foregoing, to the extent that there are available funds in
the Collection Account, Agent may, at Agent's discretion, notify each Lender
that such Lender's obligation to make available to Agent same day funds as
provided in the preceding sentence shall be satisfied to the extent of its pro
rata share out of such funds in the Collection Account, or such portion of such
funds as Agent shall indicate are to be applied to fund such Revolving Credit
Advance.
1.15 Accounting. Agent will provide a monthly accounting of transactions
----------
under the Revolving Credit Loan to Borrower. Each and every such accounting
shall (absent manifest error) be deemed final, binding and conclusive upon
Borrower in all respects as to all matters reflected therein, unless Borrower,
within thirty (30) days after the date any such accounting is delivered by Agent
to Borrower, shall notify Agent in writing of any objection which Borrower may
have to any such accounting, describing the basis for such objection with
specificity. In that event, only those items (the "disputed items") expressly
--------------
objected to in such notice shall be deemed to be disputed by Borrower. Agent's
determination, based upon the facts available, of any disputed item shall
(absent manifest error) be final, binding and conclusive on Borrower.
1.16 Indemnity.
---------
(a) Borrower shall indemnify and hold Agent, each Lender and their
respective Affiliates, officers, directors, employees, attorneys and agents
(each, an "Indemnified Person"), harmless from and against any and all suits,
------------------
actions, costs, fines, deficiencies, penalties, proceedings, claims, damages,
losses, liabilities and expenses (including reasonable attorneys' fees and
disbursements and other costs of investigations or
12
<PAGE>
defense, including those incurred upon any appeal) (each, a "Claim") which may
-----
be instituted or asserted against or incurred by such Indemnified Person as the
result of credit having been extended under this Agreement or any other Loan
Document or otherwise arising in connection with the transactions contemplated
hereunder and thereunder, including any and all Environmental Liabilities and
Costs and any infringement Claim relating to any intellectual property rights of
any Person, and regardless of whether the Indemnified Person is a party to such
Claim; provided, that Borrower shall not be liable for any indemnification to
--------
such Indemnified Person to the extent that such Claim results solely from such
Indemnified Person's gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction. NEITHER AGENT NOR ANY
LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY.
(b) In any suit, proceeding or action brought by Agent or Lenders
relating to any Account, Chattel Paper, Contract, General Intangible,
Instrument, Equipment or Document for any sum owing thereunder, or to enforce
any provision of any Account, Chattel Paper, Contract, General Intangible,
Instrument or Document, Borrower shall save, indemnify and keep Agent and
Lenders harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from Borrower, and all such obligations of Borrower shall be and remain
enforceable against, and only against, Borrower and shall not be enforceable
against Agent or Lenders.
(c) Borrower hereby acknowledges and agrees that neither Agent nor any
Lender (as of the date hereof) (i) is now or has ever been in control of any of
the Subject Property or the affairs of any Loan Party, or (ii) has the capacity
through the provisions of the Loan Documents to influence the conduct of any
Loan Party with respect to the ownership, operation or management of any of the
Subject Property.
1.17 Access. Borrower shall (and shall cause each of its Subsidiaries
------
to): (a) provide access during normal business hours to Agent and each Lender
and any of their respective officers, employees and agents, as frequently as
Agent or any Lender determines to be appropriate, upon reasonable advance notice
(unless a Default shall have occurred and be continuing,
13
<PAGE>
in which event no notice shall be required and Agent and each Lender shall have
access at any and all times), to the properties and facilities of Borrower or
any of its Subsidiaries; (b) permit Agent, and each Lender and any of their
officers, employees and agents to inspect, audit and make extracts from all of
Borrower's records, files and books of account at the times and pursuant to the
procedures set forth in clause (a) above; and (c) permit Agent, on behalf of
Lenders, to conduct audits to inspect, review and evaluate the Collateral, and
Borrower agrees to render to Agent and each Lender at Borrower's cost and
expense, such clerical and other assistance as may be reasonably requested with
regard thereto at the times and pursuant to the procedures set forth in clause
(a) above. Borrower shall, and shall cause each of its Subsidiaries to, make
available to Agent and each Lender and their respective counsel, as quickly as
practicable under the circumstances, originals or copies of all books, records,
board minutes, contracts, insurance policies, environmental audits, business
plans, files, financial statements (actual and pro forma), filings with Federal,
state and local regulatory agencies, and other instruments and documents which
Agent or any Lender may reasonably request. Borrower shall deliver any document
or instrument reasonably necessary for Agent or any Lender, as it may from time
to time request, to obtain records from any service bureau or other Person which
maintains records for Borrower, and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
Borrower. Borrower shall instruct its independent certified public accountants
and its banking and other financial institutions to make available to Agent and
each Lender such information and records as Agent and each Lender may reasonably
request.
1.18 Taxes.
-----
(a) Any and all payments by or on behalf of Borrower hereunder or
under any Revolving Credit Note or any other Loan Document, shall be made, in
accordance with this Section 1.18, free and clear of and without deduction for
------------
any and all present or future Taxes. If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Revolving Credit Note or any other Loan Document to Agent or any Lender, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 1.18) Agent or such Lender receives an amount equal to the
------------
sum it would have received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary Taxes or any other excise or property Taxes that arise from any
payment made hereunder or from the
14
<PAGE>
execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
-----------
(c) Borrower shall indemnify and pay, within ten (10) Business Days of
written demand therefor (which demand shall include a statement of the basis
therefor), Agent and each Lender for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 1.18) paid by Agent or such Lender and any liability
------------
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Any Lender who receives an indemnification payment pursuant to this
Section 1.18(c) shall, at Borrower's sole cost and expense, provide all
- ---------------
reasonable assistance to Borrower in obtaining a refund if such Tax or Other
Taxes were incorrectly or illegally asserted.
(d) Within thirty (30) days after the date of any such payment of
Taxes or Other Taxes, Borrower shall furnish to Agent or such Lender, at its
address referred to in Section 11.9, the original or a certified copy of a
------------
receipt evidencing payment thereof.
(e) If any Lender subsequently receives from a taxing authority a
refund of any Tax or Other Tax previously paid by Borrower and for which
Borrower has indemnified Lender pursuant to this Section 1.18, such Lender shall
------------
within thirty (30) days after receipt of such refund, and to the extent
permitted by applicable law, pay to Borrower the net amount of any such refund
after deducting taxes and expenses attributable thereto.
(f) Each Lender that is organized under the laws of any jurisdiction
other than the United States of America or any State thereof (including the
District of Columbia) agrees (i) to furnish to Borrower and Agent, prior to the
first interest payment date after which it becomes a Lender hereunder (including
by assignment), two (2) copies of either U.S. Internal Revenue Service Form 1001
or Form 4224 (wherein such Lender claims entitlement to complete exemption from
or reduced rate of United States Federal withholding tax on interest paid by
Borrower hereunder) and (ii) to provide to Borrower and Agent new Forms 4224 or
1001, as applicable, or any successor forms thereto upon the expiration or
obsolescence of any previously delivered form; provided, that no such Lender
--------
shall be required to deliver a Form 4224 or 1001 under clause (ii) of this
Section 1.18(f) to the extent that the delivery of such form is not authorized
- ---------------
due to a change in law. If any such Lender fails to deliver any certificate
required hereunder, the provisions of this Section 1.18, other than Section
------------ -------
1.18(f), shall not apply to such Lender.
- -------
(g) In the event Borrower becomes obligated to pay any additional
material amounts to any Lender pursuant to this Section 1.18 (which amounts are
------------
not due or payable to all Lenders
15
<PAGE>
generally) as a result of any event or condition described in this Section 1.18,
------------
then, unless such Lender has theretofore taken steps to remove or cure, and has
removed or cured, the conditions creating the cause of such obligation to pay
such additional amounts, Borrower may, subject to Agent's consent, designate a
substitute lender (such substitute lender herein called a "Replacement Lender")
------------------
to purchase and assume such Lender's rights and obligations (including
obligations with respect to Letters of Credit) with respect to its entire pro
rata share hereunder, without recourse to or warranty by, or expense to, such
Lender, for a purchase price equal to the outstanding principal amounts payable
to such Lender with respect to its pro rata share hereunder, plus any accrued
and unpaid interest and accrued and unpaid Fees in respect of such Lender's pro
rata share and on other terms satisfactory to Agent. Upon such purchase by the
Replacement Lender and payment of all other amounts owing to the Lender being
replaced hereunder, such Lender shall no longer be a party hereto or have any
rights or obligations hereunder, and the Replacement Lender shall succeed to the
rights and obligations of such Lender with respect to its pro rata share
hereunder; provided, that the rights of such Lender pursuant to this Section
-------- -------
1.18(g) shall survive any substitution described in this Section 1.18(g).
- ------- ---------------
1.19 Capital Adequacy.
----------------
(a) Borrower shall pay directly to each Lender from time to time on
written request such amounts as such Lender may reasonably determine to be
necessary to compensate such Lender for any increased costs to such Lender that
it reasonably determines are attributable to any law or regulation, or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing after the date hereof any risk-based capital guideline or other
capital requirement (whether or not having the force of law and whether or not
the failure to comply therewith would be unlawful) hereafter issued by any
Governmental Authority in respect of such Lender's Revolving Credit Commitment,
Revolving Credit Loan, or incurrence of Letter of Credit Obligations hereunder
(such compensation to include an amount equal to any reduction of the rate of
return on assets or equity of such Lender to a level below that which such
Lender could have achieved but for such law, regulation, interpretation,
directive or request).
(b) Each Lender will furnish to Borrower a certificate setting forth
the basis and amount of each request by such Lender for compensation under this
Section 1.19. Determinations and allocations by any Lender for purposes of this
- ------------
Section 1.19 of the effect of any Regulatory Change pursuant to or of capital
- ------------
maintained pursuant to this Section 1.19, on its costs or rate of return of
------------
maintaining Revolving Credit Advances, Letter of Credit Obligations, and its
Revolving Credit Commitment, and of the
16
<PAGE>
amounts required to compensate such Lender under this Section 1.19, shall be
------------
conclusive absent manifest error.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Revolving Credit Advance and Letter of
----------------------------------------------------------------
Credit Obligations. Notwithstanding any other provision of this Agreement and
- ------------------
without affecting in any manner the rights of Agent or any Lender hereunder,
Borrower shall have no rights under this Agreement (but shall have all
applicable obligations hereunder), and Agent and Lenders shall not be obligated
to make the initial Revolving Credit Advance or to incur the initial Letter of
Credit Obligations or to take, fulfill, or perform any other action hereunder,
until the following conditions have been fulfilled to the satisfaction of or
waived in writing by Agent (and to the extent specified below, of Lenders):
(a) This Agreement or counterparts thereof shall have been duly
executed by, and delivered to, Borrower, Agent and each Lender.
(b) Agent and Lenders shall have received such documents, instruments,
certificates, opinions and agreements as Agent shall request in connection with
the transactions contemplated by this Agreement, including all documents,
instruments, agreements and other materials listed in the Schedule of Documents,
---------------------
including each of the Repurchase Agreements, all of which shall be in form and
substance satisfactory to Agent and Required Lenders.
(c) Evidence satisfactory to Agent that Borrower has obtained consents
and acknowledgments of all Persons whose consents and acknowledgments may be
required, including all requisite Governmental Authorities, to the terms and to
the execution and delivery of this Agreement and the other Loan Documents and
the consummation of the transactions contemplated hereby and thereby.
(d) The terms of the Plan of Reorganization (including Borrower's
proposed capital structure and management and the structure and composition of
the board of directors of Borrower as of Consummation) shall not have been
amended, modified or supplemented without Agent's prior written consent, and the
order of the Bankruptcy Court confirming the Plan of Reorganization (the
"Confirmation Order") and all other Bankruptcy Court orders approving,
- -------------------
modifying, amending or implementing or affecting the Plan of Reorganization or
any Loan Document and the rights, remedies and obligations thereunder shall be
in form and substance satisfactory to Agent.
17
<PAGE>
(e) All aspects of the Plan of Reorganization's effect upon Borrower,
including the tax effects, shall be satisfactory to Agent.
(f) All conditions to the occurrence of Consummation (other than the
execution of this Agreement) shall have been satisfied or waived as contemplated
in the Plan of Reorganization in a manner acceptable to Agent.
(g) Evidence satisfactory to Agent that the insurance policies
provided for in Section 3.19 and Annex F are in full force and effect, together
------------ -------
with appropriate evidence showing a loss payable and/or additional insured
clauses or endorsements, as appropriate, in favor of Agent and Lenders and in
form and substance satisfactory to Agent.
(h) No default or event of default shall exist under any Material
Franchise Agreement.
(i) All of the assets supporting the initial Revolving Credit Advance
and the amount, if any, of the reserves to be established on the Closing Date
shall be sufficient in value, on a pro forma basis after giving effect to the
payment of all anticipated closing expenditures, whether or not then paid, as
determined by Agent, and without any material deterioration of trade payables,
to provide Borrower with Net Borrowing Availability under the Revolving Credit
Loan of not less than $5,000,000.
(j) Payment by Borrower to Agent for its account and the account of
Lenders, as the case may be, of all Fees, costs, and expenses of closing
(including fees and expenses of consultants and counsel to Agent presented as of
the Closing Date).
(k) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body (i) which, if successful, would have a
Material Adverse Effect, or (ii) to enjoin, restrain or prohibit, or to obtain
damages in respect of, or which is related to or arises out of, this Agreement
or any of the other Loan Documents or the consummation of the transactions
contemplated hereby and thereby and which, in Agent's sole judgment, would make
it inadvisable to consummate the transactions contemplated by this Agreement or
any of the other Loan Documents.
(l) Agent, in its sole judgment, shall not have determined that: (i)
Borrower shall have made any Restricted Payment since December 31, 1995; (ii)
any material increase in liabilities, liquidated or contingent, of Borrower, or
any material decrease in the assets of Borrower, shall have occurred since
December 31, 1995, except as shown in Borrower's unaudited June 30, 1996
financial statements; or (iii) any Material Adverse
18
<PAGE>
Effect shall have occurred since December 31, 1995, except as shown in
Borrower's unaudited June 30, 1996 financial statements.
(m) Agent shall be satisfied, in its sole judgment, with the
corporate, capital, tax, legal and management structure of Borrower, and shall
be satisfied, in its sole judgment exercised reasonably, with the nature and
status of all contractual obligations, securities, labor, tax, ERISA, employee
benefit, environmental, health and safety matters, in each case, involving or
affecting Borrower.
(n) There shall be no outstanding "Obligations" under as defined in
the DIP Agreement, other than such "Obligations" to be satisfied in full by the
initial Revolving Credit Advance and Letter of Credit Obligations.
2.2 Further Conditions to Each Revolving Credit Advance and Each Letter
-------------------------------------------------------------------
of Credit Obligation. It shall be a further condition to the funding of the
- --------------------
initial and each subsequent Revolving Credit Advance and the incurrence of the
initial and each subsequent Letter of Credit Obligation, if any, that the
following statements shall be true on the date of each such funding, advance or
incurrence, as the case may be:
(a) Borrower's representations and warranties contained herein or in
any of the Loan Documents shall be true and correct in all material respects on
and as of the Closing Date and the date on which each such Revolving Credit
Advance is made or any Letter of Credit Obligation, if any, is incurred, as
though made on or incurred on and as of such date, except to the extent that any
such representation or warranty expressly relates solely to an earlier date and
except for changes therein permitted or contemplated by this Agreement.
(b) No event shall have occurred and be continuing, or would result
from the making of any Revolving Credit Advance or the incurrence of any Letter
of Credit Obligation, as the case may be, which constitutes or, after such
funding, would constitute a Default or an Event of Default.
(c) After giving effect to such Revolving Credit Advance or the
incurrence of such Letter of Credit Obligation, as the case may be, the
aggregate principal amount of the Revolving Credit Loan and outstanding Letter
of Credit Obligations shall not exceed the Borrowing Availability as reflected
on the most recent Borrowing Base Certificate delivered to Agent and Lenders.
(d) Each of the conditions set forth in Section 2.1(b), Section
-------------- -------
2.1(c), Section 2.1(g) and Section 2.1(h) shall continue to be satisfied by
-------------- --------------
Borrower as of such date.
(e) No Material Adverse Effect shall have occurred.
19
<PAGE>
The request and acceptance by Borrower of the proceeds of any Revolving Credit
Advance, and the request by Borrower for the incurrence by Lenders of Letter of
Credit Obligations, as the case may be, shall be deemed to constitute, as of the
date of such request or acceptance, (i) a representation and warranty by
Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a
-----------
confirmation by Borrower of the granting and continuance of Agent's and Lenders'
Liens pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, Borrower
represents and warrants to Agent and Lenders that:
3.1 Corporate Existence; Compliance with Law. Borrower: (a) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to do business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification, except
where the failure to be in good standing in such other jurisdictions would not
result in a Material Adverse Effect; (b) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now and proposed to be conducted; (c) has all licenses,
permits, consents and approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct, except where any
such noncompliance would not result in a Material Adverse Effect; (d) is in
compliance with its certificate of incorporation and by-laws; and (e) is in
compliance in all material respects with all applicable provisions of law.
3.2 Executive Offices; Collateral Locations; Corporate or Other Names.
-----------------------------------------------------------------
The current locations of Borrower's executive office, principal place of
business, corporate offices, all warehouses and premises within which any
Collateral is stored or located, and the locations of all of Borrower's records
concerning the Collateral are set forth in Schedule 3.2. During the prior five
------------
(5) years, except as set forth in Schedule 3.2, Borrower has not been known as
------------
or used any corporate, fictitious or trade name.
3.3 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Borrower of the Loan Documents and all
other instruments and documents to be delivered by Borrower hereunder and
thereunder and the creation of all Liens provided for herein and therein: (a)
are within Borrower's corporate power; (b) have been duly authorized by all
necessary corporate and shareholder action; (c) are not in
20
<PAGE>
contravention of any provision of Borrower's certificate of incorporation or by-
laws or other organizational documents; (d) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(e) will not conflict with or result in the breach or termination of, constitute
a default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which Borrower
is a party or by which Borrower or any of its property is bound; (f) will not
result in the creation or imposition of any Lien upon any of the property of
Borrower other than those in favor of Agent or Lenders, all pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except for the Confirmation Order and those
referred to in Section 2.1(c), all of which will have been duly obtained, made
--------------
or complied with prior to the Closing Date and which are in full force and
effect. As of the Closing Date, each of the Loan Documents has been duly
executed and delivered for the benefit of or on behalf of Borrower and each
constitutes a legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms.
3.4 Financial Statements and Projections. Borrower has delivered the
------------------------------------
Financials and Projections identified in Schedule 3.4, and each of such
------------
Financials and Projection complies in all material respects with the description
thereof contained in Schedule 3.4.
------------
3.5 Material Adverse Change. As of the date hereof, Borrower has no
-----------------------
material obligations, contingent liabilities, liabilities for Charges then due,
long-term leases or unusual forward or long-term commitments which are not
reflected in the audited December 31, 1995 consolidated balance sheet of
Borrower and the June 30, 1996 unaudited financial statements of Borrower. As
of the date hereof, there has been no material deviation from the Projections
provided to Lenders. Except as otherwise permitted hereunder or as set forth in
Schedule 3.5, no Restricted Payment has been made since December 31, 1995, and
- ------------
no shares of Stock of Borrower have been, or are now required to be, redeemed,
retired, purchased or otherwise acquired for value by Borrower. Except as set
forth in Schedule 3.5, since December 31, 1995, no event has occurred which
------------
would result in a Material Adverse Effect.
3.6 Ownership of Property; Liens. Except as described in Schedule 3.6,
---------------------------- ------------
the real estate listed in Schedule 3.6 constitutes all of the real property
------------
owned, leased, or used in its business by Borrower. Borrower holds (a) good and
marketable fee simple title to all of its real estate described as owned in
Schedule 3.6, (b) valid and marketable leasehold interests in all of Borrower's
- ------------
Leases (both as lessor and lessee, sublessee or assignee) described as leased in
Schedule 3.6, and (c) good and marketable title to, or valid leasehold interests
- ------------
in, all of its other properties and assets. None of the properties and assets
21
<PAGE>
of Borrower are subject to any Liens, except (x) Permitted Encumbrances and
Liens set forth in Schedule 6.7 and (y) from and after the Closing Date, the
------------
Lien in favor of Agent and Lenders pursuant to the Collateral Documents.
Borrower has received all deeds, assignments, waivers, consents, non-disturbance
and recognition or similar agreements, bills of sale and other documents, and
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect Borrower's right, title and interest in and to all such real
estate and other assets or property. Except as described in Schedule 3.6: (a)
------------
as of the date hereof, neither Borrower, nor, to Borrower's knowledge, any other
party to any such Lease described in Schedule 3.6 is in default of its
------------
obligations thereunder or has delivered or received any notice of default under
any such Lease, and no event has occurred which, with the giving of notice, the
passage of time, or both, would constitute a default under any such Lease; (b)
Borrower does not own or hold, and is not obligated under or a party to, any
option, right of first refusal or any other contractual right to purchase,
acquire, sell, assign or dispose of any real property owned or leased by it; and
(c) no portion of any real property owned or leased by Borrower has suffered any
material damage by fire or other casualty loss which has not heretofore been, as
of the Closing Date, completely repaired and restored, or, at all times
thereafter, repaired and restored (or is in the process of being repaired and
restored), to a position reasonably comparable to its original condition. All
material permits required to have been issued or appropriate to enable the real
property owned or leased by Borrower to be lawfully occupied and used for all of
the purposes for which they are currently occupied and used, have been lawfully
issued and are, as of the date hereof, in full force and effect.
3.7 Restrictions; No Default; Material Contracts. No contract, lease,
--------------------------------------------
agreement or other instrument to which Borrower is a party or by which it or any
of its properties or assets is bound or affected and no provision of any
charter, corporate restriction, applicable law or governmental regulation
binding upon or applicable to Borrower has resulted in or will result in a
Material Adverse Effect. Borrower is not in default and, to Borrower's
knowledge, no third party is in default, under or with respect to any Material
Contract to which Borrower is a party. No Default has occurred and is
continuing. Schedule 3.7, as supplemented from time to time by written
------------
disclosures to the Agent, sets forth a complete and accurate list of all
Material Contracts of Borrower and each of its Subsidiaries.
3.8 Labor Matters. As of the date hereof, except as set forth in
-------------
Schedule 3.8, there are no strikes or other labor disputes against Borrower that
- ------------
are pending or, to Borrower's knowledge, threatened. Hours worked by and
payment made to employees of Borrower have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters, which
violation in either case would have a Material Adverse Effect. All material
payments due from Borrower on
22
<PAGE>
account of employee health and welfare insurance have been paid or accrued as a
liability on the books of Borrower. Except as set forth in Schedule 3.8,
------------
Borrower does not have any obligation under any collective bargaining agreement,
management agreement, or any employment agreement, and a correct and complete
copy of each agreement listed in Schedule 3.8 has been made available to Agent.
------------
As of the date hereof, there is no organizing activity involving Borrower
pending or, to Borrower's knowledge, threatened by any labor union or group of
employees. Except as set forth in Schedule 3.14, there are no representation
-------------
proceedings pending or, to Borrower's knowledge, threatened with the National
Labor Relations Board, and no labor organization or group of employees of
Borrower has made a pending demand for recognition, and there are no complaints
or charges against Borrower pending or, to Borrower's knowledge, threatened to
be filed with any Federal, state, local or foreign court, governmental agency or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by Borrower of any individual,
which could reasonably be expected to have a Material Adverse Effect.
3.9 Ventures and Subsidiaries; Outstanding Stock and Indebtedness.
-------------------------------------------------------------
Except as set forth in Schedule 3.9, Borrower has no Subsidiaries and is not
------------
engaged in any joint venture or partnership with any other Person. Schedule 3.9
------------
lists the number of authorized, and issued and outstanding Stock of Borrower.
Except as set forth in Schedule 3.9, there are no outstanding rights to purchase
------------
options, warrants or similar rights or agreements pursuant to which Borrower may
be required to issue, sell or purchase any Stock or other equity security.
Schedule 6.3 lists all Indebtedness in excess of $100,000 of Borrower as of the
- ------------
Closing Date.
3.10 Government Regulation. Borrower: (a) is not an "investment company"
---------------------
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940 as amended; and (b) is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act
or any other Federal or state statute that restricts or limits Borrower's
ability to incur Indebtedness, pledge its assets, or to perform its obligations
hereunder, or under any other Loan Document, and the making of the Revolving
Credit Advances and the incurrence of the Letter of Credit Obligations, in each
case by Lenders, the application of the proceeds and repayment thereof by
Borrower, and the consummation of the transactions contemplated by this
Agreement and the other Loan Documents, will not violate any provision of any
such statute or any rule, regulation or order issued by the Securities and
Exchange Commission.
3.11 Margin Regulations. Borrower is not engaged in the business of
------------------
extending credit for the purpose of purchasing or carrying Margin Stock and no
proceeds of the any Revolving Credit
23
<PAGE>
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. Borrower
will not take or permit to be taken any action which might cause any Loan
Document or any document or instrument delivered pursuant hereto or thereto to
violate any regulation of the Board of Governors of the Federal Reserve Board.
3.12 Taxes. All Federal, state, local and foreign tax returns, reports
-----
and statements, including information returns required to be filed by Borrower,
have been filed with the appropriate Governmental Authority and all Charges and
other impositions shown thereon to be due and payable have been paid prior to
the date on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof, or any such fine, penalty, interest, late charge
or loss has been paid. Borrower has paid when due and payable all material
Charges required to be paid by it. Proper and accurate amounts have been
withheld by Borrower from its employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions
of applicable Federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. Schedule 3.12 sets
-------------
forth those taxable years for which any of the tax returns of Borrower are
currently being audited by the IRS or any other applicable Governmental
Authority; and any assessments or threatened assessments in connection with such
audit or otherwise currently outstanding. Except as described in Schedule 3.12,
-------------
Borrower has not executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Charges. None of the
property owned by Borrower is property which is required to treat as being owned
by any other Person pursuant to the provisions of IRC Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, and in effect immediately prior to
the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of IRC Section 168(h). Borrower has not agreed or been
requested to make any adjustment under IRC Section 481(a) or IRC Section 482 by
reason of a change in accounting method or otherwise. Borrower has no
obligation under any written tax sharing agreement except as described in
Schedule 3.12. Borrower's federal employer identification number is set forth
- -------------
in Schedule 3.12.
-------------
3.13 ERISA.
-----
(a) Schedule 3.13 lists all Title IV Plans, Multiemployer Plans and
-------------
Retiree Welfare Plans maintained or contributed to by Borrower or by any ERISA
Affiliate of Borrower, and separately identifies such plans as either Title IV
Plans, Multiemployer Plans, multiple employer plans subject to Section 4064 of
ERISA or Retiree Welfare Plans. To the knowledge of Borrower: (i) all
Qualified Plans of Borrower or any ERISA
24
<PAGE>
Affiliate of Borrower are the subject of current favorable determination letters
received from the IRS under Section 401(a) of the IRC considering the effects on
such Qualified Plans of the Tax Reform Act of 1986 and all later tax enactments
through the Omnibus Reconciliation Act of 1993 ("OBRA 93")(except that
-------
compliance with the Unemployment Compensation Amendments of 1992 or/and OBRA 93
may be demonstrated alternatively by the timely verbatim adoption of appropriate
IRS model amendments), or the appropriate Person has timely filed (or, in the
case of any Qualified Plan with a plan year ending October 31, November 30 or
December 31, the appropriate Person either has timely filed or will timely file
such application) an application with the IRS for such a letter, all such
Qualified Plans have been or shall be amended, including retroactive amendments,
as required during such determination letter process to maintain the qualified
status of such Plans, and, to the best of Borrower's knowledge, all such
Qualified Plans have been operated in all material respects in compliance with
their written terms and the provisions of applicable law; and (ii) the trusts
created under each Qualified Plan are exempt from tax under the provisions of
IRC Section 501(a) and nothing has occurred which would cause the loss of
qualification of any Qualified Plan or tax-exempt status of any such trust. To
the knowledge of Borrower, each Plan is in compliance in all material respects
with the applicable provisions of ERISA and the IRC, including the filing of all
reports required under the IRC or ERISA which are true and correct as of the
date filed, and all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. Neither Borrower nor any
ERISA Affiliate of Borrower has failed to make any contribution or pay any
amount required by IRC Section 412 or Section 302 of ERISA. The present value
of the liabilities under all unfunded Pension Plans of Borrower and its ERISA
Affiliates does not exceed the aggregate amount of $500,000. Neither Borrower
nor any ERISA Affiliate has engaged in a prohibited transaction, as defined in
IRC Section 4975 or Section 406 of ERISA, in connection with any Plan which
would subject Borrower or any ERISA Affiliate to a material tax on prohibited
transactions imposed by IRC Section 4975 or any other material liability.
(b) Except as set forth in Schedule 3.13: (i) no Title IV Plan has
-------------
any material Unfunded Pension Liability; (ii) neither Borrower nor any ERISA
Affiliate of Borrower nor Borrower and its ERISA Affiliates in the aggregate,
have, or upon the occurrence of any reasonably possible events, would have any
material liability to any Multiemployer Plan or Retiree Welfare Plan which is
not otherwise fully disclosed as or in a line item in the audited financial
statements of Borrower or any ERISA Affiliate; (iii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur which has or can be expected to
result in any material liability to Borrower; (iv) there are no pending, or to
the knowledge of Borrower, threatened claims, actions or lawsuits (other than
claims for benefits in the normal
25
<PAGE>
course), asserted or instituted against (x) any Plan or its assets, (y) any
fiduciary (within the meaning of Section 3(21)(A) of ERISA) with respect to any
Plan or (z) Borrower or any ERISA Affiliate with respect to any Plan; (v)
neither Borrower nor any ERISA Affiliate of Borrower has incurred or reasonably
expects to incur any Withdrawal Liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal from a Multiemployer Plan; (vi) within the last five (5) years
neither Borrower nor any ERISA Affiliate of Borrower has engaged in a
transaction which resulted in a Title IV Plan with Unfunded Pension Liabilities
being transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any such entity; (vii) no Plan which is a
Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by IRC Section 4980B and at
the sole expense of the participant or the beneficiary of the participant);
(viii) Borrower and each ERISA Affiliate of Borrower have complied in all
material respects with the notice and continuation coverage requirements of IRC
Section 4980B and the proposed or final regulations thereunder; and (ix) the
aggregate benefit liabilities under all Plans of Borrower and its ERISA
Affiliates that has been funded or satisfied with insurance contracts rated
below AAA by Standard & Poor's Corporation, or below the equivalent rating by
any other nationally recognized rating agency, does not exceed $500,000.
3.14 No Litigation. Except as set forth in Schedule 3.14, no action,
------------- -------------
claim or proceeding is now pending or, to the knowledge of Borrower, threatened
against Borrower, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any Federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators (a) which challenges any such Person's right, power, or competence
to enter into or perform any of its obligations under the Loan Documents, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) which could reasonably be expected to result in a Material Adverse
Effect. To the knowledge of Borrower, there does not exist a state of facts
which is reasonably likely to give rise to such proceedings. Except as set
forth in Schedule 3.14, Borrower is not a party to any consent decree.
-------------
3.15 Brokers. No broker or finder acting on behalf of Borrower brought
-------
about the obtaining, making or closing of the credit extended pursuant to this
Agreement or the transactions contemplated by the Loan Documents and Borrower
does not have any obligation to any Person in respect of any finder's or
brokerage fees in connection therewith.
3.16 Patents, Trademarks, Copyrights and Licenses. Except as otherwise
--------------------------------------------
set forth in Schedule 3.16, Borrower owns or has
-------------
26
<PAGE>
valid licenses for all patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names which are necessary to
continue to conduct its business as heretofore conducted by it, now conducted by
it and proposed to be conducted by it, each of which is listed (with respect to
copyrights, those that are registered only), together with United States Patent
and Trademark Office application or registration numbers, where applicable, in
Schedule 3.16. Schedule 3.16 lists each Material Franchise Agreement of
- ------------- -------------
Borrower as of the Closing Date and will be updated by Borrower to reflect
promptly any change therein. Borrower conducts business without infringement or
claim of infringement of any license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
others, except where such infringement or claim of infringement would not have
or result in a Material Adverse Effect. Except as set forth in Schedule 3.16,
-------------
to Borrower's knowledge, there is no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of Borrower.
3.17 Full Disclosure. No information contained in this Agreement, the
---------------
other Loan Documents, the Financials or any written statement furnished by or on
behalf of any Loan Party pursuant to the terms of this Agreement or any other
Loan Document, which has previously been delivered to Agent or any Lender,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made. With respect to all
business plans and other forecasts and projections (including the Projections)
furnished by or on behalf of Borrower and made available to Agent or any Lender
relating to the financial condition, operations, business, properties or
prospects of Borrower or any Subsidiary thereof (a) all facts stated as such
therein are true and complete in all material respects, (b) all facts upon which
the forecasts or projections therein contained are based are true and complete
in all material respects and no material fact known to Borrower was omitted
therefrom, (c) all assumptions made on that basis are reasonable under the
circumstances and are disclosed therein, and (d) the forecasts or projections
are reasonably based on those facts and assumptions. With respect to any such
forecasts or projections made available to Agent or any Lender after the Closing
Date, the foregoing clauses (a) through (d) shall be true and correct in all
respects as of the date of such projections or forecasts.
3.18 Hazardous Materials. Except (a) as set forth in Schedule 3.18, (b)
------------------- -------------
in connection with routine operations in the ordinary course of business in
compliance with Environmental Laws or with applicable permits issued by a
Governmental Authority, or (c) where the presence of any Hazardous Material
could not reasonably be expected to result in a Material Adverse Effect, the
Subject Property is free of any Hazardous Material. In
27
<PAGE>
addition, Schedule 3.18 discloses any and all existing or potential
-------------
Environmental Liabilities and Costs of Borrower of which Borrower, after due
inquiry, has knowledge, which could reasonably be expected to constitute or
result in a Material Adverse Effect. Except as set forth in Schedule 3.18,
-------------
Borrower has not caused or suffered to occur any Release at, under, above or
within any Subject Property, which Release could reasonably be expected to
constitute or result in a Material Adverse Effect. None of the Loan Parties is
involved in operations which could reasonably be expected to lead to the
imposition of any liability or Lien on it or any of the Subject Property under
any Environmental Laws, which liability or Lien could reasonably be expected to
constitute or result in a Material Adverse Effect, and Borrower has not
permitted any tenant or occupant of such premises to engage in any such
activity.
3.19 Insurance Policies. Schedule 3.19 lists all insurance of any nature
------------------ -------------
maintained for current occurrences by Borrower, as well as a summary of the
terms of such insurance. Such insurance complies with and shall at all times
comply with the standards set forth in Annex F.
-------
3.20 Deposit and Disbursement Accounts. Schedule 3.20 lists all banks
--------------------------------- -------------
and other financial institutions at which Borrower maintains deposits and/or
other accounts and/or post office lock boxes, including the Disbursement
Accounts, the Concentration Account and the Lock Box Accounts, and such Schedule
correctly identifies the name, address and telephone number of each depository,
the name in which the account is held, a description of the purpose of the
account, and the complete account number.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. Borrower covenants and agrees that from and
-------------------
after the Closing Date and until the Termination Date, it shall deliver to Agent
and each Lender the Financial Statements, Projections and notices at the times
and in the manner set forth in Annex E.
-------
4.2 Communication with Accountants. Borrower (for itself and each
------------------------------
Subsidiary thereof) authorizes Agent and each Lender to communicate directly
with its and its Subsidiaries' independent certified public accountants and tax
advisors and authorizes those accountants to disclose to Agent and each Lender
any and all financial statements and other supporting financial documents and
schedules, including copies of any management letter, with respect to the
business, financial condition and other affairs of Borrower and each Subsidiary
thereof. Borrower shall deliver to Agent a letter (the "Accountant's Letter")
-------------------
addressed to such accountants and tax advisors instructing them to make
available to Agent and Lenders such information and records as Agent and Lenders
may reasonably request and to otherwise comply with the provisions of this
Section 4 and authorizing Agent and Lenders to
- ---------
28
<PAGE>
rely on the certified Financials prepared by such accountants, and shall use its
reasonable efforts to have such letter acknowledged by such accountants. Such
letter shall be delivered (a) at or before the Closing Date, (b) prior to such
accountant's commencement of an audit for each Fiscal Year ending after the
Closing Date, and (c) promptly upon Borrower's engagement of new accountants and
tax advisors.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees (for itself and its Subsidiaries) that,
unless Required Lenders shall otherwise consent in writing, from and after the
date hereof and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Borrower shall
------------------------------------------------
(and shall cause each of its Subsidiaries to): (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises, where the failure to do so would have a
Material Adverse Effect; (b) continue to conduct its business substantially as
now conducted or as otherwise permitted hereunder; (c) at all times maintain,
preserve and protect all of its Intellectual Property, and preserve all the
remainder of its property, in each case in use or useful in the conduct of its
business and keep the same in good repair, working order and condition (taking
into consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with Borrower's past practices, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; (d) keep and maintain its Equipment and Fixtures in good operating
condition sufficient for the continuation of its business conducted on a basis
consistent with past practices and shall provide or arrange for all maintenance
and service and all repairs necessary for such purpose; and (e) transact
business only under the names set forth in Schedule 3.2 unless Agent has given
------------
its prior written consent.
5.2 Payment of Charges and Claims. Borrower shall pay and discharge, or
-----------------------------
cause to be paid and discharged in accordance with the terms thereof, (a) all
Charges imposed upon it or any Subsidiary of Borrower or its or their income and
profits, or any of its property (real, personal or mixed), and (b) all lawful
claims for labor, materials, supplies and services or otherwise, which if unpaid
might by law become a Lien on its property; provided, that Borrower or any such
--------
Subsidiary shall not be required to pay any such Charge or claim which is being
contested in good faith by proper legal actions or proceedings, so long as at
the time of commencement of any such action or proceeding and during the
pendency thereof: (i) no Default shall have occurred and be continuing; (ii)
adequate reserves with respect thereto are established and are maintained in
accordance with GAAP;
29
<PAGE>
(iii) such contest operates to suspend collection of the contested Charges or
claims and is maintained and prosecuted continuously with diligence; (iv) none
of the Collateral would be subject to forfeiture or loss or any Lien by reason
of the institution or prosecution of such contest; (v) no Lien shall be imposed
to secure payment of such Charges or claims other than inchoate tax Liens; and
(vi) Borrower shall promptly pay or discharge such contested Charges and all
additional charges, interest penalties and expenses, if any, and shall deliver
to Agent evidence acceptable to Agent of such compliance, payment or discharge,
if such contest is terminated or discontinued adversely to Borrower.
5.3 Books and Records. Borrower shall (and shall cause each Subsidiary
-----------------
to) keep adequate records and books of account with respect to its business
activities, in which proper entries, reflecting all of its consolidated and
consolidating financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financials.
5.4 Litigation. Borrower shall notify Agent and each Lender in writing,
----------
promptly upon learning thereof, of any litigation, Claim or other action
commenced or threatened against Borrower or any Subsidiary of Borrower, and of
the institution against any such Person of any suit or administrative proceeding
which (a) may involve an amount in excess of $250,000 individually or in a
series of related matters or (b) could reasonably be expected to have or result
in a Material Adverse Effect.
5.5 Insurance.
---------
(a) Borrower shall, at its (or its Subsidiary's) sole cost and expense
maintain or cause to be maintained, the policies of insurance in such amounts
and as otherwise described in Annex F. Borrower shall notify Agent promptly of
-------
any occurrence causing a material loss or decline in value of any real or
personal property and the estimated (or actual, if available) amount of such
loss or decline, except as specified otherwise in Annex F. Borrower hereby
-------
directs all present and future insurers under its "All Risk" policies of
insurance to pay all proceeds payable thereunder directly to Agent on behalf of
Lenders. Borrower shall have the right (and obligation) to make, settle and
adjust all claims under its insurance policies; provided, that (i) in the event
--------
Agent, in its sole discretion, determines that Borrower has not been diligent in
such efforts, upon ten (10) Business Days prior notice (unless Agent determines,
in its sole discretion, that a shorter notice period is required in order for
its rights with respect to such claims not to be prejudiced), or (ii) upon the
occurrence of an Event of Default, Agent shall have the right (but not the
obligation) to make, settle and adjust on behalf of Borrower. Subject to the
immediately preceding sentence, Borrower irrevocably makes, constitutes and
appoints Agent (and all officers, employees or
30
<PAGE>
agents designated by Agent) as Borrower's true and lawful agent and attorney in-
fact for the purpose of making, settling and adjusting claims under the "All
Risk" policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such "All Risk" policies
of insurance, and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain (or fail to cause to be
obtained or maintained) any of the policies of insurance required above or to
pay any premium in whole or in part relating thereto, Agent or Lenders, without
waiving or releasing any Obligations or Default or Event of Default hereunder,
may at any time or times thereafter (but shall not be obligated to) obtain and
maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Agent or Lenders deem advisable. All sums so
disbursed, including attorneys' fees, court costs and other charges related
thereto, shall be payable, on demand, by Borrower to Agent on behalf of Lenders
and shall be additional Obligations hereunder secured by the Collateral,
provided, that if and to the extent Borrower fails to promptly pay any of such
sums upon Agent's demand therefor, Agent is authorized to, and at its option
may, make or cause to be made Revolving Credit Advances on behalf of Borrower
for payment thereof.
(b) Agent and Required Lenders reserve the right at any time, upon
review of Borrower's risk profile, to require additional forms and limits of
insurance to, in Agent's or Required Lenders' sole opinion, adequately protect
the interests of Agent and Lenders. Agent and each Lender acknowledge that,
based upon the evidence of insurance coverage presented to Agent and upon
Borrower's existing business, locations and operations as of the Closing Date,
Borrower's insurance coverage in effect on the Closing Date is satisfactory in
accordance with this Section. Borrower shall, if so requested by Agent, deliver
to Agent, at such time as Agent may reasonably request, a report of a reputable
insurance broker satisfactory to Agent with respect to its insurance policies.
(c) Borrower shall deliver to Agent endorsements to all of its and its
Subsidiaries' (i) "All Risk" and business interruption insurance naming Agent on
behalf of Lenders as loss payee, and (ii) general liability and other liability
policies naming Agent and each Lender as additional insureds.
5.6 Compliance with Laws. Borrower shall (and shall cause each of its
--------------------
Subsidiaries to) comply in all material respects with all Federal, state and
local laws, permits and regulations applicable to it, including those relating
to licensing, ERISA and labor matters.
5.7 Agreements. Borrower shall (and shall cause each of its
----------
Subsidiaries to) perform, within all required time periods
31
<PAGE>
(after giving effect to any applicable grace periods), all of its obligations
and enforce all of its rights under each agreement, contract, instrument or
other document to which it is a party, including each Material Franchise
Agreement, any leases and customer contracts to which it is a party, where the
failure to so perform and enforce could have or result in a Material Adverse
Effect. Borrower shall not (and shall not permit any of its Subsidiaries to)
terminate or modify any provision of any agreement, contract, instrument or
other document (including each Material Franchise Agreement) to which it is a
party which termination or modification could reasonably be expected to have or
result in a Material Adverse Effect. Borrower shall (and shall cause each of
its Subsidiaries to) perform and comply with all obligations in respect of
Accounts, Chattel Paper, Contracts, Licenses, Instruments, Documents and all
other agreements constituting or giving rise to Collateral. Except as provided
below, Borrower shall not, without Agent's prior written consent, with respect
to any of the Accounts, Chattel Paper, Instruments or amounts due under any
Contract: (a) grant any extension of the time of payment of any thereof; (b)
compromise or settle the same for less than the full amount thereof; (c)
release, in whole or in part, any Person liable for the payment thereof; or (d)
allow any credit or discount whatsoever thereon other than trade discounts
granted in the ordinary course of business of Borrower; provided, that Borrower
--------
may take any of the actions set forth in clauses (a) through (d) above to the
extent that the amount affected by any one such action does not exceed $50,000.
5.8 Supplemental Disclosure. From time to time as may be necessary,
-----------------------
Borrower may, or at the request of Agent or any Lender, Borrower shall
supplement (or cause to be supplemented) each Schedule hereto, or representation
herein or in any other Loan Document with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Schedule or as an
exception to such representation or which is necessary to correct any
information in such Schedule or representation which has been rendered
inaccurate thereby; provided, that such supplement to such Schedule or
--------
representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Agent, or (a) with respect to amendments to Schedule
--------
3.2, Borrower has provided Agent with not less than thirty (30) days prior
- ---
written notice and Borrower has executed and delivered to Agent all documents
requested by Agent to maintain the perfection and priority of Agent's Liens on
the Collateral, and (b) with respect to amendments to Schedule 3.19 or Schedule
------------- --------
3.20, Borrower has provided Agent with not less than thirty (30) days prior
- ----
written notice, and no such amendments, except as the same may be consented to
in a writing which expressly includes a waiver, shall be or be deemed a waiver
by Lenders of any Default disclosed therein. Borrower shall, if so requested by
Agent or Required Lenders, furnish to Agent and Lenders as often as they
reasonably request, statements and schedules further identifying and describing
the Collateral and such other reports in
32
<PAGE>
connection with the Collateral as Agent or Required Lenders may reasonably
request, all in reasonable detail, and, Borrower shall advise Agent and Lenders
promptly, in reasonable detail, of any of the following of which Borrower
becomes aware: (a) any Lien, other than as permitted pursuant to Section 6.7,
-----------
attaching to or asserted against any of the Collateral; (b) any material
deterioration in the Collateral; (c) any cancellation, termination, non-renewal,
default or other material occurrence with respect to a Material Franchise
Agreement; (d) any change in the list of Material Franchise Agreements; and (e)
the occurrence of any other event which would have a Material Adverse Effect
upon the Collateral and/or Agent's Lien thereon.
5.9 Environmental Matters. Borrower shall (a) comply with the
---------------------
Environmental Laws and permits applicable to it, except where such noncompliance
could not have a Material Adverse Effect, (b) notify Agent and each Lender
promptly after Borrower becomes aware of any Release upon any Subject Property
that results in a reporting obligation to any Governmental Authority, and (c)
promptly advise Agent of any material oral communication received by any Loan
Party in connection with, and forward to Agent and each Lender a copy of any
written order, notice, permit, application, or other material communication or
report received by any Loan Party in connection with, any such Release or any
other material matter relating to any Environmental Laws that may affect any
Subject Property or any Loan Party. The provisions of this Section 5.9 shall
-----------
apply whether or not the Environmental Protection Agency, any other Federal
agency or any state or local environmental agency has taken or threatened any
action in connection with any Release or the presence of any Hazardous
Materials.
5.10 Landlord's Agreements. Borrower shall use its best efforts,
---------------------
consistent with sound business judgment, to obtain a landlord's agreement in
form and substance acceptable to Agent from the lessor of any present or future
leased premises of Borrower.
5.11 Certain Obligations Respecting Subsidiaries. Borrower will, and
-------------------------------------------
will cause each of its Subsidiaries to, take such action from time to time as
shall be necessary to ensure that each of its Subsidiaries is a wholly owned
Subsidiary. Borrower will not permit any of its Subsidiaries to enter into,
after the date of this Agreement, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends or other Restricted Payments, the making of
loans, advances or Investments or the sale, assignment, transfer or other
disposition of any property or assets.
5.12 Application of Proceeds. Borrower shall use the proceeds of
-----------------------
Revolving Credit Advances as provided in Section 1.3.
-----------
33
<PAGE>
5.13 Fiscal Year. Borrower shall, and shall cause each Subsidiary to,
-----------
maintain as its Fiscal Year the twelve month period ending on December 31 of
each year.
5.14 Casualty and Condemnation.
-------------------------
(a) Borrower shall promptly notify Agent of any loss, damage, or
destruction to any Collateral or any real property owned by Borrower whether or
not constituting Collateral (collectively, "Property") or arising from its use,
--------
whether or not covered by insurance. Subject to the provisions of Section 5.5,
-----------
Agent on behalf of Lenders is hereby authorized to adjust losses and collect all
insurance proceeds directly. If, notwithstanding the provisions hereof which
require that Agent be the sole loss payee, a check or other instrument from an
insurer is made payable to Borrower or Borrower and Agent jointly, Agent may
endorse Borrower's name thereon and take such other action as Agent may elect to
obtain the proceeds thereof. After deducting from such proceeds the expenses,
if any, incurred by Agent in the collection or handling thereof, if such net
proceeds do not arise from a loss, damage or destruction to any Collateral, and
involve less than $1,000,000, Borrower may use such net proceeds to repair or
replace such property. In all other cases, Agent may apply such proceeds to the
reduction of the Obligations in the manner set forth in Section 1.11 or, at
------------
Agent's option in its sole discretion, exercised in good faith, may permit or
require Borrower to use such proceeds, or any part thereof, to replace, repair
or restore such Property as provided in paragraph (d) below.
(b) Borrower shall promptly upon learning of the institution of any
proceeding for the condemnation or other taking of any of its Property, notify
Agent of the pendency of such proceeding, and agrees that Agent may participate
in any such proceeding and Borrower from time to time will deliver to Agent all
instruments reasonably requested by Agent to permit such participation. Agent
shall (and is hereby authorized to) collect any and all awards, payments or
other proceeds of any such condemnation or taking and apply such proceeds to the
reduction of the Obligations in the manner set forth in Section 1.11 or, at
------------
Agent's option in its sole discretion, may permit or require Borrower to use
such proceeds, or any part thereof, to replace, repair or restore such Property
as provided in paragraph (d) below.
(c) Subject to the terms and conditions hereof (including Section
-------
2.2), after any application of the proceeds of any loss or taking of Borrower's
- ---
Property to the reduction of the Obligations pursuant to paragraphs (a) and (b)
above, Borrower may borrow Revolving Credit Advances for the purpose of
replacing, repairing or restoring any Property subject to such loss or taking in
accordance with paragraph (d) below.
34
<PAGE>
(d) Any Property which is to be replaced, repaired or restored
pursuant to paragraph (a), (b) or (c) above shall be replaced, repaired or
restored with materials and workmanship of substantially as good a quality as
existed before such loss or taking, and Borrower shall commence such
replacement, repair or restoration as soon as practicable and proceed diligently
with it until completion to Agent's reasonable satisfaction. Borrower shall
provide to Agent written progress reports, other information and evidence of its
compliance with the foregoing.
6. NEGATIVE COVENANTS
Borrower covenants and agrees (for itself and its Subsidiaries) that,
without Required Lenders' prior written consent, from and after the date hereof
and until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. Borrower shall not (and shall not
---------------------------
permit any of its Subsidiaries to), directly or indirectly, by operation of law
or otherwise, merge with, consolidate with, acquire all or substantially all of
the assets or capital stock of, or otherwise combine with, any Person or form or
acquire any Subsidiary. Prior to forming any Subsidiary, Borrower shall (a)
provide not less than thirty (30) days prior written notice to Agent and each
Lender, (b) take all actions requested by Agent to protect and preserve the
Collateral, and (c) receive the prior written consent of Required Lenders.
Borrower shall not permit any of its Subsidiaries to engage in any business
operations or acquire any assets or property.
6.2 Investments. Borrower shall not (and shall not permit any of its
-----------
Subsidiaries to), directly or indirectly, make or maintain any Investment
except: (a) as otherwise permitted by Section 6.3 or 6.4; (b) Investments
------------------
outstanding on the date hereof and listed in Schedule 6.2; (c) Investments in
------------
Dollars and Cash Equivalents to the extent needed to finance local operations
(provided such Investments are in deposits in one or more of the Disbursement
Accounts and such deposits do not exceed $250,000 in the aggregate for all such
accounts); (d) Investments by Borrower in trade and franchise receivables owing
to it in the ordinary course of business; (e) Investments received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; (f) negotiable instruments
endorsed for collection in the ordinary course of business; and (g) Investments
received by Borrower upon the sale or disposition of assets otherwise permitted
pursuant to Section 6.8.
-----------
6.3 Indebtedness. Borrower shall not (and shall not permit any of its
------------
Subsidiaries to) create, incur, assume or permit to exist any Indebtedness,
except: (a) the Obligations; (b) Deferred Taxes; (c) Capital Lease Obligations
existing as of the Closing
35
<PAGE>
Date; (d) Capital Lease Obligations (other than as described in clasue (c)) and
Indebtedness secured by Liens permitted under clause (d) of Section 6.7 in a
-----------
maximum aggregate amount outstanding at any time not to exceed $1,000,000; (e)
the Existing Term Loan; and (f) other Indebtedness in the aggregate amount
outstanding not to exceed $500,000 at any time.
6.4 Affiliate and Employee Loans and Transactions; Employment
---------------------------------------------------------
Agreements. Except as otherwise expressly permitted hereunder, Borrower shall
not (and shall not permit any of its Subsidiaries to) enter into any lending,
borrowing or other commercial transaction with any of its Subsidiaries,
Affiliates, officers, directors or employees, including payment of any
management, consulting, advisory or similar fee, other than on terms and
conditions as favorable to such Person as would be obtainable by such Person at
the time in a comparable arm's-length transaction with a Person other than an
Affiliate or a Subsidiary; provided, that the foregoing shall not prohibit any
--------
of the following: (a) loans by Borrower to its officers, directors and employees
in a maximum aggregate principal amount outstanding at any time for all
officers, directors and employees of $50,000; (b) payment by Borrower and its
Subsidiaries of reasonable compensation to their respective management employees
as approved by their respective boards of directors; and (c) purchases by
Borrower and its Subsidiaries from their respective Subsidiaries and Affiliates
of raw materials to be used in their respective businesses, so long as such
purchases are on terms and conditions as favorable to the purchaser as would be
obtained by such Person in a comparable arm's length transaction with a Person
other than an Affiliate or Subsidiary. Set forth in Schedule 6.4 is a list of
------------
all such lending, borrowing or other commercial transactions existing or
outstanding as of the Closing Date.
6.5 Capital Structure and Business. Except as permitted under Section
------------------------------ -------
5.1, Borrower shall not (and shall not permit any of its Subsidiaries to): (a)
- ---
make any changes in its business objectives, purposes, or operations which could
in any way adversely affect the repayment of the Obligations or have or result
in a Material Adverse Effect; (b) make any change in its capital structure as
described in Schedule 3.9 and Schedule 6.3 (including the issuance or
------------ ------------
recapitalization of any shares of Stock or other securities convertible into
Stock or any revision of the terms of its outstanding Stock); (c) amend its
certificate of incorporation, charter, by-laws or other organizational
documents; or (d) substantially alter the scope or character of their business;
provided, that Borrower may enter into a business substantially similar to the
- --------
business currently engaged in by such Person.
6.6 Guaranteed Indebtedness. Borrower shall not (and shall not permit
-----------------------
any of its Subsidiaries to) incur any Guaranteed Indebtedness except: (a) by
endorsement of instruments or items of payment for deposit to the general
account of such Person;
36
<PAGE>
(b) for Guaranteed Indebtedness incurred for the benefit of Borrower if the
primary obligation is permitted by this Agreement for Borrower to incur (and
such Guaranteed Indebtedness shall be treated as a primary obligation for all
purposes hereof); (c) for performance bonds or indemnities entered into in the
ordinary course of business consistent with past practices; (d) for Guaranteed
Indebtedness in favor of General Electric Capital Corporation of Puerto Rico,
Inc. arising under that certain Continuing Guaranty dated as of February 1,
1994; and (e) other Guaranteed Indebtedness in a maximum aggregate amount not
exceeding $150,000 at any time. Borrower expressly acknowledges that the
Guaranteed Indebtedness described in clause (e) above shall survive the
discharge of the Chapter 11 Cases.
6.7 Liens. Borrower shall not (and shall not permit any of its
-----
Subsidiaries to) create or permit to exist any Lien on any of its properties or
assets except for: (a) presently existing or hereafter created Liens in favor of
Agent or Lenders to secure the Obligations or the obligations of any Guarantor
under any Guaranty; (b) Liens set forth in Schedule 6.7 existing on the Closing
------------
Date; (c) Permitted Encumbrances; (d) purchase money liens or purchase money
security interests upon or in Equipment acquired by Borrower or any of its
Subsidiaries in the ordinary course of business to secure the purchase price of
such Equipment or to secure Indebtedness or Capital Lease Obligations permitted
under Section 6.3 incurred solely for the purpose of financing the acquisition
-----------
of such Equipment and any costs related thereto, so long as such Equipment is
not a component, part or accessory installed on, or an accession, addition or
attachment to, any other Equipment or other property of Borrower or any
Subsidiary thereof (except other Equipment on which a security interest exists
under this clause); (e) Liens securing Indebtedness not exceeding $100,000 in
the aggregate at any time; (f) Liens against Equipment arising from the filing
of UCC financing statements with respect to lease transactions permitted by the
terms of this Agreement; (g) Liens securing the Existing Term Loan; and (h)
extensions, renewals and replacements of Liens referred to in clauses (b), (d),
(e) and (f) above, provided that any such extension, renewal or replacement Lien
is limited to the property or assets covered by the Lien extended, renewed or
replaced and does not secure Indebtedness in an amount greater than the amount
of the outstanding Indebtedness secured thereby immediately prior to such
extension, renewal or replacement. Notwithstanding the generality of the
foregoing, in no event shall any Lien on Accounts or Inventory be permitted
other than Liens in favor of Agent or Lenders and other Permitted Encumbrances.
6.8 Sale of Assets. Borrower shall not (and shall not permit any of its
--------------
Subsidiaries to) sell, transfer, convey, assign or otherwise dispose of any of
its assets or properties, including any Collateral; provided, that the foregoing
--------
shall not prohibit any of the following: (a) the sale of Inventory in the
ordinary course of business; (b) the exchange of property or
37
<PAGE>
assets other than Collateral for new assets so long as the incremental cost (if
any) of such new property or assets in excess of the fair market value of the
assets so exchanged is a Capital Expenditure permitted pursuant to Annex H; (c)
-------
the licensing or sublicensing by Borrower or its Subsidiaries of Intellectual
Property in the ordinary course of business; (d) the sale or disposition by
Borrower of Collateral consisting of Equipment or Fixtures provided that (i) the
amount of gross consideration (prior to the deduction of any items taken into
account in determining the Net Proceeds of such sale or disposition) received in
cash is equal to at least one hundred percent (100%) of the fair market value of
such property or assets; (e) the disposition of (i) damaged Collateral to the
extent required by insurance or (ii) other damaged property or assets giving
rise to an insurance claim pursuant to reasonable prudent business practices;
and (f) other sales or dispositions of property not constituting Collateral and
having an aggregate fair market value not exceeding $150,000 for all such sales
or dispositions in any Fiscal Year.
6.9 ERISA Neither Borrower nor any ERISA Affiliate shall acquire any
-----
new ERISA Affiliate that maintains or has an obligation to contribute to a
Pension Plan that has either an "accumulated funding deficiency," as defined in
Section 302 of ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(E)(iii) of ERISA. Additionally, neither Borrower nor any ERISA
Affiliate shall: (a) establish any new Plan, or undertake any new obligation to
contribute to any Plan if such establishment or undertaking could reasonably be
expected to result in the creation of a material liability to Borrower or ERISA
Affiliate of Borrower, or to Borrower and its ERISA Affiliates in the aggregate;
(b) permit or suffer any condition set forth in Section 3.13 to cease to be met
------------
and satisfied at any time which condition could result in a material liability
to Borrower or any ERISA Affiliate of Borrower; (c) terminate any Pension Plan
where such termination could reasonably be anticipated to result in a material
liability to Borrower; (d) permit any accumulated funding deficiency, as defined
in Section 302(a)(2) of ERISA, to be incurred with respect to any Plan; fail to
make any contributions or fail to pay any amounts due and owing as required by
the terms of any Plan before such contributions or amounts become delinquent;
(e) make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any Multiemployer Plan which withdrawal could result in a material
liability to Borrower or any ERISA Affiliate of Borrower; (f) at any time fail
to provide Agent or any Lender within twenty-one (21) days with copies of any
Plan documents or governmental reports or filings, if reasonably requested by
Agent or any Lender.
6.10 Financial Covenants. Borrower shall not breach or fail to comply
-------------------
with any of the financial covenants set forth in Annex H.
-------
38
<PAGE>
6.11 Hazardous Materials. Except as set forth in Schedule 3.18,
------------------- -------------
Borrower shall not and shall not permit any of its Subsidiaries or any other
Person within the control of Borrower, to cause or permit a Release of Hazardous
Material on, under, in or about any Subject Property if such Release either
violates or gives rise to liability pursuant to any Environmental Laws, which
violation or liability could in a reasonable worse case scenario constitute or
result in a Material Adverse Effect.
6.12 Sale-Leasebacks. Borrower shall not (and shall not permit any of
---------------
its Subsidiaries to) engage in any sale-leaseback or similar transaction
involving any of its property or assets.
6.13 Cancellation of Indebtedness. Except as permitted by Section 5.7,
---------------------------- -----------
Borrower shall not (and shall not permit any of its Subsidiaries to) cancel any
claim or Indebtedness owing to it, except for reasonable consideration and in
the ordinary course of its business, or voluntarily prepay any Indebtedness
(other than the Obligations).
6.14 Restricted Payments. Borrower shall not make any Restricted Payment
-------------------
to any Person and Borrower shall not permit any Subsidiary to make any
Restricted Payment other than (a) payments to Borrower and (b) payments
otherwise permitted under Section 6.4.
-----------
6.15 Real Property Leases. Borrower shall not (and shall not permit any
--------------------
of its Subsidiaries to) enter into or renew (by amendment, modification or
otherwise) any Lease, except to the extent the aggregate annual base rent of all
of Borrower's Leases does not, in any Fiscal Year, increase by more than
$150,000 plus the aggregate rent increase under all such Leases based upon any
----
index-rate or rent escalation clauses set forth therein.
6.16 Bank Accounts. Borrower shall not (and shall not permit any of its
-------------
Subsidiaries to) maintain any deposit, operating or other bank accounts except
for those accounts identified in Schedule 3.20.
-------------
6.17 No Speculative Transactions. Borrower shall not (and shall not
---------------------------
permit any of its Subsidiaries to) engage in any speculative transaction or any
transaction involving commodity options or futures contracts (other than in the
ordinary course of business consistent with past practice and interest rate
swap, cap or collar agreements relating to the Revolving Credit Advances).
6.18 Margin Regulations. Borrower shall not use the proceeds of any
------------------
Revolving Credit Advance to purchase or carry any Margin Stock or any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
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<PAGE>
6.19 Limitation on Negative Pledge Clauses. Borrower shall not
-------------------------------------
(and shall not permit any of its Subsidiaries to), directly or indirectly, enter
into any agreement with any Person, other than the agreements with Agent or
Lenders pursuant to a Loan Document, which prohibits or limits the ability of
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired; provided, that any Loan Party may agree to prohibitions
--------
against other Liens on specific property encumbered to secure payment of
particular Indebtedness of such Person (which Indebtedness relates solely to
such specific property).
6.20 Accounting Changes. Borrower shall not (and shall not permit any of
------------------
its Subsidiaries to) make, any significant change in accounting treatment and
reporting practices except for changes concurred in by Borrower's independent
public accountants.
7. TERM
7.1 Duration. The financing arrangement contemplated hereby shall be in
--------
effect until the Commitment Termination Date. On the Commitment Termination
Date, the Revolving Credit Commitments shall terminate and the Revolving Credit
Loan and all other then due and payable Obligations shall immediately become due
and payable in full, in cash.
7.2 Survival of Obligations. Except as otherwise expressly provided for
-----------------------
in the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the Obligations, duties, indemnities, and liabilities of
Borrower, or the rights of Agent or any Lender relating to any Obligations, due
or not due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is not required until after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon any Loan Party, and all rights of Agent and
each Lender, all as contained in the Loan Documents shall not terminate or
expire, but rather shall survive such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided that the
--------
provisions set forth herein with respect to the payment of fees and expenses,
confidentiality, indemnification, consequential and punitive damages, governing
law, consent to jurisdiction and venue, and the jury trial waiver shall remain
in effect after the Termination Date.
40
<PAGE>
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
-----
of Default" hereunder:
- ----------
(a) Borrower shall fail to make any payment in respect of any
Obligations hereunder or under any of the other Loan Documents when due and
payable or declared due and payable, including any payment of principal of, or
interest on, the Revolving Credit Loan and, in the case of any interest payment,
such failure is not cured within two (2) Business Days after the due date
thereof.
(b) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 1.8, Section 4.1, or Section 6, including any of the
----------- ----------- ---------
provisions set forth in Annex B, Annex E, or Annex H.
------- ------- -------
(c) Borrower shall fail or neglect to perform, keep or observe any
term or provision of this Agreement (other than any such term or provision
referred to in paragraph (a) or (b) above) or of any of the other Loan
Documents, and the same shall remain unremedied for ten (10) Business Days after
(i) Borrower shall receive written notice of any such failure from Agent or any
Lender or (ii) fifteen (15) days after Borrower shall become aware thereof.
(d) A default shall occur under any other agreement, document or
instrument to which Borrower is a party or by which it or its property is bound,
and such default (i) involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of
Borrower in an aggregate amount exceeding $250,000 or (ii) causes (or permits
any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a
portion thereof in an aggregate amount exceeding $150,000, to become due prior
to its stated maturity or prior to its regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, any report, financial
statement or certificate made or delivered to Agent or any Lender by Borrower
shall be untrue or incorrect in any material respect as of the date when made or
deemed made (including those made or deemed made pursuant to Section 2.2).
-----------
(f) Any of the assets of any Loan Party shall be attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of such Loan Party and shall remain unstayed or undismissed for sixty
(60)
41
<PAGE>
consecutive days; or any Person other than a Loan Party shall apply for the
appointment of a receiver, trustee or custodian for any Loan Party's assets and
such application or proceeding shall remain unstayed or undismissed for sixty
(60) consecutive days; or any Loan Party shall have concealed, removed or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Loan
Party in a court having competent jurisdiction seeking a decree or order (i)
under the Bankruptcy Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of any Loan Party or of any substantial part of its
properties, or (iii) ordering the winding up or liquidation of the affairs of
any Loan Party and such case or proceeding shall remain undismissed or unstayed
for sixty (60) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(h) Any Loan Party (i) shall file a petition seeking relief under the
Bankruptcy Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy or other similar law, (ii) shall
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of any Loan Party or of any substantial part of any Loan Party's properties,
(iii) shall fail generally to pay its debts as such debts become due, or (iv)
shall take any corporate action in furtherance of any such action.
(i) Final judgment or judgments in a series of related matters (after
the expiration of all times to appeal therefrom) for the payment of money in
excess of $125,000 shall be rendered against any Loan Party, unless the same
shall be (i) fully covered by insurance in accordance with Section 5.5, or (ii)
-----------
vacated, stayed, bonded, paid or discharged within a period of thirty (30) days
from the date of such judgment.
(j) Any provision of any Loan Document shall for any reason cease to
be valid, binding and enforceable in accordance with its terms or any Loan Party
or other party thereto shall so state in writing; or any Lien created under any
Collateral Document shall cease to be a valid and perfected Lien having the
first priority, subject only to Permitted Encumbrances in any of the Collateral
purported to be covered thereby.
42
<PAGE>
(k) There shall occur a Change of Control.
(l) Any Material Franchise Agreement shall be either canceled,
terminated or not renewed, or modified in any way which would have a Material
Adverse Effect, or any Loan Party shall for any reason lose the benefit of any
exclusivity provision under any Material Franchise Agreement.
(m) An event or condition specified in Section 6.9 hereof shall occur
-----------
or exist and, as a result of such event or condition, Borrower or any ERISA
Affiliate or Borrower or/and any ERISA Affiliates in the aggregate shall incur
or in the opinion of Required Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the
foregoing) in excess of $500,000 in the aggregate.
(n) The terms of the Plan of Reorganization shall have been amended,
modified or supplemented without Agent's prior written consent.
(o) The Confirmation Order shall have been revoked or modified in a
manner adverse to Agent or any Lender's rights, remedies or interests in or to
the Collateral or otherwise under this Agreement or the other Loan Documents,
all as determined in Agent's sole discretion.
8.2 Remedies. If any Event of Default shall have occurred and be
--------
continuing, the rate of interest applicable to the Revolving Credit Loan and the
Letter of Credit Obligations may, at Required Lenders' sole discretion, be
increased, effective as of the date of the occurrence of the Default giving rise
to such Event of Default, to the Default Rate as provided in Section 1.5(c) and
--------------
paragraph 3 of Annex D. If any Event of Default shall have occurred and be
-------
continuing, Agent may, or if requested by Required Lenders, shall, without
notice, take any one or more of the following actions: (a) suspend or terminate
the Revolving Credit Commitments, whereupon Lenders' obligation to make further
Revolving Credit Advances shall be suspended or terminate; (b) declare all or
any portion of the Obligations to be forthwith due and payable, including any
contingent liabilities with respect to Letter of Credit Obligations, whereupon
such Obligations shall become and be due and payable; (c) require that all
Letter of Credit Obligations be fully cash collateralized in accordance with the
terms of Annex G; or (d) exercise any rights and remedies provided to Agent or
-------
Lenders under the Loan Documents and/or at law or equity, including all remedies
provided under the Code; provided, that upon the occurrence of an Event of
--------
Default specified in Section 8.1(f), (g) or (h) the rate of interest applicable
--------------------------
to all Obligations shall be increased automatically to the Default Rate as
provided in Section 1.5(c) and paragraph 3 of Annex D, and the Maximum Revolving
-------------- -------
Credit Commitment shall immediately terminate and the
43
<PAGE>
Obligations shall become immediately due and payable, in each case, without
declaration, notice or demand by or to any Person.
8.3 Waivers by Borrower. Except as otherwise provided for in this
-------------------
Agreement and applicable law, to the full extent permitted by applicable law,
Borrower waives (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all Loan Documents, notes, commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent or any Lender on which Borrower may in any way be liable, and
Borrower hereby ratifies and confirms whatever Agent or any Lender may do in
this regard, (b) all rights to notice and a hearing prior to Agent's or Lenders'
taking possession or control of, or to Agent's or Lenders' replevy, attachment
or levy upon, the Collateral or any bond or security which might be required by
any court prior to allowing Agent or Lenders to exercise any of their remedies,
and (c) the benefit of any right of redemption and all valuation, appraisal and
exemption laws. Borrower acknowledges that it has been advised by counsel of
its choice with respect to this Agreement, the other Loan Documents and the
transactions contemplated by this Agreement and the other Loan Documents.
9. AGENT
9.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
----------------------------------
appoints and authorizes GE Capital to act as its agent hereunder and under the
other Loan Documents with such powers as are specifically delegated to Agent by
the terms of this Agreement and of the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Agent (which term as used in
this sentence and in Section 9.5 and the first sentence of Section 9.6 hereof
----------- -----------
shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Loan Documents, and shall not by reason of this Agreement or any other
Loan Document be a trustee or fiduciary for any Lender; (b) shall not be
responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or any other document referred to or
provided for herein or therein or for any failure by any Loan Party or any other
Person to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document; (d) shall not be
44
<PAGE>
responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction. Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. Agent may deem and treat the payee of any Revolving Credit Note
as the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with Agent.
9.2 Reliance by Agent. Agent shall be entitled to rely upon any
-----------------
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by Required
Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.
9.3 Defaults. Agent shall not be deemed to have knowledge or notice of
--------
the occurrence of a Default (other than the non-payment of principal of or
interest on the Revolving Credit Loan or of Fees) unless Agent has received
notice from a Lender or Borrower specifying such Default and stating that such
notice is a "Notice of Default". In the event that Agent receives such a notice
-----------------
of the occurrence of a Default, Agent shall give prompt notice thereof to
Lenders (and shall give each Lender prompt notice of each such non-payment).
Agent shall (subject to Section 9.7) take such action with respect to such
-----------
Default as shall be directed by Required Lenders; provided, that unless and
--------
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of
Required Lenders or all of Lenders as is required in such circumstance.
9.4 Rights as a Lender. In the event that GE Capital (or any successor
------------------
acting as Agent) shall become a Lender hereunder, with respect any Revolving
Credit Commitment or Revolving Credit Advance, it shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not
45
<PAGE>
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Agent in its individual capacity. GE Capital (and
any successor acting as Agent) and its affiliates may (without having to account
therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with the Loan Parties (and any of their Subsidiaries or
Affiliates) as if it were not acting as Agent, and GE Capital and its affiliates
may accept fees and other consideration from the Loan Parties for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.
9.5 Indemnification. Lenders agree to indemnify Agent (to the extent
---------------
not reimbursed by Borrower hereunder and without limiting the obligations of
Borrower hereunder) ratably in accordance with the aggregate principal amount of
the Revolving Credit Advances held, by Lenders (or, if no Revolving Credit
Advances are at the time outstanding, ratably in accordance with their
respective Revolving Credit Commitments), for any and all Claims of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against Agent
(including by any Lender) arising out of or by reason of any investigation in or
in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby (including the costs and
expenses that Borrower is obligated to pay hereunder) or the enforcement of any
of the terms hereof or thereof or of any such other documents; provided, that no
--------
Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the party to be indemnified as
determined by a final judgment of a court of competent jurisdiction.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
---------------------------------------
has, independently and without reliance on Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrower and its Subsidiaries and decision to enter into this
Agreement and that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. Agent shall not be required to keep itself informed as to the
performance or observance by any Loan Party of this Agreement or any of the
other Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of Borrower or any of its
Subsidiaries. Agent will use reasonable efforts to provide Lenders with any
information received by Agent from Borrower which is required to be provided to
Lenders hereunder, with any notice of a Default received by Agent from Borrower
and with any notice of a Default delivered by Agent to Borrower; provided, that
--------
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that
46
<PAGE>
such failure is attributable to Agent's gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction. Agent
shall not have any duty or responsibility to provide any Lender with any other
credit or other information concerning the affairs, financial condition or
business of Borrower or any of its Subsidiaries (or any of their affiliates)
that may come into the possession of Agent or any of its affiliates nor to
update or correct any information previously given which becomes incorrect or
which Agent learns is incorrect.
9.7 Failure to Act. Except for action expressly required of Agent
--------------
hereunder and under the other Loan Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 9.5 hereof against any and all
-----------
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
9.8 Resignation of Agent. Subject to the appointment and acceptance of
--------------------
a successor Agent as provided below, Agent may resign at any time by giving
notice thereof to Lenders and Borrower. Upon any such resignation Required
Lenders shall have the right to appoint a successor Agent with Borrower's prior
written consent, which consent shall not be unreasonably withheld. If no
successor Agent shall have been so appointed by Required Lenders and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of
Lenders, appoint a successor Agent, that shall be a financial institution with a
combined capital and surplus or net worth of at least $200,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon 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. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Section 9 shall continue in effect for its benefit in respect of any actions
- ---------
taken or omitted to be taken by it while it was acting as Agent.
9.9 Consents under Loan Documents. Except as otherwise provided in
-----------------------------
Section 11.1 with respect to this Agreement, Agent may, with the prior consent
- ------------
of Required Lenders (but not otherwise), consent to any modification, supplement
or waiver under any of the Loan Documents; provided, that without the prior
--------
consent of each Lender, Agent shall not (except as provided herein or in the
Collateral Documents) release any material portion of the Collateral or
otherwise terminate any Lien under any Collateral Document with respect to any
material portion of the Collateral, or agree to additional obligations being
secured by such Collateral, except that no such consent shall be required, and
Agent is hereby authorized and instructed, to
47
<PAGE>
release any Lien covering Collateral (a) which is the subject of a disposition
permitted hereunder, (b) which secures Indebtedness to the extent permitted
under Section 6.3, or (c) the value of which does not exceed $5,000,000 in any
-----------
Fiscal Year.
9.10 Collateral Matters.
------------------
(a) Except as otherwise expressly provided for in this Agreement, Agent
shall have no obligation whatsoever to any Lender or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by any
Loan Party or is cared for, protected or insured or has been encumbered, or that
any particular items of Collateral meet the eligibility criteria applicable in
respect of the Borrowing Base, or whether any particular reserves are
appropriate, or that the Liens granted to Agent herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Agreement or in any of the other Loan Documents, it
being understood and agreed that (i) in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its sole discretion, given Agent's own interest in the
Collateral as a Lender and (ii) that Agent shall have no duty or liability
whatsoever to any other Lender, other than liability for its own gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction.
(b) Each Lender hereby appoints each other Lender as agent for the
purpose of perfecting Lenders' security interest in assets which, in accordance
with Article 9 of the Code, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan Documents
----------------------
shall be binding on and shall inure to the benefit of Borrower, Agent, Lenders,
and their respective successors and assigns, except as otherwise provided herein
or therein. Borrower may not assign, delegate, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the Loan Documents without the prior express written consent of Agent and
all Lenders. Any such purported assignment, transfer, hypothecation or other
conveyance by Borrower without such prior express written consent shall be void.
The terms and provisions of this Agreement and the other
48
<PAGE>
Loan Documents are for the purpose of defining the relative rights and
obligations of Borrower, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Loan Documents.
10.2 Assignments and Participations. Each Lender may resell (through
------------------------------
syndication, assignment or a participation) all or a portion of its rights and
obligations under this Agreement (including all or a part of its Revolving
Credit Advances, Revolving Credit Commitment and Revolving Credit Note), in
minimum increments of $5,000,000, to any other Person.
In the case of an assignment by any Lender under this Section 10.2, the
------------
purchaser shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender hereunder; provided,
--------
that each such assignment shall be of a constant, and not a varying, percentage
of the selling Lender's rights and obligations under this Agreement. Upon
execution by the assignor and the assignee of an instrument pursuant to which
the assignee assumes such rights and obligations, payment by such assignee to
such assignor of an amount equal to the purchase price agreed between such
assignor and assignee and delivery to Agent and Borrower of an executed copy of
such instrument together with payment to Agent of a processing fee of $2,500,
such assignee shall have, to the extent of such assignment (unless otherwise
provided therein), the same rights and benefits as it would have if it were a
Lender hereunder and the assignor shall be, to the extent of such assignment
(unless otherwise provided therein) released from its obligations under this
Agreement. Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender" hereunder and under the other Loan
Documents. In all instances, each Lender's liability to make Revolving Credit
Advances shall be several and not joint and shall be limited to such Lender's
pro rata share thereof. Upon any such assignment, Borrower, at its own expense,
shall execute and deliver to Agent in exchange for the surrendered Revolving
Credit Note of the assignor Lender a new Revolving Credit Note to the order of
the assignor Lender in an amount equal to the Revolving Credit Commitment
assumed by such assignee Lender, and if the assignor Lender has retained a
Revolving Credit Commitment hereunder a new Revolving Credit Note to the order
of the assignor Lender in an amount equal to such retained Revolving Credit
Commitment. Such new Revolving Credit Notes shall be dated the Closing Date and
shall otherwise be in the form of the Revolving Credit Note replaced thereby.
The Revolving Credit Notes surrendered to Agent shall be returned by Agent to
Borrower marked "canceled".
Each Lender may sell participations in all or any part of its Revolving
Credit Advances and its Revolving Credit Commitment, to any other Person;
provided, that (a) all amounts
- --------
49
<PAGE>
payable by Borrower hereunder shall be determined as if such Lender had not sold
such participation and such Lender shall remain a "Lender" for all purposes
under this Agreement, (b) any such grant of a participation will be made in
compliance with all applicable state or Federal laws, rules, and regulations,
(c) any such participation shall be divided pro rata among the participating
Lender's share of the Revolving Credit Loan, and (d) such Lender shall not grant
any participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or the Loan Documents, except to the
extent such amendment or waiver would (i) extend the final maturity date for
payment of the Revolving Credit Loan in which such participant is participating;
(ii) reduce the interest rate or the amount of principal or Fees applicable to
the Revolving Credit Loan in which such participant is participating; or (iii)
release all or substantially all of the Collateral, except as expressly provided
herein. In those cases in which a Lender grants rights to its participants to
approve any amendment to or waiver of this Agreement or the other Loan Documents
respecting the matters described in the foregoing clauses (i) through (iii), the
relevant participation agreements shall provide for a voting mechanism whereby a
majority of the amount of the participating Lender's portion of the Revolving
Credit Loan, as the case may be (irrespective of whether held by such Lender or
participated), shall control the vote for all of such Lender's portion of the
Revolving Credit Loan. In the case of any participation, the participant shall
not have any rights under this Agreement or any of the other Loan Documents
entered into in connection herewith (the participant's right against such Lender
in respect of such participation to be those set forth in the participation or
other agreement executed by such Lender and the participant relating thereto)
and all amounts payable to any Lender hereunder shall be determined as if such
Lender had not sold such participation.
Except as otherwise provided in this Section 10.2 no Lender shall, as
------------
between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Revolving Credit Loan or
other Obligations owed to such Lender. Any Lender permitted to sell assignments
and participations under this Section 10.2 may, subject to this Section 10.2,
------------ ------------
furnish any information concerning Borrower and its Subsidiaries in the
possession of that Lender from time to time to assignees and participants
(including prospective assignees and participants).
Borrower shall assist any Lender permitted to sell assignments or
participations under this Section 10.2 in whatever manner reasonably necessary
------------
in order to enable or effect any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other documents and
instruments as shall be reasonably requested and the preparation and delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in
50
<PAGE>
meetings with, potential assignees or participants. Borrower shall certify the
correctness, completeness and accuracy of all descriptions of Borrower and its
affairs contained in any selling materials and all information provided by it
and included in such materials or shall provide all necessary corrections
thereto. No information shall be provided to any potential assignee or
participant unless such potential assignee and participant has signed a
confidentiality agreement substantially in the form of Exhibit F.
---------
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. This Agreement and the
---------------------------------------------
other Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied), including the commitment letter dated June 7, 1996 and
accepted by Seven-Up/RC on July 19, 1996. Neither this Agreement nor any other
Loan Document nor any terms hereof or thereof may be changed, waived, discharged
or terminated unless such change, waiver, discharge or termination is in writing
signed by Required Lenders; provided, that no such change, waiver, discharge or
--------
termination shall, without the consent of each affected Lender and Agent, (a)
extend the scheduled final maturity of the Revolving Credit Loan, or any portion
thereof, or reduce the rate or extend the time of payment of interest (other
than as a result of waiving the applicability of any post-Default increase in
interest rates) thereon or Fees, or reduce the principal amount thereof, or
increase the Revolving Credit Commitment of such Lender over the amount thereof
then in effect (it being understood that a waiver of any Default shall not
constitute a change in the terms of any Revolving Credit Commitment of any
Lender), (b) release more than $5,000,000 in value of the Collateral (except as
expressly permitted by the Loan Documents), (c) amend, modify or waive any
provision of this Section, or Section 1.8, 9.5, 11.2 or 11.7, (d) reduce any
------------------------------
percentage specified in, or otherwise modify, the definition of Required
Lenders, or (e) consent to the assignment or transfer by Borrower of any of its
rights and obligations under this Agreement. No provision of Section 9 may be
---------
amended without the prior written consent of Agent.
11.2 Fees and Expenses.
-----------------
(a) Borrower shall pay on demand all reimbursable costs and expenses
arising under Section 11.2 of the DIP Agreement and all costs and expenses
(including reasonable fees of counsel) of Agent in connection with the
preparation, negotiation, approval, execution, delivery, administration,
modification, amendment, waiver and enforcement (whether through negotiations,
legal proceedings or otherwise) of the Loan Documents, and commitments relating
thereto, and the other
51
<PAGE>
documents to be delivered hereunder or thereunder and the transactions
contemplated hereby and thereby and the fulfillment or attempted fulfillment of
conditions precedent hereunder, including: (i) wire transfer fees and other
costs of forwarding to Borrower or any other Person on behalf of Borrower by
Agent and each Lender of the proceeds of the Revolving Credit Advances; (ii) any
amendment, modification or waiver of, or consent with respect to, any of the
Loan Documents or advice in connection with the administration of the advances
made pursuant hereto or its rights hereunder or thereunder; (iii) any
litigation, claim, contest, dispute, suit, proceeding or action (whether
instituted by Agent, any Lender, Borrower or any other Person) in any way
relating to the Collateral, any of the Loan Documents or any other agreements to
be executed or delivered in connection therewith or herewith, whether as party,
witness, or otherwise, including any litigation, claim, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in connection with
a case commenced by or against Borrower or any other Person that may be
obligated to Agent and Lenders by virtue of the Loan Documents, including any
litigation, contest, dispute, suit, case, proceeding or action (and any appeal
or review) in connection with a case under the Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy or similar insolvency law; (iv) any attempt to enforce any
rights of Agent or Lenders against Borrower or any other Person that may be
obligated to Agent or Lenders by virtue of any of the Loan Documents; (v) any
effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B)
evaluate, observe, assess Borrower or its affairs, or (C) verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.
(b) Borrower shall pay on demand all costs and expenses (including
reasonable fees of counsel) of Agent and each Lender in connection with any
Default and any enforcement or collection proceedings resulting therefrom or any
amendment, modification or waiver of, or consent with respect to, any of the
Loan Documents in connection with any Default.
(c) Without limiting the generality of clauses (a) and (b) above,
Borrower's obligation to reimburse Agent and/or any Lender for costs and
expenses shall include the reasonable fees and expenses of counsel (and local,
foreign or special counsel, advisors, consultants and auditors retained by such
counsel), as well as the fees and expenses of accountants, environmental
advisors, appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplicating expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram charges; secretarial overtime charges; expenses for
travel, lodging and food; and all other out-of-pocket costs and expenses of
every type and nature paid or incurred in connection with the performance of
such legal or other advisory services.
52
<PAGE>
11.3 No Waiver. No failure on the part of Agent or Lenders, at any time or
---------
times, to require strict performance by any Loan Party, of any provision of this
Agreement and any of the other Loan Documents shall waive, affect or diminish
any right of Agent or Lenders thereafter to demand strict compliance and
performance therewith. Any suspension or waiver of a Default shall not suspend,
waive or affect any other Default whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of any Loan
Party contained in this Agreement or any of the other Loan Documents and no
Default by any Loan Party shall be deemed to have been suspended or waived by
Lenders, unless such waiver or suspension is by an instrument in writing signed
by an officer of or other authorized employee of Agent and Required Lenders or
all of Lenders if required hereunder and directed to Borrower specifying such
suspension or waiver.
11.4 Remedies. The rights and remedies of Agent and Lenders under this
--------
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Agent or any Lender may have under any other agreement, including the Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required.
11.5 Severability. Wherever possible, each provision of this Agreement shall
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
11.6 Conflict of Terms. Except as otherwise provided in this Agreement or any
-----------------
of the other Loan Documents by specific reference to the applicable provisions
of this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provisions contained in this Agreement shall govern and control.
11.7 Right of Set-off. Subject to Section 1.1(f) and 1.13, upon the
---------------- -----------------------
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to setoff 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 to or for the credit or the account of Borrower
against any and all of the Obligations now or hereafter existing irrespective of
whether or not such Lender shall have made any demand under this Agreement or
any other Loan Document and although such Obligations may be unmatured. Each
Lender agrees promptly to notify Agent and Borrower after any such setoff and
application made by such
53
<PAGE>
Lender; provided, that the failure to give such notice shall not affect the
--------
validity of such setoff and application. The rights of each Lender under this
Section are in addition to the other rights and remedies (including other rights
of setoff) which such Lender may have.
11.8 Authorized Signature. Until Agent shall be notified by Borrower to the
--------------------
contrary, the signature upon any document or instrument delivered pursuant
hereto and believed by Agent or any of Agent's officers, agents, or employees to
be that of an officer or duly authorized representative of Borrower listed in
Schedule 11.8 shall bind Borrower and be deemed to be the act of Borrower
- -------------
affixed pursuant to and in accordance with resolutions duly adopted by
Borrower's Board of Directors, and Agent and each Lender shall be entitled to
assume the authority of each signature and authority of the Person whose
signature it is or appears to be unless the Person acting in reliance on such
signature shall have actual knowledge of the fact that such signature is false
or the Person whose signature or purported signature is presented is without
authority.
11.9 Notices. Except as otherwise provided herein, whenever it is provided
-------
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon either of the parties by
the other party, or whenever either of the parties desires to give or serve upon
the other party any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered: (a) upon the earlier of actual receipt and three (3) days after
deposit in the United States Mail, registered or certified mail, return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by telecopy answerback and by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
-------
11.9); (c) one Business Day after deposit with a reputable overnight courier
- ----
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below or to such other address (or
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower, Agent or any Lender) designated below to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
54
<PAGE>
(a) If to Agent, as a Lender or as Agent, at:
General Electric Capital Corporation
350 South Beverly Drive, Suite 200
Beverly Hills, California 90212
Attention: Mr. Mark Elliot Gudis
Senior Vice President
(Commercial Finance)
Facsimile: (310) 785-0644
With copies to:
General Electric Capital Corporation
3379 Peachtree Road Northeast, Suite 600
Atlanta, Georgia 30326
Attention: Mr. Timothy C. Huban
Vice President Commercial Finance
Facsimile: (404) 262-9032
and
General Electric Capital Corporation
201 High Ridge Road
Stanford, Connecticut 06927
Attention: Legal Counsel
Facsimile: (203) 316-7889
and
Murphy, Weir & Butler
101 California Street
39th Floor
San Francisco, California 94111
Attention: Dick M. Okada, Esq.
Facsimile: (415) 421-7879
(b) If to Borrower, at:
Seven-Up/RC Bottling Company of
Southern California, Inc.
3220 East 26th Street
Vernon, California 90023
Attention: Mr. Dave Brown
Facsimile: (213) 262-9566
and
Kirkland & Ellis
153 East 53rd Street
New York, New York 10002
Attention: Charles B. Fromm, Esq.
Facsimile: (212) 446-4900
55
<PAGE>
11.10 Section Titles. The Section titles and Table of Contents contained
--------------
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of this Agreement.
11.11 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
11.12 Time of the Essence. Time is of the essence of this Agreement and
-------------------
each of the other Loan Documents.
11.13 Publicity. Borrower agrees that neither it nor any other Loan
---------
Party will in the future issue any press releases or other public disclosure
using the name of GE Capital or referring to this Agreement or the other Loan
Documents without at least two (2) Business Days' prior notice to GE Capital and
without the prior written consent of GE Capital unless (and only to the extent
that) Borrower or such Loan Party is required to do so under law and then, in
any event, Borrower or such Loan Party will consult with GE Capital before
issuing such press release or other public disclosure. Borrower consents to the
publication by Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this Agreement.
11.14 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
-------------
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS; PROVIDED, THAT EACH LENDER AND BORROWER ACKNOWLEDGE THAT ANY
--------
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE
--- ------- --------
DEEMED OR OPERATE TO PRECLUDE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY LENDER.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY
OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
----- --- ----------
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
56
<PAGE>
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.9
------------
OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
--------------------
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
57
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
"Borrower"
--------
SEVEN-UP/RC BOTTLING COMPANY
OF SOUTHERN CALIFORNIA, INC.
By: /s/ David I. Brown
--------------------------
David I. Brown
Treasurer
"Agent"
-----
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Timothy C. Huban
--------------------------
Timothy C. Huban
Duly Authorized Signatory
"Lenders"
-------
Revolving Credit Commitment GENERAL ELECTRIC CAPITAL
- ---------------------------
$35,000,000 CORPORATION
By: /s/ Timothy C. Huban
--------------------------
Timothy C. Huban
Duly Authorized Signatory
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
November 22, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> AUG-16-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,291
<SECURITIES> 0
<RECEIVABLES> 24,609
<ALLOWANCES> 0
<INVENTORY> 21,730
<CURRENT-ASSETS> 56,305
<PP&E> 33,551
<DEPRECIATION> 0
<TOTAL-ASSETS> 96,463
<CURRENT-LIABILITIES> 49,780
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,986
<TOTAL-LIABILITY-AND-EQUITY> 96,463
<SALES> 33,518
<TOTAL-REVENUES> 33,518
<CGS> 27,418
<TOTAL-COSTS> 27,418
<OTHER-EXPENSES> 5,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 267
<INCOME-PRETAX> (986)
<INCOME-TAX> 28
<INCOME-CONTINUING> (1,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,014)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> 0
</TABLE>
