SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
<checked-box> QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
or
<square> TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-13914
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(Exact name of Registrant as specified in its Charter)
DELAWARE ###-##-####
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CARRETERA #865, KM 0.4
BARRIO CANDELARIA ARENAS
TOA BAJA, PUERTO RICO 00949
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (787) 251-2000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. <checked-box> Yes <square> No
As of August 14, 1997, there were 21,500,000 shares of Common Stock
issued and outstanding. This amount includes 5,000,000 shares of Class A
Common Stock and 16,500,000 shares of Class B Common Stock.
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PAGE
NUMBER
PART I FINANCIAL INFORMATION........................................... 3
Item 1. Financial Statements:........................................... 3
Condensed Consolidated Balance Sheets - Assets (dated Months
Ended June 30, 1997 and September 30, 1996)................ 3
Condensed Consolidated Balance Sheets - Liabilities
and Shareholders Equity (dated Months Ended
June 30, 1997 and September 30, 1996)....................... 4
Condensed Consolidated Statements of Income/
(Loss)(unaudited) for the Nine Months Ended
June 30, 1997 and 1996...................................... 5
Condensed Consolidated Statements of Income/(Loss)
(unaudited) for the Three Months Ended June
30, 1997 and 1996........................................... 6
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Nine Months Ended June 30,
1997 and 1996............................................... 7
Notes to Condensed Consolidated Financial Statements (Unaudited).. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 15
PART II OTHER INFORMATION............................................... 22
Item 1. Legal Proceedings............................................... 22
Item 6. Exhibits and Reports on Form 8-K................................ 22
(a) Exhibits.................................................... 22
(b) Reports on Form 8-K during the quarter ended June 30, 1997.. 23
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
----------- -------------
(unaudited) (audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,235 $ 18,614
Short-term investments - 12,904
Accounts receivable:
Trade, less allowance for doubtful accounts of $1,236
at June 30, 1997 and $1,158 at September 30, 1996 13,402 11,262
Due from PepsiCo, Inc. and affiliated companies 374 877
Other 5,735 2,423
Inventories 3,633 4,495
Deferred income taxes 187 187
Prepaid expenses and current assets 1,541 1,857
--------- -----------
Total current assets $ 44,107 $ 52,619
Investment in Buenos Aires Embotelladora S.A. (BAESA) - -
Deferred income tax, long-term 2,076 2,076
Long-lived assets for sale, principally land and building 3,805 3,805
Property, plant and equipment, net 47,752 49,936
Intangible assets, net of accumulated amortization 1,702 1,459
Other assets 60 86
--------- -----------
Total assets $ 99,502 $ 109,981
========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
---------- ------------
(unaudited) (audited)
<S> <C> <C>
Current Liabilities:
Current installments of long-term debt $ 1,007 $ 1,550
Current installments of capital lease obligations 649 341
Short-term borrowings 5,153 25,000
Accounts payable:
Trade 14,226 16,619
Affiliate - 50
Income tax payable 80 115
Other accrued expenses 8,791 8,672
------------ -----------
Total current liabilities 29,906 52,347
Long-term debt, excluding current installments 23,761 4,813
Capital lease obligations, excluding current installments 1,067 871
Accrued pension cost, long-term 2,593 2,593
------------ -----------
Total liabilities 57,327 60,624
------------ -----------
Shareholders' equity:
Class A common shares of $0.01 par value; authorized, 50 50
issued and outstanding 5,000,000 shares
Class B common shares, $0.01 par value; authorized 165 165
35,000,000 shares; issued and outstanding
16,500,000 shares
Additional paid-in capital 103,910 90,738
Retained earnings/(deficit) (60,586) (40,232)
Pension liability adjustment (1,364) (1,364)
------------ ------------
Total shareholders' equity 42,175 49,357
------------ ------------
Total liabilities and shareholders' equity $ 99,502 $ 109,981
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1997 1996
(unaudited) (unaudited)
------------- -------------
<S> <C> <C>
Net Sales $ 72,778 $ 79,117
Cost of Sales 50,390 54,980
------------- -------------
Gross profit 22,388 24,137
Selling and marketing expenses 22,342 32,246
Administrative expenses 6,497 6,928
Estimated liability under shareholders' class action litigation 13,172 -
Restructuring Charges 535 2,922
------------- -------------
Income/(loss) from operations (20,158) (17,959)
------------- -------------
Other income (expenses):
Interest expense (1,961) (876)
Interest income 966 1,889
Other, net 100 (230)
------------- -------------
Total other income (expenses) (895) 783
------------- -------------
Income/(loss) before income tax benefit/(expense) (21,053) (17,176)
and equity in net loss of BAESA
Income tax benefit/(expense) 699 (601)
------------- -------------
Income/(loss) before equity in net loss of BAESA (20,354) (17,777)
Equity in net loss of BAESA, net of income tax
benefit of $13,454 in 1996
- (37,769)
Net Income/(Loss) $ (20,354) $ (55,546)
------------- -------------
Earnings per common share:
Income/(loss) before equity in net loss of
BAESA, net of taxes $ (0.95) $ (0.83)
============= =============
Net income/(loss) $ (0.95) $ (2.58)
============= =============
Weighted average number of shares outstanding
(in thousands) 21,500 21,500
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1997 1996
(unaudited) (unaudited)
--------------- ------------
<S> <C> <C>
Net Sales $ 26,194 $ 24,615
Cost of Sales 17,727 19,915
--------------- ------------
Gross profit 8,467 4,700
Selling and marketing expenses 6,965 11,620
Administrative expenses 339 3,605
Estimated liability under shareholders' class action litigation 13,172 -
Restructuring Charges - 2,922
--------------- ------------
Income/(loss) from operations (11,999) (13,447)
--------------- ------------
Other income (expenses):
Interest expense (716) (511)
Interest income 267 524
Other, net 5 (450)
--------------- ------------
Total other income (expenses) (444) (437)
--------------- ------------
Income/(loss) before income tax benefit and equity
in net loss of BAESA (12,443) (13,884)
Income tax expense 828 90
--------------- ------------
Income/(loss) before equity in net loss of BAESA (11,615) (13,794)
Equity in net loss of BAESA, net of income tax
benefit of $1,485 in 1996 - (32,132)
=============== ============
Net Income/(loss) $ (11,615) $ (45,926)
Earnings per common share:
Income/(loss) before equity in net loss of BAESA, net of
taxes $ (0.54) $ (0.64)
=============== ============
Net income/(loss) $ (0.54) $ (2.14)
=============== ============
Weighted average number of shares outstanding (in thousands) 21,500 21,500
=============== ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (20,354) $ (55,546)
Adjustments to reconcile net earnings (loss) to net
cash provided by/(used in) operating activities:
Estimated liability under shareholders' class action
litigation 13,172 -
(Gain)/loss on sale of property, plant, and equipment 60 510
Depreciation and amortization 4,649 3,951
Intangible Write-off - 647
Equity in net earnings/(losses) of BAESA - 37,769
Changes in assets and liabilities:
Accounts receivable (4,949) (3,262)
Inventories 862 774
Prepaid expenses and other current assets 316 (366)
Accounts payable (2,443) 6,068
Other accrued expenses 119 2,810
Income taxes payable (35) 743
Other, net 26 308
----------- -----------
Net cash provided by/(used in) operating (8,577) (5,594)
activities
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 313 1,280
Proceeds from matured short-term investment 12,904 -
Purchases of property, plant and equipment (3,081) (20,531)
----------- -----------
Dividends received from affiliates - 2,839
Net cash provided by/(used in) investing activities 10,136 (16,412)
Cash flows from financing activities:
Proceeds from short-term borrowings 309 48,316
Repayment of short-term borrowings - (17,000)
Repayment of long-term debt (1,751) (1,163)
Proceeds from Capital Lease 1,793 -
Repayment of capital lease obligations (1,289) (1,149)
Dividends paid - (5,308)
----------- -----------
Net cash provided by/(used in) financing activities (938) 23,696
Net increase in cash and cash equivalents 621 1,690
Cash and cash equivalents at beginning of period 18,614 46,091
----------- -----------
Cash and cash equivalent at end of period $ 19,235 $ 47,781
=========== ===========
Supplemental disclosures:
Cash paid for:
Interest $ 1,855 $ 1,769
Income taxes $ 217 $ 186
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
7
</TABLE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
(1) ACCOUNTING PRINCIPLES AND BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements, footnotes,
and discussions should be read in conjunction with the consolidated financial
statements, related footnotes, and discussions contained in the Company's
annual report on Form 10-K for the fiscal year ended September 30, 1996. In
the opinion of the Company's management, the unaudited condensed consolidated
interim financial statements reflect all adjustments necessary for a fair
presentation. Operating results for the nine months and three months ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1997.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPTEMBER 30, 1996
---------------- ------------------
<S> <C> <C>
Raw materials $ 1,050 $ 1,346
Finished goods 1,537 1,684
Other 1,046 1,465
---------------- ------------------
$ 3,633 $ 4,495
================ ==================
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPTEMBER 30, 1996
------------- ------------------
<S> <C> <C>
Land and improvements $ 7,057 $ 7,057
Buildings and improvements 14,621 14,301
Machinery, equipment and vehicles 45,923 45,931
Bottles, cases and shells 1,444 1,401
Furniture and fixtures 1,565 1,877
Construction in process 360 1,941
------------ ------------------
70,970 72,508
Less accumulated depreciation and amortization (23,218) (22,572)
------------ ------------------
Property, plant and equipment, net $ 47,752 $ 49,936
============ ==================
</TABLE>
The Company capitalizes interest cost as a component of the cost of certain
building and improvements, and machinery. The following is a summary of
interest cost incurred:
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1996
-------------- ------------
<S> <C> <C>
Interest cost capitalized $ - $ 893
Interest cost charged to income 1,961 876
-------------- ------------
$ 1,961 $ 1,769
============== ============
</TABLE>
8
<PAGE>
(4) ACCOUNTING FOR LONG LIVED ASSETS
During the year ended September 30, 1996, the Company adopted the
provisions of FASB 121 - Accounting for Long Lived Assets. The Company deems
an asset to be impaired if a forecast of undiscounted future cash flows
directly related to the asset, including disposal value, if any, is less than
its carrying amount. Factors leading to the impairment were the Company's
decision, in mid-1996, to consolidate all of its manufacturing activities in
its new manufacturing facility, and anticipated losses from the disposition of
the former manufacturing facility, and remaining unused equipment. The amount
of the impairment was calculated using a recent appraisal of the estimated
value of such property less estimated costs of disposition. At June 30, 1997,
those Long Lived Assets remained at the same value as the value at September
30, 1996.
(5) SHAREHOLDERS' EQUITY
The Company declared and paid no cash dividends during the nine month
period ended June 30, 1997 and $5,308 during the nine month period ended June
30, 1996.
Earnings per common share are determined by dividing net income by the
weighted average number of common shares outstanding during each period. Stock
options granted to the Company's President have been disregarded in the
computation of earnings per common share as their effect would have been
antidilutive.
As indicated in note 10, the Company's founding shareholders have
effectively contributed to the Company 2,500,000 Class B shares of Common Stock
with an estimated value of $13,172.
(6) INCOME TAX
Income tax (benefit) expense for the nine months ended June 30, 1997 and
1996 consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1996
--------- ---------
<S> <C> <C>
Current $ (699) $ 601
Deferred - -
--------- ---------
Income tax (benefit) expense $ (699) $ 601
========= =========
</TABLE>
Deferred income tax benefit of $13,454 for the nine month period ended
June 30, 1996 has been provided in connection with the Company's equity in net
loss of BAESA.
The 1997 income tax benefit includes $897 of Federal income taxes paid in
prior years for which the company has filed a claim using as the basis thereof,
the significant net operating losses incurred during 1996.
(7) RELATED PARTY TRANSACTIONS
The Company paid approximately $1,553 and $1,682 during the nine months
ended June 30, 1997 and 1996, respectively, for advertising fees to a firm
controlled by a shareholder of the Company.
The Company paid approximately $232 during the nine months ended June 30,
1996 for consulting fees to a shareholder and director of BAESA.
The Company paid approximately $151 during the nine months ended June 30,
1996 for construction management services to a shareholder and former director
of the Company.
The Company paid approximately $300 during the nine months ended June 30,
1997 for legal fees to a firm, one of whose partners is a relative of the
Company's President.
9
<PAGE>
The Company's President has been granted by the company's controlling
shareholders, a ten year voting trust agreement which entitles him to vote, but
not own, 5,000,000 class A shares, representing a controlling interest in the
Company. The Company's President was granted a two-year option at $1.00 per
share on these controlling shares, to be exercised for the exclusive benefit of
the Company. This option expires on September 28, 1998.
8) INVESTMENT IN BAESA
The following condensed unaudited financial information relating to BAESA
as of June 30, 1997 and for the nine months and three months ended June 30,
1997 and 1996 and audited balance sheet financial information as of September
30, 1996 (in thousands of U.S. dollars) has been provided to the Company by
BAESA. Its inclusion in this report is for information purposes only and the
Company makes no representation as to the accuracy or completeness of such
information. At the time of filing of this Form 10-Q, the Company does not
control, or have significant influence over, the management or operations of
BAESA. For further information regarding BAESA, investors should consult
information made publicly available by BAESA to its shareholders.
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
(unaudited) (audited)
---------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 9,308 $ 27,361
Accounts receivable, less allowance for doubtful 65,750 64,069
accounts
Inventories 19,557 31,077
Deferred income tax, net 6,124 6,681
Prepaid expenses and other current assets 10,798 8,469
---------- -------------
Total current assets 111,537 137,657
Property, plant and equipment 369,707 586,908
Intangible assets, net of accumulated amortization 59,287 78,943
Investment in affiliated company 109,790 106,918
Other assets 8,181 16,954
---------- -------------
Total assets $ 658,502 $ 927,380
========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current installments of long-term debt $ 335,014 $ 290,299
Bank loans and overdrafts 397,035 367,440
Accounts payable 44,246 72,155
Income tax payable 2,784 3,149
Other accrued taxes 72,261 -
Accrued expenses and other current liabilities 88,328 124,025
---------- -------------
Total current liabilities 939,668 857,068
Long-term debt, excluding current installments 33,922 87,461
Deferred income taxes 7,511 7,740
Other long-term liabilities 7,996 8,385
---------- -------------
Total liabilities 989,097 960,654
Total shareholders' equity/(deficit) (330,595) (33,274)
---------- -------------
Total liabilities and shareholders' equity/(deficit) $ 658,502 $ 927,380
========== =============
</TABLE>
10
<PAGE>
(8) INVESTMENT IN BAESA (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
RESULTS OF OPERATIONS 1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 130,521 $ 123,318 $ 529,553 $ 563,425
Cost and expenses:
Cost of sales (76,076) (105,386) (276,120) (341,524)
Selling and marketing expenses (54,009) (124,640) (182,469) (280,039)
Administrative expenses (25,707) (86,922) (86,875) (145,444)
Debt and other restructuring charges (205,444) (9,531) (219,425) (21,071)
----------- ----------- ----------- -----------
Income/(loss) from operations (230,716) (203,161) (235,336) (224,653)
----------- ----------- ----------- -----------
Interest expense (30,257) (21,346) (74,518) (58,656)
Interest income 91 472 242 2,624
Foreign exchange gain/(loss) 1,800 (372) 4,537 (1,572)
Other, net (601) (3,341) (4,439) (7,491)
----------- ----------- ----------- -----------
(28,967) (24,587) (74,178) (65,095)
----------- ----------- ----------- -----------
Net income/(loss) before tax expense (259,683) (227,748) (309,514) (289,748)
and equity in net earnings of
affiliate
Income tax expense 286 (23,555) (937) (14,560)
----------- ----------- ----------- -----------
Net income before equity in net (259,397) (251,303) (310,451) (304,308)
earnings
of affiliate
Equity in earnings of affiliate 1,090 (152) 6,323 3,528
----------- ----------- ----------- -----------
Net income/(loss) $ (258,307) $ (251,455) $ (304,128) $ (300,780)
=========== =========== =========== ===========
</TABLE>
On July 29, 1997, BAESA announced an agreement in principle to enter into
a long-term financial restructuring plan with its major debt holders in
Argentina. Under the terms of the restructuring, BAESA's unsecured lenders in
Argentina would exchange debt for at least 98% of the equity in BAESA. BAESA's
existing shareholders would retain up to 2% of the equity and the right to
purchase additional equity pursuant to a rights offering, which would allow the
stockholders to retain their proportionate ownership. Additionally, the
current stockholders would be able to sell the rights if a market develops for
them.
On May 9, 1997 the Buenos Aires Stock Exchange suspended trading of
BAESA's Class B shares after its fiscal second quarter results for the period
ended March 31, 1997 showed a negative net worth under Argentine accounting
principles. The New York Stock Exchange also halted trading in BAESA's
American Depository Shares. Trading of these securities has not resumed to
date.
(9) STOCK OPTION PLANS
The Company has established two Stock Option Plans for the granting of
stock options to purchase Class B Shares to certain employees and directors of
the Company and its affiliates who have served in such capacities for at least
one year prior to the date the options are granted. It is expected that all
officers and directors and other employees of the Company and its affiliates
will be eligible to participate under these stock option plans, as deemed
11
<PAGE>
appropriate by the Company's Board of Directors. One of these stock option
plans is qualified for income tax purposes, whereas the other is not a
qualified plan. Options issued under the stock option plan that is qualified
for income tax purposes will have exercise prices which are not less than the
fair market value of the Class B Shares at the date of grant; the exercise
prices of options issued under the non-qualified stock option plan may be less
than the fair market value of the Class B shares at the date of grant. On
October 15, 1996, the Company granted an option to the President of the Company
to acquire 190,000 shares under the qualified plan at an exercise price of $5
per share. These plans replace a stock option plan that existed and was
terminated during 1996.
The Company has granted another stock option to the President of the
Company to acquire 1,516,667 Class B Shares of the Company, at an exercise
price of $5 per share. This stock option is exercisable in whole or in part
until exercised in full. A similar option previously granted to the former
president of the Company was canceled during 1996.
(10) LEGAL PROCEEDINGS
The Company is a defendant in eight putative class actions (originally
nine) alleging federal securities violations by the Company and various
officers and directors of the Company based on accounting irregularities that
required the Company to restate certain of its reported financial results and
other alleged misstatements and omissions in the Company's disclosure
documents. In the original filings plaintiffs sought unspecified money
damages. In a ninth action, the United States District Court for the District
of Puerto Rico issued an order granting plaintiff's motion for voluntary
dismissal without prejudice. The Company has reached a settlement with the
attorneys for the plaintiffs in seven of these lawsuits. The settlement, which
has been approved by the Court, will result in the payment of $2.5 million and
2.5 million in previously issued and outstanding Class B shares to the
plaintiffs and their attorneys. The settlement will result in the dismissal of
all eight actions. The Company and the other defendants have reached an
agreement with the Company's founding shareholders under which the founding
shareholders will effectively contribute to the Company for use in connection
with the settlement 2.5 million Class B shares owned by them. Each of the
named defendants will be released from all claims by the plaintiffs and the
class, and certain of the Company's officers and directors and the founding
shareholders will be released by the Company from all claims arising out of the
circumstances which precipitated the litigation and certain other claims.
Additionally the Company and the various directors of the company
referred to above have reached a settlement agreement with the company's
directors, officers and entity liability insurance coverage carriers (the
insurers) pursuant to which the insurers would make payments amounting to
$4,000,000 in payment of their obligations to the Company and to other
insureds. These funds are to be initially deposited in an escrow fund and
would be released only upon approval by all interested parties, including BAESA
and PepsiCo, and when the settlement of the eight putative class actions
referred to above becomes final and effective.
The Company has accrued the estimated cost of the settlement of the
aforementioned eight putative actions as follows:
Cost of 2,500,000 class B shares of stock effectively
contributed by the founding shareholders valued using
the trading price of the stock for a period of
fourteen days prior to the date of the settlement ($5.269) $ 13,172
Cash Payment of $2,500,000 less recovery from insurers -
---------
$ 13,172
=========
The remaining balance of the expected recovery from the insurers has been
recorded as a reduction of legal fees incurred in connection with this matter.
The effective contribution of the 2,500,000 class B shares by the
founding shareholders has been recorded as an additional contribution to the
Company's capital using as its basis the average trading price of the stock
referred to above.
12
<PAGE>
The shares of stock effectively contributed by the founding shareholders
have been deposited in a trust managed for the benefit of the Company, by the
Company's President, and will be released, pursuant to the terms of a stock
option agreement, when the settlement of the litigation becomes final and
unappealable.
The effect on the results of operations of the Company for the quarter
and nine month periods ended June 30, 1997, of the above mentioned transaction
is as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1997
------------- -------------
<S> <C> <C>
(In thousands)
<circle> Reduction in administrative expenses $ 1,500 $ 1,500
<circle> Settlement of the litigation (13,172) (13,172)
----------- -----------
Net effect on net income/(loss) (11,672) (11,672)
<circle> Contribution of Class B shares by founding 13,172 13,172
shareholders ----------- -----------
Net effect on shareholders' Equity $ 1,500 $ 1,500
=========== ===========
</TABLE>
In addition, in connection with the accounting irregularities, the
Securities and Exchange Commission (the "Commission") has issued a formal order
of investigation. The Staff of the Commission is currently engaged in that
investigation and the Company is cooperating fully.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, bank loans, accrued payroll, taxes and other current
liabilities approximate fair value because of the short maturity of these
instruments.
The fair value of each of the Company's long-term debt instruments is
based on the amount of future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturity. The carrying amounts approximate the
estimated fair value at June 30, 1997.
The Company currently does not hold any derivatives.
Under the equity method of accounting, the Company's investment in BAESA
has been reduced to zero. At June 30, 1997, such investment had an estimated
fair value of $0.00 determined using as a basis the New York Stock Exchange
quoted closing price per share of the Company's American Depository Shares on
that date.
(12) RESTRUCTURING CHARGES
The Company's results of operations for the nine months ended June 30,
1997 have been affected by the incurrence of a non-recurring restructuring
charge totaling $.5 million. This charge was for the costs associated with
employee terminations which resulted in a reduction of the Company's work force
by approximately 5%. The Company's results of operations for the nine months
ended June 30, 1996 have been affected by the incurrence of several non-
recurring restructuring charges totaling $2.9 million. These charges were
comprised of the following: (1) a $1.4 million fixed asset write-down related
to the closing of all bottling operations in the old plant, which is now for
sale and (2) $1.4 million in pension write-off and costs associated with
employee termination. The amount of $1.4 million in pension write-off and
costs associated with employee termination referred to above, includes $0.6
million of a pension plan intangible asset judged to be of no value to the
Company, and $0.8 million of benefits relating to two executives of the Company
who had either resigned or where the decision had been taken, pending board
approval, to discontinue their employment with the Company.
(13) LOAN RESTRUCTURING
13
<PAGE>
On April 8, 1997, the Company refinanced its short term borrowings with
Banco Popular de Puerto Rico. Under the terms of the Second Restated Credit
Agreement, a term loan of $25 million has been granted to the Company payable
in stipulated monthly installments over a ten-year period, with a balloon
payment at maturity of $11.8 million. The term loan is collateralized with a
priority lien over all real estate, machinery and equipment, and any other
assets or properties of the Company, acceptable to the Bank. The Company has
also been granted a $5 million revolving credit facility, the principal amount
of which may not exceed certain stipulated percentages of eligible receivables
and inventories, as defined.
(14) PENSION PLANS
On April 16, 1997, the Company announced its intention to suspend its
pension plans for periods not yet determined. The Company does not have
revised actuarial valuations under FASB 87 that reflect the full benefits of
the freeze of the pension plans. As these valuations become available, the
accrued pension costs will be adjusted accordingly.
(15) ADOPTION OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
no. 128). This statement is effective for financial statements for both
interim and annual periods ending after December 15, 1997. It requires
restatement of all prior-period earnings per share ("EPS") data presented.
SFAS No. 128 establishes standards for computing and presenting EPS and applies
to entities with publicly held common stock. This statement replaces the
presentation of primary EPS with a presentation of basic EPS. The Company will
adopt SFAS No. 128 for the first quarter ending December 31, 1997.
14
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL OVERVIEW
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with this overview and
the Condensed Consolidated Financial Statements of the Company, and the Notes
thereto, as of June 30, 1997 (unaudited) and September 30, 1996 and for the
nine month periods ended June 30, 1997 and 1996 (the "1997 nine month interim
period" and the "1996 nine month interim period," respectively) and for the
three month interim periods ended June 30, 1997 and 1996 (the "1997 three month
interim period" and the "1996 three month interim period," respectively ). The
Company's financial results for the nine month period ended June 30, 1996 as
reported in the Company's quarterly report on Form 10-Q which was originally
filed by the Company on October 8, 1996 were restated. The restated results
are contained in an amended quarterly report on Form 10-Q/A filed by the
Company on December 23, 1996.
This Report contains forward looking statements of expected future
developments. The Company wishes to insure that such statements are
accompanied by meaningful cautionary statements pursuant to the safe harbor
established in the Private Securities Litigation Reform Act of 1995. The
forward looking statements in this Report refer to the ability of the Company
to successfully conclude the settlement of its class action lawsuits and the
Company's claim against its liability insurance carrier and to payment of
dividends and estimated capital expenditures for future years. These forward
looking statements reflect Management's expectations and are based upon
currently available data; however, actual payments and expenditures are subject
to future events and uncertainties which could materially impact the Company's
requirements. Among the factors that can cause actual performance to differ
materially are: failure to complete the settlement of the Company's class
action lawsuits or failure to complete the anticipated settlement of the
Company's claim against its liability insurance carrier; the availability of
cash in the future which may be used to pay dividends; and changes in plans
with respect to capital expenditures, as well as the availability of resources
to fund those capital expenditures; and other factors, including economic,
climatic and political conditions in Puerto Rico, and the impact of such
conditions on consumer spending.
PRESENTATION OF FINANCIAL INFORMATION
In addition to conducting its own bottling operations, the Company
indirectly owns 12,345,347 shares, or approximately 17% of the outstanding
capital stock of BAESA as of June 30, 1997, and, through June 30, 1996,
exercised significant influence over the management of BAESA, subject to the
right of PepsiCo, Inc. ("PepsiCo") and certain of its affiliates (collectively,
"Pepsi Cola International" or "PCI") to approve certain management decisions.
As of July 1, 1996, PepsiCo assumed operating control of BAESA and the Company
does not control, or have significant influence over, the management or
operations of BAESA. The financial information relating to the Company set
forth below reflects the operations of the Company and its equity interest in
the net earnings of BAESA. On May 9, 1997, the Buenos Aires Stock Exchange
suspended trading of BAESA's Class B shares after its fiscal second quarter
results for the period ended March 31, 1997 showed a negative net worth under
Argentine accounting principles of $18.7 million. The New York Stock Exchange
also halted trading in BAESA's American Depository Shares. On July 29, 1997,
BAESA announced an agreement in principle to enter into a long-term financial
restructuring plan with its major debt holders in Argentina. Under the terms
of the restructuring, BAESA's unsecured lenders in Argentina would exchange
debt for at least 98% of the equity in BAESA. BAESA's existing shareholders
would retain up to 2% of the equity and the right to purchase additional equity
pursuant to a rights offering, which would allow the stockholders to retain
their proportionate ownership. Additionally, the current stockholders would be
able to sell the rights if a market develops for them. The Company is studying
its options in regards to BAESA's restructuring. Additionally, the Company is
liquidating Argentine Bottling Associates, a partnership through which the
Company holds its interest in BAESA. This liquidation will result in the
Company holding its BAESA shares directly, and will eliminate the accounting
requirement to report on an equity basis the results of operations of BAESA in
the future.
15
<PAGE>
SEASONALITY
The historical results of operations of the Company have not been
significantly seasonal. The Company believes that this could have been partly
attributable to existing capacity constraints while operating out of the old
plant which might have prevented the Company from meeting increased demand
during peak periods. However, the Company anticipates that its results of
operations in the future may be somewhat seasonal in the summer and holiday
seasons.
THE COMPANY
GENERAL
The following table sets forth certain financial information as a
percentage of net sales for the Company for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS INTERIM THREE MONTHS INTERIM
----------------------------------- ------------------- ---------------------
1994 1995 1996 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales 58.2 59.4 72.8 69.5 69.2 80.9 67.7
Gross Profit 41.8 40.6 27.2 30.5 30.8 19.1 32.3
Selling and Marketing Expenses 29.3 26.6 41.3 40.8 30.7 47.2 26.6
Administrative Expenses 10.1 5.5 9.3 8.8 8.9 14.6 1.2
Settlement of Litigation - - - - 18.1 - 50.3
Intangibles and Fixed Asset 2.8 - - - - -
Write-offs
Restructuring Charges - - 2.6 3.7 .7 11.9 -
Income (Loss) from Operations (.4) 8.5 (26.1) (22.7) (27.7) (54.6) (45.8)
====== ===== ===== ==== ===== ===== =====
</TABLE>
1997 NINE MONTH INTERIM PERIOD COMPARED TO 1996 NINE MONTH INTERIM PERIOD
NET SALES. Net Sales for the Company decreased $6.3 million, or 8.0%,
for the 1997 nine month interim period from the 1996 nine month interim period
to $72.8 million. This decrease was primarily the result of the significant
increase in discounts provided to customers, reflecting increased competitive
activity, and was partially offset by a 2.9% increase in unit sales volume in
the 1997 nine month interim period as compared to the 1996 nine month interim
period. The average net sales price on an eight ounce equivalent basis
decreased during the 1997 nine month interim period by approximately 10.6% as
compared to the 1996 nine month interim period.
COST OF SALES. Cost of sales for the Company decreased $4.6 million, or
8.3% for the 1997 nine month interim period as compared to the 1996 nine month
interim period to $50.4 million. This decrease was primarily the result of
lower raw material costs partially offset the 2.9% increase in sales volume and
by higher depreciation costs for the new manufacturing facility in the 1997
nine month interim period as compared to the 1996 nine month interim period.
GROSS PROFIT. Gross profit for the Company decreased by $1.7 million to
$22.4 million in the 1997 nine month interim period from $24.1 million in the
1996 nine month interim period. As a percentage of net sales, gross profit
increased to 30.8% in the 1997 nine month interim period from 30.5% in the 1996
nine month interim period. The decrease in gross profit was primarily due to
higher discounts provided to customers, the lower average net sales price, and
increased depreciation on the new manufacturing facility, which were partially
offset by the volume increase of 2.9% and lower raw material costs.
SELLING AND MARKETING EXPENSE. The Company has a number of marketing
arrangements with PepsiCo pursuant to which the Company is required to make
certain investments in marketing, new products, packaging introductions and
certain capital goods. The Company receives reimbursements from PepsiCo for a
16
<PAGE>
portion of such expenditures, which it is able to use to offset traditional
marketing expenses or to acquire fixed assets. The Company's selling and
marketing expenses are shown net of all such reimbursements from PepsiCo.
Selling and marketing expenses for the Company decreased $9.9 million, or
30.7%, to $22.4 million for the 1997 nine month interim period as compared to
the 1996 nine month interim period. This decrease was primarily due to a
reduction in marketing spending of $6.9 million, reductions in labor costs of
$1.2 million, a decrease in repair and maintenance costs of $1.4 million and a
reduction in insurance costs of $.4 million in the 1997 nine month interim
period as compared to the 1996 nine month interim period. As a percentage of
net sales, selling and marketing expenses decreased to 30.7% during the 1997
nine month interim period from 40.8% in the 1996 nine month interim period.
ADMINISTRATIVE EXPENSES. Administrative expenses for the Company
decreased $.4 million or 6.2% for the 1997 nine month interim period from the
1996 nine month interim period to $6.5 million. This decrease was primarily
the result of lower professional fees incurred in the 1997 period, due in part
to the anticipated recovery of $1.5 million from the Company's officers and
directors liability insurance carrier, compared to the 1996 period. As a
percentage of net sales, administrative expenses increased to 8.9% during the
1997 nine month interim period from 8.8% in the 1996 nine month interim period.
SETTLEMENT OF LITIGATION. The Company's results of operations for the
nine months ended June 30, 1997 were affected by the incurrence of a non-cash
expense of $13.2 million in connection with the Company's settlement of certain
civil litigation, representing the estimated value of 2.5 million Class B
shares being transferred as part of the settlement. Because these shares are
to be contributed by the Company's founding shareholders, and because the
Company anticipates receiving a $4.0 million recovery from its liability
insurance carrier, the net effect on the Company's equity of the settlement
transaction is a $1.5 million gain, which can be viewed as a recovery of
previously expensed legal cost. There was no similar non-cash expense incurred
during the 1996 nine month interim period. For further information regarding
the effect on the Company's results of operations of certain transactions
relating to the proposed settlement, see note 10 to Notes to Condensed
Consolidated Financial Statements.
RESTRUCTURING CHARGES. The Company's results of operations for the nine
months ended June 30, 1997 have been affected by the incurrence of a non-
recurring restructuring charge totaling $.5 million. This charge was for the
costs associated with employee terminations which resulted in a reduction of
the Company's work force by approximately 5%. During the 1996 nine month
interim period a charge of $2.9 million was recorded. The 1996 charge was
recorded in connection with the fixed asset write-down of $1.4 million related
to the closing of all bottling operations in the Company's old bottling plant,
which is now for sale, and $1.5 million in pension asset write-offs and costs
associated with employee termination.
INCOME (LOSS) FROM OPERATIONS. Income (loss) from operations for the
Company decreased to $(20.2) million in the 1997 nine month interim period,
from $(18.0) million in the 1996 nine month interim period. This decrease is
the result of (i) lower net sales, reflecting increased discounts offered to
customers offset partially by increased volume of 2.9%, (ii) recognition of a
loss contingency due to the proposed settlement of the civil litigation of
$15.7 million (the $13.2 million estimated value of 2.5 million Class B Shares
plus $2.5 million in cash) offset by insurance recovery of $4.0 million, (iii)
legal fees incurred in connection with the civil litigation and investigation
of the accounting irregularities, and (iv) the restructuring charges, offset
partially by lower raw material costs and reduced levels of marketing spending,
and other cost reductions for the 1997 nine month interim period as compared to
the 1996 nine month interim period.
OTHER INCOME/(EXPENSES). Other income/(expenses) decreased to $(.9)
million in the 1997 nine month interim period, from $.8 million in the 1996
nine month interim period. This decrease was primarily due to the
capitalization of construction period interest during the 1996 nine month
interim period for the new manufacturing facility which was occupied during the
third quarter of 1996. There was no such capitalization during the 1997 nine
month interim period. Interest earnings decreased during the 1997 nine month
interim period as a result of lower cash balances available for investment as
compared to the 1996 nine month interim period.
EQUITY IN NET LOSS OF BAESA. Based on information disseminated by BAESA,
equity in net loss of BAESA, net of income tax, amounted to $(37.8) million for
the 1996 nine month interim period. The Company's equity in the loss reported
by BAESA for the fiscal year ended September 30, 1996 was such that it reduced
the Company's investment in BAESA to zero, meaning that no further equity in
losses of BAESA were to be reported by the Company until BAESA reports profits
17
<PAGE>
sufficient to produce a positive investment in BAESA on the Company's balance
sheet. No such profits were realized during the 1997 nine month interim
period. In view of the intended liquidation of the affiliated partnerships
through which the Company holds its investment in BAESA the Company will no
longer be subject to the accounting requirement that it report on an equity
basis the results of operations of BAESA.
NET INCOME/(LOSS). Net income/(loss) during the 1997 nine month interim
period was $(20.4) million, compared to $(55.5) million during the 1996 nine
month interim period. Net (loss) in the 1997 nine month interim period
reflects loss before equity in net earnings (loss) of BAESA of $(20.4) million,
as compared to $(17.8) million of loss before equity in net loss of BAESA and
equity in net loss of BAESA of $(37.8) million during the 1996 nine month
interim period.
1997 THREE MONTH INTERIM PERIOD COMPARED TO 1996 THREE MONTH INTERIM PERIOD
NET SALES. Net Sales for the Company increased $1.6 million, or 6.4%,
for the 1997 three month interim period from the 1996 three month interim
period to $26.2 million. This increase was primarily the result of increased
sales volume of 15.3% offset in part by an increase in discounts provided to
customers during the 1997 three month interim period as compared to the 1996
three month interim period. The average net sales price per case on an eight
ounce equivalent basis decreased during the 1997 three month interim period by
approximately 7.7% as compared to the 1996 three month interim period.
COST OF SALES. Cost of sales for the Company decreased $2.2 million, or
11.0% for the 1997 three month interim period as compared to the 1996 three
month interim period to $17.7 million. This decrease was primarily the result
of reductions in raw material costs of $3.6 million, reductions in labor costs
of $.8 million, and reductions in utility and operating expenses of $.2
million, partially offset by the $2.4 million cost associated with the 15.3%
increase in sales volume in the 1997 three month interim period as compared to
the 1996 three month interim period.
GROSS PROFIT. Gross profit for the Company increased by $3.8 million to
$8.5 million in the 1997 three month interim period from $4.7 million in the
1996 three month interim period. As a percentage of net sales, gross profit
increased to 32.3% in the 1997 three month interim period from 19.1% in the
1996 three month interim period. The increase was due to the 15.3% sales
volume increase, offset in part, by the lower average net sales price, which
resulted in a net revenue increase of $1.6 million, coupled with the reduction
in cost of sales of $2.2 million which was due to lower raw material costs,
lower labor and other expenses, offset by the cost of the additional sales
volume of 15.3%.
SELLING AND MARKETING EXPENSE. The Company has a number of marketing
arrangements with PepsiCo pursuant to which the Company is required to make
certain investments in marketing, new products, packaging introductions and
certain capital goods. The Company receives reimbursements from PepsiCo for a
portion of such expenditures, which it is able to use to offset traditional
marketing expenses or to acquire fixed assets. The Company's selling and
marketing expenses are shown net of all such reimbursements from PepsiCo.
Selling and marketing expenses for the Company decreased $4.7 million, or
40.1%, to $7.0 million for the 1997 three month interim period as compared to
the 1996 three month interim period. This decrease was primarily due to
reductions in marketing spending of $2.5 million coupled with reductions in
labor costs of $1.2 million, and reductions in insurance, fleet, and other
costs of $1.0 million in the 1997 three month interim period as compared to the
1996 three month interim period. As a percentage of net sales, selling and
marketing expenses decreased to 26.6% during the 1997 three month interim
period from 47.2% in the 1996 three month interim period.
ADMINISTRATIVE EXPENSES. Administrative expenses for the Company
decreased $3.3 million or 90.5% for the 1997 three month interim period from
the 1996 three month interim period to $.3 million. This decrease was
primarily the result of recording the anticipated reimbursement of a portion of
the cost of legal services associated with certain civil litigation and the
18
<PAGE>
investigation of the accounting irregularities by insurance proceeds of $1.5
million. As a percentage of net sales, administrative expenses decreased to
1.2% during the 1997 three month interim period from 14.6% in the 1996 three
month interim period.
SETTLEMENT OF LITIGATION. The Company's results of operations for the
three months ended June 30, 1997 were affected by the incurrence of a non-cash
expense of $13.2 million in connection with the Company's settlement of certain
civil litigation, representing the estimated value of 2.5 million Class B
shares being transferred as part of the settlement. Because these shares are
to be contributed by the Company's founding shareholders, and because the
Company anticipates receiving a $4.0 million recovery from its liability
insurance carrier, the net effect on the Company's equity of the settlement
transactions is a $1.5 million gain, which can be viewed as a recovery of
previously expensed legal cost. For further information regarding the effect
on the Company's operations of certain transactions relating to the proposed
settlement, see note 10 to Notes to Condensed Consolidated Financial
Statements.
RESTRUCTURING CHARGES. There were no restructuring charges recorded
during the three month interim period ended June 30, 1996. For the three month
interim period ended June 30, 1996 the Company recorded restructuring charges
of $2.9 million. These charges were comprised of the fixed asset write-down
related to the closing of all bottling operations at the old manufacturing
facility of $1.4 million, and $1.5 million in pension asset write-offs and
costs associated with employee termination.
INCOME (LOSS) FROM OPERATIONS. Income (loss) from operations for the
Company decreased to $(12.0) million in the 1997 three month interim period,
from $(13.4) million in the 1996 three month interim period. This decrease is
the result of higher net sales, lower cost of sales, and lower selling and
marketing expenses, offset by the contingency loss recorded in connection with
the settlement of the civil litigation, net of the proceeds from the
anticipated insurance settlement.
OTHER INCOME/(EXPENSES). Other income/(expenses) were $(0.4) million in
the 1997 three month interim period, as compared to $(0.4) million in the 1996
three month interim period.
EQUITY IN NET LOSS OF BAESA. Based on information disseminated by BAESA,
equity in net loss of BAESA, net of income tax, amounted to $(32.1) million for
the 1996 three month interim period. The Company's equity in the loss reported
by BAESA for the fiscal year ended September 30, 1996 was such that it reduced
the Company's investment in BAESA to zero, meaning that no further equity in
losses of BAESA were to be reported by the Company until BAESA reports profits
sufficient to produce a positive investment in BAESA on the Company's balance
sheet. No such profits were realized during the 1997 three month interim
period. In view of the intended liquidation of the affiliated partnerships
through which the Company holds its investment in BAESA, the Company will no
longer be subject to the accounting requirement that it report on an equity
basis the results of operations of BAESA.
NET INCOME/(LOSS). Net income/(loss) during the 1997 three month interim
period was $(11.6) million, compared to $(45.9) million during the 1996 three
month interim period. Net (loss) in the 1997 three month interim period
reflects loss before equity in net earnings (loss) of BAESA of $(11.6) million,
as compared to $(13.8) million of loss before equity in net earnings (loss) in
BAESA and equity in net earnings (loss) of BAESA of $(32.1) million during the
1996 three month interim period.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $19.2 million of cash and cash
equivalents, and indebtedness for borrowed money, including short-term
borrowings and capital lease obligations, of $31.6 million.
The Company has announced that its current priority is to restore
profitability with respect to its Puerto Rican operations. In that connection,
the Company has made a decision to set aside its expansion plans temporarily.
Also, as of June 30, 1997, the Company has used approximately $25.6 million,
net of interest earnings, of the cash set aside from its September 1995 initial
19
<PAGE>
public offering to support these efforts through the repayment of indebtedness,
by additions to the Company's working capital, which has been and continues to
be affected as a result of the Company's net operating losses, and to cover a
portion of the cost of the offering. In addition, on April 8, 1997 the Company
completed the refinancing of its remaining debt to include a payment schedule
which more closely matches the life of its production assets.
Net cash provided by (used in) operating activities for the Company for
the 1997 nine month interim period was $(8.6) million compared to $(5.6)
million during the 1996 nine month interim period. This change was mainly the
result of the net cash loss after depreciation and amortization, loss on
contingency and other adjustments and equity in net loss of BAESA of $(2.5)
million and changes in assets and liabilities of $(6.1) million during the 1997
nine month interim period, as compared to $(12.7) million and $7.1 million,
respectively, for the 1996 nine month interim period. As of June 30, 1997, the
Company had $60.7 million in net operating loss carryforwards available to
offset future Puerto Rican income taxes and $42.6 million in net operating loss
carryforwards available to offset future U.S. taxable income.
Net cash provided by (used in) investing activities for the Company was
$10.1 million for the 1997 nine month interim period, as compared to $(16.4)
million during the 1996 interim period. Purchases of property, plant and
equipment, net, amounted to $(2.8) million during the 1997 nine month interim
period as compared to $(19.3) million during the 1996 nine month interim
period. The 1996 nine month interim period included significant expenditures
incurred in constructing the new manufacturing facility in Toa Baja. Proceeds
from short-term investments provided $12.9 million during the 1997 nine month
interim period as compared to zero for the 1996 nine month interim period.
Dividends received from BAESA during the 1997 interim period were zero as
compared to $2.8 million during the 1996 interim period. In view of the
current financial difficulties being experienced by BAESA as reported in its
recent public announcements, the Company does not believe that BAESA will be in
a position to pay dividends on its shares in the foreseeable future. In
addition, because the Company exerts no influence over BAESA, even if BAESA
does return to profitability, the Company would not be able to affect decisions
made by BAESA with respect to the payment of dividends. As a result, the
Company is unable to predict whether or when BAESA will pay any future
dividends.
Cash flows provided by (used in) financing activities for the Company
during the 1997 nine month interim period were $(1.1) million compared to $23.7
million during the 1996 nine month interim period. The significant financing
activities of the Company during the 1997 interim period were the net repayment
of debt. The significant financing activities during the 1996 interim period
were the net borrowing of $29.0 million and the payment of dividends of $(5.3)
million. In the future, the payment of dividends will be in part dependent on
the receipt of dividends from BAESA, and in part dependent on the achievement
of adequate levels of profitability in the Company's Puerto Rican operations,
and the consent of Banco Popular. The Company does not expect to pay any
dividends on its common stock for the foreseeable future.
In November 1994, the Company and its subsidiaries entered into a Credit
Agreement with Banco Popular. The Credit Agreement provided for borrowings by
the Company from time to time of $5 million in revolving loans, $8.8 million in
term loans and $15 million in non-revolving loans. In December 1995, Banco
Popular increased the amount the Company could borrow under revolving loans.
As of March 31, 1996, the Company had outstanding under the Credit Agreement
revolving loans in an aggregate principal amount of $10.0 million, term loans
in an aggregate principal amount of $5.3 million and non-revolving loans in an
aggregate principal amount of $15.0 million. On April 8, 1997, the Company
entered into a Second Restated Credit Agreement with Banco Popular, the holder
of this debt. The effect of this new agreement was to restructure the existing
debt into two portions, a long term loan of $25.0 million and a short term
revolving credit facility of $5.0 million. Both portions bear interest at 2.5%
over LIBOR.
The weighted average interest rate on such borrowings was 7.9% during the
first nine months of the fiscal year 1997. Beginning on May 1, 1997, the
Company is required to make monthly payments of principal in the amount of $.83
million with respect to the new term loan for the first two years of the loan
with annual escalating monthly payments thereafter until the end of the tenth
year of the loan (April 1, 2007) when a $11.8 million balloon payment is due.
The Company may prepay either of the loans subject to the terms and conditions
of the Second Restated Credit Agreement.
20
<PAGE>
Under the terms of the Second Restated Credit Agreement, the Company is
subject to the following financial restrictions: (i) the Company must
maintain a minimum ratio of Total Liabilities to Tangible Net Worth (as defined
in the Second Restated Credit Agreement) of not more than 1.60 to 1 for fiscal
year 1997 and 1.50 to 1 for each fiscal year thereafter during the term of the
Second Restated Credit Agreement; (ii) a ratio of Operating Cash Flow to Total
Debt Service (as defined in the Second Restated Credit Agreement) of 1.00 to 1
through June 30, 1998, 1.30 to 1 from September 30, 1998 through June 30, 1999,
and 1.5 to 1 thereafter; (iii) a minimum Tangible Net Worth of $37 million on
September 30, 1997 and of $39.5 million, $42 million, $44.5 million, and $47
million, respectively, by September 30, 1998, 1999, 2000, 2001, and thereafter.
The Company is also required to maintain with Banco Popular a minimum cash
balance of $10 million less certain prepayments of indebtedness under the term
loan, and under certain conditions this amount may be reduced to zero. In
addition, under certain circumstances, the Company may be required to prepay a
portion of the debt. Specifically, net proceeds of capital asset dispositions
over $.25 million per year, insurance recoveries other than for business
interruption not promptly applied toward repair or replacement, a portion of
excess cash flow (as defined in the Second Restated Credit Agreement), and a
portion of net proceeds associated with any sale of Class A shares, require
early repayment of the amounts outstanding under this agreement. Certain of
the repayment amounts offset the minimum cash balance requirement. The entire
principal amount of the loans outstanding under the Second Restated Credit
Agreement becomes immediately due and payable if the Company violates any of
these financial restrictions. Furthermore, the Company may not pay dividends
(other than amounts declared by and received from BAESA as dividends) without
the consent of Banco Popular under the Second Restated Credit Agreement.
As a result of the Company initially providing to Banco Popular incorrect
financial statements for the first and second quarters ended December 31, 1995
and March 31, 1996, and certain other circumstances, the Company was in
technical default of the terms of the Credit Agreement during part of fiscal
year 1996. The Company has, however, received from Banco Popular a written
waiver of such default. The Company believes that it is currently in full
compliance with the terms of the Second Restated Credit Agreement.
Pursuant to the Second Restated Credit Agreement, the Company has granted
Banco Popular a security interest in all its machinery and equipment,
receivables, inventory and the real property on which the Toa Baja plant and
the Rio Piedras plant are located.
The Company's franchise arrangements with PepsiCo require it not to
exceed a ratio of senior debt to subordinated debt to equity of 65 to 25 to 10.
The Company is currently in compliance with these covenants.
Capital expenditures for the Company totaled $3.0 million in the 1997
nine month interim period as compared to $20.5 million in the 1996 nine month
interim period. During fiscal 1996, the Company constructed a new
manufacturing facility at its Toa Baja property and purchased new manufacturing
equipment to increase production capacity and capability in the new plant. In
the past, the Company's capital expenditures have been financed by a
combination of borrowings from third parties and internally generated funds.
The Company estimates that its capital expenditures for the fiscal years 1997
and 1998 may be approximately $4 million in each year.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 10 to Notes to Condensed Consolidated
Financial Statements contained in Part I of this Report is incorporated herein
by reference. Except as described in that Note, there were no material
developments regarding legal proceedings involving the Company during the nine
month period ended June 30, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS. The following exhibits are filed herewith or incorporated
herein:
Exhibit
Number Description of Exhibit
- ------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1995).
3.2 Certificate of Amendment of the Company's Amended and Restated
Certificate of Incorporation. (Incorporated by reference to Exhibit 3.2
to the Company's quarterly report on Form 10-Q for the quarterly period
ended December 31, 1996).
3.3 Amended and Restated By-Laws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995).
4.1 Form of Specimen Stock Certificate representing Class B Shares
(incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the
Company's Registration Statement on Form S-1 (Registration No. 33-94620)
(the "S-1 Registration Statement")).
10.1 Franchise Commitment Letter (incorporated by reference to Exhibit 10.1 to
the S-1 Registration Statement).
10.2 Letter Agreement between the Company and PepsiCo extending term of
Exclusive Bottling Appointments (incorporated by reference to Exhibit
10.2 to the S-1 Registration Statement).
10.3 Form of Exclusive Bottling Appointment (incorporated by reference to
Exhibit 10.3 to the S-1 Registration Statement).
10.4 Material Differences in Exclusive Bottling Appointments (incorporated by
reference to Exhibit 10.4 to the S-1 Registration Statement).
10.5 Concentrate Price Agreement (incorporated by reference to Exhibit 10.5 to
the S-1 Registration Statement).
10.6 Amended and Restated General Partnership Agreement for BSA (incorporated
by reference to Exhibit 10.6 to Amendment No. 1 to the S-1 Registration
Statement).
10.7 Shareholders Agreement (incorporated by reference to Exhibit 10.7 to
Amendment No. 1 to the S-1 Registration Statement).
10.8 Amendment No. 1 to Shareholders Agreement (incorporated by reference to
Exhibit 10.8 to Amendment No. 1 to the S-1 Registration Statement).
10.9 Amendment No. 2 to Shareholders Agreement (incorporated by reference to
Exhibit 10.9 to Amendment No. 1 to the S-1 Registration Statement).
10.10 Amendment No. 3 to Shareholders Agreement (incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995).
10.11 Stock Option Agreement dated as of September 28, 1996 among Rafael Nin,
Pepsi-Cola Puerto Rico Bottling Company and the Shareholders
(incorporated by reference to Exhibit 1 to the Schedule 13D of Rafael Nin
dated October 9, 1996).
10.12 Voting Trust Agreement dated September 28, 1996 among Rafael Nin, Pepsi-
Cola Puerto Bottling Company and the Grantors (incorporated by reference
to Exhibit 2 to the Schedule 13D of Rafael Nin dated October 9, 1996).
22
<PAGE>
10.13 Consent of PepsiCo., Inc. to the terms of the Voting Trust Agreement
referred to under Exhibit No. 10.12 above. (Incorporated by reference to
Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the
quarterly period ended December 31, 1996).
10.14 Stock Option Agreement dated as of October 15, 1996 between Rafael Nin
and Pepsi-Cola Puerto Rico Bottling Company (incorporated by reference to
Exhibit 1 to the Amendment No. 1 to the Schedule 13D of Rafael Nin dated
January 7, 1997).
10.15 Pepsi-Cola Puerto Rico Bottling Company Qualified Stock Option Plan dated
as of December 30, 1996 (incorporated by reference to Exhibit 2 to the
Amendment No. 1 to the Schedule 13D of Rafael Nin dated January 7, 1997).
10.16 Pepsi-Cola Puerto Rico Bottling Company Non-Qualified Stock Option Plan
dated as of December 30, 1996 (incorporated by reference to the Company's
Proxy Statement dated January 31, 1997).
10.17 Amendment No. 4 to the Shareholders Agreement (incorporated by reference
to the Exhibit 10.13 to the Company's Annual Report on Form 10K/A-1 for
the fiscal year ended September 30, 1996).
10.18 Second Restated Credit Agreement dated April 8, 1997 among Pepsi-Cola
Puerto Rico Bottling Company, Pepsi-Cola Puerto Rico Manufacturing
Company, Pepsi-Cola Puerto Distributing Company, Beverage Plastics
Company and Banco Popular de Puerto Rico.
10.19 Master Lease Agreement dated April 18, 1997 between General Electric
Capital Corporation of Puerto Rico and Pepsi-Cola Puerto Rico Bottling
Company.
10.20 Amendment No. 5 to Class A Shareholders Agreement.
10.21 Trust Agreement dated as of May 14, 1997 among certain shareholders of
the Company and Rafael Nin, as Trustee (incorporated by reference to
Exhibit 1 to Amendment No. 3 to the Schedule 13D of Rafael Nin dated
August 13, 1997).
10.22 Stock Option Agreement dated as of May 14, 1997 among certain grantors, a
special committee of the Company's Board of Directors, the Company and
Rafael Nin (incorporated by reference to Exhibit No. 2 to Amendment No. 3
to the Schedule 13D of Rafael Nin dated August 13, 1997).
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the S-
1 Registration Statement).
(b) There were no reports on Form 8-K filed during the quarter ended March 31,
1997
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/S/ RAFAEL NIN Chief Executive Officer August 14, 1997
-----------------------
Rafael Nin
/S/ DAVID L. VIRGINIA Chief Financial Officer August 14, 1997
-----------------------
David L. Virginia
/S/ WANDA RIVERA ORTIZ Chief Accounting Officer August 14, 1997
------------------------
Wanda Rivera Ortiz
24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000948086
<NAME> PEPSI-COLA PUERTO RICO BOTTLING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 19,235
<SECURITIES> 0
<RECEIVABLES> 20,747
<ALLOWANCES> 1,236
<INVENTORY> 3,633
<CURRENT-ASSETS> 44,107
<PP&E> 74,775
<DEPRECIATION> (23,218)
<TOTAL-ASSETS> 99,502
<CURRENT-LIABILITIES> 29,906
<BONDS> 24,828
0
0
<COMMON> 215
<OTHER-SE> 43,324
<TOTAL-LIABILITY-AND-EQUITY> 99,502
<SALES> 26,194
<TOTAL-REVENUES> 26,194
<CGS> (17,727)
<TOTAL-COSTS> (38,227)
<OTHER-EXPENSES> 272
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> (716)
<INCOME-PRETAX> (12,443)
<INCOME-TAX> 828
<INCOME-CONTINUING> (11,615)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,615)
<EPS-PRIMARY> (.54)
<EPS-DILUTED> (.54)
</TABLE>
-------------------------------------------------------
$30,000,000
SECOND RESTATED CREDIT AGREEMENT
Among
PEPSI-COLA PUERTO RICO BOTTLING COMPANY,
PEPSI-COLA PUERTO RICO MANUFACTURING COMPANY,
PEPSI-COLA PUERTO RICO DISTRIBUTING COMPANY,
BEVERAGE PLASTICS COMPANY
and
BANCO POPULAR DE PUERTO RICO
Dated as of April 8, 1997
-------------------------------------------------------
<PAGE>
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .................................... 1
Section 1.1 Defined Terms .................................. 1
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES .............. 15
Section 2.1 Description of Transaction ..................... 15
Section 2.2 Commitments .................................... 15
Section 2.3 The Advances ................................... 15
Section 2.4 Making the Revolving Credit Borrowings ......... 17
Section 2.5 Fees ........................................... 17
Section 2.6 Reduction of the Revolving Credit Commitment ... 18
Section 2.7 Interest and Repayment ......................... 18
Section 2.8 Optional Prepayments ........................... 20
Section 2.9 Mandatory Prepayments and Reductions of
Commitments................................... 22
Section 2.10 Payments and Computations ...................... 23
Section 2.11 Payments on Non-Business Days .................. 23
Section 2.12 Funding Procedure .............................. 24
Section 2.13 Increased Costs ................................ 24
Section 2.14 Changed Circumstances .......................... 24
Section 2.15 Taxes .......................................... 25
Section 2.16 Extension of Termination Date .................. 26
ARTICLE III CONDITIONS OF LENDING .......................... 26
Section 3.1 Condition Precedent to All Advances ............ 26
Section 3.2 Conditions Precedent to All Advances ........... 28
Section 3.3 Reference to and Effect on the Loan Documents... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES ................. 29
Section 4.1 Representations and Warranties of the Borrowers. 29
ARTICLE V COVENANTS OF THE BORROWERS ..................... 35
Section 5.1 Affirmative Covenants .......................... 35
Section 5.2 Negative Covenants ............................. 43
ARTICLE VI SPECIAL PROVISIONS AS TO COLLATERAL ............ 47
Section 6.1 Perfection of Security Interest ................ 47
Section 6.2 Provisions Relating to Receivables ............. 48
Section 6.3 Warranties with Respect to Receivables ......... 48
Section 6.4 Provisions Relating to Inventory ............... 48
Section 6.5 Provisions Relating to Machinery and Equipment.. 49
Section 6.6 Collateral Reporting ........................... 49
Section 6.7 Collections; Blocked Account ................... 51
Section 6.8 Application of Collateral ...................... 51
Section 6.9 Release of Collateral .......................... 51
i
<PAGE>
ARTICLE VII EVENTS OF DEFAULT .............................. 52
Section 7.1 Event of Default ............................... 52
ARTICLE VIII MISCELLANEOUS .................................. 54
Section 8.1 Amendments, Etc. ............................... 54
Section 8.2 Notices ........................................ 54
Section 8.3 No Waiver; Remedies ............................ 55
Section 8.4 Accounting Terms ............................... 56
Section 8.5 Costs, Expenses and Taxes; Indemnification ..... 56
Section 8.6 Right of Set-Off ............................... 57
Section 8.7 Binding Effect; Governing Law .................. 57
Section 8.8 Execution in Counterparts ...................... 58
Section 8.9 Sale of Notes; Participations and Commitments... 58
Section 8.10 Severability of Provisions ..................... 58
Section 8.11 Survival of Covenants .......................... 58
Section 8.12 Application of Payments ........................ 58
Section 8.13 Disbursement Authorization ..................... 59
Section 8.14 Cross Default and Joint and Several Obligations. 59
Section 8.15 Loans and Collateral under Financing Agreement
and the First Restated Credit Agreement
Remain in Full Force and Effect............... 59
LIST OF EXHIBITS
Exhibit A - Term Loan Note
Exhibit B - Revolving Credit Note
Exhibit C - Cash Collateral Agreement
Exhibit D - Borrowers' Places of Business
Schedule 5.2(b)
Schedule 5.2(j)
ii
<PAGE>
SECOND RESTATED CREDIT AGREEMENT
SECOND RESTATED CREDIT AGREEMENT entered into as of this 8th day of
April, 1997, among PEPSI-COLA PUERTO RICO BOTTLING COMPANY ("Pepsi-Cola
PR"), PEPSI-COLA PUERTO RICO DISTRIBUTING COMPANY ("Distributing"),
BEVERAGE PLASTICS COMPANY ("Beverage Plastics") and PEPSI-COLA PUERTO RICO
MANUFACTURING COMPANY ("Manufacturing"; Pepsi-Cola PR, Distributing,
Beverage Plastics and Manufacturing hereinafter sometimes referred to
individually as a "Borrower" and collectively as "Borrowers"), each a
corporation organized and existing under the laws of the State of Delaware;
and
BANCO POPULAR DE PUERTO RICO, a banking corporation organized and
existing under the laws of the Commonwealth of Puerto Rico (hereinafter
referred to as the "Bank").
ARTICLE I
DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"ADVANCES" shall include all Revolving Credit Advances and Term Loan
Advances.
"AFFILIATE" shall mean, with respect to any Person, any other Person
(i) that directly or indirectly through one or more Persons controls, or is
controlled by, or is under common control with, such Person, (ii) that
directly or indirectly, of record or beneficially, owns or holds eight (8%)
percent or more of the shares of any class of any equity, capital stock or
partnership interest of such Person having voting powers or other equity
interest, or (iii) eight percent (8%) or more of the shares of stock,
partnership interest or other equity interest of which are owned or held,
directly or indirectly, of record or beneficially, for such Person. For the
purposes of this Agreement, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies of a Person, whether through ownership of voting
securities or partnership interest, by contract or otherwise; all of the
Borrowers' officers, shareholders, directors, subsidiary corporations,
joint venturers and partners shall be deemed to be the Borrowers'
Affiliates.
"AGREEMENT" or "THIS AGREEMENT" shall include all amendments,
modifications and supplements hereto and shall refer to this Second
Restated Credit Agreement as the same may be in effect at the time such
reference becomes operative.
<PAGE>
"ANNUALIZED CASH FLOW" shall mean, as of the end of each fiscal
quarter, Operating Cash Flow for such quarter and the previous fiscal
quarters, if any, during the current fiscal year PLUS, any legal expenses
and settlements and judgments paid during such period by any of the
Borrowers or their Restricted Subsidiaries not covered by insurance related
to the Shareholders' Suit, if any, divided by the number of months elapsed
in such fiscal year and multiplied by twelve.
"BAESA" means Buenos Aires Embotelladora, S.A.
"BAESA STOCK DISPOSITION" shall mean any sale, assignment, transfer or
other disposition of any stock or warrants convertible into stock of BAESA
(whether now owned or hereafter acquired or received) by the Borrowers or
any of their Restricted Subsidiaries.
"BANK" has the meaning assigned to that term in the Preamble.
"BASE RATE" means the highest of the rates of interest announced
publicly from time to time in THE WALL STREET JOURNAL by the principal
commercial banks in New York, New York as their prime or base rate.
"BLOCK ACCOUNT" shall have the meaning assigned thereto in Section
6.7.
"BORROWER" or "BORROWERS" have the meanings assigned to such terms in
the Preamble.
"BORROWINGS" shall refer collectively to the Revolving Credit
Borrowings and the Term Loan Borrowing.
"BOTTLING APPOINTMENT" shall mean the Exclusive Bottling Appointment
Agreement dated April 27, 1987 between Pepsi-Cola PR and PepsiCo, as
amended to date.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
legal holiday or the equivalent for banks generally under the laws of the
Commonwealth or New York, New York.
"CAPITAL EXPENDITURES" shall mean, for any period and for all
Borrowers and their Restricted Subsidiaries taken as a whole, the sum of
all expenditures actually incurred by all Borrowers and their Restricted
Subsidiaries for such period for any assets or improvements, replacements,
substitutions or additions thereto that have a useful life of more than one
(1) year, including the direct or indirect acquisition of such assets by
way of increased product or service charges, offset items or otherwise, but
excluding from such expenditures (i) Indebtedness incurred in connection
with Capitalized Leases permitted under Section 5.2(b), (ii) expenditures
financed with the proceeds from the sale of any capital stock of Pepsi-Cola
PR (other than proceeds under the Option Agreement required to effect any
2
<PAGE>
mandatory prepayment under Section 2.9(e)), or (iii) financed from any
contribution and other monies that are made available to the Borrowers by
PepsiCo or any Affiliate thereof for the specific purpose of financing the
acquisition of Capital Expenditures.
"CAPITALIZED LEASES" means all rental obligations which have been or
should be capitalized on the books of the Borrowers or any of their
respective Restricted Subsidiaries in accordance with Generally Accepted
Accounting Principles and good accounting practice, and in each case taken
at the amount thereof accounted for as Indebtedness, net of interest
expense, determined in accordance with Generally Accepted Accounting
Principles and good accounting practice.
"CASH COLLATERAL ACCOUNT" means that deposit account described in
Section 5.1(v).
"CASH COLLATERAL AGREEMENT" means the Collateral Account Agreement
governing the operation of the Cash Collateral Account and the use of funds
deposited therein, executed as of the Closing Date by and among the
Borrowers and the Bank.
"CASUALTY" shall mean any damage to or destruction of the Realty,
Machinery and Equipment or other property of any of the Borrowers or their
Restricted Subsidiaries.
"CLASS A SHARES" shall have the meaning set forth in Section 4.1(y).
"CLASS B STOCK OFFERING" shall have the meaning set forth in Section
2.8(d).
"CLOSING DATE" shall mean the date of this Agreement.
"COLLATERAL" shall mean and include all Receivables, Inventory,
Machinery and Equipment, Realty, the Cash Collateral Agreement, all
agreements and contracts assigned hereunder and all of the Borrowers' other
real and personal property in which a security interest is granted, or
purported to be granted, in accordance with the terms of this Agreement and
the other Loan Documents.
"COMMITMENTS" shall refer collectively to the Term Loan Commitment and
the Revolving Credit Commitment.
"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico.
"DEBT SERVICE" shall mean, for any period, the sum for the Borrowers
and the Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with Generally Accepted Accounting Principles) of
the following: (a) all scheduled payments of principal on (i) any Advances
hereunder (other than repayments of Revolving Credit Advances if there was
no corresponding reduction in the amount of the Revolving Credit
Commitment), and (ii) ail other Indebtedness of the Borrowers and the
Restricted Subsidiaries scheduled to be made during such period, PLUS
(b) the total interest expense on all Advances and such Indebtedness for
such period.
3
<PAGE>
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any property (tangible or intangible, and whether now owned
or hereafter acquired) by the Borrowers or any of their Restricted
Subsidiaries to any Person excluding (a) any sale of Inventory in the
ordinary course of business, (b) the disposition of obsolete or worn-out
equipment, and (c) any BAESA Stock Disposition.
"DISPOSITION RECAPTURE DATE" shall mean each date on which any of the
Borrowers or any of their Restricted Subsidiaries receive Net Available
Proceeds.
"DISTRIBUTING" has the meaning assigned to that term in the Preamble.
"ELIGIBLE INVENTORY" shall mean and include only such Inventory of the
Borrowers (excluding raw materials and work in process) located at
Borrowers' places of business listed on Exhibit D hereto, which, in the
Bank's commercially reasonable judgment, is in good and saleable condition,
it is not obsolete or unmerchantable and does not otherwise constitute
unacceptable collateral and which is subject to no other Lien other than
Permitted Liens.
"ELIGIBLE RECEIVABLES" shall mean and include only such Receivables
arising in the ordinary course of the Borrowers' business which are
scheduled to the Bank and which the Bank, in its commercially reasonable
judgment, deems to be Eligible Receivables. No Receivable shall be an
Eligible Receivable if (a) it arises out of a sale made by the Borrowers to
an Affiliate of the Borrowers or to a Person controlled by an Affiliate of
the Borrowers; or (b) it is due or unpaid more than ninety (90) days after
the original invoice date; or (c) the account debtor has commenced a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or made an assignment for the benefit of creditors, or
if a decree or order for relief has been entered by a court having
jurisdiction in the premises of the account debtor in an involuntary case
under the federal bankruptcy laws, as now constituted or hereafter amended,
or if any other petition or other application for relief under the federal
bankruptcy laws has been filed against the account debtor, or if the
account debtor has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or
affairs; or (d) is not expressed in United States dollars; or (e) the sale
to the account debtor is on a bill-and-hold, guaranteed sale, sale-and-
return, sale on approval, consignment or any other repurchase or return
basis; or (f) the Bank believes, in its commercially reasonable judgment,
that collection of such receivable is insecure or that such receivable may
not be paid by reason of the account debtor's financial inability to pay;
or (g) the account debtor is the United States of America or the
Commonwealth of Puerto Rico or any department, agency or instrumentality of
either, unless the corresponding Borrower assigns its right to payment of
such Receivable to the Bank pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. <section><section> 203 ET SEQ.) or Act No. 16
of May 1, 1967, as amended (3 L.P.R.A. <section><section> 901-902), as the
4
<PAGE>
case may be; or (h) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the account debtor or the services
giving rise to such Receivable have been performed by Distributing and
accepted by the account debtor or the Receivable otherwise does not
represent a final sale; or (i) the Receivable was not invoiced on or within
seven (7) days after the date of shipment of the finished goods covered
thereby; or (j) the Bank at all times does not have a perfected first
priority security interest on such Receivable; or (k) the account debtor is
located outside of Puerto Rico or the United States; or (l) the Receivable
consists of insurance proceeds payable to any the Borrowers or their
Restricted Subsidiaries related to the Shareholders' Suit; or (m) the
Receivable arises from sales made by the Cristalia division of Pepsi-Cola
PR.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as supplemented or amended from time to time. Section references to
ERISA are to ERISA as in effect on the date of this Agreement and any
subsequent provisions of ERISA, amendatory thereof, supplemental thereto of
substituted therefor.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which, together with the Borrowers or any Subsidiary, would
be deemed to be a single employer within the meaning of Section 4001 of
ERISA or Section 414 of the U.S. Internal Revenue Code of 1986, as amended.
"EURODOLLAR FUNDS" means deposits in United States dollars in
immediately available funds in the London interbank market on the first day
of a Funding Period (in the case of the Term Loan Note) for a period equal
to the Funding Period, and in an amount equal or comparable to the
principal amount of the Advance being funded with such Eurodollar Funds.
"EVENT OF DEFAULT" shall mean any of the events or circumstances
specified in Section 7.1.
"EXCESS CASH FLOW" shall mean for any period, Operating Cash Flow for
such period, MINUS, without duplication, the sum of (a) Capital
Expenditures for such period permitted under Section 5.2(o) that were not
financed by indebtedness, (b) all scheduled payments of principal and all
interest expensed or accrued on Indebtedness (including the interest
component of Capitalized Leases) included within the definition of Debt
Service, paid (including voluntary and mandatory prepayments) during such
period, and (c) Taxes for such period.
5
<PAGE>
"FINANCING AGREEMENT" has the meaning assigned to that term in Section
2.1.
"FIRST RESTATED CREDIT AGREEMENT" has the meaning assigned to that
term in Section 2.1.
"FUNDING PERIOD" shall mean each period of three calendar months
commencing on the first day of January, April, July and October of each
year and ending on the last day of the third calendar month thereafter,
except that (i) the initial Funding Period shall begin on the Closing Date
and shall end on June 30, 1997 and (ii) the last Funding Period for (a) the
Term Loan Advance shall end on March 31, 2007 and (b) the Revolving Credit
Advances shall end on the Termination Date.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" shall mean
generally accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent with the prior
financial practice of the Borrowers, except for changes mandated by the
Financial Accounting Standards Board or any similar accounting authority of
comparable standing.
"INCURRED" has the meaning assigned to that term in Section 3.5(a).
"INDEBTEDNESS" shall mean, for any Person, all obligations of such
Person, without duplication, required by GAAP to be shown as liabilities on
its balance sheet, and in any event shall include all: (a) indebtedness
created, issued or incurred by such Person for borrowed money (whether by
loan or the issuance and sale of debt securities or the sale of property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such property from such Person); (b) obligations
of such Person representing the deferred purchase or acquisition price of
property or services, other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the
respective services are rendered; (c) obligations and liabilities of any
Person secured by a Lien, claim, encumbrance, or security interest upon
property now or hereafter owned by any Borrower or any Restricted
Subsidiary, even though such Borrower or such Restricted Subsidiary has not
assumed or become liable for the payment thereof; (d) obligations or
liabilities created or arising under any lease of real or personal
property, or conditional sales contract or other title retention agreement,
including, but not limited to Capitalized Leases with respect to property
used or acquired by any Borrower, even though the rights and remedies of
the lessor, seller or the Bank thereunder are limited to repossession of
such property; (e) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; and (f) Indebtedness of
others guaranteed by such Person.
6
<PAGE>
"INVENTORY" shall mean and include all of the corresponding Borrower's
now owned and hereafter acquired inventory, including, without limitation,
all goods, merchandise and other personal property furnished under any
contract of service or intended for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature
or description which are or might be used, consumed or sold in such
Borrower's business or are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise and other personal property, all returned or repossessed
goods now, or at any time or times hereafter, in the possession or under
the control of such Borrower or the Bank, and all documents of title or
documents representing the same.
"LIBOR RATE" shall mean the offered quotation for the rate of interest
on deposits with a tenor equal to the applicable Funding Period of United
States dollars in the London interbank market, as published by Telerate
Systems, Inc. (currently on page 4843 of the financial information
reporting services furnished electrically by Telerate Systems, Inc.) at
approximately 9:00 a.m. Eastern Standard Time on the Pricing Date.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement
or preferential arrangement, charge or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing or recording
of any financing statement or other instrument under the Uniform Commercial
Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"LOAN DOCUMENTS" has the meaning assigned to that term in Section
3.1(b).
"LOAN PARTIES" has the meaning assigned to that term in Section 3.1
(b).
"MACHINERY AND EQUIPMENT" shall mean and include all of each
Borrower's now owned and hereafter acquired equipment and fixtures,
including, without limitation, all bottles, cases, tanks, shells,
cylinders, furniture, machinery, tool, dies, moldings vehicles and trade
fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, and
any other equipment or fixtures to be acquired or financed in whole or in
part by the Bank, that form part of the Plant or that is otherwise given as
security to the Bank.
"MANUFACTURING" has the meaning assigned to that term in the Preamble.
7
<PAGE>
"MARKETING AGREEMENT" shall mean that certain Cooperative Advertising
and Marketing Agreement between Concentrate Manufacturing Operations
PepsiCo Puerto Rico, Inc. and Pepsi-Cola PR dated April 7, 1997, as amended
or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the property, business, operations, financial condition, liabilities,
assets or capitalization of the Borrowers and the Restricted Subsidiaries
of the Borrowers taken as a whole, (b) the ability of a Loan Party to
perform its obligations under any of the Loan Documents, (c) the validity
or enforceability of any of the Loan Documents, or (d) the rights and
remedies of the Bank under any of the Joan Documents.
"MINIMUM CASH BALANCE" means, as of any date, Ten Million Dollars
($10,000,000) MINUS the sum of (a) the aggregate principal amount of any
mandatory prepayments made by the Borrowers to the Bank pursuant to
Sections 2.9(e) and 2.9(f) hereof, PLUS (b) the principal amount then held
to the credit of the Cash Collateral Account, PLUS (c) the aggregate
principal amount of any optional prepayments made by the Borrowers to the
Bank pursuant to Section 2.8(e), PLUS (d) the aggregate amount of any
reductions in the Revolving Credit Commitment, PLUS (e) $5,000,000, to the
extent, and only to the extent that: (i) the Borrowers and their Restricted
Subsidiaries achieve and maintain at all times a ratio of Operating Cash
Flow to Total Debt Service of not less than 1.5 to 1, and (ii) the
Shareholders' Suit is settled to the reasonable satisfaction of the Bank or
Pepsi-Cola PR provides evidence to the reasonable satisfaction of the Bank
that all costs, expenses, judgments and settlements of such lawsuit will be
paid from other than internal funds of any of the Borrowers and their
Restricted Subsidiaries.
"MULTIEMPLOYER PLAN" means any multiemployer plan, as defined in
Section 4001 of ERISA and subject to Title IV of ERISA, which is maintained
or at any time during the five (5) calendar years preceding the date of
this Agreement was maintained for employees of the Borrowers or of an ERISA
Affiliate.
"NET AVAILABLE PROCEEDS" shall mean, in the case of any Disposition or
BAESA Stock Disposition, the amount of Net Cash Payments received in
connection with such Disposition or BAESA Stock Disposition, which Net Cash
Payments are not promptly used to replace Machinery and Equipment.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition or
BAESA Stock Disposition, the aggregate amount of all cash payments
(including, without limitation, all cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable
or otherwise, but only as and when received) of such Disposition or BAESA
Stock Disposition; provided that:
8
<PAGE>
(a) Net Cash Payments shall be net of (i) the amount of any
reasonable legal, title and recording tax expenses, commissions and other
fees and expenses actually paid by each Borrower and its Restricted
Subsidiaries in connection with such Disposition or BAESA Stock Disposition
and satisfactorily documented in connection therewith and (ii) any Federal,
state, Commonwealth and local income or other taxes estimated to be payable
by the corresponding Borrower and its Restricted Subsidiaries as a result
of such Disposition or BAESA Stock Disposition (but only to the extent that
such estimated taxes are in fact reserved on the books of the corresponding
Borrower and its Restricted Subsidiaries for such purpose in accordance
with GAAP); and
(b) Net Cash Payments shall be net of any repayments by the
corresponding Borrower or any of its Restricted Subsidiaries of
Indebtedness to the extent that (i) such Indebtedness is secured by a Lien
on the property that is the subject of such Disposition and such
Indebtedness was permitted to be incurred under Section 5.2(b) and (ii) the
transferee of (or holder of a Lien on) such property requires that such
Indebtedness be repaid as a condition to the Disposition of such Property.
"NET INSURANCE PAYMENTS" shall mean, with respect to any Casualty, the
aggregate amount of all insurance proceeds received with respect to such
Casualty net of any Federal, State or local or other taxes payable by each
Borrower and its Restricted Subsidiaries in connection with the receipt of
such insurance proceeds.
"NET WORTH" shall mean, as of any date, the sum for the Borrowers and
their Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with Generally Accepted Accounting Principles) of
the following (a) the amount of capital stock and paid in capital PLUS
(b) the outstanding principal amount of Subordinated Debt, PLUS (c) the
amount of surplus and retained earnings (or, in the case of a surplus or
retained earnings deficit, minus the amount of such deficit), MINUS the
cost of any treasury shares.
"NON-EXCLUDED TAXES" has the meaning assigned to that term in Section
2.15(a).
"NON-REVOLVING CREDIT ADVANCES" has the meaning assigned to that term
in Section 2.3(a)(ii).
"NOTES" has the meaning assigned to that term in Section 2.7(c).
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and duties due and owing by any
Borrower or any Restricted Subsidiary to the Bank of any kind or nature,
present or future, monetary or contractual, whether or not evidenced by any
note, guaranty or other instrument, arising under this Agreement, the Notes
or any other Loan Document (in each case as now in effect or as thereafter
amended or supplemented). The term includes, without limitation, all
interest, charges, expenses, fees, attorneys' fees and any other sums
chargeable to any Borrower under this Agreement or any other Loan Document.
9
<PAGE>
"OPERATING CASH FLOW" shall mean, for any period, the sum, for the
Borrowers and their Restricted Subsidiaries (determined on a consolidated
basis without duplication in accordance with Generally Accepted Accounting
Principles) of the following: (a) net operating income (or loss)
(calculated before taxes, interest expense, and extraordinary items of
income (or loss)) for such period, PLUS (b) depreciation and amortization
(only to the extent deducted in determining net operating income) for such
period, PLUS (c) gain from the sale or other disposition of the BAESA
capital stock owned by Pepsi-Cola PR, PLUS (d) other sources of funds
during such period (including, but not limited to, Subordinated Debt,
capital stock contributions and any other monies that are made available to
the Borrowers by PepsiCo under the Bottling Appointment and the Marketing
Agreement) that are not reflected on the financial statements of the
Borrowers as revenues, a reduction of expenses or otherwise, PLUS (e)
permitted earnings from equity in Unrestricted Subsidiaries or Affiliates
(paid and received in cash), MINUS (x) to the extent permitted by Section
5.2(c) hereof, any dividends paid or declared on the outstanding shares of
capital stock of the Borrowers or the Restricted Subsidiaries during such
period.
"OPTION AGREEMENT" shall have the meaning assigned to that term in
Section 4.1(z).
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Borrower, the
certificate of incorporation and by-laws of such Borrower.
"ORIGINAL REVOLVING CREDIT ADVANCES" shall have the meaning set forth
in Section 2.1(a)(iii).
"OTHER TAXES" shall have the meaning assigned to that term in Section
2.15(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means any single employer plan, as defined in Section
4001 ERISA and subject to Title IV of ERISA, which is maintained, or at any
time during the five calendar years preceding the date of this Agreement
was maintained, for employees of any Borrower or an ERISA Affiliate.
"PEPSICO" means PepsiCo, Inc., a corporation organized under the laws
of the State of North Carolina.
"PERMITTED LIENS" shall mean: (a) Liens in favor of the Bank created
by the Loan Documents; (b) Liens for taxes, assessments or governmental
charges, but only to the extent that such taxes, assessments and charges
(i) are not yet due, or (ii) are being contested in good faith by
10
<PAGE>
appropriate proceedings and adequate reserves or other appropriate
provisions are being maintained with respect thereto in accordance with
Generally Accepted Accounting Principles; (c) statutory Liens of landlords,
Liens of carriers, warehousemen, mechanics and materialmen and other Liens
imposed by law and created in the ordinary course of the Borrowers' or any
Restricted Subsidiary's business, but only to the extent that the amounts
secured or to be secured by such Liens (i) are not past due, (ii) are being
contested in good faith by appropriate proceedings and adequate reserves or
other appropriate provisions are being maintained with respect thereto in
accordance with Generally Accepted Accounting Principles; (d) Liens
incurred or deposits made in the ordinary course of the Borrowers' or a
Restricted Subsidiary's business (including, without limitation, surety
bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, leases, contracts (other than for
the repayment of borrowed money or the deferred purchase price of property
or services), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts; (e)
Liens which are purchase money security interests, or Liens on property
subject to Capitalized Leases, including, but not limited to Liens on
vending machines and coolers arising in connection with Indebtedness
permitted to be incurred under Section 5.2(b) of this Agreement; (f)
easements, rights-of-away, restrictions and other similar charges or
encumbrances on real property which do not, singly or in the aggregate,
have a Material Adverse Effect; (g) extensions, renewals and replacements
of any lien referred to in subparagraphs (a) through (f) above, provided
that the principal amount of the obligation secured thereby is not
increased and that any such extension, renewal or replacement is limited to
the property originally encumbered thereby; and (h) Liens consented to in
writing by the Bank.
"PERSON" shall mean and include any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal, or otherwise, including,
without limitation, any instrumentality, division, agency, body or
department thereof), and including any Borrower.
"PLANT" shall mean the manufacturing plant of the Borrowers with a
gross area of approximately 144,600 square feet on a real property located
in Toa Baja, Puerto Rico.
"PRICING DATE" shall mean 9:00 A.M. (San Juan, Puerto Rico time) on
the first day of a Funding Period.
"REALTY" shall mean those certain parcels of land and any and all
improvements now or hereafter existing thereon, described in Sections
3.1(b)(iv) and (v) and 3.1(b)(vii).
11
<PAGE>
"RECAPTURE LEVERAGE RATIO" shall mean, for any period, and based upon
the immediately preceding fiscal quarter of the Borrowers and their
Restricted Subsidiaries determined on a consolidated basis for such period
without duplication pursuant to Generally Accepted Accounting Principles,
the quotient obtained by dividing (i) the outstanding principal amount of
the Term Loan Advance, PLUS the amount of the Revolving Credit Commitment
as of the end of the immediately preceding fiscal quarter of the Borrowers,
and (ii) Annualized Cash Flow.
"RECEIVABLES" shall mean and include all of the corresponding
Borrower's present and future rights to payments for goods, merchandise or
Inventory sold or leased or for services rendered, whether or not
represented by instruments or chattel paper, and whether or not earned by
performance; all of the corresponding Borrower's now owned or hereafter
acquired accounts, contract rights, chattel paper, instruments, documents,
and proceeds, including, without limitation, all insurance proceeds;
proceeds of any letter of credit on which such Borrower is beneficiary; and
all forms of obligations whatsoever owing to the corresponding Borrower,
together with all instruments and documents of title representing any of
the foregoing, all rights in any goods, merchandise or Inventory which any
of the foregoing may represent, all rights in any returned or repossessed
goods, merchandise or Inventory, and all rights, security and
guaranties with respect to each of the foregoing, including, without
limitation, any right of stoppage in transit.
"REPORTABLE EVENT" has the meaning assigned to that term in Title IV
of ERISA.
"RESTRICTED SUBSIDIARIES" shall mean all Subsidiaries of the Borrowers
other than the Unrestricted Subsidiaries.
"REVOLVING CREDIT ADVANCE" has the meaning assigned to that term in
Section 2.3(b).
"REVOLVING CREDIT BORROWINGS" has the meaning assigned to that term in
Section 2.3(b).
"REVOLVING CREDIT COMMITMENT" has the meaning assigned to that term in
Section 2.3(b).
"REVOLVING CREDIT NOTE" has the meaning assigned to that term in
Section 2.7(b).
"SHAREHOLDERS' SUIT" shall mean the lawsuits listed in Schedule 4.1(e)
hereto.
"SOLVENT" shall mean, as to any Person, that such Person has
(i) capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage; and (ii) is able
to pay its debts (excluding intercompany debts among the Borrowers and
their Restricted Subsidiaries) as they mature and owns property having a
12
<PAGE>
fair saleable value, greater that the amount required to pay its debts as
they become due.
"SUBORDINATED DEBT" shall mean unsecured Indebtedness of the Borrowers
for borrowed money which are expressly subordinate and junior in right of
payment to the Notes and all the Obligations of the Borrowers under this
Agreement and the Loan Documents (such subordination to be evidenced by
subordination agreements in form and substance acceptable to the Bank) in
that no payment or prepayment, directly or indirectly, on account of the
principal of or interest and premium, if any, on the Subordinated Debt
shall be made (in cash or property or securities, or by set-off or
otherwise) and no holder of Subordinated Debt shall be entitled to demand
or receive any such payment or prepayment unless (i) all amounts then due
for principal, interest and premium, if any on the Notes and all other
Obligations of the Borrowers to the Bank shall have been paid in full or
(ii) if at the time of such payment or prepayment or immediately after
giving effect thereto, there shall have occurred any Event of Default.
"SUBSIDIARY" shall mean any corporation, association, joint stock
company, business trust or similar organization of which more than fifty
percent (50%) of the outstanding capital stock or other equity interest
having ordinary voting powers to elect a majority of the board of directors
or other governing body of such corporation is at the time directly or
indirectly owned or controlled by any Borrower or by one or more
Subsidiaries.
"SURVEY" shall mean that certain survey of the Realty and certain
other real property located in Toa Baja prepared by Roberto Cabrera and
dated October 27, 1994 delivered to the Bank in connection with the
transactions contemplated by the First Restated Credit Agreement.
"TANGIBLE NET WORTH" shall mean, as of any date on which the amount
thereof shall be determined, the aggregate Net Worth of the Borrowers and
the Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with Generally Accepted Accounting Principles),
MINUS (a) the sum of any amounts attributable to any intangible assets,
including but not limited to, trademarks and patent rights determined in
accordance with Generally Accepted Accounting Principles, MINUS (b)
deferred expenses and taxes, MINUS (c) any Indebtedness of the
stockholders, officers, Subsidiaries and Affiliates of the Borrowers
(excluding intercompany transactions between the Borrowers and the
Restricted Subsidiaries arising in the ordinary course of business), MINUS
(d) prepaid expenses, MINUS (e) investment s made by the Borrowers and any
Restricted Subsidiaries in the Unrestricted Subsidiaries permitted
hereunder.
"TAXES" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings or all liabilities with
respect thereto imposed with respect to any and all payments by the
13
<PAGE>
Borrowers hereunder and under the Notes, excluding Other Taxes.
"TERM LOAN I ADVANCE" has the meaning assigned to that term in Section
2.3(a)(i).
"TERM LOAN ADVANCE" has the meaning assigned to that term in Section
2.3(a)(iv).
"TERM LOAN BORROWING" has the meaning assigned to that term in Section
2.3(a)(iv).
"TERM LOAN COMMITMENT" has the meaning assigned to that term in
Section 2.3(a)(iv).
"TERM LOAN NOTE" has the meaning assigned to that term in Section
2.7(a).
"TERM PORTION" has the meaning assigned to that term in Section
2.3(a)(iii).
"TERMINATION DATE" has the meaning assigned to that term in Section
2.3(b).
"TERMINATION EVENT" shall mean (a) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (b) the withdrawal of any Borrower or any ERISA
Affiliate of such Borrower from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (c) the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041
of ERISA, or (d) the institution of proceedings to terminate a Pension Plan
by the PBGC under Section 4042 of ERISA, or (e) any other event or
condition which would constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Pension Plan.
"TOTAL LIABILITIES" shall mean, as of any date the sum, for the
Borrowers and their Restricted Subsidiaries (determined on a consolidated
basis without duplication in accordance with Generally Accepted Accounting
Principles), of the following (a) all Indebtedness (other than contingent
liabilities not required to be reflected on a balance sheet pursuant to
Generally Accepted Accounting Principles), and (b) all other obligations
(excluding Subordinated Debt) that should be classified as liabilities on a
balance sheet, including, without limitation, all reserves (other than
general contingency reserves) and all deferred taxes and other deferred
items.
"UNRESTRICTED SUBSIDIARIES" shall mean BAESA, Seven-Up
Concesiones S.A.I.C., AYDECAR S.A., Argentine Bottling Associates, BAESA
Shareholders Associates, Riverside, S.A., Embotelladoras Chilenas Unidas,
14
<PAGE>
Embotelladora del Uruguay, S.A., Perla del Norte, S.A., Punch N.V.
Limitada, 9 de julio, S.A., Embotelladora Centroamericana, S.A., Sierras
del Mar, S.A.I.C., Embosur, S.A., Pepsi-Cola Engarrafadora Ltda., PCE
Bebidas, Ltda., and any other Subsidiaries of any of the Borrowers
operating outside of the United States and Puerto Rico with respect to
which the Bank has given its previous written consent to be treated as
Unrestricted Subsidiaries.
"VOTING TRUST" shall have the meaning set forth in Section 4.1(y).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.1 DESCRIPTION OF TRANSACTION. The Bank and the Borrowers
entered into a Restated Credit Agreement dated as of November 10, 1994, as
amended by a First Amendment to Restated Credit Agreement dated September
26, 1995 and a Second Amendment to Restated Credit Agreement and Loan
Documents dated June 4, 1996 (collectively, the "First Restated Credit
Agreement") in order to reflect in a single document certain modifications
to the terms and conditions of a Financing Agreement, dated September 10,
1993, among the Bank, Pepsi-Cola PR and Beverage Plastics (the "Financing
Agreement"), reflect a corporate reorganization of Pepsi-Cola PR and
Beverage Plastics and grant to Manufacturing a non-revolving credit
facility to finance part of the cost of acquiring, developing, equipping
and constructing a new manufacturing plant in Toa Baja, Puerto Rico. The
Borrowers have now requested certain further modifications to the terms and
conditions of the First Restated Credit Agreement. In order to reflect
such modifications the parties hereto have agreed to execute this Second
Restated Credit Agreement, It is not the intention of the parties to this
Agreement and nothing contained shall be interpreted as a novation of any
Obligations of the Borrowers to the Bank under the First Restated Credit
Agreement, the Financing Agreement, any collateral documents securing such
Obligations or of the indebtedness evidenced by notes issued pursuant
thereto, it being expressly acknowledged and agreed by the parties hereto
that the First Restated Credit Agreement, the Financing Agreement and all
of the documents issued or executed thereunder (as security therefor or
otherwise) shall continue to be in full force and effect as herein
modified.
Section 2.2 COMMITMENTS. Subject to the terms and conditions and
relying upon the representations and warranties contained herein, the Bank
hereby agrees to make available to the Borrowers certain loans as more
fully set forth in this Agreement.
Section 2.3 THE ADVANCES. (a) (i) On September 10, 1993, the Bank
made a term loan advance (the "Term Loan I Advance") to Pepsi-Cola PR and
15
<PAGE>
Beverage Plastics in the aggregate principal amount of TEN MILLION
DOLLARS ($10,000,000). On the date hereof, the aggregate outstanding
principal amount of the Term Loan I Advance, after applying all the
installments of principal on the Term Loan I Advance which have been
received by the Bank on or before the date hereof, is $5,256,410.56. The
proceeds of the Term Loan I Advance were originally used for the purpose of
refinancing certain existing indebtedness of Pepsi-Cola PR and for general
corporate purposes of Pepsi-Cola PR and Beveral Plastics. In connection
with the execution of the First Restated Credit Agreement, Manufacturing
agreed to become a co-borrower with respect to the Term Loan I Advance.
Pursuant to this Agreement the Term Loan I Advance will be consolidated
with the Non-Revolving Credit Advances and the Term Portion of the
Revolving Credit Advances as part of the Term Loan Advance referred to in
Section 2.3(a)(iv) hereof.
(ii) Pursuant to the First Restated Credit Agreement, the Bank
made non-revolving credit advances to Manufacturing (the "Non-Revolving
Credit Advances"), for the development, equipping and construction of the
Plant. On the date hereof, the aggregate outstanding principal amount of
the Non-Revolving Credit Advances is FIFTEEN MILLION DOLLARS ($15,000,000).
Manufacturing has requested and the Bank has agreed to convert all of the
now outstanding Non-Revolving Credit Advances into a term loan comprising a
portion of the Term Loan Advance referred to in Section 2.3 (a) (iv) hereof
subject to the conditions of this Agreement.
(iii) Pursuant to the First Restated Credit Agreement, the Bank
made revolving credit advances to Distributing (the "Original Revolving
Credit Advances"). On the date hereof, the aggregate outstanding principal
amount of the Original Revolving Credit Advances is TEN MILLION DOLLARS
($10,000,000). Distributing has requested the Bank has agreed to include
Pepsi-Cola PR, Beverage Plastics and Manufacturing as borrowers under the
Revolving Credit Commitment and to a reduction of the revolving credit
commitment amount under the First Restated Credit Agreement to FIVE MILLION
DOLLARS from TEN MILLION DOLLARS effective as of the Closing Date and to
convert $4,743,584.44 (the "Term Portion") of the now outstanding Original
Revolving Credit Advances into a term loan comprising part of the Term Loan
Advance referred to below and FIVE MILLION DOLLARS ($5,000,000) into a
revolving credit advance subject to the conditions of this Agreement.
(iv) The Term Loan I Advance, the Non-Revolving Credit Advances,
the Term Portion and the Original Revolving Credit Advances shall be
consolidated into a single term loan advance to be referred to as the "Term
Loan Advance" and the aggregate principal amount of the Term Loan Advance,
that is TWENTY-FIVE MILLION DOLLARS ($25,000,000) shall be referred to as
the "Term Loan Commitment." In connection with the execution of this
16
<PAGE>
Agreement, each of the Borrowers hereby agrees to become a co-borrower with
respect to the Term Loan Advance. The borrowings made under this Section
2.2(a) shall be hereinafter referred to as the "Term Loan Borrowing."
(b) The Bank agrees, on the terms and conditions hereinafter set
forth, to make revolving credit advances to Borrowers (each advance made
hereunder is hereinafter sometimes referred to individually as a "Revolving
Credit Advance" and collectively as "Revolving Credit Advances") from time
to time during the period from the Closing Date up to and including
September 30, 1997 (as such date may be extended pursuant to section 2.16
hereof, the "Termination Date") which shall not exceed at any time
outstanding for the Borrowers in the aggregate (subject to the provisions
of subsection (a) of Section 2.9) the sum of (i) eighty percent (80%) of
the amount of Distributing's Eligible Receivables, plus (ii) fifty percent
(50%) of the net value of Distributing's Eligible Inventory (calculated
based on the cost of Eligible Inventory); PROVIDED, HOWEVER, that revolving
Credit Advances to the Borrowers shall not exceed FIVE MILLION DOLLARS
($5,000,000) in the aggregate at any time (the "Revolving Credit
Commitment"). Each borrowing under this Section 2.3(b) (a "Revolving
Credit Borrowing") shall be in an aggregate principal amount of not less
than TWENTY-FIVE THOUSAND DOLLARS ($25,000). Within the limits of the
Revolving Credit Commitment, the Borrowers may borrow, repay and reborrow
Revolving Credit Advances under this Section 2.3(b). In connection with
the execution of this Agreement, each of the Borrowers hereby recognizes
that as of the Closing Date the aggregate outstanding principal amount of
Revolving Credit Advances is FIVE MILLION DOLLARS and each of the Borrowers
hereby agrees to become a co-borrower with respect to the Revolving Credit
Advances.
Section 2.4 MAKING THE REVOLVING CREDIT BORROWINGS. Each Revolving
Credit Borrowing shall be made upon the receipt of written notice from any
of the Borrowers to the Bank delivered by not later than 1:00 p.m. (San
Juan, Puerto Rico time) on the date of the proposed Borrowing specifying
the amount desired.
Section 2.5 FEES. (a) Pepsi-Cola PR agrees to pay to the Bank on
the Closing Date a fee in the amount of TWO HUNDRED THIRTY THOUSAND DOLLARS
($230,000). in order to compensate the Bank for the costs associated with
the structuring, processing, approving and closing of the transactions
contemplated by Section 2.3 of this Agreement, including, but not limited
to, administrative, out-of-pocket, general, overhead and lost opportunity
costs, but not including any expenses for which the Borrowers have agreed
to indemnify the Bank pursuant to Section 8.5 (d) of this Agreement or to
reimburse the Bank pursuant to Section 8.5 (a) of this Agreement. The Bank
acknowledges having received from Pepsi-Cola PR, the amount of FORTY
THOUSAND DOLLARS ($40,000) of the total fee due on the Closing Date
pursuant to this Section 2.5 (a), such amount to be credited on the Closing
Date against such fee.
(b) Pepsi-Cola PR agrees to pay to the Bank an additional fee from
the date of this Agreement until the repayment of all Obligations hereunder
in the amount of twenty-five basis points of the Revolving Credit
17
<PAGE>
Commitment, as reduced from time to time, payable annually in advance on
April 8th of each year or if such day is not a Business Day, on the first
Business Day immediately following such date during the term of this
Agreement (without any proration as a result of early prepayment),
commencing on the Closing Date.
(c) Each of the above fees shall be fully earned when due and shall
not be subject to pro-ration or rebate upon the early termination of this
Agreement for any reason.
Section 2.6 REDUCTION OF THE REVOLVING CREDIT COMMITMENT. The
Borrowers shall have the right, upon at least three (3) Business Days'
notice to the Bank, to terminate in whole or reduce in part the unused
portions of the Revolving Credit Commitment, provided that each partial
reduction related thereto shall be in the aggregate amount of ONE HUNDRED
THOUSAND DOLLARS ($100,000) or an integral multiple thereof.
Section 2.7 INTEREST AND REPAYMENT. (a) THE TERM LOAN ADVANCE shall
be evidenced by a promissory note of the Borrowers to the order of the Bank
in substantially the form of Exhibit A hereto (the "Term Loan Note"). The
notes previously executed by Pepsi-Cola PR, Manufacturing and Beverage
Plastics Company on November 10, 1994, in connection with the First
Restated Credit Agreement, shall be restated in its entirety and replaced
by the Term Loan Note. The Term Loan Note shall be in the principal amount
of TWENTY-FIVE MILLION DOLLARS ($25,000,000) and shall be payable one
hundred twenty (120) consecutive monthly installments of principal, each
payable on the first (1st) day of each month, commencing on May 1, 1997.
The installments shall be in the amounts set forth below:
May 1, 1997 - April 1, 1998 $ 83,333.33
May 1, 1998 - April 1, 1999 $ 83,333.33
May 1, 1999 - April 1, 2000 $ 87,500.00
May 1, 2000 - April 1, 2001 $ 95,833.33
May 1, 2001 - April 1, 2002 $ 104,166.66
May 1, 2002 - April 1, 2003 $ 104,166.66
May 1, 2003 - April 1, 2004 $ 125,000.00
May 1, 2004 - April 1, 2005 $ 137,500.00
May 1, 2005 - April 1, 2006 $ 145,833.33
May 1, 2006 - March 1, 2007 $11,795,833.69
; PROVIDED, that the final installment shall be in such amount as necessary
to pay in full the Obligations related to the Term Loan Advance.
The Term Loan Note shall bear interest from its date until full
payment on the unpaid balance of principal thereof at an annual rate of
interest which throughout each Funding Period shall be equal to the
following rate, commencing on the date of the Term Loan Note: (i) if
Eurodollar Funds are then available to the Bank for such Funding Period, a
18
<PAGE>
fixed rate equal to two point five percent (2.5%) over and above the LIBOR
Rate; or (ii) if Eurodollar Funds are not then available to the Bank for
such funding Period, a fluctuating annual rate equal to the Base Rate, each
change in such fluctuating rate to take effect simultaneously with the
corresponding change in the Base Rate. Anything herein to the contrary
notwithstanding, and without detriment to any other rights and remedies
available to the Bank, the interest rate applicable to the outstanding
principal of the Term Loan Note during any period when an Event of Default
shall have occurred and be continuing shall be a fluctuating annual rate
equal to three percent (3%) over and above the Base Rate, each change in
such fluctuating rate to take effect simultaneously with the corresponding
change in the Base Rate. Interest due on the Term Loan Note shall be
payable monthly in arrears on the first (1st) day of each month and on the
date on which the Term Loan Advance is paid in full for the actual number
of days elapsed.
(b) THE REVOLVING CREDIT ADVANCES made by the Bank to the Borrowers
shall be evidenced by a promissory note of the Borrowers to the order of
the Bank in substantially the form of Exhibit B hereto (the "Revolving
Credit Note"). The note previously executed by Distributing on November
10, 1994, in connection with the First Restated Credit Agreement shall be
restated in its entirety and replaced by the Revolving Credit Note. The
Revolving Credit Note shall be in the maximum principal amount of FIVE
MILLION DOLLARS ($5,000,000). Revolving Credit Advances shall be payable
on the Termination Date. Each Revolving Credit Advance made by the Bank
shall bear interest from its date until full payment on the unpaid balance
of principal thereof at an annual rate of interest which throughout each
Funding Period shall be equal to the following rate: (i) if Eurodollar
Funds are then available to the Bank for such Funding Period, a fixed rate
equal to two point five percent (2.5%) over and above the LIBOR Rate
applicable to such Funding Period; or (ii) if Eurodollar Funds are not
available to the Bank for any Funding Period, a fluctuating annual rate
equal to the Base Rate, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in the Base Rate. Anything
herein to the contrary notwithstanding, and without detriment to any other
rights and remedies available to the Bank, the interest rate applicable to
the outstanding principal amount of the Revolving Credit Note during any
period when an Event of Default shall have occurred and be continuing shall
be a fluctuating annual rate equal to three percent (3%) over and above the
Base Rate, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in the Base Rate. Interest
due on each Revolving Credit Advance shall be payable monthly in arrears on
the day of each successive month on which such Revolving Credit Advance was
disbursed and on the date on which the Revolving Credit Advance is paid in
full for the actual number of days elapsed.
All outstanding Revolving Credit Advances shall be paid in full by not
later than the Termination Date.
19
<PAGE>
(c) [Reserved]
(d) Any payments of principal or interest due under the Notes,
including liquidated sums for the payment of attorneys' fees and interest
on any overdue principal, if any, may be charged at the Bank's option, when
due and payable, against any account of any of the Borrowers with the Bank.
The Bank shall promptly notify the corresponding Borrower of any such
charges made against the accounts of such Borrower.
Section 2.8 OPTIONAL PREPAYMENTS. (a) The Borrowers may, upon at
least three (3) Business Days' prior written notice to the Bank, prepay
(without premium or penalty) to the Term Loan Note, in whole or in part
with accrued interest to the date of such prepayment on the amount prepaid,
provided that such prepayment is made from internally generated cash flow,
proceeds from the sale of capital stock of any of the Borrowers (including,
but not limited to any Class A or Class B capital stock of Pepsi-Cola PR),
other than the cash proceeds remaining from the issuance of the Class B
Stock Offering or from a refinancing of the Term Loan Advance by the Bank;
PROVIDED, HOWEVER, that in the event of the prepayment in full of the Term
Loan Note, the Borrowers shall agree in writing to continue to provide the
reports listed in Section 5.1(c) (i) and (ii) for a period of 12 months
following such prepayment in order for the Bank to verify that such
prepayment was made from funds obtained as permitted by this Section
2.8(a). Each such partial prepayment shall be in an aggregate principal
amount of not less than ONE HUNDRED THOUSAND DOLLARS ($100,000) and in
integral multiples thereof, and shall be applied to the principal
installments of the Term Loan Note, as directed by the Borrowers, in the
inverse order of their maturities, and provided further, that if the Term
Loan Note being prepaid is then funded with Eurodollar Funds, such
prepayment may only be made on the last day of the corresponding Funding
Period.
(b) The Borrowers may, upon at least three (3) Business Days' prior
written notice to the Bank, but only after the prepayment in whole of the
Term Loan Note, prepay (without premium or penalty) the Revolving Credit
Note, in whole with accrued interest to the date of such prepayment on the
amount prepaid, provided that such prepayment is made from proceeds from
the sale of capital stock of any of the Borrowers (including, but not
limited to any Class A or Class B capital stock of Pepsi-Cola PR), other
than proceeds of the Class B Stock Offering or from a refinancing of the
Revolving Credit Advances by the Bank; PROVIDED, HOWEVER, that the
Borrowers shall agree in writing to continue to provide the reports listed
in Section 5.1(c) (i) and (ii) for a period of 12 months following such
prepayment in order for the Bank to verify that such prepayment was made
from funds obtained as permitted by this Section 2.8(a), and provided
further, that if the Revolving Credit Note being prepaid is then funded
with Eurodollar Funds, such prepayment may only be made on the last day of
the corresponding Funding Period.
20
<PAGE>
(c) In the event that the Borrowers desire to make a prepayment
hereunder of the Term Loan Note from other than internally-generated cash
flow, or from proceeds from the sale of assets, including from a
refinancing of the Term Loan Advance by a third party, the Borrowers may,
upon at least three (3) Business Days' prior written notice to the Bank,
prepay Term Loan Advance in whole or in part, with accrued interest to the
date of such prepayment on the amount prepaid, provided, that if the Term
Loan Note is then funded with Eurodollar Funds, prepayment thereof may only
be made on the last day of the Funding Period. Upon any such prepayment,
the Borrowers shall pay to the Bank a fee equal to one percent (1%) of the
sum of the principal amount of the Term Loan Advance being prepaid. Any
such prepayment of the Term Loan Note shall be applied to the principal
installments of such Term Loan Note in the inverse order of their
maturities.
(d) In the event that the Borrowers desire to make a prepayment
hereunder of the Term Loan Note from cash remaining from the issuance by
Pepsi-Cola PR of 3,500,00 shares of its Class B Common Stock on September
25, 1995 (the "Class B Stock Offering"), other than cash remaining from
such issuance then held to the credit of the Cash Collateral Account, the
Borrowers may, upon at least three (3) Business Days' prior written notice
to the Bank, prepay the Term Loan Advance in whole or in part, with accrued
interest to the date of such prepayment on the amount prepaid, provided,
that if the Term Loan Note is then funded with Eurodollar Funds, prepayment
thereof may only be made on the last day of the Funding Period. Upon any
such prepayment, the Borrowers shall pay to the Bank a fee equal to one-
half of one percent (0.5%) of the sum of the principal amount of the Term
Loan Advance being prepaid. Any such prepayment of the Term Loan Note shall
be applied to the principal installments of such Term Loan Note in the
inverse order of their maturities.
(e) In the event that the Borrowers desire to make a prepayment
hereunder under the Term Loan Note from any amounts on deposit in the Cash
Collateral Account, the Borrowers may, upon at least three (3) Business
Days' prior written notice to the Bank, prepay the Term Loan Advance in
whole or in part, with accrued interest to the date of such prepayment on
the amount prepaid, provided, that if the Term Loan Note is then funded
with Eurodollar Funds, prepayment thereof may only be made on the last day
of the Funding Period. Any such prepayment of the Term Loan Note shall be
applied to the principal installments of such Term Loan Note in the inverse
order of their maturities.
(f) In the event that the Borrowers desire to make a prepayment
hereunder under the Term Loan Note from any Net Available Proceeds of any
BAESA Stock Disposition, the Borrowers may, upon at least three (3)
Business Days' prior written notice to the Bank, prepay the Term Loan
Advance in whole or in part from such Net Available Proceeds of any BAESA
Stock Disposition, with accrued interest to the date of such prepayment on
the amount prepaid, provided, that if the Term Loan Note is then funded
with Eurodollar Funds, prepayment thereof may only be made on the last day
21
<PAGE>
of the Funding Period. Any such prepayment of the Term Loan Note shall be
applied to the principal installments of such Term Loan Note in the inverse
order of their maturities.
(g) In the event that any Borrower prepays any Advance hereunder
except as permitted by this Section 2.8 and the Bank suffers any loss or
expense as a result of such prepayment, including, without limitation, any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Bank to fund any such Advance, the
Borrowers shall, upon demand by the Bank, pay to the Bank additional
amounts sufficient to indemnify the Bank against such loss or expense. A
certificate in reasonable detail as to the amount of such loss or expense
submitted to the Borrowers by the Bank, absent manifest error, shall be
conclusive and binding for ail purposes.
Section 2.9 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) BORROWING BASE. Until the Termination Date, the Borrowers shall
from time to time prepay the Revolving Credit Advances in such amounts as
shall be necessary so that at all times the aggregate outstanding amount of
the Revolving Credit Advances shall not exceed the Bank's Revolving Credit
Commitment.
(b) SALE OF ASSETS. Without limiting the obligation of the Borrowers
to obtain the consent of the Bank pursuant to Section 5.2(d) hereof to any
Disposition of assets not otherwise permitted hereunder, no later than five
Business Days after the occurrence of any Disposition Recapture Date, the
Borrowers will deliver or cause to be delivered to the Bank a statement,
certified by the chief financial officer of the corresponding Borrower or
Restricted Subsidiary, in form and detail satisfactory to the Bank, of the
amount of the Net Available Proceeds, and upon the delivery of any such
statement, the Borrowers will prepay the Advances in a principal amount
equal to Net Available Proceeds from all Dispositions of assets during such
fiscal year in excess of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000),
such prepayment and reduction to be effected in each case in the manner and
to the extent specified in clause (g) of this Section 2.9.
(c) INSURANCE PROCEEDS. No later than 7 days following the receipt
of Net Insurance Payments, the Borrowers will be obligated to repay the
Advances in an amount equal to Net Insurance Payments, such prepayment and
reduction to be effected in the manner and to the extent specified in
clause (g) of this Section 2.9; PROVIDED that no repayment shall be
required hereunder if such Net Insurance Payments are promptly (no later
than 60 days from the date of receipt thereof) applied to the repair or to
replace the assets damaged in such Casualty. No later than five (5) days
following the receipt or insurance proceeds as a result of any Casualty,
the Borrowers will deliver or cause to be delivered to the Bank a
statement, certified by the chief financial officer of the corresponding
22
<PAGE>
Borrower or Restricted Subsidiary, in form and detail satisfactory to the
Bank, of the amount of Net Insurance Proceeds. Insurance proceeds, if any,
related to the Shareholders' Suit and from any business interruption shall
not be subject to this clause.
(d) EXCESS CASH FLOW. Not later than 120 days after the end of each
fiscal year of the Borrowers, the Borrowers shall calculate Excess Cash
Flow for such fiscal year and shall apply an amount equal to fifty percent
(50%) of such Excess Cash Flow to prepay the Term Loan Advance, such
prepayment to be effected in the manner and to the extent specified in
clause (g) of this Section 2.9.
(e) SALE OF CLASS A COMMON STOCK. Not later than five (5) Business
Days after the sale by any Borrower of any Class A Common Stock of Pepsi-
Cola PR subject to the Option Agreement or upon the assignment by any of
the Borrowers of any of their rights under the Option Agreement, such
Borrower shall apply an amount equal to twenty-five percent (25%) of the
net proceeds received from such sale or assignment to prepay the Term Loan
Advance, such prepayment to be effected in the manner and to the extent
specified in clause (g) of this Section 2.9.
(f) MONIES IN CASH COLLATERAL ACCOUNT. Upon the occurrence of an
Event of Default, any amounts on deposit to the credit of the Cash
Collateral Account shall be used by the Borrowers to prepay the Term Loan
Advance or reduce the Revolving Credit Commitment, such prepayment to be
effected in the manner and to the extent specified in clause (g) of this
Section 2.9.
(g) APPLICATION. Prepayments described in this Section 2.9 (other
than Section 2.9(a)) shall be applied first to the Term Loan Note in the
inverse order of the maturities of the installments of the Term Loan Note
then outstanding and the balance, if any, shall be applied to the then
outstanding Revolving Credit Advances and shall reduce the Revolving Credit
Commitment by the corresponding amount.
Section 2.10 PAYMENTS AND COMPUTATIONS. The Borrowers shall make
each payment hereunder or under the Notes or under any Loan Document not
later than 12:00 noon (San Juan, Puerto Rico time) on the day when due in
lawful money of the United States of America to the Bank at its address
referred to in Section 8.2 in immediately available funds. The Borrowers
hereby authorize the Bank to charge from time to time against any account
of any of the Borrowers with the Bank any amount so due, and the Bank
shall promptly thereafter notify the Borrowers of such action. All
computations of interest under the Notes and fees hereunder shall be made
by the Bank on the basis of a year of 360 days.
Section 2.11 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to
be made hereunder or under the Notes or under any other Loan Document shall
be stated to be due, or whenever the last day of a Funding Period would
otherwise occur, on a day other than a Business Day, such payment may be
23
<PAGE>
made, and the last day of such Funding Period shall occur, on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may
be.
Section 2.12 FUNDING PROCEDURE. The Borrowers hereby acknowledge
that, in the event that any Advance is funded with Eurodollar Funds, the
Bank, at its discretion and in order to fund such Advance, may purchase
deposits consisting of Eurodollar Funds in an aggregate amount equal to the
Advance being funded and with a maturity coterminous with the maturity of
such Advance or of the corresponding Funding Period. The Provisions of
this Agreement relating to the funding and pricing of Advances are included
only for the purpose of conducting operations hereunder, and it is
therefore understood that, regardless of the manner selected by the Bank to
fund such Advances, all operations hereunder, including without limitation
the determination as to the interest rate applicable to any such Advance
and the determination of any loss or expense incurred by the Bank by reason
of the liquidation or reemployment of deposits or other funds acquired by
the Bank to fund Advances hereunder, shall be conducted as if the Bank had
actually funded such Advances with Eurodollar Funds through the purchase of
deposits consisting of Eurodollar Funds in an aggregate amount equal to the
Advance being funded and with a maturity coterminous with the maturity of
such Advance or of the corresponding Funding Period.
Section 2.13 INCREASED COSTS. If, due to either (1) the
effectiveness of or any change (including, without limitation, any change
by way of imposition or increase of any reserve requirements) in or in the
interpretation of any law or regulation, or (2) the compliance with any
formal guideline or formal request from any central bank or other
governmental authority (whether or not having the force of law), there
shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining Advances made to any Borrower hereunder,
then the Borrowers shall from time to time, upon demand by the Bank, pay
the Bank additional amounts sufficient to indemnify the Bank against such
increased cost. A certificate in reasonable detail as to the amount of
such increased cost submitted to the Borrowers by the Bank, absent manifest
error, shall be conclusive and binding for all purposes.
Section 2.14 CHANGED CIRCUMSTANCES. Notwithstanding any other
provision of this Agreement, if the effectiveness of or any change in or in
the interpretation of any law or regulation shall make it unlawful, or any
central bank or other governmental authority shall assert that it is
unlawful, for the Bank to perform its obligations hereunder to fund or
maintain Advances hereunder with Eurodollar Funds then, on notice thereof
and demand therefor by the Bank to the Borrowers, (1) the obligation of the
Bank to fund or maintain such Advances with Eurodollar Funds shall
terminate, and (2) the Bank shall convert all outstanding Advances funded
24
<PAGE>
with Eurodollar Funds into Advances funded with funds other than Eurodollar
Funds. In the event that the Bank suffers any loss or expense as a result
of the conversion of the Advances as aforesaid, the Borrowers shall, upon
demand by the Bank, pay the Bank additional amounts sufficient to indemnify
the Bank against such loss or expense. A certificate in reasonable detail
as to the amount of such loss or expense submitted to the Borrowers by the
Bank, absent manifest error, shall be conclusive and binding for all
purposes.
Section 2.15 TAXES. (a) Any and all payments by the Borrowers
hereunder and under the Notes shall be made free and clear of and without
deduction for any and all present or future Taxes, excluding all Taxes
imposed on or determined by reference to the Bank's net income. All Taxes
which the Borrowers are required to bear pursuant to the preceding sentence
are referred to as "Non-Excluded Taxes." If the Borrowers shall be
required by law to deduct any Non-Excluded Taxes from or in respect of any
sum payable hereunder or under the Notes, (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 2.15) the Bank receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrowers shall make
such deductions, and (iii) the Borrowers shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. In the event that the Bank receives any credit or refund
of any Non-Excluded Taxes included in any payment made by the Borrowers
pursuant to the immediately preceding sentence, the Bank shall reimburse
the corresponding Borrower for the amount of such credit or refund actually
received.
(b) In addition, the Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes, registry
fees, charges or similar levies which arise at any time from any payment
made hereunder or under the Notes or any other Loan Document or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Notes or any other Loan Document (hereinafter referred to as
"Other Taxes").
(c) The Borrowers will indemnify the Bank for the full amount of
Non-Excluded Taxes or Other Taxes (including, without limitation, any Non-
Excluded Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.15) paid by the Bank or any liability
(including penalties, interest and expenses) arising therefor or with
respect thereto, whether or not such Non-Excluded Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within
five (5) days from the date the Bank makes written demand therefor.
(d) Within thirty (30) days after the date of any payment of Non-
Excluded Taxes, the Bank will furnish to the Borrower, at its address
referred to in Section 8.2, the original or a certified copy of a receipt
evidencing payment thereof.
25
<PAGE>
Section 2.16 EXTENSION OF TERMINATION DATE. The obligation of the
Bank to make the Revolving Credit Advances shall terminate on September 30,
1997, such date, as it may be extended pursuant to the following sentence,
being the "Termination Date"). The Bank, at its sole discretion, may
extend the Termination Date for additional periods (which may be less than
one year) under terms and conditions (which may differ from those contained
in this Agreement) that the Bank may determine, at its sole discretion,
based upon economic conditions prevailing as of the Termination Date and
the Borrowers' ability to meet their obligations.
ARTICLE III
CONDITIONS OF LENDING
Section 3.1 CONDITION PRECEDENT TO ALL ADVANCES. The execution of
this Second Restated Credit Agreement and the making of any Advance
hereunder is subject to the condition precedent that the Bank shall have
received on or before the day of any additional Advance hereunder the
following, in form and substance satisfactory to the Bank:
(a) Each of the Notes to the order of the Bank.
(b) Evidence that the following security instruments (such
instruments, together with this Agreement, the Notes and all security
instruments delivered, or to be delivered, to the Bank hereunder, and any
amendments executed in connection with any of the foregoing, hereinafter
collectively referred to as the "Loan Documents"), duly executed by the
parties identified below or in such other instruments (such parties
hereinafter collectively referred to as the "Loan Parties") are in full
force and effect:
(i) the pledge a mortgage note in the amount of $3,118,800,
secured by personal property mortgages creating a continuing perfected
security interest covering the Borrowers' Machinery and Equipment listed in
Schedule E hereto;
(ii) assignment of accounts receivable agreements creating a
continuing perfected security interest covering all of the Receivables of
the Borrowers and the corresponding statements of assignment of accounts
receivable;
(iii) factor's lien agreements executed by each of the
Borrowers creating a continuing first priority security interest covering
all of the Inventory of the Borrowers and all of the Receivables generated
the sale of such Inventories;
(iv) a pledge of two mortgage notes in the aggregate
principal amount of TWO-MILLION NINE HUNDRED AND TWENTY THOUSAND DOLLARS
($2,920,000) secured by first mortgages creating continuing first priority
security interests covering certain real estate recorded at page one
26
<PAGE>
hundred ninety-seven (197) of Volume twenty-four (24) of the Registry of
Property, Toa Baja, Section II of Bayam<o'>n, property number one hundred
eighty-seven (187);
(v) a pledge of a mortgage note in the principal amount of
FIFTEEN MILLION DOLLARS ($15,000,000) secured by a second mortgage creating
a continuing second priority security interest covering the real property
described in Section 3.1(b)(iv);
(vi) a pledge of a mortgage note in the principal amount of
EIGHTY-FIVE THOUSAND DOLLARS ($85,000) secured by a second mortgage
creating a second priority lien on the parcel of real property referred to
as 5-A on the Survey and segregated from the real property described in
Section 3.1(b)(iv);
(vii) a pledge of a mortgage note in the principal amount of
THREE MILLION FORTY THOUSAND DOLLARS ($3,040,000) secured by a first
mortgage creating a continuing first priority security interest covering
certain real estate recorded at page 121 of volume 77 of Sabana Llana,
property number 30319 of the Registry of Property of Puerto Rico; and
(viii) a pledge of a mortgage note in the principal amount of
EIGHT MILLION ONE HUNDRED TWENTY-NINE THOUSAND SIX HUNDRED FORTY THREE
DOLLARS ($8,129,643) secured by a first mortgage creating a continuing
priority security interest covering the Machinery and Equipment of
Manufacturing described in that certain Personal Property Mortgage and
Affidavit dated October 11, 1996 executed by Manufacturing in favor of the
Bank.
(ix) a pledge of a mortgage note in the principal amount of
ONE MILLION FOUR HUNDRED EIGHTY-NINE THOUSAND ONE HUNDRED NINETY-TWO
DOLLARS ($1,489,192) secured by a first mortgage creating a continuing
first priority security interest covering the Machinery and Equipment of
Beverage Plastics described in that certain Personal Property Mortgage and
Affidavit dated October 11, 1996 executed by Beverage Plastics in favor of
the Bank.
(c) Evidence that all actions necessary, or in reasonable judgment of
the Bank, desirable to perfect and protect the security interest in the
Collateral have been taken.
(d) Certified copies of the resolutions of the Board of Directors of
each of the Borrowers and, if required, the consents of the stockholders of
each Loan Party, approving the execution and delivery of this Agreement and
the Notes and any amendment to each Loan Document to which it is a party
required by the Bank.
(e) A certificate of the Secretary or an Assistant Secretary of each
Borrower certifying the names and true signatures of the officers of such
Borrower authorized to sign this Agreement, the Notes and any amendment to
each Loan Document to which it is a party required by the Bank and the
other documents to be delivered by it hereunder.
27
<PAGE>
(f) Favorable opinion of counsel for the Borrowers, in substantially
the form agreed to by the Bank and the Borrowers.
(g) Certificates of good standing dated not more than ten days prior
to the execution of this Agreement showing that the Borrowers are in good
standing in the State of Delaware, and copies certified by the Secretary of
State of the State of Delaware, dated not more than ten (10) days prior to
the date of execution of this Agreement, of the Organizational Documents of
each of the Borrowers.
(h) A Certificate dated not more than ten (10) days prior to the
execution of this Agreement showing that the Borrowers are qualified to
transact business in and are in good standing under the laws of the
Commonwealth of Puerto Rico.
(i) The Cash Collateral Agreement in the form attached to this
Agreement as Exhibit C.
(j) Evidence of the insurance required by Section 5.1(b) hereof.
(k) A copy of the Marketing Agreement, stating the total marketing
budget of the Borrower for 1997 and that the amount expected to be spent by
PepsiCo for marketing, advertising related expenditures and discount and
allowances shall be not less than the amount set forth in the term sheet
prepared by the Bank in connection with this Agreement.
(l) Copies of all policies and correspondence received by any of the
Borrowers on or before the Closing Date from any insurance company that
insures any of the Borrowers or their officers and directors with respect
to the Shareholders' Suit.
(m) Such other documents, instruments and agreements as the Bank
shall reasonably request.
Section 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation
of the Bank to make an Advance on the occasion of each Borrowing (including
the initial Borrowing) shall be subject to the further condition precedent
that on the date of such Advance the following statements shall be true and
the Bank shall have received a certificate signed by a duly authorized
officer of each of the Borrowers, dated the date of such Advance, stating
that the representations and warranties contained in Articles IV and VI of
this Agreement, in the Loan Documents to which it is a party and, to the
best of its knowledge, in the Loan Documents executed by any other Loan
Party, are correct in all material respects on and as of the date of such
Advance as though made on and as of such date (except to the extent that
such representations and warranties relate to an earlier date).
Section 3.3 REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. Upon
the effectiveness of this Agreement, on and after the date hereof each
28
<PAGE>
reference in each of the Loan Documents to "the First Restated Credit
Agreement "thereunder," "thereof" or words of like referring to the First
Restated Credit Agreement, shall mean and be a reference to this Agreement
and each reference in the Notes to "this Note," "hereunder," "hereof" or
words of like import referring to such Note, and each reference in the
other Loan Documents to "the Notes," "thereunder," "thereof" or words of
like import referring to the Notes, shall mean and be a reference to the
Notes executed on the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. In
order to induce the Bank to enter into this Agreement and to make the
Advances hereunder, the Borrowers jointly and severally (solidariamente)
make the following representations and warranties to the Bank as at the
Closing Date, each and all of which shall survive the execution and
delivery of this Agreement:
(a) Each of the Borrowers: (i) is a corporation, partnership or
other entity duly organized, validly existing and in good standing under
the laws or the jurisdiction of its organization; (ii) has all requisite
corporate or other power and authority, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its
assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business and is in good standing in
all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify could have a
Material Adverse Effect.
(b) Borrower has all necessary power (corporate or otherwise), and
authority to execute, deliver and perform its obligations under each of the
Loan Documents; the execution delivery and performance by each Borrower of
each of the Loan Documents to which any Borrower is or will be a party have
been duly authorized by all necessary corporate or other action on its
part, including, without limitation, any required shareholder or partner
approvals); and this agreement has been duly and validly executed and
delivered by each Borrower and constitutes, and each of the other Loan
Documents executed and delivered by each Borrower (in the case of the
Notes, for value) constitutes, its legal, valid and binding obligations
enforceable against each Borrower in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights.
(c) No information, report, financial statement, exhibit, schedule or
disclosure letter furnished in writing by or on behalf of any of the
Borrowers to the Bank in connection with the negotiation, preparation or
29
<PAGE>
delivery of this Agreement and the other Loan Documents or included therein
or delivered pursuant thereto contains any untrue statement of material
fact or omits or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. All written information furnished after the date
hereof by each of he Borrowers to the Bank in connection with this
Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections, based on reasonable estimates, on
the date as of such projections) on the date as of which such information
is stated or certified. There is no fact known to the Borrowers that could
have a Material Adverse Effect that has not been disclosed herein, in the
other Loan Documents or in a report, financial statement, exhibit,
schedule, disclosure letter or other writing furnished to the Bank for use
in connection with the transactions contemplated hereby.
(d) None of the execution and delivery of this Agreement and the
Notes and the other Loan Documents, the consummation of the transactions
herein and therein contemplated or compliance with the terms and provisions
hereof and thereof will conflict with or result in a breach of, or require
any consent under, the Organizational Documents of any Borrower or any of
its Subsidiaries, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or Governmental authority, or agency, or
any agreement or instrument to which any of the Borrowers is a party or by
or to which any of them or any of their property is bound or subject, or
constitute a default (with or without the giving of notice or the lapse of
time) under any such agreement or instrument, or (except for the Liens
created pursuant to the Loan Documents) result in the creation or
imposition of any Lien upon any property of Borrowers pursuant to the terms
of any such agreement or instrument.
(e) Except as set forth in Schedule 4.1(e) hereto, there is no
pending or, to the best of the Borrowers' knowledge, or, to the knowledge
of the Borrowers or their Restricted Subsidiaries officers, threatened
litigation, arbitration, investigation or proceeding against any of the
Borrowers or their Restricted Subsidiaries before any court, governmental
agency or arbitrator that, adversely determined, could result in a material
judgment not fully covered by insurance, could result in a forfeiture of
all or any substantial part of the property of any of the Borrowers or
their Restricted Subsidiaries or could otherwise have a Material Adverse
Effect.
(f) No authorization, approvals or consents of, and no filings,
recordations or registration with, any governmental or regulatory authority
or agency or any securities exchange are necessary for the execution,
delivery or performance by the Borrowers of this Agreement, the Notes or
any Loan Document to which any of the Borrowers are or will be a party or
for the legality, validity or enforceability thereof, except for filings
30
<PAGE>
and recordings in respect of the Liens created pursuant to the Loan
Documents.
(g) No proceeds of any Advance will be used to acquire any security
in any transaction that is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934 and the proceeds of the Advances will be applied only
for the purposes set forth in Article II hereof.
(h) None of the Borrowers is engaged in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying margin stock (within the meaning of Regulation U and
X issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.
(i) Each Borrower is, and after giving effect to the consummation of
the transactions contemplated by this Agreement, will be Solvent.
(j) Each of the Borrowers and each of their respective Restricted
Subsidiaries have filed all federal, state, Commonwealth and other tax
returns required to be filed and have paid all taxes, assessments and other
governmental charges shown thereon to be due, including interest and
penalties, or have provided adequate reserves therefor; no unpaid or
uncontested assessments have been made against any Borrower or any
Restricted Subsidiary of any Borrower by any taxing authority, nor has any
penalty or deficiency been assessed by any such authority, and all
contested assessments have been disclosed to the Bank and adequate reserves
have been made therefor. Such tax returns properly reflect the income and
taxes of the Borrowers and their Restricted Subsidiaries for the periods
covered thereby, subject only to reasonable adjustments required by the
corresponding taxing authorities upon audit and having no Material Adverse
Effect on the financial condition, business or results of operations of the
Borrowers, and such evidence that each Borrower has provided to the Bank
showing that any such taxes or penalties have been paid by such Borrower is
true and correct.
(k) No Borrower nor any Restricted Subsidiary is in default in any
material respect under any agreement or instrument to which it is a party,
such default having the effect of permitting the termination or
acceleration of such agreement or instrument, including, but not limited to
the Bottling Agreement and the Marketing Agreement.
(l) The Borrowers' use of the proceeds of each Advance made by the
Bank hereunder is, and will continue to be, a legal and proper corporate
use (duly authorized by the Borrowers' Board of Directors or similar body)
and such use is, and will continue to be, consistent with all applicable
laws and regulations.
31
<PAGE>
(m) The operations of the Borrowers and their Restricted Subsidiaries
comply in all material respects with all applicable federal, state,
Commonwealth or local environmental statutes and regulations; none of the
operations of the Borrowers or their Restricted Subsidiaries is subject to
any judicial or administrative proceedings alleging the violation of any
federal, state, Commonwealth or local environmental, health or safety
statute or regulation; none of the operations of the Borrowers or their
Restricted Subsidiaries is the subject of a federal, state,
Commonwealth or local investigation evaluating whether any remedial action
is needed to respond to a release of any hazardous toxic waste, substance
or constituent, or any other substance into the environment, which remedial
action could have a Material Adverse Effect; the Borrowers or their
Restricted Subsidiaries have not filed any notice under any federal, state,
Commonwealth or local law indicating past or present treatment, storage or
disposal of a hazardous waste for purposes of the Federal Resource
Conservation and Recovery Act or other similar state or Commonwealth law;
and the Borrowers have no contingent liability in connection with any
release of any hazardous or toxic waste, substance or constituent, into the
environment which contingent liability, if liquidated, would not be
adequately covered (in the Bank's reasonable determination) by insurance or
other indemnification rights or which, in the Bank's reasonable
determination, would not be expected to have a Material Adverse Effect.
(n) None of the Borrowers or their Restricted Subsidiaries is an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended or any
other statute or regulation that limits its ability to incur Indebtedness.
(o) None of the Borrowers is a "holding company," or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(p) Set forth in Schedule 4.1(p) hereto is a complete and correct
list, as of the date of this Agreement, of all the Subsidiaries of the
Borrowers (and the respective jurisdiction of incorporation of each such
Subsidiary) and of all investments held by the Borrowers or any Subsidiary
in other Persons through joint ventures or otherwise. Except as disclosed
in Schedule 4.1(p) hereto, each Borrower owns free and clear of Liens, all
outstanding shares of such Subsidiaries (and each Subsidiary owns, free and
clear of Liens, all outstanding shares of its Subsidiaries) and all such
shares are validly issued, fully paid and nonassessable and no rights to
subscribe to any additional shares have been granted and no options,
warrants or similar rights are outstanding.
(q) The audited consolidated balance sheets of the Borrowers and
their Restricted Subsidiaries as of September 30, 1996, and the related
statements of income and retained earnings of the Borrowers and their
Restricted Subsidiaries for the fiscal year then ended, and the unaudited
financial statements of the Borrowers and their Restricted Subsidiaries for
32
<PAGE>
the three month period ending on December 31, 1996, complete copies of
which have been furnished to the Bank, fairly and accurately present the
financial condition of the Borrowers and their Restricted Subsidiaries at
such dates and the results of operations of the Borrowers and their
Restricted Subsidiaries for the periods ended on such dates, all in
accordance with Generally Accepted Accounting Principles consistently
applied, and since December 31, 1996, there has been no material adverse
change in such financial condition or operations. There are no
liabilities, contingent or otherwise, not disclosed in such financial
statement that involve a material amount.
(r) Each of the Borrowers and its Restricted Subsidiaries owns and
has good and marketable title to the properties shown to be owned in the
most recent financial statements of the Borrowers delivered to the Bank
prior to the date of this Agreement (other than assets and properties
disposed of in the ordinary course of business). Each Borrower and its
Restricted Subsidiaries owns and has good and marketable title to, and
enjoys peaceful and undisturbed possession of, all properties that are
necessary for the operation and conduct of their respective businesses as
conducted on the date hereof. Manufacturing has good insurable, recordable
and marketable title to the Realty. There are no squatters on the Realty
and, except as otherwise provided in this Agreement, Manufacturing is and
will remain for as long as any Obligation is outstanding, in complete and
exclusive possession of the Realty.
(s) Each Pension Plan of each Borrower and all of their Restricted
Subsidiaries, if any, is in material compliance with ERISA, no Termination
Event has occurred or is reasonably expected to occur with respect to any
Pension Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect, all contributions required to be made to any
Pension Plan by its terms, the Code or ERISA (including any quarterly
installments required under Section 412(m) of the Code or Section 302(e) of
ERISA) have been made by the applicable due date; to the knowledge of the
Borrowers, no Multiemployer Plan is insolvent or in reorganization; except
as set forth in Schedule 4.1(s), no Pension Plan has an accumulated or
waived funding deficiency within the meaning of Sections 302 and 303 of
ERISA or Section 412 of the Code; neither the Borrowers nor any ERISA
Affiliate has incurred any material liability (including any material
contingent liability) to or on account of a Pension Plan or Multiemployer
Plan pursuant to election 4062, 4063, 4064, 4201 or 4204 of ERISA which has
not been satisfied; no proceedings have been instituted to terminate any
Pension Plan, and no condition exists which presents a material risk to the
Borrowers nor an ERISA Affiliate of incurring a liability to or on account
of a Pension Plan or Multiemployer Plan pursuant to any of the foregoing
Sections of ERISA.
33
<PAGE>
(t) Neither the business nor the properties of any Borrower or their
Restricted Subsidiaries are affected by any labor dispute materially
affecting such business or properties or the operations of the Borrowers or
their Restricted Subsidiaries.
(u) None of the Borrowers or their Restricted Subsidiaries is subject
to any restriction under its corresponding Organizational Documents which
could have a Material Adverse Effect.
(v) A complete and correct copy of each Organizational Document of
each Borrower in effect on the date of this Agreement or the date when such
Borrower became a party to this Agreement has been delivered to the Bank.
(w) The Borrowers' and their Restricted Subsidiaries possess all
patents, patent rights or licenses, trademarks, trademark rights, trade
names, trade name rights and copyrights which are required to conduct their
business as presently conducted and as proposed to be conducted without
known conflict with the rights of others.
(x) The execution of each of the Bottling Appointment and the
Marketing Agreement by Pepsi-Cola PR has been duly authorized by all
necessary corporate or other action on its part and constitutes its legal,
valid, binding and enforceable obligation in accordance with its terms.
Each of the Bottling Appointment and Marketing Agreement is in full force
and effect on the date hereof and has not been terminated or threatened to
be terminated and Pepsi-Cola PR is not in breach of any of the material
terms of any such agreement.
(y) That certain Voting Trust and Irrevocable Proxy dated as of
September 28, 1996 (the "Voting Trust") by and among the recordholders of
common stock of Pepsi-Cola PR, par value $0.01 and having six votes per
share (the "Class A Shares"), Mr. Rafael Nin and Pepsi-Cola PR
(collectively, the "Voting Trust Parties") has been duly authorized by
Pepsi Cola PR by all necessary corporate or other action on its part and,
with respect to those terms and conditions attributable to it, constitutes
legal, valid, binding and enforceable obligations of Pepsi-Cola PR in
accordance with its terms and as of the date hereof is in full force and
effect.
(z) That certain Stock Option Agreement dated as of September 28,
1996 (the "Option Agreement") by and among the Voting Trust Parties has
been duly authorized by Pepsi-Cola PR by all necessary corporate and other
action on its part and to the extent the Option Agreement is transferred to
Pepsi-Cola PR, as permitted thereunder, constitutes its legal, valid and
binding agreement enforceable by Pepsi-Cola PR in accordance with its terms
and as of the date hereof is in full force and effect.
34
<PAGE>
ARTICLE V
COVENANTS OF THE BORROWERS
Section 5.1 AFFIRMATIVE COVENANTS. So long as any Note shall
remain unpaid or the Bank shall have any Commitment hereunder, the
Borrowers and each of their Restricted Subsidiaries, to the extent
applicable, shall:
(a) Comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of governmental or
regulatory authorities if failure to comply with such requirements could
have a Material Adverse Effect, except for any such law, rule, regulation
or order which is being contested in good faith and by proper proceedings
by a Borrower.
(b) Maintain the Plant, the Realty and all their other properties
(real and personal) insured at all times by responsible, reputable and
financially sound insurance companies or associations in such amounts and
covering loss or damage by fire, earthquake, hurricane and windstorm and
such other risks as are usually carried by companies engaged in similar
businesses and owning similar properties as the Borrowers, maintain
adequate (in the reasonable opinion of the Bank) business interruption
insurance covering such risks and hazards as are carried by companies
engaged in similar businesses and in such amounts as are reasonably
required by the Bank, and maintain adequate (in the reasonable opinion of
the Bank) insurance against liability to persons for such risks and
hazards and in such amounts as are usually carried by companies engaged in
similar businesses; all such policies shall name the Bank as an insured
party (as its interests may appear) and provide for payment of the proceeds
thereof to the Borrowers and/or the Bank, as their respective interests may
appear, and shall contain an endorsement providing that the insurance shall
not be cancelable except upon thirty (30) days prior written notice to the
Bank and from time to time at the request of the Bank, the Borrowers shall
deliver to the Bank a detailed schedule indicating all insurance policies
then in force and furnish to the Bank certificates or other evidence
satisfactory to the Bank of compliance with the foregoing insurance
provisions.
(c) Furnish to the Bank:
(i) as soon as available and in any event within forty-five
(45) days after the end of each of the first three quarters of each fiscal
year of each Borrower and its Subsidiaries (A) to the extent applicable,
consolidated and consolidating statements of income, statements of
stockholder's equity and cash flow of the Borrowers and their Subsidiaries
for such period and for the period from the beginning of the respective
fiscal year to the end of such period, and the related consolidated and
consolidating balance sheets as at the end of such period, and
(B) consolidated and consolidating statements of income, statements of
stockholder's equity and cash flow of each Borrower and the Restricted
35
<PAGE>
Subsidiaries on a consolidated basis, for such period and for the period
from the beginning of the respective fiscal year to the end of such
period, setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a senior financial
officer of the corresponding Borrower, which certificate shall state that
said Financial statements fairly present the consolidated financial
condition and results of operations of each Borrower and its consolidated
Subsidiaries, and the unconsolidated financial condition and results of
operations of each Borrower and of each of its consolidated Subsidiaries,
in accordance with Generally Accepted Accounting Principles, consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments and any footnotes thereto);
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of each Borrower, (A) to the extent
applicable, consolidated and consolidating statements of income, statement
of Stockholder's equity and cash flow of the Borrowers and their
Subsidiaries for such year and the related consolidated and consolidating
balance sheets as at the end of such year, and (B) consolidated and
consolidating statement of income, statements of stockholder's equity and
cash flow of each Borrower and the Restricted Subsidiaries for such year
and the related consolidating and consolidated balance sheet as at the end
of such year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied by (1) in the case of said consolidated
statements and balance sheet, by an opinion thereon of independent
certified public accountants of recognized national standing, which opinion
shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of each Borrower
and its Subsidiaries as at the end of, and for, such fiscal year in
accordance with the Generally Accepted Accounting Principles, and a
certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Event of Default, and (2) in the case of said
consolidating statements and balance sheets, by a certificate of the
President or chief financial officer of each Borrower, which certificate
shall state that said consolidating financial statements fairly present the
unconsolidated financial condition and results of operations of such
Borrower and of each of its Subsidiaries in accordance with Generally
Accepted Accounting Principles, consistently applied, as at the end of, and
for, such fiscal year;
(iii) immediately after a Borrower knows or has reason to
believe that any Event of Default or event which, with notice or lapse of
time or both, would constitute an Event of Default, has occurred, a notice
of such Event of Default or event, describing the same in reasonable detail
and, together with such notice or as soon thereafter as possible, a
36
<PAGE>
description of the action that such Borrower has taken and proposes to take
with respect thereto;
(iv) promptly after the receipt thereof by any Borrower,
copies of any reports submitted to the Borrowers by independent public
accountants in connection with any interim review of the accounts of any of
the Borrowers or their Subsidiaries made by such accountants;
(v) promptly after the same are available, copies of all
proxy statements, financial statements and reports that any of the
Borrowers shall send to its stockholders or that any of the Borrowers may
file with the Securities and Exchange Commission or any governmental
authority at any time having jurisdiction over any of the Borrowers or
their Restricted Subsidiaries;
(vi) within 30 days after the end of each month, listings of
accounts payable of each Borrower;
(vii) if and when any Borrower or its Subsidiaries gives or
is required to give notice to the PBGC of any "Reportable Event" (as
defined in Section 4043 of ERISA) with respect to any Pension Plan that
might constitute grounds for a termination of such Pension Plan under Title
IV of ERISA, or knows that any ERISA Affiliate or the plan administrator of
any Pension Plan has given or is required to give notice of any such
Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC; and
(viii) from time to time such other information regarding the
financial condition, operations, business or prospects of each Borrower or
any of its Subsidiaries as the Bank may reasonably request.
Each Borrower will furnish to the Bank at the time it furnishes each set of
financial statements for any fiscal quarter or fiscal year pursuant to
subparagraphs (c)(i) or (ii) above, a certificate of the President or the
chief financial officer of such Borrower (i) to the effect that no Event of
Default or event which, with notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing, describing
the same in reasonable detail and describing the action that such Borrower
has taken and proposes to take with respect thereto) and (ii) setting forth
in reasonable detail the computations necessary to determine whether the
Borrowers are in compliance with all of the financial ratios required to be
maintained by the Borrowers under this Agreement, as of the end of such
fiscal quarter or fiscal year together.
(d) Preserve and maintain its legal existence, rights (charter and
statutory), licenses, permits, privileges and franchises, and its going
concern status.
37
<PAGE>
(e) At any reasonable time and from time to time, permit the Bank or
any agents or representatives thereof, to examine and make copies of and
the abstracts from the records and books of account of, and visit the
properties of, the Borrowers and their Restricted Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrowers and their
Restricted Subsidiaries with any of its respective officers or directors.
All documents and information made available to the Bank shall be kept
confidential except to the extent required to be disclosed by applicable
law or governmental authority (ii) disclosed to any Affiliate of the Bank
(which shall keep such documents and information confidential in accordance
with the terms hereof) or (iii) disclosed in connection with the exercise
of any rights granted to the Bank under this Agreement or any other Loan
Document.
(f) Keep proper records and books of account, in which complete and
correct entries shall be made of all financial transactions and the assets
and businesses of the Borrowers and their Restricted Subsidiaries, in
accordance with Generally Accepted Accounting Principles consistently
applied.
(g) Maintain and apply substantially the same accounting method used
by each Borrower and their Restricted Subsidiaries on the date of this
Agreement, except for changes mandated by the Financial Accounting
Standards Board or any similar accounting authority of comparable standing.
(h) Maintain and preserve all of their properties that are used or
useful in the conduct of their businesses in good repair, working order and
condition as required for the normal conduct of its business.
(i) Utilize the Advances for the purposes set forth in Section 2.3.
(j) (i) File all federal, state, Commonwealth and local tax returns
and other reports required by law to be filed; (ii) maintain adequate
reserves for the payment of all taxes, assessments, governmental charges
and levies imposed upon each Borrower and its Restricted Subsidiaries, its
income or its profits; (iii) pay and discharge all such taxes, assessments,
governmental charges and levies imposed upon each Borrower and their
Restricted Subsidiaries or against their properties prior to the date on
which penalties accrue or attach thereto, except to the extent that the
same are being contested in good faith by such Borrower and by proper
proceedings and against which adequate reserves have been established and
are being maintained in accordance with Generally Accepted Accounting
Principles; PROVIDED, HOWEVER, that prior to their becoming overdue, each
Borrower and their Restricted Subsidiaries shall promptly notify the Bank
in writing as to any such taxes, assessments and governmental charges in
38
<PAGE>
excess of TWO HUNDRED THOUSAND DOLLARS ($200,000) which it intends to
contest; and (iv) upon request by the Bank, provide it with evidence of
payment and discharge of any such taxes, and if such taxes are not
assessable, evidence thereof.
(k) Continue to be Solvent.
(l) Promptly upon becoming aware, give to the Bank written notice of
all litigation, arbitration or of any investigative proceedings, and of all
proceedings by or before any governmental or regulatory authority or agency
and the action being taken with respect thereto, and any material
development in respect of such litigation, arbitration, investigation or
other proceedings affecting any Borrower, any of its Restricted
Subsidiaries, the Plant or the Realty, involving a claim in excess of TWO
HUNDRED THOUSAND DOLLARS ($200,000).
(m) Duly and punctually pay and perform their obligations and cause
their Restricted Subsidiaries to pay and perform their respective
obligations under the Loan Documents in accordance with the terms thereof.
(n) Execute, or cause to be executed, promptly upon the request of
the Bank, any and all instruments which the Bank may reasonably require
from time to time in order to create or maintain in effect the security
interest in any and all Collateral delivered, or purported to be delivered,
to the Bank by any Loan Party hereunder, including, but not limited to,
instruments creating a security interest in after-acquired property of the
Borrowers.
(o) Maintain their main operating, demand deposit and transaction
bank accounts with the Bank.
(p) Conduct their respective business so as to comply in all material
respects with all environmental, health and safety laws and regulations in
all jurisdictions in which they are or may at any time be doing business,
including, without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal
Clean Air Act and the Federal Occupational Safety and Health Act; PROVIDED,
HOWEVER, that nothing contained in this subsection shall prevent any
Borrower or their Restricted Subsidiaries from contesting, in good faith by
appropriate legal proceedings, any such law, regulation, interpretation
thereof or application thereof, provided, further, that such Borrower or
their Restricted Subsidiaries shall comply with the order of any court or
other governmental body of applicable jurisdiction relating to such laws
unless such Borrower or its Restricted Subsidiaries shall currently be
prosecuting an appeal or proceedings for review and shall have secured a
stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review.
If any Borrower or its Restricted Subsidiaries shall (a) receive written
39
<PAGE>
notice that any violation of any federal, state, Commonwealth or local
environmental, health or safety law or regulation may have been committed
or is about to be committed by such Borrower or their Restricted
Subsidiaries, (b) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed against
such Borrower or its Restricted Subsidiaries alleging violations of any
federal, state, Commonwealth or local environmental law or regulation or
requiring such Borrower to take any action in connection with the release
of toxic or hazardous substances into the environment, (c) receive any
written notice from a federal, state, Commonwealth or local governmental
agency or private party alleging that such Borrower or their Restricted
Subsidiaries may be liable or responsible for costs associated with a
response to or cleanup of a release of a toxic or hazardous substance into
the environment or any damaged caused thereby, (d) receive any written
notice that such Borrower is subject to federal, state, Commonwealth or
local investigation evaluating whether any remedial action is needed to
respond to the release of any hazardous or toxic waste, substance or
constituent in the environment, or (e) receive any written notice that any
properties or assets of such Borrower or its Restricted Subsidiaries are
subject to a lien in favor of any governmental entity for any liability
under federal, state, Commonwealth or local environmental laws or
regulations or damages arising from or costs incurred by such governmental
entity in response to a release of a hazardous or toxic waste, substance or
constituent, or any other substance into the environment, then such
Borrower or Restricted Subsidiary shall promptly provide the Bank with a
copy of such notice, and in any event no later than within fifteen (15)
days from such Borrower's or its Restricted Subsidiaries receipt thereof.
Within fifteen (15) days of any such Borrower or Restricted Subsidiary
having learned of the enactment or promulgation of any federal, state,
Commonwealth or local law or regulation pertaining specifically to such
Borrower or Restricted Subsidiary or its industry that may result in any
Material Adverse Effect, such Borrower or such Subsidiary shall provide the
Bank with notice thereof. Upon the occurrence of an Event of Default and
ten (10) days' prior notice, if the Bank has reasonable grounds to believe
that (i) any hazardous substances or other toxic substances are present in
the soil or water, at the Realty or (ii) that the Borrowers are not in
compliance with all applicable federal or Commonwealth environmental laws,
the Bank may obtain one or more environmental assessments of the Realty,
and the Borrowers shall be responsible for the reasonable costs of one such
assessment. Notwithstanding the occurrence of an Event of Default, the
Bank may also obtain an environmental assessment, but the cost of such
assessment will be for the account of the Bank. The Borrowers will
cooperate with the persons retained by the Bank to prepare any such
environmental assessments.
(q) (i) Maintain a ratio of Total Liabilities to Tangible Net
Worth of not more than 1.60 to 1 during fiscal year 1997 and of 1.50 to 1
at all times thereafter during the term of this Agreement.
40
<PAGE>
(ii) Maintain, as of the end of each fiscal quarter,
commencing with the quarter ended September 30, 1997 a ratio of Operating
Cash Flow for the four consecutive fiscal quarters just ended to total Debt
Service during such four fiscal quarters of not less than the following
ratios at any time during each period set forth below:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING RATIO
<S> <C> <C>
On September 30, 1997 and on or 1.00 to 1
before June 30, 1998
On or after September 30, 1998 1.30 to 1
and on or before June 30, 1999
On or after September 30, 1999 1.50 to 1
</TABLE>
; PROVIDED, HOWEVER, that the Borrowers shall not be deemed to have
breached the above financial covenant if during any period of noncompliance
the Minimum Cash Balance shall not be less than two (2) times the projected
aggregate Debt Service (assuming for purposes of making this computation
that the applicable interest rate for the Advances is the interest rate in
effect at the t' e the computation is made) for the Borrowers and their
Restricted Subsidiaries for the following fiscal year.
(iii) Maintain cash and marketable securities at all times in
an amount equal to not less than the Minimum Cash Balance.
(iv) Maintain a minimum Tangible Net Worth of not less than
the following respective amounts as of the end of each of the following
periods:
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ ------
<S> <C> <C>
Fiscal Year 1997 $37,000,000
Fiscal Year 1998 $39,500,000
Fiscal Year 1999 $42,000,000
Fiscal Year 2000 $44,500,000
Fiscal Year 2001 and for $47,000,000
each Fiscal year thereafter
</TABLE>
; PROVIDED, HOWEVER, that at all times during each fiscal year the Tangible
Net Worth shall be at least equal to the requirement set forth as of the
end of the immediately preceding fiscal year.
(r) During normal business hours, permit the Bank and Bank's
representatives, inspectors and consultants to enter upon the Realty, to
inspect the Plant and materials used therein and to examine all contracts,
records, plans and shop drawings which are kept at the Plant or at any of
the Borrowers' offices.
41
<PAGE>
(s) Not suffer or permit to exist or to continue for more than 30
days (i) any order or decree in any court of competent jurisdiction
enjoining prohibiting the Borrowers or the Bank from performing this
Agreement or (ii) any proceeding seeking any such order or decree.
(t) Cause the Plant to be operated in such manner that all licenses,
permits and approvals necessary or appropriate for the maintenance,
operation and use of the Plant for its intended purpose will be maintained
in full force and effect, except to the extent that failure to have such
licenses, permits and approvals would not have a Material Advance Effect.
(u) Perform and comply at all times with the material provisions of
each of the Bottling Appointment and the Marketing Agreement, maintain each
of the Bottling Appointment and the Marketing Agreement in fullforce and
effect and notify the Bank promptly of any material changes, modifications
or amendments to the Bottling Appointment or the Marketing Agreement or
upon the occurrence of an event of default or any event that with the
giving of notice or the passage of time or both would Constitute an event
of default under the Bottling Appointment or the Marketing Agreement.
(v) Not later than the date 45 days after the end of each fiscal
quarter of the Borrowers, commencing with the fiscal quarter ending March
31, 1997, deposit in a deposit account (the "Cash Collateral Account") to
be maintained with the Bank the following amounts up to the aggregate
amount of FIVE MILLION DOLLARS ($5,000,000) based on the Recapture Leverage
Ratio:
<TABLE>
<CAPTION>
RECAPTURE LEVERAGE RATIO AMOUNT
------------------------ ------
<S> <C> <C>
Equal to or greater than 7.00 to $1,250,000
1.00
Equal to or greater than 6.00 to $ 937,000
1.00 but less than 7.00 to 1.00
Equal to or greater than 5.00 to $ 625,000
1.00 but less than 6.00 to 1.00
Equal to or greater than 4.00 to $ 312,500
1.00 but less than 5.00 to 1.00
Less than 4.00 to 1.00 $ 0
</TABLE>
All moneys therein deposited from time to time shall be assigned and
pledged to the Bank pursuant to the Cash Collateral Agreement, the
provisions of which are incorporated herein by reference, as additional
security or collateral for the Obligations of the Borrower hereunder. The
Borrower agrees to execute such other documents or take such other action
as any Bank may deem necessary or desirable to create or maintain a lien or
security interest on amounts on deposit in the Cash Collateral Account.
42
<PAGE>
(w) Submit such periodic information and reports as the Bank may
reasonably request regarding the status of the Shareholders' Suit.
(x) Deliver to the Bank on or prior to May 15, 1997, an appraisal of
the Realty and Machinery and Equipment on which the Bank has a security
interest, performed by an independent appraiser, who is a member of the
American Institute of Real Estate Appraisers ("MAI") and is satisfactory to
the Bank, stating that the value of the Realty and Machinery and Equipment
is at least TWENTY-FIVE MILLION DOLLARS ($25,000,000).
(y) Not consent to any modification, amendment, supplement or waiver
to the voting Trust or the Option Agreement which would adversely affect or
could reasonably be expected to adversely affect the rights of the voting
trustee under the Option Agreement or the Voting Trust with respect to all
Class A Shares, without the prior consent of the Bank.
Section 5.2 NEGATIVE COVENANTS. So long as any Note shall remain
unpaid or the Bank shall have any Commitment hereunder, the Borrowers, and
their Restricted Subsidiaries, to the extent applicable, will not, without
the consent of the Bank (such consent not to be unreasonably withheld or
delayed):
(a) Create, incur, assume or suffer to exist any Lien, security
interest or other charge or encumbrance securing Indebtedness for borrowed
money or purchase money debt, or any other Lien of a material nature (other
than Permitted Liens), or any other type of preferential arrangement, upon
or with respect to any of its Properties (real or personal, tangible or
intangible), including without limitation Liens on inventory and accounts
receivable, whether now owned or hereafter acquired, or on the capital
stock of their Restricted Subsidiaries, or assign any right to receive
income, other than those Liens permitted hereunder.
(b) Create, incur, guarantee, endorse, assume or suffer to exist any
Indebtedness, direct, contingent or otherwise, except (i) Indebtedness
under this Agreement and under the Notes; (ii) trade payables and accruals
incurred in the ordinary course of business; (iii) Indebtedness outstanding
on the date hereof and listed in Schedule 5.2 (b) hereto; (iv) any
Subordinated Debt; and (v) Capitalized Leases and purchase money security
interests not exceeding FIVE MILLION DOLLARS ($5,000,000) in the aggregate
at any time outstanding (including any such Indebtedness set forth in
Schedule 5.2(b)) for all Borrowers and their Restricted Subsidiaries taken
as a whole, (vi) Indebtedness owed by one Borrower to another Borrower, and
(vii) Indebtedness with respect to operating leases for real or personal
property providing for aggregate annual rental payments in excess of TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) (including any such
Indebtedness set forth in Schedule 5.2(b)) or all Borrowers and their
Restricted Subsidiaries taken as a whole.
43
<PAGE>
(c) Declare or pay any dividends or purchase, redeem, retire or
otherwise acquire for value, or make any commitment to purchase, redeem,
retire or otherwise acquire for value, any of its capital stock or warrants
or other rights therein now or hereafter outstanding, either directly or
indirectly, or make any other distribution on any shares of capital stock
of any Borrower, either directly or indirectly without the prior written
consent of the Bank, except (i) for such declaration, payment, purchase,
redemption, retirement, acquisition or Distribution in an amount that does
not exceed any dividends paid or declared and actually received by Pepsi-
Cola PR from BAESA, net of any taxes payable by such Borrower in connection
therewith, or (ii) the payment of noncumulative quarterly dividends on up
to 600,000 shares of Management Stock of Beverage Plastics in an amount not
exceeding 25 cents per share per quarter, or (iii) for such declaration,
payment or distribution in an amount not exceeding (A) the Net Available
Proceeds from any BAESA Stock Disposition; provided that at the time of
such declaration, payment or distribution the ratio of Operating Cash Flow
to Debt Service for the four consecutive fiscal quarters ending prior to
the date of such dividend is paid, declared or distributed is not less than
2.00 to 1.00, or (B) the Net Available Proceeds from any BAESA Stock
Disposition minus the outstanding principal amount of the Term Loan Advance
at the time of such declaration, payment or distribution, or (iv) the
exercise by Pepsi-Cola PR of any rights under the Option Agreement to the
extent exercised strictly in accordance with the terms thereof as in effect
on the date hereof (without any modification, amendment, supplement or
waiver) and provided that the exercise of such rights does not have a
Material Adverse Effect or otherwise results in a breach of the limitations
set forth in Section 7.1(i), and in each case only to the extent that no
Event of Default or event or condition that, but for the requirement that
time elapse or notice be given, or both, would constitute and Event of
Default has occurred and is continuing under this Agreement and such
declaration, payment, purchase, redemption, retirement, acquisition or
distribution would not result in the occurrence of an Event of Default or
result in an event or condition that, but for the requirement that time
elapse or notice be given, or both, would constitute and Event of Default.
(d) Sell, lease, transfer or otherwise dispose of any asset except:
(i) the sale by Manufacturing of its assets and other property comprising
the previous bottling plant in Rio Piedras, Puerto Rico, (ii) the sale of
Pepsi-Cola PR's holdings of BAESA stock or warrants convertible into stock
that are currently held by any Borrower or that may be acquired or received
in the future by any Borrower under any preemptive rights or from any
dividends declared or capital stock acquired from dividends paid or
declared and actually received by any Borrower from the Unrestricted
Subsidiaries; (iii) the sale of the parcels of land, identified on the
Survey as Parcel 5-C located in Toa Baja, Puerto Rico and owned by
Manufacturing, (iv) Inventory or other property sold or disposed of in the
ordinary course of business and on ordinary business terms, (v) sales of
assets which are promptly replaced by the Borrowers (the Borrowers shall be
44
<PAGE>
obligated to immediately report any such sales when the aggregate amount of
such sales exceeds ONE MILLION DOLLARS ($1,000,000) in any fiscal year),
(vi) sales, leases, transfers of assets by the Borrowers and their
Restricted Subsidiaries not exceeding ONE MILLION DOLLARS ($1,000,000) in
the aggregate in any single fiscal year, or (vii) the sale by Pepsi-Cola PR
of its Cristalia Spring Water division.
(e) Merge into or consolidate with any Person, except (i) with the
prior written consent of the Bank or (ii) if the surviving entity is any
Borrower, PepsiCo or any subsidiary of PepsiCo in which PepsiCo owns at
least 51% of the voting stock and has, in the reasonable opinion of the
Bank, adequate financial resources at the time of such merger or
consolidation, and after giving effect to such merger or consolidation, no
Event of Default would exist hereunder and the Loan Documents remain in
full force and effect.
(f) To enter into or permit the Restricted Subsidiaries to enter into
management agreements or other agreements or arrangements for services or
for the purchase or sale of any assets with any Unrestricted Subsidiary on
terms and conditions and for an amount that is not reasonable and proper in
relation to the work performed or items being purchased and which is not
substantially comparable to that paid by other companies engaged in similar
lines of business.
(g) Make any investment in, make, assume, endorse or have outstanding
at any time any guarantee, loan or advance to, or otherwise extend credit
to any (i) officer, director or stockholder of any of the Borrowers or (ii)
Unrestricted Subsidiary, including without limitation any officer, director
or stockholder of an Unrestricted Subsidiary or any affiliate of such
Unrestricted Subsidiary except for investments, loans, advances or
guarantees (A) made in the ordinary course of business or (B) with the
prior written consent of the Bank.
(h) Transfer its principal place of business or change its registered
principal office, or maintain its Machinery and Equipment and Inventory or
its records with respect to Collateral, at any locations other than those
at which the same are presently kept or maintained, except with the Bank's
prior written consent (which consent shall not be unreasonably withheld)
and after the delivery to the Bank of security instruments, if required by
the Bank, in form satisfactory to the Bank.
(i) Engage in any line or lines of business activity other than the
business of bottling, distributing and selling the beverage known as Pepsi-
Cola and similar beverages (alcoholic and non-alcoholic) and water
products, the manufacturing and distribution of other food and beverage
products and other businesses incidental to the distribution of such
products.
45
<PAGE>
(j) Except as otherwise expressly permitted by this Agreement and
except as set forth on Schedule 5.2(i), each Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) make any investment in an Affiliate of the Borrower or
any Affiliate of its Subsidiaries;
(ii) except as permitted in Section 5.2(j)(iv) below,
transfer, sell, lease, assign or otherwise dispose of any property to an
Affiliate of such Borrower or any Affiliate of its Subsidiaries;
(iii) merge into or consolidate with or purchase or acquire
property from an Affiliate of such Borrower or any Affiliate of its
Subsidiaries; or
(iv) enter into any other transaction directly or indirectly
with or for the benefit of an Affiliate of such Borrower or any Affiliate
of its Subsidiaries (including, without limitation, guarantees and
assumptions of obligations of such an Affiliate); provided that (A) any
such Affiliate who is an individual may serve as a director, officer or
employee of such Borrower or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity, and (B) such
Borrower and its Subsidiaries may enter into transactions (other than
extensions of credit by such Borrower or any of its Subsidiaries to such an
affiliate) providing for the Leasing of Property, the rendering or receipt
of services or the purchase or sale of inventory and other property in the
ordinary course of business if the monetary or business consideration
arising therefrom would be substantially as advantageous to such Borrower
and its Subsidiaries as the monetary or business consideration which would
be obtained in a comparable transaction with a Person not an Affiliate of
such Borrower or any of its Subsidiaries.
(k) Consent to any modification, supplement or waiver of any of the
provisions of the Organizational Documents which would or could reasonably
expected to have a Material Adverse Effect, without the prior consent of
the Bank, except to the extent any such modification, supplement or waiver
may be required by applicable laws, rules or regulations. Notwithstanding
the fact that the prior consent of the Bank may not be required, the
Borrowers agree to provide the Bank with notice of modifications,
supplements or waivers to the foregoing agreements promptly following such
modification, waiver or amendment.
(l) Enter into any arrangement with any Person whereby any Borrower
or any of its Restricted Subsidiaries shall sell or otherwise transfer any
of its property, whether now owned or hereafter acquired, and thereafter
rent or lease such property or similar property for substantially the same
use or uses as the property sold or transferred.
46
<PAGE>
(m) Change their fiscal year, corporate name or structure, except with
the prior written consent of the Bank, which consent shall not be
unreasonably withheld.
(n) Change or in any manner cause or seek a change in any laws,
requirements of governmental authorities and obligations created by private
contracts and leases which now or hereafter may materially affect the
ownership, use or operation of the Plant without the prior written consent
of the Bank; provided, however, that this covenant shall not apply to
emergency situations in which each Borrower exercises its prudent judgment
and notifies the Bank promptly thereafter of such emergency and the actions
taken in response thereto.
(o) Permit the aggregate amount of Capital Expenditures to exceed
during any fiscal year FOUR MILLION DOLLARS ($4,000,000).
(p) Enforce any intercompany debts payable by a Borrower to any other
Borrower, if such enforcement would cause the corresponding Borrower to
cease to be Solvent.
ARTICLE VI
SPECIAL PROVISIONS AS TO COLLATERAL
Section 6.1 PERFECTION OF SECURITY INTEREST. It is the intention
of the Bank and the Borrowers, and the Bank and the Borrowers hereby agree
that, until all Obligations have been fully satisfied, the Bank's security
interest in the Collateral, and all products and proceeds thereof, shall
continue in full force and effect. The Borrowers shall perform any and all
steps reasonably requested by the Bank to perfect, maintain and protect the
Bank's security interest in the Collateral, including, without limitation,
executing and filing security instruments, or amendments thereof, in form
and substance satisfactory to the Bank. The Borrowers shall have the costs
of, or incidental to any recording or filing of any security instrument
concerning the Collateral and the reasonable costs of or incidental to any
and all other steps or procedures which the Bank may request in order to
perfect, maintain and protect the Bank's security interest in the
Collateral. If any Borrower fails to pay any taxes, assessments or
governmental charges levied or assessed or imposed upon or with respect to
the Collateral or any part thereof promptly when due, subject to the
Borrowers' right to contest such payment by appropriate proceedings, the
Bank may (but shall not be required to) pay the same and charge the cost
thereof to any Borrower's account with the Bank as part of the Obligations
payable hereunder on demand and secured by the Collateral. If an Event of
Default has occurred and is continuing, in order to protect or perfect any
security interest that the Bank is granted hereunder, the Bank may, in its
47
<PAGE>
sole discretion, maintain guards, discharge any lien or encumbrance or bond
the same, pay any insurance, service bureau or warehouseman, or obtain any
record and charge the same to any Borrower's account with the Bank as an
Advance hereunder and as part of the Obligations payable hereunder on
demand and secured by the Collateral.
Section 6.2 PROVISIONS RELATING TO RECEIVABLES. Without the prior
written consent of the Bank in each case, no Borrower will re-date any
invoice or sale or make sales on extended dating beyond that customary in
its industry or change the terms of sale customarily offered to its
customers. If any Borrower becomes aware of anything materially
detrimental to its material customer's credit, it will promptly advise the
Bank thereof. During the term of this Agreement, no Borrower shall sell or
assign or grant any security interest in any Receivables to anyone other
than the Bank, nor shall any Borrower encumber, mortgage, pledge or grant
any security interest in any of its Inventory to anyone other than the
Bank, and each Borrower shall place notations upon its books of account to
disclose the assignment of all Receivables to the Bank and the Bank's
interest, assignment and lien in, of or on all Collateral and all other
security held by or for the Bank. Upon the occurrence and continuance
thereof of an Event of Default the Bank may settle or adjust disputes and
claims directly with customers or account debtors or amounts and upon terms
which the Bank considers advisable unless the corresponding Borrower has
substituted other Receivables or Collateral in form and amount satisfactory
to the Bank and, in all cases, the Bank will credit such Borrower's loan
account with only the net amounts received by the Bank in payment of
Receivables.
Section 6.3 WARRANTIES WITH RESPECT TO RECEIVABLES. Each Borrower
agrees, represents and warrants that each Receivable will be owned by such
Borrower free and clear of any Liens, claims or encumbrances other than
those in favor of the Bank and will cover a bona fide sale and delivery of
merchandise usually dealt in by such Borrower, or the rendition by such
Borrower of services to customers in the ordinary course of business, and
will be for a liquidated amount maturing as stated in the schedules thereof
and in the invoice covering said sale, and the Bank's security interest
therein will not be subject to any Liens other than Permitted Liens; but
the Bank shall retain its security interest in all Receivables, eligible
and ineligible, until all Obligations have been fully satisfied.
Section 6.4 PROVISIONS RELATING TO INVENTORY. Each Borrower
agrees, represents and warrants that all Inventory is and will be owned by
such Borrower free of all Liens and encumbrances other than the Bank's
security interest hereunder and shall be kept by such Borrower at the
corresponding locations specified on Exhibit D hereto, and that such
Borrower shall not (without the Bank's prior written approval) remove the
Inventory therefrom except for the purposes of sale in the regular course
of its business. Except for sales of Inventory made in the regular course
of its business and except for obsolete or unmerchantable goods, no
48
<PAGE>
Borrower shall sell, encumber or dispose of or permit the sale, encumbrance
or disposal of any Inventory without the Bank's prior written consent.
Section 6.5 PROVISIONS RELATING TO MACHINERY AND EQUIPMENT. Each
Borrower shall keep and maintain the Machinery and Equipment in good
operating condition and repair and shall make all necessary replacements
thereof so that the value and operating efficiency thereof shall at all
times be maintained and preserved; shall promptly inform the Bank of any
additions to or deletions from the Machinery and Equipment; and shall not
permit any such items to become a fixture to real estate or accession to
other personal property unless the Bank has a perfected security interest
in such real estate or other personal property. Each such Borrower shall,
promptly, on demand therefor by the Bank, deliver to the Bank evidence,
reasonably satisfactory to the Bank of ownership of all material Machinery
and Equipment. Subject to the provisions of Section 5.2(d) hereof, and
except or otherwise permitted pursuant to this Agreement, no such Borrower
shall, without the Bank's prior written consent, sell, lease, grant a
security interest in or otherwise dispose of or encumber the Machinery and
Equipment, or any part thereof. In the event that any of the Machinery and
Equipment is sold, transferred or otherwise disposed of with the Bank's
consent, as herein provided, or as otherwise permitted pursuant to this
Agreement, (a) if the Machinery and Equipment so sold, transferred or
disposed of is not replaced or is replaced by Machinery and Equipment
leased by the corresponding Borrower, the corresponding Borrower shall
deliver all of the cash proceeds thereof to the Bank, which proceeds shall
be applied to the repayment of the Obligations of the Borrowers in
accordance with Section 2.9(b), and (b) if such sale, transfer or
disposition is made in connection with the purchase by such Borrower of
replacement Machinery and Equipment, such Borrower shall use the cash
proceeds thereof to finance the purchase of such replacement Machinery and
Equipment and shall deliver to the Bank written evidence of the use of the
proceeds for such purchase. Except as otherwise provided in this
Agreement, all replacement Machinery and Equipment purchased by any
Borrower shall be free and clear of all Liens, claims and encumbrances,
except for the Bank's security interest therein. The Borrowers agree to
execute any and all instruments which the Bank may request in order to
perfect its security interest in any replacement Machinery and Equipment.
Section 6.6 COLLATERAL REPORTING. (a) Each Borrower shall provide
the Bank, on a monthly basis, within 30 days after such month, with
schedules describing all Receivables created or acquired by it (including
on an annual basis and upon the written request of the Bank the name and
address of each account debtor) during the immediately preceding month and
shall execute and deliver confirmatory written assignments of such
Receivables to the Bank in such form as the Bank may require; PROVIDED,
HOWEVER, that any such Borrower's failure to execute and deliver such
schedules or assignments shall not affect or limit the Bank's security
interest or other rights in and to the Receivables. Together with each
schedule, such Borrower shall furnish, upon request therefor, copies of
49
<PAGE>
related customers' invoices or the equivalent and copies of original
shipping or delivery receipts for all merchandise sold (or the equivalent)
and such other documents as the Bank may require.
(b) Each Borrower shall provide to the Bank, on a monthly basis
within the 30 days after the end of such month, a schedule of its Inventory
showing the value thereof computed at the lower of cost or market value, in
form and substance satisfactory to the Bank. From time to time, each such
Borrower shall, upon the request of the Bank, execute and deliver
confirmatory written instruments in such form as the Bank may require
pledging to the Bank the Inventory described in such listings or otherwise
owned by such Borrower; PROVIDED, HOWEVER, that any Borrower's failure to
execute and deliver such confirmatory instruments, or to list any Inventory
therein, shall not affect or limit the Bank's security interest in such
Borrower's Inventory. All instruments and certificates prepared by the
Borrowers which show the value of Inventory shall be accompanied, upon
request therefor by the Bank, by copies of related purchase orders and
invoices. Each Borrower shall conduct an annual (or more often as
requested by the Bank in its commercially reasonable judgment, provided
that if the Bank requests more than one additional physical count of the
inventory it will be required to bear the reasonable costs and expenses of
conducting such physical count) physical count of the Inventory and a copy
of each such count shall be promptly supplied to the Bank accompanied by a
report of the value thereof (valued at the lower of cost or market value)
of such Inventory. In addition to the annual physical count of inventory
referred to above, each Borrower shall perform, or have performed on its
behalf, at an interim date a physical test of some Inventory items of their
respective perpetual Inventory records. A copy of the results of each such
test shall be promptly supplied to the Bank accompanied by a report of the
value. If the results of the comparison between physical counts and book
Inventory balances at such interim date results in significant differences,
the Bank, at its discretion, may request a complete physical count of
Inventory in all locations of the Borrowers.
(c) Simultaneously with the execution and delivery of this Agreement,
each Borrower shall furnish to the Bank a certificate executed by its
President or chief financial officer, scheduling all material items of
Machinery and Equipment and designating the places where such Machinery and
Equipment is located. Thereafter, on an annual basis, each such Borrower
shall furnish to the Bank a certificate in such form as the Bank may
require, executed by its President or chief financial officer, as to any
additions to or deletions from, or any changes in the locations of, the
Machinery and Equipment scheduled on the original certificate or any other
quarterly certificate furnished to the Bank hereunder.
(d) In addition to the foregoing reports, each Borrower will provide
the Bank with agings of accounts receivable for all Receivables, within
thirty (30) days after the end of each month, and such other documents and
50
<PAGE>
information with respect to the collateral as the Bank may from time to
time reasonably request.
Section 6.7 COLLECTIONS; BLOCKED ACCOUNT. (a) Unless and until the
Bank exercises its rights to notification and collection described in
subsection (c) below or gives the Borrowers other instructions, the Bank
and the Borrowers shall establish and maintain a special blocked account
(the "Blocked Account") with the Bank for the collection of Receivables of
each of the Borrowers. All collections of Receivables shall be received at
or deposited into the Blocked Account on a daily basis by each Borrower.
The Bank shall have complete control and dominion over the Blocked Account
and on a daily basis (or such other basis as may be established by the Bank
in its sole discretion) apply the money available in the Blocked Account
for the prepayment of Revolving Credit Advances.
(b) If sales of Inventory are made for cash, the corresponding
Borrower shall immediately deposit the identical checks, cash or other
forms of payment which it receives to the Blocked Account provided for in
subsection (a).
(c) Upon the occurrence and during the continuance of an Event of
Default the Bank or its designee may notify customers or account debtors at
any time that Receivables have been assigned to the Bank or of the Bank's
security interest therein, collect them directly and charge the collection
costs and expenses to the Blocked Account.
Section 6.8 APPLICATION OF COLLATERAL. The Bank may, in its sole
discretion, (a) exchange, enforce, waive or release any security or portion
of the Collateral, (b) apply such security or any proceeds of the
Collateral and direct the order or manner of sale thereof as the Bank may,
from time to time, determine, and (c) settle, compromise, collect or
otherwise liquidate any such Collateral for the Obligations of the
Borrowers in any manner following the occurrence and during the continuance
of an Event of Default without affecting or impairing the Bank's right to
take any other further action with respect to any security or Collateral
for the Obligations of the Borrowers or any part thereof.
Section 6.9 RELEASE OF COLLATERAL. Upon the satisfaction in full
of the Obligations (other than any contingent Obligations that survive the
termination of the Credit Agreement) and the termination of the Credit
Agreement, the Bank will, upon the Borrowers' request and at the Borrowers'
expense, execute and deliver to the Borrowers such documents as the
Borrowers shall reasonably request to release the Collateral.
Notwithstanding the foregoing, the Bank agrees to release as Collateral the
parcel of land identified as Parcel 5-C of Pennock I on the Survey. The
Borrowers agree to pay all fees and expenses (including attorneys fees)
51
<PAGE>
payable in connection with such release. The proceeds of any such sale
shall be applied as required by Section 2.9(b) hereof.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENT OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any installment of principal of
any Note or shall fail to pay any interest on such Note when such
Installment of principal or interest payment shall become due, or the
Borrowers shall fail to pay any fees required to be paid pursuant to
Section 2.5 of this Agreement or any fee or any other amount payable by it
hereunder or under any other Loan Document when such fees and amounts shall
become due, and any such failure shall remain uncured for five (5) days
thereafter; or
(b) Any Borrower shall fail to perform any term, covenant or
agreement contained in Sections 5.1(c)(iii), 5.1(q) or 5.2; or
(c) Any Borrower shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed (other than in respect of Sections 7.1(a) and 7.1(b))
and any such failure shall remain unremedied for a period of ten (10) days
after written notice thereof shall have been given to the corresponding
Borrower by the Bank; or
(d) Any Borrower or any Restricted Subsidiary of such Borrower shall
fail to pay any debt for borrowed money or any interest or premium thereon
when due and owing (whether at scheduled maturity, by required prepayment,
acceleration, demand or otherwise) or any other default under any agreement
or instrument relating to any such debt and such default shall be uncured
or unwaived after thirty (30) days of its occurrence; or any other event,
shall occur, if the effect of such default or event is to accelerate, or to
permit the acceleration of, or to permit the acceleration after the giving
of notice or passage of time or both, of, the maturity of such debt; or any
such debt of such Borrower or such Restricted Subsidiaries shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(e) Any representation, warranty or certification made by any
Borrower (or any of its directors, officers or employees) or any of its
Restricted Subsidiaries (or any of their respective directors, officers and
employees), as the case may be, contained in any Loan Document or any
document, instrument or certificate delivered to the Bank pursuant to the
provisions thereof (including any modification or supplement thereto),
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(f) Any Borrower or any of its Restricted Subsidiaries shall
generally not pay its debts as such debts become due and owing, or shall
admit in writing its inability to pay its debts generally, or shall make a
52
<PAGE>
general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against any Borrower or any of its Restricted
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial
part of its property, and, in the case of any such proceeding instituted
against it (but not instituted by it), shall remain undismissed or unstayed
for a period of sixty (60) days or an order for relief shall be entered
against it; or any Borrower or any of its Restricted Subsidiaries shall
take any action (corporate or other) to authorize any of the actions set
forth above in this subsection (f); or
(g) (i) Any Termination Event with respect to a Pension Plan shall
have occurred; or (ii) if any Borrower or any Restricted Subsidiary of the
Borrower as employer under a Multiemployer Plan shall have made a complete
or partial withdrawal from a Multiemployer Plan and the plan sponsor of
such Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred an actual withdrawal liability; or
(h) Any provision of any security instrument or any Loan Document
delivered to the Bank pursuant to this Agreement shall for any reason cease
to be valid and binding on the Loan Party that is a party thereto, or such
Loan Party shall fail to cure such defect within 10 days after written
notice thereof; or
(i) There is a sale, transfer, change of effective control or other
disposition, whether by operation of law or otherwise (directly or
indirectly), through a merger, consolidation or otherwise, of the Class A
Shares so that the voting trustee under the Voting Trust as of the Closing
Date ceases to control, own or is no longer entitled to vote in the
aggregate at least a majority of the voting rights under the then issued
and outstanding voting stock of Pepsi-Cola PR or in the event of a
termination, modification, supplement or amendment of the Voting Trust so
that the trustee under the Voting Trust ceases to have the right to vote
not less than 80% of all Class A Shares of Pepsi-Cola PR or in the event
that not less than 80% of all Class A Shares of Pepsi-Cola PR are at all
times subject to the Voting Trust; or
(j) Upon the occurrence of an event or existence of a condition which
has or could reasonably be expected by the Bank to have a Material Adverse
Effect and such event or condition shall continue to exist for a period of
thirty (30) days after notice thereof has been given to the corresponding
Borrower by the Bank; or
53
<PAGE>
(k) A final and unappealable judgment or order for the payment of
money shall be entered against any of the Borrowers or any of their
Restricted Subsidiaries by any court, or a warrant of attachment or
execution or similar process shall be issued or levied against property of
any of the Borrowers or any of their Restricted Subsidiaries, that in the
aggregate exceeds FIVE HUNDRED THOUSAND DOLLARS ($500,000) in value, and
such judgment, order, warrant or process shall continue undischarged or
unstayed for 45 days;
then (unless there shall have occurred an Event of Default under Section
7.1(f) above, in which case the Notes, all interest thereon and all other
amounts payable under the Notes and this Agreement shall automatically
become forthwith due and payable), and in any such event, the Bank may, by
notice to the Borrowers (i) declare the obligation of the Bank to make
Advances to be terminated, whereupon the same shall forthwith terminate;
(ii) declare the Notes, all interest thereon and all other amounts payable
under the Notes and this Agreement and all other obligations to be
forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrowers; and (iii) foreclose on the
Collateral and exercise all its rights under the Loan Documents or at law
or in equity, and proceed to protect and enforce the Bank's rights by any
action at law, in equity or other appropriate proceedings. In the event
that the Bank suffers any loss or expense described in Section 2.8(e) as a
result of the acceleration of the Notes as aforesaid because of the
occurrence of an Event of Default, the Borrowers shall, upon demand by the
Bank, pay to the Bank additional amounts sufficient to indemnify the Bank
against such loss or expense. A certificate as to the amount of such loss
or expense submitted to the Borrowers by the Bank, absent manifest error,
shall be conclusive and binding for all purposes.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 AMENDMENTS, ETC. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by any Loan
Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
Section 8.2 NOTICES. (a) All notices, requests, consents and other
communications required or permitted under this Agreement and the other
Loan Documents shall be in writing and shall be (as elected by the person
giving the notice) hand delivered by messenger or courier service, sent by
telecopier, or mailed (airmail if international) by registered or certified
mail (postage prepaid), return receipt requested, addressed to:
54
<PAGE>
If to the Borrowers:
NAME OF CORRESPONDING BORROWER
c/o Pepsi-Cola Puerto Rico Bottling Company
PO Box 191709
Hato Rey Station
San Juan, PR 00919-1709
Attention: President and CEO
Telecopier:(787) 251-2977 or
(787) 251-2934
With separate copies to the attention of the Chief Financial Officer and
Chief Accounting officer at the same address.
with an additional copy to:
Lawrence Odell, Esq.
Martinez Odell & Calabria
Banco Popular Center, Suite 1600
209 Mu<n~>oz Rivera Avenue
San Juan, PR 00918
Telecopier: (787) 753-8402
If to the Bank:
Banco Popular de Puerto Rico
209 Mu<n~>oz Rivera Avenue
Hato Rey, Puerto Rico 00918
Attention: Manager, Structured Finance Division
Telecopier: (787) 756-3909
(b) Each such notice shall be deemed delivered (i) on the date
delivered receipt acknowledged if by personal delivery, (ii) on the date of
transmission with confirmed receipt if by or on the date upon which the
return receipt is signed or delivery is refused or the notice is designated
by the postal authorities as not deliverable, as the case may be, if
mailed.
(c) By giving to the other party at least fifteen (15) days written
notice thereof, such party and its successors and assigns shall have the
right from time to time and at any time during the term of this Agreement
to change their respective addresses.
Section 8.3 NO WAIVER; REMEDIES. No failure on the part of the
Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right under any Loan Document preclude any other or further exercise
55
<PAGE>
thereof or the exercise of any other right, power or privilege. The
remedies provided in the Loan Documents are cumulative and not exclusive of
any remedies provided by law.
Section 8.4 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with Generally
Accepted Accounting Principles consistently applied, except as otherwise
stated herein.
Section 8.5 COSTS, EXPENSES AND TAXES; INDEMNIFICATION. The
Borrowers agree to pay or reimburse the Bank for paying: (a) all
reasonable out-of-pocket costs and expenses of the Bank (including, without
limitation, the reasonable fees and expenses of Pietrantoni, M<e'>ndez &
Alvarez, counsel to the Bank), in connection with (i) the negotiation,
reparation, execution and delivery of this Agreement and the other Loan
Documents and the extension of credit hereunder and any amendment,
supplement, modification or waiver (whether proposed or made effective) of
any of the terms of this Agreement or any of the other Loan Documents;
(b) all reasonable out-of-pocket costs and expenses of the Bank (including,
without limitation, reasonable counsels' fees) in connection with (i) the
administration of this Agreement and all the other Loan Documents, (ii) any
Event of Default and any enforcement or collection proceedings resulting
therefrom, including, without limitation, the reasonable allocated costs of
the Bank's in-house counsel (if any) and (iii) the enforcement of this
Section 8.5; and (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue
authority in respect of this Agreement or any of the other Loan Documents
or any other documents referred to herein or therein and all fees, costs,
expenses, taxes assessments and other charges incurred in connection with
any appraisal, search, title insurance policy, filing, registration,
recording or perfection of any security interest contemplated by this
Agreement or any other Loan Document or any other document referred to
herein or therein. The Borrowers also agree to pay, and to save and hold
harmless the Bank from any delay by the Borrowers in paying, or omission
to pay, any documentary stamp and other taxes, fees or assessments, if
any, that may be payable in connection with the execution and delivery of
this Agreement, the Notes or any of the other Loan Documents, or the
recording of any thereof, or in any modification hereof or thereof.
Additionally, the Borrowers shall pay to the Bank on demand, any and all
fees, costs and expenses that the Bank pays to a bank or other similar
institution arising out of or in connection with (A) the forwarding to the
Borrowers, or any other Person on the Borrowers' behalf, by the Bank of
proceeds of loans made by the Bank to the Borrowers pursuant to this
Agreement and (B) the depositing for collection by the Bank of any check or
item of payment received and/or delivered to the Bank on account of the
Obligations of the Borrowers under this Agreement, the Notes or any other
Loan Document.
(a) The Borrowers agree to indemnify the Bank and their respective
directors, officers, stockholders and employees, and hold the Bank, and
56
<PAGE>
their respective directors, officers, stockholders and employees, harmless
from and against any and all claims, damages, liabilities and out-of-pocket
expenses (including, without limitation, all reasonable fees and
disbursements of counsel with whom the Bank, or their respective directors,
officers, stockholders and employees, may consult in connection therewith
and all expenses of litigation or preparation therefor) which the Bank, or
its directors, officers, stockholders and employees, may incur or which may
be asserted against it in connection with any litigation or investigation
or other proceeding (including any threatened investigation or litigation
or other proceeding) involving the Borrowers or any officer, director,
stockholder or employee thereof with respect to any matter related directly
or indirectly to this Agreement or the Loan Documents, other than
litigation commenced by the Borrowers against the Bank that (i) seeks
enforcement of any of the Borrowers' rights hereunder, and (ii) is
determined adversely to the Bank. The Borrowers also agree not to assert
any claim against the Bank, any affiliate of the Bank or any of its
directors, officers, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to any of the transactions contemplated herein
or any of the other Loan Documents.
Section 8.6 RIGHT OF SET-OFF. Upon (i) the occurrence and during
the continuance of any Event of Default or (ii) the Bank's declaring the
Notes due and payable pursuant to the provisions of Section 7.1, the Bank
is hereby authorized at any time and from time to time, without notice to
the Borrowers (any such notice being expressly waived by the Borrowers), to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final, matured or unmatured) at any time held and other
Indebtedness at any time owing by the Bank to or for the credit or the
account of any of the Borrowers against any and all of the Obligations of
the Borrowers now or hereafter existing with the Bank irrespective of
whether or not the Bank shall have made any demand therefor and although
such Obligations may be unmatured. The Bank agrees promptly to notify the
Borrowers after any such set-off and application made by the Bank, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off and rights under the Loan Documents and any
other,security instruments delivered hereunder) that the Bank may have.
Section 8.7 BINDING EFFECT; GOVERNING LAW. This Agreement shall
become effective when it shall have been executed by the Borrowers and the
Bank and thereafter shall be binding upon and inure to the benefit of the
Borrowers and the Bank and their respective successors and assigns, except
that the Borrowers shall not have the right to assign their rights
hereunder or any interest herein. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the
Commonwealth.
57
<PAGE>
Section 8.8 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement.
Section 8.9 SALE OF NOTES; PARTICIPATIONS AND COMMITMENTS. The
Bank may, at any time sell, assign or otherwise dispose of any Note, or of
participations therein, or of all or any portion of its rights under any
Loan Document, to any Person so long as such sale, assignment or other
disposition will not result in the imposition of a withholding or other tax
not otherwise applicable to payments made under this Agreement. The
Borrowers hereby agree to execute any and all documents which the Bank may
reasonably request in order to effectuate any foregoing action permitted to
the Bank.
Section 8.10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.11 SURVIVAL OF COVENANTS. All covenants, agreements,
representations and warranties made by the Borrowers, and each of them, in
this Agreement or in any Loan Document or any instrument, document or
certificate delivered pursuant hereto shall be deemed to have been material
and relied on by the Bank, notwithstanding any investigation made by the
Bank, and shall survive the execution and delivery of this Agreement, Loan
Document and of such instrument, document or certificate until repayment of
all amounts due hereunder and under the Notes; PROVIDED, HOWEVER, that the
Obligations of the Borrowers under Section 8.5 of this Agreement shall
survive such repayment.
Section 8.12 APPLICATION OF PAYMENTS. The Bank shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments to any portion of the Obligations of the Borrowers; PROVIDED,
HOWEVER, that such payments shall be applied in such order as is provided
in this Agreement. Each Borrower expressly agrees that to the extent that
any Borrower makes a payment or payments to the Bank or the Bank receives
any payment or proceeds of the collateral for Borrower's benefit, which
payment or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state, Commonwealth or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations of the
Borrowers or part thereof intended to be satisfied shall be revived and
continue in full force and effect, as if such payment or proceeds had not
been received by the Bank.
58
<PAGE>
Section 8.13 DISBURSEMENT AUTHORIZATION. The Borrowers hereby
authorize and direct the Bank to disburse, for and on their behalf and
account, the proceeds of Advances made by the Bank to the Borrowers
pursuant to this Agreement to such Person or Persons as the Borrowers shall
direct, whether in writing or orally.
Section 8.14 CROSS DEFAULT AND JOINT AND SEVERAL OBLIGATIONS. To
induce the Bank to enter into this Agreement and to extend credit to or for
the account of any of the Borrowers, each of the Borrowers hereby
guarantees jointly and severally (solidariamente) the punctual payment when
due of all Obligations of any of the Borrowers to the Bank now or hereafter
existing.
The liability of the Borrowers under this Agreement shall not be
affected by (i) any lack of enforceability of any Obligation of any
particular Borrower, (ii) any change of the time, manner or place of
payment, or any other term, of any Obligation, (iii) any exchange, release,
or non-perfection of any collateral securing payment of any obligation,
(iv) any law, regulation or order of any jurisdiction affecting any term of
any obligation or the Bank's rights with respect thereto, or (v) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, a borrower or a guarantor.
Section 8.15 LOANS AND COLLATERAL UNDER FINANCING AGREEMENT AND THE
FIRST RESTATED CREDIT AGREEMENT REMAIN IN FULL FORCE AND EFFECT. The
parties hereto recognize and acknowledge that the Advances to be made
hereunder have been previously disbursed pursuant to the Financing
Agreement and the First Restated Credit Agreement and that such loans shall
remain in full force and effect until fully paid and shall hereafter be
governed by the terms of this Agreement. The parties further recognize and
acknowledge that all collateral security delivered to the Bank pursuant to
the Financing Agreement and the First Restated Credit Agreement shall
remain in full force and effect so as to secure the repayment of all loans
59
<PAGE>
previously made under the Financing Agreement and the First Restated Credit
Agreement as well as all Advances made under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of
the date first above written.
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
PEPSI-COLA PUERTO RICO
MANUFACTURING COMPANY
PEPSI-COLA PUERTO RICO
DISTRIBUTING COMPANY
BEVERAGE PLASTICS COMPANY
By:/S/ RAFAEL NIN
-----------------------------
Name: Rafael Nin
Title: President and Chief
Executive Officer
By:/S/ DAVID LEE VIRGINIA
-----------------------------
Name: David Lee Virginia
Title: Chief Financial Officer
BANCO POPULAR DE PUERTO RICO
By:/S/ RA<u'>L CACHO
-----------------------------
Name: Ra<u'>l Cacho
Title: Vice President
Affidavit No.: 865 (copy)
Acknowledged and subscribed before me by Rafael Nin, of legal age,
married, executive and resident of San Juan, Puerto Rico, in his capacity
as President and Chief Executive Officer of each of Pepsi-Cola Puerto Rico
Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company, Pepsi-Cola
Puerto Rico Distributing Company and Beverage Plastics Company, by David
Lee Virginia, of legal age, married, executive and resident of Guaynabo,
Puerto Rico, in his capacity as Chief Financial Officer of Pepsi-Cola
Puerto Rico Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company,
Pepsi-Cola Puerto Rico Distributing Company and Beverage Plastics Company;
60
<PAGE>
and by Ra<u'>l Cacho, of legal age, married, banker and resident of San
Juan, Puerto Rico, in his capacity as Vice President of Banco Popular de
Puerto Rico; both to me personally known at San Juan, Puerto Rico, on this
8th day of April, 1997.
-------------------------
Notary Public
61
<PAGE>
EXHIBIT A
TERM LOAN NOTE
$25,000,000.00 As of April 8, 1997
FOR VALUE RECEIVED, the undersigned (the "Borrowers"), hereby promise
to pay to the order of Banco Popular De Puerto Rico (the "Bank"), at its
offices located at 209 Mu<n~>oz Rivera Avenue, Hato Rey, San Juan, Puerto
Rico, the principal sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000) in
such installments, at such time and in such manner as are specified in the
Second Restated Credit Agreement (as hereinafter defined).
All capitalized terms used in this Note which are defined in the
Second Restated Credit Agreement and which are not otherwise defined in
this Note shall have the meanings set forth in the Second Restated Credit
Agreement.
The Borrowers promise to pay interest on the unpaid principal amount
of this Note from the date hereof until the principal amount is paid in
full, at such interest rates, and payable at such times, as are specified
in the Second Restated Credit Agreement.
All computations of interest under this Note shall be made on the
basis of a year of 360 days, for the actual number of days elapsed.
The undersigned, and each of them, including the Borrowers, and any
endorsers of this Note, hereby severally waive presentment, protest, demand
and notice of non-payment and severally agree that the holder of this Note
may extend the time of payment, or release any Collateral held, with or
without notice to all or any of the parties hereto, and that thereafter all
parties hereto will remain liable hereon, as if they, and each of them, had
expressly consented to such extension or release.
The Borrowers hereby agree to pay the reasonable costs and expenses,
including attorneys' fees and expenses, incurred by the holder of this Note
in the event that the holder shall take recourse of judicial proceedings
for the collection of any amount due hereunder in accordance with the terms
of the Second Restated Credit Agreement.
The liability of the Borrowers and each of them for all obligations
and covenants herein shall be joint and several ("solidaria") Any use of
the singular herein shall also refer to the plural and vice versa.
<PAGE>
This Note has been issued pursuant to, and is entitled to the terms,
conditions, benefits and security provided for by that certain Second
Restated Credit Agreement dated as of April 8, 1997 among the Bank and the
Borrowers (the "Second Restated Credit Agreement"). The Second Restated
Credit Agreement, among other things, contains provisions for prepayments
on account of principal hereof upon the terms and conditions therein
specified.
The Borrowers, and each of them, acknowledge receipt of a true and
exact copy of this Note.
EXECUTED in San Juan, Puerto Rico, on the date first set forth above.
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
PEPSI-COLA PUERTO RICO
MANUFACTURING COMPANY
PEPSI-COLA PUERTO RICO
DISTRIBUTING COMPANY
BEVERAGE PLASTICS COMPANY
By:_____________________________
Name: Rafael Nin
Title: President and Chief
Executive Officer
By:_____________________________
Name: David Lee Virginia
Title: Chief Financial Officer
Affidavit No.:
Acknowledged and subscribed before me by Rafael Nin, of legal age,
married, executive and resident of San Juan, Puerto Rico, in his capacity
as President and Chief Executive Officer of each of Pepsi-Cola Puerto Rico
Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company, Pepsi-Cola
Puerto Rico Distributing Company and Beverage Plastics Company and by David
Lee Virginia, of legal age, married, executive and resident of Guaynabo,
Puerto Rico, in his capacity as Chief Financial Officer of Pepsi-Cola
Puerto Rico Bottling Company, Pepsi-Cola Puerto Rico Manufacturing
Company,, Pepsi-Cola Puerto Rico Distributing Company and Beverage Plastics
2
<PAGE>
Company; both to me personally known at San Juan, Puerto Rico, on this 8th
day of April, 1997.
-------------------------
Notary Public
3
<PAGE>
EXHIBIT B
REVOLVING CREDIT NOTE
$5,000,000.00 As of April 8, 1997
FOR VALUE RECEIVED, the undersigned (the "Borrowers"), hereby promises
to pay to the order of BANCO POPULAR DE PUERTO RICO (the "Bank") at its
office or branch at 209 Mu<n~>oz Rivera Avenue, Hato Rey, Puerto Rico, the
sum of FIVE MILLION DOLLARS ($5,000,000) or, if less, the aggregate unpaid
principal amount of all Revolving Credit Advances that have been made by
the Bank to the Borrowers pursuant to Section 2.3(b) of the Second Restated
Credit Agreement (as hereinafter defined) and are outstanding on the date
this Note is presented for payment by the Bank to the Borrower.
Each Revolving Credit Advance made hereunder shall be payable in such
installments, at such times and in such manner as are specified in the
Second Restated Credit Agreement.
The Borrowers promise to pay interest on the unpaid principal amount
of each Advance hereunder from the date of such Advance until the principal
amount thereof is paid in full, at such interest rates, and payable at such
times, as are specified in the Second Restated Credit Agreement.
All computations of interest under this Note shall be made on the
basis of a year of 360 days, for the actual number of days elapsed.
All Revolving Credit Advances made by the Bank to the Borrowers
pursuant to Section 2.3(b) of the Second Restated Credit Agreement and all
payments made on account of principal hereof shall be recorded by the Bank
and, prior to any transfer hereof, endorsed on the grid that appears on the
reverse side of this Note.
The Borrowers hereby agree to pay the reasonable costs and expenses,
including attorneys' fees and expenses, incurred by the holder of this Note
in the event that the holder shall take recourse of judicial proceedings
for the collection of any amount due hereunder in accordance with the terms
of the Second Restated Credit Agreement.
The liability of the Borrowers and each of them for all obligations
and covenants herein shall be joint and several ("solidaria"). Any use of
the singular herein shall also refer to the plural and vice versa.
The undersigned, and each of them, including the Borrowers, and any
endorsers of this Note, hereby severally waive presentment, protest, demand
and notice of non-payment and severally agree that the holder of this Note
<PAGE>
may extend the time of payment, or release any Collateral held, with or
without notice to all or to any of the parties hereto, and that thereafter
all parties hereto will remain liable hereon, as if they, and each of them,
had expressly consented to such extension or release.
This Note has been issued pursuant to, and is entitled to, the
guarantees, benefits, and security provided for by that certain Second
Restated Credit Agreement among the Borrowers, Pepsi-Cola Puerto Rico
Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company, Beverage
Plastics Company and the Bank dated as of April 8, 1997 (the "Second
Restated Credit Agreement"). All capitalized terms used herein that are
defined in the Second Restated Credit Agreement and are not otherwise
defined herein shall have the meanings set forth in the Second Restated
Credit Agreement. This Note is subject to prepayment and acceleration, all
as provided in the Second Restated Credit Agreement.
The Borrowers, and each of them, acknowledge receipt of a true and
exact copy of this Note.
EXECUTED in San Juan, Puerto Rico, on the date first set forth above.
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
PEPSI-COLA PUERTO RICO
MANUFACTURING COMPANY
PEPSI-COLA PUERTO RICO
DISTRIBUTING COMPANY
BEVERAGE PLASTICS COMPANY
By:______________________________
Name: Rafael Nin
Title: President and Chief
Executive Officer
By:______________________________
Name: David Lee Virginia
Title: Chief Financial Officer
Affidavit No.:
Acknowledged and subscribed before me by Rafael Nin, of legal age,
married, executive and resident of San Juan, Puerto Rico, in his capacity
as President and Chief Executive Officer of each of Pepsi-Cola Puerto Rico
2
<PAGE>
Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company, Pepsi-Cola
Puerto Rico Distributing Company and Beverage Plastics Company and by David
Lee Virginia, of legal age, married, executive and resident of Guaynabo,
Puerto Rico, in his capacity as Chief Financial Officer of Pepsi-Cola
Puerto Rico Bottling Company, Pepsi-Cola Puerto Rico Manufacturing Company,
Pepsi-Cola Puerto Rico Distributing Company and Beverage Plastics Company;
both to me personally known at San Juan, Puerto Rico, on this 8th day of
April, 1997.
-------------------------
Notary Public
3
<PAGE>
ADVANCES AND PAYMENTS
<TABLE>
<CAPTION>
Date Amount of Interest Term, Maturity Amount of Principal Principal Notation
Advance Rate if any Date Paid or Prepaid Balance Made by
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT D
BORROWERS' PLACES OF BUSINESS
<PAGE>
SCHEDULE 5.2(b)
<PAGE>
SCHEDULE 5.2(j)
1. Investments of not more than $1,000,000 in the aggregate for all
Borrowers and their Restricted Subsidiaries, as a group, in Affiliates
located in Puerto Rico engaged in the business of manufacturing and
distribution of food and beverage products.
<PAGE>
MASTER LEASE AGREEMENT (Quasi)
THIS MASTER LEASE AGREEMENT, dated as of April 18, 1997 ("Agreement"),
between GENERAL ELECTRIC CAPITAL CORPORATION OF PUERTO RICO, with an office
at 450 Ponce de Leon Avenue, San Juan, Puerto Rico 00901 (hereinafter
called, together with its successors and assigns, if any, "Lessor"), and
PEPSI COLA PUERTO RICO BOTTLING COMPANY, a CORPORATION organized and
existing under the laws of DELAWARE with its mailing address and chief
place of business at CARRETERA # 865 KM 0.4 BARRIO CANDELARIA ARENAS TOA
BAJA, P.R. 00949 (hereinafter called "Lessee").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor
agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the
equipment ("Equipment") described in Annex A to any schedule hereto
("Schedule"). Terms defined in a Schedule and not otherwise defined herein
shall have the meanings ascribed to them in such Schedule.
(b) The obligation of Lessor to purchase Equipment from the
manufacturer or supplier thereof ("Supplier") and to lease the same to
Lessee under any Schedule shall be subject to receipt by Lessor, prior to
the Lease Commencement Date (with respect to such Equipment), of each of
the following documents in form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased hereunder, (ii) a
Purchase Order Assignment and Consent in the form of Annex B to the
applicable Schedule, unless Lessor shall have delivered its purchase order
for such Equipment, (iii) evidence of insurance which complies with the
requirements of Section IX, and (iv) such other documents as Lessor may
reasonably request. As a further condition to such obligations of Lessor,
Lessee shall, upon delivery of such Equipment (but not later than the Last
Delivery Date specified in the applicable Schedule) execute and deliver to
Lessor a Certificate of Acceptance (in the form of Annex C to the
applicable Schedule) covering such Equipment, and deliver to Lessor a bill
of sale therefor (in form and substance satisfactory to Lessor). Lessor
hereby appoints Lessee agent for inspection and acceptance of the Equipment
from the Supplier. Upon execution by Lessee of any Certificate of
Acceptance, the Equipment described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Lessee for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the
Equipment shall commence on the date of execution by Lessee of the
Certificate of Acceptance for such Equipment ("Lease Commencement Date").
The term of this Agreement shall be the period specified in the applicable
Schedule. If any term is extended, the word "term" shall be deemed to
refer to all extended terms, and all provisions of this Agreement shall
apply during any extended terms, except as may be otherwise specifically
provided in writing.
<PAGE>
(b) Rent shall be paid to Lessor at its address stated above, except
as otherwise directed by Lessor. Payments of rent shall be in the amount
set forth in, and due in accordance with, the provisions of the applicable
Schedule. If one or more Advance Rentals are payable, such Advance Rental
shall be (i) set forth on the applicable Schedule, (ii) due upon acceptance
by Lessor of such Schedule, and (iii) when received by Lessor, applied to
the first rent payment and the balance, if any, to the final rental
payment(s) under such Schedule. In no event shall any Advance Rental or
any other rent payments be refunded to Lessee. If rent is not paid within
fifteen (15) days of its due date, Lessee agrees to pay a late charge of
five cents (5<cent>) per dollar on, and in addition to, the amount of such
rent but not exceeding the lawful maximum, if any.
III. TAXES: Lessee shall have no liability for taxes imposed by the
United States of America or any State or political subdivision thereof
which are on or measured by the income of Lessor. Lessee shall report (to
the extent that it is legally permissible) and pay promptly all other
taxes, fees and assessments due, imposed, assessed or levied against any
Equipment (or the purchase, ownership, delivery, leasing, possession, use
or operation thereof), this Agreement, any Schedule, Lessor or Lessee by
any foreign, federal, state or local government or taxing authority during
or related to the term of this Agreement, including, without limitation,
all license and registration fees, and all sales, use, personal property,
excise, franchise, stamp or other taxes, imposts, duties and charges,
together with any penalties, fines or interest thereon (all hereinafter
called "Taxes"). Lessee shall (i) reimburse Lessor upon receipt of written
request for reimbursement for any Taxes charged to or assessed against
Lessor, (ii) on request of Lessor, submit to Lessor written evidence of
Lessee's payment of Taxes, (iii) on all reports or returns show the
ownership of the Equipment by Lessor, and (iv) send a copy thereof to
Lessor.
IV. REPORTS:
(a) Lessee will notify Lessor in writing, within ten days after
notice of any tax or other lien shall attach to any Equipment, of the full
particulars thereof and of the location of such Equipment on the date of
such notification.
(b) Lessee will within 90 days of the close of each fiscal year of
Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss
statement, certified by a recognized firm of certified public accountants.
Upon request Lessee will deliver to Lessor quarterly, within 90 days of the
close of each fiscal quarter of Lessee, in reasonable detail, copies of
Lessee's quarterly financial report certified by the chief financial
officer of Lessee.
(c) Lessee will permit Lessor to inspect any Equipment during normal
business hours.
(d) Lessee will keep the Equipment at the Equipment Location
(specified in the applicable Schedule) and will promptly notify Lessor of
any relocation of Equipment. Upon the written request of Lessor, Lessee
will notify Lessor forthwith in writing of the location of any Equipment as
of the date of such notification.
2
<PAGE>
(e) Lessee will promptly and fully report to Lessor in writing if any
Equipment is lost or damaged (where the estimated repair costs would exceed
10% of its then fair market value), or is otherwise involved in an accident
causing personal injury or property damage.
(f) Within 60 days after any request by Lessor, Lessee will furnish a
certificate of an authorized officer of Lessee stating that he has reviewed
the activities of Lessee and that, to the best of his knowledge, there
exists no default (as described in Section XII) or event which with notice
or lapse of time (or both) would become such a default.
V. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to
Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely in
the conduct of its business and in a manner complying with all applicable
federal, state, and local laws and regulations.
(c) WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, LESSEE SHALL NOT
SUBLET, ASSIGN, TRANSFER, PLEDGE OR HYPOTHECATE THIS AGREEMENT, ANY
EQUIPMENT OR ANY INTEREST IN THIS AGREEMENT OR IN AND TO THE EQUIPMENT OR
PERMIT ITS RIGHTS UNDER THIS AGREEMENT TO BE SUBJECT TO ANY LIEN, CHARGE,
OR ENCUMBRANCE OF ANY NATURE, NOR SHALL LESSEE REMOVE ANY EQUIPMENT FROM
THE COMMONWEALTH OF PUERTO RICO.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.
VI. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment
in good operating order, repair, condition and appearance in accordance
with manufacturer's recommendations, normal wear and tear excepted. Lessee
shall, if at any time requested by Lessor, affix in a prominent position on
each unit of Equipment plates, tags or other identifying labels showing
ownership thereof by Lessee and Lessor's security interest therein.
(b) Lessee will not, without the prior consent of Lessor, affix or
install any accessory, equipment or device on any Equipment if such
addition will impair the originally intended function or use of such
Equipment. All additions, repairs, parts, supplies, accessories,
equipment, and devices furnished, attached or affixed to any Equipment
which are not readily removable shall be made only in compliance with
applicable law; and shall become subject to the lien of Lessor. Lessee
will not, without prior written consent of Lessor and subject to such
conditions as Lessor may impose for its protection, affix or install any
Equipment to or in any other personal or real property.
3
<PAGE>
(c) Any alterations or modifications to the Equipment that may, at
any time during the term of this Agreement, be required to comply with any
applicable law, rule or regulation shall be made at the expense of Lessee.
VII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify
Lessor in writing if any unit of Equipment shall be or become worn out,
lost, stolen, destroyed, irreparably damaged in the reasonable
determination of Lessee, or permanently rendered unfit for use from any
cause whatsoever (such occurrences being hereinafter called "Casualty
Occurrences"). On the rental payment date next succeeding a Casualty
Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (x) the
Stipulated Loss Value of such unit calculated as of the rental next
preceding such Casualty Occurrence ("Calculation Date"); and (y) all rental
and other amounts which are due hereunder as of the Payment Date. Upon
payment of all sums due hereunder, the term of this lease as to such unit
shall terminate and (except in the case of the loss, theft or complete
destruction of such unit) Lessor shall be entitled to recover possession of
such unit.
VIII. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire
risk of any loss, theft, damage to, or destruction of, any unit of
Equipment from any cause whatsoever from the time the Equipment is shipped
to the Lessee.
IX. INSURANCE: Lessee agrees, at its own expense, to keep all
Equipment insured for such amounts and against such hazards as Lessor may
require, including, but not limited to, insurance for damage to or loss of
such Equipment and liability coverage for personal injuries, death or
property damage, with Lessor named as additional insured and with a loss
payable clause in favor of Lessor, as its interest may appear, irrespective
of any breach of warranty or other act or omission of Lessee. All such
policies shall be with companies, and on terms, satisfactory to Lessor.
Lessee agrees to deliver to Lessor evidence of insurance satisfactory to
Lessor. No insurance shall be subject to any co-insurance clause. Lessee
hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss
and claim for insurance, and to make adjustments with insurers and to
receive payment of and execute or endorse all documents, checks or drafts
in connection with payments made as a result of such insurance policies.
Any expense of Lessor in adjusting or collecting insurance shall be borne
by Lessee. Lessee will not make adjustments with insurers except (i) with
respect to claims for damage to any unit of Equipment where the repair
costs do not exceed 1 0% of such unit's fair market value, or (ii) with
Lessor's written consent. Said policies shall provide that the insurance
may not be altered or canceled by the insurer until after thirty (30) days'
written notice to Lessor. Lessor may, at its option, apply proceeds of
insurance, in whole or in part, to (i) repair or replace Equipment or any
portion thereof, or (ii) satisfy any obligation of Lessee to Lessor
hereunder.
X. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any
Schedule, Lessee shall promptly, at its own cost and expense: (i) perform
any testing and repairs required to place the affected units of Equipment
in the same condition and appearance as when received by Lessee (reasonable
wear and tear excepted) and in good working order for their originally
4
<PAGE>
intended purpose; (ii) if deinstallation, disassembly or crating is
required, cause such units to be deinstalled, disassembled and crated by an
authorized manufacturers' representative or such other service person as is
satisfactory to Lessor; and (iii) return such units to a location as Lessor
shall direct.
(b) Until Lessee has fully complied with the requirements of Section
X(a) above, Lessee's rent payment obligation and all other obligations
under this Agreement shall continue from month to month notwithstanding any
expiration or termination of the lease term. Lessor may terminate such
continued leasehold interest upon ten (10) days notice to Lessee.
XI. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if:
Lessee breaches its obligation to pay rent when due and fails to cure said
breach within ten (10) days; Lessee breaches any of its obligations under
Article X of this Agreement; Lessee breaches any of its other obligations
under this Agreement or any related document and fails to cure that breach
within thirty (30) days after written notice thereof; Lessee becomes
insolvent or ceases to do business as a going concern; the Equipment or any
part thereof is abused, seized, illegally used or misused; Lessee makes an
assignment for the benefit of creditors; a petition in bankruptcy is filed
by or against Lessee under any bankruptcy or insolvency laws; or, property
of Lessee is attached or a receiver is appointed for Lessee or any of
Lessee's property. Such declaration shall apply to all Schedules except as
specifically excepted by Lessor.
(b) After default, at the request of Lessor, Lessee shall comply with
the provisions of Section X(a). Lessee hereby authorizes Lessor, at any
time after declaration of Lessee's default, to enter, with legal process
and in accordance with applicable law, any premises where any Equipment may
be and take possession thereof. Lessee shall, upon demand, forthwith pay
to Lessor all amounts then due hereunder and, as liquidated damages for
loss of bargain and not as a penalty, an amount equal to: (i) the
Stipulated Loss Value of the Equipment (calculated as of the rental next
preceding the declaration of default), and (ii) all rentals and other sums
then due hereunder. In accordance with applicable law (including, without
limitation, giving the Lessee all notices required under applicable law),
Lessor may, but shall not be required to, sell the Equipment, at private or
public sale, in bulk or in parcels without having the Equipment present at
the place of sale, and Lessor may bid and purchase; or Lessor may, but
shall not be required to, re-lease or otherwise dispose of all or a part of
the Equipment. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (1) to pay all of
Lessor's costs, charges and expenses incurred in taking, removing, holding,
repairing and selling, leasing or otherwise disposing of Equipment; then,
(2) to the extent not previously paid by Lessee, to pay Lessor all sums due
from Lessee hereunder; then (3) to reimburse to Lessee any sums previously
paid by Lessee as liquidated damages; and (4) any surplus shall be returned
to Lessee. Lessee shall pay any deficiency in (1) and (2) forthwith.
(c) The foregoing remedies are cumulative, and any or all thereof may
be exercised in lieu of or in addition to each other or any remedies at
law, in equity, or under statute. Lessee waives notice of sale or other
disposition (and the time and place thereof), and the manner and place of
5
<PAGE>
any advertising. Lessee shall pay all reasonable attorney's fees incurred
by Lessor in the exercise of any or all remedies. Waiver of any default
shall not be a waiver of any other or subsequent default.
(d) Any default under the terms of this or any other agreement
between Lessor and Lessee may be declared by Lessor a default under this
and any such other agreement.
XII. ASSIGNMENT: Lessor may, without the consent of Lessee, assign
any or all of its rights in this Agreement. Lessee agrees that if Lessee
receives written notice of an assignment from Lessor, Lessee will pay all
rent and all other amounts payable hereunder to such assignee or as
instructed by Lessor. Lessee further agrees to confirm in writing receipt
of the notice of assignment as may be reasonably requested by assignee.
XIII. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease.
Lessee's obligation to pay rent and other amounts due hereunder shall be
absolute and unconditional. Lessee shall not be entitled to any abatement
or reductions of, or set-offs against, said rent or other amounts,
including, without limitation, those arising or allegedly arising out of
claims (present or future, alleged or actual, and including claims arising
out of strict tort or negligence of Lessor) of Lessee against Lessor under
this Agreement or otherwise. Nor shall this Agreement terminate or the
obligations of Lessee be affected by reason of any defect in or damage to,
or loss of possession, use or destruction of, any Equipment from whatsoever
cause. It is the intention of the parties that rents and other amounts due
hereunder shall continue to be payable in all events in the manner and at
the times set forth herein unless the obligation to do so shall have been
terminated pursuant to the express terms hereof.
XIV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor,
its agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including
legal expenses, of whatsoever kind and nature, in contract or tort, whether
caused by the active or passive negligence of Lessor or otherwise, and
including, but not limited to, Lessor's strict liability in tort, arising
out of (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Agreement,
and the delivery, lease, possession, maintenance, uses, condition, return
or operation of Equipment (including, without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or
employees of Lessee. Lessee shall, upon request, defend any actions based
on, or arising out of, any of the foregoing.
(b) All of Lessor's rights, privileges and indemnities contained in
this Section XIV shall survive the expiration or other termination of this
Agreement and the rights, privileges and indemnities contained herein are
expressly made for the benefit of, and shall be enforceable by Lessor, its
successors and assigns.
XV. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE
EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES.
6
<PAGE>
LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE
MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR
ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN,
COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP,
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT,
TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between
Lessor and Lessee, are to be borne by Lessee. Without limiting the
foregoing, Lessor shall have no responsibility or liability to Lessee or
any other person with respect to any of the following, regardless of any
negligence of Lessor (i) any liability, loss or damage caused or alleged to
be caused directly or indirectly by any Equipment, any inadequacy thereof,
any deficiency or defect (latent or otherwise) therein, or any other
circumstance in connection therewith; (ii) the use, operation or
performance of any Equipment or any risks relating thereto; (iii) any
interruption of service, loss of business or anticipated profits or
consequential damages; or (iv) the delivery, operation, servicing,
maintenance, repair, improvement or replacement of any Equipment. If, and
so long as, no default exists under this Lease, Lessee shall be, and hereby
is, authorized during the term of this Lease to assert and enforce, at
Lessee's sole cost and expense, from time to time, in the name of and for
the account of Lessor and/or Lessee, as their interests may appear,
whatever claims and rights Lessor may have against any Supplier of the
Equipment.
XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby
represents and warrants to Lessor that on the date hereof and on the date
of execution of each Schedule:
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "Documents")
and is duly qualified to do business wherever necessary to carry on its
present business and operations, including the jurisdiction(s) where the
Equipment is or is to be located.
(b) The Documents have been duly authorized, executed and delivered
by Lessee and constitute valid, legal and binding agreements, enforceable
in accordance with their terms, except to the extent that the enforcement
of remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required
from any Federal, Puerto Rico, local or any other governmental authority or
instrumentality with respect to the entry into or performance by Lessee of
the Documents except such as have already been obtained.
(d) The entry into and performance by Lessee of the Documents will
not: (i) violate any judgment, order, law or regulation applicable to
Lessee or any provision of Lessee's Certificate of Incorporation or By-
Laws; or (ii) result in any breach of, constitute a default under or result
7
<PAGE>
in the creation of any lien, charge, security interest or other encumbrance
upon any Equipment pursuant to any indenture, mortgage, deed of trust, bank
loan or credit agreement or other instrument (other than this Agreement) to
which Lessee is a party.
(e) There are no suits or proceedings pending or threatened in court
or before any commission, board or other administrative agency against or
affecting Lessee, which will have a material adverse effect on the ability
of Lessee to fulfill its obligations under this Agreement, except those
reflected on Annex (F).
(f) The Equipment accepted under any Certificate of Acceptance is and
will remain tangible personal property.
(g) Each Balance Sheet and Statement of Income delivered to Lessor
has been prepared in accordance with generally accepted accounting
principles, and since the date of the most recent such Balance Sheet and
Statement of Income, there has been no material adverse change.
(h) If Lessee is a corporation, Lessee is and will be at all times
validly existing and in good standing under the laws of the State or
Commonwealth of its incorporation (specified in the first sentence of this
Agreement).
(i) The Equipment will at all times be used legally for commercial or
business purposes and in such a manner as to qualify for use of eligible
funds as that term is used in Regulation 3582 (or any Regulation which is a
successor thereto), issued January 29, 1988, by the Secretary of the
Treasury, Commonwealth of Puerto Rico, as amended.
XVII. OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY INTEREST; USURY
SAVINGS:
(a) For income tax purposes, the parties hereto agree that it is
their mutual intention that Lessee shall be considered the owner of the
Equipment. Accordingly, Lessor agrees (i) to treat Lessee as the owner of
the Equipment on its Puerto Rico and U.S. federal income tax return, (ii)
not to take actions or positions inconsistent with such treatment on or
with respect to its federal income tax return, and (iii) not to claim any
tax benefits available to an owner of the Equipment on or with respect to
its federal income tax return. The foregoing undertakings by Lessor shall
not be violated by Lessor's taking a tax position inconsistent with the
forgoing sentence to the extent such a position is required by law or is
taken through inadvertence so long as such inadvertent tax position is
reversed by Lessor promptly upon its discovery. Lessor shall in no event
be liable to Lessee if Lessee fails to secure any of the tax benefits
available to the owner of the Equipment.
(b) Lessee hereby grants to Lessor a first security interest in the
Equipment, together with all additions, attachments, accessions,
accessories and accessions thereto whether or not furnished by the Supplier
of the Equipment and any and all substitutions, replacements or exchanges
therefor, and any and all insurance and/or other proceeds of the property
in and against which a security interest is granted hereunder.
8
<PAGE>
(c) It is the intention of the parties hereto to comply with any
applicable usury laws to the extent that any Schedule is determined to be
subject to such laws; accordingly, it is agreed that, notwithstanding any
provision to the contrary in any Schedule or this Agreement, in no event
shall any Schedule require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such
excess interest is contracted for, charged or received under any Schedule
or this Agreement, or in the event that all of the principal balance shall
be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under any Schedule or this Agreement
shall exceed the maximum amount of interest permitted by applicable law,
then in such event: (i) the provisions of this paragraph shall govern and
control, (ii) neither Lessee nor any other person or entity now or
hereafter liable for the payment hereof shall be obligated to pay the
amount of such interest to the extent that it is in excess of the maximum
amount of interest permitted by applicable law, (iii) any such excess which
may have been collected shall be either applied as a credit against the
then unpaid principal balance or refunded to Lessee, at the option of the
Lessor, and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful contract rate allowed under applicable law as
now or hereafter construed by the courts having jurisdiction thereof. It
is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received
under any Schedule or this Agreement which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate,
shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the indebtedness evidenced hereby, all interest at any
time contracted for, charged or received from Lessee or otherwise by Lessor
in connection with such indebtedness; provided, however, that if any
applicable law is amended, so that it becomes lawful for Lessor to receive
a greater interest per annum rate than is presently allowed, the Lessee
agrees that, on the effective date of such amendment or preemption, as the
case may be, the lawful maximum hereunder shall be increased to the maximum
interest per annum rate allowed by the amended law.
XVIII. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in the
applicable Schedule), Lessee may, so long as no default exists hereunder,
terminate this Agreement as to all (but not less than all) of the Equipment
on such Schedule as of a rent payment date ("Termination Date") upon at
least 90 days prior written notice to Lessor.
(b) Lessee shall, and Lessor may, solicit cash bids for the Equipment
on an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor,
express or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee
shall (i) certify to Lessor any bids received by Lessee and (ii) pay to
Lessor (A) the Termination Value (calculated as of the rental due on the
Termination Date) for the Equipment, and (B) all rent and other sums due
and unpaid as of the Termination Date.
(c) Provided that all amounts due hereunder have been paid on the
Termination Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for
cash to the highest bidder and (ii) refund the proceeds of such sale (net
9
<PAGE>
of any related expenses) to Lessee up to the amount of the Termination
Value. If such sale is not consummated, no termination shall occur and
Lessor shall refund the Termination Value (less any expenses incurred by
Lessor) to Lessee.
(d) Notwithstanding the foregoing, Lessor may elect by written
notice, at any time prior to the Termination Date, not to sell the
Equipment. In that event, on the Termination Date Lessee shall (i) return
the Equipment (in accordance with Section XI) and (ii) pay to Lessor all
amounts required under Section XVIII(B) less the amount of the highest bid
certified by Lessee to Lessor.
XIX. EARLY PURCHASE OPTION:
(a) Provided that this Agreement has not been earlier terminated and
provided further that Lessee is not in default under this Agreement or any
other agreement between Lessor and Lessee. Lessee may, UPON AT LEAST 30
DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S
IRREVOCABLE ELECTION TO EXERCISE SUCH OPTION, purchase all (but not less
than all) of the Equipment listed and described in any Schedule on any Rent
Payment Date following the First Termination Date as set forth in such
Schedule, and prior to the date which is the scheduled expiration of such
Schedule (the "Early Purchase Date") for a price equal to (i) the
Termination Value (calculated as of the Early Purchase Date) for the
Equipment, and (ii) all rent and other sums due and unpaid as of the
Purchase Date (the "Early Option Price"), plus all applicable sales taxes
on an AS IS BASIS. The purchase option granted by this subsection shall be
referred to herein as the "Early Purchase Option".
(b) If Lessee exercises its Early Purchase Option with respect to the
Equipment leased pursuant to any Schedule, then on the respective Early
Purchase Date, Lessee shall pay to Lessor any rent and other sums due and
unpaid on the Early Purchase Date and Lessee shall pay the Early Option
Price, plus all applicable sales taxes, to Lessor in cash.
XX. PURCHASE OPTION:
(a) So long as no default exists hereunder and the Agreement has not
been earlier terminated, Lessee may at the scheduled expiration of any
Schedule ("Expiration Date"), purchase all (but not less than all) of the
Equipment in such Schedule on an AS IS, WHERE IS BASIS for cash equal to
the amount indicated in such Schedule (the "Option Payment"). The Option
Payment shall be due and payable in immediately available funds on such
Expiration Date.
(b) Lessee shall be deemed to have waived this option unless it
provides Lessor with written notice of its irrevocable election to exercise
the same not less than 90 days prior to any respective Expiration Date.
XXI. MISCELLANEOUS:
(a) Time is of the essence of this Agreement. Lessor's failure at
any time to require strict performance by Lessee of any of the provisions
hereof shall not waive or diminish Lessor's right thereafter to demand
10
<PAGE>
strict compliance therewith. Lessee agrees, upon Lessor's request, to
execute any instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor.
(b) THE PARTIES TO THIS AGREEMENT HEREBY UNCONDITIONALLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON, OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN THEM. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed
in any court (including, without limitation, contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims).
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
(c) All notices required to be given hereunder shall be deemed
adequately given if sent by registered or certified mail to the addressee
at its address stated herein, or at such other place as such addressee may
have designated in writing. This Agreement and any Schedule and Annexes
thereto constitute the entire agreement of the parties with respect to the
subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR
ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN
WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
Any provision in any Schedule or in the Annexes thereto which expands upon
the terms and conditions hereto or purports to amend a corresponding
provision in this Agreement shall only govern the particular lease covered
in any such Schedule.
(d) In case of a failure of Lessee to comply with any provision of
this Agreement, Lessor shall have the right, but shall not be obligated to,
effect such compliance, in whole or in part; and all moneys spent and
expenses and obligations incurred or assumed by Lessor in effecting such
compliance shall constitute additional rent due to Lessor within five days
after the date Lessor sends notice to Lessee requesting payment. Lessor's
effecting such compliance shall not be a waiver of Lessee's default.
(e) Lessee acknowledges that Lessor is unwilling to enter into this
Agreement or any Schedule, unless this Agreement and all Schedules are
governed by the laws of the Commonwealth of Puerto Rico. Accordingly, this
Agreement and any Schedule shall not be binding and effective until
executed and accepted by Lessor at its office in San Juan, Puerto Rico, and
this Agreement and any Schedule shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Puerto Rico
without regard for its choice of law provisions.
11
<PAGE>
(f) In the event that any of the parties hereto file a lawsuit
against the other party arising out of this Agreement, both Lessor and
Lessee hereby submit to the jurisdiction of the United States District
Court for the District of Puerto Rico, or the Superior Court of Puerto Rico
located in the city of San Juan, Puerto Rico.
(g) The Lessee, in case the Equipment is attached to secure
effectiveness of the judgment in a judicial action against Lessor, hereby
releases the Lessor of the requisite to post a bond, waives the protection
of any law requiring the posting of a bond and expressly agrees that the
proper Court may order and decree the attachment of the Equipment without a
bond.
THIS IS NOT A CONDITIONAL SALES CONTRACT. PENALTIES APPLY IN CASE OF EARLY
TERMINATION. DO NOT SIGN THIS AGREEMENT BEFORE READING IT OR IF THERE ARE
ANY BLANK SPACES IN THE AGREEMENT. YOU HAVE THE RIGHT TO REQUEST A COPY OF
THIS AGREEMENT.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their duly authorized representatives as of the date first
above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO
By:/S/ TOM<a'>S NIDO By:/S/ RAFAEL NIN
---------------------------- --------------------------
Title: TOM<a'>S NIDO -PRESIDENT Title: RAFAEL NIN - CHIEF EXECUTIVE OFFICER
------------------------ ------------------------------------
By:/S/ DAVID VIRGINIA
--------------------------
Title: DAVID VIRGINIA - CHIEF FINANCIAL
OFFICER
-------------------------------------
12
<PAGE>
EQUIPMENT SCHEDULE
(QUASI LEASE - FIXED RATE)
SCHEDULE NO. 1
DATED THIS April __, 1997
TO MASTER LEASE AGREEMENT (Quasi)
DATED AS OF APRIL 18, 1997
Lessor & Mailing Address Lessee & Mailing Address
GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO CARRETERA # 865 KM 0.4
___________________________ BARRIO CANDELARIA ARENAS
___________________________ TOA BAJA, P.R. 00949
Capitalized terms not defined herein shall have the meanings assigned to
them in the Master Lease Agreement identified above ("Agreement"; said
Agreement and this Schedule being collectively referred to as "Lease").
A. EQUIPMENT
Pursuant to the terms of the Lease, Lessor agrees to acquire and lease
to Lessee the Equipment listed on Annex A attached hereto and made a part
hereof.
B. FINANCIAL TERMS
1. Advance Rent (if any): $ N/A .
2. Capitalized Lessor's Cost: $ 2,391,154.78 .
3. Basic Term Lease Rate Factor: 4.43162 .
4. Daily Lease Rate Factor: .14772 .
5. Basic Term (No. of Months): 24 MONTHS .
6. Basic Term Commencement Date: .
7. Equipment Location: BARRIO CANDELARIA ARENAS
TOA BAJA. P.R. 00949.
8. Lessee Federal Tax ID No.: ###-##-#### .
9. Supplier: DIXIE-NARCO.
10. Last Delivery Date: .
11. First Termination or Purchase Date: TWENTY-FOUR (24)
MONTHS AFTER THE
BASIC TERM COMMENCEMENT DATE.
12. Interest Rate: 11.00 % per annum.
13. Lessee agrees and acknowledges that the Capitalized Lessor's Cost of
the Equipment as stated on the Schedule is equal to the fair market
value of the Equipment on the date hereof.
14. Option Payment: $1.00 .
<PAGE>
15. Total Finance Charge: $152,048.90 .
16. Total Obligations: $2,543,203.68 .
C. TERM AND RENT
1. Interim Rent. For the period from and including the Lease
Commencement Date to the Basic Term Commencement Date ("Interim
Period"), Lessee shall pay as rent ("Interim Rent") for each unit of
Equipment, the product of the Daily Lease Rate Factor times the
Capitalized Lessor's Cost of such unit times the number of days in the
Interim Period. Interim Rent shall be due on N/A .
2. Basic Term Rent. Commencing on MAY 17, 1997 and on the same
day of each MONTH thereafter (each, a "Rent Payment Date") during
the basic Term, Lessee shall pay as rent ("Basic Term Rent") the
product of the Basic Term Lease Rate Factor times the Capitalized
Lessor's Cost of all Equipment on this Schedule.
3. Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down
by no more than 10% to account for equipment change orders, equipment
returns, invoicing errors, and similar matters. Lessee acknowledges
and agrees that the Rent shall be adjusted as a result of such change
in the Capitalized Lessor's Cost (pursuant to paragraphs 1 and 2
above). Lessor shall send Lessee a written notice stating the final
Capitalized Lessor's Cost, if different from that disclosed on this
Schedule.
D. INSURANCE
1. Public Liability: $1,000,000 total liability per occurrence.
2. Casualty and Property Damage: An amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the Equipment.
E. INTEREST RATE: Interest shall accrue from the Lease Commencement Date
through and including the date of termination of the Lease.
F. SECURITY DEPOSIT: In consideration of, and as an inducement for
Lessor to lease to Lessee the equipment listed on Annex A attached
hereto, Lessee shall deposit and pledge with Lessor the sum of
$597,788.69 and shall execute an agreement substantially in the form
of Annex G hereto (the "Security Deposit Pledge Agreement"). Lessee
acknowledges and agrees that should Lessor, in accordance with the
terms of the Security Deposit Pledge Agreement, partially release any
amount of such deposit, Lessor shall adjust the rent accordingly.
G. PRE-PAYMENT: Lessee may at any time prepay in whole or in part the
Rent under this Schedule, for reasons of any adjustment or otherwise
(except in an event of default), without penalty of any kind.
(Including rule of 78).
2
<PAGE>
H. REPORTS: Only for purposes of the Equipment listed in Annex A hereto,
Lessee shall report in writing if any such Equipment is lost or
damaged where the estimated repair costs exceed 20% of its then fair
market value.
Except as expressly modified hereby, all terms and provisions of the
Agreement shall remain in full force and effect. This Schedule is not
binding or effective with respect to the Agreement or Equipment until
executed on behalf of Lessor and Lessee by authorized representatives of
Lessor and Lessee, respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first
above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO PEPSI COLA PUERTO RICO BOTTLING COMPANY
By:/S/ TOM<a'>S NIDO By:/S/ RAFAEL NIN
----------------------- ----------------------------
Name: TOM<a'>S NIDO Name: RAFAEL NIN
--------------------- --------------------------
Title: PRESIDENT Title: CHIEF EXECUTIVE OFFICER
-------------------- -------------------------
Attest: By:/S/ DAVID VIRGINIA
----------------------------
By:/S/ JAIME ARIZA Name: DAVID VIRGINIA
----------------------- --------------------------
Name:/S/ JAIME ARIZA Title: CHIEF FINANCIAL OFFICER
--------------------- -------------------------
<PAGE>
ANNEX A
TO
SCHEDULE NO. 1
DATED THIS APRIL , 1997
TO MASTER LEASE AGREEMENT (Quasi)
DATED AS OF APRIL 18, 1997
SUPPLIER(S) NAMES AND ADDRESSES
--------------------------------
Dixie Narco
Dixie Narco Blvd.
Williston, S.C. 29853
DESCRIPTION OF EQUIPMENT
------------------------
<TABLE>
<CAPTION> Type and
Model of Number of Cost per SERIAL
MANUFACTURER EQUIPMENT UNITS UNIT NUMBERS
- ------------ ---------- --------- -------- ---------
<S> <C> <C> <C> <C>
</TABLE>
SEE ATTACHED EQUIPMENT LIST
Initials:/S/ TOM<a'>S NIDO /S/ DAVID VIRGINIA /S/ RAFAEL NIN
----------------- ------------------ --------------
Lessor Lessee Lessee
<PAGE>
ANNEX B
TO
SCHEDULE NO. 1
DATED THIS APRIL , 1997
TO MASTER LEASE AGREEMENT
DATED AS OF APRIL 18, 1997
BILL OF SALE
------------
PEPSI COLA PUERTO RICO BOTTLING COMPANY ("Seller"), in consideration of the
sum of TWO MILLION THREE HUNDRED NINETY ONE THOUSAND ONE HUNDRED FIFTY FOUR
AND SEVENTY EIGHT CENTS ($2,391,154.78) paid by GE CAPITAL CORPORATION OF
PUERTO RICO (hereinafter called Buyer), receipt of which is hereby
acknowledged, hereby grants, sells, transfers and delivers to Buyer the
equipment described below (hereinafter called Equipment), along with
whatever claims and rights Seller may have against the manufacturer and/or
Supplier of the Equipment, including but not limited to all warranties and
representations.
EQUIPMENT DESCRIPTION
- ---------------------
SEE EQUIPMENT LIST
Buyer is purchasing the Equipment for leasing back to the Seller pursuant
to the Lease. Seller represents and warrants to Buyer that (1) Buyer will
acquire by the terms of this Bill of Sale good title to the Equipment free
from all liens and encumbrances whatsoever; (2) Seller has the right to
sell the Equipment; and (3) the Equipment has been delivered to Seller in
good order and condition, and it conforms to the specifications,
requirements and standards applicable thereto.
Seller agrees to save and hold harmless Buyer from and against any and all
federal, state, municipal and local license fees and taxes of any kind or
nature, including, without limiting the generality of the foregoing, any
and all excise, personal property, use and sales taxes, and from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, and suits resulting therefrom and imposed upon, incurred
by or asserted against Buyer as a consequence of the sale of the Equipment
to, or the ownership, possession, operation or use of the Equipment, by
Seller.
Signed and executed on this 18 day of April, 1997, in __________, Puerto
Rico.
Buyer: General Electric Capital Corporation of P.R.
By:/S/ TOM<a'>S NIDO
-------------------------
Tom<a'>s Nido - President
Seller: Pepsi Cola Puerto Rico Bottling Company
By:/S/ RAFAEL NIN By:/S/ DAVID VIRGINIA
--------------------------------- --------------------------------
Rafael Nin - Chief Executive Officer David Virginia - Chief Financial
Officer
<PAGE>
ANNEX C
TO
SCHEDULE NO. 1
DATED THIS APRIL , 1997
TO MASTER LEASE AGREEMENT (Quasi)
DATED AS OF APRIL 18, 1997
CERTIFICATE OF ACCEPTANCE
To: GENERAL ELECTRIC CAPITAL CORPORATION OF P.R. ("Lessor")
--------------------------------------------
Pursuant to the provisions of the Master Lease Agreement (Quasi) and
Schedule No. 1 thereto, Lessee hereby certifies and warrants that (a) all
Equipment listed below has been delivered on the delivery date specified
below; Lessee has inspected the Equipment, and all such testing as it deems
necessary has been performed by Lessee, Supplier or the manufacturer; and
Lessee accepts the Equipment for all purposes of the Lease, the Purchase
Documents and all attendant documents.
Lessee does further certify that as of the date hereof (i) Lessee is
not in default under the Lease; and (ii) the representations and warranties
made by Lessee pursuant to or under the Lease are true and correct on the
date hereof.
DESCRIPTION OF EQUIPMENT
------------------------
<TABLE>
<CAPTION>
Type and
Model of Delivery
MANUFACTURER SERIAL NUMBER EQUIPMENT DATE
- ------------ ------------- --------- --------
<S> <C> <C> <C>
</TABLE>
SEE ATTACHED EQUIPMENT LIST
/S/ DAVID VIRGINIA /S/ RAFAEL NIN
------------------------- -------------------------
Authorized Representative Authorized Representative
Dated: 4/18/97
<PAGE>
ANNEX D
TO
SCHEDULE NO. __
DATED THIS APRIL , 1997
TO MASTER LEASE AGREEMENT (Quasi)
DATED AS OF APRIL 18, 1997
STIPULATED LOSS AND TERMINATION VALUE TABLE*
<TABLE>
<CAPTION>
Date Starting TakeDowns Debt Interest Principal Remaining
Balance Service Balance
<S> <C> <C> <C> <C> <C> <C>
Apr-17-97 0.00 2,391,154.78 0.00 0.00 0.00 2,391,154.78
May 17-97 2,391,154.78 0.00 105,966.82 11,936.13 94,030.69 2,297,124.09
Jun-17-97 2,297,124.09 0.00 105,966.82 11,466.75 94,500.07 2,202,624.02
Jul-17-97 2,202,624.02 0.00 105,966.82 10,995.03 94,971.79 2,107,652.23
Aug-17-97 2,107,652.23 0.00 105,966.82 10,520.95 95,445.87 2,012,206.36
Sep-17-97 2,012,206.36 0.00 105,966.82 10,044.50 95,922.32 1,916,284.04
Oct-17-97 1,916,284.04 0.00 105,966.82 9,565.68 96,401.14 1,819,882.90
Nov-17-97 1,819,882.90 0.00 105,966.82 9,084.47 96,882.35 1,723,000.55
Dec-17-97 1,723,000.55 0.00 105,966.82 8,600.85 97,365.97 1,625,634.58
------------ ---------- --------- ----------
2,391,154.78 847,734.56 82,214.36 765,520.20
Jan-17-98 1,625,634.58 0.00 105,966.82 8,114.82 97,852.00 1,527,782.58
Feb-17-98 1,527,782.58 0.00 105,966.82 7,626.36 98,340.46 1,429,442.12
Mar-17-98 1,429,442.12 0.00 105,966.82 7,135.47 98,831.35 1,330,610.77
Apr-17-98 1,330,610.77 0.00 105,966.82 6,642.13 99,324.69 1,231,286.08
May-17-98 1,231,286.08 0.00 105,966.82 6,146.32 99,820.50 1,131,465.58
Jun-17-98 1,131,465.58 0.00 105,966.82 5,648.03 100,318.79 1,031,146.79
Jul-17-98 1,031,146.79 0.00 105,966.82 5,147.26 100,819.56 930,327.23
Aug-17-98 930,327.23 0.00 105,966.82 4,644.00 101,322.82 829,004.41
Sep-17-98 829,004.41 0.00 105,966.82 4,138.21 101,828.61 727,175.80
Oct-17-98 727,175.80 0.00 105,966.82 3,629.91 102,336.91 624,838.89
Nov-17-98 624,838.89 0.00 105,966.82 3,119.06 102,847.76 521,991.13
Dec-17-98 521,991.13 0.00 105,966.82 2,605.67 103,361.15 418,629.98
------------ ------------ --------- ------------
0.00 1,271,601.84 64,597.24 1,207,004.60
Jan-17-99 418,629.98 0.00 105,966.82 2,089.71 103,877.11 314,752.87
Feb-17-99 314,752.87 0.00 105,966.82 1,571.18 104,395.64 210,357.23
Mar-17-99 210,357.23 0.00 105,966.82 1,050.06 104,916.76 105,440.47
Apr-17-99 105,440.47 0.00 105,966.82 526.35 105,440.47 0.00
0.00 423,867.28 5,237.30 418,629.98
------------ ------------ ---------- ------------
TOTAL 2,391,154.78 2,543,203.68 152,048.90 2,391,154.78
============ ============ ========== ============
</TABLE>
Initials:/S/ TOM<a'>S NIDO /S/ DAVID VIRGINIA /S/ RAFAEL NIN
----------------- ------------------ --------------
Lessor Lessee Lessee
*In the event of prepayment or partial repayment we agree to use straight
amortization of principal & interest.
<PAGE>
ANNEX E
CERTIFICATE
OF
CORPORATE RESOLUTION
OF
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
The undersigned hereby certifies that he is the Secretary of Pepsi-
Cola Puerto Rico Bottling Company, a corporation validly existing and
organized under the laws of the State of Delaware, which Corporation is
presently subsisting and in good standing under such laws and is duly
qualified to conduct its business in every jurisdiction where the laws
require it to be so qualified; that the following is a true accurate and
compared transcript of resolutions duly adopted at a meeting of the Board
of Directors of said Corporation duly held on the 13th day of February of
1997, at which meeting a quorum was present and that the proceedings were
in accordance with the Articles and By-laws of said Corporation, and that
said resolutions have not been amended, rescinded modified or revoked, and
are in full force and effect:
"RESOLVED, that each of Messrs. Rafael Nin and/or David
Virginia be, and hereby is, authorized and empowered in the name
and on behalf of this Corporation to enter into, execute and
deliver a Master Lease Agreement (Quasi), between this
Corporation as lessee and GENERAL ELECTRIC CAPITAL CORPORATION OF
PUERTO RICO (hereinafter called "Lessor") as lessor, and such
Schedules as may be now or hereafter attached thereto, providing
for the leasing to (or sale and leaseback by) this Corporation of
certain equipment; and
FURTHER RESOLVED, that each of said Messrs. Nin and/or
Virginia be, and hereby is authorized and empowered in the name
and on behalf of this Corporation to enter into, execute and
deliver any documents which are necessary or appropriate to
effectuate the lease (or sale and leaseback) of equipment from
Lessor (including, without limitation, bills of sale in the case
of any sale-leaseback); and
FURTHER RESOLVED, that each of said Messrs. Nin and/or
Virginia be, and hereby is, authorized and empowered to do and
perform all other acts and deeds that may be necessary or
<PAGE>
appropriate in connection with the lease (or sale and leaseback)
of equipment from Lessor (including, without limitation, the
delegation of authority to perform any such acts or deeds to any
employee of this Corporation).
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this 17th day of April, 1997.
(CORPORATE SEAL) /S/ LAWRENCE ODELL
-----------------------------
Secretary
2
<PAGE>
ANNEX F
TO
SCHEDULE NO. 1
DATED THIS APRIL 18, 1997
TO MASTER LEASE AGREEMENT (QUASI)
DATED AS OF APRIL 18, 1997
PENDING LITIGATION
------------------
I. SHAREHOLDER'S SUITS
1. ROBERT AND ILENE WEISS V. PEPSI-COLA PUERTO RICO BOTTLING CO.,
CHARLES H. BEACH AND RAPHAEL V. FARACE, Civil Action no. 96-2290 in the
United States District Court, Southern District of Florida.
2. THE GREAT NECK CAPITAL APPRECIATION INVESTMENT PARTNERSHIP, L.P.
AND SAM TAVE V. CHARLES H. BEACH, RAFAEL V. FARACE AND PEPSI-COLA PUERTO
RICO BOTTLING COMPANY, Case Number 96-8578 in the United States District
Court, Southern District of Florida.
3. ANNABELLA SYKES RAY, ON BEHALF OF HERSELF AND ALL OTHER SIMILARLY
SITUATED V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY, A DELAWARE
CORPORATION, CHARLES H. BEACH AND RAFAEL V. FARACE, Case Number 96-8590 in
the United States District Court, Southern District of Florida.
4. LOUIS GOLDSTEIN V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY,
CHARLES H. BEACH, MICHAEL J. GERRITS AND RAFAEL V. FARACE, Civil Action No.
96-4010, in the United States District Court, Eastern District of New York.
5. JOSEPH SHAKEN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY
SITUATED V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY, CHARLES H. BEACH,
MICHAEL J. GERRITS AND RAFAEL V. FARACE, Civil Action Number 96-8712 in the
Untied States District Court, Southern District of Florida Northern
Division.
6. LUIS A. RIVERA POMALES; ROSS I. QUINTANA; FRANK FERN<a'>NDEZ;
TALLABOA HEAVY EQUIPMENT CORP.; NELSON CAPOT<e'>; MYRTA OCEGUERA; EVENCIO
RODRIGUEZ V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY; PAINEWEBBER,
INCORPORATED; OPPENHEIMER & CO., INC. KMPG PEAT MARWICK, KPMG PEAT MARWICK
LLP; KPMG FINSTERBUSCH PICKENHAYN SIBILLE; CHARLES H. BEACH; MICHAEL
GERRITS; JAMES C. KEAVNEY; JOHN W. BECK; CHARLES R. KRAUSER; ANTON
SCHEDLBAUER; C. LEON TIMOTHY; RAYMOND ULRICH; ABC, INC., DEF, INC.; MR. AND
MRS. Y, Civil No. 96-1997, in the United States District Court for the
District of Puerto Rico.
7. SWEETWATER INVESTMENTS V. CHARLES H. BEACH, MICHAEL J. GERRITS,
RAFAEL V. FARACE AND PEPSI-COLA PUERTO RICO BOTTLING COMPANY, Civil Case
No. 96-8671 in the United States District Court, Southern District of
Florida.
<PAGE>
8. JOSEPH SINGER V. CHARLES H. BEACH, MICHAEL J. GERRITS, RAFAEL V.
FARACE AND PEPSI-COLA BOTTLING COMPANY, Civil Case No. 96-2459 in the
United States District Court, Southern District of Florida.
9. TURABO MEDICAL CENTER; HARZAN MORTGAGE; SARA PONS; VIRGILIO
CARDONA DE LA OBRA, CHARLIE LA COSTA; MIGUEL A. ORTIZ FLORES, TRUSTEE OF
MIGUEL A. ORTIZ FLORES KEOGH PLAN; HIPOLITO MIRANDA; C<e'>SAR A. CRUZ;
DAVID W. TSAO AND VIVIAN CHEN; LUZ CORREA; H<e'>CTOR V<e'>LEZ; PADRE
ZERVIGNON, ELSA CASTRO P<e'>REZ; DR. ROBERTO RODRIGUEZ V<e'>LEZ; OSCAR
RIVERA AND ANABEL A. RIVERA; DIANA NAZARIO; KEN SHING FUNG AND MUI CHUN
WONG; ORLANDO MARRERO SANTIAGO; MARCOS BANDRICH; ALFREDO GAROIS SASCO AND
WILMA BORDOY OTERO, ERNESTO IGLESIAS, RODFAM INVESTMENTS, INC., V. CHARLES
H. BEACH; MICHAEL J. GERRITS; RAFAEL V. FARACE; AND PEPSI-COLA PUERTO RICO
BOTTLING COMPANY, Civil Action No. 96-2250, in the United States District
Court for the District of Puerto Rico.
II. INVESTIGATIONS
1. IN THE MATTER OF PEPSI-COLA PUERTO RICO BOTTLING COMPANY (HO-
3199), investigation by the Securities Exchange Commission,
III. OTHER LITIGATION
1. Litigation and jury determination entered against Pepsi-Cola
Puerto Rico Bottling Company, Velco and other defendants related to a car
collision in Road 165 by the relatives of Julio Elvin Ruiz Cintr<o'>n, his
wife, Yolanda I. Rivera, their son and Jose Davis Rivera Concepci<o'>n and
Damaris Adorno D<a'>vila.
2. JOS<e'> ALVAREZ FONSECA V. PEPSI-COLA PUERTO RICO BOTTLING
COMPANY, Case No. 95-2033 (PG) in the United States District Court for the
District of Puerto Rico.
3. DAVID RIVERA ENCARNACI<o'>N V. PEPSI-COLA PUERTO RICO BOTTLING
COMPANY, Civil No. KDP-94-1098.
4. JAIME MONTERO V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY, Case
No. KPE-95-0498.
5. LUZ ORTIZ V. PEPSI-COLA PUERTO RICO BOTTLING COMPANY, Case No.
FAC-96-0433 (401).
<PAGE>
ANNEX G
TO
SCHEDULE NO. 1
DATED THIS April 18, 1997
TO MASTER LEASE AGREEMENT (Quasi)
DATED AS OF April 18, 1997
SECURITY DEPOSIT PLEDGE AGREEMENT
---------------------------------
(Lease)
THIS SECURITY DEPOSIT PLEDGE AGREEMENT (THIS "AGREEMENT") is made and
entered into as of the 18 day of April, 1997 by and between PEPSI COLA
PUERTO RICO BOTTLING COMPANY, a Delaware corporation with its principal
place of business at Carretera # 865 Km 0.4 Barrio Candelaria Arenas, Toa
Baja, PR ("LESSEE") and General Electric Capital Corporation of Puerto
Rico, a foreign corporation, with its principal place of business at Cond.
Torre De La Reina, 450 Ponce De Leon Ave San Juan, PR 00901 ("LESSOR").
In consideration of, and as an inducement for Lessor to lease to
Lessee certain equipment under the Master Lease Agreement, dated as of
April 18, 1997 (the "MASTER LEASE AGREEMENT AND SCHEDULE 1, INCLUDING ALL
ANNEXES THERETO, ARE HEREINAFTER REFERRED TO AS "LEASE"), and to secure the
payment and performance of all of Lessee's obligations under the Lease,
Lessee hereby deposits and pledges with Lessor the sum of FIVE HUNDRED
NINETY SEVEN THOUSAND SEVEN HUNDRED EIGHTY EIGHT DOLLARS AND 69/100
($597,788.69) (the "Collateral"), such pledge to be upon the terms and
conditions set forth below:
1. Lessee delivers the Collateral to Lessor to secure Lessee's
performance of its obligations under the Lease, including, but not limited
to, the timely payment of Rent;
2. The Collateral deposited with Lessor shall not accrue interest.
Lessor may commingle the Collateral with its other funds.
3. After any default by Lessee under the Lease and while the same is
continuing, upon, or at any time after said default, Lessor may apply the
Collateral towards the satisfaction of Lessee's obligations under the Lease
and the payment of all costs and expenses incurred by Lessor as a result of
such default, including but not limited to, costs of repossessing equipment
and attorneys' fees. Such application shall not excuse the performance at
the time and in the manner prescribed of any obligation of Lessee or cure a
default of Lessee. Upon the application by Lessor of any amount of the
Collateral pursuant to the terms of this paragraph, Lessee shall be
obligated to immediately pay to Lessor an amount sufficient to cause the
Collateral to equal the amount first set forth above. Notwithstanding the
foregoing, on or about six months from the date hereof, Lessor shall
consider the partial release of the Collateral in order to, from that
moment on, always maintain the deposit at approximately 25% of the then
<PAGE>
outstanding balance on the Lease. This partial release shall be
conditioned upon Lessee's compliance with the terms of this Lease and that,
in Lessor's sole opinion, no material adverse change has occurred in
Lessee's financial condition.
4. Lessor shall have no duty to first commence an action against or
seek recourse from Lessee, in the event of a default under the Lease,
before enforcing the provisions of, and proceedings under the provisions of
this Agreement. The obligations of Lessee under this Agreement shall be
absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released or discharged or in any way
affected by:
(a) any amendment or modification of or supplement to the Lease;
(b) any exercise or non-exercise of any right, remedy or
privilege under or in respect to this Agreement, the Lease, or any
other instrument provided for in the Lease, or any waiver, consent,
explanation, indulgence or actions or inaction with respect to any
such instrument; or
(c) any bankruptcy, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding of Lessee.
5. Upon the termination of the Lease and the satisfaction of all of
the obligations of Lessee thereunder, Lessor shall deliver to Lessee the
Collateral (less any portion of same cashed, sold, assigned or delivered
pursuant to and under the conditions specified in paragraph 3 hereof), and
this Agreement shall thereupon be without further effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION OF PEPSI COLA P.R. BOTTLING COMPANY
PUERTO RICO
BY:/S/ TOM<a'>S NIDO By:/S/ RAFAEL NIN
------------------------------ ------------------------
Title: TOM<a'>S NIDO - PRESIDENT Title: RAFAEL NIN - CHIEF EXECUTIVE
-------------------------- OFFICER
-----------------------------
Lessee:
Pepsi Cola P.R. Bottling Company
By:/S/ DAVID VIRGINIA
-------------------------
Title: DAVID VIRGINIA - CHIEF FINANCIAL OFFICER
-----------------------------------------
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421107
63421163
63421171
63421211
63421225
63421226
63421227
63421243
63421245
63421250
63421251
63421257
63421258
63421262
63421265
63421267
63421269
63421270
63421289
63421291
63421314
63421342
63421408
63421412
63421422
63421429
63421433
63421436
63421445
63421449
3
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421189
63421297
63421298
63421302
63421303
63421304
63421306
63421315
63421317
63421318
63421320
63421321
63421324
63421334
63421335
63421340
63421341
63421343
63421349
63421352
63421361
63421362
63421364
63421365
63421367
63421375
63421378
63421380
63421384
63421387
4
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421239
63421277
63421286
63421312
63421322
63421325
63421328
63421333
63421337
63421344
63421353
63421355
63421360
63421374
63421382
63421390
63421393
63421395
63421397
63421399
63421401
63421404
63421405
63421406
63421413
63421414
63421418
63421419
63421423
63421432
5
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420865
63420925
63420957
63420959
63420967
63420971
63420973
63420974
63420981
63420985
63420991
63421011
63421018
63421019
63421021
63421022
63421023
63421027
63421029
63421033
63421035
63421045
63421046
63421048
63421055
63421059
63421063
63421081
63421202
63421234
6
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420793
63421010
63421018
63421131
6342113?
63421138
63421148
63421152
63421155
63421165
63421170
63421175
63421176
63421179
63421182
63421183
63421184
63421185
63421188
63421193
63421197
63421203
63421204
63421205
63421212
63421214
63421228
63421240
63421247
63421255
7
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421216
63421223
63421238
63421242
63421366
63421370
63421376
63421379
63421381
63421386
63421398
63421402
63421417
63421425
63421426
63421435
63421438
63421440
63421441
63421446
63421447
63421452
63421454
63421455
63421456
63421461
63421462
63421467
63421469
63421470
8
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420882
63421052
63421053
63421067
63421076
63421077
63421079
63421082
63421083
63421090
63421095
63421098
63421103
63421104
63421105
63421106
63421111
63421118
63421120
63421125
63421126
63421127
63421129
63421130
63421132
63421134
63421137
63421141
63421142
63421160
9
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420786
63420812
63420931
63420976
63421351
63421371
63421388
63421396
63421400
63421424
63421427
63421428
63421430
63421434
63421437
63421442
63421444
63421448
63421450
63421451
63421453
63421457
63421458
63421459
63421460
63421463
63421464
63421465
63421466
63421468
10
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421271
63421301
63421319
63421329
63421330
63421336
63421339
63421346
63421350
63421354
63421357
63421359
63421372
63421373
63421383
63421385
63421389
63421391
63421392
63421394
63421403
63421407
63421409
63421410
63421411
63421415
63421416
63421420
63421421
63421431
11
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421181
63421220
63421224
63421231
63421233
63421252
63421254
63421260
63421261
63421263
63421264
63421266
63421268
63421273
63421274
63421279
63421280
63421281
63421282
63421285
63421287
63421288
63421290
63421292
63421293
63421295
63421348
63421368
63421439
63421443
12
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421229
63421272
63421275
63421276
63421278
63421284
63421294
63421296
63421299
63421300
63421305
63421307
63421308
63421309
63421310
63421311
63421313
63421316
63421323
63421326
63421327
63421331
63421332
63421338
63421345
63421347
63421356
63421358
63421363
63421369
13
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63141048
63141049
63141050
63141058
63141060
63141066
63141068
63141072
63141075
63141077
63141079
63141083
63141086
63141088
63141089
63141090
63141100
63141101
63141125
63141130
63141135
63141137
63141138
63141141
63141142
63141145
14
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63141052
63141053
63141055
63141056
63141059
63141069
63141080
63141082
63141087
63141095
63141102
63141103
63141105
63141107
63141123
63141124
63141132
63141134
63141136
63141139
63141140
63141143
63141146
63141147
63141148
63141150
15
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63141062
63141063
63141064
63141065
63141067
63141071
63141073
63141076
63141081
63141091
63141092
63141093
63141108
63141109
63141110
63141111
63141112
63141113
63141114
63141115
63141116
63141118
63141120
63141121
63141122
63141126
16
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63141051
63141054
63141057
63141061
63141070
63141074
63141078
63141084
63141085
63141094
63141096
63141097
63141098
63141099
63141104
63141106
63141117
63141119
63141127
63141128
63141129
63141131
63141133
63141144
63141149
63141151
17
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420994
63421060
63421065
63421144
63421154
63421164
63421168
63421167
63421172
63421173
63421174
63421177
63421178
63421180
63421186
63421187
63421190
63421191
63421195
63421196
63421198
63421199
63421200
63421206
63421207
63421210
63421213
63421215
63421221
63421222
18
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420878
63420923
63420924
63420932
63420945
63420965
63421009
63421032
63421034
63421038
63421047
63421049
63421051
63421057
63421062
63421064
63421066
63421069
63421070
63421073
63421080
63421085
63421091
63421096
63421099
63421100
63421101
63421115
63421123
63421133
19
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63421072
63421084
63421092
63421108
63421112
63421117
63421119
63421121
63421122
63421128
63421135
63421136
63421139
63421140
63421143
63421146
63421147
63421149
63421150
63421151
63421153
63421156
63421157
63421158
63421159
63421161
63421162
63421168
63421169
63421377
20
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420881
63420943
63420954
63420960
63420964
63421025
63421026
63421040
63421042
63421050
63421054
63421056
63421058
63421061
63421068
63421071
63421074
63421075
63421078
63421087
63421088
63421089
63421094
63421097
63421109
63421110
63421113
63421114
63421116
63421145
21
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420788
63420888
63420969
63420970
63420977
63420978
63420979
63420982
63420995
63420996
63420998
63421000
63421001
63421006
63421007
63421008
63421012
63421014
63421015
63421016
63421017
63421020
63421024
63421028
63421030
63421036
63421037
63421039
63421041
63421043
22
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420822
63420852
63420858
63420877
63420883
63420891
63420909
63420920
63420933
63420935
63420936
63420937
63420941
63420942
63420946
63420947
63420953
63420955
63420961
63420966
63420980
63420983
63420990
63420992
63420993
63420997
63420999
63421002
63421003
63421004
23
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420795
63420799
63420827
63420829
63420847
63420859
63420861
63420863
63420867
63420869
63420871
63420873
63420876
63420879
63420887
63420893
63420898
63420899
63420904
63420905
63420907
63420908
63420911
63420913
63420914
63420915
63420917
63420918
63420930
63420950
24
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420784
63420785
63420790
63420792
63420831
63420838
63420851
63420857
63420860
63420866
63420868
63420870
63420872
63420874
63420875
63420880
63420885
63420886
63420890
63420894
63420895
63420901
63420916
63420922
63420927
63420928
63420951
63420952
63420963
63420986
25
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420791
63420798
63420801
63420804
63420813
63420821
63420824
63420825
63420832
63420834
63420844
63420864
63420889
63420892
63420896
63420900
63420902
63420903
63420906
63420910
63420912
63420919
63420926
63420929
63420938
63420940
63420944
63420948
63420949
63420956
26
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420781
63420783
63420789
63420794
63420800
63420810
63420815
63420816
63420817
63420830
63420836
63420839
63420845
63420850
63420853
63420854
63420855
63420856
63420884
63420897
63420921
63420934
63420939
63420958
63420972
63420975
63420984
63420987
63420988
63420989
27
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420782
63420787
63420796
63420797
63420802
63420803
63420805
63420806
63420807
63420808
63420809
63420811
63420814
63420818
63420819
63420820
63420823
63420826
63420828
63420833
63420835
63420837
63420840
63420841
63420842
63420843
63420846
63420848
63420849
63420862
28
</TABLE>
<PAGE>
EQUIPMENT LIST
DIXIE-NARCO, INC.
PACKING LIST
SOLD PEPSI COLA FOOD SERVICE SHIP PEPSI COLA FOOD SERVICE
TO AVE SIMON MADERA #26 TO AVE SIMON MADERA #26
RIO PIEDRAS 00924 RIO PEDRAS 00924
PUERTO RICO 0000000000 PUERTO RICO 0000000000
<TABLE>
<CAPTION>
QTY PRODUCT NUMBER QUANTITY DESCRIPTION
CATALOG NUMBER ORDERED
<S> <C> <C> <C>
63420962
63420968
63421005
63421044
63421086
63421093
63421102
63421124
63421192
63421194
63421201
63421208
63421209
63421217
63421218
63421219
63421230
63421232
63421235
63421236
63421237
63421241
63421244
63421246
63421248
63421249
63421253
63421256
63421259
63421283
29
</TABLE>
<PAGE>
AMENDMENT NO. 5 TO CLASS A SHAREHOLDERS AGREEMENT
-------------------------------------------------
This Amendment No. 5 to the Class A Shareholders Agreement is made as
of this 14th day of May, 1997, by and between PEPSI-COLA PUERTO RICO
BOTTLING COMPANY, a Delaware corporation (the "Corporation") and the
individual and corporate shareholders (the "Shareholders") of the
Corporation whose signatures appear in the signature pages hereto.
WHEREAS, the undersigned are all parties to that certain Class A
Shareholders Agreement dated as of April 27, 1987, as amended under
Amendment No. 1 to Class A Shareholders Agreement dated as of July, 1990,
Amendment No. 2 to Class A Shareholders Agreement dated as of November 5,
1993, Amendment No. 3 to Class A Shareholders Agreement dated as of August
28, 1995, and Amendment No. 4 to Class A Shareholders Agreement dated as of
the 7th day of January, 1997 (hereinafter the "Agreement"); and,
WHEREAS, on September 28, 1996, the parties hereto executed a Stock
Option Agreement (the "Option Agreement") whereby all Class A shareholders
granted to Mr. Rafael Nin an option to purchase all 5,000,000 Class A
shares of the Corporation for a purchase price of $1 per share and which
option is exercisable within a period of two (2) years from the date
thereof; and,
WHEREAS, also on September 28, 1996, the parties hereto executed a
Voting Trust Agreement and Irrevocable Proxy (the "Trust Agreement")
whereby all Class A shareholders delivered and deposited with Mr. Nin the
5,000,000 Class A shares of the Corporation in trust granting thereby to
Mr. Nin the right to vote said shares in all shareholder meetings; and,
WHEREAS, as of May 14, 1997, the parties hereto have entered into a
new Stock Option Agreement ("Option Agreement No. 2") and Trust Agreement
("Trust Agreement No. 2") in respect of 2,500,000 Class B shares of the
Corporation (herein the "Class B Shares") wherein the Shareholders (i)
granted to Mr. Rafael Nin, in furtherance of any settlement relating to the
class action suits commenced by some of the public shareholders of the
Company (herein the "Suits"), an option to purchase said amount of Class B
Shares, said option being exercisable from the date hereof up to December
31, 1997, as set forth in said Option Agreement No. 2, and (ii) delivered
said shares with Mr. Nin in trust under the Trust Agreement No. 2 granting
thereby to Mr. Nin the right to vote said shares in all matters requiring
of shareholder approval and to make such shares available for purposes of
Option Agreement No. 2; and
WHEREAS, in consideration of the parties' agreements set forth in the
Option Agreement No. 2 and the Trust Agreement No. 2, the Shareholders
desire to amend certain provisions of the Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
PAGE
<PAGE>
1. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement as amended.
2. In the event that the Option with respect to Class A Shares is
exercised pursuant to that certain Agreement titled Stock Option Agreement
dated September 28, 1996 by and between the Shareholders, Rafael Nin and
the Corporation, the Corporation agrees to undertake, as promptly as
practicable thereafter, such steps and acts necessary to register the Class
B Shares held by the Shareholders with the Securities and Exchange
Commission; and to otherwise provide for any other alternatives available
to make such B Shares fully tradable in the public markets. All costs and
expenses, except underwriting commissions, associated with the foregoing
undertaking shall be borne by the Corporation.
3. The Agreement shall be and is hereby amended for purposes of
providing that notwithstanding any provision therein to the contrary, as of
the date in which the court before which the Suits are being processed
enters into and issues a final and unappealable order approving the
settlement reached with the plaintiffs of such Suits, all restrictions
relating to the transferability of Shares under the Agreement shall be
deemed without effect and no longer be limited or restricted as to their
disposition of Shares of the Corporation or subject to the terms of the
Agreement. In this respect, as of such date, the Agreement shall be
terminated and no longer effective for all intent and purposes.
After the above referenced date regarding the finality of the order
approving the settlement, any Shareholder may thereafter dispose of his,
her or its Shares of the Corporation by any lawful means including the
following alternatives: (i) a Rule 144 offering (subject to the volume
limitations set forth in said Rule 144), (ii) by virtue of a filing and
registration of Class B shares by the Corporation through Form S-3 of the
Securities and Exchange Commission which filing shall be made by the
Company not later than October 31, 1997, or (iii) if the Form S-3 filing is
not available to the Corporation by October 31, 1997, the Corporation
agrees to undertake to file promptly a Form S-1 with the Securities and
Exchange Commission for the registration of all of such Class B Shares.
With respect to each of the above alternatives, the Corporation shall
undertake to do all things and perform all acts required or necessary in
connection with the preparation and filing of any registration statement,
prospectus and/or form with the Securities and Exchange Commission as may
be required under applicable securities laws, and, shall pay all expenses
related thereto, except any underwriting commissions.
4. It is further agreed that (i) shares subject to the Voting Trust
Agreement or the Option Agreement (to the extent such agreement is still in
effect) shall continue to be subject to the restrictions on transfer and
other terms of the Voting Trust Agreement and the Option Agreement,
respectively; (ii) all Shares shall be subject to the restrictions on
2
PAGE
<PAGE>
transfer imposed by applicable securities laws; (iii) the Essential
Shareholders may not sell or otherwise transfer any Shares if such sale or
transfer would give PepsiCo, Inc. the right to terminate any of the
Exclusive Bottling Appointments dated April 27, 1987 between PepsiCo, Inc.,
the Corporation and the shareholders specified therein; and (iv) the
holders of Class A Shares may not sell any Class A Shares, even after
termination of the Voting Trust Agreement, without the consent of the
Corporation, and shall, at the request of the Corporation, and to the
extent that the EBAs require the Essential Shareholders to maintain voting
control of the Corporation, transfer to the Essential Shareholders, in
exchange for Class B Shares held by the Essential Shareholders, as many
Class A Shares as shall be necessary so that, after termination of the
Voting Trust Agreement, the Essential Shareholders maintain voting control
of the Corporation.
5. Other than for the amendments herein set forth, the Agreement, as
amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, and Amendment
No. 4 shall remain in full force and effect, unaltered and unchanged, with
the provisions of this Amendment No. 5 being fully incorporated to the
Agreement and Amendment No. 1, Amendment No. 2, Amendment No. 3 and
Amendment No. 4.
6. This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
3
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 5 to
Class A Shareholders Agreement, as of the date first above written.
<TABLE>
<CAPTION>
CORPORATION SHAREHOLDERS
- ----------- ------------
<S> <C>
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
By: /s/ RAFAEL NIN /s/Charles H. Beach
-------------- /s/PATRICIA BEACH
---------------------------
Charles H. Beach, for himself and as trustee
under Voting Trust Agreement dated 8/25/96
/s/MICHAEL J. GERRITS
---------------------------
Michael J. Gerrits, as Trustee under Voting
Trust dated April 27, 1987.
/s/JOHN W. BECK
---------------------------
John W. Beck
/s/CHARLES R. KRAUSER
---------------------------
Charles R. Krauser, as Trustee under Voting
Trust dated April 27, 1987.
/s/INES DE S. SCHEDLBAUER
---------------------------
Girasol Enterprises, S.A.
/s/ANTON SCHEDLBAUER
---------------------------
Lumiye International, S.A.
/s/GEORGE HAAS
---------------------------
Haas Financial Corporation
---------------------------
Sumner Kramer
/s/ANGEL COLLADO-SCHWARZ
---------------------------
Angel Collado-Schwarz
/s/RAFAEL NIN
---------------------------
Rafael Nin
</TABLE>
4
<PAGE>
