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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 1-13914
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PEPSIAMERICAS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
DELAWARE 66-0433580
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
3800 DAIN RAUSCHER PLAZA
60 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
(Address of Principal Executive Offices, including Zip Code)
(612) 661-3830
(Registrant's Telephone Number, including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
- - --------------------- ------------------------------------
<S> <C>
CLASS B COMMON STOCK, NEW YORK STOCK EXCHANGE
PAR VALUE $.01
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
/X/ 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 proceeding 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.
/ / Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of March 21, 2000, was approximately
$82,232,722.
As of March 21, 2000, there were 87,314,377 shares of common stock issued
and outstanding. This amount includes 5,000,000 shares of Class A Common Stock
and 82,314,377 shares of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the PepsiAmericas, Inc. Proxy Statement on Schedule 14A
for the 2000 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Form 10-K, to the extent provided herein.
<PAGE>
PEPSIAMERICAS, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1999
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ITEM NO. PAGE NO.
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PART I
Item 1. BUSINESS.................................................... 3
Item 2. PROPERTIES.................................................. 10
Item 3. LEGAL PROCEEDINGS........................................... 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 11
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 14
Item 6. SELECTED FINANCIAL DATA..................................... 14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 18
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 25
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 61
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS............................ 61
Item 11. EXECUTIVE COMPENSATION...................................... 61
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 61
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 61
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K......................................................... 62
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PepsiAmericas, Inc. 1999 Annual Report
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PART I
ITEM 1. BUSINESS
GENERAL
PepsiAmericas, Inc. and its subsidiaries (collectively, "PAS") manufacture,
package, sell and distribute a variety of carbonated and non-carbonated soft
drink products and bottled water in the United States and the Caribbean.
On July 17, 1998, P-PR Transfer LLP, a partnership principally owned by
Pohlad Companies acquired a controlling interest in PAS, formerly known as
Pepsi-Cola Puerto Rico Bottling Company. Effective with the change in control,
PAS and two other related party entities, Delta Beverage Group, Inc. ("Delta")
and Dakota Beverage Company, Inc. ("Dakota"), shared common ownership and were
under the common control of Pohlad Companies.
Effective October 15, 1999, PAS combined with Delta and Dakota in a
transaction accounted for as a merger of entities under common control. Pohlad
Companies continues to be the controlling shareholder in PAS. In conjunction
with the closing of the acquisitions, PAS obtained a $185 million credit
facility from a syndicate of banks led by Bank of America, N.A. PAS used the
credit facility to pay costs related to the acquisitions and to re-finance
existing debt, with the remaining balance available for working capital and
future acquisitions.
During 1999, PAS completed two acquisitions. In July 1999, PAS acquired the
franchise rights to Seven-Up and several other Cadbury Schweppes brands in
Puerto Rico for an aggregate cost of $12 million. In December 1999, PAS
purchased the soft drink business of Desnoes and Geddes, a PepsiCo franchisee in
Jamaica, for a net cost of $22 million.
PAS operates under exclusive franchise agreements with soft drink brand
owners, including master bottling and fountain syrup agreements with PepsiCo,
Inc. ("PepsiCo"), for the manufacture, packaging, sale and distribution of
specified Pepsi-Cola products in Puerto Rico, Jamaica and specified territories
in the United States. The franchise agreements contain operating and marketing
commitments and conditions for their termination. PAS also distributes beer and
malt beverages pursuant to exclusive distributor agreements in a limited portion
of its territory.
This report on Form l0-K contains forward looking statements of expected
future developments. PAS wishes to ensure 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 PAS to implement pricing
initiatives in a manner that improves the pricing environment in the
marketplace, its ability to generate cost savings, its ability to pay dividends,
its expected future capital expenditures and its ability to restore
profitability through these pricing initiatives and cost savings. These forward
looking statements reflect management's expectations and are based upon
currently available data; however, actual results are subject to future events
and uncertainties which could materially affect actual performance. PAS's future
performance also involves a number of risks and uncertainties. Among the factors
that could cause actual performance to differ materially are: continued
competitive pressures with respect to pricing in PAS's markets; the inability to
achieve cost savings due to unexpected developments; changed plans regarding
capital expenditures; adverse developments with respect to economic, climatic
and political conditions in PAS's markets; the impact of such conditions on
consumer spending; possible termination of PAS's franchise agreements; adverse
events affecting the popularity of PepsiCo products; adverse effects of
government regulations, including environmental regulations; possible product
liability if any of PAS's products cause injury, illness or death; possible
product recall of PAS's products that become contaminated or are damaged or
mislabeled; and possible unfavorable decisions in the pending litigation against
Delta.
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PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
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PRINCIPAL MARKETS
PAS manufactures, packages, sells and distributes Pepsi-Cola soft drinks,
Seven-Up and other products in exclusive franchise territories that include
Puerto Rico and Jamaica, and portions of Arkansas, Iowa, Louisiana, Minnesota,
Mississippi, North Dakota, South Dakota, Tennessee and Texas. PAS has received
certain rights and preferences for expansion of its exclusive business from
PepsiCo, including further expansion in the Caribbean.
BUSINESS STRATEGY
PAS's strategy is intended to capitalize on the key trends in the beverage
industry as well as its strengths, which include a broad portfolio of global
brands supported by PepsiCo's marketing programs, an extensive range of other
products, an effective distribution system, scale in operations and purchasing,
and an experienced management team. PAS plans to continue to manufacture,
package, sell and distribute a broad array of brands in all beverage categories.
Specifically, PAS's long-term strategic objectives are to (1) increase volume
and market share in its existing territories through coordinating its
franchisors' advertising and marketing campaigns with PAS's regional and local
marketing efforts, (2) improve operating margins by emphasizing higher margin
packages and controlling the level of retail discounts, (3) pursue acquisitions
that leverage PAS's existing structure or managerial expertise, (4) strengthen
PAS's corporate culture and develop its human resources, and (5) maximize
operating efficiencies by utilizing emerging technologies to improve customer
service and communications and increase the efficiency of logistics and
distribution operations.
PRODUCTS
SOFT DRINKS
The following table sets forth products of PepsiCo, Cadbury Schweppes and
other franchisors that PAS produces and/or distributes. This brand line-up is
not present in every location, but overall is representative of PAS's offerings
in the United States. The variety of brands is more limited in Puerto Rico and
Jamaica. PAS packages and distributes products in one and two liter PET bottles,
20 and 24 ounce PET bottles, aluminum cans in six packs, 12-packs, 20-packs and
24-packs and five gallon containers.
<TABLE>
<CAPTION>
PepsiCo Products Cadbury Products Seagrams
- - ------------------------------------------------------- ---------------- -----------------------
<S> <C> <C> <C>
Pepsi Caffeine Free Pepsi Dr Pepper Tonic Water
Wild Cherry Pepsi Pepsi One Diet Dr Pepper Club Soda
Diet Pepsi Caffeine Free Diet Pepsi Seven-Up* Ginger Ale
Mountain Dew Diet Mountain Dew Diet Seven-Up*
Other
-----------------------
Slice All Sport Cherry Seven-Up*
Mug Root Beer Wonder Kola Canada Dry
Welch Foods Fruit Juice
Tropicana Aquafina Country Time Hawaiian Punch
Ting** Ocean Spray Crush Sunny Delight
Old Jamaica Ginger Beer** Crystal Light Monarch
D&G Flavors** Schweppes Yoo-Hoo
Squirt
Sunkist
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PepsiCo Joint Venture Products
- - -------------------------------------------------------
<S> <C> <C> <C>
Lipton Iced Teas
Starbucks Frappucino
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* Brand owned by PepsiCo in Jamaica but owned by Cadbury Schweppes in United
States and Puerto Rico.
** Ting, Old Jamaica Ginger Beer and D&G Flavors are brands owned by PepsiCo in
Jamaica. Ting, Old Jamaica Ginger Beer and D&G Flavors are owned by PAS
outside the Caribbean.
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PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
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BEER
The following table sets forth products of Miller Brewing Company, Heineken
USA Incorporated and other brewers or licensors that PAS distributes through a
joint venture. PAS distributes these products in glass bottles, aluminum cans in
six-packs, 12-packs, 24-packs, and a variety of bulk draft containers.
<TABLE>
<CAPTION>
Miller Products Heineken Products
- - --------------------- -----------------
<S> <C>
Miller Beer Heineken
Miller Lite Amstel Light
Miller Genuine Draft
Other Products
-----------------
Miller High Life
Lowenbrau Special
Dixie Beer
Lowenbrau Dark Pete's Wicked Ale
Lowenbrau Malt Liquor Shiner Bock
Magnum
Milwaukee's Best
Milwaukee's Best
Light
Sharp's
Icehouse
Lite Ice
Red Dog
Molson Golden
Molson Ice
Foster's Lager
</TABLE>
FRANCHISE AND DISTRIBUTION ARRANGEMENTS
PAS's agreements with PepsiCo provide that PAS may not manufacture, package,
deliver and sell products that compete with the identified flavors within a
territory. The agreements with PepsiCo have perpetual terms with no definitive
termination dates. PepsiCo may terminate the agreements if PAS fails to comply
in any material respect with the terms and conditions of the agreements, subject
to a right to cure in certain instances. In addition, PepsiCo may terminate the
agreements if there is a change of effective control without PepsiCo's prior
written consent.
The franchise agreements with Cadbury Schweppes and other brand owners are
similar in form and effect to the PepsiCo franchise agreements.
PAS has a sales and distribution agreement with Welch Foods Inc. ("Welch's")
for the right to sell and distribute non-carbonated fruit juice beverages under
the Welch's trademark in Puerto Rico. PAS must purchase the product from certain
authorized sellers and may not manufacture, sell or distribute certain specified
brand names which compete with Welch's products.
The distribution agreements with Miller, Heineken and the other brewers
generally have perpetual terms with no definitive termination dates. Miller or
Heineken may terminate their agreement under certain circumstances, including
upon a change in control without prior approval.
PRODUCTION
PAS, with the exception of Dakota, produces the majority of its product
offerings. SEE ITEM 2. PROPERTIES FOR A DESCRIPTION OF THE PRODUCTION
FACILITIES.
Dakota purchases the majority of its product offerings from Wis-Pak, Inc.
("Wis-Pak"), a soft drink bottling and canning cooperative. Dakota has a
bottling line, but it is dedicated to the production of soft drinks
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PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
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exclusively for Wis-Pak. The shareholders of Wis-Pak, including Dakota, have
entered into long-term contracts under which they purchase 100% of their PepsiCo
products from Wis-Pak. Prices for products are established by Wis-Pak and
approved by Wis-Pak's Board of Directors. Rebates are distributed to the
shareholders annually based on Wis-Pak's profitability. Dakota is the second
largest shareholder in Wis-Pak with a 12% economic interest. Dakota has
historically purchased approximately 11% of Wis-Pak's production annually.
Dakota has one seat on Wis-Pak's 12-member board of directors.
PAS purchases a portion of its product offerings in finished form for sale
through its distribution system. Purchased products are typically non-carbonated
products with ingredients that require a manufacturing process that PAS does not
have. Examples of these products include certain juice and tea-based products.
RAW MATERIALS
Soft drinks are produced by mixing water, concentrate and sweetener and
injecting carbon dioxide gas into the mixture to produce carbonation. Prior to
mixing, the water is processed to eliminate mineral salts, chlorinated and then
passed through purification tanks containing sand filters, to eliminate
remaining impurities, and carbon filters, to eliminate chlorine taste, copper
and odors. The purified water is then combined with processed sweetener and
concentrate. The mixture is then carbonated and bottled in prewashed bottles or
aluminum cans. PAS maintains a laboratory area at each production facility,
where raw materials are tested and samples of soft drink products are analyzed
to ensure quality control.
The raw materials used by PAS in the production of soft drinks include
concentrate, water, sugar or high fructose corn syrup, carbon dioxide gas, glass
and plastic bottles, closures, aluminum cans and other packaging material. PAS
obtains water from publicly available supplies (such as municipal water systems)
and from its own drilled wells. A substantial portion of the raw materials,
including aluminum cans, closures, other packaging materials and fructose, are
purchased through Consolidated Purchasing Group, Inc. ("CPG"). PAS and other
franchisees of PepsiCo are members of CPG. The members submit their raw material
requirements to CPG which then negotiates with suppliers and makes purchases
based on the combined requirements of all CPG members. PAS believes that the
magnitude of CPG's purchases gives it greater influence with suppliers than PAS
could achieve on a stand-alone basis.
None of the raw materials or supplies used by PAS is currently in short
supply, although the available supply of certain materials could be adversely
affected in the future due to reasons outside PAS's control.
SALES AND DISTRIBUTION
PAS distributes products by conventional route delivery, bulk presell
delivery and route presell delivery. In conventional route delivery, a truck
owned or leased by PAS is loaded with PAS's beverage products and visits each of
PAS's customers along an assigned distribution route. The customer places orders
and accepts delivery of the amount of PAS's products needed at that time. The
drivers and salespeople are PAS employees.
In bulk presell delivery, PAS account representatives and key account
salespeople visit customers assigned to their route and take orders for PAS
products. These orders are processed and the products are delivered the next day
by independent truck drivers or by PAS employees in company-owned or leased
trucks. The bulk presell method is used primarily for wholesalers and large
retailers, and is more prevalent in the United States than in the Caribbean.
In route presell delivery, PAS employees visit customers assigned to their
route and take orders for PAS products. These orders are processed and the
products are delivered the next day by PAS employees in company-owned or leased
trucks. PAS believes this method provides better route coverage in densely
populated areas and facilitates the distribution of PAS's existing products as
well as the introduction of new
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products. This method of distribution is more prevalent in the United States
than in the Caribbean. PAS emphasizes route presell delivery where feasible.
In addition, PAS uses "single service" and "full service" vending machines
throughout PAS's territories. In the "single service" format, the proprietor of
the location of the machine purchases PAS's products while in the "full service"
format, PAS pays a commission to the proprietor, services the machine and
retains the profit from sales from the machines.
MARKETING
PAS directs its marketing efforts toward brand and package management, key
account management, promotional activities and merchandising. A primary basis of
competition among soft drink bottling companies is sales promotion activities,
including television, radio and billboard advertising and point of purchase
promotional devices, such as display racks and cases, clocks, neon signs and
other merchandise and equipment bearing the product logo and placed in retail
outlets where PAS products are sold. PAS coordinates its marketing programs with
the franchisors. National advertising campaigns are developed by the
franchisors, while local advertising campaigns are jointly developed by the
franchisors and PAS. PAS shares the cost of point-of-purchase promotional
devices, excluding design costs. PAS believes that its marketing programs allow
it to compete effectively in its territories.
The goal of these activities is to position PAS's brands to compete
effectively in the marketplace and to obtain "feature" retail advertisements and
displays in high volume retail outlets. End-aisle and secondary displays are
generally limited to special promotions and advertisements designed to stimulate
sales and encourage impulse purchases. As a service to customers and to better
merchandise its products, PAS builds displays in conjunction with promotional
programs and for restocking products in grocery stores, mass merchandise outlets
and convenience stores.
A significant portion of PAS's promotional effort focuses on price
discounting and allowances, newspaper advertising and coupons. PAS pays retail
stores under annual marketing agreements for the right to be included in the
retailer's advertising programs. Retail promotional programs are PAS's most
significant marketing expenditures and are supported through cost-sharing
arrangements with the franchisors. Other marketing expenditures are also
typically supported by the franchisors. National media advertising is funded
primarily by the franchisors, while local media advertising is funded through
cost-sharing arrangements.
PAS frequently uses promotional campaigns such as concerts and sports
events, merchandise giveaways, contests and similar programs to increase sales
of its products. These programs are typically heavily advertised and frequently
result in increased sales and higher per capita consumption of PAS's products
during the time the program is being conducted.
PAS sells its products in a variety of packages. In order to increase sales
and per capita consumption of its products, PAS continually examines sales data
and customer preferences in order to develop a mix of packaging formats which
consumers will consider most desirable. The package mix is an important
component of PAS's marketing plan and its profitability. The various packages
have different gross margin contributions. Single serve packages served cold and
ready for immediate consumption typically have better margins, despite a higher
cost of production, than take-home packages. Packages that are multi-packed or
of a larger quantity of product are generally for consumption in the home where
value is an important consideration for the buyer, and margins and the cost of
production are lower than single serve packages. All the packaging formats
utilized by PAS for soft drink products are subject to the approval of the
franchisors.
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COMPETITION
The beverage industry is highly competitive. PAS products compete with all
varieties of liquid refreshments. Carbonated soft drink products compete with
other major commercial beverages, such as coffee, milk and beer, as well as
non-carbonated soft drinks, citrus and non-citrus fruit drinks, water and other
beverages. Sales of beverages occur in a variety of locations, including
supermarkets, retail and convenience stores, restaurants and vending machines.
Competitors in the soft drink industry include bottlers and distributors of
nationally advertised and marketed products as well as chain store and private
label soft drinks. The principal methods of competition include brand
recognition, price and price promotion, retail space management, service to the
retail trade, new product introductions, packaging changes, distribution methods
and advertising. PAS's primary competitor in the United States is Coca-Cola
Enterprises Inc. ("CCE"). PAS believes that its flexibility and innovation in
developing and implementing new methods of marketing, merchandising and
distributing its products permit it to compete effectively against CCE.
The soft drink industry in the Caribbean is highly competitive which results
in intense price competition. PAS's principal competitors in the Caribbean are
the local bottlers and distributors of Coca-Cola and/or regional products. PAS's
other competitors include bottlers and distributors of nationally and regionally
advertised and marketed products, as well as bottlers of smaller private label
soft drinks.
GOVERNMENT REGULATION
PAS is subject to the regulatory oversight of the U.S. Department of
Agriculture and Department of Labor, the Food and Drug Administration, the
Occupational Safety and Health Administration, the Environmental Protection
Agency and the Puerto Rico Environmental Quality Board. PAS is required to
obtain and maintain municipal licenses for its bottling plants. PAS is currently
in compliance with such requirements. Additionally, PAS routinely obtains the
necessary approvals from municipal authorities to operate certain machinery and
equipment, such as boilers, steamers, compressors and precision instruments.
In Puerto Rico, wastewater from the Toa Baja bottling plant is discharged
pursuant to a permit to a collection and treatment system owned by the Puerto
Rico Aqueduct and Sewer Authority ("PRASA"). PAS previously entered into a
stipulation with PRASA which allowed PAS to discharge wastewater in excess of
pretreatment standards, for which PAS paid a surcharge. In 1998, PAS applied to
have the permit reissued. On October 29, 1998, PRASA reissued the permit but
without the excess wastewater and surcharge provision. PAS is negotiating with
PRASA regarding the new permit and required effluent standards. If an agreement
with PRASA cannot be reached, PAS will be required to construct an on-site
wastewater treatment system. The cost of new treatment system may have a
material adverse effect on PAS's future financial performance.
In Jamaica, PAS is subject to the regulatory oversight of the Ministry of
Labor and Bureau of Standards. PAS is required to obtain and maintain licenses
relating to the safety and operation of its bottling plant in Jamaica. PAS is
currently in compliance with such requirements. In addition, PAS is subject to
the regulatory oversight of the National Resources Conservation Authority
("NCRA"). A plan to reduce the discharge of effluent from PAS's bottling plant
has been submitted to the NCRA. The NCRA requires PAS to monitor wastewater
discharge and submit relevant periodic data to the NCRA. Although levels of
effluent discharge are currently in excess of the NCRA's Trade Effluent
Standards, no penalties or fines have been incurred to date. If an agreement
with the NCRA cannot be reached with respect to wastewater discharge, the NCRA
may require PAS to construct a water treatment facility, the cost of which may
have a material adverse effect of PAS's future fianncial performance in Jamaica.
The cost of any such treatment facility would be shared by a bottler operating
on the property contiguous to PAS's leased property in Jamaica.
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TAXATION
Specific soft drink taxes have been imposed in some states for several
years. Of the states in which PAS conducts business, Arkansas and Tennessee both
impose specific soft drink taxes. PAS believes it is in compliance with all tax
regulations pertaining to its operations.
The Puerto Rican government currently imposes an excise tax on carbonated
beverages of 5% of the "taxable price in Puerto Rico." The "taxable price in
Puerto Rico" for a product manufactured in Puerto Rico is effectively defined
under the Puerto Rico Excise Act as 72% of the manufacturer's sales price. PAS
is thus subject to an excise tax at an effective rate of 3.6% (or 5% of 72%) of
the price at which it sells its soft drink products.
The Jamaican government currently imposes a general consumption tax on
consumer products. Such general consumption tax is paid by PAS on the purchase
of raw materials used in its bottling operation. To the extent PAS is not the
end user of such materials, PAS recoups such general consumption tax from its
customers upon the sale of finished goods.
EMPLOYEES
As of December 31, 1999, PAS had approximately 3,000 full-time employees.
Approximately 20% of PAS employees are represented by a labor union. PAS has not
experienced any labor strikes or work stoppages, and believes that the
relationship between it and its employees and their labor unions is excellent.
PAS makes a variety of benefits available to its employees. In particular,
PAS sponsors tax-qualified retirement savings plans that permit eligible
employees to defer a portion of their salary on a tax-deferred basis and receive
a matching contribution from PAS. In addition, PAS sponsors welfare benefits
programs that provide health, dental, life and accidental death and
dismemberment insurance coverage to substantially all employees. PAS maintains
and contributes to two defined benefit pension plans for its Puerto Rican
employees. PAS also provides additional benefits to its executive employees.
These plans provide bonus, incentive and deferred compensation to eligible
executive employees. See "Executive Compensation."
In Jamaica, PAS provides a contributory medical and life insurance plan to
its employees, approximately with 50% of the cost of such plan being paid by
such employees.
INVESTMENT IN BAESA
PAS previously owned approximately 17% of the outstanding capital stock of
Buenos Aires Embotelladora S.A. ("BAESA"), a South American bottler of PepsiCo
products. Until June 30, 1996, PAS exercised significant influence over the
management of BAESA, subject to the right of PepsiCo and certain of its
affiliates to approve certain management decisions. As of July 1, 1996, PepsiCo
assumed operating control of BAESA and PAS no longer controlled or had
significant influence over the management or operations of BAESA. In 1998,
BAESA's financial restructuring plan diluted PAS's equity interest to 0.34%.
In 1998, the PAS Board of Directors declared a dividend consisting of the
shares of capital stock of BAESA owned by PAS. The dividend was distributed on
June 17, 1998 to PAS's shareholders of record as of May 28, 1998. The
distribution was made on a pro rata basis to the holders of PAS's outstanding
Class A shares and Class B shares. The carrying value of the capital stock of
BAESA had been written down to zero at September 30, 1996. PAS's financial
information for fiscal year 1996 and earlier reflects PAS's equity interest in
BAESA during those periods.
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ITEM 2. PROPERTIES
PAS currently bottles and cans soft drink products in five production
facilities: (i) a 50,000 square foot production facility in Fargo, North Dakota,
(ii) a 80,000 square foot production facility in Toa Baja, Puerto Rico, (iii) a
110,000 square foot production facility in Collierville, Tennessee, (iv) a
120,000 square foot production facility in Reserve, Louisiana, and (v) a 75,000
square foot production facility in Kingston, Jamaica. In addition, PAS operates
from 37 distribution facilities in the United States and two distribution
facilities in Puerto Rico, with an additional facility opening in 2000. In
Jamaica, distribution currently takes place through independent distributers.
PAS believes that its facilities will be sufficient to meet anticipated needs
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
In August 1993, Delta was named in a lawsuit filed in the District Court of
Morris County, Texas by a number of soft drink bottlers and distributors.
Additional defendants include PepsiCo, Pepsi-Cola Company, The Coca-Cola
Company, and CCE. The plaintiffs allege that the defendants engaged in unfair
trade practices and conspired to monopolize the soft drink industry in eastern
Texas, Louisiana and Arkansas in violation of the Texas Free Enterprise Act and,
alternatively, state antitrust statutes. The expert witness retained by the
plaintiffs has theorized in deposition testimony that total damages to all
plaintiffs could be as high as $33 million. The defendants assert that there is
no evidence of antitrust injury or direct causation, and therefore no antitrust
violations occurred. The expert witness retained by the defendants has testified
that total damages to all plaintiffs would range from $0 to $10 million. Any
damages awarded would likely be allocated among all defendants. The lawsuit has
been bifurcated into two groups of plaintiffs, with trial scheduled to begin on
April 26, 2000 for the first group of plaintiffs. Delta intends to continue to
vigorously defend itself fully in this action. The defendants believe that a
large recovery in this lawsuit is unlikely. However, an unfavorable decision in
this case could have a material adverse effect on Delta's financial condition.
In November and December 1999, Delta was named a defendant in several class
action lawsuits filed in the District Court of the Parish of St. John the
Baptist, Louisiana, by a group of residents near Delta's facility in Reserve,
Louisiana. The residents complained of personal injuries resulting from noxious
fumes emitted from the wastewater pond owned by the Port of South Louisiana,
into which Delta discharges its wastewater. There are approximately 4,000
potential plaintiffs. No dollar amount has been demanded to date; Delta intends
to fully defend itself in this action.
Delta owns 62% of the Pepsi-Cola/Seven-Up Beverage Company of Louisiana (the
"Joint Venture"), which distributes beer in the New Orleans metropolitan area.
The Miller distributor agreement provides that a distributor cannot be owned
directly or indirectly by a publicly-held company. Because Delta is owned by
PAS, a publicly-held company, PAS is working with Miller to resolve this
ownership issue. No assurance can be given that PAS will be able to resolve this
issue with Miller.
From time to time, PAS is involved in various other legal proceedings
arising in the ordinary course of business. PAS believes the ultimate resolution
of such litigation will not have a material adverse effect on PAS's business,
financial condition or results of operations.
10
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PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Shareholders was held on October 1, 1999. Four
proposals were submitted for shareholder approval. Holders of PAS common stock
voted as a single class on all matters, except Proposal No. 2 was also voted
upon separately by the holders of PAS Class B Common Stock. All of the proposals
passed with voting results as follows:
(1) To approve the issuance of 65,070,006 shares of Class B Common Stock in
connection with the proposed acquisition of Delta Beverage Group, Inc.
and Dakota Beverage Company, Inc. pursuant to exchange agreements,
effective June 28, 1999.
<TABLE>
<CAPTION>
PAS common stock
----------------
<S> <C> <C> <C>
FOR: 41,733,093 AGAINST: 39,668
ABSTAIN: 66,332 NON-VOTE: 0
</TABLE>
(2) To approve an amendment to the Certificate of Incorporation to increase
the number of authorized shares of capital stock to 150,000,000 from
40,000,000 and to increase the number of authorized shares of Class B
Common Stock to 145,000,000 from 35,000,000.
<TABLE>
<CAPTION>
PAS common stock
----------------
<S> <C> <C> <C>
FOR: 41,425,922 AGAINST: 350,174
ABSTAIN: 62,997 NON-VOTE: 0
<CAPTION>
PAS Class B Common Stock
------------------------
<S> <C> <C> <C>
FOR: 11,425,922 AGAINST: 350,174
ABSTAIN: 62,997 NON-VOTE: 0
</TABLE>
(3) To approve an amendment to the Certificate of Incorporation of
Pepsi-Cola Puerto Rico Bottling Company to change its name to
PepsiAmericas, Inc.
<TABLE>
<CAPTION>
PAS common stock
----------------
<S> <C> <C> <C>
FOR: 41,748,412 AGAINST: 30,002
ABSTAIN: 60,679 NON-VOTE: 0
</TABLE>
(4) To approve the 1999 Stock Option Plan.
<TABLE>
<CAPTION>
PAS common stock
----------------
<S> <C> <C> <C>
FOR: 41,597,895 AGAINST: 162,587
ABSTAIN: 78,611 NON-VOTE: 0
</TABLE>
11
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
EXECUTIVE OFFICERS OF PAS
The executive officers of PAS are elected by the Board of Directors and
serve at its discretion. There is no family relationship among any of the
officers or directors. The following table sets forth certain information
regarding the executive officers of PAS as of February 1, 2000.
<TABLE>
<CAPTION>
Name Age Position
- - --------------------- --- -----------------------------------------------------
<S> <C> <C>
Robert C. Pohlad 45 Chairman and Chief Executive Officer
Kenneth E. Keiser 48 President and Chief Operating Officer
John F. Bierbaum 55 Chief Financial Officer and Senior Vice President
Bradley J. Braun 45 Vice President, Finance and Assistant Secretary
Jay S. Hulbert 46 Vice President, Operations
Raymond R. Stitle 46 Vice President, Human Resources
Lawrence J. Flood 40 Vice President and General Manager
George W. Haugo 55 Vice President and General Manager
Michael G. Naylor 41 Vice President and General Manager
Charles M. Pullias 50 Vice President and General Manager
A. David Velez 45 Vice President and General Manager
</TABLE>
The following is a brief description of the business background of each of
the executive officers of PAS.
ROBERT C. POHLAD. Mr. Pohlad has served as Chief Executive Officer and as a
director of PAS since July 1998. Mr. Pohlad has been a director and Chief
Executive Officer of Delta, a wholly-owned subsidiary of PAS, since 1988. Since
1987, Mr. Pohlad has also served as President of Pohlad Companies, the
controlling shareholder of PAS. Prior to 1987, Mr. Pohlad was Northwest Area
Vice President of the Pepsi-Cola Bottling group. Mr. Pohlad is also currently a
director of Mesaba Holdings, Inc., Grow Biz International, Inc. and Delta.
KENNETH E. KEISER. Mr. Keiser has served as President and Chief Operating
Officer of PAS since July 1998. Mr. Keiser has been President and Chief
Operating Officer of Delta since 1990. From 1976 to 1990, he was employed by the
Pepsi-Cola Bottling Group in various capacities, including Division Vice
President of the Central Division from 1989 to 1990, Vice President of the
Minneapolis Area from 1986 to 1989, Director of Corporate Trade Development from
1985 to 1986, Area Vice President of Philadelphia from 1982 to 1985, and various
other capacities from 1976 to 1985.
JOHN F. BIERBAUM. Mr. Bierbaum has served as Chief Financial Officer of PAS
since July 1998 and Senior Vice President since February 2000. Mr. Bierbaum has
been a director (since 1993) and Chief Financial Officer of Delta (since 1988).
Mr. Bierbaum was also Chief Financial Officer of the Pohlad Companies, a holding
and management services company, which has a beneficial ownership interest in
and provides management services to PAS. Mr. Bierbaum has been associated with
the Pohlad Companies from 1975 to 1999 in a variety of capacities, including his
current position. From 1986 to 1988, Mr. Bierbaum served as Vice President of
the Pepsi-Cola Bottling Company of Tampa.
BRADLEY J. BRAUN. Mr. Braun became Vice President of Finance and Assistant
Secretary for PAS in July 1998. Mr. Braun has been Vice President of Finance of
Delta since 1991. Prior to joining Delta, Mr. Braun served as Controller of
Dakota, a PepsiCo franchise bottler, which was at that time a wholly owned
subsidiary of the Pohlad Companies.
12
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
JAY S. HULBERT. Mr. Hulbert joined PAS in July 1998 as Vice
President--Operations. Mr. Hulbert has also been Vice President-Operations for
Delta since 1988. Prior to joining Delta, Mr. Hulbert spent seven years working
for the Pepsi-Cola Bottling Group in a variety of capacities.
RAYMOND R. STITLE. Mr. Stitle joined PAS in May 1998 as Director, Human
Resources, and became Vice President, Human Resources in November 1999.
Mr. Stitle has also been Vice President of Delta since 1988. Prior to joining
Delta, Mr. Stitle was employed by Schering-Plough, and earlier by Pepsi-Cola
USA.
LAWRENCE J. FLOOD. Mr. Flood has served as Vice President and General
Manager of PAS since November 1999. Prior to joining PAS, Mr. Flood served as
General Manager of the New Orleans and Shreveport divisions of Delta since
August 1994.
GEORGE W. HAUGO. Mr. Haugo has served as Vice President and General Manager
of PAS since November 1999. Prior to joining PAS, Mr. Haugo served as Vice
President--Sales for Dakota since 1965.
MICHAEL G. NAYLOR. Mr. Naylor has served as Vice President and General
Manager of PAS since November 1999. Mr. Naylor has also served as Vice President
and General Manager of Delta since September 1994. Prior to joining Delta,
Mr. Naylor was employed by Dr. Pepper/Seven-Up Co.
CHARLES M. PULLIAS. Mr. Pullias has served as Vice President and General
Manager of PAS since November 1999. Mr. Pullias has also served as Vice
President and General Manager of Delta since July 1991.
A. DAVID VELEZ. A. David Velez has served as Vice President and General
Manager of PAS since November 1999, and has also been President of Pepsi-Cola
Puerto Rico Distribution Co. since July 1998. He was the General Manager for
BAESA's operations in Rio de Janeiro from October 1995 to February 1997. Prior
to that he was the General Manager for PepsiCo's Miami bottling operations.
13
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 10, 2000, there were (i) 5,000,000 shares of Class A Common
Stock, par value $.01 per share (the "Class A Shares"), issued and outstanding
and held by two shareholders of record, and (ii) 82,314,377 shares of Class B
Common Stock, par value $.01 per share (the "Class B Shares"), issued and
outstanding and held by 2,365 registered shareholders of record. The principal
market for PAS's Class B Common Stock is the New York Stock Exchange, Inc. (the
"NYSE"). The Class A Shares are not listed for trading on any securities
exchange.
PAS Class B Common Stock, which currently trades under the symbol "PAS," has
been listed for trading on the NYSE since September 20, 1995. The following
table sets forth, for the periods indicated, the high and low sales prices of
PAS Class B Common Stock on the NYSE as reported in the consolidated transaction
reporting system.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal 1998
First Quarter $7.6875 $6.3125
Second Quarter $8.0000 $6.0625
Third Quarter $7.7500 $6.6250
Fourth Quarter $9.0630 $6.0000
Three Months December 31, 1998 $6.2500 $4.6250
Calendar 1999
First Quarter $6.9375 $4.7500
Second Quarter $5.7500 $4.1250
Third Quarter $6.0000 $5.0000
Fourth Quarter $5.8125 $3.4375
</TABLE>
PAS's Board of Directors from time to time may declare, and PAS may pay,
dividends on its outstanding shares of Common Stock in the manner and upon the
terms and conditions provided by law. Pursuant to the terms of the Credit
Agreement (as defined below), PAS may not pay dividends without the consent of
Bank of America, N.A. if an event of default under the Credit Agreement
(including a violation of the financial restrictions) has occurred or would
occur because of the payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents summary financial results and other information
of PAS and its subsidiaries. This data has been derived from the historical
consolidated financial statements of PAS (formerly known as Pepsi-Cola Puerto
Rico Bottling Company), except for the pro forma 1998 results described below.
Such historical results have been restated for the combination of interests
transaction described below. Prior to January 1, 1999, PAS's fiscal year end was
September 30. Effective at that date, PAS changed its fiscal year-end to
December 31. As a result, PAS reported its results for the three-month period
ended December 31, 1998 to conform to the new fiscal year-end. For comparison
purposes, selected financial data is presented for the corresponding three-month
period in the prior year.
On October 15, 1999, PAS combined with Delta and Dakota in a transaction
accounted for as a merger of entities under common control with the acquisition
of certain minority interests in Delta recognized using the "purchase" method of
accounting. PAS's consolidated financial statements have been restated beginning
14
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
July 17, 1998 (the earliest date upon which common control existed in each of
PAS, Delta and Dakota) to include the financial position and results of
operations of the combined companies since that date.
For comparison purposes only, pro forma selected financial data is presented
for the calendar year ended December 31, 1998, as if the common control
transaction occurred on January 1, 1998.
This selected financial data should be read together with Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Item 8. Financial Statements and Supplementary Data (including
the accompanying footnotes to financial statements).
SPECIAL CHARGES
Income (loss) from operations for periods presented in the table of Selected
Financial Data has been affected by special charges and credits as follows:
- In fiscal year ended September 30, 1996, a charge of $2.7 million reflects
a $1.4 million write-down of the carrying value of a bottling plant in San
Juan, Puerto Rico that was taken out of service and a $1.3 million
adjustment of pension costs associated with employee terminations.
- In fiscal year ended September 30, 1997, a charge of $13.2 million
represented costs in connection with PAS's settlement of civil litigation
with shares of its common stock that were contributed to PAS by its
founding shareholders. In addition a charge of $0.5 million was incurred
for costs associated with a 5% reduction of the workforce.
- In fiscal year ended September 30, 1998, charges of $3.3 million were
incurred related to a restructuring plan, a provision for legal and
environmental issues and a further write-down of the out-of-service
bottling plant. PAS also recorded an insurance recovery of $1.3 million
for loss of business due to Hurricane Georges.
- In the three months ended December 31, 1998, a charge for $0.2 million
reflected an asset impairment loss relating to the sale of a division
engaged in bottling and distribution of bulk water in Puerto Rico. An
additional $0.3 million of insurance proceeds related to business loss
from Hurricane Georges was recorded.
- In the year ended December 31, 1999 PAS incurred an additional loss of
$0.3 million in the sale of the water division and recorded a provision of
$3.4 million related to termination of deferred compensation plans at
Delta and Dakota, following the combination transaction. Professional fees
of $4.9 million and other costs attributable to conforming the common
interest were expensed. The deferred compensation plans were revalued to
reflect the values of those companies in the combination of interests as
determined by a third party investment bank. PAS was also able to resolve
certain legal and environmental matters for $0.5 million less than the
reserve established in fiscal year ended September 30, 1998.
15
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Fiscal Years Ended September 30
Pro Forma ---------------------- -----------------------------------------
1999 1998(1) 12/31/98(2) 12/31/97 1998(2) 1997 1996 1995
-------- ----------- ----------- -------- -------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net Sales $575,743 $548,371 $136,646 $25,517 $196,335 $ 99,172 $102,891 $114,301
Gross Profit $183,517 $175,327 $ 42,558 $ 8,318 $ 59,869 $ 30,935 $ 27,935 $ 46,455
Income (loss) from operations(3) 18,998 21,808 5,135 (479) (1,002) (21,420) (26,827) 9,735
Income (loss) before income taxes,
minority interest, equity in BAESA
and extraordinary item(3) (3,314) 1,095 367 (866) (6,529) (22,845) (24,077) 9,118
Income tax benefit (expense) (4,832) 1,843 (832) (125) 2,515 3,342 1,205 297
Minority interests, net of taxes(10) (560) 2,466 2,145 -- (501) -- -- --
Net income (loss) before equity in
BAESA and extraordinary item(3) (8,706) 5,404 1,680 (991) (4,515) (19,503) (22,872) 9,415
Equity in BAESA income (loss) net of
taxes -- -- -- -- -- -- (51,458) 5,638
Net income (loss)(3)(4) (9,450) 5,404 1,680 (991) (4,515) (19,503) (74,330) 15,053
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 86,829 86,633 86,760 21,500 35,072 21,500 21,500 18,105
PER SHARE DATA(5)
Income (loss) before equity in BAESA $ (0.11) $ 0.06 $ 0.02 $ (0.05) $ (0.14) $ (0.91) $ (1.06) $ 0.52
Net income (loss) (0.11) 0.06 0.02 (0.05) (0.14) (0.91) (3.46) 0.83
Dividends declared per share of
common stock(9) -- -- -- -- -- -- 0.24 0.27
FINANCIAL POSITION (at end of
period)
Cash and cash equivalents $ 8,317 $ 23,551 $ 23,551 $13,814 $ 31,405 $ 19,621 $ 18,680 $ 46,091
Working Capital(7) 60,564 51,598 51,598 2,174 47,883 (813) (15,072) 2,580
Property and equipment, net 147,779 121,342 121,342 46,466 122,384 45,788 49,936 36,445
Total assets 516,143 410,085 410,085 88,692 418,475 95,910 109,981 185,666
Long-term debt(8) 302,050 242,108 242,108 25,516 241,214 26,064 7,575 9,967
Common shareholders equity 109,455 62,058 62,058 42,401 61,807 43,392 49,357 128,649
OTHER DATA
EBITDA(6) $ 51,718 $ 44,528 $ 11,192 $ 1,132 $ 7,986 $(15,448) $(70,841) $ 20,545
Operating cash flows 24,807 25,289 1,896 (3,554) 4,348 (7,504) (6,542) 16,497
Capital expenditures 29,053 22,915 3,146 501 5,517 4,663 24,421 10,418
</TABLE>
- - ------------
(1) Pro Forma year ended December 31, 1998 is a pro forma unaudited
presentation to facilitate comparability to fiscal year ended December 31,
1999.
(2) Effective January 1, 1999, PAS changed its fiscal year to a calendar year.
The three months ended December 31, 1998 and the fiscal year ended
September 30, 1998 have been restated to reflect the common interests
between PAS, Dakota and Delta from July 18, 1998.
(3) Includes special charges for the fiscal year ended December 31, 1999 and
the Pro Forma year 1998 of $8,068 and $1,883, respectively, and special
charges for the three months ended December 31, 1998 of $(96) and special
charges for the fiscal years ended September 30, 1998, 1997 and 1996 of
$1,979, $13,707 and $2,700, respectively. See Item 6. Selected Financial
Data--Special Charges for detail.
(4) Includes an extraordinary item in fiscal year ended December 31, 1999 of
$744, net of tax from early extinguishment of debt.
16
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
(5) Earnings per share of common stock and dividends declared per share of
common stock are determined by dividing net income by the weighted average
number of shares of PAS common stock outstanding during each period and
dividends declared by the number of shares of PAS common stock outstanding
at the time of dividend declaration, respectively. Earnings per share
information for fiscal year 1995 has been adjusted to give effect to a
stock split that occurred in fiscal year 1995.
(6) EBITDA consists of net income (loss) before special charges, income taxes,
interest, dividends on subsidiary's preferred stock and depreciation and
amortization. EBITDA is included herein to provide additional information
about PAS's ability to service its debt. EBITDA should not be considered as
an alternative measure of PAS's net income, operating income, cash flow
from operating activities or liquidity.
(7) Working capital represents current assets (excluding cash and cash
equivalents) less current liabilities (excluding current maturities of
long-term debt).
(8) Includes current maturities of long-term debt.
(9) Excludes dividends of Dakota for distribution of income taxes and profits
prior to the combination of interests on October 15, 1999.
(10) Minority interest includes the portion of Delta's net income (loss) not
related to the common interests from July 18, 1998 to October 15, 1999,
dividends on Delta's preferred stock after taxes July 18, 1998 and the
minority share of the net income of Delta's joint venture subsidiary after
July 18, 1998. Minority interests were tax affected.
(11) PAS's consolidated effective tax rate differs from the statutory rate due
to Puerto Rico tax credits and the non-deductibility of amortization of
franchise rights. For periods from July 18, 1998 to October 15, 1999,
income taxes reflect the Subchapter S election of Dakota.
17
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING TERMINOLOGY
SUCH AS "BELIEVES," "ANTICIPATED," "EXPECTS," AND "INTENDS," OR COMPARABLE
TERMINOLOGY. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. HOLDERS
AND POTENTIAL PURCHASERS OF THE COMPANY'S SECURITIES ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS WHICH ARE QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONS AND RISKS DESCRIBED HEREIN.
The primary measurement of unit volume for PAS is franchise case sales which
are case-sized quantities of the various consumer packages in which products are
produced and sold and may alternatively be described as hard case sales. PAS
also sells premix or draft products (ready-to-serve beverages which are sold in
tanks or kegs) and postmix products (fountain syrups to which carbonated water
must be added). Premix and postmix products, while effectively containing the
identical beverages as packaged product, are not included in unit volume
measurements as they are not the primary focus of PAS's selling efforts.
The primary source of revenue for PAS is franchise case sales which are
sales of PAS's branded products directly to retailers whether of package, premix
or postmix configuration. Another source of revenue is contract sales which are
sales to unaffiliated companies that hold soft drink franchises. Contract sales,
which historically represent less than 15% of total net sales, may fluctuate
from year to year, and are made at relatively low prices and gross profit
margins due to the competition for such sales, and are not a primary focus of
management in determining the business strategy of PAS. As a result, management
believes that changes in franchise case sales more accurately measure growth
than changes in total net sales.
GENERAL OVERVIEW
CHANGE IN FISCAL YEAR
Effective January 1, 1999, PAS changed its fiscal year end from
September 30 to December 31. This discussion includes information for the
interim period from October 1, 1998 through December 31, 1998, which is referred
to as the "interim period" or "1998 interim period." Comparable information for
the three months ended December 31, 1997 is included for discussion purposes.
CHANGE IN CONTROL
On July 17, 1998, P-PR Transfer, LLP, a partnership principally owned by
Pohlad Companies acquired a controlling interest in PAS, formerly known as
Pepsi-Cola Puerto Rico Bottling Company. Effective with the change in control,
PAS and two other entities, Delta Beverage Group, Inc. ("Delta") and Dakota
Beverage Company, Inc. ("Dakota"), shared common ownership and were under the
common control of Pohlad Companies.
COMBINATION OF INTERESTS
Effective October 15, 1999, PepsiAmericas combined with Delta and Dakota in
a transaction accounted for as a merger of entities under common control, with
the acquisition of certain minority interests in Delta recognized using the
"purchase" method of accounting. Pohlad Companies continues to be the
controlling shareholder in PAS.
RESTATEMENT OF SELECTED FINANCIAL DATA
The consolidated financial statements of PAS have been restated beginning
July 17, 1998 to include the combined financial position and results of
operations of PepsiAmericas, Delta and Dakota since that date.
18
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
INCOME TAXES
PAS's effective income tax rate differs from the U.S. Federal statutory
income tax rate in several respects, most notably non-deductible amortization of
franchise rights, other non-deductible fees and expenses, valuation allowances
provided for losses incurred by PAS's Puerto Rican operations, and adjustments
directly related to the combination of interests transaction and previous
S corporation tax status of Dakota.
SPECIAL CHARGES, NET
For a discussion of special charges and credits recorded by PAS during the
periods, please see the consolidated financial statements and related notes, and
the information contained in Item 6. Selected Financial Data.
MATTERS AFFECTING COMPARABILITY
As noted above, PAS changed its fiscal year end to a calendar year end
beginning with the fiscal year ended December 31, 1999. As a result, PAS
reported the results of operations for the interim of the three months ended
December 31, 1998. In order to promote comparability between periods, pro forma
unaudited results of operations for a twelve month period ended December 31,
1998 were included in the table of selected financial data.
Further, the accounting for the July 1998 transaction creating the common
interests between PAS and Dakota and Delta causes a lack of comparability
between the fiscal years ended September 30, 1998 and 1997. The discussion by
management of the results of operations for those periods will make mention of
reconciling amounts.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31,
1998
Net sales, excluding contract net sales, for the year ended December 31,
1999 increased by 5.0% to $533.8 million compared to $508.3 million for the same
period in 1998. The increase in net sales was partially due to acquisitions
during 1999 as demonstrated below:
<TABLE>
<CAPTION>
Unit
Increase (decrease) due to: Volume Net Sales
- - --------------------------- ------ ---------
<S> <C> <C>
Base business 4.6% 3.4%
Seven-Up acquisition 1.4 1.1
Jamaica acquisition 0.7 0.5
--- ---
Aggregated 6.7% 5.0%
=== ===
</TABLE>
The increase in base business was due primarily to a 4.6% increase in
volume, offset by 1.6% decrease in pricing. The decrease in average pricing
reflects a modest mix shift towards can packages of soft drinks which have a
lower net selling price per unit and are sold predominately in grocery stores
that require greater promotional costs. The brands showing strong growth were
Mountain Dew, Pepsi One, Aquafina and Ocean Spray. Improvement in beer pricing
essentially offset a 2.2% decrease in beer volume. Contract net sales for the
year ended December 31, 1999 increased 4.6% compared to the same period in 1998.
As a result of the foregoing, net sales for the year ended December 31, 1999
increased 5.0% to $575.7 million compared to $548.4 million for the same period
in 1998.
Cost of sales for the year ended December 31, 1999 increased to $392.2
million compared to $373.0 million for the same period in 1998. The increase was
due primarily to the net effect of the increase in franchise case sales and the
mentioned mix shift towards lower cost can packages of soft drinks. As a
percentage of net sales,
19
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
cost of sales for the year ended December 31, 1999 increased to 68.1% compared
to 68.0% for the same period in 1998. As a result of the foregoing, gross profit
for the year ended December 31, 1999 was $183.5 million compared to $175.3
million for the same period in 1998.
Selling, general and administrative expenses for the year ended
December 31, 1999 increased to $152.0 million compared to $147.1 million for the
same period in 1998. Selling, general and administrative expenses are comprised
of selling, distribution and warehousing expenses ("S&D"), advertising and
marketing expenses ("A&M"), and general and administrative expenses ("G&A"). S&D
and A&M expenses in the aggregate grew less rapidly than unit volume. G&A
expenses increased due primarily to provision for the potential accounts
receivable loss in the bankruptcy of a grocery customer and defense costs in
litigation that is nearing trial. As an entire category, these operating costs
represented 26.4% and 26.8% of net sales in 1999 and 1998, respectively.
As a result of the above factors, income from operations for the year ended
December 31, 1999 decreased to $19.0 million, or 3.3% of net sales, compared to
$21.8 million, or 4.0% of net sales, for the same period in 1998. Excluding the
special charges discussed in Item 6, income from operations in 1999 was $27.1
million or 4.7% of net sales as compared to $23.7 million or 4.3% of net sales
in 1998.
Interest expense for the year ended December 31, 1999 increased to $22.1
million from $20.7 million for the same period in 1998. The increase was due
primarily to interest attributable to debt incurred to complete acquisitions and
the combination of interests.
As a result of the above factors, the Company realized a net loss before
income taxes and minority interest of ($3.3) million for the year ended
December 31, 1999 compared to net income before income taxes and minority
interest of $1.1 million for the same period in 1998. Excluding the special
charge, net income before income taxes and minority interest in 1999 was $4.8
million as compared to $3.0 million in 1998
1998 INTERIM PERIOD COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1997
Net sales for Dakota and Delta in the period were $108.3 million. Net sales
for PAS increased $2.8 million. This increase was primarily the result of the
increase in case volume sales, which increased 14% during the period ended
December 31, 1998 compared to the same period in 1997. The increased volume was
in cans and 20 oz. PET bottles; this was offset by a decrease in average overall
pricing of 2.7% and reductions of price support.
Cost of sales for Dakota and Delta in the period was $73.7 million. Cost of
sales for PAS increased $3.1 million, or 18.2% for the 1998 interim period as
compared to the 1997 interim period to $20.3 million. This increase was
primarily due to the increased sales volume and costs of imported products.
Gross profit for Dakota and Delta in the period was $34.6 million. Gross
profit for PAS decreased by 3.8% to $8.0 million compared to the same interim
period in 1997. The decrease was primarily due to the impact of Hurricane
Georges in late September 1998, which forced PAS to halt production for the two
weeks after the storm and import higher cost finished goods for an extended
period.
Operating expenses for Dakota and Delta in the period were $28.9 million.
Selling and marketing expenses for PAS decreased $0.5 million, or 7.4% to
$6.9 million for the 1998 interim period as compared to the 1997 interim period.
This decrease was primarily due to reduced operating expenses of $0.5 million in
the 1998 interim period as compared to the 1997 interim period. Administrative
expenses for PAS increased $0.5 million or 33.2% for the 1998 interim period
from the 1997 interim period to $1.8 million. This increase reflects transition
costs of implementing the new management and accounting services agreements.
Income from operations for Dakota and Delta in the period was $5.7 million.
Income (Loss) from operations for PAS decreased to $(0.6) million in the 1998
interim period, from $(0.5) million in the 1997
20
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
interim period. This decrease is the result of lower gross profit of
$0.3 million, higher administrative expenses of $0.5 million, and an additional
reserve for asset impairment. These were offset in part by the lower selling and
marketing expenses of $0.5 million and proceeds from business interruption
insurance related to the hurricane of $0.3 million.
Net income for Dakota and Delta in the period was $3.1 million. Net income
(loss) for PAS decreased to $(1.4) million in the 1998 interim period, from
$(1.0) million during the 1997 interim period. This decrease is the result of
lower operating income and an increased income tax expense.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Net sales for Dakota and Delta from July 18, 1998 to September 30, 1998 were
$96.9 million. Net sales for PAS increased $0.2 million, or 0.2%, in fiscal year
1998 from fiscal year 1997 to $99.4 million. This increase was primarily the
result of an increase in sales volume of approximately 3.0% offset partially by
increased discounts provided to customers in 1998 as compared to 1997. The
average net sales price decreased during fiscal year 1998 by approximately 1.8%
as compared to fiscal year 1997.
Cost of sales for Dakota and Delta from July 18, 1998 to September 30, 1998
was $5.9 million. Cost of sales for PAS increased $2.3 million, or 3.3% for
fiscal year 1998 as compared to fiscal year 1997 to $70.5 million. This increase
was primarily the result of the increase in sales volume.
Gross profit for Dakota and Delta from July 18, 1998 to September 30, 1998
was $31.0 million. Gross profit for PAS decreased by $2.0 million to $28.9
million in fiscal year 1998 from $30.9 million in 1997. As a percentage of net
sales, gross profit decreased to 29.1% in 1998 from 31.2% in 1997. The decrease
was primarily due to the higher discounts provided to customers (which resulted
in a lower average net sales price).
Selling, General and Administrative Expenses for Dakota and Delta from
July 18, 1998 to September 30, 1998 were $22.8 million. Selling and marketing
expenses for PAS decreased $0.2 million, or 0.5%, to $30.1 million for the
fiscal year 1998 as compared to the 1997 fiscal year. As a percentage of net
sales, selling and marketing expenses decreased to 30.3% during the fiscal year
1998 from 30.5% in the 1997 fiscal year. Administrative expenses for PAS
decreased $2.4 million or 28.2% for fiscal year 1998 from fiscal year 1997 to
$6.0 million. This decrease was primarily the result of reductions of $0.9
million in the cost of legal services, reductions of $1.0 million in salaries
and wages, and $0.5 million in other administrative expenses. As a percentage of
net sales, administrative expenses decreased to 6.1% during fiscal year 1998
from 8.5% in fiscal year 1997.
PAS's results of operations for fiscal year 1997 were affected by the
incurrence of a non-cash expense of $13.2 million in connection with PAS's
settlement of certain civil litigation, representing the estimated value of 2.5
million Class B shares transferred as part of the settlement. There was no
similar non cash expense that was incurred during fiscal year 1998.
PAS's results of operations for fiscal year 1998 were affected by the
incurrence of charges for unusual items totaling $3.3 million. The unusual items
include costs related to the restructuring plan initiated by the new management
of PAS ($1.7 million), provision for certain legal and environmental issues
($0.8 million) and provision for reduction in the estimated market value of the
former production facility then held for resale ($0.8 million). The impact of
these unusual items was offset by the benefit of insurance proceeds of $1.3
million for loss of business from September 22, 1998 to October 21, 1998 due to
Hurricane Georges.
Income from operations for Dakota and Delta from July 18, 1998 to
September 30, 1998 was $8.2 million. Loss from operations for PAS decreased to
($9.2) million in fiscal year 1998 from a loss of ($21.4) million in fiscal year
1997. This increase is the net result of the decrease in gross profit of $2.0
million, decreased selling and marketing costs of $0.2 million, decreased
administrative costs of $2.4 million, the absence of the
21
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
settlement of litigation charge of $13.2 million and unusual items of $3.3
million in fiscal year 1998 versus a restructuring charge of $0.5 million in
fiscal year 1997.
Interest expense net for Dakota and Delta from July 18, 1998 to
September 30, 1998 was $4.0 million. Interest and other income (expenses) for
PAS in total remained consistent between fiscal years 1998 and 1997.
Net income for Dakota and Delta from July 18, 1998 to September 30, 1998 was
$5.1 million. Net loss for PAS during fiscal year 1998 was $(9.6) million,
compared to $(19.5) million during fiscal year 1997.
LIQUIDITY AND CAPITAL RESOURCES.
At December 31, 1999, PAS had $8.3 million of cash and cash equivalents.
Indebtedness for borrowed money, including short-term and long-term borrowings
and capital lease obligations at December 31, 1999, totaled $302.1 million,
which included $7.9 million of current obligations.
Net cash provided by (used in) operating activities for PAS was
$24.8 million for fiscal year 1999 as compared with $4.3 million for fiscal year
1998 and ($7.5) million for fiscal year 1997. The net cash provided by (used in)
operating activities excluding the portion due to changes in assets and
liabilities was $23.6 million during fiscal year 1999, $6.4 million during
fiscal year 1998, and $0.4 million during fiscal year 1997. The net cash
provided by (used in) operating activities that was due to changes in assets and
liabilities was $1.2 million during fiscal year 1999, ($2.1) million during
fiscal year 1998, and ($7.9) million during fiscal year 1997.
Net cash provided by (used in) operating activities for PAS was
$1.9 million for the interim period ended December 31, 1998 as compared with
($3.6) million for the same period in 1997. The net cash provided by (used in)
operating activities excluding the portion due to changes in assets and
liabilities was $7.5 million during the interim period 1998, and $0.4 million in
1997. The net cash provided (used in) operating activities that was due to
changes in assets and liabilities was ($5.6) million in the interim period in
1998 and ($4.0) million in the interim period in 1997.
Net cash provided by (used in) investing activities for PAS was ($72.8)
million for fiscal year 1999, as compared with ($7.3) million for fiscal year
1998 and $8.6 million for fiscal year 1997. Purchases of property, plant and
equipment, net of disposals, amounted to ($28.9) million during fiscal year 1999
as compared with ($4.8) million during fiscal year 1998 and ($4.3) million
during fiscal year 1997. Fiscal year 1999 also included the acquisition of
certain franchise rights for ($12.0) million and the acquisitions of other
businesses, including the acquisition of a bottling operation in Jamaica, of
($29.4) million.
Net cash provided by (used in) investing activities for PAS was ($6.2)
million for the interim period ended December 31, 1998, as compared with ($0.5)
million for 1997. Purchases of property, plant and equipment net of disposals,
amounted to ($3.1) and ($0.5) million for the interim period ended December 31,
1998 and 1997 respectively.
Cash flows provided by (used in) financing activities for PAS were
$32.8 million for fiscal year 1999 as compared with $7.1 million for fiscal year
1998 and ($0.2) million for fiscal year 1997. The significant financing
activities in fiscal 1999 were net proceeds from new financing arrangements of
$44.9 million, and dividends paid to Pohlad Companies, the controlling
shareholder in PAS, of ($9.2) million. The significant financing activities in
fiscal 1998 were the sale of common stock, net of equity issuance costs, of
$23.1 million, repayment of ($12.9) million of short and long term debt, and
($3.1) million in dividends paid to Pohlad Companies. The significant financing
activity for PAS in fiscal year 1997 was the net repayment of indebtedness of
($0.2) million.
Cash flows provided by (used in) financing activities for PAS were ($3.6)
million for the interim period ended December 31, 1998 as compared with ($1.6)
for the same period in 1997. The financing activities for PAS
22
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
during the 1998 interim period were dividends paid to Pohlad Companies and the
net repayment of debt. The financing activities for PAS during the 1997 interim
period were the net repayment of debt.
Capital expenditures, before the effect of dispositions, for PAS totaled
($29.0) million in fiscal year 1999, ($5.5) million in fiscal year 1998 and
($4.7) million in fiscal year 1997. Capital expenditures, before the effect of
dispositions, for PAS totaled ($3.1) million in the interim period for 1998 and
($0.5) million in the interim period for 1997. PAS's capital expenditures have
been financed by a combination of borrowings from third parties and internally
generated funds. PAS estimates that its capital expenditures for the fiscal
years ending December 31, 2000 will be approximately $25 million.
DISCLOSURES ABOUT MARKET RISK
PAS uses financial instruments, primarily variable rate debt, to finance
operations, for capital expenditures and for general corporate purposes. PAS's
exposure to market risk for changes in interest rates relates primarily to
investments, and short- and long-term debt obligations. PAS places its
investments in high-quality securities with major financial institutions while
limiting exposure to any one issuer. PAS does not use derivative financial
instruments or engage in trading activities.
The following table summarizes the principal cash flows of PAS's financial
instruments outstanding at December 31, 1999, categorized by type of instrument
and by year of maturity.
<TABLE>
<CAPTION>
2000 2001 2002 2003 Thereafter Total Fair Value
------ ------- ------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents:
Deposit and money market accounts $8,317 $ -- $ -- $ -- $ -- $ 8,317 $ 8,317
Long-term debt:
Senior notes payable (interest at
9.75%) -- -- -- 120,000 -- 120,000 120,000
Term Loan (interest at 8.18%) 6,875 10,000 13,125 -- -- 30,000 30,000
Term Loan (interest at 8.68%) 813 650 16,250 47,287 -- 65,000 65,000
Revolving line of credit--
Swing line facility (interest
ranging from 7% to 9%) -- 2,500 -- -- 2,500 2,500
All other (interest ranging from
9% to 10.8%) -- 2,200 65,220 -- -- 67,420 67,420
Notes payable to Poydras -- -- -- -- 1,839 1,839 1,839
</TABLE>
YEAR 2000 COMPLIANCE
Before the rollover of the year from 1999 to 2000, many installed computer
systems and software products were coded to accept only two digit date entries
and were unable to accept four digit date entries to distinguish 21st century
dates from the 20th century dates. As a result, computer systems and software
used by many companies prior to the rollover date required upgrading or
replacement to comply with such "Year 2000" requirements. The failure of PAS,
its vendors, suppliers or other critical third parties with whom PAS conducts
business to achieve Year 2000 compliance on a timely basis could materially
adversely affect PAS's business.
As of March 1, 2000, PAS has not experienced and does not anticipate any
material adverse effects on its systems and operations as a result of Year 2000
issues. Business is continuing as usual, and internal systems will continue to
be monitored for any likely disruptions. Further, as of March 1, 2000, PAS has
not experienced any operational difficulties as a result of Year 2000 issues
with its vendors, suppliers or other critical third parties with whom PAS
conducts business. However, Year 2000 compliance has many elements and potential
23
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
consequences, some of which may not be foreseeable or may be realized in future
periods. Consequently, there can be no assurance that unforeseen circumstances
may not arise, or that PAS will not in the future identify equipment or systems
which are not Year 2000 compliant.
Although the transition to the Year 2000 did not have any significant impact
on PAS or its systems and operations, PAS will continue to monitor the impact of
Year 2000 on its systems and those of its vendors, suppliers and other critical
third parties. The contingency plans that were developed for use in the event of
Year 2000-related failures will be maintained and generalized for ongoing
business use.
PAS has not spent, and does not anticipate spending in the future, any
material amounts relating to Year 2000 issues. This is due, in part, to PAS's
recent significant upgrades to its data communications network and key data
processing hardware, all of which are Year 2000 compliant.
INFLATION
There was no significant impact on PAS's operations as a result of inflation
during the year ended December 31, 1999, the three months ended December 31,
1998, or the fiscal years ended September 30, 1998 and 1997.
IMPACT OF CHANGES IN ACCOUNTING STANDARDS
Effective October 1, 1998, PAS adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" which required, among other items,
additional disclosures on changes in PAS's pension benefit obligations and fair
values of plan assets. PAS adopted the provisions of SFAS No. 128, "Earnings Per
Share," in fiscal year 1998 which require the presentation of a basic and
diluted earnings per share for all periods presented. Accordingly, PAS's net
loss per common share was computed by dividing the net loss by the weighted
average number of common shares outstanding. Net loss per common share--assuming
dilution did not include PAS's potentially dilutive securities because to do so
would have been antidilutive. PAS also adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income," in fiscal year 1998. This statement
established standards for the reporting and display of comprehensive income and
its components.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The statement
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured by its fair value. Changes in a derivative's fair value are recognized
currently in earnings unless specific hedge accounting criteria are met. The
statement is effective for fiscal years beginning after June 15, 2000. PAS does
not trade in derivative financial instruments and does not use financial
instruments to hedge its exposure to currency or interest rate risk. Management
does not believe the adoption of this statement will have a material impact on
PAS's consolidated financial position or results of operations.
24
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information is submitted pursuant to the requirements of Item
8.
<TABLE>
<S> <C>
Report of Independent Public Accountants, dated March 1,
2000 26
Independent Auditors' Report, dated December 5, 1997 27
Consolidated Balance Sheets as of December 31, 1999 and
1998, and September 30, 1998 28
Consolidated Statements of Income (Loss) for the Year Ended
December 31, 1999, the Three Months Ended December 31,
1998, and the Fiscal Years Ended September 30, 1998 and
1997 29
Consolidated Statements of Shareholders' Equity for the Year
Ended December 31, 1999, the Three Months Ended
December 31, 1998, and the Fiscal Years Ended
September 30, 1998 and 1997 30
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1999, the Three Months Ended December 31,
1998, and the Fiscal Years Ended September 30, 1998 and
1997 31
Notes to Consolidated Financial Statements 32
Report of Independent Public Accountants on Financial
Statement Schedule, dated March 1, 2000 64
Independent Auditors' Report on Financial Statement
Schedule, dated December 5, 1997 65
Schedule II--Valuation and Qualifying Accounts 66
</TABLE>
25
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PepsiAmericas, Inc.:
We have audited the accompanying consolidated balance sheets of
PepsiAmericas, Inc. (formerly known as Pepsi-Cola Puerto Rico Bottling Company)
and Subsidiaries as of December 31, 1999 and 1998, and September 30, 1998, and
the related consolidated statements of income (loss), shareholders' equity and
cash flows for the year ended December 31, 1999, the three months ended
December 31, 1998, and the fiscal year ended September 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PepsiAmericas, Inc. and
Subsidiaries as of December 31, 1999 and 1998, and September 30, 1998, and the
results of their operations and their cash flows for the year ended
December 31, 1999, the three months ended December 31, 1998, and the fiscal year
ended September 30, 1998 in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 1, 2000.
26
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors of PepsiAmericas, Inc. and Subsidiaries:
We have audited the accompanying consolidated statements of income (loss),
shareholders' equity and cash flows of PepsiAmericas, Inc. (formerly Pepsi-Cola
Puerto Rico Bottling Company) ("PAS") and subsidiaries for the year ended
September 30, 1997. These consolidated financial statements are the
responsibility of PAS's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of PepsiAmericas, Inc. and Subsidiaries for the year ended September 30,
1997, in conformity with generally accepted accounting principles.
KPMG LLP
San Juan, Puerto Rico,
December 5, 1997.
Stamp No. 1595002 of the Puerto Rico
Society of Certified Public Accountants
was affixed to the record copy of this report.
27
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
December 31
------------------- September 30
1999 1998 1998
-------- -------- -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,317 $ 23,551 $ 31,405
Accounts receivable:
Trade, less allowance for doubtful accounts of $3,075,
$3,177, and $3,896 48,193 44,964 44,199
Marketing and advertising 13,785 9,895 7,862
Other 7,104 5,015 5,523
Inventories, at cost 32,311 21,125 23,436
Shells, tanks and pallets 8,451 8,100 8,243
Deferred income tax assets 8,042 4,235 5,800
Prepaid expenses and other 11,348 7,848 8,459
- - ------------------------------------------------------------ -------- -------- --------
Total current assets 137,551 124,733 134,927
DEFERRED INCOME TAX ASSETS 15,686 24,062 23,105
LONG-LIVED ASSETS HELD FOR SALE, principally land and
building -- 2,615 2,615
PROPERTY, PLANT AND EQUIPMENT, net 147,779 121,342 122,384
INTANGIBLE ASSETS, net of accumulated amortization 186,695 122,651 123,873
DEFERRED FINANCING COSTS, BEVERAGE POURING RIGHTS AND OTHER
ASSETS 28,432 14,682 11,571
- - ------------------------------------------------------------ -------- -------- --------
Total assets $516,143 $410,085 $418,475
============================================================ ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt $ 7,931 $ 3,788 $ 3,940
Accounts payable 29,050 20,030 23,357
Accrued expenses 39,620 29,554 32,282
- - ------------------------------------------------------------ -------- -------- --------
Total current liabilities 76,601 53,372 59,579
LONG-TERM DEBT AND OTHER LIABILITIES, excluding current
installments 294,119 238,320 237,274
MINORITY INTEREST 35,968 54,530 56,705
ACCRUED PENSION COST -- 1,805 3,110
- - ------------------------------------------------------------ -------- -------- --------
406,688 348,027 356,668
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS' EQUITY:
Class A common stock 50 50 50
Class B common stock 824 168 168
Additional paid-in-capital 222,759 159,384 158,877
Accumulated deficit (113,820) (95,197) (94,451)
Deferred compensation (353) (457) (1)
Accumulated other comprehensive income (loss) (5) (1,890) (2,836)
- - ------------------------------------------------------------ -------- -------- --------
Total shareholders' equity 109,455 62,058 61,807
- - ------------------------------------------------------------ -------- -------- --------
Total liabilities and shareholders' equity $516,143 $410,085 $418,475
============================================================ ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 -------------------
1999 1998 1998 1997
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Net sales $575,743 $136,646 $196,335 $ 99,172
Cost of sales 392,226 94,088 136,466 68,237
- - ---------------------------------------------------------- -------- -------- -------- --------
Gross profit 183,517 42,558 59,869 30,935
Selling, general and administrative expenses 152,025 36,212 57,847 38,648
Amortization of franchise rights and other intangibles 4,426 1,307 1,045 --
Fees related to combination of interests 4,884 -- -- --
Provision for deferred compensation plan termination 3,407 -- -- --
Restructuring charges -- -- 1,728 535
Provision for (reversal of) legal and environmental
reserves (490) -- 760 --
Losses on asset impairments 267 250 800 --
Insurance proceeds from business interruption and other
losses -- (346) (1,309) --
Litigation settlement expenses -- -- -- 13,172
- - ---------------------------------------------------------- -------- -------- -------- --------
Income (loss) from operations 18,998 5,135 (1,002) (21,420)
Other income (expense):
Interest expense, net (22,126) (5,006) (5,647) (1,426)
Other, net (186) 238 120 1
- - ---------------------------------------------------------- -------- -------- -------- --------
Total other income (expense) (22,312) (4,768) (5,527) (1,425)
Income (loss) before income taxes, minority interest and
extraordinary item (3,314) 367 (6,529) (22,845)
Income tax benefit (expense) (4,832) (832) 2,515 3,342
Minority interest, net of taxes (560) 2,145 (501) --
- - ---------------------------------------------------------- -------- -------- -------- --------
Net income (loss) before extraordinary item (8,706) 1,680 (4,515) (19,503)
Extraordinary item, net of taxes (744) -- -- --
- - ---------------------------------------------------------- -------- -------- -------- --------
Net income (loss) $ (9,450) $ 1,680 $ (4,515) $(19,503)
========================================================== ======== ======== ======== ========
Net income (loss) per common share--basic $ (0.11) $ 0.02 $ (0.13) $ (0.91)
========================================================== ======== ======== ======== ========
Net income (loss) per common share--assuming dilution $ (0.11) $ 0.02 $ (0.13) $ (0.91)
========================================================== ======== ======== ======== ========
Weighted average number of common shares outstanding
(in thousands) 86,829 86,760 35,072 21,500
========================================================== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999, THE THREE MONTHS ENDED DECEMBER 31, 1998
AND THE FISCAL YEARS ENDED SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Class A Class B Additional
Common Common Paid-in Accumulated Treasury Deferred
Shares Shares Capital Deficit Stock Compensation
-------- -------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1996 $50 $165 $ 90,738 $ (40,232) $ -- $ --
Contribution of 2,500,000 Class B common shares
by founding shareholders -- -- 13,172 -- (13,172) --
Tendering of 2,500,000 Class B common shares in
partial settlement of litigation -- -- -- -- 13,172 --
Minimum pension liability adjustment -- -- -- -- -- --
Net loss -- -- -- (19,503) -- --
- - ----------------------------------------------- --- ---- -------- --------- ------- -----
BALANCE, September 30, 1997 50 165 103,910 (59,735) -- --
Sale of 190,000 Class B common shares -- 2 948 -- -- --
Sale of 5,000,000 Class A common shares, net of
equity issuance costs of $1,599 -- -- 22,151 -- -- --
Minimum pension liability adjustment -- -- -- -- -- --
Combination of common controlled interests -- 1 31,868 (27,090) -- (1)
Dividends paid by Dakota -- -- -- (3,111) -- --
Net income (loss) -- -- -- (4,515) -- --
- - ----------------------------------------------- --- ---- -------- --------- ------- -----
BALANCE, September 30, 1998 50 168 158,877 (94,451) -- (1)
Deferred compensation on stock options -- -- 507 -- -- (456)
Minimum pension liability adjustment -- -- -- -- -- --
Dividends paid by Dakota -- -- -- (2,426) -- --
Net income (loss) -- -- -- 1,680 -- --
- - ----------------------------------------------- --- ---- -------- --------- ------- -----
BALANCE, December 31, 1998 50 168 159,384 (95,197) -- (457)
Shares issued upon acquisition of minority
interests -- 650 60,464 -- -- --
Shares issued in connection with termination of
deferred compensation plans -- 6 2,911 -- -- --
Amortization of deferred compensation -- -- -- -- -- 104
Foreign currency translation -- -- -- -- -- --
Minimum pension liability adjustment -- -- -- -- -- --
Dividends paid by Dakota -- -- -- (9,173) -- --
Net income (loss) -- -- -- (9,450) -- --
- - ----------------------------------------------- --- ---- -------- --------- ------- -----
BALANCE, December 31, 1999 $50 $824 $222,759 $(113,820) -- $(353)
=============================================== === ==== ======== ========= ======= =====
<CAPTION>
Accumulated
Other Total
Comprehensive Shareholders' Comprehensive
Income (Loss) Equity Income (Loss)
------------- ------------- -------------
<S> <C> <C> <C>
BALANCE, September 30, 1996 $(1,364) $ 49,357
Contribution of 2,500,000 Class B common shares
by founding shareholders -- --
Tendering of 2,500,000 Class B common shares in
partial settlement of litigation -- 13,172
Minimum pension liability adjustment 366 $ 366 $ 366
Net loss -- (19,503) (19,503)
- - ----------------------------------------------- ------- -------- -------
BALANCE, September 30, 1997 (998) 43,392 $19,137
=======
Sale of 190,000 Class B common shares -- 950
Sale of 5,000,000 Class A common shares, net of
equity issuance costs of $1,599 -- 22,151
Minimum pension liability adjustment (1,838) (1,838) (1,838)
Combination of common controlled interests -- 4,778
Dividends paid by Dakota -- (3,111)
Net income (loss) -- (4,515) (4,515)
- - ----------------------------------------------- ------- -------- -------
BALANCE, September 30, 1998 (2,836) 61,807 $(6,353)
=======
Deferred compensation on stock options -- 51
Minimum pension liability adjustment 946 946 $ 946
Dividends paid by Dakota -- (2,426)
Net income (loss) -- 1,680 1,680
- - ----------------------------------------------- ------- -------- -------
BALANCE, December 31, 1998 (1,890) 62,058 $ 2,626
=======
Shares issued upon acquisition of minority
interests -- 61,114
Shares issued in connection with termination of
deferred compensation plans -- 2,917
Amortization of deferred compensation -- 104
Foreign currency translation (5) (5) $ (5)
Minimum pension liability adjustment 1,890 1,890 1,890
Dividends paid by Dakota -- (9,173)
Net income (loss) -- (9,450) (9,450)
- - ----------------------------------------------- ------- -------- -------
BALANCE, December 31, 1999 $ (5) $109,455 $(7,565)
=============================================== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS
THREE MONTHS ENDED
YEAR ENDED ENDED SEPTEMBER 30
DECEMBER 31 DECEMBER 31 -------------------
1999 1998 1998 1997
-------------- --------------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,450) $ 1,680 $ (4,515) $(19,503)
Adjustments to reconcile net loss to net cash used in
operating activities--
Litigation settlement expenses -- -- -- 13,172
Loss on disposition of property, plant and equipment -- -- -- 238
Losses on asset impairments 267 250 800 --
Write off of deferred financing charges 636 -- -- --
Restructuring charges -- -- 1,728 --
Provision for (reversal of) legal and environmental
reserves (490) -- 760 --
Insurance proceeds from business interruption losses -- (346) (1,309) --
Depreciation and amortization 22,920 5,702 9,747 5,971
Noncash interest on long-term debt 5,025 1,536 203 --
Net expense (payments) under deferred compensation plans 339 (13) 13 --
Deferred income taxes 3,782 608 (629) 547
Minority interest, before taxes 561 (1,906) (429) --
Changes in assets and liabilities--
Accounts receivable (3,501) (2,290) 3,524 (2,335)
Inventories (11,070) 2,311 775 1,627
Shells, tanks and pallets (1,004) 143 (496) (114)
Prepaid expenses and other current assets (1,542) 611 (1,558) (216)
Intangible assets -- -- -- (272)
Accounts payable and accrued expenses 18,282 (6,390) (4,112) (6,635)
Other, net 52 -- (154) 16
- - ------------------------------------------------------------ --------- ------- -------- --------
Net cash provided by (used in) operating activities 24,807 1,896 4,348 (7,504)
- - ------------------------------------------------------------ --------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for exclusive beverage pouring rights (3,187) (2,920) (2,536) --
Redemption of short-term investments -- -- -- 12,904
Capital expenditures (29,053) (3,146) (5,517) (4,663)
Proceeds from sales of property and equipment 140 82 720 406
Proceeds from sale of business 700 -- -- --
Acquisition of franchise rights (12,000) -- -- --
Acquisition of businesses (29,371) -- -- --
Other (65) (194) 16 --
- - ------------------------------------------------------------ --------- ------- -------- --------
Net cash provided by (used in) investing activities (72,836) (6,178) (7,317) 8,647
- - ------------------------------------------------------------ --------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of equity issuance costs -- -- 23,101 --
Proceeds from short-term borrowings 95,220 8,500 72,784 712
Repayment of short-term borrowings (34,500) (6,400) (83,693) --
Proceeds from long-term borrowings 105,000 -- -- --
Principal payment on long-term debt (120,830) (2,980) (2,000) (1,722)
Proceeds from capital leases -- -- -- 1,793
Prepayment of capital lease obligations -- -- -- (985)
Dividends paid to controlling shareholder (9,173) (2,426) (3,111) --
Cash distribution to minority interest holder -- (266) -- --
Payment of deferred financing charges (2,922) -- -- --
Net cash provided by (used in) financing activities 32,795 (3,572) 7,081 (202)
- - ------------------------------------------------------------ --------- ------- -------- --------
CHANGE IN CASH AND CASH EQUIVALENTS (15,234) (7,854) 4,112 941
- - ------------------------------------------------------------ --------- ------- -------- --------
CASH AND CASH EQUIVALENTS, beginning of period 23,551 31,405 19,621 18,680
EFFECT OF RESTATEMENT ON CASH AND CASH EQUIVALENTS -- -- 7,672 --
CASH AND CASH EQUIVALENTS, end of period $ 8,317 $23,551 $ 31,405 $ 19,621
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for--
Interest $ 20,015 $ 9,859 $ 3,222 $ 2,560
Income taxes 7,238 44 333 258
Noncash transactions- -- -- -- 599
Capital leases reclassified as operating leases -- -- -- 287
Proceeds from sale of asset, net of underlying debt -- 507 -- --
Deferred compensation on stock options
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND NATURE OF OPERATIONS
PepsiAmericas, Inc. and its subsidiaries (collectively, the "Company" or
"PAS") bottle, distribute and market soft drinks and other beverage products,
primarily Pepsi-Cola and related brands, in exclusive franchise territories in
the mid-southern and north-central United States, and in Puerto Rico and
Jamaica. The Company also distributes beer products, primarily Miller Brewing
Company and Heineken brands, in southern Louisiana.
PAS operates under exclusive franchise agreements with soft drink
concentrate producers, including "master" bottling and fountain syrup agreements
with PepsiCo for the manufacture, packaging, sale and distribution of Pepsi-Cola
products. There are similar agreements with Cadbury Schweppes and other brand
owners. The franchise agreements exist in perpetuity and contain operating and
marketing commitments and conditions for termination. PAS distributes alcoholic
beverages pursuant to distributor agreements that contain provisions regarding
the distribution and sale of alcoholic beverages.
On July 17, 1998, P-PR Transfer LLP, a partnership principally owned by
Pohlad Companies, acquired a controlling interest in PepsiAmericas, Inc.,
("PepsiAmericas", formerly known as Pepsi-Cola Puerto Rico Bottling Company).
Effective with the change in control, PepsiAmericas and two related party
entities, Delta Beverage Group, Inc. ("Delta") and Dakota Beverage
Company, Inc. ("Dakota"), shared common ownership and were under the common
control of Pohlad Companies. Effective October 15, 1999, PepsiAmericas combined
with Delta and Dakota in a transaction accounted for as a merger of entities
under common control, with the acquisition of certain minority interests in
Delta recognized using the "purchase" method of accounting. Pohlad Companies
continues to be the controlling shareholder in PAS. The accompanying
consolidated financial statements have been restated beginning July 17, 1998 to
include the financial position and results of operations of PepsiAmericas, Delta
and Dakota since that date.
The consolidated financial statements include the accounts of PepsiAmericas
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. Effective with the combination of interests, Delta became
a wholly owned subsidiary of PepsiAmericas. The proportionate share of Delta's
common shareholders' equity which was not owned or controlled by Pohlad
Companies is reflected as a minority interest in the accompanying consolidated
financial statements through October 15, 1999, the combination date. Minority
interest also includes a joint venture partner's equity in a joint venture
involving Delta (the "Delta Joint Venture"), and PAS's obligation on preferred
stock, including dividends, issued by Delta to outside investors. Throughout
fiscal year 1997, PAS maintained an effective equity interest in Buenos Aires
Embotelladora S. A. ("BAESA"), a South American bottler of Pepsi-Cola products,
of approximately 17%, which was accounted for using the equity method until such
investment was reduced to zero in fiscal year 1996. Effective June 17, 1998,
PAS's remaining ownership in BAESA was transferred to PAS's then shareholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the
32
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include temporary investments in short-term
securities, primarily discount notes, with original maturities of three months
or less. As of December 31, 1999 and 1998, PAS had bank overdrafts of
approximately $8,936 and $2,054, respectively. Bank overdrafts are included in
accounts payable in the accompanying consolidated balance sheets.
BOTTLER INCENTIVES
PepsiCo and other brand owners, at their sole discretion, provide PAS with
various forms of marketing support. This marketing support is intended to cover
a variety of programs and initiatives, including direct marketplace support,
capital equipment funding and shared media and advertising support. Based on the
objective of the programs and initiatives, marketing support is recorded as an
adjustment to net sales or a reduction of selling, general and administrative
expenses. Direct marketplace support is primarily funding by PepsiCo and other
brand owners of sales discounts and similar programs and is recorded as an
adjustment to net sales. Capital equipment funding is designed to support the
purchase and placement of marketing equipment and is recorded within selling,
general and administrative expenses. Shared media and advertising support is
recorded as a reduction to selling, general and administrative expenses. There
are no conditions or other requirements that could result in a repayment of
marketing support received.
The total amount of incentives received from PepsiCo and other brand owners
to cover a variety of marketing programs and initiatives totaled approximately
$41,295, $10,824 and $13,637 in 1999, the three month period ended December 31,
1998 and in fiscal year 1998, respectively. Of these amounts, approximately
$24,243, $4,740 and $8,009 for 1999, the three month period ended December 31,
1998 and fiscal year 1998, respectively, were recorded in net sales, with the
remainder recorded in selling, general and administrative expenses. The amount
of bottler incentives received from PepsiCo was more than 90% of total bottler
incentives in each of the periods, with the balance received from the other
brand owners.
EXCLUSIVE BEVERAGE POURING RIGHTS CONTRACTS
Amounts pursuant to contracts providing PAS with exclusive beverage pouring
rights are capitalized and amortized on a straight-line basis over the terms of
the related contracts. PepsiCo, at its sole discretion, provides direct funding
for certain pouring rights contracts. PepsiCo funding for specific multi-year
contracts is deferred and recognized as an offset to amortization of the
designated pouring rights contract on a straight-line basis over the terms of
the related contracts. PepsiCo support provided for nonspecific pouring rights
contracts is deferred and recognized as an offset to amortization of the pouring
rights asset on a straight-line basis in accordance with the terms of such
agreements. At December 31, 1999, pouring rights assets, net of related PepsiCo
support, totaled approximately $17,171, with the current portion of
approximately $1,891 reflected in prepaid expenses and other current assets in
the accompanying consolidated balance sheet.
33
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLES AND OTHER ASSETS
As of December 31, 1999 and 1998, and September 30, 1998, franchise rights
approximated $186,695, $122,083 and $123,228. Franchise rights are being
amortized on a straight-line basis over 40 years. Other intangibles, which were
fully amortized through December 31, 1999, were amortized using the
straight-line method over their estimated useful lives.
The Company periodically evaluates the recoverability of its intangible
assets as well as their amortization periods to determine whether an adjustment
to the carrying value or a revision to the estimated useful lives is
appropriate.
INCOME TAXES
PAS uses the liability method of accounting for deferred income taxes.
Deferred income taxes reflect the estimated future tax consequences attributable
to operating loss and tax credit carryforwards, and temporary differences
between PAS's assets and liabilities for financial reporting and income tax
purposes, using income tax rates currently in effect. Deferred tax assets are
recognized if management believes, based on available evidence, that it is "more
likely than not" that the future income tax benefits will be realized. Deferred
tax assets or liabilities are classified based upon the current or long-term
classification of the asset or liability giving rise to the temporary difference
or the expected future use of the loss or credit carryforward.
REVENUE RECOGNITION
Revenues are recognized when goods are shipped.
MARKETING AND ADVERTISING COSTS
PAS is involved in a variety of programs to promote its products.
Advertising and marketing costs are expensed in the year incurred. Certain
advertising and marketing costs incurred by PAS are reimbursed by PepsiCo and
other brand owners in the form of marketing support. This form of marketing
support is recorded as a reduction in advertising and marketing expenses.
Advertising and marketing expenses were $4,340, $1,841 and $4,732 in 1999, the
three month period ended December 31, 1998 and fiscal year 1998, respectively,
net of brand owner support.
EARNINGS PER SHARE
The Company presents basic and diluted earnings per share in accordance with
the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." Accordingly, the Company's net income or loss per common
share is computed by dividing the net income or loss by the weighted average
number of common shares outstanding. For 1999 and fiscal years 1998 and 1997,
net loss per common share-assuming dilution does not include the Company's
potentially dilutive securities (refer to Note 21) because to do so would be
anti-dilutive. For the three month period ended December 31, 1998, net income
per common share-assuming dilution was computed assuming that all potentially
dilutive securities were
34
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
converted into common shares at the beginning of the period. A reconciliation of
the amounts included in the computation of income (loss) per common share and
income (loss) per common share--assuming dilution is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 ------------------
1999 1998 1998 1997
------------ ------------ ------- --------
<S> <C> <C> <C> <C>
Net income (loss) $(9,450) $ 1,680 $(4,515) $(19,503)
Effective of dilutive securities
Stock options -- -- -- --
- - ----------------------------------------------------------- ------- ------- ------- --------
Net income (loss)--assuming dilution $(9,450) $ 1,680 $(4,515) $(19,503)
=========================================================== ======= ======= ======= ========
Average common shares outstanding 86,829 86,760 35,072 21,500
Effects of dilutive securities
Stock options -- 63 -- --
- - ----------------------------------------------------------- ------- ------- ------- --------
Average common shares outstanding--assuming dilution 86,829 86,823 35,072 21,500
=========================================================== ======= ======= ======= ========
Net income (loss) per common share $ (0.11) $ 0.02 $ (0.13) $ (0.91)
=========================================================== ======= ======= ======= ========
Net income (loss) per common share--assuming dilution $ (0.11) $ 0.02 $ (0.13) $ (0.91)
=========================================================== ======= ======= ======= ========
</TABLE>
STOCK-BASED COMPENSATION
Stock options and other stock-based compensation awards are accounted for
using the intrinsic value method prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations.
ENVIRONMENTAL REMEDIATION COSTS
Costs associated with environmental remediation obligations are accrued when
such costs are probable and reasonably estimable. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value.
CONCENTRATION OF CREDIT RISK
Management believes there are no significant concentrations of credit risk
with any individual party or groups of parties. PAS's customer base is comprised
of a large number of entities located within the mid-southern and north-central
United States, and in Puerto Rico and Jamaica.
35
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair value of PAS's financial instruments, except for fixed
rate long-term debt, approximate their carrying amounts. For fixed rate
long-term debt, fair value was estimated based on the current rates offered for
similar obligations and maturities. The estimated fair value of total long-term
debt and other liabilities was $302,050 and $249,349 at December 31, 1999 and
1998, and $248,955 at September 30, 1998, compared to a recorded value of
$302,050 and $242,108 at December 31, 1999 and 1998, and $241,214 at
September 30, 1998.
TRANSLATION OF FINANCIAL STATEMENTS
The balance sheet for operations in Jamaica was translated into U.S. dollars
at the year-end exchange rate, while the statement of income (loss) was
translated using an average rate. The adjustment resulting from the financial
statement translation is included as a cumulative translation adjustment in
accumulated other comprehensive income (loss). Gains and losses resulting from
foreign currency transactions are included in earnings.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured by its fair value. Changes in a
derivative's fair value are recognized currently in earnings unless specific
hedge accounting criteria are met. The statement is effective for fiscal years
beginning after June 15, 2000. PAS does not trade in derivative financial
instruments and does not use financial instruments to hedge its exposure to
currency or interest rate risk. Management does not believe the adoption of this
statement will have a material impact on PAS's consolidated financial position
or results of operations.
FISCAL YEAR
The Company's fiscal year ends on December 31. Prior to January 1, 1999, the
Company's fiscal year ended on September 30. Effective on that date, the Company
changed its fiscal year-end from September 30 to December 31. As a result, the
Company reported its results for the three month transition period ended
December 31, 1998, and has reported its results in 1999 on a calendar year
basis.
RECLASSIFICATIONS
Certain December 31, 1998 and September 30, 1998 balances have been
reclassified to conform to the December 31, 1999 presentation.
36
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. CHANGE IN CONTROL
Pursuant to the terms of a ten-year voting trust agreement and related stock
option agreement executed on September 28, 1996, PAS's 5,000,000 authorized and
outstanding Class A shares were placed into a voting trust. The then trustee of
the trust was the president of PepsiAmericas, who held an unrestricted right to
vote such shares and had the right to purchase such shares, for the benefit of
PepsiAmericas, through September 28, 1998 at $1 per share. In a transfer
agreement (the "Agreement") effective July 17, 1998, the then president assigned
to P-PR Transfer, LLP the stock option agreement for the purchase of the
Class A shares. P-PR Transfer, LLP paid PepsiAmericas $23,750 under the
Agreement and simultaneously purchased the 5,000,000 Class A shares for $1 per
share. Payments by P-PR Transfer, LLP to PepsiAmericas pursuant to the Agreement
are recorded as additional paid-in capital, net of approximately $1,599 in
equity issuance costs. Also effective July 17, 1998, P-PR Transfer, LLP
purchased a total of 6,210,429 Class B shares under stock option agreements
between P-PR Transfer, LLP and the Class B shareholders. V. Suarez & Co., Inc.
("Suarez") then purchased 1,000,000 Class A shares and 1,242,085 Class B shares
from P-PR Transfer, LLP. The combination of these transactions resulted in a
change in control of PepsiAmericas.
On July 17, 1998, PepsiAmericas issued a warrant to P-PR Transfer, LLP and
Suarez for the purchase of an additional 1,360,000 and 340,000 Class B shares,
respectively, for $6.875 per share, exercisable at any time during the 90 month
period from the date of the warrant.
The Class A shares have a six-to-one voting preference over the Class B
shares.
4. COMBINATION OF INTERESTS
As described above, on July 17, 1998 P-PR Transfer, LLP, a partnership
principally owned by Pohlad Companies, acquired a controlling interest in
PepsiAmericas. Effective with the change in control, PepsiAmericas and two
related party entities, Delta Beverage Group, Inc. and Dakota Beverage Company,
Inc. shared common ownership and were under the common control of Pohlad
Companies. On June 28, 1999, PepsiAmericas entered into share exchange
agreements with the shareholders of Delta and Dakota. On October 1, 1999, the
PepsiAmericas shareholders approved the issuance of shares as outlined in the
exchange agreements. On October 15, 1999, PepsiAmericas issued 18,310,006 and
46,760,000 shares, respectively, of its Class B common shares in connection with
the acquisitions of Delta and Dakota, pursuant to these exchange agreements.
Pohlad Companies continues to be the controlling shareholder in PAS (the
"controlling shareholder").
The share exchange transactions (the "combination") were accounted for as a
combination of entities under common control. Accordingly, the common equity
interests of Delta and Dakota owned by Pohlad Companies (representing 23.2% of
Delta and 100% of Dakota) were combined with PepsiAmericas at historical cost,
and the remaining common equity interests in Delta (the "Delta minority
interests") were acquired at fair value and accounted for using the "purchase"
method of accounting. PAS incurred approximately $6,548 in professional fees and
other costs related to the combination of interests. Costs of approximately
$4,884 attributable to combining the common equity interests of PepsiAmericas,
Delta and Dakota have been expensed, while remaining costs are included in total
costs to acquire the Delta minority interests.
37
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. COMBINATION OF INTERESTS (CONTINUED)
Costs to acquire the Delta minority interests in excess of tangible net
assets acquired of approximately $123,509 were attributed to franchise rights
and are being amortized on a straight-line basis over 40 years. The consolidated
financial statements as of December 31, 1999 include a preliminary purchase
price allocation for this acquisition.
The accompanying consolidated financial statements have been restated
beginning July 17, 1998 to include the financial position and results of
operations of PepsiAmericas, Delta and Dakota since that date, with the Delta
minority interests reported separately as a minority interest prior to the
combination date. The results of operations for PepsiAmericas, Delta and Dakota
for periods prior to the combination, and the combined amounts included in the
accompanying consolidated statements of income (loss) are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended Fiscal Year Ended Fiscal Year Ended
September 30 December 31 September 30 September 30
1999 1998 1998 1997
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales:
PepsiAmericas $ 79,288 $ 28,328 $ 99,405 $ 99,172
Delta 274,559 86,178 74,792 --
Dakota 76,473 23,591 22,553 --
Eliminations (521) (1,451) (415) --
- - ------------------------------------ -------- -------- -------- --------
$429,799 $136,646 $196,335 $ 99,172
==================================== ======== ======== ======== ========
Net earnings (loss):
PepsiAmericas $ (6,990) $ (1,420) $ (9,610) $(19,503)
Delta (417) (2,776) (193) --
Dakota 12,109 3,698 3,468 --
Other, including eliminations 209 2,178 1,820 --
- - ------------------------------------ -------- -------- -------- --------
$ 4,911 $ 1,680 $ (4,515) $(19,503)
==================================== ======== ======== ======== ========
</TABLE>
The following unaudited pro forma financial information reflects the
combined results of operations of PAS, including the acquisition of the Delta
minority interests, as if the combination had occurred as of the beginning of
1999. The pro forma adjustments are based upon available information, the
preliminary purchase price allocation and certain assumptions that PAS believes
are reasonable. The pro forma information does not purport to represent the
actual results of operations if the combination had occurred at the beginning of
the 1999. In addition, the information may not be indicative of future results.
<TABLE>
<CAPTION>
(Unaudited) 1999
- - ----------- --------
<S> <C>
Net sales $575,743
Net loss (14,905)
Loss per common share $ (0.17)
</TABLE>
38
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. PREFERRED STOCK OF SUBSIDIARY
Delta has authorized preferred stock consisting of 30,000 designated
Series AA preferred shares. The Series AA preferred stock does not contain
voting nor conversion rights. Series AA preferred stockholders receive
cumulative dividends at an annual rate of 6% based on the $5 stated value per
share. The rate will increase 2% annually beginning October 1, 2004, but is
limited to a cumulative increase of 8%. Commensurate with the October 15, 1999
combination, dividends are payable quarterly in cash. Prior to the combination,
dividends were payable in cash or in additional shares of Series AA preferred
stock. Company obligations for dividends on preferred stock issued by Delta to
outside investors are recorded as minority interest expense in the accompanying
consolidated statements of income (loss). Delta's preferred stock, including
dividends paid with additional preferred shares through October 15, 1999, is
reflected as a minority interest obligation in the accompanying consolidated
balance sheets.
6. ACQUISITIONS
On December 3, 1999, PAS acquired the soft drink business of Desnoes and
Geddes Limited, a Jamaican bottler of Pepsi-Cola products and other brands and a
brewer of Red Stripe beer. The purchase price, consisting primarily of equipment
and bottling and distribution rights, was approximately $27,700 cash. Subsequent
thereto, PAS sold the franchise rights to certain brands to PepsiCo for
approximately $5,000. Purchase price attributed to the value of the franchise
rights, net of franchise rights sold to PepsiCo, was approximately $9,841 and
was capitalized. It is being amortized ratably over 40 years.
In July 1999, PAS entered into a contract rights release agreement with
Seven-Up/RC Bottling Company of Puerto Rico, Inc. ("Seven-Up/RC") pursuant to
which Seven-Up/RC released its exclusive rights for the bottling and
distribution of the Seven-Up, Sunkist, Welch's and Schweppes brands in Puerto
Rico. The purchase price consisted of $12,000 cash. PAS obtained such releases
as a precondition to its entry into franchise agreements with each respective
franchisor. The purchase price was capitalized as the value of the franchise
rights, and is being amortized ratably over 40 years.
During 1999 PAS acquired S&R Vending Company and C&C Vending Company,
full-line vending operations based in Wahpeton, North Dakota, and Aberdeen,
South Dakota, respectively. The total purchase price was not significant.
The acquisitions described above were accounted for as purchases, and PAS's
consolidated results of operations include the results of the acquisitions since
their respective purchase dates. Costs of the franchises in excess of net assets
acquired of approximately $23,235 are being amortized on a straight-line basis
over 40 years. The consolidated financial statements as of December 31, 1999
include preliminary purchase price allocations for the acquisitions. The impact
of the acquisitions on PAS's consolidated results of operations was not
material.
7. RESTRUCTURING CHARGE
During the fourth quarter of fiscal year 1998, following the change in
control, a restructuring charge of $1,728 was established under a plan to
improve PAS's performance. The charge included approximately $679 of severance
and related charges for the elimination of 17 administrative personnel, $224 of
accruals for future
39
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. RESTRUCTURING CHARGE (CONTINUED)
payments to exit activities, including canceling lease agreements, and $825 of
asset writedowns related to the elimination of certain product lines and exiting
certain other business strategies. Severance payments in 1999, the three month
period ended December 31, 1998 and in fiscal year 1998 totaled approximately
$223, $409 and $47, respectively, while payments relating to other exit
activities in the three month period ended December 31, 1998 and in fiscal year
1998 approximated $116 and $108, respectively. Through December 31, 1999, all
restructuring activities had been completed.
8. LONG-LIVED ASSETS HELD FOR SALE
During fiscal year 1998, PAS recorded a noncash charge of $800 for the
additional impairment of an idle manufacturing facility in Puerto Rico held for
sale. The resulting carrying value of the manufacturing plant was consistent
with an appraisal on the facility obtained during the three months ended
December 31, 1998. As a result of increased production and the additional brands
acquired in the Seven-Up/RC acquisition (refer to Note 6), in 1999 PAS elected
to renovate the facility as a distribution warehouse. Consequently, such assets
(principally land and building) have been reclassified to property and equipment
in the accompanying consolidated balance sheet.
9. SALE OF BUSINESS
In December 1998, PAS agreed to sell substantially all net assets relating
to the bottling, sale and distribution of potable water under the "Cristalia"
tradename to Cristalia Acquisition Corp., and recorded a $250 non-cash charge
for the estimated impairment of the Cristalia net assets. The noncash charge was
reflected as a writedown of Cristalia's long-lived assets in the December 31,
1998 consolidated balance sheet. PAS agreed to continue the distribution of
Cristalia water for the purchaser.
The sale was finalized in April 1999 and resulted in an additional
impairment charge of $267. The sales price of $1,200 consisted of $700 cash and
a $500 note receivable due in four annual installments beginning March 31, 2000.
The note may also be reduced by royalties earned by the purchaser on the
distribution of Cristalia water by PAS. The note receivable bears interest at
the Treasury Rate, as defined (approximately 5.12% as of December 31, 1999), and
is unsecured. As of December 31, 1999, the note receivable balance approximated
$454. The note receivable is included in other assets in the accompanying
consolidated balance sheet. Current installments on the note receivable of
approximately $73 are included in other receivables in the accompanying
consolidated balance sheet.
10. BUSINESS INTERRUPTION AND OTHER LOSSES
For the period from September 22, 1998 through October 21, 1998, PAS
incurred business interruption losses in Puerto Rico resulting from Hurricane
Georges. As the collection of a claim filed under PAS's business interruption
insurance policy was probable, PAS recorded anticipated recoveries of $346 in
the three month period ended December 31, 1998 and $1,309 in fiscal year 1998
attributable to business interruption and other losses. In 1999 PAS collected
the anticipated amount of insurance recoveries.
40
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market and included the following:
<TABLE>
<CAPTION>
December 31
----------------- September 30
1999 1998 1998
------- ------- -------------
<S> <C> <C> <C>
Raw materials $12,844 $ 4,418 $ 5,890
Finished goods 19,467 16,707 17,381
Spare parts and supplies -- -- 117
Work-in process -- -- 48
- - -------------------------------------------------------- ------- ------- -------
$32,311 $21,125 $23,436
======================================================== ======= ======= =======
</TABLE>
12. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Property and equipment
renewals and betterments are capitalized, while maintenance and repair
expenditures are charged to operations currently. Property and equipment under
capital leases are stated at the present value of the minimum lease payments.
Depreciation is calculated using the straight-line method over the estimated
useful lives of purchased assets, or the shorter of the lease terms or the
estimated useful lives of assets acquired under capital lease arrangements.
Those lives are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 33-40
Leasehold improvements 7-15
Machinery and equipment 2-15
</TABLE>
Property and equipment included the following:
<TABLE>
<CAPTION>
December 31
--------------------- September 30
1999 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
Land and improvements $ 14,428 $ 12,430 $ 12,490
Buildings and improvements 44,267 42,026 41,426
Machinery and equipment 217,704 183,253 187,157
- - ---------------------------------------------------- --------- --------- ---------
276,399 237,709 241,073
Less: Accumulated depreciation (128,620) (116,367) (118,689)
- - ---------------------------------------------------- --------- --------- ---------
$ 147,779 $ 121,342 $ 122,384
==================================================== ========= ========= =========
</TABLE>
41
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
13. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31
----------------- September 30
1999 1998 1998
------- ------- -------------
<S> <C> <C> <C>
Payroll and related benefits $ 8,636 $ 4,097 $ 7,545
Income and other taxes 4,455 3,717 1,141
Marketing and advertising costs 6,714 8,039 6,612
Insurance and related costs 4,469 4,821 4,987
Interest 3,195 2,385 6,420
Restructuring reserves -- 223 748
Legal and environmental reserves -- 660 760
Accrued trade payables 7,995 3,002 1,884
Other 4,156 2,610 2,185
- - -------------------------------------------------------- ------- ------- -------
$39,620 $29,554 $32,282
======================================================== ======= ======= =======
</TABLE>
14. INVESTMENT IN BAESA
Throughout fiscal year 1997, PAS owned 12,345,348 shares, or approximately
17%, of the outstanding capital stock of BAESA. In 1997, the Buenos Aires Stock
Exchange and the New York Stock Exchange suspended trading of BAESA shares due
to its continued poor financial results. During fiscal year 1998, BAESA entered
into a long-term financial restructuring plan with its major debt holders in
Argentina whereby BAESA's unsecured lenders exchanged debt for substantially all
of the equity in BAESA. PAS did not exercise its right under a related rights
offering to retain its current proportionate ownership in BAESA, resulting in a
dilution of PAS's equity interest from approximately 17% to approximately 0.34%.
Effective June 17, 1998, PAS's remaining ownership in BAESA was transferred to
PAS's existing shareholders. PAS's recorded investment in BAESA had been reduced
to zero in fiscal year 1996.
42
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt and other liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31
------------------- September 30
1999 1998 1998
-------- -------- -------------
<S> <C> <C> <C>
Term loan A, interest at 8.18% at December 31, 1999,
due August 30, 2002 $ 30,000 $ -- $ --
Term loan B, interest at 8.68% at December 31, 1999,
due August 30, 2003 65,000 -- --
Term loan, interest at the prime rate plus 2.5%
(10.25% and 10.75% at December 31, 1998 and
September 30, 1998, respectively), retired
October 1999 -- 23,048 23,330
Term loan, interest at 6.35%, retired October 1999 -- 5,000 5,000
Senior notes payable, 9.75%, due December 16, 2003 120,000 120,000 120,000
Senior notes payable, 7.39%, retired October 1999 -- 8,450 8,450
Senior notes payable, 6.97%, retired October 1999 -- 20,000 20,000
Subordinated notes payable, 11%, retired October 1999 -- 48,573 46,041
Revolving line of credit 69,920 9,600 10,000
Note payable to Poydras, interest at the prime rate
plus 1% (9.50%, 8.75% and 9.25% at December 31, 1999
and 1998, and September 30, 1998, respectively), due
December 31, 2007 1,839 1,839 1,839
Capital lease obligations -- 144 301
Marketing support obligation, imputed interest at
8.25% to 8.75%, payments due quarterly through
April 26, 2001 203 331 371
Obligations under deferred compensation plans 2,012 3,333 3,678
Deferred purchase obligation 900 900 900
Obligations under exclusive beverage pouring rights
contracts 10,867 -- --
Other 1,309 890 1,304
- - ------------------------------------------------------ -------- -------- --------
302,050 242,108 241,214
Less: Current installments (7,931) (3,788) (3,940)
- - ------------------------------------------------------ -------- -------- --------
$294,119 $238,320 $237,274
====================================================== ======== ======== ========
</TABLE>
On October 15, 1999, PAS entered into a credit agreement with a syndicate of
banks led by Bank of America, N.A. ("Bank of America") which provides for two
term loan facilities ("Term Loan A" and "Term Loan B") totaling $95,000. The
proceeds from the term loan facilities were used to retire most of PAS's
existing term loans, senior notes and subordinated notes, except for the 9.75%
senior notes. The $30,000 Term Loan A is payable in 12 quarterly installments
beginning in January 2000, and the $65,000 Term Loan B is payable in
43
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. LONG-TERM DEBT AND OTHER LIABILITIES (CONTINUED)
16 quarterly installments beginning in January 2000. The credit agreement also
includes a revolving line of credit totaling $90,000 that matures in October
2002 (the "revolving line of credit"). Borrowings under the revolving line of
credit funded the remaining portion of the retired existing debt and a portion
of the combination of interests fees described in Note 4, and are used to fund
"permitted" acquisitions, as defined, and for general corporate purposes. The
term loan facilities and revolving line of credit bear interest, at PAS's
option, at (1) LIBOR, as adjusted, plus a defined margin, or (2) a defined
margin over the higher of (a) Bank of America's prime rate or (b) the federal
funds rate plus 0.5% (the "base rate"). Interest on the term loans and the
revolving line of credit is payable quarterly.
The revolving line of credit includes a swing line facility of up to $5,000
and a $2,500 limit for the issuance of letters of credit. Swing line loans bear
interest at either the base rate or at an otherwise mutually agreed upon rate of
interest. The credit agreement also provides for a 0.5% fee on the unused line
of credit commitment and a letter of credit facility fee. Borrowings under the
credit agreement are collateralized by a priority lien on all Company assets not
subject to a prior lien or encumbrance.
As of December 31, 1999, $65,220 was outstanding under the revolving line of
credit, including amounts outstanding under the swing line facility of $400. The
interest rate as of December 31, 1999 on amounts outstanding under the swing
line facility was 9.0%, while the interest rate on remaining amounts outstanding
ranged from 8.18% to 9.0%.
In December 1996, Delta placed $120,000 of new senior notes and executed a
$30,000 bank revolving line of credit. In a registration statement filed with
the Securities and Exchange Commission under the Securities Act of 1933 and
declared effective in February 1997, Delta exchanged the $120,000 senior notes
for new $120,000 senior notes. The senior notes are general unsecured
obligations of Delta. Interest on the senior notes is payable semi-annually on
June 15 and December 15. The senior notes mature on December 16, 2003.
Delta has available a $30,000 revolving line of credit which matures on
December 16, 2001 and bears interest, at Delta's option, at LIBOR or a defined
margin over the higher of (1) the bank's prime rate or (2) the federal funds
rate plus 0.5% (the "base rate"). Borrowings are limited to the sum of 80% of
Delta's eligible receivables and 50% of Delta's eligible inventory. The
revolving line of credit includes a swing line facility of up to $2.5 million.
Swing line loans bear interest at either the base rate or at an otherwise
mutually agreed upon rate of interest. The revolving line of credit also
includes a $10,000 limit for the issuance of letters of credit; the letter of
credit facility fee is based on the Eurodollar applicable margin less 0.125%.
The agreement also provides for a fee on the unused commitment ranging from
0.25% to 0.50%. Borrowings under the line of credit are secured by Delta's
accounts receivable and inventory. Interest and commitment fees are payable
quarterly.
As of December 31, 1999 and 1998, and September 30, 1998, $4,700, $5,600 and
$3,500, respectively, was outstanding under this revolving line of credit. This
includes amounts outstanding under the swing line facility of $2,500 as of
December 31, 1999 and 1998, and September 30, 1998. The interest rate as of
December 31, 1999 and 1998, and September 30, 1998, on amounts outstanding under
the swing line facility was 6.92%, 6.88% and 7.86%, respectively, while the
interest rate on remaining amounts outstanding was 9.0%, 8.25% and 8.75%.
44
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. LONG-TERM DEBT AND OTHER LIABILITIES (CONTINUED)
Prior to the October 15, 1999 debt refinancing, PepsiAmericas maintained a
credit agreement with a bank that provided for a $25,000 term loan payable in
120 principal payments with a balloon payment at maturity in April 2007.
PepsiAmericas was required to maintain a $5,000 cash balance with the bank at
December 31, 1998 and September 30, 1998 which was restricted from use. The
credit agreement also included a $5,000 revolving credit facility. There were no
borrowings outstanding under the revolving credit facility as of December 31,
1998 or September 30, 1998. The term loan and revolving credit facility bore
interest at 2.5% over the LIBOR rate, if Eurodollar funds were available,
otherwise at the highest prime rate or base rate of interest published from time
to time in the Wall Street Journal by principal commercial banks headquartered
in New York, NY.
Delta formerly maintained subordinated notes with interest due semi-annually
on April 1 and October 1, that could be paid in cash or, at the option of Delta,
by the issuance of additional subordinated notes ("PIK Notes"). The PIK Notes
bore interest at 11% or 15% depending upon whether the terms of the note
agreement would have permitted Delta to pay any portion of the interest in cash.
Delta issued additional subordinated notes of $5,490, $2,532 and $4,935 under
this provision during 1999, for the three months ended December 31, 1998 and in
fiscal year 1998, respectively. These additional notes bore interest at 11% and
are included with subordinated notes payable in the preceding table. The
subordinated notes were to mature on December 23, 2003, but were among the debt
retired in the October 15, 1999 debt refinancing.
Prior to the October 15, 1999 debt refinancing, Dakota maintained $20,000 in
secured senior notes payable in varying semi-annual installments through
February 2003, an additional $20,000 in secured senior notes payable beginning
February 2002, and a $5,000 term loan with a bank payable beginning August 1,
1999 which bore interest at LIBOR plus 1.1%. Dakota also maintained a $25,000
revolving line of credit with a bank which bore interest at LIBOR plus 1.1%. As
of December 31, 1998 and September 30, 1998, $4,000 was outstanding under the
revolving line of credit.
In connection with the October 15, 1999 debt refinancing, the Company
incurred financing fees of approximately $2,902. Costs incurred to obtain
long-term financing are deferred and amortized as adjustments of interest using
the effective interest method over the terms of the related agreements. Deferred
financing costs relating to the debt retired in 1999 of approximately $636 were
written off. This write-off and a prepayment penalty for the early retirement of
the Dakota senior notes of approximately $604, less a related income tax benefit
of $496, are reflected as an extraordinary item in the 1999 consolidated
statement of income (loss).
PAS's long-term debt agreements require, among other things, the maintenance
of certain minimum financial ratios and financial requirements. As of
December 31, 1999 and 1998, and September 30, 1998, PAS was in compliance with
all debt covenants.
In 1995, Delta acquired Miller Brands of Greater New Orleans, Inc. The
purchase price included a $900 deferred obligation payable upon the Miller
business achieving an annual $8,000 gross profit. Also, in connection with the
1995 and 1996 acquisitions of certain Miller Brewing Company beer
distributorships, PAS entered into marketing support agreements with Miller
Brewing Company's advertising agency for the general
45
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. LONG-TERM DEBT AND OTHER LIABILITIES (CONTINUED)
promotion of Miller products in the greater New Orleans, Louisiana area. The
marketing support obligations have been capitalized and are being amortized over
five years.
Current maturities of obligations under exclusive beverage pouring rights
contracts are included in accrued expenses in the consolidated balance sheets.
The remaining obligations will be paid over the respective contract terms, which
range from two to ten years.
Scheduled maturities of long-term debt for the four years subsequent to 2000
are as follows:
<TABLE>
<CAPTION>
Year Amount
- - ---- -------
<S> <C>
2001 $10,724
2002 29,432
2003 221,737
2004 57
</TABLE>
16. SHAREHOLDERS' EQUITY
CLASS A COMMON SHARES
As of December 31, 1999 and 1998, and September 30, 1998, Class A common
stock consisted of 5,000,000, $0.01 par value, authorized, issued and
outstanding common shares.
CLASS B COMMON SHARES
As of December 31, 1999, Class B common stock consisted of 145,000,000,
$0.01 par value, authorized common shares, with 82,314,377 common shares issued
and outstanding.
As of December 31, 1998 and September 30, 1998 (prior to the combination of
interests transaction--see Note 4), Class B common stock consisted of
35,095,000, $0.01 par value, authorized common shares, with 16,743,251.80 common
shares issued and outstanding, and 1,000, $1.00 par value, authorized, issued
and outstanding common shares.
17. INCOME TAXES
PAS is subject to Federal, state and foreign income taxes in the U.S. and
certain foreign tax jurisdictions in which the Company has operations. As of
December 31, 1999, PAS had U.S. Federal net operating loss and tax credit
carryforwards (the "U.S. carryforwards") of approximately $132,821 which expire
through 2020 and foreign net operating loss carryforwards of approximately
$102,174 which expire through 2007. The U.S. carryforwards include approximately
$30,983 in net operating loss carryforwards and alternative minimum tax credit
carryforwards of approximately $887 incurred by Delta through October 15, 1999,
the combination date (the "Delta carryforwards"). The Delta net operating loss
carryforwards expire through 2007. As a result of the combination, utilization
of the Delta carryforwards is limited by the U.S. Internal Revenue Code to
46
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. INCOME TAXES (CONTINUED)
approximately $5,600 per year. The Company's annual utilization of remaining
carryforwards is not limited under U.S. and international tax law.
Beginning October 15, 1999, the taxable income of Delta and Dakota will be
included in the consolidated U.S. Federal income tax returns filed by
PepsiAmericas, Inc., which is the holding company that also has operating
subsidiaries in Puerto Rico. Subject to the limitations described above, U.S.
Federal net operating loss and tax credit carryforwards may be utilized by
PepsiAmericas, Inc. in its consolidated Federal income tax return.
Prior to the October 15, 1999 combination, Dakota was an S corporation in
which its taxable income was included in the tax returns of its owners. In
connection with the combination, Dakota terminated its S corporation election
and became subject to corporate tax. As a result, in 1999 the Company recorded
approximately $3,407 in net deferred tax liabilities representing temporary
differences between Dakota's assets and liabilities for financial reporting and
income tax purposes. The effect of reinstating Dakota's deferred tax liabilities
is reflected in the 1999 income tax provision.
The Company has recognized deferred income tax assets of
PepsiAmericas, Inc. for the estimated future income tax benefits of net
operating loss and tax credit carryforwards that are expected to be realized
through the reduction of the future taxable income within the carryforward
periods. While realization of deferred tax assets recognized is not assured,
management believes that it is "more likely than not" that the deferred income
tax assets will be realized. The amount of the deferred income tax assets
considered realizable, however, could be reduced if estimates of future taxable
income during the carryforward periods are reduced.
The Company's operating subsidiaries in Puerto Rico file separate company
tax returns and cannot be included in the PepsiAmericas, Inc. consolidated tax
returns. Valuation allowances covering substantially all net operating loss
carryforwards of these operating subsidiaries have been provided as the Company
does not believe it is "more likely than not" that the future income tax
benefits will be realized. In addition, the Company has provided a valuation
allowance for certain Delta tax credit carryforwards that are expected to expire
in 2003 before the carryforwards can be realized. Any subsequent recognition of
tax benefits related to the valuation allowances for deferred tax assets will be
allocated to income from continuing operations.
The Company's subsidiaries operating in Puerto Rico are subject to both
Puerto Rico income taxes and U.S. Federal income taxes. U.S. and Puerto Rico
income tax expense (benefit), temporary differences that give rise to deferred
tax assets, and valuation allowances are determined under both the U.S. and
Puerto Rico tax laws based upon the taxable income of the entities, and are
presented as such in the tables below. However, the subsidiaries are eligible
for and have elected the benefit of Section 936 of the U.S. Internal Revenue
Code, using the Economic Activity Limitation method. Section 936 allows a tax
credit equal to a portion of the amount of U.S. income taxes attributable to
earnings derived from operations within Puerto Rico and to certain qualified
investments maintained in Puerto Rico, subject to certain limitations. The
subsidiaries were in compliance with requirements necessary to utilize the
credits in 1999, for the three months ended December 31, 1998 and in fiscal
years 1998 and 1997. For taxable years beginning after December 31, 2001, a cap
is placed upon the Puerto Rican source business income eligible for the credit.
For tax years beginning after January 1, 2006, the economic activity credit is
repealed in its entirety.
47
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. INCOME TAXES (CONTINUED)
Effective in 1998, PAS was granted an additional ten-year Puerto Rican tax
incentives exemption for its plastic preforms manufacturing subsidiary. Under
the terms of the grant, the subsidiary received a 90% exemption from Puerto Rico
income tax, a 60% exemption from municipal tax and a 90% exemption from property
tax. In exchange for these tax exemptions, PAS agreed to manufacture plastic
preforms and plastic bottles, employ a minimum number of persons, and maintain
equipment and facilities in Puerto Rico.
The combined income tax expense (benefit) of PAS attributable to income
(loss) from continuing operations consisted of the following:
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 -------------------
1999 1998 1998 1997
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Current:
U.S. $ 981 $191 $(1,171) $(4,231)
Non-U.S. 69 33 83 342
- - ------------------------------------------------------------ ------ ---- ------- -------
Total current income tax expense (benefit) 1,050 224 (1,088) (3,889)
- - ------------------------------------------------------------ ------ ---- ------- -------
Deferred:
U.S. 3,868 146 (1,394) --
Non-U.S. (86) 462 (33) 547
- - ------------------------------------------------------------ ------ ---- ------- -------
Total deferred income tax expense (benefit) 3,782 608 (1,427) 547
- - ------------------------------------------------------------ ------ ---- ------- -------
Total income tax expense (benefit) $4,832 $832 $(2,515) $(3,342)
============================================================ ====== ==== ======= =======
</TABLE>
48
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. INCOME TAXES (CONTINUED)
Income tax expense (benefit) attributable to income (loss) from continuing
operations differed from the amounts computed by applying the U.S. statutory
Federal tax rate (34% in 1999 and for the three months ended December 31, 1998;
35% for fiscal years 1998 and 1997) as a result of the following:
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 -------------------
1999 1998 1998 1997
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Computed statutory Federal tax expense (benefit) $(1,127) $ 125 $(2,326) $(7,984)
State taxes, net of Federal benefit (230) (100) 24 --
Non-U.S. income taxes (9,910) 1,504 (5,998) 342
Change in the beginning-of-the-year balance of the valuation
allowance for deferred income tax assets 14,483 (826) 9,567 13,829
Effects of Delta and Dakota pre-combination income (loss) (4,083) 85 (1,324) --
Reinstatement of Dakota deferred income tax liabilities on
combination date 3,407 -- -- --
Non-deductible fees and expenses 2,893 51 207 --
Puerto Rico economic activity credit (555) (791) (1,356) (2,050)
Calculated NOL value of 1997 loss, as adjusted, for Puerto
Rico income taxes -- -- -- (6,437)
Income tax credit related to prior year's losses -- -- -- (745)
Carryback of U.S. Federal net operating losses, previously
reserved -- 196 (1,251) --
Tax rate changes -- 585 -- --
Other, net (46) 3 (58) (297)
- - ------------------------------------------------------------ ------- ----- ------- -------
Total income tax expense (benefit) $ 4,832 $ 832 $(2,515) $(3,342)
============================================================ ======= ===== ======= =======
</TABLE>
The significant components of deferred income tax expense (benefit)
attributable to income (loss) from continuing operations are as follows:
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 -------------------
1999 1998 1998 1997
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Deferred income tax expense (benefit) $(10,701) $1,434 $(10,994) $(13,282)
Increase (decrease) in beginning-of-the-year balance of
the valuation allowance for deferred income tax assets,
net of amount capitalized in 1999 of $787 14,483 (826) 9,567 13,829
- - ---------------------------------------------------------- -------- ------ -------- --------
Total deferred income tax expense (benefit) $ 3,782 $ 608 $ (1,427) $ 547
========================================================== ======== ====== ======== ========
</TABLE>
49
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31 December 31 September 30
1999 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
Property, plant and equipment $ (6,965) $ (3,417) $ (4,414)
U.S. net operating loss and tax credit carryforwards 45,159 34,162 33,380
Non-U.S. net operating loss and tax credit carryforwards 39,848 29,897 31,178
Reserves and accruals 7,104 11,451 12,794
Deferred compensation liabilities 1,092 1,159 1,156
Basis difference in Delta preferred stock 4,668 4,668 4,668
Inventories 809 667 688
Basis in intangible assets (2,760) (556) (556)
Other, net (143) 80 651
- - ------------------------------------------------------------ -------- -------- --------
Total deferred tax assets 88,812 78,111 79,545
Less--Valuation allowance (65,084) (49,814) (50,640)
- - ------------------------------------------------------------ -------- -------- --------
Net deferred tax asset $ 23,728 $ 28,297 $ 28,905
============================================================ ======== ======== ========
</TABLE>
18. RELATED PARTY TRANSACTIONS
PAS is a licensed producer and distributor of Pepsi-Cola and related soft
drinks and other beverages. PAS purchases concentrate from PepsiCo to be used in
the production of carbonated soft drinks and other ready-to-drink beverages. PAS
also produces or distributes other products and purchases finished goods and
concentrate through various arrangements with PepsiCo or PepsiCo joint ventures.
Such purchases are reflected in cost of sales. PepsiCo and PAS share a business
objective of increasing the availability and consumption of Pepsi-Cola
beverages. Accordingly, PepsiCo provides PAS with various forms of marketing
support to promote Pepsi-Cola beverages. This support covers a variety of
initiatives, including marketplace support, marketing programs, capital
equipment investment and shared media expense. Based on the objective of the
programs and initiatives, marketing support is recorded as an adjustment to net
sales or as a reduction of selling, general and administrative expenses.
There are no minimum fees or payments that PAS is required to make to
PepsiCo, nor is PAS obligated to PepsiCo under any minimum purchase
requirements. There are no conditions or requirements that could result in the
repayment of any marketing support payments received by PAS from PepsiCo.
PAS manufactures and distributes fountain products and provides fountain
equipment service to PepsiCo customers in some domestic territories in
accordance with the PepsiCo beverage agreements. In addition, PAS pays a royalty
fee to PepsiCo for the AQUAFINA trademark. Royalty fees paid to PepsiCo in 1999,
during the three months ended December 31, 1998 and in fiscal year 1998
approximated $638, $81 and $72, respectively.
50
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. RELATED PARTY TRANSACTIONS (CONTINUED)
PepsiAmericas and Delta each maintain a management agreement with the
controlling shareholder of PAS. For services performed pursuant to the
management agreements, PepsiAmericas and Delta each pay the controlling
shareholder a management fee. Until October 1999, Dakota also was party to a
management agreement with the controlling shareholder. Management fees of
approximately $3,005, $774 and $644 were recorded in 1999, the three months
ended December 31, 1998, and in fiscal year 1998, respectively.
During the three months ended December 31, 1998, and in fiscal years 1998
and 1997, PAS paid approximately $175, $744 and $3,671, respectively, in
advertising fees to a firm controlled by a former shareholder of PAS.
During 1999, the three months ended December 31, 1998, and in fiscal years
1998 and 1997, PAS paid approximately $2, $16, $241 and $411, respectively, in
legal fees to a firm with a partner who is a relative of PAS's former president.
During 1998, Dakota advanced $33,400 in cash to the controlling shareholder
in exchange for a note receivable. The note receivable was due in annual
principal installments of $500 beginning December 31, 2001, with a balloon
payment of $29,900 due on June 30, 2008. In connection with the combination
described in Note 4, the note receivable was forgiven. As a result, the note has
been reflected as a component of stockholders' equity in the accompanying
consolidated balance sheets. The note receivable bore interest at 7%; all
interest payments due through the forgiveness date of the note were made.
Prior to the combination, Dakota, as an S corporation, declared monthly tax
distributions in the form of a dividend to Pohlad Companies, in amounts equal to
the income or other tax liabilities incurred by Pohlad Companies. Dakota also
declared and paid quarterly dividends equal to 50% of net income, net of tax
distributions, to Pohlad Companies. Dividends approximated $9,173, $2,426 and
$3,111 in 1999, for the three months ended December 31, 1998, and in fiscal year
1998, respectively. These amounts are reflected as a component of consolidated
stockholders' equity in the accompanying consolidated balance sheets.
PAS purchases bottled and canned beverages from Wis-Pak, Inc., an entity in
which PAS maintains an equity interest. During 1999, the three months ended
December 31, 1998, and in fiscal year 1998, Company purchases approximated
$51,200, $12,350 and $11,600, respectively. PAS's investment in Wis-Pak, Inc. is
accounted for using the cost method and is reflected in other assets in the
accompanying consolidated balance sheets.
Certain former members of PAS's Board of Directors and certain of its former
executive officers were also directors and/or officers of BAESA until
approximately mid-1996. In 1996 and prior, PepsiAmericas sold preforms to BAESA
pursuant to a long-term supply contract. The contract was terminated during the
year ended September 30, 1997. Pursuant to the termination agreement, Company
obligations to BAESA of approximately $2,065 were settled for a cash payment of
$50. In addition, PAS was relieved of obligations relating to certain operating
leases. The gain on early termination of the supply agreement was recorded in
fiscal year 1996.
51
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
19. EMPLOYEE BENEFIT PLANS
PAS sponsors separate defined contribution employee benefit plans that cover
all eligible full-time employees of Delta, Dakota and PepsiAmericas. Employees
in the Delta plan can defer up to 15% of their salaries and wages and receive
matching contributions from PAS of up to $1.0. Employees in the Dakota plan can
defer up to 15% of their salaries and wages and receive matching payments from
PAS of up to 4%, up to a maximum of 50% of the employee's total contribution.
Employees in the PepsiAmericas plan can defer up to 10% of their salaries and
wages and receive matching contributions from PAS of up to 5% of base
compensation. Employer contributions to the plans in 1999, for the three months
ended December 31, 1998, and in fiscal year 1998 were approximately $945, $642
and $181, respectively.
PAS also maintains a nonqualified deferred compensation plan that is
available for certain senior executives. Executives who participate in the plan
may elect to defer a percentage of their compensation (as defined), subject to
limitations imposed by the U.S. Internal Revenue Service and PAS, and are
eligible to receive discretionary contributions from PAS. Employee deferrals and
employer discretionary contributions are held in a trust restricted from the
general assets of PAS. Restricted assets held in trust, included in other assets
in the accompanying consolidated balance sheets, totaled $2,015, $1,692 and
$1,394 at December 31, 1999 and 1998, and September 30, 1998, respectively.
PAS maintains separate qualified, non-contributory salaried and hourly
defined benefit pension plans covering eligible salaried and hourly employees of
PepsiAmericas. Benefits under the salaried plan are based upon years of service
and average earnings during the last five years of employment, while benefits
under the hourly plan represent a fixed amount times years of credited service.
PAS makes annual contributions to the plans as required by applicable
regulations. Contributions provide benefits for service rendered to date and for
services expected to be performed in the future. The plans are insured by the
Pension Benefit Guaranty Corporation. On April 16, 1997, PAS suspended future
participation in the plans for an indeterminable period. As a result, the
projected benefit obligation is equal to the accumulated benefit obligation for
each plan.
PAS recognizes a minimum pension asset/liability, computed based upon the
accumulated benefit obligation and the fair value of plan assets, with an
adjustment to consolidated shareholders' equity.
52
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
19. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table presents the changes in benefit obligation and plan
assets for 1999, the three months ended December 31, 1998, and fiscal year 1998,
and the plans' funded status and amounts recognized in the consolidated balance
sheets as of December 31, 1999 and 1998, and September 30, 1998.
<TABLE>
<CAPTION>
Three Months Fiscal Year
Year Ended Ended Ended
December 31 December 31 September 30
1999 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
Changes in benefit obligation:
Benefit obligation, beginning of period $7,662 $ 7,650 $ 7,195
Interest cost 509 131 491
Actuarial (gain) loss (854) -- 791
Benefits paid (563) (119) (827)
- - ------------------------------------------------------------ ------ ------- -------
Benefit obligation, end of period $6,754 $ 7,662 $ 7,650
============================================================ ====== ======= =======
Change in plan assets:
Fair value of plan assets, beginning of period $5,807 $ 4,498 $ 4,903
Actual return on plan assets 2,150 1,024 (599)
Employer contributions 1,210 404 1,021
Benefits paid (563) (119) (827)
- - ------------------------------------------------------------ ------ ------- -------
Fair value of plan assets, end of period $8,604 $ 5,807 $ 4,498
============================================================ ====== ======= =======
Funded status $1,850 $(1,855) $(3,152)
Unrecognized actuarial loss (832) 1,890 2,836
- - ------------------------------------------------------------ ------ ------- -------
Prepaid (accrued) benefit cost recognized $1,018 $ 35 $ (316)
============================================================ ====== ======= =======
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid benefit cost $1,496 $ -- $ --
Accrued pension cost, including a $78, $50 and $42 current
portion (478) (1,855) (3,152)
Minimum pension liability adjustment included in accumulated
other comprehensive income -- 1,890 2,836
- - ------------------------------------------------------------ ------ ------- -------
Net amount recognized $1,018 $ 35 $ (316)
============================================================ ====== ======= =======
</TABLE>
53
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
19. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension cost for PAS's pension plans comprised the following:
<TABLE>
<CAPTION>
Fiscal Years
Three Months Ended
Year Ended Ended September 30
December 31 December 31 -------------
1999 1998 1998 1997
------------ ------------ ----- -----
<S> <C> <C> <C> <C>
Changes in benefit obligation:
Service cost $ -- $ -- $ -- $ 108
Interest cost 509 131 491 557
Expected return on plan assets (566) (104) (478) (425)
Amortization of prior service cost -- -- -- 11
Amortization of actuarial loss 53 23 24 165
- - ------------------------------------------------------------ ----- ----- ----- -----
Net periodic pension cost $ (4) $ 50 $ 37 $ 416
============================================================ ===== ===== ===== =====
</TABLE>
Key assumptions used in preparing the December 31, 1999 and 1998, and
September 30, 1998 and 1997 actuarial valuations include the following:
<TABLE>
<CAPTION>
Fiscal Years
Three Months Ended
Year Ended Ended September 30
December 31 December 31 --------------
1999 1998 1998 1997
------------ ------------ ---- ----
<S> <C> <C> <C> <C>
Discount rate 8% 7% 7% 7%
Salary scale for salaried plan N/A N/A N/A 4%
Expected return on plan assets 9% 9% 9% 9%
</TABLE>
20. TERMINATION OF DEFERRED COMPENSATION PLANS
Prior to the combination, Delta and Dakota maintained phantom stock plans
available to certain key members of management. These plans allowed eligible
senior executives to participate in the continued success of the companies based
upon the appreciation in the equity value of the companies, as defined. The
equivalent of 45,576 shares had been granted under these plans. During the three
months ended December 31, 1998, and in fiscal 1998, benefits of $(390) and $50,
respectively, were earned under the plans.
In the 1999 fourth quarter, PAS revalued the deferred compensation under the
phantom plans based upon the revised equity value for each company, determined
by a third party investment bank in connection with the combination of interests
transaction. Benefits of approximately $3,407 earned in 1999 are reflected in
the accompanying consolidated statement of income (loss). PAS then terminated
the deferred compensation plans by issuing to the participants in satisfaction
of the obligations 554,371 shares of Class B common stock and by granting
486,583 qualified stock options to acquire shares of Class B common stock under
a stock option plan established in 1999.
54
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
21. STOCK OPTION PLANS
During 1999, PAS established a stock option plan authorizing grants of
options to purchase up to 4,000,000 shares of authorized but unissued Class B
common stock (the "1999 Plan"). PAS's Board of Directors may grant stock options
to eligible employees and directors of PAS, and to outside consultants or
advisors who provide services to PAS. At December 31, 1999, there were 3,513,417
shares available for grant under this plan.
In fiscal year 1997, PAS adopted two stock option plans (the "1997 Plans")
pursuant to which PAS's Board of Directors may grant stock options to certain
employees and directors of PAS and its affiliates who have served in such
capacities for at least one year prior to the date the options are granted. The
plans authorize grants of options to purchase up to 1,000,000 shares of
authorized but unissued Class B common stock. At December 31, 1999, there were
247,500 shares available for grant under these plans.
The 1999 Plan provides for grants of either incentive or non-qualified stock
options. One of the 1997 Plans is designed to be qualified for income tax
purposes, whereas the other is not a qualified plan. Qualified stock options are
granted with an exercise price equal to the stock's fair market value at the
date of the grant. Non-qualified stock options may have an exercise price below
the stock's fair market value at the date of grant ("below market options"). In
accordance with APB Opinion No. 25, deferred compensation is recorded to reflect
any difference between the exercise price and market value for below market
options, and is expensed over the vesting period of the options. During the
three months ended December 31, 1998, PAS granted below market options to
acquire 452,500 shares of PAS's Class B stock, which vest over five years. In
1999 and for the three months ended December 31, 1998, deferred compensation
expense of $101 and $50 was recorded related to this grant. All stock options
vest and become fully exercisable in accordance with the terms of their grant.
In fiscal year 1997, PAS entered into a stock option agreement with its
former president to acquire 1,516,667 Class B common shares of PAS at an
exercise price of $5.00 per share. These stock options are exercisable in whole
or in part until they expire in July 2001.
55
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
21. STOCK OPTION PLANS (CONTINUED)
PAS accounts for these plans using the intrinsic value method. Had
compensation cost for these plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," PAS's net income (loss) and net
income (loss) per common share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>
Three Months Fiscal Years Ended
Year Ended Ended September 30
December 31 December 31 ------------------
1999 1998 1998 1997
------------ ------------ ------- --------
<S> <C> <C> <C> <C>
Net income (loss):
As reported $ (9,450) $1,680 $(4,515) $(19,503)
Pro forma (10,632) 1,531 (4,871) (25,510)
Income (loss) per common share:
As reported $ (0.11) $ 0.02 $ (0.13) $ (0.91)
Pro forma (0.12) 0.02 (0.14) (1.19)
Income (loss) per common share--assuming
dilution:
As reported $ (0.11) $ 0.02 $ (0.13) $ (0.91)
Pro forma (0.12) 0.02 (0.14) (1.19)
</TABLE>
The effect on pro forma net income (loss) and income (loss) per common share
of expensing the estimated fair value of stock options is not necessarily
representative of the effect on reported earnings in future years due to the
vesting period of stock options and the potential for issuance of additional
stock options in future years. The weighted average fair value of options
granted in 1999, in the three months ended December 31, 1998 and in fiscal years
1998 and 1997 were $3.11, $3.06, $4.91 and $3.52, respectively. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions:
<TABLE>
<CAPTION>
Fiscal Years
Three Months Ended
Year Ended Ended September 30
December 31 December 31 --------------
1999 1998 1998 1997
------------ ------------ ---- ----
<S> <C> <C> <C> <C>
Risk-free interest rate 6.41% 6.0% 6.0% 6.1%
Price volatility 43.0% 33.7% 66.7% 51.5%
Expected dividend yield 0.0% 0.0% 0.0% 0.0%
Expected term (in years) 10 10 10 10
</TABLE>
56
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
21. STOCK OPTION PLANS (CONTINUED)
A summary of PAS's stock option plans at December 31, 1999 and 1998, and
September 30, 1998 and 1997, and changes during the periods then ended, is as
follows:
<TABLE>
<CAPTION>
Option Shares Price Range
------------- -----------
<S> <C> <C>
Outstanding at September 30, 1996 -- --
Granted 1,706,667 $ 5.00
Exercised -- --
Lapsed or canceled -- --
- - ------------------------------------------------------------ --------- -----------
Outstanding at September 30, 1997 1,706,667 $ 5.00
Granted 110,000 $6.25-$8.75
Exercised (190,000) $ 5.00
Lapsed or canceled -- --
- - ------------------------------------------------------------ --------- -----------
Outstanding at September 30, 1998 1,626,667 $5.00-$8.75
Granted 452,500 $ 3.63
Exercised -- --
Lapsed or canceled -- --
- - ------------------------------------------------------------ --------- -----------
Outstanding at December 31, 1998 2,079,167 $3.63-$8.75
Granted 486,583 $ 4.75
Exercised -- --
Lapsed or canceled -- --
- - ------------------------------------------------------------ --------- -----------
Outstanding at December 31, 1999 2,565,750 $3.63-$8.75
============================================================ ========= ===========
</TABLE>
At December 31, 1999, the number of options exercisable was 2,113,250. The
weighted average exercise price of all options and options exercisable was $4.55
and $4.75, respectively, and the weighted average remaining contractual life of
all options and options exercisable was 8.28 years and 8.24 years, respectively.
22. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
PAS leases certain office space and other facilities under agreements
expiring through 2010. Total rent expense in 1999, the three months ended
December 31, 1998, and in fiscal years 1998 and 1997 was approximately $5,176,
$1,528, $2,645 and $1,661, respectively.
57
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
22. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum rental payments under all noncancellable operating leases
with initial or remaining lease terms of one year or more were as follows at
December 31, 1999:
<TABLE>
<CAPTION>
Year Amount
- - ---- ------
<S> <C>
2000 $4,971
2001 4,521
2002 3,654
2003 2,441
2004 1,616
</TABLE>
LEGAL AND ENVIRONMENTAL RESERVES
In fiscal year 1998, PAS recorded a provision of $760 to increase its legal
and environmental reserves, principally to remove four underground storage tanks
and remediate soil contamination at the former manufacturing facility, to settle
two outstanding supplier claims and to establish legal reserves for various
litigation, claims and assessments. During 1999, PAS successfully subrogated the
environmental exposure to the former owner/operator of the underground storage
tanks and favorably settled the supplier claims at amounts less than that
previously reserved. Consequently, excess legal and environmental reserves of
$490 were returned to earnings and are reflected in the accompanying
consolidated statement of income (loss).
SETTLEMENT OF LITIGATION
PAS was formerly a defendant in nine class actions alleging federal
securities violations by PAS and various former officers and directors of PAS.
These claims were settled as of September 30, 1997. PAS has recorded the cost of
the settlement in fiscal year 1997 as follows:
<TABLE>
<S> <C>
Cost of 2,500,000 Class B shares effectively contributed by
the founding shareholders, valued using the average
trading price of the stock for a period of trade dates
prior to the date of the settlement $13,172
Cash payments of $2,500, less recovery from insurers --
- - ------------------------------------------------------------ -------
$13,172
============================================================ =======
</TABLE>
As a part of the settlement, PAS was reimbursed $4,000 from its directors
liability insurers, $2,500 of which were deemed a reimbursement of amounts paid
to claimants, with the remainder offset against legal expenses incurred in
connection with the settlement. The contribution of the 2,500,000 Class B shares
by the founding shareholders was reflected as a contribution of capital using
the average trading price of the stock referred to above.
58
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
22. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The effect of the settlement on the pre-tax results of PAS for the fiscal
year ended September 30, 1997, was as follows:
<TABLE>
<S> <C>
Reduction in administrative expenses $ 1,500
Settlement of the litigation (13,172)
--------
Net effect on net income (loss) (11,672)
Contribution of Class B shares by founding shareholders 13,172
- - ------------------------------------------------------------ --------
Net effect on shareholders' equity $ 1,500
============================================================ ========
</TABLE>
In addition, the Securities and Exchange Commission (the "Commission") was
pursuing a formal order of investigation in connection with accounting
irregularities discovered in fiscal year 1996. In fiscal year 1998, PAS settled
the Commission's charges with an agreement to cease and desist from committing
any violation or future violation of specified securities laws. PAS was not
required to pay any fines or penalties associated with this settlement.
GENERAL LITIGATION
PAS is subject to various litigation, claims and assessments arising in the
normal course of business. Management believes that the ultimate resolution of
these matters, either individually or in the aggregate, will not have a
materially adverse effect on PAS's consolidated financial position or results of
operations.
23. CHANGE IN YEAR-END
Effective January 1, 1999, PAS changed its fiscal year-end from
September 30 to December 31. As a result, in 1999 PAS reported its results on a
calendar year basis. Summarized financial information for the three months ended
December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1997
1998 (Unaudited)
-------- -----------
<S> <C> <C>
Net sales $136,646 $ 25,517
============================================================ ======== ========
Gross profit $ 42,558 $ 8,318
============================================================ ======== ========
Income tax expense $ 832 $ 125
============================================================ ======== ========
Net income (loss) $ 1,680 $ (991)
============================================================ ======== ========
Net income (loss) per common share--basic $ 0.02 $ (0.05)
============================================================ ======== ========
Net income (loss) per common share--assuming dilution $ 0.02 $ (0.05)
============================================================ ======== ========
Weighted average number of common shares outstanding (in
thousands) 86,760 21,500
============================================================ ======== ========
</TABLE>
59
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998, AND SEPTEMBER 30, 1998 AND 1997
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
24. SUBSEQUENT EVENTS
In February 2000, PAS received the exclusive rights to distribute Tropicana
single-serve juices and juice drinks, including Season's Best juices and
Tropicana Twister, in Puerto Rico.
Subject to the approval of the Company's shareholders, effective April 1,
2000, PAS will establish an Employee Stock Purchase Plan to allow eligible
employees, as defined, to participate in the success of PAS through the purchase
of Class B shares of common stock. A total of 2,000,000 shares will be available
for purchase under the plan.
25. INTERIM FINANCIAL RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
----------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1999
Net sales $125,345 $150,187 $154,788 $145,423 $575,743
Gross margin 39,617 49,230 49,499 45,171 183,517
Earnings (loss) before income taxes, minority
interest and extraordinary item (2,633) 3,214 5,126 (9,021) (3,314)
Net earnings (loss) 444 379 4,088 (14,361) (9,450)
Earnings (loss) per share of common stock 0.01 0.00 0.05 (0.16) (0.11)
1998
Net sales $ 22,943 $ 25,842 $122,033 $136,646 $307,464
Gross margin 6,011 6,581 37,797 42,558 92,947
Earnings (loss) before income taxes, minority
interest and extraordinary item (2,212) (2,919) (532) 367 (5,296)
Net earnings (loss) (1,151) (3,058) 685 1,680 (1,844)
Earnings (loss) per share of common stock (0.05) (0.14) 0.01 0.02 (0.02)
</TABLE>
60
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PAS previously reported a change in independent accountants for the fiscal
year ending September 30, 1998. See PAS's Current Report on Form 8-K dated
September 1, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
PAS incorporates by reference the information contained under the captions
"Proposal 1: Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in its definitive proxy statement for the 2000 Annual
Meeting of Shareholders filed pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
The Executive Officers of PAS and their ages, as of February 1, 2000, were
as follows:
<TABLE>
<CAPTION>
Name Age Position
- - ------------------- --- ----------------------------------------------
<S> <C> <C>
Robert C. Pohlad 45 Chairman, Chief Executive Officer and Director
Kenneth E. Keiser 48 President and Chief Operating Officer
John F. Bierbaum 55 Chief Financial Officer, Senior Vice President
Bradley J. Braun 45 Vice President, Finance and Assistant
Secretary
Jay S. Hulbert 46 Vice President, Operations
Raymond R. Stitle 46 Vice President, Human Resources
Lawrence I. Flood 40 Vice President and General Manager
George Haugo 55 Vice President and General Manager
Michael G. Naylor 41 Vice President and General Manager
Charles M. Pullias 50 Vice President and General Manager
A. David Velez 45 Vice President and General Manager
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
PAS incorporates by reference the information contained under the captions
"Executive Compensation" and "Director Compensation" in its definitive proxy
statement for the 2000 Annual Meeting of Shareholders filed pursuant to Section
14(a) of the Securities Exchange Act of 1934, as amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PAS incorporates by reference the information contained under the caption
"Security Ownership" in its definitive proxy statement for the 2000 Annual
Meeting of Shareholders filed pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PAS incorporates by reference the information contained under the caption
"Certain Relationships and Related Transactions" in its definitive proxy
statement for the 2000 Annual Meeting of Shareholders filed pursuant to Section
14(a) of the Securities Exchange Act of 1934, as amended.
61
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
(1) A list of the financial statements filed as part of this report
appears on page 25.
(2) The financial statement schedule required to be filed as part of this
report consists of Schedule II--Valuation and Qualifying Accounts
appearing at the end of this Item.
(3) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------------------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of
Pepsi-Cola Puerto Rico Bottling Company, as amended.
3.2 Amended and Restated Bylaws of Pepsi-Cola Puerto Rico
Bottling Company, as amended.
4.1 Form of Specimen Stock Certificate representing Class B
Shares.
4.2 Credit Agreement by and among PepsiAmericas, Inc. and
DakBev, LLC, as Borrowers, Bank of America, N.A., as
Administrative Agent and as Lender, and First Union National
Bank, and Norwest Bank Minnesota, N.A., as Co-Documentation
Agents and The Lenders Party Hereto From Time to Time dated
October 15, 1999.
10.1 Transfer Agreement among Rafael Nin, P-PR Transfer, LLP and
the Company dated June 15, 1998 (incorporated by reference
to Exhibit 2.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-40093).
10.2 Warrant dated as of July 17, 1998, to purchase 1,360,000
shares of Class B common stock issued to P-PR Transfer, LLP
(incorporated by reference to Exhibit 10.2 to the Company's
Form 8-K dated July 31, 1998).
10.3 Warrant dated as of July 17, 1998, to purchase 340,000
shares of Class B Common stock issued to V. Suarez &
Co., Inc. (incorporated by reference to Exhibit 10.3 to the
Company's Form 8-K dated July 31, 1998).
10.4 Accounting Services Agreement between Delta Beverage
Group, Inc. and the Company dated October 16, 1998
(incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1998).
10.5 Management Agreement between Pohlad Companies and the
Company dated July 20, 1998 (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998).
10.6 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).
10.7 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
Scheduled 13D of Rafael Nin dated January 7, 1997).
10.8 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).
</TABLE>
62
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------------------- -----------
<C> <S>
10.9 Amendment dated as of June 15, 1998 to Stock Option
Agreement dated as of October 15, 1996 between Rafael Nin
and the Company (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998).
10.10 Master Lease Agreement dated April 18, 1997 between General
Electric Capital Corporation of Puerto Rico and Pepsi-Cola
Puerto Rico Bottling Company (incorporated by reference to
Exhibit 10.19 to the Company's quarterly report on
Form 10-Q for the quarterly period ended June 30, 1997).
10.11 Delta Exchange Agreement dated as of June 28, 1999 among
Pepsi-Cola Puerto Rico Bottling Company, Delta Beverage
Group, Inc. and the Delta Stockholders identified therein
(incorporated by reference to the Company's Proxy Statement
dated September 9, 1999).
10.12 Dakota Exchange Agreement dated as of June 28, 1999 among
Pepsi-Cola Puerto Rico Bottling Company, Dakota Beverage
Company, Inc. and Pohlad Companies (incorporated by
reference to the Company's Proxy Statement dated
September 9, 1999).
10.13 1999 Stock Option Plan (incorporated by reference to the
Company's Proxy Statement dated September 9, 1999).
10.14 Form of Master Bottling Agreement dated October 15, 1999
between PepsiCo, Inc. and PepsiAmericas, Inc.
10.15 Form of Master Fountain Syrup Agreement dated October 15,
1999 between PepsiCo, Inc. and PepsiAmericas, Inc.
10.16 International Master Bottling Agreement dated October 15,
1999 between PepsiCo, Inc. and PepsiAmericas, Inc.
11 Statement of Computation of Per Share Earnings.
21 List of Subsidiaries.
23.1 Consent of Independent Public Accountants.
23.2 Independent Auditors' Consent.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K.
(i) The registrant filed a Current Report on Form 8-K dated
October 26, 1999 relating to the acquisitions of Delta and Dakota.
(c) The exhibits listed under Item 14(a)(3) are filed herewith or
incorporated herein by reference.
(d) The financial statement schedule listed under Item 14(a)(2) is filed
herewith.
63
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To PepsiAmericas, Inc.:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of PepsiAmericas, Inc.
(formerly known as Pepsi-Cola Puerto Rico Bottling Company) and Subsidiaries as
of and for the year ended December 31, 1999, the three month period ended
December 31, 1998 and the fiscal year ended September 30, 1998, and have issued
our report thereon dated March 1, 2000. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
Item 14(a)2 is the responsibility of PAS's management and is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the December 31,
1999 and 1998, and September 30, 1998, financial data required to be set forth
in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 1, 2000.
64
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors of Pepsi-Cola Puerto Rico Bottling Company and
Subsidiaries:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of PepsiAmericas, Inc. (formerly known as
Pepsi-Cola Puerto Rico Bottling Company) ("PAS") and Subsidiaries as OF
September 30, 1997 and for the year then ended, and have issued our report
thereon dated December 5, 1997. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in Item 14(a)2
is the responsibility of PAS's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the 1997 financial data required
to be set forth in relation to the basic financial statements taken as a whole.
KPMG LLP
San Juan, Puerto Rico,
December 5, 1997.
Stamp No. 1595001 of the Puerto Rico
Society of Certified Public Accountants
was affixed to the record copy of this report.
65
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
PEPSIAMERICAS, INC. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
------------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
of Period Expenses Accounts Deductions Period
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
TWELVE MONTHS ENDED DECEMBER 31, 1999:
Allowance for Doubtful Accounts $3,177 $2,027 $ -- $(2,129) $3,075
Restructuring Charges 223 -- -- (223) --
THREE MONTHS ENDED DECEMBER 31, 1998:
Allowance for Doubtful Accounts 3,896 376 -- (1,095)(1) 3,177
Restructuring Charges 748 -- -- (525)(3) 223
FISCAL YEAR ENDED SEPTEMBER 30, 1998:
Allowance for Doubtful Accounts 2,872 3,691 670 (3,337)(1) 3,896
Restructuring Charges 163 903 -- (318)(2) 748
FISCAL YEAR ENDED SEPTEMBER 30, 1997:
Allowance for Doubtful Accounts 2,492 6,471 -- (6,091)(1) 2,872
Restructuring Charges -- 535 -- (372) 163
</TABLE>
- - ---------
(1) Write off of uncollectible receivables.
(2) Comprised of $215 of severance payments and other exit costs and $103
reversed into income.
(3) Comprised of $525 of severance payments and other exit costs.
66
<PAGE>
BOARD OF DIRECTORS
Christopher E. Clouser,
President
Preview Travel, Inc.
Philip N. Hughes,
Owner
Miller Printing, Inc.
Rocket Lube, Inc.
Robert C. Pohlad,
Chairman, Chief
Executive Officer
PepsiAmericas, Inc.
Diego J. Suarez,
President, Chief
Executive Officer
V. Suarez & Co., Inc.
Basil K. Vasiliou,
Chairman,
Vasiliou & Co., Inc.
Michael D. White
President & CEO
Frito-Lay's
Europe/Africa/Middle East
Division
John F. Woodhead,
Owner & President
JFW, Inc.
Raymond W. Zehr, Jr.
Vice President,
Pohlad Companies
EXECUTIVE OFFICERS
Robert C. Pohlad,
Chairman, Chief
Executive Officer
Kenneth E. Keiser,
President, Chief
Operating Officer
John F. Bierbaum,
Senior Vice President,
Chief Financial Officer
Matthew E. Carter
Senior Vice President,
Strategic Planning
TRANSFER AGENT AND REGISTRAR
Bank of New York
New York, New York
STOCK TRADING
PepsiAmericas, Inc.'s Class B
Shares of common stock
trades on the New York Stock
Exchange under the
symbol PAS.
INVESTOR INFORMATION
John F. Bierbaum
(612) 661-3830
ANNUAL MEETING
The annual meeting of
shareholders will be held
Wednesday, April 26, 2000
at 9:30 a.m. in the
Planets Room
IDS Center, 50th Floor
80 South 8th Street
Minneapolis, Minnesota 55402
CORPORATE OFFICES
PepsiAmericas, Inc.
3880 Dain Rauscher Plaza
60 South 6th Street
Minneapolis, Minnesota 55402
INDEPENDENT AUDITORS
Arthur Andersen, LLP
Memphis, Tennessee
LEGAL COUNSEL
Briggs and Morgan, PA
Minneapolis, Minnesota
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 30, 2000.
<TABLE>
<S> <C> <C>
PepsiAmericas, Inc.
By: /s/ ROBERT C. POHLAD
---------------------------------------------------
Name: Robert C. Pohlad
Title: Chief Executive Officer
</TABLE>
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.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<C> <S> <C>
/s/ ROBERT C. POHLAD
-------------------------------------- Chief Executive Officer and Director March 30, 2000
Robert C. Pohald (Principal Executive Officer)
/s/ JOHN F. BIERBAUM
-------------------------------------- Chief Financial Officer and Senior Vice March 30, 2000
John F. Bierbaum President (Principal Accounting Officer)
/s/ CHRISTOPHER E. CLOUSER
-------------------------------------- Director March 30, 2000
Christopher E. Clouser
/s/ PHILIP N. HUGHES
-------------------------------------- Director March 30, 2000
Philip N. Hughes
/s/ DIEGO SUAREZ, JR.
-------------------------------------- Director March 30, 2000
Diego Suarez, Jr.
/s/ BASIL K. VASILIOU
-------------------------------------- Director March 30, 2000
Basil K. Vasiliou
/s/ JOHN F. WOODHEAD
-------------------------------------- Director March 30, 2000
John F. Woodhead
/s/ RAYMOND W. ZEHR, JR.
-------------------------------------- Director March 30, 2000
Raymond W. Zehr, Jr.
</TABLE>
67
<PAGE>
PepsiAmericas, Inc. 1999 Annual Report
- - --------------------------------------------------------------------------------
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- ------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of
Pepsi-Cola Puerto Rico Bottling Company, as amended.
3.2 Amended and Restated Bylaws of Pepsi-Cola Puerto Rico
Bottling Company, as amended.
4.1 Form of Specimen Stock Certificate representing Class B
Shares.
4.2 Credit Agreement by and among PepsiAmericas, Inc. and
DakBev, LLC, as Borrowers, Bank of America, N.A., as
Administrative Agent and as Lender, and First Union National
Bank, and Norwest Bank Minnesota, N.A., as Co-Documentation
Agents and The Lenders Party Hereto From Time to Time dated
October 15, 1999.
10.1 Transfer Agreement among Rafael Nin, P-PR Transfer, LLP and
the Company dated June 15, 1998 (incorporated by reference
to Exhibit 2.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-40093).
10.2 Warrant dated as of July 17, 1998, to purchase 1,360,000
shares of Class B common stock issued to P-PR Transfer, LLP
(incorporated by reference to Exhibit 10.2 to the Company's
Form 8-K dated July 31, 1998).
10.3 Warrant dated as of July 17, 1998, to purchase 340,000
shares of Class B Common stock issued to V. Suarez &
Co., Inc. (incorporated by reference to Exhibit 10.3 to the
Company's Form 8-K dated July 31, 1998).
10.4 Accounting Services Agreement between Delta Beverage
Group, Inc. and the Company dated October 16, 1998
(incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1998).
10.5 Management Agreement between Pohlad Companies and the
Company dated July 20, 1998 (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998).
10.6 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).
10.7 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
Scheduled 13D of Rafael Nin dated January 7, 1997).
10.8 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).
10.9 Amendment dated as of June 15, 1998 to Stock Option
Agreement dated as of October 15, 1996 between Rafael Nin
and the Company (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1998).
10.10 Master Lease Agreement dated April 18, 1997 between General
Electric Capital Corporation of Puerto Rico and Pepsi-Cola
Puerto Rico Bottling Company (incorporated by reference to
Exhibit 10.19 to the Company's quarterly report on
Form 10-Q for the quarterly period ended June 30, 1997).
10.11 Delta Exchange Agreement dated as of June 28, 1999 among
Pepsi-Cola Puerto Rico Bottling Company, Delta Beverage
Group, Inc. and the Delta Stockholders identified therein
(incorporated by reference to the Company's Proxy Statement
dated September 9, 1999).
</TABLE>
68
<PAGE>
PEPSIAMERICAS, INC. 1999 ANNUAL REPORT
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- ------------------------------------------------------------
<C> <S>
10.12 Dakota Exchange Agreement dated as of June 28, 1999 among
Pepsi-Cola Puerto Rico Bottling Company, Dakota Beverage
Company, Inc. and Pohlad Companies (incorporated by
reference to the Company's Proxy Statement dated
September 9, 1999).
10.13 1999 Stock Option Plan (incorporated by reference to the
Company's Proxy Statement dated September 9, 1999).
10.14 Form of Master Bottling Agreement dated October 15, 1999
between PepsiCo, Inc. and PepsiAmericas, Inc.
10.15 Form of Master Fountain Syrup Agreement dated October 15,
1999 between PepsiCo, Inc. and PepsiAmericas, Inc.
10.16 International Master Bottling Agreement dated October 15,
1999 between PepsiCo, Inc. and PepsiAmericas, Inc.
11 Statement of Computation of Per Share Earnings.
21 List of Subsidiaries.
23.1 Consent of Independent Public Accountants.
23.2 Independent Auditors' Consent.
27 Financial Data Schedule.
</TABLE>
69
<PAGE>
Exhibit 3.1
AMENDMENT TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(a Delaware corporation)
Pepsi-Cola Puerto Rico Bottling Company, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Pepsi-Cola Puerto Rico Bottling Company.
2. The corporation was originally incorporated as PPR Acquisition Corp.,
and the original Certificate of Incorporation of the Corporation was filed in
the office of the Secretary of State of the State of Delaware on March 4, 1988.
An Amended and Restated Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of the State of Delaware on August
29, 1995 and a Certificate of Amendment to the Amended and Restated Certificate
of Incorporation of the Corporation was filed in the office of the Secretary of
State of the State of Delaware on March 6, 1999.
3. The effective time of this Amendment to the Amended and Restated
Certificate of Incorporation shall be 12:01 a.m., October 15, 1999.
4. Pursuant to Section 242 of the general corporation law of the State of
Delaware, the amendments set forth below have been duly adopted by the directors
and shareholders of the Corporation.
5. The Amended and Restated Certificate of Incorporation is amended as
follows:
a) Article FIRST is amended in its entirety to read as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is PepsiAmericas, Inc.
b) The first sentence of Article FOURTH is amended to read in its
entirety as follows: ------
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One Hundred Fifty
Million (150,000,000) shares, consisting of Five Million
(5,000,000) shares of Class A Common Stock, par value $.01 per
share (herein called the "Class A Common Stock") and One Hundred
Forty-Five Million (145,000,000) shares of Class B Common Stock,
par value $.01 per share (hereinafter called the "Class B Common
Stock).
<PAGE>
IN WITNESS WHEREOF, this Amendment to the Amended and Restated Certificate
of Incorporation is hereby executed on behalf of the Corporation by the
undersigned officer, who is authorized to execute same, on this 7th day of
October, 1999.
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By /s/ John F. Bierbaum
------------------------------------
John F. Bierbaum
Its: Vice President and Chief
Financial Officer
STATE OF MINNESOTA )
)ss
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this 7th day of October
1999, by John F. Bierbaum, the Vice President and Chief Financial Officer of
Pepsi-Cola Puerto Rico Bottling Company.
/s/ Charles W. Johnson
--------------------------------------
Notary Public
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
The following Amended and Restated Certificate of Incorporation of
Pepsi-Cola Puerto Rico Bottling Company, originally incorporated as PPR
Acquisition Corp. on March 4, 1988, has been duly adopted pursuant to the
authority and applicable provisions of Sections 242, 245 and 228 of the General
Corporation Law of the State of Delaware and supersedes and takes the place of
the existing certificate of incorporation and amendments thereto.
FIRST: The name of the corporation (hereinafter called the "Corporation")
is Pepsi-Cola Puerto Rico Bottling Company.
SECOND: The respective names of the County and/or the City within the
County in which the registered office or the Corporation is to be located in the
State or Delaware are the County of New Castle and the City of Wilmington. The
name of the registered agent of the corporation is The Corporation Trust
Company. The street and number of said registered office and the address by
street and number of said registered agent is 1209 Orange Street, Wilmington,
Delaware.
THIRD: The nature of the business of the Corporation and the objects or
purposes to be transacted, promoted or carried on by it are as follows:
To engage in the business of bottling all beverages and fluids
that may legally be possessed, bottled and sold and any lawful business
related thereto; to sell and distribute said beverages when bottled; to
purchase or manufacture said beverages or both; to manufacture, buy,
sell, import and export said bottled beverages and the bottles in which
they are contained as well as the cases necessary to hold said bottles
in distribution; and to acquire and hold all necessary real estate and
to erect, maintain and operate such plants as may be necessary for the
fulfillment of the above objects.
To engage in any construction, manufacturing, mercantile,
selling, management, service or other business, operation or activity
which may be lawfully carried on by a corporation organized under the
General Corporation Law of the State of Delaware, whether or not
related to the foregoing paragraph.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent
purpose and power. The foregoing enumeration of specific purposes and
powers shall not be held to limit or restrict in any manner the
purposes and powers of the corporation, and the purposes and powers
herein specified shall be in no way limited or restricted by reference
to, or inference from, the terms of any provisions of this or any other
Article of this certificate of incorporation; provided, that the
Corporation shall not carry on any business or exercise any power in
the State of Delaware or in any state, territory, or country which
under the laws thereof the Corporation may not lawfully carry on or
exercise.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Forty Million (40,000,000) shares,
consisting of Five Million (5,000,000) shares of Class A Common Stock, par value
$.01 per share (herein called the "Class A Common Stock") and Thirty Five
Million (35,000,000) shares of Class B Common Stock, par value $.01 per share
(herein called the "Class B Common Stock"). As used herein the term "Common
Stock" shall include the Class A Common Stock and the Class B Common Stock. All
cross references in each subdivision of this Article FOURTH refer to other
paragraphs in such subdivision unless otherwise indicated. The following is a
statement of the designations, preferences, limitations and relative rights in
respect of each class of Common Stock of the Corporation:
Except as herein otherwise expressly provided, all shares of Class A Common
Stock and Class B Common Stock shall be identical and shall entitle the holders
thereof to the same rights and privileges.
1. Dividends. When and as dividends are declared or paid or distributions
are made upon Common Stock, whether payable in cash, in property or in
securities of the Corporation, the holders of Common Stock shall be entitled to
share equally, share for share, in such dividends and distribution, except that
if dividends are declared which are payable in shares of Class A Common Stock or
Class B Common Stock, dividends shall be declared which are payable at the same
rate in each such class of stock and the dividends payable in shares of Class A
Common Stock shall be payable to the holders of that class of stock and the
dividends payable in shares of Class B Common Stock shall be payable to the
holders of that class of stock.
2. Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the assets of the Corporation
available for distribution to shareholders shall be distributed equally, share
for share, to the holders of outstanding Common Stock.
3. Conversion. Subject to and upon compliance with the provisions hereof,
each record holder of Class A Common Stock shall be entitled at any time and
from time to time to convert any or all of its shares of Class A Common Stock
held by such holder into shares of Class B Common Stock at the rate of one (1)
share of Class B Common Stock for each share of Class A Common Stock so
converted. The shares of Class B Common Stock shall not carry any conversion
rights nor otherwise be convertible into shares of Class A common Stock.
Each conversion of shares of Class A Common Stock into shares of Class B
Common Stock shall be effected by the surrender of the certificate or
certificates representing the shares of the Class A Common Stock to be converted
at the principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holder or holders of Class A Common Stock) at any time during its usual business
hours, together with written notice by the holder of the Class A Common Stock
stating that such holder desires to convert a stated number of shares of Class A
Common Stock represented by such certificates into Class B Common Stock which
notice shall also state the name or names (with addresses) and denominations in
which the certificate or certificates for Class B Common Stock shall be issued
and shall include instructions for delivery thereof. Promptly after such
surrender and the receipt of such written notice, the Corporation shall issue
and deliver in accordance with such instructions the certificate or certificates
for Class B Common Stock issuable upon such conversion.
<PAGE>
Such conversion shall be deemed to have been effected as of the close of
business on the date on which such certificate or certificates representing the
shares of Class A Common Stock shall have been surrendered to the Corporation
and such notice shall have been received by the Corporation, and at such time
all rights of the holder of such converted shares of Class A Common Stock (or a
specified portion thereof) as such holder shall cease and the person in whose
name or names any certificate or certificates for shares of Class B Common Stock
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Class B Common Stock issuable upon such
conversion.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Class B Common Stock solely for the purpose of
issue upon the conversion of the Class A Common Stock, as herein provided, such
number of shares of Class A Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Class A Common Stock. All shares of
Class B Common Stock issuable upon a conversion described herein shall, when
issued, be duly and validly issued and fully paid and non-assessable. The
issuance of certificates for shares of Class B Common Stock upon conversions of
shares of Class A Common Stock shall be made without charge to the holders of
such shares of Class A Common Stock for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the holder of the shares of Class A
Common Stock converted.
4. Voting Rights. Each holder of Class A Common Stock shall be entitled to
six (6) votes for each share of Class A Common Stock held by such shareholder on
any matter on which shareholders of Common Stock are entitled to vote. Each
holder of Class B Common Stock shall be entitled to one (1) vote for each share
of Class B Common Stock held by such holder on any matter on which shareholders
of Common Stock are entitled to vote. Consistent herewith, upon a conversion of
shares of Class A Common Stock to shares of Class B Common Stock, each share of
Class B Common Stock shall only be entitled to one (1) vote
FIFTH: The Corporation may from time to time effect "stock splits" and
other forms of exchanges and reclassifications of the Common Stock of the
Corporation and issue and distribute new shares to the record holders of the
outstanding Common Stock of the Corporation.
SIXTH: The directors of the Corporation shall be elected and appointed to
the Board of Directors as provided in the By-Laws of the corporation.
SEVENTH: The Corporation is to have perpetual existence.
<PAGE>
EIGHTH: The private property of the stockholders of the Corporation shall
not be subject to the payment of corporate debts to any extent whatever.
NINTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and
stockholders, it is further provided:
1. The number of directors of the Corporation shall be as specified in the
By-Laws of the Corporation but such number may from time to time be increased or
decreased in such manner as may be prescribed by the By-Laws. In no event shall
the number of directors be less than the minimum number prescribed by law. The
election of directors need not be by ballot. Directors need not be stockholders
of the Corporation.
2. The business of the Corporation shall be managed by the Board of
Directors except as otherwise provided by law.
3. In the absence of fraud, no contract or other transaction between the
Corporation and any other corporation, and no act of the Corporation shall in
any way be affected or invalidated by the fact that any of the directors of the
Corporation are pecuniarily or otherwise interested in, or are directors or
officers of, such other corporation; and, in the absence of fraud, any director,
individually, or any firm of which any director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contract or
transaction of the Corporation; provided, in any case, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors or a majority thereof; and any director of the Corporation
who is also a director or officer of any such other corporation, or who is also
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize any
such contract, act or transaction and may vote thereat to authorize any such
contract, act, or transaction, with like force and effect as if he were not such
director or officer of such other corporation, or not so interested.
4. No director of the corporation shall be liable to any person on account
of any action undertaken by him as such director in reliance in good faith upon
the existence of any fact or circumstance reported or certified to the Board of
Directors by any officer of the Corporation or by any independent auditor,
engineer, or consultant retained or employed as such by the Board of Directors.
5. No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except, in addition to any and all other requirements for such liability, (i)
for any breach of such director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) to the extent
provided under section 174 of Title 8 of the Delaware Code (relating to the
Delaware General Corporation Law) or any amendment thereto or successor
provision thereto, and (iv) for any transaction for which such director derived
an improper personal benefit. Neither the amendment nor repeal of this Section,
nor the adoption of any provision of the certificate of incorporation
inconsistent with this Section, shall eliminate or reduce the effect of this
Section in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Section would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
<PAGE>
6. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all creditors or class or creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TENTH: (a) The Corporation shall indemnify any person who was or is a part
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the Corporation, or is or was serving at the request or the Corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery of the State of Delaware or such other court shall deem
proper.
<PAGE>
(c) To the extent that any person referred to in Paragraphs (a) and (b) of
this Article TENTH has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to therein, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under Paragraphs (a) and (b) of this Article TENTH
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Paragraphs (a) and
(b) of this Article TENTH. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article TENTH. Such expenses incurred by
other employees and agents of the Corporation may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other Paragraphs of this Article TENTH shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, trustee, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify his against such liability under the provisions of this Article TENTH.
(h) For purposes to this Article TENTH, references to "the Corporation"
include, in addition to the resulting Corporation, all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, trustee, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article TENTH with respect to the resulting or surviving corporation as he would
if he had served the resulting or surviving corporation in the same capacity.
<PAGE>
(i) For purposes of this Article TENTH, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, trustee, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, such director, trustee,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article TENTH.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article TENTH shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
<PAGE>
IN WITNESS WHEREOF, PEPSI-COLA PUERTO RICO BOTTLING COMPANY has caused this
Amended and Restated Certificate of Incorporation to be signed by Charles H.
Beach, its President, and attested to by Lawrence Odell, its Secretary, this
24th day of August, 1995.
/s/ Charles H. Beach
----------------------------------
Charles H. Beach, President
Attest:
/s/ Lawrence Odell
----------------------------------
Lawrence Odell, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(A Delaware corporation)
----------------------------
Under Section 242 of the General
Corporation Law of the State of Delaware
----------------------------
Pepsi-Cola Puerto Rico Bottling Company, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: Article NINTH of the Corporation's Amended and Restated Certificate
of Incorporation shall be amended by adding a new paragraph 7 thereto, which
shall read as follows:
"7. In furtherance and not in limitation of the rights, powers,
privileges, and discretionary authority granted or conferred by the
General Corporation Law of the State of Delaware or other statutes or
laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the By-Laws of the Company,
without any action on the part of the shareholders of the Company, but
the shareholders may make additional By-Laws and may alter, amend or
repeal any By-Law whether adopted by them or otherwise."
SECOND: That said amendment was duly adopted in accordance with Section 242
of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, Pepsi-Cola Puerto Rico Bottling Company has caused its
corporate seal to be hereunto affixed and this Certificate of Amendment to be
executed and acknowledged by its President and attested to by its Secretary, as
of this 2nd day of February, 1996.
[SEAL]
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: /s/ C. Leon Timothy
-----------------------------------
C. Leon Timothy
Senior Vice President
Attest:
/s/ Lawrence Odell
- - -------------------------------
Lawrence Odell
Secretary
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
ARTICLE I. - MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of directors and the transaction of other business
shall be held during the month of January in each year and on the date and at
the time and place that the board of directors determines. If any annual meeting
is not held, by oversight or otherwise, a special meeting shall be held as soon
as practicable, and any business transacted or election held at that meeting
shall be as valid as if transacted or held at the annual meeting.
Section 2. Special Meetings. Special meetings of the shareholders for any
purpose shall be held when called by the president or the board of directors, or
when requested in writing by the holders of not less than fifty-one percent of
the voting power of all the shares entitled to vote. A meeting requested by
shareholders shall be called for a date not less than ten nor more than sixty
days after the request is made, unless the shareholders requesting the meeting
designate a later date. The secretary shall issue the call for the meeting,
unless the president, the board of directors, or shareholders requesting the
meeting designate another person to do so. The shareholders at a special meeting
may transact only business that is related to the purposes stated in the notice
of the special meeting.
Section 3. Place. Meetings of shareholders may be held either within or
outside the State of Delaware.
Section 4. Notice. A written notice of each meeting of shareholders,
stating the place, day and time of the meeting, and in the case or a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each shareholder of record entitled to vote at the meeting, not
less than ten nor more than sixty days before the date set for the meeting,
either personally or by first-class mail, by or at the direction of the
president, the secretary, or the officer or other persons calling the meeting.
If mailed, the notice shall be considered delivered when it is deposited in the
United States mail, postage prepaid, addressed to the shareholder at his address
as it appears in the records of the corporation.
Section 5. Waivers of Notice. Whenever any notice is required to be given
to any shareholder of the corporation under these by-laws, the certificate of
incorporation, or the General Corporation Law of the State of Delaware, a
written waiver of notice, signed at any time by the person entitled to notice
shall be equivalent to giving notice. Attendance by a shareholder entitled to
vote at a meeting, in person or by proxy, shall also constitute a waiver of
notice of the meeting, except when the shareholder attends a meeting solely for
the purpose, expressed at the beginning of the meeting, of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
<PAGE>
Section 6. Closing Transfer Books or Fixing Record Date. For the purpose of
determining the shareholders for any purpose, the board of directors may either
require the stock transfer books to be closed for up to sixty days or fix a
record date, which shall be not more than sixty days before the date on which
the action requiring the determination is to be taken. If the purpose is to
determine shareholders entitled to vote at a meeting, the books shall be closed,
and the record date shall be set at least ten days before the date on which the
action is to be taken. If the transfer books are not closed and no record date
is fixed for the determination of shareholders, the date on which notice of the
meeting is mailed or the date on which the board of directors adopts a
resolution declaring the dividend or authorizing the action that would require a
determination of shareholders shall be the record date. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, that determination shall apply to any adjournment of
the meeting, unless the board of directors fixes a new record date.
Section 7. Voting Record. At least ten days but not more than sixty days
before each meeting of shareholders, the officer or agent having charge of the
stock transfer books for shares of the corporation shall make a complete list of
the shareholders entitled to vote at the meeting, listing each shareholder's
address and the number, class and series of shares that he holds. For ten days
before the meeting, the list shall be kept on file at the corporation's
registered office or its principal place of business, and any shareholder may
inspect the list any time during normal business hours. The list shall also be
produced and kept open at the time and place of the meeting, at which time any
shareholder may inspect the list.
If the requirements of this section have not been substantially complied
with, the meeting, on the demand of any shareholder in person or by proxy, shall
be adjourned until the requirements are complied with. If no demand for
adjournment is made, failure to comply with the requirements of this section
shall not affect the validity of any action taken at the meeting.
Section 8. Shareholder Quorum and Voting. A majority of the shares entitled
to vote, represented in person or by proxy, constitutes a quorum at a meeting of
shareholders. If a quorum is present, the affirmative vote of a majority of the
votes of the shares entitled to vote on the matter is the act of the
shareholders, unless otherwise provided by law. A shareholder may vote either in
person or by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. After a quorum has been established at a shareholders'
meeting, a withdrawal of shareholders that reduces the number of shareholders
entitled to vote at the meeting below the number required for a quorum does not
affect the validity of an adjournment of the meeting or any action taken at the
meeting prior to the shareholder's withdrawal.
Treasury shares, shares of stock of this corporation owned by another
corporation, the majority of the voting stock of which is owned or controlled by
this corporation, and shares of stock of this corporation that it holds in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any time. The chairman of the board, the president, any vice president, the
secretary, and the treasurer of a corporate shareholder are presumed to possess,
in that order, authority to vote shares standing in the name of a corporate
shareholder, absent a bylaw or other instrument of the corporate shareholder
designating some other officer, agent or proxy to vote the shares. Shares held
by an administrator, executor, guardian, or conservator may be voted by him
without a transfer of the shares into his name. A trustee may vote shares
standing in his name, but no trustee may vote shares that are not transferred
into his name. If he is authorized to do so by an appropriate order of the court
by which he was appointed, a receiver nay vote shares standing in his name or
held by or under his control, without transferring the shares into his name. A
shareholder whose shares are pledged may vote the shares until the shares have
been transferred into the name of the pledgee, and thereafter the pledgee or his
nominee shall be entitled to vote the shares unless the instrument creating the
pledge provides otherwise.
2
<PAGE>
On and after the date on which written notice of redemption of redeemable
shares has been mailed to the holders thereof and a sum sufficient to redeem
such shares has been deposited with a bank or trust company with irrevocable
instruction and authority to pay the redemption to the holders thereof, upon
surrender of certificates thereof, such shares shall not be entitled to vote on
any matter and shall not be deemed to be outstanding shares.
Section 9. Action by Shareholders without a Meeting. Notwithstanding
Section 228 of the General Corporation Law of the State of Delaware, any action
to be taken at any annual or special meeting of shareholders of the corporation
may be taken without a meeting and without prior notice and without a vote, only
if a consent in writing, setting forth the action so taken, shall be signed by
all of the shareholders entitled to vote thereon.
ARTICLE II - DIRECTORS
Section 1. Function. The business of this corporation shall be managed and
its corporate powers exercised by the board of directors.
Section 2. Number. The number of directors of the Corporation shall not be
more than nine (9) nor less than one (1). The number of directors may be
increased or decreased from time to time by amendment of these by-laws, but no
decrease shall have the effect of shortening the term of any incumbent director,
unless the director is removed in the manner provided herein.
Section 3. Qualification. Each member of the board of directors must be an
adult. A director need not be a resident of Delaware or a shareholder of the
corporation.
Section 4. Election and Term. At each annual meeting, the shareholders
shall elect directors to hold office until the next succeeding annual meeting.
Each director shall hold office for the term for which he is elected and until
his successor is elected and qualifies or until his earlier resignation, removal
from office or death.
Section 5. Compensation. The board of directors has authority to fix the
compensation of the directors, as directors and as officers.
Section 6. Duties of Director. A director shall perform his duties as a
director including his duties as a member of any committee of the board upon
which he serves, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care that an ordinarily prudent
person in a similar position would use under similar circumstances.
2
<PAGE>
Section 7. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matters taken is presumed to have assented to the action unless he votes against
it or expressly abstains from voting on it because of an asserted conflict of
interest.
Section 8. Vacancies. Unless filled by the shareholders, any vacancy
occurring on the board of directors, including any vacancy created because of an
increase in the number of directors, may be filled by the affirmative vote of a
majority of the remaining directors, even if the number of remaining directors
does not constitute a quorum of the board of directors. A director elected to
fill a vacancy shall hold office only until the next election of directors by
the shareholders.
Section 9. Removal of Directors. At a meeting of shareholders called for
that purpose, the shareholders, by a vote of the holders of a majority of the
shares entitled to vote at an election of directors, may remove any director, or
the entire board of directors, with or without cause, and may fill any vacancy
or vacancies created by the removal.
Section 10. Quorum and Voting. At least one third of the total number of
directors constitutes a quorum for the transaction of business. The act of at
least one third of the total number of directors at a meeting at which a quorum
is present is the act of the board of directors.
Section 11. Place of Meetings. Regular and special meetings of directors
may be held within or outside the State of Delaware.
Members of the board of directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 12. Regular Meetings. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without notice other than the resolution.
Section 13. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any two directors
consistent with the terms hereof.
Section 14. Notice of Meetings. Written notice of the time and place of
special meetings of the board of directors shall be given to each director by
either personal delivery or by first Class United States mail, tele-facsimile or
electronic mail at least two days before the meeting. Notice of a meeting of the
board of directors need not be given to any director who signs a waiver of
notice either before or after the meeting.
4
<PAGE>
Attendance of a director at a meeting constitutes a waiver of notice of the
meeting and all objections to the time and place of the meeting, or the manner
in which it has been called or convened, except when the director states, at the
beginning of the meeting, any objection to the transaction of business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of the meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the board of directors to another time and place. Notice
of any adjourned meeting shall be given to the directors who were not present at
the time or the adjournment and, unless the time and place of the adjourned
meeting are announced at the time of the adjournment, to the other directors.
The directors shall act only as a board, and the individual directors shall
have no power as such, except that any action required by law to be taken at a
meeting of the directors of a corporation, or any action which may be taken at a
meeting of the directors, may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, signed by all of the
directors, is filed in the minutes of the proceedings of the board. Such consent
shall have the same effect as a unanimous vote.
Section 15. Director Conflicts of Interest. No contract or other
transaction between the corporation and one or more of its directors or any
other corporation, firm, association or entity in which one or more of its
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the board of directors which
authorizes, approves or ratifies such contract or transaction or because his
vote is counted for such purpose if (a) the fact of such relationship or
interest is disclosed or known to the board of directors which authorizes,
approves or ratifies the contract or transaction by a vote or consent sufficient
for the purpose without counting the votes or consents of such interested
directors; (b) the fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or (c) the contract or
transaction is fair and reasonable as to the corporation at the time it is
authorized by the board or the shareholders.
Interested directors may be counted in determining the presence of a quorum
at a meeting of the board of directors which authorizes, approves or ratifies
such contract or transaction.
ARTICLE III - OFFICERS
Section 1. Officers. The officers of the corporation shall consist of a
president, a secretary, and a treasurer, and may include one or more vice
presidents, one or more assistant secretaries, and one or more assistant
treasurers. The officers shall be elected at the first meeting of the board of
directors following the annual meeting of the shareholders in each year. The
board may from time to time elect or appoint other officers, assistant officers
and agents who shall have the authority to perform the duties prescribed by the
board. All officers shall hold office until their successors have been appointed
and have qualified or until their earlier resignation, removal from office or
death. One person may hold any two or more offices. The failure to elect a
president, secretary, or treasurer shall not affect the existence of the
corporation.
5
<PAGE>
Section 2. President. The president, subject to the direction of the board
of directors, is responsible for the general and active management of the
business and affairs of the corporation, has the power to sign certificates of
stock, bonds, deeds, and contracts for the corporation, and shall preside at all
meetings of the shareholders.
Section 3. Vice President. Each vice president has the power to sign bonds,
deeds, and contracts for the corporation and shall have the other powers and
perform the other duties prescribed by the board of directors or the president.
Unless the board otherwise provides, if the president is absent or unable to
act, the vice president who has served in that capacity for the longest time and
who is present and able to act, shall perform all of the duties and may exercise
any of the powers of the president. Any vice president may sign, with the
secretary or assistant secretary, certificates for stock of the corporation.
Section 4. Secretary. The secretary shall have the power to sign contracts
and other instruments for the corporation and shall (a) keep the minutes of the
proceedings of the shareholders and the board of directors in one or more books
provided for that purpose, (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law, (c) maintain custody
of the corporate records and the corporate seal, attest to the signatures of
officers who execute documents on behalf of the corporation, and assure that the
seal is affixed to all documents of which execution on behalf of the corporation
under its seal is duly authorized, (d) keep a register of the post office
address of each shareholder that shall be furnished to the secretary by the
shareholder, (e) sign with the president, or a vice president, certificates for
shares of the corporation, the issuance of which have been authorized by
resolution of the board of directors, (f) have general charge of the stock
transfer books of the corporation, and (g) in general perform all duties
incident to the office of secretary and other duties as from time to time may be
prescribed by the president or the board of directors.
Section 5. Treasurer. The treasurer shall (a) have charge and custody of
and be responsible for all funds and securities of the corporation, (b) receive
and give receipts for monies due and payable to the corporation from any source
whatsoever, and deposit monies in the name of the corporation in the banks,
trust companies, or other depositories as shall be selected by the board of
directors, and (c) in general perform all the duties incident to the office of
treasurer and other duties as from time to time may be assigned to him by the
president or the board of directors. It required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in the sum
and with the surety or sureties that the board of directors so determines.
Section 6. Removal of Officers. An officer or agent elected or appointed by
the board of directors may be removed by the board whenever in its judgment the
removal of the officer or agent will serve the best interests of the
corporation. Removal shall be without prejudice to any contract rights of the
person removed. The appointment of any person as an officer, agent, or employee
of the corporation does not create any contract rights. The board of directors
may fill a vacancy, however occurring, in any office.
6
<PAGE>
Section 7. Salaries. The board of directors from time to time shall fix the
salaries of the officers, and no officer shall be prevented from receiving his
salary merely because he is also a director of the corporation.
ARTICLE IV - INDEMNIFICATION
Section 1. Indemnification. The corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery of the state of Delaware or the court in which such action or suit was
brought shall determine upon application that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the state of Delaware or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in this section, or in defense of any
claim, issue or matter therein, be shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 2. Authorization. Any indemnification under Section 1 of this
Article (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section 1 of this
Article. Such determination shall be made: (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceedings, or (b) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in written opinion, or (c) by the shareholders.
7
<PAGE>
Section 3. Expense Advance. Expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this Article.
Such expenses incurred by other employees, trustees and agents of the
corporation may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
Section 4. Non-Exclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
Section 5. Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, trustee,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
Section 6. "The Corporation," Etc. For the purposes of this Article,
references to "the corporation" include all constituent corporations absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents as well as the resulting or surviving corporation so that any person
who is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as director, officer employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Article with respect to such a constituent corporation if
its separate existence had continued.
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the best interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article.
8
<PAGE>
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE V - STOCK CERTIFICATES
Section 1. Issuance. Every shareholder in this corporation is entitled to
have a certificate, evidencing all shares to which he is entitled. No
certificate shall be issued for any share until the share is fully paid.
Section 2. Form. Certificates evidencing shares in this corporation shall
be signed by, or in the name of the corporation by the chairman or vice chairman
of the board of directors, or the president or vice president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary,
and may be sealed with the seal of this corporation or a facsimile of the seal.
Unless the shares of stock of the corporation are registered pursuant to every
applicable securities law, each certificate shall bear an appropriate legend
restricting the transfer of the shares evidenced by that certificate.
Section 3. Lost, Stolen, or Destroyed Certificates. The corporation may
issue a new certificate in the place of any certificate previously issued if the
shareholder of record (a) makes proof in affidavit form that the certificate has
been lost, destroyed, or wrongfully taken, (b) requests the issue of a new
certificate before the corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without notice of any
adverse claim, (c) if requested by the corporation, gives bond in the form that
the corporation directs, to indemnify the corporation, the transfer agent, and
the registrar against any claim that may be made concerning the alleged loss,
destruction, or theft of a certificate, and (d) satisfies any other reasonable
requirements imposed by the corporation.
Section 4. Restrictive Legend. Every certificate evidencing shares that are
restricted as to sale, disposition, or other transfer shall bear a legend
summarizing the restriction and stating that a full statement of the restriction
is on file with the secretary of the corporation.
ARTICLE VI - DIVIDENDS
The board of directors from time to time may declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law.
9
<PAGE>
ARTICLE VII - SEAL
The corporate seal shall have the name of the corporation and the word
"seal" inscribed on it, and may be a facsimile, engraved, printed, or an
impression seal.
ARTICLE VIII - AMENDMENT
These bylaws may be repealed or amended, any additional bylaws may be
adopted, by either a vote of the full board of directors or by a vote of the
holders of all the issued and outstanding shares entitled to vote, but the board
of directors may not amend or repeal any bylaw adopted by shareholders if the
shareholders specifically provide that the bylaw is not subject to amendment or
repeal by the directors.
ARTICLE IX - MISCELLANEOUS
Section 1. Checks. All checks, notes, bills of exchange or other orders in
writing shall be signed by such person or persons as the board of directors may
from time to time designate.
Section 2. Contracts. Except as otherwise provided in these bylaws, the
board of directors may authorize any officer or officers, agent or agents, to
enter into any contract or to execute or deliver any instrument on behalf of the
corporation and such authority may be general or confined to specific instances.
Section 3. Deposits. All funds of the corporation shall be deposited from
time to time to the credit of the corporation in such banks, trust companies, or
other depositories as the board of directors may approve or designate, and all
such funds shall be withdrawn only upon checks signed by one or more officers or
employees as the board of directors shall from time to time determine.
Section 4. Balance Sheets and Profit and Loss Statements.
(1) Unless modified by resolution of the shareholders, not later than
four months after the close of each fiscal year, the corporation shall
prepare:
(a) a balance sheet showing in reasonable detail the financial
condition of the corporation at of the close of its fiscal year.
(b) a profit and loss statement showing the results of its
operation during its fiscal year.
(2) Upon the written request of any shareholder, the corporation shall
mail to such shareholder a copy of the most recent balance sheet and profit
and loss statement of the corporation.
(3) Such balance sheet and profit and loss statement shall be filed in
the registered office of the corporation in the state of Delaware, shall be
kept for at least five years and shall be subject to inspection during
business hours by any shareholder in person or by agent.
10
<PAGE>
Section 5. Corporate Books and Records.
(1) The corporation shall keep correct and complete books and records
of account and shall keep minutes of the proceedings of its shareholders,
board of directors and committees of directors.
(2) The corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of its shareholders, giving the names and addresses of all
shareholders, and the number, class and series of the shares held by each
shareholder.
(3) Any books, records and minutes may be in written form or in any
other form capable of being converted into written form within a reasonable
time.
(4) Any shareholder, upon written demand, stating a proper purpose
therefor, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose, its
relevant books and records of accounts, minutes and records of shareholders
and to make extracts therefrom.
11
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED BY-LAWS
The undersigned, Secretary of Pepsi-Cola Puerto Rico Bottling Company (the
"Corporation"), hereby certifies that the following amendments to the Amended
and Restated By-laws of the Corporation (the "By-laws") were approved in a
meeting of the Board of Directors of the Corporation held on January 24, 1998:
Sections 1, 2, 3 and 4 of Article IV of the By-laws are hereby amended and
modified in their entirety to read as follows:
ARTICLE IV - INDEMNIFICATION
Section 1. Indemnification. (a) The corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and manner he reasonably believed to be in
or not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
treated to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the state of Delaware or the court in which such action or
suit was brought shall determine upon application that despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the state of Delaware or such other court shall deem proper.
1
<PAGE>
(c) To the extent that any person referred to in the preceding two
paragraphs has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in this Section, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 2. Authorization. Any indemnification under paragraphs (a) and (b)
of Section 1 of this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraph (a) or (b) of Section 1 of this Article. Such determination shall be
made, at the option of the person seeking indemnification, by one of the
following: (a) by the board of directors by a majority vote of directors who are
not parties to such action, suit or proceedings, or (b) by independent legal
counsel selected by the person seeking indemnification from among the law firms
listed in Schedule or which are otherwise reasonably acceptable to the
corporation, in a written opinion or (c) if agreed upon by the corporation, by
the shareholders. In making such determination, the person seeking
indemnification under this Article shall be presumed to have met the applicable
standard of conduct set forth in Section 1 of this Article, which presumption
may be rebutted with evidence to the contrary. This determination shall be made
by the board of directors or independent legal counsel, as the case, may be, as
promptly as possible after submission to such board of directors or legal
counsel, and, to the extent possible, within 30 days of such submission a
determination made in accordance with, this Section shall not be deemed to
affect any right to judicial review of such determination that a person seeking
indemnification under this Article may have under applicable law.
Section 3 Expense Advance. Expenses incurred by a present or former officer
or director in defending a civil or criminal action, suit, investigation or
administrative matter (hereinafter called "Indemnifiable Events") in which such
person is named as a party, subject or witness, or brought against such person,
by reason of his serving or acting, or having served or acted as a director or
officer, or arising or allegedly arising, directly or indirectly, out of any
act, omission, occurrence or event involving such person, shall be paid by the
corporation in advance of the final disposition or completion of such
Indemnifiable Event upon the written request of such person and compliance with
the other recipients of this Section. A person requesting payments under this
Section shall be required to execute an undertaking to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized herein and furnish or file with the corporation any
other document required by law. Unless required by law, such undertaking need
not be secured. After receipt by the corporation of such executed undertaking
and any other documents, required by law, payment shall be made by the
corporation promptly after receipt by it of a reasonably detailed invoice for
any such expenses, certified by the person seeking reimbursement or the payment
of the invoice, to the effect that such expense was actually incurred by him in
connection with his defense of a claim for which indemnification could be sought
under this Article. It is the intent of the corporation that the provisions of
this Article be mandatory in operation and not subject to the discretion of the
corporation. Further, fees and expenses shall be recoverable from the
corporation, by any person adjudged or determined to be entitled to indemnity
hereunder, if such fees and expenses are incurred in order to enforce this
Article with respect to advancement of expenses or indemnification.
2
<PAGE>
Expenses incurred by other employees, trustees and agents of the
corporation may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
Section 4. Contractual Rights: Applicability of Amendments Interpretation.
The rights under this Article to Indemnification and to the advancement or
reimbursement of expenses, (i) are and shall be contract rights based upon good
and valuable consideration, pursuant to which the persons in favor of whom such
rights are created may sue as if the provisions of this Article were set forth
in a separate written contract or contracts between such persons and the
corporation, and (ii) shall continue and remain available and enforceable, after
any revocation or restricted modification thereof, as to Indemnifiable Events
occurring or having occurred prior to such relocation or modification. To the
extent that any amendment to this Article (including the Amendment adopted on
January 24, 1998) establishes specific procedures relating to indemnification
and advancement of expenses or grants additional rights to persons covered
hereunder, such procedures and additional rights shall only be applicable with
respect to Indemnifiable Events relating to events or actions or omissions by
such persons in their capacity as director, officer, employee or agent of the
corporation, in each case occurring after the date of such amendment. This
Article is intended to grant indemnification to persons covered hereby only to
the maximum extent permitted by applicable law.
The other Sections of Article IV of the By-laws shall remain unmodified,
unaltered and unchanged and in full force and effect.
Except for the amendments set forth above, the By-laws have not been
otherwise amended, repealed or revoked.
This Certificate of Amendment of the By-laws of Pepsi-Cola Puerto Rico
Bottling Company is issued on this 11th day of June, 1998.
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
By: /s/ Lawrence Odell
----------------------------------
Secretary
[Seal]
3
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
AMENDMENT TO BYLAWS
(Adopted pursuant to a Board resolution dated December 29, 1998)
WHEREAS, the Bylaws of the Company currently provide that an annual meeting
of stockholders shall occur in the month of January;
WHEREAS, the Company desires to have more flexibility in determining the
date of the annual stockholders' meeting; and
WHEREAS, the Company desires that its Bylaws be amended to provide that the
Board of Directors may determine the date, time and place of the annual meeting
of stockholders in its sole discretion; it is
RESOLVED, that Article I, Section 1 of the Company's Bylaws are hereby
amended to read as follows:
The annual meeting of the shareholders of the corporation for the
election for directors and the transaction of other business shall be
held on a date and at a time and place to be determined by the board
of directors.
<PAGE>
Exhibit 4.1
COMMON STOCK CLASS B COMMON STOCK
NUMBER $.01 PAR VALUE
SHARES
[LOGO]
PEPSIAMERICAS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 71343P 10 1
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS B COMMON STOCK OF
PEPSIAMERICAS, INC. (hereinafter called the "Corporation"), transferable on the
books of the Corporation by the registered holder hereof in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
In Witness Whereof, the Corporation has caused the facsimile signatures
of its duly authorized officers to be affixed hereto.
Dated:
Countersigned and Registered: Chief Executive Officer
THE BANK OF NEW YORK
Transfer Agent
and Registrar Secretary
By:
Authorized Signature
<PAGE>
PEPSIAMERICAS, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTION SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATION, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
ANY SUCH REQUEST MAY BE MADE TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ............Custodian............
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
.................................
JT TEN - as joint tenants with right (State)
of survivorship and not as
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
................................................................................
................................................................................
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocable constitute and appoint
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated_______________________
_______________________________________________________________________
Notice: The Signature to this assignment must correspond with the name as
written upon the face of the certificate, in every particular,
without alteration or enlargement, or any change whatever.
<PAGE>
Exhibit 4.2
CREDIT AGREEMENT
by and among
PEPSIAMERICAS, INC.
and
DAKBEV, LLC
as Borrowers,
BANK OF AMERICA, N.A.,
as Administrative Agent and as Lender,
and
FIRST UNION NATIONAL BANK,
and
NORWEST BANK MINNESOTA, N.A.,
as Co-Documentation Agents
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
October 15, 1999
BANC OF AMERICA SECURITIES LLC,
as Sole Lead Arranger and Sole Book Manager
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
1.1 Definitions 2
1.2 Rules of Interpretation 29
1.3 Acquisition Accounting 31
ARTICLE II
The Credit Facilities
2.1 Term Loan 32
2.2 Revolving Loans 35
2.3 Use of Proceeds 37
2.4 Notes 37
2.5 Swing Line 38
2.6 Joint and Several Liability, Contribution Rights 39
ARTICLE III
Letters of Credit
3.1 Letters of Credit 41
3.2 Reimbursement and Participations 41
ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
4.1 Interest Rate Options 44
4.2 Conversions and Elections of Subsequent Interest Periods 44
4.3 Payment of Interest 45
4.4 Prepayments of Eurodollar Rate Loans 46
4.5 Manner of Payment 46
4.6 Fees 46
4.7 Pro Rata Payments 47
4.8 Computation of Rates and Fees 47
4.9 Deficiency Advances; Failure to Purchase Participations 47
4.10 Intraday Funding 48
<PAGE>
ARTICLE V
Security
5.1 Security 50
5.2 Further Assurances 50
5.3 Information Regarding Collateral 51
ARTICLE VI
Change in Circumstances
6.1 Increased Cost and Reduced Return 52
6.2 Limitation on Types of Loans 53
6.3 Illegality 53
6.4 Treatment of Affected Loans 54
6.5 Compensation 54
6.6 Taxes 55
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1 Conditions of Term Loans and Initial Advance 57
7.2 Conditions of Revolving Loans and Letter of Credit 59
ARTICLE VIII
Representations and Warranties
8.1 Organization and Authority 61
8.2 Loan Documents 61
8.3 Solvency 62
8.4 Subsidiaries and Stockholders 62
8.5 Ownership Interests 62
8.6 Financial Condition 62
8.7 Title to Properties 63
8.8 Taxes 63
8.9 Other Agreements 63
8.10 Litigation 63
8.11 Margin Stock 63
8.12 Investment Company 64
8.13 Patents, Etc 64
8.14 No Untrue Statement 64
8.15 No Consents, Etc 64
8.16 Employee Benefit Plans 64
ii
<PAGE>
8.17 No Default 66
8.18 Environmental Laws 66
8.19 Employment Matters 66
8.20 RICO 66
8.21 Year 2000 Compliance 66
ARTICLE IX
Affirmative Covenants
9.1 Financial Reports, Etc 68
9.2 Maintain Properties 69
9.3 Existence, Qualification, Etc 69
9.4 Regulations and Taxes 69
9.5 Insurance 70
9.6 True Books 70
9.7 Year 2000 Compliance 70
9.8 Right of Inspection 70
9.9 Observe all Laws 70
9.10 Governmental Licenses 70
9.11 Covenants Extending to Other Persons 71
9.12 Officer's Knowledge of Default 71
9.13 Suits or Other Proceedings 71
9.14 Notice of Environmental Complaint or Condition 71
9.15 Environmental Compliance 71
9.16 Indemnification 72
9.17 Further Assurances 72
9.18 Employee Benefit Plans 72
9.19 Continued Operations 73
9.20 New Subsidiaries 73
ARTICLE X
Negative Covenants
10.1 Financial Covenants 77
10.2 Capital Expenditures 77
10.3 Liens 77
10.4 Indebtedness 78
10.5 Transfer of Assets 79
10.6 Investments and Acquisitions 79
10.7 Merger or Consolidation 80
10.8 Restricted Payments 80
10.9 Transactions with Affiliates 80
10.10 Compliance with ERISA, the Code and Foreign Benefit Laws 81
10.11 Fiscal Year 81
iii
<PAGE>
10.12 Dissolution, etc 81
10.13 Change in Control 82
10.14 Rate Hedging Obligations 82
10.15 Negative Pledge Clauses 82
10.16 Prepayments, Etc. of Indebtedness 82
ARTICLE XI
Events of Default and Acceleration
11.1 Events of Default 83
11.2 Administrative Agent to Act 86
11.3 Cumulative Rights 86
11.4 No Waiver 86
11.5 Allocation of Proceeds 86
ARTICLE XII
The Administrative Agent
12.1 Appointment, Powers, and Immunities 88
12.2 Reliance by Administrative Agent 88
12.3 Defaults 89
12.4 Rights as Lender 89
12.5 Indemnification 89
12.6 Non-Reliance on Administrative Agent and Other Lenders 90
12.7 Resignation of Administrative Agent 90
ARTICLE XIII
Miscellaneous
13.1 Assignments and Participations 91
13.2 Notices 92
13.3 Right of Set-off; Adjustments 93
13.4 Survival 94
13.5 Expenses 94
13.6 Amendments and Waivers 94
13.7 Counterparts; Facsimile Signatures 95
13.8 Termination 95
13.9 Indemnification; Limitation of Liability 96
13.10 Severability 96
13.11 Entire Agreement 97
13.12 Agreement Controls 97
13.13 Usury Savings Clause 97
13.14 Payments 97
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13.15 Confidentiality 98
13.16 Governing Law; Waiver of Jury Trial 98
EXHIBIT A Applicable Commitment Percentages A-1
EXHIBIT B Form of Assignment and Acceptance B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative C-1
EXHIBIT D-1 Form of Borrowing Notice D-1-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans D-2-1
EXHIBIT E Form of Interest Rate Selection Notice E-1
EXHIBIT F-1 Form of Revolving Note F-1-1
EXHIBIT F-2 Form of Term A Note F-2-1
EXHIBIT F-3 Form of Term B Note F-3-1
EXHIBIT F-4 Form of Swing Line Note F-4-1
EXHIBIT G Form of Opinion of Borrowers' Counsel G-1
EXHIBIT H Compliance Certificate H-1
EXHIBIT I Form of Facility Guaranty I-1
EXHIBIT J Form of Security Agreement J-1
EXHIBIT K Form of Pledge Agreement K-1
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 15, 1999 (the "Agreement"), is
made by and among PEPSIAMERICAS, INC., a Delaware corporation having its
principal place of business in Toa Baja, Puerto Rico (the "Parent"), DAKBEV,
LLC, a limited liability company organized under the laws of Delaware having its
principal place of business in Minneapolis, Minnesota ("DakBev" and together
with the Parent, collectively the "Borrowers" and individually, a "Borrower"),
BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States, in its capacity as a Lender ("Bank of
America"), and each other financial institution executing and delivering a
signature page hereto and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 13.1 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"), and
BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States, in its capacity as administrative agent for
the Lenders (in such capacity, and together with any successor agent appointed
in accordance with the terms of Section 12.7, the "Administrative Agent");
W I T N E S S E T H:
WHEREAS, the Borrowers have requested that the Lenders make available to
the Borrowers Term Loan facilities in the principal amount of $95,000,000, the
proceeds of which are to be used to repay and refinance existing indebtedness
and a revolving credit facility of up to $90,000,000, the proceeds of which are
to be used to fund a portion of the cost and the expenses of the Acquisition
Transaction, for Permitted Acquisitions and for general corporate purposes and
which shall include a letter of credit facility of up to $2,500,000 for the
issuance of standby letters of credit and a swing line facility of up to
$5,000,000; and
WHEREAS, the Lenders are willing to make such Term Loans, revolving credit
and letter of credit facilities available to the Borrowers upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Borrowers, the Lenders and the Administrative Agent
hereby agree as follows:
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ARTICLE I
Definitions and Terms
1.1 Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person (including the purchase of an option,
warrant or convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by the holder
thereof), whether by purchase of such equity interest or upon exercise
of an option or warrant for, or conversion of securities into, such
equity interest, or (ii) assets of another Person which constitute all
or any material part of the assets of such Person or of a line or lines
of business conducted by such Person.
"Acquisition Transaction" means the series of transactions
provided for in the Transaction Documents whereby DakBev and Delta
become Subsidiaries of the Parent substantially as described in the
Proxy Statement.
"Advance" means any of (i) the borrowing under the Term Loan
Facilities or (ii) a borrowing under the Revolving Credit Facility
consisting of a Base Rate Loan or a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Parent; or (ii) which beneficially owns
or holds 5% or more of any class of the outstanding voting stock (or in
the case of a Person which is not a corporation, 5% or more of the
equity interest) of the Parent; or 5% or more of any class of the
outstanding voting stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Parent. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting stock, by contract or otherwise.
"Applicable Commitment Fee" means that percent per annum set
forth on the Pricing Grid which shall be based upon (i) the
Consolidated Leverage Ratio or (ii) after the Closing Date and the
making of a Rating Election the Rating, as determined pursuant to
Section 4.3(b).
"Applicable Commitment Percentage" means, for each Lender at
any time, a fraction, (i) with respect to the Revolving Credit Facility
and the Letter of Credit Facility the numerator of which shall be such
Lender's Revolving Credit Commitment and the denominator of which shall
be the Total Revolving Credit Commitment, and (ii), with respect to
each of the Term Loan Facility A and Term Loan Facility B, as the case
may be, the numerator of which shall be such Lender's Term Loan A
Commitment or Term Loan B Commitment, as applicable, and the
denominator shall be the Total Term Loan A Commitment or Total Term
Loan B Commitment, as applicable, which Applicable Commitment
Percentage in each case for each Lender as of the Closing Date is as
set forth in Exhibit A; provided that the Applicable Commitment
Percentage of each Lender shall be increased or decreased to reflect
any assignments to or by such Lender effected in accordance with
Section 13.1.
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"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or an
affiliate of such Lender) as such Lender may from time to time specify
to the Administrative Agent and the Borrowers by written notice in
accordance with the terms hereof as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" means for each Loan of each Type that
percent per annum set forth on the Pricing Grid under the applicable
heading for such Loan of such Type which shall be based upon (i) the
Consolidated Leverage Ratio for the Four-Quarter Period most recently
ended or (ii) after the Closing Date and the making of a Rating
Election the Rating, as determined pursuant to Section 4.3(b).
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrowers from time to time and
delivered to the Issuing Bank to support the issuance of Letters of
Credit.
"Approved Fund" means, with respect to any Lender that is a
fund that invests in commercial loans, any other fund that invests in
commercial loans, and is managed by either or both of the same
investment advisor as such Lender or by an affiliate of such investment
advisor.
"Approved Stock Option Plan" means (a) each stock option plan
(whether relating to employees or directors) or agreement more
particularly described on Schedule 1.1(a) and (b) any executive or
employee stock option or incentive plan hereafter adopted by the board
of directors of the Parent.
"Asset Disposition" means any voluntary disposition, whether
by sale, lease or transfer, of (a) any of the assets, excluding cash
and cash equivalents and inventory sold in the ordinary course of
business, of the Parent or its Restricted Subsidiaries, and (b) any of
the capital stock, or securities or investments exchangeable,
exercisable or convertible for or into, or otherwise entitling the
holder to receive any of the Subsidiary Securities, of any Restricted
Subsidiary (other than a disposition to either Borrower or a
Guarantor); excluding, however, (i) any brand related assets acquired
in the Jamaica Transaction which are sold within thirty (30) days of
the date of the Jamaica Transaction and (ii) all or a portion of any
brand related assets which are acquired in a Permitted Acquisition
which are sold within thirty (30) days of such Acquisition so long as
the proceeds from the sale of such assets are paid directly or
indirectly to the Borrower or a Restricted Subsidiary and are used to
repay outstanding Revolving Loans.
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"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of Exhibit B (with blanks appropriately filled
in) delivered to the Administrative Agent in connection with an
assignment of a Lender's interest under this Agreement pursuant to
Section 13.1.
"Authorized Representative" means any of the Chief Executive
Officer or Chief Financial Officer of the Parent or any other Person
expressly designated by the Board of Directors of the Parent (or the
appropriate committee thereof) as an Authorized Representative of the
Parent, as set forth from time to time in a certificate in the form of
Exhibit C.
"BAS" means Banc of America Securities LLC and its successors.
"Bank of America" means Bank of America, N.A. and its
successors.
"Base Rate" means, for any day, the rate per annum equal to
the sum of (a) the higher of (i) the Federal Funds Rate for such day
plus one-half of one percent (0.5%) and (ii) the Prime Rate for such
day plus (b) the Applicable Margin. Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds
Rate.
"Base Rate Loan" means a Loan (including a Segment) for which
the rate of interest is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay Bank of America in
respect of Swing Line Outstandings.
"Base Rate Segment" means a Segment bearing interest or to
bear interest at the Base Rate.
"Beverage Agreement" means an agreement between the Parent or
one or more of its Subsidiaries and a Person, whereby the Person grants
to the Parent or its Subsidiary an exclusive right or license (a) to
the use of a trademark in connection with the bottling, distribution
and sale of a beverage product within a defined geographic area and (b)
to manufacture, sell and distribute fountain syrup to customers within
a defined geographic area.
"Beverage Plastics Company Management Stock" means shares of
restricted, non-voting common stock, held by management employees of
Beverage Plastics Company, the dividends on which are paid to
management employees of Beverage Plastics Company consistent with past
practice and in an aggregate annual amount not to exceed $500,000.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
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"Borrower's Account" means (a) with respect to the Parent, a
demand deposit account with the Administrative Agent and (b) with
respect to DakBev, a demand deposit account with the Administrative
Agent, which may be maintained at one or more offices of the
Administrative Agent or an agent of the Administrative Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms of Exhibits D-1 and D-2,
respectively.
"Business Day" means, (i) except as expressly provided in
clause (ii), any day which is not a Saturday, Sunday or a day on which
banks in the States of New York and North Carolina are authorized or
obligated by law, executive order or governmental decree to be closed
and, (ii) with respect to the selection, funding, interest rate,
payment, and Interest Period of any Eurodollar Rate Loan, any day which
is a Business Day, as described above, and on which the relevant
international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York,
New York and Charlotte, North Carolina.
"Capital Expenditures" means, with respect to the Parent and
its Restricted Subsidiaries, for any period the sum of (without
duplication) (i) all expenditures (whether paid in cash or accrued as
liabilities) by the Parent or any Restricted Subsidiary during such
period for items that would be classified as "property, plant or
equipment" or comparable items on the consolidated balance sheet of the
Parent and its Restricted Subsidiaries, including without limitation
all transactional costs incurred in connection with such expenditures
provided the same have been capitalized, excluding, however, the amount
of any Capital Expenditures paid for with proceeds of casualty
insurance as evidenced in writing and submitted to the Administrative
Agent together with any compliance certificate delivered pursuant to
Section 9.1(a) or (b), and (ii) with respect to any Capital Lease
entered into by the Borrower or its Restricted Subsidiaries during such
period, the present value of the lease payments due under such Capital
Lease over the term of such Capital Lease applying a discount rate
equal to the interest rate provided in such lease (or in the absence of
a stated interest rate, that rate used in the preparation of the
financial statements described in Section 9.1(a)), all the foregoing in
accordance with GAAP applied on a Consistent Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act) other than Persons owned directly or indirectly by Pohlad
Companies or PepsiCo. either (A) becomes the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act ), directly or indirectly, of Voting Securities
of the Borrower (or securities convertible into or exchangeable for such Voting
Securities) representing 25% or more of the combined voting power of all Voting
Securities of the Parent (on a fully diluted basis) or (B) otherwise has the
ability, directly or indirectly, to elect a majority of the board of directors
of the Parent;
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(ii) during any period of up to 12 consecutive months, commencing on the
Closing Date, individuals who at the beginning of such 12-month period were
directors of the Parent shall cease for any reason (other than the death,
disability or retirement of an officer of the Parent that is serving as a
director at such time so long as another officer of the Parent replaces such
Person as a director) to constitute a majority of the board of directors of the
Parent;
(iii) any Person or two or more Persons acting in concert shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation thereof, will result in its or their
acquisition of the power to exercise, directly or indirectly, a controlling
influence on the management or policies of the Parent; or
(iv) if the Pohlad Companies and Pepsi, directly or indirectly, shall own
in the aggregate less than 51% of the combined voting power of all Voting
Securities of the Parent.
"Closing Date" means the date as of which this Agreement is
executed by the Borrowers, the Lenders and the Administrative Agent and
on which the conditions set forth in Section 7.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Collateral" means, collectively, all property of the
Borrowers, any Subsidiary or any other Person in which the
Administrative Agent or any Lender is granted a Lien as security for
all or any portion of the Obligations under any Security Instrument.
"Commitments" means the Revolving Credit Commitment, the
Letter of Credit Commitment, the Term Loan A Commitment and the Term
Loan B Commitment of each Lender.
"Compliance Certificate" means a certificate in the form of
Exhibit H furnished to the Administrative Agent and Lenders by the
Parent pursuant to Section 9.1 hereof.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred to are
comparable in all material respects to those applied in the preparation
of the audited financial statements of the Parent referred to as of the
Closing Date in Section 8.6(a).
"Consolidated EBITDA" means, subject to Section 1.3, with
respect to the Parent and its Restricted Subsidiaries for any
Four-Quarter Period ending on the date of computation thereof, the sum
of, without duplication, (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) taxes on income, (iv) amortization, (v)
depreciation and (vi) up to $10,100,000 of non-recurring charges
incurred in the Four-Quarter Period ended December 31, 1999, adjusted
for Federal income taxes, if any, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis less
advances made to Delta pursuant to Section 10.6(h).
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"Consolidated Fixed Charge Ratio" means, with respect to the
Parent and its Restricted Subsidiaries for any Four-Quarter Period
ending on the date of computation thereof, the ratio of (i)
Consolidated EBITDA to (ii) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means, subject to Section 1.3,
with respect to the Parent and its Restricted Subsidiaries for any
Four-Quarter Period ending on the date of computation thereof, the sum
of, without duplication, (i) the cash portion of Consolidated Interest
Expense and (ii) scheduled principal payments of Consolidated
Indebtedness, all determined on a consolidated basis in accordance with
GAAP applied on a Consistent Basis.
"Consolidated Indebtedness" means all Indebtedness of the
Parent and its Restricted Subsidiaries, all determined on a
consolidated basis.
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the Parent
and its Restricted Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Rate Hedging Obligation)
payable in connection with the incurrence of Indebtedness to the extent
included in gross interest expense and (iii) the portion of any
payments made in connection with Capital Leases allocable to interest
expense, all determined on a consolidated basis in accordance with GAAP
applied on a Consistent Basis; provided, however, for the purpose of
determining Consolidated Interest Expense for the one, two and three
fiscal quarter periods of the Parent and its Subsidiaries following a
Permitted Acquisition, Consolidated Interest Expense for such periods
shall be multiplied by four, two and four-thirds, respectively.
"Consolidated Leverage Ratio" means, as of the date of
computation thereof, the ratio of (i) Consolidated Indebtedness
(determined as at such date) to (ii) Consolidated EBITDA (for the
Four-Quarter Period ending on (or most recently ended prior to) such
date).
"Consolidated Net Income" means, subject to Section 1.3, for
any period of computation thereof, the gross revenues from operations
of the Parent and its Restricted Subsidiaries (including payments
received by the Parent and its Restricted Subsidiaries of (i) interest
income, including as income (x) for the periods prior to and ending
March 31, 2000 that amount that would have been received by the holders
of the Delta Subordinated Notes for the Four Quarter Period ended March
31, 2000 assuming such payments were made in cash, (y) for the Four
Quarter Periods ending June 30, 2000 and September 30, 2000 the actual
amount of cash payments received on April 1, 2000 multiplied by two and
(z) thereafter, cash payments received by the Parent with respect to
the Delta Subordinated Notes and (ii) dividends and distributions of
cash made in the ordinary course of their businesses by Persons in
which investment is permitted pursuant to this Agreement and not
related to an extraordinary event), less all operating and
non-operating expenses of the Parent and its Restricted Subsidiaries
including taxes on income, all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis; but excluding (for
all purposes other than (x) compliance with Section 10.1(a) hereof) as
income: (i) net gains on the sale, conversion or other disposition of
capital assets, (ii) net gains on the acquisition, retirement, sale or
other disposition of capital stock and other securities of the Parent
or its Restricted Subsidiaries, (iii) net gains on the collection of
proceeds of life insurance policies, (iv) any write-up of any asset,
(v) any other net gain or credit of an extraordinary nature as
determined in accordance with GAAP applied on a Consistent Basis and
(vi) the amount of income from operations or otherwise of any Person,
including any Subsidiary, whose right to distribute such income is
subject to the prior approval of any other governmental or regulatory
authority which approval has not been received.
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"Consolidated Net Worth" means, as of any date on which the
amount thereof is to be determined, Consolidated Shareholders' Equity
minus (without duplication of deductions in respect of items already
deducted in arriving at surplus and retained earnings) all reserves
(other than contingency reserves not allocated to any particular
purpose), including without limitation reserves for depreciation,
depletion, amortization, obsolescence, deferred income taxes, insurance
and inventory valuation, all as determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of any date on
which the amount thereof is to be determined, the sum of the following
in respect of the Parent and its Restricted Subsidiaries (determined on
a consolidated basis and excluding any upward adjustment after the
Closing Date due to revaluation of assets): (i) the amount of issued
and outstanding share capital, plus (ii) the amount of additional
paid-in capital and retained earnings (or, in the case of a deficit,
minus the amount of such deficit), plus (iii) the amount of any foreign
currency translation adjustment (if positive, or, if negative, minus
the amount of such translation adjustment), minus (iv) the amount of
any treasury stock, all as determined in accordance with GAAP applied
on a Consistent Basis.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation (each a
"primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise
acquire any such primary obligation or any property constituting direct
or indirect security therefor, or (b) to advance or provide funds (i)
for the payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor in
respect of any such primary obligation or otherwise to maintain the net
worth or solvency or any balance sheet item, level of income or
financial condition of such primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor thereof to make payment of such primary obligation, or (d)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof.
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"Continue," "Continuation," and "Continued" shall refer to the
continuation pursuant to Section 4.2 hereof of a Eurodollar Rate Loan
of one Type as a Eurodollar Rate Loan of the same Type from one
Interest Period to the next Interest Period.
"Convert," "Conversion," and "Converted" shall refer to a
conversion pursuant to Section 4.2 of one Type of Loan into another
Type of Loan.
"Cost of Acquisition" means, with respect to any Acquisition,
as at the date of entering into any agreement therefor, the sum of the
following (without duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock or other securities of the
Parent or any Subsidiary to be transferred in connection therewith,
(ii) the amount of any cash and fair market value of other property
(excluding property described in clause (i) and the unpaid principal
amount of any debt instrument) given as consideration, (iii) the amount
(determined by using the face amount or the amount payable at maturity,
whichever is greater) of any Indebtedness incurred, assumed or acquired
by the Parent or any Subsidiary in connection with such Acquisition,
(iv) all additional purchase price amounts in the form of earnouts and
other contingent obligations that should be recorded at the time of
such Acquisition on the financial statements of the Parent and its
Subsidiaries in accordance with GAAP, (v) all amounts paid in respect
of covenants not to compete, consulting agreements that should be
recorded on financial statements of the Parent and its Subsidiaries at
the time of such Acquisition in accordance with GAAP, and other
affiliated contracts in connection with such Acquisition, (vi) the
aggregate fair market value of all other consideration given by the
Parent or any Subsidiary in connection with such Acquisition, and (vii)
out of pocket transaction costs for the services and expenses of
attorneys, accountants and other consultants incurred in effecting such
transaction, and other similar transaction costs so incurred. For
purposes of determining the Cost of Acquisition for any transaction,
(A) the capital stock of the Parent shall be valued (I) in the case of
capital stock that is then designated as a national market system
security by the National Association of Securities Dealers, Inc.
("NASDAQ") or is listed on a national securities exchange, the average
of the last reported bid and ask quotations or the last prices reported
thereon, and (II) with respect to any other shares of capital stock, as
determined by the Board of Directors of the Parent and, if requested by
the Administrative Agent, determined to be a reasonable valuation by
the independent public accountants referred to in Section 9.1(a), (B)
the Subsidiary Securities of any Subsidiary shall be valued as
determined by the Board of Directors of such Subsidiary and, if
requested by the Administrative Agent, determined to be a reasonable
valuation by the independent public accountants referred to in Section
9.1(a), and (C) with respect to any Acquisition accomplished pursuant
to the exercise of options or warrants or the conversion of securities,
the Cost of Acquisition shall include both the cost of acquiring such
option, warrant or convertible security as well as the cost of exercise
or conversion.
"Credit Parties" means, collectively, the Borrowers, each
Guarantor and each other Person providing Collateral pursuant to any
Security Instrument.
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"DakBev" has the meaning set forth in the preambles to this
Agreement.
"Dakota" means Dakota Beverage Company, Inc., a Minnesota
corporation.
"Dakota Exchange Agreement" means the Dakota Exchange
Agreement dated as of June 28, 1999 between the Parent and Dakota,
including all schedules and exhibits thereto.
"Debt Offering" means a public or private offering of
Indebtedness (including, without limitation, any security constituting
Indebtedness which is exchangeable, exercisable or convertible for or
into, or otherwise entitling the holder to receive, equity securities)
of the Parent or any Restricted Subsidiary (other than Indebtedness
among the Parent and any Restricted Subsidiary or one Restricted
Subsidiary and another Restricted Subsidiary) not otherwise permitted
under Section 10.4 and which is approved by the Required Lenders.
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a rate
of two percent (2%) above the Eurodollar Rate applicable to such Loan,
and thereafter at a rate of interest per annum which shall be two
percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans,
Swing Line Loans, Reimbursement Obligations, fees, and other amounts
payable in respect of Obligations or (except as otherwise expressly
provided therein) the obligations of any other Credit Party under any
of the other Loan Documents, a rate of interest per annum which shall
be two percent (2%) above the Base Rate and (iii) in any case, the
maximum rate permitted by applicable law, if lower.
"Delta" means Delta Beverage Group, Inc., a Delaware
corporation.
"Delta Exchange Agreement" means the Delta Exchange Agreement
dated June 28, 1999 among the Parent and Delta and the shareholders of
Delta, including all schedules and exhibits thereto.
"Delta Preferred Stock" means the Delta Preferred Stock Series
AA.
"Delta Subordinated Notes" means the Delta 11% Subordinated
Notes due September 23, 2003.
"Direct Foreign Subsidiary" means a Subsidiary other than a
Domestic Subsidiary a majority of whose Voting Securities, or a
majority of whose Subsidiary Securities, are owned by the Borrower or a
Domestic Subsidiary.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
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"Domestic Subsidiary" means any Restricted Subsidiary of the
Parent organized under the laws of the United States of America, any
state or territory thereof or the District of Columbia.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate or
Approved Fund of a Lender, and (iii) any other Person approved by the
Administrative Agent and, unless an Event of Default has occurred and
is continuing at the time any assignment is effected in accordance with
Section 13.1, the Parent, such approval not to be unreasonably withheld
(provided that the incurrence by the Borrowers of additional costs
pursuant to Section 6.6 as a result of such assignment shall constitute
a reasonable basis for withholding such consent) or delayed by the
Parent and such approval to be deemed given by the Parent (in the
absence of notice to the contrary, effective upon receipt) within two
Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Parent; provided, however, that
neither the Parent nor an affiliate of the Parent shall qualify as an
Eligible Assignee.
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Administrative
Agent:
(a) Government Securities;
(b) obligations of any corporation organized under the laws of any state of
the United States of America or under the laws of any other nation, payable in
the United States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an investment grade rating
category by S&P and Moody's;
(c) interest bearing demand or time deposits issued by any Lender or
certificates of deposit maturing within one year from the date of issuance
thereof and issued by a bank or trust company organized under the laws of the
United States or of any state thereof having capital surplus and undivided
profits aggregating at least $400,000,000 and being rated "A" or better by S&P
or "A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in obligations described in
paragraphs (a) through (f) above, the shares of which mutual funds are at all
times rated "AAA" by S&P ;
(h) tax-exempt or taxable adjustable rate preferred stock issued by a
Person having a rating of its long term unsecured debt of "A-" or better by S&P
or "A-3" or better by Moody's; and
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(i) asset-backed remarketed certificates of participation representing a
fractional undivided interest in the assets of a trust, which certificates are
rated at least "A-1" by S&P and "P-1" by Moody's.
"Employee Benefit Plan" means (i) any employee benefit plan,
including any Pension Plan, within the meaning of Section 3(3) of ERISA
which (A) is maintained for employees of the Parent or any of its ERISA
Affiliates, or any Restricted Subsidiary or is assumed by the Parent or
any of its ERISA Affiliates, or any Restricted Subsidiary in connection
with any Acquisition or (B) has at any time been maintained for the
employees of the Parent, any current or former ERISA Affiliate, or any
Restricted Subsidiary and (ii) any plan, arrangement, understanding or
scheme maintained by the Parent or any Restricted Subsidiary that
provides retirement, deferred compensation, employee or retiree medical
or life insurance, severance benefits or any other benefit covering any
employee or former employee and which is administered under any Foreign
Benefit Law or regulated by any Governmental Authority other than the
United States of America.
"Environmental Laws" means any federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree, permit
or license regulating, relating to, or imposing liability or standards
of conduct concerning, any environmental matters or conditions,
environmental protection or conservation, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; the Superfund Amendments and Reauthorization
Act of 1986, as amended; the Resource Conservation and Recovery Act, as
amended; the Toxic Substances Control Act, as amended; the Clean Air
Act, as amended; the Clean Water Act, as amended; together with all
regulations promulgated thereunder, and any other "Superfund" or
"Superlien" law.
"Equity Offering" means a public or private offering of equity
securities (including, without limitation, any security or investment
not constituting Indebtedness exchangeable, exercisable or convertible
for or into, or otherwise entitling the holder to receive, equity
securities) of the Borrower or any Restricted Subsidiary (other than
securities issued to the Parent or another Restricted Subsidiary);
provided, however, the term "Equity Offering" shall not include any
issuance of equity securities which issuance is in connection with the
exercise of stock options or warrants granted to, or purchase of
restricted stock by, eligible participants under an Approved Stock
Option Plan or in connection with a Permitted Acquisition.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"ERISA Affiliate," as applied to the Parent, means any Person
or trade or business which is a member of a group which is under common
control with the Parent, who together with the Parent, is treated as a
single employer within the meaning of Section 414(b) and (c) of the
Code.
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"Eurodollar Rate Loan" means a Loan (including a Segment) for
which the rate of interest is determined by reference to the Eurodollar
Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
-------------------------------
Rate 1- Reserve Requirement Margin
"Eurodollar Rate Segment" means a Segment bearing interest or
to bear interest at the Eurodollar Rate.
"Event of Default" means any of the occurrences set forth as
such in Section 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Existing Indebtedness" means the Indebtedness of the Parent
or certain of its Subsidiaries described on Schedule 1.1(b) hereto.
"Facilities" means the Revolving Credit Facility and the Term
Loan Facilities.
"Facility Guaranty" means each Guaranty Agreement between one
or more Guarantors and the Administrative Agent for the benefit of the
Administrative Agent and the Lenders, delivered as of the Closing Date
and otherwise pursuant to Section 9.20, as the same may be amended,
modified or supplemented.
"Facility Termination Date" means such date as all of the
following shall have occurred: (a) the Borrowers shall have permanently
terminated the Revolving Credit Facility and the Swing Line by payment
in full of all Revolving Credit Outstandings and Letter of Credit
Outstandings and Swing Line Outstandings, together with all accrued and
unpaid interest thereon, except for the undrawn portion of Letters of
Credit as have been fully cash collateralized in a manner consistent
with the terms of Section 11.1(B), (b) the Borrowers shall have paid
all Term Loan Outstandings in full, together with all accrued and
unpaid interest thereon, (c) all Swap Agreements shall have been
terminated, expired or cash collateralized, (d) all Term Loan
Commitments, Revolving Credit Commitments and Letter of Credit
Commitments shall have terminated or expired and (e) the Borrowers
shall have fully, finally and irrevocably paid and satisfied in full
all Obligations (other than Obligations consisting of continuing
indemnities and other contingent Obligations of the Borrowers or any
Guarantor that may be owing to the Lenders pursuant to the Loan
Documents and expressly survive termination of this Agreement);
"FASB 133 Adjustments" means entries on or adjustments to any
balance sheet or statement of income in respect of derivatives or
hedging instruments as required or permitted by Statement of Financial
Accounting Standards No. 133.
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"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative
Agent.
"Fiscal Year" means the twelve month fiscal period of the
Parent and its Subsidiaries commencing on January 1 of each calendar
year and ending on December 31 of such calendar year.
"Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign
nation or any province, state, territory, protectorate or other
political subdivision thereof regulating, relating to, or imposing
liability or standards of conduct concerning, any Employee Benefit
Plan.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Parent and its Restricted Subsidiaries, taken
together as one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public
Accountants, or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report.
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America.
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a
foreign entity or government.
"Guarantors" means, at any date, all Domestic Subsidiaries
which are Restricted Subsidiaries, all of which are required to be
parties to a Facility Guaranty at such date.
"Hazardous Material" means and includes any pollutant,
contaminant, or hazardous, toxic or dangerous waste, substance or
material (including without limitation petroleum products,
asbestos-containing materials and lead), the generation, handling,
storage, transportation, disposal, treatment, release, discharge or
emission of which is subject to any Environmental Law.
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<PAGE>
"Historical Financial Statements" means (i) the consolidated
balance sheets and related consolidated statements of income and cash
flows for each of the Parent, Dakota and Delta and their respective
Subsidiaries for the fiscal years ended 1996, 1997 and 1998, audited by
independent public accountants of recognized standing and prepared in
accordance with GAAP and interim unaudited consolidated balance sheets
and related consolidated statements of income for each of the Parent,
Dakota and Delta and their respective Subsidiaries for the interim
period ended June 30, 1999 and (ii) the unaudited historical proforma
financial statements (balance sheet and statement of income) prepared
on a combined basis of the Parent, Dakota and Delta and their
Subsidiaries, giving pro forma effect to the Acquisition Transaction
during the periods covered by such financial statements for the Fiscal
Year ended 1998 and for the interim period most recently ended June 30,
all such financial statements being contained in the Proxy Statement.
"Historical Pro Forma Financial Statements" means the
unaudited historical pro forma statements of income and certain cash
flow items prepared on a combined basis of the Parent, and its
Restricted Subsidiaries (giving pro forma effect to the Acquisition
Transaction during the periods covered thereby) for the Fiscal Years
ended 1998 and for the period ended June 30, 1999.
"Indebtedness" means as to any Person, without duplication,
(a) all Indebtedness for Money Borrowed of such Person, (b) all Rate
Hedging Obligations of such Person, (c) all indebtedness secured by any
Lien on any property or asset owned or held by such Person regardless
or whether the indebtedness secured thereby shall have been assumed by
such Person or is non-recourse to the credit of such Person, and (d)
all Contingent Obligations of such Person.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money
borrowed, including without limitation, all obligations under Capital
Leases, the deferred purchase price of any property or services, the
aggregate face amount of all surety bonds, letters of credit, and
bankers' acceptances, and (without duplication) all payment and
reimbursement obligations in respect thereof whether or not matured,
evidenced by a promissory note, bond, debenture or similar written
obligation for the payment of money (including reimbursement agreements
and conditional sales or similar title retention agreements), other
than trade payables and accrued expenses incurred in the ordinary
course of business.
"Interbank Offered Rate" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the rate per
annum (rounded upwards, if necessary), to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "Interbank Offered
Rate" shall mean, with respect to any Eurodollar Rate Loan for the
Interest Period applicable thereto, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period, provided, however; if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%).
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<PAGE>
"Interest Period" means, for each Eurodollar Rate Loan, a
period commencing on the date such Eurodollar Rate Loan is made or
Converted or Continued and ending, at the Borrower's option, on the
date one, two, three or six months thereafter as notified to the
Administrative Agent by the Authorized Representative in accordance
with the terms hereof; provided that,
(i) if an Interest Period for a Eurodollar Rate Loan would end on a day
which is not a Business Day, such Interest Period shall be extended to the next
Business Day (unless such extension would cause the applicable Interest Period
to end in the succeeding calendar month, in which case such Interest Period
shall end on the next preceding Business Day); and
(ii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"Interest Rate Selection Notice" means the written notice
delivered by an Authorized Representative in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Loan
or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or
the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in
the form of Exhibit E.
"Issuing Bank" means Bank of America as issuer of Letters of
Credit under Article III.
"Jamaica Transaction" means the acquisition of (a) the right
to distribute cola beverages including those bearing the "Pepsi-Cola"
or "Pepsi" trademark, in Jamaica and (b) the manufacturing and other
assets used in conjunction with manufacturing and distributing such
beverages in Jamaica, with a Cost of Acquisition of not more than
$29,000,000.
"LC Account Agreement" means the LC Account Agreement dated as
of the date hereof among the Borrowers and the Administrative Agent, as
amended, modified or supplemented from time to time.
"Letter of Credit" means a standby letter of credit issued by
the Issuing Bank pursuant to Article III hereof for the account of
either or both of the Borrowers in favor of a Person advancing credit
or securing an obligation on behalf of a Borrower.
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"Letter of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to acquire Participations in
respect of Letters of Credit and Reimbursement Obligations up to an
aggregate amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by the Issuing Bank for
the account of either or both of the Borrowers of Letters of Credit in
an aggregate stated amount at any time outstanding not exceeding the
Total Letter of Credit Commitment minus outstanding Reimbursement
Obligations.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount available to be drawn under all
Letters of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrowers and any
Restricted Subsidiary shall be deemed to be the owner of any property
which it has acquired or holds subject to a conditional sale agreement,
financing lease, or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for
security purposes.
"Loan" or "Loans" means any of the Revolving Loans or the Term
Loans, including any Segment, made under the Revolving Credit Facility
or the Term Loan Facilities, respectively.
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Facility Guaranties, the LC Account Agreement, the
Applications and Agreements for Letter of Credit, and all other
instruments and documents heretofore or hereafter executed or delivered
to or in favor of any Lender (including the Issuing Bank) or the
Administrative Agent in connection with the Loans made and transactions
contemplated under this Agreement, as the same may be amended,
supplemented or replaced from the time to time.
"Master Bottling Agreements" means the agreements between one
or more of the Parent, Delta or DakBev and PepsiCo whereby the Parent,
Delta and DakBev are granted the exclusive right to (i) distribute cola
beverages and fountain syrup manufactured from concentrates supplied by
PepsiCo in specified territories bearing the "Pepsi-Cola" and "Pepsi"
trademark, including DIET PEPSI, (ii) distribute non-cola products
consisting primarily of MOUNTAIN DEW, DIET MOUNTAIN DEW, and related
products and (iii) to distribute cola beverages and fountain syrup
bearing the "Pepsi-Cola" and "Pepsi" trademark, including DIET PEPSI in
Puerto Rico.
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"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations, prospects or condition,
financial or otherwise, of the Parent or any of its Restricted
Subsidiaries or any other Credit Party, (ii) the ability of any Credit
Party to pay or perform its respective obligations, liabilities and
indebtedness under the Loan Documents as such payment or performance
becomes due in accordance with the terms thereof, or (iii) the rights,
powers and remedies of the Administrative Agent or any Lender under any
Loan Document or the validity, legality or enforceability thereof.
"Mortgage Notes" means those Mortgage Notes in the aggregate
principal amount of $30,663,835 described on Schedule 1.1(c) hereto.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Parent or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by,
and supported by the full taxing authority of, any state of the United
States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated in the
highest investment rating category by both S&P and Moody's.
"Net Proceeds" (a) from any public or private offering of any
security (including any Debt Offering or Equity Offering) means cash
payments received by the Parent or any Restricted Subsidiary therefrom
as and when received, net of all legal, accounting, banking and
underwriting fees and expenses, commissions, discounts and other
issuance expenses incurred in connection therewith and all taxes
required to be paid or accrued as a consequence of such issuance; and
(b) from any Asset Disposition means cash payments received by the
Parent or any Restricted Subsidiary therefrom (including any cash
payments received pursuant to any note or other debt security received
in connection with any Asset Disposition) as and when received, net of
(i) all legal fees and expenses and other fees and expenses paid to
third parties and incurred in connection therewith, (ii) all taxes
required to be paid or accrued as a consequence of such disposition,
(iii) all amounts applied to repayment of Indebtedness (other than the
Obligations) secured by a Lien on the asset or property disposed and
(iii) all amounts reinvested by the Parent or a Restricted Subsidiary
substantially contemporaneously with such disposition (or to be
invested within 90 days pursuant to an investment plan approved by the
Administrative Agent) in replacement assets of substantially equal or
greater value and utility; provided, however, that Net Proceeds shall
not include the first $5,000,000 of cash payments received in each
Fiscal Year from Asset Dispositions.
"Note Pledge Agreement" means that certain Note Pledge
Agreement dated as of the date hereof between the Parent and the
Administrative Agent for the benefit of the Administrative Agent and
the Lenders, as hereafter amended, supplemented or restated from time
to time.
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"Notes" means, collectively, the Term Notes, the Swing Line
Note and the Revolving Notes.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrowers with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the Reimbursement
Obligations and otherwise in respect of the Letters of Credit, (iii)
all liabilities of Borrowers to any Lender (or any affiliate of any
Lender) which arise under a Swap Agreement, and (iv) the payment and
performance of all other obligations, liabilities and Indebtedness of
the Borrowers to the Lenders (including the Issuing Bank), the
Administrative Agent or BAS hereunder, under any one or more of the
other Loan Documents or with respect to the Loans.
"Operating Documents" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, the bylaws, operating agreement, partnership
agreement, limited partnership agreement or other applicable documents
relating to the operation, governance or management of such entity.
"Organizational Action" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, any corporate, organizational or partnership
action (including any required shareholder, member or partner action),
or other similar official action, as applicable, taken by such entity.
"Organizational Documents" means with respect to any
corporation, limited liability company, partnership, limited
partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation,
certificate of incorporation, articles of organization, certificate of
limited partnership or other applicable organizational or charter
documents relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings, Term Loan Outstandings
and Revolving Credit Outstandings on such date.
"Participation" means, (i) with respect to any Lender (other
than the Issuing Bank) and a Letter of Credit, the extension of credit
represented by the participation of such Lender hereunder in the
liability of the Issuing Bank in respect of a Letter of Credit issued
by the Issuing Bank in accordance with the terms hereof and (ii) with
respect to any Lender (other than Bank of America) and a Swing Line
Loan, the extension of credit represented by the participation of such
Lender hereunder in the liability of Bank of America in respect of a
Swing Line Loan made by Bank of America in accordance with the terms
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412
of the Code and which (i) is maintained for employees of the Borrower
or any of its ERISA Affiliates or is assumed by the Borrower or any of
its ERISA Affiliates in connection with any Acquisition or (ii) has at
any time been maintained for the employees of the Borrower or any
current or former ERISA Affiliate.
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"PepsiCo" means, collectively, PepsiCo, Inc., a North Carolina
corporation and its direct or indirect wholly-owned subsidiaries.
"Permitted Acquisition" means (a) the Acquisition Transaction,
(b) the Jamaica Transaction and (c) each other Acquisition effected
with the consent and approval of the board of directors or other
applicable governing body of the Person being acquired, and with the
duly obtained approval of such shareholders or other holders of equity
interest as such Person may be required to obtain, so long as (i)
immediately prior to and immediately after the consummation of such
Acquisition, no Default or Event of Default has occurred and is
continuing, (ii) substantially all of the sales and operating profits
generated by such Person (or assets) so acquired or invested are
derived from the business of bottling, distributing and selling the
beverage known as Pepsi-Cola and similar beverages (alcoholic and
non-alcoholic) and water products, (iii) pro forma historical financial
statements as of the end of the most recent fiscal quarter for the
trailing twelve month period giving effect to such Acquisition are
delivered to the Administrative Agent not less than five (5) Business
Days prior to the consummation of such Acquisition, together with a
certificate of an Authorized Representative demonstrating compliance
with Section 10.1 hereof after giving effect to such Acquisition and
(iv) the aggregate Cost of Acquisition with respect to any Acquisition
consummated during any Fiscal Year of a Person who is not a Guarantor
after giving effect to such Acquisition shall not exceed $25,000,000
net of any cash proceeds received by the Parent and its Restricted
Subsidiaries at the date of such Acquisition from the sale of any
assets of the Person or business so acquired.
"Person" means an individual, partnership, corporation,
limited liability company, limited liability partnership, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
"Pledge Agreement" means, collectively (or individually as the
context may indicate), (i) that certain Securities Pledge Agreement
dated as of the date hereof among the Borrowers and the Administrative
Agent for the benefit of the Administrative Agent and the Lenders, (ii)
any additional Securities Pledge Agreement delivered to the
Administrative Agent pursuant to Section 5.1 and Section 9.20, and
(iii) with respect to any Subsidiary Securities issued by a Direct
Foreign Subsidiary, any additional or substitute charge, agreement,
document, instrument or conveyance, in form and substance acceptable to
the Administrative Agent, conferring under applicable foreign law upon
the Administrative Agent for the benefit of the Administrative Agent
and the Lenders a Lien upon such Subsidiary Securities as are owned by
the Parent or any Domestic Subsidiary, in each case as hereafter
amended, supplemented (including by Pledge Agreement Supplement) or
amended and restated from time to time.
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"Pledge Agreement Supplement" means, with respect to each
Pledge Agreement, the Pledge Agreement Supplement in the form affixed
as an Exhibit to such Pledge Agreement.
"Pledged Interests" means the Subsidiary Securities required
to be pledged as Collateral pursuant to Article V or the terms of any
Pledge Agreement.
"Pledged Notes" means the Mortgage Notes and the Delta
Subordinated Notes required to be pledged as Collateral pursuant to
Article V or the terms of the Note Pledge Agreement.
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably called
for redemption and advance refunded through the deposit in escrow of
Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii)
irrevocably pledged solely to the payment of all principal and interest
on such obligations as the same becomes due and (iii) in a principal
amount and bear such rate or rates of interest as shall be sufficient
to pay in full all principal of, interest, and premium, if any, on such
obligations as the same becomes due as verified by a nationally
recognized firm of certified public accountants.
"Pricing Grid" means the tables set forth on Schedule 1.1(d)
hereto setting forth the basis for (whether the Consolidated Leverage
Ratio or Ratings) and the percentage to be utilized in calculating the
Applicable Margin for each Loan of each Type and the Applicable
Commitment Fee.
"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"Principal Office" means the principal office of Bank of
America, presently located at 101 North Tryon Street, 15th Floor, NC1
001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services,
or such other office and address as the Administrative Agent may from
time to time designate.
"Pro Forma Projections" means (i) the consolidated balance
sheet as at the Closing Date and consolidated statements of income and
cash flows for each of the five (5) Fiscal Years ending 1999 through
2004 of the Parent and its Restricted Subsidiaries giving proforma
effect to the Acquisition Transaction and (ii) the consolidated balance
sheet and consolidated statements of income and cash flows for each of
the five (5) Fiscal Years ending 1999 through 2004 of Delta and its
Subsidiaries.
"Proxy Statement" means the proxy statement of the Parent,
File No. 1-13914, filed pursuant to Rule 14(a) of the Securities
Exchange Act of 1934, as amended, with the Securities and Exchange
Commission.
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"Rate Hedging Obligations" means, without duplication, any and
all obligations of the Parent or any Restricted Subsidiary, whether
absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and
all agreements, devices or arrangements designed to protect at least
one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to,
Dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options,
puts, warrants and those commonly known as interest rate "swap"
agreements; (ii) all other "derivative instruments" as defined in FASB
133 and which are subject to the reporting requirements of FASB 133;
and (iii) any and all cancellations, buybacks, reversals, terminations
or assignments of any of the foregoing.
"Rating" means the debt rating assigned to long-term,
unsecured, unenhanced senior Indebtedness of the Parent by S&P and
Moody's.
"Rating Election" means the one-time right of the Parent to
elect to have the Applicable Margin thereafter determined based on the
Rating so long as at all times thereafter the Rating is not less than
BB by S&P and Ba2 by Moody's and if the Rating is less than either BB
or Ba2 the Applicable Margin shall at all times thereafter be
determined based upon the Consolidated Leverage Ratio.
"Registrar" means, with respect to any Subsidiary Securities,
any Person authorized or obligated to maintain records of the
registration of ownership or transfer of ownership of interests in such
Subsidiary Securities, and in the event no such Person shall have been
expressly designated by the related Subsidiary, shall mean (i) as to
any corporation or limited liability company, its Secretary (or
comparable official), and (ii) as to any partnership, its general
partner (or managing general partner if one shall have been appointed).
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrowers with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing Bank
of proceeds of Loans pursuant to Section 2.2(c)(iii)) for amounts
theretofore paid by the Issuing Bank pursuant to a drawing under such
Letter of Credit.
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 66-2/3%
of the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit Exposure"
of each Lender shall be equal at all times (a) other than following the
occurrence and during the continuance of an Event of Default, to the
sum of its Revolving Credit Commitment and Term Loan Commitments, and
(b) following the occurrence and during the continuance of an Event of
Default, to the sum of (i) the amount of such Lender's Applicable
Commitment Percentage of Term Loan Outstandings plus (ii) the aggregate
principal amount of such Lender's Applicable Commitment Percentage of
Revolving Credit Outstandings plus (iii) the amount of such Lender's
Applicable Commitment Percentage of Letter of Credit Outstandings and
Swing Line Outstandings; provided that, for the purpose of this
definition only, (A) if any Lender shall have failed to fund its
Applicable Commitment Percentage of any Advance, then the Term Loan
Commitment or Revolving Credit Commitment, as applicable, of such
Lender shall be deemed reduced by the amount it so failed to fund for
so long as such failure shall continue and such Lender's Credit
Exposure attributable to such failure shall be deemed held by any
Lender making more than its Applicable Commitment Percentage of such
Advance to the extent it covers such failure, (B) if any Lender shall
have failed to pay to the Issuing Bank upon demand its Applicable
Commitment Percentage of any drawing under any Letter of Credit
resulting in an outstanding Reimbursement Obligation (whether by
funding its Participation therein or otherwise), such Lender's Credit
Exposure attributable to all Letter of Credit Outstandings shall be
deemed to be held by the Issuing Bank until such Lender shall pay such
deficiency amount to the Issuing Bank together with interest thereon as
provided in Section 4.9 and (C) if any Lender shall have failed to pay
to Bank of America on demand its Applicable Commitment Percentage of
any Swing Line Loan (whether by funding its Participation therein or
otherwise), such Lender's Credit Exposure attributable to all Swing
Line Outstandings shall be deemed to be held by Bank of America until
such Lender shall pay such deficiency amount to Bank of America
together with interest thereon as provided in Section 4.9.
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"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks of the
Federal Reserve System against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined, or (ii) any category of extensions
of credit or other assets which include Eurodollar Rate Loans. The
Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of Parent or any Subsidiary Securities of its Restricted
Subsidiaries (other than those payable or distributable solely to the
Parent) now or hereafter outstanding, except a dividend payable solely
in shares of a class of stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Parent or any of its Restricted
Subsidiaries (other than those payable or distributable solely to the
Borrower) now or hereafter outstanding; (c) any payment made to retire,
or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of the Parent or
any Subsidiary Securities of its Restricted Subsidiaries now or
hereafter outstanding; and (d) any issuance and sale of Subsidiary
Securities of any Restricted Subsidiary of the Parent (or any option,
warrant or right to acquire such stock) other than to the Parent.
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"Restricted Subsidiary" means all Subsidiaries of the Parent
other than Delta and Subsidiaries of Delta.
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Revolving Loans to the
Borrowers up to an aggregate principal amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in
Section 2.2 hereof providing for Loans to the Borrowers by the Lenders
in the aggregate principal amount of the Total Revolving Credit
Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding.
"Revolving Credit Termination Date" means (i) the Stated
Termination Date or (ii) such earlier date of termination of Lenders'
obligations pursuant to Section 11.1 upon the occurrence of an Event of
Default, or (iii) such date as the Borrowers may voluntarily and
permanently terminate the Revolving Credit Facility by payment in full
of all Revolving Credit Outstandings, Swing Line Outstandings and
Letter of Credit Outstandings and cancellation of all Letters of
Credit, together with all accrued and unpaid interest thereon.
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with Section 2.2.
"Revolving Notes" means, collectively, the promissory notes of
the Borrowers evidencing Revolving Loans executed and delivered to the
Lenders as provided in Section 2.4 substantially in the form of Exhibit
F-1, with appropriate insertions as to amounts, dates and names of
Lenders.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Security Agreement" means, collectively (or individually as
the context may indicate), (i) the Security Agreement dated as of the
date hereof by the Borrowers and Restricted Subsidiaries to the
Administrative Agent and (ii) any additional Security Agreement
delivered to the Administrative Agent pursuant to Section 9.20, as
hereafter modified, amended or supplemented from time to time.
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"Security Instruments" means, collectively, the Pledge
Agreement, the Note Pledge Agreement, the Security Agreement and all
other agreements (including control agreements), instruments and other
documents, whether now existing or hereafter in effect, pursuant to
which the Borrowers or any Restricted Subsidiary shall grant or convey
to the Administrative Agent or the Lenders a Lien in, or any other
Person shall acknowledge any such Lien in, property as security for all
or any portion of the Obligations, as any of them may be amended,
modified or supplemented from time to time.
"Segment" means a portion of a Term Loan (or all thereof) with
respect to which a particular interest rate is (or is proposed to be)
applicable.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(a) the fair value of its assets (both at fair valuation and at present
fair saleable value on an orderly basis) is in excess of the total amount of its
liabilities, including Contingent Obligations; and
(b) it is then able and expects to be able to pay its debts as they mature;
and
(c) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.
"Stated Termination Date" means October 14, 2002.
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding Voting Securities or more than 50% of
all equity interests is owned directly or indirectly by a Borrower
and/or by one or more of a Borrower's Subsidiaries.
"Subsidiary Securities" means the shares of capital stock or
the other equity interests issued by or equity participations in any
Restricted Subsidiary, whether or not constituting a "security" under
Article 8 of the Uniform Commercial Code as in effect in any
jurisdiction, but excluding the Beverage Plastics Company Management
Stock.
"Swap Agreement" means one or more agreements among the
Borrowers and any Person with respect to Indebtedness evidenced by any
or all of the Notes, on terms mutually acceptable to Borrowers and such
Person and approved by the Required Lenders, which agreements create
Rate Hedging Obligations; provided, however, that no such approval of
the Lenders shall be required to the extent such agreements are entered
into between the Borrower and any Lender or any affiliate of any
Lender.
"Swing Line" means the revolving line of credit established by
Bank of America in favor of the Borrowers pursuant to Section 2.5.
"Swing Line Loans" means loans made by Bank of America to the
Borrowers pursuant to Section 2.5.
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"Swing Line Note" means the promissory note of the Borrowers
evidencing the Swing Line executed and delivered to Bank of America as
provided in Section 2.4 substantially in the form of Exhibit F-2.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding.
"Term Loans" means each of the Term Loan A and Term Loan B
made pursuant to the Term Loan Facilities in accordance with Section
2.1.
"Term Loan A" means the loan made pursuant to the Term Loan A
Facility.
"Term Loan A Commitment" means, with respect to each Lender,
the obligation of a Term Loan A Lender to make available the Term Loan
A to the Borrowers in a principal amount equal to such Term Loan A
Lender's Applicable Commitment Percentage of the Total Term Loan A
Commitment as set forth on Exhibit A hereto.
"Term Loan A Facility" means the facility described in Section
2.1 hereof providing for a Term Loan to the Borrowers by the Lenders in
the original principal amount of $30,000,000.
"Term Loan A Lender" means each Lender having a Term Loan
Commitment, including as of the Closing Date the Lenders indicated on
Exhibit A hereto as having a Term Loan A Commitment.
"Term Loan A Maturity Date" means October 14, 2002.
"Term Loan A Outstandings" means, as of the date of
determination, the aggregate principal amount of the outstanding Term
Loans A and all accrued interest thereon.
"Term Loan A Termination Date" means (i) the Term Loan A
Maturity Date or (ii) such earlier date of termination of a Term Loan A
Lenders' obligations pursuant to Section 11.1 hereof upon the
occurrence of an Event of Default or (iii) such date as the Borrowers
may voluntarily and permanently terminate the applicable Term Loan A
Facility by payment in full of all Obligations incurred in connection
with such Term Loan A.
"Term Loan B" means the loan made pursuant to the Term Loan B
Facility.
"Term Loan B Commitment" means, with respect to each Lender,
the obligation of a Term Loan B Lender to make available the Term Loan
B to the Borrowers in a principal amount equal to such Term Loan B
Lender's Applicable Commitment Percentage of the Total Term Loan B
Commitment, as set forth in Exhibit A hereto.
"Term Loan B Facility" means the facility described in Section
2.1 hereof providing for the Term Loan to the Borrowers in the original
principal amount of $65,000,000.
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"Term Loan B Lender" means each Lender having a Term Loan B
Commitment, including as of the Closing Date the Lenders indicated on
Exhibit A hereto as having a Term Loan B Commitment.
"Term Loan B Maturity Date" means October 14, 2003.
"Term Loan B Outstandings" means, as of the date of
determination, the aggregate principal amount of outstanding Term Loans
B and all accrued interest thereon.
"Term Loan B Termination Date" means (i) the Term Loan B
Maturity Date or (ii) such earlier date of termination of a Term Loan B
Lender's obligations pursuant to Section 11.1 hereof upon the
occurrence of an Event of Default or (iii) such date as the Borrowers
may voluntarily and permanently terminate the applicable Term Loan B
Facility by payment in full of all Obligations incurred in connection
with such Term Loan B.
"Term Loan Commitment" means, collectively, the Term Loan A
Commitment and the Term Loan B Commitment.
"Term Loan Facilities" means the Term Loan A Facility and the
Term Loan B Facility.
"Term Loan Outstandings" means, as of any date of
determination, the sum of Term Loan A Outstandings and Term Loan B
Outstandings at such date.
"Term Loan Termination Date" means the date upon which each of
the Term Loan A Termination Date and the Term Loan B Termination shall
have occurred.
"Term Notes" means, collectively, the Term A Notes and the
Term B Notes.
"Term A Notes" means, collectively, the promissory notes of
the Borrowers evidencing Term Loan A executed and delivered to the Term
Loan A Lenders as provided in Section 2.4 hereof substantially in the
form of Exhibit F-2 hereto, with appropriate insertions as to amounts,
dates and names of Term Loan A Lenders.
"Term B Notes" means, collectively, the promissory notes of
the Borrowers evidencing Term Loan B executed and delivered to the Term
Loan B Lenders as provided in Section 2.4 hereof substantially in the
form of Exhibit F-3 hereto, with appropriate insertions as to amounts,
dates and names of Term Loan B Lenders.
"Termination Event" means: (i) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder (unless
the notice requirement has been waived by applicable regulation); or
(ii) the withdrawal of either Borrower or any ERISA Affiliate 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 was deemed such
under Section 4062(e) of ERISA; or (iii) the termination of a Pension
Plan, 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 (iv) the institution of proceedings to
terminate a Pension Plan by the PBGC; or (v) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA
for the termination of, or the appointment of a trustee to administer,
any Pension Plan; or (vi) the partial or complete withdrawal of either
Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the
imposition of a Lien pursuant to Section 412 of the Code or Section 302
of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Section 4241
or Section 4245 of ERISA, respectively; or (ix) any event or condition
which results in the termination of a Multiemployer Plan under Section
4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any
event or condition with respect to any Employee Benefit Plan which is
regulated by any Foreign Benefit Law that results in the termination of
such Employee Benefit Plan or the revocation of such Employee Benefit
Plan's authority to operate under the applicable Foreign Benefit Law.
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"Total Letter of Credit Commitment" means an amount not to
exceed $2,500,000.
"Total Revolving Credit Commitment" means a principal amount
equal to $90,000,000, as reduced from time to time in accordance with
Section 2.2(e).
"Total Term Loan A Commitment" means a principal amount equal
to $30,000,000.
"Total Term Loan B Commitment" means a principal amount equal
to $65,000,000.
"Total Term Loan Commitment" means the sum of the Total Term
Loan A Commitment and the Total Term Loan B Commitment.
"Transaction Documents" means the Delta Exchange Agreement and
the Dakota Exchange Agreement and each other agreement entered into in
effecting the transactions described in such Exchange Agreements.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or
a Eurodollar Rate Loan).
"Voting Securities" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Year 2000 Compliant" means all computer applications
(including those affected by information received from its suppliers
and vendors) that are material to the Borrowers' or any of their
Subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions involving all dates on and
after January 1, 2000;
"Year 2000 Problem" means the risk that computer applications
used by the Borrower or any of its Subsidiaries (including those
affected by information received from its suppliers and vendors) may be
unable to recognize and perform properly date-sensitive functions
involving certain dates on and after January 1, 2000.
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1.2 Rules of Interpretation .
(a) All accounting terms not specifically defined herein shall have the
meanings assigned to such terms and shall be interpreted in accordance with GAAP
applied on a Consistent Basis.
(b) Each term defined in Articles 1, 8 or 9 of the North Carolina Uniform
Commercial Code shall have the meaning given therein unless otherwise defined
herein, except to the extent that the Uniform Commercial Code of another
jurisdiction is controlling, in which case such terms shall have the meaning
given in the Uniform Commercial Code of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used herein or in any
other Loan Document are solely for convenience of reference and shall not
constitute a part of any such document or affect the meaning, construction or
effect of any provision thereof.
(d) Except as otherwise expressly provided, references in any Loan Document
to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and
schedules are references to articles, sections, paragraphs, clauses, annexes,
appendices, exhibits and schedules in or to such Loan Document.
(e) All definitions set forth herein or in any other Loan Document shall
apply to the singular as well as the plural form of such defined term, and all
references to the masculine gender shall include reference to the feminine or
neuter gender, and vice versa, as the context may require.
(f) When used herein or in any other Loan Document, words such as
"hereunder," "hereto," "hereof" and "herein" and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the whole
of the applicable document and not to any particular article, section,
subsection, paragraph or clause thereof.
(g) References to "including" means including without limiting the
generality of any description preceding such term, and for purposes hereof the
rule of ejusdem generis shall not be applicable to limit a general statement,
followed by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned.
(h) Except as otherwise expressly provided, all dates and times of day
specified herein shall refer to such dates and times at Charlotte, North
Carolina.
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(i) Whenever interest rates or fees are established in whole or in part by
reference to a numerical percentage expressed as "___%," such arithmetic
expression shall be interpreted in accordance with the convention that 1% = 100
basis points.
(j) Each of the parties to the Loan Documents and their counsel have
reviewed and revised, or requested (or had the opportunity to request) revisions
to, the Loan Documents, and any rule of construction that ambiguities are to be
resolved against the drafting party shall be inapplicable in the construing and
interpretation of the Loan Documents and all exhibits, schedules and appendices
thereto.
(k) Any reference to an officer of a Borrower or any other Person by
reference to the title of such officer shall be deemed to refer to each other
officer of such Person, however titled, exercising the same or substantially
similar functions.
(l) All references to any agreement or document as amended, modified or
supplemented, or words of similar effect, shall mean such document or agreement,
as the case may be, as amended, modified or supplemented from time to time only
as and to the extent permitted therein and in the Loan Documents.
1.3 Acquisition Accounting .
In the event of the occurrence of an Acquisition (a) of a line of business
of a Person the Borrower shall, in determining Consolidated EBITDA and
Consolidated Fixed Charges for the three Four-Quarter Periods ending after the
date of such Acquisition, annualize the results of operations of the business so
acquired for the one, two and three quarter periods, respectively, ending next
following the date of Acquisition by (i) in the case of the quarter period
during which such Acquisition occurs, dividing the results of operation for the
period from the date of Acquisition to the end of such quarter by the number of
days during such quarter that remain following the date of Acquisition and
multiplying the result by 90 (the "First Quarter Results") and then multiplying
the First Quarter Results by 4, (ii) multiplying the sum of the First Quarter
Results and the second quarter results of operations by two, and (iii)
multiplying the sum of the First Quarter Results and the second and third
quarter results of operations by four-thirds; and (b) in connection with the
Acquisition of all of the equity interest or assets of a Person, for the three
Four-Quarter Periods ending next following the date of such Acquisition,
Consolidated EBITDA and Consolidated Fixed Charges shall include the results of
operations of the Person so acquired (or whose assets are so acquired), which
amounts shall be determined on an historical pro forma basis and with the
consent of the Administrative Agent may include non-recurring charges which will
be eliminated by reason of such Acquisition.
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ARTICLE II
The Credit Facilities
2.1 Term Loan .
(a) Subject to the terms and conditions of this Agreement, each Lender with
a Term Loan A Commitment and/or a Term Loan B Commitment, as the case may be,
severally agrees to make (i) an Advance of the Term Loan A on the Closing Date
in an amount equal to its Applicable Commitment Percentage of the Total Term
Loan A Commitment, and (ii) an Advance of the Term Loan B on the Closing Date in
an amount equal to its Applicable Commitment Percentage of the Total Term Loan B
Commitment, in each case, by wire transfer to the Administrative Agent. Such
wire transfer shall be directed to the Administrative Agent at the Principal
Office and shall be in the form of immediately available Dollars . The amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the respective Borrower as directed in
the Borrowing Notice by delivery of the proceeds thereof to the respective
Borrower's Account or otherwise as shall be directed by the Authorized
Representative and reasonably acceptable to the Administrative Agent. Each Term
Loan shall be available in a single draw in Dollars at Closing.
(b) Payment of Principal. (i) The principal amount of Term Loan A and Term
Loan B shall be repaid by the Borrowers on the dates and in the amounts (subject
to the provisions of Section 4.2 and 4.4) hereof set forth below:
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Amount
Date Term Loan A Term Loan B
December 31, 1999 $1,250,000 $ 162,500
March 31, 2000 $1,250,000 $ 162,500
June 30, 2000 $1,250,000 $ 162,500
September 30, 2000 $1,250,000 $ 162,500
December 31, 2000 $1,875,000 $ 162,500
March 31, 2001 $1,875,000 $ 162,500
June 30, 2001 $1,875,000 $ 162,500
September 30, 2001 $1,875,000 $ 162,500
December 31, 2001 $4,375,000 $ 162,500
March 31, 2002 $4,375,000 $ 162,500
June 30, 2002 $4,375,000 $ 162,500
September 30, 2002 $4,375,000 $ 162,500
December 31, 2002 $ -0- $15,762,500
March 31, 2003 $ -0- $15,762,500
June 30, 2003 $ -0- $15,762,500
September 30, 2003 $ -0- $15,762,500
; provided, however, that the entire amount of Term Loan Outstandings shall be
due and payable in full on the Term Loan Termination Date.
(c) Optional Prepayments. The Borrowers may prepay the Term Loans in whole
or in part from time to time on any Business Day, without penalty or premium,
upon at least three (3) Business Days' telephonic notice from an Authorized
Representative (effective upon receipt) to the Administrative Agent prior to
10:30 A.M., which notice shall be irrevocable. The Authorized Representative
shall provide the Administrative Agent written confirmation of each such
telephonic notice but failure to provide such confirmation shall not affect the
validity of such telephonic notice. Any prepayment, whether of a Base Rate
Segment or a Eurodollar Rate Segment, shall be made at a prepayment price equal
to (i) the amount of principal to be prepaid, plus (ii) all accrued and unpaid
interest on the amount so prepaid, to the date of prepayment. All prepayments
under this Section 2.1(d) shall be made in the minimum principal amount of
$5,000,000 or any integral multiple of $1,000,000 -------------- in excess
thereof (or in the entire remaining principal balance of the Term Loans), and
all such prepayments of principal shall be applied pro rata among Term Loan A
Outstandings and Term Loan B Outstandings to installments of principal in
inverse order of their maturities.
(d) Mandatory Prepayments. In addition to the required payments of
principal of the Term Loans set forth in Section 2.1(b) and any optional
payments of principal of the Term Loans effected under Section 2.1(c), the
Borrowers shall make the following required prepayments of the Term Loans, each
such payment to be made to the Administrative Agent for the benefit of the
Lenders within the time period specified below:
(i) Equity Offerings. The Borrowers shall make, or shall cause each
applicable Restricted Subsidiary to make, a prepayment of the Term Loans
from the Net Proceeds of any Equity Offering in an amount equal to fifty
percent (50%) of such Net Proceeds. Each such prepayment shall be made
within fifteen (15) Business Days of receipt of such Net Proceeds and upon
not less than three (3) Business' Days written notice to the Administrative
Agent, and shall include within one (1) Business Day of repayment a
certificate of an Authorized Representative setting forth in reasonable
detail the calculations utilized in computing the amount of the Net
Proceeds.
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(ii) Debt Offerings. The Borrowers shall make, or shall cause each
applicable Restricted Subsidiary to make, a prepayment of the Term Loans
from the Net Proceeds of any Debt Offering in an amount equal to one
hundred percent (100%) of such Net Proceeds. Each such prepayment shall be
made within fifteen (15) Business Days of receipt of such Net Proceeds and
upon not less than three (3) Business' Days written notice to the
Administrative Agent, and shall include within one (1) Business Day of
repayment a certificate of an Authorized Representative setting forth in
reasonable detail the calculations utilized in computing the amount of the
Net Proceeds.
(iii) Asset Dispositions. The Borrowers shall make, or shall cause
each applicable Restricted Subsidiary to make, a prepayment of the Term
Loans from the Net Proceeds of any Asset Disposition in an amount equal to
one hundred percent (100%) of such Net Proceeds. Each such prepayment shall
be made within fifteen (15) Business Days of receipt of such Net Proceeds
and upon not less than three (3) Business' Days written notice to the
Administrative Agent, which notice shall include a certificate of an
Authorized Representative setting forth in reasonable detail the
calculations utilized in computing the amount of the Net Proceeds.
(iv) Insurance or Condemnation Proceeds. The Borrowers shall make, or
shall cause each applicable Restricted Subsidiary to make, a prepayment of
the Term Loans in an amount equal to one hundred percent (100%) of the
proceeds of any condemnation or insurance; provided, however, that to the
extent no Default or Event of Default has occurred and is continuing, no
such prepayment shall be required with respect to proceeds which are
reinvested by the Borrowers in repair of any damaged property or in
replacement property of approximately equivalent or greater value and
utility as the property subject to such taking or loss within 180 days
following receipt of such proceeds. Each such prepayment shall be made (A)
within fifteen (15) Business Days of receipt of such proceeds and upon not
less than three (3) Business' Days written notice to the Administrative
Agent unless the Borrowers shall have delivered to the Administrative Agent
a certificate setting forth the amount of such proceeds, confirming the
intent of the Borrowers to reinvest such proceeds as provided above and
containing a detailed description of the plan of reinvestment with respect
to such proceeds or (B) upon expiration of 180 days following receipt of
such proceeds if a certificate referred to in clause (A) above has been
received by the Agent but such reinvestment has not been consummated within
the 180 day reinvestment period referred to above.
(v) Pledged Notes. The Parent shall make a prepayment of the Term
Loans in an amount equal to one hundred percent (100%) of all principal
payments made by Delta with respect to the Delta Subordinated Notes. Each
such prepayment shall be made within five (5) Business Days of receipt of
such payment and upon not less than three (3) Business Days' written notice
to the Administrative Agent.
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All mandatory prepayments made pursuant to this Section 2.1(d) shall be
applied first to repay the Term Loans on a pro rata basis (that is, based on the
ratio each outstanding Term Loan bears to Term Loan Outstandings) until the Term
Loan Outstandings have been paid in full and then to reduce Revolving Credit
Outstandings, if any. Each mandatory prepayment in an amount less than the Term
Loan Outstandings shall be applied pro rata to each remaining installment of
Term Loan A and Term Loan B (or if no Term Loan A Outstandings then exist, pro
rata to each remaining installment of Term Loan B) in inverse order of
maturities; provided, however, that any holder of Term Loan B shall have the
right by the giving of at least one day's prior written notice to the
Administrative Agent to refuse prepayment of all or a portion of the Term Loan B
held by it if, but only to the extent that after giving effect to such partial
prepayment (and any reallocation of all refused Term Loan B repayments provided
for herein), a portion of Term Loan A will remain outstanding, and any
prepayment so refused shall be applied to prepay the remaining installments of
Term Loan A in inverse order of maturities. If the amount of Term Loan B as to
which prepayment is refused is in excess of the remaining Term Loan A
Outstandings, then the Administrative Agent shall pro rate the amount of Term
Loan B which can be paid among holders of Term Loan A based upon the proportion
that the principal amount of Term Loan A held by each Lender bears to the Total
Term Loan A Outstandings. The holders of Term Loan B shall have no right to
refuse prepayment of all or any portion of Term Loan B to the extent that the
aggregate amount so refused in connection with any prepayment exceeds the amount
of Term Loan A Outstandings. Any prepayment of an Eurodollar Rate Loan pursuant
to this Section 2.1(d) other than on the last day of an Interest Period shall be
accompanied by the additional payment, if any, required by Section 6.5 hereof.
Any repayment of Revolving Credit Outstandings with proceeds of an Asset
Disposition shall permanently reduce the Total Revolving Credit Commitment by
the amount of such payment.
2.2 Revolving Loans .
(a) Commitment. Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make Advances to the Borrowers under the Revolving
Credit Facility from time to time from the Closing Date until the Revolving
Credit Termination Date on a pro rata basis as to the total borrowing requested
by a Borrower on any day determined by such Lender's Applicable Commitment
Percentage up to but not exceeding the Revolving Credit Commitment of such
Lender, provided, however, that the Lenders will not be required and shall have
no obligation to make any such Advance (i) so long as a Default or an Event of
Default has occurred and is continuing or (ii) if the Administrative Agent has
accelerated the maturity of any of the Notes as a result of an Event of Default;
provided further, however, that immediately after giving effect to each such
Advance, the amount of Revolving Credit Outstandings plus Letter of Credit
Outstandings plus Swing Line Outstandings shall not exceed the Total Revolving
Credit Commitment. Within such limits and subject to the other terms and
conditions of this Agreement, the Borrowers may borrow, repay and reborrow under
the Revolving Credit Facility on a Business Day from the Closing Date until, but
(as to borrowings and reborrowings) not including, the Revolving Credit
Termination Date.
(b) Amounts. The amount of Revolving Credit Outstandings plus Letter of
Credit Outstandings plus Swing Line Outstandings shall not exceed at any time
the Total Revolving Credit Commitment, and, in the event there shall be
outstanding any such excess, the Borrowers shall immediately make such payments
and prepayments as shall be necessary to comply with this restriction. Each
Advance under the Revolving Credit Facility, other than Base Rate Refunding
Loans, shall be in an amount of at least $5,000,000, and, if greater than
$1,000,000, an integral multiple of $1,000,000.
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(c) Advances.
(i) An Authorized Representative shall give the Administrative Agent
(1) at least three (3) Business Days' irrevocable telephonic notice of each
Eurodollar Rate Loan (whether representing an additional borrowing or the
Continuation of a borrowing hereunder or the Conversion of a borrowing hereunder
from a Base Rate Loan to a Eurodollar Rate Loan) prior to 10:30 A.M. and (2)
irrevocable telephonic notice of each Base Rate Loan (other than Base Rate
Refunding Loans to the extent the same are effected without notice pursuant to
Section 2.2(c)(iii) and whether representing an additional borrowing hereunder
or the Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate
Loans) prior to 10:30 A.M. on the day of such proposed Revolving Loan. Each such
notice shall be effective upon receipt by the Administrative Agent, shall
specify the amount of the borrowing, the type of Revolving Loan (Base Rate or
Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the
Interest Period to be used in the computation of interest. The Authorized
Representative shall provide the Administrative Agent written confirmation of
each such telephonic notice in the form of a Borrowing Notice or Interest Rate
Selection Notice (as applicable) with appropriate insertions but failure to
provide such confirmation shall not affect the validity of such telephonic
notice. Notice of receipt of such Borrowing Notice or Interest Rate Selection
Notice, as the case may be, together with the amount of each Lender's portion of
an Advance requested thereunder, shall be provided by the Administrative Agent
to each Lender by telefacsimile transmission with reasonable promptness, but
(provided the Administrative Agent shall have received such notice by 10:30
A.M.) not later than 1:00 P.M. on the same day as the Administrative Agent's
receipt of such notice.
(ii) Not later than 2:00 P.M. on the date specified for each borrowing
under this Section 2.2, each Lender shall, pursuant to the terms and subject to
the conditions of this Agreement, make the amount of the Advance or Advances to
be made by it on such day available by wire transfer to the Administrative Agent
in the amount of its pro rata share, determined according to such Lender's
Applicable Commitment Percentage of the Revolving Loan or Revolving Loans to be
made on such day. Such wire transfer shall be directed to the Administrative
Agent at the Principal Office and shall be in the form of Dollars constituting
immediately available funds. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Borrower by delivery of the proceeds thereof to the applicable Borrower's
Account or otherwise as shall be directed in the applicable Borrowing Notice by
the Authorized Representative and reasonably acceptable to the Administrative
Agent.
(iii) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit, such drawing is honored by the Issuing Bank, and the Borrowers
shall not immediately fully reimburse the Issuing Bank in respect of such
drawing from other funds available to the Borrowers, (A) provided that the
conditions to making a Revolving Loan as herein provided shall then be
satisfied, the Reimbursement Obligation arising from such drawing shall be paid
to the Issuing Bank by the Administrative Agent without the requirement of
notice to or from the Borrowers from immediately available funds which shall be
advanced as a Base Rate Refunding Loan to the Administrative Agent at its
Principal Office by each Lender under the Revolving Credit Facility in an amount
equal to such Lender's Applicable Commitment Percentage of such Reimbursement
Obligation, and (B) if the conditions to making a Revolving Loan as herein
provided shall not then be satisfied, each of the Lenders shall fund by payment
to the Administrative Agent (for the benefit of the Issuing Bank) at its
Principal Office in immediately available funds the purchase from the Issuing
Bank of their respective Participations in the related Reimbursement Obligation
based on their respective Applicable Commitment Percentages of the Total Letter
of Credit Commitment. If a drawing is presented under any Letter of Credit in
accordance with the terms thereof and the Borrowers shall not immediately
reimburse the Issuing Bank in respect thereof, then notice of such drawing or
payment shall be provided promptly by the Issuing Bank to the Administrative
Agent and the Administrative Agent shall provide notice to each Lender by
telephone or telefacsimile transmission. If notice to the Lenders of a drawing
under any Letter of Credit is given by the Administrative Agent at or before
12:00 noon on any Business Day, each Lender shall either make a Base Rate
Refunding Loan or fund the purchase of its Participation as specified above in
the amount of such Lender's Applicable Commitment Percentage of such drawing or
payment and shall pay such amount to the Administrative Agent for the account of
the Issuing Bank at the Principal Office in Dollars and in immediately available
funds before 2:30 P.M. on the same Business Day. If such notice to the Lenders
is given by the Administrative Agent after 12:00 noon on any Business Day, each
Lender shall either make such Base Rate Refunding Loan or fund such purchase
before 12:00 noon on the next following Business Day.
(d) Repayment of Revolving Loans The principal amount of each Revolving
Loan shall be due and payable to the Administrative Agent for the benefit of
each Lender in full on the Revolving Credit Termination Date, or earlier as
specifically provided herein. The principal amount of any Revolving Loan may be
prepaid in whole or in part on any Business Day, upon (A) at least three (3)
Business Days' irrevocable telephonic notice in the case of each Revolving Loan
that is a Eurodollar Rate Loan from an Authorized Representative (effective upon
receipt) to the Administrative Agent prior to 10:30 A.M. and (B) irrevocable
telephonic notice in the case of each Revolving Loan that is a Base Rate Loan
from an Authorized Representative (effective upon receipt) to the Administrative
Agent prior to 10:30 A.M. on the day of such proposed repayment. The Authorized
Representative shall provide the Administrative Agent written confirmation of
each such telephonic notice but failure to provide such confirmation shall not
effect the validity of such telephonic notice. All prepayments of Revolving
Loans made by the Borrowers shall be in the amount of $5,000,000 or such greater
amount which is an integral multiple of $1,000,000, or the amount equal to all
Revolving Credit Outstandings, or such other amount as necessary to comply with
Section 2.2(b).
(e) Voluntary Reductions. The Borrowers shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Administrative Agent, effective upon receipt, to reduce the Total
Revolving Credit Commitment. The Administrative Agent shall give each Lender,
within one (1) Business Day of receipt of such notice, telefacsimile notice, or
telephonic notice (confirmed in writing), of such reduction. Each such reduction
shall be in the aggregate amount of $5,000,000 or such greater amount which is
in an integral multiple of $1,000,000, or the entire remaining Total Revolving
Credit Commitment, and shall permanently reduce the Total Revolving Credit
Commitment. Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Loans to the extent that the principal
amount of Revolving Credit Outstandings plus Letter of Credit Outstandings plus
Swing Line Outstandings exceeds the Total Revolving Credit Commitment after
giving effect to such reduction, together with accrued and unpaid interest on
the amounts prepaid.
2.3 Use of Proceeds . The proceeds of the Loans shall be used by the
Borrower exclusively to (i) repay the Existing Indebtedness, (ii) fund the
purchase by the Parent of the Delta Subordinated Notes, (iii) pay fees and
expenses incurred in connection with the Acquisition Transaction in an amount
not to exceed $8,500,000 and (iv) provide working capital and other general
corporate purposes of the Parent and its Restricted Subsidiaries, including
Permitted Acquisitions.
2.4 Notes .
(a) Revolving Notes. Revolving Loans made by each Lender shall be evidenced
by the Revolving Note payable to the order of such Lender in the respective
amount of its Applicable Commitment Percentage of the Total Revolving Credit
Commitment, which Revolving Note shall be dated the Closing Date or a later date
pursuant to an Assignment and Acceptance and shall be duly completed, executed
and delivered by the Borrowers.
(b) Term Notes. The portion of the Term Loan A and Term Loan B made by each
Lender shall be evidenced by a Term Note A and Term Note B, respectively,
payable to the order of such Lender in the respective amount of its Term Loan A
Commitment and Term Loan B Commitment, which Term Notes shall be dated the
Closing Date or a later date pursuant to an Assignment and Acceptance and shall
be duly completed, executed and delivered by the Borrowers.
(c) Swing Line Note. The Swing Line Outstandings shall be evidenced by a
separate Swing Line Note payable to the order of the Bank of America in the
amount of the Swing Line, which Note shall be dated the Closing Date and shall
be duly completed, executed and delivered by the Borrowers.
2.5 Swing Line .
(a) Notwithstanding any other provision of this Agreement to the contrary,
in order to administer the Revolving Credit Facility in an efficient manner and
to minimize the transfer of funds between the Administrative Agent and the
Lenders, Bank of America shall make available Swing Line Loans to the Borrowers
prior to the Revolving Credit Termination Date. Bank of America shall not be
obligated to make any Swing Line Loan pursuant hereto (i) if to the actual
knowledge of Bank of America the Borrowers are not in compliance with all the
conditions to the making of Revolving Loans set forth in this Agreement, (ii) if
after giving effect to such Swing Line Loan, the Swing Line Outstandings exceed
$5,000,000, or (iii) if after giving effect to such Swing Line Loan, the sum of
the Swing Line Outstandings, Revolving Credit Outstandings and Letter of Credit
Outstandings exceeds the Total Revolving Credit Commitment. The Borrowers may,
subject to the conditions set forth in the preceding sentence, borrow, repay and
reborrow under this Section 2.5. Unless notified to the contrary by Bank of
America, borrowings under the Swing Line shall be made in the minimum amount of
$100,000 or, if greater, in amounts which are integral multiples of $100,000, or
in the amount necessary to effect a Base Rate Refunding Loan, upon written
request by telefacsimile transmission, effective upon receipt, by an Authorized
Representative made to Bank of America not later than 12:30 P.M. on the Business
Day of the requested borrowing. Each such Borrowing Notice shall specify the
amount of the borrowing and the date of borrowing, and shall be in the form of
Exhibit D-2, with appropriate insertions. Unless notified to the contrary by
Bank of America, each repayment of a Swing Line Loan shall be in an amount which
is an integral multiple of $100,000 or the aggregate amount of all Swing Line
Outstandings.
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(b) The interest payable on Swing Line Loans is solely for the account of
Bank of America. Swing Line Loans shall bear interest solely at the Base Rate or
such other rate as the Borrowers and Bank of America shall agree. Swing Line
Loans shall accrue interest from and after the occurrence of an Event of Default
at the Default Rate, and all accrued and unpaid interest on Swing Line Loans
shall be payable, on the dates and in the manner provided in Sections 4.3 with
respect to interest on Base Rate Loans.
(c) Upon the making of a Swing Line Loan, each Lender shall be deemed to
have purchased from Bank of America a Participation therein in an amount equal
to that Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon
demand made by Bank of America, each Lender shall, according to its Applicable
Commitment Percentage of such Swing Line Loan, promptly provide to Bank of
America its purchase price therefor in an amount equal to its Participation
therein. Any Advance made by a Lender pursuant to demand of Bank of America of
the purchase price of its Participation shall when made be deemed to be (i)
provided that the conditions to making Revolving Loans shall be satisfied, a
Base Rate Refunding Loan under Section 2.2, and (ii) in all other cases, the
funding by each Lender of the purchase price of its Participation in such Swing
Line Loan. The obligation of each Lender to so provide its purchase price to
Bank of America shall be absolute and unconditional and shall not be affected by
the occurrence of an Event of Default or any other occurrence or event.
The Borrowers, at their option and subject to the terms hereof, may request
an Advance pursuant to Section 2.2 in an amount sufficient to repay Swing Line
Outstandings on any date and the Administrative Agent shall provide from the
proceeds of such Advance to Bank of America the amount necessary to repay such
Swing Line Outstandings (which Bank of America shall then apply to such
repayment) and credit any balance of the Advance in immediately available funds
in the manner directed by the Borrowers pursuant to Section 2.2(c)(ii). The
proceeds of such Advances shall be paid to Bank of America for application to
the Swing Line Outstandings and the Lenders shall then be deemed to have made
Revolving Loans in the amount of such Advances. The Swing Line shall continue in
effect until the Revolving Credit Termination Date, at which time all Swing Line
Outstandings and accrued interest thereon shall be due and payable in full.
2.6 Joint and Several Liability, Contribution Rights .
(a) Notwithstanding any other provision of this Agreement, each Borrower
shall be jointly and severally liable as primary obligor and not merely as
surety for repayment of all Obligations arising under the Loan Documents. Such
joint and several liability shall apply to each Borrower regardless of whether
(x) any Loan was only requested by or made to the other Borrower or the proceeds
of any Loan were used only by the other Borrower, (y) any interest rate
selection was made only by the other Borrower, or (z) any indemnification
obligation or any other obligation arose only as a result of the actions of the
other Borrower.
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(b) If any Borrower makes a payment in respect of the Obligations it shall
have the rights of contribution set forth below against the other Borrower;
provided, that such Borrower shall not exercise its right of contribution until
all the Obligations shall have been finally paid in full in cash.
(c) It is the intent of each Borrower, the Administrative Agent and the
Lenders that each Borrower's maximum Obligations shall be, but not in excess of:
(x) in a case or proceeding commenced by or against such Borrower under the
Bankruptcy Code on or within one year from the date on which any of the
Obligations are incurred, the maximum amount that would not otherwise cause the
Obligations (or any other obligations of such Borrower to the Administrative
Agent and the Lenders) to be avoidable or unenforceable against such Borrower
under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such case or
proceeding by virtue of Section 544 of the Bankruptcy Code; or (y) in a case or
proceeding commenced by or against such Borrower under the Bankruptcy Code
subsequent to one year from the date on which any of the Obligations are
incurred, the maximum amount that would not otherwise cause the Obligations (or
any other obligations of such Borrower to the Administrative Agent and the
Lenders) to be avoidable and unenforceable against such Borrower under any state
fraudulent transfer or fraudulent conveyance act or statute applied in any such
case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (z) in a
case or proceeding commenced by or against such Borrower under any law, statute
or regulation other than the Bankruptcy Code (including, without limitation, any
other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt,
dissolution, liquidation or similar debtor relief laws), the maximum amount that
would not otherwise cause the Obligations (or any other obligations of such
Borrower to the Administrative Agent and the Lenders) to be avoidable or
unenforceable against such Borrower under such law, statute or regulation
including, without limitation, any state fraudulent transfer or fraudulent
conveyance act or statute applied in any such case or proceeding.
(d) The Borrowers acknowledge and agree that they have requested that the
Lenders make credit available to the Borrowers with each Borrower expecting to
derive benefit, directly and indirectly, from the Advances and other credit
extended by the Lenders to the Borrowers.
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ARTICLE III
Letters of Credit
3.1 Letters of Credit . The Issuing Bank agrees, subject to the terms and
conditions of this Agreement, upon request of the Borrowers to issue from time
to time for the account of a Borrower Letters of Credit upon delivery to the
Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content acceptable to the Issuing Bank; provided, that (i)
the Issuing Bank shall not be obligated to issue or renew any Letter of Credit
if it has been notified by the Administrative Agent or has actual knowledge that
a Default or Event of Default has occurred and is continuing, (ii) the Letter of
Credit Outstandings shall not exceed the Total Letter of Credit Commitment and
(iii) no Letter of Credit shall be issued or renewed if, after giving effect
thereto, Letter of Credit Outstandings plus Revolving Credit Outstandings plus
Swing Line Outstandings shall exceed the Total Revolving Credit Commitment. No
Letter of Credit shall have an expiry date (including all rights of the Borrower
or any beneficiary named in such Letter of Credit to require renewal) or payment
date occurring later than the earlier to occur of one year after the date of its
issuance or the seventh Business Day prior to the Stated Termination Date.
3.2 Reimbursement and Participations .
(a) The Borrowers hereby, jointly and severally, unconditionally agree to
pay to the Issuing Bank immediately on demand at the Principal Office all
amounts required to pay all drafts drawn or purporting to be drawn under the
Letters of Credit and all reasonable expenses incurred by the Issuing Bank in
connection with the Letters of Credit, and in any event and without demand to
place in possession of the Issuing Bank (which shall include Advances under the
Revolving Credit Facility if permitted by Section 2.2 and Swing Line Loans if
permitted by Section 2.5) sufficient funds to pay all debts and liabilities
arising under any Letter of Credit. The Issuing Bank agrees to give the
Borrowers prompt notice of any request for a draw under a Letter of Credit. The
Issuing Bank may charge any account the Borrowers may have with it for any and
all amounts the Issuing Bank pays under a Letter of Credit, plus charges and
reasonable expenses as from time to time agreed to by the Issuing Bank and the
Borrowers; provided that to the extent permitted by Section 2.2(c)(iii) and
Section 2.5, amounts shall be paid pursuant to Advances under the Revolving
Credit Facility or, if the Borrowers shall elect, by Swing Line Loans. The
Borrowers agree to pay the Issuing Bank interest on any Reimbursement
Obligations not paid when due hereunder at the Default Rate.
(b) In accordance with the provisions of Section 2.2(c), the Issuing Bank
shall notify the Administrative Agent of any drawing under any Letter of Credit
promptly following the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall automatically acquire
on the date of issuance thereof, a Participation in the liability of the Issuing
Bank in respect of each Letter of Credit in an amount equal to such Lender's
Applicable Commitment Percentage of such liability, and to the extent that the
Borrowers are obligated to pay the Issuing Bank under Section 3.2(a), each
Lender (other than the Issuing Bank) thereby shall absolutely, unconditionally
and irrevocably assume, and shall be unconditionally obligated to pay to the
Issuing Bank, its Applicable Commitment Percentage of the liability of the
Issuing Bank under such Letter of Credit in the manner and with the effect
provided in Section 2.2(c)(iii).
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(d) Simultaneously with the making of each payment by a Lender to the
Issuing Bank pursuant to Section 2.2(c)(iii)(B), such Lender shall,
automatically and without any further action on the part of the Issuing Bank or
such Lender, acquire a Participation in an amount equal to such payment
(excluding the portion thereof constituting interest accrued prior to the date
the Lender made its payment) in the related Reimbursement Obligation of the
Borrowers. Each Lender's obligation to make payment to the Administrative Agent
for the account of the Issuing Bank pursuant to Section 2.2(c)(iii) and Section
3.2(c), and the right of the Issuing Bank to receive the same, shall be absolute
and unconditional, shall not be affected by any circumstance whatsoever and
shall be made without any offset, abatement, withholding or reduction
whatsoever. In the event the Lenders have purchased Participations in any
Reimbursement Obligation as set forth above, then at any time payment (in fully
collected, immediately available funds) of such Reimbursement Obligation, in
whole or in part, is received by the Issuing Bank from the Borrowers, the
Issuing Bank shall promptly pay to each Lender an amount equal to its Applicable
Commitment Percentage of such payment from the Borrowers.
(e) Promptly following the end of each calendar quarter, the Issuing Bank
shall deliver to the Administrative Agent a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of such quarter. Upon the
request of any Lender from time to time, the Issuing Bank shall deliver to the
Administrative Agent, and the Administrative Agent shall deliver to such Lender,
any other information reasonably requested by such Lender with respect to each
Letter of Credit outstanding.
(f) The issuance by the Issuing Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Article VII, be subject to the
conditions that such Letter of Credit be in such form and contain such terms as
shall be reasonably satisfactory to the Issuing Bank consistent with the then
current practices and procedures of the Issuing Bank with respect to similar
letters of credit, and the Borrowers shall have executed and delivered such
other instruments and agreements relating to such Letters of Credit as the
Issuing Bank shall have reasonably requested consistent with such practices and
procedures and shall not be in conflict with any of the express terms herein
contained. All Letters of Credit shall be issued pursuant to and subject to the
Uniform Customs and Practice for Documentary Credits, 1993 revision,
International Chamber of Commerce Publication No. 500 or, if the Issuing Bank
shall elect by express reference in an affected Letter of Credit, the
International Chamber of Commerce International Standby Practices commonly
referred to as "ISP98," or any subsequent amendment or revision of either
thereof.
(g) The Borrowers agree that the Issuing Bank may, in its sole discretion,
accept or pay, as complying with the terms of any Letter of Credit, any drafts
or other documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, liquidator, receiver, attorney in fact or other
legal representative of a party who is authorized under such Letter of Credit to
draw or issue any drafts or other documents.
(h) Without limiting the generality of the provisions of Section 13.9, the
Borrowers hereby agree to indemnify and hold harmless the Issuing Bank, each
other Lender and the Administrative Agent from and against any and all claims
and damages, losses, liabilities, reasonable costs and expenses which the
Issuing Bank, such other Lender or the Administrative Agent may incur (or which
may be claimed against the Issuing Bank, such other Lender or the Administrative
Agent) by any Person by reason of or in connection with the issuance or transfer
of or payment or failure to pay under any Letter of Credit; provided that the
Borrowers shall not be required to indemnify the Issuing Bank, any other Lender
or the Administrative Agent for any claims, damages, losses, liabilities, costs
or expenses to the extent, but only to the extent, (i) caused by the willful
misconduct or gross negligence of the party to be indemnified or (ii) caused by
the failure of the Issuing Bank to pay under any Letter of Credit after the
presentation to it of a request for payment strictly complying with the terms
and conditions of such Letter of Credit, unless such payment is prohibited by
any law, regulation, court order or decree. The indemnification and hold
harmless provisions of this Section 3.2(h) shall survive repayment of the
Obligations, occurrence of the Revolving Credit Termination Date, the Facility
Termination Date and expiration or termination of this Agreement.
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(i) Without limiting the Borrowers' rights as set forth in Section
3.2(h), the obligation of the Borrowers to immediately reimburse the Issuing
Bank for drawings made under Letters of Credit and the Issuing Bank's right to
receive such payment shall be absolute, unconditional and irrevocable, and such
obligations of the Borrowers shall be performed strictly in accordance with the
terms of this Agreement and such Letters of Credit and the related Application
and Agreement for any Letter of Credit, under all circumstances whatsoever,
including the following circumstances:
(i) any lack of validity or enforceability of the Letter of Credit,
the obligation supported by the Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to or departure from
all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense (other than the
defense of payment in accordance with the terms of this Agreement) or other
rights which the Borrowers may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), the Administrative Agent, the
Lenders or any other Person, whether in connection with the Loan Documents, the
Related LC Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between either of the
Borrowers and any beneficiary or any transferee of a Letter of Credit (or any
persons or entities for whom such beneficiary or any such transferee may be
acting), the Administrative Agent, the Lenders or any other Person;
(v) any draft, statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever; or
(vi) any delay, extension of time, renewal, compromise or other
indulgence or modification granted or agreed to by the Administrative Agent,
with or without notice to or approval by the Borrowers in respect of any of
Borrowers' Obligations under this Agreement.
ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
4.1 Interest Rate Options . Eurodollar Rate Loans and Base Rate Loans may
be outstanding at the same time and, so long as no Default or Event of Default
shall have occurred and be continuing, the Borrowers shall have the option to
elect the Type of Loan and the duration of the initial and any subsequent
Interest Periods and to Convert Revolving Loans and Segments of the Term Loans
in accordance with Sections 2.2(c)(i) and 4.2, as applicable; provided, however,
(a) there shall not be outstanding at any one time Eurodollar Rate Loans having
more than ten (10) different Interest Periods, (b) each Eurodollar Rate Loan
(including each Conversion into and each Continuation as a Eurodollar Rate Loan)
shall be in an amount of $5,000,000 or, if greater than $1,000,000, an integral
multiple of $1,000,000, and (c) no Eurodollar Rate Segment shall have an
Interest Period that extends beyond, in the case of Term Loan A the Term Loan A
Termination Date, or, in the case of Term Loan B the Term Loan B Termination
Date, and no other Eurodollar Rate Loan shall have an Interest Period that
extends beyond the Stated Termination Date. If the Administrative Agent does not
receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of
election of the duration of an Interest Period or of Conversion of any Loan to
or Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by
Sections 2.2(c)(i) and 4.2, as applicable, the Borrowers shall be deemed to have
elected to obtain or Convert such Loan to (or Continue such Loan as) a Base Rate
Loan until the Borrowers notify the Administrative Agent in accordance with
Section 4.2. The Borrowers shall not be entitled to elect to Continue any Loan
as or Convert any Loan into a Eurodollar Rate Loan if a Default or Event of
Default shall have occurred and be continuing.
4.2 Conversions and Elections of Subsequent Interest Periods . Subject to
the limitations set forth in the definition of "Interest Period" and in Section
4.1 and Article VI, the Borrowers may:
(a) upon delivery of telephonic notice to the Administrative Agent (which
shall be irrevocable) on or before 10:30 A.M. on any Business Day, Convert any
Eurodollar Rate Loan to a Base Rate Loan on the last day of the Interest Period
for such Eurodollar Rate Loan; and
(b) provided that no Default or Event of Default shall have occurred and be
continuing, upon delivery of telephonic notice to the Administrative Agent
(which shall be irrevocable) on or before 10:30 A.M. three (3) Business Days'
prior to the date of such Conversion or Continuation:
(i) elect a subsequent Interest Period for any Eurodollar Rate Loan to
begin on the last day of the then current Interest Period for such Eurodollar
Rate Loan; or
(ii) Convert any Base Rate Loan to a Eurodollar Rate Loan on any
Business Day.
Each such notice shall be effective upon receipt by the Administrative Agent,
shall specify the amount of the Eurodollar Rate Loan affected, the type of Loan
(Revolving Loan or Segment of a Term Loan) affected, and, if a Continuation as
or Conversion into a Eurodollar Rate Loan, the Interest Period to be used in the
computation of interest. The Authorized Representative shall provide the
Administrative Agent written confirmation of each such telephonic notice in the
form of a Borrowing Notice or Interest Rate Selection Notice (as applicable)
with appropriate insertions but failure to provide such confirmation shall not
affect the validity of such telephonic notice. Notice of receipt of such
Borrowing Notice or Interest Rate Selection Notice, as the case may be, shall be
provided by the Administrative Agent to each Lender by telefacsimile
transmission with reasonable promptness, but (provided the Administrative Agent
shall have received such notice by 10:30 A.M.) not later than 3:00 P.M. on the
same day as the Administrative Agent's receipt of such notice. All such
Continuations or Conversions of Loans shall be effected pro rata based on the
Applicable Commitment Percentages of the Lenders.
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4.3 PAYMENT OF INTEREST. (a) The Borrowers shall pay interest on the
outstanding and unpaid principal amount of each Segment of the Term Loans and on
each Revolving Loan, commencing on the first date of such Segment or Revolving
Loan until such Segment or Revolving Loan, as the case may be, shall be repaid,
at the applicable Base Rate or Eurodollar Rate as designated by the Borrowers in
the related Borrowing Notice or Interest Rate Selection Notice or as otherwise
provided hereunder. Interest on each Segment and on each Revolving Loan shall be
paid on the earlier of (a) in the case of any Base Rate Loan, quarterly in
arrears on the last Business Day of each March, June, September and December,
commencing on December 31, 1999, until, as to any Base Rate Segment, the Term
Loan A Termination Date or the Term Loan B Termination Date, as the case may be,
and as to any other Base Rate Loans, the Revolving Credit Termination Date, at
which date as applicable the entire principal amount of and all accrued interest
on the Term Loan and the Revolving Loans, respectively, shall be paid in full,
(b) in the case of any Eurodollar Rate Loan, on last day of the applicable
Interest Period for such Eurodollar Rate Loan and if such Interest Period
extends for more than three (3) months, at intervals of three (3) months after
the first day of such Interest Period, and (c) upon payment in full of such Term
Loan (or Segment thereof) or the related Revolving Loan; provided, however, that
if any Event of Default shall occur and be continuing, all amounts outstanding
hereunder shall bear interest thereafter until paid in full at the Default Rate.
(b) For each period beginning on the Business Day next following the date
of receipt by the Administrative Agent of a Compliance Certificate in respect of
a quarterly fiscal period of the Parent ending on or after March 31, 2000 and
ending on the date next following the Business Day next following the date of
receipt by the Administrative Agent of a Compliance Certificate in respect of a
subsequent fiscal quarter, the Applicable Margin and Applicable Commitment Fee
shall be determined based upon the Consolidated Leverage Ratio as set forth in
the Pricing Grid. Any change in the Applicable Margin and Applicable Commitment
Fee, if any, shall become effective on the first Business Day next following
receipt of a Compliance Certificate. Notwithstanding the foregoing, if the
Parent shall receive a Rating of BB or higher from S&P and Ba2 or higher from
Moody's, then upon receipt by the Administrative Agent of a Rating Election from
an Authorized Representative and evidence of the Ratings, the Applicable Margin
and Applicable Commitment Fee shall be determined by its then Ratings as set
forth on the Pricing Grid and subsequent changes in the Applicable Margin and
Applicable Commitment Fee, if any, shall become effective on the day next
following the receipt by the Administrative Agent from an Authorized
Representative of evidence of such change in Rating. If at any time following a
Rating Election the Rating by S&P shall become less than BB or less than Ba2 by
Moody's then, effective as of the date of such change in Rating, the Applicable
Margin and Applicable Commitment shall thereafter be determined based upon the
Consolidated Leverage Ratio set forth in the Compliance Certificate most
recently received by the Agent pursuant to Section 9.1 as hereinabove provided.
If the Borrowers shall fail to furnish any Compliance Certificate by the time
required hereunder when the Applicable Margin as determinable by reference to
the Consolidated Leverage Ratio, then the Applicable Margin shall be Tier IV
from the date such Compliance Certificate was required to be delivered until the
Business Day next following its date of delivery.
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4.4 Prepayments of Eurodollar Rate Loans . Whenever any payment of
principal shall be made in respect of any Loan hereunder, whether at maturity,
on acceleration, by optional or mandatory prepayment or as otherwise required or
permitted hereunder, with the effect that any Eurodollar Rate Loan shall be
prepaid in whole or in part prior to the last day of the Interest Period
applicable to such Eurodollar Rate Loan, such payment of principal shall be
accompanied by the additional payment, if any, required by Section 6.5.
4.5 Manner of Payment .
(a) Each payment of principal (including any prepayment) and payment of
interest and fees, and any other amount required to be paid by or on behalf of
the Borrowers to the Lenders, the Issuing Bank, the Administrative Agent, or
Bank of America with respect to any Loan, Letter of Credit, Reimbursement
Obligation or Swing Line Loan, shall be made to the Administrative Agent at the
Principal Office in Dollars in immediately available funds without condition or
deduction for any setoff, recoupment, deduction or counterclaim on or before
12:30 P.M. on the date such payment is due. The Administrative Agent may, but
shall not be obligated to, debit the amount of such payment from any one or more
ordinary deposit accounts of the Borrowers with the Administrative Agent.
(b) Any payment made by or on behalf of the Borrowers that is not made both
in Dollars and in immediately available funds and prior to 12:30 P.M. on the
date such payment is to be made shall constitute a non-conforming payment. Any
such non-conforming payment shall not be deemed to be received until the later
of (i) the time such funds become available funds and (ii) the next Business
Day. Any non-conforming payment may constitute or become a Default or Event of
Default as otherwise provided herein. Interest shall continue to accrue at the
Default Rate on any principal or fees as to which no payment or a non-conforming
payment is made from the date such amount was due and payable until the later of
(i) the date such funds become available funds or (ii) the next Business Day.
(c) In the event that any payment hereunder or under any of the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under the definition of "Interest Period"; provided, however, that interest
shall continue to accrue during the period of any such extension; and provided
further, however, that in no event shall any such due date be extended (i) for
any Term Loan, beyond the applicable Term Loan Termination Date, and (ii) for
any Revolving Loan, beyond the Revolving Credit Termination Date.
4.6 Fees .
(a) Commitment Fee. For the period beginning on the Closing Date and ending
on the Revolving Credit Termination Date, the Borrowers jointly and severally
agree to pay to the Administrative Agent, for the pro rata benefit of the
Lenders based on their Applicable Commitment Percentages, a commitment fee equal
to the Applicable Commitment Fee multiplied by the average daily amount by which
the Total Revolving Credit Commitment exceeds the sum of (i) Revolving Credit
Outstandings without giving effect to Swing Line Outstandings) plus (ii) Letter
of Credit Outstandings. Such fees shall be due in arrears on the last Business
Day of each March, June, September and December commencing December 31, 1999 to
and on the Revolving Credit Termination Date. Notwithstanding the foregoing, so
long as any Lender fails to make available any portion of its Revolving Credit
Commitment when requested, such Lender shall not be entitled to receive payment
of its pro rata share of such fee until such Lender shall make available such
portion.
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(b) Term Loan Fees. In consideration of the making of the Term Loans by the
Lenders, the Borrowers jointly and severally agree to pay to the Administrative
Agent for the pro rata benefit of the Lenders according to their respective
Applicable Commitment Percentages an underwriting fee, such fee to be due and
payable in full on the Closing Date.
(c) Letter of Credit Facility Fees. The Borrowers shall pay to the
Administrative Agent, for the pro rata benefit of the Lenders based on their
Applicable Commitment Percentages, a fee on the aggregate amount available to be
drawn on each outstanding Letter of Credit at a rate equal to the Applicable
Margin for Eurodollar Rate Loans. Such fees shall be due with respect to each
Letter of Credit quarterly in arrears on the last day of each March, June,
September and December, the first such payment to be made on the first such date
occurring after the date of issuance of a Letter of Credit.
(d) Letter of Credit Fronting and Administrative Fees. The Borrowers shall
pay to the Issuing Bank a fronting fee of one-eighth percent per annum (1/8%) on
the aggregate amount available to be drawn on each outstanding Letter of Credit,
such fee to be payable quarterly in arrears with respect to each Letter of
Credit on the dates established in Section 4.6(c) for the payment of Letter of
Credit facility fees with respect to such Letter of Credit. The Borrowers shall
also pay to the Issuing Bank such administrative fee and other fees, if any, in
connection with the Letters of Credit in such amounts and at such times as the
Issuing Bank and the Borrowers shall agree from time to time.
(e) Administrative Agent Fees. The Borrowers agree to pay to the
Administrative Agent, for the Administrative Agent's individual account, an
annual Administrative Agent's fee, such fee to be payable in such amounts and at
such dates as from time to time agreed to by the Borrower and Administrative
Agent in writing.
4.7 Pro Rata Payments . Except as otherwise specified herein, (a) each
payment on account of the principal of and interest on Loans, the fees described
in Section 4.6(a), (b) and (c), and Swing Line Loans and Reimbursement
Obligations as to which the Lenders have funded their respective Participations
which remain outstanding, shall be made to the Administrative Agent for the
account of the Lenders pro rata based on their Applicable Commitment
Percentages, and (b) the Administrative Agent will promptly distribute to the
Lenders in immediately available funds payments received in fully collected,
immediately available funds from the Borrowers.
4.8 Computation of Rates and Fees . Except as may be otherwise expressly
provided, all interest rates (including the Base Rate, each Eurodollar Rate, and
the Default Rate) and fees shall be computed on the basis of a year of 360 days
and calculated for actual days elapsed.
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4.9 Deficiency Advances; Failure to Purchase Participations . No Lender
shall be responsible for any default of any other Lender in respect to such
other Lender's obligation to make any Loan or Advance hereunder or to fund its
purchase of any Participation hereunder nor shall the Revolving Credit
Commitment, Term Loan A Commitment, Term Loan B Commitment or Letter of Credit
Commitment of any Lender hereunder be increased as a result of such default of
any other Lender. Without limiting the generality of the foregoing or the
provisions of Section 4.10, in the event any Lender shall fail to advance funds
to the Borrowers as herein provided, the Administrative Agent may in its
discretion, but shall not be obligated to, advance under the applicable Note in
its favor as a Lender all or any portion of such amount or amounts (each, a
"deficiency advance") and shall thereafter be entitled to payments of principal
of and interest on such deficiency advance in the same manner and at the same
interest rate or rates to which such other Lender would have been entitled had
it made such Advance under its Note; provided that, (i) such defaulting Lender
shall not be entitled to receive payments of principal, interest or fees with
respect to such deficiency advance until such deficiency advance (together with
interest thereon as provided in clause (ii)) shall be paid by such Lender and
(ii) upon payment to the Administrative Agent from such other Lender of the
entire outstanding amount of each such deficiency advance, together with accrued
and unpaid interest thereon, from the most recent date or dates interest was
paid to the Administrative Agent by a Borrower on each Loan comprising the
deficiency advance at the Federal Funds Rate, then such payment shall be
credited against the applicable Note of the Administrative Agent in full payment
of such deficiency advance and such Borrower shall be deemed to have borrowed
the a4.9abmount of such deficiency advance from such other Lender as of the most
recent date or dates, as the case may be, upon which any payments of interest
were made by such Borrower thereon. In the event any Lender shall fail to fund
its purchase of a Participation after notice from the Issuing Bank or Bank of
America as the Swing Line lender, as applicable, such Lender shall pay to the
Issuing Bank or Bank of America as the Swing Line lender, as applicable, such
amount on demand, together with interest at the Federal Funds Rate on the amount
so due from the date of such notice to the date such purchase price is received
by the Issuing Bank or Bank of America as the Swing Line lender, as applicable.
4.10 Intraday Funding . Without limiting the provisions of Section 4.9,
unless the Borrowers or any Lender has notified the Administrative Agent not
later than 12:00 Noon of the Business Day before the date any payment (including
in the case of Lenders any Advance) to be made by them is due, that they do not
intend to remit such payment, the Administrative Agent may, in its discretion,
assume that the Borrowers or each Lender, as the case may be, have or has timely
remitted such payment in the manner required hereunder and may, in its
discretion and in reliance thereon, make available such payment (or portion
thereof) to the Person entitled thereto as otherwise provided herein. If such
payment was not in fact remitted to the Administrative Agent in the manner
required hereunder, then:
(i) if the Borrowers failed to make such payment, each Lender shall
forthwith on demand repay to the Administrative Agent the amount of such
assumed payment made available to such Lender, together with interest
thereon in respect of each day from and including the date such amount was
made available by the Administrative Agent to such Lender to the date such
amount is repaid to the Administrative Agent at the Federal Funds Rate; and
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(ii) if any Lender failed to make such payment, the Administrative
Agent shall be entitled to recover such corresponding amount forthwith upon
the Administrative Agent's demand therefor, the Administrative Agent
promptly shall notify the Borrowers, and the Borrowers shall promptly pay
such corresponding amount to the Administrative Agent in immediately
available funds upon receipt of such demand. The Administrative Agent also
shall be entitled to recover interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Administrative Agent to the Borrowers to the date such
corresponding amount is recovered by the Administrative Agent, (A) from
such Lender at a rate per annum equal to the daily Federal Funds Rate or
(B) from the Borrowers, at a rate per annum equal to the interest rate
applicable to the Loan which includes such corresponding amount. Until the
Administrative Agent shall recover such corresponding amount together with
interest thereon, such corresponding amount shall constitute a deficiency
advance within the meaning of Section 4.9. Nothing herein shall be deemed
to relieve any Lender from its obligation to fulfill its commitments
hereunder or to prejudice any rights which the Administrative Agent or the
Borrowers may have against any Lender as a result of any default by such
Lender hereunder.
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ARTICLE V
Security
5.1 Security . As security for the full and timely payment and performance
of all Obligations, the Borrowers shall, and shall cause all other Credit
Parties to, on or before the Closing Date, do or cause to be done all things
necessary in the opinion of the Administrative Agent and its counsel to grant to
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders a duly perfected first priority security interest in all Collateral
subject to no prior Lien or other encumbrance or restriction on transfer (other
than restrictions on transfer imposed by applicable securities laws and Liens
permitted under Section 10.3). Without limiting the foregoing, the Parent and
each Restricted Subsidiary having rights in any Subsidiary Securities shall on
the Closing Date deliver to the Administrative Agent, in form and substance
reasonably acceptable to the Administrative Agent, (A) a Pledge Agreement which
shall pledge to the Administrative Agent for the benefit of the Administrative
Agent and the Lenders (i) 65% of the Voting Securities of each Direct Foreign
Subsidiary and 100% of the other Subsidiary Securities of such Direct Foreign
Subsidiary, (ii) all of the Subsidiary Securities of all Domestic Subsidiaries,
(B) if such Subsidiary Securities are in the form of certificated securities,
such certificated securities, together with undated stock powers or other
appropriate transfer documents endorsed in blank pertaining thereto, (C) if such
Subsidiary Securities do not constitute securities and the Subsidiary has not
elected to have such interests treated as securities under Article 8 of the
Uniform Commercial Code, a control agreement (containing the provisions
described in Section 9.20(e)) from the Registrar of such Subsidiary Securities
and (D) Uniform Commercial Code financing statements reflecting the Lien in
favor of the Administrative Agent on such Subsidiary Securities, each in form
and substance acceptable to the Administrative Agent, (E) the Delta Subordinated
Notes together with endorsements affixed thereto, (F) the Mortgage Notes and (G)
a Note Pledge Agreement, which shall pledge to the Administrative Agent for the
benefit of the Administrative Agent and the Lenders the items of Collateral
described in clauses (E) and (F) above, and shall take such further action and
deliver or cause to be delivered such further documents as required by the
Security Instruments or otherwise as the Administrative Agent may request to
effect the transactions contemplated by this Article V. The Parent shall, and
shall cause each Restricted Subsidiary, to pledge to the Administrative Agent
for the benefit of the Administrative Agent and the Lenders (and as appropriate
to reaffirm its prior pledge of) all of the Pledged Interests of any Restricted
Subsidiary acquired or created after the Closing Date and to deliver to the
Administrative Agent all of the documents and instruments in connection
therewith as are required pursuant to the terms of Section 9.20 and of the
Security Instruments.
5.2 Further Assurances . At the request of the Administrative Agent, the
Borrowers will or will cause all other Credit Parties, as the case may be, to
execute, by its duly authorized officers, alone or with the Administrative
Agent, any certificate, instrument, financing statement, control agreement,
statement or document, or to procure any such certificate, instrument, statement
or document, or to take such other action (and pay all connected costs) which
the Administrative Agent reasonably deems necessary from time to time to create,
continue or preserve the liens and security interests in Collateral (and the
perfection and priority thereof) of the Administrative Agent contemplated hereby
and by the other Loan Documents and specifically including all Collateral
acquired by the Borrowers or other Credit Party after the Closing Date. The
Administrative Agent is hereby irrevocably authorized to execute and file or
cause to be filed, with or if permitted by applicable law without the signature
of the Borrowers or any Credit Party appearing thereon, all Uniform Commercial
Code financing statements reflecting the Borrowers or any other Credit Party as
"debtor" and the Administrative Agent as "secured party", and continuations
thereof and amendments thereto, as the Administrative Agent reasonably deems
necessary or advisable to give effect to the transactions contemplated hereby
and by the other Loan Documents.
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5.3 Information Regarding Collateral. Each Borrower represents, warrants
and covenants that (i) the chief executive office of the Borrower and each other
Person providing Collateral pursuant to a Security Instrument (each, a
"Grantor") at the Closing Date is located at the address or addresses specified
on Schedule 5.3, and (ii) Schedule 5.3 contains a true and complete list of (a)
the exact legal name, jurisdiction of formation, and address of each Grantor and
of each other Person that has effected any merger or consolidation with a
Grantor or contributed or transferred to a Grantor any property constituting
Collateral at any time since January 1, 1994 (excluding Persons making sales in
the ordinary course of their businesses to a Grantor of property constituting
inventory in the hands of such seller), (b) the exact legal name, jurisdiction
of formation, and each location of the chief executive office of each Grantor at
any time since January 1, 1994, (c) each location in which goods constituting
Collateral are or have been located since January 1, 1994 (together with the
name of each owner of the property located at such address if not the applicable
Grantor, and a summary description of the relationship between the applicable
Grantor and such Person), and (d) each trade style used by any Grantor since
January 1, 1994 and the purposes for which it was used. Neither Borrower shall
change, and shall not permit any other Grantor to change, its name, jurisdiction
of formation (whether by reincorporation, merger or otherwise), the location of
its chief executive office or any location specified in clause (c) of the
immediately preceding sentence, or use or permit any other Grantor to use, any
additional trade style, except upon giving not less than thirty (30) days' prior
written notice to the Administrative Agent and taking or causing to be taken all
such action at Borrower's or such other Grantor's expense as may be reasonably
requested by the Administrative Agent to perfect or maintain the perfection of
the Lien of the Administrative Agent in Collateral.
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ARTICLE VI
Change in Circumstances
6.1 Increased Cost and Reduced Return .
(a) If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Eurodollar Rate Loans, its
Note, or its obligation to make Eurodollar Rate Loans, or change the basis of
taxation of any amounts payable to such Lender (or its Applicable Lending
Office) under this Agreement or its Note or Notes in respect of any Eurodollar
Rate Loans (other than taxes imposed on the overall net income of such Lender by
the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, compulsory loan, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Eurodollar Rate)
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender (or its Applicable Lending
Office), including the Term Loan A Commitment , Term Loan B Commitment or
Revolving Credit Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending Office)
or on the London interbank market any other condition affecting this Agreement
or its Note or Notes or any of such extensions of credit or liabilities or
commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Loans or to reduce any sum received or
receivable by such Lender (or its Applicable Lending Office) under this
Agreement or its Note or Notes with respect to any Eurodollar Rate
Loans, then the Borrowers shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by the Borrowers
under this Section 6.1(a), the Borrowers may, by notice to such Lender
(with a copy to the Administrative Agent), suspend the obligation of
such Lender to make or Continue Loans of the Type with respect to which
such compensation is requested, or to Convert Loans of any other Type
into Loans of such Type, until the event or condition giving rise to
such request ceases to be in effect (in which case the provisions of
Section 6.4 shall be applicable); provided that such suspension shall
not affect the right of such Lender to receive the compensation so
requested.
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(b) If, after the date hereof, any Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrowers shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction; provided, that no Lender will be entitled to any compensation for any
such additional amounts if (i) demand for payment thereof is made by such Lender
more than 180 days after the occurrence of the circumstances giving rise to such
claim or (ii) similar claims are not made by such Lender from other borrowers
under similar situations.
(c) Each Lender shall promptly notify the Borrowers and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Lender to compensation pursuant to this Section 6.1 and
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the judgment of such Lender, be otherwise disadvantageous to it. Any Lender
claiming compensation under this Section 6.1 shall furnish to the Borrowers and
the Administrative Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
6.2 Limitation on Types of Loans . If on or prior to the first day of any
Interest Period for any Eurodollar Rate Loan:
(a) the Administrative Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Administrative Agent that the Eurodollar Rate will
not adequately and fairly reflect the cost to the Lenders of funding Eurodollar
Rate Loans for such Interest Period;
then the Administrative Agent shall give the Borrowers prompt notice thereof
specifying the relevant Type of Loans and the relevant amounts or periods, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Loans of such Type, Continue Loans of such Type,
or to Convert Loans of any other Type into Loans of such Type and the Borrowers
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of the affected Type, either prepay such Loans or Convert such
Loans into another Type of Loan in accordance with the terms of this Agreement.
6.3 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrowers thereof and such Lender's obligation
to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans
into Eurodollar Rate Loans shall be suspended until such time as such Lender may
again make, maintain, and fund Eurodollar Rate Loans (in which case the
provisions of Section 6.4 shall be applicable).
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6.4 Treatment of Affected Loans. If the obligation of any Lender to make a
Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type into,
Loans of a particular Type shall be suspended pursuant to Section 6.1 or 6.3
hereof (Loans of such Type being herein called "Affected Loans" and such Type
being herein called the "Affected Type"), such Lender's Affected Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for Affected Loans (or, in the case of a Conversion
required by Section 6.3 hereof, on such earlier date as such Lender may specify
to the Borrowers with a copy to the Administrative Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
Section 6.1 or 6.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so Converted,
all payments and prepayments of principal that would otherwise be applied to
such Lender's Affected Loans shall be applied instead to its Base Rate Loans;
and
(b) all Loans that would otherwise be made or Continued by such Lender as
Loans of the Affected Type shall be made or Continued instead as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into Loans
of the Affected Type shall be Converted instead into (or shall remain as) Base
Rate Loans.
If such Lender gives notice to the Borrowers (with a copy to the Administrative
Agent) that the circumstances specified in Section 6.1 or 6.3 hereof that gave
rise to the Conversion of such Lender's Affected Loans pursuant to this Section
6.4 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type made
by other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Loans of the Affected Type, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Loans of the Affected Type and by such Lender are held pro rata (as to
principal amounts, Types, and Interest Periods) in accordance with their
respective Term Loan A Commitments, Term Loan B Commitments and Revolving Credit
Commitments.
6.5 Compensation . Upon the request of any Lender, the Borrowers shall pay
to such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for
any reason (including, without limitation, the acceleration of the Loans
pursuant to Section 11.1) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by the Borrowers for any reason (including, without
limitation, the failure of any condition precedent specified in Article VII to
be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Rate Loan on
the date for such borrowing, Conversion, Continuation, or prepayment specified
in the relevant notice of borrowing, prepayment, Continuation, or Conversion
under this Agreement.
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6.6 Taxes.
(a) Any and all payments by the Borrowers to or for the account of any
Lender or the Administrative Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Lender and
the Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Lender (or its
Applicable Lending Office) or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof (all such non-excluded taxes,
duties, levies, imposts, deductions, charges, withholdings, and liabilities
being hereinafter referred to as "Taxes"). If the Borrowers shall be required by
law to deduct any Taxes from or in respect of any sum payable under this
Agreement or any other Loan Document to any Lender or the Administrative Agent,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 6.6) such Lender or the Administrative Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrowers shall make such deductions, (iii) the Borrowers shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrowers shall furnish to the
Administrative Agent, at its address referred to in Section 13.2, the original
or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrowers agree to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) The Borrowers agree to indemnify each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 6.6) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the
Borrowers or the Administrative Agent (but only so long as such Lender remains
lawfully able to do so), shall provide the Borrowers and the Administrative
Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (iii) any other
form or certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Loan Documents.
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(e) For any period with respect to which a Lender has failed to provide the
Borrowers and the Administrative Agent with the appropriate form pursuant to
Section 6.6(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 6.6(a) or 6.6(b) with respect to Taxes imposed by the United
States; provided, however, that should a Lender, which is otherwise exempt from
or subject to a reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, the Borrowers shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(f) If the Borrowers are required to pay additional amounts to or for the
account of any Lender pursuant to this Section 6.6, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrowers shall furnish to the Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 6.6 shall survive the termination of the Revolving Credit
Commitments, Term Loan A Commitments, Term Loan B Commitments and the payment in
full of the Notes and the Facility Termination Date.
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ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1 Conditions of Term Loans and Initial Advance . The obligation of the
Lenders to make the Term Loans and the initial Advance under the Revolving
Credit Facility, and of the Issuing Bank to issue any Letter of Credit, and of
Bank of America to make any Swing Line Loan, is subject to the conditions
precedent that:
(a) the Administrative Agent shall have received on the Closing Date, in
form and substance satisfactory to the Administrative Agent and Lenders, the
following:
(i) executed originals of each of this Agreement, the Notes, the
initial Facility Guaranties, the Security Instruments, the LC Account Agreement,
the other Loan Documents, together with all schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with respect to the
Loan Documents and the transactions contemplated thereby of special counsel to
the Credit Parties dated the Closing Date, addressed to the Administrative Agent
and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special
counsel to the Administrative Agent, substantially in the form of Exhibit G;
(iii) resolutions of the boards of directors or other appropriate
governing body (or of the appropriate committee thereof) of each Credit Party
certified by its secretary or assistant secretary as of the Closing Date,
approving and adopting the Loan Documents to be executed by such Person, and
authorizing the execution and delivery thereof;
(iv) specimen signatures of officers or other appropriate
representatives executing the Loan Documents on behalf of each of the Credit
Parties, certified by the secretary or assistant secretary of such Credit Party;
(v) the Organizational Documents of each of the Credit Parties
certified as of a recent date by the Secretary of State of its state of
organization;
(vi) Operating Documents of each of the Credit Parties certified as of
the Closing Date as true and correct by its secretary or assistant secretary;
(vii) certificates issued as of a recent date by the Secretaries of
State of the respective jurisdictions of formation of each of the Credit Parties
as to the due existence and good standing of such Person;
(viii) appropriate certificates of qualification to do business, good
standing and, where appropriate, authority to conduct business under assumed
name, issued in respect of each of the Credit Parties as of a recent date by the
Secretary of State or comparable official of each jurisdiction in which the
failure to be qualified to do business or authorized so to conduct business
could have a Material Adverse Effect;
(ix) notice of appointment of the initial Authorized
Representative(s);
(x) ab certificate of an Authorized Representative dated the
Closing Date demonstrating compliance with the financial covenants contained in
Sections 10.1(a) through 10.1(c) as of June 30, 1999, substantially in the form
of Exhibit H;
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(xi) evidence of all insurance required by the Loan Documents;
(xii) an initial Borrowing Notice, if any, and, if elected by the
Borrowers, Interest Rate Selection Notice;
(xiii) evidence of the filing of Uniform Commercial Code financing
statements reflecting the filing in all places required by applicable law to
perfect the Liens of the Administrative Agent under the Security Instruments as
a first priority Lien as to items of Collateral in which a security interest may
be perfected by the filing of financing statements, and such other documents
and/or evidence of other actions as may be necessary under applicable law to
perfect the Liens of the Administrative Agent under the Security Instruments as
a first priority Lien in and to such other Collateral as the Administrative
Agent may require, including without limitation:
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(1) the delivery by the Borrowers of all stock certificates
evidencing Pledged Interests accompanied in each case by duly executed stock
powers (or other appropriate transfer documents) in blank affixed thereto; and
(2) the delivery by the Borrowers of certificates of the
Registrar of each partnership or limited liability company Restricted Subsidiary
evidencing the due registration on the registration books of such Person of the
Lien in favor of the Administrative Agent conferred under the Security
Instruments;
(xiv) the Mortgage Notes and Delta Subordinated Notes, with duly
executed endorsements affixed thereto;
(xv) evidence of consummation of the Acquisition Transaction in
accordance with the terms of the Transaction Documents;
(xvi) evidence of repayment of the Existing Indebtedness and
termination of the credit facilities under which such indebtedness was created
and any related Liens;
(xvii) evidence satisfactory to the Agent of the ownership by PepsiCo
of not less than 20% of the Parent;
(xviii) evidence of ownership by the Parent of the Delta Subordinated
Notes and the right of Delta to make current cash interest payments on the Delta
Subordinated Notes;
(xix) Proxy Statement;
(xx) the Historical Financial Statements and Historical Pro Forma
Financial Statements;
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(xxi) evidence of the entering into by the Borrowers of Swap
Agreements which provide coverage in an notional amount equal to at least
$37,500,000 for a duration of at least two (2) years from the Closing Date;
(xxii) evidence that all fees payable by the Borrowers on the Closing
Date to the Administrative Agent, BAS and the Lenders have been paid in full;
(xxiii) Uniform Commercial Code search results showing only those
Liens as are acceptable to the Lenders; and
(xxiv) such other documents, instruments, certificates and opinions as
the Administrative Agent or any Lender may reasonably request on or prior to the
Closing Date in connection with the consummation of the transactions
contemplated hereby; and
(b) In the good faith judgment of the Administrative Agent and the Lenders:
(i) there shall not have occurred or become known to the
Administrative Agent or the Lenders any event, condition, situation or status
since the date of the information contained in the financial and business
projections, budgets, pro forma data and forecasts concerning the Parent and its
Subsidiaries delivered to the Administrative Agent prior to the Closing Date
that has had or could reasonably be expected to result in a Material Adverse
Effect;
(ii) no litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding shall be pending or threatened which could
reasonably be likely to enjoin, restrain or otherwise adversely affect the
Acquisition Transaction or otherwise result in a Material Adverse Effect; and
(iii) the Credit Parties shall have received all approvals, consents
and waivers, and shall have made or given all necessary filings and notices as
shall be required to consummate the Acquisition Transaction and the other
transactions contemplated hereby without the occurrence of any default under,
conflict with or violation of (A) any applicable law, rule, regulation, order or
decree of any Governmental Authority or arbitral authority or (B) any agreement,
document or instrument to which any of the Credit Parties is a party or by which
any of them or their properties is bound.
7.2 Conditions of Revolving Loans and Letter of Credit . The obligations of
the Lenders to make any Revolving Loans, and the Issuing Bank to issue or renew
Letters of Credit and Bank of America to make Swing Line Loans, hereunder on or
subsequent to the Closing Date are subject to the satisfaction of the following
conditions:
(a) the Administrative Agent or, in the case of Swing Line Loans, Bank of
America shall have received a Borrowing Notice if required by Article II;
(b) the representations and warranties of the Credit Parties set forth in
Article VIII and in each of the other Loan Documents shall be true and correct
in all material respects on and as of the date of such Advance, Swing Line Loan
or Letter of Credit issuance or renewal, with the same effect as though such
representations and warranties had been made on and as of such date, except to
the extent that such representations and warranties expressly relate to an
earlier date and except that the financial statements referred to in Section
8.6(a) shall be deemed (solely for the purpose of the representation and
warranty contained in such Section 8.6(a) but not for the purpose of any cross
reference to such Section 8.6(a) or to the financial statements described
therein contained in any other provision of Section 8.6 or elsewhere in Article
8) to be those financial statements most recently delivered to the
Administrative Agent and the Lenders pursuant to Section 9.1 from the date
financial statements are delivered to the Administrative Agent and the Lenders
in accordance with such Section;
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(c) in the case of the issuance of a Letter of Credit, the Borrower or
Borrowers, as the case may be, shall have executed and delivered to the Issuing
Bank an Application and Agreement for Letter of Credit in form and content
acceptable to the Issuing Bank together with such other instruments and
documents as it shall request;
(d) at the time of (and after giving effect to) each Advance, Swing Line
Loan or the issuance of a Letter of Credit, no Default or Event of Default
specified in Article XI shall have occurred and be continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal balance of all
outstanding Revolving Loans for each Lender shall not exceed such Lender's
Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the aggregate principal
balance of all outstanding Participations in Letters of Credit and Reimbursement
Obligations (or in the case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and Reimbursement
Obligations of other Lenders) for each Lender and in the aggregate shall not
exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the
Total Letter of Credit Commitment;
(iii) a Swing Line Loan, the Swing Line Outstandings shall not exceed
$5,000,000; and
(iv) a Revolving Loan, Swing Line Loan or a Letter of Credit or
renewal thereof, the sum of Letter of Credit Outstandings plus Revolving Credit
Outstandings plus Swing Line Outstandings shall not exceed the Total Revolving
Credit Commitment.
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ARTICLE VIII
Representations and Warranties
Each Borrower represents and warrants with respect to itself and to
its Subsidiaries (which representations and warranties shall survive the
delivery of the documents mentioned herein and the making of Loans), that:
8.1 Organization and Authority .
(a) The Borrower and each Subsidiary is a corporation, limited liability
company or partnership duly organized and validly existing under the laws of the
jurisdiction of its formation;
(b) The Borrower and each Subsidiary (x) has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as contemplated in the Loan Documents, and (y) is qualified
to do business in every jurisdiction in which failure so to qualify would have a
Material Adverse Effect;
(c) The Borrower has the power and authority to execute, deliver and
perform this Agreement and the Notes, and to borrow hereunder, and to execute,
deliver and perform each of the other Loan Documents to which it is a party;
(d) Each Credit Party (other than the Borrowers) has the power and
authority to execute, deliver and perform the Facility Guaranty and each of the
other Loan Documents to which it is a party; and
(e) When executed and delivered, each of the Loan Documents to which any
Credit Party is a party will be the legal, valid and binding obligation or
agreement, as the case may be, of such Credit Party, enforceable against such
Credit Party in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors' rights generally and to the
effect of general principles of equity (whether considered in a proceeding at
law or in equity).
8.2 Loan Documents . The execution, delivery and performance by each Credit
Party of each of the Loan Documents to which it is a party:
(a) have been duly authorized by all requisite Organizational Action of
such Credit Party required for the lawful execution, delivery and performance
thereof;
(b) do not violate any provisions of (i) any applicable law, rule or
regulation, (ii) any judgment, writ, order, determination, decree or arbitral
award of any Governmental Authority or arbitral authority binding on such Credit
Party or its properties, or (iii) the Organizational Documents or Operating
Documents of such Credit Party;
(c) does not and will not be in conflict with, result in a breach of or
constitute an event of default, or an event which, with notice or lapse of time
or both, would constitute an event of default, under any contract, indenture,
agreement or other instrument or document to which such Credit Party is a party,
or by which the properties or assets of such Credit Party are bound; and
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(d) does not and will not result in the creation or imposition of any Lien
upon any of the properties or assets of such Credit Party or any Subsidiary
except any Liens in favor of the Administrative Agent and the Lenders created by
the Security Instruments.
8.3 Solvency. Each Credit Party is Solvent after giving effect to the
transactions contemplated by the Loan Documents.
8.4 Subsidiaries and Stockholders. The Borrower has no Subsidiaries other
than those Persons listed as Subsidiaries in Schedule 8.4 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 9.20; Schedule 8.4 states as of the date hereof the organizational form
of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
8.4, free and clear of any Lien.
8.5 Ownership Interests. The Borrower owns no interest in any Person other
than the Persons listed in Schedule 8.4, equity investments in Persons not
constituting Subsidiaries permitted under Section 10.6 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 9.20.
8.6 Financial Condition .
(a) The Borrowers have heretofore furnished to each Lender the Historical
Financial Statements. Except as set forth therein, such financial statements
(including the notes thereto) present fairly the financial condition of the
Parent and its Subsidiaries as of the end of such Fiscal Years and interim
period and results of their operations and the changes in its stockholders'
equity for the Fiscal Years and interim period then ended, all in conformity
with GAAP applied on a Consistent Basis, subject however, in the case of
unaudited interim statements to year end audit adjustments;
(b) the Borrowers have heretofore furnished each Lender (i) the Historical
Pro Forma Financial Statements, which fairly present the combined financial
position of the Parent and its Restricted Subsidiaries as of the dates set forth
therein, in each case in accordance with GAAP applied on a Consistent Basis
(except as set forth therein) and (ii) pro forma financial statement projections
of the Parent and its Restricted Subsidiaries for each of the five (5) Fiscal
Years of the Parent and its Restricted Subsidiaries ending December 31, 1999
through December 31, 2004, which pro forma projections fairly present the
estimated consolidated income and cash flows of the Parent and its Restricted
Subsidiaries assuming the consummation of the Acquisition Transaction;
(c) since the later of (i) the date of the audited financial statements
delivered pursuant to Section 8.6(a) hereof or (ii) the date of the audited
financial statements most recently delivered pursuant to Section 9.1(a) hereof,
there has been no material adverse change in the condition, financial or
otherwise, of the Borrower or any of its Subsidiaries or in the businesses,
properties, performance, prospects or operations of the Borrower or its
Subsidiaries, nor have such businesses or properties been materially adversely
affected as a result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo or act of God; and
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(d) except as set forth in the financial statements referred to in
Section 8.6(a) or in Schedule 8.6 or permitted by Section 10.4, neither the
Borrower nor any Subsidiary has incurred, other than in the ordinary course of
business, any material Indebtedness, Contingent Obligation or other commitment
or liability which remains outstanding or unsatisfied.
8.7 Title to Properties . The Borrower and each of its Subsidiaries and
each other Credit Party has good and marketable title to all its real and
personal properties, subject to no transfer restrictions or Liens of any kind,
except for the transfer restrictions and Liens described in Schedule 8.7 and
Liens permitted by Section 10.3.
8.8 Taxes . Except as set forth in Schedule 8.8, the Borrower and each of
its Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed by it and, except for taxes and
assessments being contested in good faith by appropriate proceedings diligently
conducted and against which reserves reflected in the financial statements
described in Section 8.6(a) or Sections 9.1(a) or (b) and satisfactory to the
Borrower's independent certified public accountants have been established, have
paid or caused to be paid all taxes as shown on said returns or on any
assessment received by it, to the extent that such taxes have become due.
8.9 Other Agreements. No Credit Party nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree, agreement, lease
or instrument, or subject to other restrictions, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect; or
(b) in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which such Credit Party or any Subsidiary is a party, which default has, or if
not remedied within any applicable grace period could reasonably be likely to
have, a Material Adverse Effect.
8.10 Litigation. Except as set forth in Schedule 8.10, there is no action,
suit, investigation or proceeding at law or in equity or by or before any
governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or other Credit Party or affecting the Borrower or any Subsidiary or
other Credit Party or any properties or rights of the Borrower or any Subsidiary
or other Credit Party, which would reasonably be expected to have a Material
Adverse Effect.
8.11 Margin Stock. The proceeds of the borrowings made hereunder will be
used by the Borrower only for the purposes expressly authorized herein. None of
such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 221) of the Board. Neither the Borrower nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof.
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8.12 Investment Company. No Credit Party is an "investment company," or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds
of the Loans and repayment thereof by the Borrower and the performance by the
Borrower and the other Credit Parties of the transactions contemplated by the
Loan Documents will not violate any provision of said Act, or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder,
in each case as in effect on the date hereof.
8.13 Patents, Etc. The Borrower and each other Credit Party owns or has
the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct of
its businesses as now conducted and as contemplated by the Loan Documents,
without known conflict with any patent, license, franchise, trademark, trade
secret, trade name, copyright, other proprietary right of any other Person.
8.14 No Untrue Statement. Neither (a) this Agreement nor any other Loan
Document or certificate or document executed and delivered by or on behalf of
the Borrower or any other Credit Party in accordance with or pursuant to any
Loan Document nor (b) any statement, representation, or warranty provided to the
Administrative Agent in connection with the negotiation or preparation of the
Loan Documents contains any misrepresentation or untrue statement of material
fact or omits to state a material fact necessary, in light of the circumstance
under which it was made, in order to make any such warranty, representation or
statement contained therein not misleading.
8.15 No Consents, Etc. Neither the respective businesses or properties of
the Credit Parties or any Subsidiary, nor any relationship among the Credit
Parties or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person on the part of any Credit Party as a
condition to the execution, delivery and performance of, or consummation of the
transactions contemplated by the Loan Documents, which, if not obtained or
effected, would be reasonably likely to have a Material Adverse Effect, or if
so, such consent, approval, authorization, filing, registration or qualification
has been duly obtained or effected, as the case may be.
8.16 Employee Benefit Plans. Except as set forth on Schedule 8.16,
(a) The Borrower and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder and in compliance with all Foreign Benefit Laws with respect to all
Employee Benefit Plans except for any required amendments for which the remedial
amendment period as defined in Section 401(b) of the Code has not yet expired.
Each Employee Benefit Plan that is intended to be qualified under Section 401(a)
of the Code has been determined or the Borrower or its Subsidiaries is in the
process of obtaining a determination by the Internal Revenue Service to be so
qualified, each trust related to such plan has been determined to be exempt
under Section 501(a) of the Code, and each Employee Benefit Plan subject to any
Foreign Benefit Law has received the required approvals by any Governmental
Authority regulating such Employee Benefit Plan. No material liability has been
incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;
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(b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a
nonexempt prohibited transaction described in Section 4975 of the Code or
Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts
created thereunder which could subject any such Employee Benefit Plan or trust
to a material tax or penalty on prohibited transactions imposed under Internal
Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding
deficiency with respect to any Employee Benefit Plan, whether or not waived, or
any other liability to the PBGC which remains outstanding other than the payment
of premiums and there are no premium payments which are due and unpaid, (iii)
failed to make a required contribution or payment to a Multiemployer Plan, (iv)
failed to make a required installment or other required payment under Section
412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit
Plan, or (v) failed to make a required contribution or payment, or otherwise
failed to operate in compliance with any Foreign Benefit Law regulating any
Employee Benefit Plan;
(c) No Termination Event has occurred or is reasonably expected to occur
with respect to any Pension Plan or Multiemployer Plan, and neither the Borrower
nor any ERISA Affiliate has incurred any unpaid withdrawal liability with
respect to any Multiemployer Plan;
(d) The present value of all vested accrued benefits under each Employee
Benefit Plan which is subject to Title IV of ERISA, or the funding of which is
regulated by any Foreign Benefit Law did not, as of the most recent valuation
date for each such plan, exceed the then current value of the assets of such
Employee Benefit Plan allocable to such benefits;
(e) To the best of the Borrower's knowledge, each Employee Benefit Plan
which is subject to Title IV of ERISA or the funding of which is regulated by
any Foreign Benefit Law, maintained by the Borrower or any ERISA Affiliate, has
been administered in accordance with its terms in all material respects and is
in compliance in all material respects with all applicable requirements of
ERISA, applicable Foreign Benefit Law and other applicable laws, regulations and
rules;
(f) The consummation of the Loans and the issuance of the Letters of Credit
provided for herein will not involve any prohibited transaction under ERISA
which is not subject to a statutory or administrative exemption; and
(g) No material proceeding, claim, lawsuit and/or investigation exists or,
to the best knowledge of the Borrower after due inquiry, is threatened
concerning or involving any Employee Benefit Plan;
8.17 No Default. As of the date hereof, there does not exist any Default or
Event of Default hereunder.
8.18 Environmental Laws. Except as listed on Schedule 8.18, the Borrower
and each Subsidiary is in compliance with all applicable Environmental Laws and
has been issued and currently maintains all required federal, state and local
permits, licenses, certificates and approvals except where the failure to be in
compliance or to have such permits, licenses, certificates or approvals, would
not reasonably be expected to have a Material Adverse Effect. Except as listed
on Schedule 8.18, neither the Borrower nor any Subsidiary has been notified of
any pending or threatened action, suit, proceeding or investigation, and neither
the Borrower nor any Subsidiary is aware of any facts, which (a) calls into
question, or could reasonably be expected to call into question, compliance by
the Borrower or any Subsidiary with any Environmental Laws, (b) seeks, or could
reasonably be expected to form the basis of a meritorious proceeding, to
suspend, revoke or terminate any license, permit or approval necessary for the
operation of the Borrower's or any Subsidiary's business or facilities or for
the generation, handling, storage, treatment or disposal of any Hazardous
Materials, or (c) seeks to cause, or could reasonably be expected to form the
basis of a meritorious proceeding to cause, any property of the Borrower or any
Subsidiary or other Credit Party to be subject to any restrictions on ownership,
use, occupancy or transferability under any Environmental Law, which in any of
the foregoing instances would reasonably be expected to have a Material Adverse
Effect.
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8.19 Employment Matters.
(a) None of the employees of the Borrower or any Subsidiary is subject to
any collective bargaining agreement which would reasonably be expected to have a
Material Adverse Effect and there are no strikes, work stoppages, election or
decertification petitions or proceedings, unfair labor charges, equal
opportunity proceedings, or other material labor/employee related controversies
or proceedings pending or, to the best knowledge of the Borrower, threatened
against the Borrower or any Subsidiary or between the Borrower or any Subsidiary
and any of its employees, other than employee grievances arising in the ordinary
course of business which could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect; and
(b) Except to the extent a failure to maintain compliance would not have a
Material Adverse Effect, the Borrower and each Subsidiary is in compliance in
all respects with all applicable laws, rules and regulations pertaining to labor
or employment matters, including without limitation those pertaining to wages,
hours, occupational safety and taxation and there is neither pending or
threatened any litigation, administrative proceeding nor, to the knowledge of
the Borrower, any investigation, in respect of such matters which, if decided
adversely, could reasonably be likely, individually or in the aggregate, to have
a Material Adverse Effect.
8.20 RICO. Neither the Borrower nor any Subsidiary is engaged in or has
engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any criminal law,
racketeer influenced and corrupt organizations law, civil or criminal, or other
similar laws.
8.21 Year 2000 Compliance. The Borrower and its Subsidiaries have (i)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by information
received from suppliers and vendors) that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan substantially in accordance with that timetable. The
Borrower reasonably believes that all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to its or any of its Subsidiaries' business and operations will on a
timely basis be Year 2000 Compliant, except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
ARTICLE IX
Affirmative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Parent will, and where applicable will cause
each Restricted Subsidiary to:
9.1 Financial Reports, Etc.
(a) As soon as practical and in any event within 95 days after the end of
each Fiscal Year of the Parent, deliver or cause to be delivered to the
Administrative Agent and each Lender (i) consolidated and consolidating balance
sheets of the Parent and its Restricted Subsidiaries, the Parent and its
consolidated Subsidiaries and of Delta and its Subsidiaries as at the end of
such Fiscal Year, and the notes thereto, and the related consolidated and
consolidating statements of income, stockholders' equity and cash flows, and the
respective notes thereto, for such Fiscal Year, setting forth (other than for
consolidating statements) comparative financial statements for the preceding
Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis
and containing, with respect to the consolidated financial statements, opinions
of Arthur Andersen LLP, or other such independent certified public accountants
selected by the Parent and approved by the Administrative Agent, which are
unqualified as to the scope of the audit performed and as to the "going concern"
status of the Parent and Delta and without any exception not acceptable to the
Lenders, and (ii) a certificate of an Authorized Representative demonstrating
compliance with Sections 10.1(a) through 10.1(c), which certificate shall be in
the form of Exhibit H;
(b) as soon as practical and in any event within 50 days after the end of
each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver
to the Administrative Agent and each Lender (i) consolidated and consolidating
balance sheets of the Parent and its Restricted Subsidiaries, the Parent and its
consolidated Subsidiaries and of Delta and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated and consolidating statements
of income, stockholders' equity and cash flows for such fiscal quarter and for
the period from the beginning of the then current Fiscal Year through the end of
such reporting period, and accompanied by a certificate of an Authorized
Representative to the effect that such financial statements present fairly the
financial position of the Parent and its Restricted Subsidiaries and of Delta
and its Subsidiaries as of the end of such fiscal period and the results of
their operations and the changes in their financial position for such fiscal
period, in conformity with the standards set forth in Section 8.6(a) with
respect to interim financial statements, and (ii) a certificate of an Authorized
Representative containing computations for such quarter comparable to that
required pursuant to Section 9.1(a)(ii);
(c) together with each delivery of the financial statements required by
Section 9.1(a)(i), deliver to the Administrative Agent and each Lender a letter
from the Parent's accountants specified in Section 9.1(a)(i) stating that in
performing the audit necessary to render an opinion on the financial statements
delivered under Section 9.1(a)(i), they obtained no knowledge of any Default or
Event of Default by the Borrowers in the fulfillment of the terms and provisions
of this Agreement insofar as they relate to financial matters (which at the date
of such statement remains uncured); or if the accountants have obtained
knowledge of such Default or Event of Default, a statement specifying the nature
and period of existence thereof;
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(d) promptly upon their becoming available to the Parent, the Parent shall
deliver to the Administrative Agent and each Lender a copy of (i) all regular or
special reports or effective registration statements which Parent or any
Subsidiary shall file with the Securities and Exchange Commission (or any
successor thereto) or any securities exchange, (ii) any proxy statement
distributed by the Parent or any Subsidiary to its shareholders, bondholders or
the financial community in general, and (iii) any management letter or other
report submitted to the Parent or any Subsidiary by independent accountants in
connection with any annual, interim or special audit of the Parent or any
Subsidiary; and
(e) not later than the last Business Day of each Fiscal Year, deliver to
the Administrative Agent and each Lender consolidated and consolidating
financial projections including a capital and operating expense budget for the
Parent and its Restricted Subsidiaries for the next Fiscal Year, prepared in
accordance with GAAP applied on a Consistent Basis;
(f) as soon as practicable and in any event within 15 days following June
30 and December 31 of each Fiscal Year, deliver to the Administrative Agent and
each Lender an accounts receivable aging report in form and detail substantially
similar to that furnished to the Administrative Agent prior to the Closing Date;
(g) promptly, from time to time, deliver or cause to be delivered to the
Administrative Agent and each Lender such other information regarding the Parent
and any Restricted Subsidiary's operations, business affairs and financial
condition as the Administrative Agent or such Lender may reasonably request;
The Administrative Agent and the Lenders are hereby authorized to deliver a
copy of any such financial or other information delivered hereunder to the
Lenders (or any affiliate of any Lender) or to the Administrative Agent, to any
Governmental Authority having jurisdiction over the Administrative Agent or any
of the Lenders pursuant to any written request therefor or in the ordinary
course of examination of loan files, or to any other Person who shall acquire or
consider the assignment of, or acquisition of any participation interest in, any
Obligation permitted by this Agreement.
9.2 Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know-how, and other
intellectual property and proprietary information (or adequate licenses
thereto), in each case as are reasonably necessary to conduct its business as
currently conducted or as contemplated hereby, all in accordance with customary
and prudent business practices.
9.3 Existence, Qualification, Etc. Except as otherwise expressly permitted
under Section 10.7, do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and all material rights and
franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary.
9.4 Regulations and Taxes. Comply in all material respects with or contest
in good faith all statutes and governmental regulations and pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and any
other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Parent's independent certified public accountants have been established
unless and until any Lien resulting therefrom attaches to any of its property
and becomes enforceable against its creditors.
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9.5 Insurance. (a) Keep all of its insurable properties adequately insured
at all times with responsible insurance carriers against loss or damage by fire
and other hazards to the extent and in the manner as are customarily insured
against by similar businesses owning such properties similarly situated and
otherwise as required by the Security Instruments, (b) maintain general public
liability insurance at all times with responsible insurance carriers against
liability on account of damage to persons and property and (c) maintain
insurance under all applicable workers' compensation laws (or in the
alternative, maintain required reserves if self-insured for workers'
compensation purposes) and against loss by reason by business interruption such
policies of insurance to have such limits, deductibles, exclusions, co-insurance
and other provisions providing no less coverages than that specified in Schedule
9.5, such insurance policies to be in form reasonably satisfactory to the
Administrative Agent. Each of the policies of insurance described in this
Section 9.5 shall provide that the insurer shall give the Administrative Agent
not less than thirty (30) days' prior written notice before any such policy
shall be terminated, lapse or be altered in any manner.
9.6 True Books. Keep true books of record and account in which full, true
and correct entries will be made of all of its dealings and transactions, and
set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
9.7 Year 2000 Compliance. The Parent will promptly notify the
Administrative Agent and the Lenders in the event the Parent discovers or
determines that any computer application (including those affected by
information received from its suppliers and vendors) that is material to its or
any of its Subsidiaries' business and operations will not be Year 2000 Compliant
on a timely basis, except to the extent that such failure could not reasonably
be expected to have a Material Adverse Effect.
9.8 Right of Inspection. Permit any Person designated by any Lender or the
Administrative Agent to visit and inspect any of the properties, corporate books
and financial reports of the Parent or any Subsidiary and to discuss its
affairs, finances and accounts with its principal officers and independent
certified public accountants, all at reasonable times, at reasonable intervals
and with reasonable prior notice.
9.9 Observeall Laws. Conform to and duly observe in all respects all laws,
rules and regulations and all other valid requirements of any Governmental
Authority with respect to the conduct of its business, except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
9.10 Governmental Licenses. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and as
contemplated by the Loan Documents, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
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9.11 Covenants Extending to Other Persons. Cause each of its Restricted
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Parent in Sections 9.2 through 9.10, and 9.20
inclusive.
9.12 Officer's Knowledge of Default. Upon any officer of either Borrower
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of the Borrower or any Subsidiary or other Credit Party to any
Lender, or any event, development or occurrence which could reasonably be
expected to have a Material Adverse Effect, cause such officer or an Authorized
Representative to promptly notify the Administrative Agent of the nature
thereof, the period of existence thereof, and what action the Borrower or such
Subsidiary or other Credit Party proposes to take with respect thereto.
9.13 Suitsor Other Proceedings. Upon any officer of either Borrower
obtaining knowledge of any litigation or other proceedings being instituted
against the Parent or any Subsidiary or other Credit Party, or any attachment,
levy, execution or other process being instituted against any assets of the
Parent or any Subsidiary or other Credit Party, making a claim or claims in an
aggregate amount greater than $5,000,000 not otherwise covered by insurance,
promptly deliver to the Administrative Agent written notice thereof stating the
nature and status of such litigation, dispute, proceeding, levy, execution or
other process.
9.14 Notice of Environmental Complaint or Condition. Promptly provide to
the Administrative Agent true, accurate and complete copies of any and all
notices, complaints, orders, directives, claims or citations received by the
Parent or any Subsidiary relating to any (a) violation or alleged violation by
the Parent or any Subsidiary of any applicable Environmental Law; (b) release or
threatened release by the Parent or any Subsidiary, or by any Person handling,
transporting or disposing of any Hazardous Material on behalf of the Parent or
any Subsidiary, or at any facility or property owned or leased or operated by
the Parent or any Subsidiary, of any Hazardous Material, except where occurring
legally pursuant to a permit or license; or (c) liability or alleged liability
of the Parent or any Subsidiary for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials, which in any of
the foregoing instances would reasonably be expected to have a Material Adverse
Effect.
9.15 Environmental Compliance. If the Parent or any Subsidiary shall
receive any letter, notice, complaint, order, directive, claim or citation
alleging that the Parent or any Subsidiary has violated any Environmental Law,
has released any Hazardous Material, or is liable for the costs of cleaning up,
removing, remediating or responding to a release of Hazardous Materials, the
Parent and any Subsidiary shall, within the time period permitted and to the
extent required by the applicable Environmental Law or the Governmental
Authority responsible for enforcing such Environmental Law, remove or remedy, or
cause the applicable Subsidiary to remove or remedy, such violation or release
or satisfy such liability, unless and only during the period that the
applicability of the Environmental Law, the fact of such violation or liability
or the action required to remove or remedy such violation is being contested by
the Parent or the applicable Subsidiary by appropriate proceedings diligently
conducted and all reserves with respect thereto as may be required under
Generally Accepted Accounting Principles, if any, have been made, and no Lien in
connection therewith shall have attached to any property of the Parent or the
applicable Subsidiary which shall have become enforceable against creditors of
such Person.
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9.16 Indemnification. Without limiting the generality of Section 13.9, the
Borrowers hereby jointly and severally agree to indemnify and hold the
Administrative Agent, the Lenders and any affiliate of any Lender party to a
Swap Agreement, and their respective officers, directors, employees and agents,
harmless from and against any and all claims, losses, penalties, liabilities,
damages and expenses (including assessment and cleanup costs and reasonable
attorneys', consultants' or other expert fees, expenses and disbursements)
arising directly or indirectly from, out of or by reason of (a) the violation of
any Environmental Law by the Borrowers or any Subsidiary or with respect to any
property owned, operated or leased by the Borrowers or any Subsidiary or (b) the
handling, storage, transportation, treatment, emission, release, discharge or
disposal of any Hazardous Materials by or on behalf of the Borrower or any
Subsidiary, or on or with respect to property owned or leased or operated by the
Borrower or any Subsidiary. The provisions of this Section 9.16 shall survive
repayment of the Obligations and the Facility Termination Date and expiration or
termination of this Agreement.
9.17 Further Assurances. At the Borrower's cost and expense, upon request
of the Administrative Agent, duly execute and deliver or cause to be duly
executed and delivered, to the Administrative Agent such further instruments,
documents, certificates, financing and continuation statements, and do and cause
to be done such further acts that may be reasonably necessary or advisable in
the reasonable opinion of the Administrative Agent to carry out more effectively
the provisions and purposes of this Agreement, the Security Instruments and the
other Loan Documents.
9.18 Employee Benefit Plans.
(a) With reasonable promptness, and in any event within thirty (30) days
thereof, give notice to the Administrative Agent of (a) the establishment of any
new Pension Plan (which notice shall include a copy of such plan), (b) the
commencement of contributions to any Employee Benefit Plan to which the Borrower
or any of its ERISA Affiliates was not previously contributing, (c) any material
increase in the benefits of any existing Employee Benefit Plan, (d) each funding
waiver request filed with respect to any Pension Plan and all communications
received or sent by the Borrower or any ERISA Affiliate with respect to such
request and (e) the failure of the Borrower or any ERISA Affiliate to make a
required installment or payment under Section 302 of ERISA or Section 412 of the
Code (in the case of Employee Benefit Plans regulated by the Code or ERISA) or
under any Foreign Benefit Law (in the case of Employee Benefit Plans regulated
by any Foreign Benefit Law) by the due date;
(b) Promptly and in any event within fifteen (15) days of becoming aware of
the occurrence or forthcoming occurrence of any (a) Termination Event or (b)
nonexempt "prohibited transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code, in connection with any Employee Benefit Plan
or any trust created thereunder, deliver to the Administrative Agent a notice
specifying the nature thereof, what action the Borrower or any ERISA Affiliate
has taken, is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the Department
of Labor or the PBGC with respect thereto;
(c) With reasonable promptness but in any event within fifteen (15) days
for purposes of clauses (a), (b) and (c), deliver to the Administrative Agent
copies of (a) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code, (b) all notices received by the Borrower or any ERISA
Affiliate of the PBGC's or any Governmental Authority's intent to terminate any
Pension Plan or to have a trustee appointed to administer any Pension Plan, (c)
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by the Parent or any ERISA Affiliate with the Internal Revenue Service
with respect to each Employee Benefit Plan and (d) all notices received by the
Parent or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA.
The Parent will notify the Administrative Agent in writing within five (5)
Business Days of the Parent or any ERISA Affiliate obtaining knowledge or reason
to know that the Parent or any ERISA Affiliate has filed or intends to file a
notice of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA; and
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(d) cause to be done within a period of thirty (30) days those things
described on Schedule 8.16.
9.19 Continued Operations. Continue at all times to conduct its business
and engage principally in the same line or lines of business substantially as
heretofore conducted.
9.20 New Subsidiaries. Simultaneously with the acquisition or creation of
any Restricted Subsidiary, cause to be delivered to the Administrative Agent
each of the following:
(a) a Facility Guaranty executed by such Restricted Subsidiary that is a
Domestic Subsidiary substantially in the form of Exhibit I;
(b) a Security Agreement of such Restricted Subsidiary that is a Domestic
Subsidiary substantially in the form of Exhibit J, together with such Uniform
Commercial Code financing statements on Form UCC-1 or otherwise duly executed by
such Restricted Subsidiary as "Debtor" and naming the Administrative Agent for
the benefit of the Administrative Agent and the Lenders as "Secured Party," in
form, substance and number sufficient in the reasonable opinion of the
Administrative Agent and its special counsel to be filed in all Uniform
Commercial Code filing offices in all jurisdictions in which filing is necessary
or advisable to perfect in favor of the Administrative Agent for the benefit of
the Administrative Agent and the Lenders the Lien on Collateral conferred under
such Security Instrument to the extent such Lien may be perfected by Uniform
Commercial Code filing;
(c) if the Subsidiary Securities issued by such Restricted Subsidiary that
are, or are required to become, Pledged Interests, shall be owned by a
Restricted Subsidiary who has not then executed and delivered to the
Administrative Agent a Pledge Agreement granting a Lien to the Administrative
Agent, for the benefit of the Administrative Agent and the Lenders, in such
equity interests, a Pledge Agreement executed by the Restricted Subsidiary that
directly owns such Subsidiary Securities substantially in the form attached
hereto as Exhibit K (or, as to the Pledged Interests issued by any Direct
Foreign Subsidiary, in a form acceptable to the Administrative Agent), and if
such Subsidiary Securities shall be owned by the Borrowers or a Restricted
Subsidiary who has previously executed a Pledge Agreement, a Pledge Agreement
Supplement in the form required by such Pledge Agreement pertaining to such
Subsidiary Securities;
(d) If the Pledged Interests issued by such Restricted Subsidiary
constitute securities under Article 8 of the Uniform Commercial Code (i) the
certificates representing 100% of such Subsidiary Securities and (ii) duly
executed, undated stock powers or other appropriate powers of assignment in
blank affixed thereto;
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(e) (i) Uniform Commercial Code financing statements on form UCC-1 or
otherwise duly executed by the pledgor as "Debtor" and naming the Administrative
Agent for the benefit of the Administrative Agent and the Lenders as "Secured
Party," in form, substance and number sufficient in the reasonable opinion of
the Administrative Agent and its special counsel to be filed in all Uniform
Commercial Code filing offices and in all jurisdictions in which filing is
necessary or advisable to perfect in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders the Lien on such Subsidiary
Securities and (ii) if the Pledged Interests issued by such Restricted
Subsidiary do not constitute securities and such Subsidiary has not elected to
have such interests treated as securities under Article 8 of the applicable
Uniform Commercial Code, and a control agreement from the Registrar of such
Restricted Subsidiary, in form and substance acceptable to the Administrative
Agent and in which the Registrar (1) acknowledges that the pledgor is at the
date of such acknowledgment the sole record, and to its knowledge, beneficial
owner of such Subsidiary Securities, (2) acknowledges the Lien in favor of the
Administrative Agent conferred under the Pledge Agreement and that such Lien
will be reflected on the registry for such Subsidiary Securities, (3) agrees
that it will not register any transfer of such Subsidiary Securities nor
acknowledge any Lien in favor of any other Person on such Subsidiary Securities,
without the prior written consent of the Administrative Agent, in each instance,
until it receives notice from the Administrative Agent that all Liens on such
Collateral in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders have been released or terminated, and (4)
agrees that upon receipt of notice from the Administrative Agent that an Event
of Default has occurred and is continuing and that the Subsidiary Securities
identified in such notice have been transferred to a transferee identified in
such notice, it will duly record such transfer of Subsidiary Securities on the
appropriate registry without requiring further consent from the pledgor and
shall thereafter treat the transferee as the sole record and beneficial owner of
such Subsidiary Securities pending further transfer, notwithstanding any
contrary instruction received from the pledgor;
(f) a supplement to the appropriate schedule attached to the appropriate
Security Instruments listing the additional Collateral, certified as true,
correct and complete by the Authorized Representative (provided that the failure
to deliver such supplement shall not impair the rights conferred under the
Security Instruments in after acquired Collateral);
(g) an opinion of counsel to the Restricted Subsidiary dated as of the date
of delivery of the Facility Guaranty and other Loan Documents provided for in
this Section 9.20 and addressed to the Administrative Agent and the Lenders, in
form and substance reasonably acceptable to the Administrative Agent (which
opinion may include assumptions and qualifications of similar effect to those
contained in the opinions of counsel delivered pursuant to Section 7.1(a)), to
the effect that:
(i) such Subsidiary is duly organized, validly existing and in good
standing in the jurisdiction of its formation, has the requisite power and
authority to own its properties and conduct its business as then owned and then
conducted and proposed to be conducted and to execute, deliver and perform the
Facility Guaranty and other Loan Documents described in this Section 9.20 to
which such Subsidiary is a signatory, and is duly qualified to transact business
and is in good standing as a foreign corporation or partnership in each other
jurisdiction in which the character of the properties owned or leased, or the
business carried on by it, requires such qualification and the failure to be so
qualified would reasonably be likely to result in a Material Adverse Effect;
(ii) the execution, delivery and performance of the Facility Guaranty
and other Loan Documents described in this Section 9.20 to which such Subsidiary
is a signatory have been duly authorized by all requisite corporate or
partnership action (including any required shareholder or partner approval),
each of such agreements has been duly executed and delivered and constitutes the
valid and binding agreement of such Subsidiary, enforceable against such
Subsidiary in accordance with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the effect of
general principles of equity (whether considered in a proceeding at law or in
equity);
(iii) the Subsidiary Securities of such Subsidiary are duly
authorized, validly issued, fully paid and nonassessable, and free of any
preemptive rights, and the applicable Security Instrument (including foreign
collateral documents) is effective to create a valid security interest in favor
of the Administrative Agent for the benefit of the Administrative Agent and the
Lenders in such Subsidiary Securities as constitute Pledged Interests;
(iv) the Uniform Commercial Code financing statements on Form UCC-1
delivered to the Administrative Agent by the Subsidiary in connection with the
delivery of the Security Instruments of such Subsidiary have been duly executed
by the Subsidiary and are in form, substance and number sufficient for filing in
all Uniform Commercial Code filing offices in all jurisdictions in which filing
is necessary to perfect in favor of the Administrative Agent for the benefit of
the Administrative Agent and the Lenders the Lien on Collateral conferred under
such Security Instruments to the extent such Lien may be perfected by Uniform
Commercial Code filing; and
(v) in the case of Direct Foreign Subsidiaries only, that under the
laws of the applicable foreign jurisdiction, all agreements, notices and other
documents that are required to be executed, delivered, filed or recorded and all
other action required to be taken, within or pursuant to the laws of such
jurisdiction to perfect the Lien conferred in favor of the Administrative Agent
under the applicable Security Instrument as against creditors of and purchasers
for value from the holder of the Pledged Interests has been duly executed,
delivered, filed, recorded or taken, as the case may be; and
(h) current copies of the Organizational Documents and Operating Documents
of such Restricted Subsidiary, minutes of duly called and conducted meetings (or
duly effected consent actions) of the Board of Directors, partners, or
appropriate committees thereof (and, if required by such Organizational
Documents, Operating Documents or applicable law, of the shareholders, members
or partners) of such Restricted Subsidiary authorizing the actions and the
execution and delivery of documents described in this Section 9.20.
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ARTICLE X
Negative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Parent will not, nor will it permit any
Restricted Subsidiary to:
10.1 Financial Covenants.
(a) Consolidated Net Worth. Permit Consolidated Net Worth to be less than
(i) $95,000,000 from the Closing Date until (but excluding) the last day of the
fiscal quarter that includes the Closing Date (the "Closing Date Quarter") and
(ii) as at the last day of each fiscal quarter of the Parent after the Closing
Date and until (but excluding) the last day of the next following fiscal quarter
of the Parent, the sum of (A) the amount of Consolidated Net Worth required to
be maintained pursuant to this Section 10.1(a) as at the end of the immediately
preceding fiscal quarter (or, in the case of the Closing Date Quarter, required
to be maintained as of the Closing Date), plus (B) 75% of Consolidated Net
Income (with no reduction for net losses during any period) for the fiscal
quarter of the Parent ending on such day (including within "Consolidated Net
Income" certain items otherwise excluded, as provided for in the definition of
"Consolidated Net Income"), plus (C) 100% of the aggregate amount of all
increases in the stated capital and additional paid-in capital accounts of the
Parent resulting from the issuance of equity securities or other capital
investments.
(b) Consolidated Leverage Ratio. Permit at any time the Consolidated
Leverage Ratio to be greater than (i) 5.50 to 1.00 from the Closing Date through
December 31, 1999 and (ii) 5.00 to 1.00 thereafter.
(c) Consolidated Fixed Charge Ratio. Permit the Consolidated Fixed Charge
Ratio to be less than 1.50 to 1.00.
10.2 Capital Expenditures . Make or become committed to make Capital
Expenditures, excluding Costs of Acquisitions, which exceed in the aggregate (on
a noncumulative basis, with the effect that amounts not expended in any Fiscal
Year may not be carried forward to a subsequent period) $22,000,000 in the
Fiscal Year ending December 31, 2000 and $20,000,000 in any other Fiscal Year.
10.3 Liens. Incur, create or permit to exist any Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Parent or any Restricted Subsidiary, other
than
(a) Liens created under the Security Instruments in favor of the
Administrative Agent and the Lenders, and otherwise existing as of the date
hereof and as set forth in Schedule 8.7;
(b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP and which Liens are not yet enforceable against other
creditors;
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(c) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law or created in the ordinary
course of business and in existence less than 90 days from the date of creation
thereof for amounts not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
GAAP and which Liens are not yet enforceable against other creditors;
(d) Liens incurred or deposits made in the ordinary course of 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 Indebtedness), statutory obligations
and other similar obligations or arising as a result of progress payments under
government contracts;
(e) easements (including reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations, encroachments,
variations and zoning and other restrictions, charges or encumbrances (whether
or not recorded), which do not interfere materially with the ordinary conduct of
the business of the Borrower or any Subsidiary and which do not materially
detract from the value of the property to which they attach or materially impair
the use thereof to the Borrower or any Subsidiary;
(f) purchase money Liens to secure Indebtedness permitted under Section
10.4(d) and incurred to purchase fixed assets, provided such Indebtedness
represents not less than 75% of the purchase price of such assets as of the date
of purchase thereof and no property other than the assets so purchased secures
such Indebtedness;
(g) Liens arising in connection with Capital Leases permitted under Section
10.4(d); provided that no such Lien shall extend to any Collateral or to any
other property other than the assets subject to such Capital Leases; and
(h) Liens securing Indebtedness permitted under Section 10.4(h) so long as
such Liens existed at the time of the Acquisition.
10.4 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as set forth in Schedule
8.6; provided, none of the instruments and agreements evidencing or governing
such Indebtedness shall be amended, modified or supplemented after the Closing
Date to change any terms of subordination, repayment or rights of conversion,
put, exchange or other rights from such terms and rights as in effect on the
Closing Date;
(b) Indebtedness owing to the Administrative Agent or any Lender in
connection with this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
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(d) purchase money Indebtedness described in Section 10.3(f) and
Indebtedness arising under Capital Leases described in Section 10.3(g), the
aggregate outstanding principal amount of all which at any time shall not exceed
$5,000,000;
(e) Indebtedness arising from Rate Hedging Obligations permitted under
Section 10.14;
(f) unsecured intercompany Indebtedness for loans and advances made by
either Borrower or any Guarantor to a Borrower or any Guarantor, provided that
such intercompany Indebtedness is evidenced by a promissory note or similar
written instrument acceptable to the Administrative Agent which provides that
such Indebtedness is subordinated to obligations, liabilities and undertakings
of the obligor thereof under the Loan Documents on terms acceptable to the
Administrative Agent;
(g) additional unsecured Indebtedness for Money Borrowed not otherwise
covered by clauses (a) through (f) above, provided that the aggregate
outstanding principal amount of all such other Indebtedness permitted under this
clause (g) shall in no event exceed $7,500,000 at any time; and
(h) existing Indebtedness assumed in connection with a Permitted
Acquisition so long as the aggregate outstanding amount of such Indebtedness
does not exceed $2,000,000.
10.5 Transfer of Assets. Sell, lease, transfer or otherwise dispose of any
assets of Parent or any Restricted Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of property that
is substantially worn, damaged, obsolete or, in the judgment of the Parent, no
longer best used or useful in its business or that of any Restricted Subsidiary,
(c) transfers of assets necessary to give effect to merger or consolidation
transactions permitted by Section 10.7, (d) the disposition of Eligible
Securities in the ordinary course of management of the investment portfolio of
the Parent and its Restricted Subsidiaries, (e) except as otherwise permitted in
this Section 10.5 sales or other dispositions of assets so long as (i) the Net
Proceeds are applied as provided in Section 2.1(d)(iii), (ii) no Default or
Event of Default exists after giving effect to such sale or other dispositions,
and (iii) the absence of such asset will not have a Material Adverse Effect and
(f) brand related assets acquired in the Jamaica Transaction or other Permitted
Acquisition which are disposed of within thirty (30) days of such Acquisition so
long as the proceeds of such disposition are used to repay Revolving Loans.
10.6 Investments and Acquisitions . Make any Acquisition or otherwise
purchase, own, invest in or otherwise acquire, directly or indirectly, any stock
or other securities, or make or permit to exist any interest whatsoever in any
other Person or permit to exist any loans or advances to any Person, except that
Parent and its Restricted Subsidiaries may:
(a) consummate Permitted Acquisitions and mergers permitted under Section
10.7 hereof;
(b) invest in Eligible Securities and the Delta Subordinated Notes;
(c) maintain investments existing as of the date hereof and as set forth in
Schedule 8.4;
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(d) accept and maintain accounts receivable arising and trade credit
granted in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with accounts of
financially troubled Persons to the extent reasonably necessary in order to
prevent or limit loss; and
(e) make and maintain investments in Subsidiaries which are Guarantors;
(f) make and maintain loans and advances between the Borrower and the
Guarantors described in Section 10.5(f);
(g) so long as no Default or Event of Default exists make loans and
advances to Subsidiaries who are not Guarantors in an aggregate principal amount
at any time outstanding not to exceed $5,000,000;
(h) so long as no Default or Event of Default shall exist either before or
after giving effect thereto make investments in Delta to be used to redeem Delta
Preferred Stock Series AA shares issued as a dividend on such Delta Preferred
Stock after October 2, 1999; and
(i) in addition to loans and advances permitted under Section 10.6(g),
loans and advances made to Restricted Subsidiaries who are not Guarantors the
proceeds of which are used to make Capital Expenditures to the extent permitted
under Section 10.2.
10.7 Merger or Consolidation . (a) Consolidate with or merge into any other
Person, or (b) permit any other Person to merge into it, or (c) sell, transfer
or lease or otherwise dispose of all or a substantial part of its assets (other
than sales permitted under Section 10.5(a), (b) and (e)); provided, however, (i)
any Restricted Subsidiary of the Parent may merge or transfer all or
substantially all of its assets into or consolidate with the Parent or any
wholly-owned Restricted Subsidiary of the Parent, and (ii) any other Person may
merge into or consolidate with the Parent or any wholly-owned Restricted
Subsidiary and any Restricted Subsidiary may merge into or consolidate with any
other Person in order to consummate an Acquisition permitted by Section 10.6(a),
provided further, that any resulting or surviving entity shall execute and
deliver such agreements and other documents, including a Facility Guaranty, and
take such other action as the Administrative Agent may require to evidence or
confirm its express assumption of the obligations and liabilities of its
predecessor entities under the Loan Documents.
10.8 Restricted Payments. Make any Restricted Payment or apply or set apart
any of their assets therefor or agree to do any of the foregoing.
10.9 Transactions with Affiliates. Other than transactions permitted under
Sections 10.6 and 10.7, enter into any transaction after the Closing Date,
including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Parent, except (a) that such Persons may render services to the Parent or
its Restricted Subsidiaries for compensation at the same rates generally paid by
Persons engaged in the same or similar businesses for the same or similar
services, (b) that the Parent or any Restricted Subsidiary may render services
to such Persons for compensation at the same rates generally charged by the
Parent or such Restricted Subsidiary and (c) in either case in the ordinary
course of business and pursuant to the reasonable requirements of the Parent's
(or any Restricted Subsidiary's) business consistent with past practice of the
Parent and its Restricted Subsidiaries and upon fair and reasonable terms no
less favorable to the Parent (or any Restricted Subsidiary) than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate.
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10.10 Compliance with ERISA, the Code and Foreign Benefit Laws. With
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would result in a
liability on the part of a Borrower or any ERISA Affiliate to the PBGC or to any
Governmental Authority; or
(b) except as set forth on Schedule 8.16, permit the present value of all
benefit liabilities under all Pension Plans to exceed the current value of the
assets of such Pension Plans allocable to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or
not waived; or
(d) fail to make any contribution or payment to any Multiemployer Plan
which the Parent or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any
prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code
for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant
to Section 4975 of the Code may be imposed; or
(f) except as set forth on Schedule 8.16, permit the establishment of any
Employee Benefit Plan providing post-retirement welfare benefits or establish or
amend any Employee Benefit Plan which establishment or amendment could result in
liability to a Borrower or any ERISA Affiliate or increase the obligation of a
Borrower or any ERISA Affiliate to a Multiemployer Plan which annual liability
or increase, individually or together with all similar liabilities and
increases, is in excess of $10,000; or
(g) fail, or permit a Borrower or any ERISA Affiliate to fail, to
establish, maintain and operate each Employee Benefit Plan in compliance in all
material respects with the provisions of ERISA, the Code, all applicable Foreign
Benefit Laws and all other applicable laws and the regulations and
interpretations thereof.
10.11 Fiscal Year. Change its Fiscal Year.
10.12 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with a merger or
consolidation permitted pursuant to Section 10.7.
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10.13 Change in Control. Cause, suffer or permit to exist or occur any
Change of Control.
10.14 Rate Hedging Obligations. Incur any Rate Hedging Obligations or enter
into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except pursuant to Swap Agreements in an aggregate notional
amount not to exceed at any time the Total Term Loan Commitment.
10.15 Negative Pledge Clauses. Enter into or cause, suffer or permit to
exist any agreement with any Person other than the Administrative Agent and the
Lenders pursuant to this Agreement or any other Loan Documents which prohibits
or limits the ability of any of the Parent or any Restricted Subsidiary to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, provided that the
Parent and any Restricted Subsidiary may enter into such an agreement in
connection with, and that applies only to, property subject to any Lien
permitted by this Agreement and not released after the date hereof, when such
prohibition or limitation is by its terms effective only against the assets
subject to such Lien.
10.16 Prepayments, Etc. of Indebtedness.
(a) Prepay, redeem, purchase, defease or otherwise satisfy prior to the
scheduled maturity thereof in any manner, or make any payment in violation of
any subordination terms of, any Indebtedness (other than the Obligations); or
(b) amend, modify or change in any manner any term or condition of any
Indebtedness described in Section 10.4(a) or any lease so that the terms and
conditions thereof are less favorable to the Administrative Agent and the
Lenders than the terms of such Indebtedness or leases as of the Closing Date.
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ARTICLE XI
Events of Default and Acceleration
11.1 Events of Default. If any one or more of the following events (herein
called "Events of Default") shall occur for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan, Reimbursement Obligation or other Obligation, when and as
the same shall be due and payable whether pursuant to any provision of Article
II or Article III or Article IV, at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment of any amount
of interest on any Loan, Reimbursement Obligation or other Obligation or of any
fees or other amounts payable to any of the Lenders or the Administrative Agent
on the date on which the same shall be due and payable and such default
continues unremedied for three (3) days; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Sections 9.8, 9.12, 9.13, 9.20 or Article X;
(d) if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in this
Agreement or the Notes (other than as described in clauses (a), (b) or (c)
above) and such default shall continue for thirty (30) or more days after the
earlier of receipt of notice of such default by the Authorized Representative
from the Administrative Agent or an officer of a Borrower becomes aware of such
default, or if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in any of the
other Loan Documents (beyond any applicable grace period, if any, contained
therein) or in any instrument or document evidencing or creating any obligation,
guaranty, or Lien in favor of the Administrative Agent or any of the Lenders or
delivered to the Administrative Agent or any of the Lenders in connection with
or pursuant to this Agreement or any of the Obligations, or if any Loan Document
ceases to be in full force and effect (other than as expressly provided for
hereunder or thereunder or with the express written consent of the
Administrative Agent), or if without the written consent of the Lenders, this
Agreement or any other Loan Document shall be disaffirmed or shall terminate, be
terminable or be terminated or become void or unenforceable for any reason
whatsoever (other than as expressly provided for hereunder or thereunder or with
the express written consent of the Administrative Agent); or
(e) if there shall occur (i) a default, which is not waived, in the payment
of any principal, interest, premium or other amount with respect to any
Indebtedness (other than the Loans and other Obligations) of the Parent or any
Restricted Subsidiary in an amount not less than $1,000,000 in the aggregate
outstanding, or (ii) a default, which is not waived, in the performance,
observance or fulfillment of any term or covenant contained in any agreement or
instrument under or pursuant to which any such Indebtedness may have been
issued, created, assumed, guaranteed or secured by the Parent or any Restricted
Subsidiary, or (iii) any other event of default as specified in any agreement or
instrument under or pursuant to which any such Indebtedness may have been
issued, created, assumed, guaranteed or secured by the Parent or any Restricted
Subsidiary; and such default or event of default shall continue for more than
the period of grace, if any, therein specified, or such default or event of
default shall permit the holder of any such Indebtedness (or any agent or
trustee acting on behalf of one or more holders) to accelerate the maturity
thereof; or
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(f) if any representation, warranty or other statement of fact contained in
any Loan Document or in any writing, certificate, report or statement at any
time furnished to the Administrative Agent or any Lender by or on behalf of a
Borrower or any other Credit Party pursuant to or in connection with any Loan
Document, or otherwise, shall be false or misleading in any material respect
when given; or
(g) if a Borrower or any Restricted Subsidiary or other Credit Party shall
be unable to pay its debts generally as they become due; file a petition to take
advantage of any insolvency statute; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any substantial part of
its property; file a petition or answer seeking liquidation, reorganization or
arrangement or similar relief under the federal bankruptcy laws or any other
applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator of a
Borrower or any Restricted Subsidiary or other Credit Party or of the whole or
any substantial part of its properties and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days, or approve a
petition filed against a Borrower or any Restricted Subsidiary seeking
liquidation, reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any state, which petition is not dismissed within sixty (60) days; or
if, under the provisions of any other law for the relief or aid of debtors, a
court of competent jurisdiction shall assume custody or control of a Borrower or
any Restricted Subsidiary or other Credit Party or of the whole or any
substantial part of its properties, which control is not relinquished within
sixty (60) days; or if there is commenced against a Borrower or any Restricted
Subsidiary or other Credit Party any proceeding or petition seeking
reorganization, arrangement or similar relief under the federal bankruptcy laws
or any other applicable law or statute of the United States of America or any
state which proceeding or petition remains undismissed for a period of sixty
(60) days; or if a Borrower or any Restricted Subsidiary or other Credit Party
takes any action to indicate its consent to or approval of any such proceeding
or petition; or
(i) if (i) one or more judgments or orders where the amount not covered by
insurance (or the amount as to which the insurer denies liability) is in excess
of $250,000 is rendered against a Borrower or any Restricted Subsidiary, or (ii)
there is any attachment, injunction or execution against any of a Borrower's or
Restricted Subsidiaries' properties for any amount in excess of $250,000 in the
aggregate; and such judgment, attachment, injunction or execution remains
unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty
(30) days; or
(j) if a Borrower or any Restricted Subsidiary shall, other than in the
ordinary course of business (as determined by past practices), suspend all or
any part of its operations material to the conduct of the business of a Borrower
or such Restricted Subsidiary for a period of more than 60 days; or
(k) if a Borrower shall breach any of the material terms or conditions of
any agreement under which any Rate Hedging Obligations permitted hereby is
created and such breach shall continue beyond any grace period, if any, relating
thereto pursuant to the terms of such agreement, or if a Borrower shall
disaffirm or seek to disaffirm any such agreement or any of its obligations
thereunder; or
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(l) if there shall occur and not be waived an Event of Default as defined
in any of the other Loan Documents; or
(m) if at any time there shall be a termination or suspension of Beverage
Agreements which individually or collectively account for or give rise to five
percent (5%) or more of the gross revenues of the Parent and its Restricted
Subsidiaries and the Borrower shall not have demonstrated that it or its
Subsidiaries have entered into additional Beverage Agreements and as a result
thereof the net loss of revenues will be less than 5% of gross revenues;
(n) if at the Closing Date and at all times thereafter the Borrowers and
Delta are not parties to the Master Bottling Agreements;
(o) if Delta shall fail to make cash interest payments when due on the
Delta Subordinated Notes when such payment is not otherwise prohibited by the
terms of any financing agreement existing as of the date hereof, to which Delta
is a party; or
(p) if at any time after December 30, 1999 any Person other than the Parent
shall be the holder of any of the Delta Subordinated Notes.
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken: (i) the
Administrative Agent may, and at the direction of the Required Lenders
shall, declare any obligation of the Lenders and the Issuing Bank to make
further Revolving Loans and Swing Line Loans or to issue additional Letters
of Credit terminated, whereupon the obligation of each Lender to make
further Revolving Loans, of Bank of America to make further Swing Line
Loans, and of the Issuing Bank to issue additional Letters of Credit,
hereunder shall terminate immediately, and (ii) the Administrative Agent
shall at the direction of the Required Lenders, at their option, declare by
notice to the Borrowers any or all of the Obligations to be immediately due
and payable, and the same, including all interest accrued thereon and all
other obligations of the Borrowers to the Administrative Agent and the
Lenders, shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any kind, all of
which are hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary notwithstanding;
provided, however, that notwithstanding the above, if there shall occur an
Event of Default under clause (g) or (h) above, then the obligation of the
Lenders to make Revolving Loans, of Bank of America to make Swing Line
Loans, and of the Issuing Bank to issue Letters of Credit hereunder shall
automatically terminate and any and all of the Obligations shall be
immediately due and payable without the necessity of any action by the
Administrative Agent or the Required Lenders or notice to the
Administrative Agent or the Lenders;
(B) The Borrowers shall, upon demand of the Administrative Agent or
the Required Lenders, deposit cash with the Administrative Agent in an
amount equal to the amount of any Letter of Credit Outstandings, as
collateral security for the repayment of any future drawings or payments
under such Letters of Credit, and such amounts shall be held by the
Administrative Agent pursuant to the terms of the LC Account Agreement; and
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(C) the Administrative Agent and each of the Lenders shall have all of
the rights and remedies available under the Loan Documents or under any
applicable law.
11.2 Administrative Agent to Act. In case any one or more Events of Default
shall occur and not have been waived, the Administrative Agent may, and at the
direction of the Required Lenders shall, proceed to protect and enforce their
rights or remedies either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, agreement or other
provision contained herein or in any other Loan Document, or to enforce the
payment of the Obligations or any other legal or equitable right or remedy.
11.3 Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Administrative Agent is intended to be exclusive of any other
rights or remedies contained herein or in any other Loan Document, and every
such right or remedy shall be cumulative and shall be in addition to every other
such right or remedy contained herein and therein or now or hereafter existing
at law or in equity or by statute, or otherwise.
11.4 No Waiver. No course of dealing between the Borrowers and any Lender
or the Administrative Agent or any failure or delay on the part of any Lender or
the Administrative Agent in exercising any rights or remedies under any Loan
Document or otherwise available to it shall operate as a waiver of any rights or
remedies and no single or partial exercise of any rights or remedies shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder or of the same right or remedy on a future occasion.
11.5 Allocation of Proceeds. If an Event of Default has occurred and not
been waived, and the maturity of the Notes has been accelerated pursuant to
Article XI hereof, all payments received by the Administrative Agent hereunder,
in respect of any principal of or interest on the Obligations or any other
amounts payable by the Borrowers hereunder, shall be applied by the
Administrative Agent in the following order:
(a) the reasonable expenses incurred in connection with retaking, holding,
preserving, processing, maintaining or preparing for sale, lease or other
disposition of, any Collateral, including reasonable attorney's fees and legal
expenses pertaining thereto;
(b) amounts due to the Lenders and the Issuing Bank pursuant to Sections
4.6(a), 4.6(b), 4.6(c), 4.6(d) and 13.5;
(c) amounts due to the Administrative Agent pursuant to Section 4.6(e);
(d) payments of interest on Loans, Swing Line Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders(with amounts
payable in respect of Swing Line Outstandings being included in such calculation
and paid to Bank of America);
(e) payments of principal of Loans, Swing Line Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders (with amounts
payable in respect of Swing Line Outstandings being included in such calculation
and paid to Bank of America);
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(f) payments of cash amounts to the Administrative Agent in respect of
outstanding Letters of Credit pursuant to Section 11.1(B);
(g) amounts due to the Issuing Bank, the Administrative Agent and the
Lenders pursuant to Sections 3.2(h), 9.16 and 13.9;
(h) payments of all other amounts due under any of the Loan Documents, if
any, to be applied for the ratable benefit of the Lenders;
(i) amounts due to any of the Lenders or their affiliates in respect of
Obligations consisting of liabilities under any Swap Agreement with any of the
Lenders or their affiliates on a pro rata basis according to the amounts owed;
and
(j) any surplus remaining after application as provided for herein, to the
Borrower or otherwise as may be required by applicable law.
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ARTICLE XII
The Administrative Agent
12.1 Appointment, Powers, and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used in
this sentence and in Section 12.5 and the first sentence of Section 12.6 hereof
shall include its affiliates and its own and its affiliates' officers,
directors, employees, and agents):
(a) shall not have any duties or responsibilities except those expressly
set forth in this Agreement and shall not be a trustee or fiduciary for any
Lender;
(b) shall not be responsible to the Lenders for any recital, statement,
representation, or warranty (whether written or oral) made in or in connection
with any Loan Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Loan Document, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
any Loan Document, or any other document referred to or provided for therein or
for any failure by any Credit Party or any other Person to perform any of its
obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain, inquire
into, or verify the performance or observance of any covenants or agreements by
any Credit Party or the satisfaction of any condition or to inspect the property
(including the books and records) of any Credit Party or any of its Subsidiaries
or affiliates;
(d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to be taken by
it under or in connection with any Loan Document, except for its own gross
negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
12.2 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice, instrument, writing, or other
communication (including, without limitation, any thereof by telephone or
telefacsimile) believed by it to be genuine and correct and to have been signed,
sent or made by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel for any Credit Party),
independent accountants, and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until the Administrative Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 13.1 hereof. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; provided, however, that the Administrative Agent
shall not be required to take any action that exposes the Administrative Agent
to personal liability or that is contrary to any Loan Document or applicable law
or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
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12.3 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of Default unless
the Administrative Agent has received written notice from a Lender or the
Borrowers specifying such Default or Event of Default and stating that such
notice is a "Notice of Default." In the event that the Administrative Agent
receives such a notice of the occurrence of a Default or Event of Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 12.2 hereof) take such action
with respect to such Default or Event of Default as shall reasonably be directed
by the Required Lenders, provided that, unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interest of the Lenders.
12.4 Rights as Lender. With respect to its Revolving Credit Commitment and
Term Loan Commitment and the Loans made by it and Letters of Credit issued by
it, Bank of America (and any successor acting as Administrative Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. Bank of America (and any successor acting as Administrative Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or affiliates as if it were not acting
as Administrative Agent, and Bank of America (and any successor acting as
Administrative Agent) and its affiliates may accept fees and other consideration
from any Credit Party or any of its Subsidiaries or affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to the Lenders.
12.5 Indemnification. The Lenders agree to indemnify the Administrative
Agent (to the extent not reimbursed under Section 13.9 hereof, but without
limiting the obligations of the Borrowers under such Section) ratably in
accordance with their respective Revolving Credit Commitments and Term Loan
Commitments, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys'
fees), or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Administrative Agent (including by any
Lender) in any way relating to or arising out of any Loan Document or the
transactions contemplated thereby or any action taken or omitted by the
Administrative Agent under any Loan Document; provided that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Person to be indemnified. Without
limitation of the foregoing, each Lender agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any costs or expenses
payable by the Borrowers under Section 13.5, to the extent that the
Administrative Agent is not promptly reimbursed for such costs and expenses by
the Borrowers. The agreements contained in this Section 12.5 shall survive
payment in full of the Loans and all other amounts payable under this Agreement.
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12.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
agrees that it has, independently and without reliance on the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Credit Parties and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under the Loan Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or affiliates that may come into the
possession of the Administrative Agent or any of its affiliates.
12.7 Resignation of Administrative Agent. The Administrative Agent may
resign at any time by giving notice thereof to the Lenders and the Borrowers.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent's
giving of notice of resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall be a
commercial bank organized under the laws of the United States of America having
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor, such successor
shall thereupon succeed to and become vested with all the rights, powers,
discretion, privileges, and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article XII shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
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ARTICLE XIII
Miscellaneous
13.1 Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Notes, its Revolving Credit
Commitment, its Term Loan A Commitment and its Term Loan B Commitment);
provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender, an
Affiliate of a Lender, or Approved Fund or an assignment of all of a Lender's
rights and obligations under this Agreement, any such partial assignment shall
be in an amount at least equal to $5,000,000 or an integral multiple of
$1,000,000 (or if less, the entire remaining amount of such Lender's Revolving
Credit Commitment, Term Loan A Commitment or Term Loan B Commitment) in excess
thereof;
(iii) each such assignment by a Lender shall be of a constant, and not
varying, percentage of all of its rights and obligations under the Revolving
Credit Facility, Letter of Credit Facility, Term Loan Facilities and its
Revolving Note and Term Notes; and
(iv) the parties to such assignment shall execute and deliver to the
Administrative Agent for its acceptance an Assignment and Acceptance in the form
of Exhibit B hereto, together with any Note subject to such assignment and a
processing fee of $3,500.
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Upon execution, delivery, and acceptance of such Assignment and Acceptance,
the assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender
hereunder and the assigning Lender shall, to the extent of such assignment,
relinquish its rights and be released from its obligations under this
Agreement. Upon the consummation of any assignment pursuant to this
Section, the assignor, the Administrative Agent and the Borrowers shall
make appropriate arrangements so that, if required, new Notes are issued to
the assignor and the assignee. If the assignee is not incorporated under
the laws of the United States of America or a state thereof, it shall
deliver to the Borrowers and the Administrative Agent certification as to
exemption from deduction or withholding of Taxes in accordance with Section
6.6.
(b) The Administrative Agent shall maintain at its address referred to in
Section 13.2 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lenders and the Revolving Credit Commitments, Term Loan Commitments of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
parties thereto.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Commitments or its Loans);
provided, however, that (i) such Lender*s obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participant
shall be entitled to the benefit of the yield protection provisions contained in
Article VI and the right of set-off contained in Section 13.3, and (iv) the
Borrowers shall continue to deal solely and directly with such Lender in
connection with such Lender*s rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrowers relating to its Loans and its Notes and to approve any amendment,
modification, or waiver of any provision of this Agreement (other than
amendments, modifications, or waivers decreasing the amount of principal of or
the rate at which interest is payable on such Loans or Notes, extending any
scheduled principal payment date or date fixed for the payment of interest on
such Loans or Notes, or extending or increasing its Commitment).
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
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(f) Any Lender may furnish any information concerning the Borrowers or any
of their Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants.
(g)ab Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted assigns of
such party and all covenants, provisions and agreements by or on behalf of the
Borrowers which are contained in the Loan Documents shall inure to the benefit
of the successors and permitted assigns of the Administrative Agent, the
Lenders, or any of them. The Borrowers may not assign or otherwise transfer to
any other Person any right, power, benefit, or privilege (or any interest
therein) conferred hereunder or under any of the other Loan Documents, or
delegate (by assumption or otherwise) to any other Person any duty, obligation,
or liability arising hereunder or under any of the other Loan Documents, and any
such purported assignment, delegation or other transfer shall be void.
13.2 Notices. Any notice shall be conclusively deemed to have been received
by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of transmission to such party, in the case
of notice by telefacsimile (where the proper transmission of such notice is
either acknowledged by the recipient or electronically confirmed by the
transmitting device), or (iii) on the fifth Business Day after the day on which
mailed to such party, if sent prepaid by certified or registered mail, return
receipt requested, in each case delivered, transmitted or mailed, as the case
may be, to the address or telefacsimile number, as appropriate, set forth below
or such other address or number as such party shall specify by notice hereunder:
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(a) if to the Borrowers:
PepsiAmericas, Inc.
3880 Dain Rauscher Plaza
Minneapolis, Minnesota 55402
Attn: John F. Bierbaum
Telephone: (612) 661-3830
Telefacsimile: (612) 661-3825
(b) if to the Administrative Agent:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-6483
Telefacsimile: (704) 409-0014
with a copy to:
Bank of America, N.A.
600 Peachtree Street, N.E., 9th Floor
Atlanta, Georgia 30308-2213
Attention: Kathryn W. Robinson
Telephone: (404) 607-5887
Telefacsimile: (404) 607-6467
(c) if to the Lenders:
At the addresses set forth on the signature pages hereof and on the
signature page of each Assignment and Acceptance;
(d) if to any other Credit Party, at the address set forth on the signature
page of the Facility Guaranty or Security Instrument executed by such Credit
Party, as the case may be.
13.3 Right of Set-off; Adjustments.
(a) Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its affiliates) to or for the credit or the account of the Borrowers against
any and all of the obligations of the Borrowers now or hereafter existing under
this Agreement and the Notes held by such Lender, irrespective of whether such
Lender shall have made any demand under this Agreement or such Notes and
although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrowers after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
Section 13.3 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender may have.
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(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrowers agree that any Lender so
purchasing a participation from a Lender pursuant to this Section 13.3 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrowers in the amount of such
participation.
13.4 Survival. All covenants, agreements, representations and warranties
made herein shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit and the execution and delivery to the Lenders
of this Agreement and the Notes and shall continue in full force and effect so
long as any of Obligations remain outstanding or any Lender has any Commitment
hereunder or the Borrowers have continuing obligations hereunder unless
otherwise provided herein.
13.5 Expenses. The Borrowers jointly and severally agree to pay on demand
all costs and expenses of the Administrative Agent in connection with the
syndication, preparation, execution, delivery, administration, modification, and
amendment of this Agreement, the other Loan Documents, and the other documents
to be delivered hereunder, including, without limitation, the reasonable fees
and expenses of counsel for the Administrative Agent (including the cost of
internal counsel) with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities under the Loan
Documents. The Borrowers further agree to pay on demand all costs and expenses
of the Administrative Agent and the Lenders, if any (including, without
limitation, reasonable attorneys' fees and expenses and the cost of internal
counsel), in connection with the enforcement (whether through negotiations,
legal proceedings, or otherwise) of the Loan Documents and the other documents
to be delivered hereunder.
13.6 Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrowers or other applicable Credit Party
party to such Loan Document and either the Required Lenders or (as to Loan
Documents other than the Credit Agreement) the Administrative Agent on behalf of
the Required Lenders (and, if Article XII or the rights or duties of the
Administrative Agent are affected thereby, by the Administrative Agent);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) increase the Commitments of the Lenders, the Total Revolving Credit
Commitment or the Total Term Loan Commitment (ii) reduce the principal of or
rate of interest on any Loan or any fees or other amounts payable hereunder,
(iii) postpone any date fixed for the payment of any scheduled installment of
principal of or interest on any Loan or any fees or other amounts payable
hereunder or for termination of any Revolving Credit Commitment or Term Loan
Commitments, or (iv) change the percentage of the Revolving Credit Commitment or
either of the Term Loan Commitments or of the unpaid principal amount of the
Notes, or the number of Lenders, which shall be required for the Lenders or any
of them to take any action under this Section 13.6 or any other provision of
this Agreement or (v) release all or substantially all of the Guarantors or all
or substantially all of the Collateral except as expressly contemplated in the
Loan Documents; and provided, further, that no such amendment or waiver that
affects the rights, privileges or obligations of Bank of America as provider of
Swing Line Loans, shall be effective unless signed in writing by Bank of America
or that affects the rights, privileges or obligations of the Issuing Bank as
issuer of Letters of Credit, shall be effective unless signed in writing by the
Issuing Bank.
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No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Administrative Agent's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any Default or Event of Default.
13.7 Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such fully-executed
counterpart. Signatures on communications and other documents may be transmitted
by facsimile only with the consent of the Agent in its sole and absolute
discretion in each instance. The effectiveness of any such signatures accepted
by the Agent shall, subject to applicable law, have the same force and effect as
manual signatures and shall be binding on all parties. The Agent may also
require that any such signature be confirmed by a manually-signed hardcopy
thereof. Each party hereto hereby adopts as an original executed signature page
each signature page hereafter furnished by such party to the Agent (or an agent
of the Agent) bearing (with the consent of the Agent) a facsimile signature by
or on behalf of such party. Nothing contained in this Section shall limit the
provisions of Section 12.2.
13.8 Termination. The termination of this Agreement shall not affect any
rights of the Borrowers, the Lenders or the Administrative Agent or any
obligation of the Borrowers, the Lenders or the Administrative Agent, arising
prior to the effective date of such termination, and the provisions hereof shall
continue to be fully operative until all transactions entered into or rights
created or obligations incurred prior to such termination have been fully
disposed of, concluded or liquidated and the Obligations arising prior to or
after such termination have been irrevocably paid in full. The rights granted to
the Administrative Agent for the benefit of the Lenders under the Loan Documents
shall continue in full force and effect, notwithstanding the termination of this
Agreement, until all of the Obligations have been paid in full after the
termination hereof (other than Obligations in the nature of continuing
indemnities or expense reimbursement obligations not yet due and payable, which
shall continue) or the Borrowers have furnished the Lenders and the
Administrative Agent with an indemnification satisfactory to the Administrative
Agent and each Lender with respect thereto. Notwithstanding the foregoing, if
after receipt of any payment of all or any part of the Obligations, any Lender
is for any reason compelled to surrender such payment to any Person because such
payment is determined to be void or voidable as a preference, impermissible
setoff, a diversion of trust funds or for any other reason, this Agreement shall
continue in full force and the Borrowers shall be liable to, and shall indemnify
and hold the Administrative Agent or such Lender harmless for, the amount of
such payment surrendered until the Administrative Agent or such Lender shall
have been finally and irrevocably paid in full. The provisions of the foregoing
sentence shall be and remain effective notwithstanding any contrary action which
may have been taken by the Administrative Agent or the Lenders in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to the Administrative Agent or the Lenders' rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
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13.9 Indemnification; Limitation of Liability.
(a) The Borrowers, jointly and severally, agree to indemnify and hold
harmless the Administrative Agent and each Lender and each of their affiliates
and their respective officers, directors, employees, agents, and advisors (each,
an "Indemnified Party") from and against any and all claims, damages, losses,
liabilities, costs, and expenses (including, without limitation, reasonable
attorneys' fees) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation, or proceeding or preparation of defense in connection therewith) the
Loan Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 13.9 applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by either Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrowers agree that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to it, any of its Subsidiaries, any Guarantor, or
any security holders or creditors thereof arising out of, related to or in
connection with the transactions contemplated herein, except to the extent that
such liability is found in a final non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct. The Borrowers agree not to assert any
claim against the Administrative Agent, any Lender, any of their affiliates, or
any of their respective directors, officers, employees, attorneys, agents, and
advisers, on any theory of liability, for special, indirect, consequential, or
punitive damages arising out of or otherwise relating to the Loan Documents, any
of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Loans.
(b) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 13.9 shall survive the payment in full of the Loans and all
other amounts payable under this Agreement.
13.10 Severability. If any provision of this Agreement or the other Loan
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.
13.11 Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto (except that those
provisions (if any) which by the express terms of the commitment letter dated as
of July 14, 1999, executed by Bank of America and BAS and accepted by the
Borrowers, survive the closing of the Revolving Credit Facility, Letter of
Credit Facility and Term Loan Facilities, shall survive and continue in effect).
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13.12 Agreement Controls . In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
13.13 Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged under any of the Notes, including all charges or
fees in connection therewith deemed in the nature of interest under applicable
law shall not exceed the Highest Lawful Rate (as such term is defined below). If
the rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate (as defined below),
the outstanding amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect. In
addition, if when the Loans made hereunder are repaid in full the total interest
due hereunder (taking into account the increase provided for above) is less than
the total amount of interest which would have been due hereunder if the stated
rates of interest set forth in this Agreement had at all times been in effect,
then to the extent permitted by law, the Borrowers shall pay to the
Administrative Agent an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrowers to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be canceled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrowers.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
13.14 Payments. All principal, interest, and other amounts to be paid by
the Borrowers under this Agreement and the other Loan Documents shall be paid to
the Administrative Agent at the Principal Office in Dollars and in immediately
available funds, without setoff, recoupment, deduction or counterclaim. Subject
to the definition of "Interest Period" herein, whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of interest and fees, as applicable, and as the case may be.
13.15 Confidentiality. The Agent and each Lender (each, a "Lending Party")
agrees to keep confidential any information furnished or made available to it by
the Borrowers pursuant to this Agreement that is marked confidential; provided
that nothing herein shall prevent any Lending Party from disclosing such
information (a) to any other Lending Party or any affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or affiliate of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party prohibited by this Agreement or through disclosure by any
other Person whom the Agent or such Lender has reason to believe disclosed such
information in violation of or contrary to the confidentiality requirements or
policies of the Borrowers or any Subsidiaries, (g) in connection with any
litigation to which such Lending Party or any of its affiliates may be a party,
(h) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
96
<PAGE>
13.16 Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE SECURITY
INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY THE LAWS OF
ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS EXECUTED, AND TO
BE FULLY PERFORMED, IN SUCH STATE.
(b) THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY AGREE AND CONSENT THAT
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE OF NORTH CAROLINA, UNITED
STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY
BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER
HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL
SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY
SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWERS PROVIDED IN SECTION 13.2, OR BY ANY
OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE
STATE OF NORTH CAROLINA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE THE
ADMINISTRATIVE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE EITHER BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS
MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY
SUCH JURISDICTION, EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY
BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER
APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH, THE BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY AGREE,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY
IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING.
(f) EACH BORROWER HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT
ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS
AN INCONVENIENT FORUM.
[Signatures on following pages]
97
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.
<TABLE>
<S> <C>
PEPSIAMERICAS, INC.
WITNESS:
/s/ Sheila E. Foley By:/s/ John F. Bierbaum
- - -------------------------------- -----------------------------------------
Name: John F. Bierbaum
---------------------------------------
/s/ Melissa Tveit Title: Vice President and Chief Financial Officer
- - -------------------------------- -------------------------------------------
</TABLE>
DAKBEV, LLC
WITNESS:
/s/ Sheila E. Foley By: /s/ John F. Bierbaum
- - ------------------------------- ----------------------------------------
Name: John F. Bierbaum
/s/ Melissa Tveit Title: Vice President
- - ------------------------------- ------------------------------------
Signature Page 1 of 10
<PAGE>
BANK OF AMERICA, N.A.,
as Administrative Agent for the Lenders
By: /s/ Kathryn W. Robinson
Name: Kathryn W. Robinson
Title: Managing Director
BANK OF AMERICA, N.A., as Lender
By: /s/ Kathryn W. Robinson
Name: Kathryn W. Robinson
Title: Managing Director
Lending Office for Base Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone:(704) 388-6483
Telefacsimile:(704) 409-0014
Wire Transfer Instructions:
Bank of America, N.A.
ABA# 053000196
Account No.: 1366212250600
Reference: PepsiAmericas, Inc.
Attention: Agency Services
Lending Office for Eurodollar Rate Loans:
Bank of America, N.A.
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone:(704) 388-6483
Telefacsimile:(704) 409-0014
Wire Transfer Instructions:
Bank of America, N.A.
ABA# 053000196
Account No.: 1366212250600
Reference: PepsiAmericas, Inc.
Attention: Agency Services
FIRST UNION NATIONAL BANK,
as Documentation Agent and as a Lender
Signature Page 2 of 10
<PAGE>
By: /s/ Frederick W. Price
Name: Frederick W. Price
Title: Senior Vice President
Lending Office:
301 S. College Street, TW-5
Charlotte, North Carolina 28288
Wire Transfer Instructions:
First Union National Bank
Charlotte, North Carolina
ABA #053000219
Account #1459168105013
Account Name: Consumer Products
Attention: Lisa VanNote
Reference: PepsiAmericas, Inc.
Signature Page 3 of 10
<PAGE>
NORWEST BANK MINNESOTA, N.A.,
as Managing Agent and as a Lender
By: /s/ Scott W. Kemper
Name: Scott W. Kemper
Title: Vice President
Lending Office:
6th & Marquette
MAC: N9305-051
Minneapolis, Minnesota 55479
Wire Transfer Instructions:
Norwest Bank Minnesota, N.A.
ABA #091000019
Account #0000840165
CLO Clearing Account
Reference: PepsiAmericas, Inc.
Signature Page 4 of 10
<PAGE>
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ William J. Harter
Name: William J. Harter
Title: Senior Vice President
Lending Office:
165 Madison Avenue, MO-10
Memphis, Tennessee 38103
Wire Transfer Instructions:
First Tennessee Bank
Memphis, Tennessee
ABA #084000026
Account #114174 0008
Account Name: Bank Secrecy Account
Attention: Georgiana Sheets, Ext. 4260
Reference: PepsiAmericas, Inc.
Signature Page 5 of 10
<PAGE>
BANCO POPULAR DE PUERTO RICO
By: /s/ Raul H. Cacho
Name: Raul H. Cacho
Title: Vice President
By: /s/ Wilfredo Fuertet
Name: Wilfredo Fuertet
Title: Vice President
Lending Office:
Popular Center Building, Floor #6
209 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Wire Transfer Instructions:
Banco Popular de Puerto Rico
New York, New York
ABA #026008811
Account Name: PepsiAmericas, Inc.
Attention: Margarita Tobar
Signature Page 6 of 10
<PAGE>
BANK AUSTRIA CREDITANSTALT CORPORATE
FINANCE, INC.
By:/s/ Richard W. Varalla
Name: Richard W. Varalla
Title: Associate
By: /s/ John G. Taylor
Name: John G. Taylor
Title: Vice President
Lending Office:
Two Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
Wire Transfer Instructions:
Chase Manhattan Bank
New York, New York
ABA #021000021
Account: Bank Austria AG
Account #400921944
Reference: PepsiAmericas, Inc.
Signature Page 7 of 10
<PAGE>
CoBANK, ACB
By: /s/ Jim Stutzman
Name: Jim Stutzman
Title: Vice President
Lending Office:
5500 S. Quebec Street
Englewood, Colorado 80111
Wire Transfer Instructions:
CoBank, ACB Englewood,
Colorado ABA #307088754
Reference: PepsiAmericas, Inc.
Signature Page 8 of 10
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Tom Gurbach
Name: Tom Gurbach
Title: Vice President
Lending Office:
101 S. Fifth Street
Locator #T-08J
Louisville, Kentucky 40202
Wire Transfer Instructions:
National City Bank of Kentucky
ABA #083 0000 56
Attention: Deana Trotter (502-581-5551)
Commercial Loan Operations
Account #__________
Reference: PepsiAmericas, Inc.
Signature Page 9 of 10
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Michael S. Harter
Name: Michael S. Harter
Title: Vice President
Lending Office:
601 Second Avenue, South
Minneapolis, Minneasota 55402-4302
Wire Transfer Instructions:
U.S. Bank National Association
Minneapolis, Minnesota
ABA #091000022
Account #30000472160600
Attention: Commercial Loan Service Center
Reference: PepsiAmericas, Inc.
Signature Page 10 of 10
<PAGE>
EXHIBIT A
Applicable Commitment Percentages
<PAGE>
<TABLE>
<CAPTION>
Revolving Applicable
Credit Term Loan A Term Loan B Commitment
Lender Commitment Commitment Commitment Percentage
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bank of America, N.A. $17,027,027.03 $ 5,675,675.68 $12,297,297.30 18.918918919%
First Union National Bank 14,594,594.59 4,864,864.86 10,540,540.54 16.216216216%
Norwest Bank Minnesota, N.A. 14,594,594.59 4,864,864.86 10,540,540.54 16.216216216%
First Tennessee Bank
National Association 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
Banco Popular De Puerto Rico 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
Bank Austria Creditanstalt
Corporate Finance, Inc. 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
CoBank, ACB 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
National City Bank of Kentucky 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
U.S. Bank National Association 7,297,297.30 2,432,432.43 5,270,270.27 8.108108108%
-------------- -------------- ------------- ------------
$90,000,000.00 $30,000,000.00 $65,000,000.00 100%
</TABLE>
A-1
<PAGE>
EXHIBIT B
Form of Assignment and Acceptance
Reference is made to the Credit Agreement dated as of October 15, 1999 (the
"Credit Agreement") among PepsiAmericas, Inc., a Delaware corporation and
DakBev, LLC, a limited liability company organized under the laws of Delaware
(collectively, the Borrowers"), the Lenders (as defined in the Credit Agreement)
and Bank of America, N.A., as agent for the Lenders (the "Administrative
Agent"). Terms defined in the Credit Agreement are used herein with the same
meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, WITHOUT RECOURSE
and without representation or warranty except as expressly set forth herein, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement and the
other Loan Documents as of the date hereof equal to the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement and the other Loan Documents.* After giving effect to such sale
and assignment, the Assignee's Commitment and the amount of the Loans owing to
the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Credit Party or
the performance or observance by any Credit Party of any of its obligations
under the Loan Documents or any other instrument or document furnished pursuant
thereto; and (iv) attaches the Notes held by the Assignor and requests that the
Administrative Agent exchange such Notes for new Notes payable to the order of
the Assignee in an amount equal to the Commitment assumed by the Assignee
pursuant hereto and to the Assignor in an amount equal to the Commitment
retained by the Assignor, if any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 9.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under the Credit Agreement
as are delegated to the Administrative Agent by the terms thereof, together with
such powers and discretion as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a
Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms
required under Section 6.6.
________________
* In the case of Bank of America as Assignor, excluding any rights,
benefits or duties as provider of Swing Line Loans or as Issuing Bank.
B-1
<PAGE>
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance and recording by the
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Administrative
Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and
after the Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
B-2
<PAGE>
Schedule 1
<PAGE>
<TABLE>
<CAPTION>
Revolving Term Term
Credit Loan A Loan B
Facility Facility Facility
<S> <C> <C> <C>
Percentage interest assigned _____% _____% _____%
Assignee's Commitment $__________ $__________ $__________
Aggregate outstanding principal
amount of Loans assigned: $__________ $__________ $___________
Principal amount of Note
payable to Assignee: $__________ $__________ $___________
Principal amount of Note
payable to Assignor: $__________ $__________ $___________
Effective Date (if other than
date of acceptance by Administrative Agent) *________, ___ *________, ___ *________, ___
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By:_________________________________
Title:
Dated: __________, ____
[NAME OF ASSIGNEE], as Assignee
By:_________________________________
Title:
Domestic Lending Office:
Eurodollar Lending Office:
- - -----------------------
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Administrative Agent.
B-3
<PAGE>
Accepted [and Approved] **
this ___ day of ___________, ____
BANK OF AMERICA, N.A., as Administrative Agent
By:__________________________________
Title:
[Approved this ____ day
of ____________, ____
PEPSIAMERICAS, INC.
By: _________________________________]**
Title:
DAKBEV, LLC
By: _________________________________]**
Title:
- - -----------------------
** Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee."
B-4
<PAGE>
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized Representative
Reference is hereby made to the Credit Agreement dated as of October 15,
1999 (the "Agreement") among PepsiAmericas, Inc., a Delaware corporation and
DakBev, LLC, a limited liability company organized under the laws of Delaware
(collectively, the "Borrowers"), the Lenders (as defined in the Agreement), and
Bank of America, N.A., as agent for the Lenders ("Administrative Agent").
Capitalized terms used but not defined herein shall have the respective meanings
therefor set forth in the Agreement.
The Borrowers hereby nominate, constitute and appoint each individual named
below as an Authorized Representative under the Loan Documents, and hereby
represents and warrants that (i) set forth opposite each such individual's name
is a true and correct statement of such individual's office (to which such
individual has been duly elected or appointed), a genuine specimen signature of
such individual and an address for the giving of notice, and (ii) each such
individual has been duly authorized by the Borrowers to act as Authorized
Representative under the Loan Documents:
Name and Address Office Specimen Signature
- - ----------------------------- --------------------- --------------------
- - ----------------------------- --------------------- --------------------
- - -----------------------------
- - -----------------------------
- - ----------------------------- --------------------- --------------------
- - ----------------------------- ---------------------
- - -----------------------------
Borrower hereby revokes (effective upon receipt hereof by the Administrative
Agent) the prior appointment of ________________ as an Authorized
Representative.
This the ___ day of __________________, ____.
PEPSIAMERICAS, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
DAKBEV, LLC
By:_______________________________________
Name:_____________________________________
Title:____________________________________
C-1
<PAGE>
EXHIBIT D-1
Form of Borrowing Notice
To: Bank of America, N.A.,
as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 409-0014
Reference is hereby made to the Credit Agreement dated as of October 15,
1999 (the "Agreement") among PepsiAmericas, Inc. and DakBev, LLC (collectively,
the "Borrowers"), the Lenders (as defined in the Agreement), and Bank of
America, N.A., as agent for the Lenders ("Administrative Agent"). Capitalized
terms used but not defined herein shall have the respective meanings therefor
set forth in the Agreement.
The Borrowers through their Authorized Representative hereby give notice to
the Administrative Agent that Loans of the type and amount set forth below be
made on the date indicated:
<TABLE>
<CAPTION>
Type of Loan (check one) Interest Period(1) Aggregate Amount(2) Date of Loan(3)
- - ------------------------------- ------------------------ ---------------------------- --------------------
<S> <C> <C> <C>
Revolving Loan
- - -------------------------------
Base Rate Loan ---------------- --------------- --------------
Eurodollar Rate Loan ---------------- --------------- --------------
- - -----------------------
</TABLE>
(1) For any Eurodollar Rate Loan, one, two, three or six months.
(2) Must be $5,000,000 or if greater an integral multiple of $5,000,000, unless
a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
The Borrowers hereby request that the proceeds of Loans described in this
Borrowing Notice be made available to the Borrowers as follows: [insert
transmittal instructions].
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving effect
to the borrowing described herein; and
2. All the representations and warranties set forth in Article VIII of the
Agreement and in the Loan Documents (other than those expressly stated to refer
to a particular date) are true and correct as of the date hereof except that the
reference to the financial statements in Section 8.6(a) of the Agreement shall
be deemed (solely for the purpose of the representation and warranty contained
in such Section 8.6(a) but not for the purpose of any cross reference to such
Section 8.6(a) or to the financial statements described therein contained in any
other provision of Section 8.6 or elsewhere in Article 8) to refer to those
financial statements most recently delivered to you pursuant to Section 9.1 of
the Agreement (it being understood that any financial statements delivered
pursuant to Section 9.1(b) have not been certified by independent public
accountants).
3. All conditions contained in the Agreement to the making of any Loan
requested hereby have been met or satisfied in full.
D-2-1
<PAGE>
PEPSIAMERICAS, INC.
DAKBEV, LLC
BY:_________________________________________
Authorized Representative
DATE:_______________________________________
D-1-2
<PAGE>
EXHIBIT D-2
Form of Borrowing Notice--Swing Line Loans
To: Bank of America, N.A.,
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 409-0014
Reference is hereby made to the Credit Agreement dated as of October 15,
1999 (the "Agreement") among PepsiAmericas, Inc. and DakBev, LLC (collectively,
the "Borrowers"), the Lenders (as defined in the Agreement), and Bank of
America, N.A., as agent for the Lenders ("Administrative Agent"). Capitalized
terms used but not defined herein shall have the respective meanings therefor
set forth in the Agreement.
The Borrowers through their Authorized Representative hereby give notice to
Bank of America that a Swing Line Loan of the amount set forth below be made on
the date indicated:
Amount(1) Date of Loan
----------------------- -----------------------
$---------- ----------, ----
- - -----------------------
(1) Must be $100,000 or if greater an integral multiple of $100,000, unless
a Base Rate Refunding Loan.
The Borrowers hereby request that the proceeds of Swing Line Loans
described in this Borrowing Notice be made available to the Borrowers as
follows: [insert transmittal instructions]
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving effect
to the borrowing described herein; and
2. All the representations and warranties set forth in Article VIII of the
Agreement and in the Loan Documents (other than those expressly stated to refer
to a particular date) are true and correct as of the date hereof except that the
reference to the financial statements in Section 8.6(a) of the Agreement shall
be deemed (solely for the purpose of the representation and warranty contained
in such Section 8.6(a) but not for the purpose of any cross reference to such
Section 8.6(a) or to the financial statements described therein contained in any
other provision of Section 8.6 or elsewhere in Article 8) to refer to those
financial statements most recently delivered to you pursuant to Section 9.1 of
the Agreement (it being understood that any financial statements delivered
pursuant to Section 9.1(b) have not been certified by independent public
accountants).
3. All conditions contained in the Agreement to the making of any Loan
requested hereby have been met or satisfied in full.
D-2-1
<PAGE>
PEPSIAMERICAS, INC.
DAKBEV, LLC
BY:___________________________________________
Authorized Representative
DATE:_________________________________________
D-2-2
<PAGE>
EXHIBIT E
Form of Interest Rate Selection Notice
To: Bank of America, N.A., as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 409-0014
Reference is hereby made to the Credit Agreement dated as of October 15,
1999 (the "Agreement") among PepsiAmericas, Inc. and DakBev, LLC (collectively,
the "Borrowers"), the Lenders (as defined in the Agreement), and Bank of
America, N.A., as agent for the Lenders ("Administrative Agent"). Capitalized
terms used but not defined herein shall have the respective meanings therefor
set forth in the Agreement.
The Borrowers through their Authorized Representative hereby give notice to
the Administrative Agent of the following selection of a type of Loan [or
Segment] and Interest Period:
<TABLE>
<CAPTION>
Type of Loan (check one) Interest Period(1) Aggregate Amount(2) Date of Loan(3)
- - ---------------------------------- ---------------------- -------------------------- --------------------
Revolving Loan
<S> <C> <C> <C>
[] Base Rate Loan ---------------------- -------------------------- --------------------
[] Eurodollar Rate Loan ---------------------- -------------------------- --------------------
Term Loan A Segment
[] Base Rate Segment ---------------------- -------------------------- --------------------
[] Eurodollar Rate Segment ---------------------- -------------------------- --------------------
Term Loan B Segment
[] Base Rate Segment ---------------------- -------------------------- --------------------
[] Eurodollar Rate Segment ---------------------- -------------------------- --------------------
</TABLE>
E-1
<PAGE>
- - -----------------------
(1) For any Eurodollar Rate Loan or Segment, one, two, three or six months.
(2) Must be $1,000,000 or if greater an integral multiple of $1,000,000, unless
a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan or
Eurodollar Rate Segment.
PEPSIAMERICAS, INC.
DAKBEV, LLC
BY:_________________________________
Authorized Representative
DATE:_______________________________
E-2
<PAGE>
EXHIBIT F-1
Form of Revolving Note
Promissory Note
(Revolving Loan)
$-------------- ---------, --------------
-------- --, ----
FOR VALUE RECEIVED, PEPSIAMERICAS, INC., a Delaware corporation having its
principal place of business located in Toa Baja, Puerto and DAKBEV, LLC, a
Delaware limited liability company having its principal place of business
located in Minneapolis, Minnesota (collectively, the "Borrowers"), hereby
jointly and severally promise to pay to the order of
_______________________________________________ (the "Lender"), in its
individual capacity, at the office of BANK OF AMERICA, N.A., as agent for the
Lenders (the "Administrative Agent"), located at 101 North Tryon Street,
NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places
as the Administrative Agent may designate in writing) at the times set forth in
the Credit Agreement dated as of October 15, 1999, as amended from time to time,
among the Borrowers, the financial institutions party thereto (collectively, the
"Lenders") and the Administrative Agent (the "Agreement" -- all capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Agreement), in lawful money of the United States of America, in
immediately available funds, the principal amount of
________________________________ DOLLARS ($__________) or, if less than
such principal amount, the aggregate unpaid principal amount of all Revolving
Loans made by the Lender to the Borrowers pursuant to the Agreement on the
Revolving Credit Termination Date or such earlier date as may be required
pursuant to the terms of the Agreement, and to pay interest from the date hereof
on the unpaid principal amount hereof, in like money, at said office, on the
dates and at the rates provided in Articles II and IV of the Agreement. All or
any portion of the principal amount of Loans may be prepaid or required to be
prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest thereon evidenced by this Revolving Note shall become immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrowers.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees, and
interest due hereunder thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
F-1-1
<PAGE>
This Revolving Note is one of the Revolving Notes referred to in the
Agreement and is issued pursuant to and entitled to the benefits and security of
the Agreement to which reference is hereby made for a more complete statement of
the terms and conditions upon which the Revolving Loans evidenced hereby were or
are made and are to be repaid. This Revolving Note is subject to certain
restrictions on transfer or assignment as provided in the Agreement.
This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law all defenses based on suretyship or
impairment of collateral and the benefits of all provisions of law for stay or
delay of execution or sale of property or other satisfaction of judgment against
any of them on account of liability hereon until judgment be obtained and
execution issued against any other of them and returned satisfied or until it
can be shown that the maker or any other party hereto had no property available
for the satisfaction of the debt evidenced by this instrument, or until any
other proceedings can be had against any of them, also their right, if any, to
require the holder hereof to hold as security for this Revolving Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
[Signature page follows.]
F-1-2
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
made, executed and delivered by their duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
PEPSIAMERICAS, INC.
WITNESS:
______________________________ By:_______________________________
Name:_____________________________
Title:____________________________
DAKBEV, LLC
WITNESS:
______________________________ By:_______________________________
Name:_____________________________
Title:____________________________
F-1-3
<PAGE>
EXHIBIT F-2
Form of Term A Note
Promissory Note
(Term Loan A)
$---------------- --------, --------
-------- --, ----
FOR VALUE RECEIVED, PEPSIAMERICAS, INC., a Delaware corporation having its
principal place of business located in Toa Baja, Puerto and DAKBEV, LLC, a
Delaware limited liability company having its principal place of business
located in Minneapolis, Minnesota (collectively, the "Borrowers"), hereby
jointly and severally promise to pay to the order of
___________________________________ (the "Lender"), in its individual
capacity, at the office of BANK OF AMERICA, N.A., as agent for the Lenders (the
"Administrative Agent"), located at 101 North Tryon Street, NC1-001-15-04,
Charlotte, North Carolina 28255 (or at such other place or places as the
Administrative Agent may designate in writing) at the times set forth in the
Credit Agreement dated as of October 15, 1999, as amended from time to time,
among the Borrowers, the financial institutions party thereto (collectively, the
"Lenders") and the Administrative Agent (the "Agreement" -- all capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Agreement), in lawful money of the United States of America, in
immediately available funds, the principal amount of
_____________________ DOLLARS ($__________) on the Term Loan A Termination
Date or such earlier date as may be required pursuant to the terms of the
Agreement, and to pay interest from the date hereof on the unpaid principal
amount hereof, in like money, at said office, on the dates and at the rates
provided in Articles II and IV of the Agreement. All or any portion of the
principal amount of Loans may be prepaid or required to be prepaid as provided
in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount hereof and accrued but
unpaid interest thereon evidenced by this Term Note shall become immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrowers.
In the event this Term A Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree to pay, in addition to the principal
and interest due hereunder, all costs of collection, including reasonable
attorneys' fees, and interest thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
This Term A Note one of the Term A Notes referred to in the Agreement and
is issued pursuant to and entitled to the benefits and security of the Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions upon which the Term Loan A evidenced hereby was made and is to be
repaid. This Term A Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
F-2-1
<PAGE>
This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law all defenses based on suretyship or
impairment of collateral and the benefits of all provisions of law for stay or
delay of execution or sale of property or other satisfaction of judgment against
any of them on account of liability hereon until judgment be obtained and
execution issued against any other of them and returned satisfied or until it
can be shown that the maker or any other party hereto had no property available
for the satisfaction of the debt evidenced by this instrument, or until any
other proceedings can be had against any of them, also their right, if any, to
require the holder hereof to hold as security for this Term A Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
[Signature page follows.]
F-2-2
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Term A Note to be made,
executed and delivered by their duly authorized representative as of the date
and year first above written, all pursuant to authority duly granted.
PEPSIAMERICAS, INC.
WITNESS:
________________________________ By:____________________________________
Name:__________________________________
________________________________ Title:_________________________________
DAKBEV, LLC
WITNESS:
________________________________ By:____________________________________
Name:__________________________________
________________________________ Title:_________________________________
F-2-3
<PAGE>
EXHIBIT F-3
Form of Term B Note
Promissory Note
(Term Loan B)
$---------------- --------, --------
-------- --, ----
FOR VALUE RECEIVED, PEPSIAMERICAS, INC., a Delaware corporation having its
principal place of business located in Toa Baja, Puerto and DAKBEV, LLC, a
Delaware limited liability company having its principal place of business
located in Minneapolis, Minnesota (collectively, the "Borrowers"), hereby
jointly and severally promise to pay to the order of
___________________________________ (the "Lender"), in its individual
capacity, at the office of BANK OF AMERICA, N.A., as agent for the Lenders (the
"Administrative Agent"), located at 101 North Tryon Street, NC1-001-15-04,
Charlotte, North Carolina 28255 (or at such other place or places as the
Administrative Agent may designate in writing) at the times set forth in the
Credit Agreement dated as of October 15, 1999, as amended from time to time,
among the Borrowers, the financial institutions party thereto (collectively, the
"Lenders") and the Administrative Agent (the "Agreement" -- all capitalized
terms not otherwise defined herein shall have the respective meanings set forth
in the Agreement), in lawful money of the United States of America, in
immediately available funds, the principal amount of
_____________________ DOLLARS ($__________) on the Term Loan B Termination
Date or such earlier date as may be required pursuant to the terms of the
Agreement, and to pay interest from the date hereof on the unpaid principal
amount hereof, in like money, at said office, on the dates and at the rates
provided in Articles II and IV of the Agreement. All or any portion of the
principal amount of Loans may be prepaid or required to be prepaid as provided
in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount hereof and accrued but
unpaid interest thereon evidenced by this Term Note shall become immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrowers.
In the event this Term B Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree to pay, in addition to the principal
and interest due hereunder, all costs of collection, including reasonable
attorneys' fees, and interest thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
This Term B Note one of the Term B Notes referred to in the Agreement and
is issued pursuant to and entitled to the benefits and security of the Agreement
to which reference is hereby made for a more complete statement of the terms and
conditions upon which the Term Loan B evidenced hereby was made and is to be
repaid. This Term B Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
F-3-1
<PAGE>
This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law all defenses based on suretyship or
impairment of collateral and the benefits of all provisions of law for stay or
delay of execution or sale of property or other satisfaction of judgment against
any of them on account of liability hereon until judgment be obtained and
execution issued against any other of them and returned satisfied or until it
can be shown that the maker or any other party hereto had no property available
for the satisfaction of the debt evidenced by this instrument, or until any
other proceedings can be had against any of them, also their right, if any, to
require the holder hereof to hold as security for this Term B Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
[Signature page follows.]
F-3-2
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Term B Note to be made,
executed and delivered by their duly authorized representative as of the date
and year first above written, all pursuant to authority duly granted.
<PAGE>
PEPSIAMERICAS, INC.
WITNESS:
________________________________ By:_____________________________________
Name:___________________________________
________________________________ Title:__________________________________
DAKBEV, LLC
________________________________ By:_____________________________________
Name:___________________________________
________________________________ Title:__________________________________
F-3-3
<PAGE>
EXHIBIT F-4
Form of Swing Line Note
Promissory Note
(Swing Line Loan)
$5,000,000.00 ________, ________
October 15, 1999
FOR VALUE RECEIVED, PEPSIAMERICAS, INC., a Delaware corporation having its
principal place of business located in Toa Baja, Puerto Rico and DAKBEV, LLC, a
Delaware limited liability company having its principal place of business in
Minneapolis, Minnesota (collectively, the "Borrowers"), hereby jointly and
severally promise to pay to the order of
BANK OF AMERICA, N.A. ("Bank of America"), in its individual capacity, at
Bank of America's offices located at 101 North Tryon Street, NC1-001-15-04,
Charlotte, North Carolina 28255 (or at such other place or places as Bank of
America may designate) at the times set forth in the Credit Agreement dated as
of October 15, 1999, as amended from time to time, among the Borrowers, the
financial institutions party thereto (collectively, the "Lenders") and Bank of
America, N.A., as agent for the Lenders (the "Administrative Agent") (as
amended, supplemented or otherwise modified from time to time, the "Agreement"
- - -- all capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America, in immediately available funds, the principal amount of
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) or if less than such
principal amount, the aggregate unpaid principal amount of all Swing Line Loans
made by Bank of America to the Borrowers pursuant to the Agreement on the
Revolving Credit Termination Date or such earlier date as may be required
pursuant to the terms of the Agreement, and to pay interest from the date hereof
on the unpaid principal amount hereof, in like money, at said office, on the
dates and at the rates provided in Articles II and IV of the Agreement. All or
any portion of the principal amount of Swing Line Loans may be prepaid as
provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand at the Default
Rate until such principal and interest have been paid in full. Further, in the
event of such acceleration, this Note, and all other indebtedness of the
Borrowers to the Lender shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrowers agree to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees, and interest
thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360 day year for the
actual number of days in the interest period.
F-4-1
<PAGE>
This Note is the Swing Line Note referred to in the Agreement and is issued
pursuant to and entitled to the benefits and security of the Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions upon which the Swing Line Loans evidenced hereby were or are made and
are to be repaid. This Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law all defenses based on suretyship or
impairment of collateral and the benefits of all provisions of law for stay or
delay of execution or sale of property or other satisfaction of judgment against
any of them on account of liability hereon until judgment be obtained and
execution issued against any other of them and returned satisfied or until it
can be shown that the maker or any other party hereto had no property available
for the satisfaction of the debt evidenced by this instrument, or until any
other proceedings can be had against any of them, also their right, if any, to
require the holder hereof to hold as security for this Note any collateral
deposited by any of said Persons as security. Protest, notice of protest, notice
of dishonor, diligence or any other formality are hereby waived by all parties
bound hereon.
[Signature page follows.]
F-4-2
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Note to be made,
executed and delivered by their duly authorized representative as of the date
and year first above written, all pursuant to authority duly granted.
<PAGE>
PEPSIAMERICAS, INC.
WITNESS:
________________________________ By:_____________________________________
Name:___________________________________
________________________________ Title:__________________________________
DAKBEV, LLC
________________________________ By:_____________________________________
Name:___________________________________
________________________________ Title:__________________________________
F-4-3
<PAGE>
EXHIBIT GForm of Opinion of Borrowers' Counsel
See attached.
G-1
<PAGE>
EXHIBIT H
Compliance Certificate
Bank of America, N.A.,
as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 409-0014
Bank of America, N.A.,
as Administrative Agent
600 Peachtree Street, N.E., 9th Floor
Atlanta, Georgia 30308-2213
Attention: ____________________
Telefacsimile: (404) 607-6467
Reference is hereby made to the Credit Agreement dated as of October 15,
1999 (the "Agreement") among PepsiAmericas, Inc., a Delaware corporation and
DakBev, LLC, a Delaware limited liability company (collectively, the
"Borrowers"), the Lenders (as defined in the Agreement) and Bank of America,
N.A., as agent for the Lenders ("Administrative Agent"). Capitalized terms used
but not otherwise defined herein shall have the respective meanings therefor set
forth in the Agreement. The undersigned, a duly authorized and acting Authorized
Representative, hereby certifies to you as of __________ (the "Determination
Date") as follows:
1. Calculations:
A. Compliance with Section 10.1(a): Consolidated Net Worth
<TABLE>
<S> <C> <C>
1. Required Consolidated Net Worth at the last day of the
immediately preceding fiscal quarter (or, required to be
maintained as of the Closing Date in the case of the
Closing Date Quarter) $______________
2. Consolidated Net Income during fiscal quarter
ending on the Determination Date X 0.75 $______________
3. 100% of the aggregate amount of all increases in
the stated capital and additional paid-in capital
accounts of the Parent resulting from the issuance
of equity securities or other capital investments
during the fiscal quarter ending on the
Determination Date $______________
4. Sum of A.1 + A.2 + A.3 $______________
H-1
<PAGE>
5. Actual Consolidated Net Worth as at the
Determination Date $______________
Required: A.5 must not be less than A.4
B. Compliance with Section 10.1(b): Consolidated Leverage Ratio
1. Consolidated Indebtedness as at the
Determination Date $______________
2. Consolidated EBITDA for the Four-Quarter
Period ending on the Determination Date* $______________
3. Ratio of B.1 to B.2 _______ to 1.00
Required: B.3 must not be greater than 5.50 to 1.00 from the Closing
Date through the Four-Quarter Period ending December 31, 1999 and 5.00
to 1.00 thereafter
C. Compliance with Section 10.1(c): Consolidated Fixed Charge Ratio
1. Consolidated EBITDA for the Four-Quarter
Period ending on the Determination Date* $______________
2. The cash portion of Consolidated Interest
Expense for the Four-Quarter Period ending
on the Determination Date $______________
3. Scheduled principal payments of Consolidated
Indebtedness for the Four-Quarter Period ending
on the Determination Date $______________
4. C.2 + C.3 $______________
5. Ratio of C.1 to C.4 _______ to 1.00
Required: C.5 must not be less than 1.50 to 1.00
</TABLE>
* See Attached Schedule 1.
2. No Default
A. Since __________ (the date of the last similar
certification), (a) the Borrowers have not defaulted in the keeping,
observance, performance or fulfillment of its obligations pursuant to
any of the Loan Documents; and (b) no Default or Event of Default
specified in Article XI of the Agreement has occurred and is
continuing.
H-2
<PAGE>
B. If a Default or Event of Default has occurred since
__________ (the date of the last similar certification), the Borrowers
propose to take the following action with respect to such Default or
Event of Default:
(Note, if no Default or Event of Default has occurred, insert "Not
Applicable").
The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 9.1 of the
Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, ____.
By:______________________________________
Authorized Representative
Name:_____________________________________
Title:_____________________________________
H-3
<PAGE>
Schedule 1 to Compliance Certificate
Calculation of Consolidated EBITDA
Parent and Restricted
<TABLE>
<CAPTION>
Subsidiaries Actual Acquisitions** Pro Forma Total
<S> <C> <C> <C>
1. Consolidated Net Income $________________ $___________ $____________
2. Consolidated Interest Expense $________________ $___________ $____________
3. Taxes on Income $________________ $___________ $____________
4. Amortization $________________ $___________ $____________
5. Depreciation $________________ $___________ $____________
6. Up to $10,100,000 of non-recurring
charges incurred in the Four-Quarter Period
ended December 31, 1999, adjusted for
federal income taxes
$---------------- $----------- $------------
Consolidated EBITDA $________________ $___________ $____________
(Sum of 1-6)
</TABLE>
**For the Acquisition of (a) a line of business of a Person, annualized results
of operations (calculated pursuant to Section 1.3 of the Agreement) of the
business so acquired for the three quarter periods ending next following the
date of Acquisition, and (b) all of the equity interests of a Person, historical
pro forma results for the three Four-Quarter Periods ending next following the
date of such Acquisition and with the consent of the Administrative Agent may
include non-recurring charges which will be eliminated by reason of such
Acquisition
H-4
<PAGE>
EXHIBIT I
Form of Facility Guaranty
THIS GUARANTY AGREEMENT (this "Guaranty Agreement"), dated as of __________
____, is made by EACH OF THE UNDERSIGNED (each a "Guarantor" and collectively
the "Guarantors") to BANK OF AMERICA, N.A., a national banking association
organized and existing under the laws of the United States, as Administrative
Agent (in such capacity, the "Administrative Agent") for each of the lenders
(the "Lenders" and collectively with the Administrative Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as defined below). All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to PepsiAmericas, Inc.
and DakBev, LLC (the "Borrowers") certain credit facilities, including term loan
facilities and a revolving credit facility with a letter of credit and swing
line sublimit pursuant to the terms of that certain Credit Agreement dated as of
October 15, 1999, among the Borrowers, the Administrative Agent and the Lenders
(as from time to time amended, modified, supplemented or restated, the "Credit
Agreement"); and
WHEREAS, each Guarantor is, directly or indirectly, a wholly owned
Subsidiary of the Borrowers and will materially benefit from the Loans and
Advances made and to be made, and the Letters of Credit issued and to be issued,
under the Credit Agreement; and
WHEREAS, each Guarantor is required to enter into this Guaranty Agreement
pursuant to the terms of the Credit Agreement; and
WHEREAS, a material part of the consideration given in connection with and
as an inducement to the execution and delivery of the Credit Agreement by the
Secured Parties was the obligation of the Borrowers to cause each Guarantor to
enter into this Guaranty Agreement, and the Secured Parties are unwilling to
extend and maintain the credit facilities provided under the Loan Documents
unless the Guarantors enter into this Guaranty Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Guaranty. Each Guarantor hereby jointly and severally, unconditionally,
absolutely, continually and irrevocably guarantees to the Administrative Agent
for the benefit of the Secured Parties the payment and performance in full of
the Borrowers' Liabilities (as defined below). For all purposes of this Guaranty
Agreement, "Borrowers' Liabilities" means: (a) the Borrowers' prompt payment in
full, when due (whether at maturity, by acceleration or otherwise), of all
Obligations and all other amounts pursuant to the terms of the Credit Agreement,
the Notes, and all other Loan Documents heretofore, now or at any time or times
hereafter owing, arising, due or payable from the Borrowers to any one or more
of the Secured Parties, including principal, interest, premiums and fees
(including, but not limited to, loan fees and attorneys' fees and expenses); (b)
the Borrowers' prompt, full and faithful performance, observance and discharge
of each and every agreement, undertaking, covenant and provision to be
performed, observed or discharged by the Borrowers under the Credit Agreement
and all other Loan Documents; and (c) the Borrowers' prompt payment in full,
when due or declared due and at all such times, of Rate Hedging Obligations now
or hereafter arising under Swap Agreements. The Guarantors' obligations to the
Secured Parties under this Guaranty Agreement are hereinafter collectively
referred to as the "Guarantors' Obligations" and, with respect to each Guarantor
individually, the "Guarantor's Obligations". Notwithstanding the foregoing, the
liability of each Guarantor individually with respect to its Guarantor's
Obligations shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
I-1
<PAGE>
Each Guarantor agrees that it is jointly and severally, directly and
primarily liable (subject to the limitation in the immediately preceding
sentence) for the Borrowers' Liabilities.
The Guarantors' Obligations are secured by various Security Instruments
referred to in the Credit Agreement, including without limitation a Security
Agreement, Securities Pledge Agreement and Note Pledge Agreement.
2. Payment. Upon the occurrence and during the continuance of any Event of
Default under the Credit Agreement, then any or all of the Guarantors will, upon
demand thereof by the Administrative Agent, fully pay to the Administrative
Agent, for the benefit of the Secured Parties, subject to any restriction on
each Guarantor's Obligations set forth in Section 1 hereof, an amount equal to
all the Borrowers' Liabilities then due and owing.
3. Absolute Rights and Obligations. This is a guaranty of payment and not
of collection. The Guarantors' Obligations under this Guaranty Agreement shall
be joint and several, absolute and unconditional irrespective of, and each
Guarantor hereby expressly waives, to the extent permitted by law, any defense
to its obligations under this Guaranty Agreement and all Security Instruments to
which it is a party by reason of:
(a) any lack of legality, validity or enforceability of the Credit
Agreement, of any of the Notes, of any other Loan Document, or of any other
agreement or instrument creating, providing security for, or otherwise
relating to any of the Guarantors' Obligations, any of the Borrowers'
Liabilities, or any other guaranty of any of the Borrowers' Liabilities
(the Loan Documents and all such other agreements and instruments being
collectively referred to as the "Related Agreements");
(b) any action taken under any of the Related Agreements, any exercise
of any right or power therein conferred, any failure or omission to enforce
any right conferred thereby, or any waiver of any covenant or condition
therein provided;
(c) any acceleration of the maturity of any of the Borrowers'
Liabilities, of the Guarantor's Obligations of any other Guarantor, or of
any other obligations or liabilities of any Person under any of the Related
Agreements;
(d) any release, exchange, non-perfection, lapse in perfection,
disposal, deterioration in value, or impairment of any security for any of
the Borrowers' Liabilities, for any of the Guarantor's Obligations of any
Guarantor, or for any other obligations or liabilities of any Person under
any of the Related Agreements;
I-2
<PAGE>
(e) any dissolution of either or both Borrowers or any Guarantor or
any other party to a Related Agreement, or the combination or consolidation
of either or both of the Borrowers or any Guarantor or any other party to a
Related Agreement into or with another entity or any transfer or
disposition of any assets of either or both Borrowers or any Guarantor or
any other party to a Related Agreement;
(f) any extension (including without limitation extensions of time for
payment), renewal, amendment, restructuring or restatement of, and any
acceptance of late or partial payments under, the Credit Agreement, any of
the Notes or any other Loan Document or any other Related Agreement, in
whole or in part;
(g) the existence, addition, modification, termination, reduction or
impairment of value, or release of any other guaranty (or security
therefor) of the Borrowers' Liabilities (including without limitation the
Guarantor's Obligations of any other Guarantor and obligations arising
under any other Facility Guaranty now or hereafter in effect);
(h) any waiver of, forbearance or indulgence under, or other consent
to any change in or departure from any term or provision contained in the
Credit Agreement, any other Loan Document or any other Related Agreement,
including without limitation any term pertaining to the payment or
performance of any of the Borrowers' Liabilities, any of the Guarantor's
Obligations of any other Guarantor, or any of the obligations or
liabilities of any party to any other Related Agreement;
(i) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor) which may or might in any manner or to any
extent vary the risks of such Guarantor, or might otherwise constitute a
legal or equitable defense available to, or discharge of, a surety or a
guarantor, including without limitation any right to require or claim that
resort be had to the Borrowers or any other Credit Party or to any
collateral in respect of the Borrowers' Liabilities or Guarantors'
Obligations , whether arising under North Carolina General Statutes
Sections 26-7 and 26-9 or otherwise.
It is the express purpose and intent of the parties hereto that this Guaranty
Agreement and the Guarantors' Obligations hereunder shall be absolute and
unconditional under any and all circumstances and shall not be discharged except
by payment as herein provided.
4. Currency and Funds of Payment. All Guarantors' Obligations will be paid
in lawful currency of the United States of America and in immediately available
funds, regardless of any law, regulation or decree now or hereafter in effect
that might in any manner affect the Borrowers' Liabilities, or the rights of any
Secured Party with respect thereto as against the Borrowers, or cause or permit
to be invoked any alteration in the time, amount or manner of payment by the
Borrowers of any or all of the Borrowers' Liabilities.
5. Events of Default. Without limiting the provisions of Section 2 hereof,
in the event that there shall occur and be continuing an Event of Default, then
notwithstanding any collateral or other security or credit support for the
Borrowers' Liabilities, at the Administrative Agent's election and without
notice thereof or demand therefor, the Guarantors' Obligations shall immediately
be and become due and payable.
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6. Subordination. Until this Guaranty Agreement is terminated in accordance
with Section 23 hereof, each Guarantor hereby unconditionally subordinates all
present and future debts, liabilities or obligations now or hereafter owing to
such Guarantor (i) of the Borrowers, to the payment in full of the Borrowers'
Liabilities, (ii) of every other Guarantor (an "obligated guarantor"), to the
payment in full of the Guarantors' Obligations of such obligated guarantor, and
(iii) of each other Person now or hereafter constituting a Credit Party, to the
payment in full of the obligations of such Credit Party owing to any Secured
Party and arising under the Loan Documents. All amounts due under such
subordinated debts, liabilities, or obligations shall, upon the occurrence and
during the continuance of an Event of Default, be collected and, upon request by
the Administrative Agent, paid over forthwith to the Administrative Agent for
the benefit of the Secured Parties on account of the Borrowers' Liabilities, the
Guarantors' Obligations, or such other obligations, as applicable, and, after
such request and pending such payment, shall be held by such Guarantor as bailee
of the Administrative Agent and Secured Parties separate and apart from all
other funds, property and accounts of such Guarantor.
7. Suits. Each Guarantor from time to time shall pay to the Administrative
Agent for the benefit of the Secured Parties, on demand, at the Administrative
Agent's place of business set forth in the Credit Agreement or such other
address as the Administrative Agent shall give notice of to such Guarantor, the
Guarantors' Obligations as they become or are declared due, and in the event
such payment is not made forthwith, the Administrative Agent may proceed to suit
against any one or more or all of the Guarantors. At the Administrative Agent's
election, one or more and successive or concurrent suits may be brought hereon
by the Administrative Agent against any one or more or all of the Guarantors,
whether or not suit has been commenced against the Borrowers, any other
Guarantor, or any other Person and whether or not the Secured Parties have taken
or failed to take any other action to collect all or any portion of the
Borrowers' Liabilities or have taken or failed to take any actions against any
collateral securing payment or performance of all or any portion of the
Borrowers' Liabilities, and irrespective of any event, occurrence, or condition
described in Section 3 hereof.
8. Set-Off and Waiver. Each Guarantor waives any right to assert against
any Secured Party as a defense, counterclaim, set-off or cross claim, any
defense (legal or equitable) or other claim which such Guarantor may now or at
any time hereafter have against the Borrowers or the Secured Parties without
waiving any additional defenses, set-offs, counterclaims or other claims
otherwise available to such Guarantor. Each Guarantor agrees that each Secured
Party shall have a lien for all the Guarantor's Obligations upon all deposits or
deposit accounts, of any kind, or any interest in any deposits or deposit
accounts, now or hereafter pledged, mortgaged, transferred or assigned to such
Secured Party or otherwise in the possession or control of such Secured Party
for any purpose (other than solely for safekeeping) for the account or benefit
of such Guarantor, including any balance of any deposit account or of any credit
of such Guarantor with the Secured Party, whether now existing or hereafter
established, and hereby authorizes each Secured Party upon the occurrence and
during the continuance of an Event of Default at any time or times with or
without prior notice to apply such balances or any part thereof to such of the
Guarantor's Obligations to the Secured Parties then due and in such amounts as
provided for in the Credit Agreement or otherwise as they may elect. For the
purposes of this Section 8, all remittances and property shall be deemed to be
in the possession of a Secured Party as soon as the same may be put in transit
to it by mail or carrier or by other bailee.
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9. Waiver of Notice; Subrogation.
(a) Each Guarantor hereby waives to the extent permitted by law notice of
the following events or occurrences: (i) acceptance of this Guaranty Agreement;
(ii) the Lenders' heretofore, now or from time to time hereafter making Loans
and issuing Letters of Credit and otherwise loaning monies or giving or
extending credit to or for the benefit of the Borrowers, whether pursuant to the
Credit Agreement or the Notes or any other Loan Document or Related Agreement or
any amendments, modifications, or supplements thereto, or replacements or
extensions thereof; (iii) presentment, demand, default, non-payment, partial
payment and protest; and (iv) any other event, condition, or occurrence
described in Section 3 hereof. Each Guarantor agrees that each Secured Party may
heretofore, now or at any time hereafter do any or all of the foregoing in such
manner, upon such terms and at such times as each Secured Party, in its sole and
absolute discretion, deems advisable, without in any way or respect impairing,
affecting, reducing or releasing such Guarantor from its Guarantor's
Obligations, and each Guarantor hereby consents to each and all of the foregoing
events or occurrences.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of its Guarantor's Obligations under this Guaranty Agreement may be
enforced by the Administrative Agent on behalf of the Secured Parties upon
demand by the Administrative Agent to such Guarantor without the Administrative
Agent being required, such Guarantor expressly waiving to the extent permitted
by law any right it may have to require the Administrative Agent, to (i)
prosecute collection or seek to enforce or resort to any remedies against the
Borrowers or any other Guarantor or any other guarantor of the Borrowers'
Liabilities, or (ii) seek to enforce or resort to any remedies with respect to
any security interests, Liens or encumbrances granted to the Administrative
Agent or any Lender or other party to a Related Agreement by the Borrowers, any
other Guarantor or any other Person on account of the Borrowers' Liabilities or
any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO
BY SUCH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE
ADMINISTRATIVE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE
AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS
CONTINUING UNDER THE CREDIT AGREEMENT.
(c) Each Guarantor further agrees with respect to this Guaranty Agreement
that it shall have no right of subrogation, reimbursement, contribution or
indemnity, nor any right of recourse to security for the Borrowers' Liabilities
unless and until 93 days immediately following the Facility Termination Date
shall have elapsed without the filing or commencement, by or against any Credit
Party, of any state or federal action, suit, petition or proceeding seeking any
reorganization, liquidation or other relief or arrangement in respect of
creditors of, or the appointment of a receiver, liquidator, trustee or
conservator in respect to, such Credit Party or its assets. This waiver is
expressly intended to prevent the existence of any claim in respect to such
subrogation, reimbursement, contribution or indemnity by any Guarantor against
the estate of any other Credit Party within the meaning of Section 101 of the
Bankruptcy Code, in the event of a subsequent case involving any other Credit
Party. If an amount shall be paid to any Guarantor on account of such rights at
any time prior to termination of this Guaranty Agreement in accordance with the
provisions of Section 23 hereof, such amount shall be held in trust for the
benefit of the Secured Parties and shall forthwith be paid to the Administrative
Agent, for the benefit of the Secured Parties, to be credited and applied upon
the Guarantors' Obligations, whether matured or unmatured, in accordance with
the terms of the Credit Agreement or otherwise as the Secured Parties may elect.
The agreements in this subsection shall survive repayment of all of the
Guarantors' Obligations, the termination or expiration of this Guaranty
Agreement in any manner, including but not limited to termination in accordance
with Section 23 hereof, and occurrence of the Facility Termination Date.
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10. Effectiveness; Enforceability. This Guaranty Agreement shall be
effective as of the date first above written and shall continue in full force
and effect until termination in accordance with Section 23 hereof. Any claim or
claims that the Secured Parties may at any time hereafter have against a
Guarantor under this Guaranty Agreement may be asserted by the Administrative
Agent on behalf of the Secured Parties by written notice directed to such
Guarantor in accordance with Section 25 hereof.
11. Representations and Warranties. Each Guarantor warrants and represents
to the Administrative Agent, for the benefit of the Secured Parties, that it is
duly authorized to execute, deliver and perform this Guaranty Agreement; that
this Guaranty Agreement has been duly executed and delivered on behalf of such
Guarantor by its duly authorized representatives; that this Guaranty Agreement
is legal, valid, binding and enforceable against such Guarantor in accordance
with its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles; and that
such Guarantor's execution, delivery and performance of this Guaranty Agreement
do not violate or constitute a breach of any of its Operating Documents or
Organizational Documents, any agreement or instrument to which such Guarantor is
a party, or any law, order, regulation, decree or award of any governmental
authority or arbitral body to which it or its properties or operations is
subject.
12. Expenses. Each Guarantor agrees to be jointly and severally liable for
the payment of all reasonable fees and expenses, including attorneys' fees,
incurred by any Secured Party in connection with the enforcement of this
Guaranty Agreement, whether or not suit be brought.
13. Reinstatement. Each Guarantor agrees that this Guaranty Agreement shall
continue to be effective or be reinstated, as the case may be, at any time
payment received by any Secured Party in respect of any Borrowers' Liabilities
is rescinded or must be restored for any reason.
14. Attorney-in-Fact. To the extent permitted by law, each Guarantor hereby
appoints the Administrative Agent, for the benefit of the Secured Parties, as
such Guarantor's attorney-in-fact for the purposes of carrying out the
provisions of this Guaranty Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is coupled with an interest
and is irrevocable; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of an Event of Default.
15. Reliance. Each Guarantor represents and warrants to the Administrative
Agent, for the benefit of the Secured Parties, that: (a) such Guarantor has
adequate means to obtain on a continuing basis (i) from the Borrowers,
information concerning the Borrowers and the Borrowers' financial condition and
affairs and (ii) from other reliable sources, such other information as it deems
material in deciding to provide this Guaranty Agreement ("Other Information"),
and has full and complete access to the Borrowers' books and records and to such
Other Information; (b) such Guarantor is not relying on any Secured Party or its
or their employees, directors, agents or other representatives or affiliates, to
provide any such information, now or in the future; (c) such Guarantor has been
furnished with and reviewed the terms of the Credit Agreement and such other
Loan Documents as it has requested, is executing this Guaranty Agreement freely
and deliberately, and understands the obligations and financial risk undertaken
by providing this Guaranty Agreement; (d) such Guarantor has relied solely on
the Guarantor's own independent investigation, appraisal and analysis of the
Borrowers, the Borrowers' financial condition and affairs, the "Other
Information", and such other matters as it deems material in deciding to provide
this Guaranty Agreement and is fully aware of the same; and (e) such Guarantor
has not depended or relied on any Secured Party or its or their employees,
directors, agents or other representatives or affiliates, for any information
whatsoever concerning the Borrowers or the Borrowers' financial condition and
affairs or any other matters material to such Guarantor's decision to provide
this Guaranty Agreement, or for any counseling, guidance, or special
consideration or any promise therefor with respect to such decision. Each
Guarantor agrees that no Secured Party has any duty or responsibility
whatsoever, now or in the future, to provide to such Guarantor any information
concerning the Borrowers or the Borrowers' financial condition and affairs, or
any Other Information, other than as expressly provided herein, and that, if
such Guarantor receives any such information from any Secured Party or its or
their employees, directors, agents or other representatives or affiliates, such
Guarantor will independently verify the information and will not rely on any
Secured Party or its or their employees, directors, agents or other
representatives or affiliates, with respect to such information.
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16. Rules of Interpretation. The rules of interpretation contained in
Sections 1.2(c) through 1.2(l) of the Credit Agreement shall be applicable to
this Guaranty Agreement and are hereby incorporated by reference. All
representations and warranties contained herein shall survive the delivery of
documents and any extension of credit referred to herein or guaranteed hereby.
17. Entire Agreement. This Guaranty Agreement, together with the Credit
Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements, understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Except as provided in Section 23, neither this Guaranty Agreement nor
any portion or provision hereof may be changed, altered, modified, supplemented,
discharged, canceled, terminated, or amended orally or in any manner other than
as provided in the Credit Agreement.
18. Binding Agreement; Assignment. This Guaranty Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective heirs, legal representatives,
successors and assigns; provided, however, that no Guarantor shall be permitted
to assign any of its rights, powers, duties or obligations under this Guaranty
Agreement or any other interest herein without the prior written consent of the
Administrative Agent. Without limiting the generality of the foregoing sentence
of this Section 18, any Lender may assign to one or more Persons, or grant to
one or more Persons participations in or to, all or any part of its rights and
obligations under the Credit Agreement (to the extent permitted by the Credit
Agreement); and to the extent of any such assignment or participation such other
Person shall, to the fullest extent permitted by law, thereupon become vested
with all the benefits in respect thereof granted to such Lender herein or
otherwise, subject however, to the provisions of the Credit Agreement, including
Article XII thereof (concerning the Administrative Agent) and Section 13.1
thereof concerning assignments and participations. All references herein to the
Administrative Agent shall include any successor thereof.
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19. Swap Agreements. All obligations of the Borrowers under Swap Agreements
to which any Lender or its affiliates are a party shall be deemed to be
Borrowers' Liabilities, and each Lender or affiliate of a Lender party to any
such Swap Agreement shall be deemed to be a Secured Party hereunder with respect
to such Borrowers' Liabilities; provided, however, that such obligations shall
cease to be Borrower's Liabilities at such time as such Person (or affiliate of
such Person) shall cease to be a "Lender" under the Credit Agreement.
20. Severability. The provisions of this Guaranty Agreement are independent
of and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Guaranty Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
21. Counterparts. This Guaranty Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Guaranty
Agreement to produce or account for more than one such counterpart executed by
the Guarantor against whom enforcement is sought.
22. Indemnification. Without limitation of Section 13.9 of the Credit
Agreement or any other indemnification provision in any Loan Document, each
Guarantor agrees to indemnify and hold harmless each Secured Party and each of
their affiliates and their respective officers, directors, employees, agents,
and advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' fees) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or proceeding or preparation of defense in
connection therewith) the Loan Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans or other
extension of credit under the Loan Documents, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 22 applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by such Guarantor or any
other Credit Party, any of their respective directors, shareholders or
creditors, or an Indemnified Party or any other Person, or any Indemnified Party
is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. Each Guarantor agrees that no Indemnified Party shall
have any liability (whether direct or indirect, in contract or tort or
otherwise) to it, any of its subsidiaries or affiliates, or any security holders
or creditors thereof arising out of, related to or in connection with the
transactions contemplated herein, except to the extent that such liability is
found in a final non-appealable judgment by a court of competent jurisdiction to
have directly resulted from such Indemnified Party's gross negligence or willful
misconduct. Each Guarantor agrees not to assert any claim against any Secured
Party, any of its affiliates, or any of their directors, officers, employees,
attorneys, agents, or advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Loan Documents, any of the transactions contemplated therein or
the actual or proposed use of the proceeds of the Loans or other extension of
credit under the Loan Documents. The agreements in this Section 22 shall survive
repayment of all of the Guarantors' Obligations and the termination or
expiration of this Guaranty Agreement in any manner, including but not limited
to termination upon occurrence of the Facility Termination Date.
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23. Termination. Subject to reinstatement pursuant to Section 13 hereof,
this Guaranty Agreement and all of the Guarantors' Obligations hereunder
(excluding those obligations and liabilities that expressly survive such
termination) shall terminate on the Facility Termination Date.
24. Remedies Cumulative; Late Payments. All remedies hereunder are
cumulative and are not exclusive of any other rights and remedies of the
Administrative Agent or any other Secured Party provided by law or under the
Credit Agreement, the other Loan Documents or other applicable agreements or
instruments. The making of the Loans and other extensions of credit to the
Borrowers pursuant to the Credit Agreement shall be conclusively presumed to
have been made or extended, respectively, in reliance upon each Guarantor's
guaranty of the Borrowers' Liabilities pursuant to the terms hereof. Any amounts
not paid when due under this Guaranty Agreement shall bear interest at the
Default Rate.
25. Notices. Any notice required or permitted hereunder shall be given, (a)
with respect to each Guarantor, at the address of the Borrowers indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Administrative
Agent or any other Secured Party, at the Administrative Agent's address
indicated in Section 13.2 of the Credit Agreement. All such addresses may be
modified, and all such notices shall be given and shall be effective, as
provided in Section 13.2 of the Credit Agreement.
26. Governing Law; Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED
IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE
OF NORTH CAROLINA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, SUCH GUARANTOR EXPRESSLY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE
EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING, AND EACH GUARANTOR HEREBY IRREVOCABLY
SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF FOR NOTICES TO SUCH
GUARANTOR IN EFFECT PURSUANT TO SECTION 25 HEREOF, OR BY ANY OTHER METHOD
OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
NORTH CAROLINA.
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(d) NOTHING CONTAINED IN SUBSECTIONS (b) or (c) HEREOF SHALL PRECLUDE
THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE ANY GUARANTOR OR ANY OF SUCH GUARANTOR'S PROPERTY OR
ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE
LAWS OF ANY SUCH JURISDICTION, EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR
HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, EACH GUARANTOR AND THE ADMINISTRATIVE AGENT ON BEHALF
OF THE SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN
ANY SUCH ACTION, SUIT OR PROCEEDING.
(f) EACH GUARANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS
HEREOF IS AN INCONVENIENT FORUM.
[Signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Guaranty Agreement as of the day and year first written above.
GUARANTORS:
____________________________________
WITNESS:
By:_________________________________
___________________________________ Name:_______________________________
Title:______________________________
___________________________________
Administrative Agent:
BANK OF AMERICA, N.A., as
Administrative Agent for the Lenders
By:_________________________________
Name:_______________________________
Title: ___________________________
Signature Page 1 of 1
<PAGE>
EXHIBIT J
[Form of Security Agreement]
THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered
into as of __________, ____ by PEPSIAMERICAS, INC., a Delaware corporation and
DAKBEV, LLC, a limited liability company organized under the laws of Delaware
(collectively, the "Borrowers" and a "Grantor"), and EACH OF THE UNDERSIGNED
SUBSIDIARIES OF THE BORROWERS (each a "Guarantor" and a "Grantor", and
collectively with the Borrowers, the "Grantors"), and BANK OF AMERICA, N. A., a
national banking association, as Agent (the "Administrative Agent") for each of
the lenders (the "Lenders" and collectively with the Administrative Agent, the
"Secured Parties") now or hereafter party to the Credit Agreement (as defined
below). All capitalized terms used but not otherwise defined herein or pursuant
to Section 1 hereof shall have the respective meanings assigned thereto in the
Credit Agreement (as defined below).
W I T N E S E T H:
WHEREAS, the Secured Parties have agreed to provide to the Borrowers a
certain term loan facility and a revolving credit facility with a letter of
credit sublimit and swing line facility pursuant to the Credit Agreement dated
as of October 15, 1999 by and among the Borrowers, the Administrative Agent and
the Lenders (as from time to time amended, revised, modified, supplemented or
amended and restated, the "Credit Agreement"); and
WHEREAS, as collateral security for payment and performance of its
Obligations, the Borrowers are willing to grant to the Administrative Agent for
the benefit of the Secured Parties a security interest in certain of their
personal property and assets pursuant to the terms of this Security Agreement;
and
WHEREAS, each Guarantor will materially benefit from the Loans and Advances
to be made, and the Letters of Credit to be issued, under the Credit Agreement
and each Guarantor is a party to a Facility Guaranty pursuant to which each
Guarantor guarantees the Obligations of the Borrowers; and
WHEREAS, as collateral security for payment and performance by each
Guarantor of its Guarantor's Obligations (as defined in the Facility Guaranty to
which such Guarantor is a party), each Guarantor is willing to grant to the
Administrative Agent for the benefit of the Secured Parties a security interest
in certain of their personal property and assets pursuant to the terms of this
Security Agreement; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Borrowers and the Guarantors enters into this Security Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit, and in further
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
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1. Certain Definitions. Terms used in this Security Agreement, not
otherwise expressly defined herein or in the Credit Agreement, and for which
meanings are provided in the Uniform Commercial Code of the State of North
Carolina (the "UCC"), shall have such meanings. The parties agree that with
respect to terms that describe items or types of Collateral, the parties intend
to and do hereby give effect, upon their respective effective dates, to
revisions to the UCC effective after the date hereof to the extent, but only to
the extent, such revisions either (i) provide meanings of terms not previously
defined as items or types of property or (ii) expand the items of or interests
in property that are included within a previously defined term, with the effect
that each of such terms describing items or types of property shall at all times
be interpreted in its broadest sense. The term "Qualifying Control Agreement"
shall have the meaning set forth on Schedule 1 hereto.
2. Grant of Security Interest. Each Borrower hereby grants as collateral
security for the payment, performance and satisfaction of all of the Borrowers'
Obligations, and each Guarantor hereby grants as collateral security for the
payment, performance and satisfaction of all of its Guarantor's Obligations (as
defined in its Facility Guaranty) and the prompt payment and performance when
due of its obligations and liabilities hereunder (collectively, the "Secured
Obligations"), to the Administrative Agent for the benefit of the Secured
Parties a continuing first priority security interest in and to, and
collaterally assigns to the Administrative Agent for the benefit of the Secured
Parties, certain of the personal property of such Grantor or in which such
Grantor has or may have or acquire an interest, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located, including the
following:
(a) All accounts, and including accounts receivable, contracts (so long as
it does not violate the terms of such contract), bills, acceptances, choses in
action, and other forms of monetary obligations at any time owing to such
Grantor arising out of property sold, leased, licensed, assigned or otherwise
disposed of or for services rendered or to be rendered by such Grantor, and all
of such Grantor's rights with respect to any property represented thereby,
whether or not delivered, property returned by customers and all rights as an
unpaid vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation
(collectively referred to hereinafter as "Accounts");
(b) All inventory, including all goods manufactured or acquired for sale or
lease, and any piece goods, raw materials, work in process and finished
merchandise, component materials, and all supplies, goods, incidentals, office
supplies, packaging materials and any and all items used or consumed in the
operation of the business of such Grantor or which may contribute to the
finished product or to the sale, promotion and shipment thereof, in which such
Grantor now or at any time hereafter may have an interest, whether or not the
same is in transit or in the constructive, actual or exclusive occupancy or
possession of such Grantor or is held by such Grantor or by others for such
Grantor's account (collectively referred to hereinafter as "Inventory");
(c) the Mortgage Notes and the Delta Subordinated Notes;
(d) All documents, including warehouse receipts, bills of lading and other
documents of title (collectively referred to hereinafter as "Documents");
(e) All supporting obligations pertaining to any of the foregoing,
including all letter of credit rights (including rights to proceeds of letters
of credit), and all guaranties and other Contingent Obligations of any Person
(collectively referred to hereinafter as "Supporting Obligations");
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(f) All proceeds received by a Grantor from the sale of any rights
contained in any Beverage Agreement;
(g) All books and records relating to any of the foregoing (including
customer data, credit files, ledgers, computer programs, printouts, and other
computer materials and records (and all media on which such data, files,
programs, materials and records are or may be stored)); and
(h) All proceeds, products and replacements of, accessions to, and
substitutions for, any of the foregoing, including without limitation proceeds
of insurance policies insuring any of the foregoing.
All of the property and interests in property described in subsections (a)
through (h) are herein collectively referred to as the "Collateral."
3. Perfection. At the time of execution of this Security Agreement, each
Grantor shall have:
(a) furnished the Administrative Agent with properly executed financing
statements in form, number and substance suitable for filing, sufficient under
applicable law, and satisfactory to the Administrative Agent in order that upon
the filing of the same the Administrative Agent, for the benefit of the Secured
Parties, shall have a duly perfected security interest in all Collateral in
which a security interest can be perfected by the filing of financing
statements;
(b) to the extent expressly required by the terms hereof or of the Credit
Agreement, or otherwise as the Administrative Agent may reasonably request in
order to carry out the transactions contemplated by the terms hereof or of the
Credit Agreement, furnished the Administrative Agent with properly executed
Qualifying Control Agreements, registrars' certificates, issuer acknowledgments
of the Administrative Agent's interest in letter of credit rights, as
appropriate, with respect to Collateral in which either (i) a security interest
can be perfected only by control, or (ii) a security interest perfected by
control shall have priority as against a security interest perfected by Persons
not having control, in each case in form and substance acceptable to the
Administrative Agent and sufficient under applicable law so that the
Administrative Agent, for the benefit of the Secured Parties, shall have a
security interest in all such Collateral perfected by control; and
(c) to the extent expressly required by the terms hereof or of the Credit
Agreement, or otherwise as the Administrative Agent may request, delivered to
the Administrative Agent or, if the Administrative Agent shall specifically
consent in each instance, an agent or bailee of the Administrative Agent who has
acknowledged such status in a properly executed Qualifying Control Agreement
possession of all Collateral with respect to which either a security interest
can be perfected only by possession or a security interest perfected by
possession shall have priority as against Persons not having possession, and
including in the case of Instruments, Documents, and Investment Property in the
form of certificated securities, duly executed endorsements or stock powers in
blank, as the case may be, affixed thereto in form and substance acceptable to
the Administrative Agent and sufficient under applicable law so that the
Administrative Agent, for the benefit of the Secured Parties, shall have a
security interest in all such Collateral perfected by possession;
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subject in each case only to Liens allowed to exist and have priority under
Section 10.3 of the Credit Agreement ("Permitted Liens"). All financing
statements (including all amendments thereto and continuations thereof), control
agreements, certificates, acknowledgments, stock powers and other documents,
electronic identification, restrictive legends, and instruments furnished in
connection with the creation, enforcement, protection, perfection or priority of
the Administrative Agent's security interest in Collateral, including such items
as are described above in this Section 3 are sometimes referred to herein as
"Perfection Documents." The delivery of possession of items of or evidencing
Collateral, causing other Persons to execute and deliver Perfection Documents as
appropriate, the filing or recordation of Perfection Documents, and the taking
of such other actions as may be necessary or advisable in the determination of
the Administrative Agent to create, enforce, protect, perfect, or establish or
maintain the priority of, the security interest of the Administrative Agent for
the benefit of the Secured Parties in the Collateral is sometimes referred to
herein as "Perfection Action."
4. Maintenance of Security Interest; Further Assurances.
(a) Each Grantor will from time to time at its own expense, deliver
specific assignments of Collateral or such other Perfection Documents, and take
such other or additional Perfection Action, as may be required by the terms of
the Loan Documents or as the Administrative Agent may reasonably request in
connection with the administration or enforcement of this Security Agreement or
related to the Collateral or any part thereof in order to carry out the terms of
this Security Agreement, to perfect, protect, maintain the priority of or
enforce the Administrative Agent's security interest in the Collateral, subject
only to Permitted Liens, or otherwise to better assure and confirm unto the
Administrative Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. Without limiting the foregoing, each Grantor hereby
irrevocably authorizes the Administrative Agent to file (with, or to the extent
permitted by applicable law, without the signature of the Grantor appearing
thereon) financing statements or other Perfection Documents (including copies
thereof) showing such Grantor as "debtor" at such time or times and in all
filing offices as the Administrative Agent may from time to time determine to be
necessary or advisable to perfect or protect the rights of the Administrative
Agent and the Secured Parties hereunder, or otherwise to give effect to the
transactions herein contemplated.
(b) With respect to any and all Collateral, each Grantor agrees to do and
cause to be done all things necessary to perfect, maintain the priority of and
keep in full force the security interest granted in favor of the Administrative
Agent for the benefit of the Secured Parties, including, but not limited to, the
prompt payment upon demand therefor by the Administrative Agent of all fees and
expenses (including documentary stamp, excise or intangibles taxes) incurred in
connection with the preparation, delivery, or filing of any Perfection Document
or the taking of any Perfection Action to perfect, protect or enforce a security
interest in Collateral in favor of the Administrative Agent for the benefit of
the Secured Parties, subject only to Permitted Liens. All amounts not so paid
when due shall constitute additional Secured Obligations and (in addition to
other rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
(c) Each Grantor agrees to maintain among its books and records appropriate
notations or evidence of, and to make or cause to be made appropriate disclosure
upon its financial statements of, the security interest granted hereunder to the
Administrative Agent for the benefit of the Secured Parties.
5. Receipt of Payment. In the event an Event of Default shall occur and be
continuing and a Grantor (or any of its affiliates, subsidiaries, stockholders,
directors, officers, employees or agents) shall receive any proceeds of
Collateral, including without limitation monies, checks, notes, drafts or any
other items of payment, each Grantor shall hold all such items of payment in
trust for the Administrative Agent for the benefit of the Secured Parties, and
as the property of the Administrative Agent for the benefit of the Secured
Parties, separate from the funds and other property of such Grantor, and no
later than the first Business Day following the receipt thereof, at the election
of the Administrative Agent, such Grantor shall cause such Collateral to be
forwarded to the Administrative Agent for its custody, possession and
disposition on behalf of the Secured Parties in accordance with the terms hereof
and of the other Loan Documents.
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6. Preservation and Protection of Collateral.
(a) The Administrative Agent shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise, except to the extent expressly contemplated under Section 25. Each
Grantor shall be responsible for the safekeeping of its Collateral, and in no
event shall the Administrative Agent have any responsibility for (i) any loss or
damage thereto or destruction thereof occurring or arising in any manner or
fashion from any cause, (ii) any diminution in the value thereof, or (iii) any
act or default of any carrier, warehouseman, bailee or forwarding agency thereof
or other Person in any way dealing with or handling such Collateral.
(b) Each Grantor shall keep and maintain its tangible personal property
Collateral in good operating condition and repair, ordinary wear and tear
excepted. No Grantor shall permit any such items to become a fixture to real
property or accessions to other personal property.
(c) Each Grantor agrees (i) to pay when due all taxes, charges and
assessments against the Collateral in which it has any interest, unless being
contested in good faith by appropriate proceedings diligently conducted and
against which adequate reserves have been established in accordance with GAAP
applied on a Consistent Basis and evidenced to the reasonable satisfaction of
the Administrative Agent and provided that all enforcement proceedings in the
nature of levy or foreclosure are effectively stayed, and (ii) to cause to be
terminated and released all Liens (other than Permitted Liens) on the
Collateral. Upon the failure of any Grantor to so pay or contest such taxes,
charges, or assessments, or cause such Liens to be terminated, the
Administrative Agent at its option may pay or contest any of them or amounts
relating thereto (the Administrative Agent having the sole right to determine
the legality or validity and the amount necessary to discharge such taxes,
charges, Liens or assessments) but shall not have any obligation to make any
such payment or contest. All sums so disbursed by the Administrative Agent,
including reasonable attorneys' fees, court costs, expenses and other charges
related thereto, shall be payable on demand by the applicable Grantor to the
Administrative Agent and shall be additional Secured Obligations secured by the
Collateral, and any amounts not so paid on demand (in addition to other rights
and remedies resulting from such nonpayment) shall bear interest from the date
of demand until paid in full at the Default Rate.
7. Status of Grantors and Collateral Generally. Each Grantor represents and
warrants to, and covenants with, the Administrative Agent for the benefit of the
Secured Parties, with respect to itself and the Collateral as to which it has or
acquires any interest, that:
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(a) It is (or as to Collateral acquired after the date hereof will be upon
the acquisition of the same) and, except as permitted by the Credit Agreement
and subsection (b) of this Section 7, will continue to be, the owner of the
Collateral, free and clear of all Liens, other than the security interest
hereunder in favor of the Administrative Agent for the benefit of the Secured
Parties and Permitted Liens, and that it will at its own cost and expense defend
such Collateral and any products and proceeds thereof against all claims and
demands of all Persons (other than holders of Permitted Liens) at any time
claiming the same or any interest therein adverse to the Secured Parties. Upon
the failure of any Grantor to so defend, the Administrative Agent may do so at
its option but shall not have any obligation to do so. All sums so disbursed by
the Administrative Agent, including reasonable attorneys' fees, court costs,
expenses and other charges related thereto, shall be payable on demand by the
applicable Grantor to the Administrative Agent and shall be additional Secured
Obligations secured by the Collateral, and any amounts not so paid on demand (in
addition to other rights and remedies resulting from such nonpayment) shall bear
interest from the date of demand until paid in full at the Default Rate.
(b) It shall not (i) sell, assign, transfer, lease, license or otherwise
dispose of any of, or grant any option with respect to, the Collateral, except
for dispositions permitted under the Credit Agreement, (ii) create or suffer to
exist any Lien upon or with respect to any of the Collateral except for the
security interests created by this Security Agreement and Permitted Liens, or
(iii) take any other action in connection with any of the Collateral that would
materially impair the value of the interest or rights of such Grantor in the
Collateral taken as a whole or that would materially impair the interest or
rights of the Administrative Agent for the benefit of the Secured Parties.
(c) It has full power, legal right and lawful authority to enter into this
Security Agreement and to perform its terms, including the grant of the security
interests in the Collateral herein provided for.
(d) No authorization, consent, approval or other action by, and no notice
to or filing with, any Governmental Authority or any other Person is required
either (i) for the grant by such Grantor of the security interests granted
hereby or for the execution, delivery or performance of this Security Agreement
by such Grantor, or (ii) for the perfection of or the exercise by the
Administrative Agent, on behalf of the Secured Parties, of its rights and
remedies hereunder, except for action required by the Uniform Commercial Code to
perfect the security interest conferred hereunder.
(e) No effective financing statement or other Perfection Document similar
in effect, nor any other Perfection Action, covering all or any part of the
Collateral purported to be granted or taken by or on behalf of such Grantor (or
by or on behalf of any other Person and which remains effective as against all
or any part of the Collateral) has been filed in any recording office, delivered
to another Person for filing (whether upon the occurrence of a contingency or
otherwise), or otherwise taken, as the case may be, except such as pertain to
Permitted Liens and such as may have been filed for the benefit of, delivered
to, or taken in favor of, the Administrative Agent for the benefit of the
Secured Parties in connection with the security interests conferred hereunder.
(f) Schedule 7(f) attached hereto contains true and complete information as
to each of the following: (i) the exact legal name of each Grantor as it appears
in its Organizational Documents as of the date hereof and at any time during the
five (5) year period ending as of the date hereof (the "Covered Period"), (ii)
the jurisdiction of formation and form of organization of each Grantor, (iii)
each address of the chief executive office of each Grantor as of the date hereof
and at any time during the Covered Period, (iv) all trade names or trade styles
used by such Grantor as of the date hereof and at any time during the Covered
Period, (v) the address of each location of such Grantor at which any tangible
personal property Collateral (including Account Records and Account Documents)
is located at the date hereof or has been located at any time during the Covered
Period, (vi) with respect to each location described in clause (v) that is not
owned beneficially and of record by such Grantor, the name and address of the
owner thereof; and (vii) the name of each Person other than such Grantor and the
address of such Person at which any tangible personal property Collateral of
such Grantor is held under any warehouse, consignment, bailment or other
arrangement as of the date hereof. No Grantor shall change its name, change its
jurisdiction of formation (whether by reincorporation, merger or otherwise),
change the location of its chief executive office, utilize any additional
location where tangible personal property Collateral (including Account Records
and Account Documents) may be located, change or use any additional or different
trade name or style, except in each case upon giving not less than thirty (30)
days' prior written notice to the Administrative Agent and taking or causing to
be taken at such Grantor's expense all such Perfection Action, including the
delivery of such Perfection Documents, as may be reasonably requested by the
Administrative Agent to perfect or protect, or maintain the perfection and
priority of, the Lien of the Administrative Agent for the benefit of the Secured
Parties in Collateral contemplated hereunder.
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(g) No Grantor shall engage in any consignment transaction in respect of
any of the Collateral, whether as consignee or consignor.
(h) No Grantor shall cause, suffer or permit any of the tangible personal
property Collateral (i) to be evidenced by any document of title (except for
shipping documents as necessary or customary to effect the delivery of inventory
to customers in the ordinary course of business) or (ii) to be in the
possession, custody or control of any warehouseman or other bailee unless such
location and Person are set forth on Schedule 7(f) or the Administrative Agent
shall have received not less than 30 days' prior written notice of each such
transaction, the Administrative Agent shall have received a duly executed
Qualifying Control Agreement from such bailee, and the Grantor shall have caused
at its expense to be prepared and executed such additional Perfection Documents
and to be taken such other Perfection Action as the Administrative Agent may
deem necessary or advisable to carry out the transactions contemplated by this
Security Agreement.
(i) No tangible personal property Collateral is or shall be located at any
location that is leased by such Grantor from any other Person, unless (x) such
location and lessor is set forth on Schedule 7(f) attached hereto or such
Grantor provides not less than thirty (30) days' prior written notice thereof to
the Administrative Agent, (y) such lessor acknowledges the Lien in favor of the
Administrative Agent for the benefit of the Secured Parties conferred hereunder
and waives its statutory and consensual liens and rights with respect to such
Collateral in form and substance acceptable to the Administrative Agent and
delivered in writing to the Administrative Agent prior to any Collateral being
located at any such location, and (z) the Grantor shall have caused at its
expense to be prepared and executed such additional Perfection Documents and to
be taken such other Perfection Action as the Administrative Agent may deem
necessary or advisable to carry out the transactions contemplated by this
Security Agreement.
8. Inspection. The Administrative Agent (by any of its officers, employees
and agents), on behalf of the Secured Parties, shall have the right upon prior
notice to an executive officer of any Grantor, and at any reasonable times
during such Grantor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such records), and
the premises upon which any of the Collateral is located, to discuss such
Grantor's affairs and finances with any Person (other than Persons obligated on
any Accounts ("Account Debtors") except as expressly otherwise permitted in the
Loan Documents) and to verify with any Person other than (except as expressly
otherwise permitted in the Loan Documents) Account Debtors the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral and, if an Event of Default has occurred and is continuing, to
discuss such Grantor's affairs and finances with such Grantor's Account Debtors
and to verify the amount, quality, value and condition of, or any other matter
relating to, the Collateral with such Account Debtors. Upon or after the
occurrence and during the continuation of an Event of Default, the
Administrative Agent may at any time and from time to time employ and maintain
on such Grantor's premises a custodian selected by the Administrative Agent who
shall have full authority to do all acts necessary to protect the Administrative
Agent's (for the benefit of the Secured Parties) interest. All expenses incurred
by the Administrative Agent, on behalf of the Secured Parties, by reason of the
employment of such custodian shall be paid by such Grantor on demand from time
to time and shall be added to the Secured Obligations secured by the Collateral,
and any amounts not so paid on demand (in addition to other rights and remedies
resulting from such nonpayment) shall bear interest from the date of demand
until paid in full at the Default Rate.
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9. Specific Collateral.
(a) Accounts. With respect to its Accounts whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
(i) Each Grantor shall keep accurate and complete records of its
Accounts ("Account Records") and from time to time at reasonable intervals
designated by the Administrative Agent such Grantor shall provide the
Administrative Agent with a schedule of Accounts in form and substance
acceptable to the Administrative Agent describing all Accounts created or
acquired by such Grantor ("Schedule of Accounts"); provided, however, that
such Grantor's failure to execute and deliver any such Schedule of Accounts
shall not affect or limit the Administrative Agent's security interest or
other rights in and to any Accounts for the benefit of the Secured Parties.
If requested by the Administrative Agent, each Grantor shall furnish the
Administrative Agent with copies of proof of delivery and other documents
relating to the Accounts so scheduled, including without limitation
repayment histories and present status reports (collectively, "Account
Documents") and such other matter and information relating to the status of
then existing Accounts as the Administrative Agent shall reasonably
request.
(ii) All Account Records and Account Documents are and shall at all
times be located only at such Grantor's current chief executive office as
set forth on Schedule 7(f) attached hereto, such other locations as are
specifically identified on Schedule 7(f) attached hereto as an "Account
Documents location," or as to which the Grantor has complied with Section
7(f) hereof.
(iii) The Accounts are genuine, are in all respects what they purport
to be, are not evidenced by an instrument or document or, if evidenced by
an instrument or document, are only evidenced by one original instrument or
document.
(iv) The Accounts cover bona fide sales and deliveries of Inventory
usually dealt in by such Grantor, or the rendition by such Grantor of
services, to an Account Debtor in the ordinary course of business.
(v) The amounts of the face value of any Account shown or reflected on
any Schedule of Accounts, invoice statement, or certificate delivered to
the Administrative Agent, are actually owing to such Grantor and are not
contingent for any reason; and there are no setoffs, discounts, allowances,
claims, counterclaims or disputes of any kind or description in an amount
greater than $100,000 in the aggregate, or greater than $25,000
individually, existing or asserted with respect thereto and such Grantor
has not made any agreement with any Account Debtor thereunder for any
deduction therefrom, except as may be stated in the Schedule of Accounts
and reflected in the calculation of the face value of each respective
invoice related thereto.
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(vi) Except for conditions generally applicable to such Grantor's
industry and markets, there are no facts, events, or occurrences known to
such Grantor pertaining particularly to any Accounts which are reasonably
expected to materially impair in any way the validity, collectibility or
enforcement of Accounts that would reasonably be likely, in the aggregate,
to be of material economic value, or in the aggregate materially reduce the
amount payable thereunder from the amount of the invoice face value shown
on any Schedule of Accounts, or on any certificate, contract, invoice or
statement delivered to the Administrative Agent with respect thereto.
(vii) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any Lien, claim,
encumbrance or security interest, except those of the Administrative Agent
for the benefit of Secured Parties and Permitted Liens.
(viii) In the event any amounts due and owing in excess of $25,000
individually, or $100,000 in the aggregate amount, are in dispute between
any Account Debtor and a Grantor (which shall include without limitation
any dispute in which an offset claim or counterclaim may result), such
Grantor shall provide the Administrative Agent with written notice thereof
as soon as practicable, explaining in detail the reason for the dispute,
all claims related thereto and the amount in controversy.
(b) Inventory. With respect to its Inventory whether now existing or
hereafter created or acquired and wheresoever located, each Grantor represents,
warrants and covenants to the Administrative Agent for the benefit of the
Secured Parties that:
(i) Each Grantor shall keep accurate and complete records itemizing
and describing the kind, type, location and quantity of Inventory, its cost
therefor and the selling price of Inventory held for sale, and the daily
withdrawals therefrom and additions thereto, and shall furnish to the
Administrative Agent from time to time at reasonable intervals designated
by the Administrative Agent, a current schedule of Inventory ("Schedule of
Inventory") based upon its most recent physical inventory and its daily
inventory records. Each Grantor shall conduct a physical inventory no less
frequently than annually, and shall furnish to the Administrative Agent
such other documents and reports thereof as the Administrative Agent shall
reasonably request with respect to the Inventory.
(ii) All Inventory is and shall at all times be located only at such
Grantor's locations as set forth on Schedule 7(f) attached hereto or at
such other locations as to which such Grantor has complied with Section
7(f) hereof. No Grantor shall, other than in the ordinary course of
business in connection with its sale, lease, license or other permitted
disposition, remove any Inventory having an aggregate value in excess of
that stated in the preceding sentence from such locations.
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(iii) If any Account Debtor returns any Inventory to a Grantor after
shipment thereof, and such return generates a credit in excess of $25,000
on any individual Account or $100,000 in the aggregate on any Accounts of
such Account Debtor, such Grantor shall notify the Administrative Agent in
writing of the same as soon as practicable.
(c) Supporting Obligations. With respect to its Supporting Obligations
whether now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
(i) Each Grantor shall from time to time at the Administrative Agent's
request, furnish a current list identifying in reasonable detail each
Supporting Obligation relating to any Collateral from a single obligor in
excess of $25,000, and (ii) upon the request of the Administrative Agent
from time to time following the occurrence and during the continuance of
any Default or Event of Default, deliver to the Administrative Agent the
originals of all documents evidencing or constituting Supporting
Obligations, together with such other documentation (executed as
appropriate by the Grantor) and information as may be necessary to enable
the Administrative Agent to realize upon the Supporting Obligations in
accordance with their respective terms or transfer the Supporting
Obligations as may be permitted under the Loan Documents or by applicable
law.
(ii) With respect to each letter of credit that constitutes a
Supporting Obligation and has an aggregate stated amount available to be
drawn in excess of $25,000, each Grantor shall, at the request of the
Administrative Agent, cause the issuer thereof to execute and deliver to
the Administrative Agent a Qualifying Control Agreement.
10. Casualty and Liability Insurance Required.
(a) Each Grantor will keep the Collateral continuously insured against such
risks as are customarily insured against by businesses of like size and type
engaged in the same or similar operations including:
(i) casualty insurance on the Inventory in an amount not less than the
full insurable value thereof, against loss or damage by theft, fire,
lightning and other hazards ordinarily included under uniform broad form
standard extended coverage policies, limited only as may be provided in the
standard broad form of extended coverage endorsement at the time in use in
the states in which the Collateral is located;
(ii) comprehensive general liability insurance against claims for
bodily injury, death or property damage occurring with or about such
Collateral (such coverage to include provisions waiving subrogation against
the Secured Parties), with the Administrative Agent and the Lenders as
additional insureds thereunder, in amounts as shall be reasonably
satisfactory to Administrative Agent;
(iii) liability insurance with respect to the operation of its
facilities under the workers' compensation laws of the states in which such
Collateral is located, in amounts as shall be reasonably satisfactory to
Administrative Agent; and
(iv) business interruption insurance in amounts as shall be reasonably
satisfactory to Administrative Agent.
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(b) Each insurance policy obtained in satisfaction of the requirements of
Section 10(a):
(i) may be provided by blanket policies now or hereafter maintained by
each or any Grantor or by a Borrower;
(ii) shall be issued by such insurer (or insurers) as shall be
financially responsible, of recognized standing and reasonably acceptable
to the Administrative Agent;
(iii) shall be in such form and have such provisions (including
without limitation the loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee
endorsement clause) as are generally considered standard provisions for the
type of insurance involved and are reasonably acceptable in all respects to
the Administrative Agent;
(iv) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30 days'
prior written notice to the Administrative Agent, except for non-payment of
premium, as to which such policies shall provide for at least ten (10)
days' prior written notice to the Administrative Agent;
(v) without limiting the generality of the foregoing, all insurance
policies where applicable under Section 10(a)(i) carried on the Collateral
shall name the Administrative Agent, for the benefit of the Secured
Parties, as loss payee and the Administrative Agent and Lenders as parties
insured thereunder in respect of any claim for payment.
(c) Prior to expiration of any such policy, such Grantor shall furnish the
Administrative Agent with evidence satisfactory to the Administrative Agent that
the policy or certificate has been renewed or replaced or is no longer required
by this Security Agreement.
(d) Each Grantor hereby makes, constitutes and appoints the Administrative
Agent (and all officers, employees or agents designated by the Administrative
Agent), for the benefit of the Secured Parties, as such Grantor's true and
lawful attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of such
Grantor on any check, draft, instrument or other item or payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance, which appointment is
coupled with an interest and is irrevocable; provided, however, that the powers
pursuant to such appointment shall be exercisable only upon the occurrence and
during the continuation of an Event of Default.
(e) In the event such Grantor shall fail to maintain, or fail to cause to
be maintained, the full insurance coverage required hereunder or shall fail to
keep any of its Collateral in good repair and good operating condition, the
Administrative Agent may (but shall be under no obligation to), without waiving
or releasing any Secured Obligation or Default or Event of Default by such
Grantor hereunder, contract for the required policies of insurance and pay the
premiums on the same or make any required repairs, renewals and replacements;
and all sums so disbursed by Administrative Agent, including reasonable
attorneys' fees, court costs, expenses and other charges related thereto, shall
be payable on demand by such Grantor to the Administrative Agent, shall be
additional Secured Obligations secured by the Collateral, and (in addition to
other rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
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(f) Each Grantor agrees that to the extent that it shall fail to maintain,
or fail to cause to be maintained, the full insurance coverage required by
Section 10(a), it shall in the event of any loss or casualty pay promptly to the
Administrative Agent, for the benefit of the Secured Parties, to be held in a
separate account for application in accordance with the provisions of Sections
10(h), such amount as would have been received as Net Proceeds (as hereinafter
defined) by the Administrative Agent, for the benefit of the Secured Parties,
under the provisions of Section 10(h) had such insurance been carried to the
extent required.
(g) The Net Proceeds of the insurance carried pursuant to the provisions of
Sections 10(a)(ii) and 10(a)(iii) shall be applied by such Grantor toward
satisfaction of the claim or liability with respect to which such insurance
proceeds may be paid. So long as no Default or Event of Default has occurred,
the Net Proceeds of insurance carried pursuant to the provisions of Section
10(a)(iv) shall be paid to such Grantor.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be paid
to such Grantor and held by such Grantor in a separate account and applied, as
long as no Event of Default shall have occurred and be continuing, as follows:
after any loss under any such insurance and payment of the proceeds of such
insurance, each Grantor shall have a period of 30 days after payment of the
insurance proceeds with respect to such loss to elect to either (x) apply such
Net Proceeds to repair or replace the Collateral so damaged, (y) deliver such
Net Proceeds to the Administrative Agent, for the benefit of the Secured
Parties, as additional Collateral or (z) apply such Net Proceeds to the
acquisition of tangible assets constituting Collateral used or useful in the
conduct of the business of such Grantor, subject to the provisions of this
Security Agreement. If such Grantor elects to repair or replace the Collateral
so damaged, such Grantor agrees the Collateral shall be repaired to a condition
substantially similar to or of better quality or higher value than its condition
prior to damage or replaced with Collateral in a condition substantially similar
to or of better quality or higher value than the condition of the Collateral so
replaced prior to damage. At all times during which an Event of Default shall
have occurred and be continuing, the Administrative Agent shall be entitled to
receive direct and immediate payment of the proceeds of such insurance and such
Grantor shall take all action as the Administrative Agent may reasonably request
to accomplish such payment. Notwithstanding the foregoing, in the event such
Grantor shall receive any such proceeds, such Grantor shall immediately deliver
such proceeds to such Administrative Agent for the benefit of the Secured
Parties as additional Collateral, and pending such delivery shall hold such
proceeds in trust for the benefit of the Secured Parties and keep the same
segregated from its other funds.
(i) "Net Proceeds" when used with respect to any insurance proceeds shall
mean the gross proceeds from such proceeds, award or other amount, less all
taxes, fees and expenses (including attorneys' fees) incurred in the realization
thereof.
(j) In case of any material damage to, destruction or loss of, or claim or
proceeding against, all or any material part of the Collateral pledged hereunder
by a Grantor, such Grantor shall give prompt notice thereof to the
Administrative Agent. Each such notice shall describe generally the nature and
extent of such damage, destruction, loss, claim or proceeding. Subject to
Section 10(d), each Grantor is hereby authorized and empowered to adjust or
compromise any loss under any such insurance other than losses relating to
claims made directly against any Secured Party as to which the insurance
described in Section 10(a)(ii) or (iii) is applicable.
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(k) The provisions contained in this Security Agreement pertaining to
insurance shall be cumulative with any additional provisions imposing additional
insurance requirements with respect to the Collateral or any other property on
which a Lien is conferred under any Security Instrument.
11. Rights and Remedies Upon Event of Default. Upon and after an Event of
Default, the Administrative Agent shall have the following rights and remedies
on behalf of the Secured Parties in addition to any rights and remedies set
forth elsewhere in this Security Agreement or the other Loan Documents, all of
which may be exercised with or, if allowed by law, without notice to a Grantor:
(a) All of the rights and remedies of a secured party under the UCC or
under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Security
Agreement or any other Loan Document;
(b) The right to foreclose the Liens and security interests created under
this Security Agreement by any available judicial procedure or without judicial
process;
(c) The right to (i) enter upon the premises of a Grantor through self-help
and without judicial process, without first obtaining a final judgment or giving
such Grantor notice or opportunity for a hearing on the validity of the
Administrative Agent's claim and without any obligation to pay rent to such
Grantor, or any other place or places where any Collateral is located and kept,
and remove the Collateral therefrom to the premises of the Administrative Agent
or any agent of the Administrative Agent, for such time as the Administrative
Agent may desire, in order effectively to collect or liquidate the Collateral,
(ii) require such Grantor or any bailee or other agent of such Grantor to
assemble the Collateral and make it available to the Administrative Agent at a
place to be designated by the Administrative Agent that is reasonably convenient
to both parties, and (iii) notify any or all Persons party to a Qualifying
Control Agreement or who otherwise have possession of or control over any
Collateral of the occurrence of an Event of Default and other appropriate
circumstances, and exercise control over and take possession or custody of any
or all Collateral in the possession, custody or control of such other Persons;
(d) The right to (i) exercise all of a Grantor's rights and remedies with
respect to the collection of Accounts, Instruments, and Supporting Obligations
(collectively, "Payment Collateral"), including the right to demand payment
thereof and enforce payment, by legal proceedings or otherwise; (ii) settle,
adjust, compromise, extend or renew all or any Payment Collateral or any legal
proceedings pertaining thereto; (iii) discharge and release all or any Payment
Collateral; (iv) take control, in any manner, of any item of payment or proceeds
referred to in Section 5 above; (v) prepare, file and sign a Grantor's name on
any Proof of Claim in bankruptcy, notice of Lien, assignment or satisfaction of
Lien or similar document in any action or proceeding adverse to any obligor
under any Payment Collateral or otherwise in connection with any Payment
Collateral; (vi) endorse the name of a Grantor upon any document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to any Collateral; (vii) use the information recorded on or contained in any
data processing equipment and computer hardware and software relating to any
Collateral to which a Grantor has access; (viii) open such Grantor's mail and
collect any and all amounts due to such Grantor from any Account Debtors or
other obligor in respect of Payment Collateral; (ix) take over such Grantor's
post office boxes or make other arrangements as the Administrative Agent, on
behalf of the Secured Parties, deems necessary to receive such Grantor's mail,
including notifying the post office authorities to change the address for
delivery of such Grantor's mail to such address as the Administrative Agent, on
behalf of the Secured Parties, may designate; (x) notify any or all Account
Debtors or other obligor on any Payment Collateral that such Payment Collateral
has been assigned to the Administrative Agent for the benefit of the Secured
Parties and that the Administrative Agent has a security interest therein for
the benefit of the Secured Parties (provided that the Administrative Agent may
at any time give such notice to an Account Debtor that is a department, agency
or authority of the United States government); each Grantor hereby agrees that
any such notice, in the Administrative Agent's sole discretion, may (but need
not) be sent on such Grantor's stationery, in which event such Grantor shall
co-sign such notice with the Administrative Agent; and (xi) do all acts and
things and execute all documents necessary, in Administrative Agent's sole
discretion, to collect the Payment Collateral; and
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(e) Subject to the terms of the applicable Beverage Agreement, the
right to sell all or any Collateral in its then existing condition, or after any
further manufacturing or processing thereof, at such time or times, at public or
private sale or sales, with such notice as may be required by law, in lots or in
bulk, for cash or on credit, with or without representations and warranties, all
as the Administrative Agent, in its sole discretion, may deem advisable. The
Administrative Agent shall have the right to conduct such sales on a Grantor's
premises or elsewhere and shall have the right to use a Grantor's premises
without charge for such sales for such time or times as the Administrative Agent
may see fit. The Administrative Agent may, if it deems it reasonable, postpone
or adjourn any sale of the Collateral from time to time by an announcement at
the time and place of such postponed or adjourned sale, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor agrees that the Administrative Agent has no obligation
to preserve rights to the Collateral against prior parties or to marshall any
Collateral for the benefit of any Person. Subject to the terms of the applicable
Beverage Agreement, the Administrative Agent for the benefit of the Secured
Parties is hereby granted a license or other right to use, without charge, each
Grantor's labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral and a Grantor's rights under any
license and any franchise agreement shall inure to the Administrative Agent's
benefit. If any of the Collateral shall require repairs, maintenance,
preparation or the like, or is in process or other unfinished state, the
Administrative Agent shall have the right, but shall not be obligated, to
perform such repairs, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form as the
Administrative Agent shall deem appropriate, but the Administrative Agent shall
have the right to sell or dispose of the Collateral without such processing and
no Grantor shall have any claim against the Administrative Agent for the value
that may have been added to such Collateral with such processing. In addition,
each Grantor agrees that in the event notice is necessary under applicable law,
written notice mailed to such Grantor in the manner specified herein seven (7)
days prior to the date of public sale of any of the Collateral or prior to the
date after which any private sale or other disposition of the Collateral will be
made shall constitute commercially reasonable notice to such Grantor. All notice
is hereby waived with respect to any of the Collateral which threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Administrative Agent may purchase all or any part of the Collateral
at public or, if permitted by law, private sale, free from any right of
redemption which is hereby expressly waived by such Grantor and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Secured Obligations. Each Grantor recognizes that the Administrative
Agent may be unable to effect a public sale of certain of the Collateral by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state law, and may be otherwise
delayed or adversely affected in effecting any sale by reason of present or
future restrictions thereon imposed by governmental authorities ("Affected
Collateral"), and that as a consequence of such prohibitions and restrictions
the Administrative Agent may be compelled (i) to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire Affected Collateral for their own account, for
investment and not with a view to the distribution or resale thereof, or (ii) to
seek regulatory approval of any proposed sale or sales, or (iii) to limit the
amount of Affected Collateral sold to any Person or group. Each Grantor agrees
and acknowledges that private sales so made may be at prices and upon terms less
favorable to such Grantor than if such Affected Collateral was sold either at
public sales or at private sales not subject to other regulatory restrictions,
and that the Administrative Agent has no obligation to delay the sale of any
Affected Collateral for the period of time necessary to permit the Grantor or
any other Person to register or otherwise qualify them under or exempt them from
any applicable restriction, even if such Grantor or other Person would agree to
register or otherwise qualify or exempt such Affected Collateral so as to permit
a public sale under the Securities Act or applicable state law. Each Grantor
further agrees, to the extent permitted by applicable law, that the use of
private sales made under the foregoing circumstances to dispose of Affected
Collateral shall be deemed to be dispositions in a commercially reasonable
manner. Each Grantor hereby acknowledges that a ready market may not exist for
Affected Collateral that is not traded on a national securities exchange or
quoted on an automated quotation system.
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The net cash proceeds resulting from the collection, liquidation, sale, or other
disposition of the Collateral shall be applied first to the expenses (including
all attorneys' fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting, liquidating and the like, and then to the
satisfaction of all Secured Obligations in accordance with the terms of Section
11.5 of the Credit Agreement. Each Grantor shall be liable to the Administrative
Agent, for the benefit of the Secured Parties, and shall pay to the
Administrative Agent, for the benefit of the Secured Parties, on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral.
12. Attorney-in-Fact. Each Grantor hereby appoints the Administrative
Agent as the Grantor's attorney-in-fact for the purposes of carrying out the
provisions of this Security Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of an Event of Default. Without limiting the generality of the
foregoing, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right and power
(a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to endorse such Grantor's name on any checks, notes, drafts or any
other payment relating to or constituting proceeds of the Collateral which comes
into the Administrative Agent's possession or the Administrative Agent's
control, and deposit the same to the account of the Administrative Agent, for
the benefit of the Secured Parties, on account and for payment of the Secured
Obligations.
(d) to file any claims or take any action or institute any proceedings that
the Administrative Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Administrative
Agent, for the benefit of the Secured Parties, with respect to any of the
Collateral; and
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(e) to execute, in connection with any sale or other disposition of
Collateral provided for herein, any endorsement, assignments, or other
instruments of conveyance or transfer with respect thereto.
13. Reinstatement. The granting of a security interest in the Collateral
and the other provisions hereof shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Secured Obligations
is rescinded or must otherwise be returned by any Secured Party, whether upon
the insolvency, bankruptcy or reorganization of any Grantor or any other Credit
Party or otherwise, all as though such payment had not been made. The provisions
of this Section 13 shall survive repayment of all of the Secured Obligations and
the termination or expiration of this Security Agreement in any manner,
including but not limited to termination upon occurrence of the Facility
Termination Date.
14. Certain Waivers by the Grantors. Each Grantor waives to the extent
permitted by applicable law (a) any right to require any Secured Party or any
other obligee of the Secured Obligations to (x) proceed against any Person or
entity, including without limitation any Credit Party, (y) proceed against or
exhaust any Collateral or other collateral for the Secured Obligations, or (z)
pursue any other remedy in its power; (b) any defense arising by reason of any
disability or other defense of any other Person, or by reason of the cessation
from any cause whatsoever of the liability of any other Person or entity, (c)
any right of subrogation, (d) any right to enforce any remedy which any Secured
Party or any other obligee of the Secured Obligations now has or may hereafter
have against any other Person and any benefit of and any right to participate in
any collateral or security whatsoever now or hereafter held by the
Administrative Agent for the benefit of the Secured Parties. Each Grantor
authorizes each Secured Party and each other obligee of the Secured Obligations
without notice (except notice required by applicable law) or demand and without
affecting its liability hereunder or under the Loan Documents from time to time
to: (i) take and hold security, other than the Collateral herein described, for
the payment of such Secured Obligations or any part thereof, and exchange,
enforce, waive and release the Collateral herein described or any part thereof
or any such other security; and (ii) apply such Collateral or other security and
direct the order or manner of sale thereof as such Secured Party or obligee in
its discretion may determine.
The Administrative Agent may at any time deliver (without representation,
recourse or warranty) the Collateral or any part thereof to a Grantor and the
receipt thereof by such Grantor shall be a complete and full acquittance for the
Collateral so delivered, and the Administrative Agent shall thereafter be
discharged from any liability or responsibility therefor.
15. Continued Powers. Until the Facility Termination Date shall have
occurred, the power of sale and other rights, powers and remedies granted to the
Administrative Agent for the benefit of the Secured Parties hereunder shall
continue to exist and may be exercised by the Administrative Agent at any time
and from time to time.
16. Other Rights. The rights, powers and remedies given to the
Administrative Agent for the benefit of the Secured Parties by this Security
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent or any Secured Party under any Related Agreement or by
virtue of any statute or rule of law. Any forbearance or failure or delay by the
Administrative Agent in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in accordance with the terms of the Credit
Agreement.
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17. Anti-Marshaling Provisions. The right is hereby given by each Grantor
to the Administrative Agent, for the benefit of the Secured Parties, to make
releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Administrative Agent without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
Liens and security interests in the remaining Collateral conferred hereunder,
nor release any Grantor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral
held by the Administrative Agent, for the benefit of the Secured Parties, the
Administrative Agent shall have the right to determine the order in which any or
all of the Collateral shall be subjected to the remedies provided in this
Security Agreement. Each Grantor hereby waives any and all right to require the
marshaling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or in any Related Agreement.
18. Entire Agreement. This Security Agreement, together with the Credit
Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as contained in the Loan Documents. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof. Neither this Security Agreement nor any portion or
provision hereof may be changed, altered, modified, supplemented, discharged,
canceled, terminated, or amended orally or in any manner other than as provided
in the Credit Agreement.
19. Third Party Reliance. Each Grantor hereby consents and agrees that all
issuers of or obligors in respect of any Collateral, and all securities
intermediaries, warehousemen, bailees, public officials and other Persons having
any interest in, possession of, control over or right, privilege, duty or
discretion in respect of, any Collateral shall be entitled to accept the
provisions hereof as conclusive evidence of the right of the Administrative
Agent, on behalf of the Secured Parties, to exercise its rights hereunder with
respect to the Collateral, notwithstanding any other notice or direction to the
contrary heretofore or hereafter given by any Grantor or any other Person to any
of such Persons.
20. Binding Agreement; Assignment. This Security Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that no Grantor shall be permitted to assign this Security Agreement or any
interest herein or, except as expressly permitted herein or in the Credit
Agreement, in the Collateral or any part thereof, or otherwise, except as
expressly permitted herein or in the Credit Agreement, pledge, encumber or grant
any option with respect to the Collateral or any part thereof. Without limiting
the generality of the foregoing sentence of this Section 20, any Lender may
assign to one or more Persons, or grant to one or more Persons participations in
or to, all or any part of its rights and obligations under the Credit Agreement
(to the extent permitted by the Credit Agreement); and to the extent of any such
assignment or participation such other Person shall, to the fullest extent
permitted by law, thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise, subject however, to the
provisions of the Credit Agreement, including Article XII thereof (concerning
the Administrative Agent) and Section 13.1 thereof (concerning assignments and
participations). All references herein to the Administrative Agent and to the
Secured Parties shall include any successor thereof or permitted assignee, and
any other obligees from time to time of the Secured Obligations.
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21. Swap Agreements. All obligations of each Grantor under or in respect of
Swap Agreements (which are not prohibited under the terms of the Credit
Agreement) to which any Lender or any affiliate of any Lender is a party, shall
be deemed to be Secured Obligations secured hereby, and each Lender or affiliate
of a Lender party to any such Swap Agreement shall be deemed to be a Secured
Party hereunder with respect to such Secured Obligations; provided, however,
that such obligations shall cease to be Secured Obligations at such time as such
Person (or affiliate of such Person) shall cease to be a "Lender" under the
Credit Agreement.
22. Severability. The provisions of this Security Agreement are independent
of and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Security Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
23. Counterparts. This Security Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart executed by
the Grantor against whom enforcement is sought.
24. Termination. Subject to the provisions of Section 13, this Security
Agreement and all obligations of the Grantors hereunder (excluding those
obligations and liabilities that expressly survive such termination) shall
terminate without delivery of any instrument or performance of any act by any
party on the Facility Termination Date. Upon such termination of this Security
Agreement, the Administrative Agent shall, at the request and sole expense of
the Grantors, promptly deliver to the Grantors such termination statements and
take such further actions as the Grantors may reasonably request to terminate of
record, or otherwise to give appropriate notice of the termination of, any Lien
conferred hereunder.
25. Indemnification. Without limitation of Section 13.9 of the Credit
Agreement or any other indemnification provision in any Loan Document, the
Grantors agree jointly and severally to indemnify and hold harmless each Secured
Party and each of their affiliates, and their respective officers, directors,
employees, agents, and advisors (each, an "Indemnified Party"), from and against
any and all claims, damages, losses, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees) that may be incurred
by or asserted or awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of
defense in connection therewith) the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the Loans
or other extension of credit under the Loan Documents except to the extent such
claim, damage, loss, liability, cost, or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 25 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by any Grantor or any
other Credit Party, any of their respective directors, shareholders or
creditors, or an Indemnified Party or any other Person, or any Indemnified Party
is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. Each Grantor agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
it, any of its subsidiaries or affiliates, or any security holders or creditors
thereof arising out of, related to or in connection with the transactions
contemplated herein or in the other Loan Documents, except to the extent that
such liability is found in a final non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct. Each Grantor agrees not to assert any
claim against any Secured Party, any of its affiliates, or any of their
respective directors, officers, employees, attorneys, agents, or advisers, on
any theory of liability, for special, indirect, consequential, or punitive
damages arising out of or otherwise relating to the Loan Documents, any of the
transactions contemplated therein or the actual or proposed use of the proceeds
of the Loans or other extensions of credit under the Loan Documents. The
agreements in this Section 25 shall survive repayment of all of the Secured
Obligations and the termination or expiration of this Security Agreement in any
manner, including but not limited to termination upon occurrence of the Facility
Termination Date.
26. Notices. Any notice required or permitted hereunder shall be given (a)
with respect to the Borrower, at the address for the giving of notice then in
effect under the Credit Agreement, (b) with respect to any Grantor, at the
address then in effect for the giving of notices to such Grantor under the
Facility Guaranty to which it is a party, and (c) with respect to the
Administrative Agent or a Lender, at the Administrative Agent's address
indicated in Section 13.2 of the Credit Agreement. All such addresses may be
modified, and all such notices shall be given and shall be effective, as
provided in Section 13.2 of the Credit Agreement.
27. Rules of Interpretation. The rules of interpretation contained in
Sections 1.2(c) through 1.2(l) of the Credit Agreement shall be applicable to
this Security Agreement and are hereby incorporated by reference. All
representations and warranties contained herein shall survive the delivery of
documents and any extension of credit referred to herein or secured hereby.
28. Governing Law; Waivers.
(a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE; PROVIDED THAT
(i) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS
RULES OF SUCH STATE, INCLUDING SECTION 9-103 OF THE UCC, REQUIRE THAT THE
MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE
MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING
PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH
MATTERS, (ii) EACH CONTROL AGREEMENT (INCLUDING EACH QUALIFYING CONTROL
AGREEMENT) APPLICABLE TO ANY SECURITIES ACCOUNT OR DEPOSIT ACCOUNT SHALL BE
GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED IN SUCH CONTROL
AGREEMENT, OR OTHERWISE BY THE LAWS OF THE JURISDICTION THAT GOVERN THE
SECURITIES ACCOUNT OR DEPOSIT ACCOUNT TO WHICH SUCH CONTROL AGREEMENT
RELATES, AND (iii) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION
IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND
EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH
RESPECT TO SUCH MATTERS.
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(b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
MECKLENBURG, STATE OF NORTH CAROLINA, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, EXPRESSLY WAIVES ANY
OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR
TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY
SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN
SECTION 26 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
ANY GRANTOR FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY EXPRESSLY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON
MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING.
J-20
<PAGE>
(f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS
HEREOF IS AN INCONVENIENT FORUM.
[Signature pages follow]
J-21
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
on the day and year first written above.
GRANTORS
PEPSI AMERICA, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
DAKBEV, LLC
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Signature Page 1 of 2
<PAGE>
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N. A., as Administrative
Agent for the Lenders
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Signature Page 2 of 2
<PAGE>
SCHEDULE 1
For purposes of this Security Agreement, a "Qualifying Control Agreement"
shall mean each of the following, as applicable to the respective items or types
of property in which the Grantor now has or may hereafter acquire an interest:
(a) With respect to Investment Property credited to any securities
account, an agreement executed by the applicable securities intermediary
substantially in the form of Schedule 1-A hereto or in such other form as
may be consented to by the Administrative Agent in its discretion;
(b) With respect to deposit accounts or tangible personal property
Collateral in the possession, custody or control of any warehouseman or
other bailee, an acknowledgment and agreement executed by the depositary
institution or bailee (each, a "Custodian"), as the case may be, in form
and substance acceptable to the Administrative Agent and in which the
Custodian (i) acknowledges the Lien created hereunder (and, in the case of
any Custodian of tangible personal property, that such Custodian holds such
Collateral for the Administrative Agent for the benefit of the Secured
Parties), (ii) agrees to discontinue accepting requests or demands from or
on behalf of the applicable Grantor for access to or possession of any
Collateral of which it is Custodian upon receipt of notice from the
Administrative Agent that a Default or Event of Default has occurred and is
continuing (a "Default Notice"), until such time as the Administrative
Agent may furnish it with a subsequent notice that such Default or Event of
Default has been cured or waived, (iii) agrees to make the Collateral of
which it is Custodian available to the Administrative Agent at the request
of the Administrative Agent, without requiring further consent from the
Grantor, following receipt of any Default Notice from the Administrative
Agent, (iv) agrees that it will not consent to or acknowledge any Lien on
Collateral of which it is Custodian in favor of any other Person and, as to
Deposit Accounts only, agrees that it will not permit any withdrawals from
such deposit accounts, until it receives notice from the Administrative
Agent that all Liens on such Collateral in favor of the Secured Parties
have been released or terminated, (v) agrees to waive or subordinate to the
Lien conferred hereunder, on terms acceptable to the Administrative Agent,
any lien, claim, or right of setoff or recoupment (whether statutory or
consensual) in favor of the Custodian on any of the Collateral; provided,
however, deposit account Custodians may retain a prior Lien solely for the
payment of routine deposit account maintenance and activity charges, and
(vi) in the case of any warehouseman or other bailee of tangible personal
property collateral, agrees to deliver (and accompanies such agreement with
any then existing) warehouse receipts or other Documents pertaining to such
Collateral ;
(c) With respect to letter of credit rights (including those
constituting Supporting Obligations), an acknowledgment and agreement of
the issuer (the "Issuer") of the related letter of credit in form and
substance acceptable to the Administrative Agent and in which the Issuer
(i) acknowledges the Lien in favor of the Administrative Agent conferred
hereunder in proceeds of drawings under the related letter of credit, (ii)
agrees that it will not acknowledge any Lien in favor of any other Person
on letter of credit rights until it receives notice from the Administrative
Agent that all Liens on such Collateral in favor of the Secured Parties
have been released or terminated, and (iii) to the extent not inconsistent
with the express terms of the related letter of credit, agrees that upon
receipt of notice from the Administrative Agent that an Event of Default
has occurred and is continuing, it will make all payments of drawings
honored by it under the related letter of credit to the Administrative
Agent, notwithstanding any contrary instruction received from the Grantor;
and
A-1
<PAGE>
(d) With respect to any Investment Property (x) that is not (i) a
certificated security or (ii) a security entitlement maintained in a
securities account and (y) as to which a registrar (the "Registrar") has
been or is at any time appointed to maintain records for the registry of
the ownership or transfer of ownership of such Investment Property, an
acknowledgment and agreement of the Registrar in form and substance
acceptable to the Administrative Agent and in which the Registrar (i)
acknowledges that the Grantor is at the date of such acknowledgment the
sole record and, to its knowledge, beneficial owner of the Investment
Property, (ii) acknowledges the Lien in favor of the Administrative Agent
conferred hereunder and that such Lien will be reflected on the registry
for such Investment Property, (iii) agrees that it will not register any
transfer of such Investment Property nor register, consent to or
acknowledge any Lien in favor of any other Person on such Investment
Property, without the prior written consent of the Administrative Agent in
each instance, until it receives notice from the Administrative Agent that
all Liens on such Collateral in favor of the Secured Parties have been
released or terminated, and (iv) agrees that upon receipt of notice from
the Administrative Agent that an Event of Default has occurred and is
continuing and that the Investment Property identified in such notice have
been transferred to a transferee identified in such notice, it will duly
record such transfer of Investment Property on the appropriate registry
without requiring further consent from the Grantor and shall thereafter
treat such transferee as the sole record and beneficial owner of such
Investment Property pending further transfer, notwithstanding any contrary
instruction received from the Grantor.
A-2
<PAGE>
SCHEDULE 1-A
ACCOUNT CONTROL AGREEMENT
Bank of America, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent") for the Lenders (the "Lenders" and, together with the
Administrative Agent, the "Secured Parties") under that certain Credit Agreement
dated as of October 15, 1999 (as amended, supplemented or restated from time to
time, the "Credit Agreement") among the Administrative Agent, the Lenders, and
________________ ("Debtor"), the undersigned Broker-Dealer ("Broker"), and
Debtor hereby agree as follows:
PREAMBLE:
1. Broker has established a securities account number __________ in the
name of Debtor (the "Account").
2. Debtor has granted the Administrative Agent a security interest in the
Account for the benefit of the Secured Parties pursuant to agreement.
3. Administrative Agent, Debtor and Broker are entering into this Agreement
to provide for the control of the Account and to perfect the security interest
of Administrative Agent in the Account.
TERMS:
Section 1. The Account. Broker hereby represents and warrants to
Administrative Agent and Debtor that (a) the Account has been established in the
name of Debtor as recited above, (b) Exhibit A hereto is a complete and accurate
statement of the Account and the financial assets carried therein and any free
credit balance thereunder as of the date thereof, (c) Exhibit A does not reflect
any financial assets which are registered in the name of Debtor, payable to its
order, or specially endorsed to it, which have not been endorsed to Broker or in
blank, (d) the security entitlements arising out of the financial assets carried
in the Account and such free credit balance are valid and legally binding
obligations of Broker, and (e) except for the claims and interest of
Administrative Agent and Debtor in the Account (subject to any claim in favor of
Broker permitted under Section 2), Broker does not know any of claim to or
interest in Account. Broker will treat all property held by it in the Account as
financial assets under Article 8 of the Uniform Commercial Code of the State of
_________________ (the "State").
A-3
<PAGE>
Section 2. Priority of Lien. Broker hereby acknowledges the security
interest granted to Administrative Agent for the benefit of the Secured Parties
by Debtor. Broker hereby confirms that the Account is a cash account and that it
will not advance any margin or other credit to Debtor therein, either directly
by executing purchase orders in excess of any credit balance or money market
mutual funds held in the Account, executing sell orders on securities not held
in the Account, or by allowing Debtor to trade in instruments such as options
and commodities contracts that create similar obligations, nor hypothecate any
securities carried in the Account. Broker hereby subordinates, to Administrative
Agent's security interest in the Account and to the payment and performance of
all obligations and liabilities of Debtor to any of the Secured Parties secured
by the Account, all liens, encumbrances, claims and rights of setoff or
recoupment it may have against the Account or any property in the Account and
agrees that, except for payment of its customary fees and commissions pursuant
to its agreement with Debtor pertaining to the Account (the "Customer
Agreement") and for payment of the purchase price of property purchased for the
Account in compliance with this Agreement, it will not assert any such lien,
encumbrance, claim or right against the Account or any property in the Account.
In the event that, notwithstanding the foregoing subordination, Broker shall
receive any cash or other property in respect of any subordinated claim, lien,
or right, Broker shall hold such cash or other property in trust for
Administrative Agent and, pending delivery thereof to Administrative Agent,
maintain such cash or other property in a segregated account. Broker will not
agree with any third party that Broker will comply with entitlement orders
concerning the Account originated by such third party without the prior written
consent of Administrative Agent and Debtor.
Section 3. Control. Broker will comply with entitlement orders originated
by Administrative Agent concerning the Account without further consent by
Debtor. Except as otherwise provided in Section 2 above and 4 below, Broker may
make trades of financial assets held in the Account at the direction of Debtor,
or his authorized representatives, and comply with entitlement orders concerning
the Account from Debtor, or its authorized representatives, until such time as
Administrative Agent delivers a written notice to Broker that Administrative
Agent is thereby exercising exclusive control over the Account. Such notice may
be referred to herein as the "Notice of Exclusive Control."
After Broker receives the Notice of Exclusive Control, it will immediately
cease complying with entitlement orders or other directions concerning the
Account originated by Debtor or its representatives.
Section 4. No Withdrawals. Notwithstanding the provisions of Section 3
above, Broker shall neither accept nor comply with any entitlement order from
Debtor withdrawing any financial assets from the Account nor deliver any such
financial assets (or dividends or income received in respect of such property)
to Debtor nor pay any free credit balance or other amount owing from Broker to
Debtor with respect to the Account without the specific prior written consent of
Administrative Agent, except that until Broker receives a Notice of Exclusive
Control, Broker may distribute to Debtor all interest and regular cash dividends
received in respect of property in the Account.
Section 5. Statements, Confirmations and Notices of Adverse Claims. Broker
will send copies of all statements, confirmations and other correspondence
concerning the Account simultaneously to each of Debtor and Administrative Agent
at the address set forth in the heading of this Agreement. If any person asserts
any lien, encumbrance or claim in or against the Account or in any financial
asset carried therein adverse to Debtor or Administrative Agent, Broker will
promptly notify Administrative Agent and Debtor thereof.
A-4
<PAGE>
Section 6. Responsibility of Broker. Except for permitting a withdrawal or
payment in violation of Section 4 above or advancing margin or other credit to
Debtor in violation of Section 2 above, Broker shall have no responsibility or
liability to Administrative Agent for making trades of financial assets held in
the Account at the direction of Debtor, or his authorized representatives, or
complying with entitlement orders concerning the Account from Debtor, or his
authorized representatives, which are received by Broker before Broker receives
a Notice of Exclusive Control. Broker shall have no responsibility or liability
to Debtor for complying with a Notice of Exclusive Control or complying with
entitlement orders concerning the Account originated by Administrative Agent.
Broker shall have no duty to investigate or make any determination as to whether
a default exists under the Credit Agreement or any other agreement between
Debtor and any Secured Party and shall comply with a Notice of Exclusive Control
even if it believes that no such default exists. This Agreement does not create
any obligation or duty of Broker other than those expressly set forth herein.
Section 7. Tax Reporting. All items of income, gain, expense, and loss
recognized in the Account shall be reported to the Internal Revenue Service and
all state and local taxing authorities under the name of taxpayer identification
number of Debtor.
Section 8. Customer Agreement. In the event of a conflict between this
Agreement and any other agreement between the Broker and the Debtor, the terms
of this Agreement will prevail. Regardless of any provision in such agreement,
the State shall be deemed to be Broker's location for the purposes of this
Agreement and the perfection and priority of Administrative Agent's security
interest in the Account.
Section 9. Termination. The rights and powers granted herein to
Administrative Agent have been granted in order to perfect its security interest
for the benefit of the Secured Parties in the Account, are powers coupled with
an interest and will neither be affected by the death, dissolution or insolvency
of Debtor nor by the lapse of time. The obligations and agreements of Broker
under Section 2, 3, 4 and 5 above shall continue in effect until the security
interest of Administrative Agent in the Account has been terminated and
Administrative Agent has notified Broker of such termination in writing. Upon
receipt of such notice the obligations of Broker under Section 2, 3, 4 and 5
above with respect to the operation and maintenance of the Account after the
receipt of such notice shall terminate, Administrative Agent shall have no
further right to originate entitlement orders concerning the Account and Broker
may take such steps as Debtor may request to vest full ownership and control of
Account in Debtor including, but not limited to, transferring all of the
financial assets and credit balances in the Account to another securities
account in the name of Debtor or its designee. Broker may terminate this
Agreement only upon not less than thirty (30) days' prior written notice to
Administrative Agent.
Section 10. This Agreement. This Agreement, the schedules and exhibits
hereto and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties with respect to the
subject matter hereof and supersede and discharge all prior agreements (written
or oral) and negotiations and all contemporaneous oral agreements concerning
such subject matter and negotiations. There are no oral conditions precedent to
the effectiveness of this Agreement.
Section 11. Amendments. No amendment, modification or termination of this
Agreement or waiver of any right hereunder shall be binding on any party hereto
unless it is in writing and is signed by the party to be charged.
A-5
<PAGE>
Section 12. Severability. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
Section 13. Successors. The terms of this Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
corporate successors or heirs and personal representatives, and the assignees of
any Secured Party.
Section 14. Rules of Construction. In this Agreement, words in the singular
number include the plural, and in the plural include the singular; words of the
masculine gender include the feminine and the neuter, and when the sense so
indicates words of the neuter gender may refer to any gender and the word "or"
is disjunctive, but not exclusive. The captions and section numbers appearing in
this Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.
Section 15. Notices. Any notice, request or other communication required or
permitted to be given under this Agreement shall be in writing and deemed to
have been properly given when delivered in person, or when sent by telecopy or
other electronic means and electronic confirmation of error free receipt is
received or two days after being sent by certified or registered United States
mail, return receipt requested, postage prepaid, addressed to the party at the
address set forth immediately following the signature of its authorized
representative set forth below. Any party may change his address for notices in
the manner set forth above.
Section 16. Financial Assets. All property credited to the Account will be
treated as financial assets under Article 8 of the Uniform Commercial Code of
the State.
Section 17. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
Section 18. Choice of Law. The parties hereto agree that certain material
events, occurrences and transactions relating to this Agreement bear a
reasonable relationship to the State. The validity, terms, performance and
enforcement of this Agreement shall be governed by those laws of the State which
are applicable to agreements which are negotiated, executed, delivered and
performed solely in the State.
SIGNATURES:
BANK OF AMERICA, N.A., as Administrative Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
Address for Notices:
Fax: ( ) ____ - ________
DEBTOR:
By:______________________________________
Name:____________________________________
Title:___________________________________
Address for Notices:
Fax: ( ) ____ - ________
[BROKER NAME]
By:______________________________________
Name:____________________________________
Title:___________________________________
Address for Notices:
Fax: ( ) ____ - ________
A-7
<PAGE>
SCHEDULE 7(f)
Grantor Information
<TABLE>
<CAPTION>
I. II. III. IV. V. VI. VII.
Collateral Name and Address Relationship of
Locations (and of Owner of Persons lised in VI to
Jurisdiction of Address of Chief Type Collateral Location Grantor (e.g., lessor,
Name Formation Executive Office Trade Styles of Collateral) (if other than Grantor warehousemen)
- - ---- --------- ---------------- ------------ -------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 9(e)
Investment Property
<TABLE>
<CAPTION>
Securities Accounts Other Investment Property
------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Name and Address of Securities Account Name and Type Quantity of Shares Certificate
Securities Intermediary Number of Issuer or Other Interest Number(s)
Grantor
</TABLE>
<PAGE>
SCHEDULE 9(f)
Deposit Accounts
<TABLE>
<CAPTION>
Name and Address of Depository Certificate of Deposit No.
Grantor Depository Institution Account No. (if applicable)
<S> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 9(i)
Commercial Tort Claims
Grantor Adverse Party(ies) Nature of Claim Status of Claim
<PAGE>
EXHIBIT K
[Form of Pledge Agreement]
SECURITIES PLEDGE AGREEMENT
(Borrower)
THIS SECURITIES PLEDGE AGREEMENT (this "Pledge Agreement") is made and
entered into as of this 15 day of October, 1999 by and among PEPSIAMERICAS,
INC., a Delaware corporation and DAKBEV, LLC, a limited liability company
organized under the laws of Delaware (individually, the "Pledgor" and
collectively, the "Pledgors") and BANK OF AMERICA, N. A., a national banking
association, as Administrative Agent (as defined in the Credit Agreement
referred to below) for each of the Lenders (as defined in the Credit Agreement
referred to below and, collectively with the Administrative Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as defined below). All
capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the Pledgors a
revolving credit facility with a letter of credit sublimit and term loan
facilities pursuant to the Credit Agreement dated as of October 15, 1999 among
the Pledgors, the Administrative Agent and the Lenders (as from time to time
amended, revised, modified, supplemented, or amended and restated, the "Credit
Agreement"); and
WHEREAS, as collateral security for the payment and performance of its
Obligations, each Pledgor is willing to pledge and grant to the Administrative
Agent for the benefit of the Secured Parties a security interest in (i) 65% of
the Voting Securities and 100% of the other Subsidiary Securities of each of its
Direct Foreign Subsidiaries, and (ii) all of the Subsidiary Securities of all
other Subsidiaries, in each case, whether now existing or hereafter created or
acquired (collectively, the "Pledged Interests"), and certain related property,
including without limitation the Pledged Interests more particularly described
on Schedule I hereto (such Subsidiaries, together with all other Subsidiaries
whose Subsidiary Securities may be required to be subject to this Pledge
Agreement from time to time, are hereinafter referred to collectively as the
"Pledged Subsidiaries"); and
WHEREAS, the Lenders are unwilling to enter into the Loan Documents unless
each Pledgor enters into this Stock Pledge Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make the credit facilities provided for therein available
to or for the account of the Pledgors, and in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree as follows:
K-2
<PAGE>
1. Pledge of Pledged Interests; Other Collateral.
(a) As collateral security for the payment and performance by each
Pledgor of its now or hereafter existing Obligations (the "Secured
Obligations"), the Pledgors hereby grant, pledge and collaterally assign to
the Administrative Agent for the benefit of the Secured Parties a first
priority security interest in all of the following items of property in
which it now has or may at any time hereafter acquire an interest, and
wheresoever located:
(i) the Pledged Interests; and
(ii) all cash, securities, dividends, rights, and other property
at any time and from time to time (x) declared or distributed in respect of
or in exchange for or on conversion of any Pledged Interest, or (y) by its
or their terms exchangeable or exercisable for or convertible into any
Pledged Interest; and
(iii) all other property hereafter delivered to the
Administrative Agent in substitution for or as an addition to any of the
foregoing, and all certificates and instruments representing or evidencing
such property, all security entitlements constituting any Pledged Interest,
and all securities accounts to which may at any time be credited any or all
of the Pledged Interests; and
(iv) all proceeds of any of the foregoing.
All such Pledged Interests, certificates, instruments, cash, securities,
interests, dividends, rights and other property referred to in clauses (i)
through (iv) of this Section 1 are herein collectively referred to as the
"Collateral."
(b) Subject to Section 10(a), each Pledgor agrees to deliver all
certificates, instruments or other documents representing any Collateral to
the Administrative Agent at such location as the Administrative Agent shall
from time to time designate by written notice pursuant to Section 23 for
its custody at all times until termination of this Pledge Agreement,
together with such instruments of assignment and transfer as requested by
the Administrative Agent.
(c) Each Pledgor agrees to execute and deliver, or cause to be
executed and delivered by other Persons, at Pledgor's expense, all share
certificates, documents, instruments, agreements, financing statements (and
amendments thereto and continuations thereof), assignments, control
agreements, or other writings as the Administrative Agent may request from
time to time to carry out the terms of this Pledge Agreement or to protect
or enforce the Administrative Agent's Lien and security interest in the
Collateral hereunder granted to the Administrative Agent for the benefit of
the Secured Parties and further agrees to do and cause to be done upon the
Administrative Agent's request, at Pledgor's expense, all things determined
by the Administrative Agent to be necessary or advisable to perfect and
keep in full force and effect the Lien in the Collateral hereunder granted
to the Administrative Agent for the benefit of the Secured Parties,
including the prompt payment of all out-of-pocket fees and expenses
incurred in connection with any filings made to perfect or continue the
Lien and security interest in the Collateral hereunder granted in favor of
the Administrative Agent for the benefit of the Secured Parties. Each
Pledgor hereby irrevocably authorizes the Administrative Agent to execute
and file, with or if permitted by applicable law without the signature of
the Pledgors, all such financing statements and amendments thereto and
continuations thereof reflecting Administrative Agent as "debtor" and the
Administrative Agent as "secured party," as the Administrative Agent may at
any time deem necessary or advisable to carry out the purposes of this
Pledge Agreement.
K-2
<PAGE>
(d) All filing fees, advances, charges, costs and expenses, including
reasonable attorneys' fees, incurred or paid by the Administrative Agent or
any Lender in exercising any right, power or remedy conferred by this
Pledge Agreement, or in the enforcement thereof, shall become a part of the
Secured Obligations secured hereunder and shall be paid to the
Administrative Agent for the benefit of the Secured Parties by the Pledgors
immediately upon demand therefor, and any amounts not so paid on demand (in
addition to other rights and remedies resulting from such nonpayment) shall
bear interest from the date of demand until paid in full at the Default
Rate.
(e) Each Pledgor agrees to register and cause to be registered the
interest of the Administrative Agent, for the benefit of the Secured
Parties, in the Collateral on its own books and records and the
registration books of each of the Pledged Subsidiaries.
2. Status of Pledged Interests. Each Pledgor hereby represents, warrants
and covenants to the Administrative Agent for the benefit of the Secured Parties
that:
(a) All of the Pledged Interests are and shall at all times be validly
issued and outstanding, fully paid and nonassessable and constitute (i) 65%
of the issued and outstanding Voting Securities and 100% of the other
issued and outstanding Subsidiary Securities of each Direct Foreign
Subsidiary and (ii) all of the issued and outstanding Subsidiary Securities
of all other Domestic Subsidiaries, and are accurately described on
Schedule I.
(b) The Pledgor is and shall at all times be the sole registered and
record and beneficial owner of the Pledged Interests, free and clear of all
Liens, charges, equities, encumbrances and restrictions on pledge or
transfer (other than the pledge hereunder and applicable restrictions
pursuant to federal and state and applicable foreign securities laws).
(c) At no time shall any Pledged Interests (i) be held or maintained
in the form of a security entitlement or credited to any securities account
and (ii) which constitute a "security" (or as to which the related Pledged
Subsidiary has elected to have treated as a "security") under Article 8 of
the Uniform Commercial Code of the State of North Carolina or of any other
jurisdiction whose laws may govern (the "UCC") be maintained in the form of
uncertificated securities. With respect to Pledged Interests that are
"securities" under the UCC, or as to which the issuer has elected at any
time to have such interests treated as "securities" under the UCC, such
Pledged Interests are, and shall at all times be, represented by the share
certificates listed on Schedule I hereto, which share certificates, with
stock powers duly executed in blank by the Pledgor, have been delivered to
the Administrative Agent or are being delivered to the Administrative Agent
simultaneously herewith or, in the case of Additional Interests as defined
in Section 22, shall be delivered pursuant to Section 22. With respect to
Pledged Interests that are not "securities" under the UCC and the
applicable Pledged Subsidiary has not elected to have such interests
treated as "securities" under the UCC, the Pledgor has simultaneously
herewith delivered to the Administrative Agent (or has previously delivered
to the Administrative Agent or, in the case of Additional Interests as
defined in Section 22, shall deliver pursuant to Section 22) a control
agreement (or appropriate amendments thereto) duly executed by the
Registrar of the applicable Pledged Subsidiary, in form and substance
acceptable to the Administrative Agent and in which the Registrar (A)
acknowledges that the Pledgor is at the date of such acknowledgment the
sole record, and to its knowledge, beneficial owner of the Pledged
Interests, (B) acknowledges the Lien in favor of the Administrative Agent
for the benefit of the Secured Parties conferred hereunder and that such
Lien will be reflected on the registry for such Pledged Interests, (C)
agrees that it will not consent to, effect, acknowledge or register any
transfer of such Pledged Interests nor acknowledge or register any Lien in
favor of any other Person on such Pledged Interests, without the prior
written consent of the Administrative Agent in each instance, until it
receives notice from the Administrative Agent that all Liens on such
Collateral in favor of the Secured Parties have been released or
terminated, and (D) agrees that upon receipt of notice from the
Administrative Agent that an Event of Default has occurred and is
continuing and that the Pledged Interests identified in such notice have
been transferred to a transferee (including any Secured Party) identified
in such notice, it will duly record such transfer of such Pledged Interests
on the appropriate registry without requiring further consent from the
Pledgor and shall thereafter treat the transferee as the sole record and
beneficial owner of such Pledged Interests pending further transfer, in
each case notwithstanding any contrary instruction received from the
Pledgor. In addition, with respect to all Pledged Interests, the Pledgor
has simultaneously herewith delivered to the Administrative Agent (or has
previously delivered to the Administrative Agent or, in the case of
Additional Interests shall deliver pursuant to Section 22) Uniform
Commercial Code financing statements on Form UCC-1 (or appropriate
amendments thereto) duly executed by or on behalf of the Pledgor as
"debtor" and naming the Administrative Agent for the benefit of the Secured
Parties as "secured party," in form, substance and number sufficient in the
reasonable opinion of the Administrative Agent to be filed in all UCC
filing offices and in all jurisdictions in which filing is necessary or
advisable to perfect in favor of the Administrative Agent for the benefit
of the Secured Parties the Lien on such Pledged Interests, together with
all required filing fees. Without limiting the foregoing provisions of this
Section 2(c), with respect to any Pledged Interests issued by any Direct
Foreign Subsidiary, Pledgor shall deliver or cause to be delivered, (i) in
addition to or in substitution for all or any of the foregoing items, as
the Administrative Agent may elect, such other instruments, certificates,
agreements, notices, filings, and other documents, and take or cause to be
taken such other action, as the Administrative Agent may determine to be
necessary or advisable under the laws of the jurisdiction of formation of
such Direct Foreign Subsidiary, to grant, perfect and protect as a first
priority lien in such Collateral in favor of the Administrative Agent for
the benefit of the Lenders, and (ii) an opinion of counsel acceptable in
form and substance to the Administrative Agent issued by a law firm
acceptable to the Administrative Agent licensed to practice law in such
foreign jurisdiction, addressing with respect to such Pledged Interests the
matters described in Section 9.20(g)(iii) and (v) of the Credit Agreement.
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(d) It has full corporate power, legal right and lawful authority to
execute this Pledge Agreement and to pledge, assign and transfer its
Pledged Interests in the manner and form hereof.
(e) The pledge, assignment and delivery of its Pledged Interests
(along with undated stock powers executed in blank, financing statements
and control agreements) to the Administrative Agent for the benefit of the
Secured Parties pursuant to this Pledge Agreement creates or continues, as
applicable, a valid and perfected first priority security interest in such
Pledged Interests in favor of the Administrative Agent for the benefit of
the Secured Parties, securing the payment of the Secured Obligations,
assuming, in the case of the Pledged Interests which constitute
certificated "securities" under the UCC, continuous and uninterrupted
possession by or on behalf of the Administrative Agent.
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(f) Except as otherwise expressly provided herein or in the Credit
Agreement, none of the Pledged Interests (nor any interest therein or
thereto) shall be sold, transferred or assigned without the Administrative
Agent's prior written consent, which may be withheld for any reason.
(g) It shall at all times cause the Pledged Interests that constitute
"securities" (or as to which the issuer elects to have treated as
"securities") under the UCC to be represented by the certificates now and
hereafter delivered to the Administrative Agent in accordance with Sections
1, 2 and 22 hereof and that it shall cause each of the Pledged Subsidiaries
not to issue any Subsidiary Securities, or securities convertible into, or
exchangeable or exercisable for, Subsidiary Securities, at any time during
the term of this Pledge Agreement unless the Pledged Interests of such
Pledge Subsidiary are issued solely to either (y) the Pledgor who shall
immediately comply with Sections 2 and 22 hereof with respect to such
property or (z) another Credit Party who shall immediately pledge such
additional Subsidiary Securities to the Administrative Agent for the
benefit of the Secured Parties on substantially identical terms as are
contained herein and deliver or cause to be delivered the appropriate
documents described in Section 2(c) hereof to the Administrative Agent and
take such further actions as the Administrative Agent may deem necessary in
order to perfect a first priority security interest in such Subsidiary
Securities.
(h) Pledgor shall not cause, suffer or permit to occur a change in the
identity of any Registrar for any Pledged Interests except upon giving not
less than ten (10) days' prior written notice to the Administrative Agent
and providing evidence reasonably satisfactory to the Administrative Agent
(which shall include the written acknowledgment of such new Registrar if
the Administrative Agent shall elect) of continuing compliance with the
provisions of Sections 1(e) and 2(c) hereof.
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3. Preservation and Protection of Collateral.
(a) The Administrative Agent shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise, beyond the use of reasonable care in the custody and
preservation thereof while in its possession.
(b) Each Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP applied on a
Consistent Basis and evidenced to the satisfaction of the Administrative
Agent and provided that all enforcement proceedings in the nature of levy
or foreclosure are effectively stayed. Upon the failure of the Pledgor to
so pay or contest such taxes, charges, Liens or assessments, or upon the
failure of the Pledgor to pay any amount pursuant to Section 1(c), the
Administrative Agent at its option may pay or contest any of them (the
Administrative Agent having the sole right to determine the legality or
validity and the amount necessary to discharge such taxes, charges, Liens
or assessments) but shall not have any obligation to make any such payment
or contest. All sums so disbursed by the Administrative Agent, including
reasonable attorneys' fees, court costs, expenses and other charges related
thereto, shall be payable on demand by the Pledgor to the Administrative
Agent and shall be additional Secured Obligations secured by the
Collateral, and any amounts not so paid on demand (in addition to other
rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
4. Default. Upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent is given full power and authority, then or at
any time thereafter, to sell, assign, deliver or collect the whole or any part
of the Collateral, or any substitute therefor or any addition thereto, in one or
more sales, with or without any previous demands or demand of performance or, to
the extent permitted by law, notice or advertisement, in such order as the
Administrative Agent may elect; and any such sale may be made either at public
or private sale at the Administrative Agent's place of business or elsewhere,
either for cash or upon credit or for future delivery, at such price or prices
as the Administrative Agent may reasonably deem fair; and the Administrative
Agent or any other Secured Party may be the purchaser of any or all Collateral
so sold and hold the same thereafter in its own right free from any claim of the
Pledgors or right of redemption. Demands of performance, advertisements and
presence of property and sale and notice of sale are hereby waived to the extent
permissible by law. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Administrative Agent. Pledgors recognize that the
Administrative Agent may be unable to effect a public sale of the Collateral by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state law, and may be otherwise
delayed or adversely affected in effecting any sale by reason of present or
future restrictions thereon imposed by governmental authorities, and that as a
consequence of such prohibitions and restrictions the Administrative Agent may
be compelled (i) to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof, or (ii) to seek regulatory approval of any
proposed sale or sales, or (iii) to limit the amount of Collateral sold to any
Person or group. Each Pledgor agrees and acknowledges that private sales so made
may be at prices and upon terms less favorable to Pledgor than if such
Collateral was sold either at public sales or at private sales not subject to
other regulatory restrictions, and that the Administrative Agent has no
obligation to delay the sale of any of the Collateral for the period of time
necessary to permit the Pledged Subsidiary to register or otherwise qualify
them, even if such Pledged Subsidiary would agree to register or otherwise
qualify such Collateral for public sale under the Securities Act or applicable
state law. Each Pledgor further agrees, to the extent permitted by applicable
law, that the use of private sales made under the foregoing circumstances to
dispose of the Collateral shall be deemed to be dispositions in a commercially
reasonable manner. Each Pledgor hereby acknowledges that a ready market may not
exist for the Pledged Interests if they are not traded on a national securities
exchange or quoted on an automated quotation system and agrees and acknowledges
that in such event the Pledged Interests may be sold for an amount less than a
pro rata share of the fair market value of the Pledged Subsidiary's assets minus
its liabilities. In addition to the foregoing, the Secured Parties may exercise
such other rights and remedies as may be available under the Loan Documents, at
law (including without limitation the UCC) or in equity.
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5. Proceeds of Sale. The proceeds of the sale of any of the Collateral and
all sums received or collected from or on account of such Collateral shall be
applied by the Administrative Agent for the benefit of the Secured Parties in
the manner provided in Section 11.5 of the Credit Agreement.
6. Presentments, Demands and Notices. The Administrative Agent shall not be
under any duty or obligation whatsoever to make or give any presentments,
demands for performances, notices of nonperformance, protests, notice of protest
or notice of dishonor in connection with any obligations or evidences of
indebtedness held thereby as collateral, or in connection with any obligations
or evidences of indebtedness which constitute in whole or in part the Secured
Obligations secured hereunder.
7. Attorney-in-Fact. Each Pledgor hereby appoints the Administrative Agent
as such Pledgor's attorney-in-fact for the purposes of carrying out the
provisions of this Pledge Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of a Default or an Event of Default. Without limiting the
generality of the foregoing, upon the occurrence and during the continuance of a
Default or an Event of Default, the Administrative Agent shall have the right
and power to receive, endorse and collect all checks and other orders for the
payment of money made payable to such Pledgor representing any dividend,
interest payment, principal payment or other distribution payable or
distributable in respect to the Collateral or any part thereof and to give full
discharge for the same.
8. Reinstatement. The granting of a security interest in the Collateral and
the other provisions hereof shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by any Secured Party, whether upon the
insolvency, bankruptcy or reorganization of the Pledgor or any other Credit
Party or otherwise, all as though such payment had not been made. The provisions
of this Section 8 shall survive repayment of all of the Secured Obligations and
the termination or expiration of this Pledge Agreement in any manner, including
but not limited to termination upon occurrence of the Facility Termination Date.
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<PAGE>
9. Waiver by the Pledgors. Each Pledgor waives to the extent permitted by
applicable law (a) any right to require any Secured Party or any other obligee
of the Secured Obligations to (x) proceed against any Person or entity,
including without limitation any Credit Party, (y) proceed against or exhaust
any Collateral or other collateral for the Secured Obligations, or (z) pursue
any other remedy in its power; (b) any defense arising by reason of any
disability or other defense of any other Person, or by reason of the cessation
from any cause whatsoever of the liability of any other Person or entity, (c)
any right of subrogation, (d) any right to enforce any remedy which any Secured
Party or any other obligee of the Secured Obligations now has or may hereafter
have against any other Person and any benefit of and any right to participate in
any collateral or security whatsoever now or hereafter held by the
Administrative Agent for the benefit of the Secured Parties. Each Pledgor
authorizes each Secured Party and each other obligee of the Secured Obligations
without notice (except notice required by applicable law) or demand and without
affecting its liability hereunder or under the Loan Documents from time to time
to: (i) take and hold security, other than the Collateral herein described, for
the payment of such Secured Obligations or any part thereof, and exchange,
enforce, waive and release the Collateral herein described or any part thereof
or any such other security; and (ii) apply such Collateral or other security and
direct the order or manner of sale thereof as such Secured Party or obligee in
its discretion may determine.
The Administrative Agent may at any time deliver (without representation,
recourse or warranty) the Collateral or any part thereof to the Pledgors and the
receipt thereof by the Pledgors shall be a complete and full acquittance for the
Collateral so delivered, and the Administrative Agent shall thereafter be
discharged from any liability or responsibility therefor.
10. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to any of the
Pledged Interests shall be subject to the pledge hereunder, provided,
however, that cash dividends paid to the appropriate Pledgor as record
owner of the Pledged Interests, to the extent permitted by the Credit
Agreement to be declared and paid, may be retained by such Pledgor so long
as no Default or Event of Default shall have occurred and be continuing,
free from any Liens hereunder.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, the registration of the Collateral in the name of the
Pledgor as record and beneficial owner shall not be changed and the Pledgor
shall be entitled to exercise all voting and other rights and powers
pertaining to the Collateral for all purposes not inconsistent with the
terms hereof.
(c) Upon the occurrence and during the continuance of any Default or
Event of Default, all rights of the Pledgor to receive and retain cash
dividends and other distributions upon the Collateral pursuant to
subsection (a) above shall cease and shall thereupon be vested in the
Administrative Agent for the benefit of the Secured Parties, and the
Pledgor shall, or shall cause, all such cash dividends and other
distributions with respect to the Pledged Interests to be promptly
delivered to the Administrative Agent (together, if the Administrative
Agent shall request, with the documents described in Sections 1(c) and 2(c)
hereof or other negotiable documents or instruments so distributed) to be
held, released or disposed of by it hereunder or, at the option of the
Administrative Agent, to be applied to the Secured Obligations.
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<PAGE>
(d) Upon the occurrence and during the continuance of any Default or
Event of Default, at the option of the Administrative Agent, all rights of
the Pledgor to exercise the voting or consensual rights and powers which it
is authorized to exercise pursuant to subsection (b) above shall cease and
the Administrative Agent may thereupon (but shall not be obligated to), at
its request, cause such Collateral to be registered in the name of the
Administrative Agent or its nominee or agent for the benefit of the Secured
Parties and/or exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end the Pledgor
hereby appoints the Administrative Agent as its proxy, with full power of
substitution, to vote and exercise all other rights as a shareholder with
respect to such Pledged Interests hereunder upon the occurrence and during
the continuance of any Default or Event of Default, which proxy is coupled
with an interest and is irrevocable until the Facility Termination Date,
and the Pledgor hereby agrees to provide such further proxies as the
Administrative Agent may request; provided, however, that the
Administrative Agent in its discretion may from time to time refrain from
exercising, and shall not be obligated to exercise, any such voting or
consensual rights or such proxy.
11. Continued Powers. Until the Facility Termination Date shall have
occurred, the power of sale and other rights, powers and remedies granted to the
Administrative Agent for the benefit of the Secured Parties hereunder shall
continue to exist and may be exercised by the Administrative Agent at any time
and from time to time.
12. Other Rights. The rights, powers and remedies given to the
Administrative Agent for the benefit of the Secured Parties by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent or any Secured Party under any Related Agreement or by
virtue of any statute or rule of law. Any forbearance or failure or delay by the
Administrative Agent in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in accordance with the terms of the Credit
Agreement.
13. Anti-Marshaling Provisions. The right is hereby given by each Pledgor
to the Administrative Agent, for the benefit of the Secured Parties, to make
releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Administrative Agent without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
Liens and security interests in the remaining Collateral conferred hereunder,
nor release the Pledgor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral
held by the Administrative Agent, for the benefit of the Secured Parties, the
Administrative Agent shall have the right to determine the order in which any or
all of the Collateral shall be subjected to the remedies provided in this Pledge
Agreement. Each Pledgor hereby waives any and all right to require the
marshaling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or in any Related Agreement.
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<PAGE>
14. Entire Agreement. This Pledge Agreement, together with the Credit
Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Pledge Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than as provided in the Credit Agreement.
15. Further Assurances. Each Pledgor agrees at its own expense to do such
further acts and things, and to execute and deliver, and cause to be executed
and delivered as may be necessary or advisable to give effect thereto, such
additional conveyances, assignments, financing statements, control agreements,
documents, certificates, stock powers, agreements and instruments, as the
Administrative Agent may at any time reasonably request in connection with the
administration or enforcement of this Pledge Agreement or related to the
Collateral or any part thereof or in order better to assure and confirm unto the
Administrative Agent its rights, powers and remedies for the benefit of the
Secured Parties hereunder. Each Pledgor hereby consents and agrees that the
Pledged Subsidiaries and their respective Registrars, and all other Persons,
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Administrative Agent, on behalf of the Secured Parties, to exercise
its rights, privileges, and remedies hereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by the Pledgor or any other Person to any of such Pledged
Subsidiaries or Registrars or other Persons.
16. Binding Agreement; Assignment. This Pledge Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that the Pledgor shall not be permitted to assign this Pledge Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Administrative Agent as Collateral
under this Pledge Agreement. Without limiting the generality of the foregoing
sentence of this Section 16, any Lender may assign to one or more Persons, or
grant to one or more Persons participations in or to, all or any part of its
rights and obligations under the Credit Agreement (to the extent permitted by
the Credit Agreement); and to the extent of any such assignment or participation
such other Person shall, to the fullest extent permitted by law, thereupon
become vested with all the benefits in respect thereof granted to such Lender
herein or otherwise, subject however, to the provisions of the Credit Agreement,
including Article XII thereof (concerning the Administrative Agent) and Section
13.1 thereof (concerning assignments and participations). All references herein
to the Administrative Agent and to the Secured Parties shall include any
successor thereof or permitted assignee, and any other obligees from time to
time of the Secured Obligations.
17. Swap Agreements. All obligations of the Pledgor under Swap Agreements
(which are not prohibited under the terms of the Credit Agreement) to which any
Lender or any affiliate of any Lender is a party, shall be deemed to be Secured
Obligations secured hereby, and each Lender or affiliate of a Lender party to
any such Swap Agreement shall be deemed to be a Secured Party hereunder with
respect to such Secured Obligations; provided, however, that such obligations
shall cease to be Secured Obligations at such time as such Person (or affiliate
of such Person) shall cease to be a "Lender" under the Credit Agreement.
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<PAGE>
18. Severability. The provisions of this Pledge Agreement are independent
of and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Pledge Agreement shall be construed as if such invalid or unenforceable
provision had never been contained herein.
19. Counterparts. This Pledge Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Pledge Agreement
to produce or account for more than one such counterpart executed by the Pledgor
against whom enforcement is sought.
20. Termination. Subject to the provisions of Section 8, this Pledge
Agreement and all obligations of each Pledgor hereunder (excluding those
obligations and liabilities that expressly survive such termination) shall
terminate without delivery of any instrument or performance of any act by any
party on the Facility Termination Date. Upon such termination of this Pledge
Agreement, the Administrative Agent shall, at the sole expense of the Pledgors,
promptly deliver to the Pledgors the certificates evidencing its shares of
Pledged Interests (and any other property received as a dividend or distribution
or otherwise in respect of such Pledged Interests), together with any cash then
constituting the Collateral not then sold or otherwise disposed of in accordance
with the provisions hereof, and take such further actions at the request of the
Pledgors as may be necessary to effect the same.
21. Indemnification. Without limitation of Section 13.9 of the Credit
Agreement or any other indemnification provision in any Loan Document, each
Pledgor agrees to indemnify and hold harmless each Secured Party and each of
their affiliates, and their respective officers, directors, employees, agents,
and advisors (each, an "Indemnified Party"), from and against any and all
claims, damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' fees) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or proceeding or preparation of defense in
connection therewith) the Loan Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans or other
extension of credit under the Loan Documents, except to the extent such claim,
damage, loss, liability, cost, or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 21 applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by the Pledgor or any other
Credit Party, any of their respective directors, shareholders or creditors, or
an Indemnified Party or any other Person, or any Indemnified Party is otherwise
a party thereto and whether or not the transactions contemplated hereby are
consummated. Each Pledgor agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to it,
any of its subsidiaries or affiliates, or any security holders or creditors
thereof arising out of, related to or in connection with the transactions
contemplated herein or in the other Loan Documents, except to the extent that
such liability is found in a final non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct. Each Pledgor agrees not to assert any
claim against any Secured Party, any of its affiliates, or any of their
respective directors, officers, employees, attorneys, agents, or advisers, on
any theory of liability, for special, indirect, consequential, or punitive
damages arising out of or otherwise relating to the Loan Documents, any of the
transactions contemplated therein or the actual or proposed use of the proceeds
of the Loans or other extensions of credit under the Loan Documents. The
agreements in this Section 21 shall survive repayment of all of the Secured
Obligations and the termination or expiration of this Pledge Agreement in any
manner, including but not limited to termination upon occurrence of the Facility
Termination Date.
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22. Additional Interests. If either Pledgor shall at any time acquire or
hold any additional Pledged Interests, including any Pledged Interests issued by
any Subsidiary not listed on Schedule I hereto which are required to be subject
to a Lien pursuant to a Pledge Agreement by the terms hereof or of Article V or
any other provision of the Credit Agreement (any such shares being referred to
herein as the "Additional Interests"), such Pledgor shall deliver to the
Administrative Agent for the benefit of the Secured Parties (i) a revised
Schedule I hereto reflecting the ownership and pledge of such Additional
Interests and (ii) a Pledge Agreement Supplement in the form of Exhibit A hereto
with respect to such Additional Interests duly completed and executed by the
Pledgor and (iii) any other document required in connection with such Additional
Interests as described in Section 2(c). The Pledgors shall comply with the
requirements of this Section 22 concurrently with the acquisition of any such
Additional Interests or, in the case of Additional Interests to which Section
9.20 of the Credit Agreement applies, within the time period specified in
Article V, Section 9.20 or elsewhere in the Credit Agreement with respect to
such Additional Interests; provided, however, that the failure to comply with
the provisions of this Section 22 shall not impair the Lien on Additional
Interests conferred hereunder.
23. Notices. Any notice required or permitted hereunder shall be given (a)
with respect to the Pledgors, at the address of the Pledgors indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Administrative
Agent or a Lender, at the Administrative Agent's address indicated in Section
13.2 of the Credit Agreement. All such addresses may be modified, and all such
notices shall be given and shall be effective, as provided in Section 13.2 of
the Credit Agreement.
24. Rules of Interpretation. The rules of interpretation contained in
Sections 1.2(c) through 1.2(l) of the Credit Agreement shall be applicable to
this Pledge Agreement and are hereby incorporated by reference. All
representations and warranties contained herein shall survive the delivery of
documents and any extension of credit referred to herein or secured hereby.
25. Governing Law; Waivers.
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
PLEDGE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED
IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE
OF NORTH CAROLINA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND
DELIVERY OF THIS PLEDGE AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT
MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION
OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
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(c) EACH PLEDGOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE PLEDGOR PROVIDED IN
SECTION 23 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
THE ADMINISTRATIVE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR THE OTHER
LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE THE PLEDGORS OR ANY OF THE
PLEDGORS' PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE PLEDGORS
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVE, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING,
OBJECTION TO THE EXERCISE OF JURISDICTION OVER THEM AND THEIR PROPERTY BY
ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF THEIR
PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE
LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS PLEDGE AGREEMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY
IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR
PROCEEDING.
(f) EACH PLEDGOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS
HEREOF IS AN INCONVENIENT FORUM.
[Signature Pages Follow]
K-13
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement on
the day and year first written above.
PLEDGORS:
PEPSIAMERICAS, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
DAKBEV, LLC.
By: ________________________________________
Managing Member
Name:_______________________________________
Title:______________________________________
Signature Page 1 of 2
<PAGE>
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N. A., as Administrative
Agent for the Lenders
By: ________________________________________
Name:_______________________________________
Title:______________________________________
Signature Page 2 of 2
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Name of Pledgor Name, Class or Type Total Amount Total Amount Total Amount Certificate Par Value (if Name and
Jurisdiction of Pledged of Class or of Class or Pledged Number (if applicable) Title of
of Formation Interest Type of Type applicable) Registrar
and Type of Pledged Outstanding
Entity of Interests
Pledged Authorized
Subsidiary
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
PLEDGE AGREEMENT SUPPLEMENT
THIS PLEDGE AGREEMENT SUPPLEMENT (as from time to time amended, modified or
restated, this " Supplement"), dated as of ______________ ___, ____ is made by
and between ____________, a __________ corporation (the "Pledgor"), and BANK OF
AMERICA, N. A., a national banking association, as Administrative Agent for each
of the Lenders (as described in the Pledge Agreement referred to below) now or
hereafter party to the Credit Agreement (as defined in the Pledge Agreement
referred to below). All capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned thereto in the Pledge Agreement (as
defined below).
WHEREAS, the Pledgor is required under the terms of the Credit Agreement
and that certain Securities Pledge Agreement dated as of ________ ___, 1999 the
Pledgor in favor of the Administrative Agent for the benefit of the Secured
Parties (as from time to time amended, modified, supplemented or amended and
restated, the "Pledge Agreement"), to cause certain Pledged Interests held by it
and listed on Annex A to this Supplement (the "Additional Interests") to be
specifically identified as subject to the Pledge Agreement; and
WHEREAS, a material part of the consideration given in connection with and
as an inducement to the execution and delivery of the Credit Agreement by the
Secured Parties was the obligation of the Pledgor to pledge to the
Administrative Agent for the benefit of the Secured Parties the Additional
Interests, whether then owned or subsequently acquired or created; and
WHEREAS, the Pledgor has acquired rights in the Additional Interests and
desires to pledge, and evidence its prior pledge, to the Administrative Agent
for the benefit of the Secured Parties all of the Additional Interests in
accordance with the terms of the Credit Agreement and the Pledge Agreement;
NOW, THEREFORE, the Pledgor hereby agrees as follows with the
Administrative Agent, for the benefit of the Secured Parties:
The Pledgor hereby reaffirms and acknowledges the pledge and collateral
assignment to, and the grant of security interest in, the Additional Interests
contained in the Pledge Agreement and pledges and collaterally assigns to the
Administrative Agent for the benefit of the Secured Parties, and grants to the
Administrative Agent for the benefit of the Secured Parties a first priority
lien and security interest in, the Additional Interests and all of the
following:
(a) all cash, securities, dividends, rights, and other property at any
time and from time to time (x) declared or distributed in respect of or in
exchange for or on conversion of any or all of the Additional Interests or
(y) by its or their terms exchangeable or exercisable for or convertible
into any Additional Interest or other Pledged Interest;
(b) all other property hereafter delivered to the Administrative Agent
in substitution for or as an addition to any of the foregoing, and all
certificates and instruments representing or evidencing such property, all
security entitlements constituting Additional Interests, and all securities
accounts to which may at any time be credited any or all of the Additional
Interests; and
(c) all proceeds of any of the foregoing.
<PAGE>
The Pledgor hereby acknowledges, agrees and confirms by its execution of this
Supplement that the Additional Interests constitute "Pledged Interests" under
and are subject to the Pledge Agreement, and the items of property referred to
in clauses (a) through (c) above (the "Additional Collateral") shall
collectively constitute "Collateral" under and are subject to the Pledge
Agreement. Each of the representations and warranties with respect to Pledged
Interests and Collateral contained in the Pledge Agreement is hereby made by the
Pledgor with respect to the Additional Interests and the Additional Collateral,
respectively. The Pledgor further represents and warrants that a true, correct
and complete revised Schedule I to the Pledge Agreement reflecting the
Additional Interests and all other Pledged Interests is attached hereto and
hereby incorporated by reference into the Pledge Agreement, and that all other
documents required to be furnished to the Administrative Agent pursuant to
Section 2(c) of the Pledge Agreement in connection with the Additional
Collateral have been delivered or are being delivered simultaneously herewith to
the Administrative Agent.
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed by its authorized officer as of the day and year first above
written.
PLEDGOR:
____________________________________________
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Acknowledged and accepted:
BANK OF AMERICA, N. A.,
as Administrative Agent for the Lenders
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
ANNEX A
(to Pledge Agreement Supplement of __________ dated __________)
Additional Interests
<TABLE>
<CAPTION>
Name of Pledgor Name, Class or Type Total Amount Total Amount Total Amount Certificate Par Value (if Name and
Jurisdiction of Additional of Class or of Class or Pledged Number (if applicable) Title of
of Formation Interest Type of Type applicable) Registrar
and Type of Additional Outstanding
Entity of Interests
Pledged Authorized
Subsidiary
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
REVISED SCHEDULE I TO SECURITIES PLEDGE AGREEMENT
Date: __________
<TABLE>
<CAPTION>
Name of Pledgor Name, Class or Type Total Amount Total Amount Total Amount Certificate Par Value (if Name and
Jurisdiction of Pledged of Class or of Class or Pledged Number (if applicable) Title of
of Formation Interest Type of Type applicable) Registrar
and Type of Pledged Outstanding
Entity of Interests
Pledged Authorized
Subsidiary
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.14
MASTER BOTTLING AGREEMENT
Between
PEPSICO, INC.
and
PEPSIAMERICAS, INC.
<PAGE>
- - - MASTER BOTTLING AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of October 15, 1999, is
made and entered into by and between PEPSICO, INC., a corporation organized and
existing under the laws of the State of North Carolina having its principal
place of business in Purchase, New York (the "Company"), and PEPSIAMERICAS,
INC., a corporation organized and existing under the laws of the state of
Delaware having its principal place of business in Memphis, Tennessee (the
"Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the "Concentrates")
for the Beverages (as hereinafter defined). The Company authorizes others
to manufacture the syrups prepared from the Concentrates for the Beverages
(the "Syrups") and to manufacture from the Syrups and sell the soft drinks
identified on Schedule A (as modified from time to time under paragraphs 21
and 22, the "Beverages"). The formulas for the Concentrates, Syrups and
Beverages constitute trade secrets owned by the Company;
B. The Company is the owner of the trademarks identified on Schedule B
(together with such other trademarks as may be authorized by the Company
from time to time for current use by the Bottler under this Agreement, the
"Trademarks"), which, among other things, identify and distinguish the
Concentrates, the Syrups and the Beverages;
2
<PAGE>
C. The primary business of the Bottler is to act as a Bottler of the
Beverages, either directly pursuant to certain agreements previously
entered into with the Company (collectively, together with all amendments
thereto, the "Existing Bottling Appointments"), or indirectly through one
or more persons controlling, controlled by or under common control with the
Bottler (the "Bottler Affiliates");
D. The reputation of the Beverages as being of consistently superior quality
has been a major factor in stimulating and sustaining demand for the
Beverages, and special technical skill and constant diligence on the part
of the Bottler and the Company are required in order for the Beverages to
maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Beverages
have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Bottling Appointments,
and as a consequence, the Company and the Bottler desire to amend the
Existing Bottling Appointments, the terms of the Existing Bottling
Appointments, as so amended, being replaced and restated in the form of
this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Bottler agree as follows:
ARTICLE I
The Authorization
1. The Company authorizes the Bottler, and the Bottler undertakes, to
manufacture and package the Beverages and to distribute and sell the
Beverages only in Authorized Containers, as hereinafter defined, under the
Trademarks in and throughout the territories identified in Schedule C
(together with any territories added under paragraph 31, and subject to the
possible elimination of subterritories under paragraph 29, the
"Territories"). The Bottler may conduct any of the activities with respect
to which it is authorized or appointed and satisfy any duty or obligation
imposed upon it under this Agreement through its Bottler Affiliates
provided that the Bottler shall remain responsible for all obligations
imposed under this Agreement and for all of the conduct of its Bottler
Affiliates.
3
<PAGE>
2. The Company will, from time to time, in its discretion, approve containers
of certain types, sizes, shapes and other distinguishing characteristics
(collectively, subject to any additions, deletions and modifications by the
Company, the "Authorized Containers"). A list of Authorized Containers for
each Beverage will be provided by the Company to the Bottler, which list
may be amended by the Company from time to time by additions, deletions or
modifications. The Bottler is authorized to use only Authorized Containers
in the manufacture, distribution and sale of the Beverages. The Company
reserves the right to withdraw from time to time its approval of any of the
Authorized Containers upon six (6) months notice to the Bottler, and, in
such event, the repurchase provisions of subparagraph 28(e) shall apply to
containers so disapproved that are owned by the Bottler. The Company will
exercise its right to approve, and to withdraw its approval of, specific
Authorized Containers in good faith so as to permit the Bottler to continue
to fully meet the demand in the Territories as a whole for Beverages in
containers of the nature identified on Schedule D.
ARTICLE II
Exclusive Authorization
3. The Company appoints the Bottler as its sole and exclusive purchaser of the
Concentrates for the purpose of manufacture, packaging and distribution of
the Beverages under the Trademarks in Authorized Containers for sale in the
Territories;
4
<PAGE>
4. The Company agrees not to authorize any other party whatsoever to use the
Trademarks on Beverages in Authorized Containers, or any other containers
of the nature identified on Schedule D, for purposes of resale in the
Territories.
5. The Bottler shall purchase its entire requirements of Concentrates
exclusively from the Company and shall not use any other syrup,
beverage base, concentrate or other ingredient in the Beverages than as
specified by the Company.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
6. The Bottler acknowledges that the Company is the sole and exclusive owner
of the Trademarks, and the Bottler agrees not to question or dispute the
validity of the Trademarks or their exclusive ownership by the Company. By
this Agreement, the Company extends to the Bottler only: (i) a nonexclusive
license to use the trademark "Pepsi-Cola" as part of the corporate name of
the Bottler; and (ii) an exclusive license to use the Trademarks solely in
connection with the manufacture, packaging, distribution, and sale of the
Beverages in Authorized Containers in the Territories subject to the rights
reserved to the Company under this Agreement. Nothing herein, nor any act
or failure to act by the Bottler or the Company, shall give the Bottler any
proprietary or ownership interest of any kind in the Trademarks or in the
goodwill associated therewith.
7. The Bottler agrees during the term of this Agreement and in accordance with
any requirements imposed upon the Bottler under applicable laws:
(a) Not to produce, manufacture, package, sell, deal in or otherwise use
or handle, directly or indirectly, any "Cola Product" (herein defined
to mean any soft drink beverage which is generally marketed as a cola
product or which is generally perceived as being a cola product) other
than a soft drink manufactured, packaged, distributed or sold by the
Bottler under authority of the Company;
5
<PAGE>
(b) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any concentrate, beverage base, syrup,
beverage or any other product which is likely to be confused with, or
passed off for, any of the Concentrates, Syrups or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trade dress or in any
container that is an imitation of a trade dress or container in which
the Company claims a proprietary interest or which is likely to be
confused or cause confusion or be confusingly similar to or be passed
off as such trade dress or container;
(d) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trademark or other
designation that is an imitation, counterfeit, copy or infringement
of, or confusingly similar to, any of the Trademarks; and
(e) Not to acquire or hold, directly or indirectly, any ownership interest
in, or, directly or indirectly, enter into any contract or arrangement
with respect to, the management or control of, any person within or
without the Territories that engages in any of the activities
prohibited by subparagraphs (a), (b), (c) or (d) of this paragraph 7.
6
<PAGE>
ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Beverages
8.
(a) The Bottler represents and warrants that the Bottler possesses, or
will possess, in the Territories, prior to the manufacture, packaging
and distribution of the Beverages, and will maintain during the term
of this Agreement, such plant or plants, machinery and equipment,
trained staff, and distribution and vending facilities as are capable
of manufacturing, packaging and distributing the Beverages in
Authorized Containers in accordance with this Agreement, in compliance
with all applicable governmental and administrative requirements, and
in sufficient quantities to fully meet the demand for the Beverages in
Authorized Containers in the Territories.
(b) The Company and the Bottler acknowledge that each is or may become a
party to one or more agreements authorizing a bottler or other
Company-authorized entity to produce Beverages for sale by another
bottler. Such agreements include, but are not limited to (i)
agreements permitting bottlers, subject to certain conditions, to
commence or continue to manufacture the Beverages for other bottlers,
and (ii) agreements pursuant to which bottlers may have the Beverages
manufactured for them by other Company-authorized entities. It is
hereby agreed that the Company shall not unreasonably withhold (i) any
consents required by such agreements, or (ii) approval of Bottler's
participation in such agreements. All such existing agreements shall
remain in full force and effect in accordance with their terms.
7
<PAGE>
9. The Bottler recognizes that increases in the demand for the Beverages, as
well as changes in the list of Authorized Containers, may, from time to
time, require adaptation of its existing manufacturing, packaging or
delivery equipment or the purchase of additional manufacturing, packaging
and delivery equipment. The Bottler agrees to make such modifications and
adaptations as necessary and to purchase and install such equipment, in
time to permit the introduction and manufacture, packaging and delivery of
sufficient quantities of the Beverages in the Authorized Containers, to
fully meet the demand for the Beverages in Authorized Containers in the
Territories.
10. The Bottler warrants that the handling and storage of the Concentrates; the
manufacture, handling and storage of the Syrups; and the manufacture,
handling, storage, and packaging of the Beverages shall be accomplished in
accordance with the Company's quality control and sanitation standards, as
reasonably established by the Company and communicated to the Bottler from
time to time, and shall, in any event, conform with all food, labeling,
health, packaging and other relevant laws and regulations applicable in the
Territories.
11. The Bottler, in accordance with such instructions as may be given from time
to time by the Company, shall submit to the Company, at the Bottler's
expense, samples of the Syrups, the Beverages and the raw materials used in
the manufacture of the Syrups and the Beverages. The Bottler shall permit
representatives of the Company to have access to the premises of the
Bottler during ordinary business hours to inspect the plant, equipment, and
methods used by the Bottler in order to ascertain whether the Bottler is
complying with the instructions and standards prescribed for the
manufacturing, handling, storage and packaging of the Beverages.
8
<PAGE>
12.
(a) For the packaging, distribution and sale of the Beverages, the Bottler
shall use only such Authorized Containers, closures, cases, cartons
and other packages and labels as shall be authorized from time to time
by the Company for the Bottler and shall purchase such items only from
manufacturers approved by the Company, which approval shall not be
unreasonably withheld. Such approval by the Company does not relieve
the Bottler of the Bottler's independent responsibility to assure that
the Authorized Containers, closures, cases, cartons and other packages
and labels purchased by the Bottler are suitable for the purpose
intended, and in accordance with the good reputation and image of
excellence of the Trademarks and Beverages.
(b) The Bottler shall maintain at all times a stock of Authorized
Containers, closures, labels, cases, cartons, and other essential
related materials bearing the Trademarks, sufficient to fully meet the
demand for Beverages in Authorized Containers in the Territories, and
the Bottler shall not use or permit the use of Authorized Containers,
or such closures, labels, cases, cartons and other materials, if they
bear the Trademarks or contain any Beverages, for any purpose other
than the packaging and distribution of the Beverages. The Bottler
further agrees not to refill or otherwise reuse nonreturnable
containers.
13. If the Company determines the existence of quality or technical
difficulties with any Beverage, or any package used for such product, the
Company shall have the right, immediately and at its sole option, to
withdraw such product or any such package from the market. The Company
shall notify the Bottler in writing of such withdrawal, and the Bottler
shall, upon receipt of notice, immediately cease distribution of such
product or such package therefor. If so directed by the Company, the
Bottler shall recall and reacquire the product or package involved from any
purchaser thereof. If any recall of any product or any of the packages used
therefor is caused by (i) quality or technical defects in the Concentrate,
or other materials prepared by the Company from which the product involved
was prepared by the Bottler, or (ii) quality or technical defects in the
Company's designs and design specifications of packages which it has
imposed on the Bottler or the Bottler's third party suppliers if such
designs and specifications were negligently established by the Company (and
specifically excluding designs and specifications of other parties and the
failure of other parties to manufacture packages in strict conformity with
the designs and specifications of the Company), the Company shall reimburse
the Bottler for the Bottler's total expenses incident to such recall.
Conversely, if any recall is caused by the Bottler's failure to comply with
instructions, quality control procedures or specifications for the
preparation, packaging and distribution of the product involved, the
Bottler shall bear its total expenses of such recall and reimburse the
Company for the Company's total expenses incident to such recall.
9
<PAGE>
ARTICLE V
Conditions of Purchase and Sale
14. The Company reserves the right to establish and to revise at any time, in
its sole discretion, the price of any of the Concentrates, the terms of
payment, and the other terms and conditions of supply, any such revision to
be effective immediately upon notice to the Bottler. If Bottler rejects a
change in price or the other terms and conditions contained in any such
notice, then the Bottler shall so notify the Company within thirty (30)
days of receipt of the Company's notice, and this Agreement will terminate
ninety (90) days after the date of such notification by the Bottler,
without further liability of the Company or the Bottler. The change in
price or other terms and conditions so rejected by the Bottler shall not
apply to purchases of such Concentrate by the Bottler during such ninety
(90) day period preceding termination. Failure by the Bottler to notify the
Company of its rejection of the changes in price or such other terms and
conditions shall be deemed acceptance thereof by the Bottler.
10
<PAGE>
15. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Syrups and shall
use the Syrups exclusively for its manufacture of the Beverages. The
Bottler shall not sell or otherwise transfer any Concentrate or Syrup
or permit the same to get into the hands of third parties.
16.
(a) The Bottler agrees not to distribute or sell any Beverage outside the
Territories. The Bottler shall not sell any Beverage to any person
(other than another Bottler pursuant to subparagraph 8(b)) for
ultimate sale outside the Territories. If any Beverage distributed by
the Bottler is found outside of the Territories, Bottler shall be
deemed to have transshipped such Beverage and shall be deemed to be a
"Transshipping Bottler" for purposes hereof. For purposes of this
Agreement, "Offended Bottler" shall mean a Bottler in any territory
into which any Beverage is transshipped.
(b) In addition to all other remedies the Company may have against any
Transshipping Bottler for violation of this paragraph 16, the Company
may impose upon any Transshipping Bottler a charge for each case of
Beverage transshipped by such Bottler. The per-case amount of such
charge shall be determined by the Company in its sole discretion. The
Company and the Bottler agree that the amount of such charge shall be
deemed to reflect the damages to the Company, the Offended Bottler and
the bottling system. In addition, the Company may directly charge the
Transshipping Bottler the full amount of all investigative and other
costs incurred by the Company in connection with the transshipment and
such Transshipping Bottler shall be obligated to pay such amount. The
Company shall forward to the Offended Bottler, upon receipt from the
Transshipping Bottler, the full amount of the per case charge so
received (but not including investigative and other costs charged to
the Transshipping Bottler by the Company). If the Company or its agent
recalls any Beverage which has been transshipped, the Transshipping
Bottler shall, in addition to any other obligation it may have
hereunder, reimburse the Company for its costs of purchasing,
transporting, and/or destroying such Beverage.
11
<PAGE>
ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
17. The continuing responsibility to increase and fully meet the demand for the
Beverages in Authorized Containers within the Territories rests upon the
Bottler. The Bottler agrees to use all approved means as may be reasonably
necessary to meet this responsibility.
18.
(a) The Bottler will push vigorously the sale of the Beverages in
Authorized Containers throughout the entire Territories. Without in
any way limiting the Bottler's obligation under this Paragraph 18, the
Bottler must fully meet and increase the demand for the Beverages
throughout the Territories and secure full distribution up to the
maximum sales potential therein through all distribution channels or
outlets available to soft drinks, using any and all equipment
reasonably necessary to secure such distribution; must service all
accounts with frequency adequate to keep them at all times fully
supplied with the Beverages and must use its own salesmen and trucks,
(or salesmen and trucks of independent distributors, of whom the
Company approves), in quantity adequate for all seasons.
12
<PAGE>
(b) The parties agree that to fully meet and increase demand for the
Beverages in Authorized Containers advertising and other forms of
marketing activities are required. Therefore, the Bottler will spend
such funds in advertising and marketing the Beverages as may be
reasonably required to increase, as well as maintain, demand for the
Beverages in Authorized Containers in the Territories. The Bottler
shall fully cooperate in and vigorously push all cooperative
advertising and sales promotion programs and campaigns that may be
reasonably established by the Company for the Territories. The Bottler
will use and publish only such advertising, promotional materials or
other items bearing the Trademarks relating to the Beverages as the
Company has approved and authorized. The expenditures required by this
Article VI shall be made by the Bottler. The Company may, in its sole
discretion, contribute to such expenditures. The Company may also
undertake, at its expense, independently of the Bottler's marketing
programs, any advertising or promotional activity that the Company
deems appropriate to conduct in the Territories, but this shall in no
way affect the responsibility of the Bottler for increasing the demand
for the Beverages in Authorized Containers in the Territories.
19. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and
all Bottler Affiliates directly or indirectly controlled by the Bottler
will be financially able to perform their respective duties and
obligations under this Agreement and under all other agreements between
the Company and Bottler Affiliates regarding the manufacture,
packaging, distribution and sale of the Beverages in "authorized
containers" (as defined in such agreements).
13
<PAGE>
20.
(a) The Company and the Bottler have agreed upon a business plan for
the first three years occurring during the term of this
Agreement. Since periodic planning is essential for the proper
implementation of this Agreement, the Bottler and the Company
shall meet each year at such date as the parties may set (but no
later than ninety (90) days prior to the commencement of any
calendar year during the term of this Agreement beginning with
the commencement of the calendar year closest to the anniversary
date of this Agreement), to discuss the Bottler's plans for the
ensuing three (3) year period. At such meeting, the Bottler shall
present a plan that sets out in reasonable detail satisfactory to
the Company: (i) the marketing plans, management plans and
advertising plans of the Bottler with respect to the Beverages
for the ensuing year, including a financial plan showing that the
Bottler and all Bottler Affiliates have the consolidated
financial capacity to perform their respective duties and
obligations under this Agreement, and (ii) the projected sales,
marketing and advertising plans and related capital expenditures
for the two years immediately following such year. Senior
management of the Company and the Bottler shall discuss this plan
and this plan, upon approval by the Company (represented by such
senior management), which shall not be unreasonably withheld,
shall define the Bottler's obligation herein to maintain such
consolidated financial capacity and to increase and fully meet
the demand for the Beverages in Authorized Containers in the
Territories for the period of time covered by the plan.
(b) The Bottler shall report to the Company periodically, but not
less than quarterly, as to its implementation of the approved
plan; it is understood, however, that the Bottler shall report
sales on a regular basis as requested by the Company and in such
format and detail, and containing such information as may be
reasonably requested by the Company. The failure by the Bottler
to carry out the plan, or if the plan is not presented or is not
approved, will constitute a primary consideration for determining
whether the Bottler has fulfilled its obligation to maintain the
consolidated financial capacity required under paragraph 19 and
to push vigorously the sale of Beverages in Authorized Containers
throughout the Territories and to increase and fully meet the
demand for the Beverages in Authorized Containers in the
Territories. If the Bottler carries out the plan in all material
respects, it shall be deemed to have satisfied the obligations of
the Bottler under paragraphs 17, 18, 19 and 20 for the period of
time covered by the plan.
14
<PAGE>
ARTICLE VII
Reformulation, New Products and Related Matters
21. The Company has the sole and exclusive right and discretion to reformulate
any of the Beverages. In addition, the Company has the sole and exclusive
right and discretion to discontinue any of the Beverages under this
Agreement, provided (i) such Beverage is discontinued on a national basis
in Authorized Containers and in such other containers as may have been
authorized for use by other Bottlers under their respective bottle
contracts, and (ii) the Company does not discontinue all Beverages under
this Agreement. In the event that the Company discontinues any Beverage,
Schedule A to this Agreement shall be deemed amended by deleting the
discontinued Beverage from the list of Beverages set forth on Schedule A.
22. In the event that the Company introduces any new beverage in the
Territories under the trademarks "Pepsi-Cola" or "Pepsi" or any
modification thereof (herein defined to mean the addition of a prefix,
suffix or other modifier used in conjunction with the trademarks
"Pepsi-Cola" or "Pepsi"), the Bottler shall be obligated to manufacture,
package, distribute and sell such new beverage in Authorized Containers in
the Territories pursuant to the terms and conditions of this Agreement, and
Schedule A to this Agreement shall be deemed amended by adding such new
beverage to the list of beverages set forth on Schedule A.
15
<PAGE>
23. The Company has the unrestricted right to use the Trademarks on the
Beverages and on all other products and merchandise other than the
Beverages in Authorized Containers in the Territories.
ARTICLE VIII
Term and Termination of the Agreement
24. The term of this Agreement shall commence on the effective date hereof and,
unless earlier terminated in accordance with its provisions, will continue
perpetually.
25. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to manufacture,
package, distribute and sell the Beverages under this Agreement shall be
suspended during any period when any of the following conditions exist:
(a) There shall occur a change in the law or regulation (including,
without limitation, any government permission or authorization
regarding customs, health or manufacturing) in such a manner as to
render unlawful or commercially impracticable:
(i) the importation of Concentrate or any of its essential
ingredients, which cannot be produced in quantities sufficient to
satisfy the demand therefor by existing Company facilities in the
United States; or
(ii) the manufacture and distribution of the Concentrates or
Beverages; or
16
<PAGE>
(b) There shall occur any inability or commercial impracticability of
either of the parties to perform resulting from an act of god, or
"force majeure," public enemies, boycott, quarantine, riot, strike, or
insurrection, or due to a declared or undeclared war, belligerency or
embargo, sanctions, blacklisting, or other hazard or danger incident
to the same, or resulting from any other cause whatsoever beyond its
control.
If any of the conditions described in this paragraph 25 persists so
that either party's obligation to perform is suspended for a period of
six (6) months or more, the other party may terminate this Agreement
forthwith, upon notice to the party whose obligation to perform is
suspended.
26.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or Bottler Subsidiary becomes insolvent; if a
petition in bankruptcy is filed against or on behalf of the
Bottler or Bottler Subsidiary which is not stayed or dismissed
within sixty (60) days; if the Bottler or Bottler Subsidiary is
put in liquidation or placed under sequester; if a receiver is
appointed to manage the business of the Bottler or Bottler
Subsidiary; or if the Bottler or Bottler Subsidiary enters into
any judicial or voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with them or
makes an assignment for the benefit of creditors;
(ii) If the Bottler or Bottler Subsidiary adopts a plan of dissolution
or liquidation;
17
<PAGE>
(iii)If any person or any Affiliated Group (as hereinafter defined),
other than any person or any Affiliated Group acting with the
consent of the Company, acquires, or obtains any contract,
option, conversion privilege or other right to acquire, directly
or indirectly, Beneficial Ownership (as hereinafter defined), of
more than fifteen percent (15%) of any class or series of voting
securities of the Bottler or Bottler Subsidiary and if such
person or Affiliated Group does not divest itself of Beneficial
Ownership of such voting securities or otherwise terminate any
such contract, option, conversion privilege or other right to a
level equal to or below fifteen percent (15%) within thirty (30)
days after the Company notifies the Bottler that the failure of
such person or Affiliated Group to thus divest or terminate may
result in termination of this Agreement;
(iv) If any Disposition (as hereinafter defined) is made without the
consent of the Company by Bottler or by any Bottler Subsidiary of
any voting securities of any Bottler Subsidiary;
(v) If any agreement regarding the manufacture, packaging,
distribution or sale of the Beverages in "authorized containers"
(as defined in such agreement) between the Company and any person
that controls, directly or indirectly, the Bottler is terminated,
unless the Company agrees in writing that this subparagraph
26(a)(v) will not be applied by the Company to such termination;
(vi) If the Bottler or any person in which the Bottler has Beneficial
Ownership of any equity or voting securities, or in which the
Bottler has a right or control of management, or which controls
or is under common control with the Bottler, should engage
directly or indirectly in the manufacture, distribution or
marketing of any product specified in subparagraphs (a), (b), (c)
or (d) of paragraph 7 above, or should obtain a right or license
to do the same, and if the Company has given the Bottler notice
that such condition exists and that the Company will terminate
this Agreement within six (6) months if such condition is not
eliminated, and if such condition has not been eliminated within
the six (6) month period.
18
<PAGE>
(vii)If all or substantially all of the Bottler's or Bottler
Subsidiary's bottling assets are sold, transferred or otherwise
disposed of (including any transfer by operation of law) other
than sales, transfers or other dispositions of assets by the
Bottler or one or more Bottler Subsidiary to one or more
wholly-owned subsidiary of such Bottler or such Bottler
Subsidiary.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or upon obtaining
knowledge of any third party action which may or will result in
any change in ownership described in Section 26(a)(iii) above;
(ii) to make available from time to time and at the request of the
Company complete records of current ownership of the Bottler and
full information concerning any entities or parties by whom it is
controlled directly or indirectly or which it controls.
19
<PAGE>
(c) For the purposes of this Agreement:
(i) "Affiliated Group" shall mean two or more persons acting as a
partnership, limited partnership, syndicate or other group, or
who agrees to act together, for the purpose of acquiring,
holding, voting or making any Disposition of any voting
securities of the Bottler; provided further that the Affiliated
Group formed thereby shall be deemed to have acquired Beneficial
Ownership of all voting securities of the Bottler beneficially
owned by any such persons.
(ii) "Beneficial Ownership" shall mean (i) voting power which includes
the power to vote, or to direct the voting of, any securities, or
(ii) investment power which includes the power to dispose, or to
direct the Disposition of, any securities; provided further
Beneficial Ownership shall include any such voting power or
investment power which any person has or shares, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise; provided, however, that the following
persons shall not be deemed to have acquired Beneficial Ownership
under the circumstances described: (a) a person engaged in
business as an underwriter of securities who acquires securities
through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall
not be deemed to be the Beneficial Owner of such securities until
such time as such underwriter completes his participation in the
underwriting and shall not thereupon or thereafter be deemed to
be the Beneficial Owner of the securities acquired by other
members of any underwriting syndicate or selected dealers in
connection with such underwriting solely by reason of customary
underwriting or selected dealer arrangements; (b) a member of a
national securities exchange shall not be deemed to be a
Beneficial Owner of securities held directly or indirectly by it
on behalf of another person solely because such member is the
record holder of such securities and, pursuant to the rules of
such exchange, may direct the vote of such securities, without
instruction, on other than contested matters or matters that may
affect substantially the rights or privileges of the holders of
the securities to be voted, but is otherwise precluded by the
rules of such exchange from voting without instruction; and (c)
the holder of a proxy solicited by the Board of Directors of the
Bottler for the voting of securities of such Bottler at any
annual or special meeting and any adjournment or adjournments
thereof of the stockholders of such Bottler shall not be deemed
to be a Beneficial Owner of the securities that are the subject
of the proxy solely for such reason.
20
<PAGE>
(iii)"Bottler Subsidiary" shall mean any person that is controlled
directly or indirectly by the Bottler, and either participates in
the manufacture, packaging, distribution or sale of the Beverages
in "Authorized Containers" or has a direct or indirect equity
interest in another Bottler Subsidiary that does so participate;
(iv) "Disposition" shall mean any sale, merger, issuance of
securities, or other transaction in which, or as a result of
which, any person other than Bottler or a wholly owned subsidiary
of Bottler, acquires, or obtains any contract, option, conversion
privilege or other right to acquire Beneficial Ownership of any
securities.
(d) Upon the occurrence of any of the events of default specified in
subparagraphs 26(a) and (b), the Company may terminate this Agreement
by giving the Bottler notice to that effect, effective immediately.
21
<PAGE>
27.
(a) In addition to the events of a default described in paragraph 26, the
Company may also terminate this Agreement, subject to the limitations
of subparagraph 27(b), in the event of the occurrence of any of the
following events of default:
(i) If the Bottler fails to make timely payment for Concentrate or of
any other debt owing to the Company;
(ii) If the condition of the plant or equipment used by the Bottler in
manufacturing, packaging or distributing the Beverages fails to
meet the sanitary standards reasonably established by the
Company;
(iii)If the Syrups or Beverages manufactured by the Bottler fail to
meet the quality control standards reasonably established by the
Company;
(iv) If the Beverages are not manufactured in strict conformity with
such standards and instructions as the Company may reasonably
establish;
(v) If the Bottler fails to present or carry out a plan approved
under paragraph 20 in all material respects; or
(vi) If the Bottler materially breaches any of the Bottler's other
obligations under this Agreement. The standards and instructions
of the Company comprise privately published information
concerning the manufacture, handling and storage of the Beverages
under good manufacturing practices, as well as technical
instructions, bulletins and other communications issued or
amended from time to time by the Company.
22
<PAGE>
(b) Upon the occurrence of any of the foregoing events of default, the
Company shall, as a condition to termination of this Agreement under
this paragraph 27, give the Bottler notice thereof. The Bottler shall
then have a period of sixty (60) days within which to cure the
default, including, at the instruction of the Company and at the
Bottler's expense, by the prompt withdrawal from the market and
destruction of any Syrup or Beverage that fails to meet the quality
control standards of the Company or any Beverage that is not
manufactured in accordance with the instructions of the Company. If
such default has not been cured within such period, then the Company
may, by giving the Bottler further notice to such effect, suspend
sales to the Bottler of Concentrates and require the Bottler to cease
production of the Syrups and the Beverages and the packaging and
distribution of Beverages in Authorized Containers. During such second
period of sixty (60) days, the Company also may supply, or cause or
permit others to supply, the Beverages in Authorized Containers under
the Trademarks in the Territories. If such default has not been cured
during such second period of sixty (60) days, then the Company may
terminate this Agreement, by giving the Bottler notice to such effect,
effective immediately.
28. Upon the termination of this Agreement:
(a) The Bottler shall forthwith take such action as necessary to
eliminate the trademark "Pepsi-Cola" from its corporate name;
23
<PAGE>
(b) Any other agreement between the Company and the Bottler regarding
the manufacture, packaging, distribution, sale or promotion of
soft drinks in "authorized containers" (as defined in such
agreement) may, at the election of the Company, be automatically
terminated and thereby become of no further force or effect.
(c) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in Authorized
Containers or to make any use of the Trademarks or Authorized
Containers, or any closures, cases, labels or advertising
material bearing the Trademarks;
(d) The Bottler shall forthwith remove and efface all reference to
the Company, the Beverages and the Trademarks from the business
premises and equipment of the Bottler and from all business
papers and advertising used or maintained by the Bottler; and it
shall not thereafter hold forth in any manner whatsoever that it
has any connection with the Company or the Beverages; and,
(e) The Bottler shall forthwith deliver all Concentrate, Syrup,
Beverage, usable returnable or any nonreturnable containers,
cases, closures, labels, and advertising material bearing the
Trademarks, still in the Bottler's possession or under the
Bottler's control, to the Company or the Company's nominee, as
instructed, and, upon receipt, the Company shall pay to the
Bottler a sum equal to the reasonable market value of such
supplies or materials. The Company will accept and pay for only
such articles as are, in the opinion of the Company, in
first-class and usable condition, and all other such articles
shall be destroyed at the Bottler's expense. Containers, closures
and advertising material and all other items bearing the name of
the Bottler, in addition to the Trademarks, that have not been
purchased by the Company shall be destroyed without cost to the
Company, or otherwise disposed of in accordance with instructions
given by the Company, unless the Bottler can remove or obliterate
the Trademarks therefrom to the satisfaction of the Company. The
provisions for repurchase contained in subparagraph 28(e) shall
apply with regard to any Authorized Container, approval of which
has been withdrawn by the Company under paragraph 2; upon
termination by either party under paragraph 25; and upon
termination by the Bottler under subparagraph 14. In all other
cases, the Company shall have the right, but not the obligation,
to purchase the aforementioned items from the Bottler.
24
<PAGE>
29.
(a) Subject to the limitations set forth in subparagraph 29(b), in
the event that the Bottler at any time fails to carry out a plan
approved under paragraph 20 in all material respects in any
segment of the Territories, whether defined geographically or by
type of market or outlet, which segment shall be defined by the
Company (hereinafter "Subterritory"), the Company may reduce the
Territories covered by this Agreement, and thereby restrict the
Bottler's authorization hereunder to the remainder of the
Territories, by eliminating the Subterritory from the Territories
covered by this Agreement.
(b) In the event of such failure, the Company may eliminate
Subterritories from the Territories covered by this Agreement by
giving the Bottler notice to that effect, which notice shall
define the Subterritory or Subterritories to which the notice
applies. The Bottler shall then have a period of six (6) months
within which to cure such failure. If the Bottler has not cured
such failure in such six (6) month period, the Company may
eliminate such Subterritory or Subterritories from the
Territories by giving the Bottler further notice to that effect,
effective immediately.
25
<PAGE>
(c) Upon elimination of any Subterritory from the Territory:
(i) Schedule C to this Agreement shall be deemed amended by
eliminating such Subterritory from the Territories described
on Schedule C;
(ii) The Company may manufacture, package, distribute and sell
the Beverages in Authorized Containers under the Trademarks
in such Subterritory, or authorize others to do so;
(iii)Any other agreement between the Bottler and the Company
regarding the manufacture, packaging, distribution or sale
of soft drinks in "authorized containers" (as defined in
such agreement) in such Subterritory may, at the election of
the Company, be automatically terminated and thereby become
of no further force or effect in such Subterritory;
(iv) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in
Authorized Containers in such Subterritory, or to make any
use of the Trademarks, Authorized Containers, closures,
cases, labels or advertising material bearing the Trademarks
in connection with the sale or distribution of the Beverages
in such Subterritory; and
(v) The Bottler shall not thereafter hold forth in such
Subterritory in any manner whatsoever that it has any
connection with the Beverages.
26
<PAGE>
ARTICLE IX
Transferability/Additional Territories
30. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance standards
applicable to the Bottler, the dependence of the Trademarks on proper
quality control, the level of marketing effort required of the Bottler to
increase demand for the Beverages in Authorized Containers, and the
confidentiality required for protection of the Company's trade secrets and
confidential information. In recognition of the personal nature of these
and other obligations of the Bottler under this Agreement, the Bottler may
not assign, transfer or pledge this Agreement or any interest therein, in
whole or in part, whether voluntarily, involuntarily, or by operation of
law (including, but not limited to, by merger or liquidation), or delegate
any material element of the Bottler's performance thereof, or sublicense
its rights hereunder, in whole or in part, to any third party or parties,
without the prior consent of the Company. Any attempt to take such action
without such consent shall be void and shall be deemed to be a material
breach of this Agreement.
31.
(a) The Company shall designate an area (the "Specified Area") consisting
of territories proximate to the Territories representing, as of the
date hereof, approximately 2.99% of all United States sales of
Beverages in Authorized Containers. The Bottler hereby agrees that it
will not acquire or attempt to acquire, directly or indirectly,
without the prior written consent of the Company, the right to
manufacture and sell any of the Beverages in Authorized Containers, or
any equity or economic interest in any entity having such rights, in
any territory located outside the Specified Area. Any acquisition of
such rights by the Bottler within the Specified Area shall be subject
to the approval of the Company which approval shall not be withheld
if, (i) the Bottler has successfully negotiated the acquisition of
such rights for any such territories with the holder thereof and (ii)
in the reasonable judgment of the Company, the Bottler has
satisfactorily performed its obligations under this Agreement.
27
<PAGE>
(b) In the event that the Bottler acquires the right to manufacture and
sell any of the Beverages in any container that has been designated as
an Authorized Container in any territory in the United States outside
of the Territories, such additional territory shall automatically be
deemed to be included within the Territories covered by this Agreement
for all purposes. Any separate agreement that may exist concerning
such additional territory shall be ipso facto amended to conform to
the terms of this Agreement. In addition, if the Bottler acquires
control, directly or indirectly, of any person which is a party, or
which controls directly or indirectly a party, to an agreement whereby
such party has the right to manufacture and sell any of the Beverages
in any territory in the United States in any container that has been
designated as an Authorized Container, the Bottler shall cause such
party to amend such agreement, effective as of the date of acquisition
of control of such party, to conform to the terms of this Agreement
with respect to all such territory in the United States.
ARTICLE X
Litigation
32.
(a) The Company reserves the right to institute any civil, administrative
or criminal proceeding or action, and generally to take or seek any
available legal remedy it deems desirable, for the protection of its
good reputation and industrial property rights (including, but not
limited to, the Trademarks), as well as for the protection of the
Concentrates, the Syrups, the Beverages and the formulas therefor, and
to defend any action affecting these matters. At the request of the
Company, the Bottler will render reasonable assistance in any such
action. The Bottler may not claim any right against the Company as a
result of such action or for any failure to take such action. The
Bottler shall promptly notify the Company of any litigation or
proceeding instituted or threatened affecting these matters. The
Bottler shall not institute any legal or administrative proceeding
against any third party which may affect the interests of the Company
in connection with this Agreement without the Company's prior consent.
28
<PAGE>
(b) The Company has the sole and exclusive right and responsibility to
prosecute and defend all suits relating to the Trademarks. The Company
may prosecute or defend any suit relating to the Trademarks in the
name of the Bottler whenever an issue in such suit involves the
Territories and therefore it is appropriate to act in the Bottler's
name, or may proceed alone in the name of the Company, provided that
the Company shall take no action in the Bottler's name which the
Company knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
(c) The Bottler recognizes the importance and benefit to itself and all
other bottlers of the Beverages of protecting the interest of the
Company in the Beverages, Authorized Containers and the goodwill
associated with the trademarks. Therefore, the Bottler agrees to
consult with the Company on all products liability claims or lawsuits
brought against the Bottler in connection with the Beverages or
Authorized Containers and to take such action with respect to the
defense of any such claim or lawsuit as the Company may reasonably
request in order to protect the interest of the company in the
Beverages, Authorized Containers and goodwill associated with the
Trademarks. Further, the Bottler shall supervise, control and direct
the defense of all such products liability claims and lawsuits brought
against them whether individually or jointly, provided, however, that
the Bottler and the Company expressly reserve all rights of
contribution and indemnity as prescribed by law.
29
<PAGE>
ARTICLE XI
Automatic Amendment
33. In the event that bottlers, which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Beverages purchased for
the account of all bottlers who are parties to agreements with the Company
containing substantially the same terms as this Agreement, agree with the
Company to any different provisions to be included in this Agreement, then
the Bottler hereby agrees to include an amendment containing such different
provisions in this Agreement. The gallons of Concentrate purchased by such
bottlers shall be determined based on the most recently-ended calendar year
prior to the date such amendment was first offered to bottlers.
ARTICLE XII
General
34. For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "person" means an individual, a corporation, a partnership, a limited
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision
thereof.
30
<PAGE>
(b) "control" (including terms "controlling", "controlled by" and "under
common control with") means: (i) Beneficial Ownership of a majority of
any class or series of voting securities of a person; or (ii) the
power or authority, directly or indirectly, to elect or designate a
majority of the members of the board of directors, or other governing
body of a person.
35. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
36.
(a) Without relieving the Bottler of any of its responsibilities under
this Agreement, the Company, from time to time during the term of this
Agreement, at its option and either free of charge or on such terms
and conditions as the Company may propose, may offer technology to the
Bottler which the Company possesses, develops or acquires (and is free
to furnish to third parties without obligation) relating to the
design, installation, operation and maintenance of the plant and
equipment appropriate for the maintenance of product quality,
sanitation and safety as well as for the efficient manufacture and
packaging of the Beverages; or relating to personnel training,
accounting methods, electronic data processing and marketing and
distribution techniques.
(b) The Bottler covenants and agrees that, so long as this agreement is in
effect the Bottler shall install and maintain management information
systems that are capable of interfacing and sharing required data with
the management information systems of the Company in accordance with
standards established by the Company.
31
<PAGE>
37. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic information
whatsoever concerning the composition of the Concentrates, the Syrup
or the Beverages, without the prior consent of the Company, and it
will use any such information solely to perform its obligations
hereunder;
(b) It will at all times treat and maintain as confidential, all nonpublic
information that it may receive at any time from the Company,
including, but not limited to:
(i) Information or instructions of a technical or other nature,
relating to the mixing, sale, marketing and distribution of the
product.
(ii) Information about projects or plans worked out in the course of
this Agreement; and
(iii)Information constituting manufacturing or commercial trade
secrets.
The Bottler, further agrees to disclose such information, as necessary to
perform its obligations hereunder, only to employees of its enterprise: (i)
who have a reasonable need to know such information; (ii) who have agreed
to keep such information secret; and (iii) whom the Bottler has no reason
to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all photocopies or
other reproductions in its possession (including, but not limited to,
any extracts or digests thereof) containing or relating to any
nonpublic information described in this paragraph 37. Following such
termination, and the surrender of such materials, the Bottler and its
employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure thereof
whatsoever, provided that such obligation shall expire as to any
nonpublic information that does not constitute trade secrets ten (10)
years following such termination.
32
<PAGE>
38. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
39. The Bottler is an independent manufacturer and not the agent of the
Company. The Bottler agrees that it will not represent that it is an agent
of the Company nor hold itself out as such.
40. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
(i) Quarterly Statements. As soon as such statements are made available to
the public, or if such statements are not regularly made available to
the public, within thirty days after such fiscal quarter, an unaudited
income and expense statement and balance sheet for the Bottler
certified as correct by the chief financial officer of the Bottler;
and;
(ii) Annual Audit Statement. As soon as such statements are made available
to the public, or if such statements are not regularly made available
to the public, within 120 days after the end of each fiscal year,
statements of income and retained earnings of the Bottler for the
just-ended fiscal year, and a balance sheet of the Bottler as of the
end of such year, accompanied by an opinion from the independent
public accountants of the Bottler; and
33
<PAGE>
(iii)Other information. With reasonable promptness such other financial
information as the Company may reasonably request in such format as
the Company may reasonably request.
41. The Bottler shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any person
designated in writing by the Company to visit and inspect any of its
properties, corporate books and financial records (including, but not
limited to, auditor's workpapers), and make copies thereof and take
extracts therefrom, and to discuss the accounts and finances of the Bottler
with the principal officers thereof, all at such times as the Company may
reasonably request. The Company's rights of inspection under this paragraph
41 shall be exercised reasonably, and only for purposes of determining
Bottler's compliance with its obligations under paragraph 19, so as not to
interfere with the normal operation of the Bottler's business. The Company
will treat and maintain as confidential for a period of one year all
nonpublic financial information received from the Bottler.
42. The parties agree:
(a) All Existing Bottling Appointments, and other waivers, authorizations
or similar documents related to such Existing Bottling Appointments,
to the extent that they are inconsistent with this Agreement, are
hereby superseded and restated in their entirety, and all rights,
duties and obligations of the Company and the Bottler regarding the
Trademarks and the manufacture, packaging, distribution and sale of
the Beverages in Authorized Containers shall be determined under this
Agreement, without regard to the terms of any prior agreement and
without regard to any prior course of conduct between the parties;
34
<PAGE>
(b) As to all matters addressed herein, this Agreement sets forth the
entire agreement between the Company and the Bottler, and all prior
understandings, commitments or agreements relating to such matters
between the parties or their predecessors -in-interest are of no force
or effect; and
(c) Any waiver or modification of this Agreement or any of its provisions,
and any notices given or consents made under this Agreement shall not
be binding upon the Bottler or the Company unless made in writing,
signed by an officer of the Company or by a duly qualified and
authorized representative of the Bottler, and personally delivered or
sent by telegram, telex or certified mail to an officer of the Company
(if from the Bottler) or a duly qualified and authorized
representative of the Bottler (if from the Company) at the principal
address of such party.
43. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right shall
not be deemed to be a waiver of such option or right, or of the right to
demand subsequent performance of any and all obligations herein imposed
upon the Bottler.
44. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company upon
notice to the Bottler, but no such delegation shall relieve the Company of
its obligations hereunder.
45. If any provision of this Agreement, or the application thereof to any party
or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any
other provision hereof, or the application of such provision to other
parties or circumstances.
35
<PAGE>
46. This Agreement shall be governed, construed and interpreted under the laws
of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. PEPSIAMERICAS, INC.
By: ____________________________ By: _________________________
Title: ________________________ Title: _______________________
Date: _________________________ Date: _______________________
<PAGE>
SCHEDULE A
BEVERAGES-COLAS
Pepsi
Diet Pepsi
Pepsi One
Caffeine Free Pepsi
Caffeine Free Diet Pepsi
Wild Cherry Pepsi
Diet Wild Cherry Pepsi
<PAGE>
SCHEDULE B
TRADEMARKS-COLAS
Pepsi
Pepsi-Cola
Diet Pepsi
Diet Pepsi-Cola
Pepsi One
Caffeine Free Pepsi
Caffeine Free Pepsi-Cola
Caffeine Free Diet Pepsi
Caffeine Free Diet Pepsi-Cola
Wild Cherry Pepsi
Diet Wild Cherry Pepsi
<PAGE>
SCHEDULE C
TERRITORIES
Master Bottling Agreement
STATE CITY FORMER BOTTLING ENTITIES
AR Camden Delta Beverage Group, Inc.
AR Jonesboro Delta Beverage Group, Inc.
AR Little Rock Delta Beverage Group, Inc.
IA Esterville Pepsi-Cola Bottling Company of
Esterville, Inc.
LA Monroe Delta Beverage Group, Inc.
LA New Orleans Delta Beverage Group, Inc.
LA Shreveport Delta Beverage Group, Inc.
MN Ortonville Min-Dak Beverages, Inc.
MN Thief River Falls Min-Dak Beverages, Inc.
MS Carthage Delta Beverage Group, Inc.
MS Columbus Delta Beverage Group, Inc.
MS Greenville Delta Beverage Group, Inc.
MS Tupelo Delta Beverage Group, Inc.
MS Winona Delta Beverage Group, Inc.
ND Bismark Pepsi-Cola Bottling Company of
Fargo, Inc.
ND Fargo Pepsi-Cola Bottling Company of
Fargo, Inc.
ND Grand Forks Pepsi-Cola Bottling Company of
Grand Forks, Inc.
SD Aberdeen Pepsi-Cola Bottling Company of
Aberdeen, South Dakota
SD Sioux Falls Pepsi-Cola Bottling Co. of Sioux
Falls
TN Jackson Delta Beverage Group, Inc.
TN Memphis Delta Beverage Group, Inc.
TX Texarkana Delta Beverage Group, Inc.
<PAGE>
EXHIBIT 10.15
MASTER FOUNTAIN SYRUP AGREEMENT
Between
PEPSICO, INC.
and
PEPSIAMERICAS, INC.
<PAGE>
MASTER FOUNTAIN SYRUP AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of October 15, 1999, is
made and entered into by and between PEPSICO, INC., a corporation organized and
existing under the laws of the State of North Carolina having its principal
place of business in Purchase, New York (the "Company"), and PEPSIAMERICAS,
INC., a corporation organized and existing under the laws of the state of
Delaware having its principal place of business in Memphis, Tennessee (the
"Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the "Concentrates")
for the manufacture of fountain beverage syrups (the "Fountain Syrups").
The Company authorizes others to manufacture the Fountain Syrups from the
Concentrates and to distribute and sell the Fountain Syrups to certain
customers for use in preparing the fountain soft drinks identified on
Schedule A (as modified from time to time under paragraphs 18 and 19, the
"Beverages"). The formulas for the Concentrates, Fountain Syrups and the
Beverages constitute trade secrets owned by the Company;
B. The Company is the owner of the trademarks identified on Schedule B
(together with such other trademarks as may be authorized by the Company
from time to time for current use by the Bottler under this Agreement, the
"Trademarks"), which, among other things, identify and distinguish the
Fountain Syrups;
C. A significant business of the Bottler is the manufacture and distribution
of the Fountain Syrups either pursuant to certain agreements previously
entered into with the Company, (collectively, together with all amendments
thereto, the "Existing Syrup Appointments"), or indirectly through one or
more persons controlling, controlled by or under common control with the
Bottler (the "Bottler Affiliates");
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D. The reputation of the Fountain Syrups as being of consistently superior
quality has been a major factor in stimulating and sustaining demand for
the Fountain Syrups, and special technical skill and constant diligence on
the part of the Bottler and the Company are required in order for the
Fountain Syrups to maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Fountain
Syrups have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Syrup Appointments, and
as a consequence, the Company and the Bottler desire to amend the Existing
Syrup Appointments, the terms of the Existing Syrup Appointments, as so
amended, being replaced and restated in the form of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Bottler agree as follows:
ARTICLE I
The Authorization
1.
(a) The Company authorizes the Bottler, and the Bottler undertakes, to:
(i) manufacture and package the Fountain Syrups and (ii) distribute
and sell the Fountain Syrups under the Trademarks in and throughout
the Territories (as hereinafter defined) for Local Account Customers
(as hereinafter defined) only. The Bottler may conduct any of the
activities with respect to which it is authorized or appointed and
satisfy any duty or obligation imposed upon it under this Agreement
through its Bottler Affiliates provided that the Bottler shall remain
responsible for all obligations imposed under this Agreement and for
all of the conduct of its Bottler Affiliates.
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(b) The Company appoints the Bottler as its sole and exclusive purchaser
of the Concentrates for the purpose of manufacturing and packaging the
Fountain Syrups under the Trademarks for distribution and sale in the
Territories to Local Account Customers.
(c) (i) "Territories" means each of the territories identified Schedule C
hereto subject to the possible elimination of Subterritories under
paragraph 26 hereof and including any Territories added in accordance
with paragraph 28 hereof.
(ii) "Local Account Customers" means a single outlet, chain or
multiple outlet operations and cup vending machine operators that have
all of their outlets located within only one of the Territories.
(iii) "National Account Customers" means chain or multiple outlet
operations and cup vending machine operators that have outlets in (x)
more than one of the Territories or (y) in at least one of the
Territories and in one or more other PepsiCo licensed territories.
(iv) "Program Customer" means any of the following (a) any National
Account Customer that enters into an agreement with the Company's
Fountain Beverage Division or National Sales Business Unit (or
successors thereto) after the date hereof, (b) any National Account
Customer listed on Schedule D annexed hereto and made a part hereof,
(c) any existing National Account Customer, not otherwise designated
as a Program Customer hereunder, if and when such National Account
Customer converts from DSD (as defined below) to Commissary (as
defined below) delivery, or (d) any National Account Customer, not
otherwise designated as a Program Customer hereunder, that Bottler and
Company agree should be deemed to be a Program Customer.
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(v) "Commissary" means a distributor of food or beverage or related
items to restaurants, hotels, theatres, stadiums or any other entity
serving food or beverages that do not receive beverage shipments to
their outlets through DSD.
ARTICLE II
Reservation of Company's Rights; Agency Arrangements
2.
(a) The Company reserves the right to (i) manufacture and package the
Fountain Syrups and (ii) distribute and sell the Fountain Syrups under
the Trademarks in and throughout the Territories for all National
Account Customers. Notwithstanding the foregoing, if a National
Account Customer elects to receive shipments of Fountain Syrup through
direct store door delivery ("DSD") in one or more of the Territories,
the Company shall appoint the Bottler, and upon appointment the
Bottler hereby undertakes to serve, as the Company's exclusive agent
in such Territories for the (i) manufacture and packaging of the
Fountain Syrups and (ii) distribution of the Fountain Syrup under the
Trademarks to such National Account Customer. In the event the
National Account Customer elects to discontinue DSD of the Fountain
Syrups at any time, or if the bottler refuses to serve as the
Company's exclusive agent, the exclusive agency granted to the Bottler
pursuant to this paragraph shall immediately terminate without any
liability whatsoever to the Company in connection therewith. If a
National Account Customer does not elect DSD, the Company may in its
sole discretion appoint the Bottler as its non-exclusive agent for
manufacturing and packaging Fountain Syrups for the Company's sale to
National Account Customers.
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(b) The Company authorizes the Bottler, and the Bottler undertakes, to
maintain and service the equipment used to dispense the Beverages
located at the premises of all National Account Customers (unless the
National Account Customer elects to handle its service requirements
independently) in and throughout the Territories provided that the
Bottler complies with all of the Company's requirements and service
performance standards.
(c) The Company and the Bottler agree that the rights and authorizations
set forth in Article I and Article II paragraphs 2(a) and (b) are
necessary to effectively promote the development and growth of the
Fountain Syrup business in the Territories. In this regard the Company
and the Bottler agree to certain fees and incentive payments as set
forth in Schedules E-1 through E-6 hereto, as may be amended by the
parties from time to time. The categories addressed by Schedules E-1
through E-6 are as follows: Bottler Delivery Remittance, Brand
Development Fee, Equipment Service Standards and Fees, New Equipment
Program, Production Fee, and Service Incentive.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
3. The Bottler acknowledges that the Company is the sole and exclusive owner
of the Trademarks, and the Bottler agrees not to question or dispute the
validity of the Trademarks or their exclusive ownership by the Company. By
this Agreement, the Company extends to the Bottler only: (i) an exclusive
license to use the Trademarks solely in connection with the manufacture,
packaging and sale of the Fountain Syrups for distribution and sale to
Local Account Customers in the Territories as set forth in Article I
hereof; (ii) an exclusive license to use the Trademarks solely in
connection with the manufacture, packaging and sale of the Fountain Syrups
for distribution and sale to National Account Customers in the Territories
who elect DSD, as set forth in paragraph 2(a) hereof; and (iii) a
non-exclusive license to use the Trademarks solely in connection with the
manufacture and packaging of the Fountain Syrups for distribution to
National Account Customers in the Territories, who do not elect DSD, as set
forth in subparagraph 2(a) hereof. Nothing herein, nor any act or failure
to act by the Bottler or the Company, shall give the Bottler any
proprietary or ownership interest of any kind in the Trademarks or in the
goodwill associated therewith.
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4. The Bottler agrees during the term of this Agreement and in accordance with
any requirements imposed upon the Bottler under applicable laws:
(a) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any "Cola Product" (herein defined to mean any
soft drink beverage or syrup which is generally marketed as a cola
product or which is generally perceived as being a cola product) other
than a soft drink or syrup manufactured, packaged, distributed or sold
by the Bottler under authority of the Company;
(b) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any concentrate, beverage base, syrup,
beverage or any other product which is likely to be confused with, or
passed off for, any of the Concentrates, Fountain Syrups or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product or syrup under any trademark or
other designation that is an imitation, counterfeit, copy or
infringement of, or confusingly similar to, any of the Trademarks; and
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<PAGE>
(d) Not to acquire or hold, directly or indirectly, any ownership interest
in, or, directly or indirectly, enter into any contract or arrangement
with respect to, the management or control of, any person within or
without the Territories that engages in any of the activities
prohibited by subparagraphs (a), (b), (c) or (d) of this paragraph 4.
ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Fountain Syrups
5.
(a) The Bottler represents and warrants that the Bottler possesses, or
will possess, in the Territories, prior to the manufacture, packaging
and distribution of the Fountain Syrups, and will maintain during the
term of this Agreement, such plant or plants, machinery and equipment,
trained staff, and distribution and fountain vending facilities as are
capable of manufacturing, packaging and distributing the Fountain
Syrups in accordance with this Agreement, in compliance with all
applicable governmental and administrative requirements, and in
sufficient quantities to fully meet the demand for the Fountain Syrups
in the Territories.
(b) The Company and the Bottler acknowledge that each is or may become a
party to one or more agreements authorizing a bottler or other
Company-authorized entity to produce Fountain Syrups for sale by
another bottler. Such agreements include, but are not limited to (i)
agreements permitting bottlers, subject to certain conditions, to
commence or continue to manufacture the Fountain Syrups for other
bottlers, and (ii) agreements pursuant to which bottlers may have the
Fountain Syrups manufactured for them by other Company-authorized
entities. It is hereby agreed that the Company shall not unreasonably
withhold (i) any consents required by such agreements, or (ii)
approval of Bottler's participation in such agreements. All such
existing agreements shall remain in full force and effect in
accordance with their terms.
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<PAGE>
6. The Bottler recognizes that increases in the demand for the Fountain
Syrups, as well as changes in the packaging used for the Fountain Syrups,
may, from time to time, require adaptation of its existing manufacturing,
packaging or delivery equipment or the purchase of additional
manufacturing, packaging and delivery equipment. The Bottler agrees to make
such modifications and adaptations as necessary and to purchase and install
such equipment, in time to permit the introduction and manufacture,
packaging and delivery of sufficient quantities of the Fountain Syrups, to
fully meet the demand for the Fountain Syrups in the Territories.
7. The Bottler warrants that the handling and storage of the Concentrates and
the manufacture, handling, storage, and packaging of the Fountain Syrups
shall be accomplished in accordance with the Company's quality control and
sanitation standards, as reasonably established by the Company and
communicated to the Bottler from time to time, and shall, in any event,
conform with all food, labeling, health, packaging and other relevant laws
and regulations applicable in the Territories.
8. The Bottler, in accordance with such instructions as may be given from time
to time by the Company, shall submit to the Company, at the Bottler's
expense, samples of the Fountain Syrups and the raw materials used in the
manufacture of the Fountain Syrups. The Bottler shall permit
representatives of the Company to have access to the premises of the
Bottler during ordinary business hours to inspect the plant, equipment, and
methods used by the Bottler in order to ascertain whether the Bottler is
complying with the instructions and standards prescribed for the
manufacturing, handling, storage and packaging of the Fountain Syrups.
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<PAGE>
9.
(a) For the packaging, distribution and sale of the Fountain Syrups, the
Bottler shall use only such packaging and labels as shall be
authorized from time to time by the Company for the Bottler and shall
purchase such items only from manufacturers approved by the Company,
which approval shall not be unreasonably withheld. Such approval by
the Company does not relieve the Bottler of the bottler's independent
responsibility to assure that the packaging and labels purchased by
the Bottler are suitable for the purpose intended, and in accordance
with the good reputation and image of excellence of the Trademarks and
Beverages.
(b) The Bottler shall maintain at all times a stock of packages, labels,
and other essential related materials bearing the Trademarks,
sufficient to fully meet the demand for Fountain Syrups in the
Territories, and the Bottler shall not use or permit the use of any
packages, labels or other materials, if they bear the Trademarks or
contain any Fountain Syrups, for any purpose other than the packaging
and distribution of the Fountain Syrups. The Bottler further agrees
not to refill or otherwise reuse nonreturnable containers.
10. If the Company determines the existence of quality or technical
difficulties with any Fountain Syrup, or any package used for the Fountain
Syrup, the Company shall have the right, immediately and at its sole
option, to withdraw the Fountain Syrup or any such package from the market.
The Company shall notify the Bottler in writing of such withdrawal, and the
Bottler shall, upon receipt of notice, immediately cease distribution of
the Fountain Syrup or such package therefor. If so directed by the Company,
the Bottler shall recall and reacquire the Fountain Syrup or package
involved from any purchaser thereof. If any recall of any product or any of
the packages used therefor is caused by (i) quality or technical defects in
the Concentrate, or other materials prepared by the Company from which the
Fountain Syrup involved was prepared by the Bottler, or (ii) quality or
technical defects in the Company's designs and design specifications of
packages which it has imposed on the Bottler or the Bottler's third party
suppliers if such designs and specifications were negligently established
by the Company (and specifically excluding designs and specifications of
other parties and the failure of other parties to manufacture packages in
strict conformity with the designs and specifications of the Company), the
Company shall reimburse the Bottler for the Bottler's total expenses
incident to such recall. Conversely, if any recall is caused by the
Bottler's failure to comply with instructions, quality control procedures
or specifications for the preparation, packaging and distribution of the
Fountain Syrup involved, the Bottler shall bear its total expenses of such
recall and reimburse the Company for the Company's total expenses incident
to such recall.
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<PAGE>
ARTICLE V
Conditions of Purchase and Sale
11. The Company reserves the right to establish and to revise at any time, in
its sole discretion, the price of any of the Concentrates, the terms of
payment, and the other terms and conditions of supply, any such revision to
be effective immediately upon notice to the Bottler. If Bottler rejects a
change in price or the other terms and conditions contained in any such
notice, then the Bottler shall so notify the Company within thirty (30)
days of receipt of the Company's notice, and this Agreement will terminate
ninety (90) days after the date of such notification by the Bottler,
without further liability of the Company or the Bottler. The change in
price or other terms and conditions so rejected by the Bottler shall not
apply to purchases of such Concentrate by the Bottler during such ninety
(90) day period preceding termination. Failure by the Bottler to notify the
Company of its rejection of the changes in price or such other terms and
conditions shall be deemed acceptance thereof by the Bottler.
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<PAGE>
12. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Fountain Syrups. The
Bottler shall not sell or otherwise transfer any Concentrate or permit the
same to get into the hands of third parties.
13.
(a) The Bottler agrees not to distribute or sell any Fountain Syrups
outside the Territories. The Bottler shall not distribute or sell any
Fountain Syrups to any person (other than another Bottler pursuant to
subparagraph 5(b) and other than as a delivery agent for the Company
to National Account Customers outside of the Territories which elect
to receive Fountain Syrup through distribution methods other than
direct store delivery as provided in subparagraph 2(a) hereof) for
ultimate sale outside the Territories. If any Fountain Syrup
distributed by the Bottler is found outside of the Territories in
violation of this paragraph 13, Bottler shall be deemed to have
transshipped such Fountain Syrup and shall be deemed to be a
"Transshipping Bottler" for purposes hereof. For purposes of this
Agreement, "Offended Bottler" shall mean a Bottler in any Territories
into which any Fountain Syrup is transshipped.
(b) In addition to all other remedies the Company may have against any
Transshipping Bottler for violation of this paragraph 13, the Company
may impose upon any Transshipping Bottler a charge for each gallon of
Fountain Syrup transshipped by such Bottler. The per-gallon amount of
such charge shall be determined by the Company in its sole discretion.
The Company and the Bottler agree that the amount of such charge shall
be deemed to reflect the damages to the Company, the Offended Bottler
and the bottling system. In addition, the Company may directly charge
the Transshipping Bottler the full amount of all investigative and
other costs incurred by the Company in connection with the
transshipment and such Transshipping Bottler shall be obligated to pay
such amount. The Company shall forward to the Offended Bottler, upon
receipt from the Transshipping Bottler, the full amount of the per
gallon charge so received (but not including investigative and other
costs charged to the Transshipping Bottler by the Company). If the
Company or its agent recalls any Beverage which has been transshipped,
the Transshipping Bottler shall, in addition to any other obligation
it may have hereunder, reimburse the Company for its costs of
purchasing, transporting, and/or destroying such Beverage.
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<PAGE>
ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
14. The continuing responsibility to increase and fully meet the demand for the
Fountain Syrups within the Territories rests upon the Bottler. The Bottler
agrees to use all approved means as may be reasonably necessary to meet
this responsibility.
15.
(a) The Bottler will push vigorously the sale of the Fountain Syrups
throughout all of the Territories. Without in any way limiting the
Bottler's obligation under this Paragraph 15, the Bottler must (i)
fully meet and increase the demand for the Fountain Syrups throughout
the Territories and secure full distribution up to the maximum sales
potential therein through all channels or outlets available to
fountain beverages, using any and all equipment reasonably necessary
to secure such distribution; (ii) service all accounts with frequency
adequate to keep them at all times fully supplied with the Fountain
Syrups and (iii) keep the fountain dispensing equipment located at
such channels and outlets in good working order in accordance with
requirements and performance standards established by the Company.
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<PAGE>
(b) The parties agree that to fully meet and increase demand for the
Fountain Syrups advertising and other forms of marketing activities
are required. Therefore, the Bottler will spend such funds in
advertising and marketing the Fountain Syrups as may be reasonably
required to increase, as well as maintain, demand for the Fountain
Syrups in the Territories. The Bottler shall fully cooperate in and
vigorously push all cooperative advertising and sales promotion
programs and campaigns that may be reasonably established by the
Company for the Territories. The Bottler will use and publish only
such advertising, promotional materials or other items bearing the
Trademarks relating to the Fountain Syrups as the Company has approved
and authorized. The expenditures required by this Article VI shall be
made by the Bottler. The Company may, in its sole discretion,
contribute to such expenditures. The Company may also undertake, at
its expense, independently of the Bottler's marketing programs, any
advertising or promotional activity that the Company deems appropriate
to conduct in the Territories, but this shall in no way affect the
responsibility of the Bottler for increasing the demand for the
Fountain Syrups.
(c) The obligations set forth in Paragraphs 14, 15(a)(i) and 15(b) above
shall be modified as follows. In the case of Program Customers only,
the Bottler and the Company agree that such obligations shall be joint
obligations of both the Bottler and the Company.
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16. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and all
Bottler Affiliates directly or indirectly controlled by the Bottler will be
financially able to perform their respective duties and obligations under
this Agreement and under all other agreements between the Company and
Bottler Affiliates regarding the manufacture, packaging, distribution and
sale of the Fountain Syrups.
17.
(a) The Company and the Bottler have agreed upon a business plan for the
first three years of the term of this Agreement. Since periodic
planning is essential for the proper implementation of this Agreement,
the Bottler and the Company shall meet each year at such date as the
parties may set (but no later than ninety (90) days prior to the
commencement of any calendar year during the term of this Agreement
beginning with the commencement of the calendar year closest to the
anniversary date of this Agreement), to discuss the Bottler's plans
for the ensuing three (3) year period. At such meeting, the Bottler
shall present a plan that sets out in reasonable detail satisfactory
to the Company: (i) the marketing plans, management plans and
advertising plans of the Bottler with respect to the Fountain Syrups
for the ensuing year, including a financial plan showing that the
Bottler and all Bottler Affiliates have the consolidated financial
capacity to perform their respective duties and obligations under this
Agreement, and (ii) the projected sales and capital expenditures for
the two years immediately following such year. The Company and the
Bottler shall discuss this plan and this plan, upon approval by the
Company, which shall not be unreasonably withheld, shall define the
Bottler's obligation herein to maintain such consolidated financial
capacity and to increase and fully meet the demand for the Fountain
Syrups in the Territories for the period of time covered by the plan.
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<PAGE>
(b) The Bottler shall report to the Company periodically, but not less
than quarterly, as to its implementation of the approved plan; it is
understood, however, that the Bottler shall report sales on a regular
basis as requested by the Company and in such format and detail, and
containing such information as may be reasonably requested by the
Company. The failure by the Bottler to carry out the plan, or if the
plan is not presented or is not approved, will constitute a primary
consideration for determining whether the Bottler has fulfilled its
obligation to maintain the consolidated financial capacity required
under paragraph 16 to push vigorously the sale of the Fountain Syrups
throughout the Territories and to increase and fully meet the demand
for the Fountain Syrups in the Territories as set forth in Paragraphs
14 and 15 hereof. If the Bottler carries out the plan in all material
respects, it shall be deemed to have satisfied the obligations of the
Bottler under Paragraphs 14, 15 and 16 for the period of time covered
by the plan.
ARTICLE VII
Reformulation, New Products and Related Matters
18. The Company has the sole and exclusive right and discretion to reformulate
any of the Fountain Syrups. In addition, the Company has the sole and
exclusive right and discretion to discontinue any of the Fountain Syrups
under this Agreement, provided such Fountain Syrups are discontinued on a
national basis. In the event that the Company discontinues any Fountain
Syrup, Schedule A to this Agreement shall be deemed amended by deleting the
discontinued Fountain Syrups from the list of Fountain Syrups set forth on
Schedule A.
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19. In the event that the Company introduces any new Fountain Syrup in the
Territories under the trademarks "Pepsi-Cola" or "Pepsi" or any
modification thereof (herein defined to mean the addition of a prefix,
suffix or other modifier used in conjunction with the trademarks
"Pepsi-Cola" or "Pepsi"), the Bottler shall be obligated to manufacture,
package, distribute and sell such new Fountain Syrup in the Territories
pursuant to the terms and conditions of this Agreement, and Schedule A to
this Agreement shall be deemed amended by adding such new Fountain Syrup to
the list of beverages set forth on Schedule A.
20. The Company has the unrestricted right to use the Trademarks on the
Fountain Syrups and on all other products and merchandise other than the
Fountain Syrups in the Territories.
ARTICLE VIII
Term and Termination of the Agreement
21.
(a) The term of this Agreement shall commence on the effective date hereof
and, unless earlier terminated in accordance with its provisions, will
end on the fifth anniversary of the effective date hereof (the
"Initial Term"). The Initial Term thereafter shall be extended
automatically for additional periods of five (5) years (each a
"Renewal Term"). Notwithstanding the foregoing, the Company may
terminate this Agreement without cause at any time during any Renewal
Term upon twenty-four (24) months notice.
(b) Upon termination of this Agreement in accordance with subparagraph
21(a) hereof and completion of the valuation process referred to in
subparagraph 21(c) below, the Company shall make a payment to the
Bottler in an amount equal to the fair market value of the business
conducted by the Bottler pursuant to the rights and authorizations set
forth in Articles I and II hereof, referred to collectively as the
"Bottler's Fountain Business".
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(c) In the event that the Company must compensate the Bottler under the
circumstance described in Paragraph 21(b) hereof, the procedures set
forth on Schedule F shall apply.
22. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to manufacture,
package, distribute and sell the Fountain Syrups under this Agreement shall
be suspended during any period when any of the following conditions exist:
(a) There shall occur a change in the law or regulation (including,
without limitation, any government permission or authorization
regarding customs, health or manufacturing) in such a manner as to
render unlawful or commercially impracticable:
(i) the importation of Concentrate or any of its essential
ingredients, which cannot be produced in quantities sufficient to
satisfy the demand therefor by existing Company facilities in the
United States; or
(ii) the manufacture and distribution of the Concentrates or Fountain
Syrups; or
(b) There shall occur any inability or commercial impracticability of
either of the parties to perform resulting from an act of God, or
"force majeure," public enemies, boycott, quarantine, riot, strike, or
insurrection, or due to a declared or undeclared war, belligerency or
embargo, sanctions, blacklisting, or other hazard or danger incident
to the same, or resulting from any other cause whatsoever beyond its
control.
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If any of the conditions described in this paragraph 22 persists so
that either party's obligation to perform is suspended in any
substantial respect for a period of six (6) months or more, the other
party may terminate this Agreement forthwith, upon notice to the party
whose obligation to perform is suspended.
23.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or Bottler Subsidiary becomes insolvent; if a
petition in bankruptcy is filed against or on behalf of the
Bottler or Bottler Subsidiary which is not stayed or dismissed
within sixty (60) days; if the Bottler or Bottler Subsidiary is
put in liquidation or placed under sequester; if a receiver is
appointed to manage the business of the Bottler or Bottler
Subsidiary; or if the Bottler or Bottler Subsidiary enters into
any judicial or voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with them or
makes an assignment for the benefit of creditors;
(ii) If the Bottler or Bottler Subsidiary adopts a plan of dissolution
or liquidation;
(iii)If any person or any Affiliated Group, other than any person or
any Affiliated Group acting with the consent of the Company,
acquires, or obtains any contract, option, conversion privilege
or other right to acquire, directly or indirectly, Beneficial
Ownership of more than fifteen percent (15%) of any class or
series of voting securities of the Bottler and if such person or
Affiliated Group does not divest itself of Beneficial Ownership
of such voting securities or otherwise terminate any such
contract, option, conversion privilege or other right to a level
equal to or below fifteen percent (15%) within thirty (30) days
after the Company notifies the Bottler that the failure of such
person or Affiliated Group to thus divest or terminate may result
in termination of this Agreement;
19
<PAGE>
(iv) If any Disposition is made without the consent of the Company by
Bottler or by any Bottler Subsidiary of any voting securities of
any Bottler Subsidiary;
(v) If the Master Bottling Agreement between the Company and the
Bottler or any person that controls, directly or indirectly, the
Bottler is terminated, unless the Company agrees in writing that
this subparagraph 23(a)(v) will not be applied by the Company to
such termination;
(vi) If the Bottler or any person in which the Bottler has Beneficial
Ownership of any equity or voting securities, or in which the
Bottler has a right or control of management, or which controls
or is under common control with the Bottler, should engage
directly or indirectly in the manufacture, distribution or
marketing of any product specified in subparagraphs (a), (b), (c)
or (d) of paragraph 4 above, or should obtain a right or license
to do the same, and if the Company has given the Bottler notice
that such condition exists and that the Company will terminate
this Agreement within six (6) months if such condition is not
eliminated, and if such condition has not been eliminated within
the six (6) month period.
20
<PAGE>
(vii)If all or substantially all of the Bottler's or Bottler
Subsidiary's bottling assets are sold, transferred or otherwise
disposed of (including any transfer by operation of law) other
than sales, transfers or other dispositions of Assets by the
Bottler or one or more Bottler Subsidiary to one or more wholly
owned Bottler Subsidiary.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or upon obtaining
knowledge of any third party action which may or will result in
any change in ownership described in Section 23(a)(iii) above;
and
(ii) to make available from time to time and at the request of the
Company complete records of current ownership of the Bottler and
full information concerning any entities or parties by whom it is
controlled directly or indirectly or which it controls.
(c) For the purposes of this Agreement:
(i) "Affiliated Group" shall mean two or more persons acting as a
partnership, limited partnership, syndicate or other group, or
who agrees to act together, for the purpose of acquiring,
holding, voting or making any Disposition of any voting
securities of the Bottler; provided further that the Affiliated
Group formed thereby shall be deemed to have acquired Beneficial
Ownership of all voting securities of the Bottler beneficially
owned by any such persons.
21
<PAGE>
(ii) "Beneficial Ownership" shall mean (i) voting power which includes
the power to vote, or to direct the voting of, any securities, or
(ii) investment power which includes the power to dispose, or to
direct the Disposition of, any securities; provided further
Beneficial Ownership shall include any such voting power or
investment power which any person has or shares, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise; provided, however, that the following
persons shall not be deemed to have acquired Beneficial Ownership
under the circumstances described: (a) a person engaged in
business as an underwriter of securities who acquires securities
through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall
not be deemed to be the Beneficial Owner of such securities until
such time as such underwriter completes his participation in the
underwriting and shall not thereupon or thereafter be deemed to
be the Beneficial Owner of the securities acquired by other
members of any underwriting syndicate or selected dealers in
connection with such underwriting solely by reason of customary
underwriting or selected dealer arrangements; (b) a member of a
national securities exchange shall not be deemed to be a
Beneficial Owner of securities held directly or indirectly by it
on behalf of another person solely because such member is the
record holder of such securities and, pursuant to the rules of
such exchange, may direct the vote of such securities, without
instruction, on other than contested matters or matters that may
affect substantially the rights or privileges of the holders of
the securities to be voted, but is otherwise precluded by the
rules of such exchange from voting without instruction; and (c)
the holder of a proxy solicited by the Board of Directors of the
Bottler for the voting of securities of the Bottler at any annual
or special meeting and any adjournment or adjournments thereof of
the stockholders of the Bottler shall not be deemed to be a
Beneficial Owner of the securities that are the subject of the
proxy solely for such reason.
22
<PAGE>
(iii)"Bottler Subsidiary" shall mean any person that is controlled
directly or indirectly by the Bottler, and either participates in
the manufacture, packaging, distribution or sale of the Beverages
in "authorized containers" or has a direct or indirect equity
interest in another Bottler Subsidiary that does so participate;
(iv) "Disposition" shall mean any sale, merger, issuance of
securities, or other transaction in which, or as a result of
which, any person other than Bottler or a wholly owned subsidiary
of Bottler, acquires, or obtains any contract, option, conversion
privilege or other right to acquire Beneficial Ownership of any
securities.
(d) Upon the occurrence of any of the events of default specified in
subparagraph 23(a), the Company may terminate this Agreement by giving
the Bottler notice to that effect, effective immediately.
24.
(a) In addition to the events of a default described in paragraph 23, the
Company may also terminate this Agreement, subject to the limitations
of subparagraph 24(b), in the event of the occurrence of any of the
following events of default:
(i) If the Bottler fails to make timely payment for Concentrate or of
any other debt owing to the Company;
23
<PAGE>
(ii) If the condition of the plant or equipment used by the Bottler in
manufacturing, packaging or distributing the Fountain Syrups
fails to meet the sanitary standards reasonably established by
the Company;
(iii)If the Fountain Syrups manufactured by the Bottler fail to meet
the quality control standards reasonably established by the
Company;
(iv) If the Fountain Syrups are not manufactured in strict conformity
with such standards and instructions as the Company may
reasonably establish;
(v) If the Bottler fails to present or carry out a plan approved
under paragraph 17 in all material respects; or
(vi) If the Bottler materially breaches any of the Bottler's other
obligations under this Agreement.
The standards and instructions of the Company comprise privately
published information concerning the manufacture, handling and storage
of the Fountain Syrups under good manufacturing practices, as well as
technical instructions, bulletins and other communications issued or
amended from time to time by the Company.
(b) Upon the occurrence of any of the foregoing events of default, the
Company shall, as a condition to termination of this Agreement under
this paragraph 24, give the Bottler notice thereof. The Bottler shall
then have a period of sixty (60) days within which to cure the
default, including, at the instruction of the Company and at the
Bottler's expense, by the prompt withdrawal from the market and
destruction of any Fountain Syrup that fails to meet the quality
control standards of the Company or any Beverage that is not
manufactured in accordance with the instructions of the Company. If
such default has not been cured within such period, then the Company
may, by giving the Bottler further notice to such effect, suspend
sales to the Bottler of Concentrates and require the Bottler to cease
production of the Fountain Syrups and the packaging and distribution
of Beverages in Authorized Containers. During such second period of
sixty (60) days, the Company also may supply, or cause or permit
others to supply, the Beverages in Authorized Containers under the
Trademarks in the Territories. If such default has not been cured
during such second period of sixty (60) days, then the Company may
terminate this Agreement, by giving the Bottler notice to such effect,
effective immediately.
24
<PAGE>
25. Upon the termination of this Agreement:
(a) The Bottler shall forthwith take such action as necessary to eliminate
the trademark "Pepsi-Cola" from its corporate name;
(b) Any other agreement between the Company and the Bottler regarding the
manufacture, packaging, distribution, sale or promotion of Fountain
Syrups may, at the election of the Company, be automatically
terminated and thereby become of no further force or effect.
(c) The Bottler shall not thereafter continue to manufacture, package,
distribute or sell any of the Fountain Syrups or to make any use of
the Trademarks or any packaging, labels or advertising material
bearing the Trademarks;
25
<PAGE>
(d) The Bottler shall forthwith remove and efface all reference to the
Company, the Fountain Syrups and the Trademarks from the business
premises and equipment of the Bottler and from all business papers and
advertising used or maintained by the Bottler; and it shall not
thereafter hold forth in any manner whatsoever that it has any
connection with the Company or the Beverages; and,
(e) The Bottler shall forthwith deliver all Concentrate, Fountain Syrup,
usable returnable or any nonreturnable containers, packaging, labels,
and advertising material bearing the Trademarks, still in the
Bottler's possession or under the Bottler's control, to the Company or
the Company's nominee, as instructed, and, upon receipt, the Company
shall pay to the Bottler a sum equal to the reasonable market value of
such supplies or materials. The Company will accept and pay for only
such articles as are, in the opinion of the Company, in first-class
and usable condition, and all other such articles shall be destroyed
at the Bottler's expense. Containers and advertising material and all
other items bearing the name of the Bottler, in addition to the
Trademarks, that have not been purchased by the Company shall be
destroyed without cost to the Company, or otherwise disposed of in
accordance with instructions given by the Company, unless the Bottler
can remove or obliterate the Trademarks therefrom to the satisfaction
of the Company. The provisions for repurchase contained in
subparagraph 25(e) shall apply upon termination by either party under
paragraph 22; and upon termination by the Bottler under subparagraph
11. In all other cases, the Company shall have the right, but not the
obligation, to purchase the aforementioned items from the Bottler.
26
<PAGE>
26.
(a) Subject to the limitations set forth in subparagraph 26(b), in the
event that the Bottler at any time fails to carry out a plan approved
under paragraph 17 in all material respects in any segment of the
Territories, whether defined geographically or by type of market or
outlet, which segment shall be defined by the Company (hereinafter a
"Subterritory"), the Company may reduce the Territories covered by
this Agreement, and thereby restrict the Bottler's authorization
hereunder to the remainder of the Territories, by eliminating the
Subterritory from the Territories covered by this Agreement.
(b) In the event of such failure, the Company may eliminate the
Subterritory from the Territories covered by this Agreement by giving
the Bottler notice to that effect, which notice shall define the
Subterritory or Subterritories to which the notice applies. The
Bottler shall then have a period of six (6) months within which to
cure such failure. If the Bottler has not cured such failure in such
six (6) month period, the Company may eliminate such Subterritory or
Subterritories from the Territories by giving the Bottler further
notice to that effect, effective immediately.
(c) Upon elimination of any Subterritory from the Territories:
(i) Schedule C to this Agreement shall be deemed amended by
eliminating such Subterritory from the Territories;
(ii) The Company may manufacture, package, distribute and sell the
Fountain Syrups under the Trademarks in such Subterritory, or
authorize others to do so;
27
<PAGE>
(iii)Any other agreement between the Bottler and the Company
regarding the manufacture, packaging, distribution or sale of
Fountain Syrups in such Subterritory may, at the election of the
Company, be automatically terminated and thereby become of no
further force or effect in such Subterritory;
(iv) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Fountain Syrups in such
Subterritory, or to make any use of the Trademarks, packaging,
labels or advertising material bearing the Trademarks in
connection with the sale or distribution of the Fountain Syrups
in such Subterritory; and
(v) The Bottler shall not thereafter hold forth in such Subterritory
in any manner whatsoever that it has any connection with the
Fountain Syrups.
ARTICLE IX
Transferability/Additional Territories
27. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance standards
applicable to the Bottler, the dependence of the Trademarks on proper
quality control, the level of marketing effort required of the Bottler to
increase demand for the Fountain Syrups, and the confidentiality required
for protection of the Company's trade secrets and confidential information.
In recognition of the personal nature of these and other obligations of the
Bottler under this Agreement, the Bottler may not assign, transfer or
pledge this Agreement or any interest therein, in whole or in part, whether
voluntarily, involuntarily, or by operation of law (including, but not
limited to, by merger or liquidation), or delegate any material element of
the Bottler's performance thereof, or sublicense its rights hereunder, in
whole or in part, to any third party or parties, without the prior consent
of the Company. Any attempt to take such action without such consent shall
be void and shall be deemed to be a material breach of this Agreement.
29
<PAGE>
28.
(a) The Bottler hereby agrees that it will not acquire or attempt to
acquire, directly or indirectly, without the prior written consent of
the Company, the right to manufacture and sell any of the Fountain
Syrups or any equity or economic interest in any entity having such
rights in any territory located outside the Specified Area (the term
"Specified Area" shall have the meaning as set forth in the Master
Bottling Agreement between the parties hereto). Any acquisition of
such rights by the Bottler within the Specified Area shall be subject
to the approval of the Company, which approval shall not be withheld
if (i) the Bottler has successfully negotiated the acquisition of such
rights for any such territories with the holder thereof and (ii) in
the reasonable judgment of the Company, the Bottler has satisfactorily
performed its obligations under this Agreement.
(b) In the event that the Bottler acquires the right to manufacture and
sell any of the Fountain Syrups in any territories in the United
States outside of the Territories, such additional territories shall
automatically be deemed to be included within the Territories covered
by this Agreement for all purposes, except as set forth below. Any
separate agreement that may exist concerning such additional
territories shall be ipso facto amended to conform to the terms of
this Agreement, except as set forth below. In addition, if the Bottler
acquires control, directly or indirectly, of any person which is a
party, or which controls directly or indirectly a party, to an
agreement whereby such party has the right to manufacture and sell any
of the Fountain Syrups in any territory in the United States, the
Bottler shall cause such party to amend such agreement, effective as
of the date of acquisition of control of such party, to conform to the
terms of this Agreement with respect to all such territory in the
United States, except as set forth below. Notwithstanding the
foregoing, in the event the Bottler makes any such acquisition after
the date hereof, the Bottler's right to receive the Brand Development
Fee and the Bottler Delivery Remittance applicable to such acquired
territories shall continue to be governed by the agreement that
existed between the Company and the former bottler on the date of
acquisition, provided however that (i) such agreement shall be deemed
to expire five years from the date such territory was acquired after
which date this Agreement shall become applicable as if it were in
effect from the date of the acquisition and (ii) such agreement shall
only be applicable to those National Account Customers under contract
with the former bottler or the Company on the date of the acquisition.
29
<PAGE>
ARTICLE X
Litigation
29.
(a) The Company reserves the right to institute any civil, administrative
or criminal proceeding or action, and generally to take or seek any
available legal remedy it deems desirable, for the protection of its
good reputation and industrial property rights (including, but not
limited to, the Trademarks), as well as for the protection of the
Concentrates and the Fountain Syrups, and the formulas therefor, and
to defend any action affecting these matters. At the request of the
Company, the Bottler will render reasonable assistance in any such
action. The Bottler may not claim any right against the Company as a
result of such action or for any failure to take such action. The
Bottler shall promptly notify the Company of any litigation or
proceeding instituted or threatened affecting these matters. The
Bottler shall not institute any legal or administrative proceeding
against any third party which may affect the interests of the Company
in connection with this Agreement without the Company's prior consent.
30
<PAGE>
(b) The Company has the sole and exclusive right and responsibility to
prosecute and defend all suits relating to the Trademarks. The Company
may prosecute or defend any suit relating to the Trademarks in the
name of the Bottler whenever an issue in such suit involves the
Territories and therefore it is appropriate to act in the Bottler's
name, or may proceed alone in the name of the Company, provided that
the Company shall take no action in the Bottler's name which the
Company knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
(c) The Bottler recognizes the importance and benefit to itself and all
other licensed manufacturers and distributors of the Fountain Syrups
of protecting the interest of the Company in the Fountain Syrups and
the goodwill associated with the trademarks. Therefore, the Bottler
agrees to consult with the Company on all products liability claims or
lawsuits brought against the Bottler in connection with the Fountain
Syrups and to take such action with respect to the defense of any such
claim or lawsuit as the Company may reasonably request in order to
protect the interest of the company in the Fountain Syrups and
goodwill associated with the Trademarks. Further, the Bottler shall
supervise, control and direct the defense of all such products
liability claims and lawsuits brought against them whether
individually or jointly, provided, however, that the Bottler and the
Company expressly reserve all rights of contribution and indemnity as
prescribed by law.
31
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ARTICLE XI
Automatic Amendment
30. In the event that bottlers which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Fountain Syrups
purchased for the account of all bottlers who are parties to agreements
with the Company containing substantially the same terms as this Agreement,
agree with the Company to any different provisions to be included in this
Agreement, then the Bottler hereby agrees to include an amendment
containing such different provisions in this Agreement. The gallons of
Concentrate purchased by such bottlers shall be determined based on the
most recently-ended calendar year prior to the date such amendment was
first offered to bottlers. Such gallons of Concentrate purchased shall
include purchases which were concluded in any bottler's territory through
Commissary delivery or otherwise to National Account Customers.
ARTICLE XII
General
31. For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "person" means an individual, a corporation, a partnership, a limited
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision
thereof.
(b) "control" (including terms "controlling", "controlled by" and "under
common control with") means: (i) Beneficial Ownership of a majority of
any class or series of voting securities of a person; or (ii) the
power or authority, directly or indirectly, to elect or designate a
majority of the members of the board of directors, or other governing
body of a person.
32
<PAGE>
32. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
33.
(a) Without relieving the Bottler of any of its responsibilities under
this Agreement, the Company, from time to time during the term of this
Agreement, at its option and either free of charge or on such terms
and conditions as the Company may propose, may offer technology to the
Bottler which the Company possesses, develops or acquires (and is free
to furnish to third parties without obligation) relating to the
design, installation, operation and maintenance of the plant and
equipment appropriate for the maintenance of product quality,
sanitation and safety as well as for the efficient manufacture and
packaging of the Fountain Syrups; or relating to personnel training,
accounting methods, electronic data processing and marketing and
distribution techniques.
(b) The Bottler covenants and agrees that, so long as this agreement is in
effect the Bottler shall install and maintain management information
systems that are capable of interfacing and sharing required data with
the management information systems of the Company in accordance with
standards established by the Company.
34. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic information
whatsoever concerning the composition of the Concentrates or the
Fountain Syrups, without the prior consent of the Company, and it will
use any such information solely to perform its obligations hereunder;
33
<PAGE>
(b) It will at all times treat and maintain as confidential, all nonpublic
information that it may receive at any time from the Company,
including, but not limited to:
(i) Information or instructions of a technical or other nature,
relating to the mixing, sale, marketing and distribution of the
product.
(ii) Information about projects or plans worked out in the course of
this Agreement; and
(iii)Information constituting manufacturing or commercial trade
secrets.
The Bottler, further agrees to disclose such information, as necessary to
perform its obligations hereunder, only to employees of its enterprise: (i)
who have a reasonable need to know such information; (ii) who have agreed
to keep such information secret; and (iii) whom the Bottler has no reason
to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all photocopies or
other reproductions in its possession (including, but not limited to,
any extracts or digests thereof) containing or relating to any
nonpublic information described in this paragraph 34. Following such
termination, and the surrender of such materials, the Bottler and its
employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure thereof
whatsoever, provided that such obligation shall expire as to any
nonpublic information that does not constitute trade secrets ten (10)
years following such termination.
34
<PAGE>
35. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
36. The Bottler is an independent manufacturer and not the agent of the Company
except with regard to its provision of certain services to National Account
Customers.
37. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
(i) Quarterly Statements. As soon as such statements are made available to
the public, or if such statements are not regularly made available to
the public, an unaudited income and expense statement and balance
sheet for the Bottler certified as correct by the chief financial
officer of the Bottler; and
(ii) Annual Audit Statement. As soon as such statements are made available
to the public, statements of income and retained earnings of the
Bottler for the just-ended fiscal year, and a balance sheet of the
Bottler as of the end of such year, accompanied by an opinion from the
independent public accountants of the Bottler; and
(iii)Other information. With reasonable promptness such other financial
information as the Company may reasonably request in such format as
the Company may reasonably request.
35
<PAGE>
38. The Bottler shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any person
designated in writing by the Company to visit and inspect any of its
properties, corporate books and financial records (including, but not
limited to, auditor's workpapers), and make copies thereof and take
extracts therefrom, and to discuss the accounts and finances of the Bottler
with the principal officers thereof, all at such times as the Company may
reasonably request. The Company's rights of inspection under this paragraph
38 shall be exercised reasonably, and only for purposes of determining
Bottler's compliance with its obligations under paragraph 16, so as not to
interfere with the normal operation of the Bottler's business. The Company
will treat and maintain as confidential for a period of one year all
nonpublic financial information received from the Bottler.
39. The parties agree:
(a) All Existing Syrup Appointments and other waivers, authorizations, or
similar documents related to such existing Syrup Appointments, to the
extent they are inconsistent with this Agreement, are hereby
superseded and restated in their entirety, and all rights, duties and
obligations of the Company and the Bottler regarding the Trademarks
and the manufacture, packaging, distribution and sale of the Fountain
Syrups shall be determined under this Agreement, without regard to the
terms of any prior agreement and without regard to any prior course of
conduct between the parties;
(b) As to all matters addressed herein, this Agreement sets forth the
entire agreement between the Company and the Bottler, and all prior
understandings, commitments or agreements relating to such matters
between the parties or their predecessors-in-interest are of no force
or effect; and
36
<PAGE>
(c) Any waiver or modification of this Agreement or any of its provisions,
and any notices given or consents made under this Agreement shall not
be binding upon the Bottler or the Company unless made in writing,
signed by an officer of the Company or by a duly qualified and
authorized representative of the Bottler, and personally delivered or
sent by telegram, telex or certified mail to an officer of the Company
(if from the Bottler) or a duly qualified and authorized
representative of the Bottler (if from the Company) at the principal
address of such party.
40. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right shall
not be deemed to be a waiver of such option or right, or of the right to
demand subsequent performance of any and all obligations herein imposed
upon the Bottler.
41. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company upon
notice to the Bottler, but no such delegation shall relieve the Company of
its obligations hereunder.
42. If any provision of this Agreement, or the application thereof to any party
or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any
other provision hereof, or the application of such provision to other
parties or circumstances.
43. This Agreement shall be governed, construed and interpreted under the laws
of the State of New York.
37
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. PEPSIAMERICAS, INC.
By:_______________________ By:________________________
Title: ___________________ Title: ____________________
Date: ____________________ Date: _____________________
38
<PAGE>
SCHEDULE A
BEVERAGES-COLAS
Pepsi
Diet Pepsi
Pepsi One
Caffeine Free Pepsi
Caffeine Free Diet Pepsi
Wild Cherry Pepsi
Diet Wild Cherry Pepsi
<PAGE>
SCHEDULE B
TRADEMARKS-COLAS
Pepsi
Pepsi-Cola
Diet Pepsi
Diet Pepsi-Cola
Pepsi One
Caffeine Free Pepsi
Caffeine Free Pepsi-Cola
Caffeine Free Diet Pepsi
Caffeine Free Diet Pepsi-Cola
Wild Cherry Pepsi
Diet Wild Cherry Pepsi
<PAGE>
SCHEDULE C
TERRITORIES
Master Bottling Agreement
STATE CITY FORMER BOTTLING ENTITIES
AR Camden Delta Beverage Group, Inc.
AR Jonesboro Delta Beverage Group, Inc.
AR Little Rock Delta Beverage Group, Inc.
IA Esterville Pepsi-Cola Bottling Company of
Esterville, Inc.
LA Monroe Delta Beverage Group, Inc.
LA New Orleans Delta Beverage Group, Inc.
LA Shreveport Delta Beverage Group, Inc.
MN Ortonville Min-Dak Beverages, Inc.
MN Thief River Falls Min-Dak Beverages, Inc.
MS Carthage Delta Beverage Group, Inc.
MS Columbus Delta Beverage Group, Inc.
MS Greenville Delta Beverage Group, Inc.
MS Tupelo Delta Beverage Group, Inc.
MS Winona Delta Beverage Group, Inc.
ND Bismark Pepsi-Cola Bottling Company of
Fargo, Inc.
ND Fargo Pepsi-Cola Bottling Company of
Fargo, Inc.
ND Grand Forks Pepsi-Cola Bottling Company of
Grand Forks, Inc.
SD Aberdeen Pepsi-Cola Bottling Company of
Aberdeen, South Dakota
SD Sioux Falls Pepsi-Cola Bottling Co. of Sioux
Falls
TN Jackson Delta Beverage Group, Inc.
TN Memphis Delta Beverage Group, Inc.
TX Texarkana Delta Beverage Group, Inc.
<PAGE>
SCHEDULE D
List of Program Customers Referred to at Paragraph 1(c)(iv)(b)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Taco Bell AM-PM KFC Marriott
Arby's Dunkin Donuts Circle K Ponderosa/Bonanza
Canteen California Pizza Kitchen Chevron Shell
General Cinema Roy Rogers Walmart/Sam's Regal Cinemas
Jack In The Box Steak & Ale/Bennigans Sonic Sizzler
Lees Famous Recipe Quiktrip Coastal Mart DAKA
Long John Silvers Brueggers Bagels Amoco Aramark
Morrison's/Ruby Tuesday National Amusements Hardee's Texaco
Dairy Mart Kenny Rogers Galardi Group/Wienerschnitzel
Pizza Hut Mobil Subway Southland
Shoney's/Captain D's AVA Western Sizzlin Casey's General Stores
Wendy's Church's/Popeye's Dairy Queen Sbarro's
</TABLE>
<PAGE>
SCHEDULE E-1
BOTTLER DELIVERY REMITTANCE
The Company will pay a per-gallon fee (the "Bottler" Delivery Remittance" as
hereinafter defined) to the Bottler as the Company's agent for manufacturing
and delivering the Fountain Syrup to National Account Customers electing DSD
in accordance with the provisions of paragraph 2(a) above. Such fees shall be
established by the Company on an annual basis in accordance with the terms of
this agreement. If the Bottler, as agent of the Company, collects payments
from a National Account Customer for Fountain Syrup it has delivered to a
National Account Customer, the amount due and payable by the Bottler to the
Company with respect to such Fountain Syrup (the "Bottler Delivery Fee Charge")
shall be equal to the difference between (i) the price per gallon of such
Fountain Syrup for National Account Customers as established by the Company (the
"National Account List Price") and (ii) the amount of the corresponding Bottler
Delivery Remittance.
Subject to paragraph 28(b) of the Master Fountain Syrup Agreement, the Company
and the Bottler agree, that for those National Account Customers included in
the categories listed below, the Company will reduce the amount of the Bottler
Delivery Remittance paid to the Bottler by a specified per gallon amount.
<PAGE>
Business Unit (or successors) and that elect DSD. The Bottler Deliver
Remittance applicable to such National Account Customers shall be reduced by
$0.40 per gallon.
<PAGE>
II. A reduced Bottler Delivery Remittance will apply to any National Account
Customer described in Paragraph 1(c)(iv)(b) and (d) of this Agreement, if and
when such National Account Customer enters into a new National Account
agreement or extends or renews its current agreement with the Company. The
Bottler Delivery Remittance applicable to such National Account Customers shall
be reduced by $0.10 per gallon during the first 12 months following such new
agreement, extension or renewal and such reduction shall increase by $0.10 per
gallon in each 12 month period following the date the initial reduction became
applicable to such National Account Customer, to a maximum of $0.40 per gallon.
If during the Initial Term or any Renewal Term there is an increase in the
National Account List Price for any Fountain Syrup (a "National Account Price
Increase") that exceeds any corresponding increase in the cost of concentrate
for the manufacture of a gallon of such Fountain Syrup (a "Concentrate Cost
Increase"), the amount of the Bottler Delivery Remittance shall be increased by
at least an amount equal to the sum of the Concentrate Cost Increase plus 25%
of the amount by which the National Account Price Increase exceeds the
Concentrate Cost Increase.
By way of examples, the following chart sets forth adjustments to the Bottler
Delivery Remittance and the Bottler Delivery Fee Charge under various scenarios
(all amounts in cents per gallon):
Increase Minimum Increase in Maximum
National Account Concentrate Cost Bottler Delivery Bottler Delivery
Fee
Price Increase Increase Remittance Charge
- - ---------------- ---------------- ------------------- -------------------
0 0 0 0
5 8 5 0
10 10 10 0
20 8 11 9
8 cents Concentrate Cost Increase plus 3 cents (i.e. 25% of the 12 cents excess
of the 20 cents National Account Price Increase over the 8 cents Concentrate
Cost Increase)
<PAGE>
SCHEDULE E-2
BRAND DEVELOPMENT FEE
The Company will pay a fee (hereafter called the "Brand Development Fee") to
the Bottler for each gallon of Fountain Syrup sold by the Company to National
Account Customers (other than National Account Customers serviced through DSD
as set forth in Paragraph 2(a) above). The Brand Development Fee will be equal
to eight percent (8%) of the Company's list price for Fountain Syrup.
For those National Account Customers included in the categories listed below,
the Company will reduce the Brand Development Fee paid to the Bottler by a
specified per gallon amount.
CATEGORIES:
I. New National Account Customers that are not under contract on the date
hereof and are sold by the Company's Fountain Beverage Division or National
Sales Business Unit (or successors) during the Initial Term or any Renewal Term.
The Bottler will not receive any Brand Development Fee or National Account
Customers in this category.
<PAGE>
II. Any National Account Customer described at Paragraph 1(c)(iv)(b), (c) and
(d) of this Agreement will be subject to a reduced Brand Development Fee if and
when the National Account Customer enters into a new National Account agreement
or extends or renews its current agreement with the Company, or in the case of
those accounts listed on Exhibit E-2 hereto converts from DSD to commissary
delivery. The Brand Development Fee applicable to such National Account
Customers shall be reduced from 8% to 6% of the Company's list price in the
first 12 months following such and shall decrease by an equal amount in each 12
month new agreement extension or renewal service following the date the initial
reduction became applicable to such National Account Customer until such Brand
Development Fee no longer applies.
<PAGE>
EXHIBIT E-2
Taco Bell
KFC
Pizza Hut
<PAGE>
SCHEDULE E-3
EQUIPMENT SERVICE STANDARDS AND FEES
Company has established a service program as set forth hereafter (the "Service
Program") for the Initial Term and any Renewal Term, which applies to Program
Customers. The Service Program contains the following elements:
(i) The Bottler (assuming it is in compliance with the Company's reasonable
service standards) shall have a right of first refusal to provide service as the
Company's service agent.
(ii) If the Bottler agrees to act as the Company's service agent the Bottler
will provide service according to the existing Sudden Service standards attached
hereto as Exhibit E-3(i).
(iii) If the Company adopts new or revised service standards, any such new
standards must be reasonable. In the event any such new or revised service
standards result in increases or decreases to the Bottler's costs, the Company's
payments in Exhibit E-3(ii) (described in sub-paragraph (iv) below) will be
increased or decreased accordingly.
(iv) The Bottler, as the Company's service agent will be paid a
<PAGE>
Customers regardless of whether the Program Customer is receiving delivery
through a Commissary or through DSD.
<PAGE>
Exhibit E-3(i)
Sudden Service Standards--Bottler Coverage
------------------------------------------
o 24 hours - 7 day/week repair answering service
o 7 a.m. to 11 p.m. dispatching - 7 days per week
o 4 hour response time during regular dispatching hours
o Reimbursement for service all willl be computed on the basis of
a one hour minimum plus fifteen minute increment (or portion
thereof) in excess of one hour. Drive time will not be included
in the above computation except where special circumstances
related to an outlet location apply.
o One preventative maintenance check per outlet every 6 months
(taking 20-30 minutes to complete).
<PAGE>
Exhibit E-3(ii)
Bottler Service Rates
---------------------
Rate per Call Geography
- - ------------- ---------
$65 Los Angeles, Miami, Chicago, Boston,
Baltimore/Washington D.C., Alaska, New York City
$55 HI, CA, WA, MD, IL, SC, AR, NV
$50 CT, FL, GA, VA, MN, OR, NY, IN, NJ, WI, ME, NC,
OH, AZ, DL, MA, LA, PA, RI, WV, MO, ND, AL, MS
$45 NE, MI, CO, IA, TX, TN, SD, KS, MT, OK, UT, KY,
NH, VT
$40 WY, ID, NM
<PAGE>
SCHEDULE E-4
NEW EQUIPMENT PROGRAM
The Company has established a new equipment program for the Initial Term and any
Renewal Term which will be applicable only to the Program Customers. The
equipment program contains the following elements:
(i) The Company will provide equipment to National Account Customers
that enter into agreements with the Company's Fountain Beverage Division or
National Sales Business Unit (or successors thereto) after the date hereof.
(ii) The Company will offer to purchase from the Bottler any equipment
on loan from the Bottler to a National Account Customer that converts from DSD
to commissary delivery. The purchase price will be the fair market value of
such equipment. As used herein, fair market value will take into account costs,
age, condition, and resale opportunities. The Bottler will grant the Company
such reasonable access to the Bottler's books and records as is necessary to
determine identity, age, and cost of equipment.
(iii) If the Company and the Bottler fail to agree on the
[TEXT MISSING]
<PAGE>
SCHEDULE E-5
PRODUCTION FEE
During the Initial Term and any Renewal Term the Company will pay a fee to the
Bottler for production of all Fountain Syrup produced by the Bottler for
delivery to a Commissary at brand specific per gallon rates reasonably
established by the Company. The rates shall be calculated to include a margin
that is 3.3% above product average variable costs, adjusted for concentrate
increases and cumulative increases or decreases in the price of high fructose
corn syrup which exceeds $0.05 per gallon of Fountain Syrup. Transportation
will be reimbursed separately according to a regional delivery rate table to be
reasonably established by the Company on an annual basis.
<PAGE>
SCHEDULE E-6
SERVICE INCENTIVE
The Company has established an equipment service incentive fund, to be paid to
the Bottler in accordance with the following formula. Initially, this fund
will be paid at the rate of $0.15 per gallon on all Fountain Syrup delivered by
a Commissary to those National Account Customers in the Territories whose
gallons do not qualify the Bottler to receive any Brand Development Fee provided
that the Bottler meets the service criteria set forth in Schedule E-3, as
amended from time to time. This Fund may be adjusted in subsequent years at the
sole discretion of the Company.
<PAGE>
SCHEDULE F
COMPENSATION UPON TERMINATION
1. At least 90 days prior to the end of a period for which a notice of
termination is deliverd by the Company to the Bottler, the Company and the
Bottler shall decide on a mutually acceptable appraiser for determining the
amount of the Exit Value (as defined below). If the parties cannot agree, each
party shall choose a recognized, experienced independent appraiser, which
appraisers shall in turn choose a third appraiser who shall be responsible for
conducting the appraisal and determining the Exit Value (any such appraiser is
referred to herein as the "Appraiser").
2. The parties shall provide the Appraiser with a letter setting forth the
guidelines for the conduct of the appraisal proceedings. Such guidelines shall
specify (a) that the Appraiser utilizes 5 years of Projected Cash Flow (as
defined below), (b) that the Appraiser assume that such cash flows would be
derived from the value of the Bottler's Fountain Business, with normal capital
expenditures and investments in the Bottler's Fountain Business.
<PAGE>
4. Definitions:
(a) "Projected Cash Flow" means the projected After-Tax Cash Flow of
the Bottler's Fountain Business, based on (i) the actual After-Tax Cash Flow
(as defined below) of the Bottler's Fountain Business for the four (4) 12-month
periods ending six months prior to termination, and (ii) revenue, cost and
gallon sales growth trends for each segment of the Bottler's Fountain Business.
(b) "After-Tax Cash Flow" means net income, after taxes, plus reversal
of any provisions for depreciation or amortization and plus or minus net
interest expense or income, as the case may be, all determined in accordance
with generally accepted accounting principles then in effect.
(c) "Exit Value" shall mean five (5) years of discounted Projected Cash
Flow (as defined below); plus, in either case, the net book value (determined
in accordance with U.S. generally accepted accounting principles then in effect)
of the tangible assets of the Bottler used in the conduct of Bottler's Fountain
Business, less related liabilities assumed by the Company. The discount factor
to be used in connection with any calculation of Exit Value shall be the
<PAGE>
EXHIBIT F-1
WEIGHTED AVERAGE COST OF CAPITAL
(WACC)
PepsiCo's WACC is determined by taking the average of the long term expected
return on debt and equity, weighted by their proportion in PepsiCo's capital
structure:
WACC = Rd x D% + Rd x E%
Rd = Expected after-tax return on debt
D% = Percentage of Net Debt to Total Capital
Re = Expected return on Equity
E% = Percentage of Equity to Total Capital
Rd is the after-tax yield on a 30-year PepsiCo bond.
Re is determined by using the Capital Asset Pricing Model.
Re = Rf + Beta x (Rm-Rf)
Rf = 30-year Treasury yield
Beta = PepsiCo's Beta, (value line)
Rf-Rm = Market risk premium, (Alcar)
<PAGE>
EXHIBIT 10.16
Puerto Rico
All Brands
INTERNATIONAL MASTER BOTTLING AGREEMENT
Between
PEPSICO, INC.
and
PEPSIAMERICAS, INC.
<PAGE>
INTERNATIONAL MASTER BOTTLING AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of October 15, 1999, is
made and entered into by and between PEPSICO, INC., a corporation organized and
existing under the laws of the State of North Carolina having its principal
place of business in Purchase, New York (the "Company"), and PepsiAmericas,
Inc., a corporation organized and existing under the laws of the State of
Delaware having its principal place of business in Memphis, Tennessee (the
"Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the "Concentrates")
for the Beverages (as hereinafter defined). The Company authorizes others
to manufacture the syrups prepared from the Concentrates for the Beverages
(the "Syrups") and to manufacture from the Syrups and sell the fountain
syrup and the bottle and canned soft drinks identified on Schedule A (the
fountain syrup and the bottle and canned soft drinks identified on Schedule
A, as modified from time to time under paragraphs 21 and 22, are together
referred to herein as the "Beverages"). The formulas for the Concentrates,
Syrups and Beverages constitute trade secrets owned by the Company;
B. The Company is the owner of certain proprietary intellectual property,
including, without limitation, trademarks, trade dress, logos, designs and
slogans, used in connection with the brands listed in Schedule A (together
with such other trademarks as may be authorized by the Company from time to
time for current use by the Bottler under this Agreement, the
"Trademarks"), which, among other things, identify and distinguish the
Concentrates and the Beverages;
2
<PAGE>
C. The primary business of the Bottler is to act as a Bottler of the
Beverages, either directly pursuant to certain agreements with the Company
(collectively, together with all amendments thereto, the "Existing Bottling
Appointments"), or indirectly through one or more persons controlling,
controlled by or under common control with the Bottler (the "Bottler
Affiliates");
D. The reputation of the Beverages as being of consistently superior quality
has been a major factor in stimulating and sustaining demand for the
Beverages, and special technical skill and constant diligence on the part
of the Bottler and the Company are required in order for the Beverages to
maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Beverages
have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Bottling Appointments,
and as a consequence, the Company and the Bottler desire to amend the
Existing Bottling Appointments, the terms of the Existing Bottling
Appointments, as so amended, being replaced and restated in the form of
this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Bottler agree as follows:
ARTICLE I
The Authorization
1. The Company authorizes the Bottler, and the Bottler undertakes, to
manufacture and package the Beverages and to distribute and sell the
Beverages only in Authorized Containers, as hereinafter defined, under the
Trademarks in and throughout the territory described in Schedule B
(together with any territories added under paragraph 31, and subject to the
possible elimination of subterritories under paragraph 29, the
"Territory"). The Bottler may conduct any of the activities with respect to
which it is authorized or appointed and satisfy any duty or obligation
imposed upon it under this Agreement through subsidiaries in which Bottler
owns at least fifty-one percent (51%) of the outstanding stock and voting
power (whether such ownership is direct or indirect) provided that the
Bottler shall remain responsible for all obligations imposed under this
Agreement
3
<PAGE>
2. The Company will, from time to time, in its discretion, approve containers
of certain types, sizes, shapes and other distinguishing characteristics
(collectively, subject to any additions, deletions and modifications by the
Company, the "Authorized Containers"). A list of Authorized Containers for
each Beverage will be provided by the Company to the Bottler, which list
may be amended by the Company from time to time by additions, deletions or
modifications. The Bottler is authorized to use only Authorized Containers
in the manufacture, distribution and sale of the Beverages. The Company
reserves the right to withdraw from time to time its approval of any of the
Authorized Containers upon six (6) months notice to the Bottler, and, in
such event, the repurchase provisions of subparagraph 28(e) shall apply to
containers so disapproved that are owned by the Bottler. The Company will
exercise its right to approve, and to withdraw its approval of, specific
Authorized Containers in good faith so as to permit the Bottler to continue
to fully meet the demand in the Territory as a whole for Beverages.
ARTICLE II
Exclusive Authorization
3. The Company appoints the Bottler as its sole and exclusive purchaser of the
Concentrates for the purpose of manufacture, packaging and distribution of
the Beverages under the Trademarks in Authorized Containers for sale in the
Territory.
4
<PAGE>
4. The Company agrees not to authorize any other party whatsoever to use the
Trademarks on Beverages in Authorized Containers for purposes of resale in
the Territory.
5. The Bottler shall purchase its entire requirements of Concentrates
exclusively from the Company and shall not use any other syrup, beverage
base, concentrate or other ingredient in the Beverages than as specified by
the Company.
ARTICLE III
Obligations of Bottler
Relating to Trademarks and Other Matters
6. The Bottler acknowledges that the Company is the sole and exclusive owner
of the Trademarks, and the Bottler agrees not to question or dispute the
validity of the Trademarks or their exclusive ownership by the Company. By
this Agreement, the Company extends to the Bottler only: (i) a nonexclusive
license to use the trademark "Pepsi-Cola" as part of the corporate name of
the Bottler; and (ii) an exclusive license to use the Trademarks solely in
connection with the manufacture, packaging, distribution, and sale of the
Beverages in Authorized Containers in the Territory subject to the rights
reserved to the Company under this Agreement. Nothing herein, nor any act
or failure to act by the Bottler or the Company, shall give the Bottler any
proprietary or ownership interest of any kind in the Trademarks or in the
goodwill associated therewith.
7. The Bottler agrees during the term of this Agreement and in accordance with
any requirements imposed upon the Bottler under applicable laws:
5
<PAGE>
(a) Not to produce, manufacture, package, sell, deal in or otherwise use
or handle, directly or indirectly, in the Territory any beverage
products other than the Beverages authorized hereunder and the
following non PepsiCo brands: Seven-Up, Diet Seven-Up, Welsh's Grape,
Cristalia Water, Sunkist, Fruit Bunch, Schweppes tonic water, club
soda and ginger ale and Seagram's tonic water, club soda and ginger
ale. No other brands will be sold by the Bottler in the Territory
without the prior approval of the Pepsi-Cola International ("PCI"), or
failing agreement of PCI and the Bottler as to the introduction of new
brands, the approval of the Chief Executive Officer of the Pepsi-Cola
Company;
(b) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any concentrate, beverage base, syrup,
beverage or any other product which is likely to be confused with, or
passed off for, any of the Concentrates or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trade dress or in any
container that is an imitation of a trade dress or container in which
the Company claims a proprietary interest or which is likely to be
confused or cause confusion or be confusingly similar to or be passed
off as such trade dress or container;
(d) Not to manufacture, package, sell, deal in or otherwise use or handle,
directly or indirectly, any product under any trademark or other
designation that is an imitation, counterfeit, copy or infringement
of, or confusingly similar to, any of the Trademarks; and
(e) Not to acquire or hold, directly or indirectly, any ownership interest
in, or, directly or indirectly, enter into any contract or arrangement
with respect to, the management or control of, any person within or
without the Territory that engages in any of the activities prohibited
by subparagraphs (a), (b), (c) or (d) of this paragraph 7.
6
<PAGE>
ARTICLE IV
Obligations of Bottler Relating to
Manufacture and Packaging of the Beverages
8.
(a) The Bottler represents and warrants that the Bottler possesses, or
will possess, in the Territory, prior to the manufacture, packaging
and distribution of the Beverages, and will maintain during the term
of this Agreement, such plant or plants, machinery and equipment,
trained staff, and distribution and vending facilities as are capable
of manufacturing, packaging and distributing the Beverages in
Authorized Containers in accordance with this Agreement, in compliance
with all applicable governmental and administrative requirements, and
in sufficient quantities to fully meet the demand for the Beverages in
Authorized Containers in the Territory.
(b) The Company and the Bottler acknowledge that each is or may become a
party to one or more agreements authorizing a bottler or other
Company-authorized entity to produce Beverages for sale by another
bottler. Such agreements include, but are not limited to (i)
agreements permitting bottlers, subject to certain conditions, to
commence or continue to manufacture the Beverages for other bottlers,
and (ii) agreements pursuant to which bottlers may have the Beverages
manufactured for them by other Company-authorized entities. It is
hereby agreed that the Company shall not unreasonably withhold (i) any
consents required by such agreements, or (ii) approval of Bottler's
participation in such agreements. All such existing agreements shall
remain in full force and effect in accordance with their terms.
7
<PAGE>
9. The Bottler recognizes that increases in the demand for the Beverages, as
well as changes in the list of Authorized Containers, may, from time to
time, require adaptation of its existing manufacturing, packaging or
delivery equipment or the purchase of additional manufacturing, packaging
and delivery equipment. The Bottler agrees to make such modifications and
adaptations as necessary and to purchase and install such equipment, in
time to permit the introduction and manufacture, packaging and delivery of
sufficient quantities of the Beverages in the Authorized Containers, to
fully meet the demand for the Beverages in Authorized Containers in the
Territory.
10. The Bottler warrants that the handling and storage of the Concentrates; and
the manufacture, handling, storage, and packaging of the Beverages shall be
accomplished in accordance with the Company's quality control and
sanitation standards, as reasonably established by the Company and
communicated to the Bottler from time to time, and shall, in any event,
conform with all food, labeling, health, packaging and other relevant laws
and regulations applicable in the Territory.
11. The Bottler, in accordance with such instructions as may be given from time
to time by the Company, shall submit to the Company, at the Bottler's
expense, samples of the Beverages and the raw materials used in the
manufacture of the Beverages. The Bottler shall permit representatives of
the Company to have access to the premises of the Bottler during ordinary
business hours to inspect the plant, equipment, and methods used by the
Bottler in order to ascertain whether the Bottler is complying with the
instructions and standards prescribed for the manufacturing, handling,
storage and packaging of the Beverages.
8
<PAGE>
12.
(a) For the packaging, distribution and sale of the Beverages, the Bottler
shall use only such Authorized Containers, closures, cases, cartons
and other packages and labels as shall be authorized from time to time
by the Company for the Bottler and shall purchase such items only from
manufacturers approved by the Company, which approval shall not be
unreasonably withheld. Such approval by the Company does not relieve
the Bottler of the Bottler's independent responsibility to assure that
the Authorized Containers, closures, cases, cartons and other packages
and labels purchased by the Bottler are suitable for the purpose
intended, and in accordance with the good reputation and image of
excellence of the Trademarks and Beverages.
(b) The Bottler shall maintain at all times a stock of Authorized
Containers, closures, labels, cases, cartons, and other essential
related materials bearing the Trademarks, sufficient to fully meet the
demand for Beverages in Authorized Containers in the Territory, and
the Bottler shall not use or permit the use of Authorized Containers,
or such closures, labels, cases, cartons and other materials, if they
bear the Trademarks or contain any Beverages, for any purpose other
than the packaging and distribution of the Beverages. The Bottler
further agrees not to refill or otherwise reuse nonreturnable
containers.
13. If the Company determines the existence of quality or technical
difficulties with any Beverage, or any package used for such product, the
Company shall have the right, immediately and at its sole option, to
withdraw such product or any such package from the market. The Company
shall notify the Bottler in writing of such withdrawal, and the Bottler
shall, upon receipt of notice, immediately cease distribution of such
product or such package therefor. If so directed by the Company, the
Bottler shall recall and reacquire the product or package involved from any
purchaser thereof. If any recall of any product or any of the packages used
therefor is caused by (i) quality or technical defects in the Concentrate,
or other materials prepared by the Company from which the product involved
was prepared by the Bottler, or (ii) quality or technical defects in the
Company's designs and design specifications of packages which it has
imposed on the Bottler or the Bottler's third party suppliers if such
designs and specifications were negligently established by the Company (and
specifically excluding designs and specifications of other parties and the
failure of other parties to manufacture packages in strict conformity with
the designs and specifications of the Company), the Company shall reimburse
the Bottler for the Bottler's total expenses incident to such recall.
Conversely, if any recall is caused by the Bottler's failure to comply with
instructions, quality control procedures or specifications for the
preparation, packaging and distribution of the product involved, the
Bottler shall bear its total expenses of such recall and reimburse the
Company for the Company's total expenses incident to such recall.
9
<PAGE>
ARTICLE V
Conditions of Purchase and Sale
14. The Company reserves the right to establish and to revise at any time, in
its sole discretion, the price of any of the Concentrates, the terms of
payment, and the other terms and conditions of supply, any such revision to
be effective immediately upon notice to the Bottler. If Bottler rejects a
change in price or the other terms and conditions contained in any such
notice, then the Bottler shall so notify the Company within thirty (30)
days of receipt of the Company's notice, and this Agreement will terminate
ninety (90) days after the date of such notification by the Bottler,
without further liability of the Company or the Bottler. The change in
price or other terms and conditions so rejected by the Bottler shall not
apply to purchases of such Concentrate by the Bottler during such ninety
(90) day period preceding termination. Failure by the Bottler to notify the
Company of its rejection of the changes in price or such other terms and
conditions shall be deemed acceptance thereof by the Bottler.
10
<PAGE>
15. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Beverages. The Bottler
shall not sell or otherwise transfer any Concentrate or permit the same to
get into the hands of third parties.
16.
(a) The Bottler agrees not to distribute or sell any Beverage outside the
Territory except pursuant to another bottling agreement granted by the
Company. The Bottler shall not sell any Beverage to any person (other
than another Bottler pursuant to subparagraph 8(b)) for ultimate sale
outside the Territory. If any Beverage distributed by the Bottler is
found outside of the Territory, Bottler shall be deemed to have
transshipped such Beverage and shall be deemed to be a "Transshipping
Bottler" for purposes hereof. For purposes of this Agreement,
"Offended Bottler" shall mean a Bottler in any territory into which
any Beverage is transshipped.
(b) In addition to all other remedies the Company may have against any
Transshipping Bottler for violation of this paragraph 16, the Company
may impose upon any Transshipping Bottler a charge for each case of
Beverage transshipped by such Bottler. The per-case amount of such
charge shall be determined by the Company in its sole discretion. The
Company and the Bottler agree that the amount of such charge shall be
deemed to reflect the damages to the Company, the Offended Bottler and
the bottling system. In addition, the Company may directly charge the
Transshipping Bottler the full amount of all investigative and other
costs incurred by the Company in connection with the transshipment and
such Transshipping Bottler shall be obligated to pay such amount. The
Company shall forward to the Offended Bottler, upon receipt from the
Transshipping Bottler, the full amount of the per case charge so
received (but not including investigative and other costs charged to
the Transshipping Bottler by the Company). If the Company or its agent
recalls any Beverage which has been transshipped, the Transshipping
Bottler shall, in addition to any other obligation it may have
hereunder, reimburse the Company for its costs of purchasing,
transporting, and/or destroying such Beverage.
11
<PAGE>
ARTICLE VI
Obligations of the Bottler
Relating to the Marketing of the Beverages
Financial Capacity and Planning
17. The continuing responsibility to increase and fully meet the demand for the
Beverages in Authorized Containers within the Territory rests upon the
Bottler. The Bottler agrees to use all approved means as may be reasonably
necessary to meet this responsibility.
18.
(a) The Bottler will push vigorously the sale of the Beverages in
Authorized Containers throughout the entire Territory. Without in any
way limiting the Bottler's obligation under this Paragraph 18, the
Bottler must fully meet and increase the demand for the Beverages
throughout the Territory and secure full distribution up to the
maximum sales potential therein through all distribution channels or
outlets available to soft drinks, using any and all equipment
reasonably necessary to secure such distribution; must service all
accounts with frequency adequate to keep them at all times fully
supplied with the Beverages and must use its own salesmen and trucks,
(or salesmen and trucks of independent distributors, of whom the
Company approves), in quantity adequate for all seasons.
12
<PAGE>
(b) The parties agree that to fully meet and increase demand for the
Beverages in Authorized Containers advertising and other forms of
marketing activities are required. Therefore, the Bottler will spend
such funds in advertising and marketing the Beverages as may be
reasonably required to increase, as well as maintain, demand for the
Beverages in Authorized Containers in the Territory. The Bottler shall
fully cooperate in and vigorously push all cooperative advertising and
sales promotion programs and campaigns that may be reasonably
established by the Company for the Territory. The Bottler will use and
publish only such advertising, promotional materials or other items
bearing the Trademarks relating to the Beverages as the Company has
approved and authorized. The expenditures required by this Article VI
shall be made by the Bottler. The Company may, in its sole discretion,
contribute to such expenditures. The Company may also undertake, at
its expense, independently of the Bottler's marketing programs, any
advertising or promotional activity that the Company deems appropriate
to conduct in the Territory, but this shall in no way affect the
responsibility of the Bottler for increasing the demand for the
Beverages in Authorized Containers in the Territory.
19. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and all
Bottler Affiliates directly or indirectly controlled by the Bottler will be
financially able to perform their respective duties and obligations under
this Agreement and under all other agreements between the Company and
Bottler Affiliates regarding the manufacture, packaging, distribution and
sale of the Beverages in "authorized containers" (as defined in such
agreements).
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20.
(a) The Company and the Bottler have agreed upon a business plan for the
first three years occurring during the term of this Agreement. Since
periodic planning is essential for the proper implementation of this
Agreement, the Bottler and the Company shall meet each year at such
date as the parties may set (but no later than ninety (90) days prior
to the commencement of any calendar year during the term of this
Agreement beginning with the commencement of the calendar year closest
to the anniversary date of this Agreement), to discuss the Bottler's
plans for the ensuing three (3) year period. At such meeting, the
Bottler shall present a plan that sets out in reasonable detail
satisfactory to the Company: (i) the marketing, management and
advertising plans of the Bottler with respect to the Beverages for the
ensuing year, including a financial plan showing that the Bottler and
all Bottler Affiliates have the consolidated financial capacity to
perform their respective duties and obligations under this Agreement
for such ensuing year and (ii) the projected sales, marketing and
advertising plans and related equipment placements for the two years
immediately following such year. The Company and the Bottler shall
discuss this plan and this plan, upon approval by the Company which
shall not be unreasonably withheld, shall define the Bottler's
obligation herein to maintain such consolidated financial capacity,
and to increase and fully meet the demand for the Beverages in
Authorized Containers in the Territory for the period of time covered
by the plan.
(b) The Bottler shall report to the Company periodically, but not less
than quarterly, as to its implementation of the approved plan; it is
understood, however, that the Bottler shall report sales on a regular
basis as requested by the Company and in such format and detail, and
containing such information as may be reasonably requested by the
Company. The failure by the Bottler to carry out the plan, or if the
plan is not presented or is not approved, will constitute a primary
consideration for determining whether the Bottler has fulfilled its
obligation to maintain the consolidated financial capacity required
under paragraph 19, to push vigorously the sale of Beverages in
Authorized Containers throughout the Territory and to increase and
fully meet the demand for the Beverages in Authorized Containers in
the Territory. If the Bottler carries out the plan in all material
respects, it shall be deemed to have satisfied the obligations of the
Bottler under paragraphs 17, 18, 19 and 20 for the period of time
covered by the plan.
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ARTICLE VII
Reformulation, New Products and Related Matters
21. The Company has the sole and exclusive right and discretion to reformulate
any of the Beverages. In addition, the Company has the sole and exclusive
right and discretion to discontinue any of the Beverages under this
Agreement, provided (i) such Beverage is discontinued in the United States
in Authorized Containers and in such other containers as may have been
authorized for use by other bottlers under their respective bottle
contracts and (ii) the Company does not discontinue all Beverages under
this Agreement. In the event that the Company discontinues any Beverage,
Schedule A to this Agreement shall be deemed amended by deleting the
discontinued Beverage from the list of Beverages set forth on Schedule A.
22. In the event that the Company introduces any new beverage in the Territory
under the trademarks of the Beverages or any modification thereof (herein
defined to mean the addition of a prefix, suffix or other modifier used in
conjunction with the trademarks of the Beverages), the Bottler shall be
obligated to manufacture, package, distribute and sell such new beverage in
Authorized Containers in the Territory pursuant to the terms and conditions
of this Agreement, and Schedule A to this Agreement shall be deemed amended
by adding such new beverage to the list of beverages set forth on Schedule
A.
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23. The Company has the unrestricted right to use the Trademarks on the
Beverages and on all other products and merchandise other than the
Beverages in Authorized Containers in the Territory.
ARTICLE VIII
Term and Termination of the Agreement
24. The term of this Agreement shall commence on the effective date hereof and,
unless earlier terminated in accordance with its provisions, will continue
perpetually.
25. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to manufacture,
package, distribute and sell the Beverages under this Agreement shall be
suspended during any period when any of the following conditions exist:
(a) There shall occur a change in the law or regulation (including,
without limitation, any government permission or authorization
regarding customs, health or manufacturing) in such a manner as to
render unlawful or commercially impracticable:
(i) the importation of Concentrate or any of its essential
ingredients, which cannot be produced in quantities sufficient to
satisfy the demand therefor by existing Company facilities; or
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(ii) the manufacture and distribution of the Concentrates or
Beverages; or
(b) There shall occur any inability or commercial impracticability of
either of the parties to perform resulting from an act of god, or
"force majeure," public enemies, boycott, quarantine, riot, strike, or
insurrection, or due to a declared or undeclared war, belligerency or
embargo, sanctions, blacklisting, or other hazard or danger incident
to the same, or resulting from any other cause whatsoever beyond its
control.
If any of the conditions described in this paragraph 25 persists so that
either party's obligation to perform is suspended in any substantial
respect for a period of six (6) months or more, the other party may
terminate this Agreement forthwith, upon notice to the party whose
obligation to perform is suspended.
26.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or Bottler Subsidiary becomes insolvent; if a
petition in bankruptcy is filed against or on behalf of the
Bottler or Bottler Subsidiary which is not stayed or dismissed
within sixty (60) days; if the Bottler or Bottler Subsidiary is
put in liquidation or placed under sequester; if a receiver is
appointed to manage the business of the Bottler or Bottler
Subsidiary; or if the Bottler or Bottler Subsidiary enters into
any judicial or voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with them or
makes an assignment for the benefit of creditors;
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(ii) If the Bottler or Bottler Subsidiary adopts a plan of dissolution
or liquidation;
(iii)If any person or any Affiliated Group, other than any person or
any Affiliated Group acting with the consent of the Company,
acquires, or obtains any contract, option, conversion privilege
or other right to acquire, directly or indirectly, Beneficial
Ownership of more than fifteen percent (15%) of any class or
series of voting securities of the Bottler and if such person or
Affiliated Group does not divest itself of Beneficial Ownership
of such voting securities or otherwise terminate any such
contract, option, conversion privilege or other right to a level
equal to or below fifteen percent (15%) within thirty (30) days
after the Company notifies the Bottler that the failure of such
person or Affiliated Group to thus divest or terminate may result
in termination of this Agreement;
(iv) If any Disposition is made without the consent of the Company by
Bottler or by any Bottler Subsidiary of any voting securities of
any Bottler Subsidiary;
(v) If any agreement regarding the manufacture, packaging,
distribution or sale of the Beverages in "authorized containers"
(as defined in such agreement) between the Company and any person
that controls, directly or indirectly, the Bottler is terminated,
unless the Company agrees in writing that this subparagraph
26(a)(v) will not be applied by the Company to such termination;
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(vi) If the Bottler or any person in which the Bottler has Beneficial
Ownership of any equity or voting securities, or in which the
Bottler has a right or control of management, or which controls
or is under common control with the Bottler, should engage
directly or indirectly in the manufacture, distribution or
marketing of any product specified in subparagraphs (a), (b), (c)
or (d) of paragraph 7 above, or should obtain a right or license
to do the same, and if the Company has given the Bottler notice
that such condition exists and that the Company will terminate
this Agreement within six (6) months if such condition is not
eliminated, and if such condition has not been eliminated within
the six (6) month period.
(vii)If all or substantially all of the Bottler's or Bottler
Subsidiary's bottling assets are sold, transferred or otherwise
disposed of (including any transfer by operation of law) other
than sales, transfers or other dispositions of Assets by the
Bottler or one or more Bottler Subsidiary to one or more wholly
owned Bottler Subsidiary.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or
upon obtaining knowledge of any third party action
which may or will result in any change in ownership
described in Section 26(a)(iii) above; and
(ii) to make available from time to time and at the
request of the Company complete records of current
ownership of the Bottler and full information
concerning any entities or parties by whom it is
controlled directly or indirectly.
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(c) For the purposes of this Agreement:
(i) "Affiliated Group" shall mean two or more persons acting as a
partnership, limited partnership, syndicate or other group, or
who agrees to act together, for the purpose of acquiring,
holding, voting or making any Disposition of any voting
securities of the Bottler; provided further that the Affiliated
Group formed thereby shall be deemed to have acquired Beneficial
Ownership of all voting securities of the Bottler beneficially
owned by any such persons.
(ii) "Beneficial Ownership" shall mean (i) voting power which includes
the power to vote, or to direct the voting of, any securities, or
(ii) investment power which includes the power to dispose, or to
direct the Disposition of, any securities; provided further
Beneficial Ownership shall include any such voting power or
investment power which any person has or shares, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise; provided, however, that the following
persons shall not be deemed to have acquired Beneficial Ownership
under the circumstances described: (a) a person engaged in
business as an underwriter of securities who acquires securities
through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall
not be deemed to be the Beneficial Owner of such securities until
such time as such underwriter completes his participation in the
underwriting and shall not thereupon or thereafter be deemed to
be the Beneficial Owner of the securities acquired by other
members of any underwriting syndicate or selected dealers in
connection with such underwriting solely by reason of customary
underwriting or selected dealer arrangements; (b) a member of a
national securities exchange shall not be deemed to be a
Beneficial Owner of securities held directly or indirectly by it
on behalf of another person solely because such member is the
record holder of such securities and, pursuant to the rules of
such exchange, may direct the vote of such securities, without
instruction, on other than contested matters or matters that may
affect substantially the rights or privileges of the holders of
the securities to be voted, but is otherwise precluded by the
rules of such exchange from voting without instruction; and (c)
the holder of a proxy solicited by the Board of Directors of the
Bottler for the voting of securities of the Bottler at any annual
or special meeting and any adjournment or adjournments thereof of
the stockholders of the Bottler shall not be deemed to be a
Beneficial Owner of the securities that are the subject of the
proxy solely for such reason.
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(iii)"Bottler Subsidiary" shall mean any person that is controlled
directly or indirectly by the Bottler, and either participates in
the manufacture, packaging, distribution or sale of the Beverages
in "authorized containers" or has a direct or indirect equity
interest in another Bottler Subsidiary that does so participate;
(iv) "Disposition" shall mean any sale, merger, issuance of
securities, or other transaction in which, or as a result of
which, any person other than Bottler or a wholly owned subsidiary
of Bottler, acquires, or obtains any contract, option, conversion
privilege or other right to acquire Beneficial Ownership of any
securities.
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(d) Upon the occurrence of any of the events of default specified in
subparagraphs 26(a) and (b), the Company may terminate this Agreement
by giving the Bottler notice to that effect, effective immediately.
27.
(a) In addition to the events of a default described in paragraph 26, the
Company may also terminate this Agreement, subject to the limitations
of subparagraph 27(b), in the event of the occurrence of any of the
following events of default:
(i) If the Bottler fails to make timely payment for Concentrate or of
any other debt owing to the Company;
(ii) If the condition of the plant or equipment used by the Bottler in
manufacturing, packaging or distributing the Beverages fails to
meet the sanitary standards reasonably established by the
Company;
(iii)If the Beverages manufactured by the Bottler fail to meet the
quality control standards reasonably established by the Company;
(iv) If the Beverages are not manufactured in strict conformity with
such standards and instructions as the Company may reasonably
establish;
(v) If the Bottler fails to present or carry out a plan approved
under paragraph 20 in all material respects; or
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(vi) If the Bottler materially breaches any of the Bottler's other
obligations under this Agreement.
The standards and instructions of the Company comprise privately
published information concerning the manufacture, handling and storage
of the Beverages under good manufacturing practices, as well as
technical instructions, bulletins and other communications issued or
amended from time to time by the Company.
(b) Upon the occurrence of any of the foregoing events of default,
the Company shall, as a condition to termination of this
Agreement under this paragraph 27, give the Bottler notice
thereof. The Bottler shall then have a period of sixty (60) days
within which to cure the default, including, at the instruction
of the Company and at the Bottler's expense, by the prompt
withdrawal from the market and destruction of any Beverage that
fails to meet the quality control standards of the Company or any
Beverage that is not manufactured in accordance with the
instructions of the Company. If such default has not been cured
within such period, then the Company may, by giving the Bottler
further notice to such effect, suspend sales to the Bottler of
Concentrates and require the Bottler to cease production of the
Beverages and the packaging and distribution of Beverages in
Authorized Containers. During such second period of sixty (60)
days, the Company also may supply, or cause or permit others to
supply, the Beverages in Authorized Containers under the
Trademarks in the Territory. If such default has not been cured
during such second period of sixty (60) days, then the Company
may terminate this Agreement, by giving the Bottler notice to
such effect, effective immediately.
28. Upon the termination of this Agreement:
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(a) The Bottler shall forthwith take such action as necessary to eliminate
the trademark "Pepsi-Cola" from its corporate name;
(b) Any other agreement between the Company and the Bottler regarding the
manufacture, packaging, distribution, sale or promotion of soft drinks
in "authorized containers" (as defined in such agreement) may, at the
election of the Company, be automatically terminated and thereby
become of no further force or effect.
(c) The Bottler shall not thereafter continue to manufacture, package,
distribute or sell any of the Beverages in Authorized Containers or to
make any use of the Trademarks or Authorized Containers, or any
closures, cases, labels or advertising material bearing the
Trademarks;
(d) The Bottler shall forthwith remove and efface all reference to the
Company, the Beverages and the Trademarks from the business premises
and equipment of the Bottler and from all business papers and
advertising used or maintained by the Bottler; and it shall not
thereafter hold forth in any manner whatsoever that it has any
connection with the Company or the Beverages; and,
(e) The Bottler shall forthwith deliver all Concentrate, Beverage, usable
returnable or any nonreturnable containers, cases, closures, labels,
and advertising material bearing the Trademarks, still in the
Bottler's possession or under the Bottler's control, to the Company or
the Company's nominee, as instructed, and, upon receipt, the Company
shall pay to the Bottler a sum equal to the reasonable market value of
such supplies or materials. The Company will accept and pay for only
such articles as are, in the opinion of the Company, in first-class
and usable condition, and all other such articles shall be destroyed
at the Bottler's expense. Containers, closures and advertising
material and all other items bearing the name of the Bottler, in
addition to the Trademarks, that have not been purchased by the
Company shall be destroyed without cost to the Company, or otherwise
disposed of in accordance with instructions given by the Company,
unless the Bottler can remove or obliterate the Trademarks therefrom
to the satisfaction of the Company. The provisions for repurchase
contained in subparagraph 28(e) shall apply with regard to any
Authorized Container, approval of which has been withdrawn by the
Company under paragraph 2; upon termination by either party under
paragraph 25; and upon termination by the Bottler under subparagraph
14. In all other cases, the Company shall have the right, but not the
obligation, to purchase the aforementioned items from the Bottler.
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29.
(a) Subject to the limitations set forth in subparagraph 29(b), in the
event that the Bottler at any time fails to carry out a plan approved
under paragraph 20 in all material respects in any segment of the
Territory, whether defined geographically or by type of market or
outlet, which segment shall be defined by the Company (hereinafter
"Subterritory"), the Company may reduce the Territory covered by this
Agreement, and thereby restrict the Bottler's authorization hereunder
to the remainder of the Territory, by eliminating the Subterritory
from the Territory covered by this Agreement.
(b) In the event of such failure, the Company may eliminate Subterritories
from the Territory covered by this Agreement by giving the Bottler
notice to that effect, which notice shall define the Subterritory or
Subterritories to which the notice applies. The Bottler shall then
have a period of six (6) months within which to cure such failure. If
the Bottler has not cured such failure in such six (6) month period,
the Company may eliminate such Subterritory or Subterritories from the
Territory by giving the Bottler further notice to that effect,
effective immediately.
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(c) Upon elimination of any Subterritory from the Territory:
(i) Schedule B to this Agreement shall be deemed amended by
eliminating such Subterritory from the Territory described on
Schedule B;
(ii) The Company may manufacture, package, distribute and sell the
Beverages in Authorized Containers under the Trademarks in such
Subterritory, or authorize others to do so;
(iii)Any other agreement between the Bottler and the Company
regarding the manufacture, packaging, distribution or sale of
soft drinks in "authorized containers" (as defined in such
agreement) in such Subterritory may, at the election of the
Company, be automatically terminated and thereby become of no
further force or effect in such Subterritory;
(iv) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in Authorized
Containers in such Subterritory, or to make any use of the
Trademarks, Authorized Containers, closures, cases, labels or
advertising material bearing the Trademarks in connection with
the sale or distribution of the Beverages in such Subterritory;
and
(v) The Bottler shall not thereafter hold forth in such Subterritory
in any manner whatsoever that it has any connection with the
Beverages.
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ARTICLE IX
Transferability/Worldwide and Regional Accounts/Additional Territories
30. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance standards
applicable to the Bottler, the dependence of the Trademarks on proper
quality control, the level of marketing effort required of the Bottler to
increase demand for the Beverages in Authorized Containers, and the
confidentiality required for protection of the Company's trade secrets and
confidential information. In recognition of the personal nature of these
and other obligations of the Bottler under this Agreement, the Bottler may
not assign, transfer or pledge this Agreement or any interest therein, in
whole or in part, whether voluntarily, involuntarily, or by operation of
law (including, but not limited to, by merger or liquidation), or delegate
any material element of the Bottler's performance thereof, or sublicense
its rights hereunder, in whole or in part, to any third party or parties,
without the prior consent of the Company. Any attempt to take such action
without such consent shall be void and shall be deemed to be a material
breach of this Agreement.
31.
(a) The Bottler understands that from time to time the Company negotiates
worldwide or regional agreements to sell fountain syrup for the brands
identified in Schedule A (the "Fountain Syrup") to certain hotel
chains, restaurant chains, movie theaters and similar on premise
accounts which operate in multiple countries. The Company will submit
to the Bottler for its review the terms of these worldwide or regional
agreements to sell Fountain Syrup (the "Chain Agreements"). The
Bottler agrees to use its best efforts to support the Company in the
Chain Agreements by supplying the Fountain Syrup to these accounts
based on the terms of the Chain Agreements negotiated by the Company.
In the event that the Bottler declines to participate in any Chain
Agreement, the Bottler agrees that the Company shall have the right to
find alternative ways to supply the Fountain Syrup to these accounts
through other authorized bottlers or distributors of the Beverages,
without any obligation to compensate the Bottler with respect to these
sales; provided, however, that the Company's right to supply the
Fountain Syrup to these accounts will not affect in any way the
Bottler's exclusive rights to sell and distribute the Beverages to all
other accounts within the Territory. With respect to the Chain
Agreements, the Bottler also agrees to use its best efforts to support
the Company by supplying Beverages in packages other than the Syrups
to these accounts.
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(b) In the event that the Bottler acquires the right to manufacture and
sell any of the Beverages in any container that has been designated as
an Authorized Container in any territory outside of the United States
and outside of the Territory, such additional territory shall
automatically be deemed to be included within the Territory covered by
this Agreement for all purposes. Any separate agreement that may exist
concerning such additional territory shall be ipso facto amended to
conform to the terms of this Agreement. In addition, if the Bottler
acquires control, directly or indirectly, of any person which is a
party, or which controls directly or indirectly a party, to an
agreement whereby such party has the right to manufacture and sell any
of the Beverages in any territory outside of the United States in any
container that has been designated as an Authorized Container, the
Bottler shall cause such party to amend such agreement, effective as
of the date of acquisition of control of such party, to conform to the
terms of this Agreement with respect to all such territory outside of
the United States.
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ARTICLE X
Litigation
32.
(a) The Company reserves the right to institute any civil, administrative
or criminal proceeding or action, and generally to take or seek any
available legal remedy it deems desirable, for the protection of its
good reputation and industrial property rights (including, but not
limited to, the Trademarks), as well as for the protection of the
Concentrates, the Beverages and the formulas therefor, and to defend
any action affecting these matters. At the request of the Company, the
Bottler will render reasonable assistance in any such action. The
Bottler may not claim any right against the Company as a result of
such action or for any failure to take such action. The Bottler shall
promptly notify the Company of any litigation or proceeding instituted
or threatened affecting these matters. The Bottler shall not institute
any legal or administrative proceeding against any third party which
may affect the interests of the Company in connection with this
Agreement without the Company's prior consent.
(b) The Company has the sole and exclusive right and responsibility to
prosecute and defend all suits relating to the Trademarks. The Company
may prosecute or defend any suit relating to the Trademarks in the
name of the Bottler whenever an issue in such suit involves the
Territory and therefore it is appropriate to act in the Bottler's
name, or may proceed alone in the name of the Company, provided that
the Company shall take no action in the Bottler's name which the
Company knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
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(c) The Bottler recognizes the importance and benefit to itself and all
other bottlers of the Beverages of protecting the interest of the
Company in the Beverages, Authorized Containers and the goodwill
associated with the trademarks. Therefore, the Bottler agrees to
consult with the Company on all products liability claims or lawsuits
brought against the Bottler in connection with the Beverages or
Authorized Containers and to take such action with respect to the
defense of any such claim or lawsuit as the Company may reasonably
request in order to protect the interest of the company in the
Beverages, Authorized Containers and goodwill associated with the
Trademarks. Further, the Bottler shall supervise, control and direct
the defense of all such products liability claims and lawsuits brought
against them whether individually or jointly, provided, however, that
the Bottler and the Company expressly reserve all rights of
contribution and indemnity as prescribed by law.
ARTICLE XI
Automatic Amendment
33. In the event that bottlers, which purchased for their own account eighty
percent (80%) or more of all of the Concentrate for Beverages purchased for
the account of all bottlers who are parties to agreements with the Company
containing substantially the same terms as this Agreement, agree with the
Company to any different provisions to be included in this Agreement, then
the Bottler hereby agrees to include an amendment containing such different
provisions in this Agreement. The gallons of Concentrate purchased by such
bottlers shall be determined based on the most recently-ended calendar year
prior to the date such amendment was first offered to bottlers.
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ARTICLE XII
General
34. For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "person" means an individual, a corporation, a partnership, a limited
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political subdivision
thereof.
(b) "control" (including terms "controlling", "controlled by" and "under
common control with") means: (i) Beneficial Ownership of a majority of
any class or series of voting securities of a person; or (ii) the
power or authority, directly or indirectly, to elect or designate a
majority of the members of the board of directors, or other governing
body of a person.
35. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
36.
(a) Without relieving the Bottler of any of its responsibilities under
this Agreement, the Company, from time to time during the term of this
Agreement, at its option and either free of charge or on such terms
and conditions as the Company may propose, may offer technology to the
Bottler which the Company possesses, develops or acquires (and is free
to furnish to third parties without obligation) relating to the
design, installation, operation and maintenance of the plant and
equipment appropriate for the maintenance of product quality,
sanitation and safety as well as for the efficient manufacture and
packaging of the Beverages; or relating to personnel training,
accounting methods, electronic data processing and marketing and
distribution techniques.
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(b) The Bottler covenants and agrees that, so long as this agreement is in
effect the Bottler shall install and maintain management information
systems that are capable of interfacing and sharing required data with
the management information systems of the Company in accordance with
standards established by the Company.
37. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic information
whatsoever concerning the composition of the Concentrates or the
Beverages, without the prior consent of the Company, and it will use
any such information solely to perform its obligations hereunder;
(b) It will at all times treat and maintain as confidential, all nonpublic
information that it may receive at any time from the Company,
including, but not limited to:
(i) Information or instructions of a technical or other nature,
relating to the mixing, sale, marketing and distribution of the
product.
(ii) Information about projects or plans worked out in the course of
this Agreement; and
(iii)Information constituting manufacturing or commercial trade
secrets.
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The Bottler, further agrees to disclose such information, as necessary
to perform its obligations hereunder, only to employees of its
enterprise: (i) who have a reasonable need to know such information;
(ii) who have agreed to keep such information secret; and (iii) whom
the Bottler has no reason to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all photocopies or
other reproductions in its possession (including, but not limited to,
any extracts or digests thereof) containing or relating to any
nonpublic information described in this paragraph 37. Following such
termination, and the surrender of such materials, the Bottler and its
employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure thereof
whatsoever, provided that such obligation shall expire as to any
nonpublic information that does not constitute trade secrets ten (10)
years following such termination.
38. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
39. The Bottler is an independent manufacturer and not the agent of the
Company. The Bottler agrees that it will not represent that it is an agent
of the Company nor hold itself out as such.
40. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
(i) Quarterly Statements. As soon as such statements are made available to
the public, or if such statements are not regularly made available to
the public, an unaudited income and expense statement and balance
sheet for the Bottler;
33
<PAGE>
(ii) Annual Audit Statement. As soon as such statements are made available
to the public, statements of income and retained earnings of the
Bottler for the just-ended fiscal year, and a balance sheet of the
Bottler as of the end of such year, accompanied by an opinion from the
independent public accountants of the Bottler; and
(iii)Other information. With reasonable promptness such other financial
information as the Company may reasonably request in such format as
the Company may reasonably request.
41. The Bottler shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any person
designated in writing by the Company to visit and inspect any of its
properties, corporate books and financial records (including, but not
limited to, auditor's workpapers), and make copies thereof and take
extracts therefrom, and to discuss the accounts and finances of the Bottler
with the principal officers thereof, all at such times as the Company may
reasonably request. The Company's rights of inspection under this paragraph
41 shall be exercised reasonably, and only for purposes of determining
Bottler's compliance with its obligations under paragraph 19, so as not to
interfere with the normal operation of the Bottler's business. The Company
will treat and maintain as confidential for a period of one year all
nonpublic financial information received from the Bottler.
42. The parties agree:
(a) The existing Beverage Exclusive Bottling Appointments for the
Territory and waivers, authorizations or other agreements related to
such existing Exclusive Bottling Appointments are hereby superseded
and restated in their entirety, and all rights, duties and obligations
of the Company and the Bottler regarding the Trademarks and the
manufacture, packaging, distribution and sale of the Beverages in
Authorized Containers shall be determined under this Agreement,
without regard to the terms of any prior agreement and without regard
to any prior course of conduct between the parties;
34
<PAGE>
(b) As to all matters addressed herein, this Agreement sets forth the
entire agreement between the Company and the Bottler, and all prior
understandings, commitments or agreements relating to such matters
between the parties or their predecessors -in-interest are of no force
or effect; provided, however, that this subparagraph (b) shall not
terminate the Franchise Commitment Letter dated July 17, 1998 among
P-PR Transfer LLP, the Bottler and PepsiCo which shall remain in full
force and effect; and
(c) Any waiver or modification of this Agreement or any of its provisions,
and any notices given or consents made under this Agreement shall not
be binding upon the Bottler or the Company unless made in writing,
signed by an officer of the Company or by a duly qualified and
authorized representative of the Bottler, and personally delivered or
sent by telegram, telex or certified mail to an officer of the Company
(if from the Bottler) or a duly qualified and authorized
representative of the Bottler (if from the Company) at the principal
address of such party.
43. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right shall
not be deemed to be a waiver of such option or right, or of the right to
demand subsequent performance of any and all obligations herein imposed
upon the Bottler.
35
<PAGE>
44. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company upon
notice to the Bottler, but no such delegation shall relieve the Company of
its obligations hereunder.
45. If any provision of this Agreement, or the application thereof to any party
or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any
other provision hereof, or the application of such provision to other
parties or circumstances.
46. This Agreement shall be governed, construed and interpreted under the laws
of the State of New York.
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. PEPSIAMERICAS, INC.
By: /s/ Robert K. Biggart By: /s/ Robert C. Pohlad
------------------------------ -----------------------------
Robert K. Biggart Robert C. Pohlad
Title: Assistant Secretary Title: Chief Executive Officer
Date: October 15, 1999 Date: October 15, 1999
------------------------------ -----------------------------
36
<PAGE>
SCHEDULE A
Pepsi-Cola
Diet Pepsi-Cola
Pepsi-Cola Free
Diet Pepsi-Cola Free
Teem
Diet Teem
Mountain Dew
All Sport
Wonder Kola
Mandarin Orange Slice
Diet Mandarin Orange Slice
Lemon Lime Slice
Diet Lemon Lime Slice
Grape Slice
<PAGE>
SCHEDULE B
Puerto Rico
<PAGE>
Exhibit 11
PEPSIAMERICAS, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
(U.S. Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Fiscal Years
Year Ended Ended Ended
December 31, December 31, September 30
--------------------------
1999 1998 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) $ (9,450) $ 1,680 $ (4,515) $(19,503)
Effective of dilutive securities
Stock options * * * *
------------ ------------ ------------ ------------
Net income (loss) - assuming dilution $ (9,450) $ 1,680 $ (4,515) $(19,503)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Average common shares outstanding 86,829 86,760 35,072 21,500
Effects of dilutive securities
Stock options * 63 * *
------------ ----------- ------------ ------------
Average common shares outstanding -
assuming dilution 86,829 86,823 35,072 21,500
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per common share $(0.11) $0.02 $(0.13) $(0.91)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per common share -
assuming dilution $(0.11) $0.02 $(0.13) $(0.91)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Note: If an item appears with a *, the security was antidilutive for the period
presented.
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES
Name State of Incorporation
PepsiAmericas Caribbean, Inc. Delaware
Pepsi-Cola Jamaica Bottling Company Limited Jamaica
Pepsi-Cola Puerto Rico Manufacturing Company Delaware
Pepsi-Cola Puerto Rico Distributing Company Delaware
Beverage Plastics Company Delaware
Delta Beverage Group, Inc. Delaware
Dakota Beverage Company, LLC Delaware
Min-Dak Beverages, LLC South Dakota
S & R Vending, LLC North Dakota
TS Vending Service, LLC South Dakota
Pepsi-Cola Bottling Company of Fargo, LLC South Dakota
Pepsi-Cola Bottling Company of Estherville, LLC Minnesota
Pepsi-Cola Bottling Co. of Aberdeen, LLC South Dakota
Pepsi-Cola Bottling Co. of Sioux Falls, LLC Minnesota
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports on the consolidated financial statements and
financial statement schedule of PepsiAmericas, Inc. (formerly known as
Pepsi-Cola Puerto Rico Bottling Company) and Subsidiaries as of and for the
year ended December 31, 1999, the three month period ended December 31, 1998,
and the fiscal year ended September 30, 1998, included in this Form 10-K,
into the following registration statements previously filed by PepsiAmericas,
Inc.: Form S-8 (File No. 333-31970); Form S-8 (File No. 333-90855); Form S-3
(File No. 333-90015); Form S-8 (File No. 333-40091); and Form S-3 (File No.
333-40093).
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 30, 2000.
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
As independent auditors, we hereby consent to the incorporation by reference of
our reports on the consolidated financial statements and financial statement
schedule of PepsiAmericas, Inc. (formerly known as Pepsi-Cola Puerto Rico
Bottling Company) as of and for the year ended September 30, 1997, included in
this Form 10-K, into the following registration statements previously filed by
PepsiAmericas, Inc.: Form S-8 (File No. 333-31970); Form S-8 (File No.
333-90855); Form S-3 (File No. 333-90015); Form S-8 (File No. 333-40091); Form
S-3 (File No.333-40093).
KPMG LLP
San Juan, Puerto Rico,
March 30, 2000.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,317
<SECURITIES> 0
<RECEIVABLES> 51,268
<ALLOWANCES> 3,075
<INVENTORY> 32,311
<CURRENT-ASSETS> 137,551
<PP&E> 276,399
<DEPRECIATION> 128,620
<TOTAL-ASSETS> 516,143
<CURRENT-LIABILITIES> 76,601
<BONDS> 294,119
0
0
<COMMON> 874
<OTHER-SE> 108,581
<TOTAL-LIABILITY-AND-EQUITY> 516,143
<SALES> 575,743
<TOTAL-REVENUES> 575,743
<CGS> 392,226
<TOTAL-COSTS> 556,745
<OTHER-EXPENSES> 22,312
<LOSS-PROVISION> 2,027
<INTEREST-EXPENSE> 2,126
<INCOME-PRETAX> (13,314)
<INCOME-TAX> 4,832
<INCOME-CONTINUING> (8,706)
<DISCONTINUED> 0
<EXTRAORDINARY> (744)
<CHANGES> (9,450)
<NET-INCOME> 0
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
