-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OIH3zfomf78n9DxetC8VyOk87KW6bGJRYF50v7K83+cGEsOEnVnPKpMUwuVnWmAz BAQ8YhvUQS7skhXcGc/8CA== 0000950130-96-004540.txt : 19961125 0000950130-96-004540.hdr.sgml : 19961125 ACCESSION NUMBER: 0000950130-96-004540 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961122 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEVEN UP RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA INC CENTRAL INDEX KEY: 0000887353 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 954284699 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-16593 FILM NUMBER: 96670562 BUSINESS ADDRESS: STREET 1: 3220 E 26TH ST CITY: VERNON STATE: CA ZIP: 90023 BUSINESS PHONE: 2132687779 MAIL ADDRESS: STREET 1: 3220 EAST 26TH ST CITY: VERNON STATE: CA ZIP: 90023 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) --------------- DELAWARE 95-4284699 2086 (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD JURISDICTION IDENTIFICATION NO.) INDUSTRIAL OF INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NUMBER) 3220 EAST 26TH STREET VERNON, CALIFORNIA 90023 TELEPHONE: 213-268-7779 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- MR. RICK FERGUSON CHIEF FINANCIAL OFFICER SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. 3220 EAST 26TH STREET VERNON, CALIFORNIA 90023 TELEPHONE: 213-268-7779 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: LANCE C. BALK, ESQ. KIRKLAND & ELLIS 153 EAST 53RD STREET NEW YORK, NEW YORK 10022 TELEPHONE: 212-446-4800 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [X] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE - ----------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share....... 1,904,805 Shares $10.875 $20,714,754.38 $6,227.20
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c), using the average of the high and low prices reported in the over-the-counter market on November 19, 1996. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED NOVEMBER 22, 1996 PROSPECTUS , 1996 1,904,805 SHARES SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. COMMON STOCK ----------- This Prospectus relates to the offer and sale of up to 1,904,805 shares (the "Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of Seven-Up/RC Bottling Company of Southern California, Inc. (the "Company"). The Shares are being offered by certain stockholders of the Company (the "Selling Stockholders"). The distribution of the Shares by the Selling Stockholders may be effected from time to time in one or more transactions for their own accounts (which may include block transactions) in the over-the-counter market, on the Nasdaq Stock Market ("Nasdaq"), or on any exchange on which the Common Stock may then be listed, in negotiated transactions, through the writing of options on shares (whether such options are listed on an options exchange or otherwise), or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may effect such transactions by selling Shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or the purchasers of Shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation as to a particular broker- dealer might be in excess of customary commissions). The Selling Stockholders and any participating brokers and dealers may be deemed to be "underwriters" as defined in the Securities Act of 1933, as amended (the "Securities Act"). See "Principal and Selling Stockholders" and "Plan of Distribution." The Common Stock of the Company is traded on the over-the-counter market under the symbol "SURC." The last sale price as reported in the over-the- counter market for the Common Stock on November 19, 1996 was $10.50 per share. None of the proceeds from the sale of the Shares by the Selling Stockholders will be received by the Company. The Company has agreed to bear all expenses in connection with the registration of the Shares being offered by the Selling Stockholders. See "Plan of Distribution." ----------- SEE "RISK FACTORS," BEGINNING ON PAGE 6, FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. All information provided herein as of a date or dates prior to July 1, 1996 reflects the inclusion of Seven-Up/RC Bottling Company of Puerto Rico, Inc. ("Puerto Rico"). The Company is among the largest beverage distributors in the United States and is the largest bottler of Seven-Up in the United States. The Company manufactures and distributes a broad range of beverage products in Southern California, Central California, and in portions of Nevada and New Mexico. The Company has the exclusive right within its territories to manufacture and/or distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes (ginger-ale and mixers), Evian (imported still water), Perrier (imported mineral water), Welch's (grape, strawberry and pineapple), and Yoo-Hoo (chocolate drink). The Company's net sales in 1995 were $396,725,000. The Company competes as an independent bottler on the basis of its large portfolio of franchised brands, its significant combined market share, its ability to market, distribute and merchandise its products effectively and favorable demographics within its territories. The Company's portfolio of franchised brands consists of highly recognizable trademarks that are in almost all cases the first ranking brand in their respective beverage flavor categories. The Company's combined market share of its franchised brands and other products enables the Company to realize purchasing, manufacturing, marketing, and delivery efficiencies. In addition, the Company's territories have many attributes that contribute to revenue growth in the beverage industry, including a favorable climate and a high density of retail outlets in populous areas. The Company's products are made available to its customers through a network of distribution facilities positioned within major population areas. The Company distributes almost all of its products directly to retail outlets through its core direct-store-door ("DSD") distribution system. Through its DSD distribution channel, the Company provides efficient, high-quality services to more than 35,000 retail outlets. These retail outlets include supermarkets, warehouse clubs, convenience stores, and other retail establishments that serve a combined population of over 30 million consumers. The Company's business strategy is to manufacture and distribute a franchised portfolio of leading trademarked beverages in each beverage flavor category and to create additional sources of revenue through contract manufacturing. In accordance with this strategy, the Company's Liquitrend division ("Liquitrend") engages in contract manufacturing, which utilizes the Company's excess production capacity by manufacturing carbonated soft drink products for a variety of small, independent franchisors and retailers selling private label products. As part of the Company's restructuring effort, the Liquitrend division was significantly downsized and the Company's Avalon Food and Beverage division ("Avalon"), which provided a wide array of beverage products primarily to large retail grocers who picked up the products from the Company's warehouse facilities and distributed these products through their internal distribution systems, was discontinued. THE OFFERING Common Stock offered by the Selling Stockholders....................... 1,904,805 shares Common Stock to be outstanding after the Offering(1).................... 5,000,000 shares Use of Proceeds..................... The Company is not selling shares in the Offering and is not receiving any proceeds from the Offering. See "Use of Proceeds."
- -------- (1) Excludes 263,158 shares issuable upon the exercise of a warrant held by WB Bottling Corporation. See "Principal and Selling Stockholders." 2 RISK FACTORS Prospective purchasers of the Common Stock offered hereby should carefully consider the "Risk Factors" immediately following this Prospectus Summary. RECENT DEVELOPMENTS Reorganization. On August 15, 1996, the Joint Plan of Reorganization of the Company and its then parent Beverage Group Acquisition Corporation (the "Plan of Reorganization") was consummated and the Company emerged from bankruptcy. The Company believes that because the Plan of Reorganization was consensual, the bankruptcy will not adversely affect the Company's relationships with its trade creditors, franchisors, employees and customers. However, if such relationships are adversely affected, the Company's operations could be materially affected. Puerto Rico Disposition. On June 30, 1996, the Company consummated a sale of all the stock of Puerto Rico for approximately $74 million to an investor group led by Center Street Capital Partners, L.P. and certain members of the current Puerto Rico management (the "Puerto Rico Disposition"). The net proceeds from the sale of Puerto Rico that were distributed pursuant to the Plan of Reorganization to the holders of the Senior Secured Notes was approximately $55 million. See "Business--Sale of the Stock of Seven-Up/RC Bottling Company of Puerto Rico." 3 SUMMARY CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) The following table summarizes selected consolidated historical operating and financial data of the Company for the five fiscal years ended December 31, 1995 which were derived, except as otherwise noted, from the consolidated financial statements of the Company audited by Arthur Andersen LLP. The table also summarizes selected unaudited consolidated historical operating and financial data for the nine month period ended September 30, 1995, the seven month and fifteen day period ended August 15, 1996 and the forty-six day period ended September 30, 1996, derived from unaudited interim condensed consolidated financial statements of the Company, which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The following table also includes certain pro forma unaudited financial data that reflect adjustments necessary to give effect to the transactions in connection with the consummation of the Plan of Reorganization on August 15, 1996. The pro forma unaudited financial data do not purport to represent the Company's results of operations or financial condition had the Company's reorganization been effective for the periods indicated and do not purport to project the Company's results of operations and financial condition for any future period. This table should be read in conjunction with, and is qualified in its entirety by reference to, "Selected Consolidated Financial Data", "Management's Discussion and Analysis of Results of Operations and Financial Condition", the Company's historical Consolidated Financial Statements and notes thereto, and the "Pro Forma Unaudited Financial Information" appearing elsewhere in this Prospectus.
REORGANIZED PREDECESSOR COMPANY(A) COMPANY(A) ---------------------------------------------------------------- ----------- UNAUDITED SEVEN UNAUDITED UNAUDITED UNAUDITED MONTHS FORTY- PRO FORMA NINE AND 15 SIX NINE MONTHS DAYS DAYS MONTHS ENDED ENDED ENDED ENDED YEAR ENDED DECEMBER 31, SEPT. 30, AUG. 15, SEPT. 30, SEPT. 30, ------------------------------------------- --------- --------- ----------- --------- 1991 1992 1993 1994 1995 1995 1996 1996 1996(B) ------- ------- ------- ------- ------- --------- --------- ----------- --------- STATEMENT OF OPERATIONS DATA: Net sales................ 364,436 374,460 371,062 413,840 396,725 306,473 202,844 33,518 198,427 Cost of goods sold....... 289,795 295,481 299,735 342,336 334,942 260,698 164,320 27,418 161,806 Administrative, marketing and general expenses.... 48,980 49,876 47,342 48,437 47,935 36,111 28,011 5,362 29,681 Depreciation and amortization............ 17,460 18,428 17,983 17,251 18,180 13,398 10,399 1,461 5,289 Restructure charges (c).. 0 0 0 0 5,015 2,646 547 0 547 ------- ------- ------- ------- ------- ------- ------- ------ ------- Operating income (loss).. 8,201 10,675 6,002 5,816 (9,347) (6,380) (433) (723) 1,104 Interest expense......... 24,575 21,222 19,938 21,626 23,057 17,349 12,871 267 2,464 Other income, net (d).... 2,682 1,236 418 95 210 171 33,712 4 2,001 ------- ------- ------- ------- ------- ------- ------- ------ ------- (Loss) Income before income taxes, reorganization expenses and extraordinary items. (13,692) (9,311) (13,518) (15,715) (32,194) (23,558) 20,408 (986) 641 Reorganization expenses (e)....................... 0 0 0 0 0 0 35,369 0 0 Provision for income taxes................... 0 0 0 185 0 0 345 28 28 ------- ------- ------- ------- ------- ------- ------- ------ ------- (Loss) income before extraordinary items..... (13,692) (9,311) (13,518) (15,900) (32,194) (23,558) (15,306) (1,014) 613 Extraordinary Items (f).. 0 (11,233) (826) 0 0 0 77,239 0 (510) ------- ------- ------- ------- ------- ------- ------- ------ ------- Net (loss) income........ (13,692) (20,544) (14,344) (15,900) (32,194) (23,558) 61,933 (1,014) 103 ------- ------- ------- ------- ------- ------- ------- ------ ------- Net (loss) income per common share............ N/A N/A N/A N/A N/A N/A N/A (0.20) 0.02 ======= ======= ======= ======= ======= ======= ======= ====== ======= Weighted average of shares outstanding...... N/A N/A N/A N/A N/A N/A N/A 5,000 5,000 SELECTED FINANCIAL RATIOS AND OTHER FINANCIAL DATA: Capital expenditures..... 5,051 4,742 5,466 5,138 5,208 3,020 4,402 746 4,451 EBITDA (g)............... 25,661 29,103 23,985 23,067 13,848 9,664 10,513 738 6,940 Cash flows provided by (used in) operating activities.............. 7,861 16,260 372 1,670 5,767 (3,294) 18,374 (3,294) N/A
4
REORGANIZED COMPANY(a) ------------------ AS OF SEPTEMBER 30, 1996 (UNAUDITED) ------------------ BALANCE SHEET DATA: Cash........................................................ 3,291 Property, plant and equipment, net.......................... 33,551 Total assets................................................ 96,463 Total current liabilities (h)............................... 49,231 Total debt (i).............................................. 18,246 Stockholders' equity........................................ 28,986
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA (a) On May 13, 1996, the Company and its immediate holding company parent, Beverage Group Acquisition Corporation, filed voluntary petitions for reorganization relief under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court for the District of Delaware. On August 15, 1996, the Plan of Reorganization was consummated and the Company emerged as a reorganized company from Chapter 11. Due to the reorganization and implementation of fresh start reporting, the Condensed Consolidated Financial Statements for the new reorganized company (period starting August 15, 1996) are not comparable to those of the predecessor company. The predecessor company included the Company and Puerto Rico through the date of disposition, June 30, 1996. The reorganized company includes the operations of the Company subsequent to the consummation date. (b) Pro forma operating data, other financial data and balance sheet data give effect to (i) the transactions in connection with the consummation of the Plan of Reorganization on August 15, 1996, and (ii) the Puerto Rico Disposition on June 30, 1996, as if they had occurred on January 1, 1996. (c) Restructuring charges for the year ended December 31, 1995 represent $906,000 for severance pay, $1,660,000 for lease terminations and $2,449,000 related to the negotiation of the potential restructuring of the senior secured notes. The restructuring charges for the seven months and fifteen days ended August 15, 1996 relate to the termination of a capital lease. (d) Other income, net consists of income associated with a joint venture in Puerto Rico and non-recurring contractual income. The seven months and fifteen days ended August 15, 1996, reflect the gain resulting from the Puerto Rico Disposition of approximately $32 million. (e) Reorganization expenses represent costs and fees for professionals in conjunction with the Plan of Reorganization and $29.7 million for the adjustment of assets to fair market value. (f) The 1992 extraordinary item represents the write-off of debt issuance costs and a prepayment premium as a result of the issuance of the senior secured notes on August 12, 1992. The 1993 extraordinary item consists of a prepayment premium and the write-off of deferred financing charges to the replacement of revolving credit facilities in February 1994. The seven months and fifteen days ended August 15, 1996 extraordinary items represent the write-off of debt issuance costs related to the predecessor company revolving credit facility and the gain resulting from the discharge of indebtedness of the senior secured notes. (g) EBITDA represents earnings before interest income and expense, financial restructuring costs, reorganization items, other income, income taxes, depreciation and amortization. EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. (h) Total current liabilities exclude current portion of long-term debt. (i) Total debt includes current portion of long-term debt. 5 RISK FACTORS In addition to the other information contained in this Prospectus, prospective investors should carefully consider the following risk factors before making an investment in the Common Stock offered hereby. EFFECT OF BANKRUPTCY ON RELATIONSHIPS WITH CREDITORS, CUSTOMERS AND SUPPLIERS On August 15, 1996, the Plan of Reorganization was consummated and the Company emerged from bankruptcy. The Company believes that because the Plan of Reorganization was consensual, the bankruptcy will not adversely affect the Company's relationships with its trade creditors, franchisors, employees and customers. However, if such relationships are adversely affected, the Company's operations could be materially affected. COMPETITION The soft drink industry is highly competitive. In order to maintain its market share, the Company must generally remain price competitive. See "Business--Marketing." Market conditions over the past several years have limited the Company's ability to increase the prices of many of its products. The Company's profitability has been, and may continue to be, adversely affected by its commitment to maintaining market share. The Company's principal competitors are Coca-Cola Enterprises Inc. ("CCE") and the company- owned bottling operations of the Pepsi-Cola Company ("COBO"), both of which are affiliated with their respective syrup franchisors. Price competition between CCE and COBO has resulted in a market-wide erosion of per case margins. Both CCE and COBO have greater financial resources than the Company and may be influenced by their respective syrup franchisors to reduce prices in order to increase the volume of syrup sales. See "Business--Competition." Furthermore, the Company relies to a substantial degree upon advertising and promotional funds provided by its franchisors (the "Franchisors"). These support funds are negotiated on an annual basis and may be reduced or terminated. The Company may not have adequate financial resources, alone or with support funds provided by the Franchisors, to meet future competitive challenges. RELATIONSHIP WITH FRANCHISORS The Company's agreements with the Franchisors cover all of the Company's present bottling territories and most of its products. Under such agreements, the Franchisors are entitled to set the price for their concentrate unilaterally. The agreements generally contain certain covenants and provide that the Company may not transfer control of its bottling rights without the consent of the Franchisor. Upon the occurrence of an event of default under any such agreement and in certain other limited circumstances, the Franchisor may terminate the Company's bottling rights with respect to the product of such Franchisor. Termination of the Company's bottling rights with respect to its principal products would constitute an event of default under the Company's credit facilities and, might have a material adverse effect on the financial position of the Company. LOCAL ECONOMIES; WEATHER The Company's sales are dependent on the condition of the local economies in the Company's territories. In addition, the Company's sales are also substantially dependent on weather conditions existing in its territories. GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL FACTORS The Company's business could be significantly affected if certain legislative proposals are adopted, including soft drink taxes and mandatory container deposit laws. In that connection, a proposal for a national container deposit law was recently re-introduced and defeated in Congress. In addition, costs of compliance with existing and future environmental laws and regulations cannot be predicted with any degree of certainty and may significantly affect the Company's operations. See "Business--Governmental Regulations." 6 DEPENDENCE ON KEY PERSONNEL The success of the Company depends to a large extent on its executive management team, including the Company's President, Chief Executive Officer and Chairman of the Board, Bart S. Brodkin. Although the Company has entered into employment agreements with certain of the Company's executive officers, it is possible that members of executive management may leave the Company, and such departures could have a negative impact on the business of the Company. The Company does not maintain key-man life insurance on any of its executive officers. See "Management." LIMITED TRADING MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE The Company's Common Stock is thinly traded and as such could be subject to price fluctuations to a greater degree than heavily traded securities for which there is a well established trading market. POSSIBLE ADVERSE EFFECT ON MARKET PRICE DUE TO SHARES ELIGIBLE FOR FUTURE SALE All of the outstanding shares of the Company's Common Stock, including the shares offered hereby, were issued under the Plan of Reorganization pursuant to Section 1145 of the Bankruptcy Code of 1986 which provides an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and are freely tradeable without restriction or further registration under the Securities Act unless held by an "affiliate" of the Company, as that term is defined under Rule 144 of the Securities Act, which shares will be subject to the resale limitations of Rule 144. No prediction can be made as to the effect, if any, that market sales of Common Stock or the availability of shares of Common Stock for sale will have on the market price of the Common Stock from time to time. The sale of a substantial number of shares held by the existing stockholders, whether pursuant to a subsequent public offering or otherwise, or the perception that such sales could occur, could adversely affect the market price of the Common Stock and could materially impair the Company's future ability to raise capital through an offering of equity securities. ANTITAKEOVER PROVISIONS The Company's Amended and Restated Certificate of Incorporation and Bylaws contain certain provisions that could make more difficult the acquisition of the Company by means of a tender offer, a proxy contest or otherwise. These provisions include advance notice procedures for stockholders to submit proposals for consideration at stockholders' meetings. See "Description of Capital Stock." FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements concerning the Company's operations, economic performance and financial condition. Such statements are subject to various risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those identified under "Risk Factors" and elsewhere in this Prospectus. 7 THE COMPANY GENERAL The Company is among the largest beverage distributors in the United States and is the largest bottler of Seven-Up in the United States. The Company manufactures and distributes a broad range of beverage products in Southern California, Central California, and in portions of Nevada and New Mexico. The Company has the exclusive right within its territories to manufacture and/or distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes (ginger-ale and mixers), Evian (imported still water), Perrier (imported mineral water), Welch's (grape, strawberry and pineapple), and Yoo-Hoo (chocolate drink). The Company's net sales in 1995 were $396,725,000. The Company competes as an independent bottler on the basis of its large portfolio of franchised brands, its significant combined market share, its ability to market, distribute and merchandise its products effectively and favorable demographics within its territories. The Company's portfolio of franchised brands consists of highly recognizable trademarks that are in almost all cases the first ranking brand in their respective beverage flavor categories. The Company's combined market share of its franchised brands and other products enables the Company to realize purchasing, manufacturing, marketing, and delivery efficiencies. In addition, the Company's territories have many attributes that contribute to revenue growth in the beverage industry, including a favorable climate and a high density of retail outlets in populous areas. The Company's products are made available to its customers through a network of distribution facilities positioned within major population areas. The Company distributes almost all of its products directly to retail outlets through its core DSD distribution system. Through its DSD distribution channel, the Company provides efficient, high-quality services to more than 35,000 retail outlets. These retail outlets include supermarkets, warehouse clubs, convenience stores, and other retail establishments that serve a combined population of over 30 million consumers. The Company's business strategy is to manufacture and distribute a franchised portfolio of leading trademarked beverages in each beverage flavor category and to create additional sources of revenue through contract manufacturing. In accordance with this strategy, the Company's Liquitrend division ("Liquitrend") engages in contract manufacturing, which utilizes the Company's excess production capacity by manufacturing carbonated soft drink products for a variety of small, independent franchisors and retailers selling private label products. As part of the Company's restructuring effort, the Liquitrend division was significantly downsized and the Company's Avalon Food and Beverage division ("Avalon"), which provided a wide array of beverage products primarily to large retail grocers who picked up the products from the Company's warehouse facilities and distributed these products through their internal distribution systems, was discontinued. The Company's executive offices are located at 3220 East 26th Street, Vernon, California 90023. The telephone number at the Vernon location is (213) 268-7779. RECENT DEVELOPMENTS Reorganization. On August 15, 1996, the Joint Plan of Reorganization of the Company and its then parent Beverage Group Acquisition Corporation was consummated and the Company emerged from bankruptcy. The Company believes that because the Plan of Reorganization was consensual, the bankruptcy will not adversely affect the Company's relationships with its trade creditors, franchisors, employees and customers. However, if such relationships are adversely affected, the Company's operations could be materially affected. Puerto Rico Disposition. On June 30, 1996, the Company consummated a sale of all the stock of Puerto Rico for approximately $74 million to an investor group led by Center Street Capital Partners, L.P. and certain members of the current Puerto Rico management. The net proceeds from the sale of Puerto Rico that were distributed pursuant to the Plan of Reorganization to the holders of the Senior Secured Notes was approximately $55 million. See "Business--Sale of the Stock of Seven-Up/RC Bottling Company of Puerto Rico." 8 USE OF PROCEEDS The Company is not selling shares in the Offering and is not receiving any proceeds from the Offering. PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Common Stock is traded on the over-the-counter market under the symbol "SURC." The following table sets forth on a per share basis, for the periods indicated, the high and low sales price of the Common Stock as reported on the over-the-counter market. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. See "Risk Factors--Limited Trading Market and Possible Volatility of Stock Price."
PRICE RANGE ------------ HIGH LOW ------ ----- FISCAL 1996: Third Quarter (since August 15, 1996).............................. 10 1/2 8 Fourth Quarter (as of November 20, 1996)........................... 11 7/8 9 5/8
Prior to the consummation of the Plan of Reorganization, the Company's Common Stock was not publicly traded. A recent closing price as reported on the over-the-counter market is set forth on the cover page of this Prospectus. Since the reorganization, the Company has not declared or paid any cash or other dividends on its Common Stock and does not expect to pay dividends for the foreseeable future. 9 SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) The following table sets forth the selected consolidated historical operating and financial data of the Company for the five fiscal years ended December 31, 1995, and as of December 31, 1995, which were derived, except as otherwise noted, from the consolidated financial statements of the Company audited by Arthur Andersen, LLP. The table also sets forth selected unaudited consolidated historical operating and financial data for the nine month period ended September 30, 1995, the seven month and fifteen day period ended August 15, 1996, the forty-six day period ended September 30, 1996 and as of September 30, 1996, derived from unaudited interim condensed consolidated financial statements of the Company, which in the opinion of management, include all adjustments consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The following table also includes certain pro forma unaudited financial data that reflect adjustments necessary to give effect to the transactions in connection with the consummation of the Plan of Reorganization on August 15, 1996. The pro forma financial data do not purport to represent the Company's results of operations or financial condition had the Company's reorganization been effective for the periods indicated and do not purport to project the Company's results of operations and financial condition for any future period. This table should be read in conjunction with, and is qualified in its entirety by reference to, "Summary Consolidated Financial Data," "Management's Discussion and Analysis of Results of Operations and Financial Condition," the Company's historical Consolidated Financial Statements and notes thereto and the "Pro Forma Unaudited Financial Information" appearing elsewhere in this Prospectus.
REORGANIZED PREDECESSOR COMPANY(a) COMPANY (a) ----------------------------------------------------------------- ----------- UNAUDITED UNAUDITED SEVEN UNAUDITED UNAUDITED NINE MONTHS FORTY-SIX PRO FORMA MONTHS AND 15 DAYS NINE MONTHS ENDED DAYS ENDED ENDED ENDED YEAR ENDED DECEMBER 31, SEPT. 30, AUG. 15, SEPT. 30, SEPT. 30, ------------------------------------------- --------- ---------- ----------- ----------- 1991 1992 1993 1994 1995 1995 1996 1996 1996(b) ------- ------- ------- ------- ------- --------- ---------- ----------- ----------- STATEMENT OF OPERATIONS DATA: Net sales................... 364,436 374,460 371,062 413,840 396,725 306,473 202,844 33,518 198,427 Cost of goods sold.......... 289,795 295,481 299,735 342,336 334,942 260,698 164,320 27,418 161,806 Administrative, marketing and general expenses....... 48,980 49,876 47,342 48,437 47,935 36,111 28,011 5,362 29,681 Depreciation and amortization............... 17,460 18,428 17,983 17,251 18,180 13,398 10,399 1,461 5,289 Restructure charges (c)..... 0 0 0 0 5,015 2,646 547 0 547 ------- ------- ------- ------- ------- ------- ------- ------ ------- Operating income (loss)..... 8,201 10,675 6,002 5,816 (9,347) (6,380) (433) (723) 1,104 Interest expense............ 24,575 21,222 19,938 21,626 23,057 17,349 12,871 267 2,464 Other income, net (d)....... 2,682 1,236 418 95 210 171 33,712 4 2,001 ------- ------- ------- ------- ------- ------- ------- ------ ------- (Loss) income before income taxes, reorganization expenses and extraordinary items...................... (13,692) (9,311) (13,518) (15,715) (32,194) (23,558) 20,408 (986) 641 Reorganization expenses (e). 0 0 0 0 0 0 35,369 0 0 Provision for income taxes.. 0 0 0 185 0 0 345 28 28 ------- ------- ------- ------- ------- ------- ------- ------ ------- (Loss) income before extraordinary items........ (13,692) (9,311) (13,518) (15,900) (32,194) (23,558) (15,306) (1,014) 613 Extraordinary Items (f)..... 0 (11,233) (826) 0 0 0 77,239 0 (510) ------- ------- ------- ------- ------- ------- ------- ------ ------- Net (loss) income........... (13,692) (20,544) (14,344) (15,900) (32,194) (23,558) 61,933 (1,014) 103 ======= ======= ======= ======= ======= ======= ======= ====== ======= Net (loss) income per common share...................... N/A N/A N/A N/A N/A N/A N/A (0.20) 0.02 Weighted average of shares outstanding................ N/A N/A N/A N/A N/A N/A N/A 5,000 5,000 SELECTED FINANCIAL RATIOS AND OTHER FINANCIAL DATA: Capital expenditures........ 5,051 4,742 5,466 5,138 5,208 3,020 5,252 746 4,451 EBITDA (g).................. 25,661 29,103 23,985 23,067 13,848 9,664 10,513 738 6,940 Cash flows provided by (used in) operating activities... 7,861 16,260 372 1,670 5,767 (3,294) 18,374 (3,294) N/A
10
REORGANIZED PREDECESSOR COMPANY(a) COMPANY(a) -------------------------------------------------------- ------------- AS OF AS OF AS OF DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------- ------------- ------------- 1991 1992 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------- ------------- ------------- (UNAUDITED) BALANCE SHEET DATA: Cash................... 3,820 4,148 3,746 6,982 5,949 4,360 3,291 Property, plant and equipment, net........ 90,464 87,496 83,447 87,388 79,945 81,555 33,551 Total assets........... 227,493 212,407 210,198 243,834 192,133 204,595 96,463 Total current liabilities (h)....... 33,868 42,429 49,554 81,312 63,512 61,983 49,231 Total debt (i)......... 176,009 168,873 173,883 191,661 189,954 195,309 18,246 Stockholders' equity... 17,616 1,105 (13,239) (29,139) (61,333) (52,697) 28,986
NOTES TO SELECTED FINANCIAL DATA (a) On May 13, 1996 the Company and its immediate holding company parent, Beverage Group Acquisition Corporation, filed voluntary petitions for reorganization relief under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court for the District of Delaware. On August 15, 1996, the Plan of Reorganization was consummated and the Company emerged as a reorganized company from Chapter 11. Due to the reorganization and implementation of fresh start reporting, the Condensed Consolidated Financial Statements for the new reorganized company (period starting August 15, 1996) are not comparable to those of the predecessor company. The predecessor company included the Company and Puerto Rico through the date of disposition, June 30, 1996. The reorganized company includes the operations of the Company subsequent to the consummation date. (b) Pro forma operating data and other financial data give effect to (i) the transactions in connection with the consummation of the Plan of Reorganization on August 15, 1996, and (ii) the Puerto Rico Disposition on June 30, 1996, as if they had occurred on January 1, 1996. (c) Restructuring charges for the year ended December 31, 1995 represent $906,000 for severance pay, $1,660,000 for lease terminations and $2,449,000 related to the negotiation of the potential restructuring of the senior secured notes. The restructuring charges for the seven months and fifteen days ended August 15, 1996 relate to the termination of a capital lease. (d) Other income (expense), net consists of income associated with a joint venture in Puerto Rico and non-recurring contractual income. The seven months and fifteen days ended August 15, 1996, reflect the gain resulting from the Puerto Rico Disposition of approximately $32 million. (e) Reorganization expenses represent costs and fees for professionals in conjunction with the Plan of Reorganization and $29.7 million for the adjustment of asset to fair market value. (f) The 1992 extraordinary item represents the write-off of debt issuance costs and a prepayment premium as a result of the issuance of the senior secured notes on August 12, 1992. The 1993 extraordinary item consists of a prepayment premium and the write-off of deferred financing charges related to the replacement of revolving credit facilities in February 1994. The seven months and fifteen day period ended August 15, 1996 extraordinary items represent the write-off of debt issuance costs related to the predecessor company revolving credit facility and the gain resulting from the discharge of indebtedness of the senior secured notes. (g) EBITDA represents earnings before interest income and expense, financial restructuring costs, reorganization items, other income, income taxes, depreciation and amortization. EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. (h) Total current liabilities exclude current portion of long-term debt. (i) Total debt includes current portion of long-term debt. 11 UNAUDITED PRO FORMA FINANCIAL DATA The Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 1996 and the Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1995 have been prepared giving effect to the sale of Puerto Rico and the consummation of the Reorganization, including the costs related thereto (collectively, the "Pro Forma Adjustments"), in accordance with AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The Company has accounted for the Reorganization using the principles of "fresh start" reporting as required by SOP 90-7. Pursuant to such principles, the reorganization value of $30.0 million was derived from various valuation methods, including discounted cash flows, selected company multiplies, selected acquisition transaction multiplies and other applicable ratios and valuation techniques believed by management and its financial advisors to be representative of the Company's business and industry. In accordance with SOP 90-7, the reorganization value was allocated to specific identifiable assets and liabilities based upon fair market value. The unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 1996, was prepared as if the Pro Forma Adjustments had occurred on January 1, 1996. The Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1995, was prepared as if the Pro Forma Adjustments had occurred on January 1, 1995. The Unaudited Pro Forma Consolidated Financial Information does not purport to be indicative of the results which would have been obtained had such transactions in fact been completed as of the date hereof and for the periods presented or that may be obtained in the future. 12 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Net sales............................. $236,362 $(37,935)(a) $198,427 Cost of goods sold.................... 191,738 (29,932)(a) 161,806 -------- -------- -------- Gross profit........................ 44,624 (8,003) 36,621 Administrative, marketing and general expenses............................. 33,373 (3,692)(a) 29,681 Depreciation and amortization......... 11,860 (6,571)(a),(e) 5,289 Restructure charges................... 547 -- 547 -------- -------- -------- Operating (loss) income............. (1,156) 2,260 1,104 Interest expense...................... 13,138 (10,674)(b) 2,464 Other income, net..................... 33,716 (31,715)(a) 2,001 -------- -------- -------- Income before income taxes, reorganization expenses and extraordinary items.................. 19,422 (18,781) 641 Reorganization expenses............... 35,369 (35,369)(c) 0 Provision for income taxes............ 373 (345)(a) 28 -------- -------- -------- (Loss) Income before extraordinary items.............................. (16,320) 16,933 613 Extraordinary items................... 77,239 (77,749)(f) (510) -------- -------- -------- Net income.......................... $ 60,919 $(60,816) $ 103 ======== ======== ======== Net income per common share........... $ 0.02(d) ======== Weighted average common shares outstanding.......................... 5,000(d) ========
See Notes to Pro Forma Consolidated Statement of Operations. 13 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (DOLLAR AMOUNTS IN THOUSANDS) The following notes set forth the explanations and assumptions used in preparing the Unaudited Pro Forma Consolidated Statement of Operations. (a) The Company sold Puerto Rico during the nine-month period ended September 30, 1996 at a net gain to the Company of $31,715. The Pro Forma Adjustments represent the exclusion of Puerto Rico's operating activities, revenues and expenses, and the one-time gain during the period. (b) Net reduction of interest expense as a result of the Reorganization and the sale of Puerto Rico has been calculated as follows: Reversal of interest on $140,000 Senior Secured Notes............... $10,063 Reversal of interest on Puerto Rico Revolving Credit Facility....... 611 ------- Pro Forma Adjustment................................................ $10,674 =======
(c) Represents costs incurred during fiscal 1996 related to the Reorganization which are being excluded from the pro forma results for the nine-month period ended September 30, 1996. (d) Pro forma loss per common share is computed based upon 5,000,000 average shares of common stock assumed to be outstanding during the nine-month period ended September 30, 1996. (e) In accordance with SOP 90-7, the Reorganization Value is allocated to identifiable assets and liabilities based upon fair value. The amount reflects an adjustment of $3,968 for the restatement of depreciation and amortization expense related to the write down of assets and liabilities to the fair value. (f) Reflects the elimination of the extraordinary gain recognized in connection with the Plan of Reorganization. The extraordinary gain resulting from the Reorganization has been calculated as follows: Historical carrying value of Senior Secured Notes.................. $140,000 Historical carrying value of related accrued interest.............. 24,756 Write-off of old deferred financing costs.......................... (2,607) Market value of securities exchanged for old debt.................. (29,400) Cash used from proceeds from the sale of Puerto Rico............... (55,000) -------- Extraordinary gain................................................. $ 77,749 ========
The Company believes that it will not recognize any gain for tax purposes due to cancellation of indebtedness resulting from the reorganization. The gain related to cancellation of debt will result in a reduction of the Company's end-of-the-year tax attributes (net operating and capital loss carryovers) and then, to the extent the amount of such cancellation of indebtedness income exceeds the Company's tax attributes, a reduction of the Company's adjusted tax basis in its assets. It is anticipated that the cancellation of indebtedness income will result in the reduction of all of the Company's net operating losses remaining after the sale of Puerto Rico and a portion of the Company's adjusted tax basis in its assets. 14 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Net sales............................. $396,725 $(82,256)(a) $314,469 Cost of goods sold.................... 334,942 (65,925)(a) 269,017 -------- -------- -------- Gross profit........................ 61,783 (16,331) 45,452 Administrative, marketing and general expenses............................. 47,935 (6,383)(a) 41,552 Depreciation and amortization......... 18,180 (10,450)(a)(d) 7,730 Restructure charges................... 5,015 -- 5,015 -------- -------- -------- Operating income (loss)............. (9,347) 502 (8,845) Interest expense...................... 23,057 (17,380)(b) 5,677 Other income, net..................... 210 0 210 -------- -------- -------- Net loss............................ $(32,194) $(17,882) $(14,312) ======== ======== ======== Net loss per common share............. $ (2.86)(c) ======== Weighted average common shares outstanding.......................... 5,000 (c) ========
See Notes to Pro Forma Consolidated Statement of Operations. 15 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (DOLLAR AMOUNTS IN THOUSANDS) The following notes set forth the explanations and assumptions used in preparing the Unaudited Pro Forma Consolidated Statement of Operations. (a) The Company sold Puerto Rico during the nine-month period ended September 30, 1996 at a net gain to the Company of $31,715. The Pro Forma Adjustments represent the exclusion of Puerto Rico's operating activities, for fiscal year 1995. (b) Net reduction of interest expense as a result of the Reorganization and the sale of Puerto Rico has been calculated as follows: Reversal of interest on $140,000 Senior Secured Notes............... $16,100 Reversal of interest on Puerto Rico Revolving Credit Facility....... 1,280 ------- Pro Forma Adjustment................................................ $17,380 =======
(c) Pro Forma loss per common share is computed based upon 5,000,000 average shares of common stock assumed to be outstanding during the year ended December 31, 1995. (d) In accordance with SOP 90-7, the Reorganization Value is allocated to identifiable assets and liabilities based upon fair value. The amount reflects an adjustment of $5,494 for the restatement of depreciation and amortization expense related to the write down of assets and liabilities to fair value. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL On May 13, 1996, the Company and its immediate holding company parent, Beverage Group Acquisition Corporation ("BGAC") filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code. On August 2, 1996, the Bankruptcy Court confirmed the Plan and on August 15, 1996, the Plan was consummated. Due to the Reorganization and implementation of fresh start reporting, the Condensed Consolidated Financial Statements for the new reorganized company (period starting August 16, 1996) are not comparable to those of the predecessor company. The predecessor company included the operations of the Company and Puerto Rico, through the date of disposition, June 30, 1996. The reorganized company includes the operations of the Company subsequent to the consummation date. The Company's primary measurement of unit volume is DSD cases. Case sales are defined as physical cases of beverages sold, including both ready-to-serve premix and postmix fountain products that are sold in bulk (tanks or boxes). Avalon (warehouse distribution) and Liquitrend (contract manufacturing) are not combined in the Company's physical case sales, but are included in net sales, cost of goods sold, and operating income. Liquitrend's net sales fluctuate from year to year and generate gross margins that are less than gross margins for DSD sales. RESTRUCTURING AND REORGANIZATION CHARGES As a result of the debt restructuring negotiations and the Company's effort to reduce its cost and overhead structure, the Company incurred a restructuring charge of $5,015,000 in 1995. The restructuring charge represented $906,000 related to employee severance, $1,660,000 related to lease terminations and $2,449,000 related to the negotiation of the potential restructuring of the Senior Secured Notes. The Company incurred a restructuring charge of $547,000 during the seven month and fifteen day period ended August 15, 1996. In addition, the Company incurred reorganization expenses of $35,369,000 consisting of $29,735,000 related to the adjustment of assets to fair market value and $5,634,000 related to financial restructuring costs during the seven month and fifteen day period ended August 15, 1996. BANKRUPTCY PETITIONS As a result of severe liquidity problems, on July 31, 1995, the Company suspended payment of interest on its $140,000,000 11.5% Senior Secured Notes due 1999 (the "Senior Secured Notes"). The Company entered into negotiations with financial and legal advisors of an unofficial committee of the holders of the Senior Secured Notes (the "Committee") and announced on November 9, 1995 that it reached an agreement in principle with the Committee. At the end of the second quarter of 1995 through the first quarter of 1996, the Company was also in violation of certain of its revolving credit facility covenants, including tangible net-worth, interest coverage and fixed charge coverage. At the request of the Company, the revolving credit lender executed forbearance agreements extending through May 15, 1996. On May 13, 1996, the Company and BGAC filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware. Following commencement of the Chapter 11 cases, all actions and proceedings against the Company and BGAC and all acts to obtain any property of the bankruptcy estate were automatically stayed under section 362 of the Bankruptcy Code. Subsequent to the filing of the bankruptcy petitions and until the effective date of the Plan of Reorganization, the Company and BGAC continued to operate the business as debtors-in-possession. 17 Under the terms of the Plan of Reorganization, consistent with the agreement in principle reached with the Committee, the holders of the Senior Secured Notes exchanged their Notes for approximately 98% of the equity of the Company and received the net proceeds from the sale of Puerto Rico. On May 13, 1996, the Bankruptcy Court entered an order (the "Trade Order") authorizing the Company to, among other things, make payments to its trade suppliers on account of pre-bankruptcy claims provided that such suppliers continue to provide goods to the Company on the same credit terms as were in effect on the day before the Company announced the suspension of interest payments on the Senior Secured Notes. The Company and BGAC filed their Plan of Reorganization (and accompanying Disclosure Statement) with the Bankruptcy Court on May 20, 1996. The Bankruptcy Court approved the Disclosure Statement on June 19, 1996. On June 30, 1996, the Company consummated a sale of all the stock of Puerto Rico for approximately $74 million to an investor group led by Center Street Capital Partners, L.P. and certain members of the current Puerto Rico management. The net proceeds from the sale of Puerto Rico that were distributed pursuant to the Plan of Reorganization to the holders of the Senior Secured Notes was approximately $55 million. In 1995, Puerto Rico's operating profit was approximately $4,992,000 and its depreciation and amortization charges were approximately $4,956,000. During the first six months of 1996, Puerto Rico's operating profit was approximately $2,279,000 and its depreciation and amortization charges were approximately $2,603,000. On August 2, 1996, the Bankruptcy Court confirmed the Plan of Reorganization. On August 15, 1996 the Plan of Reorganization was consummated and the Company emerged from bankruptcy. The bankruptcy, although the Plan of Reorganization was consensual, could adversely affect the Company's relationships with its trade creditors, franchisors, employees and customers, although, in light of the recovery by the Company's creditors under the Plan of Reorganization, the bankruptcy is not expected to have an adverse effect on such relationships. If such relationships are adversely affected, the Company's operations could be materially affected. RESULTS OF OPERATIONS (UNAUDITED) Comparison of the Company's Nine Months Ended September 30, 1996, with the Nine Months Ended September 30, 1995. The table below sets forth sales for the nine months ended September 30, 1996 and 1995. For purposes of analysis below the operations of the predecessor company and the reorganized company have been combined. As a result of the Reorganization and recent restructuring resulting in the elimination and downsizing of several product lines, the operations of Puerto Rico, Avalon and Snapple DSD distribution have been eliminated to arrive at comparable sales.
NINE MONTHS ENDED --------------------------- SEPTEMBER 30, SEPTEMBER 30, 1996 1995 ------------- ------------- Consolidated net sales.............................. $236,362 $306,473 Less: Puerto Rico....................................... 37,931 59,354 Avalon............................................ 1,564 20,781 Snapple DSD....................................... -- 13,200 Snapple Liquitrend................................ -- 6,946 -------- -------- Comparable Sales................................ $196,867 $206,192 ======== ========
18 Net sales decreased to $236,362,000 for the nine months ending September 30, 1996, from $306,473,000 for the comparable 1995 period, or 22.9%. This decrease is the result of (i) the Puerto Rico Disposition ($21,423,000 of the net sales decrease); (ii) reduced sales of the Company's Liquitrend division ($6,946,000 of the net sales decrease); (iii) the elimination of the Company's warehouse distribution product division, Avalon, ($19,217,000 of the net sales decrease); and (iv) the elimination of a Snapple distribution agreement, Snapple DSD ($13,200,000 of the net sales decrease). Net sales for the Company's DSD product line decreased to $172,390,000 from $177,390,000 or 2.7% for the nine months ending September 30, 1996 and 1995, respectively. This decrease is the direct result of the termination of a temporary Snapple product distribution agreement for portions of Southern California ($13,200,000 in net sales). Excluding the impact on 1995 net sales for this distribution agreement termination, comparable net sales for Southern California would have increased 5.5%. Liquitrend contract packing net sales decreased to $24,268,000 for the nine month period ending September 30, 1996, from $47,424,000 for the nine month period ending September 30, 1995, or 48.8%. This net sales decrease is the direct result of the Company's previously announced strategic decision to downsize this division resulting in the elimination of Snapple Liquitrend in 1995 ($6,946,000 in sales). Costs of goods sold decreased to $191,738,000 for the nine months ending September 30, 1996, from $260,698,000 for the comparable 1995 period, or 26.5%. This decrease is primarily the result of the sale of Puerto Rico at the end of the second quarter of 1996 (24.9% of the decrease) and reduced fixed costs in the Company, such as warehouse expense and labor costs that were eliminated as a result of the third quarter 1995 restructuring. Administrative, marketing and general expenses decreased to $33,373,000 for the nine months ending September 30, 1996, from $36,111,000 for the comparable 1995 period or 7.6%. This decrease is primarily the result of the sale of Puerto Rico (61.4% of the decrease) and the result of workforce reductions during the third quarter of 1995 in the Company. Interest expense decreased to $13,138,000 for the nine months ending September 30, 1996, from $17,349,000 for the comparable 1995 period, or 24.3%. This decrease was the result of the discontinuance of accrued interest related to the retirement of the senior secured notes, the elimination of interest expense during the third quarter for Puerto Rico, and lower average balance of the Company's working capital facility. For the reasons set forth above, net loss before income taxes and extraordinary items (net of restructuring and reorganization charges and the gain from the Puerto Rico Disposition) decreased to $12,293,000 for the nine months ending September 30, 1996 from $23,558,000 for the comparable 1995 period. On a comparable pro-forma basis, EBITDA increased to $6,940 from $2,683, or 159%, for the nine months ending September 30, 1996. This increase was the combined result of higher DSD case sales, improved volume mix of packages that contribute a greater percentage of margin contribution, lower raw material costs and a decrease in variable and fixed expenses due to the Company's reorganization efforts. EBITDA represents earnings before interest income and expense, financial restructuring costs, reorganization items, other income, income taxes, depreciation and amortization, EBITDA should not be considered as an alternative to net income (as determined in accordance with GAAP). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. Comparison of the Company's 1995 Results of Operations with the Company's 1994 Results of Operations Total net sales decreased to $396,725,000 in 1995 from $413,840,000 in 1994, or 4.1%. This decrease was due to a net sales decrease of $29,163,000 at the Company that was partially offset by a $12,048,000 net sales increase at Puerto Rico. The Company's performance in 1995 was negatively impacted by a reduction in DSD case volume, reduced hot-fill contract packing sales and reduced sales of private label products. Puerto Rico's net sales increase was primarily the result of increased New Age beverage sales. 19 Net sales of the Company's DSD product line decreased to $235,466,000 in 1995 from $252,96 1,000 in 1994, or 6.9%, due to a case sales decrease of 13.0%, which was greater than the market-wide reduction of measured carbonated soft drink ("CSD") sales. This decrease was primarily the result of (i) the Company's decision to increase its pricing during 1995 to offset raw material price increases, (ii) reduced levels of franchisor-supported price promotions, and (iii) aggressive competitive CSD pricing and promotional activity in this market. DSD net sales at Puerto Rico increased to $80,625,000 in 1995 from $69,768,000 in 1994, or 15.6%. This net sales increase was primarily the result of an approximate $12,500,000 increase in New Age and malta beverage sales, offset by a carbonated DSD soft drink sales decrease of approximately $1,643,000. Liquitrend's net sales increased to $56,149,000 in 1995 from $54,075,000 in 1994, or 3.8%. Restated to reflect approximately $13,683,000 of contractual raw material purchase increases, which had no impact on operating results because cost of goods sold was increased by a like amount, net sales decreased to $42,466,000, or 21.5%. As part of the Company's restructuring effort, Liquitrend's operations will be downsized, which will lower sales in the future. Avalon's net sales decreased to $24,485,000 in 1995 from $37,036,000 in 1994, or 33.9%. This decrease was due to the Company's decision to discontinue Avalon's DSD operation during the second quarter of 1995 and significantly lower sales of the Company's value-priced Royal Island and Nehi products. Management believes that the factors that caused the Company's net sales to decrease in 1995 are likely to continue in the foreseeable future. Cost of goods sold decreased to $334,942,000 in 1995 from $342,336,000 in 1994, or 2.2%. This decrease was primarily the result of variable transportation and production expenses associated with the net sales reduction in the Company's operations, and the fourth quarter impact of the Company's permanent work force reduction implemented in the third quarter of 1995. Offsetting this decrease were significant direct material increases at the Company and Puerto Rico, Puerto Rico's net sales increase and Liquitrend's $13,683,000 contractual raw material cost increase offset by its corresponding sales increase. Administrative, marketing and general expenses decreased to $47,935,000 in 1995 from $48,437,000 in 1994, or 1.0%. This decrease was primarily the result of the fourth quarter impact of the Company's permanent 205 employee work force reduction. Partially offsetting this decrease were increased legal and litigation expenses, higher worker's compensation expense and increased expenses related to customer required implementation of delivery and invoicing information systems in the Company. Puerto Rico's administrative, marketing and general expenses increased, primarily the result of variable marketing expenses related to its New Age and malta product sales increase. Interest expense increased to $23,057,000 in 1995 from $21,626,000 in 1994, or 6.6%, the result of higher interest rates on the Company's revolving credit facilities and an increase in the average borrowings outstanding. For the reasons set forth above, the Company's consolidated net loss before restructuring charges of $5,015,000, increased to $27,179,000 in 1995 from $15,900,000 in 1994, or 70.9%. Comparison of the Company's 1994 Results of Operations with the Company's 1993 Results of Operations Net sales increased to $413,840,000 in 1994 from $371,062,000 in 1993, or 11.5%. The increase was due to an improving economy in Southern California, increases in brand Seven-Up DSD sales and Puerto Rico Snapple DSD sales and significant sales increases in the Company's Liquitrend and Avalon divisions. DSD net sales increased to $322,729,000 in 1994 from $309,664,000 in 1993, or 4.2%, a function of increased franchisor support to maintain core brand market share in spite of aggressive competitive pricing in Southern California and significant Snapple product sales increases in the Company's Puerto Rico and New Mexico franchise territories. Liquitrend's net sales increased to $54,075,000 in 1994 from $32,503,000 in 1993, or 66.4%. The sales increase was due to a significant increase in orders for Snapple, Lipton and Mistic pasteurized teas and 20 flavored beverage products manufactured on the Company's recently installed hot-fill manufacturing equipment located in Vernon and Buena Park, California, increased private label carbonated soft drink production for the Cott Corporation and increased carbonated soft drink export sales to the Far East. The Avalon division increased its net sales to $37,036,000 in 1994 from $28,895,000 in 1993, or 28.2%. These increases were the result of increased sales of the Company's Royal Island trademark to independent regional chain outlets and the introduction of Stroh's alcoholic and non-alcoholic products to large retail chain customers. Costs of goods sold increased to $342,336,000 in 1994 from $299,735,000 in 1993, or 14.2%. This increase is attributable to higher manufacturing labor and factory expense associated with Liquitrend's significant sales increase, higher transportation and manufacturing costs resulting from DSD and Avalon increased sales volume and higher material and distribution costs related to increased two liter bottle and Snapple product sales to retail customers. These increases were partially offset by annual cost containment programs put in place by the Company that reduced selected material costs through negotiations with suppliers, reduced manufacturing and distribution compensation and increased productive labor and overhead efficiencies resulting from newly installed manufacturing capital equipment. Administrative, marketing and general expenses increased to $48,437,000 in 1994 from $47,342,000 in 1993, or 2.3%. Administrative and marketing variable expenses increased at a rate significantly less than the 11.5% sales increase and as a percent of sales, decreased to 11.7% of sales in 1994 from 12.8% of sales in 1993. Administrative and general compensation expense decreased as a result of reduced management compensation programs and annual cost containment programs designed to reduce discretionary spending, partially offset by higher bad debt expense and employee benefit cost increases. Interest expense increased to $21,626,000 in 1994 from $19,938,000 in 1993, or 8.5%. This increase is the result of increased short term interest rates, increased borrowings under the Company's working capital facility and interest related to the term loan and capital leases which the Company entered into during 1994. Other income, net, decreased to $95,000 of income in 1994 from $418,000 of income in 1993, due primarily to scheduled reductions in nonrecurring contractual support. For the reasons set forth above, the Company's consolidated net loss before extraordinary items increased to $15,900,000 in 1994 from $13,518,000 in 1993. LIQUIDITY AND CAPITAL RESOURCES To facilitate comparison of cash flow activity for the first nine months of 1996 to the comparable 1995 period, Predecessor Company and Reorganized Company have been combined. Operating activities provided $4,993,000 in cash for the first nine months of 1996 as compared to the first nine months of 1995 when operating activities used $3,294,000 of cash. This change was primarily the result of the suspension of interest payments related to the Senior Secured Notes. During the first nine months of 1996, $66,611,000 was provided by investing activities as compared to a use of $2,974,000 for the comparable 1995 period. This change was primarily the result of the proceeds of approximately $74 million related to the sale of Puerto Rico in the second quarter of 1996 and an increase in capital additions from $3,020,000 in the first nine months in 1995 to $5,148,000 in the first nine months of 1996 related to costs incurred in 1996 for the installation of a major management information system and a required water reclamation project at the Vernon, California production facility in Southern California. Upon consummation of the Plan of Reorganization, on August 15, 1996, the Company entered into a credit facility in the amount of $35 million, with GE Capital. This facility will provide the Company a revolving financing facility for general corporate purposes, including working capital and capital expenditures. Borrowings under this facility will be secured by substantially all of the Company's assets. The Company believes that cash available under its revolving financing facility, and cash provided by future operations should enable it to continue to pay its creditors in the ordinary course of business. 21 BUSINESS GENERAL The Company is among the largest beverage distributors in the United States and is the largest bottler of Seven-Up in the United States. The Company manufactures and distributes a broad range of beverage products in Southern California, Central California, and in portions of Nevada and New Mexico. The Company has the exclusive right within its territories to manufacture and/or distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream soda), Sunkist (orange and lemonade), Hawaiian Punch (fruit punch), Schweppes (ginger-ale and mixers), Evian (imported drinking water), Perrier (imported mineral water), Welch's (grape, strawberry and pineapple) and Yoo-Hoo (chocolate drink). The Company's net sales in 1995 were $396,725,000. The Company competes as an independent bottler on the basis of its large portfolio of franchised brands, its significant combined market share, its ability to market, distribute and merchandise its products effectively and favorable demographics within its territories. The Company's portfolio of franchised brands consists of highly recognizable trademarks that are in almost all cases the first ranking brand in their respective beverage flavor categories. The Company's combined market share of its franchised brands and other products enables the Company to realize purchasing, manufacturing, marketing, and delivery efficiencies. In addition, the Company's territories have many attributes that contribute to revenue growth in the beverage industry, including a favorable climate and a high density of retail outlets in populous areas. The Company's products are made available to its customers through a network of distribution facilities positioned within major population areas. The Company distributes almost all of its products directly to retail outlets through its core direct-store-door ("DSD") distribution system. Through its DSD distribution channel, the Company provides efficient, high-quality services to more than 35,000 retail outlets. These retail outlets include supermarkets, warehouse clubs, convenience stores, and other retail establishments that serve a combined population of over 30 million consumers. The Company's business strategy is to manufacture and distribute a franchised portfolio of leading trademarked beverages in each beverage flavor category and to create additional sources of revenue through contract manufacturing. In accordance with this strategy, the Company's Liquitrend division ("Liquitrend") engages in contract manufacturing, which utilizes the Company's excess production capacity by manufacturing carbonated soft drink products for a variety of small, independent franchisors and retailers selling private label products. As part of the Company's restructuring effort, the Liquitrend division was significantly downsized and the Company's Avalon Food and Beverage division ("Avalon"), which provided a wide array of beverage products primarily to large retail grocers who picked up the products from the Company's warehouse facilities and distributed these products through their internal distribution systems, was discontinued. RESTRUCTURING In the third and fourth quarter of 1995, the Company began the implementation of a restructuring of its operations, including a reduction of its work force, rationalization of its operations, an consolidation of certain of its distribution facilities. REORGANIZATION On August 15, 1996, the Joint Plan of Reorganization of the Company and its then parent Beverage Group Acquisition Corporation (the "Plan of Reorganization") was consummated and the Company emerged from bankruptcy. Although the Company believes that because the Plan of Reorganization was consensual, the bankruptcy will not adversely affect the Company's relationships with its trade creditors, franchisors, employees and customers. However, if such relationships are adversely affected, the Company's operations could be materially affected. 22 BEVERAGE INDUSTRY Soft drinks are the most widely consumed beverage in the United States. Retail sales for the American soft drink industry in 1995 were estimated to be approximately $52 billion, of which approximately 58% were cola sales. Historically, the soft drink industry has been an industry of continual change and evolution. It is characterized by relative absence of technological risk, lack of foreign competition and significant barriers to entry, primarily due to geographic exclusivity agreements with franchisors. Its competitive climate requires bottlers and franchisors to adapt quickly to mark challenges, including changes in consumer tastes and package preferences and continuing developments in manufacturing and distribution methods. The Company believes that social concerns, including the quality of tap water and the reduced level of alcohol consumption, have contributed to a shift in beverage consumption preferences. The growth of cold, sweet beverages, the largest component of which is soft drinks, appears to have been at the expense of tap water. The acceptance and success of the bottled water category also appears to have been at the expense of tap water. Per capita consumption of certain "traditional" beverages, including hot drinks such as tea and coffee, and alcoholic beverages such as beer, wine, and distilled spirits, has declined since 1980. Although consumers are expected to maintain their preference for caffeinated, naturally sweetened soft drinks, it is likely that future market growth will be influenced by the continuing increase in health consciousness. Sales of products that have taken advantage of these trends, such as diet soft drinks and pasteurized teas and juices, have experienced significant sales growth. TERRITORIES AND PRODUCTS The warm climate in the Company's territories contributes favorably to consumption of cold beverages. In addition, the high density of retail outlets in populous areas in the Company's territories results in lower distribution costs. Unlike its principal competitors, the Company does not rely on the products of any single franchisor for a substantial majority of its sales. This diversification results in each brand receiving significant attention from the Company thereby providing the franchisor with the marketing and merchandising benefits of a large bottler. The Company is committed to the profitability of its core DSD business and prefers not to seek to gain market share at the expense of profitability. The following table shows the percentage of DSD case sales for 1995 for each of the brands distributed by the Company in its territories:
BRAND % ----- ----- Seven-Up............................................................... 46.4 Royal Crown............................................................ 9.8 A&W Brands............................................................. 7.9 Sunkist................................................................ 6.9 Evian.................................................................. 5.5 Hawaiian Punch......................................................... 4.8 Snapple (see Note A)................................................... 4.3 Schweppes.............................................................. 3.3 Welch's................................................................ 2.9 Perrier................................................................ 1.8 Other (including fountain)............................................. 6.4 ----- 100.0 =====
- -------- Note A--Sales of Snapple products in 1995 included those related to a temporary distribution agreement for Orange Country and inland territory that was terminated during the fourth quarter of 1995. 23 Liquitrend manufactures a variety of products pursuant to short-term and long-term contracts. Liquitrend also exports products to Mexico and the Far East. As part of the Company's restructuring effort, Avalon's warehouse distribution was discontinued and Liquitrend's hot-fill manufacturing capabilities were significantly downsized during 1996. The Company's portfolio of franchised brands consists of highly recognizable trademarks that are market leaders in their respective beverage flavor categories. The Company believes that it is able to achieve a competitive number of promotional displays and a competitive amount of shelf space in retail outlets because of the breadth and strength of its brand portfolio. The Company's portfolio has a significant combined market share of the beverages sold in its territories. However, Pepsi-Cola and Coca-Cola together account for over 60% of the soft drinks sold in the Company's territories. The Company believes that it is able to compete in these markets because its combined market share gives the Company marketing and merchandising advantages that it would not have with a smaller or less diversified portfolio. BOTTLING RIGHTS The Company has agreements with franchisors pursuant to which the Company has the exclusive right to manufacture and/or distribute certain beverage products in specified territories. The Company generally has non-exclusive rights to produce, distribute and market certain soft drink syrups in premix (ready-to-use) and postmix (concentrated) form for fountain sales. Concentrates are the primary ingredient of beverage products. Concentrate formulas are highly proprietary and are owned solely by the respective franchisors. The franchisors manufacture and sell to the Company concentrates from which the beverage products are produced. The franchisors are entitled to set the price for their concentrate unilaterally. Under the franchise agreements, in connection with the marketing and distribution of the beverage products, the Company has the right to use the trade names and trademarks and associated patents, copyrights, designs and labels, all of which are owned by the respective franchisors. The Company considers its franchise agreements with Cadbury Beverages, Royal Crown Cola Co., and Great Brands of Europe, Inc. (Evian Water) to be material to the Company's operations. These and the Company's other franchise agreements generally contain certain affirmative obligations of the Company that include, but are not limited to, maintenance of sufficient production and distribution facilities to satisfy fully the demand for the various beverage products in its territories, maintenance of quality control standards that are prescribed by the franchisor, maintenance of sound financial capacity, use of best efforts to promote sales, submission of annual marketing, management, and advertising plans for approval (which approval may not be unreasonably withheld) and the submission of reports as to the implementation of these plans. The agreements generally prohibit the Company from engaging in specific activities, including, but not limited to, distributing or selling the beverage products outside the specified territories, producing or handling competing products or other products or packages that would imitate, infringe upon or cause confusion with the beverage products, trade dress, containers or trademarks of the franchisor and assigning, transferring or pledging an agreement, or any interest therein, whether voluntarily, involuntarily or by operation of law, without prior consent. No franchisor has ever terminated any of the Company's franchise agreements as a result of the Company breaching any provisions thereof and the Company considers its relationship with each of the franchisors to be satisfactory. However, on July 28, 1995, the Company received a notice of termination of the distribution agreement dated September 12, 1990 (the "Distribution Agreement") with Great Brands of Europe, Inc. ("GBE"). The Distribution Agreement grants the Company the exclusive right to distribute Evian Water in Southern California. In its notice of termination, GBE stated its belief that termination was justified, based on the Company's decision to suspend interest payments on its Senior Secured Notes. Additionally, the termination notice stated that the Company would be allowed to distribute Evian Water on an at will basis. GBE's notice of termination was not effective until the expiration of the contractually specified cure period. Before the cure period (as extended by agreement between the parties) expired, the Company and GBE reached a settlement pursuant to which the 24 termination notice was withdrawn and the Distribution Agreement was amended. The Distribution Agreement, as amended on January 12, 1996, grants certain termination rights to GBE in the event that certain execution performance standards are not met. The franchise agreements are either perpetual or for several years with automatic renewals. A franchisor may terminate the Company's rights to produce, market and distribute products upon an event of default by the Company and in certain other limited circumstances. Events of default by the Company include, but are not limited to, failure to fulfill the affirmative obligations or violations of the prohibited activities as described above. The Company generally may terminate an agreement at any time without cause by giving proper notice to the franchisor. Termination of the Company's bottling rights with respect to its principal products would constitute an event of default under the Company's revolving credit facilities and might have a material adverse effect on the financial position of the Company. MANUFACTURING The Company has manufacturing plants in Vernon and Buena Park, California, and Albuquerque, New Mexico. The Company's largest manufacturing plant is located in Vernon, California, which is a combination manufacturing and distribution facility built in 1977. The Vernon plant operates two bottle lines and two can lines that can produce 42 million cases annually. The Company's Buena Park plant is diversified with four separate lines that produce cans, bottles and fountain products, and the capability for manufacturing pasteurized products. The Buena Park facility has a 27 million annual case capacity. The Albuquerque plant is a combined manufacturing and distribution facility that is capable of producing 3 million cases annually with one can and one bottle line. The manufacturing process consists of receiving, batching, filling and packaging product. Containers are received in bulk and are moved from the supplier's trailers to "de-palletizing" equipment, which automatically places the containers on conveyors that feed them to the filling equipment. Treated water, concentrate, sugar and additives are combined in large stainless steel tanks and mixed, or "batched," into syrup with a motorized impeller. The syrup is then mixed with additional purified water and carbonated. Finished product is then sent to the filling equipment. At the same time, containers arrive by conveyor and are rinsed. At the Vernon and Buena Park facilities, the containers are "air-rinsed" using ionized air and vacuums to remove dust particles. The filling equipment fills the cleaned containers with finished product at extremely high speeds. At the Vernon and Buena Park facilities, the containers are filled with finished product at ambient water temperature. This warm-fill process eliminates costs associated with refrigeration of the product (to reduce foaming in the filling process) and its subsequent warming (to reduce packaging damage caused by condensation). The filled cans and bottles are then automatically scanned or manually inspected to test filling level and cap and top placement. Cans are either placed in corrugated trays and fastened with plastic rings or placed in multi-pack cartons. Bottles are usually placed in plastic containers for stability. Each case is then automatically transported to a "palletizer" where it is stacked on a wood pallet to be stored before distribution. The Company purchases concentrate for its franchised brands directly from franchisors in accordance with franchise agreements. Price increases for concentrate are not limited by such agreements, but are imposed unilaterally by franchisors and have been historically 3 to 5% annually. The majority of the Company's other raw materials are purchased through a national cooperative of "non-Coke/Pepsi" bottlers that meet minimum case volume requirements. The cooperative leverages the combined purchasing volume of its members in the negotiation of raw material costs. Most raw materials contracts are for a period of one year or less. As a member of the cooperative, the Company believes that its costs for raw materials are comparable to those of its competitors. Key raw materials and their approximate percentage of material costs for 1995 include: concentrate (22.4%); aluminum cans (21.3%); finished products (including Evian, Perrier and Yoo-Hoo) (25.0%); plastic bottles (9.8%); liquid corn sugar (9.9%); glass bottles (3.7%); packaging (1.7%); and other (including bottle 25 closures and additives) (6.2%). The Company believes that adequate alternative sources exist for all of its raw materials other than concentrate and finished products. The Company maintains a stringent quality control program. Automatic quality testing is performed on all of the Company's products prior to bottling. A microbiologist and skilled technicians are kept on staff to further test product, containers and packaging. The Company also maintains an inventory management program that minimizes raw material inventory carrying costs and potential spoilage. In addition, only one day's supply of certain raw materials are kept on hand, including sugar, cans and bottles. SALES AND DISTRIBUTION The Company's sales are oriented towards high-volume customers such as large retail chains, which results in economies of scale in selling and distribution expenses. Product orders are generally taken in advance by a salesperson. Orders are generally delivered and merchandised within 24 hours by other Company employees. The Company utilizes its distribution channels to maximize market penetration. The Company's principal method of distribution is DSD delivery. DSD delivery represents over 85% of the Company's case sales. It is also the Company's preferred method of distribution because the Company has greater control over the sales, marketing and merchandising of products. Deliveries are made from distribution facilities by the Company's fleet of trucks. Liquitrend manufactures products for beverage or retail grocery companies that lack sufficient volume to justify the capital investment of a manufacturing plant. Liquitrend utilizes the Company's excess manufacturing capacity to participate in other geographic markets and to enhance its presence in its local markets. As part of the restructuring effort, the Company has significantly downsized the Liquitrend division's operations, but will continue to use its excess production capacity to produce carbonated soft drinks when appropriate. The Company makes cold drinks available to consumers through vending machines, fountain equipment and visi-coolers (bottler identified refrigerated cabinets). Vending machines are either sold, leased or loaned to retail outlets or distributors who are responsible for machine maintenance and product restocking. Fountain equipment dispenses products in restaurants, bars, amusement parks, theaters and other similar locations. The Company sells either premix, a ready-to-use product, or postmix, a concentrated product, to retailers in stainless steel or disposable containers for use in fountain equipment. However, the Company's fountain market share is not significant. Visi-coolers are generally loaned to large retail outlets and convenience stores. During 1995, no single customer accounted for 10% or more of the Company's sales, and the Company is not dependent on any single customer. A significant portion of the Company's sales are made to large retail chains. However, because consumer demand requires these chains to stock the Company's products and because the Company is the only distributor of its products within its territories, the Company does not anticipate the loss of any significant number of these customers. MARKETING The marketing of beverage products is the primary basis of competition among soft drink bottlers. Successful bottlers most competitively price products, creatively advertise in their territories and effectively execute promotional programs. The Company's marketing efforts are directed towards brand management, key account management, promotional activities and merchandising. The Company believes that its marketing program allows it to compete effectively in its markets. Marketing programs for each of the Company's franchised brands are coordinated with the franchisors by the Company's brand management group. National advertising campaigns are developed by the franchisors. Brand managers develop local advertising campaigns, implement brand development strategies, direct 26 promotional activities on a Company-wide basis and monitor marketing support in accordance with annual marketing agreements with the franchisors. The Company's success is closely tied to its on-going relationships with its key accounts. Key account managers are responsible for coordinating promotional activities for a select group of accounts. The activities include placing "feature" newspaper advertisements that coincide with competitive pricing programs, obtaining authorization from the customer for new products and packages, and designing customer promotional programs to meet specific customer needs. A significant portion of the Company's promotional efforts focus on off- invoice allowances, newspaper advertising and coupons. The goal of these activities is to competitively position the Company's brands in the marketplace and to obtain "feature" retail advertisements and end-aisle displays in high volume retail outlets. End-aisle and secondary displays are important marketing tools because they are tied to special promotions and feature advertisements that stimulate sales and encourage impulse purchases. The Company's merchandising activities seek to maintain high visibility and availability of the Company's products in large grocery chains. Merchandisers are responsible for building displays in conjunction with promotional programs and restocking products on the beverage aisle of grocery stores. The Company assists its customers in obtaining maximum space utilization of the beverage aisle by employing a state-of-the-art computer program. This program determines the most efficient use of shelf space based on sales volume and consumer preferences for product and packaging. This service is provided by the Company to its key accounts as a means of enhancing its relationship with these customers. Marketing expenditures are incurred by the Company, by the Company's franchisors and by cooperative arrangements between the two. Retail promotional programs are the Company's most significant marketing expenditures and are paid for by the Company and supported through cooperative arrangements with the Company's franchisors. National media advertising is funded by the Company's franchisors, while local media advertising is funded by the Company or through cooperative arrangements. COMPETITION The soft drink industry is highly competitive. Historically, bottlers were independently-owned entities that purchased syrup from franchisors and competed against other bottlers in their territory for market share. Over the past decade, the bottling industry has witnessed significant horizontal and vertical consolidation. Competition among bottlers is dependent on price, volume, advertising, promotional incentives and franchisor subsidies. The Company's principal competitors are Coca-Cola Enterprises, Inc. ("CCE") and the Pepsi-Cola Company ("COBO"), each of which is affiliated with its respective syrup company. Price competition between CCE and COBO has resulted in a market-wide erosion of earnings. The Company competes in its markets by efficiently balancing the various components that affect market share and profitability. The Company believes that long-term profitability is closely tied to its market share and requires efficient execution of marketing programs and investments in manufacturing and distribution technology to assure a low overhead cost structure. EMPLOYEES In the third quarter of 1995, as part of its restructuring, the Company implemented a permanent reduction in its work force of 205 employees, divided almost equally between salaried and hourly employees. As of December 31, 1995, the Company employed 1,352 employees. A majority of these employees (59%) are hourly workers covered by collective bargaining agreements. The United Industrial Workers covers most of the Company's employees under contracts that expire in 1997. Various local chapters of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America represent employees at Las 27 Vegas, Santa Maria and San Diego under contracts expiring in 1998, 1999, and 2001, respectively. The Company has not had any strikes or work stoppages in the past 20 years and considers its relationship with its employees to be satisfactory. GOVERNMENT REGULATION The production, distribution and sale of many of the Company's products are subject to the Federal Food, Drug and Cosmetic Act, the Occupational Safety and Health Act, various Federal environmental statutes and various other Federal, state and local statutes regulating the production, sale, safety, advertising, labeling and franchising of beverages. California imposes a recycling fee on all containers of carbonated beverages. The fee is $0.025 per container holding 24 ounces or less and $.05 per container holding 25 ounces or more, which may automatically be increased if target recycling rates are not reached. Containers of carbonated beverages must clearly display specific information, which informs consumers that the fee will be used exclusively for recycling efforts. The Company is required to pay the fee, but it is included on the invoice for products and assessed on the consumer at the retail level. The Company believes that future fee increases will be minimal because of the success of California's recycling program. However, a significant increase in the fee could materially decrease consumption of carbonated beverages in California. Substantially all of the Company's facilities are subject to Federal, state and local laws regulating the environment. Compliance with these laws has not had any material effect upon the capital expenditures, net income or competitive position of the Company. Costs of compliance with existing and future environmental laws cannot be predicted with any degree of certainty and may significantly affect the Company's operations. The Company does not presently sell products in any state that requires deposits on bottle or can containers. The Company's operating costs could be significantly affected if a national container deposit law were to be implemented. SALE OF THE STOCK OF SEVEN-UP/RC BOTTLING COMPANY OF PUERTO RICO. Following the agreement-in-principle on the terms of a restructuring of the Senior Secured Notes, the Company retained Whitman Heffernan Rhein & Co., Inc. and Houlihan Lokey Howard & Zukin (collectively, the "Brokers") to handle the sale of Puerto Rico (the "Puerto Rico Disposition"). Before the Brokers began contacting parties with respect to the Puerto Rico Disposition, the Company received an unsolicited offer from Center Street Capital Partners, L.P. ("Center Street") in December of 1995. Thereafter, Center Street submitted an amended offer on January 5, 1996 for $75 million, which included a $10 million cash payment in exchange for the Company's entering into a non-competition and consulting agreement with Center Street and providing management and operations consulting services to Center Street for a period of five years from closing (the "Consulting Fee"). On January 17, 1996, the Company and Center Street signed a letter of intent, pursuant to which the Puerto Rico Disposition would be consummated for $74.2 million, including the Consulting Fee and the assumption of certain liabilities of Puerto Rico (the "Letter of Intent"). Certain members of management of Puerto Rico are investors with Center Street with respect to the Puerto Rico Disposition. Following the execution of the Letter of Intent and pursuant to their retention, the Brokers contacted approximately seventy-eight strategic or financial parties concerning the Puerto Rico Disposition. The contacted parties included beverage bottlers in addition to financial buyers with an interest in the bottling industry. In addition, at the time that the restructuring proposal was accepted, the Company had issued a press release in which it announced that the Company and the Noteholders Committee had reached agreement on the principal economic terms of the restructuring and that one of the key components of the restructuring proposal was the Puerto Rico Disposition. The Company, with the assistance of the Brokers, prepared a package of confidential information (the "Confidential Memorandum") in January 1996. The Brokers distributed the Confidential Memorandum to 28 approximately thirty-five interested parties that had executed and returned confidentiality agreements. Each of the parties that received the Confidential Memorandum was asked to submit an indication of interest (with an approximate purchase price) for the Puerto Rico Disposition. The Company received eight indications of interest in mid-February that were sufficiently significant as to justify further discussions. After receiving the indications of interest, the Center Street proposal reflected in the Letter of Intent remained, in the opinion of the Company and the Brokers, the most attractive proposal and the most likely proposal to proceed to a closing. Therefore, while Center Street conducted its due diligence investigation, the Company and Center Street negotiated, over a fifteen-week period, the terms of the Stock Purchase Agreement. During the course of the negotiations, the Company and Center Street agreed to decrease Center Street's purchase price to approximately $74 million. On May 3, 1996, the Company and Center Street executed the Stock Purchase Agreement. On May 6, 1996, the Company issued a press release announcing that it had entered into the Stock Purchase Agreement with Center Street and stated expressly that the offer contained therein was subject to approval by the Bankruptcy Court and higher and better offers. In addition to Center Street, the Company and the Brokers permitted two additional parties to conduct due diligence. All parties that submitted an indication of interest were given notice of the proposed Puerto Rico Disposition and of the hearing scheduled by the Bankruptcy Court for June 19, 1996, to approve such sale to Center Street, and had an opportunity to submit higher and better offers. On May 13, 1996, the Bankruptcy Court entered an order approving, among other things, certain provisions of the Stock Purchase Agreement, including a topping fee of $1,750,000, and a minimum overbid requirement of $2 million. On May 14, 1996, Center Street deposited the sum of $2 million with an escrow agent, in accordance with the terms of the Stock Purchase Agreement. The Bankruptcy Court set June 17, 1996 as the last date on which potential bidders could submit alternative bids with respect to the Puerto Rico Disposition. No alternative bids were received. On June 19, 1996, the Bankruptcy Court entered an order approving the Puerto Rico Disposition to Center Street. Closing of the Puerto Rico Disposition occurred on June 28, 1996. 29 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company and their respective ages and positions are as follows:
NAME AGE POSITION ---- --- -------- Bart S. Brodkin...... 55 Chief Executive Officer, President and Chairman of the Board Richard Ferguson..... 40 Executive Vice President/Chief Financial Officer Roy S. Breneman...... 55 Executive Vice President/Chief Sales and Marketing Officer Louis Janicich....... 59 Senior Vice President of Administration/Legal Services, Chief Human Resources Officer F.L. Joseph Chalmers. 54 Senior Vice President of Operations Jack R. Attwood...... 67 Director William C. Langley... 58 Director Monroe L. Lowenkron.. 65 Director Daniel D. Villanueva. 58 Director
Barton S. Brodkin began his career in the soft drink industry in 1967 with the Pepsi-Cola Bottling Company, where he held various sales and marketing positions, ultimately becoming Group Marketing Manager. He joined Westinghouse's Beverage Group in 1973 as Vice President of the Western Division and in 1980 was promoted to Business Unit President and General Manager. He is a director of and has served as President of the Seven-Up Bottlers Association and is current Treasurer of the National Soft Drink Association and a director of the RC Bottlers Association. Richard Ferguson has been with the Company since 1979 and has held various positions of increasing importance in accounting and finance. He has held the position of Executive Vice President, Chief Financial Officer since October 1996 and was previously the Vice President of Financial and Business Planning since 1981. Roy S. Breneman began his career in the soft drink industry in 1968 as a merchandising manager with the Pepsi-Cola Company. He served as Vice President, General Manager for the Dr. Pepper bottler in Dallas and was National Sales Manager for the Country Time ready-to-drink division of General Foods Corporation. He joined Westinghouse's Beverage Group as Vice President of Marketing Services and became Senior Vice President of Sales and Marketing in 1986. Louis Janicich has been involved in human resources in the soft drink industry since 1967 as Director of Industrial Relations with the Pepsi-Cola Bottling Company of Los Angeles. He joined Westinghouse's Beverage Group as Director of Industrial Relations in 1970 and in 1987 assumed his current position of Senior Vice President of Human Resources. F.L. Joseph Chalmers joined Westinghouse in 1969 and held various positions in purchasing and operations. He joined Westinghouse's Beverage Group in 1976 and has held various positions of increasing importance in purchasing, sales and operations. He assumed his current position as Senior Vice President of Operations in June 1996. Jack R. Attwood, a director of the Company since 1990, joined the Coca-Cola Bottling Company of Los Angeles in 1953 and served in various positions until his retirement in 1986. From 1966 to 1970 he was Vice President of Advertising and from 1970 to 1971 he was Vice President of Marketing. In 1971, he was named Senior Vice President and General Manager of the soft drink division. In 1976, he was appointed Executive Vice President, and in 1981 was pointed President and Chief Operating Officer. In 1984, he was appointed Corporate Senior Vice President of the Beverage Group, US Food Segment of Beatrice Companies, Inc. and became Chairman of the Board of the Coca-Cola Bottling Company of Los Angeles. He is a director of Sports Chalet, Inc. and several private companies. 30 William Langley became a director of the Company in August 1996. From 1991 to 1996, Mr. Langley was Executive Vice President, Chief Credit and Risk Policy Officer, Chemical Bank and Chemical Banking Corporation and Executive Vice President of Chase Manhattan Corporation from April to July 1996. Mr. Langley is a director of the Chase Preferred Capital Corporation and Morrison Knudsen Corporation. Monroe L. Lowenkron became a director of the Company in August 1996. From 1980 to 1993 Mr. Lowenkron was President and Chief Executive Officer of A&W Brands, Inc. and from 1995 to June 1996 President and Chief Executive Officer of A. Heileman Brewing Co. Inc. Mr. Lowenkron is a director of Hat Brands, Inc., Triarc Companies and DePux, Inc. Daniel D. Villanueva became a director of the Company in August 1996. Since 1990, Mr. Villanueva has been Chairman and Managing Director of Bastion Capital Corporation and from 1988 to 1990 was General Manager of a Los Angeles Univision affiliate, KMEX-TV. At present, all Directors are elected and serve until a successor is duly elected and qualified or until his or her earlier death, resignation or removal. There are no family relationships between any of the Directors or executive officers of the Company. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following summarizes the principal components of compensation of the Company's Chief Executive Officer and the four highest compensated executive officers. The compensation set forth below fully reflects compensation for work performed on behalf of the Company.
ANNUAL COMPENSATION NAME AND ---------------------- ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) ------------------ ---- -------- -------- --------------- Barton S. Brodkin......... 1995 $300,000 $54,000 $ 7,933 Director, Chief Executive Officer, 1994 275,580 53,573 12,120 and President 1993 274,698 28,523 7,572 Roy S. Breneman........... 1995 $138,960 $ -- $ 14,785 Chief Sales and Marketing Officer, and 1994 133,920 -- 17,740 Executive Vice President 1993 133,490 -- 17,014 Louis Janicich............ 1995 $128,295 $ -- $165,413(4) Senior Vice President of Human Resources 1994 123,660 -- 22,421 and Secretary 1993 123,265 -- 21,771 Donald G. Coppersmith..... 1995 $123,360 $ -- $234,620(3) Senior Vice President of Operations(3) 1994 116,640 -- 15,559 1993 116,265 -- 15,669
- -------- (1) Represents annual incentive compensation earned during the prior calendar year but paid in the subsequent year. (2) Represents amounts paid by the Company for life insurance premiums, automobile reimbursement and employer matched 401(k) payments. Includes contributions by the Company to the Company's target benefit defined contribution plan on behalf of each of the named executives for 1993 and 1994. (3) Mr. Coppersmith retired as of June 30, 1996. (4) Includes funds received from termination of the 401-E program that was previously reported as bonus for these employees. DIRECTOR COMPENSATION Non-employee directors are paid an annual retainer of $20,000 plus an additional fee of $1,000 for each meeting of the Board of Directors attended and are reimbursed for expenses incurred in attending meetings of the Board. 31 MANAGEMENT AGREEMENT The Company has entered into a management agreement with Mr. Barton Brodkin, dated as of September 25, 1995 and amended as of May 8, 1996. The management agreement is scheduled to terminate on September 25, 1998, subject to automatic one-year renewals unless terminated upon written notice by either party at least 90 days prior to the end of the year or earlier upon Mr. Brodkin's death, Disability, resignation, retirement or removal for Cause (as such capitalized terms are defined in the management agreement) or at the discretion of the Board of Directors. PRINCIPAL AND SELLING STOCKHOLDERS The Company's authorized equity consists of Common Stock. All shares of Common Stock are identical and entitle the holders thereof to the same rights and privileges. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. The table below sets forth certain information regarding ownership of Common Stock as of November 13, 1996. The information set forth below with respect to the ownership of 5% Stockholders is derived solely from the Company's review of Schedules B, D and 13G on file with the Securities and Exchange Commission.
SHARE BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED AFTER PRIOR TO THE OFFERING THE OFFERING ----------------------------- -------------------------- SHARES NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT - ------------------------------------ --------------- ------------- --------- ------------- ------------ Dean Witter Intercapital Inc.(a)................. 1,904,805 38.1% 1,904,805 0 * 2 World Trade Center New York, New York 10048 Merrill Lynch & Co., Inc.(b)................. 763,000 15.2% -- 763,000 15.2% World Financial Center, North Tower 250 Vesey Street New York, New York 10281 Metropolitan Life Insurance Company(c).... 605,500 12.1% -- 605,500 12.1% One Madison Avenue New York, New York 10010 Bart S. Brodkin(d)....... 0 * -- 0 * Richard Ferguson(d)...... 0 * -- 0 * Roy S. Breneman(d)....... 0 * -- 0 * Louis Janicich(d)........ 0 * -- 0 * F.L. Joseph Chalmers (d). 0 * -- 0 * Jack R. Attwood(d)....... 0 * -- 0 * William Langley(d)....... 0 * -- 0 * Monroe L. Lowenkron(d)... 0 * -- 0 * Daniel D. Villanueva(d).. 0 * -- 0 * All executive officers and directors as a Group (9 Persons)............. 0 * -- 0 *
- -------- * Less than 1%. (a) All shares are owned by the following funds for which Dean Witter Intercapital Inc. acts as investment advisor: Dean Witter High Yield Securities (489,055 shares); Dean Witter High Income Securities (495,000 shares); High Income Advantage Trust (140,000 shares); High Income Advantage Trust II (175,000 shares); High Income Advantage Trust III (70,000 shares); Dean Witter Diversified Income Trust (332,675 shares); Dean Witter Diversified Income Trust--Select Shares (7,000 shares); and Variable Investment Series--High Yield (201,075 shares). 32 (b) All shares may also be deemed to be beneficially owned by Merrill Lynch Group, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc., Princeton Services, Inc., a wholly owned subsidiary of Merrill Lynch Group, Inc., Fund Asset Management, L.P., a limited partnership of which Princeton Services, Inc. is a general partner, and Merrill Lynch Corporate Bond Fund, Inc. (High Income Portfolio), a registered investment company advised by Fund Asset Management, L.P. (c) All shares may also be deemed to be beneficially owned by State Street Research & Management Company, a wholly-owned subsidiary of Metropolitan Life Insurance Company and a registered investment advisor. (d) The address of such person is c/o Seven-Up/RC Bottling Company of Southern California, Inc., 3220 East 26th Street, Vernon, California 90023. DESCRIPTION OF CAPITAL STOCK GENERAL MATTERS The total amount of authorized capital stock of the Company consists of 6,000,000 shares of Common Stock, par value $0.01 per share, of which 5,000,000 shares are currently outstanding. The discussion herein describes the Company's capital stock, the Certificate of Incorporation and By-laws as anticipated to be in effect upon consummation of the Offering. The following summary of certain provisions of the Company's capital stock describes all material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, the Certificate of Incorporation and the By- laws of the Company that are included as exhibits to the Registration Statement of which this Prospectus forms a part and by the provisions of applicable law. COMMON STOCK As of November 13, 1996, there were 5,000,000 shares of Common Stock outstanding. The issued and outstanding shares of Common Stock are validly issued, fully paid and nonassessable. The holders of outstanding shares of Common Stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the Board may from time to time determine. See "Dividend Policy." Following consummation of the Offering, the shares of Common Stock will not be redeemable or convertible, and the holders thereof will have no preemptive or subscription rights to purchase any securities of the Company. Upon liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive pro rata, along with the holders of Common Stock, the assets of the Company which are legally available for distribution, after payment of all debts and other liabilities. CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BY-LAWS The Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws provide that stockholder action can be taken only at an annual or special meeting of stockholders and can be taken by written consent in lieu of a meeting. The Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws provide that special meetings of the stockholders can be called pursuant to a resolution adopted by a majority of the Board of Directors, the chief executive officer of the Company, and stockholders entitled to cast 25% of the votes at the meeting. The Amended and Restated By-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders of the Company, including proposed nominations of persons for election to the Board. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the Board or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to the Company's Secretary timely written notice, in proper form, of the stockholder's intention to bring that business before the meeting. Although the Amended and Restated By-laws do not give the Board the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the Amended and Restated By-laws 33 may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or defer a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company. The Company is not subject to the "business combination" provisions of the Delaware General Corporation Law. LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Amended and Restated Certificate of Incorporation limits the liability of directors to the fullest extent permitted by the Delaware General Corporation Law. In addition, the Amended and Restated By-laws provides that the Company shall indemnify directors and officers of the Company to the fullest extent permitted by such law. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Fleet National Bank. REGISTRATION RIGHTS The Company is party to a Registration Rights Agreement with certain funds advised by Dean Witter Intercapital, Inc. pursuant to which such stockholders have the right to cause the Company to register shares of Common Stock (the "registrable securities") under Rule 415 of the Securities Act (the "Shelf Registration"). The Company is obligated to pay all registration expenses (other than underwriting discounts and commissions and subject to certain limitations) incurred in connection with the Shelf Registration. PLAN OF DISTRIBUTION The distribution of the Shares by the Selling Stockholders may be effected from time to time in one or more transactions for their own accounts (which may include block transactions) in the over-the-counter market, on the Nasdaq Stock Market ("Nasdaq"), or on any exchange on which the Common Stock may then be listed, in negotiated transactions, through the writing of options on shares (whether such options are listed on an options exchange or otherwise), or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may effect such transactions by selling Shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or the purchasers of Shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). The Selling Stockholders and any participating brokers and dealers may be deemed to be "underwriters" as defined in the Securities Act of 1933, as amended (the "Securities Act"). LEGAL MATTERS The validity of the Common Stock being offered hereby and certain other legal matters relating to the Offering will be passed upon for the Company by Kirkland & Ellis (a partnership which includes professional corporations), New York, New York. EXPERTS The audited consolidated financial statements and schedules included in this Prospectus and elsewhere in the Registration Statement to the extent and for the periods indicated in their reports have been audited by Arthur Andersen LLP, independent accountants, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 34 ADDITIONAL INFORMATION The Company has filed the Registration Statement on Form S-1 with respect to the Common Stock being offered hereby with the Commission under the Securities Act. This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain items of which are omitted in accordance with the rules and regulations of the Commission. Statements contained in this Prospectus concerning the provisions of documents filed with the Registration Statement as exhibits are necessarily summaries of such documents, and each such statement is qualified in its entirety by reference to the copy of the applicable document filed as an exhibit to the Registration Statement. The Registration Statement may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661- 2511; and at its New York Regional Office, 75 Park Place, 14th Floor, New York, New York 10007. Copies of such material can be obtained from the public reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may also be accessed electronically at the Commission's world wide web site on the Internet at http://www.sec.gov. For further information pertaining to the Company and the Common Stock being offered hereby, reference is made to the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. 35 INDEX TO FINANCIAL STATEMENTS
PAGE ---- AUDITED FINANCIAL STATEMENTS Report of Independent Public Accountants.................................. F-2 Consolidated Balance Sheets as of December 31, 1995 and 1994.............. F-3 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993...................................................... F-4 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993...................................................... F-5 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1995, 1994 and 1993................................... F-6 Notes to Consolidated Financial Statements as of December 31, 1995........ F-7 UNAUDITED FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995........................................................ F-18 Condensed Consolidated Statements of Operations for the 46 days ending September 30, 1996, the 46 days ending August 15, 1996, and the three months ending September 30, 1995......................................... F-19 Condensed Consolidated Statements of Operations for the 46 days ending September 30, 1996, the seven months and 15 days ending August 15, 1996, and the nine months ending September 30, 1995............................ F-20 Condensed Consolidated Statements of Cash Flows for the 46 days ending September 30, 1996, the seven months and 15 days ending August 15, 1996, and the nine months ending September 30, 1995............................ F-21 Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the 46 days ending September 30, 1996, the seven months and 15 days ending August 15, 1996, and the nine months ending September 30, 1995.... F-22 Notes to Condensed Consolidated Financial Statements (unaudited).......... F-23
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTS To the Board of Directors and Stockholder of Seven-UP/RC Bottling Company of Southern California, Inc.: We have audited the accompanying consolidated balance sheets of Seven-Up/RC Bottling Company of Southern California, Inc. (a Delaware corporation) ("Southern California") and its subsidiary (collectively, "the Company") as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholder's equity (deficit) and cash flows for the years ended December 31, 1995, 1994 and 1993. These consolidated financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Seven- Up/RC Bottling Company of Southern California, Inc. and its subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years ended December 31, 1995, 1994 and 1993, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, Southern California has suffered recurring losses from operations and has defaulted under the terms of its $140 million Senior Secured Notes. These factors, among others discussed in Note 1, raise substantial doubt about Southern California's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Arthur Andersen LLP Los Angeles, California March 20, 1996 F-2 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS)
1995 1994 --------- -------- ASSETS Current assets: Cash.................................................... $ 5,949 $ 6,982 Accounts receivable: Trade, net.............................................. 42,261 57,709 Other................................................... 9,450 13,259 Inventories............................................. 24,947 44,418 Prepaid expenses........................................ 2,908 2,164 --------- -------- Total current assets.................................. 85,515 124,532 --------- -------- Investment in joint venture............................... 1,422 1,333 Property, plant and equipment, net........................ 79,945 87,388 Other assets: Intangible and other assets............................... 21,422 25,583 Debt issuance costs....................................... 3,829 4,998 --------- -------- Total assets.......................................... $ 192,133 $243,834 ========= ======== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Current liabilities: Accounts payable........................................ $ 29,141 $ 53,388 Accrued expenses........................................ 34,371 27,924 Current portion of long-term debt and capital lease obligations............................................ 189,954 2,219 --------- -------- Total current liabilities............................. 253,466 83,531 --------- -------- Long-term debt: Revolving credit facilities............................. -- 38,463 Term loan............................................... -- 3,571 Capital lease obligations............................... -- 7,408 Senior secured notes.................................... -- 140,000 --------- -------- Total long-term debt.................................. -- 189,442 --------- -------- Stockholder's equity (deficit): Capital stock $0.01 par value; 1,000 shares authorized, issued and outstanding................................. -- -- Additional paid-in capital.............................. 42,557 42,557 Retained deficit........................................ (103,890) (71,696) --------- -------- Total stockholder's equity (deficit).................. (61,333) (29,139) --------- -------- Total liabilities and stockholder's equity (deficit).. $ 192,133 $243,834 ========= ========
F-3 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS)
1995 1994 1993 -------- -------- -------- Net sales........................................ $396,725 $413,840 $371,062 Cost of goods sold............................... 334,942 342,336 299,735 -------- -------- -------- Gross profit..................................... 61,783 71,504 71,327 Administrative, marketing and general expenses... 47,935 48,437 47,342 Depreciation and amortization.................... 18,180 17,251 17,983 Restructure charges.............................. 5,015 -- -- -------- -------- -------- Operating (loss) income.......................... (9,347) 5,816 6,002 Interest expense................................. 23,057 21,626 19,938 Other income, net................................ 210 95 418 -------- -------- -------- Loss before provision for income taxes and extraordinary item.............................. (32,194) (15,715) (13,518) Provision for income taxes....................... -- 185 -- -------- -------- -------- Loss before extraordinary item................... (32,194) (15,900) (13,518) Extraordinary item............................... -- -- (826) -------- -------- -------- Net loss....................................... $(32,194) $(15,900) $(14,344) ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-4 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS)
1995 1994 1993 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Loss before extraordinary item................. $(32,194) $(15,900) $(13,518) Adjustments to reconcile loss before extraordinary item to net cash provided by operating activities: Depreciation and amortization.................. 20,048 19,209 19,016 Equity in earnings of joint venture............ (103) (42) (124) (Gain) loss on sales of fixed assets........... (8) 117 (45) Provision for doubtful accounts................ 715 1,025 25 Cash dividend from investment in joint venture. -- 225 -- Changes in assets and liabilities: Accounts receivable............................ 18,542 (16,616) (5,217) Inventories.................................... 19,471 (17,737) 1,907 Prepaids and other............................. (2,904) (370) (7,993) Accounts payable............................... (24,247) 24,345 3,158 Accrued expenses............................... 6,447 7,414 3,163 -------- -------- -------- Net cash used in operating activities........ 5,767 1,670 372 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment..................................... 117 48 96 Additions to property, plant and equipment..... (5,208) (5,138) (5,446) -------- -------- -------- Net cash used in investing activities........ (5,091) (5,090) (5,350) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: (Repayments) borrowings of revolving loans, net........................................... (616) 3,687 4,576 Repayments of capital leases................... (1,003) (1,317) -- (Repayments of) proceeds from term loan........ (90) 4,286 -- -------- -------- -------- Net cash (used in) provided by financing activities.................................. (1,709) 6,656 4,576 -------- -------- -------- NET (DECREASE) INCREASE IN CASH.................. (1,033) 3,236 (402) Cash, beginning of year.......................... 6,982 3,746 4,148 -------- -------- -------- Cash, end of year................................ $ 5,949 $ 6,982 $ 3,746 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash interest paid............................... $ 13,342 $ 19,811 $ 17,478 ======== ======== ======== Purchases of property, plant and equipment through issuance of capital lease obligation.... $ 555 $ 10,229 $ -- ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-5 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
CAPITAL STOCK ------------- TOTAL STOCKHOLDER'S PAID-IN RETAINED EQUITY SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT) ------ ------ ------- --------- ------------- Balance at December 31, 1992..... 1,000 $ -- $42,557 $ (41,452) $ 1,105 Net loss......................... -- -- -- (14,344) (14,344) ----- ----- ------- --------- -------- Balance at December 31, 1993..... 1,000 -- 42,557 (55,796) (13,239) Net loss......................... -- -- -- (15,900) (15,900) ----- ----- ------- --------- -------- Balance at December 31, 1994..... 1,000 -- 42,557 (71,696) (29,139) Net loss......................... -- -- -- (32,194) (32,194) ----- ----- ------- --------- -------- Balance at December 31, 1995..... 1,000 $ -- $42,557 $(103,890) $(61,133) ===== ===== ======= ========= ========
The accompanying notes are an integral part of these consolidated statements. F-6 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 (1) NATURE OF BUSINESS AND PRESENTATION OF FINANCIAL INFORMATION General Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware corporation ("Southern California"), is a among the largest beverage distributions in the United States, selling over two billion equivalent eight- ounce servings in 1995, and is the largest bottler of Seven-Up in the United States. Southern California manufactures and distributes a broad range of beverage products in Southern California, Central California, portions of Nevada and New Mexico, and, through its wholly-owned subsidiary Seven-Up/RC Bottling Company of Puerto Rico, Inc. ("Puerto Rico"), Puerto Rico and the Virgin Islands (Southern California and Puerto Rico are collectively referred to as "the Company"). The Company has the exclusive right within its territories to manufacture and/or distribute Seven-Up (lemon-lime), Royal Crown (cola), A&W (root beer and cream soda), Sunkist (orange and citrus), Hawaiian Punch (tropical punch), Schweppes (tonics and mixtures), Evian (imported drinking water), Perrier (imported mineral water), Welch's (grape, strawberry and pineapple), Country Time (lemonade), Yoo-Hoo (chocolate drink) and Snapple (teas and flavors) in the Puerto Rico and New Mexico franchise territories. The Company's consolidated net sales in 1995 were $396,725,000, of which Puerto Rico contributed approximately 21%. The Company's business strategy is to manufacture and distribute a franchised portfolio of leading trademarked beverages in each beverage flavor category and to create additional sources of revenue through warehouse distribution and contract manufacturing. In accordance with this strategy, the primary focus of Southern California's Avalon Food and Beverage division ("Avalon") is warehouse distribution: providing a wide array of beverage products primarily to large retail grocers who pick up the products from Southern California's warehouse facilities and distribute these products through their internal distribution systems. Southern California's Liquitrend division ("Liquitrend") engages in contract manufacturing, which utilizes the Company's excess production capacity by manufacturing carbonated soft drink products for a variety of small, independent franchisors and retailers selling private label products. As part of Southern California's restructuring effort, the Avalon division will be discontinued and the Liquitrend division will be significantly downsized. Basis of Presentation Southern California is a wholly-owned subsidiary of Beverage Group Acquisition Corporation ("BGAC"); BGAC has no independent operations and no liabilities, and its only asset is its investment in the Southern California's common stock. BGAC is wholly-owned by WB Bottling Corporation, a privately- held Delaware corporation ("WB Bottling"). The Company is not a guarantor of any obligations of WB Bottling nor are any of its assets pledged as security for such obligations. The Company is not obligated to pay, nor does it anticipate paying in 1996, dividends to WB Bottling. Default on Senior Secured Notes The Company has incurred consolidated net losses of $32.2 million, $15.9 million and $14.3 million in its three most recent fiscal years and has a stockholder's deficit of $61.3 million at December 31, 1995. Due to Southern California's net losses in the first half of 1995, certain financial covenants under its revolving credit facility were not met. Subsequently, Southern California received a waiver of this event of default; the waiver contained certain requirements, one of which prohibited Southern California from making the interest payment due in August, 1995 on its $140 million Senior Secured Notes (the Senior Secured Notes). The non-payment of the Senior Secured Notes' interest caused a default under the terms of the related Indenture. As discussed in Note 5, Southern California and the lender entered into an agreement which extends through April 30, 1996, F-7 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 whereby the lender agreed to not exercise its remedies in regards to the financial covenant defaults provided that no other defaults occur. Southern California has announced that it had reached an agreement in principle, subject to certain conditions, on the terms of a restructuring of the Senior Secured Notes with an unofficial committee of holders of the Senior Secured Notes. The principal terms of the restructuring proposal provide that the stock of Puerto Rico would be sold and that the holders of the Senior Secured Notes would receive 98% of Southern California's equity (subject to dilution to the extent certain warrants and options to be granted by Southern California as part of the restructuring are exercised) and certain net cash proceeds from the sale of the stock of Puerto Rico for their notes. Southern California would retain approximately $10 million of the net proceeds from the sale of the stock of Puerto Rico to pay down a portion of Southern California's revolving credit facility, with the balance of the net proceeds (after payment of, among other things, closing and restructuring costs) being paid to the holders of the Senior Secured Notes. Southern California's trade suppliers would be paid in full pursuant to the restructuring proposal. Southern California, in conjunction with the professional advisors to the Bondholders' Committee, is currently working on the implementation of the restructuring proposal announced in the fourth quarter of 1995. In that regard, Southern California is considering the means of implementing the restructuring proposal, including the possible commencement of a Chapter 11 case and the filing of a pre-negotiated plan of reorganization. Southern California expects that its operations will continue in the normal course prior to, during and after the above mentioned planned transactions. No assurances can be given that the restructuring proposal can be successfully implemented by Southern California. Southern California has received offers for the stock of Puerto Rico that exceed the net book value of Puerto Rico. The accompanying consolidated financial statements present Southern California's long-term debt as due currently, as a result of the defaults under the indenture governing the Senior Secured Notes and the revolving credit facility. No other adjustments have been made to the accompanying consolidated financial statements to reflect the outcome of the Southern California's financial uncertainty. Restructuring Charge In order to reduce overhead costs, Southern California decided to discontinue the operations of its Avalon division, which distributed lower- volume beverage products, and to downsize the hot-fill operations of its Liquitrend division, which primarily bottled products for companies who did not distribute their products throughout Southern California's distribution system. As a result, Southern California terminated 205 employees in September, 1995; a reserve of $906,000 was set up for severance pay, of which $850,000 was paid out by December 31, 1995. Also, Southern California determined that certain leased facilities and equipment were no longer needed and a reserve of $1,660,000 was established to reflect the projected cost of terminating these leases, of which $324,000 was paid out by December 31, 1995. These reserves are included in the restructuring charge in the accompanying 1995 consolidated statement of operations. Southern California incurred costs of $2,449,000 in 1995 in relation to the negotiation of the potential restructuring of Southern California's obligations under the Senior Secured Notes and the revolving credit facility; these costs are included in the restructuring charge in the accompanying 1995 consolidated statement of operations. F-8 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The financial statements of the Company reflect the consolidated financial statements of Seven-Up/RC Bottling Company of Southern California, Inc. and its wholly-owned subsidiary, Seven-Up/RC Bottling Company of Puerto Rico, Inc. Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Cash Included in accounts payable are $9,459,000 and $7,966,000 of checks outstanding in excess of cash balances at December 31, 1995 and 1994, respectively. For purposes of the statement of cash flows, cash and cash equivalents are defined as cash deposits with original maturities of less than 90 days. Trade Receivables, Net Trade receivables, net, include allowances for doubtful accounts of $1,814,000 and $1,428,000 at December 31, 1995 and 1994, respectively. Other Receivables Other receivables consist principally of amounts due from franchisors under the terms of marketing and/or purchasing contracts. Inventories Inventories are recorded at cost, determined on the first-in, first-out method. Elements of cost include direct materials, direct labor and bottling overhead. Investment in Joint Venture The Company has a 50% ownership interest in Porta Pack, a joint venture in Puerto Rico. Porta Pack packages non-carbonated juices using a process known as "aseptic packaging." The Company accounts for this investment using the equity method. Property, Plant and Equipment, Net Property, plant and equipment is stated at cost. Depreciation is provided for under the straight-line method using the following lives: Building and improvements..................................... 31.5 years Machinery and equipment....................................... 7 to 8 years Equipment held under capital leases........................... 6 to 7 years
F-9 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred. The cost and accumulated depreciation of property, plant and equipment retired or otherwise disposed of are eliminated and any resulting gain or loss recognized at the time of disposal. Other Assets Intangible assets include the appraised value of specific intangible assets acquired, including advertising libraries, beverage franchises and trademarks. The intangible assets are amortized over their useful lives, which range from 2 to 40 years. The Company continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful life of intangible assets may warrant revisions or that the remaining balances of intangible assets may not be recoverable. When factors indicate that intangible assets should be evaluated for possible impairment, the Company uses an estimate of the related business segment's undiscounted net income over the remaining life of the intangible assets in measuring whether the intangible assets are recoverable. The net balance recorded at December 31, 1995 and 1994, includes accumulated amortization of $14,820,000 and $17,205,000, respectively. The Company incurred debt issuance costs in connection with the arrangement of various long-term debt facilities. These costs are amortized over the individual lives of the various debt facilities using the effective interest method. The net balance at December 31, 1995 and 1994, includes accumulated amortization of $3,493,000 and $2,322,000, respectively. The Company recorded an extraordinary loss of $826,000 for the year ended December 31, 1993, due to the accrual of $562,000 for a prepayment premium associated with the repayment of a prior revolving loan agreements and the write-off of $264,000 of related debt issuance costs. Accrued Expenses Accrued expenses as of December 31, 1995 and 1994 include accrued interest of $15,060,000 and $7,003,000, respectively. Income Taxes The Company accounted for income taxes using the method prescribed by Statement of Financial Accounting Standard No. 109 (SFAS 109). Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred income tax assets is adjusted by a valuation reserve, if necessary, so that the net tax assets are recognized only to the extent they are expected to be realized. The adoption of SFAS 109 had no effect on the Company's financial position. RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets" (SFAS 121). The Company will be required to adopt SFAS 121 in the first quarter of 1996. The Company does not expect that the adoption of SFAS 121 will be material to its financial position or its results of operation in 1996, assuming that the proposed restructuring is completed. F-10 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 (3) INVENTORIES Inventories at December 31, 1995 and 1994, consisted of the following (in thousands):
1995 1994 ------- ------- Raw materials................................................ $ 6,198 $18,628 Finished goods............................................... 18,749 25,790 ------- ------- $24,947 $44,418 ======= =======
(4) PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net, at December 31, 1995 and 1994, consisted of the following (in thousands):
1995 1994 -------- -------- Land..................................................... $ 22,477 $ 22,682 Building and improvements................................ 23,994 23,052 Machinery and equipment.................................. 71,911 70,225 Equipment held under capital leases...................... 12,816 10,229 Construction in progress................................. 480 866 -------- -------- 131,678 127,054 Accumulated depreciation................................. (49,246) (38,786) Capital lease depreciation............................... (2,487) (880) -------- -------- $ 79,945 $ 87,388 ======== ========
(5) LONG-TERM DEBT At December 31, 1995, the components of current portion of long-term debt were (in thousands): Revolving loans.................................................. $ 37,847 Senior Secured Notes............................................. 140,000 Term loans....................................................... 3,571 Capital lease obligations........................................ 8,536 -------- Total.......................................................... 189,954 ========
Revolving Credit Facility Southern California's revolving credit facility consists of a $45.0 million revolving loan commitment; $29.2 million was outstanding at December 31, 1995. The Puerto Rico revolving loan consists of a $10.0 million revolving loan commitment; $8.6 million was outstanding at December 31, 1995. Interest on these revolving loans is charged monthly at the GE Commercial Paper rate (5.68 percent at December 31, 1995) plus 3.5 percent. The average interest rate on the revolving loans in 1995 was 9.34 percent. The Company is charged a commitment fee for the unused portion of the revolving loan commitments plus an annual administration fee and other facility fees. Borrowings under the revolving loan commitments are based on a percentage of certain eligible trade and franchisor receivables and inventory. The Company has a lockbox agreement where by all cash receipts are used to pay down the revolving loans. F-11 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 Southern California, at the end of the second quarter and through the remainder of 1995, was in violation of certain of its revolving credit facility covenants, including tangible net worth, interest coverage and fixed- charge coverage. At the request of Southern California, the lender agreed to waive all defaults for the months of June and July 1995. Subsequently, a forbearance agreement was entered into whereby the lender agreed, for a period ending on April 30, 1996, to not exercise its remedies in regard to the financial covenant defaults, provided that no other defaults occur. Term Loan Agreement Southern California's secured amortizing term loan is collateralized by certain specified equipment. Scheduled principal payments and interest, which is calculated three months in arrears and computed at the same rate and basis as the Revolving Loan Agreement, are required each January, April, July and November, through January 31, 1998. Senior Secured Notes On August 11, 1992, Southern California issued the Senior Secured Notes. The net proceeds of approximately $133,500,000 were used to repay indebtedness of the Company. The Senior Secured Notes are senior obligations of Southern California and are secured by a lien on and security interest in all of the issued and outstanding capital stock of Southern California and 66.5% of the issued and outstanding capital stock of Puerto Rico. The Senior Secured Notes are unconditionally guaranteed by BGAC. Interest on the notes is payable semi- annually, on February 1 and August 1. The fair value of the Company's Senior Secured Notes at December 31, 1995 was approximately $84,000,000 based on quoted market prices. On August 1, 1995, Southern California suspended payments of interest on its Senior Secured Notes pending negotiations of a financial restructuring. The indenture governing the Senior Secured Notes gives the indenture trustee, among other remedies and if certain requirements are met, the holders of the Senior Secured Notes, the right to accelerate and demand payment of the outstanding principal amount of the Senior Secured Notes. Because of the right to accelerate, the aggregate amount of the outstanding Senior Secured Notes, term loans and capital leases which are cross collateralized, are reflected as current liabilities in the accompanying consolidated balance sheet at December 31, 1995. Capital Lease Obligations Southern California intends to terminate $3,690,000 of its capital lease obligations in 1996 since the equipment held under these agreements is used in the hot-fill production process, which will not be continued. Southern California will be required to return the related equipment to the lessors and has recorded a reserve for the estimated lease termination payments. Puerto Rico has several capital lease obligations that are secured by certain specified vehicles and office equipment and are payable through 1999 in monthly installments of approximately $23,000, including interest. F-12 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 (6) EMPLOYEE BENEFIT PLANS The Company sponsors two defined contribution plans for all employees other than union members, unless specifically negotiated. The Target Benefit Plan was created effective September 1, 1990, and allows participants to make contributions of 2% of their eligible compensation, as defined. The Company's annual contribution is determined by an actuary based upon assumptions of the participant's highest five year average pay, their years of eligible service with the Company, and their vesting status as of their termination date. The 401(k) Plan entitles all employees other than union members, unless specifically negotiated, to participate. The Company matches one-quarter of each participant's contribution up to 6% of the participant's eligible compensation. In September of 1995, the Company suspended its contribution relate to the Target Benefit Plan and the 401(k) Plan. The following table summarizes the 1995 estimated contributions, and 1994 and 1993 actual contributions for each plan for the applicable periods (in thousands):
TARGET BENEFIT 401(K) PLAN -------------- ----------- Year ended December 31, 1995...................... $306 $160 1994.............................................. $380 $210 1993.............................................. $345 $212
Under labor contracts between the Company and certain of its employee unions, the Company contributes to multi-employer union benefit plans which are administered by the applicable unions. The Company has no liability to these plans in excess of the contractually agreed to contribution, which is usually equal to a set charge per hour of eligible service by the union members to the Company. The Company contributed the following amounts to unions on behalf of its employees during the applicable periods (in thousands): Year ended December 31, 1995......................................... $ 972 1994................................................................. $1,017 1993................................................................. $ 989
Puerto Rico Pension Plan The Company sponsors the Seven-Up/RC Bottling Company of Puerto Rico, Inc. Pension Plan (the "Puerto Rico Plan"), a contributory defined benefit pension plan for union employees of Puerto Rico. Employees are eligible to participate in the Puerto Rico Plan the first year of the Plan year following the date of employment. Participating employees are required to contribute 3% of their compensation in excess of $9,000 in a given calendar year. The following table indicates the actual net pension expense components for the years ended December 31, 1995 and 1994, respectively (in thousands):
1995 1994 ----- ----- Service cost component......................................... $ 48 $ 85 Interest cost component........................................ 248 268 Expected return on plan assets................................. (184) 82 Net amortization and deferral.................................. 34 (226) ----- ----- Net pension expense.......................................... $ 146 $ 209 ===== =====
F-13 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 The assumptions used to develop the components of the above amounts were as follows:
1995 1994 ---- ---- Discount rate.................................................... 7.50% 8.50% Rate of increase in compensation levels.......................... 4.00% 4.00% Expected long-term rate of return on plan assets................. 9.00% 9.00%
The funded status of the Puerto Rico Plan as of January 1, 1995 and 1994 was as follows (in thousands):
1995 1994 ------- ------- Accumulated benefit obligation............................ $ 2,952 $ 2,504 Vested.................................................. 133 5 ------- ------- Non-vested.............................................. $ 3,085 $ 2,509 ======= ======= Present value of projected benefit obligation............. $(3,739) $(2,830) Fair value of plan assets................................. 2,472 2,012 ------- ------- Present value of projected benefit obligation in excess of plan assets.............................................. (1,267) (818) Remaining unrecognized net obligation..................... 271 305 Unrecognized net gain..................................... 439 74 ------- ------- Accrued pension costs..................................... $ (557) $ (439) ======= =======
The Company contributed approximately $25,000 to the Puerto Rico Plan during 1995 and $23,000 during 1994. (7) OPERATING LEASES The Company leases certain office and warehouse facilities, machinery, vehicles and computer equipment under various renewable long-term leases expiring from 1996 to 1999. Rental expense under operating lease agreements was approximately $4,481,000, $3,415,000 and $3,550,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Following are the future minimum lease payments under operating leases that have initial or remaining noncancellable lease terms in excess of one year from December 31, 1995 (in thousands): Year ended December 31, 1996........................................ $ 2,368 1997................................................................ 2,433 1998................................................................ 2,431 1999................................................................ 2,480 2000................................................................ 2,516 Thereafter.......................................................... -- ------- $12,228 =======
Litigation The Company is involved in various lawsuits and claims incidental to its business. Management believes that any potential liabilities arising from these matters will not have a material effect on its financial position or future results of operations. F-14 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 (8) INCOME TAXES The Company is included in the consolidated Federal and state income tax returns of WB Bottling. Effective September 1, 1990, the Company and WB Bottling entered into a tax sharing agreement, whereby the Company calculates its tax provision on a separate entity basis. In the future, the Company will be required to make cash payments if WB Bottling is required to pay income taxes. The differences between the total income tax expense (benefit) and the income tax expense (benefit) computed using the Federal income tax rate were as follows (in thousands):
1995 1994 1993 -------- ------- ------- U.S. Federal income tax provision (benefit) at statutory rate on income (loss) from operations..................................... $(11,072) $(3,765) $(3,298) Foreign income tax provision.................... -- 185 -- Losses for which no benefit is recognizable..... 11,072 3,765 3,298 -------- ------- ------- Provision (benefit) for income taxes............ $ -- $ 185 $ -- ======== ======= =======
The temporary differences and tax attribute carryforwards which gave rise to deferred tax assets and (liabilities) at December 31, 1995 and 1994 are as follows (in thousands):
DECEMBER 31, DECEMBER 31, 1995 1994 ------------ ------------ Current deferred tax assets and (liabilities): Difference in inventory basis................... $ 880 $ 1,778 Deferred compensation, pension and other arrangements................................... 169 526 Accrued vacation and sick pay................... 814 820 Accrued expenses................................ 811 338 Reserve for Workers' Compensation............... 1,729 1,110 Coupon reserve.................................. 221 1,029 Capital lease expense........................... (829) Restructuring charges........................... 548 Other........................................... 579 263 -------- -------- $ 4,922 $ 5,864 Less: Valuation allowance......................... (4,922) (5,864) -------- -------- Net current deferred tax assets and (liabilities). $ -- $ -- Non-current deferred tax assets and (liabilities): Net operating loss carryforward................. $ 28,415 $ 15,185 Accelerated depreciation and amortization....... (410) 2,060 Other........................................... (212) (171) -------- -------- $ 27,793 $ 17,074 Less: Valuation allowance......................... (27,793) (17,074) Net current deferred tax assets and (liabilities). $ -- $ -- ======== ========
F-15 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 The components of income (loss) from operations before the provision for income taxes were as follows (in thousands):
1995 1994 1993 -------- -------- -------- Domestic....................................... $(32,566) $(15,975) $(12,472) Foreign........................................ 372 260 (1,872) -------- -------- -------- Total........................................ $(32,194) $(15,715) $(14,344) ======== ======== ========
The Company has net operating loss carryforwards as of December 31, 1995 in the following jurisdictions (in thousands):
JURISDICTION AMOUNT PERIOD OF EXPIRATION ------------ ------ -------------------- U.S. Federal..................................... 77,840 2005 to 2010 Puerto Rico...................................... 13,200 1997 to 2002 State............................................ 31,765 1997 to 2000
The Internal Revenue Code of 1986 contains provisions which may limit the net operating loss carryforwards available to be used in any given year in the event of certain events including significant changes in ownership interests. (9) SEGMENT DATA The Company operates in the beverage production and distribution business in two separate geographic segments. Information about the Company's operations in these two geographic segments is summarized below (in thousands):
1995 1994 1993 -------- -------- -------- Net Sales for the years ended December 31: Southern California.......................... $314,469 $343,632 $316,560 Puerto Rico.................................. 82,256 70,208 54,502 -------- -------- -------- $396,725 $413,840 $371,062 ======== ======== ======== Operating Profit for the years ended December 31: Southern California.......................... $(14,339) $ 1,290 $ 3,915 Puerto Rico.................................. 4,992 4,526 2,087 -------- -------- -------- $ (9,347) $ 5,816 $ 6,002 ======== ======== ======== Identifiable Assets as of December 31: Southern California.......................... $140,931 $194,545 Puerto Rico.................................. 51,202 49,289 -------- -------- $192,133 $243,834 ======== ========
F-16 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AS OF DECEMBER 31, 1995 10. EVENTS SUBSEQUENT TO THE DATE OF AUDITOR'S REPORT (UNAUDITED) On May 13, 1996 Southern California and its immediate holding company parent, Beverage Group Acquisition Company ("BGAC"), filed voluntary petitions for reorganization relief under Chapter 11 of the bankruptcy code in the U.S. Bankruptcy Court for the District of Delaware. The bankruptcy court entered an order authorizing Southern California to make payments to its trade suppliers for pre-bankruptcy claims provided that such suppliers continued to provide goods to Southern California on the same credit terms as were in effect on the day before Southern California announced the suspension of interest payments on the Senior Secured Notes. Additionally, Southern California entered into a Debtor in Possession Loan Agreement (the "DIP" agreement) to obtain revolving credit advances and letter of credit obligations in the aggregate principal amount of $54 million during the pendence of the Chapter 11 case. On May 20, 1996, Southern California and BGAC filed the First Amended Joint Plan of Reorganization (the "Plan") and accompanying disclosure statement with the bankruptcy court. The bankruptcy court approved the disclosure statement on June 19, 1996. On July 1, 1996, the sale of the stock of Puerto Rico was consummated for approximately $74 million. A portion of the net proceeds from the sale, approximately $55 million, were distributed pursuant to the Plan to holders of the Senior Secured Notes. On August 2, 1996, the bankruptcy court confirmed the Plan. On August 15, 1996 the Plan was consummated and Southern California emerged from Chapter 11. Pursuant to the Plan, Southern California entered into a post-consummation revolving credit and letter of credit facility in the aggregate principal amount of $35 million in order to refinance obligations under the DIP agreement. F-17 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (DOLLAR AMOUNTS IN THOUSANDS)
REORGANIZED PREDECESSOR COMPANY COMPANY ------------- ------------ SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ (NOTES 2 & 3) ASSETS Current assets: Cash............................................... $ 3,291 $ 5,949 Accounts receivable: Trade, net....................................... 24,609 42,261 Other............................................ 5,049 9,450 Inventories: Finished goods................................... 15,486 18,749 Raw materials.................................... 6,244 6,198 Prepaids........................................... 1,626 2,908 ------- --------- Total current assets........................... 56,305 85,515 ------- --------- Investment in joint venture.......................... -- 1,422 Property, plant and equipment, net................... 33,551 79,945 Other assets: Intangible and other assets........................ 6,508 21,422 Debt issuance costs................................ 99 3,829 ------- --------- Total assets................................... $96,463 $ 192,133 ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable................................... $15,935 $ 29,141 Accrued expenses................................... 33,296 34,371 Current portion of long-term debt.................. 549 189,954 ------- --------- Total current liabilities...................... 49,780 253,466 ------- --------- Long-term debt: Revolving credit facilities........................ 14,590 -- Term loan.......................................... 527 -- Capital leases..................................... 2,580 -- ------- --------- Total long-term debt........................... 17,697 -- ------- --------- Stockholders' equity (deficit): Capital stock $0.01 par value, 6,000,000 and 1,000 shares authorized and 5,000,000 and 1,000 issued and outstanding, respectively......... -- -- Additional paid-in capital......................... 30,000 42,557 Retained deficit................................... (1,014) (103,890) ------- --------- Total stockholders' equity (deficit)........... 28,986 (61,333) ------- --------- Total liabilities and stockholders' equity..... $96,463 $ 192,133 ======= =========
The accompanying notes are an integral part of these condensed consolidated balance sheets. F-18 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
REORGANIZED PREDECESSOR COMPANY COMPANY ------------- ----------------- 7/1- 8/16-9/30 8/15 7/1-9/30 1996 1996 1995 ------------- ------- -------- (NOTES 2 & 3) Net sales..................................... $33,518 $38,788 $106,035 Cost of goods sold............................ 27,418 31,406 90,814 ------- ------- -------- Gross profit................................ 6,100 7,382 15,221 Administrative, marketing and general expenses..................................... 5,362 4,568 12,550 Depreciation and amortization................. 1,461 1,612 4,410 Restructure charges (Note 4).................. -- -- 2,646 ------- ------- -------- Operating (loss) income..................... (723) 1,202 (4,385) Interest expense.............................. 267 2,216 5,842 Other income, net............................. 4 31,817 35 ------- ------- -------- (Loss) income before income taxes, reorganization expenses and extraordinary items...................................... (986) 30,803 (10,192) Reorganization expenses (Note 2).............. -- 32,212 -- Provision for income taxes.................... 28 300 -- ------- ------- -------- Loss before extraordinary items............. (1,014) (1,709) (10,192) Extraordinary items (Notes 2 & 3)............. -- 77,749 -- ------- ------- -------- Net (loss) income........................... $(1,014) $76,040 $(10,192) ======= ======= ======== Loss per common share: Net loss per common share................... $ (0.20) -- -- ======= ======= ======== Weighted average common shares outstanding.. 5,000 -- -- ======= ======= ========
The accompanying notes are an integral part of these condensed consolidated financial statements. F-19 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
REORGANIZED PREDECESSOR COMPANY COMPANY ------------- ------------------ 8/16-9/30 1/1-8/15 1/1-9/30 1996 1996 1995 ------------- -------- -------- (NOTES 2 & 3) Net sales.................................... $33,518 $202,844 $306,473 Cost of goods sold........................... 27,418 164,320 260,698 ------- -------- -------- Gross profit............................... 6,100 38,524 45,775 Administrative, marketing and general expenses.................................... 5,362 28,011 36,111 Depreciation and amortization................ 1,461 10,399 13,398 Restructure charges (Note 4)................. -- 547 2,646 ------- -------- -------- Operating loss............................. (723) (433) (6,380) Interest expense............................. 267 12,871 17,349 Other income, net (Note 2)................... 4 33,712 171 ------- -------- -------- (Loss) income before income taxes, reorganization expenses and extraordinary items..................................... (986) 20,408 (23,558) Reorganization expenses (Note 2)............. -- 35,369 -- Provision for income taxes................... 28 345 -- ------- -------- -------- Loss before extraordinary items............ (1,014) (15,306) (23,558) Extraordinary items (Notes 2 & 3)............ -- 77,239 -- ------- -------- -------- Net (loss) income.......................... $(1,014) $ 61,933 $(23,558) ======= ======== ======== Loss per common share: Net loss per common share.................. $ (0.20) -- -- ======= ======== ======== Weighted average common shares outstanding. 5,000 -- -- ======= ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. F-20 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS)
REORGANIZED PREDECESSOR COMPANY COMPANY ------------- ------------------ 8/16-9/30 1/1-8/15 1/1-9/30 1996 1996 1995 ------------- -------- -------- (NOTES 2 & 3) CASH FLOWS FROM OPERATING ACTIVITIES: Loss before extraordinary item.............. $ (1,014) $(15,306) $(23,558) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization.............. 1,461 10,997 14,768 Equity in earnings of joint venture........ -- (5) (77) Gain on sales of fixed assets.............. -- (169) 6 Non cash reorganization expenses........... -- 29,735 -- Disposition of capital lease............... -- 1,192 -- Provision for doubtful accounts............ 100 783 565 Gain on sale of Puerto Rico................ -- (31,715) -- Changes in assets and liabilities: Accounts receivable....................... 5,529 (1,671) 19,103 Inventories............................... (5,156) 227 10,247 Prepaids and other........................ (948) 1,877 (5,019) Accounts payable.......................... (14,240) 11,505 (22,083) Accrued expenses.......................... 887 10,924 2,754 -------- -------- -------- Net cash (used in) provided by operating activities............................. (13,381) 18,374 (3,294) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of Puerto Rico........... -- 71,626 -- Proceeds from sales of property, plant and equipment.................................. -- 133 46 Cash additions to property, plant and equipment.................................. (746) (4,402) (3,020) -------- -------- -------- Net cash (used in) provided by investing activities............................. (746) 67,357 (2,974) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (repayment of) revolving loans...................................... 14,590 (30,290) 4,136 Payment to Senior Secured Note holders...... -- (55,000) -- (Repayment of) proceeds from term loan...... (11) (2,852) 114 Payment of debt issuance costs.............. -- (88) (2) Repayment of capital lease.................. (37) (638) (602) -------- -------- -------- Net cash provided by (used in) financing activities............................. 14,542 (88,868) 3,646 -------- -------- -------- NET INCREASE (DECREASE) IN CASH............... 415 (3,137) (2,622) Cash, beginning of period..................... 2,876 6,013 6,982 -------- -------- -------- Cash, end of period........................... $ 3,291 $ 2,876 $ 4,360 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash interest paid.......................... $ 257 $ 1,957 $ 11,912 ======== ======== ======== Purchase of property, plant and equipment through issuance of capital lease obligation................................. $ -- $ -- $ 555 ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. F-21 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (AMOUNTS IN THOUSANDS)
CAPITAL STOCK ADDITIONAL TOTAL ------------- PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT) ------ ------ ---------- --------- ---------------- REORGANIZED (Notes 2 & 3) August 16 to September 30, 1996 Balance, August 16, 1996................... 5,000 $ -- $ 30,000 $ -- $ 30,000 Net loss for the period. -- -- -- (1,014) (1,014) ----- ----- -------- --------- --------- Balance, September 30, 1996................. 5,000 $ -- $ 30,000 $ (1,014) $ 28,986 ===== ===== ======== ========= ========= PREDECESSOR January 1 to August 15, 1996 Balance December 31, 1995................... 1 $ -- $ 42,557 $(103,890) $ (61,333) Reorganization.......... 99 -- (41,957) 41,957 -- New issue............... 4,900 -- 29,400 -- 29,400 Net income for the period................. -- -- -- 61,933 61,933 ----- ----- -------- --------- --------- Balance, August 15, 1996................. 5,000 $ -- $ 30,000 $ -- $ 30,000 ===== ===== ======== ========= ========= PREDECESSOR January 1 to September 30, 1995 Balance, December 31, 1994................... 1 $ -- $ 42,557 $ (71,696) $ (29,139) Net loss for the period. -- -- -- (23,558) (23,558) ----- ----- -------- --------- --------- Balance, September 30, 1995................. 1 $ -- $ 42,557 $ (95,254) $ (52,697) ===== ===== ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. F-22 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) PRESENTATION OF FINANCIAL INFORMATION The accompanying condensed consolidated financial statements include the accounts of Seven-Up/RC Bottling Company of Southern California, Inc. ("Southern California") and Southern California's wholly-owned subsidiary, Seven-Up/RC Bottling Company of Puerto Rico, Inc. ("Puerto Rico"). Except as otherwise indicated, Southern California and Puerto Rico are referred to collectively as the "Company". On May 13, 1996, Southern California and its immediate holding company parent, Beverage Group Acquisition Corporation, filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. On August 15, 1996, the Plan was consummated and Southern California emerged as a reorganized company from Chapter 11. Due to the reorganization and implementation of fresh start reporting, the Condensed Consolidated Financial Statements for the new Reorganized Company (period starting August 16, 1996) are not comparable to that of Predecessor Company. Predecessor Company included Southern California and Puerto Rico through the date of disposition, June 30, 1996. Reorganized Company includes the operations of Southern California subsequent to the consummation date. During interim periods, the Company follows the accounting policies set forth in its Annual Report on Form 10-K filed with the Securities and Exchange Commission. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the Annual Report on Form 10-K when reviewing interim financial results. In the opinion of management, the accompanying interim financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial condition, the results of operations, cash flows, and stockholders' equity of the Company for interim periods. Certain reclassifications have been made to the 1995 financial statements to conform to the 1996 presentation. (2) BANKRUPTCY FILINGS As a result of severe liquidity problems, on July 31, 1995, Southern California suspended payments of interest on its $140,000,000, 11.5% Senior Secured Notes due 1999 (the "Senior Secured Notes"). At the end of the second quarter of 1995 through the first quarter of 1996, Southern California was in violation of certain of its revolving credit facility covenants, including tangible net-worth, interest coverage and fixed charge coverage. At the request of Southern California, the revolving credit lender executed forbearance agreements extending through May 15, 1996. On November 9, 1995, Southern California announced that it had reached an agreement in principle on the terms of a restructuring of the Senior Secured Notes with an unofficial committee (the "Committee") of holders of such notes. The agreement contemplated, among other things, (i) the exchange of the Senior Secured Notes for approximately 98% of the equity of Southern California, and (ii) the sale of Puerto Rico and the payment to the holders of the Senior Secured Notes of the net proceeds from such sale. On May 13, 1996, Southern California and its immediate holding company parent, Beverage Group Acquisition Corporation ("BGAC"), filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code to implement the terms of the restructuring agreement with the Committee. On July 1, 1996, Southern California sold its wholly owned subsidiary, Puerto Rico, for approximately $74 million which resulted in a net gain of approximately $32 million. The proceeds from this sale were used to repay holders of the Senior Secured Notes and reduce Southern California's revolving credit facility. F-23 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) On August 2, 1996 (the "Confirmation Date"), the U.S. Bankruptcy Court of the District of Delaware, confirmed the Company's First Amended Joint Plan of Reorganization (the "Reorganization"), and on August 16, 1996, the Company emerged from bankruptcy. Pursuant to the Reorganization, on such date certain indebtedness of the Company was canceled in exchange for cash and new equity interests. The Company distributed to holders of its Senior Secured Notes approximately $55 million in cash and equity securities consisting of 5.0 million shares of common stock. As a result of the bankruptcy filing and the resulting debtor-in-possession working capital facility, Southern California wrote off $510,000 of debt issuance costs related to its previous working capital facility. In addition, in the third quarter Southern California realized an extraordinary gain of $78 million relating to the discharge of the Senior Secured Notes and related accrued interest in accordance with the Reorganization. Upon emerging from bankruptcy, the Company's $54 million Debtor-In- Possession Revolving Credit Facility was canceled and replaced by a $35 million facility. In accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code," ("SOP 90-7") expenses resulting from the Reorganization should be reported separately as reorganization items in the Condensed Consolidated Statements of Operations, and are summarized below:
JULY 1, 1996 JANUARY 1, 1996 TO TO AUGUST 15, 1996 AUGUST 15, 1996 --------------- --------------- Adjustment of assets to fair market value... $ 29,735 $ 29,735 Financial restructuring costs............... 2 ,477 5,634 -------- -------- Total..................................... $ 32,212 $ 35,369 ======== ========
(3) FRESH START ACCOUNTING As of August 15, 1996, the Company adopted Fresh Start Reporting in accordance with SOP 90-7. Fresh Start Reporting resulted in material changes to the Condensed Consolidated Balance Sheet, including valuation of real, intangible and other assets and the valuation of equity based on the appraised reorganization value of the ongoing business. The reorganization value of $30 million (the approximate fair value) was established based upon analysis by an independent valuation firm and considered many factors and various valuation methods, including discounted cash flows, selected comparable company multiples, selected acquisition transaction multiples and other applicable ratios and valuation techniques believed by management and its financial advisors to be representative of the Company's business and industry. F-24 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) The Reorganization and adoption of Fresh Start Reporting resulted in the following adjustments to the Company's Condensed Consolidated Balance Sheet for the period ending August 15, 1996 (dollar amounts in thousands).
PREDECESSOR REORGANIZED COMPANY COMPANY ----------- ----------- AT REORGANIZATION AND AT AUGUST 15, FRESH START ADJUSTMENTS AUGUST 15, ----------- ------------------------------ ----------- 1996 DEBIT CREDIT 1996 ----------- ----------- ------------ ----------- ASSETS Total current assets.... $119,733 $ -- $ 63,836(f) $55,897 Property, plant and equipment, net......... 55,918 -- 22,030(a) 33,888 Other assets: Intangible and other assets............... 14,038 -- 6,414(b) 7,624 Debt issuance costs... 2,695 -- 2,607(c) 88 -------- ----------- ----------- ------- Total assets........ $192,384 $ -- $ 94,887 $97,497 ======== =========== =========== ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable...... $ 30,176 $ -- $ -- $30,176 Accrued expenses...... 57,087 23,465(d) -- 33,622 Current portion of long-term debt....... 544 -- -- 544 -------- ----------- ----------- ------- Total current liabilities........ 87,807 23,465 -- 64,342 -------- ----------- ----------- ------- Long-term debt.......... 151,991 148,836(e)(f) -- 3,155 -------- ----------- ----------- ------- Stockholders' equity (deficit): Additional paid-in capital.............. 42,557 41,957(g) 29,400(g) 30,000 Retained deficit...... (89,971) -- 77,749(h) -- 12,222(i) -------- ----------- ----------- ------- Total (deficit) equity............. (47,414) 41,957 119,371 30,000 -------- ----------- ----------- ------- Total liabilities and stockholders' equity............. $192,384 $ 214,258 $ 119,371 $97,497 ======== =========== =========== =======
Explanations of adjustment columns of the balance sheet are as follows: (a) To adjust property and equipment to estimated current market value. The market value of property and equipment has been determined by independent third party appraisal. (b) To primarily reflect the write-off of intangibles and adjust other assets to current market value. (c) To write-off remaining debt issuance costs for the Senior Secured Notes. (d) To primarily reflect the cancellation of accrued interest related to the Senior Secured Notes. (e) To reflect the cancellation of the Senior Secured Notes. (f) To reflect the paydown of the debtor-in-possession revolving credit facility. (g) To reflect the issuance of 5,000,000 shares of new common stock (par value $0.01). F-25 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) (h) To reflect the extraordinary gain resulting from the discharge of indebtedness. This extraordinary gain is calculated below: Historical carrying value of old debt securities................... $140,000 Historical carrying value of related accrued interest.............. 24,756 Unamortized old deferred financing costs........................... (2,607) Market Value of consideration exchanged for old debt: Plan securities (face value $29,400)............................. (29,400) Senior securities principal payment.............................. (55,000) -------- Extraordinary gain............................................. $ 77,749 ========
(i) To reflect the elimination of stockholders' equity of the Predecessor Company. The following Unaudited Pro Forma Condensed Financial Information for the nine months ended September 30, 1996 and 1995, have been prepared giving effect to the sale of Puerto Rico and the consummation of the Reorganization including adjustments to interest, depreciation expense and asset amortization. The Pro Forma financial information was prepared as if the adjustments had occurred on January 1, 1996 and 1995, respectively. This information does not purport to be indicative of the results which would have been obtained had such transaction in fact been completed as of the date hereof and for the periods presented or that may be obtained in the future. Unaudited Pro Forma Financial Information (dollar amounts in thousands):
PRO FORMA NINE MONTHS ENDED --------------------------- SEPTEMBER 30, SEPTEMBER 30, 1996 1995 ------------- ------------- Total revenue................................. $198,427 $247,119 Operating costs and expenses.................. 197,323 251,903 -------- -------- Income (loss) before interest, other income, reorganization expenses and income taxes..... 1,104 (4,784) Interest, other income, income taxes and reorganization expenses...................... 1,001 (4,210) -------- -------- Net income (loss)............................. $ 103 $ (8,994) ======== ========
(4) RESTRUCTURING CHARGES During the second quarter of 1996, the Company recorded approximately $547,000 of restructuring charges related to the termination of a capital lease. Annual lease payments related to the terminated lease were $1,328,000 in 1996, and $759,000 in 1997. F-26 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OF- FER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ---------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 2 Risk Factors.............................................................. 6 Use of Proceeds........................................................... 9 Dividend Policy........................................................... 9 Selected Consolidated Financial Data...................................... 10 Unaudited Pro Forma Financial Data........................................ 12 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 17 Business.................................................................. 22 Management................................................................ 30 Principal and Selling Stockholders........................................ 32 Description of Capital Stock.............................................. 33 Plan of Distribution...................................................... 34 Legal Matters............................................................. 34 Experts................................................................... 34 Additional Information.................................................... 35 Index to Financial Statements............................................. F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1,904,805 SHARES SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. COMMON STOCK ---------------- PROSPECTUS ---------------- , 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE ---- Report of Independent Public Accountants................................... S-2 Schedule II--Valuation and Qualifying Accounts............................. S-3
S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholder of Seven-Up/RC Bottling Company of Southern California, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Seven-Up/RC Bottling Company of Southern California, Inc. and its subsidiary included in this Form 10-K, and have issued our report thereon dated March 20, 1996. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the Company's ability to continue as a going concern as discussed in Note 1 of the financial statements. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index on page S-1 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Los Angeles, California March 20, 1996 S-2 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (DOLLAR AMOUNTS IN THOUSANDS)
BALANCE AT BALANCE AT BEGINNING OF END OF PERIOD ADDITIONS DEDUCTIONS PERIOD ------------ --------- ---------- ---------- Allowance for doubtful accounts for the year ended December 31, 1995................................ $1,428 $ 715 $(329) $1,814 ====== ====== ===== ====== Allwance for doubtful accounts for the year ended December 31, 1994................................ $1,192 $1,025 $(789) $1,428 ====== ====== ===== ====== Allowance for doubtful accounts for the year ended December 31, 1993................................ $1,281 $ 25 $(114) $1,192 ====== ====== ===== ======
S-3 PART II--INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is a statement of estimated expenses of the issuance and distribution of the securities being registered other than underwriting compensation: SEC registration fee............................................... $ 6,312 Printing and engraving expenses.................................... 50,000 Accounting fees and expenses....................................... 75,000 Legal fees and expenses............................................ 100,000 Miscellaneous expenses............................................. 43,688 -------- Total............................................................ $275,000 ========
All amounts are estimated except for the SEC registration fee. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company is incorporated under the laws of the State of Delaware. Section 145 of the General Corporation Law of the State of Delaware ("Section 145") provides that a Delaware corporation may indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred. The Company's Certificate of Incorporation provides for the indemnification of directors and officers of the Company to the fullest extent permitted by Section 145. In that regard, the Certificate of Incorporation provides that the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of such corporation, or is or was serving at the request of such corporation as a director, officer or member of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of such corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Indemnification in connection with an action or suit by or in the right of such corporation II-1 to procure a judgment in its favor is limited to payment of settlement of such an action or suit except that no such indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the indemnifying corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine that, despite the adjudication of liability but in consideration of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. In connection with the consummation of the Plan of Reorganization on August 15, 1996, the Company issued 5,000,000 shares of Common Stock to certain creditors and equityholders of the Company. Pursuant to an exemption from registration under Section 1145 of the Bankruptcy Code of 1986, as amended. See the Plan of Reorganization filed as an exhibit to this registration statement. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits:
NUMBER DESCRIPTION ------ ----------- 2.1 First Amended Joint Plan of Reorganization of the Company and Beverage Group Acquisition Corporation, dated as of June 19, 1996 3.1 Amended and Restated Certificate of Incorporation of the Company 3.2 By-Laws of the Company 5.1 Opinion of Kirkland & Ellis 10.1 Stock Purchase and Sale Agreement among Seven-Up Acquisition Corporation, the Company and Seven-Up/RC Bottling Company of Puerto Rico, Inc., dated as of May 3, 1996* 10.2 Amended and Restated Management Agreement dated as of May 8, 1996 among the Company and Bart S. Brodkin.* 10.3 Registration Rights Agreement, dated as of August 15, 1996, among the Company and certain of its Stockholders. 10.4 Credit Agreement, dated as of August 2, 1996 among the Company, General Electric Capital Corporation, and certain other lenders party thereto. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1) 24.1 Powers of attorney (included in signature page included in this part II) 27.1 Financial Data Schedule
- -------- * Incorporated by reference to the Company's Form 10-Q for the period ended June 30, 1996. (b) Financial Statement Schedules: II II-2 ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF VERNON, STATE OF CALIFORNIA ON NOVEMBER 22, 1996. Seven-Up/RC Bottling Company of Southern California, Inc. /s/ Bart S. Brodkin By: _________________________________ Name:Bart S. Brodkin Title: President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bart S. Bodkin and Rick Ferguson and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Seven-Up/RC Bottling Company of Southern California, Inc.), to sign any or all amendments (including post-effective amendments) to this registration statement and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON NOVEMBER 22, 1996, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH RESPECT TO SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC.: SIGNATURE CAPACITY /s/ Bart S. Brodkin President, Chief Executive - ------------------------------------- Officer, and Director BART S. BRODKIN (Principal Executive Officer) /s/ Richard Ferguson Executive Vice President and - ------------------------------------- Chief Financial Officer RICHARD FERGUSON (Principal Financial and Accounting Officer) /s/ Jack R. Attwood Director - ------------------------------------- JACK R. ATTWOOD /s/ William C. Langley Director - ------------------------------------- WILLIAM C. LANGLEY /s/ Monroe L. Lowenkron Director - ------------------------------------- MONROE L. LOWENKRON /s/ Daniel D. Villanueva Director - ------------------------------------- DANIEL D. VILLANUEVA II-4 EXHIBIT INDEX
NUMBER DESCRIPTION ------ ----------- 2.1 First Amended Joint Plan of Reorganization of the Company and Beverage Group Acquisition Corporation, dated as of June 19, 1996 3.1 Amended and Restated Certificate of Incorporation of the Company 3.2 By-Laws of the Company 5.1 Opinion of Kirkland & Ellis 10.1 Stock Purchase and Sale Agreement among Seven-Up Acquisition Corporation, the Company and Seven-Up/RC Bottling Company of Puerto Rico, Inc., dated as of May 3, 1996* 10.2 Amended and Restated Management Agreement dated as of May 8, 1996 among the Company and Bart S. Brodkin.* 10.3 Registration Rights Agreement, dated as of August 15, 1996, among the Company and certain of its Stockholders. 10.4 Credit Agreement, dated as of August 2, 1996 among the Company, General Electric Capital Corporation, and certain other lenders party thereto. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1) 24.1 Powers of attorney (included in signature page included in this part II) 27.1 Financial Data Schedule
- -------- * Incorporated by reference to the Company's Form 10-Q for the period ended June 30, 1996. EX-2.1 2 1ST AMENDMENT JOINT PLAN OF REORGANIZATION EXHIBIT 2.1 INTRODUCTION Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware corporation, and Beverage Group Acquisition Corporation, a Delaware corporation, jointly propose the Debtors' First Amended Joint Plan of Reorganization (as may be amended, the "Plan") for the resolution of their outstanding creditor claims and equity interests. All holders of Claims are encouraged to read the Plan and the Disclosure Statement in their entirety before voting to accept or reject the Plan. Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code and those restrictions on modifications set forth in Article X of the Plan, the Debtors reserve their right to alter, amend, or modify the Plan one or more times before its substantial consummation. ARTICLE I DEFINITIONS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME A. SCOPE OF DEFINITIONS For purposes of this Plan, except as expressly provided or unless the context otherwise requires, all capitalized terms not otherwise defined shall have the meanings ascribed to them in Article I of the Plan. Any term used in the Plan that is not defined herein, but is defined in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. Whenever the context requires, such terms shall include the plural as well as the singular, the masculine gender shall include the feminine, and the feminine gender shall include the masculine. B. DEFINITIONS 1.1 "Administrative Claim" means a Claim for payment of an administrative expense of a kind specified in section 503(b) of the Bankruptcy Code and entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code, including, but not limited to, the actual, necessary costs and expenses incurred after the Petition Date of preserving the Estates and operating the business of Seven-Up/RC, including wages, salaries, or commissions for services rendered after the commencement of these Chapter 11 Cases, Professional Fees, and all fees and charges assessed against the Estates under chapter 123 of title 28 of the United States Code. 1.2 "Allowed Claim" means a Claim or any portion thereof (a) that has been allowed by a Final Order, (b) for which a proof of claim bar date has been established and a proof of claim has been timely filed with the Bankruptcy Court pursuant to the Bankruptcy Code, Bankruptcy Rules, or any Final Order of the Bankruptcy Court, and as to which either (i) no objection to its allowance has been filed within the periods of limitation fixed by the Bankruptcy Code, Bankruptcy Rules or by any Final Order of the Bankruptcy Court, or (ii) any objection to its allowance has been settled, withdrawn, or has been denied by a Final Order, or (c) that is expressly allowed in the Plan; provided, however, that all Claims for which no proof of claim bar date has been established shall be treated for all purposes as if the Chapter 11 Cases had not been commenced and, subject to the provisions of section VII.G. hereof, the determination of whether any such Claim shall be allowed and/or the amount thereof shall be determined, resolved or adjudicated, as the case may be, in the procedural manner in which such Claim would have been determined, resolved or adjudicated if the Chapter 11 Cases had not been commenced. 1.3 "Allowed Class . . . Claim" means an Allowed Claim in the particular Class described. 1.4 "Bankruptcy Code" means title 11 of the United States Code, 11 U.S.C. (S)(S) 101-1330, as in effect on the date hereof. 1.5 "Bankruptcy Court" means the Bankruptcy Court of the United States District Court for the District of Delaware or such other court as may have jurisdiction over these Chapter 11 Cases. 1.6 "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the Federal Rules of Civil Procedure, as amended, as applicable to these Chapter 11 Cases or proceedings therein, and the Local Rules of the Bankruptcy Court, as applicable to these Chapter 11 Cases or proceedings therein, as the case may be. 1.7 "BGAC" means Beverage Group Acquisition Corporation, a Delaware corporation and a debtor and debtor-in-possession in Chapter 11 Case No. 96- 739 (HSB). BGAC will be merged and substantively consolidated with and into Seven-Up/RC prior to Consummation. BGAC also means Reorganized Seven-Up/RC on and after Consummation. 1.8 "BGAC Common Stock" means the common stock of BGAC with a par value of $0.01 per share, authorized and outstanding as of the Petition Date. 1.9 "Business Day" means any day, excluding Saturdays, Sundays, and legal holidays, on which commercial banks are open for business in New York, New York. 1.10 "Cash" means legal tender of the United States or its equivalent. 1.11 "Chapter 11 Cases" means the Chapter 11 cases of Seven-Up/RC and BGAC pending in the Bankruptcy Court. 1.12 "Claim" means a claim against Seven-Up/RC or BGAC, whether or not asserted, as defined in section 101(5) of the Bankruptcy Code. 1.13 "Class" means a category of holders of Claims or Interests described in Article II hereof. 1.14 "Class 4 New Common Stock" means 98% of the New Common Stock. 1.15 "Class 4 Proceeds" means all proceeds realized by Seven-Up/RC from the Stock Purchase Agreement and the Consulting Agreement minus (i) federal, state and Puerto Rico gains, income, transfer, repatriation, or similar taxes, (ii) the commissions, legal fees, accounting fees, retention program payments to employees of Seven-Up/RC of PR and all other costs applicable to the sale transaction, (iii) outstanding principal, accrued but unpaid interest, and any other fees or costs associated with the payment of all amounts owed by Seven- Up/RC of PR to GE Capital of PR, and (iv) $10 million, which sum shall be applied either (a) to reduce the outstanding pre-petition and post-petition obligations owed by Seven-Up/RC to GE Capital in the manner provided, and pursuant to, the DIP Facility or (b) as a credit against borrowings of Reorganized Seven-Up/RC under the GE Capital Post-Consummation Facility. 1.16 "Class 5 Note" means the note to be distributed to the holder of the Allowed Class 5 GE Capital Term Loan Secured Claim, a copy of which is attached as Exhibit "D" hereto. 1.17 "Committee" means the creditors' committee appointed by the United States Trustee on May 24, 1996, to represent unsecured creditors of Seven- Up/RC, as such committee may be constituted from time to time. 1.18 "Confirmation" means confirmation of the Plan pursuant to section 1129 of the Bankruptcy Code. 1.19 "Confirmation Hearing" means the hearing on confirmation of the Plan under section 1128 of the Bankruptcy Code. 1.20 "Confirmation Order" means the order, entered by the Bankruptcy Court, confirming the Plan. 2 1.21 "Consulting Agreement" means the Non-Competition and Consulting Agreement, between Seven-up Acquisition Corp. and Seven-Up/RC. 1.22 "Consummation" means the Business Day on which all conditions to the consummation of the Plan set forth in Section IX.B. hereof have been satisfied or waived as provided in Section IX.C. hereof. 1.23 "Cure" means the distribution of Cash, or such other property as may be agreed upon by the parties and ordered by the Bankruptcy Court, with respect to the assumption of an executory contract or unexpired lease, pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to all unpaid monetary obligations, without interest, or such other amount as may be agreed upon by the parties, under such executory contract or unexpired lease, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law. 1.24 "Debtors" means Seven-Up/RC and BGAC collectively, including Seven- Up/RC and BGAC in their capacity as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 1.25 "DIP Facility" means the Debtor-in-Possession Credit Agreement, dated as of May 13, 1996, between Seven-Up/RC, as borrower, the lenders party thereto, and GE Capital, as agent, as approved by the Bankruptcy Court pursuant to the terms of the orders with respect thereto, dated May 13, 1996 and May 21, 1996, and as may be amended from time to time. 1.26 "DIP Facility Claim" means a claim pursuant to or arising under the DIP Facility. 1.27 "Disallowed Claim" means (a) a Claim, or any portion thereof, that has been disallowed by a Final Order or (b) a Claim as to which a proof of claim bar date has been established by the Bankruptcy Code, Bankruptcy Rules or Final Order of the Bankruptcy Court but no proof of claim has been filed or deemed timely filed with the Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of the Bankruptcy Court. 1.28 "Disbursing Agent" means the Indenture Trustee, who shall make distributions to holders of Allowed Class 4 Noteholders Claims. 1.29 "Disclosure Statement" means the written disclosure statement relating to the Plan and approved by the Bankruptcy Court, as such disclosure statement may be amended, modified, or supplemented from time to time. 1.30 "Disputed Claim" means a Claim, or any portion thereof, that is neither an Allowed Claim nor a Disallowed Claim; provided, however, that, for purposes of the Plan, any Claim for which no proof of claim bar date has been established shall not be treated as a Disputed Claim unless Seven-Up/RC disputes such claim in accordance with the provisions of section VII.G. hereof. 1.31 "Distribution Date" means the date, occurring as soon as practicable after Consummation but in no event more than 10 days after Consummation, upon which the first distributions are made to holders of Allowed Class 4 Noteholders Claims and to holders of Allowed Class 5 GE Capital Term Loan Secured Claims in accordance with Section III.C. hereof. 1.32 "Estates" means, collectively, the estates of Seven-Up/RC and BGAC in the Chapter 11 Cases, pursuant to section 541 of the Bankruptcy Code. 1.33 "Face Amount" means (a) when used in reference to a Disputed or Disallowed Claim, the full stated amount claimed by the holder of such Claim in any proof of Claim timely filed with the Bankruptcy Court or otherwise deemed timely filed by any Final Order of the Bankruptcy Court or other applicable bankruptcy law, and (b) when used in reference to an Allowed Claim, the allowed amount of such Claim. 3 1.34 "Final Order" means an order or judgment, the operation or effect of which has not been stayed, reversed, or amended and as to which order or judgment (or any revision, modification, or amendment thereof) the time to appeal or to seek review or rehearing has expired and as to which no appeal or petition for review or rehearing was filed or, if filed, remains pending. 1.35 "GE Capital" means General Electric Capital Corporation, a corporation organized under the banking laws of the State of New York. 1.36 "GE Capital Commitment Letter" means the commitment letter, dated May 21, 1996 issued by GE Capital, and attached to the Disclosure Statement as Exhibit "2", or a commitment by another financial institution on the same, or substantially similar, terms. 1.37 "GE Capital Credit Agreement" means the credit agreement, as amended, dated as of February 1, 1994, between Seven-Up/RC, as borrower, the lenders party thereto, and GE Capital, as agent. 1.38 "GE Capital Credit Agreement Collateral" means the property as described in the Collateral Documents (as defined in the GE Capital Credit Agreement), in which Seven-Up/RC granted GE Capital, as agent under the GE Capital Credit Agreement, a lien or security interest to secure its obligations under the GE Capital Credit Agreement to the extent that such property remains encumbered by a valid, enforceable and perfected lien or security interest of GE Capital, as agent under the GE Capital Credit Agreement, that has neither been avoided nor is the subject of an action pending on Consummation to avoid such lien or security interest under the Bankruptcy Code or applicable non-bankruptcy law. 1.39 "GE Capital of PR" means General Electric Capital Corporation of Puerto Rico, a Puerto Rico corporation. 1.40 "GE Capital of PR Collateral" means the property as described in the GE Capital of PR Guaranty, in which Seven-Up/RC granted GE Capital of PR a lien or security interest to secure its obligations under the GE Capital of PR Guaranty to the extent that such property remains encumbered by a valid, enforceable and perfected lien or security interest of GE Capital of PR that has neither been avoided nor is the subject of an action pending as of Consummation to avoid such lien or security interest under the Bankruptcy Code or applicable non-bankruptcy law. 1.41 "GE Capital of PR Guaranty" means the Continuing Guaranty Agreement, dated as of February 1, 1994, between Seven-Up/RC and GE Capital of PR, pursuant to which Seven-Up/RC guaranteed the payment and performance of Seven- Up/RC of PR's obligations under the credit agreement, dated as of February 1, 1994, between GE Capital of PR, and the lender parties thereto, and Seven- Up/RC of PR. 1.42 "GE Capital Post-Consummation Facility" means the credit agreement and related documents to be entered into by Seven-Up/RC and the lender parties thereto, in accordance with the GE Capital Commitment Letter. 1.43 "GE Capital Term Loan" means the loan evidenced by the Promissory Note, dated April 3, 1995, by Seven-Up/RC, as maker, in favor of GE Capital, as payee, in the original principal amount of $693,166.18. 1.44 "GE Capital Term Loan Collateral" means the property as described in the Master Security Agreement, made as of March 31, 1995, by and between Seven-Up/RC, as debtor, and GE Capital, as secured party, the Collateral Schedule dated April 3, 1996, and the Amendment No. 1 to Master Security Agreement, dated March 31, 1995, between Seven-Up/RC, as debtor, and GE Capital, as secured party, in which Seven-Up/RC granted GE Capital a lien or security interest to secure its obligations under the GE Capital Term Loan to the extent that such property remains encumbered by a valid, enforceable and perfected lien or security interest of GE Capital that has neither been avoided nor is the subject of an action pending as of Consummation to avoid such lien or security interest under the Bankruptcy Code or applicable non- bankruptcy law. 4 1.45 "Indenture Trustee" means The Bank of New York, as indenture trustee under the Senior Secured Notes Indenture, or any successor or replacement trustee. 1.46 "Interest" means the rights of the holder and owner of issued and outstanding shares of Old Common Stock or BGAC Common Stock, as the case may be. 1.47 "Management Option" means the option agreement between Seven-Up/RC and certain members of Seven-Up/RC management designated therein, pursuant to which such designated members of management will be granted the right to purchase 6% of the equity of Reorganized Seven-Up/RC, which form of option agreement is attached as Exhibit "B" hereto. 1.48 "Merger Agreement" means the merger agreement between Seven-Up/RC and BGAC, pursuant to which BGAC will merge into Seven-Up/RC immediately prior to Consummation of the Plan, a copy of which is attached as Exhibit "E" hereto. 1.49 "New Common Stock" means the shares of common stock of Reorganized Seven-Up/RC, par value $0.01 per share, to be authorized and issued by Reorganized Seven-Up/RC on Consummation pursuant to this Plan. The New Common Stock shall have such rights with respect to dividends, liquidation, voting, and other matters as set forth in Reorganized Seven-Up/RC's amended and restated certificate of incorporation, a copy of which is attached as Exhibit "A" hereto and as provided under applicable law. 1.50 "Noteholders" means those Persons holding the Senior Secured Notes. 1.51 "Old Common Stock" means the common stock of Seven-Up/RC with a par value of $0.01 per share, authorized and outstanding as of the Petition Date. 1.52 "Old Securities" means the Senior Secured Notes and the Old Common Stock. 1.53 "Other Priority Claim" means a Claim entitled to priority pursuant to section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim, an Administrative Claim, or a DIP Facility Claim. 1.54 "Other Secured Claims" means a Secured Claim other than (i) a Secured Claim in subclasses 2.01 GE Capital Working Capital Secured Claims or 2.02 GE Capital of PR Secured Claims, (ii) a Class 4 Noteholders Claim, (iii) a Class 5 GE Capital Term Loan Secured Claim, and (iv) a DIP Facility Claim. 1.55 "Person" means an individual, corporation, partnership, joint venture, association, joint stock company, trust, estate, unincorporated organization, or other entity. 1.56 "Petition Date" means May 13, 1996, the date on which Seven-Up/RC and BGAC filed their petitions for reorganization commencing these Chapter 11 Cases. 1.57 "Plan" has the meaning ascribed to that term in the Introduction to this Plan. 1.58 "Porta Pack" means Porta Pack Corporation, a Delaware corporation. 1.59 "Principal Agreements" means those franchise, license, and distribution agreements with Cadbury Schweppes Inc., Royal Crown Cola Co., and Great Brands of Europe, Inc. 1.60 "Priority Tax Claim" means a Claim entitled to priority pursuant to section 507(a)(8) of the Bankruptcy Code. 1.61 "Professional Fees" means a Claim of a professional, retained in these Chapter 11 Cases, or either Chapter 11 Case, pursuant to sections 327 and 1103 of the Bankruptcy Code or otherwise, for compensation or reimbursement of costs and expenses relating to services incurred prior to and including the date of Confirmation, 5 when and to the extent any Claim described above is approved by a Final Order entered pursuant to sections 330, 331, 503(b), or 1103 of the Bankruptcy Code. 1.62 "Pro Rata" means, at any time, the proportion that the Face Amount of a Claim in a particular Class bears to the aggregate Face Amount of all Claims (including Disputed Claims, but excluding Disallowed Claims) in such Class, unless the Plan provides otherwise. 1.63 "Record Date" means the record date for purposes of making distributions under the Plan on account of Allowed Claims, which date shall be the fifth (5th) Business Day following Confirmation. 1.64 "Registration Rights Agreement" means the registration rights agreement to be in a form reasonably acceptable to the Committee. 1.65 "Reinstated" or "Reinstatement" means leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the holder of such Claim so as to leave such Claim unimpaired in accordance with section 1124 of the Bankruptcy Code, thereby entitling the holder of such Claim to, but not more than, (a) reinstatement of the original maturity of the obligations on which such Claim is based, and (b) payment, as provided herein, of an amount of Cash consisting solely of the sum of (i) matured but unpaid principal installments, without regard to any acceleration of maturity, accruing prior to Consummation, (ii) accrued but unpaid interest as of the Petition Date, and (iii) reasonable fees, expenses, and charges, to the extent such fees, expenses, and charges are allowed under the Bankruptcy Code and are provided for in the agreement or agreements on which such Claim is based; provided, however, that any contractual right that does not pertain to the payment when due of principal and interest on the obligation on which such Claim is based, including, but not limited to, financial covenant ratios, negative pledge covenants, covenants or restrictions on merger or consolidation, and affirmative covenants regarding corporate existence prohibiting certain transactions or actions contemplated by the Plan, or conditioning such transactions or actions on certain factors, shall not be reinstated in order to accomplish Reinstatement. 1.66 "Rejection Schedule" means the schedule of executory contracts and unexpired leases designated by Seven-Up/RC to be rejected, as of Confirmation of the Plan, pursuant to sections 365 and 1123(b)(2) of the Bankruptcy Code and section VIII.A. of the Plan, which schedule will be filed with the Bankruptcy Court on or before July 15, 1996. 1.67 "Reorganized Seven-Up/RC" means Seven-Up/RC as reorganized on and after Consummation and after giving affect to the merger with, and substantive consolidation into, BGAC. 1.68 "Secured Claim" means a Claim, secured by a valid, binding and enforceable security interest in or lien upon property of the Estates to the extent of the value as is established by the Bankruptcy Court, of such interest or lien as determined by a Final Order of the Bankruptcy Court, after notice to the Committee, pursuant to section 506 of the Bankruptcy Code or as otherwise agreed upon in writing by Seven-Up/RC and the holder of such Claim after notice to the Committee and subject to the approval of the Bankruptcy Court. 1.69 "Senior Secured Notes" means the 11.5% Senior Secured Notes due 1999 of Seven-Up/RC, issued and outstanding under the Senior Secured Notes Indenture. 1.70 "Senior Secured Notes Collateral" means the Old Common Stock and 66.5% of the issued and outstanding capital stock of Seven-Up/RC of PR in which BGAC and Seven-Up/RC granted the Noteholders liens and security interests to secure BGAC's obligations under its guarantee of the Senior Secured Notes and Seven- Up/RC's obligations under the Senior Secured Notes. 1.71 "Senior Secured Notes Indenture" means the indenture dated as of August 1, 1992, by and among Seven-Up/RC, BGAC and the Indenture Trustee, pursuant to which the Senior Secured Notes were issued, as such indenture may heretofore have been amended, modified, or supplemented. 6 1.72 "Seven-Up/RC" means Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware corporation, a wholly-owned subsidiary of BGAC and a debtor and debtor-in-possession in Chapter 11 Case No. 96-738 (HSB). Seven-Up/RC also means Reorganized Seven-Up/RC on and after Consummation. 1.73 "Seven-Up/RC of PR" means Seven-Up/RC Bottling Company of Puerto Rico, Inc, the direct wholly-owned subsidiary of Seven-Up/RC. 1.74 "Stock Purchase Agreement" means the Stock Purchase and Sale Agreement, dated May 3, 1996, among Seven-Up Acquisition Corporation, Seven-Up/RC and Seven-Up/RC of PR, or such other agreement between Seven-Up/RC and the party offering a higher and better offer. 1.75 "Unofficial Noteholders Committee" means the ad hoc unofficial committee of holders of Senior Secured Notes, which was formed after the August 1, 1995 suspension of interest payments on the Senior Secured Notes. 1.76 "Unsecured Claim" means a Claim against Seven-Up/RC that is not a DIP Facility Claim, Administrative Claim, Priority Tax Claim, or Class 1 Other Priority Claim, Class 2 Secured Claim, Class 4 Noteholders Claim, or Class 5 GE Capital Term Loan Secured Claim. 1.77 "Westinghouse" means Westinghouse Electric Corporation and its affiliates. 1.78 "WB" means WB Bottling Corporation, a Delaware corporation and the holder of 100% of the BGAC Common Stock. 1.79 "WB Warrant" means the warrant to be issued under the warrant agreement by and between Seven-Up/RC and WB, pursuant to which WB will be granted the right to purchase five percent (5%) of New Common Stock, which warrant agreement is attached as Exhibit "C" hereto. C. RULES OF INTERPRETATION For purposes of the Plan (a) any reference in the Plan to a contract, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions, (b) any reference in the Plan to an existing document or exhibit filed or to be filed means such document or exhibit as it may have been or may be amended, modified, or supplemented, (c) unless otherwise specified, all references in the Plan to Sections, Articles, Schedules, and Exhibits are references to Sections, Articles, Schedules, and Exhibits of or to the Plan, (d) the words "herein" and "hereto" refer to the Plan in its entirety rather than to a particular portion of the Plan, (e) any reference to the number or percentage of shares of New Common Stock, unless otherwise specified, reflects the actual distribution of such New Common Stock but does not reflect any dilution due to the exercise of the Management Option or the WB Warrant, (f) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan, and (g) the rules of construction set forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall apply. D. COMPUTATION OF TIME In computing any period of time prescribed or allowed by the Plan, unless otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a) shall apply. 7 ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS A. INTRODUCTION All Claims and Interests, except DIP Facility Claims, Administrative Claims, and Priority Tax Claims, are placed in the Classes set forth below. In accordance with section 1123(a)(1) of the Bankruptcy Code, DIP Facility Claims, Administrative Claims, and Priority Tax Claims, as described below, have not been classified. A Claim or Interest is placed in a particular Class only to the extent that the Claim or Interest falls within the description of that Class, and is classified in other Classes to the extent that any portion of the Claim or Interest falls within the description of such other Classes. A Claim or Interest is also placed in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim in that Class and such Claim or Interest has not been paid, released, or otherwise settled prior to Consummation. B. UNCLASSIFIED CLAIMS (NOT ENTITLED TO VOTE ON THE PLAN) 1. DIP Facility Claims 2. Administrative Claims Against Seven-Up/RC 3. Priority Tax Claims Against Seven-Up/RC C. CLASSES OF CLAIMS THAT ARE NOT IMPAIRED (NOT ENTITLED TO VOTE ON THE PLAN) 1. Class 1: Other Priority Claims Class 1 consists of all Other Priority Claims against Seven-Up/RC. 2. Class 2: Secured Claims Class 2 consists of separate subclasses for each Secured Claim secured by a security interest in or lien upon property in which Seven-Up/RC's Estate has an interest. Each subclass is deemed to be a separate class for all purposes under the Bankruptcy Code. Class 2.01: GE Capital Working Capital Secured Claims Class 2.01 consists of all Claims against Seven-Up/RC, secured by and to the extent of the value of the GE Capital Credit Agreement Collateral, directly or indirectly arising from or under, or relating in any way to the GE Capital Credit Agreement. Class 2.02: GE Capital of PR Secured Claims Class 2.02 consists of all Claims secured by and to the extent of the value of the GE Capital of PR Collateral, directly or indirectly arising from or under, or relating in any way to the GE Capital of PR Guaranty. Class 2.03: Other Secured Claims Class 2.03 consists of all Other Secured Claims against Seven-Up/RC. 3. Class 3: General Unsecured Claims Class 3 consists of all Unsecured Claims against Seven-Up/RC. 8 D. IMPAIRED CLASSES OF CLAIMS (ENTITLED TO VOTE ON THE PLAN) 1. Class 4: Noteholders Claims Class 4 consists of all Claims directly or indirectly arising from or under, or relating in any way to, the Senior Secured Notes Indenture, the Senior Secured Notes or the Senior Secured Notes Collateral. 2. Class 5: GE Capital Term Loan Secured Claims Class 5 consists of all Claims directly or indirectly arising from or under, or relating in any way to, the GE Capital Term Loan or the GE Capital Term Loan Collateral. E. IMPAIRED CLASS OF INTEREST (ENTITLED TO VOTE ON THE PLAN BUT DEEMED TO HAVE ACCEPTED PURSUANT TO ORDER OF BANKRUPTCY COURT) 1. Class 6: Old Common Stock Interest Class 6 consists of all Interest arising from or in any way associated with the Old Common Stock. ARTICLE III TREATMENT OF CLAIMS AND INTERESTS A. UNCLASSIFIED CLAIMS 1. DIP Facility Claims On the Distribution Date, the holder of all Claims pursuant to or arising under the DIP Facility shall receive, in full satisfaction, settlement, release and discharge of and in exchange for such Allowed DIP Facility Claim, (a) Cash equal to the amount of such Allowed Claim and all the rights, benefits, and protections provided it under the order or orders of the Bankruptcy Court approving the DIP Facility or (b) such other treatment as to which Seven-Up/RC and such holder shall have agreed upon in writing as announced at or prior to the Confirmation Hearing. 2. Administrative Claims On the Distribution Date, a holder of an Allowed Administrative Claim shall receive in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Administrative Claim (a) Cash equal to the unpaid portion of such Allowed Administrative Claim or (b) such other treatment as to which Seven-Up/RC and such holder shall have agreed upon in writing; provided, however, that Allowed Administrative Claims with respect to liabilities incurred by Seven-Up/RC in the ordinary course of its business during these Chapter 11 Cases shall be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto. 3. Priority Tax Claims On the Distribution Date, a holder of an Allowed Priority Tax Claim shall be entitled to receive in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Priority Tax Claim (a) deferred Cash payments in an aggregate principal amount equal to the amount of such Allowed Priority Tax Claim plus interest on the unpaid portion thereof at the rate of five (5) percent per annum from Consummation through the date of payment thereof or (b) such other treatment as to which Seven-Up/RC and such holder shall have agreed upon in writing, with the approval of the Bankruptcy Court, after notice to the Committee. If deferred Cash payments are made to a holder of an Allowed Priority Tax Claim, payments of principal shall be made in annual installments, each such installment amount being equal to ten (10) percent of such Allowed Priority Tax Claim plus accrued and unpaid interest, with the first payment to be due on the first anniversary of 9 the Distribution Date, and subsequent payments to be due on each successive anniversary of the first payment date or as soon thereafter as is practicable; provided, however, that any installments remaining unpaid on the date that is six years after the date of assessment of the tax that is the basis of the Allowed Priority Tax Claim shall be paid on the first Business Day following such date, together with any accrued and unpaid interest to the date of payment; provided, further, that Seven-Up/RC reserves the right to pay any Allowed Priority Tax Claim, or any remaining balance of such Allowed Priority Tax Claim, in full at any time on or after Consummation without premium or penalty. B. CLASSES OF CLAIMS THAT ARE NOT IMPAIRED 1. Class 1: Other Priority Claims On the Distribution Date, a holder of an Allowed Class 1 Other Priority Claim shall receive, in the sole discretion of Seven-Up/RC, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Class 1 Other Priority Claim (a) Cash equal to the amount of such Allowed Class 1 Other Priority Claim or (b) such other treatment as to which Seven-Up/RC and such holder shall have agreed upon in writing. 2. Class 2: Secured Claims Each subclass of Class 2 Secured Claims shall be treated as a separate class for purposes of implementing and consummating the Plan and each holder of an Allowed Class 2 Secured Claim shall receive the treatment set forth below. To the extent, if any, that the value of the collateral securing a Class 2 Secured Claim is less than the amount of such Allowed Claim, the difference shall be treated as a Class 3 General Unsecured Claim. Class 2.01: GE Capital Working Capital Secured Claims On the Distribution Date, a holder of an Allowed Class 2.01 GE Capital Working Capital Secured Claim shall, in the sole discretion of Seven-Up/RC, and in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Class 2.01 GE Capital Working Capital Secured Claim, receive (a) Cash in an amount equal to such Allowed Class 2.01 GE Capital Working Capital Claim or (b) such other treatment as Seven-Up/RC and such holder shall have agreed in writing as announced at or prior to the Confirmation Hearing. Class 2.02: GE Capital of PR Secured Claims On the Distribution Date, a holder of an Allowed Class 2.02 GE Capital of PR Secured Claim shall, in the sole discretion of Seven-Up/RC, and in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Class 2.02 GE Capital of PR Secured Claim, receive (a) Cash in an amount equal to such Allowed Class 2.02 GE Capital of PR Secured Claim or (b) such other treatment as Seven-Up/RC and such holder shall have agreed in writing as announced at or prior to the Confirmation Hearing. Class 2.03: Other Secured Claims On the Distribution Date, a holder of an Allowed Class 2.03 Other Secured Claim shall, in the sole discretion of Seven-Up/RC, and in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Class 2.03 Other Secured Claim, (a) receive Cash in an amount equal to such Allowed Class 2.03 Other Secured Claim, (b) have its Allowed Class 2.03 Other Secured Claim Reinstated, (c) have the collateral, to the extent it secures the payment obligations of Seven-Up/RC or BGAC to such holder, returned to it or (d) receive such other treatment as Seven-Up/RC and such holder shall have agreed in writing as announced at or prior to the Confirmation Hearing; provided, however, that notwithstanding any provision of this Plan to the contrary, nothing herein shall affect the right or ability of Seven-Up/RC to avoid any purported lien or security interest. 10 3. Class 3: General Unsecured Claims A holder of an Allowed Class 3 General Unsecured Claim, shall be paid in full in the ordinary course of business. Such Allowed Class 3 General Unsecured Claim will become an obligation of Reorganized Seven-Up/RC, and, if applicable, be paid in accordance with the terms of any invoice or agreement relating to such Allowed Class 3 General Unsecured Claim. C. IMPAIRED CLASSES OF CLAIMS 1. Class 4: Noteholders Claims On the Distribution Date, a holder of an Allowed Class 4 Noteholders Claim, in full satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 4 Noteholders Claim, shall receive, its Pro Rata share of (x) Class 4 New Common Stock and (y) Class 4 Proceeds. For all purposes associated herewith, including voting and distributions, the Class 4 Noteholders Claims are hereby allowed in the aggregate principal amount of $140,000,000 plus accrued and unpaid interest through and including the Petition Date at the rate provided for in the Senior Secured Notes Indenture. Each Noteholder may apply the distributions received hereunder to either unpaid principal or accrued and unpaid interest, at the discretion of such Noteholder. On the Distribution Date, Seven-Up/RC shall pay the reasonable and actual costs and expenses of the Unofficial Noteholders Committee, including without limitation the fees of the legal and financial advisors to the Unofficial Noteholders Committee. Notwithstanding the foregoing or anything in the Plan to the contrary, in the event that Class 4 Proceeds are less than $55 million but more than $54 million, Seven-Up/RC shall make an additional distribution to the Disbursing Agent in the amount by which $55 million exceeds the Class 4 Proceeds. In the event that Class 4 Proceeds are more than $55 million but less than $56 million, Class 4 Proceeds shall be deemed to be $55 million and the difference between the actual amount of Class 4 Proceeds and $55 million shall be retained by Seven-Up/RC to pay its indebtedness under the DIP Facility or the GE Post-Consummation Facility, as the case may be. 2. Class 5: GE Capital Term Loan Secured Claims On the Distribution Date, a holder of an Allowed Class 5 GE Capital Term Loan Secured Claim, in full satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 5 GE Capital Term Loan Secured Claims, shall receive either (i) Cash equal to 100% of the outstanding and unpaid principal amount of the GE Capital Term Loan, accrued and unpaid interest under the GE Capital Term Loan (including post-petition interest to the extent allowable under the Bankruptcy Code), and the fees and costs provided for under the terms of the GE Capital Term Loan or (ii) the Class 5 Note. D. IMPAIRED CLASS OF INTEREST (ENTITLED TO VOTE ON THE PLAN BUT DEEMED TO HAVE ACCEPTED PURSUANT TO ORDER OF BANKRUPTCY COURT) 1. Class 6: Old Common Stock Interest WB, as holder on or after Consummation of the Allowed Class 6 Old Common Stock Interest, shall receive the WB Warrant and 2% of the New Common Stock on account of such Class 6 Old Common Stock Interest. 11 ARTICLE IV MEANS FOR IMPLEMENTATION OF THE PLAN A. SUBSTANTIVE CONSOLIDATION AND CONTINUED CORPORATE EXISTENCE OF SEVEN-UP/RC On Consummation, BGAC will be substantively consolidated into, and merged (pursuant to the Merger Agreement) with, Seven-Up/RC, with Seven-Up/RC as the surviving corporation. For purposes of the Plan, all Claims against BGAC shall be deemed to be Claims against Seven-Up/RC and all property of BGAC shall be deemed to be property of Seven-Up/RC. Seven-Up/RC will continue to exist as a separate corporate entity in accordance with the laws of Delaware and pursuant to the certificate of incorporation and by-laws in effect prior to Consummation, except to the extent such certificate of incorporation and by- laws are amended and restated as provided for by this Plan. Both the amended and restated certificate of incorporation and by-laws shall include, among other things, pursuant to section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of nonvoting equity securities. The amended and restated certificate of incorporation and by-laws of Reorganized Seven-Up/RC is attached as Exhibit "A" hereto. B. DIRECTORS AND OFFICERS The officers of Seven-Up/RC before Consummation shall serve as the officers of Reorganized Seven-Up/RC after Consummation. On Consummation, the current directors of Seven-Up/RC shall resign and be replaced by the directors whose names will be listed on a schedule that is filed with the Bankruptcy Court on or before July 15, 1996. These directors shall serve as the initial board of directors of Reorganized Seven-Up/RC. Any right or obligation of Seven-Up/RC pursuant to its certificate of incorporation, by-laws, applicable state law or specific agreement to indemnify its shareholders or its officers, directors or employees who either (i) served Seven-Up/RC in one or more such capacities as of March 15, 1996 or (ii) have ceased to serve because of death or physical or mental disability, with respect to or arising out of events that occurred prior to the Petition Date, shall be an obligation of Reorganized Seven-Up/RC. C. OPERATIONS OF DEBTORS BETWEEN CONFIRMATION AND CONSUMMATION The Debtors shall continue to operate as debtors-in-possession, subject to the supervision of the Bankruptcy Court, pursuant to the Bankruptcy Code during the period from Confirmation through and until Consummation, and any obligation incurred by the Debtors during that period shall constitute an Administrative Claim; provided, however, that nothing herein shall preclude the Debtors from taking any step they deem necessary or desirable to prepare for and effect the Consummation of the Plan. D. EXCLUSIVITY PERIOD The Debtors shall retain the exclusive right to amend the Plan and solicit acceptances thereof until Consummation. E. TERM OF INJUNCTIONS OR STAYS Unless otherwise provided herein or in the Confirmation Order, all injunctions or stays provided for in the Chapter 11 Cases under Section 105 or 362 of the Bankruptcy Code, or otherwise, and extant immediately prior to Confirmation shall remain in full force and effect until Consummation. F. REVESTING OF ASSETS Pursuant to section 1141(b) of the Bankruptcy Code, the property of the Estates shall revest in Seven-Up/RC on Consummation of the Plan. Thereafter, Reorganized Seven-Up/RC may operate its business and may use, acquire, and dispose of property free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules, and the 12 Bankruptcy Court. As of Consummation, all property of Seven-Up/RC and BGAC shall be free and clear of all Claims and Interests, including liens and security interests, except as specifically provided in the Plan or in the Confirmation Order. Without limiting the foregoing, Seven-Up/RC may, without application to or approval by the Bankruptcy Court, pay professional fees and expenses that it may incur after Confirmation. G. CREDITORS' COMMITTEE The Committee shall cease to exist after Consummation. H. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS The Chairman of the Board of Directors, the President, the Chief Operating Officer, the Chief Financial Officer, or any other appropriate officer of the Debtors, shall be, and hereby are, authorized to execute, deliver, file, or record such contracts, instruments, releases, indentures, certificates, and other agreements or documents, and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. The Secretary or Assistant Secretary of the Debtors shall be authorized to certify or attest to any of the foregoing actions, if necessary. I. PROCEDURE FOR MAKING DISTRIBUTIONS TO HOLDERS OF NOTEHOLDERS CLAIMS Each holder of an Allowed Class 4 Noteholders Claim shall tender its Senior Secured Notes to the Indenture Trustee in accordance with written instructions to be provided to such holders by the Indenture Trustee as promptly as possible following Consummation. Such instructions shall specify that delivery of such Senior Secured Notes will be effected, and the risk of loss and title thereto will pass, only upon the proper delivery of such Senior Secured Notes with a letter of transmittal in accordance with such instructions. All surrendered Senior Secured Notes shall be marked as canceled and delivered by the Indenture Trustee to Reorganized Seven-Up/RC. All distributions of Class 4 New Common Stock or Class 4 Proceeds on account of Allowed Class 4 Noteholders Claims shall be made by the Indenture Trustee, who shall have sole responsibility for distributing shares or Cash to holders of Allowed Class 4 Noteholders Claims and for calculating the amount of shares or Cash to be distributed to such holders out of the shares and Cash distributed to the Indenture Trustee. It shall be a condition to the making of any distribution of shares and Cash to any holder of an Allowed Class 4 Noteholders Claim that such holder shall have tendered to the Indenture Trustee such holder's Senior Secured Notes or, in the event that any such Senior Secured Notes are lost, stolen, mutilated or destroyed, evidence satisfactory to the Indenture Trustee of the loss, mutilation or destruction of such Senior Secured Notes or, at the Indenture Trustee's option, an affidavit of such holder in accordance with Article 8 of the Uniform Commercial Code. Distributions under this Plan to any Person in respect of Senior Secured Notes shall not be made if such Person has not complied with the provisions of the foregoing sentence within two (2) years following Consummation, and any such Person shall be deemed to have no further Claim and shall not participate in any distribution under this Plan. J. FRACTIONAL SHARES Notwithstanding any other provision of the Plan to the contrary, no fractional shares shall be issued pursuant to the Plan. Whenever any payment of a fraction of a share under the Plan would otherwise be required, the actual distribution made shall reflect a rounding of such fraction to the nearest whole share (up or down), with half shares or less being rounded down and fractions in excess of half of a share being rounded up. K. FRACTIONAL CENTS Notwithstanding any other provision of the Plan to the contrary, no payment of fractional cents shall be made pursuant to the Plan. Whenever any payment of a fraction of a cent under the Plan would otherwise be required, the actual distribution made shall reflect a rounding of such fraction to the nearest whole penny (up or down), with half pennies or less being rounded down and fractions in excess of half of a penny being rounded up. 13 L. DE MINIMIS DISTRIBUTIONS No Cash distribution of less than twenty-five dollars ($25.00) shall be made by the Indenture Trustee or Seven-Up/RC in respect of any Allowed Claim unless a request therefor is made in writing to the Indenture Trustee. M. MANAGEMENT OPTION Upon Consummation of the Plan, certain members of management of Seven-Up/RC shall be granted the right, subject to the conditions contained in the Management Option, to purchase up to 6% of New Common Stock at a purchase price per share equal to the Exercise Price (as defined in the Management Option). ARTICLE V ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY IMPAIRED CLASSES OF CLAIMS A. CLASSES ENTITLED TO VOTE Each impaired Class that will receive or retain property or any interest in property under the Plan shall be entitled to vote to accept or reject the Plan. Any Class of Claims that is not impaired shall be deemed to have accepted the Plan and shall not be entitled to vote to accept or reject the Plan. B. CLASS ACCEPTANCE REQUIREMENT Under section 1126(c) of the Bankruptcy Code, an impaired Class of Claims has accepted the Plan if the holders of at least two-thirds ( 2/3) in dollar amount and more than one-half ( 1/2) in number of the Allowed Claims of such Class who have voted on the Plan, have voted to accept the Plan. C. CRAMDOWN The Debtors reserve their right to request Confirmation of the Plan, as it may be modified from time to time, under section 1129(b) of the Bankruptcy Code. ARTICLE VI PRESERVATION OF LITIGATION CLAIMS A. RETAINED LITIGATION CLAIMS In accordance with section 1123(b)(3) of the Bankruptcy Code, and except as otherwise provided herein or in the Confirmation Order, Reorganized Seven-Up shall retain and may expressly, in its sole discretion, enforce, sue on, settle, or compromise (or decline to do any of the foregoing) all claims, rights of action, suits, and proceedings, whether in law or in equity, whether known or unknown, that Seven-Up/RC, BGAC, or their Estates may hold against any Person. Reorganized Seven-Up/RC or any of its successors may pursue such retained litigation claims in accordance with the best interests of Reorganized Seven-Up/RC or its successors who hold such rights of action. B. PRESERVATION OF INSURANCE The Debtors' discharge and release from all Claims as provided herein, except as necessary to be consistent with the Plan, shall not diminish or impair the enforceability of any insurance policy that may cover Claims against Seven-Up/RC, BGAC or any other Person. 14 ARTICLE VII PROVISIONS GOVERNING DISTRIBUTIONS A. DATE OF DISTRIBUTIONS Distributions under the Plan shall be made on the Distribution Date, except as otherwise provided for herein or ordered by the Bankruptcy Court. B. INTEREST ON CLAIMS Except (i) as specifically provided for in the Plan or the Confirmation Order or (ii) with respect to an Allowed DIP Facility Claim, an Allowed Class 2.01 GE Capital Working Capital Secured Claim, an Allowed Class 2.02 GE Capital of PR Secured Claim, or an Allowed Class 5 GE Capital Term Loan Claim, interest shall not accrue on Claims, and no holder of a Claim shall be entitled to interest accruing on or after the Petition Date on any Claim. Interest shall not accrue or be paid upon any Disputed Claim in respect of the period from the Petition Date to the date a final distribution is made thereon if and after such Disputed Claim becomes an Allowed Claim; provided, however, that, if Seven-Up/RC objects to the allowance of a Claim after the Distribution Date and such Claim becomes an Allowed Claim, Seven-Up/RC shall pay interest on such Allowed Claim from the date of the objection through the date of the initial distribution on such Allowed Claim at a rate of 6% per annum. C. DISBURSING AGENT As to all distributions to holders of Allowed Claims in classes other than Class 4 Noteholders Claims, Seven-Up/RC shall make all distributions required under this Plan. The Indenture Trustee shall make all distributions to holders of Allowed Class 4 Noteholders Claims. Distributions to holders of Allowed Class 4 Noteholders Claims shall be deemed delivered and accepted when Class 4 Proceeds and Class 4 New Common Stock are delivered to the Indenture Trustee. D. MEANS OF CASH PAYMENT Cash payments made pursuant to this Plan shall be in U.S. funds, by the means agreed to by the payor and the payee, including by check or wire transfer, or, in the absence of an agreement, such commercially reasonable manner as the payor shall determine in its sole discretion. E. DELIVERY OF DISTRIBUTIONS Distributions to holders of Allowed Claims shall be made by the Indenture Trustee or Seven-Up/RC, as the case may be, (a) at the addresses set forth on the list of record holders of the Senior Secured Notes as of the Record Date or (b) at the addresses reflected in Seven-Up/RC's books and records. If any holder's distribution is returned to the Indenture Trustee, Seven- Up/RC, or such other agent as Seven-Up/RC may designate, as the case may be, no further distributions to such holder shall be made unless and until the Indenture Trustee, Seven-Up/RC, or such other agent as Seven-Up/RC may designate, as the case may be, is notified of such holder's then current address, at which time all missed distributions shall be made to such holder without interest; provided, however, that to the extent Seven-Up/RC or the Indenture Trustee earns interest on the Class 4 Proceeds, such interest less any applicable bank charges shall be distributed Pro Rata to the holders of Allowed Class 4 Noteholders Claims. Amounts in respect of undeliverable distributions made through the Indenture Trustee, Seven-Up/RC, or such other agent as Seven-Up/RC may designate, as the case may be, shall be returned to Reorganized Seven-Up/RC until such distributions are claimed. All claims for undeliverable distributions shall be made on or before the fifth (5th) anniversary of Consummation. After such date, all unclaimed property shall revert to Reorganized Seven-Up/RC and the claim of any holder or successor to such holder with respect to such property shall be discharged and forever barred. 15 F. CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS Upon Consummation, except as otherwise provided for herein and except with respect to the obligations, if any, arising under the DIP Facility that survive Consummation of the Plan, (i) the Old Securities and any other note, bond, indenture, or other instrument or document evidencing or creating any indebtedness, equity interest or obligation of Seven-Up/RC, except such notes or other instruments evidencing indebtedness or obligations of Seven-Up/RC that are Reinstated under the Plan, shall be canceled, and (ii) the obligations of Seven-Up/RC under any agreements, indentures, or certificates of designations governing the Old Securities and any other note, bond, indenture, or other instrument or document evidencing or creating any indebtedness, equity interest or obligation of Seven-Up/RC, except such notes or other instruments evidencing indebtedness or obligations of Seven-Up/RC that are Reinstated under the Plan, as the case may be, shall be discharged; provided, however, that each indenture or other agreement that governs the rights of the holder of a Claim and that is administered by the Indenture Trustee shall continue in effect solely for the purposes of (i) allowing the Indenture Trustee to make the distributions to be made on account of such Claims under the Plan as provided in Article VII hereof and (ii) governing the agency relationship between the Indenture Trustee and the Noteholders, which provisions shall remain in effect according to the terms of the Senior Secured Notes Indenture; provided, further, that the provisions of this paragraph shall not affect the discharge of the Debtors' liabilities under the Bankruptcy Code and the Confirmation Order or result in any expense or liability to Reorganized Seven-Up/RC. Reorganized Seven-Up/RC shall not have any obligations to the Indenture Trustee for any fees, costs, or expenses, except as expressly provided in this Section VII.F.; provided, further, that Reorganized Seven-Up/RC shall be liable for the payment of the reasonable fees and expenses of the Indenture Trustee under the Senior Secured Notes, including attorneys fees outstanding on the Petition Date and amounts incurred in connection with this Plan and in making the distributions to holders of Allowed Class 4 Noteholders Claims in accordance with the provisions hereof, in an aggregate amount not to exceed $75,000. G. RESOLUTION OF CLAIMS Any Claim, other than a Claim for Professional Fees, that is not an Allowed Claim shall be determined, resolved, or adjudicated in the manner in which such Claim would have been determined, resolved or adjudicated if this Chapter 11 case had not been commenced, unless, at Seven-Up/RC's election, the amount, validity or priority of such Claim is determined, resolved, or adjudicated by the Bankruptcy Court. Seven-Up/RC may file an objection with the Bankruptcy Court to the allowance of any Claim (whether or not a proof of claim has been filed) at any time on or before November 1, 1996, unless such time period is extended by order of the Bankruptcy Court. H. ORDINARY COURSE LIABILITIES Subject to the terms hereof, holders of Claims against Seven-Up/RC based on liabilities incurred before or after the Petition Date in the ordinary course of Seven-Up/RC's business shall not be required to file any request for payment of such Claims. Such Claims shall be assumed and paid by Seven-Up/RC in accordance with the terms of this Plan, without any further action by the holders of such Claims. I. RECORD DATE FOR DISTRIBUTIONS TO HOLDERS OF SENIOR SECURED NOTES At the close of business on the Record Date, the transfer ledgers of the Indenture Trustee shall be closed, and there shall be no further changes in the record holders of the Senior Secured Notes. Reorganized Seven-Up/RC and the Indenture Trustee shall have no obligation to recognize any transfer of such Senior Secured Notes occurring after the Record Date. Reorganized Seven- Up/RC and the Indenture Trustee shall be entitled instead to recognize and deal for all purposes hereunder with only those record holders stated on the transfer ledgers as of the close of business on the Record Date. 16 ARTICLE VIII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES All executory contracts and unexpired leases of Seven-Up/RC specifically listed on the Rejection Schedule shall be deemed automatically rejected upon Confirmation. The Confirmation Order shall constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365(a) of the Bankruptcy Code. B. ASSUMED IF NOT REJECTED All executory contracts and unexpired leases of Seven-Up/RC, including any and all franchise, distribution, licensing, or cooperative association agreements, not specifically listed on the Rejection Schedule shall be deemed to be automatically assumed as of Confirmation. The Confirmation Order shall constitute an order of the Bankruptcy Court approving such assumptions, pursuant to section 365(a) of the Bankruptcy Code, as of Confirmation. Each assumed executory contract and unexpired lease of Seven-Up/RC that relates to the use or occupancy of real property shall include (a) all modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, and (b) all executory contracts or unexpired leases appurtenant to the premises, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vaults, tunnel or bridge agreements, or franchises, and any other interests in real estate or rights in rem related to such premises, unless any of the foregoing agreements has been rejected pursuant to a Final Order of the Bankruptcy Court or is listed on the Rejection Schedule. All executory contracts and unexpired leases of BGAC, if any, shall be deemed automatically rejected as of Confirmation. C. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES Any monetary amounts by which each executory contract and unexpired lease to be assumed under the Plan may be in default shall be satisfied by Cure, under section 365(b)(1) of the Bankruptcy Code, at the option of Seven-Up/RC or the assignee of Seven-Up/RC assuming such contract or lease. In the event of a dispute regarding (i) the nature or the amount of any Cure, (ii) the ability of Reorganized Seven-Up/RC or any assignee to provide "adequate assurance of future performance" (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed, or (iii) any other matter pertaining to assumption, Cure shall occur following the entry of a Final Order resolving the dispute and approving the assumption and, as the case may be, assignment. D. BAR DATE FOR REJECTION DAMAGES If the rejection by Seven-Up/RC or BGAC, pursuant to the Plan, of an executory contract or unexpired lease results in a Claim, then such Claim shall be barred forever and shall not be enforceable against Seven-Up/RC or Reorganized Seven-Up/RC, or its property unless a proof of claim is filed with the clerk of the Bankruptcy Court and served upon counsel to Seven-Up/RC and counsel to the Committee within thirty (30) days after service of a notice that the executory contract or unexpired lease has been rejected. E. COMPENSATION AND BENEFIT PROGRAMS All employment and severance agreements, and all employee compensation and benefit programs of Seven-Up/RC, including agreements and programs subject to sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or after the Petition Date and not since terminated, shall be deemed to be, and shall be treated as though they are, executory contracts that are assumed under this Plan, but only to the extent that rights under 17 such agreements and programs are held by Seven-Up/RC or Persons who are Seven- Up/RC employees as of Confirmation, and Seven-Up/RC's obligations under such agreements and programs to persons who are employees of Seven-Up/RC on Confirmation shall survive Confirmation of this Plan, except for (i) such executory contracts or plans specifically rejected pursuant to the Plan (to the extent such rejection does not violate sections 1114 and 1129(a)(13) of the Bankruptcy Code) and (ii) such executory contracts or plans as have previously been rejected, pursuant to a Final Order, or specifically waived by the beneficiaries of such plans or contracts or programs. F. ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO REORGANIZED SEVEN-UP/RC On Consummation, each of the executory contracts and unexpired leases that is being, or previously has been, assumed shall be assigned to Reorganized Seven-Up/RC. The Confirmation Order shall approve such assignments pursuant to section 365 of the Bankruptcy Code. ARTICLE IX CONDITIONS PRECEDENT A. CONDITIONS TO CONFIRMATION The following are conditions precedent to Confirmation of the Plan that must be satisfied unless waived in accordance with Section IX.C. of the Plan: 1. The Confirmation Order shall be in form and substance reasonably acceptable to Seven-Up/RC, the Committee, and GE Capital. 2. The GE Capital Commitment Letter shall be in effect and shall not have been terminated. 3. The Bankruptcy Court shall have entered an order approving the Stock Purchase Agreement, which agreement shall have been executed and delivered, shall be in effect and shall not have been terminated. B. CONDITIONS TO CONSUMMATION The following are conditions precedent to the occurrence of Consummation, each of which must be satisfied unless waived in accordance with Section IX.C. of the Plan: 1. Confirmation Order shall have been entered. 2. The Confirmation Order shall have become a Final Order and provide, among other things, that: a.The provisions of the Confirmation Order are nonseverable and mutually dependent. b. All executory contracts or unexpired leases assumed by Seven-Up/RC during these Chapter 11 Cases or under the Plan shall be assigned and transferred to, and remain in full force and effect for the benefit of, Reorganized Seven-Up/RC notwithstanding any provision in such contract or lease (including those described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits such assignment or transfer or that enables or requires termination of such contract or lease. c. The transfers of property by Seven-Up/RC and, to the extent applicable, BGAC (a) to Reorganized Seven-Up/RC (i) are or shall be legal, valid, and effective transfers of property, (ii) vest or shall vest Reorganized Seven-Up/RC with good title to such property free and clear of all liens, charges, Claims, encumbrances, or interests, except as expressly provided in the Plan or Confirmation Order, (iii) do not and shall not constitute avoidable transfers under the Bankruptcy Code or under applicable bankruptcy or non-bankruptcy law, and (iv) do not and shall not subject Reorganized Seven-Up/RC to any liability by reason of such transfer under the Bankruptcy Code or under applicable non-bankruptcy law, including, without limitation, any laws affecting successor or transferee liability, and 18 (b) to holders of Claims under the Plan are for good consideration and value and are in the ordinary course of Seven-Up/RC's business. d. Except as expressly provided in the Plan, Seven-Up/RC and BGAC are discharged effective upon Confirmation from any "debt" (as that term is defined in section 101(12) of the Bankruptcy Code), and the Debtors' liability in respect thereof is extinguished completely, whether reduced to judgment or not, liquidated or unliquidated, contingent or noncontingent, asserted or unasserted, fixed or unfixed, matured or unmatured, disputed or undisputed, legal or equitable, or known or unknown, or that arose from any agreement of Seven-Up/RC or BGAC that has either been assumed or rejected in these Chapter 11 Cases or pursuant to the Plan, or obligation of Seven-Up/RC or BGAC incurred before Confirmation, or from any conduct of Seven-Up/RC or BGAC prior to Confirmation, or that otherwise arose before Confirmation, including, without limitation, all interest, if any, on any such debts, whether such interest accrued before or after the Petition Date. e. The Plan does not provide for the liquidation of all or substantially all of the property of Seven-Up/RC or BGAC and its Confirmation is not likely to be followed by the liquidation of Reorganized Seven-Up/RC or the need for further financial reorganization. f. Any objection, not previously withdrawn or settled, to the adequacy of the information contained in the Disclosure Statement is overruled, and the information contained in the Disclosure Statement was adequate for the purpose of soliciting ballots for Confirmation of the Plan. g. The substantive consolidation of BGAC with and into Seven-Up/RC is approved and authorized, and such substantive consolidation is in the best interests of the Estates. 3. The Bankruptcy Court shall have entered one or more orders (which may be the Confirmation Order), which have become Final Orders authorizing the assumption and assignment of all unexpired leases and executory contracts, including the Principal Agreements, to Reorganized Seven- Up/RC. 4. No request for revocation of the Confirmation Order under section 1144 of the Bankruptcy Code shall have been made, or, if made, shall remain pending. 5. The sale of the stock of Seven-Up/RC of PR, pursuant to the Stock Purchase Agreement or substantially similar agreement, and the Consulting Agreement shall have closed. 6. The documents implementing the GE Capital Post-Consummation Facility shall have been executed and delivered to Seven-Up/RC and the conditions to funding thereunder, except for those conditions relating to Consummation of the Plan and payments to be made in the Chapter 11 Cases, shall have been satisfied or waived. 7. Seven-Up/RC's amended and restated certificate of incorporation shall have been filed with the secretary of state of Delaware and shall be in effect. 8. Seven-Up/RC shall have adopted its amended and restated by-laws and such by-laws shall be in effect. 9. Seven-Up/RC shall have reserved (a) the Class 4 Proceeds for payment to holders of Allowed Class 4 Noteholders Claims and (b) the funds (if any) that must be distributed to the Disbursing Agent pursuant to the second paragraph of Section III.C.1. hereof. 10. Seven-Up/RC shall have reserved $10 million of the gross proceeds received from the Stock Purchase Agreement and the Consulting Agreement for payment to GE Capital either to satisfy the outstanding obligations of Seven-Up/RC under the DIP Facility, in accordance with the terms of the DIP Facility, or as a credit against borrowings of Reorganized Seven-Up/RC under the GE Capital Post-Consummation Facility. 11. The Merger Agreement shall have been executed, delivered and filed with the secretary of state of Delaware. 12. The Registration Rights Agreement shall have been executed and delivered. 19 C. WAIVER OF CONDITIONS TO CONFIRMATION AND CONSUMMATION The conditions set forth in Sections IX.A. and IX.B.2. through B.4. of the Plan may be waived by Seven-Up/RC without notice or a hearing; provided, however, that Seven-Up/RC shall provide the Committee and GE Capital with notice of any waiver under this Section IX.C. The conditions set forth in Sections IX.B.1. and IX.B.5. through B.12. may not be waived by Seven-Up/RC and BGAC. ARTICLE X MODIFICATIONS AND AMENDMENTS A. MODIFICATION OF THE PLAN The Debtors may alter, amend, or modify the Plan or any Exhibits thereto under section 1127(a) of the Bankruptcy Code at any time prior to Confirmation. The Debtors shall provide parties-in-interest with notice of such amendments or modifications as may be required by the Bankruptcy Rules or order of the Bankruptcy Court and shall, in any event, provide such notice to counsel for the Committee and GE Capital. After Confirmation and prior to substantial consummation of the Plan as defined in section 1101(2) of the Bankruptcy Code, Seven-Up/RC may, under section 1127(b) of the Bankruptcy Code, institute proceedings in the Bankruptcy Court to remedy any defect or omission or to reconcile any inconsistencies in the Plan, the disclosure statement approved with respect to the Plan, or the Confirmation Order, and such matters as may be necessary to carry out the purpose and effect of the Plan so long as such proceedings do not adversely affect the treatment of holders of Claims or holders of Interests under the Plan; provided, however, that prior notice of such proceedings shall be served in accordance with the Bankruptcy Rules or order of the Bankruptcy Court. ARTICLE XI RETENTION OF JURISDICTION A. JURISDICTION OF BANKRUPTCY COURT The Bankruptcy Court shall have exclusive jurisdiction, under sections 105(a) and 1142 of the Bankruptcy Code, of all matters arising out of, and related to, these Chapter 11 Cases and the Plan including, among other things, the following matters: 1. To hear and determine any and all pending or future objections to the allowance of Claims relating to events or transactions occurring on or prior to Consummation; 2. To consider and rule on the compromise and settlement of any Claim against or cause of action on behalf of Seven-Up/RC or its Estate; 3. To hear and determine all pending or future controversies, suits, and disputes that may arise in connection with the interpretation of the Plan or any documents intended to implement the provisions of the Plan; 4. To hear and determine any and all applications for the allowance of Professional Fees; 5. To hear and determine, if necessary, or to estimate or liquidate any and all claims arising from the rejection of executory contracts or unexpired leases pursuant to the Plan or otherwise; 6. To consider any modifications of the Plan permitted by the Bankruptcy Code; 7. To correct any defect, cure any omission or reconcile any inconsistency in the Plan, including any exhibit thereto, or in any order of the Bankruptcy Court, including the Confirmation Order, as may be necessary to carry out the purposes and intent of the Plan and to implement and effectuate the Plan; 8. To determine such other matters as may be provided for in the Confirmation order or other orders of the Bankruptcy Court as may be authorized under the provisions of the Bankruptcy Code or any other applicable law; 20 9. To enforce all orders, judgments, injunctions, and rulings entered in the Chapter 11 Cases; 10. To issue such orders as may be necessary or appropriate in aid of Confirmation and/or to facilitate Consummation of the Plan; 11. To enter an order closing these Chapter 11 Cases; 12. To recover all assets of Seven-Up/RC, or property of its Estate, wherever located; and 13. To hear and determine (a) all motions, applications, adversary proceedings, and contested and litigated matters pending on Consummation, and (b) all claims by or against Seven-Up/RC arising under the Bankruptcy Code or non-bankruptcy law, if made applicable by the Bankruptcy Code, including claims to avoid fraudulent transfers under section 548 of the Bankruptcy Code, whether such claims are commenced before or after Consummation. ARTICLE XII MISCELLANEOUS PROVISIONS A. SETOFF Seven-Up/RC may, but shall not be required to, set off against any Claim and the payments or other distributions to be made pursuant to the Plan in respect of such Claim, claims of any nature whatsoever that Seven-Up/RC may have against the holder of such Claim; however, neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by Seven-Up/RC of any such claim that Seven-Up/RC may have against such holder. B. WITHHOLDING AND REPORTING REQUIREMENTS In connection with the Plan and all instruments issued in connection therewith and distributions thereon, Seven-Up/RC shall comply with all withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all distributions hereunder shall be subject to any such withholding and reporting requirements. C. DISCHARGE OF DEBTORS All property distributed under the Plan shall be in exchange for, and in complete satisfaction, settlement, discharge, and release of, all Claims of any nature whatsoever against the Debtors or any of their respective assets or properties, and, except as otherwise provided herein or in the Confirmation Order, upon Confirmation, Seven-Up/RC and BGAC shall each be deemed discharged and released under section 1141(d)(1)(A) of the Bankruptcy Code from any and all debts. The Confirmation Order shall be a judicial determination of discharge of all liabilities of Seven-Up/RC and BGAC, subject to the occurrence of Consummation. D. RELEASES Except as otherwise specifically provided for by this Plan, any Person accepting any distribution pursuant to this Plan shall be presumed conclusively to have released the (i) Debtors, (ii) Reorganized Seven-Up/RC, (iii) successors and assigns of the Debtors, (iv) Affiliates of the Debtors and such Persons, successors and assigns of such Affiliates, (v) present and former stockholders of the Debtors or an Affiliate of the Debtors and such stockholder's Affiliates, and (vi) directors, officers, agents, attorneys, accountants, advisors, financial advisors of the foregoing (collectively, the "Released Parties"), and the employees of any Released Party, and any Person claimed to be liable derivatively through any of the foregoing, from any cause of action based on, arising from, or in any way connected with the same subject matter as the Claim or Interest on which the distribution is 21 received. The release described in the preceding sentence shall be enforceable as a matter of contract law against any Person that accepts any distribution pursuant to this Plan. Upon Consummation, the Debtors will conclusively be deemed to release (i) the following parties and their members and representatives, including but not limited to all professionals (such as accountants, financial advisors and attorneys) retained by such parties: (a) Seven-Up/RC and BGAC; (b) GE Capital; (c) the Committee; (d) the Unofficial Noteholders Committee; (e) the Indenture Trustee; (f) the lenders under the DIP Facility; (g) all stockholders and their Affiliates of the Debtors or of an Affiliate of the Debtors; and (h) all directors and officers of the Debtors and their Affiliates holding such offices at any time during the period from and including March 15, 1996 through and including Confirmation from any and all liability based upon any act or omission related to past service with, for, or on behalf of the Debtors, including but not limited to the prosecution of this Chapter 11 Case, except for: 1. any indebtedness of any such person to the Debtors for money borrowed by such person; 2. any setoff or counterclaim the Debtors may have or assert against any such person, provided that the aggregate amount thereof shall not exceed the aggregate amount of any Claims held or asserted by such person against the Debtors; 3. the uncollected amount of any claim made by the Debtors (whether in a filed pleading, by letter or otherwise asserted in writing) prior to the Consummation against such person which claim has not been adjudicated to Final Order, settled, or compromised; or 4. claims arising from the fraud, willful misconduct, or gross negligence of such persons. Notwithstanding the foregoing or anything in the Plan to the contrary, nothing herein shall be deemed to release Westinghouse from any claim (as defined in section 101(5) of the Bankruptcy Code) of Seven-Up/RC, BGAC, WB, or Seven-UP/RC of PR against Westinghouse arising under that certain Asset and Stock Purchase Agreement dated as of March 30, 1990. The releases embodied in this Plan are in addition to, and not in lieu of, any other release separately given, conditionally or unconditionally. E. INJUNCTION The satisfaction, release, and discharge pursuant to Section XII.C. hereof shall also act as an injunction against any Person commencing or continuing any action, employment of process, or act to collect, offset, or recover any Claim or cause of action satisfied, released, or discharged under this Plan to the fullest extent authorized or provided by the Bankruptcy Court, including, without limitation, to the extent provided for or authorized by sections 524 and 1141 thereof. F. EXCULPATION AND LIMITATION OF LIABILITY Neither Seven-Up/RC, Reorganized Seven-Up/RC, the Committee, the Unofficial Noteholders Committee, GE Capital nor any of their respective present or former members, officers, directors, employees, advisors, attorneys, or agents, shall have or incur any liability to any holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, 22 or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of, these Chapter 11 Cases, the pursuit of Confirmation of the Plan, the Consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for their willful misconduct, and in all respects shall be entitled to rely reasonably upon the advice of counsel with respect to their duties and responsibilities under the Plan. Notwithstanding any other provision of this Plan, any holder of a Claim or an Interest, any other party in interest, and any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, and any successors or assigns of the foregoing, shall have no right of action against Seven-Up/RC, Reorganized Seven-Up/RC, the Committee, the Unofficial Noteholders Committee, GE Capital or any of their respective present or former members, officers, directors, employees, advisors, attorneys, or agents, for any act or omission in connection with, relating to, or arising out of, these Chapter 11 Cases, the pursuit of Confirmation of the Plan, the Consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for their willful misconduct. G. BINDING EFFECT The Plan shall be binding upon and inure to the benefit of BGAC, Seven- Up/RC, Reorganized Seven-Up/RC, the holders of Claims, the holders of Interests, and their respective successors and assigns. H. WITHDRAWAL OR NON-CONSUMMATION If the Debtors withdraw the Plan prior to Confirmation, or if Confirmation or Consummation does not occur, then the Plan, any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain any Claim or Class of Claims), assumption or rejection of executory contracts or leases affected by the Plan, and any document or agreement executed pursuant to the Plan, shall be deemed null and void. In such event, nothing contained herein, and no acts taken in preparation for Consummation of the Plan, shall be deemed to constitute a waiver or release of any Claims by or against Seven-Up/RC, BGAC or any other Person, to prejudice in any manner the rights of Seven-Up/RC, BGAC or any Person in any further proceedings involving Seven-Up/RC or BGAC, or to constitute an admission of any sort by Seven-Up/RC, BGAC or any other Person. I. MODIFICATION OF TREATMENT OF CLAIMS. The Debtors reserve the right to modify the treatment of any Allowed Claim in any manner adverse only to the holder of such Claim at any time after Consummation upon the consent of the creditor whose Allowed Claim is being adversely affected. J. CONTINUED CONFIDENTIALITY OBLIGATIONS. Pursuant to the terms thereof, members of and advisors to any Committee, any other holder of a Claim or Interest and their respective predecessors and successors shall continue to be obligated and bound by the terms of any confidentiality agreement executed by them in connection with these Chapter 11 Cases or the Debtors, to the extent that such agreement, by its terms, may continue in effect after Confirmation. K. SECTION 1145 EXEMPTION. Pursuant to, in accordance with, and solely to the extent provided under, section 1145 of the Bankruptcy Code, the issuance of the New Common Stock under this Plan is exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, and any state or local law requiring registration or licensing of an issuer, underwriter, broker, or dealer in such New Common Stock and is deemed to be a public offering of the New Common Stock. 23 L. SECTION 1146 EXEMPTION. To the extent permitted by section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of any security under the Plan, or the execution, delivery, or recording of an instrument of transfer pursuant to, in implementation of, or as contemplated by the Plan, or the revesting, transfer, or sale of any property of the Debtors, including but not limited to the stock of Seven-Up of PR and Porta Pack held by Seven-Up/RC and sold under the Stock Purchase Agreement, pursuant to, in implementation of, or as contemplated by the Plan shall not be taxed under any state or local law imposing a stamp tax, transfer tax, or similar tax or fee. Consistent with the foregoing, each recorder of deeds or similar official for any county, city, or governmental unit in which any instrument hereunder or of the type referred to above is to be recorded shall, pursuant to the Confirmation Order, be ordered and directed to accept such instrument, without requiring the payment of any documentary stamp tax, deed stamps, stamp tax, transfer tax, intangible tax, or similar tax. M. NOTICES. Any notice required or permitted to be provided to Seven-Up/RC and the Committee under the Plan shall be in writing and served by (a) certified mail, return receipt requested, (b) hand delivery, or (c) overnight delivery service, to be addressed as follows: KIRKLAND & ELLIS Attorneys for Seven-Up/RC Bottling Company of Southern California, Inc. and Beverage Group Acquisition Corporation Citicorp Center 153 East 53rd Street New York, New York 10022-4675 Attn: Luc A. Despins - and - WACHTELL, LIPTON, ROSEN & KATZ Attorneys for the Committee 51 West 52nd Street New York, New York 10019 Attn: Chaim J. Fortgang N. GOVERNING LAW. Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules), the laws of the State of New York shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan. The laws of the State of Delaware shall govern corporate governance matters. Dated: New York, New York June 19, 1996 SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., BEVERAGE GROUP ACQUISITION CORPORATION Debtors-in-Possession /s/ Barton S. Brodkin By: _________________________________ Barton S. Brodkin Chief Executive Officer and President 24 EX-3.1 3 AMENDED AND RESTATED CERT. OF INCORPORTION EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. ARTICLE FIRST The name of the corporation is Seven-Up/RC Bottling Company of Southern California, Inc. ARTICLE SECOND The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THIRD The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOURTH The total number of shares of stock which the corporation has authority to issue to six million (6,000,000) shares of Common Stock, with a par value of one cent ($.01) per share. Notwithstanding anything to the contrary contained herein, the Corporation shall not issue any shares of nonvoting stock. ARTICLE FIFTH The corporation is to have perpetual existence. ARTICLE SIXTH In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation except that no provision of Sections 2 and 11 of ARTICLE II, Section 4 of ARTICLE VI and ARTICLE VIII of the by- laws as of the date hereof of the corporation may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of holders of shares entitled to cast not less than a majority of the votes at an annual meeting of stockholders at which all holders of Common Stock are entitled to vote. ARTICLE SEVENTH Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by- laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the corporation so provide. ARTICLE EIGHTH To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE EIGHTH shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE NINTH The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE TENTH The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. 2 EX-3.2 4 AMENDMENT AND RESTATED BY-LAWS EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. A DELAWARE CORPORATION (AS AMENDED AND RESTATED ON JUNE , 1996) ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be located at 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of the corporation's registered agent at such address shall be The Corporation Trust Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be held each year within one hundred twenty days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting. Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors, the president or the holders of shares entitled to cost not less than twenty-five (25%) percent of the votes at the meeting. No provision of this Section 2 of ARTICLE II of these by-laws may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of holders of shares entitled to cast not less than a majority of the votes at an annual meeting of stockholders at which all holders of the Company's common stock are entitled to vote. Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of 1 objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Stockholders List. The officer having charge of the stock ledger of the corporation shall make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares required registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a quorum is once present to commence a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholders or their proxies. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if its states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular. 2 Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. No provision of this Section 11 of ARTICLE II of these by-laws may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of holders of shares entitled to cast not less than a majority of the votes at a regular meeting of stockholders at which all holders of the Company's common stock are entitled to vote. ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors shall be established from time to time by resolution of the board or by the vote of the holders of a majority of the shares then entitled to vote at an election of directors. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal and Resignation. Any director or the entire board of directors may be removed at any time, with or without cause, by the holders of majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation. Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. 3 Section 5. Annual Meetings. The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president or any director on at least 24 hours notice to each director, either personally, by telephone, by mail or by telegraph. Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting, except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, 4 may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committees. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and shall consist of a president, one or more vice- presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible. Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. The President. The president shall be the chief executive officer of the corporation; shall preside at all meetings of the stockholders and board of directors at which he or she is present; subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws. Section 7. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the president or these by-laws may, from time to time, prescribe. Section 8. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from 5 time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have the authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the president, or secretary may, from time to time, prescribe. Section 9. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six tears) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the president or treasurer may, from time to time, prescribe. Section 10. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 11. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. Section 12. Signing Authority. Any of the president, any vice president, the treasurer, the secretary or any assistant thereto, or any other officer of the corporation is authorized on the corporation's behalf to execute, swear to and or file with the United States Bureau of Alcohol, Tobacco and Firearms, the California Department of Alcoholic Beverage Control and any other authority or agency which such officer may deem appropriate any application, statement, request for approval or other document which such officer deems appropriate to the conduct of the corporation's business. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint 6 venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so unless prohibited from doing so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Section 2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Section 5. Expenses. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition unless 7 otherwise determined by the board of specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation of its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK Section 1. Form. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. 8 Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waive, at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjoined meeting. Section 4. Fixing a Record Date for Action by Written Consent. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors prior to the date upon which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. No provision of this Section 4 of ARTICLE VI of these by-laws may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of holders of shares entitled to cast not less than a majority of the votes at a regular meeting of stockholders at which all holders of the Company's common stock are entitled to vote. Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the date on which the board of directors adopts the resolution relating thereto. 9 Section 6. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share of shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. The corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 10 Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Section 8. Inspection of Books and Records. Any stockholder of record in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote except that no provision of Sections 2 and 11 of ARTICLE II, Section 4 of ARTICLE VI and this ARTICLE VIII of these by-laws may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of holders of shares entitled to cast not less than a majority of the votes at a regular meeting of stockholders at which all holders of the Company's common stock are entitled to vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers. 13 EX-5.1 5 OPINION OF KIRKLAND & ELLIS EXHIBIT 5.1 [LETTERHEAD OF KIRKLAND & ELLIS] November 15, 1996 Seven-Up/RC Bottling Company of Southern California, Inc. 3220 East 26th Street Vernon, California 90023 Re: Shares of Common Stock, $0.01 par value --------------------------------------- Ladies and Gentlemen: We are acting as counsel to Seven-Up/RC Bottling Company of Southern California, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), of a Registration Statement on Form S-1 (Registration No. 333- ______________ (the "Registration Statement") pertaining to the registration of a proposed offering of up to 1,904,805 shares of the Company's Common Stock, $0.01 par value per share ("Common Stock")) which are proposed to be offered by certain stockholders of the Company (the "Selling Stockholder Shares"). We have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion, including the following: (a) a form of Amended and Restated Certificate of Incorporation (the "Restated Charter"); (b) the Amended and Restated Bylaws of the Company; and (c) certain resolutions adopted by the Board of Directors of the Company. In addition, we have made such other and further investigations as we have deemed necessary to enable us to express the opinions hereinafter set forth. Based upon the foregoing and having regard to legal considerations that we deem relevant, and subject to the comments and qualifications set forth below, it is our opinion that the Common Stock has been duly authorized and the Selling Stockholder Shares have been duly and validly issued and are fully paid and nonassessable. November 15, 1996 Page 2 For purposes of this opinion, we have with your permission made the following assumptions, in each case without independent verification: (1) the authenticity of all documents submitted to us as originals, (2) the conformity to the originals of all documents submitted to us as copies, (3) the authenticity of the originals of all documents submitted to us as copies, (4) the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, (5) the authority of such persons signing all documents on behalf of the parties thereto, and (6) the due authorization, execution and delivery of all documents by the parties thereto. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the section entitled "Legal Matters" in the prospectus included in the Registration Statement. In giving such consent, we do not thereby concede that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations promulgated thereunder. We do not find it necessary for purposes of this opinion to cover, and accordingly we do not purport to cover herein, the application of the securities or "Blue Sky" laws of the various states to the offering and sale of the Common Stock. This opinion shall be limited to the laws of the State of Delaware. This opinion is furnished to you in connection with the filing of the Registration Statement and is not to be used, circulated, quoted or otherwise relied upon for any other purpose. Very truly yours, KIRKLAND & ELLIS EX-10.3 6 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.3 REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT dated as of August 1996 (this "Agreement"), by and among Seven-UP/RC Bottling Company of Southern California, Inc., a Delaware corporation (the "Company"), and [insert names of holders of, or affiliated groups of holders that collectively hold, at least 5% of the Common Stock outstanding as of confirmation of the Plan] (the "Named Holders"). WHEREAS, this Agreement is being entered into in accordance with the Plan (as hereinafter defined) in connection with the acquisition of Registrable Shares (as hereinafter defined) by the Original Holders pursuant to the Plan; and WHEREAS, the Company has undertaken to register the Registrable Shares under the Securities Act (as hereinafter defined) and to take certain other actions with respect to the Registrable Shares. NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following terms ----------- shall have the meanings ascribed to them below (such meanings to be equally applicable to both the singular and plural forms of the terms defined); "Affiliate" shall mean with respect to any Person, any other Person --------- which, directly or indirectly, is in control of, is controlled by or is under common control with such Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person. "Agreement" shall have the meaning ascribed thereto in the preamble --------- hereof. "Business Day" shall mean any day except a Saturday, Sunday or other day ------------ on which commercial banks in New York City are authorized or required by law to be closed. "Commission" shall mean the United States Securities and Exchange ---------- Commission, or any successor agency thereto. "Common Stock" shall mean the shares of the Company's Common Stock, par ------------ value $0.01 per share, to be issued pursuant to the Plan and any such shares issued after confirmation of the Plan, and includes any securities of the Company issued or issuable with respect to such shares by way of a stock split, recapitalization, merger, consolidation or other reorganization or otherwise. "Company" shall have the meaning ascribed thereto in the preamble ------- hereof. "Company Indemnities" shall have the meaning ascribed thereto in Section ------------------- 9(a) hereof. "Disadvantageous Condition" shall have the meaning ascribed thereto in ------------------------- Section 4 hereof. "Effectiveness Period" shall have the meaning ascribed thereto in -------------------- Section 3(d) hereof. "Effective Date" shall mean the effective date of the Plan pursuant to -------------- the terms thereof. "Electing Holders" shall have the meaning ascribed thereto in Section ---------------- 2(a) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended, and the rules and regulations thereunder, or any similar or successor statute thereto. "Expenses" shall mean all expenses incident to the Company's performance -------- of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, securities exchange and NASD fees, all fees and expenses of complying with state securities or blue sky laws (including fees, disbursements and other charges of counsel for the underwriters, if any, in connection with blue sky filings), all word processing, duplicating and printing expenses, messenger and delivery expenses, all rating agency fees, the fees, disbursements and other charges of counsel for the Company and of its independent public accountants, including the expenses incurred in connection with "comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters, if any customarily paid by issuers and sellers of securities and the reasonable fees and disbursements at Holders' Counsel, but excluding underwriting discounts and commissions and applicable transfer taxes, if any, which discounts, commissions and transfer taxes shall be borne by the seller or sellers of Registrable Shares in all cases. "Holder" shall mean (i) the Original Holders and the Electing Holders ------ (ii) any direct or indirect transferees of the - 2 - Original Holders and/or the Electing Holders where (x) such shares as owned by such transferees continue to be Registrable Shares and (y) such transferees have been assigned the rights of the immediate predecessor holder of such shares in accordance with Section 15 hereof; provided, however, that at any given time, Holder shall mean only the Persons among those listed in the preceding clause that as of such time own Registrable Shares. "Holders' Counsel" shall mean one firm of counsel chosen by Holders of a ---------------- majority of the outstanding Registrable Shares as of the date hereof, and where such counsel is to act as counsel to the Holders in connection with this Agreement. "Holder Indemnitee" shall have the meaning ascribed thereto in Section ----------------- 9(b) hereof. "Initial Shelf Registration" shall have the meaning ascribed thereto in -------------------------- Section 3(a) hereof. "Loss" shall have the meaning ascribed thereto in Section 9(a) hereof. ---- "Named Holders" shall have the meaning ascribed thereto in the preamble ------------- hereof. "NASD" shall mean the National Association of Securities Dealers, Inc. ---- "Notified Persons" shall have the meaning ascribed thereto in Section ---------------- 2(a) hereof. "Offering Documents" shall have the meaning ascribed thereto in Section ------------------ 9(a) hereof. "Original Holders" shall mean the Named Holders and the Electing ---------------- Holders. "Person" shall mean any natural person, corporation, limited ------ partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government or agency or political subdivision thereof. "Plan" shall mean the "Debtors' First Amended Joint Plan of ---- Reorganization", filed under Chapter 11 of the United States Bankruptcy Code in connection with the reorganization of Seven-Up/RC Bottling Company of Southern California, Inc. and Beverage Group Acquisition Corporation. Case Nos. 96-738 and - 3 - 96-739(HSB), and filed with the United States Bankruptcy Court for the District or Delaware and confirmed by such court on August 2, 1996, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Public Offering" shall mean a public offering and sale of securities --------------- pursuant to an effective Registration Statement. "Registrable Shares" shall mean the shares of Common Stock held by the ------------------ Holders; provided, however, that Registrable Shares shall not include any shares -------- ------- of Common Stock (i) that have been sold or distributed pursuant to a Registration Statement, upon such sale or distribution of such shares; (ii) that have been sold or distributed to a recipient of such shares that is allowed to sell such shares without restriction under the Securities Act and any state securities laws, upon such time as such recipient is so allowed pursuant to applicable law; or (iii) with respect to which a Holder has received an opinion, reasonably satisfactory in form and substance to such Holder, by legal counsel, reasonably acceptable to such Holder, to the effect that the public sale of such shares without restriction under the Securities Act and any state securities laws does not require the registration of such shares under the Securities Act and any state securities laws, upon the receipt of such opinion by such Holder. "Registration Notification" shall have the meaning ascribed thereto in ------------------------- Section 2(a) hereof. "Registration Statement" shall mean a registration statement filed on ---------------------- any appropriate form with the Commission providing for the registration of securities under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations thereunder, or any similar or successor statute thereof. "Shelf Registration" and "Shelf Registrations" shall have the meanings ------------------ ------------------- ascribed thereto in Section 3(b) hereof. "Subsequent Shelf Registration" shall have the meaning ascribed thereto ----------------------------- in Section 3(b) hereof. - 4 - Section 2. Notice of Registration Rights. ----------------------------- (a) Within 20 days after the Effective Date (exclusive of the Effective Date), the Company shall provide written notice, along with a copy of the form of this Agreement ("Registration Notification"), to all Persons, or ------------------------- group of Persons where each is an Affiliate of each other member of such group and is identified as such to the Company in writing, who each, pursuant to the Plan, received at least 5% of the Common Stock outstanding immediately after the Effective Date, of the right of each such Person to have the Common Stock received by such Person pursuant to the Plan registered pursuant to, and in conformity with, the terms of this Agreement (each, a "Notified Person"). --------------- Each such Notified Person shall have 20 days after receipt of such Registration Notification to notify the Company, of such Notified Person's election to have sales of the Common Stock received by it pursuant to the Plan registered pursuant to, and in conformity with, the terms of this Agreement by delivering to the Company, in conformity with the provisions of Section 17(e) hereof, a counterpart to this Agreement signed by such Notified Person (each Notified Person so signing and delivering to the Company such counterpart, an "Electing -------- Holder"). Upon receipt by the Company of a counterpart to this Agreement signed - ------ by an Electing Holder, each such Electing Holder has been deemed a vary to this Agreement as of the date hereof. (b) This Agreement expressly contemplates that each Notified Person and each Electing Holder is a third-party beneficiary hereunder, entitled to enforce the rights granted to Notified Persons and Electing Holders hereunder in accordance with the terms hereof. Section 3. Registration Under the Securities Act. ------------------------------------- (a) Initial Shelf Registration. The Company shall (i) cause to -------------------------- be filed as promptly as practicable but not later than 90 days after the Effective Date, a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (the "Initial ------- Shelf Registration") covering all of the Registrable Shares as of the date - ------------------ hereof and providing for the sale of the Registrable Shares by the Holders and (ii) use its best efforts to have such Initial Shelf Registration declares effective by the Commission as promptly as practicable thereafter. (b) Subsequent Shelf Registrations. If the Company determines to ------------------------------ terminate the effectiveness of the - 5 - Initial Shelf Registration prior to the end of the Effectiveness Period (as hereinafter defined) where such termination may be effected only in compliance with the provisions of Section 4 hereof, then prior to such termination the Company shall file, and shall use its best efforts to cause the Commission to declare effective, a subsequent Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (a "Subsequent Shelf Registration" and any such Registration Statement filed ----------------------------- thereafter, also a Subsequent Shelf Registration) covering all of the Registrable Shares which are outstanding as of the date of such filing. (Each of the Initial Shelf Registration and any Subsequent Shelf Registration are referred to herein individually as a "Shelf Registration", and collectively as ------------------ the "Shelf Registrations"). The Subsequent Shelf Registration shall be filed ------------------- by the Company at such time prior to the termination of the effectiveness of the Shelf Registration then in effect which is reasonably calculated to cause the Subsequent Shelf Registration to become effective on or before the date on which the effectiveness of the Shelf Registration then in effect terminates. (c) Amendments to Initial Shelf Registration or Subsequent Shelf ------------------------------------------------------------- Registrations. If any Shelf Registration fails to be effective for any reason - ------------- (except as provided in Section 3(b)) at any time during the Effectiveness Period (as hereinafter defined) for any reason (other than because of the sale of all of the Registrable Shares covered thereby), the Company shall use its best efforts to obtain, as promptly as possible, the withdrawal of any order suspending the effectiveness thereof or to take, as promptly as possible, such other actions as may be necessary to reinstate the effectiveness thereof, and in any event shall, within 60 days of such cessation of effectiveness, either (i) amend such Shelf Registration in a manner reasonably calculated to obtain the withdrawal of the order suspending the effectiveness thereof, or (ii) file a Subsequent Shelf Registration covering all Registrable Shares as of the date of such filing. (d) Effectiveness Period. Subject to this Section 3 and Section 4 -------------------- hereof, the Company shall use its best efforts to keep a Shelf Registration, or Shelf Registrations, continuously effective under the Securities Act for a period of three (3) years following the date on which the Initial Shelf Registration became effective (the "Effectiveness Period"), or such shorter -------------------- period ending on the date when there are no Registrable Shares; provided, -------- however, that the Effectiveness Period shall be extended - ------- - 6 - by any period during which a Shelf Registration is not in effect or during which sales have been suspended, whether pursuant to Sections 4 or 6(g) hereof or otherwise. If a Subsequent Shelf Registration is filed, pursuant to Sections 3(b) or 3(c) hereof, the Company shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective promptly as practicable after such filing and to keep such Registration Statement continuously effective for a period equal to the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously in effect. The intent of this provision is that the Shelf Registration (including the Initial Shelf Registration and any Subsequent Shelf Registration) shall be in effect for a number of days, in aggregate, equal to three (3) years; provided, however, that -------- ------- a Shelf Registration shall not be required to be maintained in effect after the date when (i) there are no Registrable Shares or (ii) at least two years have elapsed in the Effectiveness Period and the Registrable Shares in the Effectiveness Period and the Registrable Shares represent less than 3% of the then outstanding Common Stock. (e) Supplements and Amendments. The Company shall supplement or -------------------------- amend the Shelf Registration as promptly as practicable, if (i) required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, (ii) otherwise required by the Commission, or (iii) requested to do so by any Holder to the extent necessary to list such Holder as a selling securityholder in such Shelf Registration. Section 4. Blackout Periods. With respect to a Shelf ---------------- Registration filed or to be filed pursuant to Section 3 hereof, if the Board of Directors of the Company shall determine, in its good faith reasonable judgment, that to maintain the continued effectiveness of such Shelf Registration or to permit such Shelf Registration to become effective (or if no Shelf Registration has yet been filed, to file such Shelf Registration) would be significantly disadvantageous to the Company's financial condition, business or prospects (a "Disadvantageous Condition") in light of the existence, or in anticipation, of ------------------------- (i) any acquisition or financing activity involving the Company, or any subsidiary of the Company, including a proposed public offering, (ii) an undisclosed material event, the public disclosure of which would have a material event, the public disclosure of which would have a material adverse effect on the Company, (iii) a proposed material transaction involving the Company or a substantial amount of its assets, or (iv) any other circumstance or condition the disclosure of which would materially disadvantage the Company, and the existence of which - 7 - renders any Shelf Registration to be filed, or any Shelf Registration then filed or effective, inadequate as failing to include material information, then the Company may, until such Disadvantageous Condition no longer exists (but not with respect to more than four occasions, nor for more than 105 days in the aggregate, nor involving more than 45 days in the aggregate during any continuous 12-month period) cause the right of Holders to make dispositions of Registrable Shares pursuant to such Shelf Registration to be suspended, or in the case of a Shelf Registration that has not yet been filed, elect not to file such Shelf Registration; provided, however, that the Company may not take any -------- ------- such action unless it simultaneously takes the same action with respect to any other Registration Statements of the Company that are then effective or that are contemplated or required to be filed. If the Company determines to take any action pursuant to the preceding sentence, the Company shall deliver a notice to all Holders of Registrable Shares covered or to be covered under such Shelf Registration, which indicates that the Shelf Registration is no longer effective or useable or will not be filed. Upon the receipt of any such notice, such Persons shall forthwith discontinue any sale of Registrable Shares pursuant to such Shelf Registration and any use of the prospectus contained in such Shelf Registration. If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify all Holders of Registrable Shares covered by such Shelf Registration indicating such cessation and disclosing in reasonable detail the nature and outcome of such Disadvantageous Condition. The Company shall, if any Shelf Registration required to be filed or maintained under this Agreement has been not filed, file promptly, at such time as it in good faith deems the earliest practicable time, a new Shelf Registration covering the Registrable Shares which are outstanding as of the date of such filing. Section 5. Expenses. The Company shall promptly pay all Expenses, and -------- reimburse all Expenses incurred by any Holders, incurred in connection with any registration initiated pursuant to Section 3 or Section 4 hereof, whether or not such registration becomes effective. Section 6. Registration Procedures. If and whenever the Company is ----------------------- required to effect any registration under the Securities Act as provided in Section 3 hereof, the Company shall, as expeditiously as possible (subject to Section 4 hereof): (a) promptly prepare and file with the Commission on the requisite form a Shelf Registration to effect such registration and thereafter use its reasonable best - 8 - efforts to cause such Shelf Registration to be declared effective by the commission as promptly as practicable thereafter; provided, however, that -------- ------- the Company may discontinue any registration of its securities that are not Registrable Shares at any time prior to the effective date of the Shelf Registration relating thereto; (b) prepare and file with the Commission such amendments and supplements to such Shelf Registration and the prospectus used in connection therewith as may be necessary to keep such Shelf Registration effective and to comply with the provisions of the Securities Act with respect to the offering of all Registrable Shares covered by such Shelf Registration until such time as all of such Registration Shares have been disposed of in accordance with such registration statement; (c) furnish to each seller of Registrable Shares covered by such Shelf Registration such number of copies of such Shelf Registration and of each amendment and supplement thereto (in each case including all exhibits and any documents incorporated by reference, if any), such number of copies of the prospectus contained in such Shelf Registration (including each preliminary prospectus, each final prospectus and any supplement to any prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in writing; (d) use its best efforts (i) to register or qualify all Registrable Shares and other securities covered by such Shelf Registration under such other securities or blue sky laws of such states or other jurisdictions of the United States of America as the Holders of a majority of the Registrable Shares covered by such Shelf Registration shall reasonably request in writing, (ii) to keep such registration or qualification in effect for so long as such Shelf Registration remains in effect and (iii) to take any other action that may be reasonably necessary or advisable to enable the sellers of Registrable Shares to consummate to disposition in such jurisdictions of the securities to be sold by sellers, except that the company shall not for any such purpose be required to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of the Section 6(d) be obligated to be so qualified, to subject itself to taxation in such jurisdiction or to consent to general service of process in any such jurisdiction; -9- (e) use its best efforts to cause all Registrable Shares covered by such Shelf Registration to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and Holders' Counsel to enable such sellers to consummate the offering of such Registrable Shares; (f) use its good faith efforts to obtain and if obtained, furnish a copy to each seller of Registrable Shares of (i) an opinion of counsel for the Company, dated the effective date of such Shelf Registration, reasonably satisfactory in form and substance to Holder's Counsel, and (ii) a "comfort" letter, dated the effective date of such Shelf Registration, signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such Shelf Registration, reasonably satisfactory in form and substance to Holders' Counsel, in each case, covering substantially the same matters with respect to such Shelf Registration (and the prospectus included therein) and, in the case of the accountants' comfort letter, with respect to events subsequent to the date of such financial statements and matters contained in such Shelf Registration, as are customarily covered in opinions of issuer's counsel and in accountant's comfort letters delivered to selling securityholders in connection with the sale of securities pursuant to "shelf" registration statements; (g) notify the sellers of Registrable Shares (providing, if requested by any such Persons, confirmation in writing) as promptly as practicable after becoming aware of: ()A) the filing of any prospectus or prospectus supplement or the filing or effectiveness (or anticipated date of effectiveness) of such Shelf Registration or any post-effective amendment thereto; (B) any request by the Commission for amendments or supplements to such Shelf Registration or the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration or the initiation of any proceedings for the purpose; (D) the receipt by the Company of any notification with respect to the suspension of the qualification - 10 - or registration (or exemption therefrom) of any Registrable Securities for sale in any jurisdiction in the United States or the initiation or threatening of any proceeding for such purposes; or (E) the happening of any event that makes any statement made in such Shelf Registration or in any related prospectus, prospectus supplement, amendment or document incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Shelf Registration or in any such prospectus, supplement, amendment or other such document so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus in the light of the circumstances under which they were made) not misleading; (h) otherwise comply with all applicable rules and regulations of the Commission and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as promptly as practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such Shelf Registration, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder; (i) enter into customary agreements and take all such other reasonable actions in connection therewith in order to expidite or facilitate the disposition of the Registrable Shares included in such Shelf Registration; (j) make every reasonable effort to obtain the withdrawal of any order or other action suspending the effectiveness of any such Shelf Registration or suspending the qualification or registration (or exemption therefrom) of the Registrable Securities for sale in any jurisdiction; (k) if any event described in Section 6(g) hereof occurs, use its best efforts (subject to Section 4 hereof) to cooperate with the Commission to prepare as promptly as practicable, any amendment or supplement to such Shelf Registration or such related prospectus in order that such Shelf Registration and prospectus, as so amended or supplemented, shall not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances - 11 - under they were made, not misleading, or to take other action that may have been requested by the Commission; and (l) use its best efforts to cause all such Registrable Shares covered by such Shelf Registration to be listed on any national securities exchange or included in any automated quotation system on which securities of the same class issued by the Company are then listed or included (if the listing or inclusion of such Registrable Shares is then permitted under the rules of such exchange or interdealer quotation system). Section 7. Holders' Obligations. --------------------- (a) It shall be a condition precedent to the obligations of the Company to take action pursuant to this Agreement that the selling Holders shall furnish to the Company such information regarding themselves and the Registrable Shares held by them, and the intended method of disposition of such securities, as shall be required to effect the registration of their Registrable Shares. (b) Following a registration pursuant to Section 3 hereof, each Holder agrees that as of the date that a final prospectus is made available to it for distribution to prospective purchasers of registrable Shares it shall cease to distribute copies of any preliminary prospectus prepared in connection with the offer and sale of such Registrable Shares. Each Holder further agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(g) hereof, such Holder shall forthwith discontinue such Holder's disposition of Registrable Shares pursuant to the Shelf Registration relating to such Registrable Shares until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(k) hereof and, if so directed by the Company, shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus relating to such Registrable Shares outstanding at the time of receipt of such notice. (c) Should any Holder or Holders employ any underwriter or underwriters in connection with the sale of any Registrable Shares, each such underwriter shall be a nationally recognized securities firm selected by such Holder or Holders with the approval of the Company, which such approval shall not be unreasonable withheld. - 12 - Section 8. Preparation; Reasonable Investigation. In connection with ------------------------------------- the preparation and filing of each Shelf Registration under the Securities Act pursuant to this Agreement, the Company shall give each Holder of Registrable Shares registered under such Shelf Registration, the underwriters, if any, selected such Holders and such underwriters' respective counsel and accountants the reasonable opportunity to participate in the preparation of such Shelf Registration, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them such reasonable access to its books and records and such reasonable opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of any such Holders' Counsel and such underwriters', if any, counsel, to conduct a reasonable investigation within the meaning of the Securities Act. Section 9. Indemnification. --------------- (a) Indemnification by the Company. In connection with any ------------------------------ Shelf Registration filed by the Company pursuant to Section 3 hereof, the Company shall, and hereby agrees to, indemnify and hold harmless, each Holder and seller of any Registrable Shares covered by such registration statement and each other Person, if any, who controls such Holder or seller, and their respective directors, officers, partners, investment advisers, agents, and Affiliates (each, a "Company ------- Indemnitee"), against any losses, claims, damages, liabilities (or ---------- actions or proceedings, whether commenced or threatened, in respect thereof and whether or not such Company Indemnitee is a party thereto), joint or several, and expenses, including, without limitation, the reasonable fees, disbursements and other changes of legal counsel and reasonable out-of-pocket costs of investigation, to which such Company Indemnitee may become subject under the Securities Act or otherwise ("each a Loss"), insofar as such Loss arises out of or is based upon any ---- untrue statement or alleged untrue statement of any material fact contained in any Shelf Registration, any preliminary prospectus, final prospectus or supplement thereto (collectively, "Offering Documents"), ------------------ or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading; provided, however, that the Company shall not liable in any -------- ------- such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement -13- or omission or alleged omission made in such Offering Documents in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Company Indemnitee specifically stating that it is expressly for use therein; and provided, further, that the Company shall not be liable -------- ------- to any Holder or seller of Registrable Shares or any other Person, if any, who controls such Person, in any such case to the extent that any such Loss arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Shares to such Person if such statement or omission was corrected in such final prospectus; provided, however, that -------- ------- copies of such final prospectus, as supplemented or amended, shall have been delivered to such Company Indemnitee. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnitee and shall survive the transfer of such securities by such Company Indemnitee as provided for in Section 6(c) hereof. (b) Indemnification by the Sellers. In connection with any ------------------------------ registration statement filed by the Company pursuant to Section 3 hereof in which a Holder has registered for sale Registrable Shares, each such Holder or seller of Registrable Shares, severally and not jointly, shall, and hereby agrees to, indemnify and hold harmless the Company and each of its directors, officers, employees and agents, each other Person, if any, who participates as an underwriter in the offering or sale of such securities, each other Person, if any, who controls the Company, any such underwriter and each other seller and such underwriter's or other seller's directors, officers, stockholders, partners, employees, agents and affiliates (each a "Holder Indemnitee"), ----------------- against all Losses insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Offering Documents (or any document incorporated by reference therein) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such -14- Holder or seller of Registrable Shares specifically stating that it is expressly for use therein; provided, however, that the liability of such -------- ------- indemnifying party under this Section 9(b) shall be limited to the amount of the net proceeds received by such indemnifying party in the offering giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Holder Indemnitee and shall survive the transfer of the Registrable Shares by such Holder. (c) Notices of Losses, etc. Promptly after receipt by an ---------------------- indemnified party of notice of the commencement of any action or proceeding involving a Loss referred to in Section 9(a) & (b) hereof, such indemnified party will, if a claim in respect thereof is to made against an indemnifying party, give written notice to the latter be of the commencement of such action; provided, however, that the failure of -------- ------- any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 9(a) & (b) hereof, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable judgment, a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Loss, to assume and control the defense thereof, in each case at its own expense, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from such indemnifying party of its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall be liable for any settlement of any such action or proceeding effected without its written consent, which shall not be unreasonably withheld. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such Loss or which requires action on the part of such indemnified party or otherwise subjects the indemnified party to any obligation or restriction to which it would not otherwise be subject. -15- (d) Contribution. If the indemnification provided for in this ------------ Section 9 shall for any reason be unavailable to an indemnified party under Section 9(a) or 9(b) hereof in respect of any Loss, then, in lieu of the amount paid or payable under Section 9(a) or 9(b) hereof the indemnified party and the indemnifying party under Section 9(a) or 9(b) hereof shall contribute to the aggregate Losses (including legal or other expenses reasonably incurred in connection with investigating the same) in such proportion as is appropriate to reflect the relative fault of the Company and the sellers of Registrable Shares covered by the Shelf Registration which resulted in such Loss or action in respect thereof, with respect to the statements, omissions or action which resulted in such Loss or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just or equitable if contributions were to be determined by any method of allocation which does not take account of the equitable considerations referred to in this paragraph. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any local and other expenses reasonably incurred by such indemnified party in connection with the investigation of or defending against any Loss which is the sugject of this Section 9(d). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or Loss affected without such Person's consent. (e) Other Indemnification. The Company and, in connection with --------------------- any Shelf Registration filed by the Company pursuant to Section 3, each Holder shall with respect to any required registration or other qualifiction of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act, indemnify Holder Indemnitees and Company Indemnitees respectively, against Losses or, to the extent that indemnification shall be unavailable to a Holder Indemnitee or -16- Company Indemnitee, contribute to the reimbursement of the aggregate Losses of such Holder Indemnitee or Company Indemnitee in a manner similar to that specified in Sections 9(a), (b), (c), (d) and (f) hereof (with, appropriate modifications). (f) Indemnification Payments. The indemnification and ------------------------ contribution required by this Section 9 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any Loss is incurred. Section 10. Registration Rights to Others. If the Company shall at any ----------------------------- time hereafter provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act or the Exchange Act, such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the Holders with respect to the Registrable Shares. Section 11. Adjustments Affecting Registrable Shares. The Company ---------------------------------------- shall not affect or permit to occur any combination, subdivision or reclassification of Registrable Shares that would materially adversely affect the ability of the Holders to include such Registrable Shares in any registration of its securities under the Securities Act contemplated by this Agreement or the marketability of such Registrable Shares under any such registration or other offering. Section 12. Rule 144 and Rule 144A. Prior to the expiration of the ---------------------- Effectiveness Period, the Company shall take all actions reasonably necessary to enable Holders to sell Registrable Shares without registration under the Securities Act within the limitation of the exemptions, if applicable, provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission, including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed under the Exchange Act. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Section 13. Amendments and Waivers. Except as otherwise provided ---------------------- herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company shall have obtained the prior written consent of both (a) the Holders of at least a majority of the -17- Registrable Shares affected by such amendment, modification or waiver and (b) each Holder of Registrable Shares owning more than 5% of the Company's then outstanding Common Stock. Section 14. Nominees for Beneficial Owners. In the event that any ------------------------------ Registrable Share is held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the Holder of such registrable Shares for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of the number or percentage of Registrable Shares held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Shares so elects, the Company may require assurances reasonable satisfactory to it of such owner's beneficial ownership of such Registrable Shares. Section 15. Assignment. The provisions of this Agreement shall be ---------- binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns including, without limitation and without the need for an express assignment, any successor by merger to the Company, and any Holders of the Registrable Shares. Section 16. Calculation of Percentage of Outstanding Registrable Shares. ----------------------------------------------------------- For purposes of this Agreement, all references to an aggregate number of Registrable Shares or a percentage thereof shall be calculated based upon the aggregate number of Registrable Shares outstanding at the time such calculation is made and shall exclude any Registrable Shares or shares of Common Stock, as the case may be, owned by the Company or any subsidiary of the Company. Section 17. Miscellaneous. ------------- (a) Further Assurances. Each of the parties hereto shall execute ------------------ such documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby. (b) Headings. The headings in this agreement are for convenience -------- of reference only and shall not control or affect the meaning or construction of any provisions hereof. (c) Remedies. Each Holder, in addition to being entitled to -------- exercise all rights granted by law, including recovery of damages, will be entitled to specific - 18 - performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (d) Entire Agreement. This Agreement constitutes the entire agreement ---------------- and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. (e) Notices. Any notices or other communications to be given hereunder ------- by any party to another party shall be in writing, shall be delivered personally, by telecopy, by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other comparable delivery service, to the address of the party set forth on Schedule A hereto or to such other address as the party to whom notice is to be given may provide in a written notice to the other parties hereto, a copy of which shall be on file with the Secretary of the Company. Notice shall be effective when delivered if given personally, when receipt is acknowledged if telecopied, three days after mailing if given by registered or certified mail as described above, and one business day after deposit if given by overnight courier service. (f) Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York applicable to agreements made to be performed entirely in such State, without regard to principles of conflicts of law. The Company and the parties each hereby irrevocably submit to the jurisdiction of any New York State court sitting in the City of New York or any Federal Court sitting in the City of New York in respect of any suit, action or proceeding arising out of or relating to this Agreement, and each irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Nothing herein shall affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. - 19 - (g) Severability. If one or more of the provisions contained herein, ------------ or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect, for any reason, the validity, legality and enforceability or the remaining provisions contained herein shall not be in any way affected or impaired thereby, and the provision held to be invalid, illegal or unenforceable shall be reformed to the minimum extent necessary, and in a manner as consistent with the purposes thereof as is practicable, so as to render it valid, legal and enforceable it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. (h) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. -20- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. By: ------------------------ Name: ------------------- Title: ------------------- Accepted and Agreed to as of the date first above written: Dean Witter High Yield Securities By: --------------------- Peter M. Avelar Vice President Dean Witter High Income Securities By: --------------------- Peter M. Avelar Vice President High Income Advantage Trust By: --------------------- Peter M. Avelar Vice President High Income Advantage Trust II By: --------------------- Peter M. Avelar Vice President -21- High Income Advantage Trust III By: --------------------- Peter M. Avelar Vice President Dean Witter Diversified Income Trust By: --------------------- Peter M. Avelar Vice President Dean Witter Select Series Dimensions - Diversified Income By: --------------------- Peter M. Avelar Vice President Variable Investment Series - High Yield By: --------------------- Peter M. Avelar Vice President -22- EX-10.4 7 CREDIT AGREEMENT EXHIBIT 10.4 ================================================================================ CREDIT AGREEMENT Dated as of August 2, 1996 between SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., as Reorganized Debtor, as Borrower, THE LENDERS PARTY HERETO and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent ================================================================================ TABLE OF CONTENTS Section Page - ------- ---- 1. AMOUNT AND TERMS OF CREDIT............................... 2 1.1 Revolving Credit Advances......................... 2 1.2 Repayment; Termination of Commitment.............. 4 1.3 Use of Proceeds................................... 5 1.4 Letters of Credit................................. 5 1.5 Interest.......................................... 5 1.6 Eligible Accounts and Inventory................... 6 1.7 Fees.............................................. 7 1.8 Cash Management System............................ 7 1.9 Receipt of Payments............................... 7 1.10 Pro Rata Treatment................................ 7 1.11 Application and Allocation of Payments............ 7 1.12 Non-Receipt of Funds by Agent..................... 8 1.13 Sharing of Payments, Etc.......................... 9 1.14 Settlement Procedures............................. 10 1.15 Accounting........................................ 12 1.16 Indemnity......................................... 12 1.17 Access............................................ 13 1.18 Taxes............................................. 14 1.19 Capital Adequacy.................................. 16 2. CONDITIONS PRECEDENT..................................... 17 2.1 Conditions to the Initial Revolving Credit Advance and Letter of Credit Obligation........... 17 2.2 Further Conditions to Each Revolving Credit Advance and Each Letter of Credit Obligation...... 19 3. REPRESENTATIONS AND WARRANTIES........................... 20 3.1 Corporate Existence; Compliance with Law.......... 20 3.2 Executive Offices; Collateral Locations; Corporate or Other Names.......................... 20 3.3 Corporate Power; Authorization; Enforceable Obligations....................................... 20 3.4 Financial Statements and Projections.............. 21 3.5 Material Adverse Change........................... 21 3.6 Ownership of Property; Liens...................... 21 3.7 Restrictions; No Default; Material Contracts...... 22 3.8 Labor Matters..................................... 22 3.9 Ventures and Subsidiaries; Outstanding Stock and Indebtedness...................................... 23 3.10 Government Regulation............................. 23 3.11 Margin Regulations................................ 23 3.12 Taxes............................................. 24 3.13 ERISA............................................. 24 3.14 No Litigation..................................... 26 3.15 Brokers........................................... 26 3.16 Patents, Trademarks, Copyrights and Licenses...... 26 3.17 Full Disclosure................................... 27 3.18 Hazardous Materials............................... 27 i TABLE OF CONTENTS CONT'D Section Page - ------- ---- 3.19 Insurance Policies................................ 28 3.20 Deposit and Disbursement Accounts................. 28 4. FINANCIAL STATEMENTS AND INFORMATION..................... 28 4.1 Reports and Notices............................... 28 4.2 Communication with Accountants.................... 28 5. AFFIRMATIVE COVENANTS.................................... 29 5.1 Maintenance of Existence and Conduct of Business.......................................... 29 5.2 Payment of Charges and Claims..................... 29 5.3 Books and Records................................. 30 5.4 Litigation........................................ 30 5.5 Insurance......................................... 30 5.6 Compliance with Laws.............................. 31 5.7 Agreements........................................ 31 5.8 Supplemental Disclosure........................... 32 5.9 Environmental Matters............................. 33 5.10 Landlord's Agreements............................. 33 5.11 Certain Obligations Respecting Subsidiaries....... 33 5.12 Application of Proceeds........................... 33 5.13 Fiscal Year....................................... 34 5.14 Casualty and Condemnation......................... 34 6. NEGATIVE COVENANTS....................................... 35 6.1 Mergers, Subsidiaries, Etc........................ 35 6.2 Investments....................................... 35 6.3 Indebtedness...................................... 35 6.4 Affiliate and Employee Loans and Transactions; Employment Agreements............................. 36 6.5 Capital Structure and Business.................... 36 6.6 Guaranteed Indebtedness........................... 36 6.7 Liens............................................. 37 6.8 Sale of Assets.................................... 37 6.9 ERISA............................................. 38 6.10 Financial Covenants............................... 38 6.11 Hazardous Materials............................... 39 6.12 Sale-Leasebacks................................... 39 6.13 Cancellation of Indebtedness...................... 39 6.14 Restricted Payments............................... 39 6.15 Real Property Leases.............................. 39 6.16 Bank Accounts..................................... 39 6.17 No Speculative Transactions....................... 39 6.18 Margin Regulations................................ 39 6.19 Limitation on Negative Pledge Clauses............. 40 6.20 Accounting Changes................................ 40 7. TERM..................................................... 40 7.1 Duration.......................................... 40 7.2 Survival of Obligations........................... 40 ii TABLE OF CONTENTS CONT'D Section Page - ------- ---- 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES................... 41 8.1 Events of Default................................. 41 8.2 Remedies.......................................... 43 8.3 Waivers by Borrower............................... 44 9. AGENT.................................................... 44 9.1 Appointment, Powers and Immunities................ 44 9.2 Reliance by Agent................................. 45 9.3 Defaults.......................................... 45 9.4 Rights as a Lender................................ 45 9.5 Indemnification................................... 46 9.6 Non-Reliance on Agent and Other Lenders........... 46 9.7 Failure to Act.................................... 47 9.8 Resignation of Agent.............................. 47 9.9 Consents under Loan Documents..................... 47 9.10 Collateral Matters................................ 48 10. SUCCESSORS AND ASSIGNS................................... 48 10.1 Successors and Assigns............................ 48 10.2 Assignments and Participations.................... 49 11. MISCELLANEOUS............................................ 51 11.1 Complete Agreement; Modification of Agreement..... 51 11.2 Fees and Expenses................................. 51 11.3 No Waiver......................................... 53 11.4 Remedies.......................................... 53 11.5 Severability...................................... 53 11.6 Conflict of Terms................................. 53 11.7 Right of Set-off.................................. 53 11.8 Authorized Signature.............................. 54 11.9 Notices........................................... 54 11.10 Section Titles.................................... 56 11.11 Counterparts...................................... 56 11.12 Time of the Essence............................... 56 11.13 Publicity......................................... 56 11.14 GOVERNING LAW..................................... 56 11.15 WAIVER OF JURY TRIAL.............................. 57 iii INDEX OF ANNEXES, SCHEDULES AND EXHIBITS ---------------------------------------- Annex A - Definitions; Rules of Construction Annex B - Cash Management System Annex C - Schedule of Documents Annex D - Schedule of Certain Fees Annex E - Financials, Projections and Notices Annex F - Insurance Requirements Annex G - Letters of Credit Annex H - Financial Covenants Schedule 3.2 - Executive Offices; Trade Names Schedule 3.4 - Financials and Projections Schedule 3.5 - Dividends; Material Changes Schedule 3.6 - Real Estate and Leases Schedule 3.7 - Material Contracts Schedule 3.8 - Labor Matters Schedule 3.9 - Ventures, Subsidiaries and Affiliates; Outstanding Stock Schedule 3.12 - Tax Matters; FEIN Schedule 3.13 - ERISA Plans Schedule 3.14 - Litigation Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses Schedule 3.18 - Hazardous Materials Schedule 3.19 - Insurance Policies Schedule 3.20 - Disbursement and Deposit Accounts Schedule 6.2 - Investments Schedule 6.3 - Indebtedness Schedule 6.4 - Loans to and Transactions with Employees Schedule 6.7 - Liens Schedule 11.8 - Authorized Signatures Exhibit A - Form of Notice of Revolving Credit Advance Exhibit B - Form of Revolving Credit Note Exhibit C - Form of Borrowing Base Certificate Exhibit D - Form of Security Agreement Exhibit E - Form of Pledged Account Agreement Exhibit F - Form of Confidentiality Agreement iv CREDIT AGREEMENT ---------------- THIS CREDIT AGREEMENT ("Agreement") is entered into as of August 2, 1996 --------- by and between SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., a Delaware corporation, as reorganized debtor ("Borrower"), each of the lenders -------- listed on the signature pages hereof or which pursuant to Section 10.2 becomes a ------------ "Lender" hereunder (each individually a "Lender" and collectively "Lenders"), ------ ------- and GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital"), a corporation organized ---------- under the banking laws of the State of New York, as agent hereunder for Lenders (in such capacity, together with its successors in such capacity, "Agent"), with ----- reference to the following facts: RECITALS -------- A. On May 13, 1996 (the "Petition Date"), Seven-Up/RC Bottling Company ------------- of Southern California, Inc. ("Seven-Up/RC") and its parent, Beverage Group ----------- Acquisition Corporation ("BGAC"), commenced Chapter 11 cases numbered 96-738 ---- (HSB) and 96-739 (HSB), respectively (the "Chapter 11 Cases"), by filing ---------------- voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). ---------------- B. Since the Petition Date, Seven-Up/RC and BGAC have continued to operate their businesses and manage their properties as debtors and debtors in possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. C. GE Capital has been financing Seven-Up/RC during the pendency of its Chapter 11 Case under the terms of that certain Debtor In Possession Credit Agreement dated as of May 13, 1996 (the "DIP Agreement"). All of Seven-Up/RC's ------------- obligations under the DIP Agreement will become due and payable upon "Consummation," as such term is defined in the Debtors' First Amended Joint Plan of Reorganization Dated June 19, 1996 (the "Plan of Reorganization") in the ---------------------- Chapter 11 Cases. D. Seven-Up/RC has requested that Lenders provide a post-confirmation senior secured revolving credit facility to Borrower as of Consummation in the aggregate principal amount of up to $35,000,000 to fund Borrower's post- confirmation working capital and letter of credit requirements. E. Lenders are willing to provide the requested post-confirmation financing to Borrower in accordance with and on the terms and conditions set forth in, this Agreement and the other Loan Documents. F. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings ascribed to them in Annex A and, for purposes of ------- this Agreement and the other Loan 1 Documents, the rules of construction set forth in Annex A shall govern. Unless ------- otherwise indicated, all references in this Agreement or in the Annexes to this Agreement to sections, subsections, recitals, schedules, exhibits, annexes, and attachments shall refer to the corresponding sections, subsections, recitals, schedules, exhibits, annexes and attachments of or to this Agreement. All schedules, exhibits, annexes and attachments hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement. Unless otherwise expressly set forth herein, or in a written amendment referring to such schedules and annexes, all schedules and annexes referred to herein shall mean the schedules and annexes as in effect as of the Closing Date. These Recitals shall be construed as part of this Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: 1. AMOUNT AND TERMS OF CREDIT 1.1 Revolving Credit Advances. ------------------------- (a) Upon and subject to the terms and conditions hereof, each Lender severally agrees to make available, from time to time from the Closing Date until the Commitment Termination Date, for Borrower's use and upon the request of Borrower therefor to Agent, advances (each, a "Revolving Credit Advance") in ------------------------ an aggregate principal amount at any time outstanding up to but not exceeding the Revolving Credit Commitment of such Lender, provided that in no event shall the aggregate principal amount of the Revolving Credit Loan and Letter of Credit Obligations at any time exceed the Borrowing Availability as reflected on the most recent Borrowing Base Certificate delivered to Agent and Lenders. Borrower may from time to time borrow, repay and reborrow Revolving Credit Advances under this Section 1.1. ----------- (b) Borrower shall give Agent (which shall promptly notify Lenders) notice of each borrowing hereunder as provided in Section 1.1(c) and, subject to -------------- Section 1.14, on the date specified for such borrowing each Lender shall make - ------------ available the amount of the Revolving Credit Advance or Revolving Credit Advances to be made by it on such date to Agent to such account of Agent as Agent may designate, in immediately available funds, for the account of Borrower. (c) Each notice of a borrowing of a Revolving Credit Advance shall be given in writing (by telecopy, hand delivery, or U.S. mail) by Borrower to Agent at its address at 350 South Beverly Drive, Suite 200, Beverly Hills, California 90212, to the attention of Mr. Mark E. Gudis, or such other Person as may be 2 designated in writing by Agent, Telephone No. (310) 203-0335, Telecopy No. (310) 785-0644, given no later than 10:00 a.m. (Los Angeles time) on the Business Day of the proposed Revolving Credit Advance. Each such notice of borrowing (a "Notice of Revolving Credit Advance") shall be substantially in the form of - ----------------------------------- Exhibit A, specifying therein the requested date, the amount of such Revolving - --------- Credit Advance, the Disbursement Account into which such Revolving Credit Advance shall be made, and such other information as may be required by Agent. Agent and Lenders shall be entitled to rely upon and shall be fully protected under this Agreement in relying upon any Notice of Revolving Credit Advance believed by Agent to be genuine and to assume that the persons executing and delivering the same were duly authorized unless the responsible individual acting thereon for Agent shall have actual knowledge to the contrary. (d) The Revolving Credit Advances made by each Lender shall be evidenced by a single promissory note of Borrower for such Lender substantially in the form of Exhibit B, dated the date hereof, payable to such Lender in a --------- principal amount equal to the amount of its Revolving Credit Commitment as originally in effect and otherwise duly completed. The date and amount of each Revolving Credit Advance made by each Lender and each payment of principal with respect thereto shall be recorded on the books and records of such Lender, which books and records shall constitute prima facie evidence of the accuracy of the information therein recorded. The entire unpaid balance of the Revolving Credit Loan and all other Obligations shall be immediately due and payable on the Commitment Termination Date. (e) Borrower shall furnish to Agent and each Lender a Borrowing Base Certificate substantially in the form of Exhibit C, completed and signed by --------- Borrower's Chief Executive Officer, Chief Financial Officer, Director of Banking and Investor Relations or Director of Accounting Services which sets forth a calculation of the Borrowing Base at the times and for the periods set forth in Annex E. Borrower agrees that in making any Revolving Credit Advance hereunder - ------- (or incurring any Letter of Credit Obligations) Agent and each Lender shall be entitled to rely upon the most recent Borrowing Base Certificate delivered to Agent and Lenders by Borrower. Borrower further agrees that if Borrower shall have failed to deliver a Borrowing Base Certificate to Agent and Lenders within the specified period Lenders shall be under no obligation to make any further Revolving Credit Advances (or incur any additional Letter of Credit Obligations) until such time, subject to the other terms and conditions contained herein, as such Borrowing Base Certificate is delivered to Agent and Lenders. (f) The failure of any Lender (such Lender, a "Non-Funding Lender") to ------------------ make any Revolving Credit Advance to be made by it on the date specified therefor shall not relieve any other Lender (each such other Lender, an "Other ----- Lender") of its obligation to make its Revolving Credit Advance on such date, - ------ but 3 neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make a Revolving Credit Advance to be made by such Non- Funding Lender, and no Non-Funding Lender shall have any obligation to Agent or any Other Lender for the failure by such Non-Funding Lender. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" (or be included in the calculation of "Required Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement, the Revolving Credit Notes and the other Loan Documents (including exercising any rights of offset) without first obtaining the prior written consent of Agent and Required Lenders, it being the agreement of Lenders that any such action to protect or enforce rights under this Agreement, the Revolving Credit Notes and the other Loan Documents shall be taken in concert and at the direction or with the consent of Agent and Required Lenders and not individually by a single Lender. 1.2 Repayment; Termination of Commitment. ------------------------------------ (a) Borrower hereby promises to pay to Agent, for the account of each Lender, the entire outstanding principal amount of the Revolving Credit Loan and Letter of Credit Obligations and the Revolving Credit Loan shall mature on the Commitment Termination Date. (b) If on any day the outstanding balance of the Revolving Credit Loan, when added to the then outstanding Letter of Credit Obligations, shall at any time exceed the Borrowing Availability as reflected on the most recent Borrowing Base Certificate delivered to Agent and Lenders, Borrower shall repay the Revolving Credit Loan in the amount of such excess on such day (or if such day is not a Business Day, on the next succeeding Business Day). Such excess balance shall nevertheless constitute Obligations that are secured by the Collateral and entitled to all of the benefits thereof and of the Loan Documents and shall be evidenced by the Revolving Credit Notes. (c) Borrower shall have the right at any time, upon at least forty- five (45) days prior written notice to Agent, to voluntarily terminate the Revolving Credit Commitments (in whole but not in part) without premium or penalty other than payment of the Termination Fee, if any. On the date of such termination, Borrower shall pay to Agent in immediately available funds all of the Obligations, including the Termination Fee, if any, and any accrued and unpaid interest, and make arrangements, in accordance with the terms and conditions of Annex G, for satisfaction with respect to any outstanding Letter ------- of Credit Obligations. Upon such termination, Borrower's right to receive Revolving Credit Advances and the benefit of Letter of Credit Obligations shall 4 simultaneously terminate and Borrower's obligation to pay the Non-Use Fee, the Collateral Monitoring Fee and, upon such payment of the Obligations, the Collateral Examination Charge arising after such termination shall terminate, and notwithstanding anything to the contrary contained herein or in any Revolving Credit Note, the entire outstanding balance of the Revolving Credit Loan shall be immediately due and payable. 1.3 Use of Proceeds. Borrower shall use the proceeds of the Revolving --------------- Credit Loan for (a) the repayment in full of all outstanding obligations under the DIP Agreement on Consummation, (b) the payment of costs and expenses of the financing transactions contemplated by this Agreement that are payable by Borrower and (c) other corporate purposes permitted by the terms of this Agreement and the other Loan Documents. 1.4 Letters of Credit. Subject to the terms and conditions of this ----------------- Agreement, Borrower shall have the right to request, and Lenders agree to incur, from the Closing Date until the Commitment Termination Date, the Letter of Credit Obligations in accordance with the terms and conditions set forth in Annex G. - ------- 1.5 Interest. -------- (a) Borrower shall pay interest on the Revolving Credit Loan to Agent for the account of each Lender: (i) in arrears for the preceding calendar month, on the first day of each calendar month, commencing on September 1, 1996; (ii) on the Commitment Termination Date; and (iii) if any interest accrues or remains payable after the Commitment Termination Date, upon demand. If any interest or other payment under this Agreement becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Borrower shall be obligated to pay interest to Agent for the account of each Lender on the outstanding balance of the Revolving Credit Loan from the date any Revolving Credit Advance is made until it is paid in full at a floating rate equal to the CP Rate (as in effect from time to time) plus three ---- percent (3%) per annum (the "Stated Rate"). All computations of interest shall ----------- be made by Agent and on the basis of a three hundred and sixty (360) day year, in each case for the actual number of days occurring in the period for which such interest is payable. Each determination by Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error or bad faith. (c) Upon the occurrence and during the continuance of any Event of Default, the interest rate applicable to all of the Obligations, including the Revolving Credit Loan, may in the sole discretion of Required Lenders be increased, effective as of the 5 date of the Default giving rise to such Event of Default, to the Default Rate; provided, that upon the occurrence of an Event of Default specified in Sections - -------- -------- 8.1(f), (g) or (h), the interest rate applicable to all of the Obligations shall - ------------------ be increased automatically to the Default Rate without the necessity of any action on the part of Required Lenders. (d) Notwithstanding anything to the contrary set forth in this Section ------- 1.5, if, at any time until payment in full of all of the Obligations, the rate - --- of interest payable hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such ------------------- event and so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, -------- that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by each Lender from the making of Revolving Credit Advances hereunder is equal to the total interest which such Lender would have received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, the interest rate payable hereunder shall be the rate of interest provided in Sections 1.5(a) through (c), unless and until the rate of interest --------------------------- again exceeds the Maximum Lawful Rate, in which event this Section 1.5(d) shall -------------- again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount which such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this Section 1.5(d), shall make -------------- a final determination that a Lender has received interest hereunder or under any of the Loan Documents in excess of the Maximum Lawful Rate, such Lender shall, to the extent permitted by applicable law, promptly apply such excess in the manner set forth in Section 1.11, and thereafter shall refund any excess to ------------ Borrower or as a court of competent jurisdiction may otherwise order. 1.6 Eligible Accounts and Inventory. Based on the most recent ------------------------------- Borrowing Base Certificate delivered by Borrower to Agent and Lenders and on other information available to Agent, Agent shall determine in accordance with the terms and provisions of this Agreement which Accounts shall be deemed to be "Eligible Accounts" and which Inventory shall be deemed to be "Eligible ----------------- -------- Inventory" for purposes of determining the amounts, if any, to be advanced to - --------- Borrower under the Revolving Credit Loan. 6 1.7 Fees. As compensation for Agent's and Lender's costs, skills, ---- services and efforts incurred and expended in making the Revolving Credit Loan and the Letters of Credit available to Borrower, Borrower agrees to pay to Agent for its own account or the account of Lenders, as the case may be, the fees set forth in Annex D in accordance with the terms set forth therein. All of the ------- Fees described in Annex D shall be non-refundable and shall be fully-earned as ------- and when such Fees become due and payable. 1.8 Cash Management System. On or prior to the Closing Date, Borrower ---------------------- will establish and maintain until the Termination Date, the cash management system described in Annex B. ------- 1.9 Receipt of Payments. Borrower shall make each payment under this ------------------- Agreement not later than 11:00 a.m. (Los Angeles time) on the day when due in Dollars in immediately available funds to the Collection Account. For purposes of computing interest and Fees and determining the Borrowing Availability: (a) all payments (including cash sweeps) consisting of cash, wire, or electronic transfers in immediately available funds shall be deemed received by Agent upon deposit in the Collection Account and notice to Agent of such deposit; and (b) all payments consisting of checks, drafts, or similar non-cash items shall be deemed received upon receipt of good funds following deposit in the Collection Account (together with notice to Agent of such deposit). Subject to Section ------- 1.14, each payment received by Agent under this Agreement or any Revolving - ---- Credit Note for the account of any Lender shall be paid by Agent promptly to such Lender, in the same funds received, for application to the Revolving Credit Loan or other obligation in respect of which such payment is made. 1.10 Pro Rata Treatment. Except to the extent otherwise provided herein: ------------------ (a) each Revolving Credit Advance (including any Revolving Credit Advance pursuant to Section 1.14(b)) shall be incurred and made by the relevant Lenders, --------------- and each payment of the Non-Use Fee and the Termination Fee shall be made for the account of the relevant Lenders, pro rata according to the amounts of their respective Revolving Credit Commitments; (b) each payment or prepayment of principal of the Revolving Credit Loan by Borrower shall be made for the account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Revolving Credit Loan held by Lenders; and (c) each payment of interest on the Revolving Credit Loan by Borrower shall be made for the account of the relevant Lenders pro rata in accordance with the amounts of interest on the Revolving Credit Loan then due and payable to the respective Lenders. 1.11 Application and Allocation of Payments. Borrower irrevocably -------------------------------------- waives the right to direct the application of any and all payments at any time or times hereafter received from or on behalf of Borrower, and Borrower irrevocably agrees that Agent and Lenders shall have the continuing exclusive right to apply 7 any and all such payments against the then due and payable Obligations of Borrower and in repayment of the Revolving Credit Loan and the Letter of Credit Obligations as Lenders may deem advisable. In the absence of a specific determination by Agent with respect thereto, the same shall be applied in the following order: (a) then due and payable Fees, expenses and other Obligations (including Revolving Credit Advances made by Agent in its capacity as Agent) owing to Agent; (b) then due and payable Fees and expenses of Lenders; (c) then due and payable interest payments; (d) then due and payable Obligations to Lenders other than Fees, expenses and interest and principal payments; and (e) then due and payable principal payments on the Revolving Credit Loan. Agent, on behalf of Lenders, is authorized to, and at its option may, make or cause to be made Revolving Credit Advances by Lenders on behalf of Borrower for payment of all Fees, expenses, charges, costs, principal, interest, or other Obligations then due and payable by Borrower under this Agreement or any of the Loan Documents, even if the making of such Revolving Credit Advance causes the outstanding balance of the Revolving Credit Loan, when added to the then outstanding Letter of Credit Obligations, to exceed the Borrowing Availability, in which case the terms of Section 1.2(b) shall apply. -------------- 1.12 Non-Receipt of Funds by Agent. Unless Agent shall have been ----------------------------- notified by a Lender or Borrower (in either case, "Payor") prior to the date on ----- which such Payor is to make payment to Agent of (in the case of a Lender) the proceeds of a Revolving Credit Advance to be made by such Lender hereunder or (in the case of Borrower) a payment to Agent for account of one or more of Lenders hereunder (such payment being herein called the "Required Payment"), ---------------- which notice shall be effective upon receipt by Agent, that such Payor does not intend to make the Required Payment to Agent, Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date; and, if such Payor has not in fact made the Required Payment to Agent, the recipient(s) of such payment shall, on demand, repay to Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date (the "Advance Date") such amount was so ------------ made available by Agent until the date Agent recovers such amount, at a rate per annum equal to the CP Rate for such day and, if such recipient(s) shall fail promptly to make such payment, Agent shall be entitled to recover such amount, on demand, from such Payor, together with interest as aforesaid; provided, that -------- if neither the recipient(s) nor such Payor shall return the Required Payment to Agent within three (3) Business Days of the Advance Date, then, retroactively to the Advance Date, such Payor and the recipient(s) shall each be obligated to pay interest on the Required Payment as follows: (a) if the Required Payment shall represent a payment to be made by Borrower to Lenders, Borrower and the recipient(s) shall (without duplication) each be obligated 8 retroactively to the Advance Date to pay interest in respect of the Required Payment at the Default Rate (and, in case the recipient(s) shall return the Required Payment to Agent, without limiting the obligation of Borrower hereunder to pay interest to such recipient(s) at the Default Rate in respect of the Required Payment); and (b) if the Required Payment shall represent proceeds of a Revolving Credit Advance to be made by Lenders to Borrower, such Payor and Borrower shall (without duplication) each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the rate of interest provided for such Required Payment pursuant hereto (and, in case Borrower shall return the Required Payment to Agent, without limiting any claim Borrower may have against Payor in respect of the Required Payment). Nothing in this Section 1.12 or elsewhere in this Agreement or the other Loan ------------ Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder. 1.13 Sharing of Payments, Etc. ------------------------- (a) Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as between Lenders, to the provisions of the last sentence of Section 1.1(f)), to offset balances -------------- held by it for the account of Borrower at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's pro rata portion of the Revolving Credit Loan (including any Revolving Credit Advances deemed made by such Lender under Section 1.14(b)) or any other amount --------------- payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower and Agent thereof; provided, that such Lender's failure to give -------- such notice shall not affect the validity thereof. (b) If any Lender shall obtain from Borrower payment of any principal of or interest on the Revolving Credit Loan owing to it or payment of any other amount under this Agreement or any Revolving Credit Note held by it, or any other Loan Document through the exercise of any right of setoff, banker's lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Revolving Credit Loan or such other amounts then due hereunder or thereunder by Borrower to such Lender than the percentage received by any other Lender, it 9 shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in (or, if and to the extent specified by such Lender, direct interests in) the Revolving Credit Loan or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Revolving Credit Loan or such other amounts, respectively, owing to each Lender. Amounts received by Agent under this Section 1.13(b) shall be --------------- treated as a payment by Borrower under Section 1.9. To such end all Lenders ----------- shall make appropriate adjustments among themselves (by the resale of any participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) Borrower agrees that any Lender so purchasing such a participation (or direct interest) may exercise, in a manner consistent with Section 1.13(a), --------------- all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of the Revolving Credit Loan or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any right as against Borrower as described in this Section 1.13 or shall affect the ------------ right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff or right as against Borrower to which this Section 1.13 applies, such Lender shall, to the extent practicable, ------------ assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section 1.13 to share in the benefits ------------ of any recovery on such secured claim. 1.14 Settlement Procedures. --------------------- (a) The Revolving Credit Loan balance may fluctuate from day to day from Agent's disbursement of funds to, and receipt of funds from, Borrower. In order to minimize the frequency of transfers of funds between Agent and Lenders, Revolving Credit Advances may be made by Agent and payments in respect thereof will be settled according to the procedures set forth in this Section 1.14. ------------ Notwithstanding these procedures, each Lender's obligation to fund its portion of any Revolving Credit Advance made to Borrower will commence on the date such Revolving Credit Advances are made. Such payments will be made 10 by each Lender without setoff, counterclaim or reduction of any kind. (b) Notwithstanding anything to the contrary contained in this Agreement, Agent may elect, at its sole option, to fund the entire amount of any Revolving Credit Advance requested by Borrower. In the event Agent makes such election, such Revolving Credit Advance made by Agent shall be deemed, and shall constitute, as of the date of making thereof, a Revolving Credit Advance made by each of Lenders in an amount equal to such Lender's pro rata share thereof, and each Lender shall be obligated to deliver to Agent such share of such Revolving Credit Advance on the Weekly Settlement Date in accordance with the procedure for weekly settlement set forth in Section 1.14(c) or as otherwise provided in --------------- Section 1.14(d). Notwithstanding anything to the contrary contained in this - --------------- Agreement, for purposes of calculating interest payable to any Lender (i) Agent shall be deemed a "Lender" with respect to any outstanding Revolving Credit Advances funded by Agent, and (ii) the amount of Revolving Credit Advances of any Lender that are outstanding on any day shall be equal to the amount of such Lender's Revolving Credit Advances outstanding on such day (A) excluding any Revolving Credit Advances that have been funded entirely by Agent with respect to which such Lender has not funded its pro rata share and (B) including Revolving Credit Advances of such Lender which have been repaid by Borrower to Agent but not yet received by such Lender from Agent. (c) Each Lender shall settle with Agent, upon Agent's request, on the third Business Day of each week (or on such other day of the week as may be designated from time to time by Agent) in each successive week (the "Weekly ------ Settlement Date"), on the net Revolving Credit Advances and payments since the - --------------- date of the last settlement. On each Weekly Settlement Date, prior to 9:00 a.m. (Los Angeles time), Agent shall notify each Lender by telephone or by telex, telecopy or other form of teletransmission, of such Lender's pro rata share of the outstanding Revolving Credit Advances and the amount of the payment necessary to adjust such Lender's outstanding Revolving Credit Advances to such Lender's pro rata share of such Revolving Credit Advances as of such Weekly Settlement Date (on a net basis taking into account any funds in the Collection Account which Agent determines are available). Any such payment shall be made by the party from which such payment is due to the other party, in same day funds, not later than 11:00 a.m. (Los Angeles time) on such Weekly Settlement Date. If any Lender shall, for any reason, not settle with Agent within one Business Day after the Weekly Settlement Date, such Lender agrees to pay and Borrower agrees to repay, severally, to Agent forthwith on demand the amount due Agent on such Weekly Settlement Date together with interest thereon for each day from such Weekly Settlement Date until the day such amount is paid to Agent, at (i) in the case of such Lender, the CP Rate for the first three (3) days for which such amount remains unpaid and thereafter at the Stated Rate, and 11 (ii) in the case of Borrower, the Stated Rate for each day after the date of demand that such amount remains unpaid. If such Lender shall pay to Agent such corresponding amount, such amount so paid shall constitute such Lender's Revolving Credit Advance and, if both such Lender and Borrower shall have paid and repaid, respectively, such corresponding amount, Agent shall promptly pay over to Borrower such corresponding amount in same day funds, but Borrower shall remain obligated for all interest thereon. (d) As an alternative to the weekly settlement provided for in Section ------- 1.14(c) , Agent may elect at its sole option, to use the following same day - ------- settlement procedure for borrowings of Revolving Credit Advances. Prior to 9:00 a.m. (Los Angeles time) on any date specified for a borrowing of a Revolving Credit Advance in a Notice of Revolving Credit Advance, Agent may notify each Lender by telephone or by telex, telecopy or other form of teletransmission, of the requested Revolving Credit Advance. Not later than 11:00 a.m. (Los Angeles time) on the date of such proposed Revolving Credit Advance, each Lender shall make available to Agent, in same day funds, to such account of Agent as Agent may designate, such Lender's pro rata share of such Revolving Credit Advance. Notwithstanding the foregoing, to the extent that there are available funds in the Collection Account, Agent may, at Agent's discretion, notify each Lender that such Lender's obligation to make available to Agent same day funds as provided in the preceding sentence shall be satisfied to the extent of its pro rata share out of such funds in the Collection Account, or such portion of such funds as Agent shall indicate are to be applied to fund such Revolving Credit Advance. 1.15 Accounting. Agent will provide a monthly accounting of transactions ---------- under the Revolving Credit Loan to Borrower. Each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein, unless Borrower, within thirty (30) days after the date any such accounting is delivered by Agent to Borrower, shall notify Agent in writing of any objection which Borrower may have to any such accounting, describing the basis for such objection with specificity. In that event, only those items (the "disputed items") expressly -------------- objected to in such notice shall be deemed to be disputed by Borrower. Agent's determination, based upon the facts available, of any disputed item shall (absent manifest error) be final, binding and conclusive on Borrower. 1.16 Indemnity. --------- (a) Borrower shall indemnify and hold Agent, each Lender and their respective Affiliates, officers, directors, employees, attorneys and agents (each, an "Indemnified Person"), harmless from and against any and all suits, ------------------ actions, costs, fines, deficiencies, penalties, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigations or 12 defense, including those incurred upon any appeal) (each, a "Claim") which may ----- be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended under this Agreement or any other Loan Document or otherwise arising in connection with the transactions contemplated hereunder and thereunder, including any and all Environmental Liabilities and Costs and any infringement Claim relating to any intellectual property rights of any Person, and regardless of whether the Indemnified Person is a party to such Claim; provided, that Borrower shall not be liable for any indemnification to -------- such Indemnified Person to the extent that such Claim results solely from such Indemnified Person's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. NEITHER AGENT NOR ANY LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY. (b) In any suit, proceeding or action brought by Agent or Lenders relating to any Account, Chattel Paper, Contract, General Intangible, Instrument, Equipment or Document for any sum owing thereunder, or to enforce any provision of any Account, Chattel Paper, Contract, General Intangible, Instrument or Document, Borrower shall save, indemnify and keep Agent and Lenders harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder arising out of a breach by Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from Borrower, and all such obligations of Borrower shall be and remain enforceable against, and only against, Borrower and shall not be enforceable against Agent or Lenders. (c) Borrower hereby acknowledges and agrees that neither Agent nor any Lender (as of the date hereof) (i) is now or has ever been in control of any of the Subject Property or the affairs of any Loan Party, or (ii) has the capacity through the provisions of the Loan Documents to influence the conduct of any Loan Party with respect to the ownership, operation or management of any of the Subject Property. 1.17 Access. Borrower shall (and shall cause each of its Subsidiaries ------ to): (a) provide access during normal business hours to Agent and each Lender and any of their respective officers, employees and agents, as frequently as Agent or any Lender determines to be appropriate, upon reasonable advance notice (unless a Default shall have occurred and be continuing, 13 in which event no notice shall be required and Agent and each Lender shall have access at any and all times), to the properties and facilities of Borrower or any of its Subsidiaries; (b) permit Agent, and each Lender and any of their officers, employees and agents to inspect, audit and make extracts from all of Borrower's records, files and books of account at the times and pursuant to the procedures set forth in clause (a) above; and (c) permit Agent, on behalf of Lenders, to conduct audits to inspect, review and evaluate the Collateral, and Borrower agrees to render to Agent and each Lender at Borrower's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto at the times and pursuant to the procedures set forth in clause (a) above. Borrower shall, and shall cause each of its Subsidiaries to, make available to Agent and each Lender and their respective counsel, as quickly as practicable under the circumstances, originals or copies of all books, records, board minutes, contracts, insurance policies, environmental audits, business plans, files, financial statements (actual and pro forma), filings with Federal, state and local regulatory agencies, and other instruments and documents which Agent or any Lender may reasonably request. Borrower shall deliver any document or instrument reasonably necessary for Agent or any Lender, as it may from time to time request, to obtain records from any service bureau or other Person which maintains records for Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by Borrower. Borrower shall instruct its independent certified public accountants and its banking and other financial institutions to make available to Agent and each Lender such information and records as Agent and each Lender may reasonably request. 1.18 Taxes. ----- (a) Any and all payments by or on behalf of Borrower hereunder or under any Revolving Credit Note or any other Loan Document, shall be made, in accordance with this Section 1.18, free and clear of and without deduction for ------------ any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note or any other Loan Document to Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.18) Agent or such Lender receives an amount equal to the ------------ sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. (b) In addition, Borrower agrees to pay any present or future stamp or documentary Taxes or any other excise or property Taxes that arise from any payment made hereunder or from the 14 execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). ----------- (c) Borrower shall indemnify and pay, within ten (10) Business Days of written demand therefor (which demand shall include a statement of the basis therefor), Agent and each Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 1.18) paid by Agent or such Lender and any liability ------------ (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Any Lender who receives an indemnification payment pursuant to this Section 1.18(c) shall, at Borrower's sole cost and expense, provide all - --------------- reasonable assistance to Borrower in obtaining a refund if such Tax or Other Taxes were incorrectly or illegally asserted. (d) Within thirty (30) days after the date of any such payment of Taxes or Other Taxes, Borrower shall furnish to Agent or such Lender, at its address referred to in Section 11.9, the original or a certified copy of a ------------ receipt evidencing payment thereof. (e) If any Lender subsequently receives from a taxing authority a refund of any Tax or Other Tax previously paid by Borrower and for which Borrower has indemnified Lender pursuant to this Section 1.18, such Lender shall ------------ within thirty (30) days after receipt of such refund, and to the extent permitted by applicable law, pay to Borrower the net amount of any such refund after deducting taxes and expenses attributable thereto. (f) Each Lender that is organized under the laws of any jurisdiction other than the United States of America or any State thereof (including the District of Columbia) agrees (i) to furnish to Borrower and Agent, prior to the first interest payment date after which it becomes a Lender hereunder (including by assignment), two (2) copies of either U.S. Internal Revenue Service Form 1001 or Form 4224 (wherein such Lender claims entitlement to complete exemption from or reduced rate of United States Federal withholding tax on interest paid by Borrower hereunder) and (ii) to provide to Borrower and Agent new Forms 4224 or 1001, as applicable, or any successor forms thereto upon the expiration or obsolescence of any previously delivered form; provided, that no such Lender -------- shall be required to deliver a Form 4224 or 1001 under clause (ii) of this Section 1.18(f) to the extent that the delivery of such form is not authorized - --------------- due to a change in law. If any such Lender fails to deliver any certificate required hereunder, the provisions of this Section 1.18, other than Section ------------ ------- 1.18(f), shall not apply to such Lender. - ------- (g) In the event Borrower becomes obligated to pay any additional material amounts to any Lender pursuant to this Section 1.18 (which amounts are ------------ not due or payable to all Lenders 15 generally) as a result of any event or condition described in this Section 1.18, ------------ then, unless such Lender has theretofore taken steps to remove or cure, and has removed or cured, the conditions creating the cause of such obligation to pay such additional amounts, Borrower may, subject to Agent's consent, designate a substitute lender (such substitute lender herein called a "Replacement Lender") ------------------ to purchase and assume such Lender's rights and obligations (including obligations with respect to Letters of Credit) with respect to its entire pro rata share hereunder, without recourse to or warranty by, or expense to, such Lender, for a purchase price equal to the outstanding principal amounts payable to such Lender with respect to its pro rata share hereunder, plus any accrued and unpaid interest and accrued and unpaid Fees in respect of such Lender's pro rata share and on other terms satisfactory to Agent. Upon such purchase by the Replacement Lender and payment of all other amounts owing to the Lender being replaced hereunder, such Lender shall no longer be a party hereto or have any rights or obligations hereunder, and the Replacement Lender shall succeed to the rights and obligations of such Lender with respect to its pro rata share hereunder; provided, that the rights of such Lender pursuant to this Section -------- ------- 1.18(g) shall survive any substitution described in this Section 1.18(g). - ------- --------------- 1.19 Capital Adequacy. ---------------- (a) Borrower shall pay directly to each Lender from time to time on written request such amounts as such Lender may reasonably determine to be necessary to compensate such Lender for any increased costs to such Lender that it reasonably determines are attributable to any law or regulation, or any interpretation, directive or request (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any court or governmental or monetary authority (i) following any Regulatory Change or (ii) implementing after the date hereof any risk-based capital guideline or other capital requirement (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) hereafter issued by any Governmental Authority in respect of such Lender's Revolving Credit Commitment, Revolving Credit Loan, or incurrence of Letter of Credit Obligations hereunder (such compensation to include an amount equal to any reduction of the rate of return on assets or equity of such Lender to a level below that which such Lender could have achieved but for such law, regulation, interpretation, directive or request). (b) Each Lender will furnish to Borrower a certificate setting forth the basis and amount of each request by such Lender for compensation under this Section 1.19. Determinations and allocations by any Lender for purposes of this - ------------ Section 1.19 of the effect of any Regulatory Change pursuant to or of capital - ------------ maintained pursuant to this Section 1.19, on its costs or rate of return of ------------ maintaining Revolving Credit Advances, Letter of Credit Obligations, and its Revolving Credit Commitment, and of the 16 amounts required to compensate such Lender under this Section 1.19, shall be ------------ conclusive absent manifest error. 2. CONDITIONS PRECEDENT 2.1 Conditions to the Initial Revolving Credit Advance and Letter of ---------------------------------------------------------------- Credit Obligations. Notwithstanding any other provision of this Agreement and - ------------------ without affecting in any manner the rights of Agent or any Lender hereunder, Borrower shall have no rights under this Agreement (but shall have all applicable obligations hereunder), and Agent and Lenders shall not be obligated to make the initial Revolving Credit Advance or to incur the initial Letter of Credit Obligations or to take, fulfill, or perform any other action hereunder, until the following conditions have been fulfilled to the satisfaction of or waived in writing by Agent (and to the extent specified below, of Lenders): (a) This Agreement or counterparts thereof shall have been duly executed by, and delivered to, Borrower, Agent and each Lender. (b) Agent and Lenders shall have received such documents, instruments, certificates, opinions and agreements as Agent shall request in connection with the transactions contemplated by this Agreement, including all documents, instruments, agreements and other materials listed in the Schedule of Documents, --------------------- including each of the Repurchase Agreements, all of which shall be in form and substance satisfactory to Agent and Required Lenders. (c) Evidence satisfactory to Agent that Borrower has obtained consents and acknowledgments of all Persons whose consents and acknowledgments may be required, including all requisite Governmental Authorities, to the terms and to the execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby. (d) The terms of the Plan of Reorganization (including Borrower's proposed capital structure and management and the structure and composition of the board of directors of Borrower as of Consummation) shall not have been amended, modified or supplemented without Agent's prior written consent, and the order of the Bankruptcy Court confirming the Plan of Reorganization (the "Confirmation Order") and all other Bankruptcy Court orders approving, - ------------------- modifying, amending or implementing or affecting the Plan of Reorganization or any Loan Document and the rights, remedies and obligations thereunder shall be in form and substance satisfactory to Agent. 17 (e) All aspects of the Plan of Reorganization's effect upon Borrower, including the tax effects, shall be satisfactory to Agent. (f) All conditions to the occurrence of Consummation (other than the execution of this Agreement) shall have been satisfied or waived as contemplated in the Plan of Reorganization in a manner acceptable to Agent. (g) Evidence satisfactory to Agent that the insurance policies provided for in Section 3.19 and Annex F are in full force and effect, together ------------ ------- with appropriate evidence showing a loss payable and/or additional insured clauses or endorsements, as appropriate, in favor of Agent and Lenders and in form and substance satisfactory to Agent. (h) No default or event of default shall exist under any Material Franchise Agreement. (i) All of the assets supporting the initial Revolving Credit Advance and the amount, if any, of the reserves to be established on the Closing Date shall be sufficient in value, on a pro forma basis after giving effect to the payment of all anticipated closing expenditures, whether or not then paid, as determined by Agent, and without any material deterioration of trade payables, to provide Borrower with Net Borrowing Availability under the Revolving Credit Loan of not less than $5,000,000. (j) Payment by Borrower to Agent for its account and the account of Lenders, as the case may be, of all Fees, costs, and expenses of closing (including fees and expenses of consultants and counsel to Agent presented as of the Closing Date). (k) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body (i) which, if successful, would have a Material Adverse Effect, or (ii) to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of, this Agreement or any of the other Loan Documents or the consummation of the transactions contemplated hereby and thereby and which, in Agent's sole judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents. (l) Agent, in its sole judgment, shall not have determined that: (i) Borrower shall have made any Restricted Payment since December 31, 1995; (ii) any material increase in liabilities, liquidated or contingent, of Borrower, or any material decrease in the assets of Borrower, shall have occurred since December 31, 1995, except as shown in Borrower's unaudited June 30, 1996 financial statements; or (iii) any Material Adverse 18 Effect shall have occurred since December 31, 1995, except as shown in Borrower's unaudited June 30, 1996 financial statements. (m) Agent shall be satisfied, in its sole judgment, with the corporate, capital, tax, legal and management structure of Borrower, and shall be satisfied, in its sole judgment exercised reasonably, with the nature and status of all contractual obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting Borrower. (n) There shall be no outstanding "Obligations" under as defined in the DIP Agreement, other than such "Obligations" to be satisfied in full by the initial Revolving Credit Advance and Letter of Credit Obligations. 2.2 Further Conditions to Each Revolving Credit Advance and Each Letter ------------------------------------------------------------------- of Credit Obligation. It shall be a further condition to the funding of the - -------------------- initial and each subsequent Revolving Credit Advance and the incurrence of the initial and each subsequent Letter of Credit Obligation, if any, that the following statements shall be true on the date of each such funding, advance or incurrence, as the case may be: (a) Borrower's representations and warranties contained herein or in any of the Loan Documents shall be true and correct in all material respects on and as of the Closing Date and the date on which each such Revolving Credit Advance is made or any Letter of Credit Obligation, if any, is incurred, as though made on or incurred on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date and except for changes therein permitted or contemplated by this Agreement. (b) No event shall have occurred and be continuing, or would result from the making of any Revolving Credit Advance or the incurrence of any Letter of Credit Obligation, as the case may be, which constitutes or, after such funding, would constitute a Default or an Event of Default. (c) After giving effect to such Revolving Credit Advance or the incurrence of such Letter of Credit Obligation, as the case may be, the aggregate principal amount of the Revolving Credit Loan and outstanding Letter of Credit Obligations shall not exceed the Borrowing Availability as reflected on the most recent Borrowing Base Certificate delivered to Agent and Lenders. (d) Each of the conditions set forth in Section 2.1(b), Section -------------- ------- 2.1(c), Section 2.1(g) and Section 2.1(h) shall continue to be satisfied by -------------- -------------- Borrower as of such date. (e) No Material Adverse Effect shall have occurred. 19 The request and acceptance by Borrower of the proceeds of any Revolving Credit Advance, and the request by Borrower for the incurrence by Lenders of Letter of Credit Obligations, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a ----------- confirmation by Borrower of the granting and continuance of Agent's and Lenders' Liens pursuant to the Collateral Documents. 3. REPRESENTATIONS AND WARRANTIES To induce Agent and Lenders to enter into this Agreement, Borrower represents and warrants to Agent and Lenders that: 3.1 Corporate Existence; Compliance with Law. Borrower: (a) is a ---------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be in good standing in such other jurisdictions would not result in a Material Adverse Effect; (b) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now and proposed to be conducted; (c) has all licenses, permits, consents and approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except where any such noncompliance would not result in a Material Adverse Effect; (d) is in compliance with its certificate of incorporation and by-laws; and (e) is in compliance in all material respects with all applicable provisions of law. 3.2 Executive Offices; Collateral Locations; Corporate or Other Names. ----------------------------------------------------------------- The current locations of Borrower's executive office, principal place of business, corporate offices, all warehouses and premises within which any Collateral is stored or located, and the locations of all of Borrower's records concerning the Collateral are set forth in Schedule 3.2. During the prior five ------------ (5) years, except as set forth in Schedule 3.2, Borrower has not been known as ------------ or used any corporate, fictitious or trade name. 3.3 Corporate Power; Authorization; Enforceable Obligations. The ------------------------------------------------------- execution, delivery and performance by Borrower of the Loan Documents and all other instruments and documents to be delivered by Borrower hereunder and thereunder and the creation of all Liens provided for herein and therein: (a) are within Borrower's corporate power; (b) have been duly authorized by all necessary corporate and shareholder action; (c) are not in 20 contravention of any provision of Borrower's certificate of incorporation or by- laws or other organizational documents; (d) will not violate any law or regulation, or any order or decree of any court or governmental instrumentality; (e) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Borrower is a party or by which Borrower or any of its property is bound; (f) will not result in the creation or imposition of any Lien upon any of the property of Borrower other than those in favor of Agent or Lenders, all pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except for the Confirmation Order and those referred to in Section 2.1(c), all of which will have been duly obtained, made -------------- or complied with prior to the Closing Date and which are in full force and effect. As of the Closing Date, each of the Loan Documents has been duly executed and delivered for the benefit of or on behalf of Borrower and each constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms. 3.4 Financial Statements and Projections. Borrower has delivered the ------------------------------------ Financials and Projections identified in Schedule 3.4, and each of such ------------ Financials and Projection complies in all material respects with the description thereof contained in Schedule 3.4. ------------ 3.5 Material Adverse Change. As of the date hereof, Borrower has no ----------------------- material obligations, contingent liabilities, liabilities for Charges then due, long-term leases or unusual forward or long-term commitments which are not reflected in the audited December 31, 1995 consolidated balance sheet of Borrower and the June 30, 1996 unaudited financial statements of Borrower. As of the date hereof, there has been no material deviation from the Projections provided to Lenders. Except as otherwise permitted hereunder or as set forth in Schedule 3.5, no Restricted Payment has been made since December 31, 1995, and - ------------ no shares of Stock of Borrower have been, or are now required to be, redeemed, retired, purchased or otherwise acquired for value by Borrower. Except as set forth in Schedule 3.5, since December 31, 1995, no event has occurred which ------------ would result in a Material Adverse Effect. 3.6 Ownership of Property; Liens. Except as described in Schedule 3.6, ---------------------------- ------------ the real estate listed in Schedule 3.6 constitutes all of the real property ------------ owned, leased, or used in its business by Borrower. Borrower holds (a) good and marketable fee simple title to all of its real estate described as owned in Schedule 3.6, (b) valid and marketable leasehold interests in all of Borrower's - ------------ Leases (both as lessor and lessee, sublessee or assignee) described as leased in Schedule 3.6, and (c) good and marketable title to, or valid leasehold interests - ------------ in, all of its other properties and assets. None of the properties and assets 21 of Borrower are subject to any Liens, except (x) Permitted Encumbrances and Liens set forth in Schedule 6.7 and (y) from and after the Closing Date, the ------------ Lien in favor of Agent and Lenders pursuant to the Collateral Documents. Borrower has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and duly effected all recordings, filings and other actions necessary to establish, protect and perfect Borrower's right, title and interest in and to all such real estate and other assets or property. Except as described in Schedule 3.6: (a) ------------ as of the date hereof, neither Borrower, nor, to Borrower's knowledge, any other party to any such Lease described in Schedule 3.6 is in default of its ------------ obligations thereunder or has delivered or received any notice of default under any such Lease, and no event has occurred which, with the giving of notice, the passage of time, or both, would constitute a default under any such Lease; (b) Borrower does not own or hold, and is not obligated under or a party to, any option, right of first refusal or any other contractual right to purchase, acquire, sell, assign or dispose of any real property owned or leased by it; and (c) no portion of any real property owned or leased by Borrower has suffered any material damage by fire or other casualty loss which has not heretofore been, as of the Closing Date, completely repaired and restored, or, at all times thereafter, repaired and restored (or is in the process of being repaired and restored), to a position reasonably comparable to its original condition. All material permits required to have been issued or appropriate to enable the real property owned or leased by Borrower to be lawfully occupied and used for all of the purposes for which they are currently occupied and used, have been lawfully issued and are, as of the date hereof, in full force and effect. 3.7 Restrictions; No Default; Material Contracts. No contract, lease, -------------------------------------------- agreement or other instrument to which Borrower is a party or by which it or any of its properties or assets is bound or affected and no provision of any charter, corporate restriction, applicable law or governmental regulation binding upon or applicable to Borrower has resulted in or will result in a Material Adverse Effect. Borrower is not in default and, to Borrower's knowledge, no third party is in default, under or with respect to any Material Contract to which Borrower is a party. No Default has occurred and is continuing. Schedule 3.7, as supplemented from time to time by written ------------ disclosures to the Agent, sets forth a complete and accurate list of all Material Contracts of Borrower and each of its Subsidiaries. 3.8 Labor Matters. As of the date hereof, except as set forth in ------------- Schedule 3.8, there are no strikes or other labor disputes against Borrower that - ------------ are pending or, to Borrower's knowledge, threatened. Hours worked by and payment made to employees of Borrower have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters, which violation in either case would have a Material Adverse Effect. All material payments due from Borrower on 22 account of employee health and welfare insurance have been paid or accrued as a liability on the books of Borrower. Except as set forth in Schedule 3.8, ------------ Borrower does not have any obligation under any collective bargaining agreement, management agreement, or any employment agreement, and a correct and complete copy of each agreement listed in Schedule 3.8 has been made available to Agent. ------------ As of the date hereof, there is no organizing activity involving Borrower pending or, to Borrower's knowledge, threatened by any labor union or group of employees. Except as set forth in Schedule 3.14, there are no representation ------------- proceedings pending or, to Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of Borrower has made a pending demand for recognition, and there are no complaints or charges against Borrower pending or, to Borrower's knowledge, threatened to be filed with any Federal, state, local or foreign court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by Borrower of any individual, which could reasonably be expected to have a Material Adverse Effect. 3.9 Ventures and Subsidiaries; Outstanding Stock and Indebtedness. ------------------------------------------------------------- Except as set forth in Schedule 3.9, Borrower has no Subsidiaries and is not ------------ engaged in any joint venture or partnership with any other Person. Schedule 3.9 ------------ lists the number of authorized, and issued and outstanding Stock of Borrower. Except as set forth in Schedule 3.9, there are no outstanding rights to purchase ------------ options, warrants or similar rights or agreements pursuant to which Borrower may be required to issue, sell or purchase any Stock or other equity security. Schedule 6.3 lists all Indebtedness in excess of $100,000 of Borrower as of the - ------------ Closing Date. 3.10 Government Regulation. Borrower: (a) is not an "investment company" --------------------- or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940 as amended; and (b) is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any other Federal or state statute that restricts or limits Borrower's ability to incur Indebtedness, pledge its assets, or to perform its obligations hereunder, or under any other Loan Document, and the making of the Revolving Credit Advances and the incurrence of the Letter of Credit Obligations, in each case by Lenders, the application of the proceeds and repayment thereof by Borrower, and the consummation of the transactions contemplated by this Agreement and the other Loan Documents, will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. 3.11 Margin Regulations. Borrower is not engaged in the business of ------------------ extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of the any Revolving Credit 23 Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Borrower will not take or permit to be taken any action which might cause any Loan Document or any document or instrument delivered pursuant hereto or thereto to violate any regulation of the Board of Governors of the Federal Reserve Board. 3.12 Taxes. All Federal, state, local and foreign tax returns, reports ----- and statements, including information returns required to be filed by Borrower, have been filed with the appropriate Governmental Authority and all Charges and other impositions shown thereon to be due and payable have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, or any such fine, penalty, interest, late charge or loss has been paid. Borrower has paid when due and payable all material Charges required to be paid by it. Proper and accurate amounts have been withheld by Borrower from its employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable Federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. Schedule 3.12 sets ------------- forth those taxable years for which any of the tax returns of Borrower are currently being audited by the IRS or any other applicable Governmental Authority; and any assessments or threatened assessments in connection with such audit or otherwise currently outstanding. Except as described in Schedule 3.12, ------------- Borrower has not executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the property owned by Borrower is property which is required to treat as being owned by any other Person pursuant to the provisions of IRC Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in effect immediately prior to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning of IRC Section 168(h). Borrower has not agreed or been requested to make any adjustment under IRC Section 481(a) or IRC Section 482 by reason of a change in accounting method or otherwise. Borrower has no obligation under any written tax sharing agreement except as described in Schedule 3.12. Borrower's federal employer identification number is set forth - ------------- in Schedule 3.12. ------------- 3.13 ERISA. ----- (a) Schedule 3.13 lists all Title IV Plans, Multiemployer Plans and ------------- Retiree Welfare Plans maintained or contributed to by Borrower or by any ERISA Affiliate of Borrower, and separately identifies such plans as either Title IV Plans, Multiemployer Plans, multiple employer plans subject to Section 4064 of ERISA or Retiree Welfare Plans. To the knowledge of Borrower: (i) all Qualified Plans of Borrower or any ERISA 24 Affiliate of Borrower are the subject of current favorable determination letters received from the IRS under Section 401(a) of the IRC considering the effects on such Qualified Plans of the Tax Reform Act of 1986 and all later tax enactments through the Omnibus Reconciliation Act of 1993 ("OBRA 93")(except that ------- compliance with the Unemployment Compensation Amendments of 1992 or/and OBRA 93 may be demonstrated alternatively by the timely verbatim adoption of appropriate IRS model amendments), or the appropriate Person has timely filed (or, in the case of any Qualified Plan with a plan year ending October 31, November 30 or December 31, the appropriate Person either has timely filed or will timely file such application) an application with the IRS for such a letter, all such Qualified Plans have been or shall be amended, including retroactive amendments, as required during such determination letter process to maintain the qualified status of such Plans, and, to the best of Borrower's knowledge, all such Qualified Plans have been operated in all material respects in compliance with their written terms and the provisions of applicable law; and (ii) the trusts created under each Qualified Plan are exempt from tax under the provisions of IRC Section 501(a) and nothing has occurred which would cause the loss of qualification of any Qualified Plan or tax-exempt status of any such trust. To the knowledge of Borrower, each Plan is in compliance in all material respects with the applicable provisions of ERISA and the IRC, including the filing of all reports required under the IRC or ERISA which are true and correct as of the date filed, and all required contributions and benefits have been paid in accordance with the provisions of each such Plan. Neither Borrower nor any ERISA Affiliate of Borrower has failed to make any contribution or pay any amount required by IRC Section 412 or Section 302 of ERISA. The present value of the liabilities under all unfunded Pension Plans of Borrower and its ERISA Affiliates does not exceed the aggregate amount of $500,000. Neither Borrower nor any ERISA Affiliate has engaged in a prohibited transaction, as defined in IRC Section 4975 or Section 406 of ERISA, in connection with any Plan which would subject Borrower or any ERISA Affiliate to a material tax on prohibited transactions imposed by IRC Section 4975 or any other material liability. (b) Except as set forth in Schedule 3.13: (i) no Title IV Plan has ------------- any material Unfunded Pension Liability; (ii) neither Borrower nor any ERISA Affiliate of Borrower nor Borrower and its ERISA Affiliates in the aggregate, have, or upon the occurrence of any reasonably possible events, would have any material liability to any Multiemployer Plan or Retiree Welfare Plan which is not otherwise fully disclosed as or in a line item in the audited financial statements of Borrower or any ERISA Affiliate; (iii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur which has or can be expected to result in any material liability to Borrower; (iv) there are no pending, or to the knowledge of Borrower, threatened claims, actions or lawsuits (other than claims for benefits in the normal 25 course), asserted or instituted against (x) any Plan or its assets, (y) any fiduciary (within the meaning of Section 3(21)(A) of ERISA) with respect to any Plan or (z) Borrower or any ERISA Affiliate with respect to any Plan; (v) neither Borrower nor any ERISA Affiliate of Borrower has incurred or reasonably expects to incur any Withdrawal Liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan; (vi) within the last five (5) years neither Borrower nor any ERISA Affiliate of Borrower has engaged in a transaction which resulted in a Title IV Plan with Unfunded Pension Liabilities being transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any such entity; (vii) no Plan which is a Retiree Welfare Plan provides for continuing benefits or coverage for any participant or any beneficiary of a participant after such participant's termination of employment (except as may be required by IRC Section 4980B and at the sole expense of the participant or the beneficiary of the participant); (viii) Borrower and each ERISA Affiliate of Borrower have complied in all material respects with the notice and continuation coverage requirements of IRC Section 4980B and the proposed or final regulations thereunder; and (ix) the aggregate benefit liabilities under all Plans of Borrower and its ERISA Affiliates that has been funded or satisfied with insurance contracts rated below AAA by Standard & Poor's Corporation, or below the equivalent rating by any other nationally recognized rating agency, does not exceed $500,000. 3.14 No Litigation. Except as set forth in Schedule 3.14, no action, ------------- ------------- claim or proceeding is now pending or, to the knowledge of Borrower, threatened against Borrower, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any Federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators (a) which challenges any such Person's right, power, or competence to enter into or perform any of its obligations under the Loan Documents, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) which could reasonably be expected to result in a Material Adverse Effect. To the knowledge of Borrower, there does not exist a state of facts which is reasonably likely to give rise to such proceedings. Except as set forth in Schedule 3.14, Borrower is not a party to any consent decree. ------------- 3.15 Brokers. No broker or finder acting on behalf of Borrower brought ------- about the obtaining, making or closing of the credit extended pursuant to this Agreement or the transactions contemplated by the Loan Documents and Borrower does not have any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.16 Patents, Trademarks, Copyrights and Licenses. Except as otherwise -------------------------------------------- set forth in Schedule 3.16, Borrower owns or has ------------- 26 valid licenses for all patents, patent applications, copyrights, service marks, trademarks, trademark applications and trade names which are necessary to continue to conduct its business as heretofore conducted by it, now conducted by it and proposed to be conducted by it, each of which is listed (with respect to copyrights, those that are registered only), together with United States Patent and Trademark Office application or registration numbers, where applicable, in Schedule 3.16. Schedule 3.16 lists each Material Franchise Agreement of - ------------- ------------- Borrower as of the Closing Date and will be updated by Borrower to reflect promptly any change therein. Borrower conducts business without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others, except where such infringement or claim of infringement would not have or result in a Material Adverse Effect. Except as set forth in Schedule 3.16, ------------- to Borrower's knowledge, there is no infringement or claim of infringement by others of any material license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of Borrower. 3.17 Full Disclosure. No information contained in this Agreement, the --------------- other Loan Documents, the Financials or any written statement furnished by or on behalf of any Loan Party pursuant to the terms of this Agreement or any other Loan Document, which has previously been delivered to Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. With respect to all business plans and other forecasts and projections (including the Projections) furnished by or on behalf of Borrower and made available to Agent or any Lender relating to the financial condition, operations, business, properties or prospects of Borrower or any Subsidiary thereof (a) all facts stated as such therein are true and complete in all material respects, (b) all facts upon which the forecasts or projections therein contained are based are true and complete in all material respects and no material fact known to Borrower was omitted therefrom, (c) all assumptions made on that basis are reasonable under the circumstances and are disclosed therein, and (d) the forecasts or projections are reasonably based on those facts and assumptions. With respect to any such forecasts or projections made available to Agent or any Lender after the Closing Date, the foregoing clauses (a) through (d) shall be true and correct in all respects as of the date of such projections or forecasts. 3.18 Hazardous Materials. Except (a) as set forth in Schedule 3.18, (b) ------------------- ------------- in connection with routine operations in the ordinary course of business in compliance with Environmental Laws or with applicable permits issued by a Governmental Authority, or (c) where the presence of any Hazardous Material could not reasonably be expected to result in a Material Adverse Effect, the Subject Property is free of any Hazardous Material. In 27 addition, Schedule 3.18 discloses any and all existing or potential ------------- Environmental Liabilities and Costs of Borrower of which Borrower, after due inquiry, has knowledge, which could reasonably be expected to constitute or result in a Material Adverse Effect. Except as set forth in Schedule 3.18, ------------- Borrower has not caused or suffered to occur any Release at, under, above or within any Subject Property, which Release could reasonably be expected to constitute or result in a Material Adverse Effect. None of the Loan Parties is involved in operations which could reasonably be expected to lead to the imposition of any liability or Lien on it or any of the Subject Property under any Environmental Laws, which liability or Lien could reasonably be expected to constitute or result in a Material Adverse Effect, and Borrower has not permitted any tenant or occupant of such premises to engage in any such activity. 3.19 Insurance Policies. Schedule 3.19 lists all insurance of any nature ------------------ ------------- maintained for current occurrences by Borrower, as well as a summary of the terms of such insurance. Such insurance complies with and shall at all times comply with the standards set forth in Annex F. ------- 3.20 Deposit and Disbursement Accounts. Schedule 3.20 lists all banks --------------------------------- ------------- and other financial institutions at which Borrower maintains deposits and/or other accounts and/or post office lock boxes, including the Disbursement Accounts, the Concentration Account and the Lock Box Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number. 4. FINANCIAL STATEMENTS AND INFORMATION 4.1 Reports and Notices. Borrower covenants and agrees that from and ------------------- after the Closing Date and until the Termination Date, it shall deliver to Agent and each Lender the Financial Statements, Projections and notices at the times and in the manner set forth in Annex E. ------- 4.2 Communication with Accountants. Borrower (for itself and each ------------------------------ Subsidiary thereof) authorizes Agent and each Lender to communicate directly with its and its Subsidiaries' independent certified public accountants and tax advisors and authorizes those accountants to disclose to Agent and each Lender any and all financial statements and other supporting financial documents and schedules, including copies of any management letter, with respect to the business, financial condition and other affairs of Borrower and each Subsidiary thereof. Borrower shall deliver to Agent a letter (the "Accountant's Letter") ------------------- addressed to such accountants and tax advisors instructing them to make available to Agent and Lenders such information and records as Agent and Lenders may reasonably request and to otherwise comply with the provisions of this Section 4 and authorizing Agent and Lenders to - --------- 28 rely on the certified Financials prepared by such accountants, and shall use its reasonable efforts to have such letter acknowledged by such accountants. Such letter shall be delivered (a) at or before the Closing Date, (b) prior to such accountant's commencement of an audit for each Fiscal Year ending after the Closing Date, and (c) promptly upon Borrower's engagement of new accountants and tax advisors. 5. AFFIRMATIVE COVENANTS Borrower covenants and agrees (for itself and its Subsidiaries) that, unless Required Lenders shall otherwise consent in writing, from and after the date hereof and until the Termination Date: 5.1 Maintenance of Existence and Conduct of Business. Borrower shall ------------------------------------------------ (and shall cause each of its Subsidiaries to): (a) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises, where the failure to do so would have a Material Adverse Effect; (b) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; (c) at all times maintain, preserve and protect all of its Intellectual Property, and preserve all the remainder of its property, in each case in use or useful in the conduct of its business and keep the same in good repair, working order and condition (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with Borrower's past practices, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; (d) keep and maintain its Equipment and Fixtures in good operating condition sufficient for the continuation of its business conducted on a basis consistent with past practices and shall provide or arrange for all maintenance and service and all repairs necessary for such purpose; and (e) transact business only under the names set forth in Schedule 3.2 unless Agent has given ------------ its prior written consent. 5.2 Payment of Charges and Claims. Borrower shall pay and discharge, or ----------------------------- cause to be paid and discharged in accordance with the terms thereof, (a) all Charges imposed upon it or any Subsidiary of Borrower or its or their income and profits, or any of its property (real, personal or mixed), and (b) all lawful claims for labor, materials, supplies and services or otherwise, which if unpaid might by law become a Lien on its property; provided, that Borrower or any such -------- Subsidiary shall not be required to pay any such Charge or claim which is being contested in good faith by proper legal actions or proceedings, so long as at the time of commencement of any such action or proceeding and during the pendency thereof: (i) no Default shall have occurred and be continuing; (ii) adequate reserves with respect thereto are established and are maintained in accordance with GAAP; 29 (iii) such contest operates to suspend collection of the contested Charges or claims and is maintained and prosecuted continuously with diligence; (iv) none of the Collateral would be subject to forfeiture or loss or any Lien by reason of the institution or prosecution of such contest; (v) no Lien shall be imposed to secure payment of such Charges or claims other than inchoate tax Liens; and (vi) Borrower shall promptly pay or discharge such contested Charges and all additional charges, interest penalties and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrower. 5.3 Books and Records. Borrower shall (and shall cause each Subsidiary ----------------- to) keep adequate records and books of account with respect to its business activities, in which proper entries, reflecting all of its consolidated and consolidating financial transactions, are made in accordance with GAAP and on a basis consistent with the Financials. 5.4 Litigation. Borrower shall notify Agent and each Lender in writing, ---------- promptly upon learning thereof, of any litigation, Claim or other action commenced or threatened against Borrower or any Subsidiary of Borrower, and of the institution against any such Person of any suit or administrative proceeding which (a) may involve an amount in excess of $250,000 individually or in a series of related matters or (b) could reasonably be expected to have or result in a Material Adverse Effect. 5.5 Insurance. --------- (a) Borrower shall, at its (or its Subsidiary's) sole cost and expense maintain or cause to be maintained, the policies of insurance in such amounts and as otherwise described in Annex F. Borrower shall notify Agent promptly of ------- any occurrence causing a material loss or decline in value of any real or personal property and the estimated (or actual, if available) amount of such loss or decline, except as specified otherwise in Annex F. Borrower hereby ------- directs all present and future insurers under its "All Risk" policies of insurance to pay all proceeds payable thereunder directly to Agent on behalf of Lenders. Borrower shall have the right (and obligation) to make, settle and adjust all claims under its insurance policies; provided, that (i) in the event -------- Agent, in its sole discretion, determines that Borrower has not been diligent in such efforts, upon ten (10) Business Days prior notice (unless Agent determines, in its sole discretion, that a shorter notice period is required in order for its rights with respect to such claims not to be prejudiced), or (ii) upon the occurrence of an Event of Default, Agent shall have the right (but not the obligation) to make, settle and adjust on behalf of Borrower. Subject to the immediately preceding sentence, Borrower irrevocably makes, constitutes and appoints Agent (and all officers, employees or 30 agents designated by Agent) as Borrower's true and lawful agent and attorney in- fact for the purpose of making, settling and adjusting claims under the "All Risk" policies of insurance, endorsing the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such "All Risk" policies of insurance, and for making all determinations and decisions with respect to such "All Risk" policies of insurance. In the event Borrower at any time or times hereafter shall fail to obtain or maintain (or fail to cause to be obtained or maintained) any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, Agent or Lenders, without waiving or releasing any Obligations or Default or Event of Default hereunder, may at any time or times thereafter (but shall not be obligated to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Agent or Lenders deem advisable. All sums so disbursed, including attorneys' fees, court costs and other charges related thereto, shall be payable, on demand, by Borrower to Agent on behalf of Lenders and shall be additional Obligations hereunder secured by the Collateral, provided, that if and to the extent Borrower fails to promptly pay any of such sums upon Agent's demand therefor, Agent is authorized to, and at its option may, make or cause to be made Revolving Credit Advances on behalf of Borrower for payment thereof. (b) Agent and Required Lenders reserve the right at any time, upon review of Borrower's risk profile, to require additional forms and limits of insurance to, in Agent's or Required Lenders' sole opinion, adequately protect the interests of Agent and Lenders. Agent and each Lender acknowledge that, based upon the evidence of insurance coverage presented to Agent and upon Borrower's existing business, locations and operations as of the Closing Date, Borrower's insurance coverage in effect on the Closing Date is satisfactory in accordance with this Section. Borrower shall, if so requested by Agent, deliver to Agent, at such time as Agent may reasonably request, a report of a reputable insurance broker satisfactory to Agent with respect to its insurance policies. (c) Borrower shall deliver to Agent endorsements to all of its and its Subsidiaries' (i) "All Risk" and business interruption insurance naming Agent on behalf of Lenders as loss payee, and (ii) general liability and other liability policies naming Agent and each Lender as additional insureds. 5.6 Compliance with Laws. Borrower shall (and shall cause each of its -------------------- Subsidiaries to) comply in all material respects with all Federal, state and local laws, permits and regulations applicable to it, including those relating to licensing, ERISA and labor matters. 5.7 Agreements. Borrower shall (and shall cause each of its ---------- Subsidiaries to) perform, within all required time periods 31 (after giving effect to any applicable grace periods), all of its obligations and enforce all of its rights under each agreement, contract, instrument or other document to which it is a party, including each Material Franchise Agreement, any leases and customer contracts to which it is a party, where the failure to so perform and enforce could have or result in a Material Adverse Effect. Borrower shall not (and shall not permit any of its Subsidiaries to) terminate or modify any provision of any agreement, contract, instrument or other document (including each Material Franchise Agreement) to which it is a party which termination or modification could reasonably be expected to have or result in a Material Adverse Effect. Borrower shall (and shall cause each of its Subsidiaries to) perform and comply with all obligations in respect of Accounts, Chattel Paper, Contracts, Licenses, Instruments, Documents and all other agreements constituting or giving rise to Collateral. Except as provided below, Borrower shall not, without Agent's prior written consent, with respect to any of the Accounts, Chattel Paper, Instruments or amounts due under any Contract: (a) grant any extension of the time of payment of any thereof; (b) compromise or settle the same for less than the full amount thereof; (c) release, in whole or in part, any Person liable for the payment thereof; or (d) allow any credit or discount whatsoever thereon other than trade discounts granted in the ordinary course of business of Borrower; provided, that Borrower -------- may take any of the actions set forth in clauses (a) through (d) above to the extent that the amount affected by any one such action does not exceed $50,000. 5.8 Supplemental Disclosure. From time to time as may be necessary, ----------------------- Borrower may, or at the request of Agent or any Lender, Borrower shall supplement (or cause to be supplemented) each Schedule hereto, or representation herein or in any other Loan Document with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an exception to such representation or which is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby; provided, that such supplement to such Schedule or -------- representation shall not be deemed an amendment thereof unless expressly consented to in writing by Agent, or (a) with respect to amendments to Schedule -------- 3.2, Borrower has provided Agent with not less than thirty (30) days prior - --- written notice and Borrower has executed and delivered to Agent all documents requested by Agent to maintain the perfection and priority of Agent's Liens on the Collateral, and (b) with respect to amendments to Schedule 3.19 or Schedule ------------- -------- 3.20, Borrower has provided Agent with not less than thirty (30) days prior - ---- written notice, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by Lenders of any Default disclosed therein. Borrower shall, if so requested by Agent or Required Lenders, furnish to Agent and Lenders as often as they reasonably request, statements and schedules further identifying and describing the Collateral and such other reports in 32 connection with the Collateral as Agent or Required Lenders may reasonably request, all in reasonable detail, and, Borrower shall advise Agent and Lenders promptly, in reasonable detail, of any of the following of which Borrower becomes aware: (a) any Lien, other than as permitted pursuant to Section 6.7, ----------- attaching to or asserted against any of the Collateral; (b) any material deterioration in the Collateral; (c) any cancellation, termination, non-renewal, default or other material occurrence with respect to a Material Franchise Agreement; (d) any change in the list of Material Franchise Agreements; and (e) the occurrence of any other event which would have a Material Adverse Effect upon the Collateral and/or Agent's Lien thereon. 5.9 Environmental Matters. Borrower shall (a) comply with the --------------------- Environmental Laws and permits applicable to it, except where such noncompliance could not have a Material Adverse Effect, (b) notify Agent and each Lender promptly after Borrower becomes aware of any Release upon any Subject Property that results in a reporting obligation to any Governmental Authority, and (c) promptly advise Agent of any material oral communication received by any Loan Party in connection with, and forward to Agent and each Lender a copy of any written order, notice, permit, application, or other material communication or report received by any Loan Party in connection with, any such Release or any other material matter relating to any Environmental Laws that may affect any Subject Property or any Loan Party. The provisions of this Section 5.9 shall ----------- apply whether or not the Environmental Protection Agency, any other Federal agency or any state or local environmental agency has taken or threatened any action in connection with any Release or the presence of any Hazardous Materials. 5.10 Landlord's Agreements. Borrower shall use its best efforts, --------------------- consistent with sound business judgment, to obtain a landlord's agreement in form and substance acceptable to Agent from the lessor of any present or future leased premises of Borrower. 5.11 Certain Obligations Respecting Subsidiaries. Borrower will, and ------------------------------------------- will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Subsidiaries is a wholly owned Subsidiary. Borrower will not permit any of its Subsidiaries to enter into, after the date of this Agreement, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends or other Restricted Payments, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of any property or assets. 5.12 Application of Proceeds. Borrower shall use the proceeds of ----------------------- Revolving Credit Advances as provided in Section 1.3. ----------- 33 5.13 Fiscal Year. Borrower shall, and shall cause each Subsidiary to, ----------- maintain as its Fiscal Year the twelve month period ending on December 31 of each year. 5.14 Casualty and Condemnation. ------------------------- (a) Borrower shall promptly notify Agent of any loss, damage, or destruction to any Collateral or any real property owned by Borrower whether or not constituting Collateral (collectively, "Property") or arising from its use, -------- whether or not covered by insurance. Subject to the provisions of Section 5.5, ----------- Agent on behalf of Lenders is hereby authorized to adjust losses and collect all insurance proceeds directly. If, notwithstanding the provisions hereof which require that Agent be the sole loss payee, a check or other instrument from an insurer is made payable to Borrower or Borrower and Agent jointly, Agent may endorse Borrower's name thereon and take such other action as Agent may elect to obtain the proceeds thereof. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, if such net proceeds do not arise from a loss, damage or destruction to any Collateral, and involve less than $1,000,000, Borrower may use such net proceeds to repair or replace such property. In all other cases, Agent may apply such proceeds to the reduction of the Obligations in the manner set forth in Section 1.11 or, at ------------ Agent's option in its sole discretion, exercised in good faith, may permit or require Borrower to use such proceeds, or any part thereof, to replace, repair or restore such Property as provided in paragraph (d) below. (b) Borrower shall promptly upon learning of the institution of any proceeding for the condemnation or other taking of any of its Property, notify Agent of the pendency of such proceeding, and agrees that Agent may participate in any such proceeding and Borrower from time to time will deliver to Agent all instruments reasonably requested by Agent to permit such participation. Agent shall (and is hereby authorized to) collect any and all awards, payments or other proceeds of any such condemnation or taking and apply such proceeds to the reduction of the Obligations in the manner set forth in Section 1.11 or, at ------------ Agent's option in its sole discretion, may permit or require Borrower to use such proceeds, or any part thereof, to replace, repair or restore such Property as provided in paragraph (d) below. (c) Subject to the terms and conditions hereof (including Section ------- 2.2), after any application of the proceeds of any loss or taking of Borrower's - --- Property to the reduction of the Obligations pursuant to paragraphs (a) and (b) above, Borrower may borrow Revolving Credit Advances for the purpose of replacing, repairing or restoring any Property subject to such loss or taking in accordance with paragraph (d) below. 34 (d) Any Property which is to be replaced, repaired or restored pursuant to paragraph (a), (b) or (c) above shall be replaced, repaired or restored with materials and workmanship of substantially as good a quality as existed before such loss or taking, and Borrower shall commence such replacement, repair or restoration as soon as practicable and proceed diligently with it until completion to Agent's reasonable satisfaction. Borrower shall provide to Agent written progress reports, other information and evidence of its compliance with the foregoing. 6. NEGATIVE COVENANTS Borrower covenants and agrees (for itself and its Subsidiaries) that, without Required Lenders' prior written consent, from and after the date hereof and until the Termination Date: 6.1 Mergers, Subsidiaries, Etc. Borrower shall not (and shall not --------------------------- permit any of its Subsidiaries to), directly or indirectly, by operation of law or otherwise, merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with, any Person or form or acquire any Subsidiary. Prior to forming any Subsidiary, Borrower shall (a) provide not less than thirty (30) days prior written notice to Agent and each Lender, (b) take all actions requested by Agent to protect and preserve the Collateral, and (c) receive the prior written consent of Required Lenders. Borrower shall not permit any of its Subsidiaries to engage in any business operations or acquire any assets or property. 6.2 Investments. Borrower shall not (and shall not permit any of its ----------- Subsidiaries to), directly or indirectly, make or maintain any Investment except: (a) as otherwise permitted by Section 6.3 or 6.4; (b) Investments ------------------ outstanding on the date hereof and listed in Schedule 6.2; (c) Investments in ------------ Dollars and Cash Equivalents to the extent needed to finance local operations (provided such Investments are in deposits in one or more of the Disbursement Accounts and such deposits do not exceed $250,000 in the aggregate for all such accounts); (d) Investments by Borrower in trade and franchise receivables owing to it in the ordinary course of business; (e) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (f) negotiable instruments endorsed for collection in the ordinary course of business; and (g) Investments received by Borrower upon the sale or disposition of assets otherwise permitted pursuant to Section 6.8. ----------- 6.3 Indebtedness. Borrower shall not (and shall not permit any of its ------------ Subsidiaries to) create, incur, assume or permit to exist any Indebtedness, except: (a) the Obligations; (b) Deferred Taxes; (c) Capital Lease Obligations existing as of the Closing 35 Date; (d) Capital Lease Obligations (other than as described in clasue (c)) and Indebtedness secured by Liens permitted under clause (d) of Section 6.7 in a ----------- maximum aggregate amount outstanding at any time not to exceed $1,000,000; (e) the Existing Term Loan; and (f) other Indebtedness in the aggregate amount outstanding not to exceed $500,000 at any time. 6.4 Affiliate and Employee Loans and Transactions; Employment --------------------------------------------------------- Agreements. Except as otherwise expressly permitted hereunder, Borrower shall not (and shall not permit any of its Subsidiaries to) enter into any lending, borrowing or other commercial transaction with any of its Subsidiaries, Affiliates, officers, directors or employees, including payment of any management, consulting, advisory or similar fee, other than on terms and conditions as favorable to such Person as would be obtainable by such Person at the time in a comparable arm's-length transaction with a Person other than an Affiliate or a Subsidiary; provided, that the foregoing shall not prohibit any -------- of the following: (a) loans by Borrower to its officers, directors and employees in a maximum aggregate principal amount outstanding at any time for all officers, directors and employees of $50,000; (b) payment by Borrower and its Subsidiaries of reasonable compensation to their respective management employees as approved by their respective boards of directors; and (c) purchases by Borrower and its Subsidiaries from their respective Subsidiaries and Affiliates of raw materials to be used in their respective businesses, so long as such purchases are on terms and conditions as favorable to the purchaser as would be obtained by such Person in a comparable arm's length transaction with a Person other than an Affiliate or Subsidiary. Set forth in Schedule 6.4 is a list of ------------ all such lending, borrowing or other commercial transactions existing or outstanding as of the Closing Date. 6.5 Capital Structure and Business. Except as permitted under Section ------------------------------ ------- 5.1, Borrower shall not (and shall not permit any of its Subsidiaries to): (a) - --- make any changes in its business objectives, purposes, or operations which could in any way adversely affect the repayment of the Obligations or have or result in a Material Adverse Effect; (b) make any change in its capital structure as described in Schedule 3.9 and Schedule 6.3 (including the issuance or ------------ ------------ recapitalization of any shares of Stock or other securities convertible into Stock or any revision of the terms of its outstanding Stock); (c) amend its certificate of incorporation, charter, by-laws or other organizational documents; or (d) substantially alter the scope or character of their business; provided, that Borrower may enter into a business substantially similar to the - -------- business currently engaged in by such Person. 6.6 Guaranteed Indebtedness. Borrower shall not (and shall not permit ----------------------- any of its Subsidiaries to) incur any Guaranteed Indebtedness except: (a) by endorsement of instruments or items of payment for deposit to the general account of such Person; 36 (b) for Guaranteed Indebtedness incurred for the benefit of Borrower if the primary obligation is permitted by this Agreement for Borrower to incur (and such Guaranteed Indebtedness shall be treated as a primary obligation for all purposes hereof); (c) for performance bonds or indemnities entered into in the ordinary course of business consistent with past practices; (d) for Guaranteed Indebtedness in favor of General Electric Capital Corporation of Puerto Rico, Inc. arising under that certain Continuing Guaranty dated as of February 1, 1994; and (e) other Guaranteed Indebtedness in a maximum aggregate amount not exceeding $150,000 at any time. Borrower expressly acknowledges that the Guaranteed Indebtedness described in clause (e) above shall survive the discharge of the Chapter 11 Cases. 6.7 Liens. Borrower shall not (and shall not permit any of its ----- Subsidiaries to) create or permit to exist any Lien on any of its properties or assets except for: (a) presently existing or hereafter created Liens in favor of Agent or Lenders to secure the Obligations or the obligations of any Guarantor under any Guaranty; (b) Liens set forth in Schedule 6.7 existing on the Closing ------------ Date; (c) Permitted Encumbrances; (d) purchase money liens or purchase money security interests upon or in Equipment acquired by Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such Equipment or to secure Indebtedness or Capital Lease Obligations permitted under Section 6.3 incurred solely for the purpose of financing the acquisition ----------- of such Equipment and any costs related thereto, so long as such Equipment is not a component, part or accessory installed on, or an accession, addition or attachment to, any other Equipment or other property of Borrower or any Subsidiary thereof (except other Equipment on which a security interest exists under this clause); (e) Liens securing Indebtedness not exceeding $100,000 in the aggregate at any time; (f) Liens against Equipment arising from the filing of UCC financing statements with respect to lease transactions permitted by the terms of this Agreement; (g) Liens securing the Existing Term Loan; and (h) extensions, renewals and replacements of Liens referred to in clauses (b), (d), (e) and (f) above, provided that any such extension, renewal or replacement Lien is limited to the property or assets covered by the Lien extended, renewed or replaced and does not secure Indebtedness in an amount greater than the amount of the outstanding Indebtedness secured thereby immediately prior to such extension, renewal or replacement. Notwithstanding the generality of the foregoing, in no event shall any Lien on Accounts or Inventory be permitted other than Liens in favor of Agent or Lenders and other Permitted Encumbrances. 6.8 Sale of Assets. Borrower shall not (and shall not permit any of its -------------- Subsidiaries to) sell, transfer, convey, assign or otherwise dispose of any of its assets or properties, including any Collateral; provided, that the foregoing -------- shall not prohibit any of the following: (a) the sale of Inventory in the ordinary course of business; (b) the exchange of property or 37 assets other than Collateral for new assets so long as the incremental cost (if any) of such new property or assets in excess of the fair market value of the assets so exchanged is a Capital Expenditure permitted pursuant to Annex H; (c) ------- the licensing or sublicensing by Borrower or its Subsidiaries of Intellectual Property in the ordinary course of business; (d) the sale or disposition by Borrower of Collateral consisting of Equipment or Fixtures provided that (i) the amount of gross consideration (prior to the deduction of any items taken into account in determining the Net Proceeds of such sale or disposition) received in cash is equal to at least one hundred percent (100%) of the fair market value of such property or assets; (e) the disposition of (i) damaged Collateral to the extent required by insurance or (ii) other damaged property or assets giving rise to an insurance claim pursuant to reasonable prudent business practices; and (f) other sales or dispositions of property not constituting Collateral and having an aggregate fair market value not exceeding $150,000 for all such sales or dispositions in any Fiscal Year. 6.9 ERISA Neither Borrower nor any ERISA Affiliate shall acquire any ----- new ERISA Affiliate that maintains or has an obligation to contribute to a Pension Plan that has either an "accumulated funding deficiency," as defined in Section 302 of ERISA, or any "unfunded vested benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA. Additionally, neither Borrower nor any ERISA Affiliate shall: (a) establish any new Plan, or undertake any new obligation to contribute to any Plan if such establishment or undertaking could reasonably be expected to result in the creation of a material liability to Borrower or ERISA Affiliate of Borrower, or to Borrower and its ERISA Affiliates in the aggregate; (b) permit or suffer any condition set forth in Section 3.13 to cease to be met ------------ and satisfied at any time which condition could result in a material liability to Borrower or any ERISA Affiliate of Borrower; (c) terminate any Pension Plan where such termination could reasonably be anticipated to result in a material liability to Borrower; (d) permit any accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to be incurred with respect to any Plan; fail to make any contributions or fail to pay any amounts due and owing as required by the terms of any Plan before such contributions or amounts become delinquent; (e) make a complete or partial withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer Plan which withdrawal could result in a material liability to Borrower or any ERISA Affiliate of Borrower; (f) at any time fail to provide Agent or any Lender within twenty-one (21) days with copies of any Plan documents or governmental reports or filings, if reasonably requested by Agent or any Lender. 6.10 Financial Covenants. Borrower shall not breach or fail to comply ------------------- with any of the financial covenants set forth in Annex H. ------- 38 6.11 Hazardous Materials. Except as set forth in Schedule 3.18, ------------------- ------------- Borrower shall not and shall not permit any of its Subsidiaries or any other Person within the control of Borrower, to cause or permit a Release of Hazardous Material on, under, in or about any Subject Property if such Release either violates or gives rise to liability pursuant to any Environmental Laws, which violation or liability could in a reasonable worse case scenario constitute or result in a Material Adverse Effect. 6.12 Sale-Leasebacks. Borrower shall not (and shall not permit any of --------------- its Subsidiaries to) engage in any sale-leaseback or similar transaction involving any of its property or assets. 6.13 Cancellation of Indebtedness. Except as permitted by Section 5.7, ---------------------------- ----------- Borrower shall not (and shall not permit any of its Subsidiaries to) cancel any claim or Indebtedness owing to it, except for reasonable consideration and in the ordinary course of its business, or voluntarily prepay any Indebtedness (other than the Obligations). 6.14 Restricted Payments. Borrower shall not make any Restricted Payment ------------------- to any Person and Borrower shall not permit any Subsidiary to make any Restricted Payment other than (a) payments to Borrower and (b) payments otherwise permitted under Section 6.4. ----------- 6.15 Real Property Leases. Borrower shall not (and shall not permit any -------------------- of its Subsidiaries to) enter into or renew (by amendment, modification or otherwise) any Lease, except to the extent the aggregate annual base rent of all of Borrower's Leases does not, in any Fiscal Year, increase by more than $150,000 plus the aggregate rent increase under all such Leases based upon any ---- index-rate or rent escalation clauses set forth therein. 6.16 Bank Accounts. Borrower shall not (and shall not permit any of its ------------- Subsidiaries to) maintain any deposit, operating or other bank accounts except for those accounts identified in Schedule 3.20. ------------- 6.17 No Speculative Transactions. Borrower shall not (and shall not --------------------------- permit any of its Subsidiaries to) engage in any speculative transaction or any transaction involving commodity options or futures contracts (other than in the ordinary course of business consistent with past practice and interest rate swap, cap or collar agreements relating to the Revolving Credit Advances). 6.18 Margin Regulations. Borrower shall not use the proceeds of any ------------------ Revolving Credit Advance to purchase or carry any Margin Stock or any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934. 39 6.19 Limitation on Negative Pledge Clauses. Borrower shall not ------------------------------------- (and shall not permit any of its Subsidiaries to), directly or indirectly, enter into any agreement with any Person, other than the agreements with Agent or Lenders pursuant to a Loan Document, which prohibits or limits the ability of Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired; provided, that any Loan Party may agree to prohibitions -------- against other Liens on specific property encumbered to secure payment of particular Indebtedness of such Person (which Indebtedness relates solely to such specific property). 6.20 Accounting Changes. Borrower shall not (and shall not permit any of ------------------ its Subsidiaries to) make, any significant change in accounting treatment and reporting practices except for changes concurred in by Borrower's independent public accountants. 7. TERM 7.1 Duration. The financing arrangement contemplated hereby shall be in -------- effect until the Commitment Termination Date. On the Commitment Termination Date, the Revolving Credit Commitments shall terminate and the Revolving Credit Loan and all other then due and payable Obligations shall immediately become due and payable in full, in cash. 7.2 Survival of Obligations. Except as otherwise expressly provided for ----------------------- in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the Obligations, duties, indemnities, and liabilities of Borrower, or the rights of Agent or any Lender relating to any Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is not required until after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon any Loan Party, and all rights of Agent and each Lender, all as contained in the Loan Documents shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date; provided that the -------- provisions set forth herein with respect to the payment of fees and expenses, confidentiality, indemnification, consequential and punitive damages, governing law, consent to jurisdiction and venue, and the jury trial waiver shall remain in effect after the Termination Date. 40 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 8.1 Events of Default. The occurrence of any one or more of the ----------------- following events (regardless of the reason therefor) shall constitute an "Event ----- of Default" hereunder: - ---------- (a) Borrower shall fail to make any payment in respect of any Obligations hereunder or under any of the other Loan Documents when due and payable or declared due and payable, including any payment of principal of, or interest on, the Revolving Credit Loan and, in the case of any interest payment, such failure is not cured within two (2) Business Days after the due date thereof. (b) Borrower shall fail or neglect to perform, keep or observe any of the provisions of Section 1.8, Section 4.1, or Section 6, including any of the ----------- ----------- --------- provisions set forth in Annex B, Annex E, or Annex H. ------- ------- ------- (c) Borrower shall fail or neglect to perform, keep or observe any term or provision of this Agreement (other than any such term or provision referred to in paragraph (a) or (b) above) or of any of the other Loan Documents, and the same shall remain unremedied for ten (10) Business Days after (i) Borrower shall receive written notice of any such failure from Agent or any Lender or (ii) fifteen (15) days after Borrower shall become aware thereof. (d) A default shall occur under any other agreement, document or instrument to which Borrower is a party or by which it or its property is bound, and such default (i) involves the failure to make any payment (whether of principal, interest or otherwise) due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of Borrower in an aggregate amount exceeding $250,000 or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof in an aggregate amount exceeding $150,000, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment. (e) Any representation or warranty herein or in any Loan Document or in any written statement pursuant thereto or hereto, any report, financial statement or certificate made or delivered to Agent or any Lender by Borrower shall be untrue or incorrect in any material respect as of the date when made or deemed made (including those made or deemed made pursuant to Section 2.2). ----------- (f) Any of the assets of any Loan Party shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of such Loan Party and shall remain unstayed or undismissed for sixty (60) 41 consecutive days; or any Person other than a Loan Party shall apply for the appointment of a receiver, trustee or custodian for any Loan Party's assets and such application or proceeding shall remain unstayed or undismissed for sixty (60) consecutive days; or any Loan Party shall have concealed, removed or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property or the incurring of an obligation which may be fraudulent under any bankruptcy, fraudulent conveyance or other similar law. (g) A case or proceeding shall have been commenced against any Loan Party in a court having competent jurisdiction seeking a decree or order (i) under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable Federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of any Loan Party or of any substantial part of its properties, or (iii) ordering the winding up or liquidation of the affairs of any Loan Party and such case or proceeding shall remain undismissed or unstayed for sixty (60) consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding. (h) Any Loan Party (i) shall file a petition seeking relief under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable Federal, state or foreign bankruptcy or other similar law, (ii) shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of any Loan Party or of any substantial part of any Loan Party's properties, (iii) shall fail generally to pay its debts as such debts become due, or (iv) shall take any corporate action in furtherance of any such action. (i) Final judgment or judgments in a series of related matters (after the expiration of all times to appeal therefrom) for the payment of money in excess of $125,000 shall be rendered against any Loan Party, unless the same shall be (i) fully covered by insurance in accordance with Section 5.5, or (ii) ----------- vacated, stayed, bonded, paid or discharged within a period of thirty (30) days from the date of such judgment. (j) Any provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms or any Loan Party or other party thereto shall so state in writing; or any Lien created under any Collateral Document shall cease to be a valid and perfected Lien having the first priority, subject only to Permitted Encumbrances in any of the Collateral purported to be covered thereby. 42 (k) There shall occur a Change of Control. (l) Any Material Franchise Agreement shall be either canceled, terminated or not renewed, or modified in any way which would have a Material Adverse Effect, or any Loan Party shall for any reason lose the benefit of any exclusivity provision under any Material Franchise Agreement. (m) An event or condition specified in Section 6.9 hereof shall occur ----------- or exist and, as a result of such event or condition, Borrower or any ERISA Affiliate or Borrower or/and any ERISA Affiliates in the aggregate shall incur or in the opinion of Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) in excess of $500,000 in the aggregate. (n) The terms of the Plan of Reorganization shall have been amended, modified or supplemented without Agent's prior written consent. (o) The Confirmation Order shall have been revoked or modified in a manner adverse to Agent or any Lender's rights, remedies or interests in or to the Collateral or otherwise under this Agreement or the other Loan Documents, all as determined in Agent's sole discretion. 8.2 Remedies. If any Event of Default shall have occurred and be -------- continuing, the rate of interest applicable to the Revolving Credit Loan and the Letter of Credit Obligations may, at Required Lenders' sole discretion, be increased, effective as of the date of the occurrence of the Default giving rise to such Event of Default, to the Default Rate as provided in Section 1.5(c) and -------------- paragraph 3 of Annex D. If any Event of Default shall have occurred and be ------- continuing, Agent may, or if requested by Required Lenders, shall, without notice, take any one or more of the following actions: (a) suspend or terminate the Revolving Credit Commitments, whereupon Lenders' obligation to make further Revolving Credit Advances shall be suspended or terminate; (b) declare all or any portion of the Obligations to be forthwith due and payable, including any contingent liabilities with respect to Letter of Credit Obligations, whereupon such Obligations shall become and be due and payable; (c) require that all Letter of Credit Obligations be fully cash collateralized in accordance with the terms of Annex G; or (d) exercise any rights and remedies provided to Agent or ------- Lenders under the Loan Documents and/or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of -------- Default specified in Section 8.1(f), (g) or (h) the rate of interest applicable -------------------------- to all Obligations shall be increased automatically to the Default Rate as provided in Section 1.5(c) and paragraph 3 of Annex D, and the Maximum Revolving -------------- ------- Credit Commitment shall immediately terminate and the 43 Obligations shall become immediately due and payable, in each case, without declaration, notice or demand by or to any Person. 8.3 Waivers by Borrower. Except as otherwise provided for in this ------------------- Agreement and applicable law, to the full extent permitted by applicable law, Borrower waives (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Loan Documents, notes, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent or any Lender on which Borrower may in any way be liable, and Borrower hereby ratifies and confirms whatever Agent or any Lender may do in this regard, (b) all rights to notice and a hearing prior to Agent's or Lenders' taking possession or control of, or to Agent's or Lenders' replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Agent or Lenders to exercise any of their remedies, and (c) the benefit of any right of redemption and all valuation, appraisal and exemption laws. Borrower acknowledges that it has been advised by counsel of its choice with respect to this Agreement, the other Loan Documents and the transactions contemplated by this Agreement and the other Loan Documents. 9. AGENT 9.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably ---------------------------------- appoints and authorizes GE Capital to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Agent (which term as used in this sentence and in Section 9.5 and the first sentence of Section 9.6 hereof ----------- ----------- shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by any Loan Party or any other Person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document; (d) shall not be 44 responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any Revolving Credit Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with Agent. 9.2 Reliance by Agent. Agent shall be entitled to rely upon any ----------------- certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Lenders. 9.3 Defaults. Agent shall not be deemed to have knowledge or notice of -------- the occurrence of a Default (other than the non-payment of principal of or interest on the Revolving Credit Loan or of Fees) unless Agent has received notice from a Lender or Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that Agent receives such a notice ----------------- of the occurrence of a Default, Agent shall give prompt notice thereof to Lenders (and shall give each Lender prompt notice of each such non-payment). Agent shall (subject to Section 9.7) take such action with respect to such ----------- Default as shall be directed by Required Lenders; provided, that unless and -------- until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of Required Lenders or all of Lenders as is required in such circumstance. 9.4 Rights as a Lender. In the event that GE Capital (or any successor ------------------ acting as Agent) shall become a Lender hereunder, with respect any Revolving Credit Commitment or Revolving Credit Advance, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not 45 acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its individual capacity. GE Capital (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with the Loan Parties (and any of their Subsidiaries or Affiliates) as if it were not acting as Agent, and GE Capital and its affiliates may accept fees and other consideration from the Loan Parties for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 9.5 Indemnification. Lenders agree to indemnify Agent (to the extent --------------- not reimbursed by Borrower hereunder and without limiting the obligations of Borrower hereunder) ratably in accordance with the aggregate principal amount of the Revolving Credit Advances held, by Lenders (or, if no Revolving Credit Advances are at the time outstanding, ratably in accordance with their respective Revolving Credit Commitments), for any and all Claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Borrower is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; provided, that no -------- Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified as determined by a final judgment of a court of competent jurisdiction. 9.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it --------------------------------------- has, independently and without reliance on Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and its Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. Agent shall not be required to keep itself informed as to the performance or observance by any Loan Party of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of Borrower or any of its Subsidiaries. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower which is required to be provided to Lenders hereunder, with any notice of a Default received by Agent from Borrower and with any notice of a Default delivered by Agent to Borrower; provided, that -------- Agent shall not be liable to any Lender for any failure to do so, except to the extent that 46 such failure is attributable to Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower or any of its Subsidiaries (or any of their affiliates) that may come into the possession of Agent or any of its affiliates nor to update or correct any information previously given which becomes incorrect or which Agent learns is incorrect. 9.7 Failure to Act. Except for action expressly required of Agent -------------- hereunder and under the other Loan Documents, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 9.5 hereof against any and all ----------- liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 9.8 Resignation of Agent. Subject to the appointment and acceptance of -------------------- a successor Agent as provided below, Agent may resign at any time by giving notice thereof to Lenders and Borrower. Upon any such resignation Required Lenders shall have the right to appoint a successor Agent with Borrower's prior written consent, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of Lenders, appoint a successor Agent, that shall be a financial institution with a combined capital and surplus or net worth of at least $200,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 shall continue in effect for its benefit in respect of any actions - --------- taken or omitted to be taken by it while it was acting as Agent. 9.9 Consents under Loan Documents. Except as otherwise provided in ----------------------------- Section 11.1 with respect to this Agreement, Agent may, with the prior consent - ------------ of Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents; provided, that without the prior -------- consent of each Lender, Agent shall not (except as provided herein or in the Collateral Documents) release any material portion of the Collateral or otherwise terminate any Lien under any Collateral Document with respect to any material portion of the Collateral, or agree to additional obligations being secured by such Collateral, except that no such consent shall be required, and Agent is hereby authorized and instructed, to 47 release any Lien covering Collateral (a) which is the subject of a disposition permitted hereunder, (b) which secures Indebtedness to the extent permitted under Section 6.3, or (c) the value of which does not exceed $5,000,000 in any ----------- Fiscal Year. 9.10 Collateral Matters. ------------------ (a) Except as otherwise expressly provided for in this Agreement, Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Loan Party or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Borrowing Base, or whether any particular reserves are appropriate, or that the Liens granted to Agent herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Loan Documents, it being understood and agreed that (i) in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its sole discretion, given Agent's own interest in the Collateral as a Lender and (ii) that Agent shall have no duty or liability whatsoever to any other Lender, other than liability for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. (b) Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Lenders' security interest in assets which, in accordance with Article 9 of the Code, can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions. 10. SUCCESSORS AND ASSIGNS 10.1 Successors and Assigns. This Agreement and the other Loan Documents ---------------------- shall be binding on and shall inure to the benefit of Borrower, Agent, Lenders, and their respective successors and assigns, except as otherwise provided herein or therein. Borrower may not assign, delegate, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the Loan Documents without the prior express written consent of Agent and all Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by Borrower without such prior express written consent shall be void. The terms and provisions of this Agreement and the other 48 Loan Documents are for the purpose of defining the relative rights and obligations of Borrower, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Loan Documents. 10.2 Assignments and Participations. Each Lender may resell (through ------------------------------ syndication, assignment or a participation) all or a portion of its rights and obligations under this Agreement (including all or a part of its Revolving Credit Advances, Revolving Credit Commitment and Revolving Credit Note), in minimum increments of $5,000,000, to any other Person. In the case of an assignment by any Lender under this Section 10.2, the ------------ purchaser shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were a Lender hereunder; provided, -------- that each such assignment shall be of a constant, and not a varying, percentage of the selling Lender's rights and obligations under this Agreement. Upon execution by the assignor and the assignee of an instrument pursuant to which the assignee assumes such rights and obligations, payment by such assignee to such assignor of an amount equal to the purchase price agreed between such assignor and assignee and delivery to Agent and Borrower of an executed copy of such instrument together with payment to Agent of a processing fee of $2,500, such assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would have if it were a Lender hereunder and the assignor shall be, to the extent of such assignment (unless otherwise provided therein) released from its obligations under this Agreement. Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrower to the assignee and that the assignee shall be considered to be a "Lender" hereunder and under the other Loan Documents. In all instances, each Lender's liability to make Revolving Credit Advances shall be several and not joint and shall be limited to such Lender's pro rata share thereof. Upon any such assignment, Borrower, at its own expense, shall execute and deliver to Agent in exchange for the surrendered Revolving Credit Note of the assignor Lender a new Revolving Credit Note to the order of the assignor Lender in an amount equal to the Revolving Credit Commitment assumed by such assignee Lender, and if the assignor Lender has retained a Revolving Credit Commitment hereunder a new Revolving Credit Note to the order of the assignor Lender in an amount equal to such retained Revolving Credit Commitment. Such new Revolving Credit Notes shall be dated the Closing Date and shall otherwise be in the form of the Revolving Credit Note replaced thereby. The Revolving Credit Notes surrendered to Agent shall be returned by Agent to Borrower marked "canceled". Each Lender may sell participations in all or any part of its Revolving Credit Advances and its Revolving Credit Commitment, to any other Person; provided, that (a) all amounts - -------- 49 payable by Borrower hereunder shall be determined as if such Lender had not sold such participation and such Lender shall remain a "Lender" for all purposes under this Agreement, (b) any such grant of a participation will be made in compliance with all applicable state or Federal laws, rules, and regulations, (c) any such participation shall be divided pro rata among the participating Lender's share of the Revolving Credit Loan, and (d) such Lender shall not grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or the Loan Documents, except to the extent such amendment or waiver would (i) extend the final maturity date for payment of the Revolving Credit Loan in which such participant is participating; (ii) reduce the interest rate or the amount of principal or Fees applicable to the Revolving Credit Loan in which such participant is participating; or (iii) release all or substantially all of the Collateral, except as expressly provided herein. In those cases in which a Lender grants rights to its participants to approve any amendment to or waiver of this Agreement or the other Loan Documents respecting the matters described in the foregoing clauses (i) through (iii), the relevant participation agreements shall provide for a voting mechanism whereby a majority of the amount of the participating Lender's portion of the Revolving Credit Loan, as the case may be (irrespective of whether held by such Lender or participated), shall control the vote for all of such Lender's portion of the Revolving Credit Loan. In the case of any participation, the participant shall not have any rights under this Agreement or any of the other Loan Documents entered into in connection herewith (the participant's right against such Lender in respect of such participation to be those set forth in the participation or other agreement executed by such Lender and the participant relating thereto) and all amounts payable to any Lender hereunder shall be determined as if such Lender had not sold such participation. Except as otherwise provided in this Section 10.2 no Lender shall, as ------------ between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Revolving Credit Loan or other Obligations owed to such Lender. Any Lender permitted to sell assignments and participations under this Section 10.2 may, subject to this Section 10.2, ------------ ------------ furnish any information concerning Borrower and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants). Borrower shall assist any Lender permitted to sell assignments or participations under this Section 10.2 in whatever manner reasonably necessary ------------ in order to enable or effect any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be reasonably requested and the preparation and delivery of informational materials, appraisals or other documents for, and the participation of relevant management in 50 meetings with, potential assignees or participants. Borrower shall certify the correctness, completeness and accuracy of all descriptions of Borrower and its affairs contained in any selling materials and all information provided by it and included in such materials or shall provide all necessary corrections thereto. No information shall be provided to any potential assignee or participant unless such potential assignee and participant has signed a confidentiality agreement substantially in the form of Exhibit F. --------- 11. MISCELLANEOUS 11.1 Complete Agreement; Modification of Agreement. This Agreement and the --------------------------------------------- other Loan Documents constitute the complete agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied), including the commitment letter dated June 7, 1996 and accepted by Seven-Up/RC on July 19, 1996. Neither this Agreement nor any other Loan Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by Required Lenders; provided, that no such change, waiver, discharge or -------- termination shall, without the consent of each affected Lender and Agent, (a) extend the scheduled final maturity of the Revolving Credit Loan, or any portion thereof, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-Default increase in interest rates) thereon or Fees, or reduce the principal amount thereof, or increase the Revolving Credit Commitment of such Lender over the amount thereof then in effect (it being understood that a waiver of any Default shall not constitute a change in the terms of any Revolving Credit Commitment of any Lender), (b) release more than $5,000,000 in value of the Collateral (except as expressly permitted by the Loan Documents), (c) amend, modify or waive any provision of this Section, or Section 1.8, 9.5, 11.2 or 11.7, (d) reduce any ------------------------------ percentage specified in, or otherwise modify, the definition of Required Lenders, or (e) consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement. No provision of Section 9 may be --------- amended without the prior written consent of Agent. 11.2 Fees and Expenses. ----------------- (a) Borrower shall pay on demand all reimbursable costs and expenses arising under Section 11.2 of the DIP Agreement and all costs and expenses (including reasonable fees of counsel) of Agent in connection with the preparation, negotiation, approval, execution, delivery, administration, modification, amendment, waiver and enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, and commitments relating thereto, and the other 51 documents to be delivered hereunder or thereunder and the transactions contemplated hereby and thereby and the fulfillment or attempted fulfillment of conditions precedent hereunder, including: (i) wire transfer fees and other costs of forwarding to Borrower or any other Person on behalf of Borrower by Agent and each Lender of the proceeds of the Revolving Credit Advances; (ii) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or advice in connection with the administration of the advances made pursuant hereto or its rights hereunder or thereunder; (iii) any litigation, claim, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreements to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, claim, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against Borrower or any other Person that may be obligated to Agent and Lenders by virtue of the Loan Documents, including any litigation, contest, dispute, suit, case, proceeding or action (and any appeal or review) in connection with a case under the Bankruptcy Code, as now constituted or hereafter amended, or any other applicable Federal, state or foreign bankruptcy or similar insolvency law; (iv) any attempt to enforce any rights of Agent or Lenders against Borrower or any other Person that may be obligated to Agent or Lenders by virtue of any of the Loan Documents; (v) any effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B) evaluate, observe, assess Borrower or its affairs, or (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral. (b) Borrower shall pay on demand all costs and expenses (including reasonable fees of counsel) of Agent and each Lender in connection with any Default and any enforcement or collection proceedings resulting therefrom or any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents in connection with any Default. (c) Without limiting the generality of clauses (a) and (b) above, Borrower's obligation to reimburse Agent and/or any Lender for costs and expenses shall include the reasonable fees and expenses of counsel (and local, foreign or special counsel, advisors, consultants and auditors retained by such counsel), as well as the fees and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram charges; secretarial overtime charges; expenses for travel, lodging and food; and all other out-of-pocket costs and expenses of every type and nature paid or incurred in connection with the performance of such legal or other advisory services. 52 11.3 No Waiver. No failure on the part of Agent or Lenders, at any time or --------- times, to require strict performance by any Loan Party, of any provision of this Agreement and any of the other Loan Documents shall waive, affect or diminish any right of Agent or Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver of a Default shall not suspend, waive or affect any other Default whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of any Loan Party contained in this Agreement or any of the other Loan Documents and no Default by any Loan Party shall be deemed to have been suspended or waived by Lenders, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and Required Lenders or all of Lenders if required hereunder and directed to Borrower specifying such suspension or waiver. 11.4 Remedies. The rights and remedies of Agent and Lenders under this -------- Agreement shall be cumulative and nonexclusive of any other rights and remedies which Agent or any Lender may have under any other agreement, including the Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.5 Severability. Wherever possible, each provision of this Agreement shall ------------ be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.6 Conflict of Terms. Except as otherwise provided in this Agreement or any ----------------- of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provisions contained in this Agreement shall govern and control. 11.7 Right of Set-off. Subject to Section 1.1(f) and 1.13, upon the ---------------- ----------------------- occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Borrower against any and all of the Obligations now or hereafter existing irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify Agent and Borrower after any such setoff and application made by such 53 Lender; provided, that the failure to give such notice shall not affect the -------- validity of such setoff and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including other rights of setoff) which such Lender may have. 11.8 Authorized Signature. Until Agent shall be notified by Borrower to the -------------------- contrary, the signature upon any document or instrument delivered pursuant hereto and believed by Agent or any of Agent's officers, agents, or employees to be that of an officer or duly authorized representative of Borrower listed in Schedule 11.8 shall bind Borrower and be deemed to be the act of Borrower - ------------- affixed pursuant to and in accordance with resolutions duly adopted by Borrower's Board of Directors, and Agent and each Lender shall be entitled to assume the authority of each signature and authority of the Person whose signature it is or appears to be unless the Person acting in reliance on such signature shall have actual knowledge of the fact that such signature is false or the Person whose signature or purported signature is presented is without authority. 11.9 Notices. Except as otherwise provided herein, whenever it is provided ------- herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon either of the parties by the other party, or whenever either of the parties desires to give or serve upon the other party any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by telecopy answerback and by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section ------- 11.9); (c) one Business Day after deposit with a reputable overnight courier - ---- with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower, Agent or any Lender) designated below to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 54 (a) If to Agent, as a Lender or as Agent, at: General Electric Capital Corporation 350 South Beverly Drive, Suite 200 Beverly Hills, California 90212 Attention: Mr. Mark Elliot Gudis Senior Vice President (Commercial Finance) Facsimile: (310) 785-0644 With copies to: General Electric Capital Corporation 3379 Peachtree Road Northeast, Suite 600 Atlanta, Georgia 30326 Attention: Mr. Timothy C. Huban Vice President Commercial Finance Facsimile: (404) 262-9032 and General Electric Capital Corporation 201 High Ridge Road Stanford, Connecticut 06927 Attention: Legal Counsel Facsimile: (203) 316-7889 and Murphy, Weir & Butler 101 California Street 39th Floor San Francisco, California 94111 Attention: Dick M. Okada, Esq. Facsimile: (415) 421-7879 (b) If to Borrower, at: Seven-Up/RC Bottling Company of Southern California, Inc. 3220 East 26th Street Vernon, California 90023 Attention: Mr. Dave Brown Facsimile: (213) 262-9566 and Kirkland & Ellis 153 East 53rd Street New York, New York 10002 Attention: Charles B. Fromm, Esq. Facsimile: (212) 446-4900 55 11.10 Section Titles. The Section titles and Table of Contents contained -------------- in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. 11.11 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which shall, collectively and separately, constitute one agreement. 11.12 Time of the Essence. Time is of the essence of this Agreement and ------------------- each of the other Loan Documents. 11.13 Publicity. Borrower agrees that neither it nor any other Loan --------- Party will in the future issue any press releases or other public disclosure using the name of GE Capital or referring to this Agreement or the other Loan Documents without at least two (2) Business Days' prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) Borrower or such Loan Party is required to do so under law and then, in any event, Borrower or such Loan Party will consult with GE Capital before issuing such press release or other public disclosure. Borrower consents to the publication by Agent or any Lender of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement. 11.14 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF ------------- THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT EACH LENDER AND BORROWER ACKNOWLEDGE THAT ANY -------- APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE --- ------- -------- DEEMED OR OPERATE TO PRECLUDE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY LENDER. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF ----- --- ---------- SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, 56 COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.9 ------------ OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 11.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH -------------------- COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 57 IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. "Borrower" -------- SEVEN-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC. By: /s/ David I. Brown -------------------------- David I. Brown Treasurer "Agent" ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Timothy C. Huban -------------------------- Timothy C. Huban Duly Authorized Signatory "Lenders" ------- Revolving Credit Commitment GENERAL ELECTRIC CAPITAL - --------------------------- $35,000,000 CORPORATION By: /s/ Timothy C. Huban -------------------------- Timothy C. Huban Duly Authorized Signatory EX-23.1 8 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our Firm included in or made a part of this Registration Statement. ARTHUR ANDERSEN LLP Los Angeles, California November 22, 1996 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 OTHER DEC-31-1995 AUG-16-1996 SEP-30-1996 3,291 0 24,609 0 21,730 56,305 33,551 0 96,463 49,780 0 0 0 0 28,986 96,463 33,518 33,518 27,418 27,418 5,362 0 267 (986) 28 (1,014) 0 0 0 (1,014) (.20) 0
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