-----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, WtoRaZrnz4YvIIwBA5G+lfDNR2x8HxtZQClFxVIwDlSlDmlTN1sCBuCI0jr8+byz PN7L73uJyxCTOFjsvNoWBg== 0000950157-01-500794.txt : 20020410 0000950157-01-500794.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950157-01-500794 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PANAMERICAN BEVERAGES INC CENTRAL INDEX KEY: 0000911360 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] STATE OF INCORPORATION: R1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12290 FILM NUMBER: 1791061 BUSINESS ADDRESS: STREET 1: C/O PANAMCO LLC STREET 2: 701 WATERFORD WAY STE 800 CITY: MIAMI STATE: FL ZIP: 33126 BUSINESS PHONE: 3059290800 MAIL ADDRESS: STREET 1: BLVD MANUEL AVIAL CAMACHO NO 40 22ND FL STREET 2: COL LOMAS DE CHAPULTEPEC DEL MIGUEL MIDA CITY: MEXICO D F STATE: NY ZIP: 11000 10-Q 1 panamco10q.txt FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________ COMMISSION FILE NUMBER 1-12290 PANAMERICAN BEVERAGES, INC. (Exact Name of Registrant as Specified in Its Charter) Republic of Panama Not Applicable (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) c/o Panamco, L.L.C. 701 Waterford Way, Suite 800 Miami, Florida (Address of Principal Executive Offices) 33126 (Zip Code) Registrant's Telephone Number, including area code: (305) 856-7100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the registrant's classes of common and preferred stock, par value $0.01 per share, as of November 7, 2001 were: Class A Common Stock: 113,481,026 Class B Common Stock: 8,697,405 Class C Preferred Stock: 2 TABLE OF CONTENTS Page PART I FINANCIAL INFORMATION Item 1. UNAUDITED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000................... 1 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2001 and 2000.. 3 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000............ 4 Notes to Condensed Consolidated Financial Statements.............. 5 PANAMCO MEXICO AND CENTRAL AMERICA - Selected Statements of Operations Data for the three and nine months ended September 30, 2001 and 2000................................................... 21 PANAMCO BRASIL - Selected Statements of Operations Data for the three and nine months ended September 30, 2001 and 2000. 23 PANAMCO COLOMBIA - Selected Statements of Operations Data for the three and nine months ended September 30, 2001 and 2000. 24 PANAMCO VENEZUELA - Selected Statements of Operations Data for the three and nine months ended September 30, 2001 and 2000. 25 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 26 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................................... 33 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS................................................ 33 Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................ 33 Item 3. DEFAULTS UPON SENIOR SECURITIES.................................. 34 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 34 Item 5. OTHER INFORMATION................................................ 34 Item 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 34 Signatures................................................................ 35 i PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in thousands of United States of America ("U.S.") dollars) (Unaudited) September 30, December 31, 2001 2000 ------------- ------------ ASSETS Current Assets: Cash and equivalents $ 104,456 $ 191,773 Accounts receivable, net 108,842 138,473 Inventories, net 91,399 105,439 Other current assets 22,383 30,268 ----------- ----------- Total Current Assets 327,080 465,953 ----------- ----------- Investments 25,350 158,006 Property, plant and equipment, net 1,025,256 1,125,719 Bottles and cases, net 213,677 236,527 Cost in excess of net assets acquired, net 865,238 903,683 Other assets 118,290 136,433 ----------- ----------- Total Assets $ 2,574,891 $ 3,026,321 =========== =========== LIABILITIES Current Liabilities: Accounts payable $ 183,157 $ 171,239 Current portion of long-term obligations 38,659 184,889 Bank loans 64,478 40,295 Other accrued liabilities 135,103 241,801 ----------- ----------- Total Current Liabilities 421,397 638,224 ----------- ----------- Long-term Liabilities: Long-term obligations, net of current portion 886,571 1,028,575 Other liabilities 173,131 164,406 ----------- ----------- Total Long-term Liabilities 1,059,702 1,192,981 ----------- ----------- Total Liabilities 1,481,099 1,831,205 ----------- ----------- (Continued) 1 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in thousands of United States of America ("U.S.") dollars) (Unaudited) September 30, December 31, 2001 2000 ---------------- -------------- Commitments and contingencies Minority interest in consolidated subsidiaries 29,044 27,805 --------- --------- SHAREHOLDERS' EQUITY Class C preferred stock, $0.01 par value; 50,000 shares authorized; 2 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively - - Class A common stock, $0.01 par value; 136,936,684 and 136,745,820 shares issued and 114,706,756 and 119,742,584 shares outstanding at September 30, 2001 and December 31, 2000, respectively 1,367 1,367 Class B common stock, $0.01 par value; 11,075,178 and 11,266,042 shares issued and 8,697,411 and 8,888,435 shares outstanding at September 30, 2001 and December 31, 2000, respectively 113 113 Capital in excess of par value 1,591,819 1,585,498 Retained earnings 119,425 50,632 Accumulated other comprehensive loss (470,889) (399,541) --------- --------- 1,241,835 1,238,069 Less - 24,607,695 and 19,380,843 treasury shares held at September 30, 2001 and December 31, 2000, respectively, at cost (177,087) (70,758) --------- --------- Total Shareholders' Equity 1,064,748 1,167,311 --------- --------- Total Liabilities and Shareholders' Equity $ 2,574,891 $ 3,026,321 =========== =========== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in thousands of U.S. dollars, except per share amounts) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- ---------------------------- 2001 2000 2001 2000 ---------- ---------- ----------- ----------- Net sales $ 638,642 $ 648,180 $ 1,958,105 $ 1,897,422 Cost of sales, excluding depreciation and amortization 309,660 304,922 944,123 903,856 ---------- ---------- ----------- ----------- Gross profit 328,982 343,258 1,013,982 993,566 ---------- ---------- ----------- ----------- Operating expenses: Selling, general and administrative 194,406 221,888 612,404 640,410 Depreciation and amortization 51,680 56,869 161,166 171,937 Amortization of goodwill 6,556 9,344 19,882 27,543 Facilities reorganization charges - - - 79,878 ---------- ---------- ----------- ----------- 252,642 288,101 793,452 919,768 ---------- ---------- ----------- ----------- Operating income 76,340 55,157 220,530 73,798 ---------- ---------- ----------- ----------- Other income (expense): Interest income 4,056 8,027 17,806 23,822 Interest expense (24,222) (36,122) (85,295) (107,058) Other expense, net (3,537) (5,738) (7,467) (18,067) ---------- ---------- ----------- ----------- Income (loss) before income taxes 52,637 21,324 145,574 (27,505) Provision for income taxes 20,740 19,663 49,217 29,185 ---------- ---------- ----------- ----------- Income (loss) before minority interest 31,897 1,661 96,357 (56,690) Minority interest in earnings of subsidiaries 1,787 1,197 4,684 2,824 ---------- ---------- ----------- ----------- Net income (loss) $ 30,110 $ 464 $ 91,673 $ (59,514) ========== ========== =========== ========== Basic earnings (loss) per share $ 0.24 $ 0.00 $ 0.72 $ (0.46) ========== ========== =========== ========== Basic weighted average shares outstanding, in thousands 124,842 128,733 126,676 128,869 ========== ========== =========== ========== Diluted earnings (loss) per share $ 0.24 $ 0.00 $ 0.72 $ (0.46) ========== ========== =========== ========== Diluted weighted average shares outstanding, in thousands 126,191 129,147 127,878 128,869 ========== ========== =========== ==========
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in thousands of U.S. dollars) (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2001 2000 ------------ ------------ Net cash provided by operating activities $ 240,900 $ 207,938 Cash flows from investing activities: Capital expenditures (56,163) (96,497) Purchases of bottles and cases (32,131) (49,062) Purchases of investments (428) (4,000) Proceeds from sale of investments 127,720 25,000 Proceeds from sale of property, plant and equipment 25,711 17,713 Other (454) (36) --------- --------- Net cash provided by (used in) investing activities 64,255 (106,882) --------- --------- Cash flows from financing activities: Payment of bank loans and other long-term obligations (407,279) (144,192) Proceeds from bank loans and other long-term obligations 151,492 75,162 Issuance of capital stock 9,316 412 Share repurchase (109,323) (11,772) Payment of dividends to minority interest (1,057) (759) Payment of dividends to shareholders (22,880) (23,178) --------- --------- Net cash used in financing activities (379,731) (104,327) --------- --------- Effect of exchange rate changes on cash and cash equivalents (12,741) (1,962) --------- --------- Net decrease in cash and equivalents (87,317) (5,233) Cash and equivalents at beginning of period 191,773 152,648 --------- --------- Cash and equivalents at end of period $ 104,456 $ 147,415 ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for: Interest (net of capitalized interest) $ 81,825 $ 96,868 ========= ========= Income taxes $ 72,846 $ 59,850 ========= ========= NONCASH ACTIVITIES: Write-off of property, plant and equipment against accrued facilities reorganization charges $ - $ 39,533 ========= ========= The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (1) BASIS OF PRESENTATION The unaudited condensed consolidated financial statements included herein have been prepared by Panamerican Beverages, Inc. (the "Company"), in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the Company's consolidated financial position as of September 30, 2001 and December 31, 2000, and the consolidated results of operations for the three and nine months ended September 30, 2001 and 2000. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. These unaudited financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's 2000 Annual Report on Form 10-K filed with the SEC on April 2, 2001. The Company has made no significant changes in accounting policies from those reflected in the consolidated financial statements included in the Annual Report on Form 10-K. The financial statements of the Colombian and Venezuelan subsidiaries for all periods have been remeasured into U.S. dollars, the reporting and functional currency, in accordance with the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," as it applies to highly inflationary economies. The functional currencies of the Mexican, Brazilian, Costa Rican, Nicaraguan and Guatemalan subsidiaries are the Mexican peso, Brazilian real, Costa Rican colon, Nicaraguan cordova and Guatemalan quetzal, respectively. The financial statements of the Mexican, Brazilian, Costa Rican, Nicaraguan and Guatemalan subsidiaries have been translated using the current rate translation method and the resulting translation adjustments are included in accumulated other comprehensive income (loss), which is a component of shareholders' equity. Foreign currency translation gains (losses) on monetary assets and liabilities for the Colombian and Venezuelan subsidiaries have been included in the consolidated statements of operations captions to which such items relate as shown below: 5 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (1) BASIS OF PRESENTATION, CONTINUED THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2001 2000 2001 2000 ------- ------- ------- ------- Net sales $ 161 $ (227) $ 275 $ (630) Cost of sales and operating expenses 890 1,886 2,456 7,640 Interest and other income (expense), net 1,379 727 3,499 1,573 Provision (benefit) for income taxes (149) 1 (85) 1,508 ------- ------- ------- ------- Net translation gain $ 2,281 $ 2,387 $ 6,145 $10,091 ======= ======= ======= ======= (2) NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and the pooling-of-interests method will be prohibited. The remaining provisions of SFAS No. 141 will be effective for transactions accounted for using the purchase method that are completed after June 30, 2001. Under SFAS No. 142, goodwill and certain intangible assets are no longer subject to amortization over its estimated useful life, but instead will be subject to an impairment test to be performed at least annually. The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001, and will therefore be adopted by the Company beginning on January 1, 2002. The Company is currently reviewing the statements to determine the overall effect on the Company, but expects that the adoption of SFAS No. 142 will lower fiscal year 2002 amortization expense by approximately $26.0 million. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" and Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of Operations - Reporting the Effects of the Disposal of a Segment Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 establishes a single accounting model for assets to be disposed of by sale whether previously held and used or newly acquired. SFAS No. 144 retains the provisions of APB No. 30 for presentation of discontinued operations in the income statement, but broadens the presentation to include a component of an entity. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and the interim periods within. The Company does not believe that the adoption of SFAS No. 144 will have a material impact on its consolidated results of operations. 6 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (2) NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS, CONTINUED In April 2001, the Emerging Issues Task Force ("EITF") of the FASB reached a consensus on Issue No. 00-25, "Vendor Income Statement Characterization of Consideration to a Purchaser of the Vendor's Products or Services." This issue addresses the income statement classification of various sales incentives such as slotting fees, cooperative advertising arrangements and buydowns. EITF 00-25 requires that such customer promotional payments that are currently classified as selling and distribution expenses be classified as a reduction of net sales. Had the Company applied EITF 00-25 to its year-to-date fiscal 2001, this would have resulted in a $7.8 million reclassification between net sales and selling and distribution expense. The adoption of EITF 00-25 will have no impact on operating income, net income or earnings per share. The Company will adopt EITF 00-25 for fiscal quarters beginning after December 15, 2001. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement of FASB Statement No. 125." SFAS No. 140 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Those standards are based on consistent application of a financial-components approach that focuses on control. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, de-recognizes financial assets when control has been surrendered, and de-recognizes liabilities when extinguished. SFAS No. 140 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company adopted SFAS No. 140 on March 31, 2001. The adoption of this standard did not have a material effect on its financial position or results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires the recognition of all derivatives on the consolidated balance sheet at fair value. Derivatives that are not designated as part of a hedging relationship must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, the effective portion of the hedge's change in fair value is either (1) offset against the change in fair value of the hedged asset, liability or firm commitment through income or (2) held in equity until the hedged item is recognized in income immediately. The ineffective portion of a hedge's change in fair value is recognized in income. The Company adopted SFAS No. 133, as amended, on January 1, 2001. The adoption of SFAS No. 133, on January 1, 2001, resulted in a reduction in other comprehensive income of approximately $3.0 million. The Company also recorded an additional reduction of $3.3 million and $8.0 million in other comprehensive income relating to the change in fair value of the cash flow hedge for the quarter and nine months ended September 30, 2001, respectively and an unrealized holding gain of $1.0 million and $0.9 million relating to the change in fair value of the fair value hedge for the quarter and nine months ended September 30, 2001, respectively. 7 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (3) Earnings (Loss) per Share In accordance with SFAS No. 128, "Earnings per Share," basic earnings per common share calculations are determined by dividing earnings available to common shareholders by the weighted average number of shares of common stock. Diluted earnings per share are determined by dividing earnings available to common shareholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding, related to outstanding stock options and nonvested stock grants. Following is a reconciliation of the weighted average number of shares outstanding with the number of shares used in the computation of diluted earnings (loss) per share: Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 2001 2000 2001 2000 -------- -------- -------- --------- Numerator: Net income (loss) $ 30,110 $ 464 $ 91,673 $ (59,514) ======== ======== ======== ========= Denominator (in thousands): Denominator for basic earnings (loss) per share 124,842 128,733 126,676 128,869 Effect of dilutive securities: Options to purchase common stock and restricted stock 1,349 414 1,202 - -------- -------- -------- --------- Denominator for diluted earnings (loss) per share 126,191 129,147 127,878 128,869 ======== ======== ======== ========= Earnings (loss) per share: Basic $ 0.24 $ 0.00 $ 0.72 $ (0.46) ======== ======== ======== ========= Diluted $ 0.24 $ 0.00 $ 0.72 $ (0.46) ======== ======== ======== ========= Anti-dilutive securities not included in the diluted earnings (loss) per share calculation: Options to purchase common stock (in thousands) 2,053 2,189 2,053 5,260 Exercise prices: $ 19.25 $ 19.62 $ 19.25 $ 13.75 to to to to $ 29.94 $ 29.94 $ 29.94 $ 29.94 The Company declared cash dividends of $0.06 and $0.18 per share of common stock for the three and nine months ended September 30, 2001 and 2000. 8 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (4) REORGANIZATION PROGRAMS Throughout 2000, the Company continued its reorganization programs, which were initiated during the first quarter of 2000. As a result of these reorganization programs, during the year ended December 31, 2000, the Company recorded the following items in its statements of operations: Facilities Reorganization Charges - During the year ended December 31, 2000, the Company recorded $503.7 million of facilities reorganization charges, of which $79.9 million was recorded during the first quarter and $423.8 million was recorded during the fourth quarter. These charges are primarily the result of the $350.0 million write-down of goodwill, attributable to Panamco Venezuela; the write-off of noncash items of property, plant and equipment, obsolete bottles and cases and nonrecurring charges (related to legal contingencies) amounting to $65.1 million; and cash items relating primarily to severance payments, job terminations and reorganization of the distribution system of the Venezuelan and Brazilian subsidiaries amounting to $88.6 million. Severance payments recorded during 2000 relate to the termination of approximately 10,000 employees across all levels and operating units of the Company. Approximately 7,600 employees had been terminated by the Company as of September 30, 2001. Nonoperating Charges - During the year ended December 31, 2000, the Company recorded $6.0 million of charges, of which $5.4 million were recorded in the first quarter and $0.6 million were recorded in the fourth quarter, related to the disposal of nonoperating assets, including land of some of the operating plants, which are presented as part of other expense, net. As a result of the facilities reorganization charges and nonoperating charges, the Company recorded a tax benefit of $46.5 million, of which $23.4 million was recorded in the first quarter of 2000 and $23.1 million was recorded in the fourth quarter of fiscal 2000. The following table shows a summary of the net charges and benefits recorded in the consolidated statements of operations for the year ended December 31, 2000: YEAR ENDED DECEMBER 31, 2000 -------------------------------------------- CASH NONCASH TOTAL --------- --------- -------- Restructuring charges $ 86,677 $ 24,814 $111,491 Asset write-offs 1,894 381,637 383,531 Nonrecurring charges - 8,637 8,637 --------- --------- -------- 88,571 415,088 503,659 Nonoperating charges - 5,977 5,977 --------- --------- --------- Gross charges $ 88,571 $421,065 509,636 ========= ========= Income tax benefit 46,516 -------- Net charges $463,120 ======== 9 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (4) REORGANIZATION PROGRAMS, CONTINUED The following tables show the status of the balance of the reorganization accrual and asset write-down allowance at September 30, 2001 and December 31, 2000. Balances of $14.8 million and $47.9 million related to accrued facilities reorganization costs are reflected in other accrued liabilities and balances of $5.4 million and $7.8 million are reflected in other long-term liabilities in the condensed consolidated balance sheets at September 30, 2001 and December 31, 2000, respectively: SEVERANCE, OTHER CASH BALANCE AT PAYMENTS AND BALANCE AT DECEMBER 31, NONCASH SEPTEMBER 30, 2000 APPLICATIONS 2001 -------------- -------------- -------------- Job termination and severance payments $ 44,899 $ 30,286 $ 14,613 Other 10,732 5,218 5,514 ---------- ---------- ---------- Total $ 55,631 $ 35,504 $ 20,127 ========== ========== ==========
====== CHARGES ====== ============ APPLICATIONS ============ PROPERTY BALANCE AT SEVERANCE AND BALANCE AT DECEMBER 31, AND OTHER CASH EQUIPMENT ASSET DECEMBER 31, 1999 CASH NONCASH PAYMENTS SOLD WRITE-OFFS 2000 ------------ ------------------- ---------------------------------------- ----------- Write-off of property and equipment $ - $ 2,770 $ 54,451 $ - $ 6,112 $ 51,109 $ - Job termination and severance payments - 78,769 - 33,870 - - 44,899 Venezuela goodwill impairment - - 350,000 - - 350,000 - Other - 7,032 10,637 6,937 - - 10,732 ------------ --------- -------- --------- --------- ---------- -------- Total $ - $ 88,571 $415,088 $ 40,807 $ 6,112 $ 401,109 $55,631 ============ ========= ======== ========= ========= ========== ========
10 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (5) INVENTORIES Inventories consist of: SEPTEMBER 30, DECEMBER 31, 2001 2000 --------------- --------------- Bottled beverages $ 30,943 $ 31,745 Raw materials 35,879 41,675 Spare parts and supplies 29,428 35,473 ----------- ----------- 96,250 108,893 Less - Allowance for obsolete and slow moving items (4,851) (3,454) ----------- ----------- $ 91,399 $ 105,439 =========== =========== (6) PROPERTY, PLANT, EQUIPMENT, AND BOTTLES AND CASES Property, plant, equipment, and bottles and cases consist of: SEPTEMBER 30, DECEMBER 31, 2001 2000 --------------- --------------- Property, plant and equipment $ 1,943,432 $ 1,996,820 Less - Accumulated depreciation (918,176) (871,101) ----------- ----------- 1,025,256 1,125,719 Bottles and cases, net 213,677 236,527 ----------- ----------- $ 1,238,933 $ 1,362,246 =========== =========== 11 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (7) TRANSACTIONS WITH RELATED PARTIES For the three and nine months ended September 30, 2001, the Company conducted transactions with related parties. A summary of balances as of September 30, 2001 and December 31, 2000 and transactions for the three and nine months ended September 30, 2001 and 2000 with related parties is as follows: SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------- ------------ Accounts receivable: Subsidiaries of The Coca-Cola Company $ 8,113 $ 7,934 Subsidiaries of Cervejarias Kaiser, S.A. 1,692 2,532 --------- ---------- $ 9,805 $ 10,466 ========= ========== Accounts payable: Subsidiaries of The Coca-Cola Company $ 19,373 $ 17,076 Productos de Vidrio, S.A. 1,967 - Central Azucarero Portuguesa, C.A. 3,126 - Tapon Corona de Colombia, S.A. 1,396 994 Comptec, S.A. 61 976 Other 194 773 --------- ---------- $ 26,117 $ 19,819 ========= ========== THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- --------------------- 2001 2000 2001 2000 -------- -------- --------- -------- Income: Marketing expense support (recorded net against marketing expenses) $ 6,708 $ 8,886 $ 22,393 $ 29,565 Other 929 95 2,241 964 -------- -------- --------- -------- $ 7,637 $ 8,981 $ 24,634 $ 30,529 ======== ======== ========= ======== 12 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (7) TRANSACTIONS WITH RELATED PARTIES, CONTINUED THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ -------------------- 2001 2000 2001 2000 -------- -------- --------- --------- Expenses: Purchase of concentrate $ 85,115 $ 88,040 $ 261,172 $ 232,161 Purchase of beer 12,552 13,679 41,330 42,252 Purchase of other inventories 6,155 5,694 25,304 19,223 -------- -------- --------- --------- $103,822 $107,413 $ 327,806 $ 293,636 ======== ======== ========= ========= Capital expenditure incentives received in cash $ 544 $ - $ 1,892 $ - ======== ======== ========= ========= (8) OTHER TRANSACTIONS On February 22, 2001, Panamco de Venezuela, S.A. ("Panamco Venezuela") entered into an agreement with Chase Manhattan Bank, as arranger and administrative agent, to obtain a one-year loan in the amount of $25.0 million, guaranteed by the Company. The loan matures on February 21, 2002, with quarterly interest payments with an average annual interest rate of three-month LIBOR plus 1.75% and principal balance payable upon maturity. On March 19, 2001, Panamco Venezuela entered into an agreement with Banco Bilbao Vizcaya Argentaria ("BBVA") S.A., as administrative agent, and BBVA Securities Inc. and Wachovia Securities, Inc., as arrangers, to obtain a loan in the amount of $45.1 million, guaranteed by the Company. The loan matures and principal balance is payable on July 16, 2004, with semi-annual interest payments with an average annual interest rate ranging from six-month LIBOR plus 1.75% for year one and year two to six-month LIBOR plus 2.0% after year two until maturity. 13 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (8) OTHER TRANSACTIONS, CONTINUED On April 20, 2001, Spal Industria Brasileira de Bebidas, S.A. (a subsidiary of the Company in Brazil, "Spal") entered into a credit agreement with BankBoston, N.A. as lender, to obtain two loans of $30.0 million in the aggregate, guaranteed by the Company. The first loan amounts to $10.0 million and matures on April 16, 2002, with semi-annual interest payments with an annual interest rate of 6.65% and principal balance payable upon maturity. The second loan amounts to $20.0 million, with semi-annual interest payments with an annual interest rate of 6.65% and principal balance of $5.0 million payable on April 16, 2002 and principal balance of $15.0 million payable on April 10, 2003. On the date of the loan, Spal also entered into four swap agreements with BankBoston, N.A. to exchange the dollar denominated debt totaling $30.0 million. The terms of the swap agreements are as follows: R2,109,870 (Brazilian reals) maturing on October 16, 2001; R32,753,046 maturing on April 15, 2002; R994,334 maturing on October 11, 2002; and R29,788,731 maturing on April 9, 2003. All four swap agreements have an interest rate of 90% of CDI (the Brazilian borrowing rate). On May 30, 2001, Panamco Venezuela entered into a credit agreement with Comerica Bank as lender, to obtain a two-year loan in the amount of $15.0 million, guaranteed by the Company. The loan matures on May 30, 2003, with semi-annual interest payments with an average annual interest rate of six-month LIBOR plus 2.50% and principal balance payable upon maturity. On September 4, 2001, Panamco Venezuela entered into an amendment agreement (the "First Amendment to Term Credit Agreement") to the $15.0 million credit agreement entered with the lender. Pursuant to the First Amendment to Term Credit Agreement, the lender reduced the average annual interest rate of six-month LIBOR plus 2.50% to six-month LIBOR plus 1.60% with interest payable semi-annually. On June 1, 2001, Spal entered into a credit agreement with Citibank, N.A. as lender, to obtain a two-year loan in the amount of $15.0 million, guaranteed by the Company. The loan matures on June 4, 2003, with semi-annual interest payments with an average annual interest rate of six-month LIBOR plus 1.15% and principal balance payable upon maturity. On June 4, 2001, Panamco Venezuela entered into an amendment and waiver (the "Amendment and Waiver") to the JPY2,163,000,000 credit agreement entered with Inarco International Bank, N.V. (an indirect wholly owned subsidiary of Citibank, N.A., "Inarco") dated as of July 18, 2000. Pursuant to the Amendment and Waiver, Inarco increased the total amount of the loan to JPY5,948,250,000 and reduced the average annual interest rate of six-month JPY LIBOR plus 3.24% to six-month JPY LIBOR plus 2.15% with interest payable semi-annually. This loan is guaranteed by the Company and matures and principal balance is payable on July 28, 2003. 14 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (8) OTHER TRANSACTIONS, CONTINUED On June 5, 2001, Panamco Venezuela entered into a credit agreement with Banco Santander Central Hispano, S.A. as lender, to obtain a one-year loan in the amount of $10.0 million, guaranteed by the Company. The loan matures on June 6, 2002, with quarterly interest payments with an average annual interest rate of three-month LIBOR plus 1.30% and principal balance payable upon maturity. On June 27, 2001, Panamco Venezuela entered into an amendment agreement with BankBoston, N.A. in order to extend the maturity of a $15.0 million credit agreement until June 27, 2002. The loan is guaranteed by the Company, with quarterly interest payments at an average annual interest rate of three-month LIBOR plus 2.0% and principal balance payable upon maturity. On September 5, 2001, Panamco Venezuela entered into a financial lease agreement with Citibank, N.A. as lender, to lease approximately 110 distribution trucks amounting to approximately $5.7 million, guaranteed by the Company. The lease agreement has a term of five years, with semi-annual interest payments with an average annual interest rate of 8.86%. On September 14, 2001, Panamco Nicaragua entered into a credit agreement with Citibank, N.A. as lender, to obtain a one-year loan in the amount of $6.5 million, guaranteed by the Company. The loan matures on September 13, 2002, with quarterly interest payments with an average annual interest rate of three-month LIBOR plus 1.05% and principal balance payable upon maturity. On September 24, 2001, the Company entered into a credit agreement with The Chase Manhattan Bank as lender, to obtain a loan in the amount of $10.0 million. The loan matures on December 19, 2001, with monthly interest payments with an average annual interest rate of one-month LIBOR plus 0.95% and principal balance payable upon maturity. (9) SHARE REPURCHASE PROGRAM On December 9, 1999, the Board of Directors authorized a $100.0 million share repurchase program of the Company's Class A Common Stock (the "Share Repurchase Program") in accordance with the anti-market- manipulation safe harbor of Rule 10b-18 promulgated under the Securities Exchange Act of 1934. The Share Repurchase Program was supplemented with $25.0 million increases on each of July 20, 2001 and September 6, 2001. In addition to this $150.0 million authority, the Share Repurchase Program also provides for repurchases of shares from independent brokers by the Company (currently totalling $4.8 million) made in connection with employees' stock option exercises. Company shares may be purchased in the open market or in privately negotiated transactions, depending on market conditions and other factors. 15 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (9) SHARE REPURCHASE PROGRAM, CONTINUED The Company has repurchased 5,795,800 shares amounting to $109.6 million (including brokerage commissions) at an average price per share of $18.91 during the nine months ended September 30, 2001. From the Share Repurchase Program's inception on December 9, 1999 to September 30, 2001, the Company has repurchased 6,949,800 shares for a total amount of $130.8 million (including brokerage commissions) at an average price per share of $18.83. (10) COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes net income (loss), foreign currency translation and unrealized gains (losses) on derivative instruments. The comprehensive income (loss) for the three and nine months ended September 30, 2001 and 2000 is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ------------------------- 2001 2000 2001 2000 ----------- --------- ----------- ---------- Net income (loss) $ 30,110 $ 464 $ 91,673 $ (59,514) -------- ------- --------- --------- Other comprehensive income (loss): Foreign currency translation (45,408) 3,988 (60,380) (18,903) Unrealized holding loss on derivative financial instruments (3,274) - (10,968) - -------- ------- --------- --------- $ (18,572) $ 4,452 $ 20,325 $ (78,417) ========= ======= ========= =========
16 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (11) SEGMENTS AND RELATED INFORMATION Relevant information concerning the geographic areas in which the Company operates, is as follows:
NINE MONTHS ENDED SEPTEMBER 30, 2001 ------------------------------------------------------------------------------------- MEXICO AND CENTRAL AMERICA BRAZIL COLOMBIA VENEZUELA CORPORATE TOTAL ------------- --------- ----------- ----------- --------- ----------- Net sales $ 960,289 $ 309,254 $ 276,811 $ 411,751 $ - $ 1,958,105 ============= ========= =========== =========== ========= =========== Operating income (loss) $ 176,893 $ 10,882 $ 17,502 $ 28,252 $ (12,999) $ 220,530 ============= ========= =========== =========== ========= =========== Interest income $ 7,055 $ 801 $ 3,393 $ 128 $ 6,429 $ 17,806 ============= ========= =========== =========== ========= =========== Interest expense $ (14,807) $ 309 $ (9,806) $ (15,041) $ (45,950) $ (85,295) ============= ========= =========== =========== ========= =========== Depreciation and amortization $ 62,460 $ 15,638 $ 42,379 $ 45,572 $ 14,999 $ 181,048 ============= ========= =========== =========== ========= =========== Capital expenditures $ 41,286 $ 3,576 $ 4,341 $ 6,932 $ 28 $ 56,163 ============= ========= =========== =========== ========= =========== SEPTEMBER 30, 2001 ------------------------------------------------------------------------------------- MEXICO AND CENTRAL AMERICA BRAZIL COLOMBIA VENEZUELA CORPORATE TOTAL ------------- --------- ----------- ----------- --------- ----------- Long-lived assets $ 660,208 $ 167,510 $ 328,642 $ 348,005 $ 660,993 $ 2,165,358 ============= ========= =========== =========== ========= =========== Total assets $ 789,751 $ 320,549 $ 384,005 $ 398,446 $ 682,140 $ 2,574,891 ============= ========= =========== =========== ========= ===========
17 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (11) SEGMENTS AND RELATED INFORMATION, CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 2000 ------------------------------------------------------------------------------------- MEXICO AND CENTRAL AMERICA BRAZIL COLOMBIA VENEZUELA CORPORATE TOTAL ------------- --------- ----------- ----------- --------- ----------- Net sales $ 891,090 $ 356,273 $ 278,850 $ 371,384 $ (175) $ 1,897,422 ============= ========= =========== =========== ========= =========== Operating income (loss) $ 130,959 $ 5,559 $ (2,559) $ (27,635) $ (32,526) $ 73,798 ============= ========= =========== =========== ========= =========== Interest income $ 7,445 $ 1,344 $ 2,855 $ 1 $ 12,177 $ 23,822 ============= ========= =========== =========== ========= =========== Interest expense $ (18,072) $ (11,358) $ (5,844) $ (17,936) $ (53,848) $ (107,058) ============= ========= =========== =========== ========= =========== Depreciation and amortization $ 53,655 $ 22,435 $ 45,114 $ 56,432 $ 21,844 $ 199,480 ============= ========= =========== =========== ========= =========== Capital expenditures $ 61,958 $ 5,141 $ 6,201 $ 23,197 $ - $ 96,497 ============= ========= =========== =========== ========= =========== DECEMBER 31, 2000 ------------------------------------------------------------------------------------- Long-lived assets $ 617,516 $ 246,149 $ 361,364 $ 385,220 $ 850,954 $ 2,461,203 ============= ========= =========== =========== ========= =========== Total assets $ 772,698 $ 425,134 $ 457,102 $ 461,486 $ 909,901 $ 3,026,321 ============= ========= =========== =========== ========= ===========
(12) COMMITMENTS AND CONTINGENCIES On July, 2001, a labor union and several individuals from the Republic of Colombia filed a lawsuit in the U.S. District Court for the Southern District of Florida against the Company (and certain of its subsidiaries) as well as The Coca-Cola Company (and certain of its subsidiaries) and another Coca-Cola bottler in Colombia. In the complaint, the plaintiffs have alleged that the Company has engaged in wrongful acts against the labor union and its members in Colombia, including kidnapping, torture, death threats and intimidation. The complaint alleges claims under the Alien Tort Claims Act, the Torture Victim Protection Act, RICO and state tort law and seeks injunctive and declaratory relief and damages of more than $500.0 million, including treble and punitive damages and the cost of the suit, including attorney fees. In October, the Company filed a motion to dismiss the complaint for lack of subject matter and personal jurisdiction. A ruling on the Company's motion to dismiss the lawsuit is expected in the first quarter of 2002. The Company believes this lawsuit is without merit and intends to vigorously defend itself against this lawsuit. 18 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tables stated in thousands of U.S. dollars) (Unaudited) (12) COMMITMENTS AND CONTINGENCIES, CONTINUED During 1999, a group of independent distributors of Panamco Venezuela commenced a proceeding to incorporate a union of distributors. On September 20, 2001, the Venezuelan Supreme Court rendered its opinion confirming the incorporation of the union, but withheld granting any specific labor rights to the members of the union other than the right to be unionized. In order to obtain specific labor rights, the union (or its members) will have to request to a court of law (with jurisdiction over labor law) to determine if the members of such union can be considered workers pursuant to Venezuelan labor laws, and thereafter claim against Panamco Venezuela the payment of such benefits and rights including retroactive payments. To the Company's knowledge, neither the union nor any of its individual members have initiated any process with the objective of obtaining a court decision on whether the members of the union are subject to the rights and benefits of the Venezuelan labor laws, although certain members of the union have threatened such action. The Company intends to vigorously defend its rights should this action be filed. 19 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES SUPPLEMENTARY FINANCIAL INFORMATION (Stated in thousands of U.S. dollars) (Unaudited) The statements of operations data for Panamco Mexico and Central America (Costa Rica, Nicaragua and Guatemala), Panamco Brasil, Panamco Colombia, and Panamco Venezuela, are presented on the following pages. The data presented as of and for each period have been derived from the unaudited financial statements of Panamco Mexico and Central America (Costa Rica, Nicaragua and Guatemala), Panamco Brasil, Panamco Colombia, and Panamco Venezuela, as applicable, which financial statements are not included herein. Additionally, the data presented does not include the unaudited financial data of the Holding company, the corporate offices or some minor entities; nor does it reflect the eliminating entries that are used in consolidating the unaudited financial statements of the aforementioned subsidiaries. 20 PANAMCO MEXICO AND CENTRAL AMERICA (Stated in thousands of U.S. dollars) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales $ 328,384 $ 311,462 $ 960,289 $ 891,090 Cost of sales, excluding depreciation and amortization 144,961 136,185 416,085 398,180 ---------- --------- --------- --------- Gross profit 183,423 175,277 544,204 492,910 Operating expenses: Selling, general and administrative 103,581 99,429 304,851 288,615 Depreciation and amortization 18,773 16,826 60,675 51,245 Amortization of goodwill 601 808 1,785 2,410 Facilities reorganization charges - - - 19,681 ---------- --------- --------- --------- 122,955 117,063 367,311 361,951 ---------- --------- --------- --------- Operating income 60,468 58,214 176,893 130,959 Interest expense, net (2,661) (2,717) (7,752) (10,627) Other income (expense), net 952 (1,768) 532 (1,185) ---------- --------- --------- --------- Income before income taxes 58,759 53,729 169,673 119,147 Provision for income taxes 18,841 17,163 53,512 37,537 ---------- --------- --------- --------- Income before minority interest 39,918 36,566 116,161 81,610 Minority interest in Panamco Mexico subsidiaries 1,310 1,189 3,729 2,550 ---------- --------- --------- --------- Net income attributable to Panamco Mexico holding company and Central America 38,608 35,377 112,432 79,060 Minority interest in Panamco Mexico holding company 620 416 1,765 1,060 ---------- --------- --------- --------- Net income attributable to Panamco $ 37,988 $ 34,961 $ 110,667 $ 78,000 ========== ========= ========= ========= Cash operating profit $ 79,842 $ 75,848 $ 239,353 $ 195,621 ========== ========= ========= ========= UNIT CASE SALES DATA (IN THOUSANDS): Soft drinks 89,641 89,638 261,816 266,508 Water 44,103 44,476 131,447 127,318 Other products 1,509 859 3,559 2,390
21 PANAMCO MEXICO AND CENTRAL AMERICA (Stated in thousands of U.S. dollars) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales: Mexico $ 270,889 $ 255,778 $786,960 $ 725,979 Central America 57,495 55,684 173,329 165,111 UNIT CASE SALES DATA (IN THOUSANDS): Mexico: Soft drinks 72,277 72,458 209,919 214,705 Water 43,250 43,812 128,962 125,338 Other products 1,030 718 2,404 1,974 Central America: Soft drinks 17,364 17,180 51,897 51,803 Water 853 664 2,485 1,980 Other products 479 141 1,155 416
22 PANAMCO BRASIL (Stated in thousands of U.S. dollars) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales $ 81,821 $ 111,813 $ 309,254 $ 356,273 Cost of sales, excluding depreciation and amortization 53,917 67,181 200,266 217,292 ---------- --------- --------- --------- Gross profit 27,904 44,632 108,988 138,981 ---------- --------- --------- --------- Operating expenses: Selling, general and administrative 22,735 32,736 82,468 99,869 Depreciation and amortization 3,860 7,144 13,933 20,874 Amortization of goodwill 504 541 1,705 1,561 Facilities reorganization charges - - - 11,118 ---------- --------- --------- --------- 27,099 40,421 98,106 133,422 ---------- --------- --------- --------- Operating income 805 4,211 10,882 5,559 Interest income (expense), net 1,871 (2,794) 1,110 (10,014) Other expense, net (2,468) (6,759) (8,599) (12,177) ---------- --------- --------- --------- Income (loss) before income taxes 208 (5,342) 3,393 (16,632) Benefit from income taxes (435) (2,047) (1,373) (7,906) ---------- --------- --------- --------- Income (loss) before minority interest 643 (3,295) 4,766 (8,726) Minority interest in Panamco Brasil holding company 4 (42) 35 (105) ---------- --------- --------- --------- Net income (loss) attributable to Panamco $ 639 $ (3,253) $ 4,731 $ (8,621) ========== ========= ========= ========= Cash operating profit $ 5,169 $ 11,896 $ 26,520 $ 32,024 ========== ========= ========= ========= UNIT CASE SALES DATA (IN THOUSANDS): Soft drinks 50,842 53,909 175,719 169,063 Water 3,832 3,081 12,370 9,921 Beer 15,575 13,758 48,505 43,854 Other products 190 - 254 -
23 PANAMCO COLOMBIA (Stated in thousands of U.S. dollars) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales $ 92,496 $ 93,410 $ 276,811 $ 278,850 Cost of sales, excluding depreciation and amortization 43,771 40,367 129,798 118,637 ---------- --------- --------- --------- Gross profit 48,725 53,043 147,013 160,213 Operating expenses: Selling, general and administrative 26,715 31,111 87,132 99,433 Depreciation and amortization 14,291 15,079 42,171 44,907 Amortization of goodwill 69 207 208 207 Facilities reorganization charges - - - 18,225 ---------- --------- --------- --------- 41,075 46,397 129,511 162,772 ---------- --------- --------- --------- Operating income (loss) 7,650 6,646 17,502 (2,559) Interest expense, net (2,218) (1,096) (6,413) (2,989) Other income (expense), net (94) 193 295 (5,405) ---------- --------- --------- --------- Income (loss) before income taxes 5,338 5,743 11,384 (10,953) Provision (benefit) for income taxes 1,729 1,555 3,514 (3,653) ---------- --------- --------- --------- Income (loss) before minority interest 3,609 4,188 7,870 (7,300) Minority interest in Panamco Colombia subsidiaries holding company 29 55 83 113 ---------- --------- --------- --------- Net income (loss) attributable to Panamco Colombia holding company 3,580 4,133 7,787 (7,413) Minority interest in Panamco Colombia 97 113 213 (205) ---------- --------- --------- --------- Net income (loss) attributable to Panamco $ 3,483 $ 4,020 $ 7,574 $ (7,208) ========== ========= ========= ========= Cash operating profit $ 22,010 $ 21,932 $ 59,881 $ 49,473 ========== ========= ========= ========== UNIT CASE SALES DATA (IN THOUSANDS): Soft drinks 37,993 38,169 113,398 114,071 Water 7,973 8,810 27,007 25,744 Other products 139 - 481 -
24 PANAMCO VENEZUELA (Stated in thousands of U.S. dollars) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 2001 2000 2001 2000 ---------- --------- --------- --------- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales $ 135,941 $ 131,568 $ 411,751 $ 371,384 Cost of sales, excluding depreciation and amortization 68,023 61,369 201,317 170,925 ---------- ---------- ---------- --------- Gross profit 67,918 70,199 210,434 200,459 Operating expenses: Selling, general and administrative 44,380 51,919 136,610 140,808 Depreciation and amortization 15,152 18,365 45,572 56,432 Facilities reorganization charges - - - 30,854 ---------- ---------- --------- --------- 59,532 70,284 182,182 228,094 ---------- ---------- --------- --------- Operating income (loss) 8,386 (85) 28,252 (27,635) Interest expense, net (2,409) (6,966) (14,913) (17,935) Other income, net 1,217 3,941 6,539 3,910 ---------- ---------- --------- --------- Income (loss) before income taxes 7,194 (3,110) 19,878 (42,380) Provision (benefit) for income taxes 35 294 (8,694) (3,620) ---------- ---------- --------- --------- Net income (loss) attributable to Panamco $ 7,159 $ (3,404) $ 28,572 $ (38,760) ========== ========== ========== ========= Cash operating profit $ 23,538 $ 18,280 $ 73,824 $ 46,374 ========== ========== ========== ========= UNIT CASE SALES DATA (IN THOUSANDS): Soft drinks 38,369 39,176 114,856 112,346 Water 6,169 6,046 18,599 16,313 Beer 1,044 530 3,026 1,176 Other products 1,350 1,489 4,473 4,605
25 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion addresses the financial condition and results of operations of Panamerican Beverages, Inc. ("Panamco" or "we") and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements as of September 30, 2001 and December 31, 2000 and for the three and nine months ended September 30, 2001 and 2000 and the notes thereto included elsewhere herein. Results for any interim period are not necessarily indicative of results for any full year. We conduct our operations through tiers of subsidiaries in which, in some cases, minority shareholders hold interests. Since we have varying percentage ownership interests in our approximately 60 consolidated subsidiaries, the amount of the minority interest in income or loss before minority interest during a period depends upon the revenues and expenses of each of the consolidated subsidiaries and the percentage of each of such subsidiary's capital stock owned by minority shareholders during such period. In 1998, we created the "Panamco Central America" group, which consists of Panamco Costa Rica, Panamco Nicaragua and Panamco Guatemala. Prior to the second quarter of 2001, the financial condition and results of operations of these three companies were previously reported together in the financial statements entitled Panamco Central America. In February 1999, we formed the North Latin American Division ("NOLAD"), which consists of Panamco Mexico and Panamco Central America. Since the second quarter of 2001, the results of operations of Panamco Mexico and Panamco Central America are reported together in the financial statements entitled Panamco Mexico and Central America. Unit case means 192 ounces of finished beverage product (24 eight-ounce servings). Average sales prices per unit case means net sales in U.S. dollars for the period divided by the number of unit cases sold during the same period. Cash operating profit means operating income plus depreciation, amortization of goodwill and noncash facilities reorganization charges. Forward-looking statements, contained in this document include the amount of future capital expenditures and the possible uses of proceeds from any future borrowings. The words believes, intends, expects, anticipates, projects, estimates, predicts, and similar expressions are also intended to identify forward-looking statements. Such statements, estimates, and projections reflect various assumptions by our management, concerning anticipated results and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. Factors that could cause results to differ include, but are not limited to, changes in the soft drink business environment, including actions of competitors and changes in consumer preference, changes in governmental laws and regulations, including income taxes, market demand for new and existing products, raw material prices and devaluation of local currencies against the U.S. dollar. Accordingly, we cannot assure you that such statements, estimates and projections will be realized. The forecasts and actual results will likely vary and those variations may be material. We make no representation or warranty as to the accuracy or completeness of such statements, estimates or projections contained in this document or that any forecast contained herein will be achieved. Additional information 26 concerning such factors is contained in our Registration Statement on Form S-8 as filed with the Securities Exchange Commission ("SEC") as well as other documents filed with the SEC, all of which are available from the SEC. THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000 Net sales for the third quarter ended September 30, 2001 decreased 1.5% to $638.6 million from $648.2 million in the 2000 third quarter, mainly due to a reduction of 0.4% in consolidated unit case sales volume and a 41% currency devaluation in Brazil. Excluding Brazil, consolidated net sales increased 3.8%. Total unit case sales decreased to 298.7 million cases from 299.9 million unit cases in the 2000 period. The 0.4% total unit case sale decrease was attributable to total volume decrease of 1.9%, 0.7%, and 0.4% in Colombia, Venezuela and Brazil, respectively, offset by the NOLAD region, where total volume increased 0.2%. Consolidated soft drink and water volumes decreased 1.8% and 0.5%, respectively, whereas consolidated beer volumes increased 16.3%. During the third quarter, Panamco continued to introduce new products, successfully launching Powerade in Mexico, Nicaragua and Colombia as well as Club Kna, a proprietary flavored-water in Colombia and Quatro, a juice-based beverage in Mexico. Year-to-date, Panamco has introduced twelve new products, including three in each of Mexico, Central America and Colombia, two in Venezuela and one in Brazil. Cost of sales as a percentage of net sales increased to 48.5% during the third quarter of 2001 from 47.0% in the 2000 period. This increase resulted from changes in product mix as well as higher costs of raw materials and currency movements, offset by the benefits created by our cost restructuring programs. On September 3, 2001, the Mexican Government assumed the operations of 27 failing sugar mills in the country. The Government said it will establish a state company to run the mills, which make up about half of the 59 mills existing in the country. The partial nationalization of this industry is expected to have implications on the price of sugar for Panamco in Mexico and prices are expected to increase 15.1% by year-end 2001. Gross profit as a percentage of net sales decreased to 51.5% during the third quarter of 2001 from 53.0% in the third quarter of 2000, primarily the result of higher raw material prices and currency devaluation particularly in Brazil, where the Brazilian real devalued 41%. This devaluation of the Brazilian real is expected to continue to adversely affect the results of operations of our Brazilian subsidiary for the near term and generally until such time as local currency price increases are sufficient to cover the impact of the devaluation. Operating expenses as a percentage of net sales decreased to 39.6% during the third quarter of 2001 from 44.4% in the 2000 period, mainly as a result of the benefits of the reorganization program. Operating income increased 38.4% to $76.3 million during the third quarter of 2001 from $55.2 million in the 2000 period, primarily as a result of a $27.5 million or 12.4% reduction in selling, general and administrative expenses which were positively impacted by the benefits created by our cost restructuring programs. Cash operating profit increased 10.9% to $134.6 million in 2001 from $121.4 million in the third quarter of 2000. Net interest expense decreased to $20.2 million during the third quarter of 2001 from $28.1 million in the 2000 period, primarily as a result of gross debt reduction of $164.2 million during the quarter and $283.6 million from the 2000 third quarter. 27 Other expense, net decreased to $3.5 million during the third quarter of 2001 from $5.7 million in the 2000 period, primarily caused by an increase in equity earnings of affiliates, the result of a change in the method of accounting for certain investments, a gain on sale of fixed assets, mainly land sale in Venezuela, and a decrease in miscellaneous costs, offset by an increase in contingency provisions. The consolidated effective income tax rate decreased to 39.4% during the third quarter of 2001 from 92.2% in the 2000 period. The effective income tax rate of 92.2% in the 2000 period is considered unusual and resulted from the relatively low income during this period and non-deductibility of significant expenses such as amortization of goodwill. As a result of the foregoing, we recorded net income of $30.1 million during the third quarter of 2001, or $0.24 per share (basic and diluted), compared to net income of $0.5 million, or $0.00 per share (basic and diluted), during the 2000 period. NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000 Net sales for the nine months ended September 30, 2001 increased 3.2% to $1.96 billion from $1.90 billion during the same period in 2000, mainly due to an increase of 2.5% in consolidated unit case sales volume. Total unit case sales increased to 915.5 million cases from 893.3 million unit cases in the 2000 period. The 2.5% total unit case sale increase was attributable to total volume increase of 6.3% and 4.8% and soft drink volume increase of 3.9% and 2.2% in Brazil and Venezuela, respectively. Colombia reported total volume increase of 0.8% while soft drink volume declined 0.6%. The NOLAD region had total volume growth of 0.2% while soft drink volume declined 1.8%. Consolidated water and beer volumes grew by 5.6% and 14.4%, respectively. During the third quarter, Panamco continued to introduce new products, successfully launching Powerade in Mexico, Nicaragua and Colombia as well as Club Kna, a proprietary flavored-water in Colombia and Quatro, a juice-based beverage in Mexico. Year-to-date, Panamco has introduced twelve new products, including three in each of Mexico, Central America and Colombia, two in Venezuela and one in Brazil. Cost of sales as a percentage of net sales increased to 48.2% during nine months ended September 30, 2001 from 47.6% in the 2000 period. This increase resulted from changes in product mix as well as higher costs of raw materials and currency movements, offset by the benefits created by our cost restructuring programs. On September 3, 2001, the Mexican Government assumed the operations of 27 failing sugar mills in the country. The Government said it will establish a state company to run the mills, which make up about half of the 59 mills existing in the country. The partial nationalization of this industry is expected to have implications on the price of sugar for Panamco in Mexico and prices are expected to increase 15.1% by year-end 2001. Gross profit as a percentage of net sales decreased to 51.8% during the nine months ended September 30, 2001 from 52.4% in the 2000 period, primarily the result of higher raw material prices and currency devaluation in Brazil. This devaluation of the Brazilian real is expected to continue to adversely affect the results of operations of our Brazilian subsidiary for the near term and generally until such time as local currency price increases are sufficient to cover the impact of the devaluation. 28 The following discussion of the consolidated results of operations excludes the recording of facilities reorganization charges, asset write-offs, and nonoperating charges totalling $60.3 million, net of the related tax benefit of $24.6 million, during the nine months ended September 30, 2000. Operating expenses as a percentage of net sales decreased to 40.5% during the nine months ended September 30, 2001 from 44.3% in the 2000 period, mainly the result of the benefits obtained from our cost restructuring programs. Operating income increased 43.5% to $220.5 million during the nine months ended September 30, 2001 from $153.7 million in the 2000 period, primarily the result of increased sales and volume as well as the benefits of the reorganization program. Cash operating profit increased 13.7% to $401.6 million in 2001 from $353.2 million in the 2000 period. Net interest expense decreased to $67.5 million during the nine months ended September 30, 2001 from $83.2 million in the 2000 period, primarily the result of gross debt reduction of $264.1 million during the nine months of 2001 and $283.6 million from the 2000 period. Other expense, net decreased to $7.5 million during the nine months ended September 30, 2001 from $13.1 million in the 2000 period, primarily caused by an increase in equity earnings of affiliates, the result of a change in the method of accounting for certain investments, a gain on sale of fixed assets, mainly land sale in Venezuela, and a decrease in contingency provisions, offset by an increase in foreign exchange losses mainly in Brazil. The consolidated effective income tax rate decreased to 33.8% during the nine months ended September 30, 2001 from 93.8% in the 2000 period. The effective income tax rate of 93.8% in the 2000 period is considered unusual and resulted from the relatively low operating income during this period and non-deductibility of significant expenses such as amortization of goodwill. As a result of the foregoing, we recorded net income of $91.7 million during the nine months ended September 30, 2001, or $0.72 per share (basic and diluted), compared to net income of $0.7 million, or $0.01 per share (basic and diluted), during the 2000 period. FACILITIES REORGANIZATION CHARGES During the first quarter of 2000, we began a company-wide reorganization program designed to improve productivity and strengthen our competitive position in the beverage industry. The program includes productivity initiatives to streamline Panamco's manufacturing infrastructure, consolidation of distribution centers and warehouses, and the termination of approximately 10,000 jobs across all levels of Panamco. During the fourth quarter of 2000, we performed an analysis of our growth opportunities, cost structure and asset valuation. This resulted in several new steps to further position Panamco for improved financial performance and future growth. These steps include additional restructuring of the distribution system in Brazil and Venezuela, plant closings and related disposal of property, plant and equipment, write-down of goodwill in the Venezuelan operating unit, write-off of obsolete property, plant and equipment, bottles and cases, and asset write-downs related to coolers. 29 During the year ended December 31, 2000, we recorded charges of $540.7 million, which was comprised of $503.6 million of facilities reorganization charges, $31.1 million of asset write-downs presented as part of depreciation and amortization expenses, and $6.0 million of charges related to the disposal of nonoperating assets presented in other income (expense). The following is a detail of the aforementioned items: I. Facilities reorganization charges of $503.6 million consist of: (1) Restructuring charges totalling $111.5 million consist of: o Cash restructuring charges totalling approximately $86.7 million, which include $77.3 million related to job terminations and $9.4 million related to the restructuring of our distribution system in Brazil and Venezuela; and o Noncash restructuring charges totalling approximately $24.8 million, which result from plant closings and the related disposal of property, plant and equipment. (2) Asset write-offs totalling $383.5 million consist of: o $350 million write-down of goodwill reflecting the recognition of impairment of the cost in excess of net assets acquired in the Venezuelan operating unit; o $23.8 million of obsolete property, plant and equipment in all operating units; o $7.8 million of obsolete bottles and cases, mainly in the Venezuelan unit's water jug business; and o $1.9 million of cash charges related to the disposal of property, plant and equipment. (3) Nonrecurring charges totalling $8.6 million related to legal contingencies mostly pertaining to tax matters. II. Asset write-downs totalling $31.1 million presented as part of depreciation and amortization expenses consist of: o $11.0 million from an increase in provision related to changing the useful lives of coolers; and o $20.1 million resulting from the write-down of bottles and cases due to loss in market value. III. Nonoperating asset charges totalling $6.0 million related to the disposal of nonoperating assets, including the sale of affiliated companies and land in some of the operating units. As a result of the above, our income for the year 2000 was impacted by facilities reorganization charges, asset write-downs and nonoperating charges totalling $494.2 million, net of the related tax benefit of approximately $46.5 million. The following table shows a summary of the net charges and benefits recorded in the consolidated statements of operations for the year ended December 31, 2000: 30
YEAR ENDED DECEMBER 31, 2000 -------------------------------------- (STATED IN THOUSANDS OF U.S. DOLLARS) FOURTH FIRST TOTAL QUARTER QUARTER -------------------------------------- Depreciation and amortization, excluding goodwill: Asset write-downs $ 31,079 $ 31,079 $ - ---------- ----------- ---------- Facilities reorganization charges: Cash 88,572 48,226 40,346 Noncash 415,087 375,555 39,532 ---------- ----------- ---------- 503,659 423,781 79,878 Other income (expense), net: Nonoperating charges 5,976 590 5,386 ---------- ----------- ---------- Gross charges 540,714 455,450 85,264 Tax benefit (46,516) (23,111) (23,405) ---------- ----------- ---------- Net charges $ 494,198 $ 432,339 $ 61,859 ========== =========== ==========
As of September 30, 2001, we had completed approximately 76% of the total planned workforce reduction. There has been no material change to the expected effects on future earnings and cash flows resulting from the facilities reorganization program, which were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2000. LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 2001 and 2000, consolidated cash flow provided by operations was $240.9 million and $207.9 million, respectively. Cash generated from operations was primarily used to pay down $145.0 million of our syndicated loan, to prepay $100.0 million of the remaining outstanding debt with The Coca-Cola Company, to pay down nearly $30.0 million of debt in our Venezuelan operations, and to repurchase $109.3 million of our shares. Cash provided by investing activities included the release of investments in bank deposits for $125.0 million, which guaranteed bank loans obtained by subsidiaries and were therefore previously classified as noncurrent investments, as well as $25.7 million gains on sale of property, plant and equipment. At September 30, 2001, we had consolidated cash and cash equivalents of $104.5 million, a decrease of 45.5% compared to $191.8 million as of December 31, 2000. At September 30, 2001, we had negative working capital of $94.3 million, a 45.3% improvement compared to a negative working capital of $172.3 million as of December 31, 2000. A working capital deficit is not unusual for us and does not indicate a lack of liquidity. We continue to maintain adequate current assets to satisfy current liabilities when they are due and have sufficient liquidity and financial resources to manage our day-to-day cash needs. Total consolidated indebtedness was $989.7 million as of September 30, 2001, consisting of $590.0 million at the holding company level and $399.7 million of subsidiary indebtedness. As of September 30, 2001, 79.3% of the total debt is dollar denominated and 89.6% is long-term. The $164.2 million reduction in gross debt from $1.15 billion at the end of the second quarter to $989.7 million at the end of the third quarter is mainly the result of a combination of a $145.0 million pay down of our syndicated loan, as well as nearly a $30.0 million reduction in the debt held by our Venezuelan 31 subsidiary. Approximately $100.0 million of debt in our Mexican operations carry a Standard & Poor's rating of MX-AA and approximately $62.0 million of debt in our Colombian operations carry a Duff & Phelps rating of AAA. On December 31, 2000, we had a loan with The Coca-Cola Financial Corporation (U.S.), amounting to $100.0 million with an average annual interest rate of three-month LIBOR plus 3.25%. On February 28, 2001, we prepaid the remaining outstanding debt with The Coca-Cola Financial Corporation (U.S.) in the amount of $100.0 million. There was no prepayment penalty. On December 9, 1999, the Board of Directors authorized a $100.0 million share repurchase program of the Company's Class A Common Stock (the "Share Repurchase Program") in accordance with the anti-market-manipulation safe harbor of Rule 10b-18 promulgated under the Securities Exchange Act of 1934. The Share Repurchase Program was supplemented with $25.0 million increases on each of July 20, 2001 and September 6, 2001. In addition to this $150.0 million authority, the Share Repurchase Program also provides for repurchases of shares from independent brokers by Panamco (currently totalling $4.8 million) made in connection with employees' stock option exercises. Panamco shares may be purchased in the open market or in privately negotiated transactions, depending on market conditions and other factors. We have repurchased 5,795,800 shares amounting to $109.6 (including brokerage commissions) million at an average price per share of $18.91 during the nine months ended September 30, 2001. From the Share Repurchase Program's inception on December 9, 1999 to September 30, 2001, we have repurchased 6,949,800 shares for a total amount of $130.8 million (including brokerage commissions) at an average price per share of $18.83. Total capital expenditures for the nine months ended September 30, 2001 were $56.2 million, showing a spending reduction of 41.8%, compared to $96.5 million for the nine months ended September 30, 2000. For the year 2001, we expect our capital expenditures to be approximately $86.0 million. On February 21, 2001, Panamco Colombia issued unsecured, publicly traded bonds valued at Col$35,000,000,000 Colombian pesos (approximately $15.5 million in U.S. dollars) with a coupon rate of DTF (the Colombian borrowing rate) plus 2.75% (15.5% at February 21, 2000) and a maturity date of August 9, 2005. The proceeds from the debt issue were used to pay U.S. dollar denominated debt. On November 22, 2000, we entered into a swap agreement where we receive LIBOR at specified measurement dates and pay interest at a fixed rate of 6.44% on a notional amount of $250.0 million. The swap agreement, which is classified as a cash flow hedge and was initiated in order to reduce exposure to adverse fluctuation in interest rates, expires on November 22, 2002. On April 20, 2001, our Brazilian subsidiary entered into four swap agreements to exchange dollar denominated debt amounting to $30.0 million in the aggregate. The terms of the swap agreements are as follows: R2,109,870 (Brazilian reals) maturing on October 16, 2001; R32,753,046 maturing on April 15, 2002; R994,334 maturing on October 11, 2002; and R29,788,731 maturing on April 9, 2003. All four swap agreements have an interest rate of 90% of CDI (the Brazilian borrowing rate). The swap agreements, which are classified as fair value hedges, were initiated in order to reduce exposure to adverse currency exchange fluctuations. 32 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no significant change in our exposure to market risk during the nine months ended September 30, 2001. For a discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in our Annual Report on Form 10-K for the year ended December 31, 2000. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In July 2001, a labor union and several individuals from the Republic of Colombia filed a lawsuit in the U.S. District Court for the Southern District of Florida against us (and certain of our subsidiaries) as well as The Coca-Cola Company (and certain of its subsidiaries) and another Coca-Cola bottler in Colombia. In the complaint, the plaintiffs have alleged that we have engaged in wrongful acts against the labor union and its members in Colombia, including kidnapping, torture, death threats and intimidation. The complaint alleges claims under the Alien Tort Claims Act, the Torture Victim Protection Act, RICO and state tort law and seeks injunctive and declaratory relief and damages of more than $500 million, including treble and punitive damages and the cost of the suit, including attorney fees. In October, we filed a motion to dismiss the complaint for lack of subject matter and personal jurisdiction. A ruling on our motion to dismiss the lawsuit is expected in the first quarter of 2002. We believe this lawsuit is without merit and intend to vigorously defend ourselves in this matter. During 1999, a group of independent distributors of Panamco Venezuela commenced a proceeding to incorporate a union of distributors. On September 20, 2001, the Venezuelan Supreme Court rendered its opinion confirming the incorporation of the union, but withheld granting any specific labor rights to the members of the union other than the right to be unionized. In order to obtain specific labor rights, the union (or its members) will have to request to a court of law (with jurisdiction over labor law) to determine if the members of such union can be considered workers pursuant to Venezuelan labor laws, and thereafter claim against Panamco Venezuela the payment of such benefits and rights including retroactive payments. To our knowledge, neither the union nor any of its individual members have initiated any process with the objective of obtaining a court decision on whether the members of the union are subject to the rights and benefits of the Venezuelan labor laws, although certain members of the union have threatened such action. We intend to vigorously defend our rights should this action be filed. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 33 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: ---------------- 10.1 - First Amendment to the Term Credit Agreement dated as of September 4, 2001, by and among Panamco de Venezuela, S.A., as borrower, Comerica Bank, as lender, and the Company, as guarantor. 10.2 - Financial Lease Agreement dated as of September 5, 2001, by and among Panamco de Venezuela, S.A., as borrower, Citibank, N.A., as lender, and the Company, as guarantor. 10.3 - Promissory Note dated as of September 14, 2001, by and among Panamco de Nicaragua, S.A., as borrower, Citibank, N.A., as lender, and the Company, as guarantor. 10.4 - Credit Agreement dated as of September 24, 2001, between the Company, as borrower, and The Chase Manhattan Bank, as lender. (b) Reports on Forms 8-K - We did not file any reports on Form 8-K during the three months ended September 30, 2000. 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. November 14, 2001 PANAMERICAN BEVERAGES, INC. (REGISTRANT) By: /s/ Paulo J. Sacchi -------------------------- Paulo J. Sacchi Senior Vice President Chief Financial Officer and Treasurer (On behalf of the Registrant and as Chief Accounting Officer) EX-10.2 3 ex10-1.txt FIRST AMENDMENT TO THE TERM CREDIT AGREEMENT Exhibit 10.1 FIRST AMENDMENT TO TERM CREDIT AGREEMENT This First Amendment is entered into as of this 4th day of September, 2001, by and among COMERICA BANK, a Michigan banking corporation ("Bank"), PANAMCO DE VENEZUELA, S.A., a corporation duly organized and validly existing under the laws of the Bolivarian Republic of Venezuela ("Company"), and PANAMERICAN BEVERAGES, INC., a corporation duly organized and validly existing under the laws of the Republic of Panama ("Guarantor"). Recitals: A. On or about May 30, 2001 Bank, Company and Guarantor entered into a certain Term Credit Agreement, (as amended from time to time, the "Credit Agreement") and in connection therewith, Company executed and delivered to Bank a certain Term Note in the principal amount of $15,000,000 dated May 30, 2001 (the "Term Note"). B. In connection with the Credit Agreement, Guarantor executed a certain Guaranty dated May 30, 2001 in favor of Bank. C. The Bank, Company and Guarantor desire to amend the Credit Agreement to reduce the LIBOR Margin applicable to the Term Note, upon the following terms and conditions. NOW THEREFORE, for good and valuable consideration, the Bank, Company and Guarantor agree as follows: 1. DEFINITIONS 1.1 Capitalized terms used herein and not defined to the contrary have the meanings given them in the Credit Agreement. 2. AMENDMENT TO CREDIT AGREEMENT 2.1 The definition of "LIBOR Margin" appearing in Section 1 of the Credit Agreement is hereby amended and restated in its entirety as follows: " "LIBOR Margin" shall mean one and six tenths percent (1.60%)". 3. REPRESENTATIONS Company and Guarantor hereby represent and warrant that: 3.1 Execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment are within Company's and Guarantor's powers, have been duly authorized, are not in contravention of law or the terms of Company's or Guarantor's articles of incorporation/charter, or bylaws, and do not require the consent or approval of any governmental body, agency, or authority. 3.2 This Amendment and any other documents and instruments required under this Amendment or the Credit Agreement, when issued and delivered under this Amendment or the Credit Agreement, will be valid and binding in accordance with their terms. 3.3 To the knowledge of Company and Guarantor, except as previously disclosed to Bank in writing, no Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute a Default under the Term Note, has occurred and is continuing as of the date hereof. 4. MISCELLANEOUS 4.1 This Amendment may be executed in as many counterparts as Bank, Company and Guarantor deem convenient, and shall become effective upon: (a) delivery to Bank of all executed counterparts hereof; and (b) delivery to Bank, in form and substance satisfactory to Bank of each of the documents and instruments listed on the Checklist attached as Exhibit "A" hereto. 4.2 Company, Guarantor and Bank acknowledge and agree that except as specifically amended hereby, all of the terms and conditions of the Credit Agreement and the loan documents related thereto (the "Loan Documents") remain in full force and effect in accordance with their original terms. 4.3 Company shall pay all of Bank's legal costs and expenses (including attorneys' fees and expenses) incurred in the negotiation, preparation and closing hereof, including, without limitation, costs of all lien searches and financing statement filings. 4.4 Nothing set forth in this Amendment shall constitute, or be interpreted or construed to constitute, a waiver of any right or remedy of Bank, or of any default or Event of Default whether now existing or hereafter arising and whether now known or hereafter discovered by or disclosed to Bank. 4.5 Bank expressly reserves the right to exercise any or all rights and remedies provided under the Loan Documents and applicable law except as modified herein. Bank's failure to immediately exercise such rights and remedies shall not be construed as a waiver or modification of those rights or an offer of forbearance. 4.6 Company and Guarantor, in every capacity, including, but not limited to, as shareholders, partners, officers, directors, investors and/or creditors of borrower, or any one or more of them, hereby waive, discharge and forever release Bank, Bank's employees, officers, directors, attorneys, stockholders and successors and assigns, from and of any and all claims, causes of action, defenses, counterclaims or offsets Company or Guarantor may have or may have made which (in any case) could be based on facts or circumstances known to Company or Guarantor as of the date of this amendment, against any or all of Bank, Bank's employees, officers, directors, attorneys, stockholders and successors and assigns. 2 IN WITNESS WHEREOF, this Amendment has been executed as of the day first stated above. PANAMCO DE VENEZUELA, S.A. By: --------------------------------- Its: --------------------------------- PANAMERICAN BEVERAGES, INC. By: --------------------------------- Its: --------------------------------- COMERICA BANK By: --------------------------------- Robert J. Hurley Its: --------------------------------- EX-10.2 4 ex10-2.txt FINANCIAL LEASE AGREEMENT (VENEZUELA) Exhibit 10.2 I, MERY ESAYAG, Public Interpreter of the English Language in the Bolivarian Republic of Venezuela, as per Title published by Official Gazette No 30,807, dated September 29th, 1975, registered in the Main Public Registry Office of the Federal District under No 470, page 223 (overleaf), Vol. 3, and in the First Civil Court of this City on September 18th, 1975, CERTIFY: That the following is a true translation of the attached document written in Spanish: "Signed by Lawyer Bianca Galandro. Inpreabogado No44,298. Seventh Notary Public of the Libertador Municipality of the Federal District. Voucher No 67,850. FINANCIAL LEASE AGREEMENT No 199. Between CITIBANK N.A., a corporation domiciled in Caracas, through entry originally inscribed in the Commercial Registry kept by the Commerce Courtroom of the Federal District, on date November 13, 1917, under No 1293, then inscribed before the First Commercial Registry of the Judicial Circuit of the Federal District and State of Miranda, on date May 21, 1976, under No 21, Volume 70-A-First, and whose last amendment to its statutory constitutive document was registered before said Registry Office on date March 29, 1999, under No 6, Volume 58-A-First, authorized to operate as an Universal Bank according to the General Law of Banks and Other Financial Institutions and according to Resolution Number 014-97 of the Superintendence of Banks and Other Financial Institutions published in Official Gazette of the Republic of Venezuela No 36,137 dated January 30, 1997, herein represented by Special Attorney Joel Vitrian, a Venezuelan, of legal age, of this domicile, bearer of Identity Card No 6,910,485, and who acts duly authorized to that effect as evidenced by Power of Attorney instrument authenticated before the Nineteenth Notary Public of the Libertador Municipality on date August 110, 1999, written under No 72, Volume 68, of the Books of Authentications kept by said Notarial Office, (hereinafter "THE LESSOR"), party of the first part, and on the other, by PANAMCO DE VENEZUELA, S.A., originally constituted under the name of EMBOTELLADORA COCA-COLA Y HIT DE VENEZUELA, S.A., as per document inscribed at the Second Commercial Registry of the Judicial Circuit of the Federal District and State of Miranda, on date September 02, 1996, under No 51, Volume 462-A Second and that shall change its name to the current one as certified by document inscribed at the mentioned Second Commercial Registry of the Judicial Circuit of the Federal District and State of Miranda, on date June 03, 1997, under No 59, Volume 295-A-Second, said change ratified as certified by document inscribed under the same Commercial Registry, on date December 16, 1997, under No 37, Volume 572-A-Second, herein represented by citizens SERGIO ROBLEDA and JOSE LUIS PICHARDO, of Mexican nationality the former and of Venezuelan the latter, of legal age, domiciled in Caracas and bearers of Identity Card Numbers 82,272,986 and 6,113,600, respectively, acting as Vicepresident of Administration and Finances and Director of the Financial Comptroller respectively, duly authorized for this act by the Board of Directors of the company in its meeting of date August 30, 2001(hereinafter "THE LESSEE") it has been agreed to enter into the agreement contained in the following clauses: PRELIMINARY STATEMENTS WHEREAS, THE LESSEE, has stated to THE LESSOR, its irrevocable intention of entering into a financial Lease Agreement over the foods or equipment selected by THE LESSEE that are described in each one of the Annexes that in successive numbers starting with number 1 are attached to this agreement and which to all legal effects form an integral part of the same, hereafter THE ANNEXES, to be held and used by THE LESSEE in the conduction of activities typical of trade and/or industry having selected at its own will and entire satisfaction the seller of the same; WHEEAS, THE LESSOR has agreed with THE LESSEE in entering into a Financial Lease Agreement over the goods or equipment selected by THE LESSEE that are described in THE ANBNEXES of this agreement, and for such purposes and according to the instructions and request of THE LESSEE has purchased from the seller sufficiently identified in THE ANNEXES (hereafter "THE SELLER") said goods or equipment; THAT IS THE REASON WHY, THE LESSEE and THE LESSOR in order to regulate in an express manner the terms and conditions that shall govern the juridical relation to which the statements of will refer to contained n the preceding items, have agreed to grant this Financial Lease Agreement (hereinafter the "CONTRACT") that shall be governed by the clauses next determined: FIRST: OBJECT OF THE AGREEMENT. The LESSOR gives as financial lease to THE LESSEE and the latter takes in financial lease from the LESSOR the goods or equipment hereafter "THE GOODS or EQUIPMENT" (of its fully identified exclusive ownership in THE ANNEXES to this AGREEMENT, which duly signed by the parties is accompanied to this document forming an integral part of the same. SECOND: DECLARATIONS OF THE LESSEE. THE LESSEE expressly declares that THE GOODS or EQUIPMENT, subject to the financial lease have been acquired by THE LESSOR according to the request made by THE LESSEE for the purposes of its granting in financial lease and wholly according to the specifications and instructions issued by THE LESSEE for which the LESSOR shall not be responsible for the suitability of THE GOODS or EQUIPMENT, their technical and operational conditions, due legal system nor other conditions including those of their parts and accessories, which remain at the exclusive risk of THE LESSEE. THIRD: DELIVERY OF THE GOODS or EQUIPMENT SUBJECT OF THE FINANCIAL LEASE AGREEMENT. THE LESSOR declares that it has delivered to THE LESSEE to be retained and used in financial lease and THE LESSEE declares having received from THE LESSOR for such purposes THE GOODS or EQUIPMENT subject of this AGREEMENT, leaving express certification of having received them in perfect state and conditions of operation to its entire and full satisfaction. Therefore, THE LESSOR shall have no obligation with THE LESSEE for and by virtue of contractual or Legal reparation, THE LESSEE assuming all the risks of THE GOODS or EQUIPMENT, for eviction, defects or sound operation warranties. 2 Without prejudice of the above, THE LESSEE must demand from THE SELLER the legally corresponding reparation and sound operation warranties. In such events, THE LESSOR shall assign to THE LESSEE the shares corresponding to it as purchaser of THE GOODS or EQUIPMENT and THE LESSEE binds itself to accept said assignment. FOURTH: IDENTIFICATION OF THE OWNERSHIP OF THE GOODS or EQUIPMENT. THE LESSEE expressly binds itself with THE LESSOR in placing and maintaining in THE GOODS or EQUIPMENT a plate or decal certifying in a clear and precise manner that THE LESSOR is the owner of THE GOODS or EQUIPMENT and that the same are under a financial lease system in favor of THE LESSEE. THE LESSOR, this latter being entitled to order them to be fixed if THE LESSEE fails to comply with its obligation, shall provide these plates or decals. In the event of loss or destruction of the same, THE LESSEE shall give immediate notice to THE LESSOR in order that it proceeds to their restoration. THE GOODS or EQUIPMENT cannot be considered under any circumstance as real property by destination. FIFTH: DURATION OF THE LEASE. The duration of the lease of THE GOODS or EQUIPMENT subject of this AGREEMENT shall be the one specified under THE ANNEXES. SIXTH: RENT RATES. The monthly rent rates of THE GOODS or EQUIPMENT shall be fixed and calculated as determined by THE ANNEXES of this AGREEMENT. THE LESSEE shall pay the monthly lease rates at the time and manner indicated by THE ANNEXES of this AGREEMENT: SEVENTH: THE INTEREST RATE. The rate of interests that shall govern the determination of the monthly rate of financial lease that must be paid by THE LESSEE to THE LESSOR is the one specified under the fifth clause of THE ANNEXES. EIGHTH: PENALLTY IN THE EVENT OF DEFAULT. THE LESSEE expressly agrees with THE LESSOR that in the assumption of timely default in the payment of any of the monthly lease rates, it shall pay to THE LESSOR, for the concept of Compensation of the damages that said delay would have caused to THE LESSOR, interest for delayed payment at a yearly rate equivalent to the applicable interest rate as provided by the preceding Clause plus an additional three percent (3%) for each one of the days of default incurred by THE LESSEE. NINTH: RISKS. THE LESSEE expressly agrees with THE LESSOR that during the life of this AGREEMENT, all the operation and functioning risks of the leased GOODS or EQUIPMENT shall be on the exclusive account of THE LESSEE. Therefore, THE LESSOR shall not be liable for any damages, including without being limited to, consequential damages and loss of profits that could be caused to THE LESSEE by virtue of defects or other flaws, even for hidden defects of THE GOODS or EQUIPMENT. 3 Also, THE LESSEE expressly agrees in that any damages that may be derived under any circumstance on occasion of the tenancy and use of the leased GOODS or EQUIPMENT, as well as any damages that could be caused to third parties or to the goods of third partied by THE GOODS or EQUIPMENT, according to that stipulated by the General Law of Banks and other Financial Institutions shall be on its exclusive and own responsibility. Without detriment of the above, THE LESSOR may assign to THE LESSEE, who binds itself to accept said assignment, all the rights and shares corresponding to THE LESSOR for the defense of the integrity of the leased GOODS or EQUIPMENT, it being understood that THE LESSOR under no event may be deemed as responsible, nor assume any risk, for the results of said actions or exercises of the rights of defense and other consequences that may be caused by virtue of files, suits or claims related with THE GOODS or EQUIPMENT, their use or tenancy, that shall be on the exclusive account of THE LESSEE. Also on the exclusive account of THE LESSEE shall be the risks of reversion, expropriation, confiscation and eviction, it being understood that under said assumptions in respect to THE GOODS or EQUIPMENT subject of the AGREEMENT, THE LESSOR may terminate the financial lease and declare THE AGREEMENT resolved as a matter of law demanding to THE LESSEE the payment of all the expired and unpaid rental payments up to the current date and additionally the payment of the value of THE GOODS or EQUIPMENT according to the book value of THE LESSOR, and under no event may THE LESSEE claim to THE LESSOR nothing for such a concept nor for any other concept derived from the AGREEMENT. It is expressly agreed that in the event of expropriation THE LESSOR shall deduct from the amounts that must be paid by THE LESSEE, the amounts that it has actually received to its satisfaction from the governmental entity that has performed the expropriation. TENTH: ABSENCE OF DEFENSE IN THE PAYMENT OR NONFULFILLMENT OF OTHER OBLIGATIONS, FOR THE EXISTENCE OF CLAIMS OR DEFECTS. THE LESSEE expressly agrees with THE LESSOR that under no event it may challenge THE LESSOR as defenses for the timely payment of the lease rates nor for the compliance of its other obligations under this ACGREEMENT, the existence or actions, suits or claims of any kind against third parties related with the leased THE GOODS or EQUIPMENT, nor for the existence of flaws or defects, including hidden defects that affect or may affect the use or destinations that THE LESSEE confers to THE GOODS or EQUIPMENT according to this AGREEMENT. ELEVENTH: COSTS, EXPENSES AND TAXES All the costs, expenses and charges of any nature that may affect or be caused on occasion of the ownership, use and tenancy of the leased GOODS or EQUIPMENT shall be on the exclusive account of THE LESSEE. In the event that THE LESSOR would have to incur in any cost, expense or charge of any nature for the concept of ownership of THE LESSOR and/or tenancy and use of the leased GOODS or EQUIPMENT on the part of THE LESSEE, the latter expressly agrees to 4 reimburse to THE LESSOR the amounts paid for such concepts, at the first requirement made by THE LESSOR. Also all the taxes, duties and other fiscal contributions shall be on the exclusive account of THE LESSEE, those that affect the leased GOODS or EQUIPMENT, or that may affect them during the life of this AGREEMENT, as well as any applicable taxes, duties and other fiscal contributions and by virtue of the tenancy and use of the leased GOODS or EQUIPMENT including any payment demanded from any fiscal or tax authority to THE LESSOR for the concept of Revaluation of the Assets. Only on account of THE LESSOR shall be the Income Tax that might by cause on the occasion of this financial lease AGREEMENT. Also, on account of THE LESSEE shall be all the installation expenses of THE GOODS or EQUIPMENT in the place indicated in the NINTH clause of THE ANNEXES of this AGREEMENT, as well as the expenses of dismantling, transportation, new installation and any other expense incurred upon in the event of moving, attributable or not to THE LESSEE. TWELFTH: PROHIBITION OF SUB-LEASING OR ASSIGNING THE RIGHTS OVER THE GOODS OR EQUIPMENT AND DELEGATION OF OBLIGATIONS. THE LESSEE expressly agrees that under no event nor circumstance it may sub-lease or assign or transfer in any other manner the rights of tenancy and use of the leased GOODS or EQUIPMENT under this AGREEMENT, nor delegate the obligations for which it is responsible in favor of third parties without the express written authorization to such an affect of THE LESSOR, except that it may assign the use or tenancy to third parties with which THE LESSEE maintains business relations (such as its concessionaires, transporters, etc.). THE LESSOR may assign or transfer in any time during the life of this agreement, wholly or partially, its rights without the need of authorization of THE LESSEE in favor of another or of other institutions authorized to carry out lease operations, as well as to give them as guarantee, regardless of the manner arranged for it. THIRTEENTH: PROHIBITION OF TRANSFERING OWNERSHIP OR MORTGAGING. THE LESSEE expressly agrees that under no circumstance it may transfer or dispose of, mortgage or affect THE GOODS or EQUIPMENT that have been granted to it in financial lease by THE LESSOR. FOURTEENTH: TENANCY AND USE OF THE GOODS OR EQUIPMENT. THE LESSEE expressly agrees with THE LESSOR, in using and maintaining the leased GOODS or EQUIPMENT with the diligence of a good head of a family and in solely giving it the normal and proper use corresponding to them according to their nature. FIFTEENTH: MAINTENANCE OF THE GOODS or EQUIPMENT. All the expenses and charges caused by the adequate maintenance of the leased GOODS or EQUIPMENT shall be on the excusive account of THE LESSEE, in order to guarantee that the same shall be in perfect conditions of operation and functioning. Therefore, THE LESSEE binds itself to hire on its account, the maintenance service of the leased GOODS or EQUIPMENT with a company satisfactory to THE LESSOR or an 5 authorized maintenance center in order to guarantee the proper functioning and conservation of the same, all in accordance with the provisions set forth by the manufacturer's standards. Said maintenance service shall be made constantly, whenever necessary in the time required as per the catalogs and manuals supplied by the vendor and/or manufacturer of the leased GOODS or EQUIPMENT. Also, the following guidelines shall by of compulsory compliance by THE LESSEE: 1. To know and make use of the guarantees granted to the leased GOODS or EQUIPMENT, concerning to repairs, supply of spare parts, defects and other applicable ones. 2. To comply with all the demands, recommendations and controls indicted in the respective manuals or by the personnel of the authorized centers of maintenance and service. 3. To instruct its personnel in order that they use the leased GOODS or EQUIPMENT with due care and diligence, operating them with all the cautions to avoid faults or injuries and damages to third parties. SIXTEENTH: REPAIRS. All major or minor repairs to be made to the leased GOODS or EQUIPMENT shall be on the exclusive account of THE LESSEE that shall be carried out in Workshops authorized by THE LESSOR. THE LESSOR shall nor be liable nor assume any obligation with THE LESSEE as a consequence of the time elapsed to undertake and execute such repairs and therefore, THE LESSEE shall have nothing to claim for and by virtue of the term in which it was hindered or prevented from utilizing THE GOODS or EQUIPMENT and of any other consequences that they cause, being such circumstances at its sole risk and exclusive account. Any spare part installed by THE LESSEE at THE GOODS or EQUIPMENT or any replacement of parts made in the same shall be made with original pieces and shall become the ownership of THE LESSOR without THE LESSOR being bound to reimburse to THE LESSEE the cost of the same nor THE LESSEE intend to separate and rake said spare parts or pieces at the expiration of the CONTRACT. THE LESSEE cannot without prior written consent granted by THE LESSOR modify, alter, adapt or install spare parts or accessories to THE GOODS or EQUIPMENT if the installation or adaptation changes the original function that must be performed by THE GOODS or EQUIPMENT or change the use for which they are normally intended. SEVENTEENTH: INSURANCE COVERAGE. THE LESSEE expressly agrees with THE LESSOR in subscribing and maintaining in force during the entire life of this AGREEMENT at its sole and exclusive expense, a Civil Liability Insurance Policy that covers the leased GOODS or EQUIPMENT. THE LESSEE expressly agrees with THE LESSOR in sending to THE LESSOR as soon as it has been delivered by the Insurance Company, an original or certified copy of the contracted Civil Liability Insurance Policy and of the receipt issued as certification of the payment of the respective premium. 6 Also, at any time during the life of this CONTRACT, THE LESSOR may, if it determines the absence of coverage, hire and pay on account of THE LESSEE the required Civil Liability Insurance Policy, remaining THE LESSEE bound, at the first request made by THE LESSOR, to reimburse to THE LESSOR, said amounts thus paid thereby as well as any additional expenses or charges in which THE LESSOR has incurred upon to comply on account of THE LESSEE with the circumstances herein foreseen. EIGHTEENTH: RIGHT OF INSPECTION. THE LESSOR reserves to itself the right of demanding the exhibition and performing the inspection of the leased GOODS or EQUIPMENT whenever it deems convenient and necessary during the life of this AGREEMENT in order to certify the compliance on the art of THE LESSEE of the proper use and destination of THE GOODS or EQUIPMENT, as well as of its maintenance and repair obligations. In any case, THE LESSOR shall seek to request the exhibition and to realize said inspections at times when they do not adversely interrupt nor harm the conduction of the activities of THE LESSEE. NINETEENTH: LOCATION OF THE GOODS or EQUIPMENT. THE LESSEE expressly agrees with THE LESSOR in maintaining during the entire life of this AGREEMENT THE GOODS or EQUIPMENT at the location specified in THE ANNEXES to this agreement and in not moving them to a different place, without the written authorization of THE LESSOR to that effect. Also, it declares that THE GOODS or EQUIPMENT shall remain at all times, perfectly separated from the other property of THE LESSEE. If one or more property were automotive, so that they may move with their own means from one place to another, or when due to that special nature its operating capacity is precisely its mobilization. THE LESSEE binds itself to report once every six months to THE LESSOR, the exact place in which they are found. TWENTIETH: ADDITIONAL OBLIGATIONS OF THE LESSEE. THE LESSEE also assumes the following obligations: 1) To obtain and maintain in force at its sole and exclusive expenses, all the Licenses, Permits, Registrations and other certifications and authorizations that according to the effective Legal Norms or Rules (both National as well as State of Municipal) were required or necessary for the tenancies, use and enjoyment of THE GOODS or EQUIPMENT; 2) To pay all the taxes, duties and other fiscal contributions (both National as well as State of Municipal), that encumber or affect or that may encumber or affect the property, the tenancy, the use and enjoyment o THE GOODS or EQUIPMENT; 3) To pay all the expenses, costs and charges of any nature, directly or indirectly derived from the performance and compliance or execution of this ASAGREEMEHNT, including (but not limited only to these), the expenses of judicial or extrajudicial collection of any amounts owed by THE LESSEE in relation with this AGREEMENT, lawyers' fees, as well as any expenses and cost related with the termination of this AGREMENT; 7 4) To immediately report to THE LESSOR in the quickest way any harmful, damaging incident or any fact or actions of which THE LESSEE has knowledge and that affects or may affect THE GOODS or EQUIPMENT or the property that THE LESSOR has in respect to the same and; 5) To send to THE LESSOR at the first requirement made, the financial and corporate information what is requested, being of particular importance any modifications to the Articles of Incorporation and Bylaws Document and the financial information made by the Balance Sheet and Profit and Loss Statement of THE LESSEE at each close of the financial period. TWENTY-FIRST: OBLIGATION OF NOTICE OF LOSS. THE LESSEE binds itself to notify THE LESSOR the occurrence of any loss that affects the leased GOODS or EQUIPMENT or that may affect them, within forty-eight (48) hours following to the occurrence of said event. It shall also give notice of the loss to the Insurance Company within the period established by the respective Civil Liability Insurance Policy. In the event of any loss that implies partial destruction or total perishing of THE GOODS or EQUIPMENT that provided by Article 1588 of the Civil Code of the Bolivarian Republic of Venezuela shall not prevail, but the following rules shall be followed: 1) If there is partial destruction and the Insurance Company pays on a timely basis the amounts necessary to repair the damage, THE LESSEE cannot demand the resolution of the AGREEMENT nor the decrease of the rental payments, that shall be independently and normally paid during the time of the duration of the repair; 2) If there is partial destruction and the Insurance Company for any circumstance refuses to pay for the amount of the repair, THE LESSEE must repair the leased GOODS or EQUIPMENT at its own expense without being entitled to demand neither a decrease of the lease payment nor variation of the stipulations of this AGREEMENT; 3) If their is total perishing of THE GOODS or EQUIPMENT THE LESSEE cannot demand either the resolution of the AGREMENT nor a decrease of the monthly lease payments, which shall be paid normally, except that THE LESSOR demands to THE LESSEE the payment of the amounts owed for the concept of due monthly lease payments unpaid up to said date and the value of the destructed GOODS or EQUIPMENT as indicated by the books of THE LESSOR, corresponding to the portion of the lost THE GOODS or EQUIPMENT, in which case THE LESSOR shall recalculate the amount of monthly lease payments, the residual value and the amounts for the concept of penalty for damages referred to by the ANNEXES of this AGREEMENT. TWENTY-SECOND: EVENTS OF DEFAULT AND TERMINATION OF AGREEMENT FOR FAILURE OF PERFORMANCE. THE LESSEE expressly agrees with THE LESSOR that under the assumption that THE LESSEE incurs upon any of the events of default next specifies (hereinafter "EVENTS OF DEFAULT") independently fro the causes or circumstances by virtue of which said EVENTS OF DEFAULT occur. THE LESSOR may terminate this AGREEMENT for failure of performance of THE LESSEE demanding the redelivery of THE GOODS or EQUIPMENT 8 taking possession of the same, THE LESSEE remaining under the obligation to pay to THE LESSOR all the amounts owed up to the date and those that may be owed and payable by THE LESSEE under the AGREEMENT, considering all said quantities as overdue, being immediately demandable and payable without the need of any other requirement, for the concept of compensation of the damages caused to THE LESSOR by virtue of default and the termination of the AGREEMENT. For the purposes foreseen by this Clause, EVENTS OF DEFAULT shall be the following: 1) The lack of payment by THE LESSEE of one or more financial lease payments at the time in which they must be paid according to the provisions of this AGREEMENT and its ANNEXES; 2) If THE LESSEE fails to comply with its obligation of contracting and maintaining in force the Civil Liability Insurance Policy of the leased GOODS or EQUIPMENT under the terms and conditions foreseen by this AGREEMENT, or does not pay the premium at the time in which it is demanded; 3) THE LESSEE does not comply with its obligation of maintaining and using THE GOODS or EQUIPMENT with the diligence of a good head of a family or does not comply with its obligation of providing maintenance and services to THE GOODS or EQUIPMENT as stipulated by this AGREEMENT; 4) If THE LESSEE fails to comply with its obligation of protection and custody of THE GOODS or EQUIPMENT at the place foreseen according to the provisions of this AGREEMENT; 5) The alienation or encumbrance of THE GOODS or EQUIPMENT, or any unsuccessful action tending to such an alienation or encumbrance on the part of THE LESSEE or if the sublease or assignment of the use and tenancy of the leased GOODS or EQUIPMENT by THE LESSEE by any means or circumstances, except that it may assign the use or tenancy to third parties with which THE LESSEE maintains business relations (such as its concessionaires, transporters, etc.); 6) The discontinuance of payments of THE LESSEE, or the request of THE LESSEE of the benefit o arrears of the judicial declaration of bankruptcy of THE LESSEE or the request made through any means by THE LESSEE of a friendly arrangement or extrajudicial agreement of restructuring of debt or extension of time of the payment of its obligations, or the appointment by THE LESSEE of a special administrator or any other action of similar kind with comparable consequences to the foregoing filed by or followed against THE LESSEE; 7) The dissolution or liquidation of THE LESSEE or the discontinuance of its business for any juridical or de facto cause; 8) The attachment or seizure of THE GOODS or EQUIPMENT by virtue of a judicial action filed by third parties or any other juridical action that affects the tenancy or the use of THE GOODS or EQUIPMENT by THE LESSEE or the property of THE LESSO, including but not limited to, the reversion, the confiscation, expropriation, eviction or any other action of 9 deprivation or limitative effect over the rights of ownership, tenancy and use of THE GOODS or EQUIPMENT; 9) The occurrence or putting into practice of an adverse change in the financial situation of THE LESSEE that provides sufficient circumstantial evidence at the criterion of THE LESSOR of a possible default on the part of THE LESSEE of its obligations foreseen by this AGREEMENT; 10) The default by THE LESSEE in the payment of its obligations greater than Twenty Million Dollars of the United States of America (US$20,000,000.00) with third parties at the agreed contractual time, that enables under the contractual provisions with such third parties to demand in advance under loss of the benefit of the perm, the payment of the owed obligations even if not declared nor demanded by its creditor or creditors; 11) The default by THE LESSEE in the payment of amounts greater than Twenty Million Dollars of the United States of America (US$20,000,000.00) that were demanded by virtue of a final decision or another judicial order or the nonfulfillment of any o6ther orders and obligations to which it was subject to and by virtue of a final decision of judicial order of any juridical nature, that at the criterion of THE LESSOR constitutes an undesired risk in its condition of creditor; 12) The default on the part of THE LESSEE of any other obligations of its responsibility according to the provisions of this agreement other than those foreseen as case of defaults established by the foregoing numbers "1", "2", "3", "4" and "5". In each and every one of the above mentioned CASES OF DEFAULT, THE LESSOR shall demand from THE LESSEE, the redelivery of the leased GOODS or EQUIPMENT, and declares as a matter of law the termination of this AGREEMENT, this without detriment of the judicial action for resolution of the AGREEMENT and other rights corresponding to it according to this AGREEMENT and the applicable laws. TWENTY-THIRD: PURCHASE OPTION. THE LESSOR grants to THE LESSEE a purchase option over the leased GOODS or EQUIPMENT who may only exercise it under the terms and conditions indicated by THE ANNEXES of this AGREEMENT. TWENTY-FOURTH: RETURN OF THE GOODS or EQUIPMENT. THE LESSEE expressly agrees, that in the event that the same fails to exercise the purchase option foreseen by the preceding Clause, it must deliver to THE LESSOR immediately, without need of requirement or any other formality the leased GOODS or EQUIPMENT in sound maintenance, service and operational conditions, all as per the provisions of this AGREEMENT, and at the place indicated by THE LESSOR. TWENTY-FIFTH: EXCLUSIVE DOMICILE: The parties expressly agree in that for all purposes, derived and consequences of this AGREEMENT the special and exclusive domicile is the City of Caracas, to the jurisdiction of 10 whose competent Courts THE LESSEE and THE LESSOR expressly declare to submit themselves. TWENTY-SIXTH: AUTHORIZATION OF COMPENSATION. THE LESSEE expressly agrees with THE LESSSOR that at any time during the life of this AGREEMENT, THE LESSOR may compensate any amounts owed by THE LESSEE, for and by virtue of any of the provisions contained by this AGREEMENT, against any amount demandable to THE LESSOR for sight or time deposits in any savings, checking, time placements accounts and investments of any nature of THE LESSEE with THE LESSOR, said compensation taking place immediately as soon as THE LESSOR makes it applicable without need of prior notice to THE LESSEE nor any requirement or other formality. TWENTY-SEVENTH: EXCLUSIVITY CITIBANK VENEZUELA. Citibank, N.A., VENEZUELA Branch, solely and exclusively assumes the obligations acquired by virtue of this agreement. It is agreed between the parties of this agreement that the compliance of the obligations derived from the same, are subject to the laws, decrees, resolutions and administrative actions issued by the Bolivarian Republic of Venezuela by the competent governmental authorities. Also, the compliance of said obligations shall be subject to the non-occurrence of actions of was, civil uprisings, acts of God or force majeure, or any other event outside of the control of Citibank, N.A., Venezuela Branch that limits their compliance. TWENTY-EIGHTH: FINAL PROVISION. Two (2) copies are made to the same tenor and to a single effect in Caracas at the date of its authentication by Notary Public." The above is a true translation of the attached original document, in witness whereof I have set my hand and affixed my seal in Caracas on this 12th day of the month of October 2001. Mery Esayag I.C.V-1,845,588 GUARANTY AGREEMENT This Guaranty (the "Guaranty Agreement") dated as of September 5, 2001, is made by Panamerican Beverages, Inc., a corporation organized and existing under the laws of the Republic of Panama (the "Guarantor"), in favor of Citibank N.A. a subsidiary organized and existing under the laws of Bolivarian Republic of Venezuela (the "Bank"). WHEREAS, the Bank will enter into a financial lease agreement (the "Lease Agreement") with Panamco de Venezuela, S.A. (the "Lessee") in the amount of US$5 Million, provided the Guarantor furnish its guaranty of the obligations (as hereinafter defined) of the Lessee to the Bank, and WHEREAS, the Guarantor is willing to guaranty all the obligations of the Lessee under the Lease Agreement; NOW THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor hereby agrees as follows: SECTION 1. The Guarantor hereby unconditionally and irrevocably guarantees and promises to pay to the Bank on demand any and all obligations of the Lessee under the Lease Agreement an agrees to pay any and all out-of-pocket costs and expenses and reasonable fees and disbursements of counsel (including the allocated costs of staff counsel) incurred by the Bank in enforcing any rights under this Guaranty Agreement. The word "Obligations" is used herein in it most comprehensive sense and includes all obligations and liabilities of the Lessee to the Bank under any loan agreement, promissory notes or other instruments to which the Borrower is a party, whether absolute of contingent, liquidated or unliquidated, for principal, interest, fees, indemnities, costs and expenses and all other amounts payable under or in connection with the Lease Agreement. SECTION 2. (a) The Guarantor's obligations hereunder are those of a primary obligor, and not merely a surety, and are independent of the Obligations. A separate action or actions may be brought against the Guarantor whether and action in brought against the Lessee or any other obligor in respect of the Obligations or whether the Lessee or any other obligor in respect of the Obligations is joined in any such action or actions. 1 (b) The obligations of the Guarantor under this Guaranty Agreement are absolute and unconditional, and the Guarantor guarantees that the Obligations will be paid in full on demand when due (whether at stated maturity, by required prepayment, by acceleration, on demand otherwise) in accordance with the terms of this Guaranty Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Bank with respect thereto or any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a guarantor. (c) This Guaranty shall in all respects remain in full force and effect (notwithstanding, without limitation, the dissolution, liquidation, bankruptcy, insolvency or reorganization of the Lessee or any other obligor in respect of the Obligation), unless and until all of the Obligations have been finally paid in full. (d) This Guaranty shall in all respects continue in full force and effect or shall be reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded or must otherwise be restored or returned for any reason, including, without limitation, because of any change in the corporate existence or structure or ownership o the Lessee or because the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Lessee or any other obligor in respect of the Obligations or upon or as result of the appointment of a custodian, receiver, trustee or other officer with similar power with respect to the Lessee or any such other obligor or any such other obligor or any material part of its assets, or otherwise, all as though such payment had not been made. If an event permitting the acceleration shall at such time be prevented by reason of the pendency against the Lessee of a case of proceeding under any bankruptcy or insolvency law, the Guarantor agrees that, for purposes of this Guaranty Agreement and its obligations hereunder, the Obligations shall be deemed to have been accelerated and the Guarantor shall forthwith pay such Obligations, and the other obligations hereunder, without any further notice or demand. (e) Without limiting the foregoing, the Guarantor authorizes the Bank, without notice or demand and without affecting the Guarantor's liability hereunder, from time to time to (i) renew, extend, accelerated, compromise, settle restructure, refinance, refund or otherwise change the amount and time for payment of the Obligations, or otherwise change the terms of the Obligations or any part thereof; (ii) take and hold security for the payment of this Guaranty Agreement of the Obligations or the obligations of other obligors in respect of the Obligations and enforce any such security, (iii) apply such security and direct the order or manner of sale thereof or sell, exchange, release, compromise, settle, waive or surrender any such security, and (iv) take, hold, exchange, release, compromise, settle, 2 amend or waive, or consent to the departure from the terms of, any guaranty or other agreement relating to the obligations of any other obligor in respect of the Obligations. The Bank shall have no obligation to perfect, secure, protect or insure any collateral agreement or any collateral and the Guarantor's liability hereunder shall not be affected by the non-perfection, invalidity or unenforceability of any collateral or collateral agreement. (f) Notwithstanding any payments made by the Guarantor hereunder, the Guarantor shall not be entitled to be subrogated to any of the rights of the Bank against the Lessee or any other person or to any collateral or other rights or interests held of the payment of the Obligations of the Guarantor hereunder have been finally paid in full. If the Guarantor shall receive any payment on account of any subrogation rights at any time when all the Obligations and the Guarantor's obligations hereunder shall not have been paid in full, any amount so paid will be held in trust by the Guarantor and promptly turned over to the Bank to be applied first to the Obligations until paid in full and thereafter to the Guarantor's obligations hereunder. (g) Guarantor's liability under this Guaranty Agreement shall be unconditional irrespective of (i) any exchange, release or non-perfection of any collateral securing payment of any Obligations, (ii) the existence of any claim, set-off or other rights which we may have at any time against the Lessee, the Guarantor, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim, (iii) any statute of limitation, (iv) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of the Lessee or the Guarantor, other than the payment in full of the Obligations and (v) an occurrence of an Event of Sovereign Risk, as such term is defined below. (h) The Guarantor unconditionally waives any right to require the Bank to (i) proceed against the Lessee or any other obligor in respect of the Obligations, (ii) proceed against or exhaust any security held directly or indirectly on account of the Obligations, or (iii) pursue any other remedy in the Bank's powers whatsoever Guarantor unconditionally waives any defense arising by reason of any disability or other legal or equitable defense of the Lessee by reason of the cessation from any cause whatsoever of the liability of the Borrower other than final payment in full in cash of the Obligations. The Guarantor waives all diligence, presentments, protest, notices of protest, notices of dishonor, notices of non-payment, acceptance and notices of acceptance of this Guaranty Agreement. 3 (i) All payments by Guarantor hereunder shall be made in freely transferable United States Dollars in same day funds free and clear of all taxes or other deductions levied or assessed by any domestic or foreign governmental entity. Such payments shall be made without set-off or counterclaim and free and clear of and without deduction or withholding for or on account of any present or future taxes, levies, imposts, duties or other charges of whatsoever nature impose, levied, assessed, collected or required to be withheld by any government or political subdivision or taxing authority thereof. In the event that Guarantor shall be compelled by law to make any such deduction, then it shall pay such additional amounts as may be necessary to ensure that the net amount received by the Bank shall equal the amount it would have received if such withholding would not have been made, and Guarantor shall furnish copies of the receipts evidencing that such taxes have been paid within 30 days after such taxes are due. For the purpose hereof an "Event of Sovereign Risk" means any of the following: (a) any war (whether or not declared), revolution, insurrection, civil strife or hostile acts, (b) the promulgation, operation or enforcement of any law, act, decree, regulation or other similar event, ordinance, order, policy or determination (herein, a "Venezuelan Law"), or any modification of or change in the interpretation of any Venezuelan Law, by any National Governmental Authority (as herein defined), including without limitation the imposition of any moratorium on, required rescheduling of, or required approval of the payment of any indebtedness, (c) the failure or refusal by the Central Bank of Venezuela (or other government authorities of Venezuela with comparable jurisdiction) to exchange, or to approve or permit the exchange of, the then-lawful currency of Venezuela for Dollars, or any other action of any National Governmental Authority that has the effect of prohibiting or restricting such exchange or the transfer of funds outside Venezuela, (d) the unavailability of Dollars in the exchange market therefor in Venezuela in accordance with normal commercial practice for the purpose of transactions such as the transactions contemplated herein, (e) any expropriation, confiscation, requisition, nationalization, or other action by any other branch or affiliate of Citibank, N.A. in Venezuela, of its ownership or control of the benefits of all or a 4 substantial portion of its assets located in Venezuela or the revenues attributable thereto, (f) a declaration of banking moratorium or any suspension of payments by banks in Venezuela, or the imposition by any National Government Authority of any moratorium on, required rescheduling of, or approval of, the payment of any indebtedness in Venezuela, (g) any disruption in the bank payments system which prevents the Lessee from paying Dollars in the manner contemplated by the Lease Agreement, or (h) any suspension, relinquishment or termination of the operations of the Lessee, any other branch or affiliate of Citibank, N.A. in Venezuela, or a result of any event of the kinds referred to in clauses (a)-(g) above or as the result of the threat of any such event. "National Governmental Authority" means, at any time, the government of the Bolivarian Republic of Venezuela or any political subdivision thereof or any other office, agency or instrumentality thereof, including the Central Bank of Venezuela or any successor thereto, or any other authority asserting governmental, military or political power of any kind at such time in Venezuela, whether or not such authority is recognized as a de facto or de jure government. SECTION 3. The Guarantor hereby waives (i) notice of acceptance of this Guaranty and of any extension of credit by the Bank to the Lessee; (ii) presentment and demand for payment of any of the Obligation; (iii) protest and notice of dishonor or default to the Guarantor or to any other party with respect to any of the Obligations; any (iv) all other notices to which the Guarantor might otherwise be entitled. SECTION 4. This is a continuing guaranty and shall (i) remain in full force and effect until the Bank shall have received written notice form the Guarantor that has been revoked, but any such notice shall not release the Guarantor from any liability as to any Obligation or the Guarantor's obligations hereunder (including any contingent liability) existing at the time of such notice (ii) be binding upon the Guarantor and the Guarantor's successors and assigns, and (iii) insure to the benefit of , and be enforceable by, the Bank and the Bank's successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), the Bank may assign or otherwise transfer all or any portion of the Bank's rights and obligations to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits thereof granted to the Bank herein or otherwise. 5 SECTION 5. The liability of the Guarantor under this Guaranty Agreement shall be limited to obligations which do not exceed the sum of Five Million Dollars, United States Dollars US$ 5 Million for principal together with all interest, fees, and other costs and expenses relating to or arising out of the Obligations. SECTION 6. Representations and Warranties. The Guarantor represents and warrants that: (a) Existence and Power. The Guarantor is a corporation duly incorporated and validly existing under the laws of the Republic of Panama and has all requisite power and authority to own its property and to carry on its business as now conducted. (b) Authority. The Guarantor has full power and authority to enter into, execute, deliver and carry out the terms of this Guaranty Agreement and to incur the obligations provided for herein, all of which have been duly authorized by all proper and necessary action and are in full compliance with the Guarantor's Articles of Incorporation and By-laws. (c) Authority of Officers. The officers of the Guarantor who are executing this Guaranty Agreement are properly in office and are duly authorized to execute the same. (d) Binding Agreement. This Guaranty Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable against it in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditor's rights generally. (e) Litigation. There are no actions, suits or arbitration proceedings pending or, to the knowledge of the Guarantor, threatened against the Guarantor, at law or in equity, which, individually or in the aggregate, if adversely determined, would materially adversely affect the financial condition of the Guarantor or materially impair the ability of the Guarantor to perform its obligations under this Guaranty Agreement. (f) No Conflicting Law or Agreements. The execution, delivery and performance by the Guarantor of this Guaranty Agreement; (i) do not violate any provision of the Articles of Incorporation or By-laws of the Guarantor; (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or regulation applicable to or binding on the Guarantor or affecting any of its property; and (iii) do not violate or conflict with, result in a breach of or constitute 6 (with notice or lapse of time or both) a default under, any mortgage, indenture, contract or other agreement to which the Guarantor is a party, or by which any of its property is bound. SECTION 7. Miscellaneous: (a) All notices, requests and other communications to any party hereunder shall be in writing and shall be given to such party at its address set forth below or such other address as such party may hereafter specify by notice to the other party: If to the Guarantor: Panamerican Beverages, Inc. Torre Dresdner Bank Piso No. 7, Calle 50 Panama City - Republic of Panama Telecopy: (507) 223-8308 Attention: Chief Financial Officer If to the Bank: c/o Citibank Mexico S.A. 390 Reforma Piso 7 Colonial Juarez Mexico D.F. 06695 Telecopy: (525) 533-6125 Attention: Relationship Manager Each such notice, request or other communication may be sent by international courier addressed as aforesaid and shall be effective upon delivery evidenced by the receipt or declaration of the courier, or by facsimile transmission to the telecopiers indicated above, which shall be effective as of the time so telecommunicated. (b) No Waivers. No failure or delay by the Bank in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (c) Payment of Expenses. The Guarantor will, at its own cost and expense, execute and deliver to the Bank all such documents, instruments, and 7 agreements and do all such acts and things as may be reasonably requisite in the opinion of the Bank, to enable the Bank to exercise and enforce its rights hereunder. (d) Severability. In case any one or more of the provisions contained in this Guaranty Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (e) Governing Law. This Guaranty Agreement and the rights and obligations of the Guarantor and the Bank hereunder shall be governed by, and construed and interpreted in accordance with, the law of the State of New York, without giving effect to principles of conflicts of laws. (f) Submission to Jurisdiction. Guarantor irrevocably agrees that any legal action arising out of or relating to this Guaranty Agreement may be instituted in the United States District Court for the southern District of New York or the courts of the State of New York, United States, in the City of New York, Borough of Manhattan and the Guarantor irrevocably submits to the exclusive jurisdiction of such courts in any such action or proceeding and waives any other jurisdiction to which it may be entitled by reason of its present or future domicile. Guarantor irrevocably waives to the fullest extent permitted by law, any objection which it may or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such action or proceeding brought in such a court has been brought in an inconvenient forum. The Guarantor agrees to the extent permitted by applicable laws of the State of New York and the Republic of Panama, that a final judgment against it in any such legal action or proceeding shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which judgment shall be conclusive evidence thereof. By accepting this Guaranty Agreement, the Bank also submits to the jurisdiction of the above named New York State courts. (g) Waiver of Sovereign Immunity. Guarantor acknowledges and agrees that the Lease Agreement is commercial in nature rather than governmental or public, and further acknowledges and agrees that neither the Lessee nor Guarantor are entitled to any right or immunity on the grounds of sovereignty or otherwise with respect to any legal action or proceeding arising out of relating to the Lease Agreement or this Guaranty Agreement. Guarantor, in respect of itself and its properties and revenues expressly and irrevocably waives any such right of immunity or claim thereto which may now or hereafter exist (including any immunity from any legal process, from the jurisdiction of any court, from execution upon a judgment and from attachment prior to judgment or in aid of 8 execution) and agrees not to assert any such right or claim in any such action or proceeding, whether in the United States or otherwise. (h) Captions. Captions contained in this Guaranty Agreement are for convenience of reference only and shall not limit or define the provisions of this Guaranty Agreement or affect the interpretation or construction thereof. IN WITNESS WHEREOF, the Guarantor have caused this Guaranty Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. PANAMERICAN BEVERAGES, INC. By: ----------------------- Name: Title: EX-10.3 5 ex10-3.txt PROMISSORY NOTE (NICARAGUA) Exhibit 10.3 PROMISSORY NOTE US$ 6,500,000.00 Dated: September 14, 2001 - ---------------- ------------------------- FOR VALUE RECEIVED, the undersigned, Panamco de Nicaragua, S.A. a corporation (sociedad anonima) organized and existing under the laws of the Republic of Nicaragua (The "Borrower"), HEREBY PROMISES TO PAY to the order of Citibank N.A., - International Banking Facility of a United States national banking association (the "Bank"), the principal sum of SIX MILLION FIVE HUNDRED THOUSAND EXACTLY in United States Dollars (US$6,500,000.00) on September 13, 2002 (the "Maturity Date"). The principal amount of this Promissory Note shall be due and payable on the Maturity Date, accrued interest is payable quarterly. The Borrower promises to pay interest on the unpaid principal amount hereof until such principal amount is paid in full at an interest rate per annum equal at all times to 1.05% per annum above, but on any overdue principal amount hereof 2.0% per annum, above LIBOR (as hereinafter defined). LIBOR means, in respect of a particular date and payment, the rate per annum at which U.S. dollar deposits, in the amount of such payment and with a maturity of 90 days, are or would be offered by the London branch of Citibank , N.A. interbank market as of approximately 11:00 A.M., London time. Such interest shall be due and payable quarterly. Computations of interest shall be made by the Bank on the basis of a year of 365 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. In no event shall the interest charged hereunder exceed the maximum interest rate allowed by applicable law. The Borrower shall make each payment under this Note in same day funds no later then 12:00 noon (New York, N.Y. time) on the day when due in lawful money of the United States of America (in freely transferable United States dollars) to the Bank at the address of Citibank N.A. at 111 Wall Street, New York, N.Y. 10043 U.S.A. (or such other address as the Bank may hereafter designate). The Borrower may, upon five business days' notice to the Bank, prepay this Note in whole or in part on any business day; provided, however, that if the prepayment is partial (x) the minimum amount of any such prepayment shall be $500,000.00 or any larger multiple thereof and (y) such prepayment is made together with accrued interest and any break-funding amounts due pursuant to Section 6(b). 1. TAXES (a) Any and all payments made hereunder shall be made free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on net income and all income and franchise taxes of the United States and any political subdivisions thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). 1 If any Taxes are required by law to be deducted from or in respect of any sum payable hereunder, (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) the Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future documentary stamp or intangible taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Note or advances hereunder (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify the Bank for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 1) paid by the Bank 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. This indemnification shall be made within 30 days from the date the Bank makes written demand therefor. (d) Within 45 days after the date of any payment of Taxes, the Borrower will furnish to the Bank the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of any payment, the Borrower will furnish to the Bank a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to the Bank, in either case stating that such payment is exempt from or not subject to Taxes. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in subsections (a) through (d) above shall survive the payment in full of principal and interest hereunder. 2. DEFAULT If any or the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any installment of principal of, or interest on, this Note when due; or (b) The Borrower (or any of them) shall fail to perform or observe any other term, covenant or agreement contained in this Note or any agreement securing it on its part to be performed or observed and any such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Borrower (or any of them) by the Bank; or (c) An Event of Default or default shall occur under any agreement securing this Note executed by a third party; or 2 (d) The Borrower (or any of them) or any of its subsidiaries shall fail to pay any indebtedness in excess of twenty million United States Dollars (US$ 20,000,000.00) (but excluding any such indebtedness evidenced by this Note) of the Borrower (or any of them) or such subsidiary (as the case may be), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any default under any agreement or instrument securing or otherwise relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly schedule required prepayment), prior to the stated maturity thereof; or (e) The Borrower (or any of them) or any of its subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower (or any of them) or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent,or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower (or any of them) or any of its subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of twenty million United States Dollars (US$ 20,000,000.00 (or its equivalent in another currency) shall be rendered against the Borrower (or any of them) or any of its subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any governmental authority or any person or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of the Borrower (or any of them) or of any of its subsidiaries, or shall have taken any action to displace the management of the Borrower (or any of them) or of any of its subsidiaries or to curtail its authority in the conduct of the business of the Borrower or of any of its subsidiaries; then, and in any such event, the Bank may, by notice to the Borrower (or any of them), declare this Note, all interest thereon and all other amounts payable under this Note to be forthwith due and payable, whereupon this Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. 3 3. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York County, New York over any action or proceeding arising out of or relating to this Note. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of any such action or proceeding. The Borrower hereby irrevocably appoints ______________. (the "Process Agent"), with an office on the date hereof at ____________________, as its agent to receive on behalf of the Borrower and its property service of copies of the summons and complaint and any other process which may be served in any such action or proceeding. As an alternative method of service, the Borrower also irrevocable consents to the service of any and all process in any such action or proceeding by the mailing of a copy of such process to the Borrower at its address as set forth below. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 3 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the bank to bring any action or proceeding against the borrower (or any of them) or its property in the courts of other jurisdictions. (c) To the extent that the Borrower (or any of them) has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment in aid of execution, attachment prior to judgment, execution or otherwise) with respect to itself or its property, the Borrower hereby irrevocably waives such immunity in respect of its obligations under this Note. 4. RIGHT OF SETOFF The Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Bank, any branch of Citibank N.A. or any subsidiary or affiliate of Citibank N.A.or for the credit or the account of the Borrower (or any of them) against any and all of the obligations of the borrower now or hereafter existing under this Note, irrespective of whether or not the Bank shall have made any demand under this Note and although such obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank may have. 5. JUDGMENT (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in United States dollars into another currency, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with 4 normal banking procedures the Bank could purchase United States dollars with such other currency on the business day preceding that on which final judgment is given. (b) The obligation of the Borrower in respect of any sum due from it to the Bank hereunder shall,notwithstanding any judgment in a currency other than United States dollars, be discharged only to the extent that on the business day following receipt by the Bank of any sum adjudged to be due hereunder in such other currency, the Bank may in accordance with normal banking procedures purchase United States dollars with such other currency; if the United Stated dollars so purchased are less than the sum originally due to the Bank in United States dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Bank against such loss, and if the United States dollars so purchased exceed the sum originally due to the Bank in United States dollars, the Bank agrees to remit to the Borrower (or any of them) such excess. 6.COSTS AND EXPENSES (a) The Borrower agrees to pay on demand all losses, costs and expenses, if any (including reasonable counsel fees and expenses whether in connection with a trial, appeals or otherwise), in connection with the enforcement of this Note, including losses, costs and expenses sustained by the Bank as a result of an Event of Default. (b) The Borrower shall pay to the Bank, upon the request of the Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank, absent manifest error) to compensate it for any loss, cost or expense related to the breakage of LIBOR attributable to any prepayment of this Promissory Note 7. JOINT AND SEVERAL LIABILITY; PRONOUNS If this Note is signed by two or more persons or entities, each of such persons or entities shall be jointly and severally liable for the Borrower's obligations under it, the release of one or more such persons or entities shall not affect the obligations and liabilities of the others, the term "the Borrower" shall mean all such persons or entities and the term" the Borrower (or any of them)" shall mean any one or more of such persons or entities. If appropriate, each neuter pronoun shall be read as a masculine or feminine pronoun and each singular pronoun as a plural pronoun. 8. GOVERNING LAW This note shall be governed by, and construed in accordance with, the laws of The State of New York, United States of America. 9. COMPLETION OF INSTRUMENT The Borrower hereby irrevocably authorizes the Bank, if this Note is delivered to the Bank undated, to complete the appropriate blank at the head of this Note with a date that is the earlier of the date this Note is delivered to the Bank and the date any obligation intended to be evidenced hereby is first created, or, if it is delivered with elements essential to its being an instrument not completed, to make whatever appropriate insertions are necessary to make this Note an instrument. 5 10. CERTAIN WAIVERS The Borrower hereby waives presentment for payment, demand, notice of dishonor and protest of this Note. 11. WAIVER OF JURY TRIAL The Borrower and the Bank each hereby irrevocably waive all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Note. IN WITNESS WHEREOF, the Borrower has executed this Note as of the day and year first above written. ADDRESSES: Panamco de Nicaragua , S.A. Km. 41/2 Carretera Norte Frente a la Direccion General de Ingresos Managua, Nicaragua PANAMCO DE NICARAGUA, S.A. (Typed or printed name of organization) --------------------------------------- By:(Signature of officer/representative) 6 CITIBANK, N.A. INTERNATIONAL BANKING FACILITY (IBF) ------------------------------------ STATEMENT OF ELIGIBILITY ------------------------ Panamco de Nicaragua, S.A., a nonbank entity located outside the United States, understands that it is the policy of the Board of Governors of the Federal Reserve System that deposits received by international banking facilities may be used only to support the non-U.S. operations of a depositor (or its foreign affiliates) located outside the United States and that extensions of credit by international banking facilities may be used only to finance non-U.S. operations of a customer (or its foreign affiliates) located outside the U.S. Paulo J. Sacchi (Customer's authorized signer), acknowledges that funds it deposits with the IBF of Citibank, N.A. will be used solely in support of its non-U.S. operations, or that of its foreign affiliates, and that the proceeds of its borrowings from the IBF will be used solely to finance its operations outside the United States, or that of its foreign affiliates. __________________________________ (Authorized Signature and Stamp) ID# _________________________________ (Date) 7 GUARANTY AGREEMENT This Guaranty (the "Guaranty Agreement") dated as of September 14, 2001, is made by Panamerican Beverages, Inc., a corporation organized and existing under the laws of the Republic of Panama (the "Guarantor"), in favor of Citibank N.A - International Banking Facility an international banking facility of a United States national banking association (the "Bank"). WHEREAS, the Bank will enter into a credit agreement (the "Credit Agreement") with Panamco de Nicaragua, S.A. (the "Borrower") in the amount of Six Million Five Hundred United States Dollars (US$ 6,500,000.00), provided the Guarantor furnish its guaranty of the obligations (as hereinafter defined) of the Borrower to the Bank, and WHEREAS, the Guarantor is willing to guaranty all the obligations of the Borrower under the Credit Agreement; NOW THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor hereby agrees as follows: SECTION 1. The Guarantor hereby unconditionally and irrevocably guarantees and promises to pay to the Bank on demand any and all obligations of the Borrower under the Credit Agreement an agrees to pay any and all out-of-pocket costs and expenses and reasonable fees and disbursements of counsel (including the allocated costs of staff counsel) incurred by the Bank in enforcing any rights under this Guaranty Agreement. The word "Obligations" is used herein in it most comprehensive sense and includes all obligations and liabilities of the Borrower to the Bank under the Credit Agreement to which the Borrower is a party, whether absolute of contingent, liquidated or unliquidated, for principal, interest, fees, indemnities, costs and expenses and all other amounts payable under or in connection with the Credit Agreement. SECTION 2. (a) The Guarantor's obligations hereunder are those of a primary obligor, and not merely a surety, and are independent of the Obligations. A separate action or actions may be brought against the Guarantor whether and action in brought against the Borrower or any other obligor in respect of the Obligations or whether the Borrower or any other obligor in respect of the Obligations is joined in any such action or actions. 1 (b) The obligations of the Guarantor under this Guaranty Agreement are absolute and unconditional, and the Guarantor guarantees that the Obligations will be paid in full on demand when due (whether at stated maturity, by required prepayment, by acceleration, on demand otherwise) in accordance with the terms of this Guaranty Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Bank with respect thereto or any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a guarantor. (c) This Guaranty shall in all respects remain in full force and effect (notwithstanding, without limitation, the dissolution, liquidation, bankruptcy, insolvency or reorganization of the Borrower or any other obligor in respect of the Obligation), unless and until all of the Obligations have been finally paid in full. (d) This Guaranty shall in all respects continue in full force and effect or shall be reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded or must otherwise be restored or returned for any reason, including, without limitation, because of any change in the corporate existence or structure or ownership of the Borrower or because the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Lessee or any other obligor in respect of the Obligations or upon or as result of the appointment of a custodian, receiver, trustee or other officer with similar power with respect to the Borrower or any such other obligor or any such other obligor or any material part of its assets, or otherwise, all as though such payment had not been made. If an event permitting the acceleration shall at such time be prevented by reason of the pendency against the Borrower of a case of proceeding under any bankruptcy or insolvency law, the Guarantor agrees that, for purposes of this Guaranty Agreement and its obligations hereunder, the Obligations shall be deemed to have been accelerated and the Guarantor shall forthwith pay such Obligations, and the other obligations hereunder, without any further notice or demand. (e) Without limiting the foregoing, the Guarantor authorizes the Bank, without notice or demand and without affecting the Guarantor's liability hereunder, from time to time to (i) renew, extend, accelerated, compromise, settle restructure, refinance, refund or otherwise change the amount and time for payment of the Obligations, or otherwise change the terms of the Obligations or any part thereof; (ii) take and hold security for the payment of this Guaranty Agreement of the Obligations or the obligations of other obligors in respect of the Obligations and enforce any such security, (iii) apply such security and direct the 2 order or manner of sale thereof or sell, exchange, release, compromise, settle, waive or surrender any such security, and (iv) take, hold, exchange, release, compromise, settle, amend or waive, or consent to the departure from the terms of, any guaranty or other agreement relating to the obligations of any other obligor in respect of the Obligations. The Bank shall have no obligation to perfect, secure, protect or insure any collateral agreement or any collateral and the Guarantor's liability hereunder shall not be affected by the non-perfection, invalidity or unenforceability of any collateral or collateral agreement. (f) Notwithstanding any payments made by the Guarantor hereunder, the Guarantor shall not be entitled to be subrogated to any of the rights of the Bank against the Borrower or any other person or to any collateral or other rights or interests held of the payment of the Obligations of the Guarantor hereunder have been finally paid in full. If the Guarantor shall receive any payment on account of any subrogation rights at any time when all the Obligations and the Guarantor's obligations hereunder shall not have been paid in full, any amount so paid will be held in trust by the Guarantor and promptly turned over to the Bank to be applied first to the Obligations until paid in full and thereafter to the Guarantor's obligations hereunder. (g) Guarantor's liability under this Guaranty Agreement shall be unconditional irrespective of (i) any exchange, release or non-perfection of any collateral securing payment of any Obligations, (ii) the existence of any claim, set-off or other rights which we may have at any time against the Borrower, the Guarantor, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim, (iii) any statute of limitation, (iv) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of the Borrower or the Guarantor, other than the payment in full of the Obligations and (v) an occurrence of an Event of Sovereign Risk, as such term is defined below. (h) The Guarantor unconditionally waives any right to require the Bank to (i) proceed against the Borrower or any other obligor in respect of the Obligations, (ii) proceed against or exhaust any security held directly or indirectly on account of the Obligations, or (iii) pursue any other remedy in the Bank's powers whatsoever Guarantor unconditionally waives any defense arising by reason of any disability or other legal or equitable defense of the Borrower by reason of the cessation from any cause whatsoever of the liability of the Borrower other than final payment in full in cash of the Obligations. The Guarantor waives all diligence, presentments, protest, notices of protest, notices of dishonor, notices of non-payment, acceptance and notices of acceptance of this Guaranty Agreement. 3 (i) All payments by Guarantor hereunder shall be made in freely transferable United States Dollars in same day funds free and clear of all taxes or other deductions levied or assessed by any domestic or foreign governmental entity. Such payments shall be made without set-off or counterclaim and free and clear of and without deduction or withholding for or on account of any present or future taxes, levies, imposts, duties or other charges of whatsoever nature impose, levied, assessed, collected or required to be withheld by any government or political subdivision or taxing authority thereof. In the event that Guarantor shall be compelled by law to make any such deduction, then it shall pay such additional amounts as may be necessary to ensure that the net amount received by the Bank shall equal the amount it would have received if such withholding would not have been made, and Guarantor shall furnish copies of the receipts evidencing that such taxes have been paid within 45 days after such taxes are due. For the purpose hereof an "Event of Sovereign Risk" means any of the following: (a) any war (whether or not declared), revolution, insurrection, civil strife or hostile acts, (b) the promulgation, operation or enforcement of any law, act, decree, regulation or other similar event, ordinance, order, policy or determination (herein, a "Nicaraguan Law"), or any modification of or change in the interpretation of any Nicaraguan Law, by any National Governmental Authority (as herein defined), including without limitation the imposition of any moratorium on, required rescheduling of, or required approval of the payment of any indebtedness, (c) the failure or refusal by the Central Bank of Nicaragua (or other government authorities of Nicaragua with comparable jurisdiction) to exchange, or to approve or permit the exchange of, the then-lawful currency of Nicaragua for Dollars, or any other action of any National Governmental Authority that has the effect of prohibiting or restricting such exchange or the transfer of funds outside Nicaragua, (d) the unavailability of Dollars in the exchange market therefor in Nicaragua in accordance with normal commercial practice for the purpose of transactions such as the transactions contemplated herein, (e) any expropriation, confiscation, requisition, nationalization, or other action by any other branch or affiliate of Citibank, N.A. in 4 Nicaragua, of its ownership or control of the benefits of all or a substantial portion of its assets located in Nicaragua or the revenues attributable thereto, (f) a declaration of banking moratorium or any suspension of payments by banks in Nicaragua, or the imposition by any National Government Authority of any moratorium on, required rescheduling of, or approval of, the payment of any indebtedness in Nicaragua, (g) any disruption in the bank payments system which prevents the Borrower from paying Dollars in the manner contemplated by the Credit Agreement, or (h) any suspension, relinquishment or termination of the operations of the Borrower, any other branch or affiliate of Citibank, N.A. in Nicaragua, or a result of any event of the kinds referred to in clauses (a)-(g) above or as the result of the threat of any such event. "National Governmental Authority" means, at any time, the government of the Republic of Nicaragua or any political subdivision thereof or any other office, agency or instrumentality thereof, including the Central Bank of Nicaragua or any successor thereto, or any other authority asserting governmental, military or political power of any kind at such time in Nicaragua, whether or not such authority is recognized as a de facto or de jure government. SECTION 3. The Guarantor hereby waives (i) notice of acceptance of this Guaranty and of any extension of credit by the Bank to the Borrower; (ii) presentment and demand for payment of any of the Obligation; (iii) protest and notice of dishonor or default to the Guarantor or to any other party with respect to any of the Obligations; any (iv) all other notices to which the Guarantor might otherwise be entitled. SECTION 4. This is a continuing guaranty and shall (i) remain in full force and effect until the Bank shall have received written notice form the Guarantor that has been revoked, but any such notice shall not release the Guarantor from any liability as to any Obligation or the Guarantor's obligations hereunder (including any contingent liability) existing at the time of such notice (ii) be binding upon the Guarantor and the Guarantor's successors and assigns, and (iii) insure to the benefit of, and be enforceable by, the Bank and the Bank's successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), the Bank may assign or otherwise transfer all or any portion of the Bank's rights and obligations to any other person or entity, and such other person or entity shall 5 thereupon become vested with all the benefits thereof granted to the Bank herein or otherwise. SECTION 5. The liability of the Guarantor under this Guaranty Agreement shall be limited to obligations which do not exceed the sum of Six Million Five Hundred Thousand Dollars (US$ 6,500,000.00) for principal plus all interest, fees, and other costs and expenses relating to or arising out of the Obligations. SECTION 6. Representations and Warranties. The Guarantor represents and warrants that: (a) Existence and Power. The Guarantor is a corporation duly incorporated and validly existing under the laws of the Republic of Panama and has all requisite power and authority to own its property and to carry on its business as now conducted. (b) Authority. The Guarantor has full power and authority to enter into, execute, deliver and carry out the terms of this Guaranty Agreement and to incur the obligations provided for herein, all of which have been duly authorized by all proper and necessary action and are in full compliance with the Guarantor's Articles of Incorporation and By-laws. (c) Authority of Officers. The officer of the Guarantor who is executing this Guaranty Agreement is properly in office and is duly authorized to execute the same. (d) Binding Agreement. This Guaranty Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable against it in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditor's rights generally. (e) Litigation. There are no actions, suits or arbitration proceedings pending or, to the knowledge of the Guarantor, threatened against the Guarantor, at law or in equity, which, individually or in the aggregate, if adversely determined, would materially adversely affect the financial condition of the Guarantor or materially impair the ability of the Guarantor to perform its obligations under this Guaranty Agreement. (f) No Conflicting Law or Agreements. The execution, delivery and performance by the Guarantor of this Guaranty Agreement; (i) do not violate any provision of the Articles of Incorporation or By-laws of the Guarantor; (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or 6 regulation applicable to or binding on the Guarantor or affecting any of its property; and (iii) do not violate or conflict with, result in a breach of or constitute (with notice or lapse of time or both) a default under, any mortgage, indenture, contract or other agreement to which the Guarantor is a party, or by which any of its property is bound. SECTION 7. Miscellaneous: (a) All notices, requests and other communications to any party hereunder shall be in writing and shall be given to such party at its address set forth below or such other address as such party may hereafter specify by notice to the other party: If to the Guarantor: Panamerican Beverages, Inc. Torre Dresdner Bank Piso No. 7, Calle 50 Panama City - Republic of Panama Telecopy: (507) 223-8308 Attention: Chief Financial Officer If to the Bank: c/o Citibank Mexico S.A. 390 Reforma Piso 7 Colonial Juarez Mexico D.F. 06695 Telecopy: (525) 533-6125 Attention: Relationship Manager Each such notice, request or other communication may be sent by international courier addressed as aforesaid and shall be effective upon delivery evidenced by the receipt or declaration of the courier, or by facsimile transmission to the telecopiers indicated above, which shall be effective as of the time so telecommunicated. (b) No Waivers. No failure or delay by the Bank in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 7 (c) Payment of Expenses. The Guarantor will, at its own cost and expense, execute and deliver to the Bank all such documents, instruments, and agreements and do all such acts and things as may be reasonably requisite in the opinion of the Bank, to enable the Bank to exercise and enforce its rights hereunder. (d) Severability. In case any one or more of the provisions contained in this Guaranty Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (e) Governing Law. This Guaranty Agreement and the rights and obligations of the Guarantor and the Bank hereunder shall be governed by, and construed and interpreted in accordance with, the law of the State of New York, without giving effect to principles of conflicts of laws. (f) Submission to Jurisdiction. Guarantor irrevocably agrees that any legal action arising out of or relating to this Guaranty Agreement may be instituted in the United States District Court for the southern District of New York or the courts of the State of New York, United States, in the City of New York, Borough of Manhattan and the Guarantor irrevocably submits to the exclusive jurisdiction of such courts in any such action or proceeding and waives any other jurisdiction to which it may be entitled by reason of its present or future domicile. Guarantor irrevocably waives to the fullest extent permitted by law, any objection which it may or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such action or proceeding brought in such a court has been brought in an inconvenient forum. The Guarantor agrees to the extent permitted by applicable laws of the State of New York and the Republic of Panama, that a final judgment against it in any such legal action or proceeding shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which judgment shall be conclusive evidence thereof. By accepting this Guaranty Agreement, the Bank also submits to the jurisdiction of the above named New York State courts. (g) Waiver of Sovereign Immunity. Guarantor acknowledges and agrees that the Credit Agreement is commercial in nature rather than governmental or public, and further acknowledges and agrees that neither the Borrower nor Guarantor are entitled to any right or immunity on the grounds of sovereignty or otherwise with respect to any legal action or proceeding arising out of relating to the Credit Agreement or this Guaranty Agreement. Guarantor, in respect of itself and its properties and revenues expressly and irrevocably waives any such right of immunity or claim thereto which may now or hereafter exist (including any 8 immunity from any legal process, from the jurisdiction of any court, from execution upon a judgment and from attachment prior to judgment or in aid of execution) and agrees not to assert any such right or claim in any such action or proceeding, whether in the United States or otherwise. (h) Captions. Captions contained in this Guaranty Agreement are for convenience of reference only and shall not limit or define the provisions of this Guaranty Agreement or affect the interpretation or construction thereof. [Intentionally Left Blank] 9 IN WITNESS WHEREOF, the Guarantor have caused this Guaranty Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. PANAMERICAN BEVERAGES, INC. By: ---------------------------------- Name: Paulo J. Sacchi Title: Senior Vice President-Finance & Treasurer EX-10.4 6 ex10-4.txt CREDIT AGREEMENT Exhibit 10.4 PROMISSORY NOTE U.S. $10,000,000 Dated: September 24, 2001 FOR VALUE RECEIVED as a loan, the undersigned PANAMERICAN BEVERAGES INC., a corporation duly constituted and domiciled in the Republic of Panama (the "Borrower"), unconditionally promises to pay to the order of THE CHASE MANHATTAN BANK (the "Bank"), at its principal office, 270 Park Avenue, New York, New York 10017 (the "Principal Office"), the principal sum of TEN MILLION UNITED STATES DOLLARS (U.S. $10,000,000) on the Maturity Date (as defined below). The Borrower promises to pay interest on the unpaid balance of the Loan (as defined below) from and including the date of such Loan to but excluding the date such Loan is due at a rate per annum for such period equal to the Eurodollar Rate (as defined below) for each Interest Period (as defined below) for such Loan during such period plus the Margin (as defined below), subject to the provisions of Section 3(c) hereof. Accrued interest shall be payable on each Interest Payment Date, provided that interest payable at the Default Rate (as defined below) pursuant to Section 3(c) hereof shall be payable upon demand. All payments hereunder shall be made in U.S. Dollars and in immediately available funds, without deduction, set-off or counterclaim. The Bank shall maintain on its books records setting forth the amounts of principal, interest and other sums paid or payable by the Borrower from time to time hereunder. In the event of any dispute, action or proceeding relating to this Note, such records shall be conclusive in the absence of manifest error. 1. Certain Definitions. As used herein, the following terms shall have the corresponding meanings. (a) "Banking Day" means any day on which commercial banks are not authorized or required to close in New York City and which is also a day on which dealings in U.S. Dollar deposits are carried out in the London interbank market. (b) "Closing Date" means the date hereof. (c) "Commitment" means U.S. $10,000,000. (d) "Default Rate" means, in respect of any amount not paid when due, a rate per annum during the period commencing on the due date until such amount is paid in full equal to a fixed rate of 2.00% above the rate of interest applicable to principal hereof (including the Margin) at the time of default until the end of the then current Interest Period and, thereafter, a floating rate 2% above the Variable Rate. (e) "Drawdown Date" means September 24, 2001. (f) "Eurodollar Base Rate" means, with respect to any Interest Period for any Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by the principal office of the Bank in London at approximately 11:00 a.m. London time (or as soon thereafter as practicable) two Banking Days prior to the date which is the first date of such Interest Period for the offering by the Bank to leading banks in the London interbank market of U.S. Dollar deposits having a term comparable to such Loan and in an amount comparable to the principal amount of such Loan. (g) "Eurodollar Rate" means the Eurodollar Base Rate divided by 1 minus the Reserve Requirement. (h) "Event of Default" shall have the meaning set forth in Section 10 hereof. (i) "Federal Funds Rate" means, with respect to a Variable Rate Loan (i) for the first day of any such Loan, the rate per annum at which U.S. Dollar deposits with an overnight maturity and in a comparable principal amount to any Loan are offered by the Bank in the Federal funds market at approximately the time the Borrower requests a Loan on such day, and (ii) for each day thereafter that such Loan is outstanding, the rate per annum at which U.S. Dollar deposits with an overnight maturity and in a comparable principle amount to such Loan are offered by the Bank in the Federal funds market at approximately the time the Borrower notifies the Bank pursuant to Section 5(c) hereof of its election to continue such Loan; provided that if the Borrower fails to notify the Bank pursuant to Section 5(c) of its election to continue or repay such Loan, the rate per annum determined by the Bank to be its cost of funding such Loan for such day; and (b) any other amount hereunder which bears interest at the Variable Rate, the rate per annum at which U.S. Dollar deposits with an overnight maturity and in a comparable amount are offered by the Bank in the Federal funds market at approximately 2:00 p.m. New York City time. (j) "Indebtedness" means, with respect to any Person, any amount payable by such Person pursuant to an agreement or instrument involving or evidencing money borrowed or received, the advance of credit, a conditional sale or a transfer with recourse or with an obligation to repurchase, pursuant to a lease with substantially the same economic effect as any such agreement or instrument, or any such agreement, instrument or arrangement secured by any lien or other encumbrance upon any property owned by such Person, even though such Person has not assumed or become liable for the payment of any money under such agreement, instrument or arrangement, to which such Person is a party as debtor, borrower or guarantor. (k) "Interest Payment Date" for the Loan means (i) the Maturity Date of such Loan and (ii) the date of any prepayment or repayment of principal of such Loan. (l) "Interest Period" for the Loan means (i) initially, the period commencing on the date thereof and ending one month thereafter; and (ii) thereafter, the period commencing on the 2 last day of the immediately preceding Interest Period and ending one month thereafter; provided, however, that: (A) any Interest Period which would otherwise end on a day which is not a Banking Day shall be extended to the next succeeding Banking Day unless such Banking Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Banking Day, (B) any Interest Period which begins on the last Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Banking Day of the last calendar month of such Interest Period; and (C) if any Interest Period includes a date on which a payment of principal of such Loan is required to be made but does not end on such date, then (x) the principal amount of such Loan required to be paid on such date shall have an Interest Period ending on such date and (y) the remainder (if any) of such Loan shall have an Interest Period determined as set forth above. (m) "Loan" shall have the meaning set forth in Section 2. (n) "Margin" shall mean 0.95% per annum. (o) "Maturity Date" means the December 19, 2001. (p) "Note" means this Promissory Note. (q) "Person" means any corporation, natural person, firm, joint venture, partnership, trust, unincorporated organization or government, or any political subdivision, department or agency of any government. (r) "Prime Rate" means the rate of interest per annum publicly announced from time to time by the Bank as its prime rate in effect at its principal office in New York City; any change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. (s) "Regulatory Change" means any change after the date hereof in United States federal, state or foreign laws or regulations (including Regulation D (as defined in the definition of Reserve Requirement)) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including the Bank of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. (t) "Reserve Requirement" means, with respect to any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during the Interest Period under Regulation D of the Board of Governors of the Federal Reserve System as amended or supplemented from time to time ("Regulation D") by member banks of the Federal Reserve System in New York City with deposits exceeding one billion U.S. Dollars against "Eurocurrency Liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement 3 shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined or (ii) any category of extensions of credit or other assets which includes the Loan evidenced by this Note. (u) "Subsidiary" means, with respect to the Borrower, at any time, any entity of which more than fifty percent (50%) of the outstanding voting stock or other equity interest entitled ordinarily to vote in the election of the directors or other governing body (however designated) of such entity is at the time beneficially owned or controlled directly or indirectly by the Borrower. (v) "Variable Rate" means, for any day, the higher of (i) Federal Funds Rate for such day plus 1/2 of 1% and (ii) the Prime Rate. (w) "Panama" means the Republic of Panama. (x) "Syndicated Facility" means the U.S.$265,000,000 Amended and Restated Credit Agreement dated as of November 21, 2000 and entered into by and among the Borrower, certain financial institutions named therein and ING Baring (U.S.) Capital LLC, as Administrative Agent. 2. The Loan. (a) The Bank agrees, on the terms and conditions of this Note, to make one loan (the "Loan") to the Borrower on the Drawdown Date in an aggregate principal amount up to but not exceeding the aggregate amount of the Commitment. (b) The Borrower may borrow the Loan by giving the Bank notice by 12:00 noon, New York City time, on the date hereof. (c) Amounts that are prepaid may not be reborrowed. 3. Payments; Prepayments; Fees. (a) Place and Time of Payment. All payments of principal of and interest on this Note and all other amounts payable hereunder shall be made by deposit to account no. 544748148 of the Bank at the Principal Office not later than 12:00 p.m. (New York time) on the dates due, or to such other account as the Bank may designate in writing to the Borrower. (b) Payments to be on Banking Days. Whenever any payment hereunder shall be stated to be due on a day other than a Banking Day, such payment shall be made on the next succeeding Banking Day (unless such next succeeding Banking Day would fall in the succeeding calendar month, in which case such payment shall be made on the next preceding Banking Day), and any such extension or reduction of time shall in such case be reflected in the computation of payment of interest. 4 (c) Interest on Overdue Principal and Other Amounts. In the event that any principal hereof, any interest hereon or any other amount payable by the Borrower hereunder is not paid when due (by reason of demand or otherwise) in accordance with the terms of this Note, the Borrower will pay, to the extent permitted by applicable law, interest on such past-due amount from the date such amount becomes due until the date the same is paid in full, at a rate per annum equal to the Default Rate in effect from time to time. (d) Voluntary Prepayments. The Borrower may, upon five Banking Days' notice to the Bank, prepay this Note on any Banking Day; provided, however, that (x) the minimum amount of any such prepayment shall be $5,000,000.00 or any larger multiple thereof and (y) such prepayment is made together with accrued interest and any break-funding amounts due pursuant to Section 5(b). 4. Interest. All computations of interest hereon shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which interest is payable. 5. Additional Costs, Etc.; Illegality (a) If as a result of any Regulatory Change, the Bank determines that the cost to the Bank of making or maintaining the Loan is increased, or any amount received or receivable by the Bank hereunder is reduced, or the Bank is required to make any payment in connection with any transaction contemplated hereby, then the Borrower shall pay to the Bank on demand such additional amount or amounts as the Bank determines will compensate the Bank for such increased cost, reduction or payment. (b) The Borrower shall pay to the Bank, upon the request of the Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate it for any loss, cost or expense which the Bank determines is attributable to any prepayment of any Loan. (c) Notwithstanding any other provision in this Note, in the event that it becomes unlawful for the Bank or its lending office to honor its obligation to make or maintain the Loan bearing interest at the Eurodollar Rate, then the Bank shall promptly notify the Borrower thereof and the Bank's obligation to make or maintain the Loan bearing interest at the Eurodollar Rate shall be suspended until such time as the Bank may again make and maintain the Loan bearing such interest rate, and the interest rate on the Loan shall be automatically converted to the Variable Rate on the date specified by the Bank in such notice unless the Bank shall have received written notice from the Borrower of its decision to prepay the Loan and such notice is received by the Bank prior to 11:00 a.m. on the day of such prepayment. 6. Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all interest, penalties or other liabilities with 5 respect thereto, excluding taxes imposed on or measured by the net income or capital of the Bank by the jurisdiction (or any political subdivision of such jurisdiction) in which the Bank's lending office is located or under which the Bank is organized (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter called "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Bank, (x) the Borrower shall forthwith pay to the Bank such additional amount as may be necessary so that after making all required deductions for Taxes (including deductions applicable to additional amounts payable under this Section 6) the Bank receives an amount equal to the sum it would have received had no such deductions been made, (y) the Borrower shall make such deductions and (z) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law. (b) Payment of Stamp Taxes. In addition, the Borrower shall pay any present or future stamp or documentary taxes or other excise or property taxes, charges or similar levies which arise in any jurisdiction from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Note (all such taxes, charges or levies being herein called "Other Taxes"). (c) Reimbursement of Taxes Paid by the Bank. The Borrower will reimburse the Bank for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 6) paid by the Bank or any liabilities (including, without limitation, penalties, interest and expenses other than those attributable to the gross negligence of the Bank) arising therefrom or with respect thereto. Reimbursement under this Section 6(c) for any Taxes, Other Taxes or liabilities shall be made within 30 days from the date the Bank makes written demand therefor. (d) Tax Certificates. Within 45 days after the date of any payment of Taxes, the Borrower will furnish to the Bank the original or a certified copy of a receipt evidencing payment thereof. 7. Conditions Precedent to the Loan. In addition to having received a notice of borrowing as set forth in Section 2(b) hereto, the obligation of the Bank to make the Loan hereunder is subject to the condition precedent that the following conditions shall have been fulfilled to the satisfaction of the Bank and its counsel on or before the Drawdown Date; provided, however, that with respect only to conditions (a) and (b) below, the Borrower shall have the right to fulfill such conditions no later than thirty five (35) Banking Days after the Drawdown Date: (a) Corporate Documents. The Bank shall have received certified copies of the charter and by-laws (or equivalent documents) of the Borrower and of all corporate authority for the Borrower (including, without limitation, board of director resolutions, powers of attorney and evidence of the incumbency of officers) with respect to the execution, delivery and performance of this Note and each other document to be delivered by the Borrower in connection herewith. 6 (b) Opinion of Counsel. The Bank shall have received an opinion, dated the initial Drawdown Date, from Arias, Fabrega & Fabrega, special Panamanian counsel to the Borrower, satisfactory in form and substance to the Bank, and in each case covering such other matters as the Bank may reasonably request (and the Borrower shall have instructed such counsel to deliver such opinion to the Bank). (c) Process Agent Acceptance. The Bank shall have received an executed letter, in form and substance satisfactory to the Bank, from a process agent, located in New York State and acceptable to the Bank, acknowledging such agent's acceptance of its appointment as agent for service of process with respect to the Borrower. (d) No Material Adverse Change. There shall not have occurred any event which, in the opinion of the Bank, would involve a material adverse change in the economic or financial condition of the Borrower or in general market conditions. (e) No Event of Default; Accuracy of Representations and Warranties. On the Drawdown Date, both immediately prior to the making of such Loan and also after giving effect thereto and to the intended use thereof (x) no Event of Default or an event that with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing; and (y) the representations and warranties made by the Borrower in Section 8 hereof shall be true and correct on and as of such Drawdown Date. (f) Government Approvals. The Bank shall have received certified copies of English language translations of all approvals and consents required by any governmental authority for the incurrence by the Borrower of the Loan. (g) Other Documents. The Bank shall have received such other documents as the Bank or its counsel may reasonably request. 8. Representations and Warranties. The Borrower represents and warrants to the Bank as follows: (a) Incorporation and Existence. The Borrower is a company duly organized and validly existing under the laws of Panama and has or will have the power and authority to execute and deliver this Note, to incur the obligations to be incurred by it hereunder and to perform and observe the provisions hereof. (b) Corporate Power and Authority. The Borrower has taken or will take all necessary action to authorize the execution and delivery of this Note and all other documents to be executed and delivered by it in connection herewith and the performance of its obligations hereunder. (c) Legally Enforceable Note. This Note has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, 7 moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (d) Governmental Authorizations. All governmental authorizations, if any, and actions of any kind necessary for the due execution, delivery and performance of this Note by the Borrower or required for the validity or enforceability against the Borrower of this Note, have been obtained or performed and are valid and subsisting in full force and effect. (e) Consent and Approvals. No consent or approval of, or notice to, any creditor of the Borrower is required by the terms of any agreement or instrument evidencing any Indebtedness of the Borrower for the execution or delivery of, or the performance of the obligations of the Borrower under, this Note, and such execution, delivery and performance will not result in any breach or violation of, or constitute a default under, the charter or by-laws of the Borrower or any agreement, instrument, judgment, order, statute, rule or regulation applicable to the Borrower or to any of its property. (f) Pari Passu Status. The payment obligations of the Borrower under this Note rank at least pari passu with all of its other unsecured Indebtedness, whether now existing or hereafter outstanding, except for obligations accorded preference by mandatory provisions of law. (g) Absence of Litigation. There are no actions, proceedings or claims pending or, to the knowledge of the Borrower, threatened, the adverse determination of which might have a materially adverse effect on the financial condition of the Borrower or impair its ability to perform its obligations under, or affect the validity or enforceability of, this Note. (h) Withholding. No withholding in respect of any taxes imposed by or within Panama or any political subdivision or taxing authority thereof or therein is required to be made from any payment by the Borrower under this Note. (i) Waiver of Sovereign Immunity; Commercial Activity. Neither the Borrower nor its property has any right of immunity on the grounds of sovereignty or otherwise from jurisdiction, attachment (before or after judgment) or execution in respect of any action or proceeding relating in any way to this Note that may be brought in the courts of Panama. The execution, delivery and performance of this Note by the Borrower constitute commercial transactions. (j) Use of Proceeds. The proceeds of the Loan shall be used for general corporate purposes and only to finance the Borrower's operations outside the United States. 9. Covenants. From the Closing Date, the Borrower covenants as follows: (a) Lines of Business. The Borrower will at all times continue to engage in the same line of business engaged in by the Borrower on the date hereof and will not engage to any 8 substantial extent in any line or lines of business activity other than such current lines of business. (b) Limitation on Fundamental Changes. The Borrower will not convey, sell, lease, transfer or otherwise dispose of, in one transaction or in a series of transactions, a material portion of the property necessary or useful in the conduct of its business. (c) Financial Information. The Borrower shall deliver to the Bank promptly, and in any event within 60 days, following the end of each fiscal quarter of the Borrower such financial statements and other financial information concerning the Borrower as the Bank may reasonably request. (d) Government Approvals. The Borrower shall maintain and keep in full force and effect all approvals and consents required by any governmental authority for the incurrence of the Loan. (f) Syndicated Facility Covenants. The Borrower shall comply with and be bound by all the covenants set forth in Article V of the Syndicated Facility during the term of the Loan. The aforementioned covenants, together with the related definitions, as in effect on the date hereof are hereby incorporated herein by reference (mutandis mutandis) for the benefit of the Bank and shall continue for the purposes of this section 9 regardless of the repayment of any loans thereunder prior to the Maturity Date of the Note or the termination of the Syndicated Facility or the participation of the Bank therein or any amendment of, or any consent to any deviation from or other modification of the Syndicated Facility. 10. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower fails to pay any principal, interest, or other amount hereunder as and when such amount becomes payable (whether at stated maturity or otherwise); or (b) The Borrower fails to perform or observe any covenant or agreement contained herein to be performed or observed by it or any representation or warranty of the Borrower in this Note or in any other document delivered in connection herewith proves to have been incorrect, incomplete or misleading in any material respect at the time it was made or repeated or deemed to have been made or repeated; or (c) The Borrower or any material Subsidiary (A) fails to pay any of its Indebtedness in an aggregate amount equal to or exceeding U.S. $20,000,000 (or its equivalent in other currencies) as and when such Indebtedness becomes payable (subject to any applicable grace period) (as used in this clause (e), "Indebtedness" shall not include any Indebtedness of the Borrower or any material Subsidiary owing to any other material Subsidiary or the Borrower) or (B) fails to perform or observe any material covenant or agreement to be performed or observed by it under one or more agreements or instruments evidencing Indebtedness in an aggregate amount equal to or exceeding U.S. $20,000,000 (or its equivalent in other currencies) (subject to 9 any applicable grace period) if, as a result of such failure, any other party to such agreements or instruments is entitled to exercise, and has not irrevocably waived, the right to accelerate the maturity of any amount owing thereunder; or (d) The Borrower or any material Subsidiary (i) is dissolved, (ii) fails or is unable to pay its debts generally as they become due, (iii) commences a voluntary case in bankruptcy or any other action or proceeding for any other relief under any law affecting creditors' rights that is similar to a bankruptcy law or (iv) consents by answer or otherwise to the commencement against it of an involuntary case in bankruptcy or any other such action or proceeding, or a proceeding is commenced in an involuntary case in bankruptcy in respect of the Borrower or any material Subsidiary or any property of the Borrower or any such material Subsidiary if such proceeding is not dismissed or stayed on or before the thirtieth day after the entry thereof or if any such dismissal or stay ceases to be in effect and such proceeding, in the reasonable opinion of the Bank, materially affects the ability of the Borrower to perform its obligations under this Note; or (e) Any governmental authorization necessary for the performance of any obligation of the Borrower under this Note fails to become or remain valid and subsisting in full force and effect; or (f) Any governmental authority or court takes any action that, in the reasonable opinion of the Bank, materially adversely affects the condition of the Borrower or its ability to perform its obligations under this Note; or (g) The aggregate amount of unsatisfied judgments, decrees or orders for the payment of money against the Borrower or any material Subsidiary exceeds U.S. $20,000,000 or the equivalent thereof in any other currency or currencies; or (h) The Borrower or any material Subsidiary sells or otherwise disposes of all or a substantial part of its assets or ceases to conduct all or a substantial part of its business as now conducted, or merges or consolidates with any other company without the prior written consent of the Bank, unless the entity surviving such merger or consolidation is the Borrower; or (i) A moratorium is enacted by Panama or the central bank or any agency or political subdivision of Panama affecting the Borrower's right and obligation to effect payment under this Note or otherwise to perform its obligations hereunder; or (j) The payment obligations of the Borrower under this Note cease to rank at least pari passu with all of its other unsecured Indebtedness, except for obligations accorded preference by mandatory provisions of law; or (k) The failure of (A) the Voting Trustees under the Voting Trust Agreement restated as of April 20, 1993, as amended and (B) The Coca-Cola Export Corporation or its affiliates to jointly own (directly or indirectly) at least 51% of the outstanding securities having the right to elect the board of directors of the Borrower. 10 THEN, in any such case, if the Bank shall elect by notice to the Borrower, the unpaid principal amount of this Note, together with accrued interest, shall become forthwith due and payable; provided that in the case of an Event of Default under clause (f) above, the unpaid principal amount of this Note, together with accrued interest, shall immediately become due and payable without any notice or other action by the Bank. 11. Notices. All notices, requests, demands or communications hereunder shall be in writing and shall be given to or made upon the respective parties hereto at the following addresses: If to the Borrower: If to the Bank: Panamerican Beverages Inc. The Chase Manhattan Bank Torre Dresdner Bank 270 Park Avenue 19th Floor Floor 7, Calle #50 New York, New York 10017 Panama City 55-0820, Republic of Panama Attn.: Chief Financial Officer Attn.: Linda M. Meyer Tel: (507) 223-8308 Tel: (212) 270-6776 Fax: (507) 223-8723 Fax: (212) 270-8890 12. Miscellaneous. (a) The Borrower waives presentment, notice of dishonor, protest and any other formality with respect to this Note. (b) This Note sets forth the entire agreement between the parties hereto, supersedes all prior communications and understandings of any nature and may not be amended, supplemented or altered except in writing signed by both parties hereto. (c) The Borrower agrees to reimburse the Bank on demand for all reasonable costs, expenses and charges (including reasonable fees and charges of external and in-house legal counsel for the Bank) in connection with the preparation, negotiation, execution, interpretation, performance or enforcement of this Note. (d) This Note shall be binding on the Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns, except that the Borrower may not delegate any obligations hereunder without the prior written consent of the Bank. The Bank may at any time assign or otherwise transfer or sell participations in this Note or any of its rights with respect thereto to any third party, including, but not limited, to any Federal Reserve Bank or to any banks, financial institutions or any affiliates of the Bank (including, any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by the Bank or an affiliate of the Bank). (e) The Bank agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance 11 with safe and sound banking practices, any non-public information supplied to it by the Borrower pursuant to this Note which is identified by the Borrower as being confidential at the time the same is delivered to the Bank, provided that nothing herein shall limit the disclosure of any such information (A) to any subsidiaries or affiliates of the Bank, (B) to the extent required by statute, rule, regulation or judicial process, (C) to counsel for the Bank, (D) to bank examiners, auditors or accountants, (E) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Note or the enforcement of rights hereunder, (F) to any actual or prospective assignee or participant, or (G) to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations; provided, further, that in no event shall the Bank be obligated or required to return any materials furnished by the Borrower. (f) Any suit, action or proceeding against the Borrower with respect to this Note or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York or in the courts of Panama, as the Bank may elect in its sole discretion, and the Borrower submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. The Borrower hereby waives any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Note brought in such courts, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. The Borrower irrevocably appoints CT Corporation System, which currently maintains a New York City office situated at 111 Eighth Avenue, 13th Floor, New York, New York 10011, U.S.A., as its agent to receive service of process or other legal summons for purposes of any such suit, action or proceeding, and agrees that the failure of such agent to give any notice of any such process or summons to the Borrower shall not impair or affect the validity of such service or of any judgment based thereon. So long as the Borrower has any obligation under this Note, it will maintain a duly appointed agent in New York City for the service of such process or summons. (g) The Borrower hereby waives any right the Borrower may have to jury trial. (h) This Note shall be governed by and interpreted and construed in accordance with the law of the State of New York, without regard to principles of conflicts of laws. (i) To the extent that the Borrower may now or hereafter be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to this Note, to claim for itself or its revenues or properties any immunity from the jurisdiction of any court or from legal process (whether from service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and to the extent that in any such jurisdiction there may be attributed to the Borrower any such immunity (whether or not claimed), the Borrower hereby irrevocably agrees not to claim, and hereby waives, such immunity in respect of its obligations under this Note. 12 (j) Each reference in this Note to U.S. Dollars is of the essence. The obligation of the Borrower in respect of any amount due under the Note shall, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in U.S. Dollars that the Bank may, in accordance with normal banking procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Banking Day immediately following the day on which the Bank receives such payment. If the amount in U.S. Dollars that may be so purchased for any reasons falls short of the amount originally due, the Borrower shall pay such additional amounts, in U.S. Dollars, as may be necessary to compensate for such a shortfall. Any obligation of the Borrower not discharged by such payment shall be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect. (k) The Borrower acknowledges that the Bank may have and may in the future have investment and commercial banking, trust and other relationships with other companies in respect of which the Borrower may have conflicting interests regarding the transactions described herein and otherwise. The Borrower acknowledges that the Bank may perform its functions in connection with such fiduciary or other relationships without regard to its relationship with the Borrower hereunder. The Bank will not use confidential information obtained from Borrower by virtue of the transactions contemplated by this Note or its other relationships with the Borrower in connection with the performance by the Bank of services for other companies, and the Bank will not furnish any such information to other companies. The Borrower also acknowledges that the Bank has no obligation to use in connection with the transactions contemplated by this Note, or to furnish to the Borrower, confidential information obtained from other companies. 13 IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. PANAMERICAN BEVERAGES INC. By: ----------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----