-----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, ALbouxDO5TCbx9EKwRCdoOGpvbTSiPk9JPwziBsgF+2VH1kyGreGH2luc10MnWzV KzScFDWdQTXtq3vjLErH5Q== 0000950157-03-000194.txt : 20030328 0000950157-03-000194.hdr.sgml : 20030328 20030327213415 ACCESSION NUMBER: 0000950157-03-000194 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 34 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PANAMERICAN BEVERAGES INC CENTRAL INDEX KEY: 0000911360 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 000000000 STATE OF INCORPORATION: R1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12290 FILM NUMBER: 03622377 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-K 1 form10_k.txt ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 [ ] 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 Identification No.) incorporation or organization) C/O PANAMCO, L.L.C. 701 WATERFORD WAY, SUITE 800 MIAMI, FLORIDA 33126 (Address of principal executive offices) (Zip code) (305) 929-0800 (Registrant's Telephone Number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS: ON WHICH REGISTERED: -------------------- -------------------- Class A Common Stock, $0.01 par value per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE 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 __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. Indicate by check mark whether the registrant is an accelerated filer. Yes X No __ The aggregate market value of the voting and non-voting stock common stock held by non-affiliates of the registrant was $1,152,366,781 (computed by reference to the closing price as of June 30, 2002). 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 March 24, 2003 were: Class A Common Stock: 112,793,056 Class B Common Stock: 8,659,802 Class C Preferred Stock: 2 The number of shares outstanding of Class A Stock includes 466,667 restricted shares that are not vested and remain subject to forfeiture. TABLE OF CONTENTS PART I Item 1. Business Overview........................................................ 1 Proposed Merger Transaction..................................... 1 Corporate Structure............................................. 2 Financial Information on Industry Segments and Geographic Areas. 4 Our Franchise Territories....................................... 4 Beverages and Packaging......................................... 5 Sales, Distribution and Marketing............................... 7 Raw Materials and Supplies...................................... 8 Production...................................................... 10 Competition..................................................... 10 Employees....................................................... 11 Franchise Arrangements.......................................... 12 Government Regulation........................................... 12 Political, Economic and Social Conditions in Latin America...... 13 Currency Devaluations and Fluctuations.......................... 15 Seasonality..................................................... 15 Additional Information.......................................... 15 Item 2. Properties....................................................... 16 Item 3. Legal Proceedings................................................ 16 Item 4. Submission of Matters to a Vote of Security Holders.............. 18 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................. 18 Item 6. Selected Financial Data.......................................... 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 40 Item 8. Financial Statements and Supplementary Data...................... 41 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 41 PART III Item 10. Directors and Executive Officers of the Registrant............... 42 Item 11. Executive Compensation........................................... 45 Item 12. Security Ownership of Certain Beneficial Owners and Management... 54 Item 13. Certain Relationships and Related Transactions................... 58 Item 14. Controls and Procedures.......................................... 59 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 60 Signature Pages and Certificates of Chief Executive Officer and Chief Financial Officer.......................................................... 67 PART I ITEM 1. BUSINESS OVERVIEW Panamerican Beverages, Inc. ("Panamco" or the "Company" or "we") is the largest soft drink bottler in Latin America and the third largest bottler of the soft drink products of The Coca-Cola Company ("The Coca-Cola Company" or "Coca-Cola"). In 2002, our sales accounted for approximately 5% of the worldwide unit case volume reported by Coca-Cola. Our 2002 sales represented approximately 20% of the Latin American unit case volume reported by Coca-Cola. Sales of products of Coca-Cola accounted for approximately 89% of our net sales in 2002. We have a 62-year bottling relationship with Coca-Cola. In 1995, Coca-Cola designated Panamco an "anchor bottler," making us one of their strategic partners in Coca-Cola's worldwide bottling system. Coca-Cola has been a stockholder of our Company since 1993 and beneficially owns approximately 25% of our common stock. Coca-Cola has two representatives on our Board of Directors. We operate in diverse markets in Latin America. We operate in Mexico (a substantial part of central Mexico, excluding Mexico City), Guatemala (Guatemala City and surrounding areas), Nicaragua (all of the country), Costa Rica (all of the country), recently acquired Panama1 (all of the country), Colombia (most of the country), Venezuela (all of the country) and Brazil (greater Sao Paulo, Campinas, Santos and part of Mato Grosso do Sul). The territories in which the Company operates have an aggregate population of approximately 128 million people, or about 25-26% of the total population of Latin America. Within these territories, we have the exclusive right to produce and distribute substantially all of Coca-Cola's soft drink products and certain non-carbonated beverages. We also produce and distribute a variety of flavored soft drinks and bottled water products under licensed and proprietary trademarks in certain parts of our territories. In our Brazilian franchise we distribute Kaiser, Bavaria and Heineken beers. We also distribute Regional malt in Venezuela. Our business began in 1941, when Albert H. Staton, Sr. and a group of investors acquired a core of the franchised bottling operations of Coca-Cola in Mexico. We were incorporated in Panama in 1945 as successor to a Mexican company through which the business was initially conducted. In 1944 and 1945, we expanded our operations to Colombia and Brazil, respectively. In 1950, we acquired Coca-Cola's bottling franchise for the Sao Paulo territory. Since then, our operating units have acquired additional bottling franchises within their respective countries. We entered the Costa Rican market in 1995, both the Venezuelan market and the Nicaraguan market in 1997, the Guatemalan market in 1998, and the Panamanian market in 2002. PROPOSED MERGER TRANSACTION On December 22, 2002, we entered into a merger agreement with Coca-Cola Femsa S.A. de C.V. ("Coca-Cola FEMSA"), pursuant to which Coca-Cola FEMSA will acquire Panamco in a transaction valued at approximately $3.6 billion, including the assumption of $880 million in estimated net debt (used in this report to mean long-term obligations, including current portion and bank loans, minus cash and equivalents). Under the terms of the transaction, holders of our Class A common stock, excluding The Coca-Cola Company, will receive $22 per share in cash and holders of our Class B common stock, excluding Coca-Cola, will receive $38 per share in cash. Panamco Class A shares trade on the New York Stock Exchange and do not have any voting rights. Panamco Class B shares have full voting rights but do not trade on any exchange. The Coca-Cola Company will receive approximately 304 million unlisted Coca-Cola FEMSA Series D shares. There can be no assurance that the proposed merger transaction with Coca-Cola FEMSA will be completed, and consummation of the merger is subject to several significant conditions. Assuming satisfaction of such conditions, the merger is expected to close during the second quarter of 2003. Upon completion of the merger transaction, Panamco will become a wholly-owned subsidiary of Coca-Cola FEMSA and our shares of Class A common stock will be delisted from trading on the New York Stock Exchange. Additional information regarding the proposed - -------------------------- 1 Except where indicated consolidated numbers exclude operating results from Coca-Cola de Panama throughout this report. 1 transaction can be found in the preliminary proxy statement that we filed with the Securities and Exchange Commission on January 30, 2003. See also "Item 7. - -- Management's Discussion and Analysis of Financial Condition and Results of Operations." CORPORATE STRUCTURE HOLDING COMPANY STRUCTURE We are a holding company and conduct our operations through tiers of subsidiaries. The following chart summarizes our corporate structure and ownership interest in our country level holding companies and describes their interests in their bottling subsidiaries as of December 31, 2002:
----------------- | PANAMCO | ----------------- | ------------------------------------------------------------------------------------------------------------- | | | | | | | | ------------- ------------ ------------ ------------ ---------- ------------ ----------- ----------- | 98.1% | | 100% | | 69.4%** | | 50.1%* | | 53.0% | | 97.6% | | 100% | | 98.8% | | | | | | | | | | CA | | | | | | | | Panamco | | Panamco | | Panamco | | Panamco | |Beverages,| | Panamco | | Panamco | | Panamco | | Mexico | | Guatemala | | Nicaragua | | Costa Rica | | Inc. | | Colombia | | Venezuela | | Brazil | ------------- ------------ ------------ ------------ ---------- ------------- ----------- ----------- | | | | | | | | ------------- ------------ ------------ ------------ ---------- ------------- ----------- ----------- | Panamco | | Panamco | | Panamco | | Panamco | | CA | | Panamco | | Panamco | | Panamco | | Mexico owns | | Guatemala | | Nicaragua | | Costa Rica | |Beverages,| | Colombia | | Venezuela | |Brazil owns| | between 86% | |owns 100% of| |owns 100% of| |owns 100% of| |Inc. owns | | owns 65% of | | owns 100% | |100% of its| | and 99% of | |its bottling| |its bottling| |its bottling| | 95.7% of | |one and 100% | | of its | | bottling | | its bottling| | subsidiary.| | subsidiary.| | subsidiary.| |Coca-Cola | | of four of | | bottling | |Subsidiary.| |subsidiaries.| | | | | | | |de Panama.| |its bottling | |subsidiary.| | | | | | | | | | | | | |subsidiaries.| | | | | ------------- ------------ ------------ ------------ ---------- ------------ ----------- -----------
* Panamco Mexico owns 49.9% of Panamco Costa Rica. ** Panamco Costa Rica owns 30.6% of Panamco Nicaragua. SUBSIDIARY OPERATIONS NORTH LATIN AMERICAN DIVISION Our North Latin American Division ("NOLAD") is comprised of our operations in Mexico, Guatemala, Nicaragua, Costa Rica and recently acquired Panama. Mexico. We own approximately 98.1% of the capital stock of Panamco Mexico, S.A. de C.V. ("Panamco Mexico"), a Mexican corporation that in turn owns interests ranging from 86% to 99% in five bottling subsidiaries that own and operate eight bottling plants (including two water bottling plants) in Mexico. Panamco Mexico also owns majority and minority interests in companies that produce materials and equipment used in the production and distribution of soft drinks. Panamco Mexico and its consolidated subsidiaries are collectively referred to herein as "Panamco Mexico." Guatemala. In March 1998, we acquired all the capital of Embotelladora Central, S.A. ("Panamco Guatemala"). Panamco Guatemala produces, distributes and sells Coca-Cola's products, and other soft drink products in about half of the country, including Guatemala City. Nicaragua. We own all the capital stock (69.4% directly and 30.6% indirectly through Panamco Costa Rica) of Panamco de Nicaragua, S.A. ("Panamco Nicaragua"). Panamco Nicaragua produces, distributes and sells Coca- 2 Cola's products, and to a lesser extent other non-carbonated beverages, throughout Nicaragua. We acquired Panamco Nicaragua in 1997. Costa Rica. We own all the capital stock (50.1% directly and 49.9% indirectly through Panamco Mexico) of Panamco Costa Rica. Panamco Costa Rica produces, distributes and sells Coca-Cola's products and other soft drink products throughout Costa Rica. Today Panamco Costa Rica owns and operates one bottling plant and a plastics business. We acquired these operations in 1995 and achieved 100% of coverage of the country in 1996, when we acquired a smaller bottler that operated in the east side of the country. Panama. In October 2002, we acquired slightly more than 50.0% of Coca-Cola de Panama through our 53% ownership in CA Beverages, Inc. (a joint-venture formed by Panamco, Heineken and Florida Ice and Farm and Company "FIFCO"). In late December, we successfully concluded the tender offer for shares of Coca-Cola de Panama through our ownership in CA Beverages Inc., with an acceptance rate of approximately 95%. It is expected that, during the first quarter of 2003, CA Beverages, Inc. will sell its shares in Coca-Cola de Panama to Panamco, allowing for consolidation of this entity into Panamco's results. For more information on this transaction refer to "Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations - Operating Segments." COLOMBIA We own approximately 97.6% of the capital stock of Panamco Colombia, S.A. ("Panamco Colombia"), a Colombian corporation that owns interests ranging from 65% to 100% in subsidiaries that own and operate 16 bottling plants (including one mineral water bottling plant) and own majority and minority interests in corporations that produce materials and equipment used in the production and distribution of soft drinks such as Friomix del Cauca, a cold drink equipment manufacturing company. Panamco Colombia and its consolidated subsidiaries are collectively referred to herein as "Panamco Colombia." VENEZUELA In May 1997, we acquired all the capital stock of Embotelladora Coca-Cola y Hit de Venezuela S.A. ("Panamco Venezuela") (the "Venezuela Acquisition"). Panamco Venezuela produces, distributes and sells products of Coca-Cola throughout Venezuela. Panamco Venezuela owns and operates 9 bottling plants (including one water bottling plant). Panamco Venezuela and its consolidated subsidiaries are collectively referred to herein as "Panamco Venezuela." BRAZIL We indirectly own approximately 98.8% of the capital stock of Refrescos do Brazil S.A. ("Panamco Brazil"), a Brazilian holding company that through subsidiaries owns a bottling subsidiary that, in turn, owns and operates four bottling plants including one water bottling plant and our state-of-the-art facility in Jundiai. We operate in Sao Paulo, Campinas and Santos, as well as in the western central part of the country in the state of Matto Grosso do Sul. In September 1998, we acquired all the capital stock of the Brazilian bottler, Refrigerantes do Oeste S.A. ("R.O.S.A."). R.O.S.A. produces, distributes and sells Coca-Cola's products in the western central part of Brazil in the state of Matto Grosso do Sul. Panamco Brazil and its consolidated subsidiaries are collectively referred to herein as "Panamco Brazil." Prior to March 2002, Panamco Brazil held a 12.1% interest in Cervejarias Kaiser, S.A. ("Kaiser"). In March 2002, we sold our interest in Kaiser as part of a larger transaction in which Molson, Inc. acquired Kaiser, and entered into a partnership with Heineken. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations." As a holding company, our ability to pay operating expenses, debt service obligations and dividends primarily depends upon receipt of sufficient funds from our majority-owned subsidiaries, which are in turn dependent upon receipt of funds from their majority-owned subsidiaries. See "Item 5. -- Market for Registrant's Common Equity and Related Stockholder Matters -- Exchange Controls and Other Limitations Affecting Security Holders" for a discussion of limitations imposed by exchange control laws on the payment of dividends. Dividends paid to us 3 and other foreign shareholders by the subsidiaries are subject to investment registration requirements and withholding taxes. See "Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." The payment of dividends by our subsidiaries is also subject, in certain instances, to statutory restrictions or restrictive covenants in debt instruments and is contingent upon the earnings and cash flow of, and permitted borrowings by, such subsidiaries. The minority shareholders of our subsidiaries receive a pro-rata portion of all dividends paid by those subsidiaries. FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS As a soft drink bottler operating in diverse markets in Latin America, our operations are organized based on geographic location. We report segment information for five geographic areas: NOLAD, Colombia, Venezuela, Brazil and the corporate operations in the United States. Financial information by segment, including revenues and long-lived assets, is provided in Note 22 of the "Notes to Consolidated Financial Statements" included elsewhere in this report. No revenues have been derived from our country of domicile, Panama, prior to 2002 and our acquisition of Coca-Cola de Panama. OUR FRANCHISE TERRITORIES We have exclusive rights under our bottling agreements with Coca-Cola to bottle and distribute soft drinks and water in all of the territories in which we operate. We market all our other soft drink, bottled water, beer products and other beverages only within our franchise territories. The countries where we operate and our franchise territories are shown below: [MAP OMITTED] 4 BEVERAGES AND PACKAGING OUR PRODUCTS We produce or distribute colas, flavored soft drinks, non-carbonated drinks, bottled drinking water and beer. We produce and distribute Coca-Cola products, a few products licensed from other third parties and our own proprietary brands. In 2002, approximately 74% of our unit case volume came from products we sold of Coca-Cola and 26% of our unit case volume were products of Panamco or other companies. In terms of net sales, Coca-Cola products accounted for approximately 89% of our 2002 net sales (64% black colas and 25% other Coca-Cola products), with the remainder of our net sales accounted for by water (8%), beer (2%), and other non Coca-Cola products (1%). In 2002, Panamco complemented its portfolio with new non-carbonated products. Our focus on new products has had the effect of broadening the product portfolio to better meet the needs of more sophisticated consumers with an increasing variety of tastes. Specifically, we launched several new products during 2002. Panamco also introduced new presentations and innovative multi-serve packaging, as described in "Packaging and Presentations." We produce and distribute flavored soft drinks under our own proprietary trademarks, including "Super 12" in Costa Rica, "Kist" in Panama and "Club K", "Club Soda" and "Premio" in Colombia. We produce and distribute bottled waters under our own proprietary trademarks including "Risco" in Mexico, "Shangri-la" in Guatemala, "Alpina" in Costa Rica and Nicaragua, "Manantial", "Premio", "Soda Clausen", Club K and "Santa Clara" in Colombia and "Crystal" in Brazil. During 2002, Panamco reached an agreement with The Coca-Cola Company to convert its proprietary water brand Risco in Mexico to Coca-Cola's brand Ciel. Risco is currently being licensed to The Coca-Cola Company. It is expected that the conversion to Ciel, which started the last week of January 2003, will be gradual. We distribute two types of bottled water products: purified water and mineral water. Purified water is prepared in a similar manner to the water used in the soft drink manufacturing process. Mineral water is obtained from springs and wells. In Brazil, we distribute five beer brands including Bavaria, Kaiser and Heineken beers. In Venezuela we distribute Regional malt. The beverage products we produce or distribute and that accounted for nearly all of our sales in the period ending December 31, 2002 are listed below: 5
------------------------------------------------------------------------------------------------------------------------------- | PANAMCO | PANAMCO | PANAMCO | PANAMCO | COCA-COLA DE | PANAMCO | PANAMCO | PANAMCO | | MEXICO | GUATEMALA | NICARAGUA | COSTA RICA | PANAMA | COLOMBIA | VENEZUELA | BRAZIL | | ---------------|---------------|---------------|---------------|--------------|----------------|----------------|---------------| | COCA-COLA SOFT |COCA-COLA SOFT |COCA-COLA SOFT |COCA-COLA SOFT |COCA-COLA |COCA-COLA SOFT |COCA-COLA SOFT |COCA-COLA SOFT | | DRINK PRODUCTS:|DRINK PRODUCTS:|DRINK PRODUCTS:|DRINK PRODUCTS:|SOFT DRINK |DRINK PRODUCTS: |DRINK PRODUCTS: |DRINK PRODUCTS:| | Coca-Cola |Coca-Cola |Coca-Cola |Coca-Cola |PRODUCTS: |Coca-Cola |Coca-Cola |Coca-Cola | | Coca-Cola Light|Coca-Cola Light|Coca-Cola Light|Coca-Cola Light|Coca-Cola |Coca-Cola Light |Coca-Cola Light |Coca-Cola Light| | Sprite |Fanta |Sprite |Sprite |Coca-Cola |Sprite |Hit Naranja |Sprite | | Sprite Light |Sprite |Fanta |Fanta |Light |Fanta |Hit Pina |Diet Sprite | | Fanta Orange |Lift |Fresca |Fresca |Sprite |Quatro |Hit Uva |Fanta | | Fanta | | |Canada Dry |Fanta |Lift |Hit Manzana |Diet Fanta | | Strawberry |BOTTLED WATER: |BOTTLED WATER: | Ginger Ale |Fresca | |Hit Kola |Simba | | Fresca |Shangri-la* |Kinley Soda | | |OTHER SOFT |Hit Mandarina |Tai | | Lift | |Canada Dry |OTHER SOFT |BOTTLED WATER:|DRINKS: |Hit Parchita |Diet Tai | | Delaware Punch |OTHER PRODUCTS:| Club Soda |DRINKS: |Pure Mountain*|Roman** |Grapette Uva |Kuat | | Senzao |Hi-C |Alpina* |Super 12* | |Premio* |Grapette Kola |Kuat Light | | Beat |Powerade | | |OTHER |Club Soda* |Grapette |Schweppes | | | |OTHER PRODUCTS:|BOTTLED WATER: |PRODUCTS: | |Naranja | Tonic Water | | BOTTLED WATER: | |Hi-C |Canada Dry |Kist* |BOTTLED WATER: |Grapette Pina |Kinley Club | | Risco-Ciel*** | |Kapo | Club Soda |Juizz* |Manantial* |Quatro | Soda | | | |Powerade |Canada Dry |Polar * |Club K* |Frescolita |Fanta Uva | | OTHER PRODUCTS:| |Sunfil | Quinada |Super Malta **|Soda Clausen* |Chinotto | | | Keloco* | | |Alpina* | |Santa Clara* |Chinotto Light |BOTTLED WATER: | | Quatro | | | | | |Aguakina |Crystal* | | Powerade | | |OTHER PRODUCTS:| |OTHER PRODUCTS: | Schweppes | | | Nestea** | | |Powerade | |Powerade |Senzao |BEER: | | Disney | | |Sunfil | | |Soda |Kaiser** | | Kin Light | | |Nestea** | | | Schweppes |Kaiser Light** | | | | |Fruitopia | | | |Kaiser Bock** | | | | | | | |BOTTLED WATER: |Kaiser Gold** | | | | | | | |Nevada |Kaiser Summer | | | | | | | | | Draft** | | | | | | | |BEER: |Heineken** | | | | | | | |Regional** |Bavaria** | | | | | | | | |Xingu** | | | | | | | |OTHER PRODUCTS: |Santa Cerva** | | | | | | | |Malta | | | | | | | | | Regional** |OTHER PRODUCTS:| | | | | | | |Nestea** |Kapo | | | | | | | |Sonfil |Nestea | | | | | | | |Powerade |Flash Power | | | | | | | | | | -------------------------------------------------------------------------------------------------------------------------------
Unless otherwise indicated, products are proprietary to Coca-Cola. Products in italics are new introductions. * Proprietary to Panamco. ** Products licensed from third parties. *** Panamco reached an agreement to convert its water brand Risco to The Coca-Cola Company's brand Ciel. PACKAGING AND PRESENTATIONS A majority of our sales are made in glass or plastic bottles. Our beverages are available in returnable presentations in different package types including returnable PET bottles and glass bottles. Our non-returnable presentations, which are sometimes referred to as "NR" or "one-way", include cans, NR glass, plastic bottles and plastic bags. During 2002, new packages were introduced as follows: 1.5 returnable PET in Guatemala, 1.5 NR PET in Mexico and Colombia, 1.65 NR PET in Colombia and 600 ml NR in Venezuela. Panamco also introduced innovative multi-packages such as six-pack of 20 oz PET bottles and six/twelve/fifteen pack of cans. 6 SALES, DISTRIBUTION AND MARKETING SALES By selling our beverage products directly to over one million points of sale, we believe we have one of the largest consumer goods distribution operations in Latin America. By country, our points of sales are located approximately 20% in Mexico, 5% in Guatemala, 4% in Nicaragua, 3% in Costa Rica, 2% in Panama, 36% in Colombia, 20% in Venezuela and 10% in Brazil. This network serves traditional small stores (including small grocery stores, "Mom and Pop" stores, kiosks and roadside stands), supermarkets, restaurants, bars, schools, offices, businesses and distributors. The mix of sales to these particular types of outlets varies by country and is a function of the economics, demographics and other characteristics of each franchise area. The large grocery format, which typically accounts for close to 1% of the outlets serviced in each country, represents less than 8% of our volume in most of the countries, except in Brazil where it represents approximately 45%. Although this is the fastest growing channel, it still represents a low percentage of our total consolidated volume. We generally sell our beverage products for either on-premise or off-premise consumption. A majority of the products we sell are sold for off-premise consumption. Products we sell for on-premise consumption are generally consumed in traditional small stores, restaurants, bars, fast food outlets, entertainment venues and other similar locations. While consumers typically prefer soft drinks served cold for on-premise consumption, in certain cases, particularly in Mexico, consumers also purchase cold soft drinks for off-premise consumption. For years, in each of our franchise territories we have had programs to place new beverage coolers, post-mix dispensers and vending machines at points of sale for our products to make chilled products available to the consumer. At the end of 2002, cold equipment penetration per 10,000 inhabitants was approximately 79 in Mexico, 54 in Guatemala, 32 in Nicaragua, 59 in Costa Rica, 25 in Panama, 43 in Colombia, 55 in Venezuela and 33 in Brazil. In addition to bottled presentations, we sell soft drinks in post-mix form. Post-mix dispensed product consists of manufactured finished syrup, which we sell to the outlet, and then is mixed with filtered water, typically from the city water source, immediately before the consumer orders a beverage. Post-mix sales represent a small portion of Panamco's total sales. DISTRIBUTION We have developed extensive product delivery and container retrieval systems to maintain sales levels at each of our points of sale. By actively managing our distribution routes, we seek to ensure that deliveries are made when our clients (retailers) have the space and funds available to purchase our beverage products. Distribution is also critical in Latin America, because of the need to reach a significant portion of small retailers. Additionally, a significant portion of our soft drink products are sold in returnable bottles and we must continually collect empty bottles from retailers and return them to our bottling plants to be washed and refilled. Distribution is primarily carried out by our employees and in some cases it is supplemented by a network of independent distributors. We have located and designed our production and distribution facilities based upon local factors including population concentration, topography, quality of roads and availability and efficiency of communications. In territories with large, industrial cities, such as greater Sao Paulo, we operate a smaller number of plants and large distribution centers and often integrate distribution and bottling capabilities at the same facility. In markets with large rural areas, such as Colombia, Venezuela and parts of Mexico, Guatemala, Nicaragua, Costa Rica and Panama, we use a larger number of warehouses. During 2002 we rationalized the number of warehouses in an effort to improve costs. Including our operations in Panama, today we have 210 distribution centers and 35 plants that integrate production and delivery. Out of the 210 distribution centers, Panamco owns 172. We also serve highly concentrated urban markets with over 500 miniwarehouses, 65% of which are in Colombia. 7 We use two main delivery methods depending upon local conditions: the traditional or conventional route truck system (in which salesmen drive delivery trucks on pre-established routes and make immediate sales from inventory available on the route truck) and the pre-sell method (in which a separate sales force takes orders from customers prior to the time of delivery by route trucks, usually within the next 24 hours). With the exception of Guatemala, where we still sell approximately 83% of our volume through the traditional route truck system, sales in all other countries are generally made through the pre-sell method as follows: 86% of our commercial volume in Mexico, 50% in Nicaragua, 85% in Costa Rica, 60% in Colombia, 69% in Venezuela, and 97% in Brazil. The pre-sell method enables us to utilize our route trucks more efficiently, delivering all of their freight capacity and at the same time providing us real time information about the product and presentation needs of our clients. We also employ a system of bicycles, carts and small trucks for smaller customers to provide flexible and fast deliveries within restricted and highly concentrated urban areas. In order to more effectively respond to the needs of our clients and to help us better manage our inventories we have computer systems in place in each of our franchise territories. We have also equipped most of our sales force with handheld computers to provide us with real time information about the product and presentation needs of our customers. MARKETING During 2002, we focused on price/value management and channel and mix management to drive growth. Market segmentation has given rise to preferences on the part of consumers for a variety of presentations. Income level, substitutes, pricing and other factors affect consumer preferences. As part of this strategy, we introduced new presentations in 2002 at both ends of the size spectrum (single-serve and multi-serve sizes) - 600 ml and 1.5L - to better meet these consumer preferences. The smaller presentations have the objective of capturing consumers who look for convenience or for whom the product would otherwise not be affordable while the larger presentations provide a more cost-effective alternative for in-home/multiple consumption. We also introduced innovative multi-pack alternatives, including six 20 oz. packages and six/twelve/fifteen pack cans. In all of our territories, we adapt our product presentations and distribution to each market and to the individual clients and consumers in terms of the space available for product display, point-of-sale material, advertising and delivery methods. In order to maximize sales and per capita consumption of our products, we continually examine sales data in an effort to develop a mix of product presentations that will best satisfy consumers and provide our clients with the most effective product mix. To this end, we have invested in a sophisticated information system that allows us to collect detailed, daily data on over 80% of our points of sale. While the investment was made a couple of years ago, utilization of this information system has significantly improved over time. We also employ a variety of marketing techniques in each of our franchise territories to increase our share of sales, penetration and per capita consumption. Examples of these initiatives include the growth of displays and points of connection, value added promotions, etc. RAW MATERIALS AND SUPPLIES Soft drinks are produced by mixing water, concentrate and sweetener. We process the water we use in our soft drinks to eliminate mineral salts and disinfect it with chlorine. We then filter it to eliminate impurities, chlorine taste, trace metals and odors. We combine the purified water with the appropriate sweetener and concentrate. To produce carbonation, we inject carbon dioxide gas into the mixture. Immediately following carbonation, we bottle the mixture in pre-washed labeled bottles or cans. We maintain a quality control laboratory at each production facility where we test raw materials and analyze samples of soft drink products. All of our sources of supply for raw materials are subject to the approval of The Coca-Cola Company. None of the raw materials or supplies for our products are currently in short supply, although the supply of specific raw materials or supplies could be adversely affected by government controls, strikes, adverse weather conditions or other factors beyond our control. Any increase in the price of our raw materials or supplies will 8 increase our cost of sales and adversely affect our net earnings to the extent we are unable to pass along the full amount of such increases to the consumer. Concentrates. We purchase concentrates from The Coca-Cola Company for all Coca-Cola trademark products and from other sources for our proprietary or third party products. See "Item 7. - Management Discussion and Analysis of Financial Condition and Results of Operations - Overview - Related Party Transactions with The Coca-Cola Company." Water and sugar. We obtain water from various sources, including springs, wells, rivers and municipal water systems. Sugar is readily available in all of our territories as each of Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and Brazil is a producer of sugar. In addition, we are authorized by Coca-Cola to use high fructose sweetener as a sugar substitute for certain of our products. We purchase our requirements from multiple suppliers in each country. Carbon dioxide. We purchase all of our supply of carbon dioxide in Costa Rica, Colombia and Venezuela from Praxair. All of our supply for Brazil is being cogenerated at one of our bottling plants. Panamco Mexico purchases its supply of carbon dioxide gas from Cryoinfra. Panamco Nicaragua and Panamco Guatemala purchase their supply of carbon dioxide from Carbox, a supplier located in Guatemala. Our local supplier in Panama is Industrias Hielo. Alternate suppliers are available in all the countries where we operate. Bottles, caps and other packaging materials. We usually purchase glass bottles, plastic soft drink containers, plastic bottle caps, cans and general packaging materials locally in each country from multiple suppliers. Our supplies of plastic bottles in all of our territories are generally sourced from single suppliers of such bottles in each country, and there are alternative suppliers. Panamco Colombia has facilities to produce a small portion of its own disposable plastic bottles and owns 20% of Comptec, S.A., a joint venture with a subsidiary of The Coca-Cola Company and other Andean bottlers formed to produce returnable and disposable plastic bottles. Panamco Costa Rica owns a plastics business, which supplies plastic bottles for all of Panamco Costa Rica's requirements and to other customers in Central America, including Panamco Nicaragua and Panamco Guatemala. We purchase metal bottle caps primarily from the Zapata International group of companies, which have manufacturing facilities in Mexico and Brazil. In Colombia, one of the companies in the Zapata group owns 60% and Panamco Colombia the other 40% of Tapon Corona, S.A., a Colombian company that manufactures bottle caps for Panamco Colombia, Panamco Venezuela and other customers. Panamco Costa Rica, Panamco Nicaragua and Panamco Guatemala currently purchase their plastic bottle caps from Alcoa CSI, a third-party supplier. We have facilities in Mexico, Colombia and Costa Rica, which produce plastic cases for carrying bottles. The Costa Rican facility supplies Panamco Nicaragua and Panamco Guatemala. Plastic is purchased locally or imported when necessary. Plastic cases in Venezuela are purchased mainly from Gaveras Plasticas Venezolanas, C.A. and are produced from 100% recycled materials. Other local suppliers are also available. In addition to its bottling operations, Panamco Brazil also has the capacity to produce cans for soft drinks at its Jundiai plant and to produce plastic bottles at its bottling facility in Matto Grosso do Sul. Panamco Mexico owns approximately 14.9% of Industria Envasadora de Queretaro, S.A. de C.V., a canning cooperative for products of Coca-Cola in Mexico. Panamco Colombia has the capacity to produce canned soft drinks at its Bogota plant. Panamco Venezuela has the capacity to produce canned soft drinks at three of its plants. Panamco Central America imports canned soft drinks from a Coca-Cola bottler in El Salvador, EMBOSALVA S.A, except in Panama, which produces its own canned product. Finally, Panamco Colombia has its own facilities to manufacture its own beverage coolers, which it also sells to our other operating Panamco subsidiaries. Panamco Costa Rica manufactures its own racking systems for route trucks and freight vehicles. 9 PRODUCTION During 2002, we proactively took actions that resulted in the reduction of a portion of our assets to improve costs within the context of deteriorating macroeconomic conditions that impacted our region. As a result, our subsidiaries, including Panama, now own and operate a total of 43 bottling plants, four less than a year ago. Per country we have 8 plants in Mexico, 1 in Guatemala, 1 in Nicaragua, 1 in Costa Rica, 2 in Panama, 17 in Colombia, 9 in Venezuela and 4 in Brazil. The totals include 2 plants in Mexico, 1 plant in Brazil, 1 in Colombia and 1 in Venezuela, which we use exclusively to bottle water at the source. Despite the decrease in the number of plants, we now have over 213 bottling lines, 18 more versus a year ago. Installed capacity totals over 2.3 billion unit cases a year (assuming 500 production hours per month for 12 months per year), including total carbonated soft drinks capacity which is approximately 1.7 billion unit cases a year. Additionally, in order to increase production efficiency and reduce costs we have continued implementing cost reduction plans at all of our subsidiaries. Product quality indexes have increased versus prior years and we will continue to evaluate and monitor the efficiency of our operations. Panamco Brazil's Jundiai plant is the largest and one of the most sophisticated manufacturing complexes in the Coca-Cola system. Our Jundiai plant has an annual production capacity of 250 million unit cases and obtained ISO 9002 certification in the prior year and 14001 certification for quality, productivity and environmental safety, which is confirmed every six months. COMPETITION The beverage business in our franchise territories is highly competitive. Our principal competitors are bottlers of PepsiCo, Inc. ("Pepsi") products and bottlers and distributors of nationally and regionally advertised and marketed soft drinks. Our principal competitors in each of our franchise territories are set forth below: NOLAD Our principal competitors in Mexico are bottlers of Pepsi products, whose territories overlap, but do not precisely match ours. We compete with Geupec, Grupo Regordosa and Pepsi Bottling Group, who recently acquired Pepsi-Gemex, for share of sales in our territory. Additionally, a new entrant, Big Cola (also known as Kola Real), a "B" brand or low cost producer of soft drinks, has increased competition in some of our Mexican territories. In Costa Rica, Embotelladora Centroamericana S.A. (Pepsi bottler) is our principal competitor. In addition, Cerveceria Costa Rica, a subsidiary of FIFCO and the country's only beer manufacturer, competes against us in the juice segment in Costa Rica. In Nicaragua and Guatemala, The Central American Bottling Corporation (Pepsi bottler) is our main competitor and in Panama we compete against Refrescos Nacionales (Pepsi bottler), a business unit of Bavaria brewery (Cerveceria Nacional) in that country. COLOMBIA In Colombia our principal competitor is Postobon, a well-established bottler of both nationally advertised flavored soft drink products and Pepsi. The owners of Postobon hold other significant commercial interests in Colombia. VENEZUELA A joint venture formed between Pepsi and Empresas Polar, S.A., the leading beer distributor in the country named Pepsi-Cola Venezuela, S. A., is our main competitor in Venezuela. Since December 1999, we also compete with the producers of Kola Real in the central part of the country. 10 BRAZIL In Brazil our main competitor is AmBev. We also compete with "B" brands or "tubainas", which are small, local, lower cost producers of flavored soft drinks. Tubainas are local shops that produce "no frills" flavored soft drinks mainly in 2-liter presentations for at home consumption. They market their products primarily in supermarkets. In Brazil, B brands represent an important portion of the market. In addition to competition from other soft drink producers, our products compete with other major commercial beverages, such as coffee, tea, milk, beer and wine, as well as non-carbonated soft drinks, citrus and non-citrus fruit juices and drinks and other beverages. Soft drink bottlers also compete for share of sales through distribution and availability of products, pricing, service provided to retail outlets (including merchandising equipment, maintenance of bottle inventories at appropriate levels and frequency of visits), product packaging presentations and value added promotions. In recent years, price discounting by our competitors has been a means of obtaining sales share in Mexico, Colombia, Venezuela and Brazil. Our consumer promotions are guided primarily by Coca-Cola and take the form of contests, television, radio and billboard advertising, displays, merchandising and sampling. EMPLOYEES At December 31, 2002, we employed over 42,000 people (including outsourced labor, but excluding independent distributors). Approximately 35% of our employees are members of labor unions, most of who are in Mexico. Most of the employees in Colombia are covered by non-union collective bargaining agreements. The collective bargaining agreements for both unionized and non-unionized employees are negotiated separately for each bottling subsidiary. In Mexico, collective bargaining agreements are renegotiated annually with respect to wages and biannually with respect to benefits. In Colombia all collective bargaining agreements are negotiated biannually. In Venezuela all collective bargaining agreements are negotiated every three years but salaries are reviewed annually. In accordance with profit sharing programs required by local labor laws, Panamco Mexico pays employees amounts usually equal to 10% of its taxable income. The Mexican government also requires employers to set aside a percentage of employee wages in retirement accounts. In addition, both employers and employees in Mexico must contribute amounts to the national health care system and a workers' housing fund. In Guatemala, Nicaragua, Costa Rica, Colombia and Brazil, employers and employees contribute to employee retirement accounts and to their national health care systems. In accordance with labor laws in Venezuela, a profit-sharing program has been implemented pursuant to which employees are entitled to receive an additional payment equal to at least 15 days' wages (but not more than four months' wages). A profit-sharing program was established in Brazil in 1997. In Mexico, Guatemala, Nicaragua and Costa Rica, employees are entitled to a mandatory Christmas bonus in an amount equal to 15 days in the case of Mexico, and one month's salary for the rest of the countries. If an employee has worked for a company less than one year, that employee's bonus is reduced in proportion to the amount of time such employee was not employed. In Guatemala, employees receive a mandatory bonus in the form of a three-month payment based upon the salary paid during the preceding twelve months. We have voluntarily instituted and maintained popular benefits for our employees, including housing loans. We believe that our relationship with our employees is good in general. In 2001, five employees and a union representing approximately 400 of our employees in Colombia instituted a legal action against us and others claiming human rights violations. See "Item 3. -- Legal Proceedings." The labor laws in each of the seven countries in which we operate require certain severance payments upon involuntary termination of employment. 11 FRANCHISE ARRANGEMENTS Coca-Cola. We have the right to sell Coca-Cola's products, certain other soft drinks and certain bottled water products pursuant to bottling or other similar agreements. See "Item 13. -- Certain Relationships and Related Transactions" for a discussion of our bottling agreements with Coca-Cola. Other Brands. Panamco Colombia has agreements with companies other than Coca-Cola for the sale of locally recognized soft drink products and mineral water. These agreements contain provisions governing the production, marketing and sale of the beverages that are, in most instances, less stringent than the requirements contained in our bottling agreements with Coca-Cola. Panamco Venezuela had an agreement for the sale and distribution of beer under the Regional trademark in Venezuela until November 1, 2002. Panamco Venezuela continues to distribute malt in Venezuela under the Regional trademark. Panamco Brazil has an agreement to distribute both Kaiser and Heineken beers. GOVERNMENT REGULATION Controls on Pricing and Promotions. Although there are none currently in effect, in the last ten years the governments of Mexico, Colombia, Brazil and Venezuela have imposed formal price controls on soft drinks. Currently in Colombia, for soft drinks and for other goods, price increases proposed by manufacturers are subject to the informal approval of the government. In the past, the Mexican government also limited the types of presentations for soft drinks. Each of the governments of the countries in which we operate regulates some of our promotional activities such as cash prize contests and certain other promotions. Taxation of Soft Drinks. All the countries in which we operate impose a value-added tax ("VAT") on the sale of soft drinks, with a rate of 15% in Mexico, 12% in Guatemala, 15% in Nicaragua, 16% in Colombia, 16% in Venezuela and 18% in Brazil. In addition, several of the countries in which we operate impose excise or other taxes on soft drinks. In Guatemala, there is an excise tax of Q$ 0.18 per liter of soft drink and lower amounts for other beverages like juices and water. During 2002, Nicaragua imposed a 11.0% consumption tax, which was reduced to 9% on October. There is an additional U.S. $0.11 surcharge per physical case of returnable glass products. Costa Rica imposes specific taxes on soft drinks that together with its VAT result in an average effective tax rate of approximately 24.4%. Brazil imposes an excise tax of 12.5% and a consumption tax of 6.7%. In 2002, Mexico introduced an excise tax of 20% on fructose-based soft drinks. This excise tax was suspended temporarily and re-enacted in the month of July 2002. The tax temporarily affected our costs by $8.3 million and the Company implemented a transition from fructose corn-syrup to sugar. As of January 2003, beverages produced with sweeteners other than sugar are taxed. Diet drinks and mineral water fall under this category. Environmental Regulation. We spent $1.8 million and $2.0 million in 2002 and 2001, respectively, on plant upgrades designed to meet environmental objectives. We must comply with local permit requirements for constructing and expanding facilities, drilling wells, drawing water from rivers and discharging effluent. Intellectual Property. The intellectual property laws of the countries in which we operate require a proprietary owner of trademarks used in the operation of franchises in the countries to make certain filings with the government to protect the trademark. We believe that we have made all necessary filings to protect our proprietary trademarks and to the best of our knowledge, Coca-Cola and the owners of the other trademarks we use have made the necessary filings to protect their respective trademarks. See also "Item 5. -- Market for Registrant's Common Equity and Related Stockholder Matters -- Exchange Controls and Other Limitations Affecting Security Holders." 12 POLITICAL, ECONOMIC AND SOCIAL CONDITIONS IN LATIN AMERICA In addition to the governmental regulations that have been imposed on our operations, the Latin American markets in which we operate are characterized by volatile, and frequently unfavorable, political, economic and social conditions. High inflation and, with it, high interest rates are common. In 2002, the annual inflation rates were approximately 5.7% in Mexico, 7.0% in Guatemala, 3.9% in Nicaragua, 9.7% in Costa Rica, 7.0% in Colombia, 31.2% in Venezuela and 12.2% in Brazil. The governments in these countries have often responded to high inflation by imposing price and wage controls or similar measures, although currently there are no formal soft drink price controls in any of the countries. These countries have also experienced significant currency fluctuations. See "Item 1. -- Currency Devaluations and Fluctuations." We can be adversely impacted by inflation in many ways. In particular, when wages rise more slowly than prices, inflation can erode consumer purchasing power and thereby adversely affect sales. Margins are diminished if product prices fail to keep pace with increases in supply and material costs. While we have been able in most recent years to increase prices in local currency terms, net sales in local currency terms may nevertheless remain flat or decrease if, among other things, inflation or high unemployment diminishes consumer purchasing power, as has been the case recently in most of our countries. Although we expect that prices will generally keep pace with inflation in the near term, sales volume may decline and supply and material costs may rise more rapidly than prices in the future. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations." See also the discussion under "Item 1. - -- Currency Devaluations and Fluctuations" regarding the impact of devaluations on net sales in dollars. The governments in the countries in which we operate have historically exercised substantial influence over many aspects of their respective economies. In recent years, these governments have implemented important measures to improve their economies. The current political climate in these countries may create significant uncertainty as to future economic, fiscal and tax policies. MEXICO In July 2000, the "Institutional Revolutionary Party", which had ruled Mexico since 1929, lost the presidential election and transferred the presidential powers to President Vicente Fox, the leader of the opposition party "Partido de Accion Nacional." During 2002, the economy of Mexico was impacted by the slowdown of the economy in the United States, its principal trade partner, and gross domestic product ("GDP") grew only 1.7%. Growth has been predominantly export-led more than by the expansion of the internal economy. In addition, the domestic economy growth has been constrained by rising unemployment. President's Fox's policy agenda has been comprised of several measures: fiscal and labor-market reform, liberalization of the electricity sector and privatization. Without a majority in the legislature, these measures may be difficult to implement. The tax reform approved by the Mexican congress and which became effective at the beginning of 2002 was different from the original proposal presented by the Fox administration. Monetary policy has focused on keeping annual inflation at single-digit levels and the government has to date been successful in implementing this policy. GUATEMALA 2003 is an election year for Guatemala, where the ruling Frente Republicano Guatemalteco (FRG) may have to confront the supporters of the president Alfonso Portillo and the supporters of the party's secretary and president of Congress, the retired general Efrain Rios Montt. In April 2002 the government signed a one-year precautionary stand-by arrangement with the International Monetary Fund ("IMF"), providing a credit facility for the equivalent of U.S. $105 million. Under the program, the government committed itself to consolidating its fiscal position, strengthening the financial sector and improving governance and transparency. The government has expressed its intentions to extend the agreement with the IMF until the end of 2003, but this will depend on its commitment to fiscal discipline in 2003. Guatemala had a 12-month inflation rate of 7.0%, in part due to the rise in VAT in August 13 2001. The government decreed rises in the minimum wage for the beginning of 2003 of 14% for nonagricultural workers and 16% for agricultural workers, which may exert upward pressure on prices. The quetzal firmed from a low Q8.15:U.S.$1 in November 2001 to its present rate Q7.65:U.S.$1. The trade deficit widened in 2002 reflecting weak external demand. Reports estimate that the current-account deficit widened by more than U.S.$200 million. NICARAGUA President Enrique Bolanos has focused most of his political agenda during 2002 in fighting corruption and confronting ex-president Mr. Arnoldo Aleman in different legal and political arenas. In July of 2002, the U.S. Congress approved trade promotion authority for the U.S. president, George W. Bush, and talks on free-trade agreement between the U.S. and five Central American countries including Nicaragua started in December. Talks with the IMF have proceeded and a formal agreement may be reached. The requirements of the IMF include a three-year poverty reduction and growth facility (PRGF). After slowing significantly in 2002, GDP growth is expected to improve moderately in 2003, as a gradual revival in domestic business confidence boosts investment and output, and the external environment slowly brightens. The size of the trade deficit is expected to remain substantial, signaling that the current-account deficit may encompass a significant percentage of GDP, perhaps at over 20%. COSTA RICA President Abel Pacheco continues to enjoy a high level of popular support, which has provided the government with a degree of legitimacy that has helped it implement its policy agenda. Costa Rica's foreign policy centers on improving trade relations and seeking foreign direct investment from the United States and the European Union. Mr. Pacheco's administration has tried to boost regional economic integration through the U.S.-sponsored Free-Trade Area of the Americas (FTAA) initiative. On a bilateral level, Costa Rica is trying to sign a free-trade agreement (FTA) with the U.S., having signed one with Canada in 2002. The Banco Central de Costa Rica (the "Central Bank") experienced difficulty in 2002 in reducing inflation in the face of persistent fiscal deficits, labor market rigidities and other structural problems. The Central Bank manages the exchange rate through a system of daily crawling peg adjustments in order to maintain a stable trade-weighted real exchange rate. The rate of depreciation is designed to match the inflation differential between Costa Rica and its developed-country trading partners in the preceding 12 months, although in practice, this aim is not always met. COLOMBIA The newly elected president, Alvaro Uribe, is moving swiftly to enact an agenda intended to address Colombia's political and economic challenges through a referendum expected to be held by mid-2003. The Uribe administration is currently working with IMF officials on a new stand-by facility with the IMF for 2003 through 2006 to secure financial support from multilateral agencies, which is essential to finance the country's fiscal deficit. Fiscal reforms were enacted by the Colombian congress at the end of 2002, placing the public finances on a healthier footing. Persistently high unemployment, fiscal constraints and an adverse political environment have been the main impediment to growth. Agriculture, telecom, manufacturing and construction have been the leading sectors in the Colombian economy. A widening trade deficit and rising debt payments has lifted the current-account deficit to approximately 2-3% of GDP. VENEZUELA The currency suffered a devaluation of approximately 85% and GDP contracted approximately 8.9% during the year. Polarization of the government and its opposition drove the country to a short-lived coup d'etat in the month of April, when President Hugo Chavez was taken out of power for 48 hours, before being able to return to the presidential palace. After the events of April, the opposition and the government have been discussing different alternatives to a democratic solution to the country's political situation with direct participation of Mr. Cesar Gaviria, President of the Organization of American States ("OAS"). Notwithstanding Mr. Chavez continues in power, his governability has been further impaired by opposition-organized civil campaigns, which included the national strike that began on December 2002 and concluded in February 2003, with most of the population going back to work. The national strike included a significant sector of the workers from Petroleos de Venezuela, S.A., hampering oil 14 production by more than 85% from its normal levels. The recession and the devaluation of the Bolivar have kept import spending depressed and since the beginning of the national strike, oil earnings have dropped to minimal levels. Additionally, in February 2003, the government imposed controls on foreign currencies exchanges. BRAZIL Having won the presidential election in October, Luiz Ignacio "Lula" de Silva took office on January 1st 2003 for a four-year term. Lula has committed himself to maintaining the macroeconomic policy of the outgoing government of Fernando Henrique Cardoso, including broad fiscal discipline, a floating exchange rate and inflation targeting. Specifically, he has endorsed the terms of the IMF agreement signed by Mr. Cardoso in August, which makes available a U.S.$30 billion loan facility to provide balance-of-payments support to the end of 2003. CURRENCY DEVALUATIONS AND FLUCTUATIONS As a general matter, because our consolidated cash flow from operations is generated exclusively in the currencies of Mexico, Guatemala, Nicaragua, Costa Rica, Colombia, Venezuela and Brazil, we are subject to the effects of fluctuations in the value of these currencies. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations." Each of these countries has historically experienced significant currency devaluations relative to the U.S. dollar. In general, such devaluations are accompanied by high inflation and declining purchasing power, which can adversely affect our sales as well as income. Because our financial statements are prepared in U.S. dollars, net sales (and other financial statement accounts, including net income) tend to increase when the rate of inflation in each country exceeds the rate of devaluation of such country's currency against the U.S. dollar. Alternatively, net sales (and other financial statement accounts, including net income) generally are adversely affected if and to the extent that the rate of devaluation of each country's currency against the U.S. dollar exceeds the rate of inflation in such country in any period. When dividends are distributed to us by our foreign subsidiaries, the payments are converted from local currencies to U.S. dollars, and any future devaluations of local currencies relative to the U.S. dollar could result in a loss of cash flows to Panamco. For a discussion of devaluation rates in Mexico, Guatemala, Nicaragua, Costa Rica, Colombia, Venezuela and Brazil, see "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Inflation." In periods of high inflation and high interest rates, borrowings denominated in local currencies are more costly, while borrowings indexed to the U.S. dollar or other foreign currencies place the risk of devaluation on the borrower. We could be adversely affected by a devaluation of the countries where we operate. SEASONALITY Sales of our soft drink products are highest during the December holidays and during the hottest times of the year. For this reason, we typically experience our best results in the second and fourth quarters. However, the seasonality effect is tempered in our case because of the difference in the timing of the summer months in the countries in which we operate. In Brazil, summer occurs during November, December and January, while summer occurs in the rest of our territories during the months of June, July and August. ADDITIONAL INFORMATION Additional information about Panamco may be found at our corporate website at WWW.PANAMCO.COM. Through our website you may access, free of charge, the various reports that we file with the Securities and Exchange Commission. 15 ITEM 2. PROPERTIES PROPERTIES Our properties consist primarily of bottling, distribution and office facilities in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and Brazil. Panamco Mexico, Panamco Guatemala, Panamco Nicaragua, Panamco Costa Rica, Coca-Cola de Panama, Panamco Colombia, Panamco Venezuela and Panamco Brazil, currently own and operate 8, 1, 1, 1, 2, 17, 9 and 4 bottling plants, respectively. As of December 31, 2002, the Company owned or leased over 200 warehouse distribution centers and 518 mini-warehouses, in addition to these in the 35 plants that integrate production and delivery. See "Item 1. -- Business -- Production" for additional information regarding our properties. As of December 31, 2002, the consolidated net book value of all land, buildings, machinery and equipment owned by the Company was approximately $843.9 million. The total annual rent paid by the Company in 2002 for its leased distribution and office facilities was approximately $7.2 million. ITEM 3. LEGAL PROCEEDINGS NOLAD Mexico - Antitrust Matters. During May 2000, the Comision Federal de Competencia in Mexico (the Mexican Antitrust Commission, the "Commission") pursuant to a complaint filed by PepsiCo, Inc. and certain of its bottlers in Mexico, initiated an investigation of the sales practices of Coca-Cola and its bottlers. In November 2000, in a preliminary decision and in February 2002, through a final resolution, the Mexican Antitrust Commission held that Coca-Cola and its bottlers engaged in monopolistic practices with respect to exclusivity arrangements with certain retailers. The Mexican Antitrust Commission did not impose any fines, but ordered Coca-Cola and its bottlers, including certain Mexican subsidiaries of the Company, to abstain from entering into any exclusivity arrangement with retailers. The Company, along with other Coca-Cola bottlers, appealed the resolution rendered in February of 2002 by a Recurso de Revision ("Review Recourse"), which was presented before the Mexican Antitrust Commission. The Mexican Antitrust Commission confirmed its original resolution and issued a confirmatory resolution on July 11, 2002. The Company appealed this resolution before the competent courts by initiating a Juicio de Amparo (appeal based on the violation of constitutional rights). The Company anticipates that a decision from the appeals court could be rendered by the end of 2003. Although no assurances can be given, the Company does not believe that the outcome of this matter, even if determined against the Company, will have a material adverse effect on its financial condition or results of operations. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Forward-Looking Statements." Costa Rica - Antitrust Matters. During August 2001, the Comision para Promover la Competencia in Costa Rica (the "Costa Rican Antitrust Commission") pursuant to a similar complaint filed by PepsiCo, Inc. and its bottler in Costa Rica initiated an investigation on the sales practices of Coca-Cola and Panamco Costa Rica for alleged monopolistic practices in the retail distribution channel including the gain of share of sales through exclusivity arrangements. Although no assurances can be given, the Company does not believe that the outcome of this matter, even if determined against the Company, will have a material adverse effect on its financial condition or results of operations. Panamco Costa Rica has vigorously defended itself throughout the process and presented its final conclusions to the Costa Rican Antitrust Commission in September 2002. The Company is anticipating a decision from the Costa Rican Antitrust Commission during the second quarter of 2003. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Forward-Looking Statements." VENEZUELA Tax. In connection with the Venezuela Acquisition, in 1999 the Company received notice of certain tax claims asserted by the Venezuelan taxing authorities, which mostly relate to fiscal periods prior to the Venezuela Acquisition. The Company has presented the appropriate recourses against these claims at the administrative level as 16 well as the court level, where required. These claims currently total approximately $23.1 million. The Company has certain rights to indemnification from Venbottling (a company owned by the Cisneros family) and Coca-Cola for a substantial portion of such claims. Based on the analysis that the Company has completed in relation to these claims, as well as the defense strategy that the Company has developed, the Company does not believe that the ultimate disposition of these cases will have a material adverse affect on its financial condition or results of operations. See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Forward-Looking Statements." Labor and distribution. During 1999, a group of independent distributors of Panamco Venezuela commenced a proceeding to incorporate a union of distributors. As a result, these distributors may, among other things, individually demand certain labor and severance rights against Panamco Venezuela. Since the incorporation process began, Panamco Venezuela has vigorously opposed its formation through all available legal channels. In February 2000, Panamco Venezuela presented a nullity recourse against the union incorporation solicitation, as well as an injunction request before the Venezuelan Supreme Court. 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 and obtain from a court of law a determination that the members of such union are 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 such a court decision, although certain members of the union have threatened such action. The Company intends to vigorously defend its rights should this action be filed. During February 2002, the union filed a petition before the Venezuelan administrative agency in charge of labor matters attempting to obligate Panamco Venezuela to negotiate a collective bargaining agreement. In response, Panamco Venezuela filed a nullity recourse before the competent tribunal (the "Court") along with an injunction requesting the Court to suspend the collective bargaining negotiations until the nullity recourse is resolved. The Court granted the injunction in favor of Panamco Venezuela and admitted the nullity recourse. This injunction and nullity recourse was extended to a subsequent request by the union to have the Venezuelan labor administrative agency mediate the matter. In March 2002, a subcommittee of the Venezuelan congress conducted a hearing with representatives of the union as well as representatives of Panamco Venezuela. The subcommittee is currently reviewing the matter and a final recommendation from this political body is pending. Since 2001 (and after two decisions rendered during 2000 and 2001 by the Venezuelan Supreme Court against affiliates of Empresas Polar, S. A. whereby the Supreme Court found in those individual cases that the relationship between the affiliates of Empresas Polar, S. A. and those specific distributors was a relationship of labor nature and not of commercial nature) Panamco Venezuela has been the subject of numerous claims by former distributors (including former members of the distributors union) claiming alleged labor and severance rights owed to them at the time of the termination of their relationship with Panamco Venezuela. As of December 31, 2002, Panamco Venezuela was the subject of approximately 430 lawsuits filed by former distributors for a total amount of approximately $31.2 million. Notwithstanding the number of claims and the amounts involved most of these claims have been filed by former distributors that either have entered into release agreements with Panamco Venezuela at the time of their termination and therefore the Company believes that they have no rights for additional claims, or are claims that have been filed after the statute of limitations for the presentment of such claims has expired. There are also lawsuits presented by people that have never had a distributor's or employee relationship with Panamco Venezuela, which the Company believe have no merit at all. Since the decisions rendered by the Supreme Court during 2000 and 2001 against the affiliates of Empresas Polar, S. A., the Supreme Court has during 2002 mitigated its criteria of what should be considered a labor relationship vis-a-vis a commercial relationship. The Company believes based on the new decisions rendered by the Supreme Court as well as based on the individual analysis of each individual claim, that these claims are without merits and intends to vigorously defend itself against them. 17 COLOMBIA During 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 our subsidiaries) and Coca-Cola (and certain of its subsidiaries). In the complaint, the plaintiffs alleged that the Company 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. The Company has filed a motion to dismiss the complaint for lack of subject matter and personal jurisdiction. The Company expects a ruling on the motion to dismiss in 2003. The Company believes this lawsuit is without merit and intends to vigorously defend itself in this matter. Other legal proceedings are pending against or involve the Company and its subsidiaries, which are incidental to the conduct of their businesses. The Company believes that the ultimate disposition of such other proceedings will not have a material adverse effect on its consolidated financial condition. BRAZIL Tax. The Brazilian subsidiaries are also being assessed by the Brazilian tax authorities for tax credits taken during 1995 and 1996, relating to overpayments of the value-added tax in previous years. Such overpayments related to value-added tax applied to samples, free products given to customers and to credit sales. These assessments amount to approximately $24.7 million and $37.2 million as of December 31, 2002 and 2001, respectively, and the Company has appealed the assessments at the administrative level. The Company and its outside legal advisors believe that in view of the legal basis adopted for the use of such credits, no significant liability should result from this issue and therefore no provision for this matter has been recorded in the accompanying consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal year 2002. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS NATURE OF TRADING MARKET As of March 24, 2003, we had approximately 1,302 holders of record of an aggregate 112,793,056 shares of Class A Common Stock outstanding, of which 466,667 shares are subject to forfeiture under restricted stock agreements. As of March 24, 2003, there were an estimated 1,058 holders of record of the Class B Common Stock. We estimate that there are approximately 4,000 beneficial shareholders (as opposed to holders of record) of the Company's stock. As of March 24, 2003, to our knowledge, approximately 91% of the total outstanding Common Stock was held of record by persons in the United States. The Class A Common Stock has been listed and traded on the NYSE under the symbol "PB" since September 21, 1993. The following table sets forth the range of high and low closing sale prices of the Class A Common Stock as reported on the NYSE during the periods shown: 18 High Low -------- -------- 2002: First Quarter $18.43 $14.60 Second Quarter $18.69 $14.04 Third Quarter $14.93 $9.13 Fourth Quarter $20.78 $7.67 2001: First Quarter $18.95 $13.56 Second Quarter $21.17 $17.62 Third Quarter $20.67 $16.52 Fourth Quarter $16.50 $13.95 2000: First Quarter $20.50 $16.06 Second Quarter $17.69 $14.94 Third Quarter $20.13 $15.06 Fourth Quarter $17.50 $13.14 On March 24, 2003, the closing sale price of the Class A Common Stock on the NYSE was $21.00 per share. We declared and paid quarterly cash dividends of $0.06 per share of common stock during each of the years ended December 31, 2002 and 2001. EQUITY COMPENSATION PLAN INFORMATION The following table provides information with respect to the Company's equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION ------------------------------------------------------------------------- NUMBER OF SECURITIES NUMBER OF SECURITIES TO BE ISSUED UPON WEIGHTED AVERAGE REMAINING AVAILABLE FOR EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION WARRANTS AND RIGHTS WARRANTS AND RIGHTS PLANS ---------------------- ---------------------- ------------------------- Equity compensation plans approved by security holders..................... 5,488,649 $ 15.95 6,760,870 Equity compensation plans not approved by security holders(1)............... 600,000 $ 14.25 - --------- --------- Total................................... 6,088,649 $ 15.79 6,760,870 ========= ========= - -------------------------------------------------------------------------------------------------------------------
(1) Refer to Note 18, "Stock Option Plans" for a discussion of the November 10, 2000 grant to certain executive officers. CERTAIN RESTRICTIONS ON TRANSFER Our Articles of Incorporation prohibit the transfer of shares of Class A Common Stock if the proposed transferee would become the beneficial owner of 10% or more of the Class A Common Stock, unless such transfer is approved by the Board of Directors or the holders of at least 80% of the shares entitled to vote. Such restriction also applies to any transfer of shares of Class B Common Stock, which are then converted into Class A Common Stock. Our Articles of Incorporation also provide that shares of Class B Common Stock automatically convert into a like number of shares of Class A Common Stock if transferred to any person who is not a Qualifying Transferee, or an Additional Qualifying Transferee, as defined therein. 19 We are registered with the Panamanian National Securities Commission and are subject to a Panamanian statute, which prohibits acquisitions of 5% or more of the outstanding voting securities of a Panama corporation without Board of Directors' review or shareholder approval. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS None of the countries in which we operate currently restricts the remittance of dividends paid by subsidiaries to us, although Venezuela and Brazil have laws in effect that impose limitations on the exchange of local currency for foreign currency at official rates of exchange. Panama does not restrict the payment of dividends by us to our shareholders. Mexico, Brazil, Colombia, Costa Rica, Nicaragua and Guatemala have imposed more restrictive exchange controls in the past, and no assurance can be given that more restrictive exchange control policies, which could affect the ability of the subsidiaries to pay dividends to Panamco, will not be imposed in the future. The payment of dividends by such subsidiaries is also in certain instances subject to statutory restrictions and is contingent upon the earnings and cash flow of and permitted borrowings by such subsidiaries. Payment of dividends by majority-owned subsidiaries necessitates pro rata dividends to minority shareholders. The Mexican Government has not restricted the conversion of the peso into other currencies to pay dividends except during brief periods. However, in prior years, other types of transactions have been subject to exchange controls and less favorable official rates of exchange. Brazil currently restricts the ability of nationals and foreigners to convert the local currency into dollars or other currencies other than in connection with certain authorized transactions, which include, among others, payment of dividends in compliance with foreign investment registration regulations. In Brazil, all foreign investments must be registered with the Central Bank, which issues a certificate of registration of the foreign currency value of such investment. Without such registration, no remittances of dividends or profits may be made abroad, nor may any part of the original investment be repatriated in foreign currency. The Central Bank has issued certificates to the Company and its subsidiaries with respect to its investment in Panamco Brazil. We must obtain an amendment to our Certificate of Registration from the Central Bank upon any change in our investment in Brazil. In Colombia, there are no restrictions on the remittance of profits to foreign investors as long as the investment is registered with the Colombian Central Bank and the proper tax has been withheld. The Central Bank has registered the Company as a foreign investor in each of the directly owned Colombian subsidiaries, and these registrations allow Panamco to remit all dividends received from its Colombian subsidiaries, subject to payment of applicable taxes. However, under current Colombian law, whenever foreign reserve levels fall below the equivalent of three months of imports, repatriation and remittance rights may be temporarily modified. In February 2003, the Venezuelan government imposed controls on foreign exchange transactions. Pursuant to the new exchange regime, all purchases of foreign currencies have to be approved by the government. The new regime imposes several requisites that have to be completed before the purchase of foreign currencies can be approved by the government, which in principle, would be limited to purchases of raw materials, finished food product and to a lesser extent payment of dividends or capital repatriation. Since 1996, no substantial restrictions on the foreign exchange system remain in force in Nicaragua. Although the 1991 Foreign Investment Law, which was created to guarantee foreign investors the right to remit 100% of profits through the official exchange market, is still formally in effect, it no longer has any practical application. Since it is not mandatory, most foreign investors do not seek registration under the 1991 Foreign Investment Law. Investors, whether registered under the 1991 Foreign Investment Law or not, can freely repatriatetheir profits through the banking system. Profit repatriation has not been a problem in Nicaragua in recent years. In Guatemala, there are no restrictions on the remittance of profits to foreign investors. There is no obligation for foreign investors to register their investments with any governmental office or to solicit any authorization to participate in local businesses. In February 1998, the Guatemalan Congress enacted the Foreign Investment Law, which amended or, in some cases, eliminated, restrictions created in the past that affected foreign 20 investment. Since that date, the Guatemalan government treats national and foreign investment under the same rules and conditions. There can be no assurance that prior restrictions will not be reimposed in the future. TAXATION Introduction The following discussion summarizes the principal U.S. Federal income tax consequences of acquiring, holding and disposing of the Company's Class A Common Stock. The following discussion is not intended to be exhaustive and does not consider the specific circumstances of any owner of Class A Common Stock. The discussion is based on currently existing provisions of the United States Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury Regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change (which change could be retroactive). The discussion is limited to United States Federal income tax matters and does not address other U.S. Federal taxes (such as estate taxes) or the state, local or foreign tax aspects of acquiring, holding and disposing of Class A Common Stock. The discussion is limited to holders of Class A Common Stock that do not currently own and have not owned any stock in the Company (or any of its subsidiaries) other than Class A Common Stock and that hold such shares as a capital asset (within the meaning of Section 1221 of the Code). There is no reciprocal tax treaty between Panama and the United States regarding withholding taxes. Certain U.S. Federal Income Tax Consequences to U.S. Holders The following discussion applies to a holder of Class A Common Stock who is an individual citizen or resident of the United States, a corporation created or organized in the United States or any other person subject to U.S. Federal income taxation on its worldwide income and gain ("U.S. Holders"). Distributions by the Company. Distributions by the Company with respect to Class A Common Stock will be taxable to U.S. Holders as ordinary dividend income to the extent of the Company's current and accumulated earnings and profits. Distributions, if any, in excess of the Company's current and accumulated earnings and profits will constitute a nontaxable return of capital to a U.S. Holder to the extent of the U.S. Holder's adjusted tax basis in the Class A Common Stock and will be applied against and reduce the U.S. Holder's tax basis in such Class A Common Stock. To the extent that such distributions are in excess of the U.S. Holder's tax basis in its Class A Common Stock, the distributions will constitute capital gain. Distributions with respect to Class A Common Stock generally will not be eligible for the dividends-received deduction. Foreign Personal Holding Company. The Company and several of its subsidiaries may be "foreign personal holding companies" ("FPHC"). A foreign corporation is classified as an FPHC for a taxable year during which at least 60% of its gross income for the taxable year is "FPHC income" and more than 50% of the voting power or value of all stock in such corporation is owned, directly or indirectly (including shares owned through attribution), by five or fewer individuals who are United States persons. FPHC income generally includes royalties, annuities, proceeds from the sale of stock or securities, gains from futures transactions in any commodities, rents, income from personal services, dividends and interest (other than certain dividends and interest paid by a qualifying related company that is incorporated in the same country as the recipient corporation). After its initial year as an FPHC, a corporation may remain an FPHC even if only 50% of its gross income is FPHC income. All United States Holders that are shareholders of an FPHC are required to include in their taxable income a deemed dividend equal to their share of the corporation's "undistributed FPHC income". In general, a corporation's undistributed FPHC income is the corporation's total taxable income (which is gross income minus allowable deductions such as ordinary and necessary business expenses), with certain adjustments, less dividends paid by the corporation. Such a deemed dividend is recognized by all U.S. Holders that are shareholders of an FPHC with 21 undistributed FPHC income, regardless of their percentage ownership in the corporation, and regardless of whether they actually receive a dividend from the FPHC. Because the Company intends to distribute sufficient dividends and to cause each of its FPHC subsidiaries to distribute sufficient dividends so that no FPHC will have undistributed FPHC income, it is not expected that U.S. Holders will receive deemed dividend income as a result of the FPHC rules. Nevertheless, if the Company or certain of its FPHC subsidiaries have undistributed FPHC income, U.S. Holders will recognize deemed dividend income regardless of whether they receive cash distributions from the Company. Controlled Foreign Corporation. Panamco and its subsidiaries may be "controlled foreign corporations" ("CFC"). A corporation is a CFC if more than 50% of the shares of the corporation, by vote or value, are owned, directly or indirectly (including shares owned through attribution, which requires treating warrants and securities convertible into shares actually or constructively owned by a U.S. Holder as exercised or converted), by "10% CFC Shareholders". The term CFC Shareholder means a U.S. person (including citizens and residents of the United States, corporations, partnerships, associations, trusts, and estates created or organized in the United States) who owns, or is considered as owning through attribution, 10% or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation. Each 10% CFC Shareholder in a CFC is required to include in its gross income for a taxable year its pro rata share of the CFC's earnings and profits for that year attributable to certain types of income or investments. Income recognized by a 10% CFC Shareholder under the CFC rules would not also be recognized as undistributed FPHC income. A U.S. Holder will not be a "10% CFC Shareholder" and will not be subject to the CFC rules unless in the case of the Company the U.S. Holder owns 10% of the Class B Common Stock or in the case of any CFC Subsidiary of the Company, at least 10% of the value of the Company's outstanding shares or at least 10% of the voting stock in one or more of the Company's CFC subsidiaries), in each case directly or indirectly (including shares owned through attribution). Passive Foreign Investment Company. A "passive foreign investment company" ("PFIC") is defined as any foreign corporation at least 75% of whose consolidated gross income for the taxable year is passive income, or at least 50% of the value of whose consolidated assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets, which produce passive income. However, a corporation that is a CFC will not be treated as a PFIC with respect to a shareholder who is a 10% CFC shareholder. Neither Panamco nor any of its subsidiaries has been or is a PFIC, and the Company intends to conduct its affairs so as to avoid the classification of the Company and its subsidiaries as PFICs. However, if ever applied to the Company, the PFIC rules could produce significant adverse tax consequences for a U.S. Holder, including the imposition of the highest tax rate on income or gains allocated to prior PFIC years and an interest charge on U.S. Federal income taxes deemed to have been deferred. Foreign Tax Credits. Dividends received from the Company generally will be characterized as passive income, and any U.S. tax imposed on these dividends cannot be offset by excess foreign tax credits that a U.S. Holder may have from foreign-source income not qualifying as passive income. Dispositions of Stock. In general, any gain or loss on the sale or exchange of Class A Common Stock by a U.S. Holder will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has held the Class A Common Stock for more than 12 months. For noncorporate U.S. Holders, long-term capital gain generally will be subject to U.S. Federal income tax at a maximum rate of 20% if the underlying Class A Common Stock has been held for more than 12 months. There are limits on the deductibility of capital losses. Information Reporting and Backup Withholding Requirements with Respect to U.S. Holders. United States information reporting requirements may apply with respect to the payment of dividends on the Class A Common Stock. Under current Regulations, noncorporate U.S. Holders may be subject to backup withholding at the rate of 22 30% on dividend payments made during 2002 and 2003 when a U.S. Holder (i) fails to furnish or certify a correct taxpayer identification number to the payor in the manner required, (ii) is notified by the IRS that it has failed to report payments of interest or dividends properly or (iii) fails, under certain circumstances, to certify that it has not been notified by the Internal Revenue Service that it is subject to backup withholding for failure to report interest and dividend payments. As long as the reporting requirements above have been met, no backup withholding is required on dividends paid to noncorporate U.S. holders. Form 5471 Reporting Requirements. U.S. Holders may be required to file IRS Form 5471 under certain circumstances. A United States person required to file a Form 5471 to report its ownership of Class A Common Stock may also be required to file one or more Forms 5471 for various subsidiaries of the Company. Failure to provide the information required by Form 5471 may result in substantial civil and criminal penalties. Each prospective shareholder should consult its own tax advisor with respect to the specific requirements for filing Forms 5471. Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders The following discussion summarizes the U.S. Federal income tax consequences of acquiring, holding and disposing of Class A Common Stock by a holder of Class A Common Stock that is not a U.S. Holder (a "Foreign Holder"), is not engaged in the conduct of a trade or business in the United States and is not present in the United States for 183 days or more during the taxable year. Distributions. Distributions by the Company to a Foreign Holder would be subject to withholding of U.S. Federal income tax only if 25% or more of the gross income of the Company (from all sources for the three-year period ending with the close of the taxable year preceding the declaration of the dividend) was effectively connected with the conduct of a trade or business in the United States by the Company. The Company anticipates that it will recognize income that is effectively connected with the conduct of a trade or business in the United States. However, if the Company is subject to a branch profits tax on the income effectively connected with the conduct of a trade or business in the United States, dividends paid by the Company would not be subject to a second-level withholding of U.S. Federal income tax as mentioned above. As a Panamanian corporation not entitled to treaty benefits, the Company would be subject to the branch profits tax. Therefore, there should be no withholding on distributions to foreign shareholders. Dispositions of Shares. A Foreign Holder generally will not be subject to United States Federal income or withholding tax with respect to a gain recognized on the disposition of Class A Common Stock. Information Reporting and Backup Withholding Requirements with Respect to Foreign Holders. Foreign Holders may be required to comply with certification and identification procedures to prove their exemption from information reporting and backup withholding requirements with respect to dividends paid and broker proceeds. Any amounts withheld under the backup withholding rules from a payment to a Foreign Holder will be allowed as a refund or a credit against such Foreign Holder's United States Federal income tax, provided that the required information is furnished to the IRS. As long as the reporting requirements above have been met, no U.S. Income Withholding Tax is required on dividends paid. Certain Panamanian Taxation Matters The principal Panamanian tax consequences of ownership of Shares are as follows: General. Panama's income tax is exclusively territorial. Only income actually earned from sources within Panama is subject to taxation. Income earned by Panamanian corporations from offshore operations is not taxable in Panama. The territorial principle of taxation has been in force throughout the history of the country and is supported by legislation, administrative regulations and court decisions. 23 The Company is not subject to taxes in Panama to the extent that its income arises from the business or activities of its subsidiaries conducted outside of Panama. Furthermore, such income as is earned by the Company in the form of dividends from the operations of a subsidiary or related person in Panama is subject to dividends tax by withholding at its source only and is not subject to further Panamanian taxes at the Company level. This is the case even though the Company maintains its registered office and permanently employs administrative personnel in Panama. Taxation of Capital Gains. There would be no taxes on capital gains realized by an individual or corporation regardless of its nationality or residency on the sale or other disposition of Shares on the basis of the already mentioned principles of territorial taxation, to the extent that the value of such Shares is determined upon assets and activities which are held or conducted outside of Panama. In the last quarter of 2002, the Company acquired a significant investment in Coca-Cola de Panama (the "Panama Acquisition"), which could represent a future source of income and value for the Company by way of profits and dividends sourced within Panama. The Panama Acquisition has not as yet generated additional value to the Company nor has it constituted a source of new profit, by way of dividends or otherwise, for the Company. Furthermore, at present, the value to the Company of the Panama Acquisition is de minimis in proportion to the Company's overall value. Additionally, Panama's tax laws and regulations do not provide any guidelines for the allocation of Panamanian source as opposed to non-Panamanian sourced capital gains arising from the sale or disposition of Shares. Taxation of Distributions. Dividends and similar distributions paid by the Company with respect to Shares would be exempt from Panamanian dividend taxes under the aforementioned territorial principles of taxation to the extent that such income is generated from businesses and activities conducted by the Company's subsidiaries outside of Panama. In addition, dividends and similar distributions made by the Company to its shareholders derived from sources within Panama would not be subject to Panamanian dividends tax at the Company's level, since this dividends tax applies only once, by withholding at source, upon the first distribution of such dividend income from the Company's subsidiary or related person doing business in Panama to its immediate shareholder or parent company. The preceding summary of certain Panamanian tax matters is based upon the tax laws of Panama and regulations thereunder currently in effect and is subject to any subsequent change in Panamanian laws and regulations which may come into effect. ITEM 6. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED FINANCIAL DATA (TABLE STATED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table sets forth selected consolidated financial and operating data for the Company. The selected financial data have been derived from the consolidated financial statements of the Company. The audited consolidated financial statements of the Company for the three years ended December 31, 2002 have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and are stated in U.S. dollars. The selected consolidated financial and operating data should be read in conjunction with "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere herein. 24
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------- ------------ STATEMENT OF OPERATIONS DATA: Net sales (1).............................. $ 2,357,913 $ 2,630,772 $ 2,590,305 $ 2,405,233 $ 2,761,793 Cost of sales, excluding depreciation and amortization shown separately below...... 1,204,216 1,296,307 1,243,485 1,191,883 1,425,246 ----------- ----------- ----------- ------------ ----------- Gross profit.......................... 1,153,697 1,334,465 1,346,820 1,213,350 1,336,547 Operating expenses: Selling and distribution (1)............. 582,726 609,287 627,633 561,454 645,655 General and administrative............... 169,140 204,897 250,491 251,450 222,327 Depreciation and amortization (2)(3)..... 235,205 210,667 276,524 214,539 253,112 Amortization of goodwill................. - 26,416 35,819 36,284 35,739 Facilities reorganization and other charges (7)............................ 35,421 - 503,659 35,172 - ----------- ----------- ----------- ------------ ----------- Total operating expenses.............. 1,022,492 1,051,267 1,694,126 1,098,899 1,156,833 ----------- ----------- ----------- ------------ ----------- Operating income (loss).................... 131,205 283,198 (347,306) 114,451 179,714 Interest income ........................... 6,994 21,341 31,933 28,962 12,817 Interest expense........................... (85,312) (119,390) (142,299) (129,072) (98,152) Other income (expense), net................ 36,352 (10,891) (23,244) (39,296) 22,136 Nonrecurring income, net (4)............... - - - - 60,486 ----------- ----------- ----------- ------------ ----------- Income (loss) before income taxes.......... 89,239 174,258 (480,916) (24,955) 177,001 Provision for income taxes (3)(4).......... 51,126 50,369 21,800 31,254 51,374 ----------- ----------- ----------- ------------ ----------- Income (loss) before minority interest..... 38,113 123,889 (502,716) (56,209) 125,627 Minority interest in earnings of subsidiaries 4,871 5,865 1,944 3,695 5,305 ----------- ----------- ----------- ------------ ----------- Net income (loss)..................... $ 33,242 $ 118,024 $ (504,660) $ (59,904) $ 120,322 =========== =========== =========== ============ =========== Basic earnings (loss) per share............ $ 0.28 $ 0.94 $ (3.92) $ (0.46) $ 0.93 =========== =========== =========== ============ =========== Diluted earnings (loss) per share.......... $ 0.27 $ 0.93 $ (3.92) $ (0.46) $ 0.92 =========== =========== =========== ============ =========== OTHER DATA: Total product unit case volume............. 1,228,054 1,242,200 1,222,500 1,163,117 1,174,035 Dividends per share (5).................... $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 Weighted average shares outstanding (basic) 120,602 125,559 128,833 129,683 129,538 Weighted average shares outstanding (diluted) 121,172 126,655 128,833 129,683 130,792 Capital expenditures (6)................... $ 112,531 $ 83,121 $ 123,897 $ 163,203 $ 302,215
AT DECEMBER 31, ---------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------- ------------ BALANCE SHEET DATA (END OF PERIOD): Cash and equivalents....................... $ 69,024 $ 133,666 $ 191,773 $ 152,648 $ 131,152 Property, plant and equipment, net ........ 843,886 1,043,870 1,125,719 1,218,383 1,307,590 Total assets .............................. 2,327,605 2,693,026 3,026,321 3,613,122 3,647,690 Total long-term liabilities................ 646,763 1,022,375 1,192,981 1,437,834 964,525 Minority interest.......................... 25,121 28,541 27,805 27,974 26,243 Shareholders' equity....................... 904,286 1,072,445 1,167,311 1,751,896 1,978,234 - ----------------------------------------------------------------------------------------------------------------------------
(1) Although not considered significant to the consolidated financial statements, these captions include a reclassification of sales incentives totaling $20.1 million in 2001, $9.1 million in 2000, $10.6 million in 1999 and $11.5 million in 1998 from selling and distribution expense to a reduction of net sales in accordance with Emerging Issues Task Force Issue No. 01-09 "Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor's Products)." (2) Includes breakage of bottles and cases and amortization expense related to new introductions. See Note 1 of "Notes to Consolidated Financial Statements." (3) During 1998, Panamco Brazil conducted a study to evaluate the expected future utilization of returnable product presentations in the Brazilian market, having observed accelerated demand for, and utilization of, non returnable presentations in the marketplace. The 25 results of this study showed that the use of non returnable presentations will continue to increase in the Brazilian market. Therefore, during 1998, Panamco adjusted the carrying value of bottles and cases to reflect their estimated use in the marketplace by charging $36.5 million to the 1998 operating results, increasing total depreciation and amortization expense, and reducing the 1998 tax provision by $12.1 million. (4) Panamco Brazil reversed a contingency allowance recorded in prior years for excise tax credits taken on purchases of concentrate between February 1991 and February 1994. Panamco had previously accrued this allowance in the full amount of such credits. Panamco Brazil reversed this allowance in 1998 because during 1998 the Brazilian Supreme Court resolved similar claims of other bottlers in favor of the bottlers. The reversal of the excise tax allowance amounted to $60.5 million and was credited to nonrecurring income, in the statement of operations. Income tax credits recorded in this allowance, amounting to $20.0 million, were also reversed and charged directly to income in the provision for income taxes in 1998. (5) Dividends per share reflect the amounts declared and paid during the applicable period. (6) Does not include purchases of bottles and cases. (7) Facilities reorganization and other charges in 2002 are related to job terminations and severance payments, charges related to plant closings and disposal of property, plant and equipment, offset by excise tax benefits and the reversal of previously accrued facilities reorganization charges. Facilities reorganization and other charges in 2000 are related to goodwill impairment of $350.0 million in Venezuela, write-off of obsolete property, plant, equipment, bottles and cases, charges related to plant closings and disposal of property, plant and equipment, job terminations and severance payments, and nonrecurring charges related to legal contingencies. Facilities reorganization charges in 1999 are related to job terminations and severance payments and write-off of obsolete property, plant, and equipment. See Note 3 of "Notes to Consolidated Financial Statements." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion addresses the financial condition and results of operations of Panamco and its consolidated subsidiaries. The discussion begins with an overview of our: o Proposed Merger Transaction with Coca-Cola FEMSA; o Beverage Volumes; o Operating Segments; o Critical Accounting Policies; o Related Party Transactions with The Coca-Cola Company; o Effect of Inflation on Financial Information and Costs; o Minority Interests in Operations; and o Forward-Looking Statements. The overview is followed by a review of items that affect the comparability of historic or future results. We then provide an analysis of our results of operations and liquidity and financial condition. The last section of the discussion provides information about our market risks. This discussion should be read in conjunction with our audited consolidated financial statements, including the notes to the consolidated financial statements, as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002 and the notes thereto included elsewhere herein. PROPOSED MERGER TRANSACTION On December 22, 2002, we entered into a merger agreement with Coca-Cola FEMSA, pursuant to which Coca-Cola FEMSA will acquire Panamco in a transaction valued at approximately $3.6 billion, including the assumption of $880 million in estimated net debt (used in this report to mean long-term obligations, including current portion and bank loans, minus cash and equivalents). Under the terms of the transaction, holders of our Class A common stock, excluding The Coca-Cola Company ("Coca-Cola"), will receive $22 per share in cash and holders of our Class B common stock, excluding Coca-Cola, will receive $38 per share in cash. Panamco Class A shares trade on the New York Stock Exchange and do not have any voting rights. Panamco Class B shares have full voting rights but do not trade on any exchange. Coca-Cola will receive approximately 304 million unlisted Coca-Cola FEMSA Series D shares. Additional information regarding the proposed transaction can be found in the preliminary proxy statement that we filed with the Securities and Exchange Commission on January 30, 2003. 26 There can be no assurance that the proposed merger transaction with Coca-Cola FEMSA will be completed, and consummation of the merger is subject to several significant conditions, including the approval by the holders of a majority of our shares of Class B common stock and the approval by the holders of a majority of our shares of Class A common stock present or represented by proxy at the special meeting to be held to consider and vote upon the proposed merger transaction who, in accordance with the merger agreement, are not disqualified holders (for this purpose, disqualified holders means Coca-Cola and its subsidiaries, Venbottling Holdings, Inc. and its subsidiaries, the officers and directors of Panamco and any other holder who beneficially owns shares of our Class B common stock). Other than the shareholder approvals, other important conditions to the proposed merger transaction include antitrust regulatory approvals, the disbursement of funds to Coca-Cola FEMSA by its lenders, the confirmation of investment grade rating of the combined company and the absence of changes that lead to a material adverse effect on Panamco. The merger transaction is expected to be completed shortly after we receive shareholder and regulatory approvals for the merger, which we expect will be during the second quarter of 2003. Upon completion of the merger transaction, Panamco will become a wholly-owned subsidiary of Coca-Cola FEMSA and our shares of Class A common stock will be delisted from trading on the New York Stock Exchange. BEVERAGE VOLUMES Like most companies in the beverage industry, we measure our volumes in unit cases of finished products. As used in this report, "unit case" means 192 ounces of finished beverage product (24 eight-ounce servings) and "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. OPERATING SEGMENTS As a soft drink bottler operating in diverse markets in Latin America, our operations are organized based on geographic location. We report segment information (see Note 22 of the "Notes to Consolidated Financial Statements") for five geographic areas: North Latin American Division (or NOLAD), Colombia, Venezuela, Brazil and the corporate operations in the United States. NOLAD consists of Panamco's operations in Mexico and in the Central American countries of Guatemala, Nicaragua and Costa Rica. In September 2002, we entered into a joint venture with Heineken and Florida Ice and Farm Company, the leading brewer in the Costa Rican market ("FIFCO"), and in October 2002, the joint venture (through a company called CA Beverages, Inc.) acquired direct control of Coca-Cola de Panama Compania Embotelladora, S.A. ("Coca-Cola de Panama") and indirect control of Cervecerias Baru - Panama, S.A. ("Baru"), the second largest brewer in Panama. Following this acquisition, CA Beverages, Inc. caused Coca-Cola de Panama to launch a self-tender offer in Panama for its shares and CA Beverages, Inc. launched a public tender offer in Panama for the shares of Baru that it did not already own. The tender offers were completed during December 2002. We expect in the first quarter of 2003 that CA Beverages, Inc. will spin off its ownership in Coca-Cola de Panama to Panamco and its ownership of Baru to Heineken and FIFCO. Until that process is completed, Panamco will continue to record its ownership in CA Beverages, Inc. as an investment under the equity method. Once the spin-off process is completed, Panamco will begin consolidating the results of Coca-Cola de Panama under its NOLAD division. The acquisition value for Coca-Cola de Panama, on a standalone basis, is estimated to be $73 million, including net debt of $11.7 million. Panamco financed this acquisition from available cash resources and bank debt of $60 million. CRITICAL ACCOUNTING POLICIES The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our Consolidated Financial Statements and the related accompanying notes. We use our best judgment based on our knowledge of existing facts and circumstances and actions that we may undertake in the future, as well as the advice of external experts, in determining the estimates that affect our Consolidated Financial Statements. We have identified the following five accounting policies that 27 require us to make accounting estimates based on assumptions about matters that are highly uncertain at the time we make the estimate and that could materially change our Consolidated Financial Statements if we had had used a different estimate or if our estimate could reasonably change from period to period. Panamco's management has discussed the development and selection of these accounting estimates with Panamco's Audit Committee prior to the filing of this Annual Report on Form 10-K for the year ended December 31, 2002. Basis for translation: Panamco, as the reporting entity, maintains its accounts in U.S. dollars. The accounts of our subsidiaries are maintained in the currencies of the respective countries. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52"), the accounts of our subsidiaries are translated from local currency amounts to U.S. dollars. The method of translation is determined by the functional currency of our subsidiaries. A subsidiary's functional currency is defined as the currency of the primary environment in which a subsidiary operates and is determined based on management's judgment. When the local currency of a subsidiary is determined to be the functional currency, the statements are translated into the currency of the reporting entity using the current rate method. The adjustments generated by translation using the current rate method are accumulated in an equity account entitled "Accumulated other comprehensive loss" within our consolidated balance sheets. When a subsidiary's accounts are not maintained in the functional currency, the financial statements must be re-measured into the functional currency. Re-measurement obviates translation if the subsidiary's functional currency is also the reporting currency. Re-measurement involves re-measuring monetary assets and liabilities using current exchange rates and non-monetary assets and liabilities using historical exchange rates. The adjustments generated by re-measurement are included in our consolidated statement of operations. Property, plant and equipment: Panamco determines the estimated useful lives of property, plant and equipment after consideration of historical results and management's experience. The estimated useful life of these assets represents the service period the asset is expected to provide including normal maintenance. A portion of a soft drink bottler's assets are coolers that are used to display the products at the various points of sale. As part of our normal operations, we may enter into rent-free agreements with customers to place such coolers at the customer's location. Management estimates the potential loss related to coolers placed with customers and records a provision, which is included within depreciation expense. Based on prior history and management's judgment, we believe that the provision represents management's best estimate of the potential loss related to coolers placed with customers. Depreciation expense for property, plant and equipment is calculated using the straight- line method over the estimated remaining useful lives of the assets. A change in the method of depreciation used or a revision in the estimated useful lives of assets may result in materially different amounts reported in our results of operations or could materially affect our financial condition. Bottles and cases: We utilize the first-in, first-out ("FIFO") cost or market method for valuing bottles and cases on hand. In addition, we amortize the cost of newly introduced bottles and cases over their estimated useful lives. We determine the estimated useful lives for new introductions after consideration of prior history and management's experience. Any adjustment in the methodology used to value the bottles and cases or a revision in the estimated useful lives of new introductions may result in materially different amounts reported in our results of operations or could affect our financial condition. Deferred Tax Assets: The carrying value of our deferred tax assets assumes that we will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, including our financial performance and general market conditions. Management evaluates the realizability of the deferred tax assets and assesses the need for additional valuation allowances. During 2002, we increased the valuation allowance in our Brazilian and Venezuelan subsidiaries by $4.3 million and $21.1 million, respectively. If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against our deferred tax assets, resulting in additional income tax expense recorded in our consolidated statement of operations. Conversely, if our financial performance improves, primarily in our Venezuelan operations, we may be able to reverse a portion of the current valuation allowance against deferred tax assets related to our Venezuelan operations, which would result in a decrease in the income tax expense of the Venezuelan subsidiary. 28 Recoverability of long-lived assets: We review all long-lived assets, including cost in excess of net assets of acquired business ("goodwill"), when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, we write down an impaired asset to its estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is employed to estimate discounted future cash flows. Goodwill represents the residual purchase price after allocation to all identifiable net assets acquired. In assessing the recoverability of our goodwill, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of goodwill. This process is subjective and requires judgment at many points throughout the analysis. With the adoption of SFAS No. 142, Panamco is required to test goodwill for impairment at least annually. We completed the transitional goodwill impairment test during the second quarter of 2002. This analysis resulted in no indications of impairment. Subsequently, during the fourth quarter of 2002, we performed a second goodwill impairment test as a result of the recent events occurring in Latin America. This second impairment test also resulted in no indications of impairment and established the new annual impairment test date for the Company. However, changes in the assumptions used in the analysis could have changed the resulting outcome. For example, to estimate the fair value of our reporting units, management made judgments and estimates about future cash flows based on 2003 forecasts and current long-range plans used to manage the business. These long-range estimates could change in the future depending on internal changes in Panamco as well as external factors. Future changes in estimates could possibly result in a non-cash goodwill impairment charge. RELATED PARTY TRANSACTIONS WITH COCA-COLA Coca-Cola is our largest shareholder and owns approximately 25% of our outstanding Class A shares, 25% of our outstanding Class B shares and all of our outstanding Series C Preferred Stock. Two members of our board of directors are designees of Coca-Cola. For information about Coca-Cola's rights as the holder of our Series C Preferred Stock, see "Item 12. Security Ownership of Certain Beneficial Owners and Management -- Series C Preferred Stock." In 2002 and 2001, 74% of our unit case volume was attributable to products of Coca-Cola. We sell Coca-Cola's products pursuant to bottling agreements, which may have a material effect on our financial statements in the case of non-compliance by Panamco or non-performance by Coca-Cola. In the event of a problem with the quality of a beverage, Coca-Cola may require us to take all necessary measures to withdraw the beverage from the market. Coca-Cola must also approve the types of containers used in bottling and controls the design and decoration of the bottles, boxes, cartons, stamps and other materials used in production. The bottling agreements grant Coca-Cola the right to inspect the products. We may not assign, transfer or pledge our bottling agreements, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Coca-Cola. Coca-Cola charges us for concentrates, based upon a set percentage of the weighted average wholesale price (net of taxes) of each case sold to retailers within each of our franchise territories. Coca-Cola may change such pricing at its discretion. Total payments to Coca-Cola for concentrates were approximately $333.0 million and $361.1 million in 2002 and 2001, respectively. We pay no additional compensation to Coca-Cola under the licenses for the use of the associated trade names and trademarks. The bottling agreements provide that, subject to local law, Coca-Cola has the right to limit the wholesale prices of its products. As it has in the past, Coca-Cola may, in its discretion, contribute to our advertising and marketing expenditures (including pricing support) as well as undertake independent advertising and marketing activities. Coca-Cola has routinely established annual budgets with Panamco for cooperative advertising and promotion programs. In 2002 and 2001, Coca-Cola provided us with $33.5 million and $36.5 million in marketing support. Incentive payments that are related to the increase in volume of Coca-Cola products that result from such expenditures are treated as an offset against the costs of concentrates paid by Panamco to Coca-Cola. 29 In 2002, we reached an agreement with Coca-Cola to convert our Risco water volume in Mexico to Coca-Cola's brand Ciel beginning in the first quarter of 2003. The conversion was done in exchange for a total consideration of $65.0 million to be paid by Coca-Cola. Approximately $56.0 million of this amount was paid in the first quarter of 2003, $3.6 million was already paid in the fourth quarter of 2002 and the remaining amounts will be paid in equal installments between 2003 and 2006. Income from the conversion will be deferred and recognized over the life of the contract, which is ten years. EFFECT OF INFLATION ON FINANCIAL INFORMATION AND COSTS Our net sales and many of our operating costs are denominated in the currency of the country in which the subsidiaries recording such sales and costs are located. In accordance with SFAS 52, the financial statements of our subsidiaries are re-measured or translated into U.S. dollars for purposes of the preparation of the consolidated financial statements. See "-- Critical Accounting Policies -- Basis for translation." Borrowings and purchases of machinery and equipment are often made in U.S. dollars. During any period when the rate of inflation in a particular country exceeds the rate of devaluation of the local currency against the U.S. dollar, all amounts recorded in the statement of operations are higher when translated into U.S. dollars than would be the case in the absence of such an excess. Conversely, if devaluation exceeds inflation, amounts recorded in the statement of operations tend to be lower when translated into U.S. dollars. The following table compares the rate of inflation, as measured by certain national consumer price indices in our operating territories, with the rate of devaluation (revaluation) for the periods shown:
YEAR ENDED DECEMBER 31, (1) -------------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Mexico Inflation................................................ 6% 4% 9% Currency devaluation (revaluation)....................... 13% (5%) 1% Brazil Inflation................................................ 12% 10% 10% Currency devaluation..................................... 52% 19% 9% Colombia Inflation................................................ 7% 8% 9% Currency devaluation..................................... 25% 3% 19% Venezuela Inflation................................................ 31% 12% 12% Currency devaluation..................................... 85% 8% 9% Costa Rica Inflation................................................ 10% 11% 10% Currency devaluation..................................... 11% 7% 7% Nicaragua Inflation................................................ 4% 5% 10% Currency devaluation..................................... 6% 6% 6% Guatemala Inflation................................................ 7% 9% 5% Currency devaluation (revaluation)....................... (3%) 4% (1%) -------------------
(1) Inflation figures are based on the applicable Consumer Price Index obtained from official local sources from each respective country. Currency devaluation (revaluation) figures are based on official U.S. dollar exchange rates at year-end. On February 5, 2003, the Venezuelan government imposed exchange rate controls, fixing the Bolivar's value to the U.S. dollar at 1,600 Bolivars to the U.S. dollar. In addition, the countries in which we operate have in the past and may in the future impose government-mandated price controls. Although currently there are no formal price 30 controls on soft drinks in our franchise territories, price and wage controls do exist on other types of products and services in certain of the countries in which we operate. Our sales also have been, and may in the future be, adversely affected when wages rise more slowly than the rate of inflation, resulting in a loss of consumer purchasing power. This has been the case recently in most of our operating countries. In Mexico, Brazil, Colombia, Venezuela, Costa Rica and Nicaragua, income taxes are indexed to reflect the effects of inflation; however, the effects of inflation are calculated differently for purposes of local taxation and financial reporting. MINORITY INTERESTS IN RESULTS OF OPERATIONS We conduct our operations through tiers of subsidiaries in which, in some cases, minority shareholders hold interests. See "Item 1. Business -- Corporate Structure -- Holding Company Structure" for further discussion on ownership interest in our subsidiaries. Because 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 subsidiary's capital stock owned by minority shareholders during that period. FORWARD-LOOKING STATEMENTS The nature of our operations and the environment in which we operate subject us to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we note the following facts that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied in this document: 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 the economic and political environment of Venezuela, changes in governmental laws and regulations (including income and excise taxes), market demand for new and existing products, raw material prices, devaluation of local currencies against the U.S. dollar and the ability to consummate the proposed merger transaction with Coca-Cola FEMSA. A discussion of certain of the factors that could cause actual results to differ is set forth in our Registration Statement on Form S-8, dated July 23, 2001 (File no. 333-65652). These and other factors are also discussed in this document, particularly in this "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations" and in "Item 1. Business." 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. We caution readers not to place undue reliance on these forward-looking statements. These statements speak only as of their dates, and we undertake no obligations to update or revise any of them, whether as a result of new information, future events or otherwise. 31 ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY CLASSIFICATION OF EXPENSES RELATED TO OUR DISTRIBUTION NETWORK We incur various expenses related to the distribution of our product in each of our operating areas. Some of these expenses include internal transfer costs and purchasing costs. We include these types of costs in the selling and distribution and general and administrative lines of our statement of operations, rather than as cost of sales. As such, certain costs of our distribution network are excluded from our computation of gross profit. The exclusion of these charges from our cost of sales line may result in the amounts reported as gross profit not being comparable to other companies, who may include all expenses related to their distribution network in cost of sales when computing gross profit (or an equivalent measure). Had we included our internal transfer costs in cost of sales, our cost of sales and gross profit for the years 2002, 2001 and 2000 would have been as follows:
DECEMBER 31, ------------------------------------------------- 2002 2001 2000 ------------------------------------------------- Gross profit, as reported $ 1,153,697 $ 1,334,465 $ 1,346,820 Less: Internal transfer costs (28,357) (36,380) (27,711) ----------- ------------ ----------- Gross profit, pro forma $ 1,125,340 $ 1,298,085 $ 1,319,109 =========== ============ =========== Cost of sales, as reported $ 1,204,216 $ 1,296,307 $ 1,243,485 Plus: Internal transfer costs 28,357 36,380 27,711 ----------- ------------ ----------- Cost of sales, pro forma $ 1,232,573 $ 1,332,687 $ 1,271,196 =========== ============ ===========
Panamco retains a general purchasing function in our operating subsidiaries. The total cost related to purchasing are included in general and administrative expenses. We cannot reasonably estimate the amounts related to purchasing of raw materials, which would normally be included in cost of sales. The total purchasing cost incurred during 2002, 2001 and 2000 were $2.3 million, $2.4 million and $4.2 million, respectively. SALE OF OUR 12.1% EQUITY STAKE IN CERVEJARIAS KAISER, S.A. ("KAISER") During 2002, we recorded a gain on the sale of our 12.1% equity stake in Kaiser as part of a larger transaction in which Molson, Inc. ("Molson") acquired Kaiser, and entered into a partnership with Heineken. The sale generated proceeds for Panamco of $55.1 million and an $18.9 million interest in Molson stock ($12.1 million at December 31, 2002 as a result of translation adjustments). The interest in the Molson stock is recorded as an investment. The Molson stock is subject to a two-year contractual restriction on sale that expires on March 19, 2004, pursuant to the agreement with Molson entered into at the time of the acquisition of Kaiser by Molson. The two-year restriction can only be shortened in the case of a change in control of Molson, transfer of substantially all of the assets of Molson, or any material inaccuracy in Molson's representations and warranties contained in the Kaiser purchase agreement. As of December 31, 2002, no events have occurred which have decreased the original restriction period. This transaction resulted in a gain of $48.6 million in 2002, which is included as part of Other income (expense), net in the consolidated statement of operations. Panamco will continue to distribute Kaiser products in its franchise areas in Brazil and the acquisition of Kaiser is not expected to impact this distribution agreement. See Note 7 of "Notes to Consolidated Financial Statements." FACILITIES REORGANIZATION AND OTHER CHARGES, NET OF BENEFITS 2002 FACILITIES REORGANIZATION AND OTHER CHARGES During 2002, Panamco recorded $110.2 million of facilities reorganization and other charges ($92.0 million, net of tax benefits), primarily due to the deterioration of macroeconomic conditions in some of the countries in which Panamco operates. These charges consist of severance charges related to approximately 2,100 employees, asset write-offs, and impairment charges and write-offs of obsolete machinery and discontinued production components. 32 As of December 31, 2002, approximately 1,200 of the 2,100 employees have been terminated by Panamco, resulting in severance payments totaling $17.3 million. The following table shows a summary of the facilities reorganization and other charges and benefits included in the consolidated statements of operations captions presented below for the year ended December 31, 2002, including reversals related to the reorganization programs announced in 2000:
Full year 2002 -------------- Cost of sales $ 11,483 (a) Selling, general and administrative 3,401 (b) Cash facilities reorganization and other charges 18,513 (c) ----------- Total cash charges 33,397 ----------- Noncash facilities reorganization and other charges 16,908 (d) Depreciation and amortization 51,097 (e) ----------- Total noncash charges 68,005 ----------- Total operating charges 101,402 Included in Other income (expense), net: Nonoperating charges 8,801 (f) ----------- Gross charges 110,203 Tax benefit (18,250) ----------- Net charges $ 91,953 ===========
(a) Cost of sales charges relate to the write-off of raw materials inventory totaling $0.6 million, obsolete spare parts for production machinery totaling $2.6 million and the payment of excise taxes totaling $8.3 million on soft drink inventories containing high fructose corn syrup in Mexico. The payment of the excise taxes resulted from a law that was suspended shortly after it was initiated, but subsequently reinstated effective July 15, 2002. (b) Selling, general and administrative charges relate to the write-off of obsolete promotional materials totaling $0.3 million, obsolete spare parts totaling $1.0 million, a provision for labor contingencies totaling $0.9 million and miscellaneous administrative expenses totaling $1.2 million. (c) The cash facilities reorganization and other charges relate to severance charges for the termination of approximately 2,100 employees in Mexico, Venezuela and Colombia totaling $26.4 million, offset by excise tax benefits obtained in Brazil totaling $3.4 million, and the reversal into income of accrued facilities reorganization costs related to severance payments totaling $4.5 million ($2.5 million relates to the reorganization programs announced in 2000). (d) The noncash facilities reorganization and other charges relate to plant closings and related disposal of property, plant and equipment in Venezuela and Mexico totaling $7.9 million and $4.1 million, respectively, the loss on sale of unproductive assets in Venezuela totaling $8.0 million, offset by the reversal into income of accrued facilities reorganization charges related to the reorganization programs announced in 2000 totaling $3.1 million. (e) Depreciation and amortization charges relate to the writedown of obsolete property, plant and equipment in Mexico, Venezuela and Colombia totaling $43.8 million, of which approximately 83% occurred in Venezuela, 11% in Mexico and 6% in Colombia and the write-off of bottles and cases in Mexico, Venezuela and Colombia totaling $7.3 million, of which approximately 76% occurred in Venezuela, 18% in Mexico and 6% in Colombia. (f) The nonoperating charges relate to the loss on disposal of nonoperating property, plant and equipment, mostly in Venezuela, totaling $4.4 million, the sale, at a loss totaling $3.0 million, of the corporate airplane to a related party and the loss on disposal of investments, mostly in Colombia, totaling $1.4 million. 33 As a result of the above, Panamco's income for the year ended December 31, 2002 was impacted by the facilities reorganization and other charges totaling $92.0 million, net of the related tax benefit of $18.3 million. 2000 FACILITIES REORGANIZATION PROGRAMS During the year ended December 31, 2000, Panamco 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 nonoperating charges presented in Other income (expense). The following table shows a summary of the facilities reorganization charges recorded in the consolidated statements of operations for the year ended December 31, 2000:
FULL YEAR 2000 -------------- Facilities reorganization charges: Cash $ 88,571 (a) Noncash 415,088 (b) ----------- Total facilities reorganization charges 503,659 Depreciation and amortization, excluding goodwill 31,079 (c) ----------- Total operating charges 534,738 Included in Other income (expense), net: Nonoperating charges 5,977 (d) ----------- Gross charges 540,715 Tax benefit (46,516) ----------- Net charges $ 494,199 ===========
(a) Cash facilities reorganization charges relate to job terminations totaling $77.3 million, restructuring of the distribution system in Brazil and Venezuela totaling $9.4 million, and cash charges related to the disposal of property, plant and equipment totaling $1.9 million. (b) Noncash facilities reorganization charges relate to the write-down of goodwill reflecting the recognition of impairment of the cost in excess of net assets acquired in the Venezuelan operating unit totaling $350.0 million, plant closings and the related disposal of property, plant and equipment totaling $24.8 million, obsolete property, plant and equipment in all operating units totaling $23.8 million, obsolete bottles and cases, mainly in the Venezuelan unit's water jug business, totaling $7.8 million, and other charges related to legal contingencies, mostly pertaining to tax matters, totaling $8.6 million. (c) Depreciation and amortization charges, excluding goodwill, relate to asset write-downs and consist of an increase in provision related to changing the useful lives of coolers totaling $11.0 million and the write-down of bottles and cases due to loss in market value totaling $20.1 million. (d) Nonoperating charges, totaling $6.0 million, relate 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, Panamco's income for the year 2000 was impacted by facilities reorganization charges, asset write-downs and nonoperating charges totaling $494.2 million, net of the related tax benefit of $46.5 million. 34 RESULTS OF OPERATIONS 2002 COMPARED TO 2001 2002 results were adversely impacted by events that occurred in Venezuela. In February 2002, the Venezuelan government abandoned the trading band for its currency, the Venezuelan Bolivar, which had the effect of quickly depreciating the currency. From January 1, 2002 to December 31, 2002, the bolivar devalued 85% relative to the U.S. dollar and inflation increased to 31% in 2002 from 12% in 2001. The devaluation of the bolivar increased the relative price of our dollar-denominated raw materials in Venezuela and decreased our U.S. dollar-reported net sales (and other financial statement accounts, including net income). Unit case volumes were also affected by the slowdown in the Venezuelan economy which culminated in a country-wide general strike that began on December 2, 2002 and that effectively halted production and distribution activities for Panamco during the month of December 2002 and the month of January 2003. During that period Panamco worked closely with Coca-Cola to take all appropriate actions to safeguard its employees and its assets. In early February 2003, the general strike effectively came to an end and Panamco re-started its production and distribution activities in that country. Results during the fourth quarter of 2002 reflect the negative impact of the general strike in our results, including the loss of the majority of its volumes and revenues during the month of December. We expect results during the first quarter to reflect the impact of lost volumes and revenues during the month of January. While production and distribution have already begun, it is impossible to predict how fast they will reach normal levels. In addition, the Venezuelan government imposed foreign exchange controls in January 2003 and it is difficult to forecast the impact that this will have on the cost of dollar denominated raw materials or on Panamco's overall financial results. Net sales for Panamco declined 10.4% to $2.36 billion in 2002 from $2.63 billion in 2001. The decline in net sales was driven by a 1.1% decline in consolidated unit case sales volume, to 1,228.1 million unit cases from 1,242.2 million unit cases in the year 2001, and a 9.3% decline in average dollar prices, to $1.92 per unit case. Soft drink sales volume for the year declined by 1.6%, reflecting declines of 14.3% in Venezuela, 2.7% in Colombia and 0.9% in Brazil, that could not be offset by an increase of 4.1% in the NOLAD region. Unit case sales volume of bottled water increased 1.2% to 250.8 million, and beer, sold in Brazil and Venezuela, declined by 11.3% to 67.5 million unit cases. Volume growth during the year was negatively impacted by the deteriorating macroeconomic and political conditions in many of the countries in which Panamco operates. Particularly in Venezuela, unit case volumes declined 32.0% during the fourth quarter as a result of the country-wide strike. Net sales were also impacted by lower average dollar prices per unit case, which were hurt by weaker currencies across the region as well as by a more competitive soft-drink environment in Mexico. Prices in local currency increased in every region except NOLAD. During 2002, Panamco recorded $110.2 million of facilities reorganization and other charges, ($92.0 million, net of tax benefits) resulting primarily from the deterioration of macroeconomic conditions in some of the countries in which Panamco operates. Panamco also recorded other benefits of $48.6 million, primarily related to the sale of a 12.1% equity stake in the Brazilian brewer, Kaiser. The following comparison of Panamco's 2002 and 2001 consolidated results of operations includes the effect of such charges and benefits. See "-Items That Affect Historical or Future Comparability" for further discussion on Panamco's facilities reorganization and other charges and benefits. During 2002, the cost of sales as a percentage of net sales increased to 51.1% for Panamco, from 49.3% in 2001. Cost of sales as a percentage of net sales was impacted by increases in dollar denominated raw materials and packaging, which were not fully offset by increases in product prices as well as by a change in product mix towards non-returnable presentations. Facilities reorganization and other charges included in cost of sales amounted to $11.5 million. 35 Operating expenses as a percentage of net sales increased to 43.4% in 2002 from 40.0% in 2001, due to a decline in operating expenses of 2.7%, which was lower than the 10.4% contraction experienced in net sales. Selling, general and administrative expenses declined 7.7% to $751.9 million, mainly the result of continued benefits associated with our reorganization programs, as well as by the impact that weaker currencies have on the translation of local currency denominated operating expenses. Selling, general and administrative expenses also included $3.4 million in facilities reorganization and other charges. Depreciation and amortization declined 0.8%, to $235.2 million, despite $51.1 million in facilities reorganization and other charges. These charges are mainly related to asset write-offs in Venezuela. Facilities reorganization and other charges not included in selling, general and administrative expenses or in depreciation and amortization amounted to $35.4 million. During 2002, operating income declined 53.7% to $131.2 million, from $283.2 million in 2001. The decline in operating income was the result of a decline in net sales of 10.4%, a decline in cost of sales and operating expenses that, at 6.7%, was lower than the decline in net sales and $35.4 million in facilities reorganization and other operating charges. Net interest expense decreased to $78.3 million in 2002 from $98.0 million in 2001, due primarily to an 8.1% gross debt reduction to $891.9 million at the end of the year, from $970.2 million at the end of 2001. Total net debt decreased 1.6% to $822.8 million at December 31, 2002, from $836.6 million at December 31, 2001. Other income increased to $36.4 million in 2002 from other expense of $10.9 million in 2001. The $47.2 million year over year difference is primarily the result of a $48.6 million gain from the sale of the 12.1% equity stake in Kaiser, the recording of a $2.8 million foreign exchange gain in 2002, in comparison to a $9.3 million foreign exchange loss in 2001, a $1.3 million decrease in the provision for contingencies, partially offset by a $2.2 million decrease in gains on sale of property and equipment and investments, a $0.8 million decrease in equity earnings of unconsolidated companies, a $0.4 million decrease in capital expenditure incentives from Coca-Cola, and a $12.7 million increase in non-recurring and other charges. The consolidated effective income tax rate increased to 57.3% from 28.9% in 2001, primarily due to Venezuela's use of tax loss carry forwards in 2001, which affects the comparison, as well as because a majority of the earnings in 2002 were derived by fully tax-paying countries such as Mexico and Central America. As a result of the foregoing, Panamco recorded net income in 2002 of $33.2 million, or $0.28 per basic share ($0.27 per diluted share), compared to net income of $118.0 million, or $0.94 per basic share ($0.93 per diluted share), during 2001. 2001 COMPARED TO 2000 Net sales increased 1.6% to $2.63 billion in 2001 versus 2000. Net sales growth was driven by an increase of 1.6% in consolidated unit case sales volume, to 1,242.2 million unit cases from 1,222.5 million unit cases in the year 2000. Soft drink sales volume for the year increased by 0.1%, reflecting increases of 2.1% in Brazil and 0.3% in Colombia, offset by decreases of 1.2% in the NOLAD region and 0.3% in Venezuela. Unit case sales volume of bottled water increased 3.9% to 247.8 million, and beer, sold in Brazil and Venezuela, increased 9.6% to 76.1 million unit cases. Volume and net sales growth during the year were positively impacted by Panamco's continued effort in introducing new products. New products have had the effect of broadening our portfolio to better meet consumer needs. Panamco was also active in introducing new presentations at both ends of the size spectrum. The smaller presentations are designed to capture consumers for whom the product would otherwise not be affordable while the larger presentations provide a more attractive alternative for in-home consumption. During the year 2000, Panamco had facilities reorganization and other charges, net of benefits, totaling $494.2 million. The following comparison of Panamco's 2001 and 2000 consolidated results of operations includes the effect of such charges and benefits. See "-- Items That Affect Historical or Future Comparability" for further discussion on Panamco's facilities reorganization and other charges and benefits. 36 The cost of sales as a percentage of net sales increased to 49.3% in 2001, from 48.0% in 2000, mainly due to an increase in the cost of raw materials and packaging throughout most operations as well as a change in product mix towards non-returnables. Operating expenses as a percentage of net sales decreased to 40.0% in 2001 from 65.4% in 2000, mainly as a result of a 7.3% decrease in selling, general and administrative expenses, the result of the benefits associated with our reorganization programs, and a 24.1% decrease in depreciation and amortization, mainly the result of lower property and equipment balances and a lower goodwill cost basis. In addition, results for the year 2000 include $503.7 million in facilities reorganization charges. See "-- Items That Affect Historical or Future Comparability" for further discussion on Panamco's facilities reorganization and other charges and benefits. Operating income increased to $283.2 million in 2001 from a loss of $347.3 million in 2000, primarily as a result of the benefits of the reorganization programs initiated in 2000 and 1999. Net interest expense decreased to $98.0 million in 2001 from $110.4 million in 2000, due primarily to a 22.6% gross debt reduction to $970.2 million at the end of the year, from $1,253.8 million at the end of 2000. Total net debt decreased 21.2% to $836.6 million at December 31, 2001, from $1,062.0 million at December 31, 2000. Other expense, net decreased 53.1% to $10.9 million in 2001 from $23.2 million in 2000, primarily caused by a $5.7 million increase in gains on sale of property and equipment and investments, a $1.7 million increase in equity earnings of unconsolidated companies, a $0.8 million increase in capital expenditure incentives from Coca-Cola, and a $5.1 million decrease in non-operating charges, offset by a $1.1 million increase in foreign exchange losses primarily in Brazil due to a 18.7% devaluation of the Brazilian real during 2001. The consolidated effective income tax rate increased to 28.9% from 4.5% in 2000. The increase is mainly due to facilities reorganization charges of $503.7 million in 2000, of which $350.0 million was nondeductible for income tax purposes, which resulted in a loss before income taxes of $480.9 million. As a result of the foregoing, Panamco recorded net income in 2001 of $118.0 million, or $0.94 per basic share ($0.93 per diluted share), compared to a net loss of $504.7 million, or $3.92 per basic and diluted share, during 2000. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW We have financed our capital investments and acquisitions primarily through cash flow from operations and debt. We believe our future cash flow from operations and our borrowing capacity will be sufficient to fund our capital expenditures, acquisitions, dividends and working capital requirements. As a holding company, our principal internal sources of cash are dividends and inter-company loans from our subsidiaries. The amount of dividends payable by the subsidiaries to us is subject to general limitations imposed by the corporate laws of the respective jurisdictions of incorporation of such subsidiaries. Dividends paid to us and other foreign shareholders by certain of our subsidiaries are subject to investment registration requirements and withholding taxes. For a list of the withholding tax rate on dividends by country, see Note 20 to the "Notes to Consolidated Financial Statements." In February 2003, the Venezuela government imposed exchange rate controls. We do not expect such controls to affect our liquidity position in 2003 since we are not expecting our Venezuela subsidiary as a source of funds for the holding company this year. However, the continuation of such controls coupled with a marked improvement in the operating results of our Venezuelan subsidiary could in the future affect our ability to upstream dollars to the holding company, either by means of a dividend or inter-company loan, from such subsidiary. 37 OFF-BALANCE SHEET ARRANGEMENTS We have not engaged in transactions with structured finance or special purpose entities and do not use off-balance sheet arrangements as a source of liquidity. DEBT FINANCING Total consolidated indebtedness decreased to $891.9 million at the end of 2002, from $970.2 million at the end of 2001, consisting of $600.9 million at the holding company level and $291.0 million of subsidiary indebtedness. Of the total debt, 61.4% is long-term. The lower percentage of long-term debt relative to 2001 reflects the reclassification of the $150.0 million 8.125% Senior Notes maturing on April 1, 2003 (the "2003 Yankee Bonds"). Panamco will repay the 2003 Yankee Bonds with the proceeds of a $150.0 million bridge loan to be provided by ING Bank, which will be assumed in the proposed merger transaction by Coca-Cola FEMSA at the closing of the transaction. See "-- Overview -- Proposed Merger Transaction." If the merger is not consummated as planned, Panamco would have to refinance the bridge loan, which most likely would be through the issuance of a syndicated loan. The 2003 Yankee Bonds and Panamco's other public debt (Senior Notes due 2009) have been rated investment grade by Standard & Poor (BBB-) and Moody's (Baa3). Our dollar-denominated debt increased to 78.3% of the total at the end of 2002 from 67.5% at the end of 2001. The $78.4 million reduction in gross debt is mainly the result of a combination of a $19.5 million pay down of our syndicated loan and a reduction of debt held by our subsidiaries (primarily NOLAD with $70.0 million), offset by issuance of $60.0 million of debt ($50.0 million at December 31, 2002) at the holding company level to fund the Coca Cola de Panama acquisition. Approximately $118.3 million of debt in our Mexican operations carries a Standard & Poor's rating of MX-AA and approximately $50.6 million of debt in our Colombian operations carry a Duff & Phelps rating of AAA. Net debt decreased to $822.8 million at the end of 2002 from $836.6 million at the end of 2001. During the fourth quarter 2002, Panamco amended some of its debt covenants with its lenders. More specifically, Panamco amended its maximum Debt to EBITDA coverage from 2.25 to 2.35. As of December 31, 2002, Panamco had a Debt to EBITDA ratio of 2.33 and was in full compliance with its covenants, as amended. Any future failure by Panamco to meet its debt covenants or obtain a waiver from the lending banks could have a material and adverse effect on our financial condition. CONTRACTUAL OBLIGATIONS Our contractual obligations as of December 31, 2002 are as follows:
PAYMENTS DUE BY PERIOD (IN THOUSANDS) ----------------------------------------------------------------------------- LESS THAN AFTER TOTAL 1 YEAR 1 - 3 YEARS 4 - 5 YEARS 5 YEARS ----------------------------------------------------------------------------- Bank loans and long-term obligations $ 888,618 $ 343,419 $ 108,379 $ 146,820 $ 290,000 Capital lease obligations 3,244 990 2,254 - - Operating leases 15,410 4,639 6,512 4,259 - Purchase obligations 54,290 20,961 33,329 - - Other long-term liabilities reflected on the Balance Sheet under GAAP - - - - - -------- -------- -------- -------- -------- Total $ 961,562 $370,009 $150,474 $151,079 $290,000 ========= ========= ======== ======== ========
38 CAPITAL EXPENDITURES Total capital expenditures were $112.5 million, $83.1 million and $123.9 million in 2002, 2001 and 2000, respectively. During 2002, approximately 75%, 8%, 11% and 6% of such expenditures were made by Panamco NOLAD, Panamco Colombia, Panamco Venezuela and Panamco Brazil, respectively. Total purchases for bottles and cases were $38.4 million, $47.8 million and $73.7 million in 2002, 2001 and 2000, respectively. During 2002, approximately 57%, 29%, 13% and 1% of such expenditures were made by Panamco NOLAD, Panamco Colombia, Panamco Venezuela and Panamco Brazil, respectively. Our Board of Directors has established various criteria for the allocation of capital resources. The factors that management reviews in proposing three-year capital budgets include anticipated internal rates of return, pay-back periods, corresponding plans of Coca-Cola and anticipated levels of earnings and debt in the country in which such expenditures are proposed to be made. During 2003, we estimate that we will have aggregate capital expenditures of approximately $138.6 million. In addition, we expect to invest approximately $61.5 million in bottles and cases. Estimates of capital expenditures and bottles and cases purchases are based on our current expectations and are subject to change. Actual costs may exceed estimates or we may reallocate or alter our capital budget. We intend to fund our capital expenditure program with cash on hand, consolidated cash flow from operations and borrowings at the holding and subsidiary level. Coca-Cola, from time to time, provides incentives for its bottlers to make particular types of capital expenditures. During 2002, 2001 and 2000, such incentives consisted of grants, which are included as other income in "Other income (expense)" in the consolidated financial statements, and loans included in the indebtedness referred to above. See Note 21 of "Notes to Consolidated Financial Statements." Coca-Cola also provides cooperative advertising support to us. SHARE REPURCHASES At December 31, 2001, we completed our $100.0 million share repurchase program adopted in 1999, increased to a total of $150.0 million by two $25.0 million supplements in 2001. In 2002, we adopted a new program (the "2002 Share Repurchase Program") to repurchase up to $40.0 million of our Class A Common Stock. During 2002, the Company repurchased 2,466,532 shares amounting to $36.8 million (including brokerage commissions). We are currently not repurchasing shares under the 2002 Share Repurchase Program, which can be expected to increase Panamco's liquidity. CASH FLOWS Cash flow provided by operations amounted to $186.0 million in 2002, a $171.4 million decrease from 2001. The decrease was primarily the result of lower net income, the negative impact of exchange rates on our working capital balances and the gain on the sale of Kaiser. Cash used for investing activities amounted to $139.9 million in 2002 and primarily related to capital expenditures and purchases of bottles and cases. During 2001, cash provided from investing activities reached $26.5 million and 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 non-current investments as well as $34.5 million proceeds from the sale of property, plant and equipment. Cash used for financing activities amounted to $90.9 million in 2002, a $353.7 million decrease from 2001. This decrease primarily reflects a reduction in the number of shares repurchased under our Share Repurchase Program as well as a decrease in the amount of gross debt repaid during 2002, as compared to 2001. At December 31, 2002, Panamco had consolidated cash and cash equivalents of $69.0 million, a decrease of 48.4% compared to $133.7 million as of December 31, 2001. At December 31, 2002, we had negative working capital of $432.1 million. This represents a decrease in working capital of $263.2 million from negative working 39 capital of $168.9 million as of December 31, 2001 and is primarily impacted by the reclassification of the 2003 Yankee Bonds, from long-term obligations to current portion of long-term obligations. As noted above, Panamco has made arrangements to repay this instrument with the proceeds of a bridge loan to be provided by ING Bank. Excluding this amount, Panamco's working capital deficit at December 31, 2002 amounted to $282.1 million. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our business exposes us to many different market risks, such as fluctuations in interest rates, currency exchange rates and commodity prices. Consequently, we consider risk management as an essential activity in the course of our business. To address certain of these risks, we enter into various hedging transactions as described below. We utilize hedging strategies to mitigate those risks. Our hedging strategies may include the use of derivative instruments, such as forwards, futures and options, generally with terms not exceeding one year. COMMODITY PRICE RISK Our largest exposure to commodity price fluctuations is for sugar. As a risk management practice, we may periodically utilize both futures and options contracts to hedge against an increase in the price of sugar. As of December 31, 2002, we did not hold any material positions for the purchase of commodities. INTEREST RATE AND FOREIGN CURRENCY RISKS We hedge our exposure to changes in interest rates on certain of our financial instruments. From time to time, we enter into interest rate swap agreements to mitigate our exposure to changes in interest rates. Our currency exchange risk is generally related to the potential devaluation of the U.S. dollar against the Latin American currencies used in the countries in which we have operations. In each country where we operate, our sales are in local currencies, while our holding company debt is in U.S. dollars. Therefore, foreign currency exchange exposure relates primarily to our debt obligations in U.S. dollars. To mitigate the impact of currency exchange rate fluctuations, we may enter into foreign exchange forward contracts with financial institutions in order to lock in the exchange rates for anticipated transactions. As of December 31, 2002, these contracts had notional amounts of $7.5 million and an unrealized loss and fair value of approximately $22 thousand recorded in our statement of operations and balance sheet, respectively. Foreign exchange forward contracts generally have maturities or expirations not exceeding 12 months. The following table provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. The table presents our debt obligations, principal cash flows and related weighted average interest rates by expected maturity dates and fair values. For interest rate swaps, the tables present notional amounts, outstanding at December 31, 2002, weighted average interest rates and fair values. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract.
EXPECTED MATURITY DATE 2002 2001 --------------------------------------------------- ----------------- ---------------- THERE- 2003 2004 2005 2006 2007 AFTER TOTAL F.V.(3) TOTAL F.V.(3) ---- ---- ---- ---- ---- ------ ----- ------ ------ ------ LONG-TERM OBLIGATIONS, INCLUDING CURRENT PORTION (Amounts in equivalent millions of U.S. dollars) Fixed Rate Debt (1) - In U.S. dollars $ 13.3 - - - - $290.0 $303.3 $335.7 $457.1 $483.6 Weighted average interest rate 2.5% - - - - 7.3% - In Brazilian reals $ 0.1 - - - - - $ 0.1 $ 0.1 $ 1.6 $ 1.5 Weighted average interest rate 10.0% - - - - - - In Guatemalan quetzals $ 1.5 $ 0.5 $ 0.5 $ 0.5 $ 0.4 - $ 3.4 $ 3.1 $ 4.5 $ 4.4 Weighted average interest rate 12.5% 11.5% 11.5% 11.5% 11.5% - - In Colombian pesos - - - - - - - - $ 17.1 $ 17.1
40
EXPECTED MATURITY DATE 2002 2001 --------------------------------------------------- ----------------- ---------------- THERE- 2003 2004 2005 2006 2007 AFTER TOTAL F.V.(3) TOTAL F.V.(3) ---- ---- ---- ---- ---- ------ ----- ------ ------ ------ Weighted average interest rate - - - - - - - In Mexican UDIS - - - $118.3 - - $118.3 $ 117.3 $127.0 $ 136.3 Weighted average interest rate - - - 8.7% - - Floating Rate Debt (2) - In U.S. dollars (4) $308.4 $ 85.6 $ 1.1 - - - $395.1 $ 400.7 $193.5 $ 193.5 Weighted average interest rate 4.4% 2.4% 3.3% - - - - In Colombian pesos (5) - - $ 22.9 $ 15.7 $ 12.0 - $ 50.6 $ 50.6 $ 63.2 $ 63.2 Weighted average interest rate - - 10.5% 10.6% 9.6% - - In Mexican pesos (5) $ 21.2 - - - - - $ 21.2 $ 21.2 $102.0 $ 102.0 Weighted average interest rate 9.3% - - - - - - In Brazilian reals (5) - - - - - - - - - - Weighted average interest rate - - - - - - - - - - - In Costa Rican colon (5) - - - - - - - - $ 4.2 $ 4.2 Weighted average interest rate - - - - - - - - - - ---------------------------------------------------------------------------------------- Total debt $344.5 $ 86.1 $ 24.5 $134.5 $ 12.4 $290.0 $892.0 $928.7 $970.2 $1,005.8 ====== ====== ====== ======== Less bank loans $135.5 ------ Total 2003 long-term debt $209.0 ====== INTEREST RATE DERIVATIVE FINANCIAL INSTRUMENTS RELATED TO DEBT Interest Rate Swaps Fixed to Variable (6) $150.0 - - - - - $150.0 $ 0.4 - - Average Pay Rate 5.9% - - - - - 5.9% - - - Average Receive Rate 8.1% - - - - - 8.1% - - - Variable to Fixed (7) - - - - - - $250.0 - $250.0 $ 10.4 Average Pay Rate - - - - - - 6.4% - 6.4% - Average Receive Rate - - - - - - 1.9% - 4.4% - - -------------------------
(1) Fixed interest rates are weighted averages as contracted by us. (2) Floating interest rates are based on market rates as of December 31, 2002, plus the weighted-average spread for us. (3) F.V. = Fair Value (4) Market interest rates are based on the U.S. dollar LIBOR curve. (5) Market rates are based on the country benchmark or LIBOR and assume a flat yield curve. (6) The fixed to variable interest rate swap matures on April 1, 2003 and its fair value is recorded as an asset of $0.4 million at December 31, 2002. (7) The variable to fixed interest rate swap matured on November 22, 2002. The fair value at December 31, 2001, for the variable to fixed interest rate swap was a liability of $10.4 million. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Attached hereto beginning at page F-1 and filed as a part of this Form 10-K are the financial statements required by Regulation S-X and the supplementary data required by Regulation S-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On July 1, 2002, Panamco appointed Deloitte & Touche, LLP as its independent public accountant to replace Arthur Andersen LLP. For additional information, see Panamco's Current Report on Form 8-K, dated July 1, 2002, as filed with the Securities and Exchange Commission. 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Our Board of Directors presently consists of 9 members, whose terms are divided into three classes as set forth below. Coca-Cola currently has the contractual right to designate three nominees for election to the Board and currently designates Messrs. Fayard and Schimberg to the Board. Venbottling Holdings, Inc. ("Venbottling") presently has contractual rights to designate Gustavo A. Cisneros and Oswaldo J. Cisneros for election to the Board. All directors are elected for three-year terms. The following table sets forth the names and country of citizenship of the members of our Board, their tenure as directors and the year in which their next term will expire:
COUNTRY OF DIRECTOR TERM NAME CITIZENSHIP SINCE EXPIRES - -------------------------------------------------------------- -------------- -------- ------- Gustavo A. Cisneros.......................................... Venezuela 1997 2003 Oswaldo J. Cisneros.......................................... Venezuela 1997 2003 Gary P. Fayard............................................... U.S.A. 2001 2005 Craig D. Jung................................................ U.S.A. 2002 2004 Wade T. Mitchell............................................. U.S.A. 1986 2004 James J. Postl............................................... U.S.A. 2000 2005 Henry A. Schimberg........................................... U.S.A. 2000 2005 Houston Staton............................................... Colombia 1997 2005 Woods W. Staton Welten....................................... Colombia 1982 2003
The following table sets forth the names, ages and tenures of our executive officers:
TOTAL YEARS WITH NAME AGE POSITION SINCE PANAMCO - ---------------------------------- ----- -------------------------------------------------- ------ ----------- Woods W. Staton Welten........... 52 Chairman of the Board 2002 20 Craig D. Jung.................... 49 President and Chief Executive Officer 2002 1 Henry A. Schimberg................ 70 Vice Chairman of the Board 2000 3 Annette Franqui................... 40 Vice President--Chief Financial Officer, Treasurer 2002 2 and Assistant Secretary Carlos Hernandez-Artigas.......... 39 Vice President--General Counsel and Secretary 1994 9 Felipe Alvira..................... 40 Vice President--Colombian Operations (President of 2003 10 Panamco Colombia) Jose Antonio de Echavarri......... 43 Vice President--Venezuelan Operations (President 2002 8 of Panamco Venezuela) Paulo Sacchi...................... 55 Vice President--Brazilian Operations (President of 2002 12 Panamco Brazil)
Officers are elected by our Board of Directors annually, and, subject to certain employment agreements, serve at the discretion of the Board of Directors. The backgrounds of the directors and the executive officers of the Company in alphabetical order are described below: Felipe Alvira was elected Operations Vice President-Colombia and President Panamco Colombia in January 2003. Mr. Alvira joined Panamco in 1993 as national product manager for Panamco Colombia, and became the regional director of the central zone for Panamco Colombia. From 1998 to 2000, Mr. Alvira served as the Vice President, Operations for Panamco Colombia and from 2000 to 2002 he served as the Executive Vice President of Panamco Colombia. Mr. Alvira is a citizen of Colombia. 42 Gustavo A. Cisneros was elected a director of Panamco in June 1997. Mr. Cisneros is Chairman and Chief Executive Officer of the Cisneros Group of Companies, an organization that includes more than 50 companies in Latin America, Europe and the United States. Mr. Cisneros is a founding member of the International Advisory Board of the Council on Foreign Relations in New York, a former director of the International Advisory Committee of The Chase Manhattan Bank and a director of the Chairman's International Advisory Council of The Americas Society as well as a member of the Board of Overseers of the International Center for Economic Growth and the International Advisory Board of Power Corporation of Canada. Mr. Cisneros sits on the Board of Overseers at Babson College, the International Advisory Board of Columbia University, and at Harvard University's Advisory Committee of the David Rockefeller Center for Latin American Studies and the International Advisory Board of the Center for International Development. Mr. Cisneros is a member of the Board of Directors of America Online Latin America, Inc., and of the University Council at The Rockefeller University in New York. Mr. Cisneros is the cousin of Oswaldo J. Cisneros. Mr. Cisneros is a citizen of Venezuela. Oswaldo J. Cisneros was elected a director of Panamco in June 1997. Until late 2000, he was President of Telcel Cellular, C.A., the largest private cellular communications company in Venezuela, a company that he founded in partnership with Bellsouth International. He was the Chairman of Panamco Venezuela until May 1997. Mr. Cisneros is President and owner of Central Azucarero Portuguesa, a modern and productive sugar mill, President of Puerto Viejo Marina & Yacht Club and Director of Produvisa (glass manufacturing company). Mr. Cisneros is the cousin of Gustavo A. Cisneros. Mr. Cisneros is a citizen of Venezuela. Jose Antonio de Echavarri was elected President of Panamco Venezuela in December 2002. From April 2002 to September 2002, Mr. de Echavarri was Operations Vice President (General Director) of Panamco Bajio S.A. de C.V. Mr. de Echavarri served as Operations Vice President of Panamco Golfo S.A. de C.V. from January 1999 to March 2002 and Operations Vice President of Panamco Mexico Administracion S.A. from May 1997 to December 1998. Mr. de Echavarri is a citizen of Mexico. Gary P. Fayard was elected a director of Panamco in February 2001. Since December 1999, Mr. Fayard has been Senior Vice-President and Chief Financial Officer of The Coca-Cola Company. Mr. Fayard joined The Coca-Cola Company in April 1994. In July 1994, he was elected Vice-President and Controller. Prior to joining The Coca-Cola Company, Mr. Fayard was a partner with Ernst & Young LLP. Mr. Fayard has served as an alternate director of Coca-Cola FEMSA since 2000 and was designated by The Coca-Cola Company. Mr. Fayard is a citizen of the United States of America. Annette Franqui was elected Chief Financial Officer of Panamco in October 2002. Ms. Franqui joined Panamco as Vice President of Corporate Finance in April 2001. Prior to joining Panamco, Ms. Franqui spent close to ten years at JPMorgan Chase, where she was most recently the Managing Director in charge of Latin America Research, Sales and Trading. Earlier in her career at JPMorgan, Ms. Franqui was an Institutional Investor-ranked Latin American research analyst, covering food and beverage stocks and part of JPMorgan Chase's Latin American Mergers and Acquisitions team. Ms. Franqui also spent five years at Goldman, Sachs & Company, primarily in their London Corporate Finance Group. Ms. Franqui is a citizen of the United States of America. Carlos Hernandez was elected Secretary of Panamco in November 1993 and Vice President, General Counsel of Panamco in January 1994. From 1992 to October 1993, he was an associate at the law firm Fried, Frank, Harris, Shriver & Jacobson in New York City. Mr. Hernandez is a citizen of Mexico. Craig D. Jung was elected President and Chief Executive Officer of Panamco in September 2002. Mr. Jung joined Panamco as President and Chief Operating Officer in March 2002. From October 2000 to March 2002, Mr. Jung was the Chief Executive Officer of eOriginal, Inc., an e-commerce company. From July 1997 to October 1999, he served as the Chief Operating Officer of the Pepsi Bottling Group. From October 1996 to June 1997, Mr. Jung was the General Manager of South America and the Caribbean for the Pepsi-Cola Company. Mr. Jung is a citizen of the United States of America. 43 Wade T. Mitchell was first elected a director of Panamco in June 1986. Mr. Mitchell is retired. Prior to January 1994, he was an Executive Vice President of SunTrust Bank in Atlanta, Georgia, for more than five years. Mr. Mitchell is a citizen of the United States of America. James J. Postl was elected a director of Panamco in July 2000. Mr. Postl served as President and Chief Executive Officer of Pennzoil-Quaker State Company until October 1, 2002. Mr. Postl joined Pennzoil-Quaker State Company in October 1998 as President and Chief Operating Officer. He was elected to his current position in May 2000. Prior to joining Pennzoil-Quaker State Company, Mr. Postl served as President of Nabisco Biscuit Company from 1996 to 1998. Prior to joining Nabisco, Mr. Postl held a variety management positions with PepsiCo, Inc. over a 19-year period. Mr. Postl is a citizen of the United States of America. Paulo J. Sacchi has been with Panamco for over twelve years. He was appointed Vice President-Brazilian Operations and President of Panamco Brazil in March 2002. From 1998 to March 2002, he was Panamco's Chief Financial Officer. He previously served as Vice-President-Operations of Panamco Brazil, and prior to that as Vice President-Strategic Planning and Vice President-Operations. Mr. Sacchi is a citizen of Brazil. Henry A. Schimberg was elected a director of Panamco in May 2000 and Vice Chairman of the Board in October 2000. Until the end of 1999, Mr. Schimberg served as President and Chief Executive Officer of Coca-Cola Enterprises Inc. Mr. Schimberg served as President and a director of Coca-Cola Enterprises Inc. since December 1991. He served as Chief Operating Officer from December 1991 until April 1998, when he became Chief Executive Officer. Mr. Schimberg has served on the board of Coca-Cola Enterprises as well as the boards of numerous state soft drink associations and the Canada-United States Fulbright program. Mr. Schimberg serves on the boards of directors of Coca-Cola Amatil Limited and Coca-Cola HBC S.A. Mr. Schimberg is a citizen of the United States of America. Houston Staton Welten was elected a director of Panamco in 1997. For more than four years prior to April 1997, he served on the Advisory Board of Panamco. He has been a director of 3 Points Technology, Inc. since May 1996. From 1992 through September 1995, Mr. Staton was an owner-operator of McDonald's in Caracas, Venezuela. He is the brother of Woods W. Staton Welten. Mr. Staton is a citizen of Colombia. Woods W. Staton Welten is Chairman of the Panamco board since 2002. He was first elected a director of Panamco in 1982. Mr. Staton Welten was the Vice President of Marketing for Panamco Colombia from 1980 to 1982 and has been the President of Arcos Dorados S.A., the Argentinean joint venture of McDonald's Corporation, since 1984. He is the brother of Houston Staton Welten. Mr. Staton is a citizen of Colombia. COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING The Securities Exchange Act of 1934 requires the Company's directors, executive officers and any person owning more than 10% of the Company's Class A common stock to file reports with the Securities and Exchange Commission regarding their ownership of the Company's stock and any changes in such ownership. Based on our review of the copies of these reports and certifications given to us, we believe that the Company's executive officers, directors and 10% shareholders complied with their filing requirements for 2001, with the exception that: (i) Mario Gonzalez Padilla and Jose Antonio de Echavarri's initial report on Form 3 was not filed on a timely basis; (ii) Mr. Woods Staton failed to file two Form 4 reports on a timely basis with respect to two transactions; and (iii) Mr. Ruben Pietropaolo failed to file seven Form 4 reports on a timely basis with respect to ten transactions. Mr. Pietropaolo has subsequently filed a Form 5 to report these transactions immediately following this determination. Certain of Mr. Pietropaolo's transactions resulted in a "short-swing profit" in the amount of $52,870 pursuant to Section 16 (b) of the Securities Exchange Act of 1934. Mr. Pietropaolo has disgorged this short-swing profit to the Company. 44 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION The following table summarizes for the fiscal years ended December 31, 2002, 2001 and 2000, all compensation awarded to, earned by, or paid to (i) all persons who served in the position of Chief Executive Officer during 2002, (ii) the Vice-Chairman of the Board of Directors, and (iii) the four most highly compensated executive officers other than the Chief Executive Officer who were serving in executive officer capacities at the end of December 2002.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION -------------------------------------- -------------------------------------------- OTHER SECURITIES ANNUAL RESTRICTED UNDERLYING ALL OTHER COMPEN- STOCK OPTIONS/SAR COMPEN- NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SATION ($) AWARDS ($) AWARDS SATION ($) - ----------------------------------- ------ ------------ ------------ ------------ -------------- -------------- ------------- Craig Jung 2002 $487,500 417,500(1) $147,331(2) - 325,000 $22,303(3) Chief Executive Officer and President Annette Franqui 2002 303,550 94,660 2,700 - 70,000 30,889(3) Chief Financial Officer and 2001 208,095 199,500 - - 80,000 2,240 Treasurer Carlos Hernandez-Artigas 2002 301,600 96,512 154,037(2) - 45,000 39,783(3) Vice President - General 2001 256,800 139,200 202,298 - 35,000 9,280 Counsel and Secretary 2000 228,000 13,600 226,033 - 25,900 5,494 Ruben Pietropaolo 2002 500,000 138,000 248,550(2) - 135,000 30,386(3) President - Panamco NOLAD(4) Paulo J. Sacchi 2002 400,000 160,000 15,282 - 65,000 51,970(3) President - Panamco Brazil 2001 343,957 208,800 229,135 - 65,000 64,303 2000 325,000 27,600 224,600 - 64,320 8,737 Henry A. Schimberg 2002 - - - - 4,372 - Vice Chairman of the Board 2001 - - - - 3,619 - 2000 - - - 4,275,000(5) 251,910(6) - William G. Cooling 2002 - - - - - 1,350,000(7) Former Chairman of the 2001 - - - - 3,619 - Board and Former Chief 2000 - - - 5,700,000(5) 351,910(6) - Executive Officer
- ------------------ (1) Mr. Jung joined the Company in March 2002 and was appointed Chief Executive Officer and President in August 2002. 2002 Bonus amount includes a $125,000 sign-on bonus. (2) Other Annual Compensation includes housing allowance of $52,748 for Mr. Hernandez and $120,000 for Mr. Pietropaolo, and moving expenses of $106,601 for Mr. Jung. (3) Represents life insurance premiums and/or the Company's contribution to defined contribution plans. (4) On March 26, 2003, Mr. Pietropaolo resigned as President of Panamco NOLAD, as President of Panamco Mexico and as the Company's Vice President for NOLAD Operations and, on March 27, 2003, he assumed the position as Vice President--Special Operations of the Company. See "--Employment Agreement-- Mr. Pietropaolo". (5) On November 10, 2000, when the closing price of the Class A Common Stock on the New York Stock Exchange was $14.25 per share, the Company granted 400,000 and 300,000 shares of restricted stock to the former Chairman and CEO and the Vice Chairman, respectively. By the terms of the restricted stock, one-third of the shares vested in July 2001 as a result of the share price exceeding the grant date share price by $5.00 for the required period of time. Pursuant to the restricted stock agreement, as amended, an additional one-third of the shares will vest if the share price exceeds the grant date share price by $10.00 or more on or before the fifth anniversary of the grant date, and the remaining one-third will vest in the event that the share price equals or exceeds the grant date share price by $15.00 or more on or before the sixth anniversary of the grant date. The holders are entitled to dividends on the entire amount of the restricted stock. The value of Messrs. Cooling and Schimberg's unvested restricted stock as of December 31, 2002 was $5,514,667 and $4,136,000, respectively. Non-vested shares will be forfeited to the extent that they do not vest by the applicable expiration date. In connection with the July 2001 vesting of the restricted stock, the Company loaned $1,193,555 and $801,335 to Mr. Cooling and Mr. Schimberg, respectively, which is the amount of their tax withholding triggered by the restricted stock vesting. 45 Such loans bear interest at five percent per year and mature on the earlier of June 2006 or 30 days following termination of employment. Mr. Cooling has repaid his loan. (6) On November 10, 2000, when the closing price of the Class A Common Stock on the New York Stock Exchange was $14.25 per share, the Company granted 350,000 and 250,000 options, respectively, to Mr. Cooling and Mr. Schimberg at an exercise price of $14.25 per share. These options vest 50% upon issuance and 50% after one year. These options were in addition to the options granted to these persons in their capacity as directors for such year. (7) Represents severance payment to Mr. Cooling. See "--Employment Agreements-Mr. Cooling." OPTION GRANTS The table below sets forth information concerning stock options granted to the executive officers named in the "Summary Compensation Table" during the year ended December 31, 2002:
OPTION/SAR GRANTS IN 2002 % OF TOTAL NUMBER OF SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO GRANT DATE OPTIONS/SARS GRANTED EMPLOYEES IN EXERCISE OR BASE PRESENT VALUE NAME (#)(1) FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE ($)(2) - ------------------------ -------------------- ------------- ---------------- --------------- -------------- Craig Jung 175,000 11.27% $ 17.85 03/20/12 $ 1,393,000 Craig Jung 150,000 9.66% 8.86 11/04/12 619,500 Annette Franqui 70,000 4.51% 8.86 11/04/12 289,100 Carlos Hernandez-Artigas 45,000 2.90% 8.86 11/04/12 185,850 Ruben Pietropaolo 70,000 4.51% 14.97 01/08/12 461,300 Ruben Pietropaolo 65,000 4.18% 8.86 11/04/12 268,450 Paulo J. Sacchi 65,000 4.18% 8.86 11/04/12 268.450 Henry A. Schimberg 4,372 0.28% 8.86 11/04/12 18,056 - ------------------- (1) These options were granted under the "Equity Incentive Plan" under which the options vest over a three-year period. (2) The grant date present value of the options is based on the Black-Scholes option valuation model, whereby the weighted-average fair value at date of grant for options with an exercise price of $8.86 was $4.13, the options with an exercise price of $14.97 was $6.59 and the options with an exercise price of $17.85 was $7.96. The weighted-average assumptions for stock options granted during 2002 using the Black-Scholes option valuation model were: (i) risk-free interest rate of 3.58%, (ii) dividend yield of 2.49%, (iii) expected volatility of 47.6%, and (iv) expected option term life of 6.4 years.
OPTION EXERCISES AND YEAR-END VALUES The table below sets forth information concerning the exercise of stock options by the executive officers named in the "Summary Compensation Table" during the year ended December 31, 2002 and the value of unexercised options as of December 31, 2002:
VALUE OF UNEXERCISED IN-THE NUMBER OF SECURITIES -MONEY OPTIONS/SARS AT SHARES UNDERLYING UNEXERCISED FY-END ($) (BASED ON $20.78 ACQUIRED ON VALUE OPTIONS/SARS AT FY-END (#) PER SHARE) EXERCISABLE / NAME EXERCISE (#) REALIZED ($) EXERCISABLE / UNEXERCISABLE UNEXERCISABLE - ------------------------ ------------ ------------ --------------------------- --------------------------- Craig Jung 0 $ 0 0 / 325,000 $ 0 / $ 2,300,750 Annette Franqui 0 0 26,665 / 123,335 101,726 / 1,037,874 Carlos Hernandez-Artigas 0 0 112,532 / 76,968 400,469 / 698,439 Ruben Pietropaolo 0 0 0 / 135,000 0 / 1,181,500
46
AGGREGATE OPTION/SAR EXERCISES IN 2002 AND FY-END OPTION/SAR VALUES VALUE OF UNEXERCISED IN-THE NUMBER OF SECURITIES -MONEY OPTIONS/SARS AT SHARES UNDERLYING UNEXERCISED FY-END ($) (BASED ON $20.78 ACQUIRED ON VALUE OPTIONS/SARS AT FY-END (#) PER SHARE) EXERCISABLE / NAME EXERCISE (#) REALIZED ($) EXERCISABLE / UNEXERCISABLE UNEXERCISABLE - ------------------------ ------------ ------------ --------------------------- --------------------------- Paulo J. Sacchi 0 0 223,146 / 129,774 922,392 / 1,108,660 Henry A. Schimberg 0 0 252,479 / 7,422 1,645,912 / 67,312 William G. Cooling 0 0 357,392 / 3,050 2,305,494 / 15,198
PENSION PLANS The following table sets forth the annual retirement benefits that may be paid to a total of 23 executives of the Company (including Messrs. Sacchi, Hernandez and Pietropaolo) that are participants in the Company's International Pension Plan, a non-qualified plan. To vest, the executive must have 10 years of service with the Company and retire after age 55. Benefits are payable at age 65 based on an executive's average annual salary and bonus for the 3 years preceding retirement. The Company, at its option, may make a lump sum distribution to an employee at retirement in lieu of annual benefits described in this table. Reduced benefits are applicable for early retirement starting at age 55. The years of credited service for Mr. Sacchi are 17.5 years, for Mr. Hernandez are 9 years and for Mr. Pietropaolo is 1 year. INTERNATIONAL PENSION PLAN TABLE YEARS OF CREDITED SERVICE WITH THE COMPANY ---------------------------------------------------------- REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS --------------- -------- -------- -------- -------- -------- $ 100,000 $ 12,000 $ 16,000 $ 20,000 $ 24,000 $ 28,000 200,000 24,000 32,000 40,000 48,000 56,000 300,000 36,000 48,000 60,000 72,000 84,000 400,000 48,000 64,000 80,000 96,000 112,000 500,000 60,000 80,000 100,000 120,000 140,000 600,000 72,000 96,000 120,000 144,000 168,000 700,000 84,000 12,000 140,000 168,000 196,000 800,000 96,000 28,000 160,000 192,000 224,000 Mr. Jung's employment agreement with the Company provides him with a pension benefit that, commencing at age 62, will pay him annually an amount equal to the product of: (i) his years of service with the Company; (ii) his annual base salary and bonus payment (determined by averaging his final three years of service or shorter period if applicable); and (iii) 1.75%. The amount of this benefit is to be offset by the amount of any Company contributions on Mr. Jung's behalf to defined contribution plans. This pension benefit includes a 75% survivor benefit for Mr. Jung's spouse. The benefit vests after three years of service and Mr. Jung currently has one year of credited service. If Mr. Jung's employment with the Company is terminated without cause under his employment agreement, he will be credited with additional years of service equal to the lesser of two years or the remaining term of his employment agreement. SERP FOR CRAIG JUNG YEARS OF CREDITED SERVICE WITH THE COMPANY -------------------------------------------------------- REMUNERATION 3 YEARS 6 YEARS 9 YEARS 12 YEARS 15 YEARS - ---------------- -------- -------- -------- -------- -------- $ 1,000,000 $ 52,500 $105,000 $157,500 $210,000 $262,500 1,100,000 57,750 115,000 173,250 231,000 288,750 1,200,000 63,000 126,000 189,000 252,000 315,000 47 CASH BONUS PLAN We adopt each year a short-term incentive plan (the "Bonus Plan"), pursuant to which key executives of the Company and subsidiaries may receive bonus compensation based on Company performance and other factors, as determined by the Compensation Committee of the Board of Directors (the "Committee"). Under the Bonus Plan, each participant is assigned a target award expressed as a percentage of base salary. The actual award is based on the performance measures set forth in the Bonus Plan as determined by the Committee. For the 2003 Bonus Plan, the performance objectives are 20 percent based on individual objectives and 80 percent based on the following three financial objectives: sales volumes by physical case, net revenues per physical case and earnings before interest and taxes. Depending on the participant, the financial objectives may be measured on either a country basis, a regional basis (e.g, NOLAD) or on a Company-wide basis. The actual award may vary from 0 to 300 percent of a participant's target award. The Committee has the authority to select participants, to establish target awards and performance measures, and to make adjustments to awards. The target award percentages for the current executives included in the "Summary Compensation Table" are: Craig Jung, 75%, Annette Franqui, 50%, Carlos Hernandez, 45%, Paulo Sacchi, 50%, and Ruben Pietropaolo, 40%. Mr. Schimberg is not eligible for a bonus under the Bonus Plan or otherwise. The Committee may amend, suspend or terminate the Bonus Plan at any time. EQUITY INCENTIVE PLAN We have an Equity Incentive Plan (the "Equity Incentive Plan"), the purpose of which is to further the growth, development and financial success of the Company by providing incentives to selected employees. Pursuant to the Equity Incentive Plan, options (including incentive stock options) to purchase shares of Class A Common Stock and restricted stock awards with respect to Class A Common Stock may be granted. A total of 14,200,000 shares of Class A Common Stock (subject to adjustment upon certain events) is available for grant. The Equity Incentive Plan is administered by the Committee. The Committee determines the terms and conditions of all grants, subject to certain limitations set forth in the plan. In 2002, we granted options to purchase 1,553,348 shares of Class A Common Stock under the Equity Incentive Plan. STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS We have a Stock Option Plan for Nonemployee Directors (the "Stock Option Plan for Nonemployee Directors"), the purpose of which is to attract and retain the services of experienced and knowledgeable nonemployee directors and nonemployee members of the advisory board of the Company. The Stock Option Plan for Nonemployee Directors provides each nonemployee director with an option to purchase a specified number of shares of Class A Common Stock. A total of 190,000 shares of Class A Common Stock is available for grant. The Stock Option Plan for Nonemployee Directors is administered by the Board of Directors or a subcommittee thereof. The Board of Directors has the discretion to amend, terminate or suspend the Stock Option Plan for Nonemployee Directors at any time. All options granted under the Stock Option Plan for Nonemployee Directors expire 10 years from the date of issuance. In 2002, we granted each nonemployee director options to purchase 4,372 shares of Class A Common Stock of an exercise price of $8.86. EMPLOYMENT AGREEMENTS The Company has employment agreements with each of the executive officers named in the "Summary Compensation Table". MR. JUNG. Our employment agreement with Mr. Jung, as amended, provides for an initial term ending March 19, 2005 (which is automatically extended for additional one-year periods unless we or Mr. Jung provide six months advance notice that the term will not be renewed), pursuant to which Mr. Jung serves as our Chief Executive Officer and President, and as a member of our board of directors, reporting solely and directly to the board of directors. Mr. Jung's employment agreement currently provides for a minimum annual salary of $716,625, a target annual bonus in an amount equal to 75% of his annual base salary and an annual stock option grant having a Black-Scholes value on the date of grant in an amount equal to 265% of his annual base salary. Mr. Jung received a $125,000 sign-on bonus 48 in March 2002 when we originally entered into this agreement. We also reimbursed Mr. Jung on a grossed-up basis for costs incurred in relocating him and his family to his new principal place of employment in Miami, Florida. In the event of a subsequent relocation of our principal offices to a new location outside of the Miami, Florida area to which Mr. Jung consents, he will be entitled to similar reimbursements of costs in connection with the subsequent relocation of his residence. The agreement provides that Mr. Jung is entitled to participate in the Company's Equity Incentive Plan and any other equity or long-term incentive plans on at least as favorable basis as other similarly-situated executives, and is eligible to participate in all pension (including any 401(k) plan), savings, profit-sharing and deferred compensation plans offered to our senior executives. In addition, Mr. Jung and his dependents are eligible to participate in all employee benefit programs applicable to senior executives generally, in each case at a level and on terms and conditions consistent with his positions and no less favorable than those provided to other senior executives and with certain minimum levels of disability, life insurance and accidental death and dismemberment coverages. Mr. Jung is entitled to perquisites on the same basis as made available to our other non-expatriate senior executives, and an automobile allowance, reimbursement of fees and dues for one country club membership, tax and financial planning services and an annual executive physical. Mr. Jung is also entitled to receive a supplemental pension benefit as described above under the caption "--Pension Plans". If Mr. Jung's employment is terminated by the Company (other than due to death, disability or cause) or by Mr. Jung as a constructive termination without cause (as defined in his employment agreement), then Mr. Jung will be entitled to receive the following benefits: (1) base salary through the termination date, (2) a pro-rata target bonus for the year of termination, (3) an amount equal to two times his base salary, at the annualized rate in effect on the termination date, payable in 24 monthly installments, (4) an amount equal to two times target bonus for the year of termination, at the annualized rate in effect on the termination date, payable in 24 monthly installments, (5) accelerated vesting of any outstanding stock options, each option to remain exercisable for 12 months following the termination date, and any other equity awards (if any) not yet vested, (6) continued participation in all welfare benefit plans until the earlier of the end of the 18-month period following the date of termination, or the date he receives like coverages and benefits from a subsequent employer (determined on a benefit by benefit basis), provided that he will receive an economic equivalent on an after-tax basis if the plans do not permit his continued participation, (7) relocation benefits up to $50,000, (8) for purposes of determining the amount of his supplemental pension benefit, additional service credit equal to the lesser of two years or the number of years remaining in the term of his employment agreement after his termination of employment, (9) any amounts earned, accrued or owing, but not yet paid to him and (10) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company and its affiliates. Upon a change in control (as defined in the Company's Equity Incentive Plan), any outstanding stock options will vest and remain exercisable in accordance with such plan and any other equity awards will fully vest. If the payments or benefits to Mr. Jung would result in a payment of an "excess parachute payment" for purposes of Section 280G of the Internal Revenue Code (and an imposition of an excise tax on Mr. Jung), then the Company will provide a gross-up payment so that Mr. Jung will be placed in the same economic position on an after-tax basis as he would have been in had no excise tax been imposed. Mr. Jung is prohibited for a period of two years following the termination of his employment from competing directly or indirectly with, or soliciting employees from, the Company or disclosing proprietary or confidential information. In the event of any inconsistency between any provision of Mr. Jung's employment agreement and any other plan or arrangement of the Company (including the Change in Control Plan), the provision most favorable to Mr. Jung shall govern. MS. FRANQUI. Our employment agreement with Ms. Franqui provides for an initial term ending October 6, 2005 (which is automatically extended for additional one-year periods unless we or Ms. Franqui provide six months advance notice that the term will not be renewed), pursuant to which Ms. Franqui serves as our Vice President and Chief Financial Officer, reporting solely and directly to the Chief Executive Officer. Ms. Franqui's employment agreement currently provides for a minimum annual salary of $325,000 and a target annual bonus in an amount equal to no less than 50% of her annual base salary. The agreement provides that Ms. Franqui is entitled to participate in the Company's Equity Incentive Plan and any other equity or long-term incentive plans on at least as favorable basis as other similarly-situated executives, and is eligible to participate in all pension (including any 401(k) plan), savings, 49 profit-sharing and deferred compensation plans offered to our senior executives. In addition, Ms. Franqui and her dependents are eligible to participate in all executive benefit programs applicable to senior executives generally, in each case at a level and on terms and conditions consistent with her position. Ms. Franqui also receives an automobile allowance. Pursuant to Ms. Franqui's employment agreement with the Company, in the event that Ms. Franqui's employment is terminated by the Company (other than due to death, disability, cause or nonrenewal) or by Ms. Franqui as a constructive termination without cause (as defined in Ms. Franqui's employment agreement), then Ms. Franqui will be entitled to receive the following benefits: (1) base salary through the termination date, (2) a pro-rata target bonus for the year of termination, (3) an amount equal to 1.5 times her base salary, at the annualized rate in effect on the termination date, payable in 18 monthly installments, (4) an amount equal to 1.5 times target bonus for the year of termination, at the annualized rate in effect on the termination date, payable in 18 monthly installments, (5) accelerated vesting of any outstanding stock options, each option to remain exercisable for 12 months following the termination date, and any other equity awards (if any) not yet vested, (6) continued participation in all welfare benefit plans until the earlier of the end of the 18-month period following the date of termination, or the date she receives like coverages and benefits from a subsequent employer (determined on a benefit by benefit basis), provided that she will receive an economic equivalent on an after-tax basis if the plans do not permit her continued participation, (7) any amounts earned, accrued or owing, but not yet paid to her and (8) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company and its affiliates. Upon a change in control (as defined in the Company's Equity Incentive Plan), any outstanding stock options will vest and remain exercisable in accordance with such plan and any other equity awards will fully vest. If the payments or benefits to Ms. Franqui would result in a payment of an "excess parachute payment" for purposes of Section 280G of the Internal Revenue Code (and an imposition of an excise tax on Ms. Franqui), then the Company will provide a gross-up payment so that Ms. Franqui will be placed in the same economic position on an after-tax basis as she would have been in had no excise tax been imposed. Ms. Franqui is prohibited for a period of 18 months following the termination of her employment from competing directly or indirectly with, or soliciting employees from, the Company or disclosing proprietary or confidential information. In the event of any inconsistency between any provision of Ms. Franqui's employment agreement and the Change in Control Plan, the provision most favorable to Ms. Franqui shall govern. MR. HERNANDEZ ARTIGAS. Our employment agreement with Mr. Hernandez Artigas provides for an initial term that ended on September 30, 2002 (which is automatically extended for additional one-year periods unless we or Mr. Hernandez Artigas provide six months advance notice that the term will not be renewed), pursuant to which Mr. Hernandez Artigas serves as our Chief Legal Officer. Mr. Hernandez Artigas's employment agreement currently provides for him to receive a minimum annual salary of $301,600, plus additional compensation equal to 50% of his daily base salary for each vacation day accrued per year during the vacation period per year, and to be eligible to receive annual bonuses under the Company's annual bonus plan and to participate in the Company's Equity Incentive Plan. We also provided Mr. Hernandez Artigas with relocation assistance for costs incurred in relocating him and his family to his new principal place of employment in Miami, Florida, including a one-time relocation allowance, a three-year home rental allowance (payable at Mr. Hernandez Artigas's election in a discounted lump sum with a 25% premium) and a three-year cost-of-living transitional allowance (all such allowances are grossed-up for taxes), a 90-day interest free loan and reimbursements with respect to his former residence (either relating to selling the property or covering one year of maintenance costs). In addition, Mr. Hernandez Artigas is entitled to receive life insurance coverage in an amount equal to at least three times his base salary and target bonus, disability insurance coverages in an amount equal to 60% of base salary, specified health, medical, dental and vision coverages, and is eligible to participate in all other plans offered by the Company to is executives, including savings, pension, profit-sharing and deferred compensation plans. In addition, Mr. Hernandez Artigas is entitled to payment of luncheon club fees and dues, and fees for tax return, financial planning and/or estate planning advice. Prior to September 30, 2002, the Company also provided Mr. Hernandez Artigas with one first class round trip airfare per year for Mr. Hernandez Artigas, his spouse and his children to travel between Miami, Florida and his former country of residency, and tax equalization (on a grossed-up 50 basis) in the event that any tax is assessed upon him in respect of any and all payments (other any taxes imposed in respect of grants of restricted stock and stock options) that is in excess of the tax that would have been assessed had he remained in his former employment location with the Company. If his employment is terminated by the Company (other than due to death, disability, or cause) or by Mr. Hernandez Artigas for good reason (as defined in his employment agreement), Mr. Hernandez Artigas will be entitled to receive the following benefits: (1) any unpaid base salary through the date of termination, (2) accrued but unpaid incentive bonus compensation, if any, (3) payment for accrued and unused vacation days, (4) an amount equal to the greater of (a) two (2) times the base salary and target bonus for the year in which the termination occurs, or (b) the severance benefit as set forth and calculated under the employment laws of Mexico as in effect as of October 1, 1999, (5) a pro rata portion of the incentive bonus compensation, if any, for the bonus period during which termination of employment occurs, (6) continuation of employee benefits for a period of 1.5 years after the date of termination, in the manner and at such times as the benefits otherwise would have been payable or provided to him, or, if earlier, until similar benefits are obtained through new employment, and (7) reimbursement for moving and related expenses incurred as a result of his relocation back to his home country (collectively, the "Severance Benefits"). In the event that Panamco LLC is unable to provide any of the Severance Benefits, Mr. Hernandez Artigas will be entitled to cash in an amount equal to the value of that benefit. In addition, in the event of termination of employment under the circumstances described above, Mr. Hernandez Artigas will become immediately vested in his stock options and will have one year from the date of termination of employment to exercise such stock options. In the event Mr. Hernandez Artigas is offered to be relocated to any of the Company's operations under customary conditions and he refuses to accept such offer, Panamco LLC shall have the right to terminate his employment agreement for cause; provided, however, that Panamco LLC shall (x) pay him the greater of (A) an amount equal to one half (1/2) times his base salary and target bonus for the year in which the termination of employment occurs, or (B) the severance benefit as set forth and calculated under the employment laws of Mexico as in effect as of October 1, 1999, and (y) reimburse him for reasonable moving and related expenses incurred as a result of his relocation back to his home country. In addition, in such event Mr. Hernandez Artigas will have one year from the date of termination within which to exercise the portion of his stock options that was vested as of the date of termination. If the payments or benefits to Mr. Hernandez Artigas would result in a payment of an "excess parachute payment" for purposes of Section 280G of the Internal Revenue Code (and an imposition of an excise tax on Mr. Hernandez Artigas), then Panamco LLC will provide a gross-up payment so that he will be placed in the same economic position on an after-tax basis as he would have been in had no excise tax been imposed. Mr. Hernandez Artigas is prohibited for a period of two years following the termination of his employment (for any reason other than cause or good reason) from competing directly or indirectly with the Company. In addition, Mr. Hernandez Artigas is prohibited for a period of two years following the termination of his employment for any reason from disclosing proprietary or confidential information or soliciting the Company's employees or clients. MR. SACCHI. In connection with Mr. Sacchi's appointment as the President of Panamco Brazil and the Company's Vice President--Brazilian operations in February 2002, we entered into a employment agreement with Mr. Sacchi and terminated his previous employment agreement with the Company. The current agreement, as amended, provides for an annual base salary of $428,000 and expires December 31, 2003. At December 31, 2003, Mr. Sacchi will receive the following retirement benefits (the "Retirement Benefits"): (1) the benefits determined in accordance with the applicable provisions of the Company's International Pension Plan that governs the terms of his retirement; and (2) continued participation (for no additional cost) in the Panamco Brasil-sponsored health and life insurance plans until his 72nd birthday. In addition, at December 31, 2003, Panamco or Panamco LLC shall have the option (but not the obligation) to engage Mr. Sacchi as a consultant for a term of 18 months or more in exchange for the monthly payment of $31,111.11. If Mr. Sacchi's employment is terminated without cause or for good reason (each as defined in his employment agreement) prior to December 31, 2003, then he shall be entitled to receive the Retirement Benefits, an amount equal to his base salary and an amount equal to his target bonus. The same benefits shall also be provided to Mr. Sacchi if a change in control (as defined in his employment agreement) of Panamco-Brasil or Panamco shall occur on or before December 31, 2003, and on or before December 31, 2003, Mr. Sacchi's employment is terminated by Panamco-Brasil without cause or his employment is terminated for good reason. 51 MR. SCHIMBERG. Our employment agreement with Mr. Schimberg provides for an initial term that ended on December 31, 2001 (which is automatically extended for additional six-month periods unless we or Mr. Schimberg provide three months advance notice that the term will not be renewed), pursuant to which Mr. Schimberg currently serves as a member of the board of directors and as Vice Chairman of the board of directors. Mr. Schimberg's employment agreement does not provide Mr. Schimberg with any entitlement to base salary or an annual bonus, except to the extent the board of directors otherwise provides in its sole discretion. On November 10, 2000, Mr. Schimberg received grants of stock options and restricted stock pursuant to the terms of his employment agreement with the Company (as described in the footnotes to the Summary Compensation Table). Mr. Schimberg's employment agreement also provides that he is entitled to participate in all fringe benefits and perquisites, including vacations, available to senior executives of the Company at levels, and on terms and conditions, that are commensurate with his positions and responsibilities. Mr. Schimberg's employment agreement provides that if Mr. Schimberg's employment is terminated by the Company other than due to disability or cause, or by Mr. Schimberg as a constructive termination without cause (as defined in Mr. Schimberg's employment agreement), then Mr. Schimberg will be entitled to a cash payment of $950,000 and any amounts of earned but unpaid compensation as a director, benefits and other additional benefits in accordance with applicable plans, programs and arrangements with the Company and its affiliates, provided that the lump sum payment is not payable in connection with a constructive termination without cause the sole basis of which is that a new full-time Chief Executive Officer of the Company has commenced employment or in connection with a termination of employment upon expiration of the then scheduled term of his employment agreement. If the payments or benefits under Mr. Schimberg's employment agreement would result in a payment of an "excess parachute payment" for purposes of Section 280G of the Internal Revenue Code (and an imposition of an excise tax on Mr. Schimberg), then the Company will provide a gross-up payment so that Mr. Schimberg will be in the same economic position on an after-tax basis as he would have been in had no excise tax been imposed. MR. PIETROPAOLO. In connection with Mr. Pietropaolo's appointment as the President of Panamco NOLAD and the Company's Vice President--NOLAD operations in January 2002, we entered into an employment agreement with Mr. Pietropaolo. The agreement provides for an annual base salary of $456,730.78, plus $38,461.53 as Christmas bonus, plus $4,807.69 as vacation bonus. Mr. Pietropaolo is entitled to participate in the Company Annual Incentive Plan and is also entitled to participate in all pension, profit-sharing, vacation, insurance, hospitalization, medical health, disability and other employee benefit or welfare plan, program or policy that the Company may adopt, subject to eligibility and participation provisions set forth in the plan or program. Mr. Pietropaolo is entitled to a housing allowance of $120,000 per year for the first three years of employment and to a company car with a driver. Mr. Pietropaolo is entitled to a golf club membership and to one round trip plane ticket to the City of Buenos Aires per year. On March 26, 2003, Ruben Pietropaolo resigned as President of Panamco NOLAD, President of Panamco Mexico and as the Company's Vice President--NOLAD Operations and, effective March 27, 2003, he assumed the position of Vice President--Special Projects of the Company. On an interim basis, Juan Carlos Jaramillo, the Executive Vice President of Panamco Mexico, will lead the Company's operations in Mexico, Jose Francisco Vazquez will continue to lead the Company's operations in Central America, and Felipe Alvira will continue to lead the Copany's operations in Colombia. All three executives will report directly to the Company's Chief Executive Officer. In connection with this charge: (i) Mr. Pietropaolo's January 2002 employment agreement was terminated as he was paid the severance benefits required by Mexican law totaling approximately $35,000; (ii) the Company and Mr. Pietropaolo entered into a new agreement for his services as the Company's Vice President-- Special Projects that provides for the payment of $700,000 to Mr. Pietropaolo payable over the term of the agreement, which expires upon the earlier of September 30, 2003 or the closing of a change of control transaction, including the proposed merger transaction with Coca-Cola FEMSA; (iii) Mr. Pietropaolo's existing stock options continue to be governed by the terms of the Company's Equity Incentive Plan; and (iv) Mr. Pietropaolo waived all benefits under the Company's Key Executive Retention, Severance and Non-Competition Plan. 52 MR. COOLING. Mr. Cooling's employment agreement with the Company was terminated effective August 30, 2002, pursuant to a severance agreement between the parties. Under this severance agreement, the Company made a lump sum payment of $1,350,000, of which $950,000 was an obligation of the Company under Mr. Cooling's employment agreement. Mr. Cooling received no bonus payment for 2002 and has repaid all outstanding loans. See "--Summary Compensation Table". CHANGE OF CONTROL PLANS In September 2002, Panamco adopted the Key Executive Retention, Severance and Non-Competition Plan and the Key Employee Retention, Severance and Non-Competition Plan (the "Change of Control Plans"), which provide benefits to designated executive officers and other employees of the Company. The Change in Control Plans provide that in the event a participant's employment with the Company is terminated without cause or as a result of an Involuntary Termination (which generally includes a termination of the employee's employment with the Company without cause or by the participant as a result of certain changes in the participant's duties, principal place of employment or salary and bonus opportunity), within the period (which we refer to as the window period) that commences 90 days prior to (a) the occurrence of a change in control of the Company (as defined in the Change of Control Plans) or (b) any public announcement of the intention to undertake a transaction that if completed would result in a change of control, and terminates upon the expiration of no more than three years following the date of such change in control, the participant will be entitled to receive the following benefits: o a cash severance payment in an amount which varies by participant from one-half to three times the participant's annual base salary plus target bonus; o continued provision of Panamco's standard group employee insurance coverages for a specified period, which varies by participant from six months to three years; o payment of all salary and accrued vacation pay earned through the date of termination of employment; and o if the participant is an expatriate (as defined in the Change in Control Plans), an additional cash payment of $25,000. The Change in Control Plans further provide that upon a change of control, each participant who is then employed by Panamco or whose employment terminated prior to the change of control as a result of an Involuntary Termination during the window period, shall become entitled to receive, in lieu of any payments that he or she may be entitled to receive under Panamco's annual incentive plan for the year in which the change of control occurs, a lump-sum payment equal to the product of (a) the participant's target bonus for the year in which the change of control occurs and (b) the number of days from January 1 to the date of the change of control divided by 365. If a participant's Involuntary Termination occurs prior to the date of the change of control, the participant's outstanding stock options and restricted shares of Panamco's Class A Common Stock granted under Panamco's Equity Incentive Plan will fully vest and, in the case of stock options, become exercisable as of the date of such termination of employment. If certain designated participants, including Messrs. Jung, Hernandez and Ms. Franqui, become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, then Panamco will provide such participants with a gross-up payment to place the participants in the same economic position on an after-tax basis that such participants would have been in had no excise tax been imposed. If any other participant becomes subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, then the participant's benefits shall be reduced to the maximum amount as will result in no portion of the payments being subject to the excise tax (the "Safe Harbor Cap"), but only if the net after-tax amount that would be received by the participant, taking into account all applicable federal, state and local income taxes and the excise tax, is greater than the net after-tax amount that would be received by the participant if the payments are not reduced to the Safe Harbor Cap. To the extent that an executive receives any severance benefits under any other plan or arrangement, then the payments and benefits payable under the Change in Control Plans shall be reduced by a like amount. The proposed merger transaction with Coca-Cola FEMSA will result in a change of control under the Change of Control Plans. 53 DIRECTORS FEES Directors of the Company other than the Chief Executive Officer receive annual directors' fees of $35,000 and $1,000 per diem (or $500 per telephonic conference call) for attendance at Board of Directors and committee meetings. Committee chairmen receive $3,000 per year. Commencing September 2002, the Chairman of the Board is paid an aggregate annual fee of $170,000 per year for his services to the Company, but does not receive the per diem or per telephonic conference call amounts noted above. The Company provides medical insurance to its directors. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee during 2002 were Mr. Wade T. Mitchell, Mr. Woods W. Staton Welten, Mr. James Postl, and Mr. Oswaldo Cisneros. In September 2002, Mr. Woods W. Staton Welten resigned from the Compensation Committee upon being named Chairman of the Board of the Company, an officer's position under Panamco's bylaws. There were no Compensation Committee interlocks during 2002. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT GENERAL We are not directly or indirectly owned or controlled by another corporation or by any foreign government. We have two classes of Common Stock and one series of Preferred Stock: the Class A Common Stock, which currently has no voting rights, the Class B Common Stock, which is entitled to one vote per share and the Series C Preferred Stock, par value $0.01 per share (the "Series C Preferred Stock"), which currently has certain rights as described in detail below. The holders of Class B Common Stock have the exclusive power to elect the Board of Directors and to determine the outcome of all matters to be decided by a vote of the shareholders. Class A Common Stock will not have voting rights unless certain events occur which will cause all outstanding shares of Class B Common Stock to be converted into shares of Class A Common Stock, at which point each share of Class A Common Stock will carry one vote. Such events, which may never occur, are specified in our Articles of Incorporation. Coca-Cola is the sole holder of the Series C Preferred Stock. The following table sets forth information with respect to the beneficial ownership of Panamco's Class B Common Stock as of March 24, 2003 by (1) each stockholder known by Panamco to own beneficially five percent or more of the outstanding shares of Panamco's Class B Common Stock, (2) each Panamco (A) director, (B) executive officer and (C) "named executive officer" included in the "Summary Compensation Table", in each case known by Panamco to own shares of Panamco's Class B Common Stock and (3) all directors and executive officers as of March 24, 2003 as a group. As of March 24, 2003, there were 8,659,802 shares of Panamco's Class B Common Stock outstanding. There are no options to acquire shares of Panamco's Class B Common Stock. Unless otherwise indicated in a footnote, the business address of each person listed below is Panamco's corporate address.
Amount and Nature of Name and Address of Beneficial Owner of Class B Common Stock Beneficial Ownership Percent of Class - ------------------------------------------------------------------- -------------------- ---------------- Mr. James M. Gwynn and Mr. Woods W. Staton Welten in the capacities as Voting Trustees under the Voting Trust Agreement (1), (2)......... 5,155,052 59.5% The Coca-Cola Company (3)............................................... 2,167,064 25.0% Venbottling Holdings, Inc (4)........................................... 778,844 9.0% Gustavo A. Cisneros (5)................................................. 272,217 3.1% Oswaldo J. Cisneros (6)................................................. 265,765 3.1% Wade T. Mitchell........................................................ 59,525 * Woods W. Staton Welten.................................................. 3,408,838 39.4%
54
Amount and Nature of Name and Address of Beneficial Owner of Class B Common Stock Beneficial Ownership Percent of Class - ------------------------------------------------------------------- -------------------- ---------------- Houston Staton Welten................................................... 466 * All Directors and Executive Officers as a group......................... 4,006,811 46.3%
- ------------------ * Less than one percent. (1) Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the shares beneficially owned as set forth opposite such person's name. (2) The address of the Voting Trustees is c/o The Bank of Butterfield Executor & Trustee Co. Ltd., P.O. Box HM 195, Hamilton HM GX, Bermuda. Messrs. Gwynn and Woods Staton disclaim beneficial ownership of the shares held by the Voting Trust that are held on behalf of Voting Trust participants other than themselves. (3) The address of The Coca-Cola Company is One Coca-Cola Plaza, Atlanta, Georgia, 30313. (4) The business address of Venbottling Holdings, Inc. is Calle 53 Este Marbella, Torre Swiss Bank, Segundo Piso, Panama, Republic of Panama. (5) The business address of Gustavo A. Cisneros is Final Avenida La Salle, Edificio Venevision, Urb. Colina de los Caobos, Caracas, Venezuela. The shares of Panamco's Class B Common Stock beneficially owned by Gustavo A. Cisneros are held by Venbottling Holdings, Inc. Gustavo A. Cisneros is a director and indirect shareholder of Venbottling Holdings, Inc. and disclaims beneficial ownership of all shares held by Venbottling Holdings, Inc. other than those listed above. (6) The business address of Oswaldo J. Cisneros is Av. Francisco de Miranda, Parque Cristal Piso #14, Torre Oeste, Caracas, Venezuela. All of the shares of Panamco's Class B Common Stock beneficially owned by Oswaldo J. Cisneros are held by Venbottling Holdings, Inc. Oswaldo J. Cisneros is a director and indirect shareholder of Venbottling Holdings, Inc. and disclaims beneficial ownership of all shares held by Venbottling Holdings, Inc. other than those listed above. The following table sets forth information with respect to the beneficial ownership of Panamco's Class A Common Stock as of March 24, 2003 by (1) each stockholder known by Panamco to own beneficially five percent or more of the outstanding shares of Panamco's Class A Common Stock, (2) each Panamco (A) director, (B) executive officer and (C) "named executive officer" included in the "Summary Compensation Table", in each case known by Panamco to own shares of Panamco's Class A Common Stock and (3) all directors and executive officers of Panamco as of March 24, 2003, as a group. As of March 24, 2003, there were 112,793,056 shares of Panamco's Class A Common Stock outstanding, of which 466,667 shares are subject to forfeiture under restricted stock agreements. Unless otherwise indicated in a footnote to the table set forth below or above, the business address of each person listed below is Panamco's corporate address.
AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL OWNER OF CLASS A COMMON STOCK BENEFICIAL OWNERSHIP PERCENT OF CLASS (1) - ------------------------------------------------------------ -------------------- -------------------- The Coca-Cola Company........................................ 28,458,626 25.2% Venbottling Holdings, Inc.................................... 10,271,156 9.1% Gustavo A. Cisneros (2), (4)................................. 3,594,659 3.2% Oswaldo J. Cisneros (3)...................................... 3,509,563 3.1% William G. Cooling (4)....................................... 594,154 * Gary P. Fayard (4)........................................... 1,206 * Wade T. Mitchell (4)......................................... 117,449 * Paulo Sacchi (4)............................................. 233,156 * Woods W. Staton Welten (4)................................... 910,701 * Houston Staton Welten (4).................................... 3,576,788 3.2% Craig D. Jung (4)............................................ 50,000 * James J. Postl (4)........................................... 4,313 * Henry A. Schimberg (4)....................................... 352,475 * Annette Franqui (4).......................................... 26,665 * Ruben Pietropaolo (4)........................................ 111,667 * Carlos Herandez Artigas (4).................................. 112,832 *
55
AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL OWNER OF CLASS A COMMON STOCK BENEFICIAL OWNERSHIP PERCENT OF CLASS (1) - ------------------------------------------------------------ -------------------- -------------------- Felipe Alvira (4)............................................ 81,566 * Jose Antonio de Echavarri (4)................................ 55,133 * All Directors and Executive Officers as a group.............. 13,330,493 11.8%
- ------------------ * Less than one percent (1) Shares subject to options are considered outstanding for the purpose of determining the percent of the class held by the holder of such option, but not for the purpose of computing the percentage held by others. (2) Includes 3,589,923 shares of Panamco's Class A Common Stock held by Venbottling. Mr. Gustavo Cisneros is a director and indirect shareholder of Venbottling. Mr. Cisneros disclaims beneficial ownership of all shares held by Venbottling other than those listed above. (3) Includes 3,504,827 shares of Panamco's Class A Common Stock held by Venbottling. Mr. Oswaldo Cisneros is a director and indirect shareholder of Venbottling. Mr. Cisneros disclaims beneficial ownership of all shares held by Venbottling other than those listed above. (4) Such shares include the following shares the directors and named executive officers have the right to acquire within 60 days through the exercise of vested stock options: Gustavo Cisneros, 4,736; Oswaldo Cisneros, 4,736; William G. Cooling, 357,392; Gary P. Fayard, 1,206; Wade T. Mitchell, 7,392; Paulo Sacchi, 233,146; Woods. W. Staton Welten, 7,392; Houston Staton Welten, 7,302; Craig D. Jung, 50,000; James J. Postl, 2,479; Henry A. Schimberg, 252,479; Annette Franqui, 26,665; Ruben Pietropaolo, 111,667; Carlos Hernandez, 112,532; Felipe Alvira, 81,566; Jose Antonio de Echavarri, 55,133; and for all Directors and Officers as a group, 1,315,823. SERIES C PREFERRED STOCK The holder of the Series C Preferred Stock (the "Holder") is not entitled to receive any dividends with respect to the Series C Preferred Stock and is entitled to a preference on the liquidation, dissolution or winding-up of the Company of $1.00. Pursuant to the Certificate of Designation for the Series C Preferred Stock, we have agreed not to take certain actions without the approval of the Holder, including, but not limited to: (i) certain consolidations, mergers and sales of substantially all of our assets; (ii) any acquisition or sale of a business (or an equity interest therein) if the purchase price or sales price thereof, as the case may be, exceeds a material amount (as defined therein); (iii) entry into any new significant line of business or termination of any existing significant line of business; (iv) certain capital expenditures and acquisitions and dispositions of property and equipment; (v) certain transactions with affiliates (as defined); (vi) certain changes in our policy with respect to dividends or distributions to shareholders; and (vii) certain changes to our Articles of Incorporation or By-laws. These rights are subject to certain exceptions and qualifications and may be suspended or terminated in certain circumstances. The Holder has no voting rights except as provided for above and except for any voting rights provided by law. The Holder is entitled to designate for election to the Board of Directors a certain number of designees depending on the percentage of the outstanding capital stock beneficially owned by it. The Holder of the Series C Preferred Stock has certain rights to purchase additional shares of common stock issued by the Company to maintain its proportionate interest, subject to certain exceptions and limitations. The Series C Preferred Stock may not be transferred to any person other than Coca-Cola or a corporation 100% of the capital stock of which (other than directors' qualifying shares or shares held by persons to comply with local law) is owned, directly or indirectly, by Coca-Cola. Upon any transfer in violation of such restrictions, the Series C Preferred Stock will convert automatically to a share of Class A Common Stock. Pursuant to the investment agreement (the "Investment Agreement") dated November 1, 1995, between us and Coca-Cola Export Corporation ("Export"), a wholly owned subsidiary of Coca-Cola, for so long as Export is entitled to delegate one or more individuals for election to our Board of Directors, in the event of certain subsequent new issues of Common Stock, Coca-Cola will have the right to purchase shares of Common Stock from us (on the terms of such new issue) in order to maintain its economic and voting interest in Panamco. Under certain circumstances (but not currently), Export has the right to request that we file a registration statement so as to permit or facilitate the sale or distribution of shares of Class A Common Stock beneficially owned by Coca-Cola. In addition, in certain instances (but not currently), when we propose to register under the Securities Act of 1933 shares of our Common Stock in connection with an underwritten offer for our own account, we must offer Export the opportunity to include in such registration statement shares of Common Stock beneficially owned by Coca-Cola. 56 SERIES D PREFERRED STOCK Immediately prior to the effective time of the merger between the Company and Coca-Cola FEMSA, all shares of Class A Common Stock and Class B Common Stock beneficially owned by The Coca-Cola Company through its subsidiaries will be exchanged for newly issued shares of Series D Preferred Stock, par value $0.01 per share, of the Company at a one-to-one ratio. The holder of the Series D Preferred Stock (the "Holder") is not entitled to receive any dividends with respect to the Series D referred Stock and is entitled to a preference on the liquidation, dissolution or winding-up of the Company of $0.00001. Pursuant to the Certificate of Designation for the Series D Preferred Stock, we have agreed not to take certain actions without the approval of the Holder, including, but not limited to: (i) any alteration, amendment or modification of the Certificate of Designations of the Series D Preferred Stock and (ii) certain changes to our Articles of incorporation or By-laws. The Holder has no voting rights except as provided for above and except for any voting rights provided by law. The Holder has no right to purchase additional shares of unissued common stock of the Company in the future. The Series D Preferred Stock may not be transferred to any person other that Coca-Cola or a corporation 100% of the capital stock of which (other than directors' qualifying shares or shares held by persons to comply with local law) is owned, directly or indirectly, by Coca-Cola. Upon transfer in violation of such restrictions, the Series D Preferred Stock will convert automatically to a share of Class A Common Stock. In addition, the transfer of the Series D Preferred Stock is subject to certain restrictions contained in the Investment Agreement. VOTING TRUST The beneficial owners of 5,155,052 shares of Class B Common Stock, who are no longer the holders of record of such shares, representing approximately 59.5% of the shares of such class, have entered into a Voting Trust Agreement, amended and restated as of April 20, 1993, as amended (the "Voting Trust"), for which Mr. James M. Gwynn and Mr. Woods W. Staton Welten act as the voting trustees (the "Voting Trustees"). The Voting Trust will expire on January 11, 2013. The Voting Trust may be amended at any time by the holders of voting trust certificates representing 70% of the shares subject to the Voting Trust. Under the terms of the Voting Trust, the Voting Trustees may vote as they, in their sole discretion, deem to be in the best interests of the holders of the voting trust certificates. However, the Voting Trustees are not permitted to vote on any proposal for a merger, consolidation or certain other significant transactions involving the Company, except as directed by the individual holders of the voting trust certificates (or, if no such direction is received, in accordance with the recommendation of our Board of Directors). The Voting Trustees have also agreed with Coca-Cola and Export (i) to vote for Coca-Cola's designees for election to our Board of Directors and (ii) not to take any action or cause us to take any action the effect of which would circumvent or adversely affect or be inconsistent with any of the terms of the Series C Preferred Stock. The Voting Trustees have also agreed with Venbottling to vote for Venbottling's designees for election to our Board of Directors. Certain of the Voting Trustees are directors of the Company. See "Item 10 -- Directors and Officers of the Registrant." The Voting Trustees will serve for five-year terms, unless earlier removed by the holders of voting trust certificates representing 70% of the shares subject to the Voting Trust. The Voting Trustees are not permitted to transfer the shares of Class B Common Stock or any other voting securities which may be held in the Voting Trust. The Voting Trust is on file at our registered office, Dresdner Bank, Seventh Floor, 50th Street, City of Panama, Republic of Panama, and is available on request of the Secretary. 57 SHAREHOLDER AGREEMENT WITH VENBOTTLING HOLDINGS, INC. Pursuant to a Shareholder Agreement dated May 9, 1997, entered into by us and Venbottling, Gustavo A. Cisneros and Oswaldo J. Cisneros have the right to be appointed to our board of directors. If Venbottling ownership of the total outstanding Common Stock of the Company decreases below 7.5%, Venbottling shall cause one of its representatives to resign from the board of directors and if its ownership decreases below 5% of the total outstanding Common Stock of the Company, Venbottling shall cause its representatives to resign from the board of directors. Venbottling has the right to request that we file a registration statement so as to permit or facilitate the sale or distribution of shares beneficially owned by it. Also, in certain circumstances when we propose to register under the Securities Act of 1933 shares of our Common Stock in connection with an underwritten offer for our own account we must offer Venbottling the opportunity to include in such registration statement shares of Common Stock beneficially owned by it. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CISNEROS FAMILY Many of the raw materials and supplies used in Venezuela are purchased from companies owned by, related to, or affiliated with certain members of the Cisneros family, the former owners of Panamco Venezuela, as follows: ENTITY MATERIAL SUPPLIED AMOUNT PAID IN 2002* ----------------------------------- ----------------- -------------------- Productos de Vidrio, S.A. Bottles $ 12,418 Central Azucarero Portuguesa, C.A. Sugar 30,808 Proyectos PET C.A. PET 7,495 Gaveras Plasticas Venezolanas, C.A. Plastic cases 463 C.A. Cerverceria Regional Beer 3,448 * Stated in thousands of U.S. dollars We believe the terms of such arrangements are no less favorable to us than those that could be obtained from independent third parties. FRANCHISE ARRANGEMENTS Panamco has exclusive rights under its bottling agreements with The Coca-Cola Company to bottle and distribute Coca-Cola trademark soft drinks and water in all of the territories in which Panamco operates. Panamco also produces and distributes its proprietary brands. In 2002 and 2001, 74% of Panamco's unit case volume, respectively, was attributable to Coca-Cola products. These bottling agreements expire on various dates. In 1995, Panamco and The Coca-Cola Company agreed that all bottling agreements of Panamco's Mexican subsidiaries would have a uniform term ending in 2005, renewable for one additional ten-year term. In general, the Brazilian, Venezuelan, Nicaraguan, Costa Rican, Guatemalan and Colombian agreements are for five-year terms, renewable for one additional five-year term. The bottling agreements regulate the preparation, bottling and distribution of beverages in the applicable franchise territory. The bottling agreements authorize the bottlers to use the concentrates purchased from The Coca-Cola Company to bottle, distribute and sell a variety of beverages under certain brand names and in certain approved presentations and to utilize the trademarks of The Coca-Cola Company to promote these products. The Coca-Cola Company reserves the right to market independently or license post-mix products. The prices that The Coca-Cola Company may charge Panamco for concentrates are determined by The Coca-Cola Company from time to time at its discretion. The Coca-Cola Company currently charges Panamco a 58 percentage of the weighted average wholesale price (net of taxes) of each case sold to retailers within each of Panamco's franchise territories. Panamco pays no additional compensation to The Coca-Cola Company under the licenses for the use of the associated trade names and trademarks. Where local law permits, The Coca-Cola Company has the right to limit the wholesale prices of its products. Total payments by Panamco to The Coca-Cola Company for concentrates were approximately $333.0 million and $361.1 million in 2002 and 2001, respectively. Panamco may not assign, transfer or pledge its bottling agreements, whether voluntarily, involuntarily or by operation of law, without the prior consent of The Coca-Cola Company. Moreover, Panamco may not enter into any contract or other arrangement to manage or participate in the management of any other bottler without the prior consent of The Coca-Cola Company. Panamco may not sell or otherwise transfer ownership of any bottling operation. As it has in the past, Coca-Cola may, in its discretion, contribute to our advertising and marketing expenditures (including pricing support) as well as undertake independent advertising and marketing activities. Coca-Cola has routinely established annual budgets with Panamco for cooperative advertising and promotion programs. In 2002 and 2001, Coca-Cola provided us with $33.5 million and $36.5 million in marketing support. Incentive payments that are related to the increase in volume of Coca-Cola products that result from such expenditures are treated as an offset against the costs of concentrates paid by Panamco to Coca-Cola. In 2002, we reached an agreement with Coca-Cola to convert our Risco water volume in Mexico to Coca-Cola's brand Ciel beginning in the first quarter of 2003. The conversion was done in exchange for a total consideration of $65.0 million to be paid by Coca-Cola. Approximately $56.4 million of this amount was paid in the first quarter of 2003, $3.6 million was already paid in the fourth quarter of 2002 and the remaining amounts will be paid in equal installments between 2003 and 2006. Income from the conversion will be deferred and recognized over the life of the contract, which is ten years. VOTING TRUST Panamco has agreed to reimburse the fees and expenses incurred by the Voting Trust in connection with the proposed merger with Coca-Cola FEMSA, including with respect to the consideration, evaluation and negotiation of the transaction, and the review and execution of related documents, not to exceed $1.0 million, unless otherwise approved by Panamco. To date, Panamco has paid a retainer fee to the Voting Trust's legal advisor of $100,000. ITEM 14. CONTROLS AND PROCEDURES Panamco's Chief Executive Officer and Chief Financial Officer (collectively, the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for Panamco. Such officers have concluded (based upon their evaluation of these controls and procedures as of a date within 90 days of the filing of this report) that Panamco's disclosure controls and procedures are effective to ensure that information required to be disclosed about Panamco in this report is accumulated and communicated to Panamco's management, including its principal executive officers as appropriate, to allow timely decisions regarding required disclosure. The Certifying Officers also have indicated that there were no significant changes in Panamco's internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation, and there were no corrective actions with regard to significant deficiencies and material weaknesses. 59 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1), (2) The Financial Statements and Schedule II--Valuation and Qualifying Accounts listed on the index on Page F-1 following are included herein by reference. All other schedules are omitted, either because they are not applicable or because the required information is shown in the financial statements or the notes thereto. (a)(3) Exhibits: Exhibit No. Description of Exhibit 3.1 Restatement of Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 3.2 Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-12290). 3.3 Certificate of Designation of the Series C Preferred Stock (incorporated herein by reference to Exhibit 10.8 of the Company's Registration Statement on Form F-4, File No. 333-7918.) 3.4 Certificate of Designation of the Series D Preferred Stock. 4.1 Indenture, dated as of July 11, 1997, by and between the Company and The Chase Manhattan Bank, as Trustee (incorporated herein by reference to Exhibit 4.1 of the Company's Registration Statement on Form F-4, File No. 333-7918). 4.2 Indenture, dated as of March 1, 1996, between the Company and Chemical Bank, as Trustee, in respect of the Company's 8.125% Senior Notes due 2003 (incorporated herein by reference to Exhibit 10.17 of the Company's Registration Statement on Form F-4, File No. 333-7918). 4.3 Supplemental Indenture, dated as of March 27, 1996, between the Company and Chemical Bank, as Trustee, in respect of the Company's 8.125% Senior Notes due 2003 (incorporated herein by reference to Exhibit 10.18 of the Company's Registration Statement on Form F-4, File No. 333-7918). 4.4 Registration Rights Agreement, dated as of July 11, 1997, by and between the Company and Lazard Freres & Co. LLC (incorporated herein by reference to Exhibit 4.2 of the Company's Registration Statement on Form F-4, File No. 333-7918). 9.1 Voting Trust Agreement as amended and restated as of July 15, 1993 (incorporated herein by reference to Exhibit 9.1 of the Company's Registration Statement on Form F-1, File No. 33-67978). 9.2 Voting Trust Amendment, dated as of December 22, 2002 (incorporated by reference to Exhibit A to Exhibit DB to the Company's Rule 13e-3 Transaction Statement filed with the Securities and Exchange Commission on January 30, 2003, File No. 005-47468). 10.1 Purchase Agreement, dated July 8, 1997, between the Company and Lazard Freres & Co. LLC (incorporated herein by reference to Exhibit 10.1 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.2 Exchange Agreement, dated as of May 9, 1997, by and among the Company, Venbottling Holdings, Inc., Atlantic Industries and Embotelladora Coca-Cola y Hit de Venezuela, S.A. (incorporated herein by reference to Exhibit 10.2 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.3 Shareholder Agreement, dated as of May 9, 1997, by and among the Company and Venbottling Holdings, Inc. (incorporated herein by reference to Exhibit 10.4 of the Company's Registration Statement on Form F-4, File No. 333-7918). 60 10.4 Voting Agreement, dated as of May 9, 1997, by and among Venbottling Holdings, Inc., Lt. Gen. Donald Colin Mackenzie, James M. Gwynn and Woods W. Staton II, in their capacity as voting trustees, and the Voting Trust created pursuant to the Voting Trust Agreement (incorporated herein by reference to Exhibit 10.5 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.5 Voting Agreement, dated August 10, 1993, among The Coca-Cola Company and Lt. Gen. Donald Colin Mackenzie, James M. Gwynn and Woods W. Staton Welton, in their capacity as voting trustees (incorporated herein by reference to the Company's Registration Statement on Form F-1, File No. 33-67978). 10.6 Supplement No. 1, dated as of May 9, 1997, by and among the Company, The Coca-Cola Company and The Coca-Cola Export Corporation in respect of the Amended and Restated Investment Agreement, dated as of November 1, 1995, by and among the Company, The Coca-Cola Company and The Coca-Cola Export Corporation (incorporated herein by reference to Exhibit 10.7 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.7 Amended and Restated Investment Agreement, dated as of November 1, 1995, by and among the Company, The Coca-Cola Company and The Coca-Cola Export Corporation (incorporated herein by reference to Exhibit 10.8 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.8 Investment Agreement, dated August 10, 1993, among the Company, The Coca-Cola Company and The Coca-Cola Export Corporation (incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on Form F-1, File No. 33-67978). 10.9 Stock Subscription Agreement, dated August 10, 1993, between the Company and The Coca-Cola Export Corporation (incorporated herein by reference to Exhibit 10.6 of the Company's Registration Statement on Form F-1, File No. 33-67978). 10.10 Letter Agreement, dated May 9, 1997, among Atlantic Industries, Venbottling Holdings, Inc. and the Company (incorporated herein by reference to Exhibit 10.12 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.11 Letter Agreement, dated May 9, 1997, between The Coca-Cola Company and the Company (incorporated herein by reference to Exhibit 10.13 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.12 Letter Agreement, dated May 9, 1997, among Oswaldo Cisneros Fajardo, Gustavo Cisneros Rendiles, Ricardo Cisneros Rendiles, the Company and The Coca-Cola Company (incorporated herein by reference to Exhibit 10.14 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.13 Letter Agreement, dated May 9, 1997, between The Coca-Cola Company and Embotelladora Coca-Cola y Hit de Venezuela, S.A. (incorporated herein by reference to Exhibit 10.15 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.14 Letter Agreement, dated May 9, 1997, among Oswaldo Cisneros Fajardo, Gustavo Cisneros Rendiles, Ricardo Cisneros Rendiles and the Company (incorporated herein by reference to Exhibit 10.16 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.15 Stock Purchase and Sale Agreement, dated August 14, 1997 among Maria Rosario Lacayo Gil de Graziano, Maria Gabriela Cardenal Lacayo, Manuel Ignacio Lacayo Gil and the Company (incorporated herein by reference to Exhibit 10.19 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.16 Stock Purchase Agreement, dated March 25, 1998, among Interamerican Financial Corporation, the Company, Charver Incorporated and Carlos Humberto Gonzalez (incorporated herein by reference to Exhibit 10.21 of the Company's Registration Statement on Form F-4, File No. 333-7918). 10.17 Stock Purchase Agreement for Shares, dated as of September 15, 1998, among Diecity, S.A., Dixer Distribuidora de Bebidas, S.A. and Refrigerantes Do Oeste, S.A. (incorporated herein by reference to Exhibit 10.1 of the Company's Form 20-F, File No. 1-12290). 61 10.18 Escrow Agreement, dated as of September 30, 1998, by and among Dixer Distribuidora de Bebidas, S.A., Yetready S.A. and Discount Bank and Trust Company (incorporated herein by reference to Exhibit 10.3 of the Company's Form 20-F, File No. 1-12290). 10.19 Customer's Outsourcing Agreement, dated December 1, 2000, between Administracion S.A. de C.V. and E.D.S. de Mexico S.A. de C.V. (incorporated herein by reference to Exhibit 10.34 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.20 Customer's Outsourcing Agreement, dated December 1, 2000, between Spal Industria Brasilera de Bebidas, S.A. and Electronic Data Systems do Brazil Ltda. (incorporated herein by reference to Exhibit 10.35 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.21 Customer's Outsourcing Agreement, dated December 1, 2000 between Panamco Colombia, S.A. and Electronic Data Systems Colombia S.A. (incorporated herein by reference to Exhibit 10.36 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.22 Customer's Outsourcing Agreement, dated December 1, 2000, between Panamco de Venezuela, S.A. and Electronic Data Systems de Venezuela "EDS" C.A. (incorporated herein by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.23 Customer's Outsourcing Agreement, dated December 1, 2000, between Embotelladora Panamco Tica, S.A. and Electronic Data Systems (EDS) de Costa Rica S.A. (incorporated herein by reference to Exhibit 10.38 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.24 Customer's Outsourcing Agreement, dated December 1, 2000, between Panamco de Nicaragua, S.A. and Electronic Data Systems (EDS) de Nicaragua y Cia. Ltda. (incorporated herein by reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.25 Customer's Outsourcing Agreement, dated December 1, 2000, between Embotelladora Central, S.A. and Electronic Data Systems (EDS) de Guatemala S.A. (incorporated herein by reference to Exhibit 10.40 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.26 Customer's Outsourcing Agreement, dated December 1, 2000, between Panamco L.L.C. Electronic Data Systems Corporation. (incorporated herein by reference to Exhibit 10.41 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290). 10.27 Employment Agreement between the Company and Carlos Hernandez-Artigas. (incorporated herein by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-12290).* 10.28 Employment Agreement between the Company and Henry A. Schimberg (incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, File No. 1-12290).* 10.29 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 (incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-12290). 10.30 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 (incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-12290). 62 10.31 Credit Agreement by and among the Company as Borrower, ING Bank (Mexico) Institucion de Banca Multiple, ING Baring Grupo Financiero (Mexico) S.A. de C.V. as the Bank, and Panamco Mexico, S.A. de C.V. and Panamco Golfo, S.A. de C.V. as the Guarantors, dated as of December 18, 2001 (incorporated by reference to Exhibit 39 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.32 Debt Acknowledgement and Obligor Substitution Agreement by the Company as Original Obligor, Panamco Mexico, S.A de C.V. as Substitute Obligor, Panamco Golfo S.A. de C.V. as Joint Obligor and Guarantor and ING Bank (Mexico) Institucion de Banca Multiple, ING Baring Grupo Financiero (Mexico) S.A. de C.V. as the Bank, dated as of December 18, 2001 (incorporated by reference to Exhibit 40 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.33 Debt Acknowledgement and Obligor Substitution Agreement by Panamco Mexico, S.A de C.V. as Original Obligor, Panamco Golfo S.A. de C.V. as Substitute Obligor and ING Bank (Mexico) Institucion de Banca Multiple, ING Baring Grupo Financiero (Mexico) S.A. de C.V. as the Bank, dated as of December 18, 2001 (incorporated by reference to Exhibit 41 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.34 Credit Agreement by and among the Company as Borrower, BBVA Bancomer S.A. Institucion de Banca Multiple, Grupo Financiero BBVA Bancomer S.A. as the Bank, and Panamco Mexico, S.A. de C.V. and Panamco Golfo, S.A. de C.V. as the Guarantors, dated as of December 18, 2001 (incorporated by reference to Exhibit 42 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.35 Debt Acknowledgement and Obligor Substitution Agreement by the Company as Original Obligor, Panamco Mexico, S.A de C.V. as Substitute Obligor, Panamco Golfo S.A. de C.V. as Joint Obligor and Guarantor and BBVA Bancomer S.A. Institucion de Banca Multiple, Grupo Financiero BBVA Bancomer S.A. as the Bank, dated as of December 18, 2001 (incorporated by reference to Exhibit 43 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.36 Debt Acknowledgement and Obligor Substitution Agreement by Panamco Mexico, S.A de C.V. as Original Obligor, Panamco Golfo S.A. de C.V. as Substitute Obligor and BBVA Bancomer S.A. Institucion de Banca Multiple, Grupo Financiero BBVA Bancomer S.A. as Bank, dated as of December 18, 2001 (incorporated by reference to Exhibit 44 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.37 US$ 130 Million Second Amended and Restated Credit Agreement entered by and among the Company as Borrower, the financial institutions listed therein as Lenders, ING (US) Capital L.L.C. as Administrative Agent and The Chase Manhattan Bank, as the Syndication Agent, dated as of October 29, 2001 (incorporated by reference to Exhibit 45 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290). 10.38 Restricted Stock Agreement, dated as of November 10, 2000, between the Company and William Cooling (incorporated by reference to Exhibit 54 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.39 Restricted Stock Agreement, dated as of November 10, 2000, between the Company and Henry Schimberg (incorporated by reference to Exhibit 55 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.40 Stock Option Agreement, dated as of November 10, 2000, between the Company and William Cooling (incorporated by reference to Exhibit 56 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.41 Stock Option Agreement, dated as of November 10, 2000, between the Company and Henry Schimberg (incorporated by reference to Exhibit 57 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 63 10.42 Promissory Note, dated as of June 21, 2001, from Henry A. Schimberg to the Company (incorporated by reference to Exhibit 59 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.43 Promissory Note, dated as of August 14, 2001, from Henry A. Schimberg to the Company (incorporated by reference to Exhibit 60 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.44 Termination Agreement and General Release, dated as of October 7, 2002, between the Company and Mario Gonzalez Padilla.* 10.45 Employment Agreement, dated as of February 27, 2002, between the Company and Craig Jung (incorporated by reference to Exhibit 62 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-12290).* 10.46 First Amendment to Employment Agreement, dated as of April 8, 2002, between the Company and Craig Jung.* 10.47 Second Amendment to Employment Agreement, dated as of July 1, 2002, between the Company and Craig Jung.* 10.48 Third Amendment to Employment Agreement, dated as of November 4, 2002, between the Company and Craig Jung.* 10.49 Share Subscription Agreement entered by and among Coca Cola de Panama as Seller and CA Beverages, Inc. as Buyer, dated as of October 2, 2002. 10.50 Coca Cola OPA Trust Agreement entered by and among Coca Cola de Panama Compania Embotelladora, S.A. as the Settlor, Banco General, S.A. as the Trustee, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama as the Representative and CA Beverages, Inc., dated as of October 2, 2002 10.51 Coca Cola Holdback Agreement entered by and among Coca Cola de Panama Compania Embotelladora, S.A. as the Settlor, Banco General, S.A. as the Trustee, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama as the Representative and CA Beverages, Inc., dated as of October 2, 2002. 10.52 CBP OPA Trust Agreement entered by and among CA Beverages, Inc. as Settlor, Banco General, S.A. as Trustee, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama as the Representative, dated October 2, 2002. 10.53 CBP Holdback Agreement entered by and among CA Beverages, Inc. as Settlor, Banco General, S.A. as Trustee, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama as the Representative, dated October 2, 2002. 10.54 Amended and restated US$ 60 Credit Agreement entered by the Company as borrower and ING Bank, N.V. as lender, dated as of October 15, 2002. 10.55 Amendment to the US$ 130 million Second Amended and Restated Credit Agreement dated as of November 20, 2002, entered by and among the Company as borrower and the financial institutions listed in the signature pages thereto as the consenting lenders. 10.56 US$ 33 million Credit Agreement entered by and among Inarco International Bank, N.V. as lender, Panamco de Venezuela, S.A. as borrower, dated as of December 16, 2002. 10.57 Memorandum of Understanding entered by and among Inter- American Financial Corporation, Florida Ice and Farm Co. and Heineken Finance, N.V., dated as of September 13, 2002. 10.58 Limited Non-Competition Agreement entered by and among the Company, Embotelladora Panamco Tica, S.A., Florida Ice & Farm Co., Florida Bebidas, S.A., Heineken International B.V. and Heineken Finance, N.V., dated as of September 13, 2002. 10.59 Employment Agreement entered by and among Annette Franqui and Panamco L.L.C., dated as of October 7, 2002. 10.60 Letter Agreement between the Company and Woods W. Staton as Chairman of the Company, dated as of February 5, 2003. 64 10.61 Second Amendment to Revolving Credit Agreement entered by and among Comerica Bank as the lender, Panamco de Venezuela, S.A. as the borrower and the Company as the guarantor, dated as of December 17, 2002. 10.62 Amendment No 1 dated as of December 19, 2002 to the US$ 10 million guaranty dated as of August 19, 2002 made by the Company as the guarantor in favor of Banco Santander Central Hispano, S.A. in consideration of a US$ 10 million loan made by the lender to Panamco de Venezuela, S.A. on August 19, 2002. 10.63 Agreement of Merger, dated as of December 22, 2002, among Coca-Cola FEMSA, S.A. de C.V., Midtown Sub, Inc. and Panamerican Beverages, Inc. (incorporated by reference to the Current Report on Form 8-K filed by Panamerican Beverages, Inc. with the Securities and Exchange Commission on December 24, 2002). 10.64 Stockholder Agreement, dated as of December 22, 2002, among the persons set forth in Schedule A thereto, Woods W. Staton, II and James M. Gwynn, solely in their capacities as voting trustees and not individually of acting on behalf of the voting rust established pursuant to the Voting Trust Agreement, amended and restated as of July 15, 1993, the voting trust, Coca-Cola FEMSA, S.A. de C.V., Midtown Sub, Inc. and Panamerican Beverages, Inc. (incorporated by reference to the Current Report on Form 8-K filed by Panamerican Beverages, Inc. with the Securities and Exchange Commission on December 24, 2002). 10.65 Consent and Agreement, dated as of November 14, 2002, among Panamerican Beverages, Inc., The Coca-Cola Company and The Coca-Cola Export Corporation (incorporated by reference to Exhibit (d)(5) to the Company's Rule 13e-3 Transaction Statement filed with the Securities and Exchange Commission on January 30, 2003, File No. 005-47468). 10.66 Amendment, dated January 13, 2003, to Consent and Agreement, dated as of November 14, 2002, among Panamerican Beverages, Inc. to The Coca-Cola Company and The Coca-Cola Export Corporation (incorporated by reference to Exhibit (d)(6) to the Company's Rule 13e-3 Transaction Statement filed with the Securities and Exchange Commission on January 30, 2003, File No. 005-47468). 10.67 Confidentiality Agreement, dated as of November 14, 2002, among Panamerican Beverages Inc., Fomento Economico Mexicano, S.A. de C.V. and Coca-Cola FEMSA, S.A. de C.V. (incorporated by reference to Exhibit (d)(7) to the Company's Rule 13e-3 Transaction Statement filed with the Securities and Exchange Commission on January 30, 2003, File No. 005-47468). 10.68 Key Executive Retention, Severance and Non-Competition Plan, dated September 18, 2002.* 10.69 Key Employee Retention, Severance and Non-Competition Plan, dated September 18, 2002.* 10.70 Severance Agreement and Mutual Release between the Company and William G. Cooling, dated as of August 30, 2002 (incorporated by reference to Exhibit 99.1 of the Company's Current Report of Form 8-K, dated August 30, 2002, File No. 1-12290).* 10.71 Employment Agreement, dated December 5, 2001, by and among the Company, SPAL, Industria Brasileira de Bebidas and Paulo Sacchi.* 10.72 First Amendment to Employment Agreement, dated December 6, 2002, by and among the Company, SPAL, Industria Brasileira de Bebidas and Paulo Sacchi.* 10.73 Executive Deferred Compensation Plan. 10.74 Employment Agreement entered by and among Ruben Pietropaolo de Jong and Administracion SA de CV, dated as of January 8, 2002.* 10.75 Amendment to Promissory Note, dated December 13, 2002, between the Company and ING Bank, N.V. 10.76 Guaranty, dated as of December 16, 2002, made by the Company in favor of Citigroup, Inc. 12.1 Computation of Ratio of Earnings to Fixed Charges. 65 21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Certified Public Accountants. 23.2 Explanation Concerning Absence of Current Written Consent of Arthur Andersen, LLP. 99.1 Certificate of the Chief Executive Officer and President of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certificate of the Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Management contracts and compensatory plans or arrangements required to be filed as exhibits to this form pursuant to Item 15(a)(3). (a) During the fourth quarter of 2002, the Company filed Current Reports on Form 8-K dated November 4, 2002 with respect to "Item 9. Regulation FD Disclosure;" dated November 11, 2002 with respect to "Item 9. Regulation FD Disclosure;" and dated December 22, 2002 with respect to "Item 5. Other Events." 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PANAMERICAN BEVERAGES, INC. Dated: March 27, 2003 By: /s/ Annette Franqui ----------------------------------- Annette Franqui, Vice President, Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: March 27, 2003 By: /s/ Craig D. Jung ----------------------------------- Craig D. Jung, Director, President and Chief Executive Officer Dated: March 27, 2003 By: /s/ Woods W. Staton Welten ----------------------------------- Woods W. Staton Welten, Director and Chairman of the Board Dated: March 27, 2003 By: /s/ Henry A. Schimberg ----------------------------------- Henry A. Schimberg, Director and Vice Chairman of the Board Dated: March 27, 2003 By: /s/ Gustavo A. Cisneros ----------------------------------- Gustavo A. Cisneros, Director Dated: March 27, 2003 By: /s/ Oswaldo J. Cisneros ----------------------------------- Oswaldo J. Cisneros, Director Dated: March 27, 2003 By: /s/ Gary P. Fayard ----------------------------------- Gary P. Fayard, Director Dated: March 27, 2003 By: /s/ Wade T. Mitchell ----------------------------------- Wade T. Mitchell, Director 67 Dated: March 27, 2003 By: /s/ James J. Postl ----------------------------------- James J. Postl, Director Dated: March 27, 2003 By: /s/ Houston Staton ----------------------------------- Houston Staton, Director 68 CERTIFICATIONS I, Craig Jung, certify that: 1. I have reviewed this annual report on Form 10-K of Panamerican Beverages, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Craig D. Jung ------------------------------------------- Craig D. Jung Chief Executive Officer and President 69 I, Annette Franqui, certify that: 1. I have reviewed this annual report on Form 10-K of Panamerican Beverages, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Annette Franqui ------------------------------------------- Annette Franqui Vice President, Chief Financial Officer and Treasurer 70 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE Independent Auditors' Report.......................................... F-2 Report of Independent Certified Public Accountants ................... F-3 Consolidated Balance Sheets at December 31, 2002 and 2001............. F-4 Consolidated Statements of Operations for each of the three Years in the Period Ended December 31, 2002................. F-6 Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) for each of the three Years in the Period Ended December 31, 2002........................................... F-7 Consolidated Statements of Cash Flows for each of the three Years in the Period Ended December 31, 2002............................. F-9 Notes to Consolidated Financial Statements............................ F-11 Report of Independent Certified Public Accountants on Schedule........ F-52 Schedule II - Valuation and Qualifying Accounts....................... F-53 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Panamerican Beverages, Inc. Miami, Florida We have audited the accompanying consolidated balance sheet of Panamerican Beverages, Inc. (a Panamanian corporation) and subsidiaries (the "Company") as of December 31, 2002 and the related consolidated statements of operations, of shareholders' equity and comprehensive income (loss) and of cash flows for the year then ended. Our audit also included the 2002 financial statement schedule listed in the index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. The financial statements and financial statement schedule of the Company as of December 31, 2001 and for each of the two years in the period ended December 31, 2001, before the reclassification discussed in Note 21, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements and stated that such 2001 and 2000 financial statement schedule, when considered in relation to the 2001 and 2000 basic financial statements taken as a whole, presented fairly, in all material respects, the information set forth therein, in their reports dated February 5, 2002. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2002, and the results of its operations and its cash flows for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such 2002 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 2002, the Company changed its method of accounting for goodwill to conform to Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. As discussed above, the consolidated financial statements of the Company as of December 31, 2001, and for each of the two years in the period then ended were audited by other auditors who have ceased operations. These consolidated financial statements have been revised as follows: (a) as described in Note 1 under the heading "Cost in Excess of Net Assets of Acquired Businesses", these consolidated financial statements have been revised to include the transitional disclosures required by SFAS No. 142, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the transitional disclosures in Note 1 with respect to 2001 and 2000 included (i) agreeing the previously reported net income (loss) to the previously issued consolidated financial statements and the adjustments to reported net income (loss) representing amortization expense (including any related tax effects) recognized in those periods related to goodwill as a result of initially applying SFAS No. 142 (including any related tax effects), to the Company's underlying records obtained from management, and (ii) testing the mathematical accuracy of the reconciliation of adjusted net income (loss) to reported net income (loss), and the related earnings(loss)-per-share amounts; (b) as described in Note 21, the 2000 consolidated statement of operations and related notes have been revised to reflect the reclassification of certain contingency accruals. Our audit procedures with respect to this reclassification described in Note 21 included (i) agreeing the reported amount to the previously issued consolidated financial statement, and (ii) testing the mathematical accuracy of the reclassification. In our opinion, the disclosures and the reclassification are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial statements of the Company other than with respect to such disclosures and reclassification and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 consolidated financial statements taken as a whole. Deloitte & Touche LLP Certified Public Accountants Miami, Florida February 14, 2003 F-2 THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP WHICH CEASED OPERATIONS, AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. NO CHANGES WERE MADE TO THE 2001 AND 2000 CONSOLIDATED FINANCIAL STATEMENTS OTHER THAN THOSE REQUIRED BY THE ADOPTION IN 2002 OF EMERGING ISSUES TASK FORCE ISSUE NO. 01-09, "ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF THE VENDOR'S PRODUCTS)" AS DISCLOSED IN NOTE 1 TO THE 2002 CONSOLIDATED FINANCIAL STATEMENTS AND THE RECLASSIFICATION DISCLOSED IN NOTE 21 TO THE CONSOLIDATED FINANCIAL STATEMENTS. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To Panamerican Beverages, Inc.: We have audited the accompanying consolidated balance sheets of Panamerican Beverages, Inc. (a Panamanian corporation) and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of operations, shareholders' equity and comprehensive income and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Panamerican Beverages, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Miami, Florida, February 5, 2002 (except with respect to the matters discussed in Note 23, as to which the date is March 18, 2002). F-3 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (STATED IN THOUSANDS OF UNITED STATES OF AMERICA ("U.S.") DOLLARS, EXCEPT PER SHARE AMOUNTS) DECEMBER 31, ----------------------------- 2002 2001 ------------- ------------ ASSETS Current assets: Cash and equivalents $ 69,024 $ 133,666 Accounts receivable, net 128,169 136,614 Inventories, net 105,116 103,040 Other current assets 17,010 27,466 ---------- ---------- Total current assets 319,319 400,786 Investments 82,375 28,522 Long-term receivables 2,908 5,521 Property, plant and equipment, net 843,886 1,043,870 Bottles and cases, net 162,806 213,908 Deferred income taxes, net of current portion 61,235 94,592 Cost in excess of net assets acquired, net 836,657 869,056 Other assets 18,419 36,771 ---------- ---------- Total assets $ 2,327,605 $ 2,693,026 ========== ========== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 264,128 $ 274,164 Current portion of long-term obligations 208,914 75,439 Bank loans 135,495 35,184 Income taxes payable 20,685 28,973 Deferred income taxes 22,687 28,043 Sales and other taxes payable 39,740 45,881 Current portion of employee severance payments 3,451 3,081 Employee profit sharing 18,501 21,016 Accrued facility reorganization charges 3,693 6,575 Other accrued liabilities 34,141 51,309 ---------- ---------- Total current liabilities 751,435 569,665 ---------- ---------- Long-term liabilities: Long-term obligations, net of current portion 547,453 859,619 Pensions and employee severance payments, net of current portion 24,257 30,882 Deferred income taxes, net of current portion 49,622 87,291 Other liabilities 25,431 44,583 ---------- ---------- Total long-term liabilities 646,763 1,022,375 ---------- ---------- Total liabilities $ 1,398,198 $ 1,592,040 ---------- ---------- (Continued) F-4 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) (Continued) DECEMBER 31, ----------------------------- 2002 2001 ------------- ------------ Commitments and contingencies (Notes 16, 17 and 18) Minority interest in consolidated subsidiaries $ 25,121 $ 28,541 ---------- ---------- SHAREHOLDERS' EQUITY Class A common stock, $0.01 par value; 500,000,000 authorized; 136,974,151 and 136,952,780 shares issued and 112,169,150 and 113,237,031 shares outstanding at December 31, 2002 and 2001, respectively 1,370 1,369 Class B common stock, $0.01 par value; 50,000,000 authorized; 11,037,711 and 11,059,082 shares issued and 8,659,802 and 8,681,245 shares outstanding at December 31, 2002 and 2001, respectively 110 111 Series C preferred stock, $0.01 par value; 50,000,000 shares authorized; 2 shares issued and outstanding at December 31, 2002 and 2001, respectively - - Capital in excess of par value 1,602,265 1,591,827 Retained earnings 142,813 138,433 Accumulated other comprehensive loss (616,068) (458,341) ---------- ---------- 1,130,490 1,273,399 Less 27,182,910 and 26,093,586 treasury shares held at December 31, 2002 and 2001, respectively, at cost (226,204) (200,954) Total shareholders' equity 904,286 1,072,445 ---------- ---------- Total liabilities and shareholders' equity $ 2,327,605 $ 2,693,026 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. F-5 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, --------------------------------------- 2002 2001 2000 Net sales $ 2,357,913 $ 2,630,772 $ 2,590,305 Cost of sales, excluding deprecia- tion and amortization shown separately below 1,204,216 1,296,307 1,243,485 --------- --------- --------- Gross profit 1,153,697 1,334,465 1,346,820 --------- --------- --------- Operating expenses: Selling and distribution 582,726 609,287 627,633 General and administrative 169,140 204,897 250,491 Depreciation and amortization 235,205 210,667 276,524 Amortization of goodwill - 26,416 35,819 Facilities reorganization and other charges 35,421 - 503,659 --------- --------- --------- 1,022,492 1,051,267 1,694,126 --------- --------- --------- Operating income (loss) 131,205 283,198 (347,306) --------- --------- --------- Other income (expense): Interest income 6,994 21,341 31,933 Interest expense (85,312) (119,390) (142,299) Other income (expense), net 36,352 (10,891) (23,244) --------- --------- --------- (41,966) (108,940) (133,610) --------- --------- --------- Income (loss) before provision for income taxes 89,239 174,258 (480,916) Provision for income taxes --------- --------- --------- 51,126 50,369 21,800 --------- --------- --------- Income (loss) before minority interest 38,113 123,889 (502,716) Minority interest in earnings of consolidated subsidiaries 4,871 5,865 1,944 --------- --------- --------- Net income (loss) $ 33,242 $ 118,024 $ (504,660) ========= ========= ========== Basic earnings (loss) per share $ 0.28 $ 0.94 $ (3.92) ========= ========= ========= Basic weighted average shares outstanding 120,602 125,559 128,833 ========= ========= ========= Diluted earnings (loss) per share $ 0.27 $ 0.93 $ (3.92) ========= ========= ========= Diluted weighted average shares outstanding 121,172 126,655 128,833 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements. F-6 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
Shares Amounts ----------------------- ------------------------------------------------------------------- Accumu- lated Common Other Total Stock Capital in Compre- Treasury Share- Held in $0.01 Excess of Retained hensive Shares, holders' Issued Treasury Par Value Par Value Earnings Loss At Cost Equity ------------------------ ------------------------------------------------------------------- Balance, December 31, 1999 148,011,864 18,658,707 $ 1,480 $1,584,788 $ 586,196 $(363,269) $ (57,299) $1,751,896 Comprehensive loss: Net loss - - - - (504,660) - - (504,660) Translation adjustments (including $1,972 from taxes) - - - - - (35,895) - (35,895) Pension plan - - - - - (377) - (377) ---------- Total comprehensive loss (540,932) ---------- Share repurchase - 785,295 - - - - (13,675) (13,675) Stock options exercised - (25,000) - 326 - - 79 405 Directors' compensation - (38,159) - 384 - - 137 521 Dividends declared ($0.24 per share) - - - - (30,904) - - (30,904) ----------- ---------- --------- ---------- --------- --------- -------- ---------- Balance, December 31, 2000 148,011,864 19,380,843 1,480 1,585,498 50,632 (399,541) (70,758) 1,167,311 Comprehensive income: Net income - - - - 118,024 - - 118,024 Initial effect on deferred taxes relating to the change in functional currency in the Colombian subsidiary - - - - - (30,057) - (30,057) Translation adjustments (including $(17,308) from taxes) - - - - - (25,997) - (25,997) Pension plan - - - - - (2,746) - (2,746) ---------- Total comprehensive income 59,224 ---------- Share repurchase - 7,283,685 - - - - (133,198) (133,198) Stock options exercised - (336,580) - 3,025 - - 1,764 4,789 Restricted stock issued - (234,362) - 3,304 - - 1,238 4,542 Dividends declared ($0.24 per share) - - - - (30,223) - - ( 30,223) ----------- ---------- --------- ---------- --------- --------- -------- ---------- Balance, December 31, 2001 148,011,864 26,093,586 $ 1,480 $1,591,827 $ 138,433 $(458,341) $(200,954) $1,072,445 =========== ========== ======== ========= ======== ======== ======== =========
(Continued) F-7 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) (Continued)
Shares Amounts ------------------------ -------------------------------------------------------------------- Accumu- lated Common Other Total Stock Capital in Compre- Treasury Share- Held in $0.01 Excess of Retained hensive Shares, holders' Issued Treasury Par Value Par Value Earnings Loss At Cost Equity ------------------------ ------------------------------------------------------------------- Balance, December 31, 2001 148,011,864 26,093,586 $ 1,480 1,591,827 $ 138,433 $(458,341) $(200,954) 1,072,445 Comprehensive income: Net income - - - - 33,242 - - 33,242 Translation adjustments (including $(38,786) from taxes) - - - - - (157,533) - (157,533) Pension plan - - - - (194) - (194) ---------- Total comprehensive loss (124,485) ---------- Share repurchase - 2,466,532 - - - - (36,661) (36,661) Stock options exercised - (1,361,199) - 10,324 - - 11,280 21,604 Treasury stock issued to acquire minority interest in subsidiary - (16,009) - 114 - - 131 245 Dividends declared ($0.24 per share) - - - - (28,862) - - (28,862) - - - - - - - - ----------- ---------- --------- ---------- ---------- ---------- ---------- ----------- Balance, December 31, 2002 148,011,864 27,182,910 $ 1,480 $1,602,265 $ 142,813 $(616,068) $(226,204) $ 904,286 =========== ========== ========= ========== ========= ======== ======== =========
The accompanying notes are an integral part of these consolidated financial statements. F-8 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (STATED IN THOUSANDS OF U.S. DOLLARS)
YEAR ENDED DECEMBER 31, --------------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Cash flows from operating activities: Net income (loss) $ 33,242 $ 118,024 $ (504,660) ----------- ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 235,205 237,083 312,343 Gain on foreign currency remeasurement (12,011) (5,541) (11,664) Minority interest in earnings of consolidated subsidiaries 4,871 5,865 1,944 Deferred income tax benefit and change in valuation allowance (27,249) (40,145) (75,681) Provision for legal contingencies 3,648 137 5,166 Pensions and other employee benefits 14,473 17,945 6,890 Loss (gain) on sales of property, plant and equipment and investments 193 (2,047) 3,642 Equity in losses (gains) of unconsolidated companies, net of cash dividends received 290 (516) 1,189 Noncash facilities reorganization charges (benefits) 16,908 (2,015) 415,088 Nonoperating (benefits) charges (39,822) 874 5,977 Other (9,146) 6,867 5,433 Changes in operating assets and liabilities: Accounts receivable (26,404) (10,857) (14,393) Inventories (8,045) 278 15,025 Other current assets (3,393) 999 6,506 Long-term receivables (3,116) 1,006 4,562 Accounts payable and accrued expenses 40,142 98,030 64,133 Employee severance payments (16,922) (13,103) (2,835) Other liabilities (16,816) (55,489) 58,774 ----------- ----------- ----------- Total adjustments 152,806 239,371 802,099 ----------- ----------- ----------- Net cash provided by operating activities 186,048 357,395 297,439 ----------- ----------- ----------- Cash flows from investing activities: Capital expenditures (112,531) (83,121) (123,897) Purchases of bottles and cases (38,388) (47,826) (73,746) Purchases of investments (83,351) (1,463) (4,982) Proceeds from sales of investments 69,413 127,718 54,959 Proceeds from sales of property, plant and equipment 24,972 34,465 18,164 Acquisition of minority interest in consolidated subsidiaries - - (965) Other - (3,306) - ----------- ----------- ---------- Net cash (used in) provided by investing activities (139,885) 26,467 (130,467) ----------- ----------- -----------
(Continued) F-9 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (STATED IN THOUSANDS OF U.S. DOLLARS) (Continued)
YEAR ENDED DECEMBER 31, --------------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Cash flows from financing activities: Payment of bank loans and other long-term obligations $(143,485) $ (529,145) $ (302,596) Proceeds from bank loans and other long-term obligations 98,768 241,807 223,109 Issuance of capital and treasury stock 21,849 9,331 926 Share repurchase (36,661) (133,198) (13,675) Payment of dividends to minority interest shareholders (2,490) (3,201) (980) Payment of dividends to shareholders (28,862) (30,223) (30,904) ----------- ----------- ----------- Net cash used in financing activities (90,881) (444,629) (124,120) ----------- ----------- ----------- Effect of exchange rate changes on cash and equivalents (19,924) 2,660 (3,727) ----------- ----------- ----------- Net (decrease) increase in cash and equivalents (64,642) (58,107) 39,125 Cash and equivalents at beginning of year 133,666 191,773 152,648 ----------- ----------- ---------- Cash and equivalents at end of year $ 69,024 $ 133,666 $ 191,773 =========== ========== ========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for: Interest $ 78,330 $ 109,078 $ 126,566 =========== ========== ========== Income taxes $ 71,602 $ 83,602 $ 69,200 =========== ========== ========== NONCASH ACTIVITIES: Write-off of property, plant and equipment against accrued facilities reorganization charges $ 16,908 $ (2,015) $ 54,451 =========== ========== ========== Write-off of costs in excess of net assets acquired against accrued facilities reorganization charges $ - $ - $ 350,000 =========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-10 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) 1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Operations The primary activity of Panamerican Beverages, Inc., a Panamanian corporation, and subsidiaries (collectively, the "Company"), is the production and sale of The Coca-Cola Company ("Coca-Cola") products and other beverages. The Company operates in Mexico, Central America (Guatemala, Nicaragua and Costa Rica), Colombia, Venezuela, and Brazil. In 1998, the "Panamco Central America" group was created, 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 as Panamco Central America. In February 1999, North Latin American Division ("NOLAD") was created, which consists of Panamco Mexico and Panamco Central America. The results of operations of Panamco Mexico and Panamco Central America are reported together and referred to in these financial statements as Panamco NOLAD. During 2002, the Company formed a joint venture to acquire an interest in the local Coca-Cola bottler in Panama, see Note 7. Approximately 89% of the Company's 2002 net sales were derived from the distribution of Coca-Cola products. Coca-Cola may be able to exercise influence over the conduct of the Company's business through rights maintained under bottler agreements with the Company and otherwise. The bottler agreements with Coca-Cola are renewed regularly, reflecting a long and ongoing relationship with Coca-Cola. On November 1, 1995, Coca-Cola, the Coca-Cola Export Corporation ("Export"), a wholly owned subsidiary of Coca-Cola, and the Company entered into an Amended and Restated Investment Agreement (the "Agreement") pursuant to which Coca-Cola designated the Company as an anchor bottler and agreed to increase its equity interest in the Company. Coca-Cola also acquired the right to approve certain major corporate actions taken by the Company. Subject to satisfaction of certain conditions, the Agreement calls for Coca-Cola to purchase Company capital stock in amounts equal to the purchase price of bottling acquisitions to be made by the Company from time to time, up to a maximum voting interest of 25%. The price per share in any such acquisition of additional capital stock will be the average closing price on the New York Stock Exchange during a period preceding the announcement of the related bottling acquisition. The Agreement does not obligate the Company to finance an acquisition by selling stock to Export. The designation of the Company as an anchor bottler means that the Company is one of Coca-Cola's strategic partners in the worldwide Coca-Cola bottling system. Although the designation does not guarantee that the Company will be able to acquire any particular franchise or renew existing bottler agreements, the Company believes it is looked upon favorably and that Coca-Cola will provide the Company with favorable treatment relating to these opportunities. As of December 31, 2002 and 2001, Coca-Cola was the Company's largest shareholder and owns approximately 25% of the Company's outstanding Class A shares, 25% of the Company's outstanding Class B shares and all of the Company's outstanding Series C Preferred Stock. The significant accounting policies of the Company and its subsidiaries are as follows: Basis of Consolidation The consolidated financial statements include the accounts and operations of Panamerican Beverages, Inc. and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Minority interest in majority-owned subsidiaries has been recorded in the Company's consolidated financial statements representing the minority owners' share of subsidiary's net assets and earnings. F-11 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Basis for Translation The accounts of the Company are maintained in United States of America ("U.S.") dollars. The accounts of the subsidiaries are maintained in the currencies of the respective countries. For the Company's subsidiaries that use their local currency as the functional currency, the assets and liabilities of these subsidiaries are translated at year-end exchange rates, and income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are included in accumulated other comprehensive income (loss), which is a component of shareholders' equity. Foreign currency gains and losses resulting from transactions denominated in foreign currencies, including intercompany transactions, except for intercompany loans of a long-term nature, are included in results of operations. For periods that the local economy is considered to be highly inflationary, the respective subsidiary's financial statements are remeasured into U.S. dollars. For the Company's subsidiaries that use the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured into U.S. dollars at year-end exchange rates. All other assets and liabilities are remeasured at the historical rates of exchange prevailing at the time the items were originally recorded. Income and expense items are remeasured at average rates of exchange prevailing during the year, except for depreciation, amortization and materials consumed from inventories, which are translated at the rates of exchange in effect when the respective assets were acquired. Foreign currency remeasurement gains (losses) on monetary assets and liabilities have been included in the statement of operations accounts to which such items relate as shown below: YEAR ENDED DECEMBER 31, ---------------------------------------- 2002 2001 2000 ----------- ----------- ------------ Net sales $ (4,846) $ 403 $ (92) Cost of sales and operating expenses 17,107 2,517 7,959 Interest and other income (expense) (572) 2,666 2,406 Provision (benefit) for income taxes 322 (45) 1,391 --------- -------- -------- Net remeasurement gain $ 12,011 $ 5,541 $ 11,664 ========= ======== ======== Latin America The Latin American markets in which the Company operates are characterized by volatile and frequently unfavorable economic, political and social conditions. High inflation and high interest rates are common. The governments in the countries where the Company operates have responded in the past to high inflation by imposing price and wage controls or similar measures, although formal soft drink price controls in each country have been lifted or phased out. Certain countries in Latin America have also experienced significant currency fluctuations. Since the Company's cash flows from operations are generated primarily in the currencies of the subsidiaries, the Company is subject to the effect of fluctuations in the value of those currencies. During 2002, the Venezuelan government removed controls over the trading range of the country's currency, the Bolivar, allowing the exchange rate to be determined by market conditions. During 2002, the local currency decreased in value in relation to U.S. dollar by approximately 85%, which contributed to the net remeasurement gain for 2002 totaling $12.0 million. Subsequently, on February 5, 2003, the Venezuelan government imposed exchange rate controls, fixing the Bolivar's value to the U.S. dollar at 1,600 Bolivars to the U.S. dollar. F-12 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) During January 1999, the Brazilian Government changed its local currency exchange policy in relation to the U.S. dollar, allowing the exchange rate to be determined by market conditions without the establishment of a trading band. During 2002 and 2001, the local currency decreased in value in relation to the U.S. dollar by 52.3% and 18.7%, respectively, and the related exchange loss amounted to $0.9 million and $8.6 million, respectively, which was recorded in other income (expense). As of December 31, 2002 and 2001, the Brazilian subsidiaries have liabilities denominated in U.S. dollars subject to translation exchange gains or losses in the amount of $8.1 million and $5.5 million, respectively, and assets subject to translation effect in the amount of $17.4 million and $1.3 million, respectively. Reclassifications Certain amounts in the 2001 and 2000 consolidated financial statements have been reclassified to conform to the current year presentation. Although not considered significant to the consolidated financial statements, the Company has, in accordance with Emerging Issues Task Force ("EITF") Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer (including a Reseller of the Vendor's Products)", reclassified customer promotional payments that were previously classified as selling and distribution expenses as a reduction of net sales totaling $20.1 million and $9.1 million in 2001 and 2000, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results in subsequent periods could differ from those estimates. The most significant estimates with regard to these consolidated financial statements are related to the estimation of facilities reorganization charges, estimation of future cash flow generation for purposes of impairment testing of long-lived assets, including goodwill, realization of accounts receivable and inventories, useful life of bottles and cases and cold equipment, and the settlement of taxes and pensions. Revenue Recognition Revenues from sales are recorded at the time products are delivered to trade customers. Net sales reflect units delivered at selling list prices reduced by promotion allowances. The Company's frequency of delivery to its customers as well as the Company's prior experience indicates that sales returns are not significant. Therefore, no allowance for sales returns is recorded. Other Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments and pension liability adjustments, and is presented in the accompanying Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss). Cash and Equivalents Cash and equivalents include cash on hand and in banks and certificates of deposit stated at cost plus income accrued up to the balance sheet date. Cash and equivalents have an original maturity of three months or less at the date of acquisition. F-13 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Inventories Inventories are stated at the lower of average cost, determined using the first-in, first-out ("FIFO") method, or market. Components of inventory cost include bottled beverages, raw materials, and spare parts and supplies. Provisions, when necessary, has been made to reduce obsolete and slow-moving inventories to net realizable value. Investments The Company uses the cost method to account for certain equity investments in which it has a minority interest and does not exercise significant influence. As a general policy, investments in other companies in which the Company holds at least 20% of the outstanding shares, but less than 50%, are accounted for using the equity method, wherein the Company's participation in the earnings (losses) of those subsidiaries are recorded in income as earned, and dividends received in cash are applied to reduce the related investment. However, the ultimate decision regarding the application of the equity method of accounting is dependent upon the specific facts and circumstances of each investment. The Company's equity in earnings (losses) and the changes in the Company's equity of subsidiaries that are acquired or sold during the period are included in the consolidated financial statements from or until the date of the transaction. The Company holds an ownership interest in CA Beverages, Inc., a joint venture formed for the purposes of acquiring the Coca-Cola bottler and a beer company in the Republic of Panama (see Note 7). In addition, the Company has classified certain other investments as held-to-maturity investments under the scope of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," based on the Company's intent to hold such investments to maturity and its ability to do so. These held-to-maturity investments are carried at amortized cost. Property, Plant and Equipment Property, plant and equipment includes the cost of land, buildings, equipment and significant improvements to existing property. Additions, improvements and expenditures for repairs and maintenance that significantly add to the productive capacity or extend the life of an asset are capitalized; other expenditures for repairs and maintenance are charged to operating results as incurred. Leasehold improvements are amortized over the shorter of the asset's life or the remaining contractual lease term. Interest incurred with respect to long-term capital projects is capitalized. No interest was capitalized during 2002, 2001 or 2000. When an asset is sold or retired, the cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is included in results of operations for that year. Depreciation expense is calculated under the straight-line method for all subsidiaries over the estimated remaining useful lives of the assets. Included in depreciation expense is a provision to cover losses related to coolers that are placed with customers under rent-free agreements. This provision is adjusted, as necessary, to account for the loss of coolers. F-14 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Bottles and Cases The Company utilizes the lower of the FIFO cost or market method for valuing bottles and cases on hand. Breakage of bottles and cases on hand is included in depreciation expense. For the years ended December 31, 2002, 2001 and 2000, breakage expense amounted to $33.1 million, $37.7 million, and $60.9 million, respectively. Bottles and cases include the cost of bottles and cases on hand and the unamortized portion of the capitalized cost of new introductions, net of any amounts collected for bottles and cases. The cost of new introductions is amortized over estimated useful lives ranging from three to six years for bottles and six to ten years for cases. Amortization expense of $39.9 million, $40.3 million, and $58.5 million was recorded in 2002, 2001 and 2000, respectively, and is included within depreciation and amortization expense in the consolidated statements of operations. Accumulated amortization at December 31, 2002 and 2001 amounted to $214.6 million and $207.9 million, respectively. A certain number of bottles and cases are permanently in circulation in the marketplace. The Company's practice is to accept returnable bottles and cases in lieu of deposits on new sales. In practice, the Company's customers generally do not return bottles and cases for refunds. Accordingly, funds received by the Company from customers for bottles and cases are netted against the Company's cost of acquiring bottles and cases. Cost in Excess of Net Assets of Acquired Businesses The cost in excess of net assets of acquired businesses ("goodwill") represents the residual purchase price after the allocation to all identifiable net assets acquired. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which requires goodwill to be tested for impairment and written down when impaired, rather than being amortized over useful lives, as previous standards required. SFAS No. 142 became effective for the Company beginning January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized to earnings but instead must be reviewed for possible impairment at least annually. The Company ceased the amortization of goodwill beginning January 1, 2002 and also performed the transitional goodwill impairment test, which indicated no impairment as of January 1, 2002. Subsequent to the completion of the transitional goodwill impairment test and due to recent events occurring in Latin America, the Company performed a second goodwill impairment test in the fourth quarter of 2002. The second impairment test resulted in no indications of impairment and established a new annual impairment test date for the Company. Goodwill of a reporting unit is tested for impairment on an annual basis or between annual tests if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. The following table provides pro forma results for the years ended December 31, 2002, 2001 and 2000 as if the non-amortization provisions of SFAS 142 have been applied: F-15 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS)
2002 2001 2000 ---------- ---------- ---------- Net income (loss): Reported net income (loss) $ 33,242 $ 118,024 $ (504,660) Add back: Goodwill amortization, net of taxes - 24,774 34,242 -------- --------- ----------- Pro forma net income (loss) $ 33,242 $ 142,798 $ (470,418) ======== ========= ======== Basic earnings (loss) per share: Reported net income (loss) $ 0.28 $ 0.94 $ (3.92) Add back: Goodwill amortization, net of taxes - 0.20 0.27 -------- --------- --------- Pro forma basic earnings (loss) per share $ 0.28 $ 1.14 $ (3.65) ======== ========= ========= Diluted earnings (loss) per share: Reported net income (loss) $ 0.27 $ 0.93 $ (3.92) Add back: Goodwill amortization, net of taxes - 0.20 0.27 -------- --------- --------- Pro forma diluted earnings (loss) per share $ 0.27 $ 1.13 $ (3.65) ======== ========= =========
Impairment The Company accounts for possible impairments of long-lived assets in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires that long-lived assets to be held and used by the Company be reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If changes in circumstances indicate that the carrying amount of an asset that an entity expects to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition must be estimated. If the undiscounted value of the future cash flows is less than the carrying amount of the asset, an impairment charge may result after reviewing certain indicators of fair value. During 2002, the Company recognized an impairment expense of approximately $8.9 million related to the machinery and equipment used to produce the Company's malta product in the Venezuelan subsidiary. During 2000, the Company recognized an impairment expense of $350.0 million attributable to the goodwill of the Company's Venezuelan subsidiary. Accounting for Internal Use Software The Company follows the guidance provided in Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which specifies software costs that are required to be capitalized. Cost of Sales Cost of sales includes expenses related to raw materials used in the production of the Company's products, including but not limited to the following: concentrate, sugar, cans, packaging, pet resin, glass, crowns and plastic. Cost of sales also includes labor (wages and other benefits) and other overhead costs including fuel, electricity and equipment maintenance, specifically incurred or attributable to bottling and/or acquiring the Company's products. F-16 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Selling and Distribution Expenses Selling and distribution expenses include sales commissions, marketing expenses including promotions and advertising as well as labor costs (wages and other benefits) for employees directly involved in the selling and distribution of the Company's products. General and Administrative Expenses General and administrative expenses include labor costs (wages and other benefits) for employees not directly involved in the selling and distribution of the Company's products, professional service fees, and other overhead costs not directly associated with the production of the Company's products. Marketing and Advertising Expense The Company expenses broadcast advertising costs when invoiced, which generally coincides with the broadcast of the related advertisement. Other marketing and advertising costs are expensed as incurred. Marketing expense, net of Coca-Cola reimbursements in 2002, 2001 and 2000 was $62.3 million, $52.8 million, and $60.9 million, respectively, and is included within selling and distribution expense in the consolidated statements of operations. The Company reduces marketing expenses by the amount of marketing reimbursements received from Coca-Cola that relate to marketing support at the date such amounts are received in cash. Franchisor Incentives Coca-Cola, at its sole discretion, provides the Company with various benefits and incentives, including capital expenditure incentives, promotional programs and advertising support. In 1999, Coca-Cola modified the terms and conditions of its franchisor incentive arrangements. As a result, reimbursements are now based on meeting certain conditions as stipulated in the Capabilities and Performance Program ("CAPRS") agreement. Until 1998, there were no conditions required for franchisor incentives. Prior to 1999, capital expenditure incentives were recorded as other income when Coca-Cola confirmed its commitment to the related incentive. Beginning in 1999, capital expenditure incentives are deferred when received and have been amortized to other income on a straight-line basis over 60 months beginning the next month after Coca-Cola confirms its commitment to the related incentive (see Note 21). Incentive payments that are related to the increase in volume of Coca-Cola products that result from such expenditures and are viewed by the Company as an offset against the costs of concentrates paid by the Company to Coca-Cola. As described above, advertising and promotional incentives are treated as reductions of marketing expense. Pensions and Other Employee Benefits Pension plan assets, liabilities and provisions, and related disclosures are presented in accordance with SFAS No. 87, "Employers' Accounting for Pensions" determined under the projected unit credit method. All of the Company's subsidiaries, including the Company's servicing company, namely Panamco LLC, but excluding the Company's Venezuelan subsidiary, have pension plans, which cover all their employees except for the Mexican plan, which covers only nonunion employees. F-17 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) The Mexican, Brazilian and Costa Rican pension plans are funded and the contributions are based on actuarial valuations. The Colombian plan is unfunded and shared with a government agency. The Nicaraguan, Guatemalan and Panamco LLC plans are unfunded. The labor laws in each of the countries in which the Company operates require severance payments upon involuntary termination. The Company accrues for such costs when the amounts can be estimated. The Company has no material post-retirement or post-employment benefits, which would require adjustment under SFAS No. 106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions," or SFAS No. 112, "Employers' Accounting for Post-employment Benefits - an Amendment of FASB Statements No. 5 and 43." Income Taxes Deferred tax assets and liabilities are determined based on differences between financial reporting carrying values and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred income tax provisions and benefits are based on the changes to the asset or liability from period to period. A valuation allowance is recognized to reduce net deferred tax assets to amounts that management believes are more likely than not to be realized. Stock-based Compensation At December 31, 2002, the Company has two stock-based employee compensation plans, which are described more fully in Note 18. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the dates of grant. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.
December 31, ------------------------------------------- 2002 2001 2000 --------- --------- ----------- Net income (loss), as reported $ 33,242 $ 118,024 $ (504,660) Stock-based compensation expense, included in the determination of net income (loss), as reported, net of related tax effects - - - Less: Total stock-based employee compensation expense determined under a fair value based method for all awards, net of related tax effects 7,361 10,040 5,379 --------- --------- ---------- Pro forma net income (loss) $ 25,881 $ 107,984 $ (510,039) ========= ========= ========== Earnings (loss) per share: Basic, as reported $ 0.28 $ 0.94 $ (3.92) ========= ========= ========== Basic, pro forma $ 0.22 $ 0.86 $ (3.96) ========= ========= ========== Diluted, as reported $ 0.27 $ 0.93 $ (3.92) ========= ========= ========== Diluted, pro forma $ 0.21 $ 0.85 $ (3.96) ========= ========= ==========
F-18 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Financial Instruments The Company's financial instrument counterparties are high quality investment or commercial banks with significant experience with such instruments. The Company manages exposure to counterparty credit risk through specific credit standards and diversification of counterparties. The Company has procedures to monitor the credit exposure amounts. The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. The assumptions used have a significant effect on the estimated amounts reported. Due to the short-term nature of these accounts (i.e. usually less than 3 months), the carrying amount of cash and equivalents, accounts receivable, accounts payable and bank loans approximate fair value as of December 31, 2002, and 2001. The carrying amounts and estimated fair values of the Company's financial instruments as of December 31, 2002 and 2001 are summarized as follows:
2002 2001 -------------------------- ---------------------------- Carrying Carrying Amount Fair Value Amount Fair Value ---------- ---------- ---------- ------------ Molson, Inc. $ 12,057 $ 18,490 $ - $ - ========== ========== ========== ============ Foreign bonds and other instruments $ 3,246 $ 3,246 $ 3,133 $ 3,058 ========== ========== ========== ============ Bank loans and long-term obligations (including current portion) $ 891,862 $ 928,648 $ 970,242 $ 1,005,878 ========== ========== ========== ============
The fair values of foreign bonds and other instruments are estimated based on quoted market prices. For investments for which there are no quoted market prices, fair values are derived from estimated yields for investments of similar characteristics. The fair values of bank loans and long-term obligations are based on quoted market prices or, where quoted market prices are not available, on the present value of future cash flows discounted at estimated yields on instruments with similar characteristics. The Company's other investments include cost and equity investments, which are not included in the fair value calculation. Derivative Instruments The Company enters into derivative transactions to mitigate the risk associated with interest rates, foreign currency exchange rates, price fluctuations of goods used in the normal course of business and other similar hedging strategies. Derivative instruments are recorded on the balance sheet at fair value. Depending on the accounting treatment for which the Company qualifies, the changes in fair value are recorded in the consolidated statement of operations or, if the derivative instrument is designated as a cash flow hedge, the effective portion of the hedging relationship is recorded in accumulated other comprehensive income (loss) and the ineffective portion of the hedging relationship is recorded in the consolidated statement of operations. The policy of the Company is to classify any gains or losses, realized or unrealized, in the same account caption in the consolidated statements of operations as the item being hedged. F-19 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) Earnings per Share In accordance with SFAS No. 128, "Earnings per Share," basic earnings (loss) per common share calculations are determined by dividing earnings attributable 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. The following table reconciles the weighted average number of shares outstanding with the number of shares used in the computation of diluted earnings (loss) per share:
December 31, ---------------------------------------- 2002 2001 2000 ---------- ---------- ---------- Numerator: Net income (loss) $ 33,242 $ 118,024 $(504,660) ========== ========== ========== Denominator (in thousands): Denominator for basic earnings (loss) per share 120,602 125,559 128,833 Effect of dilutive securities: Options to purchase common stock 570 1,096 - ---------- ---------- ---------- Denominator for diluted earnings (loss) per share 121,172 126,655 128,833 ========== ========== ========== Earnings (loss) per share: Basic $ 0.28 $ 0.94 $ (3.92) ========== ========== ========== Diluted $ 0.27 $ 0.93 $ (3.92) ========== ========== ========== Anti-dilutive securities not included in the diluted earnings (loss) per share calculation: Options to purchase common stock (in thousands) 4,850 2,115 7,003 Nonvested stock (in thousands) - - 700 Exercise prices: $ 13.75 $ 17.84 $ 13.75 to to to $ 29.94 $ 29.94 $ 29.94
New Pronouncements In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities- an Interpretation of ARB No. 51." FIN No. 46 addresses consolidation by business enterprises of variable interest entities, which include entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. FIN 46 also applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company is currently evaluating the effect that the adoption of FIN 46 will have on its results of operations and financial condition. F-20 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation- Transition and Disclosure- an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for financial statements for fiscal years ending after December 15, 2002. The Company will continue to account for stock-based compensation according to APB No. 25, while its adoption of SFAS No. 148 requires the Company to provide prominent disclosures about the effect of SFAS No. 123 on reported income and will require the Company to disclose these effects in the interim financial statements as well. In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others- an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34." FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. It also clarifies that a guarantor is required to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does not expect the adoption of FIN 45 to have a significant impact on its consolidated financial position or results of operations. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by this standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operations, plant closing, or other exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. In April 2002, the FASB issued SFAS No. 145, "Rescission of the FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 eliminates the requirement to classify gains and losses from the extinguishment of indebtedness as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction, and makes other non-substantive technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with earlier adoption encouraged. The Company does not expect the adoption of SFAS No. 145 will have a significant impact on its consolidated financial position or results of operations. F-21 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) (2) MERGER TRANSACTION On December 22, 2002, Coca-Cola FEMSA, S.A. de C.V. ("Coca-Cola FEMSA"), Midtown Sub, Inc. and the Company signed a merger agreement, pursuant to which Coca-Cola FEMSA will acquire the Company in a transaction valued at approximately $3.6 billion, including the assumption of approximately $880 million in net debt (total long-term obligations, including current portion and bank loans less cash and equivalents). In the proposed merger transaction, the Company would be merged with Midtown Sub, Inc., a wholly-owned subsidiary of Coca-Cola FEMSA. The Company will survive the merger and continue to exist as a wholly-owned subsidiary of Coca-Cola FEMSA, but the directors of the Company after the merger will be the directors designated by Midtown Sub, Inc. In the proposed merger transaction, each outstanding share of the Company's Class A shares will be converted into the right to receive $22.00 in cash and each outstanding share of the Company's Class B shares will be converted into the right to receive $38.00 in cash. In exchange for all the shares of the Company that it beneficially owns, The Coca-Cola Company will receive, instead of cash, 304,045,678 Series D shares of Coca-Cola FEMSA. Each outstanding option to purchase shares of Class A shares will be cancelled, with the holder becoming entitled to receive the excess, if any, of $22.00 over the exercise price, per share, or such option. There can be no assurance that the proposed merger transaction with Coca-Cola FEMSA will be completed and consummation of the merger is subject to several significant conditions, including the approval by the holders of a majority of the Company's Class B shares and the approval by the holders of a majority of the Company's Class A shares present or represented by proxy at a special meeting to be held to consider and vote upon the proposed merger transaction (the "Special Meeting"), excluding the vote of specified holders of Class A shares that also hold Class B shares. On January 30, 2003, the Company filed a preliminary proxy statement with the Securities and Exchange Commission with respect to the Special Meeting and the proposed merger transaction. Other than the shareholder approvals, other important conditions to the proposed merger transaction include antitrust regulatory approvals, the disbursement of funds to Coca-Cola FEMSA by its lenders, the confirmation of investment grade rating of the combined company and the absence of changes that lead to a material adverse effect on the Company. The merger transaction is expected to be completed shortly after the Company receives shareholder and regulatory approvals for the merger, which the Company expects will be during the second quarter of 2003. (3) FACILITIES REORGANIZATION AND OTHER CHARGES Current Year Charges At the conclusion of the reorganization programs announced in 2000, approximately 7,700 employees had been terminated by the Company. As of June 30, 2002, the 2000 reorganization programs have been completed and all remaining balances related to accrued facilities reorganization costs totaling $4.2 million, which includes an estimated $1.1 million in cash charges and $3.1 million in noncash charges, were reversed into operating income by reducing facilities reorganization and other charges in the Company's consolidated statements of operations. During 2002, the Company recorded $110.2 million of facilities reorganization and other charges ($92.0 million, net of tax benefits) resulting primarily from the deterioration of macroeconomic conditions in some of the countries, primarily in Venezuela, in which the Company operates. These charges consist of $26.4 million of severance charges throughout the Company's operations related to approximately 2,100 employees, $68.0 million of asset write-offs, impairment charges and plant closings primarily in the Company's Venezuelan F-22 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) operations and $23.7 million related to obsolete machinery and discontinued product components, offset by excise tax benefits obtained in Brazil totaling $3.4 million and the reversal into income of accrued facilities reorganization costs related to severance payments totaling $4.5 million. As of December 31, 2002, approximately 1,200 of the 2,100 employees have been terminated by the Company resulting in severance payments totaling $17.3 million. The following table shows a summary of the facilities reorganization and other charges and benefits included in the consolidated statements of operations captions presented below for the year ended December 31, 2002, including reversals related to the 2000 reorganization programs, which were concluded during 2002: Cost of sales $ 11,483 (a) Selling, general and administrative 3,401 (b) Cash facilities reorganization and other charges 18,513 (c) ---------- Total cash charges 33,397 ---------- Noncash facilities reorganization and other charges 16,908 (d) Depreciation and amortization 51,097 (e) ---------- Total noncash charges 68,005 ---------- Total operating charges 101,402 Included in Other income (expense), net: Nonoperating charges 8,801 (f) ---------- Gross charges 110,203 Tax benefit (18,250) ---------- Net charges $ 91,953 ========== a) Cost of sales charges relate to the write-off of raw materials inventory totaling $0.6 million, obsolete spare parts for production machinery totaling $2.6 million and the payment of excise taxes totaling $8.3 million on soft drink inventories containing high fructose corn syrup in Mexico. The payment of the excise taxes resulted from a law that was suspended shortly after it was initiated, but subsequently reinstated effective July 15, 2002. b) Selling, general and administrative charges relate to the write-off of obsolete promotional materials totaling $0.3 million, obsolete spare parts totaling $1.0 million, a provision for labor contingencies totaling $0.9 million and miscellaneous administrative expenses totaling $1.2 million. c) The cash facilities reorganization and other charges relate to severance charges for the termination of approximately 2,100 employees in Mexico, Venezuela and Colombia totaling $26.4 million, offset by excise tax benefits obtained in Brazil totaling $3.4 million, and the reversal into income of accrued facilities reorganization costs related to severance payments totaling $4.5 million ($2.5 million relates to the 2000 reorganization programs). d) The noncash facilities reorganization and other charges relate to plant closings and related disposal of property, plant and equipment in Venezuela and Mexico totaling $7.9 million and $4.1 million, respectively, the loss on sale of unproductive assets in Venezuela totaling $8.0 million, offset by the reversal into income of accrued facilities reorganization charges related to the 2000 reorganization programs totaling $3.1 million. e) Depreciation and amortization charges relate to the write-off of obsolete property, plant and equipment in Mexico, Venezuela and Colombia totaling $43.8 million, of which approximately 83% occurred in Venezuela, 11% in Mexico and 6% in Colombia and the write-off of bottles and cases in Mexico, Venezuela and Colombia totaling $7.3 million, of which approximately 76% occurred in Venezuela, 18% in Mexico and 6% in Colombia. F-23 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) f) The nonoperating charges relate to the loss on disposal of nonoperating property, plant and equipment, mostly in Venezuela, totaling $4.4 million, the sale, at a loss totaling $3.0 million, of the corporate airplane to a related party and the loss on disposal of investments, mostly in Colombia, totaling $1.4 million. As a result of the above, net income for the year ended December 31, 2002 was impacted by the facilities reorganization and other charges totaling $92.0 million, net of the related tax benefit of $18.3 million. The following tables show the status of the balance of the reorganization accrual related to the facilities reorganization and other charges recorded in 2002 at December 31, 2002:
===== CHARGES ===== =========== APPLICATIONS =========== BALANCE AT SEVERANCE ASSET BALANCE AT DECEMBER 31, AND OTHER CASH WRITE-OFFS/ DECEMBER 31, 2001 CASH NONCASH PAYMENTS LOSS ON SALE REVERSALS 2002 ------------------------------------------------------------------------------------------- $ - $ - $ 20,054 $ - $ 20,054 $ - $ - - 23,042 - 17,300 - 2,049 3,693 -------- -------- -------- ------------ -------- -------- -------- $ - $ 23,042 $ 20,054 $ 17,300 $ 20,054 $ 2,049 $ 3,693 ======== ======== ======== ============ ======== ======== ========
Summary of Previously Announced Reorganization Programs Facilities Reorganization Charges - During the year ended December 31, 2000, the Company recorded $503.7 million of facilities reorganization charges. 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 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 7,700 employees had been terminated by the Company as of December 31, 2001 relating to the restructuring effected during 2000. During the fourth quarter of 2001, the Company reevaluated its original estimated headcount reduction of approximately 10,000 employees and revised the headcount reduction to approximately 8,200 employees throughout the Company. Nonoperating Charges - During the year ended December 31, 2000, the Company recorded $6.0 million of charges, of which $5.4 million was recorded in the first quarter and $0.6 million were recorded in the fourth quarter, related to the disposal of nonoperating assets, including land from some of the operating plants, which are included in 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 summarizes the net charges and benefits recorded in the consolidated statements of operations for the year ended December 31, 2000: F-24
PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS) 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 -------- -------- --------- Facilities reorganization charges 88,571 415,088 503,659 Nonoperating charges - 5,977 5,977 -------- -------- --------- Gross charges $ 88,571 $421,065 509,636 ======== ======== Tax benefit (46,516) -------- Net charges $463,120 =========
The following tables show the status of the balance of the reorganization accrual and asset write-down allowance related to the facilities reorganization charges recorded in 2000 at December 31, 2002, 2001 and 2000:
BALANCE AT SEVERANCE PROPERTY/ ASSET BALANCE AT DECEMBER 31, AND OTHER EQUIPMENT WRITE-OFFS/ DECEMBER 31, 2001 CASH PAYMENTS SOLD WRITE-DOWN REVERSALS (ADDITIONS) 2002 ------------- ------------- --------- ----------- --------- ----------- ------------- Write-off of property and equipment $ - $ - $ - $ - $ - $ - $ - Job termination and severance payments 4,221 1,741 - - 2,480 - - Other 8,305 5,159 - - 3,146 - - ---------- -------- -------- -------- ------- ------ ------ Facilities reorganization charges $12,526 $ 6,900 $ - $ - $ 5,626 $ - $ - ========== ======== ======== ======== ======== ====== ======
The following table shows the status of the balance of the reorganization accrual and asset write-down allowance at December 31, 2001 and 2000. Balances of $6.0 million and $7.8 million are reflected in other long-term liabilities in the consolidated balance sheets at December 31, 2001 and 2000:
BALANCE AT SEVERANCE PROPERTY/ ASSET BALANCE AT DECEMBER 31, AND OTHER EQUIPMENT WRITE-OFFS/ DECEMBER 31, 2000 CASH PAYMENTS SOLD WRITE-DOWN REVERSALS (ADDITIONS) 2001 ------------- ------------- --------- ----------- --------- ----------- ------------- Write-off of property and equipment $ - $ - $ - $ (2,015) $ 2,015 $ - $ - Job termination and severance payments 44,899 42,693 - - 3,500 (5,515) 4,221 Other 10,732 2,427 - - - - 8,305 ---------- ---------- --------- ----------- --------- -------- --------- Facilities reorganization charges $55,631 $45,120 $ - $ (2,015) $ 5,515 $(5,515) $ 12,526 ========== ========== ========= ========= ========= ======== ========
F-25 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS)
==== CHARGES ==== ========= APPLICATIONS ========= BALANCE AT SEVERANCE PROPERTY/ ASSET BALANCE AT DECEMBER 31, AND OTHER CASH EQUIPMENT WRITE-OFFS/ DECEMBER 31, 1999 CASH NONCASH PAYMENTS SOLD WRITE-DOWN 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 ----------- -------- --------- -------- -------- -------- -------- Facilities reorganization charges $ - $88,571 $415,088 $ 40,807 $ 6,112 $401,109 $55,631 =========== ======== ========= ========= ======== ======== ========
(4) ACCOUNTS RECEIVABLE
December 31, --------------------------- 2002 2001 ----------- ------------ Current accounts receivable consist of: Customers and distributors $ 66,897 $ 87,183 Employees 5,193 5,929 Subsidiaries of Coca-Cola and related companies (Note 9) 19,484 16,510 Sales and income taxes receivable 14,237 8,942 Other 29,639 26,487 --------- ---------- 135,450 145,051 Less - Allowance for doubtful accounts 7,281 8,437 --------- ---------- $ 128,169 $ 136,614 ========= ========== Long-term receivables consist of: Notes from distributors $ 648 $ 1,158 Employee housing loan fund - 592 Other 2,260 3,771 --------- --------- $ 2,908 $ 5,521 ========= =========
Notes from distributors relate to financing provided by the Company to distributors to acquire vehicles. Notes have maturities ranging from three to five years and all bear interest at 15% as of December 31, 2002. F-26 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (BALANCES IN THE TABLES ARE STATED IN THOUSANDS OF U.S. DOLLARS)
(5) INVENTORIES DECEMBER 31, --------------------------- 2002 2001 ----------- ----------- Inventories consist of: Bottled beverages $ 25,629 $ 28,335 Raw materials 57,364 51,837 Spare parts and supplies 28,072 29,637 ------ ------ 111,065 109,809 Less - Allowance for obsolete and slow moving items 5,949 6,769 ----- ----- $ 105,116 $ 103,040 ========= =========
(6) OTHER CURRENT ASSETS
DECEMBER 31, ------------------------- 2002 2001 -------- --------- Other current assets consist of: Prepaid expenses $ 7,592 $ 7,466 Deferred income taxes 3,644 13,059 Other 5,774 6,941 -------- --------- $ 17,010 $ 27,466 ========= =========
(7) INVESTMENTS The principal components of investments as of December 31, 2002 and 2001, and the method of accounting applied and respective ownership percentages for cost and equity method investments at December 31, 2002 are as follows:
DECEMBER 31, ACCOUNTING ------------------------ DESCRIPTION METHOD USED OWNERSHIP 2002 2001 ------------------------------------------------- ----------- --------- --------- --------- CA Beverages, Inc. Equity 53% $ 61,277 $ - Tapon Corona de Colombia, S.A. Equity 40% 2,703 2,794 Molson, Inc. - 12,057 - Industria Envasadora de Queretaro, S.A. de C.V. Cost 15% 1,075 1,132 Beta San Miguel Cost 3% 978 1,030 Cervejarias Kaiser, S.A. ("Kaiser") - - 13,276 Ingenio San Carlos - - 3,556 Comptec, S.A. - - 1,633 Foreign bonds - 1,946 3,133 Other 2,339 1,968 ---------- --------- $ 82,375 $ 28,522 ========== =========
F-27 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) In September 2002, the Company formed a joint venture with Heineken, N.V. and Florida Ice and Farm Company S.A. ("FIFCO") to acquire the Coca-Cola bottler and a beer company in the Republic of Panama. On October 2, 2002, the joint venture entity, CA Beverages, Inc. ("CA Beverages") acquired control of Coca-Cola de Panama Compania Embotelladora, S.A. ("Coca-Cola Panama") and indirect control of Cervecerias Baru-Panama, S.A. ("Baru"). In December 2002, Coca-Cola Panama completed a self tender offer for its shares, as a result of which CA Beverages became a 95.6% holder of stock of Coca-Cola de Panama. Also in December 2002, CA Beverages completed a tender offer for shares of Baru, as a result of which CA Beverages became a 99% holder of the stock of Baru. All acts of CA Beverages must be unanimously approved by its board of directors, which, by contract, is comprised of three directors with each shareholder appointing one director. The Company accordingly lacks the ability to elect a majority of CA Beverages directors or to cause CA Beverages to take any action without first obtaining the approval of Heineken, N.V. and FIFCO. As a result of the substantive participating rights of the minority shareholders of CA Beverages and in accordance with EITF Issue No. 96-16, "Investor's Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights," the Company has not consolidated the results of CA Beverages in 2002. The Company recorded an equity loss, included in other income (expense), totaling $0.4 million related to its ownership interest in CA Beverages, which includes the results of Coca-Cola Panama and Baru. The Company held an investment interest of 12.1% in Cervejarias Kaiser, S.A. ("Kaiser"), a Brazilian brewery, which amounted to $13.3 million as of December 31, 2001. During 2002, the Company recorded a gain on the sale of its 12.1% equity stake in Kaiser. The sale of the 12.1% equity stake was part of a larger transaction in which Molson, Inc. ("Molson") acquired Kaiser and entered into a partnership with Heineken. The sale generated proceeds for the Company of $55.1 million, which includes an equity interest in Molson stock of $12.1 million as of December 31, 2002. The interest in the Molson stock is recorded as an investment. The Molson stock is subject to a two-year contractual restriction on sale that expires on March 19, 2004, pursuant to the agreement with Molson entered into at the time of the acquisition of Kaiser by Molson. The two-year restriction can only be shortened in the case of a change in control of Molson, transfer of substantially all of the assets of Molson, or any material inaccuracy in Molson's representations and warranties contained in the Kaiser purchase agreement. As of December 31, 2002, no events have occurred which have decreased the original restriction period. This transaction resulted in a gain of $48.6 million, which is included as part of Other income (expense), net in the Company's consolidated statements of operations. The Company will continue to distribute Kaiser products in its franchise areas in Brazil and the acquisition of Kaiser will not impact this distribution agreement. The Company does not hold any investments in general or limited partnerships. F-28 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) (8) PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ---------------------------------------------------- ESTIMATED 2002 2001 USEFUL LIVES -------------- ------------ --------------- Property, plant and equipment consist of: Land $ 71,369 $ 86,040 - Buildings 273,165 309,355 17 to 40 years Leasehold improvements 4,103 7,563 5 to 8 years Machinery, equipment, furniture and fixtures 1,103,274 1,162,129 2 to 20 years Vehicles 396,630 357,178 3 to 10 years Construction in progress 31,322 51,829 - ------------- -------------- 1,879,863 1,974,094 Less - Accumulated depreciation and amortization 1,035,977 930,224 ------------- -------------- $ 843,886 $ 1,043,870 ============= ===============
During the years ended December 31, 2002, 2001 and 2000, the Company recorded depreciation expense, including approximately $51.1 million of write-offs of property, plant and equipment discussed in Note 3 above, of approximately $162.3 million, $132.7 million, and $157.1 million, respectively. (9) RELATED PARTY TRANSACTIONS The Company purchases raw materials from various suppliers, including related parties, subject to approval of Coca-Cola. Such transactions are in the ordinary course of business at negotiated prices comparable to those transactions with other customers and suppliers. The principal components of related party transactions were purchases of concentrates, syrups, sugars, returnable and non-returnable bottles, cans, and caps. On April 22, 2002, the Company sold its corporate airplane for $10.5 million to a trust affiliated with a director of the Company. In connection with this transaction, the Company terminated the operating lease for the airplane by payment to the lending bank of $14.9 million representing the amount outstanding under the lease. The Company believes the terms of this transaction were no less favorable to the Company than could have been obtained from an unaffiliated third party. On October 7, 2002, the Company announced that it had reached various agreements with Coca-Cola to convert its Risco water volume in Mexico to Coca-Cola's brand Ciel beginning in the first quarter of 2003. The conversion is done in exchange for total cash consideration of $65.0 million to be paid by Coca-Cola. The Company received $3.6 million during the fourth quarter and will receive $56.0 million of the remaining consideration in the first quarter of 2003 with the remaining amount to be paid in the following four years. Income from the conversion will be deferred and recognized into income over the life of the contract, which is ten years. Amounts due from or due to related parties as of December 31, 2002 and 2001, respectively, are as follows: F-29 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
DECEMBER 31, --------------------------- 2002 2001 ---------- ---------- Accounts receivable: Subsidiaries of Coca-Cola $ 17,502 $ 14,025 Subsidiaries of Kaiser 1,982 2,485 --------- --------- $ 19,484 $ 16,510 ========= ========= Accounts payable: Subsidiaries of Coca-Cola $ 29,407 $ 21,842 Productos de Vidrio, S.A. 2,469 2,912 Central Azucarero Portuguesa, C.A. 2,602 1,950 Tapon Corona de Colombia, S.A. 1,920 1,564 Comptec, S.A. 546 767 Other 1,673 - --------- --------- $ 38,617 $ 29,035 ========= =========
The Company had the following significant transactions with related parties:
YEAR ENDED DECEMBER 31, --------------------------------------- 2002 2001 2000 -------- -------- -------- Income: Marketing expense support from Coca-Cola (recorded net against marketing expenses) $ 33,483 $ 36,503 $ 18,017 Kaiser beer distribution fees 3,762 3,650 4,840 Other 378 2,453 - --------- --------- --------- $ 37,623 $ 42,606 $ 22,857 ========= ========= ========= Expenses: Purchases of concentrate from Coca-Cola $ 333,019 $ 361,052 $ 343,075 Purchases of beer 37,649 52,295 59,372 Purchases of other inventories 95,645 179,133 79,011 --------- --------- --------- $ 466,313 $ 592,480 $ 481,458 ========= ========= ========= Capital expenditure incentives received in cash $ - $ 303 $ 408 ========= ========= =========
(10) INCOME TAXES As a Panamanian corporation, the Company does not pay income taxes on income derived from foreign sources, but the operations of the subsidiaries are subject to income taxes at the applicable local rates in the countries where the subsidiaries operate. Income taxes are computed taking into consideration the taxable and deductible effects of inflation in each of the countries in which the Company operates. The provisions for income taxes have been determined on the basis of the taxable income of each individual company and not on a consolidated basis. As of December 31, 2002, the Company had $80.7 million (tax effected) of net operating loss carryforwards available from its subsidiaries to offset future taxable income. The Company has recorded a total valuation allowance of approximately $45.3 million of which $33.1 million applies against net operating loss carryforwards from its subsidiaries. The Company's net operating loss carryforwards, totaling $80.7 million, expire as follows: F-30 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
2003 2004 TO 2010 THEREAFTER NO EXPIRATION TOTAL ---------- ------------ ---------- ------------- --------- NOLAD $ - $ 2,813 $ 4,495 $ - $ 7,308 Venezuela 10,628 17,460 - - 28,088 Brazil - - - 45,321 45,321 --------- ----------- -------- --------- ---------- Total $ 10,628 $ 20,273 $ 4,495 $ 45,321 $ 80,717 ======== ======== ======= ======== ==========
The Mexican and Venezuelan subsidiaries are subject to an asset tax, to the extent that such asset tax exceeds the income tax of the period, at an annual rate of 1.8% and 1.0%, respectively. Any required payment of asset taxes is refundable against the excess of income taxes over asset taxes for the following ten and three years in the case of Mexico and Venezuela, respectively. Income tax expense for the years ended December 31, 2002, 2001 and 2000 consists of the following:
CURRENT DEFERRED VALUATION ALLOWANCE TOTAL EXPENSE EXPENSE (BENEFIT) INCREASE (DECREASE) EXPENSE (BENEFIT) 2002: NOLAD $ 65,381 $ (2,196) $ - $ 63,185 Colombia 10,043 (12,242) - (2,199) Venezuela 2,133 (36,563) 21,131 (13,299) Brazil 535 (1,506) 4,330 3,359 Corporate 283 (203) - 80 --------- ----------- ----------- ---------- Total $ 78,375 $ (52,710) $ 25,461 $ 51,126 ========= =========== =========== ========== 2001: NOLAD $ 79,258 $ (12,948) $ - $ 66,310 Colombia 4,900 (124) - 4,776 Venezuela 2,453 4,836 (28,673) (21,384) Brazil 1,058 (3,236) - (2,178) Corporate 2,845 - - 2,845 --------- ----------- ------------ ----------- Total $ 90,514 $ (11,472) $ (28,673) $ 50,369 ========= =========== ============ =========== 2000: NOLAD $ 78,609 $ (26,695) $ - $ 51,914 Colombia 11,612 (19,212) - (7,600) Venezuela 5,366 (2,288) (11,037) (7,959) Brazil 1,429 (16,449) - (15,020) Corporate 465 - - 465 --------- ----------- ------------ ----------- Total $ 97,481 $ (64,644) $ (11,037) $ 21,800 ========= ========== ============ ===========
The provisions for (benefits from) income taxes computed by applying the local statutory rates to income before taxes, as reconciled to the actual provisions (benefits), are as follows for the years ended December 31, 2002, 2001 and 2000: F-31 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
2002 2001 2000 ---- ---- ---- Consolidated statutory tax rate 50% 52% (2%) Add (deduct)-- Tax inflation adjustments, net (17%) (11%) (1%) Indexed tax depreciation (1%) 1% 1% Employee profit sharing 4% 4% 1% Asset tax 4% - 1% Change in statutory rate 1% - - Tax credits relating to the deduction of interest on shareholders' equity and other - (2%) - Increase (decrease) in valuation allowance 28% (11%) (2%) Other (12%) (4%) 7% ----- ---- ---- Consolidated effective tax rate 57% 29% 5% ===== ==== ====
The local country statutory rates are approximately 34% in the NOLAD segment, 33% in Brazil, 35% in Colombia and 34% in Venezuela. The consolidated statutory tax rate presented above has been determined on the basis of each individual subsidiary. In addition, the Company's Corporate entity incurs various expenses, for which no tax benefit is generated and therefore, results in a higher statutory rate on a consolidated basis. The components of the net deferred income tax liability (asset) as of December 31, 2002 and 2001 are as follows: DECEMBER 31, ---------------------------- 2002 2001 ---------- --------- Current: Inventories $ 14,329 $ 18,404 Nondeductible provisions (3,783) (1,995) Tax loss carryforwards (10,628) (28,865) Valuation allowance 12,961 19,800 Other 6,164 7,640 --------- ---------- Total current liability, net 19,043 14,984 --------- ---------- Long-term: Bottles and cases 9,171 24,619 Property, plant and equipment 44,346 68,344 Nondeductible provisions (20,318) (31,120) Tax loss carryforwards (70,089) (66,012) Valuation allowance 32,300 - Other (7,023) (3,132) ---------- --------- Total long-term asset, net (11,613) (7,301) ---------- --------- Total $ 7,430 $ 7,683 ========== ========= As of December 31, 2002, the net deferred income tax liability of $7.4 million was presented in the balance sheet, based on tax jurisdiction, as current deferred income tax assets of $3.7 million (included in other current assets, see Note 6), non-current deferred income tax assets of $61.2 million, current deferred income tax liabilities of $22.7 million and non-current deferred income tax liabilities of $49.6 million. Similarly, at December 31, 2001, the net deferred income tax liability of $7.7 million was presented in the balance sheet, F-32 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) based on tax jurisdiction, as current deferred income tax assets of $13.0 million (included in other current assets, see Note 6), non-current deferred income tax assets of $94.6 million, current deferred income tax liabilities of $28.0 million and non-current deferred income tax liabilities of $87.3 million. (11) BANK LOANS AND LONG-TERM OBLIGATIONS At December 31, 2002, the Company and its subsidiaries had $135.5 million in direct unsecured bank loans denominated in U.S. dollars and other currencies, with maturities between one and twelve months. The weighted average annual fixed interest rate for $14.5 million of the loans as of December 31, 2002 was 3.5%. The remaining $121.0 million in bank loans, as of December 31, 2002, had a weighted average annual interest rate of 2.4%. Current and long-term obligations at December 31, 2002 and 2001 consisted of the following:
DECEMBER 31, --------------------------- 2002 2001 --------- ---------- Current obligations: Notes payable to banks, in various currencies, weighted average interest rates of 2.5% and 9.2%, respectively $ 135,495 $ 35,184 Current maturities of long-term obligations 208,914 75,439 --------- --------- Total current obligations 344,409 $ 110,623 ========= ========= Long-term obligations: Senior notes, in U.S. dollars, weighted average interest rates of 7.0% and 7.5%, respectively, maturing from April 2003 to July 2009 $ 440,371 $ 450,000 Notes payable to banks, in U.S. dollars, weighted average interest rates of 2.4% and 3.6%, respectively, maturing from June 2003 to November 2004 120,770 179,975 Notes payable to banks, in Mexican pesos, weighted average interest rates of 9.3% and 8.0%, respectively, maturing in December 2003 21,233 101,960 Notes payable to banks, in Brazilian reales, weighted average interest rates of 10.1% and 9.2%, respectively, maturing from January 2003 to March 2003 50 1,558 Notes payable to banks, in Guatemalan quetzales, weighted average interest rates of 11.5% and 15.0%, respectively, maturing from June 2003 to July 2007 1,779 2,908 Notes payable to banks, in Costa Rican colones, weighted average interest rates of 17.5% in 2001, outstanding amount was repaid during 2002 - 4,224 Unsecured promissory notes, in Mexican pesos, weighted average interest rates of 8.7% and 8.7%, respectively, maturing in November 2006 118,305 126,993 Marketable bonds, in Colombian pesos, weighted average interest rates of 10.3% and 11.3%, respectively 50,615 63,287 Capital lease, in U.S. dollars, interest rates of 3.3% and 5.4%, respectively 3,244 4,153 --------- ---------- 756,367 935,058 Less -current maturities 208,914 75,439 ---------- ---------- Total long-term obligations, net of current maturities $ 547,453 $ 859,619 ========== ==========
F-33 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) On November 12, 1999, the Mexican subsidiaries issued unsecured promissory notes for 1.0 billion Mexican pesos equivalent to 380.0 million UDI's (unit of real constant value, in Mexican pesos, whose value is calculated by Bank of Mexico), payable semiannually with a seven-year maturity and bearing an annual interest rate of 8.65% (including withholding). As of December 31, 2002 and 2001, the amount of this debt is $118.3 million and $127.0 million, respectively. Some of the Company's debt agreements establish, among other restrictions, an interest coverage ratio not less than 4.0 to 1 and a debt-to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio not more than 2.35 to 1. During the fourth quarter of 2002, the Company amended the terms of its $130.0 million syndicated loan maturing in November 2004, as well as the other agreements that included similar covenants, by modifying the consolidated debt to consolidated debt-to-EBITDA ratio so that it may not exceed 2.35 to 1. During October 2002, the Company entered into a bridge loan agreement, related to the acquisition of Coca-Cola Panama, of $60.0 million maturing on April 1, 2003 with monthly interest payments. Interest payments bear an annual interest rate at LIBOR plus 0.60% from October 1, 2002 to January 1, 2003, with incremental increases in the interest rate during 2003 and concluding with an interest rate of LIBOR plus 1.10% from March 1, 2003 to maturity on April 1, 2003. As of December 31, 2002, $50.0 million of the bridge loan remained outstanding and is reflected as part of notes payable to banks in the table above. In the normal course of business, the Company provides guarantees to lenders and financial institutions regarding debt obligations incurred by the Company's operating subsidiaries. In general, the guarantees provide assurance that the Company will repay debt obligations incurred by the Company's operating subsidiaries if the operating subsidiaries are unable to repay the obligations. As of December 31, 2002, the Company has provided guarantees relating to approximately $76.0 million of the long-term obligations of the Company's operating subsidiaries. Maturities of current and long-term obligations, including bank loans, at December 31, 2002 are as follows: 2003 $ 344,409 2004 86,043 2005 24,590 2006 134,477 2007 12,343 Thereafter 290,000 ---------- $ 891,862 ========== As of December 31, 2002, the Company and its subsidiaries have complied with all the terms and conditions established in the loan agreements. F-34 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) (12) DERIVATIVE INSTRUMENTS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133," became effective for the Company on January 1, 2001. The Company had a floating-to-fixed interest rate swap (the "Swap"), which expired in November 2002, with a total notional amount of $250.0 million, which exchanged LIBOR for a fixed interest rate of 6.437%. Upon adoption of SFAS No. 133, the Company designated the Swap as a cash flow hedge. During 2001, the Company determined that it was probable that the original forecasted transaction would not continue through the expiration of the Swap. Therefore, during 2001, the Company reclassified $12.2 million of unrealized losses related to the Swap from accumulated other comprehensive income (loss) to other expense, net in the Company's consolidated statement of operations. The Company realized a loss of $1.0 million, included in other income (expense) net, for the year ended December 31, 2002 in the Company's consolidated statement of operations. The Company has a fixed-to-floating interest rate swap, expiring in April 2003, with a total notional amount of $150.0 million, which exchanges a fixed interest rate of 8.125% for a LIBOR-based rate. As of December 31, 2002, the fair value of the interest rate swap was an asset of $0.4 million and is recorded within other current assets. The Company recorded approximately $0.8 million, included as a reduction of interest expense, for the year ended December 31, 2002 in the Company's consolidated statement of operations. During 2002, the Company entered into a foreign currency forward purchase contract in its Mexican operations, expiring during the first quarter of 2003, with a notional amount of approximately $14.0 million. The Company cancelled this contract during the fourth quarter of 2002. The Company realized a loss of $0.4 million, included in other income (expense) net, for the year ended December 31, 2002 in the Company's consolidated statements of operations. During 2002, the Company entered into foreign currency forward purchase contracts to purchase the Brazilian real forward, expiring during the first quarter of 2004, with total notional amounts of approximately $21.0 million. During the third and fourth quarters of 2002, the Company cancelled the foreign currency forward purchase contracts. The Company realized a loss of approximately $5.7 million, included in other income (expense) net, for the year ended December 31, 2002 in the Company's consolidated statement of operations. During 2002, the Company entered into an equity forward purchase contract, expiring in March 2004, on Molson shares to be received from the sale of Kaiser, with a notional amount of approximately $18.1 million. The Company recognized an unrealized holding loss of approximately $0.7 million, included in other income (expense) net, for the year ended December 31, 2002 in the Company's consolidated statement of operations. As of December 31, 2002, the fair value of the equity forward purchase contract was a liability of $0.7 million and is recorded within other current liabilities. During 2002, the Company entered into a foreign currency forward contract in Venezuela, expiring during the fourth quarter of 2002 for a notional amount of approximately $5.0 million. The Company realized a gain of approximately $0.3 million, included in other income (expense) net, for the year ended December 31, 2002 in the Company's consolidated statement of operations. F-35 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) During 2002, the Company entered into a foreign currency forward purchase contract to purchase the Colombian peso forward, expiring during the first quarter of 2003 for a notional amount of approximately $7.5 million. As of December 31, 2002, the Company recognized an unrealized loss of approximately $22 thousand recorded in Other income (expense) net, in the Company's consolidated statements of operations. As of December 31, 2002, the fair value of the foreign currency forward purchase contract was a liability of $22 thousand and is recorded within Other current liabilities. (13) ACCOUNTS PAYABLE December 31, ---------------------------- Accounts payable consists of: 2002 2001 ---------- --------- Trade and other payables $ 225,511 $ 245,129 Related party payables 38,617 29,035 ---------- --------- Total $ 264,128 $ 274,164 =========== ========= (14) OTHER ACCRUED LIABILITIES December 31, ---------------------------- Other accrued liabilities consist of: 2002 2001 --------- --------- Accrued salaries and benefits $ 10,848 $ 17,365 Fair value of derivative instruments 716 10,433 Interest payable 79 4,472 Other accrued expenses 22,498 19,039 --------- -------- Total $ 34,141 $ 51,309 ========= ======== (15) PENSIONS The status of the pension plans are presented in accordance with SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement Benefits":
DECEMBER 31, 2002 DECEMBER 31, 2001 ------------------------- ------------------------- UNFUNDED FUNDED UNFUNDED FUNDED -------- ------ -------- ------ Change in benefit obligation: Benefit obligation at beginning of year $ 18,983 $ 24,581 $ 14,556 $ 29,049 Service cost 644 1,655 610 2,410 Interest cost, net 2,021 2,142 1,886 2,508 Effect of curtailment and settlements - (3,226) 3,733 (8,601) Actuarial (gain) loss (280) 398 252 (704) Benefit payments (1,274) (1,970) (78) (2,304) Translation (gain) loss (5,566) (2,574) (1,976) 2,223 ---------- --------- ---------- ---------- Benefit obligation at end of year $ 14,528 $ 21,006 $ 18,983 $ 24,581 ---------- --------- ---------- ----------
F-36 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
DECEMBER 31, 2002 DECEMBER 31, 2001 ------------------------- -------------------------- UNFUNDED FUNDED UNFUNDED FUNDED ---------- --------- ------------ ------------ CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year $ - $ 11,538 $ - $ 12,964 Actual return on plan assets - 1,396 - 769 Employer contributions - 1,790 - 3,263 Benefit payments - (1,577) - (3,543) Translation gain - (1,625) - (1,915) --------- --------- ---------- ------------ Fair value of plan assets at end of year $ - $ 11,522 $ - $ 11,538 --------- --------- ---------- ------------ FUNDED STATUS: Benefit obligation in excess of fair value of plan assets $ 14,528 $ 9,484 $ 18,983 $ 13,043 Unrecognized net actuarial (gain) loss 1,347 1,153 1,721 (2,584) Unrecognized prior service cost (benefit) (69) (5,719) (102) (6,747) Effect of curtailment and settlements - - (3,733) 797 Unrecognized net transition obligation (asset) 283 (307) 69 (700) --------- --------- ---------- ----------- Net obligation recognized $ 16,089 $ 4,611 $ 16,938 $ 3,809 ========= ========= ========== ===========
The net periodic pension cost consists of the following: YEAR ENDED DECEMBER 31, ------------------------------------- 2002 2001 2002 --------- -------- --------- Service cost $ 2,299 $ 3,020 $ 3,294 Interest cost, net 4,163 4,394 5,870 Expected return on plan assets (1,314) (817) (1,518) Amortization of prior service cost 335 601 540 Recognized net actuarial loss (gain) 143 (14) 121 Transition obligation (117) (80) (32) --------- --------- --------- Net periodic pension costs $ 5,509 $ 7,104 $ 8,275 ========= ========= ========= The actuarial assumptions in 2002, 2001 and 2000, net of inflation, which reflect the local economic conditions and particular circumstances of each of the subsidiaries, are as follows:
2002 -------------------------------------------------------------------------------- EXPECTED RETURN RATE OF COMPENSATION DISCOUNT RATE ON PLAN ASSETS INCREASE ------------------ ------------------ ----------------------- Mexico 11.0% 12.0% 8.0% Guatemala 15.0% * 10.0% Nicaragua 14.0% * 10.0% Costa Rica 18.0% 20.0% 13.0% Colombia 12.5% * 8.0% Brazil 11.3% 11.3% 7.1% Corporate 6.8% * 4.5%
F-37 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
2001 ------------------------------------------------------------------------------- EXPECTED RETURN RATE OF COMPENSATION DISCOUNT RATE ON PLAN ASSETS INCREASE ---------------- -------------------- ------------------------- Mexico 12.0% 13.0% 9.0% Guatemala 15.0% * 10.0% Nicaragua 14.0% * 10.0% Costa Rica 18.0% 20.0% 13.0% Colombia 19.0% * 13.0% Brazil 11.3% 11.3% 7.1% Corporate 7.5% 8.0% 7.5% 2000 ------------------------------------------------------------------------------ EXPECTED RETURN RATE OF COMPENSATION DISCOUNT RATE ON PLAN ASSETS INCREASE --------------- -------------------- ------------------------ Mexico 7.3% 9.0% 3.3% Guatemala 15.0% * 10.0% Colombia 19.0% * 13.0% Brazil 6.0% 6.0% 2.0% *Not applicable, as the benefits are not funded.
(16) COMMITMENTS AND CONTINGENCIES Concentration of Credit Risk Financial instruments, which potentially subject the Company to credit risk, consist primarily of trade accounts receivable. The Company extends credit on an unsecured basis to some of its distributors and customers. Diversification of credit risk is difficult since the Company sells primarily in the beverage industry. The Company's management recognizes that extending credit and setting appropriate allowances for uncollectible accounts receivable is largely a subjective decision based on knowledge of the customer. The Company's management and their staff meet regularly to evaluate credit exposure in the aggregate, and by individual credit and maintains allowances for potential losses or adjustments. Management sets and maintains credit standards and ensures the overall quality of the credit portfolio. Litigation, Claims and Assessments From time to time, the Company and its subsidiaries are involved in litigation, claims and assessments incidental to the operation of the Company's business. As a general policy, the Company defends matters in which the Company or its subsidiaries are named defendants and, for insurable losses, maintains insurance to protect against adverse judgments, claims or assessments that may affect the Company. In the opinion of the Company, although the adequacy of existing insurance coverage or the outcome of any legal proceedings cannot be predicted with certainty, the ultimate liability associated with any claims or litigation in which the Company or its subsidiaries are currently involved will not materially affect the Company's financial condition but could be material to the results of operations or cash flows in any one accounting period. F-38 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) Self-insurance As of December 31, 2002, the Company's subsidiaries in Mexico, Colombia, and Venezuela are partly self-insured through a wholly-owned subsidiary, Panamco Insurance Company Limited ("Panamco Insurance"), for various property risks. These risks, relating to property, plant and equipment, include but are not limited to natural disasters, theft, machinery malfunction, and other illegal acts by third parties. The Company is responsible for the first $0.25 million for each and every loss incurred and for a total of $1.0 million annually in excess of policy deductibles. Expense related to claims covered by Panamco Insurance was approximately $0.6 million, $0.5 million and $0.6 million in 2002, 2001 and 2000, respectively. While the ultimate amount of claims incurred is dependent on future developments, in management's opinion, the recorded allowance of $0.4 million as of December 31, 2002 and 2001, respectively, is adequate to cover the future payment of claims. As such, no activity has been recorded for the self-insurance reserve during each of the three years in the period ended December 31, 2002. However, it is reasonably possible that recorded allowances may not be adequate to cover future payment of claims. Adjustments, if any, to estimates recorded resulting from ultimate claim payments will be reflected in operations in the periods in which such adjustments are known. Construction Commitments In the normal course of business, the Company occasionally enters into commitments for the construction of new production facilities. At December 31, 2002, the amounts outstanding under these construction commitments totalled approximately $4.5 million. EDS Contract On December 1, 2000, the Company entered into a five-year outsourcing contract with EDS to manage its information technology infrastructure throughout Latin America for approximately $97.6 million, which will end on November 30, 2005. During 2002, the Company incurred $21.9 million in expense related to this contract. The future minimum obligations under this contract are $21.0 million in 2003, $18.4 million in 2004, and $14.9 million in 2005. Vulnerability due to Concentration and Franchise Arrangements The Company's primary raw material supplier is Coca-Cola. Transactions with Coca-Cola are subject to maintenance provisions under existing bottler agreements. The Company's other raw materials are sourced from multiple vendors and the Company believes additional supply sources exist for all these raw materials. The Company has the right to sell Coca-Cola's products pursuant to bottling or other similar agreements described below, which may have a material effect on the Company's financial statements in the case of non-compliance by the Company or non-performance by Coca-Cola. In the event of a problem with the quality of a beverage, Coca-Cola may require the Company to take all necessary measures to withdraw the beverage from the market. Coca-Cola must also approve the types of container used in bottling and controls the design and decoration of the bottles, boxes, cartons, stamps and other materials used in production. The agreements grant Coca-Cola the right to inspect the products. Coca-Cola charges the Company a fixed price for concentrates, which may change from time to time at the discretion of Coca-Cola. Coca-Cola currently charges the Company a percentage of the weighted average wholesale price (net of taxes) of each case sold to retailers within each of the Company's franchise territories. The Company pays no additional compensation to Coca-Cola under the licenses for the use of the associated F-39 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) trade names and trademarks. Subject to local law, Coca-Cola has the right to limit the wholesale prices of its products. As it has in the past, Coca-Cola may, in its discretion, contribute to the Company's advertising and marketing expenditures as well as undertake independent advertising and marketing activities. Coca-Cola has routinely established annual budgets with the Company for cooperative advertising and promotion programs. Tax Credits The Brazilian subsidiaries are being assessed by the Brazilian tax authorities for tax credits taken during 1995 and 1996, relating to overpayments of the value-added tax in previous years. Such overpayments related to value-added tax applied to samples, free products given to customers and to credit sales. These assessments amount to approximately $24.7 million and $37.2 million as of December 31, 2002 and 2001, respectively, and the Company has appealed the assessments at the administrative level. The Company and its outside legal advisors believe that in view of the legal basis adopted for the use of such credits, no significant liability should result from this issue and therefore no provision for this matter has been recorded in the accompanying consolidated financial statements. Other Contingencies During May 2000, the Comision Federal de Competencia in Mexico (the Mexican Antitrust Commission, the "Commission") pursuant to a complaint filed by PepsiCo, Inc. and certain of its bottlers in Mexico, initiated an investigation of the sales practices of Coca-Cola and its bottlers. In November 2000, in a preliminary decision and in February 2002, through a final resolution, the Mexican Antitrust Commission held that Coca-Cola and its bottlers engaged in monopolistic practices with respect to exclusivity arrangements with certain retailers. The Mexican Antitrust Commission did not impose any fines, but ordered Coca-Cola and its bottlers, including certain Mexican subsidiaries of the Company, to abstain from entering into any exclusivity arrangement with retailers. The Company, along with other Coca-Cola bottlers, appealed the resolution rendered in February of 2002 by a Recurso de Revision ("Review Recourse"), which was presented before the Mexican Antitrust Commission. The Mexican Antitrust Commission confirmed its original resolution and issued a confirmatory resolution on July 11, 2002. The Company appealed this resolution before the competent courts by initiating a Juicio de Amparo (appeal based on the violation of constitutional rights). The Company anticipates that a decision from the appeals court could be rendered by the end of 2003. Although no assurances can be given, the Company does not believe that the outcome of this matter, even if determined against the Company, will have a material adverse effect on its financial condition or results of operations. During August 2001, the Comision para Promover la Competencia in Costa Rica (the "Costa Rican Antitrust Commission") pursuant to a similar complaint filed by PepsiCo, Inc. and its bottler in Costa Rica initiated an investigation on the sales practices of Coca-Cola and Panamco Costa Rica for alleged monopolistic practices in the retail distribution channel including the gain of share of sales through exclusivity arrangements. Although no assurances can be given, the Company does not believe that the outcome of this matter, even if determined against the Company, will have a material adverse effect on its financial condition or results of operations. Panamco Costa Rica has vigorously defended itself throughout the process and presented its final conclusions to the Costa Rican Antitrust Commission in September 2002. The Company is anticipating a decision from the Costa Rican Antitrust Commission during the second quarter of 2003. In connection with the Venezuela Acquisition, in 1999 the Company received notice of certain tax claims asserted by the Venezuelan taxing authorities, which mostly relate to fiscal periods prior to the Venezuela Acquisition. The Company has presented the appropriate recourses against these claims at the administrative level as well as the court level, where required. These claims currently total approximately $23.1 million. The F-40 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) Company has certain rights to indemnification from Venbottling (a company owned by the Cisneros family) and Coca-Cola for a substantial portion of such claims. Based on the analysis that the Company has completed in relation to these claims, as well as the defense strategy that the Company has developed, the Company does not believe that the ultimate disposition of these cases will have a material adverse affect on its financial condition or results of operations. During 1999, a group of independent distributors of Panamco Venezuela commenced a proceeding to incorporate a union of distributors. As a result, these distributors may, among other things, individually demand certain labor and severance rights against Panamco Venezuela. Since the incorporation process began, Panamco Venezuela has vigorously opposed its formation through all available legal channels. In February 2000, Panamco Venezuela presented a nullity recourse against the union incorporation solicitation, as well as an injunction request before the Venezuelan Supreme Court. 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 and obtain from a court of law a determination that the members of such union are 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 such a court decision, although certain members of the union have threatened such action. The Company intends to vigorously defend its rights should this action be filed. During February 2002, the union filed a petition before the Venezuelan administrative agency in charge of labor matters attempting to obligate Panamco Venezuela to negotiate a collective bargaining agreement. In response, Panamco Venezuela filed a nullity recourse before the competent tribunal (the "Court") along with an injunction requesting the Court to suspend the collective bargaining negotiations until the nullity recourse is resolved. The Court granted the injunction in favor of Panamco Venezuela and admitted the nullity recourse. This injunction and nullity recourse was extended to a subsequent request by the union to have the Venezuelan labor administrative agency mediate the matter. In March 2002, a subcommittee of the Venezuelan congress conducted a hearing with representatives of the union as well as representatives of Panamco Venezuela. The subcommittee is currently reviewing the matter and a final recommendation from this political body is pending. Since 2001 (and after two decisions rendered during 2000 and 2001 by the Venezuelan Supreme Court against affiliates of Empresas Polar S.A., whereby the Supreme Court found in those individual cases that the relationship between the affiliates of Empresas Polar S.A. and those specific distributors was a relationship of labor nature and not of commercial nature), Panamco Venezuela has been the subject of numerous claims by former distributors (including former members of the distributors union) claiming alleged labor and severance rights owed to them at the time of the termination of their relationship with Panamco Venezuela. As of December 31, 2002, Panamco Venezuela was the subject of approximately 430 lawsuits filed by former distributors for a total amount of approximately $31.2 million. Notwithstanding the number of claims and the amounts involved most of these claims have been filed by former distributors that either have entered into release agreements with Panamco Venezuela at the time of their termination and therefore the Company believes that they have no rights for additional claims, or are claims that have been filed after the statute of limitations for the presentment of such claims has expired. There are also lawsuits presented by people that have never had a distributor's or employee relationship with Panamco Venezuela, which the Company believe have no merit at all. Since the decisions rendered by the Supreme Court during 2000 and 2001 against the affiliates of Empresas Polar S.A., the Supreme Court has during 2002 mitigated its criteria of what should be considered a labor relationship vis-a-vis a commercial relationship. The Company believes based on the new decisions rendered by the Supreme Court as well as based on the individual analysis of each individual claim, that these claims are without merits and intends to vigorously defend itself against them. F-41 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) During 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 our subsidiaries) and Coca-Cola (and certain of its subsidiaries). In the complaint, the plaintiffs alleged that the Company 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. The Company has filed a motion to dismiss the complaint for lack of subject matter and personal jurisdiction. The Company expects a ruling on the motion to dismiss in 2003. The Company believes this lawsuit is without merit and intends to vigorously defend itself in this matter. Other legal proceedings are pending against or involve the Company and its subsidiaries, which are incidental to the conduct of their businesses. The Company believes that the ultimate disposition of such other proceedings will not have a material adverse effect on its consolidated financial condition. (17) LEASES The Company leases buildings, machinery and equipment, vehicles, and office equipment throughout its operations under both operating and capital leases that expire between 2003 and 2007. The following are the minimum lease payments for each of the years indicated applicable to capital and noncancellable operating leases as of December 31, 2002: CAPITAL OPERATING ------------- ----------- Fiscal year: 2003 $ 990 $ 4,639 2004 1,079 3,390 2005 1,175 3,122 2006 - 2,380 2007 - 1,879 ---------- -------- Total minimum lease payments 3,244 $ 15,410 ======== Amount representing interest 108 ---------- Present value of minimum lease payments $ 3,136 ========== Rental expense for all operating leases charged against earnings amounted approximately to $7.2 million, $9.7 million, and $13.5 million in 2002, 2001, and 2000, respectively, and is included within the general and administrative expense in the consolidated statements of operations. During 2002, the Company terminated operating leases, primarily related to equipment used by the Company's NOLAD subsidiaries. The Company paid approximately $23.0 million related to the termination of the lease agreements. F-42 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) (18) COMPENSATION PLANS Cash Bonus Plan The Company has adopted a short-term incentive plan (the "Annual Incentive Plan"), pursuant to which key executives of the Company and subsidiaries may receive bonus compensation based on Company performance, as determined by the Compensation Committee of the Board of Directors (the "Committee"). Under the 2002 Annual Incentive Plan, each participant is assigned a target award expressed as a percentage of base salary in varying amounts (which do not exceed 60% of base salary). The actual award is based on Company performance, and may vary from 0% to 300% of the target award, on the basis of the relationship between actual performance of the participant's "Economic Unit" (that is, the Company, Panamco Mexico, Panamco Colombia, Panamco Brazil, Panamco Venezuela, Panamco Costa Rica, Panamco Nicaragua and Panamco Guatemala) and projected performance. For purposes of evaluating Economic Unit performance, the Committee compares actual revenues, cash operating profit, net income, and free cash flow to projected amounts, subject to adjustments made by the Committee as permitted by the Annual Incentive Plan. Change in Control Plans The Company has adopted a Key Executive and a Key Employee Retention, Severance and Non-Competition Plan (the "Change in Control Plans"), which provide benefits to designated employees of the Company. The Change in Control Plans provide that in the event a participating employee's employment with the Company is terminated without cause or as a result of an Involuntary Termination (which generally includes a termination of the employee's employment with the Company without cause or by the executive as a result of certain changes in the executive's duties, principal place of employment or salary and bonus opportunity), within the period that commences 90 days prior to (a) the occurrence of a change in control of the Company or (b) any public announcement of the intention to undertake a transaction that if completed would result in a change of control, and terminates upon the expiration of no more than three years following the date of such change in control, the participating executive officer or employee will be entitled to receive certain benefits including a cash severance payment, continued insurance coverage and payment of accrued salary and vacation pay earned through the date of termination of employment, and relocation expenses of $25,000 for expatriate executives. In addition, participants in the Change of Control Plans will receive a pro rated bonus at the time of the change of control. The proposed merger transaction with Coca-Cola FEMSA (see Note 2) will result in a change of control under the Change of Control Plans. Employee Profit Sharing Mexican, Brazilian and Venezuelan laws require that the Company make payments to employees relating to profit sharing. Profit sharing payments are treated as compensation expense and are reflected in the appropriate captions in the accompanying consolidated statements of operations. The employee profit sharing expense was $15.1 million, $36.5 million and $33.2 million for the years ended December 31, 2002, 2001 and 2000, respectively. F-43 Stock Option Plans At December 31, 2002, the Company had two stock option plans. The Annual Incentive Plan (the "Employee Plan") has a maximum of 14,200,000 shares of Class A Common Stock available for stock option and restricted stock grants. Under this plan, the options vest over a five-year period for the options granted through 1996 and over a three-year period for options granted beginning in 1997. The Company also has a Stock Option Plan for Nonemployee Directors (the "Directors Plan"), which was implemented to attract and retain the services of experienced and knowledgeable nonemployee directors and nonemployee members of the advisory board of the Company. The Directors Plan provides each nonemployee director and each nonemployee advisory board member with an option to purchase a specified number of shares of Class A Common Stock. A total of 190,000 shares of Class A Common Stock is available for grants under the Directors Plan, which is administered by the Board of Directors or a subcommittee thereof. The Board of Directors has the discretion to amend, terminate or suspend the Directors Plan at any time. Under the Directors Plan, the options vest over a four-year period for the options granted until 1996 and over a three-year period for the options granted beginning in 1997. As of December 31, 2002, no options have been exercised or cancelled under the Directors Plan and 162,369 remain outstanding. There were 6,760,870 shares of common stock reserved for future grants as of December 31, 2002 under all stock option plans. On November 10, 2000, when the closing price of the Class A Common Stock on the New York Stock Exchange was $14.25 per share, the Company granted 600,000 options to certain executive officers, outside the Employee Plan, at an exercise price of $14.25 per share. These options vested 50% upon issuance and 50% after one year. Since the grant of the stock options was at an exercise price equal to that of the quoted market price on the date of the grant, no compensation expense was recorded by the Company related to these options. Restricted Stock Grant On November 10, 2000, when the closing price of the Class A Common Stock on the New York Stock Exchange was $14.25 per share, the Company granted 700,000 shares of restricted stock to certain executive officers. The terms of the restricted stock, as amended, are as follows: one-third of the shares shall vest in the event that the share price equals or exceeds the grant date share price by $5.00 or more on or before the second anniversary of the grant date; two-thirds of the shares (reduced by one-third if shares already vested) shall vest if the share price exceeds the grant date share price by $10.00 or more on or before the fifth anniversary of the grant date; and all the unvested shares shall vest in the event that the share price equals or exceeds the grant date share price by $15.00 or more on or before the sixth anniversary of the grant date. The holders are entitled to dividends on the entire amount of the restricted stock. During the second quarter of 2001, the Company issued 700,000 shares and retained possession of the shares subject to meeting the vesting requirements. During July 2001, one-third of the shares became vested and the Company delivered the vested shares to the executive officers and recognized compensation expense of $4.5 million associated with the vesting of one-third of the shares. Due to the uncertainty of the future market price of the stock, management cannot make a reasonable estimate as to what the compensation expense, associated with the vesting of two-thirds of the shares, may be or if the remaining restricted stock will vest. F-44 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) Stock Option Activity A summary of option transactions is presented below:
2002 2001 2000 ------------------------------- -------------------------------- -------------------------------- OPTIONS WEIGHTED OPTIONS WEIGHTED OPTIONS WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE PRICE PRICE PRICE ------------------------------- -------------------------------- -------------------------------- Outstanding on January 1, 7,354,002 $ 17.70 7,003,224 $ 17.82 5,463,414 $ 19.00 Granted 1,553,348 10.45 1,039,295 16.31 1,750,110 14.54 Exercised (1,361,199) 15.87 (336,580) 14.23 (25,000) 16.20 Forfeited (1,457,502) 19.94 (351,937) 19.26 (185,300) 21.89 ----------- ---------- ---------- Outstanding on December 31, 6,088,649 $ 15.79 7,354,002 $ 17.70 7,003,224 $ 17.82 ========= ========== ========== Options exercisable at end of year 3,766,525 $ 17.95 5,139,626 $ 18.59 4,041,840 $ 19.06 ========= ========== ========== Nonvested stock at end of year 466,667 $ 14.25 466,667 $ 14.25 700,000 $ 14.25 ========= ========== ==========
The following table sets forth certain information relating to outstanding and exercisable stock options at December 31, 2002:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------------------- ---------------------------------------- NUMBER WEIGHTED AVERAGE OUTSTANDING AT WEIGHTED REMAINING NUMBER WEIGHTED DECEMBER 31, AVERAGE CONTRACTUAL LIFE OUTSTANDING AT AVERAGE 2002 EXERCISE PRICE (IN YEARS) DECEMBER 31, 2002 EXERCISE PRICE ---------------------------------------------------------------- ---------------------------------------- $8.86 to $11.85 1,238,348 $ 8.91 10.0 - $ - $11.86 to $15.00 1,614,444 14.46 7.3 1,307,763 14.39 $15.01 to $20.00 2,007,703 16.29 7.8 1,236,608 16.08 $20.01 to $25.00 917,210 21.51 5.7 911,210 21.52 $25.01 to $29.94 310,944 29.94 5.0 310,944 29.94 ---------- --------- 6,088,649 $ 15.79 5.6 3,766,525 $ 17.95 ========== =========
F-45 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) The weighted-average fair value at date of grant for stock options granted during 2002, 2001 and 2000 was $4.13, $6.57, and $6.69, respectively, and was estimated using the Black-Scholes option valuation model with the following weighted-average assumptions: DECEMBER 31, -------------------------------------------- 2002 2001 2000 --------- --------- ------------ Risk-free interest rate 3.58% 3.90% 5.78% Dividend yield 2.49% 1.40% 1.30% Expected volatility 47.6% 40.5% 42.0% Expected option term lives 6.1 years 6.4 years 6.7 years The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including expected stock price volatility. The Company's stock-based compensation arrangements have characteristics significantly different from those of traded options, and changes in the subjective input assumptions used in valuation models can materially affect the fair value estimate. As a result, the existing models may not necessarily provide a reliable measure of the fair value of its stock-based compensation. (19) CAPITAL AND OTHER TRANSACTIONS At the time of the signing of the Agreement (mentioned in Note 1), and in connection with the acquisition of the Costa Rican franchise in 1995, Export acquired additional shares of Class A and B Common Stock and 2 shares of a new Series C Preferred Stock ("Series C Shares") of the Company. The holder of the Series C Shares (the "Holder") is not entitled to receive any dividends with respect to the Series C Shares and is only entitled to a preference on the liquidation, dissolution or winding up of the Company of $1.00 in total. Pursuant to the Certificate of Designation for the Series C Shares, the Company has agreed with the Holder not to take certain actions without the approval of the Holder, including, but not limited to: (i) certain consolidations, mergers and sales of substantially all of the Company's assets; (ii) any acquisition or sale of a business (or an equity interest therein) if the purchase price or sales price thereof, as the case may be, exceeds a material amount (as defined therein); (iii) entry into any new significant line of business or termination of any existing significant line of business; (iv) certain capital expenditures and acquisitions and dispositions of property and equipment; (v) certain transactions with affiliates (as defined); (vi) certain changes in the Company's policy with respect to dividends or distributions to shareholders and (vii) certain changes to the Company's Articles or By-laws. These rights are subject to certain exceptions and qualifications and may be suspended or terminated in certain circumstances. At December 31, 2001, the Company had completed the $100.0 million share repurchase program adopted in 1999, increased to a total of $150.0 million by two $25.0 million supplements in 2001 (the "1999 Share Repurchase Program"). In 2002, the Company adopted a new program (the "2002 Share Repurchase Program") to repurchase up to $40.0 million of the Company Class A Common Stock. During 2002, the Company repurchased 2,466,532 shares amounting to $36.8 million (including brokerage commissions). The Company applies the cost method to account for the repurchase of its shares. Under this method, the Company repurchases its shares and records them as treasury stock at the cost of the acquired shares. If reissuance of the repurchased shares occurs for other than stock option exercises, the reissuance is accounted for at the fair value of the shares, with a corresponding decrease to the treasury stock account based on the weighted average cost. The difference between the fair value of the shares and its weighted average cost is recorded as an adjustment to capital in F-46 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) excess of par value. For stock option exercises, the difference between the exercise price and the weighted average cost is recorded as an adjustment to capital in excess of par value. In general, with the exception of voting rights and certain conversion rights, the Class A Common Stock and the Class B Common Stock have the same rights and privileges. Each share of Class B Common Stock entitles the holder to one vote on all matters as to which the shareholders are entitled to vote. The Class A Common Stock is non-voting and does not entitle the holder thereof to vote on any matter. The Company declared cash dividends of $0.24 per share of common stock for each of the years ended December 31, 2002, 2001, and 2000. (20) RETAINED EARNINGS Certain of the Company's subsidiaries are required by law to appropriate a portion of their annual net income to legal provisions until such allowances equal prescribed percentages of outstanding capital stock. These legal allowances, which aggregated $31.6 million and $39.2 million at December 31, 2002 and 2001, respectively, are generally not available for distributions to shareholders until the liquidation of the individual companies, except in the form of stock dividends in the Mexican subsidiaries. The Brazilian companies' statutes require minimum dividend distributions representing 25% of net income (after deducting reserves provided by law or by the shareholders) for the year. This dividend requirement may be waived by the unanimous vote of shareholders at a meeting where a quorum (consisting of the holders of a majority of the shares) is present. Brazil imposes a withholding tax of 15% on dividends paid by domestic subsidiaries to the Company that are derived from earnings generated prior to January 1, 1996. At December 31, 2002, accumulated undistributed retained earnings subject to withholding taxes of foreign subsidiaries in Colombia and Costa Rica, amounted to approximately $67.9 million and $76.2 million, respectively. No provision for withholding tax is made on foreign earnings because they are considered by management to be permanently invested in those subsidiaries and, under current tax laws, are not subject to such taxes until distributed as dividends. If the earnings were not considered permanently invested, approximately $4.8 million and $11.4 million of deferred taxes would have been provided for subsidiaries in Colombia and Costa Rica, respectively, at December 31, 2002. The tax amounts were calculated using the current withholding tax rate of 7% for Colombia and 15% for Costa Rica. Effective January 1, 2002, dividends corresponding to untaxed profits became subject to withholding taxes in Venezuela; however, during 2002, the Company did not declare any dividends in Venezuela. As of December 31, 2002, no withholding taxes are generally paid for distribution of earnings in Nicaragua or Guatemala. Dividends from earnings generated until 1998 are not subject to income taxes in Mexico, as long as they are paid from "net taxed income" (UFIN). Dividends not paid from UFIN are subject to a 35% income tax. During 2000 and 2001, dividends paid to individuals or foreign residents were subject to income tax withholding at an effective tax rate of approximately 7.7%. As of December 31, 2001, the income tax withholding rate of approximately 7.7% in Mexico was eliminated. F-47 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) (21) OTHER INCOME (EXPENSE), NET Other income (expense), net for the three years ended December 31, 2002, 2001 and 2000 is as follows:
DECEMBER 31, ---------------------------------------------------- 2002 2001 2000 --------- ---------- ----------- Reduction of (provision for) contingency accrual $ 817 $ (522) $ - Exchange gain (loss), net 2,750 (9,272) (8,217) Gain (loss) on sale of property and equipment and investments (193) 2,047 (3,642) Equity in earnings (losses) of unconsolidated companies, net (290) 516 (1,189) Capital expenditure incentives 2,207 2,637 1,886 Operating loss from non-bottling subsidiaries (870) (2,333) (741) Gain on sale of Kaiser (see Note 7) 48,623 - - Nonoperating charges (see Note 3) (8,801) (874) (5,977) Other income 2,583 9,898 - Other charges (10,474) (12,988) (5,364) ---------- ----------- -------------- Other income (expense), net $ 36,352 $ (10,891) $ (23,244) ========== =========== ==============
The Company maintains an interest in certain subsidiaries, which assist in the production of materials and assets used in the Company's operations. These subsidiaries have minimal operations related to third parties. The operating results of these subsidiaries are included in "operating loss from non-bottling subsidiaries" within other income (expense) in the Company's consolidated statement of operations. The detail of Nonoperating charges for the three years ended December 31, 2002, 2001 and 2000, respectively, consist of the following:
DECEMBER 31, ---------------------------------------------- 2002 2001 2000 ----------- ---------- ----------- Loss on sale of corporate airplane $ (3,000) $ - $ - Loss on disposal of investments (1,378) - - Loss on disposal of nonoperating assets (4,423) - (5,977) Other nonoperating charges - (874) - ---------- ---------- ---------- Total nonoperating charges $ (8,801) $ (874) $ (5,977) ========== ========== ==========
During 2002, the Company reclassified $8.4 million recorded in 2000 related to certain contingency accruals from other income (expense) to operating expenses. This reclassification in 2000 consists of $5.9 million to general and administrative expenses and $2.5 million to depreciation and amortization expenses. F-48 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars) (22) SEGMENTS AND RELATED INFORMATION The Company operates in the bottling and distribution industries and in markets throughout Latin America. The basis for determining the Company's operating segments is the manner in which financial information is used by the Company in its operations. Management operates and organizes itself according to business units, which comprise the Company's products across geographic locations. The Company's Corporate entity engages in various transactions, including but not limited to debt agreements and, at times, derivative transactions, which may generate gains or losses. These amounts are included as a separate reportable segment entitled "Corporate" and are not allocated to the Company's other reportable segments as the Company evaluates the performance of its Corporate entity on a stand-alone basis and the Company believes the allocation of these expenses to the remaining operating segments would result in a misleading presentation of the Company's segment performance. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Long-lived assets constitute total assets less current assets less long-term deferred income taxes less long-term receivables from affiliated companies. Relevant information concerning the geographic areas in which the Company operates in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," is as follows:
2002 ELIMINA- NOLAD COLOMBIA VENEZUELA BRAZIL CORPORATE TIONS TOTAL Net sales $ 1,298,856 $ 367,098 $ 324,948 $ 367,011 $ - $ - $ 2,357,913 =========== ========== ======== ========== ============= ============== =========== Operating income (loss) 205,245 19,814 (113,140) 14,097 96,137 (90,948) 131,205 =========== ========== ======== ========== ============= ============== =========== Interest income 3,682 619 1,383 2,545 473 (1,708) 6,994 =========== ========== ======== ========== ============= ============== =========== Interest expense (26,833) (8,699) (8,058) (3,430) (40,000) 1,708 (85,312) =========== ========== ======== ========== ============= ============== =========== Other income (expense), net 4,809 (3,011) (2,914) 47,633 (10,165) - 36,352 =========== ========== ======== ========== ============= ============== =========== Depreciation and amortization 80,297 49,696 93,098 13,559 486 (1,931) 235,205 =========== ========== ======== ========== ============= ============== =========== Capital expenditures 84,196 8,708 13,150 6.477 - - 112,531 =========== ========== ======== ========== ============= ============== =========== Long-lived assets 656,412 226,137 248,917 111,896 1,713,752 (1,010,063) 1,947,051 =========== ========== ======== ========== ============= ============== =========== Total assets 861,777 386,883 296,635 249,898 1,865,031 (1,332,619) 2,327,605 =========== ========== ======== ========== ============= ============== =========== GOODWILL ------------------------------------------------------------------------------------------------------- Balance as of January 1, 2002 $ 72,249 $ 827 $ - $ 57,579 $ 738,401 $ - $ 869,056 Goodwill acquired during the year - - - - - - - Impairment losses - - - - - - - Goodwill amortized during the year - - - - - - - Goodwill written off related to sale of business unit - - - - - - - Translation adjustments (8,421) (166) - (23,812) - - (32,399) ----------- ---------- -------- ---------- ------------ ------------ ----------- Balance as of December 31, 2002 $ 63,828 $ 661 $ - $ 33,767 $ 738,401 $ - $ 836,657 =========== ========== ======== ========== ============= ============== ===========
F-49
2001 --------------------------------------------------------------------------------------------------- ELIMINA- NOLAD COLOMBIA VENEZUELA BRAZIL CORPORATE TIONS TOTAL Net sales $ 1,283,824 $ 381,468 $ 554,679 $ 410,801 $ - $ - $ 2,630,772 =========== ========== ======== ========== ============= ============== =========== Operating income (loss) 225,828 24,838 37,271 11,950 217,636 (234,325) 283,198 =========== ========== ======== ========== ============= ============== =========== Interest income 8,367 2,287 160 4,115 8,181 (1,769) 21,341 =========== ========== ======== ========== ============= ============== =========== Interest expense (20,532) (13,084) (17,586) (11,794) (58,163) 1,769 (119,390) =========== ========== ======== ========== ============= ============== =========== Other income (expense), net (694) 1,410 6,317 (3,282) (14,642) - (10,891) =========== ========== ======== ========== ============= ============== =========== Depreciation and amortization 79,634 56,404 61,184 19,913 21,898 (1,950) 237,083 =========== ========== ======== ========== ============= ============== =========== Capital expenditures 59,044 8,274 9,808 5,965 30 - 83,121 =========== ========== ======== ========== ============= ============== =========== Long-lived assets 690,519 325,040 348,294 188,932 1,650,240 (1,005,377) 2,197,648 =========== ========== ======== ========== ============= ============== =========== Total assets 881,118 484,326 428,717 352,598 1,759,217 (1,212,950) 2,693,026 =========== ========== ======== ========== ============= ============== =========== GOODWILL --------------------------------------------------------------------------------------------------- Balance as of January 1, 2001 $ 71,632 $ 1,102 $ - $ 70,988 $ 759,961 $ - $ 903,683 Goodwill acquired during the year - - - - - - - Impairment losses - - - - - - - Goodwill amortized during the year (2,394) (275) - (2,187) (21,560) - (26,416) Goodwill written off related to sale of business unit - - - - - - - Translation adjustments 3,011 - - (11,222) - - (8,211) ----------- ---------- -------- ---------- ------------ ------------ ----------- Balance as of December 31, 2001 $ 72,249 $ 827 $ - $ 57,579 $ 738,401 $ - $ 869,056 =========== ========== ======== ========== ============= ============== ===========
F-50 PANAMERICAN BEVERAGES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Balances in the tables are stated in thousands of U.S. dollars)
2000 ---------------------------------------------------------------------------------------------------- ELIMINA- NOLAD COLOMBIA VENEZUELA BRAZIL CORPORATE TIONS TOTAL Net sales $ 1,195,822 $ 383,768 $ 514,227 $ 496,488 $ - $ - $ 2,590,305 =========== ========== ========== ========== ============== ============== ============= Operating income (loss) 142,688 (23,022) (67,911) (6,943) (289,478) (102,640) (347,306) =========== ========== ========== ========== ============== ============== ============= Interest income 11,394 3,135 3 1,572 18,971 (3,142) 31,933 =========== ========== ========== ========== ============== ============== ============= Interest expense (24,484) (7,621) (24,819) (13,810) (74,707) 3,142 (142,299) =========== ========== ========== ========== ============== ============== ============= Other income (expense), net (1,628) (8,374) 2,840 (12,463) (3,619) - (23,244) =========== ========== ========== ========== ============== ============== ============= Depreciation and amortization 88,988 67,075 96,804 30,246 31,517 (2,287) 312,343 =========== ========== ========== ========== ============== ============== ============= Capital expenditures 74,659 9,104 30,408 7,596 2,130 - 123,897 =========== ========== ========== ========== ============== ============== ============= Long-lived assets 621,338 360,676 393,012 245,802 1,782,534 (942,159) 2,461,203 =========== ========== ========== ========== ============== ============== ============= Total assets 809,909 459,409 469,278 424,806 1,870,162 (1,007,243) 3,026,321 =========== ========== ========== ========== ============== ============== =============
As of December 31, 2002 and 2001, the Company does not hold any identifiable intangible assets as all previously acquired intangible assets were classified as goodwill. (23) QUARTERLY INFORMATION (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 JUNE 30, 2002 SEPTEMBER 30, 2002 DECEMBER 31, 2002 ----------------- --------------- -------------------- --------------------- Net sales $ 624,349 $ 623,434 $ 563,665 $ 546,465 ========= ========= =========== ========= Gross profit $ 314,961 $ 314,980 $ 268,465 $ 255,291 ========= ========= =========== ========= Net income (loss) $ 68,182 $ 32,205 $ (84,697) $ 17,552 ========= ========= =========== ========= Basic earnings (loss) per share $ 0.56 $ 0.27 $ (0.71) $ 0.15 ========= ========= ========== ========= Diluted earnings (loss) per share $ 0.56 $ 0.26 $ (0.71) $ 0.15 ========= ========= ========== ========= FOR THE THREE MONTHS ENDED MARCH 31, 2001 JUNE 30, 2001 SEPTEMBER 30, 2001 DECEMBER 31, 2001 ----------------- --------------- -------------------- --------------------- Net sales $ 644,845 $ 666,163 $ 633,271 $ 686,493 ========= ========= =========== ========= Gross profit $ 328,582 $ 347,963 $ 323,611 $ 334,309 ========= ========= =========== ========= Net income (loss) $ 21,321 $ 40,242 $ 30,110 $ 26,351 ========= ========= =========== ========= Basic earnings (loss) per share $ 0.17 $ 0.32 $ 0.24 $ 0.22 ========= ========= =========== ========= Diluted earnings (loss) per share $ 0.16 $ 0.31 $ 0.24 $ 0.21 ========= ========= =========== =========
During 2002, the Company recorded certain facilities reorganization and other charges, (See Note 3), of which the majority were recorded during the three months ended September 30, 2002. F-51 THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP WHICH CEASED OPERATIONS, AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. NO CHANGES WERE MADE TO THE 2001 AND 2000 FINANCIAL STATEMENT SCHEDULE EXCEPT FOR THE DISCLOSURE OF THE "ALLOWANCE FOR LOSSES RELATED TO COOLERS PLACED IN MARKET" AND THE EXCLUSION OF THE "ALLOWANCE FOR OBSOLETE AND SLOW-MOVING INVENTORY". REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE To Panamerican Beverages, Inc.: We have audited in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements included in the Panamerican Beverages, Inc. (the "Company") annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 5, 2002 (except with respect to the matters discussed in Note 23, as to which the date is March 18, 2002). Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The Financial Statement Schedule II listed in Item 14 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This financial statement schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Miami, Florida, February 5, 2002. F-52 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS The following is an analysis of the valuation and qualifying accounts for the three years ended December 31, 2002, 2001 and 2000:
ADDITIONS ------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER DEDUCTIONS- BALANCE AT DESCRIPTION OF YEAR EXPENSES ACCOUNTS APPLICATIONS END OF YEAR ----------- ------------ ------------ ------------ ---------------- --------------- 2002: Allowance for doubtful accounts $ 8,437 (719) 522 959 $ 7,281 Allowance for restructuring $ 12,526 35,421 - 44,254 $ 3,693 Allowance for losses related to coolers placed in market $ 16,833 6,489 (2,200) 3,435 $ 17,687 2001: Allowance for doubtful accounts $ 9,874 718 (499) 1,656 $ 8,437 Allowance for restructuring $ 55,631 - - 43,105 $ 12,526 Allowance for losses related to coolers placed in market $ 13,855 6,569 (532) 3,059 $ 16,833 2000: Allowance for doubtful accounts $ 11,534 585 861 3,106 $ 9,874 Allowance for restructuring $ - 503,659 - 448,028 $ 55,631 Allowance for losses related to coolers placed in market $ 2,700 14,983 3,379 7,207 $ 13,855
F-53 EX-3.4 3 ex3_4.txt CERTIFICATE OF DESIGNATION -- SERIES D PREF STOCK EXHIBIT 3.4 CERTIFICATE OF DESIGNATIONS OF THE SERIES D PREFERRED STOCK OF PANAMERICAN BEVERAGES, INC. Carlos Hernandez-Artigas, Secretary of Panamerican Beverages, Inc., a corporation organized and existing under the laws of Panama (the "Company"), HEREBY CERTIFIES: 1. That a meeting of the Board of Directors of the Company was duly called and held on December 20, 2002, by telephone conference originated from Miami, Florida, U.S.A. pursuant to Article III, Section 9, of the By-Laws. 2. That present at the meeting were a majority of the directors, to wit: Gustavo Cisneros, Oswaldo Cisneros, Craig Jung, Wade Mitchell, James Postl, Woods W. Staton and Houston Staton, with Luiz Furlan acting by proxy, so that the proper quorum was obtained and voted throughout. 3. That pursuant to Article III, Section 11, of the By-Laws, Woods W. Staton, Chairman of the Board, chaired the meeting, and the undersigned kept the minutes. 4. That at said meeting, after extensive discussion and pursuant to and in accordance with the Stockholders Agreement, to be executed and dated as of December 22, 2002, by and among the Company, Fomento Economico Mexicano, S.A. de C.V., Coca-Cola FEMSA, S.A. de C.V., Midtown Sub, Inc., The Coca-Cola Company, The Coca-Cola Export Corporation and Atlantic Industries, the following Resolution was adopted: RESOLVED, that pursuant to the authority vested in the Board of Directors (the "Board") of Panamerican Beverages, Inc., a Panamanian corporation (the "Company"), by Article 5 of the Restatement of Articles of Incorporation of the Company as of May 12, 2002, as amended (the "Articles of Incorporation"), the Board does hereby create, provide for and approve a series of Preferred Stock, par value U.S.$0.01 per share, of the Company to be designated "Series D Preferred Stock", consisting of 30,625,690 shares of the presently authorized but unissued shares of Preferred Stock, and that in connection therewith, and pursuant to the authority granted to the Board under Article 5 of the Articles of Incorporation, does hereby fix and herein state and express such designations, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof as follows (all terms used herein which are defined in the Articles of Incorporation and not otherwise defined herein shall have the meaning provided in said Articles of Incorporation): 2 ARTICLE I Designation and Amount The shares of such series shall be designated "Series D Preferred Stock" and the number of shares constituting such series shall be 30,625,690 (the "Series D Preferred Shares"), which number may not be increased by the Board of Directors without the prior approval of the Holders (as defined in Section 2.1). SECTION 2.1. Dividends and Distributions. The holders of the Series D Preferred Shares (together, the "Holders" and each, a "Holder") shall be entitled to such dividends and other distributions in cash, stock or property of the Company as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Company legally available therefor, provided, however, that in no event may the rate of any dividend payable on outstanding shares of any class of the Company's Common Stock be greater than the dividend rate payable on outstanding shares of the Series D Preferred Stock, or vice versa. All dividends and distributions on the Series D Preferred Stock payable in stock of the Company shall be made at the same dividend rate per share as determined by the Board of Directors of the Company (the "Board of Directors"). In no event will shares of any class of the Company's Common Stock or Series D Preferred Stock be split, divided or combined unless the other such class is also split, divided or combined at the same rate per share. SECTION 2.2. Liquidation Preference. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the Holders of the Series D Preferred Shares shall be entitled to receive out of the assets of the Company, whether such assets are stated capital or surplus of any nature, an amount equal to U.S.$0.00001 per share. Such payment shall be made before any payment shall be made or any assets distributed to the holders of shares of Common Stock or any other class or series of the Company's capital stock ranking junior as to liquidation rights to the Series D Preferred Shares. SECTION 3.1. Corporate Governance Rights. In addition to and independent of any approvals of the Board of Directors or of the holders of any other class or series of shares of the Company that may be required by the Articles of Incorporation of the Company or by applicable law, unless and until such action is approved by the Holders of the Series D Preferred Shares in the manner set forth herein, the Company shall not be authorized to take and shall not take any of the following actions (each such action being hereinafter referred to as an "Approval Item"): (a) any alteration, amendment or modification of this Certificate of Designations; or (b) any action, including without limitation any action with respect to the Company's Articles of Incorporation or by-laws, the effect of which would circumvent or adversely affect or be inconsistent with the rights, powers, privileges and preferences afforded to the Holders pursuant to this Certificate of Designations, including without limitation the approval rights granted to the Holders pursuant to this Section 3.1. If the approval of the Holders is required pursuant to any of the foregoing provisions, such approval shall be required notwithstanding the fact that such action is excepted from the requirement of such approval pursuant to any other such provision. The approval or disapproval 3 by the Holders of any Approval Item submitted to it shall be deemed given for all intents and purposes hereunder if and when written notice of such approval or disapproval is delivered by the Holders to the Company or its Board of Directors. SECTION 3.2. Voting Rights. The Holders shall have no voting rights except as provided by law. For purposes of any calculation of the percentage of the outstanding Voting Stock or the combined voting power of the outstanding Voting Stock under the terms of this Certificate of Designations, the Series D Preferred Shares shall not be deemed Voting Stock. ARTICLE II Rank Except as described in Section 2.2, the Series D Preferred Shares shall rank, as to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, pari passu with all of the Company's now or hereafter issued Common Stock. The term "Common Stock" shall mean the Class A Common Stock, par value U.S.$0.01 per share, and the Class B Common Stock, par value U.S.$0.01 per share, of the Company as the same exists at the date hereof or as such stock may be constituted from time to time. ARTICLE III Effects of Transfer; Restrictions on Transfer. The Series D Preferred Shares may not be Transferred (as hereinafter defined) to any person other than a KO Transferee (as hereinafter defined). In the event of a Transfer (as hereinafter defined) of the Series D Preferred Shares to any person other than a KO Transferee, or in the event that the Holders shall cease at any time to be a KO Transferee, as a result of any transfer of the capital stock of the Holders or any merger, consolidation or amalgamation or otherwise, each Series D Preferred Share shall automatically, without any further action on the part of the Company or the Holder, convert into one share of Class A Common Stock. Each Series D Preferred Share may be converted at any time at the option of the Holder into either one share of Class A Common Stock or one share of Class B Common Stock; provided, however, that the number of shares of Series D Preferred Stock that may be converted into shares of Class B Common Stock will be no more than 2,167,064. Such conversion may be effected by delivery by the Holders of the certificate therefor and written notice to such effect to the Company, and will be effective immediately upon delivery of such notice, at the office of the transfer agent for the Common Stock or at such other place as the Board of Directors may designate. For purposes of this paragraph, "Transfer" shall mean any sale, assignment, transfer, pledge, hypothecation, deposit in a voting trust or other disposition, directly or indirectly, of the Series D Preferred Shares or the rights of the Holders hereunder, and "Transferred" shall have a correlative meaning; provided, however, that the terms "Transfer" and "Transferred" shall not be deemed to include (a) any action taken pursuant to the Stockholders Agreement, (b) the granting of a power of attorney or proxy by the Holders to any officer, director or employee of the Holders or (c) any transfers of the Series D Preferred Stock which occur as a result of the transactions contemplated by the Merger Agreement. For purposes of this Article V, "KO Transferee" shall mean (x) The Coca-Cola Company ("TCCC") or (y) any corporation one-hundred percent (100%) of the capital stock of which (other than directors' qualifying shares or shares held by Persons to comply with local law) is owned, directly or indirectly, by TCCC (a "Wholly Owned TCCC Subsidiary"); provided, however, that if such Wholly Owned TCCC Subsidiary is a Person other 4 than the Holders, such Wholly Owned TCCC Subsidiary shall have agreed in writing to be bound by the provisions of the Stockholders Agreement. ARTICLE IV Defined Terms The following terms as used herein have the following respective meanings: "Affiliate" means, as to a specified person, any other person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. "Approval Item" has the meaning set forth in Section 3.1. "beneficial owner" has the meaning given to such term in Rule 13d-3 (as currently in effect) under the Exchange Act and the terms "beneficially own" and "beneficial ownership" shall have the correlative meanings. "Board of Directors" has the meaning set forth in Section 2.1. "Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Georgia, U.S.A., the State of New York, U.S.A., or Mexico City, Mexico are authorized or obligated by law or executive order to close. "capital stock of the Company" means all shares of Class A Common Stock, Class B Common Stock, Series C Preferred Stock and Series D Preferred Stock of the Company and all other Equity Securities of the Company. "Class A Common Stock" means the Company's Class A Common Stock, U.S.$0.01 par value per share. "Class B Common Stock" means the Company's Class B Common Stock, U.S.$0.01 par value per share. "Common Stock" has the meaning set forth in Article IV. "Company" means Panamerican Beverages, Inc., a corporation organized and existing under the laws of Panama. "Equity Security" has the meaning given to such term in Rule 3a11-1 (as currently in effect) under the Exchange Act. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Holder" or "Holders" has the meaning set forth in Section 2.1. 5 "KO Transferee" has the meaning set forth in Article V. "Merger Agreement" means the Agreement of Merger dated December 22, 2002, among the Company, Coca-Cola FEMSA, S.A. de C.V. and Midtown Sub, Inc. "Person" means any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Series D Preferred Shares" has the meaning set forth in Article I. "Securities Act" means the United States Securities Act of 1933, as amended. "Stockholders Agreement" means the Stockholders Agreement, dated as of December 22, 2002, by and among the Company, Fomento Economico Mexicano, S.A. de C.V., Coca-Cola FEMSA, S.A. de C.V., Midtown Sub, Inc., The Coca-Cola Company, The Coca-Cola Export Corporation and Atlantic Industries. "Subsidiary" with respect to any subject corporation means any other corporation the results of which are included in the consolidated financial statements of such subject corporation, and the term "Subsidiaries" has the correlative meaning. "TCCC" has the meaning set forth in Article V. "Transfer" has the meaning set forth in Article V. "Voting Stock" means any shares of capital stock of the Company the holder of which is ordinarily, in the absence of contingencies, entitled to vote in the election of directors of the Company. "Wholly Owned Subsidiary" means a subsidiary of the Company all the capital stock of which (other than directors' qualifying shares or shares held by Persons to comply with local laws) is owned by the Company or another Wholly Owned Subsidiary. "Wholly Owned TCCC Subsidiary" has the meaning set forth in Article V. ARTICLE V Notices. SECTION 7.1. Notice of Meetings. Notice of the record date for any meeting convened for the purpose of voting on any matter with respect to which the holders of any class of Common Stock have a voting right, and of any record date for any solicitation of consents of holders of any class of Common Stock, including a reasonable description of the matters on which a vote will be held, or for which consent will be sought, shall be provided to the Holders by the Company not more than sixty (60) or less than thirty (30) days prior to such record date, unless such notice requirement is waived in writing by the Holders. SECTION 7.2. Notices. Any notice, request, instruction or other document to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered 6 personally or by telecopy transmission or sent by any express mail or reputable overnight courier service, postage or fees pre-paid, if to the Company, Panamerican Beverages, Inc. c/o Panamco L.L.C. 701 Waterford Way, Suite 800 Miami, FL 33126 Attention: General Counsel Telephone No.: (305) 929-0800 Telecopy No.: (786) 388-8191 7 with copies to: Arias, Fabrega & Fabrega Plaza P.H. 2000 Building 50th Street (Box 6307) Panama 5, Republic of Panama Attention: Eduardo de Alba Telephone No.: (011) 507-205-7000 Telecopy No.: (011) 507-205-7001 Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Attention: Richard Hall Telephone No.: (212) 474-1000 Telecopy No.: (212) 474-3700 if to the Holders or TCCC to: The Coca-Cola Company One Coca-Cola Plaza, N.W. Atlanta, Georgia 30313 Attention: Chief Financial Officer Telephone No.: (404) 676-2121 Telecopy No.: (404) 676-8683 with a copy to: The Coca-Cola Company One Coca-Cola Plaza, N.W. Atlanta, Georgia 30313 Attention: General Counsel Telephone No.: (404) 676-2121 Telecopy No.: (404) 676-6792 or at such other address or number for a party as shall be specified by like notice. Any notice which is delivered personally or by telecopy transmission in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party. Any notice which is addressed and mailed in the manner herein provided shall be conclusively presumed to have been duly given to the party to which it is addressed at the close of business, local time of the recipient, on the second Business Day after the day it is so placed in the mail or given to such courier, or if earlier, the time of actual receipt. 8 ARTICLE VI Miscellaneous. SECTION 8.1. If a Series D Preferred Share is converted to a share of Class A Common Stock or Class B Common Stock pursuant to the provisions of Article V, such Series D Preferred Share shall thereupon be deemed automatically cancelled and it will cease immediately, without further action of any party, to give rise to any rights or preferences of the Series D Preferred Stock (but will instead have the rights and preferences of the Class A Common Stock or Class B Common Stock, as applicable). The holder of the Series D Preferred Shares shall nonetheless be obligated to surrender the corresponding share certificate to the Company, endorsed in its favor without restrictions or qualifications, but failure to surrender said share certificate as herein provided shall not affect the automatic cancellation of the share and the immediate termination of all rights and preferences appertaining to the Series D Preferred Shares as provided in Article V and herein. SECTION 8.2. The Series D Preferred Shares confers on the Holder thereof no other preemptive rights to unissued shares of capital stock of the Company (whether now or hereafter authorized) or securities of the Company convertible into or carrying a right to subscribe to or acquire shares of capital stock of the Company. SECTION 8.3. Each certificate representing the Series D Preferred Shares shall bear a legend in the following form, in addition to any legend ordinarily appearing on the certificates representing the shares of preferred stock of the Company: THE SHARE OF SERIES D PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE (THE "SERIES D PREFERRED SHARES") AND THE RIGHTS OF THE HOLDER OF THE SERIES D PREFERRED SHARES UNDER THE CERTIFICATE OF DESIGNATIONS MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, DEPOSITED IN A VOTING TRUST OR OTHERWISE DISPOSED, DIRECTLY OR INDIRECTLY (HEREINAFTER, "TRANSFERRED" OR A "TRANSFER"), TO ANY PERSON OTHER THAN (X) THE COCA-COLA COMPANY, A DELAWARE CORPORATION (HEREINAFTER, "TCCC"), OR (Y) ANY CORPORATION ONE-HUNDRED PERCENT (100%) OF THE CAPITAL STOCK OF WHICH (EXCEPT FOR DIRECTORS' QUALIFYING SHARES OR SHARES HELD BY PERSONS TO COMPLY WITH LOCAL LAW) IS OWNED, DIRECTLY OR INDIRECTLY, BY TCCC (COLLECTIVELY, A "KO TRANSFEREE"). IN THE EVENT OF A TRANSFER OF THE SERIES D PREFERRED SHARES TO ANY PERSON OTHER THAN A KO TRANSFEREE, OR IN THE EVENT THAT THE HOLDER SHALL CEASE TO BE A KO TRANSFEREE, AS A RESULT OF ANY TRANSFER OF THE CAPITAL STOCK OF THE HOLDER OR ANY MERGER, CONSOLIDATION OR AMALGAMATION OR OTHERWISE, EACH SERIES D PREFERRED SHARE SHALL AUTOMATICALLY, WITHOUT ANY FURTHER ACTION ON THE PART OF THE COMPANY OR THE HOLDER, CONVERT INTO ONE SHARE OF THE COMPANY'S CLASS A COMMON STOCK, PAR VALUE U.S.$0.01 PER SHARE. 9 IN ADDITION, THE TRANSFER OF THE SERIES D PREFERRED SHARES IS SUBJECT TO CERTAIN RESTRICTIONS CONTAINED IN THE AMENDED AND RESTATED INVESTMENT AGREEMENT DATED AS OF NOVEMBER 1, 1995 (THE "INVESTMENT AGREEMENT"), AS THE SAME MAY BE AMENDED FROM TIME TO TIME, BY AND AMONG THE COMPANY, TCCC AND THE COCA-COLA EXPORT CORPORATION, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY, AND AS FURTHER PROVIDED IN ARTICLE V OF THE CERTIFICATE OF DESIGNATIONS OF THE SERIES D PREFERRED STOCK, PAR VALUE U.S.$0.01 PER SHARE, OF THE COMPANY (THE "CERTIFICATE OF DESIGNATIONS") ISSUED BY THE COMPANY PURSUANT TO THE STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 22, 2002 (THE "STOCKHOLDERS AGREEMENT"), AS THE SAME MAY BE AMENDED FROM TIME TO TIME, BY AND AMONG THE COMPANY, FOMENTO ECONOMICO MEXICANO, S.A. DE C.V., COCA-COLA FEMSA, S.A. DE C.V., MIDTOWN SUB, INC., TCCC, THE COCA-COLA EXPORT CORPORATION AND ATLANTIC INDUSTRIES, WHICH CERTIFICATE OF DESIGNATIONS HAS BEEN REGISTERED AT THE PANAMA PUBLIC REGISTRY. THE SERIES D PREFERRED SHARES HAVE BEEN ISSUED IN CONNECTION WITH AND IN CONSIDERATION OF THE AGREEMENTS OF THE COCA-COLA EXPORT CORPORATION AND ATLANTIC INDUSTRIES SET FORTH IN THE STOCKHOLDERS AGREEMENT AND THE OTHER AGREEMENTS OF COCA-COLA EXPORT CORPORATION AND ATLANTIC INDUSTRIES IN THE CERTIFICATE OF DESIGNATIONS. THE SERIES D PREFERRED SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE SERIES D PREFERRED SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT. SECTION 8.4. The headings contained in this Certificate of Designations are for convenience and reference only and shall not affect in any way the meaning or interpretation of this Certificate of Designations. References to a section are, unless otherwise specified, to one of the sections of this Certificate of Designations. SECTION 8.5. Without intending to limit the remedies available to the Holders or the Company, the Holders and the Company have acknowledged and agreed that damages at law will be an insufficient remedy in the event either of them violates the terms of this Certificate of Designations or fails to perform any of its obligations hereunder, and each of them has further agreed that the other of them may apply for and obtain injunctive or other equitable relief in any court of competent jurisdiction to restrain the breach or threatened breach of, or otherwise specifically enforce, any of their agreements set forth in this Certificate of Designations. SECTION 8.6. This Certificate of Designations has been adopted by the Board of Directors pursuant to the Company's obligations under the Stockholders Agreement and the Merger Agreement. True copies of the Stockholders Agreement and the Merger Agreement are available for inspection at the administrative offices of the Company in Panama City located at the Edificio Torre Dresdner Bank, 7th Floor, 50th Street, Panama, Republic of Panama. 10 IN WITNESS WHEREOF, the Company has caused this Certificate to be signed by Carlos Hernandez-Artigas, its Secretary, this the 8th day of January, 2003. Panamerican Beverages, Inc. By /s/ Carlos Hernandez-Artigas ------------------------------- Name: Carlos Hernandez-Artigas Title: Secretary EX-10.44 4 ex10_44.txt EMPLOYMENT TERMINATION AGRT AND GENERAL RELEASE EXHIBIT 10.44 EMPLOYMENT TERMINATION AGREEMENT AND GENERAL RELEASE ----------------------------- WHEREAS MARIO GONZALEZ PADILLA ("MR. GONZALEZ") has been employed by PANAMCO LLC, a limited liability company organized under the laws of Delaware and d/b/a PANAMERICAN BEVERAGES COMPANY in Florida (hereinafter the "COMPANY") as Chief Financial Officer, and because the parties hereto desire to set forth their agreements with respect to the termination of MR. GONZALEZ's employment with the COMPANY pursuant to Section 5.4 of MR. GONZALEZ's Employment Agreement entered into on December 14, 2002, effective as of February 15, 2002 ("Employment Agreement"), MR. GONZALEZ and the COMPANY agree as follows: 1. MR. GONZALEZ's employment with the COMPANY is hereby terminated on October 7, 2002 pursuant to Section 5.4 of the Employment Agreement. 2. In consideration of the promises of the COMPANY set forth in paragraph 3 below, MR. GONZALEZ and his heirs, executors and administrators intending to be legally bound, hereby permanently and irrevocably terminates his employment with the COMPANY and releases and discharges the COMPANY and its parents, subsidiaries, affiliates, and its and their officers, directors, shareholders, employees, agents, successors, assigns, heirs, executors, and administrators, and any individual or organization related to the COMPANY and against whom or which MR. GONZALEZ could claim (hereinafter referred to collectively as the "COMPANY") from any and all causes of actions, suits, debts, claims and demands whatsoever, which he had, has, or may have against the COMPANY up until the date of his execution of this Agreement. Particularly, but without limitation, MR. GONZALEZ so releases any claims relating in any way to his employment or the termination of his employment relationship with the COMPANY, including any claims under any U.S. or Mexican federal, state or local laws, including the Florida Civil Rights Act of 1992, the Florida Private Whistleblower Act, the Miami-Dade County Equal Opportunity Ordinance, Title VII of the Civil Rights Act of 1964, as amended, the Americans With Disabilities Act, the Age Discrimination in Employment Act, as amended, the Family and Medical Leave Act, or any other labor or employment laws, any common law claims, such as actions in tort and contract, and all claims for counsel fees and costs. 3. In full consideration of MR. GONZALEZ's execution of this Employment Termination Agreement and General Release, and his agreement to be legally bound by its terms, the COMPANY will, on or after the eighth day after MR. GONZALEZ's execution of this Agreement, provide MR. GONZALEZ with the following consideration, to which he would not otherwise be entitled: A. Unpaid Base Salary Through Date of Termination. PANAMCO promises to pay MR. GONZALEZ his regular base salary described in the Employment Agreement, as it shall have been increased, up to and including his Termination Date. Said payment shall be made according to PANAMCO's normal payroll practices on or prior to October 15, 2002. B. Lump Sum Severance Payment. PANAMCO promises to pay MR. GONZALEZ the gross amount of Forty Two Thousand Four Hundred and Ninety Four Dollars and Sixty Eight Cents ($42,494.68), less any tax withholding required by applicable law or regulation which is the equivalent to one month of Base Salary in accordance with Section 5.4(iii)of the Employment Agreement notwithstanding the full year of service has not been completed, plus unused vacation (ten days) in accordance with Section 4.4 of the Employment Agreement Agreement plus a pro rata automobile allowance in accordance with Section 3.3 of the Employment Agreement. Such amount shall be paid in a single lump sum within 5 business days after the 7 day revocation period described in Section 15 herein expires. C. Prorated Incentive Compensation Bonus for Bonus Period During which the Termination Occurred. PANAMCO promises to pay MR. GONZALEZ the gross amount of One Hundred and Twenty Six Thousand Six Hundred and Sixty Six Dollars and Sixty Seven Cents ($126,666.67), less any tax withholding required by applicable law or regulation which is the equivalent to the amounts that would otherwise be due to him as the Chief Financial Officer under -2- Panamerican Beverages, Inc.'s 2002 Annual Incentive Plan (the "Incentive Plan") if he had remained as Chief Financial Officer through the end of the year, prorated based on the number of days of participation under the Incentive Plan. Both parties agree that said payment shall be determined in the manner and upon the terms and conditions set forth in the Incentive Plan as if the Target Award of 50% of MR. GONZALEZ's annual Base Salary has been met multiplied by 1x. Such amount shall be paid in a single lump sum within 5 business days after the 7 day revocation period described in Section 15 herein expires. D. Relocation to home country. Upon MR. GONZALEZ's presentation of appropriate documentation, reimburse MR. GONZALEZ for reasonable moving and related expenses incurred as a result of MR. GONZALEZ's relocation back to his home country within 60 days after the execution of this Agreement in an amount not to exceed $25,000.00. E. Reasonable Business Expense. In accordance with the provisions of Section 4.1 of the Employment Agreement, PANAMCO promises to reimburse MR. GONZALEZ for reasonable expenses paid or incurred by him in the course of and pursuant to the business of PANAMCO up to the Termination Date. Such reimbursement shall occur as soon as practicable after MR. GONZALEZ' Termination Date. F. Accrued But Unused Vacation Day Compensation. Included in the gross amount in paragraph 2 B. is the equivalent in cash of any unused vacation days available at the Termination Date. The payment under this paragraph is intended to compensate MR. GONZALEZ for any accrued but unused vacation days as of the Termination Date, as provided in Section 4.4 of the Employment Agreement. G. Benefit Programs. PANAMCO promises to continue to sponsor for MR. GONZALEZ the individual benefit programs described at Section 4.2 of the Employment Agreement for the earlier of (1) twelve (12) months following MR. GONZALEZ' Termination Date, or (2) the -3- date MR. GONZALEZ obtains a similar individual benefit through other employment. In the event that PANAMCO is unable to provide MR. GONZALEZ with any individual benefit described at Section 4.2 of the Employment Agreement by reason of the termination of MR. GONZALEZ's employment, PANAMCO promises to pay MR. GONZALEZ an amount of money equivalent to PANAMCO's cost of providing the benefit to MR. GONZALEZ. PANAMCO's good faith determination of that cost shall be binding and conclusive on MR. GONZALEZ. Except as set forth in this Agreement, it is expressly agreed and understood that the COMPANY does not have, and will not have, any obligation to provide MR. GONZALEZ at any time in the future with any payments, benefits or considerations other than those recited in this paragraph. MR. GONZALEZ understands and acknowledges that he would not receive some of the benefits provided pursuant to this Section 3 except for his execution of this Agreement, his waiver of claims against PANAMCO, and the fulfillment of the promises contained herein. The parties acknowledge that the performance of the promises of each are expressly contingent upon the fulfillment and satisfaction of the obligations of the other party as set forth in this Agreement. 4. MR. GONZALEZ hereby agrees and recognizes that his employment relationship with the COMPANY has been permanently and irrevocably severed and that the COMPANY has no obligation to re-employ him in the future and that his H-1 visa will no longer be effective as of the Termination Date. COMPANY has the obligation to report the foregoing to the Immigration and Naturalization Service ("INS") and MR. GONZALEZ has the obligation to change his immigration status as of the Termination Date. -4- 5. MR. GONZALEZ agrees and acknowledges that this agreement is not and shall not be construed to be an admission of any violation of any federal, state or local statute or regulation, or of any duty owed by the COMPANY. 6. MR. GONZALEZ agrees (on reasonable request by PANAMCO, at PANAMCO's sole expense, and subject to his other commitments and obligations) to cooperate with PANAMCO in effecting a smooth transition of the management of PANAMCO with respect to the duties and responsibilities which MR. GONZALEZ performed for PANAMCO as its Chief Financial Officer. MR. GONZALEZ agrees to make himself reasonably available (on reasonable request by PANAMCO, at PANAMCO's sole expense, and subject to his other commitments and obligations) regarding prior business arrangements, and regarding pending litigation or litigation which may arise in the future, concerning matters of which MR. MR. GONZALEZ has personal knowledge or which were within MR. MR. GONZALEZ's management responsibilities. 7. Each of GONZALEZ and PANAMCO and its officers shall not issue any communication or statement, written or otherwise, that disparages, criticizes or otherwise reflects adversely upon the other, except if testifying truthfully in conjunction with legal proceedings. In the event that either GONZALEZ or PANAMCO or its officers is compelled by subpoena process to testify, he or it will provide, to the extent possible, written notice to the other party in time to permit such party to seek an appropriate protective order or such other relief as may be necessary to enforce his or its rights under this Agreement. 8. MR. GONZALEZ acknowledges that he remains subject to Articles 6, 7, 8, 9, and 10 of the Employment Agreement. 9. Any dispute or controversy arising under or in connection with this Employment Termination Agreement and General Release shall be settled exclusively by -5- arbitration in Miami-Dade County, Florida, in accordance with the Rules of the American Arbitration Association then in effect (except to the extent that the procedures outlined below differ from such rules). Within thirty (30) days after written notice by either party has been given that a dispute exists and that arbitration is required, each party must select an arbitrator and those two arbitrators shall promptly, but in no event later than thirty (30) days after their selection, select a third arbitrator. The parties agree to act as expeditiously as possible to select arbitrators and conclude the dispute. The selected arbitrators must render their decision in writing. The cost and expenses of the arbitration and of enforcement of any award in any court shall be borne equally by both parties. If advances are required, each party will advance one-half of the estimated fees and expenses of the arbitrators. Judgment may be entered on the arbitrators award in any court having jurisdiction. Although arbitration is contemplated to resolve disputes hereunder, either party may proceed to court to obtain an injunction to protect its rights hereunder, the parties agreeing that either could suffer irreparable harm by reason of any breach of this Agreement. Pursuit of an injunction shall not impair arbitration on all remaining issues. 10. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. 11. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, upon its effectiveness, shall supersede all prior agreements, understandings and arrangements, both oral and written, between MR. GONZALEZ and the COMPANY with respect to such subject matter, including but not limited to the Employment Agreement. However, Articles 6, 7, 8, and 9 of the Employment Agreement remain in full force and effect. This Agreement may not be modified in any way unless by a written instrument signed by both the COMPANY and MR. GONZALEZ. 12. MR. GONZALEZ hereby certifies that he has read the terms of this Employment Termination Agreement and General Release, that he has been advised by the COMPANY to consult with an attorney of his own choice prior to executing this Agreement, that he has had an opportunity to do so, and that he understands this Agreement's terms and effects. MR. GONZALEZ further certifies that the COMPANY has not made any representations to MR. -6- GONZALEZ concerning this Employment Termination Agreement and General Release other than those contained herein. 13. MR. GONZALEZ acknowledges that he has been informed that he has the right to consider this Employment Termination Agreement and General Release for a period of at least 21 days prior to entering into this Agreement. He also understands that he has the right to revoke this Agreement for a period of 7 days following his execution of this Agreement by giving written notice by facsimile or hand delivery to the COMPANY at 701 Waterford Way, Eighth Floor, Miami, Florida 33126, Attention: Carlos Hernandez-Artigas, General Counsel. If any provision of this Employment Termination Agreement and General Release is deemed invalid, the remaining provisions shall not be affected. IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have executed the foregoing Employment Termination Agreement and General Release this ____ day of ___________, 2002. WITNESS:______________________ /s/ Mario Gonzalez Padilla --------------------------- MARIO GONZALEZ PADILLA PANAMCO LLC d/b/a PANAMERICAN BEVERAGES COMPANY WITNESS:______________________ BY: /s/ Carlos Hernandez-Artigas ----------------------------- NAME: CARLOS HERNANDEZ-ARTIGAS VICE PRESIDENT AND SECRETARY -7- EX-10.46 5 ex10_46.txt FIRST AMENDMENT TO EMPLOYMENT AGRT -- C. JUNG EXHIBIT 10.46 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT AND STOCK OPTION AWARD AGREEMENT First Amendment to Employment Agreement and Stock Option Award Agreement ("Agreement"), dated as of April 8, 2002, by and among PANAMERICAN BEVERAGES, INC., a company organized under the laws of the Republic of Panama (together with its successors and assigns, the "Company"), PANAMCO, L.L.C., a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, "Panamco") and CRAIG D. JUNG (the "Executive"). W I T N E S S E T H : WHEREAS, Executive's employment with the Company and Panamco commenced on March 20, 2002; WHEREAS, the parties desire to amend the Employment Agreement, dated February 27, 2002, between the parties hereto ("Employment Agreement") to reflect March 20, 2002 as the commencement date under the Employment Agreement; and WHEREAS, the parties desire to amend the Stock Option Award Agreement (Exhibit B to the Employment Agreement) to reflect March 20, 2002 as the date of grant of such option. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Parties agree as follows: 1. Section 2 of the Employment Agreement is hereby amended to read as follows: The term of the Executive's employment hereunder (the "Term") shall be for a period commencing on March 20, 2002 (the "Commencement Date") and ending March 19, 2005, provided, however, that the Term shall thereafter be automatically and indefinitely extended for additional one-year periods unless either the Company or the Executive gives the other written notice at least six (6) months prior to the then-scheduled date of expiration of the Term that such Party is electing not to so extend the Term. Notwithstanding the foregoing, the Term may be earlier terminated in strict accordance with the provisions of Section 11 below. Non-renewal shall not be considered a termination for Cause. 2. The "Date of Grant" as set forth in Section 1 of the Stock Option Award Agreement shall be March 20, 2002. 3. Except as specifically amended in Section 1 and 2 above, the Employment Agreement and the Stock Option Award Agreement remain in full force and effect. 4. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument. Signatures delivered by facsimile shall be valid and binding for all purposes. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. PANAMERICAN BEVERAGES, INC. By: /s/ William G. Cooling ----------------------------------- William G. Cooling Chairman and Chief Executive Officer PANAMCO, L.L.C. By: /s/ William G. Cooling ----------------------------------- William G. Cooling Chief Executive Officer The Executive By: /s/ Craig D. Jung ----------------------------------- Craig D. Jung EX-10.47 6 ex10_47.txt SECOND AMENDMENT TO EMPLOYMENT AGRT -- C. JUNG EXHIBIT 10.47 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT ---------------------------------------- Second Amendment to Employment Agreement ("Agreement"), dated as of July 1, 2002, by and among PANAMERICAN BEVERAGES, INC., a company organized under the laws of the Republic of Panama (together with its successors and assigns, the "Company"), PANAMCO, L.L.C., a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, "Panamco") and CRAIG D. JUNG (the "Executive"). W I T N E S S E T H : WHEREAS, the parties desire to amend the Employment Agreement, dated February 27, 2002, between the parties hereto ("Employment Agreement") to clarify the definition of "Termination Date" set forth in Exhibit A to the Employment Agreement. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the parties agree as follows: 1. Section (m)(iv) of Exhibit A to the Employment Agreement is hereby amended to read as follows: "in the case of a voluntary termination or Termination without Cause by the Company, the last day of the Executive's employment." 2. Except as specifically amended in Section 1 above, the Employment Agreement remains in full force and effect. 3. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument. Signatures delivered by facsimile shall be valid and binding for all purposes. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. PANAMERICAN BEVERAGES, INC. By: /s/ William G. Cooling ----------------------------------- William G. Cooling Chairman and Chief Executive Officer PANAMCO, L.L.C. By: /s/ William G. Cooling ----------------------------------- William G. Cooling Chief Executive Officer The Executive By: /s/ Craig D. Jung ----------------------------------- Craig D. Jung EX-10.48 7 ex10_48.txt THIRD AMENDMENT TO EMPLOYMENT AGRT -- C. JUNG EXHIBIT 10.48 THIRD AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------------- Third Amendment to Employment Agreement ("Amendment"), dated as of November 4, 2002, by and among PANAMERICAN BEVERAGES, INC., a company organized under the laws of the Republic of Panama (together with its successors and assigns, the "Company"), PANAMCO, L.L.C., a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, "Panamco") and CRAIG D. JUNG (the "Executive"). W I T N E S S E T H : WHEREAS, the parties desire to further amend the Employment Agreement, dated February 27, 2002, as amended, between the parties hereto ("Employment Agreement") to, among other things, give effect to Executive's promotion to the position of Chief Executive Officer. NOW, THEREFORE, pursuant to Section 20(b) of the Employment Agreement, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the parties agree as follows: 1. Section 3(a) of the Employment Agreement is hereby amended to read as follows: During the Term, the Executive shall serve as the Chief Executive Officer and President of the Company and Panamco and shall be a member of the Board. The Executive shall report solely and directly to the Board. The Executive shall have the authorities, duties and responsibilities customarily exercised by an individual serving as Chief Executive Officer and President in a corporation of the size and nature of the Company or Panamco, as the case may be. 2. Section 3(b) of the Employment Agreement is hereby amended by adding the following provision at the end of such section: Effective January 1, 2003, the Base Salary shall be increased to $716,625. 3. Section 4 of the Employment Agreement is hereby amended by adding the following provision at the end of the first paragraph of such section: Effective January 1, 2003, the Target Bonus shall be increased to seventy-five (75%) of Executive's Base Salary. 4. Section 11(e) of the Employment Agreement is hereby amended by replacing the second sentence of Section 11(e) in its entirety with the following: Except in the case of a termination of the Executive's employment for Cause pursuant to Section 11(c)(ii) above, there shall be no offset against amounts due the Executive under this Agreement or otherwise on account of any remuneration or other benefit earned or received by the Executive after termination or on account of any claim that the Company, Panamco or any of their Affiliates may have against him. 5. Section 7 of the Employment Agreement is hereby amended to read as follows: During the Term, the Executive shall be eligible to participate in the Company's Equity Incentive Plan and any other equity or long-term incentive plans of the Company and/or Panamco on at least as favorable basis as other similarly-situated executives. For the annual option grant in 2002, the Executive shall be granted an annual stock option award, to be made at the same time other equity awards are granted to other similarly-situated executives, to purchase no less than 150,000 shares of the Company's common stock on the same terms and conditions as the initial award in Section 6(b) above. Effective for the annual grant in 2003 and thereafter, the Executive shall be granted an annual stock option award, to be made at the same time other equity awards are granted to other similarly-situated executives, to purchase not less than such number of shares of the Company's common stock having an option value (determined by the Company using the Black Scholes model in the same manner as determined for the other employee options) on the date of grant equal to 265% of Executive's Base Salary, with all such awards to be made on the same terms and conditions as the initial award in Section 6(b) above. All stock option awards shall be granted substantially in the form of the stock option award agreement attached hereto as Exhibit B. 6. Section 12(a) of the Employment Agreement is hereby amended by adding the following provision at the end of such section: The Executive shall also be entitled to any compensation, benefit or entitlement provided in accordance with any other agreement with the Company and/or Panamco, or any Company and/or Panamco plan, policy or arrangement, relating to a Change in Control or Change of Control (as any such term is defined in this Agreement or in such other agreement, plan, policy or arrangement) of either the Company or Panamco (with such other agreement, plan, policy or arrangement collectively referred to as the "Change in Control Policy"), provided that if any item of compensation or benefit or any entitlement is provided under this Agreement which is more favorable to the Executive than the corresponding item of compensation or benefit or entitlement under the Change in Control Policy, or if an item of compensation or benefit or any entitlement is provided under this 2 Agreement, but not under the Change in Control Policy, such item of compensation or benefit or such entitlement, as the case may be, shall be provided in accordance with the terms of this Agreement. In no event, however, shall the Executive be entitled to duplication as to any item of compensation or benefit or as to any entitlement that is provided under both this Agreement and the Change in Control Policy. In the event of any inconsistency between any provision of this Agreement and any provision of the Change in Control Policy (including, but not limited to, any restrictive covenant, definition or procedure required to be followed prior to terminating the Executive's employment), the provision (including any portion thereof) most favorable to the Executive shall govern and the other agreement (whether this Agreement or the Change in Control Policy) shall be deemed to be amended to the extent necessary to give the Executive the benefit of the most favorable provision. 7. Section 20(a) of the Employment Agreement is hereby amended by replacing the last sentence in its entirety with the following: In the event of any inconsistency between any provision of this Agreement and any provision of any plan, employee handbook, personnel manual, program, policy, arrangement or agreement of the Company, Panamco or any of their Affiliates ("Company Arrangement"), the provision (including any portion thereof) most favorable to the Executive shall govern and the other provision (whether in this Agreement or any Company Arrangement) shall be deemed to be amended to the extent necessary to give the Executive the benefit of the most favorable provision. Notwithstanding anything to the contrary in any other plan, policy, arrangement or agreement of the Company, including, but not limited to, the Change in Control Policy, the Executive shall not be required to release as a condition of receiving any compensation, benefit or entitlement, and will not be releasing, any rights he has to enforce this Agreement. 8. Section h(i) of Exhibit A to the Employment Agreement is hereby amended to read as follows: a material diminution in the Executive's duties; or assignment to him of duties that are materially inconsistent with his duties or materially impair his ability to function as Chief Executive Officer or as President of the Company and/or Panamco (or in any other position the Executive is appointed to); 9. Section h(ii) of Exhibit A to the Employment Agreement is hereby amended to read as follows: the failure to elect or reelect the Executive as Chief Executive Officer and President of the Company or Panamco, or as a member of the Board, or the removal of him from any such position; 3 10. Section h(iv) of Exhibit A to the Employment Agreement is hereby amended to read as follows: a change in the reporting structure so that the Executive no longer reports solely and directly to the Board; 11. Section h(v) of Exhibit A to the Employment Agreement is hereby deleted. 12. Section h(vi) of Exhibit A to the Employment Agreement is hereby amended to read as follows: relocation of the Executive's principal place of employment to a location other than specified in Section 3(c) of this Agreement, except for travel reasonably required in the performance of the Executive's duties under this Agreement; 13. Except as specifically amended in Sections 1 though 12 above, the Employment Agreement remains in full force and effect. 14. The Company and Panamco represent and warrant to the Executive that (i) they are fully authorized by action of their respective boards (and of any other entity or body whose action is required) to enter into this Amendment and to perform their obligations hereunder and (ii) the officer signing this Amendment on behalf of the Company and Panamco is duly authorized to do so. 15. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument. Signatures delivered by facsimile shall be valid and binding for all purposes. 4 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first set forth above. PANAMERICAN BEVERAGES, INC. By: /s/ Carlos Hernandez ------------------------------------- Carlos Hernandez Vice-President, Legal and Secretary By: /s/ Abilio Gonzalez ------------------------------------- Abilio Gonzalez Vice-President, Human Resources PANAMCO, L.L.C. By: /s/ Carlos Hernandez ------------------------------------- Carlos Hernandez Vice-President, Legal and Secretary By: /s/ Abilio Gonzalez ------------------------------------- Abilio Gonzalez Vice-President, Human Resources The Executive By: /s/ Carlos D. Jung ------------------------------------- Craig D. Jung 5 EX-10.49 8 ex10_49.txt SHARE SUBSCRIPTION AGREEMENT -- CA BEVERAGES EXHIBIT 10.49 SHARE SUBSCRIPTION AGREEMENT ---------------------------- This SHARE SUBSCRIPTION AGREEMENT, dated as of October 2, 2002 (together with its Schedules and Exhibits and as amended or supplemented from time to time, the "Agreement") is entered into by and between Coca Cola de Panama Cia. Embotelladora, S.A., a corporation organized and existing according to the laws of the Republic of Panama ("Coca Cola" or the "Seller"), and CA Beverages, Inc., a corporation organized and existing according to the laws of the Republic of Panama (the "Buyer"). CONSIDERING THAT, Seller owns and operates soft drink bottling and distribution facilities in the Republic of Panama; THAT, Seller also is the owner, directly or indirectly, among other investments: (i) of approximately fifty one and one-half percent (51.5%) of the issued and outstanding capital stock of Cervecerias Baru-Panama, S.A. ("CBP"), a corporation organized according to the laws of the Republic of Panama that owns and operates beer bottling and distribution facilities in the Republic of Panama (a "Company" and, jointly with the Seller, the "Companies"); and (ii) a majority share interest in the issued and outstanding capital stock of Crecimiento y Desarrollo, S.A. ("Credesa") and Ventas y Mercadeo, S.A. ("Vemersa"); THAT, CBP is the owner, directly or indirectly, among other investments, of a majority share interest in the issued and outstanding capital stock of Cerveceria Panama, S.A. ("Cerveceria Panama"), Cerveceria del Baru, S.A. ("Baru"), Direccion y Administracion de Empresas, S.A. ("Daesa"), Panama Beer Import S.A. ("Panama Beer"), Panama Brew Inc. ("Panama Brew"), and Grupo El Hangar, S.A. ("Hangar"); THAT, with the advice and support of its financial advisor, the Seller undertook a process to select a strategic partner in order to improve the Seller's ability to face the challenges presented by globalization and by changes in the local market; THAT, as a result of that process, the Seller has selected Buyer as its strategic partner; THAT, the Buyer is wholly owned by and a joint venture of Heineken Finance N.V. (a wholly-owned, indirect subsidiary of Heineken N.V.), Florida Ice and Farm Co., and Inter-American Financial Corporation (a wholly owned subsidiary of Panamerican Beverages Inc.) (jointly, the "Sponsors"); THAT, the Seller wishes to issue, and the Buyer wishes to buy, 3,934,246 shares (representing 50% of the issued and outstanding voting shares plus one voting share) of newly issued and authorized common shares, no par value, of Seller (the "Shares"), according to the terms and subject to the conditions set out in this Agreement; and THAT, after the issuance of the Shares and the change of control of the Companies effected thereby, the Seller and the Buyer wish to give the shareholders of both Companies (as existed immediately prior to the issuance of the Shares) the opportunity to decide to maintain or to sell their share interests therein. THEREFORE, Seller and Buyer agree as follows: ARTICLE I SUBSCRIPTION FOR SHARES 1.1 Subscription. On the basis of the representations and warranties herein contained, and subject to the terms, conditions and agreements herein set forth, Seller hereby issues and sells to the Buyer an aggregate of 3,934,246 Shares and the Buyer hereby purchases the Shares by making a capital contribution to the Seller in an amount equal to a price of US$22.55 per share, for an aggregate purchase price and capital contribution of US$88,717,247.30 (the "Purchase Price"). ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER 2.1 The Seller represents and warrants to the Buyer as follows (for purposes of this Section 2.1, the term "Coca Cola" shall mean Coca Cola and all of its direct and indirect subsidiaries except for CBP and all of its direct and indirect subsidiaries and the term "CBP" shall mean CBP and its direct and indirect subsidiaries): (a) Organization and Standing; Articles and Bylaws. Schedule 2.1(a) sets forth the name of each entity which either Company controls (through its ability to direct the management or operation of such entity or otherwise) or has more than a 50% equity or participation interest ("Subsidiaries") and provides for each Company and Subsidiary its jurisdiction of organization, its capitalization and the percentage equity or other participation interest (including options, etc.) owned by the Company, each Subsidiary and any other natural person, legal entity or governmental or regulatory authority ("Person") with a percentage equity interest in excess of five percent. Each of the Companies and the Subsidiaries is a corporation duly organized and in good standing under the laws of its jurisdiction of organization. Each of the Companies and the Subsidiaries is duly qualified to transact business and is in good standing in each other jurisdiction in which the ownership or leasing of its properties or assets or the conduct of its business requires such qualification, except where the failure to so qualify has not had or would not have a material adverse effect on or change in the assets, results of operations, financial condition, business, or prospects of, either Coca Cola, CBP or any Subsidiary (in either case, a "Material Adverse Effect"). Each of the Companies and the Subsidiaries has all requisite corporate power to own or lease and to operate and use its properties and assets and to carry on its businesses as now conducted. Each of the Companies and the Subsidiaries has delivered or made available to the Buyer complete and correct copies of its articles of organization (or equivalent thereof) and, if any, bylaws (or equivalent thereof), each as in effect on the date hereof. 2 (b) Capital Structure. The authorized and outstanding capital stock of each Company and each Subsidiary is set forth on Schedule 2.1(a). Schedule 2.1(a) includes an accurate and complete list of the stock options issued by either of the Companies or the Subsidiaries setting forth the name of the optionee, the exercise price and the number of shares of capital stock subject to each outstanding option. Except as disclosed in Schedule 2.1(a), there are no agreements, warrants, puts, calls, rights, preemptive rights, options or other commitments of any character to which either Company or any Subsidiary is a party or by which any of them are bound which obligates either Company or any Subsidiary to issue, deliver, register or sell any additional shares of capital stock or any securities or instruments convertible into or exchangeable for additional shares of capital stock. The outstanding shares of capital stock of each of the Companies and the Subsidiaries are duly and validly issued and fully paid and nonassessable. (c) Issuance of Shares. The Shares issued and sold by the Seller to the Buyer have been duly authorized and, when delivered against payment thereof as provided herein, will be duly and validly issued, fully paid and non-assessable and not subject to the pre-emptive rights of any Person. Upon the closing of this Agreement, the Buyer will own and have good and valid title to, all of the Shares, free and clear of all Encumbrances (as defined below), except for any created by the Buyer. Schedule 2.1(c) contains a true and correct copy of the resolution of the Board of Directors of the Seller authorizing the issuance of the Shares. The Shares represent at least fifty percent plus one share of the Seller's outstanding capital stock on a fully diluted basis (i.e., giving effect to the options and all other rights to acquire capital stock of the Seller) and give the Buyer, subject to the rights set forth in Section 5.10 hereof, voting control of the Seller. (d) Authorization. The Seller has full power, and is properly authorized and empowered (including corporate authorizations and others) to execute, to deliver and to comply with this Agreement. This Agreement constitutes the valid, legal and binding obligation of the Seller, enforceable against the Seller according to its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally. (e) No Conflicts or Consents. (i) The execution, delivery and performance of this Agreement, including the issuance and delivery of the Shares and the proper registration on the share registry book of the Seller of the Shares in the name of the Buyer and the execution, delivery and performance of any related agreements or contemplated transactions by the Seller will not: (a) violate, contravene, or constitute a breach or default (whether upon lapse of time or the occurrence of any act or event or otherwise) under, the charter documents or by-laws (or comparable governing documents) of either Company or any Subsidiary; (b) violate any law, statute, regulation, judgment, order, writ, injunction, or decree of any court, administrative agency, or governmental body applicable to any Company or any Subsidiary or any of their respective properties, assets or outstanding debt or equity securities; (c) contravene, conflict with or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise) under any contract to 3 which either Company or any Subsidiary is a party, except (x) where any such violation, breach or default would not have a material adverse effect on the ability of either Company or any Subsidiary to perform their obligations under this Agreement or limit or impair any right of Buyer under or with respect to the Shares and (y) as set forth in Schedule 2.1(e)(i). (ii) No consent, notice or approval by any governmental or regulatory entity or stock exchange or any other Person is required in connection with the execution of this Agreement or the consummation of the transactions provided for herein or contemplated hereby, with the exception of the consents, notices and approvals set forth in Schedule 2.1(e)(ii). (f) Financial Statements; No Undisclosed Liabilities, Inventories and Receivables. (i) The Buyer has been furnished with copies of the financial statements set forth on Schedule 2.1(f)(i) (collectively, the "Financial Statements"). The Financial Statements: (A) are correct and complete in all material respects and have been prepared in accordance with the books and records of the Companies and the Subsidiaries; (B) have been prepared in accordance with international accounting standards ("IAS") consistently applied throughout the periods covered; (C) reflect and provide adequate reserves in respect of all liabilities, including all contingent liabilities, as of their respective dates; and (D) present fairly the consolidated financial condition of each of Coca Cola and CBP at such dates and the results of its operations for the fiscal periods then ended. (ii) Each Company and the Subsidiaries keep books, records and accounts that, in reasonable detail, accurately and fairly reflect (A) the transactions and dispositions of their respective assets and (B) the value of inventory calculated in accordance with IAS. (iii) The inventories of the Companies and the Subsidiaries as of the date hereof are good and merchantable, and the aggregate quantity of inventory for each of Coca Cola and CBP is reasonable and consistent with past practice. (iv) All accounts receivable reflected in the Financial Statements, and all accounts receivable arising since the date of the most recent balance sheet, represent bona fide claims against debtors for sales arising on or before the dates thereof, and all the goods delivered and services performed which give rise to such accounts will have been delivered or performed in accordance with the applicable orders or customer requirements. The accounts receivable reflected in the Financial Statements, and all accounts receivable arising since the date of the most recent balance sheet, will be subject to no defenses, counterclaims or rights of setoff and will be fully collectible in the ordinary course of business consistent with past practice without costs payable by the Buyer to third parties in collection efforts therefor, except to the extent that reserves for uncollectible accounts receivable are included in the Financial Statements. (v) The Net Debt (as defined herein) of CBP and Coca Cola as of September 25, 2002 was US$9,527,237 and US$11,683,408, respectively. Net Debt shall 4 mean interest-bearing liabilities less cash and cash equivalents determined in accordance with IAS. Since September 25, 2002, neither the Net Debt of CBP nor the Net Debt of Coca Cola has increased. (vi) Since the date of the most recent balance sheet included in Schedule 2.1(f)(i), the Companies and the Subsidiaries have operated their businesses in the ordinary course consistent with past practice and no event has occurred with respect to the Companies that has had or could reasonably be expected to have a Material Adverse Effect, except as set forth on Schedule 2.1(f)(vi). (g) Taxes. Each Company and each Subsidiary has filed or caused to be filed all material tax returns, tax information returns, reports, and estimates ("Returns"), for all taxable or reporting periods ending on or before the date hereof. All Taxes due have been paid in full when due and each Company and each Subsidiary has established adequate reserves in accordance with IAS on the books and records and on their respective financial statements for all Taxes not yet due and payable. All Returns are complete and accurate in all material respects; and there are no liens on any of the assets of the Company or any Subsidiary that arose in connection with any failure (or alleged failure) to pay any Tax. As used in this Agreement, "Taxes" or "Tax" means all foreign, federal, state and local taxes of any kind, including, without limitation, income, excise, capital gains, gross receipts, franchise, employment, sales, use, license, property or withholding taxes and any interest or penalties related thereto, validly imposed upon the Company and the Subsidiaries with respect to such taxes. (h) Material Agreements. Except as set forth in Part A of Schedule 2.1(h), neither of the Companies nor any of the Subsidiaries is a party to, or is bound by: (i) any agreement, contract or other commitment outside of the ordinary course of business involving payments by or to either Company or any Subsidiary of more than US$250,000 in any 12-month period; (ii) any severance agreement or contract for the employment of any officer or employee (other than any contract which is terminable without liability upon notice of 90 days or less), or any severance agreement or contract of employment with a former officer, director or employee, pursuant to which, in any case, payments in excess of US$50,000 in any 12-month period are required to be made by either Company or any Subsidiary after the date hereof; (iii) any contract or obligation relating to any outstanding indebtedness for borrowed money by the Company or any Subsidiary, other than borrowings less than US$250,000 in the aggregate; (iv) any guarantee or other contingent liability in respect of any indebtedness or obligation; (v) any collective bargaining agreement; (vi) any agreement which obligates either Company or any Subsidiary not to compete with any business or which otherwise restrains or prevents the Company or any of the Subsidiaries from carrying on any lawful business; or (vii) any sales, marketing or distribution agreements generating revenues or expenditures in excess of US$250,000. Except as set forth in Part B of Schedule 2.1(h), complete and correct copies of all contracts, agreements and other instruments referred to in Part A of Schedule 2.1(h) have been made available to the Buyer. Except as disclosed in Part B of Schedule 2.1(h), all contracts, agreements and other instruments referred to in Part A of Schedule 2.1(h) are in full force and effect and enforceable by the relevant Company or Subsidiary against the 5 other parties thereto and neither of the Companies nor any Subsidiary, nor any third party including any employee of either Company or the Subsidiaries, is in breach of or default under any such contract, agreement or instrument. (i) Compliance with Laws; Environmental Matters. (i) Each of the Companies and the Subsidiaries has complied in the conduct of its business with all applicable laws, except failures to comply which have not had and would not have a Material Adverse Effect. (ii) (A) Neither of the Companies nor any Subsidiary is subject to any order, consent, decree, notice, demand, enforcement proceeding or injunction issued or initiated by any governmental authority relating to any environmental law or regulation, (B) neither of the Companies nor any Subsidiary has been notified in writing that it may be a responsible party or potentially responsible party under or in violation of or noncompliance with any environmental law or regulation and (C) there are no events or facts known to either Company that indicate that either Company or any Subsidiary is or will be such a responsible party or potentially responsible party or will be in violation of or not in compliance with any environmental law or regulation. (iii) Except as has not had and would not have a Material Adverse Effect, there are no other circumstances or conditions involving either Company or any Subsidiary that have resulted or are likely to result in any liability on the part of either Company or any Subsidiary relating to or arising under any environmental law or regulation. (j) Litigation. Except as set forth in Schedule 2.1(j), there is no action, suit, proceeding or investigation pending or, to either Company's knowledge, threatened against either Company or any Subsidiary. Neither Company nor any Subsidiary is in default in respect of any judgment, order, writ, injunction or decree of any court or any governmental authority. Except as set forth in Schedule 2.1(j), there is no action, suit, investigation or proceeding pending, or to either Company's knowledge, threatened involving either Company or any of the Subsidiaries which would be reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of either Company to perform its obligations hereunder, or which seeks to rescind, void, enjoin or obtain damages in respect of the consummation of the transactions contemplated hereby. (k) Labor Matters. Except as set forth in Schedule 2.1(k), neither Company nor any of the Subsidiaries is a party to any contract or collective bargaining agreement with any labor organization. Each of the Companies and each of the Subsidiaries are in compliance with all applicable labor laws and collective bargaining agreements, except to the extent any non-compliance would not reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 2.1(k), no strike, slowdown or work stoppage is occurring or, to the knowledge of the Companies, is threatened to occur. There is no pending social security or labor complaint involving either Company or any of the Subsidiaries which would reasonably be expected to have a Material Adverse Effect. The Companies and the Subsidiaries have established adequate reserves in accordance with IAS on the books and records and on their respective financial statements for all labor-related 6 obligations. The recent collective bargaining agreement between the Seller and Sitecovem is on terms and condition that are not materially less advantageous to the Seller than the terms and conditions of the recently expired collective bargaining agreement between the Seller and Sitecovem. (l) Affiliated Transactions. Except as set forth in Schedule 2.1(l), neither Company nor any Subsidiary is a party to or bound by any contract, commitment or understanding with any of its respective shareholders, directors or officers (except for the employment and related agreements listed in Schedule 2.1(h)) or any of its affiliates or any member of their respective families, and none of such shareholders, directors or officers or any of their affiliates or members of their respective families owns or otherwise has any right to or interest in any asset, tangible or intangible, which is used in the business of either Company or any Subsidiary. For purposes of this paragraph, a person will be considered part a "family" if he or she is related to a shareholder, director or officer within the fourth degree of consanguinity and second degree of affinity. (m) Property. (i) Ownership of Property. Except as set forth in Schedule 2.1(m)(i), each Company and each Subsidiary has good (and, in the case of owned real property, marketable) title (or leasehold interest with respect to leased real property) to all assets which are necessary to the conduct of their respective businesses, free and clear of any claim, collection, covenant, obligation, tax, bail, mortgage, lien, preventive sequestration, attachment, option, privileged credit or restriction ("Encumbrances"), except (A) for liens for taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which appropriate reserves have been established on the relevant Financial Statements or (B) for liens of carriers, warehousemen, mechanics, materialmen and other similar liens incurred in the ordinary course of business that do not individually or in the aggregate have a Material Adverse Effect. (ii) Personal Property. Each Company and each Subsidiary has good and marketable title to each item of material personal property free and clear of all Encumbrances. All material items of personal property are in reasonably good condition and in a reasonable state of repair, reasonable wear and tear excepted, and material maintenance on such items has not been deferred beyond a reasonable time period. (iii) Intellectual Property. Part A of Schedule 2.1(m)(iii) contains a complete and correct list of each patent, patent application, registered trademark, trademark application, registered service mark, service mark application, trade name, trade secret or copyright owned by, used by, or licensed for use by either Company or any Subsidiary (together with other intellectual property rights owned by, used by or licensed for use by either Company or any Subsidiary, the "Intellectual Property") and the owner of each item of Intellectual Property. Either Coca Cola, CBP or a Subsidiary is the owner of all right, title and interest in and to each item of Intellectual Property. Except as set forth in Part B of Schedule 2.1(m)(iii), either Coca Cola, CBP or a Subsidiary has the right and authority to use all such Intellectual Property in connection with the conduct of its business in the 7 manner presently conducted and such use does not conflict with, infringe upon or violate any third parties' intellectual property rights. (n) Licenses and Permits. Each Company and each Subsidiary owns, holds or possesses all licenses, permits, privileges, immunities, approvals and other authorizations which are necessary for the ownership, leasing, operation and use of its respective assets and business or which is required for the conduct of its respective business (the "Licenses and Permits"), except (i) where the failure to own, hold or possess such Licenses and Permits has not had or would not have a Material Adverse Effect or (ii) as set forth in Schedule 2.1(n). Each License and Permit is valid and in full force and effect and, to the knowledge of the Companies, no suspension or cancellation of any License or Permit is threatened. Except as set forth in Schedule 2.1(n), immediately after the date hereof, each License and Permit will be valid and in full force and effect. (o) Brokerage. Except as set forth on Schedule 2.1(o), none of the Companies nor any of their Subsidiaries nor any employee, shareholder, director or agent of the Companies nor any of their Subsidiaries has dealt with any finder or broker in connection with any of the transactions contemplated by this Agreement or the negotiations looking toward the consummation of such transactions who may be entitled to a fee in connection therewith. Any fees payable to any finder or broker set forth on Schedule 2.1(o) shall be fully paid as provided in Section 5.3(g) and in no circumstance shall the Buyer or the Seller have any liability therefor. 2.2 Disclosure. To the knowledge of the Seller, the Seller's representations and warranties in this Agreement do not contain any untrue statement of a material fact, nor do such representations and warranties omit statements necessary in order to make such representations and warranties not misleading. Any disclosure or exception by Seller in this Agreement, in any Schedule or Exhibit hereto, shall be deemed to be a disclosure or exception, as the case may be, with respect to the same or any similar matter contained elsewhere in this Agreement, in any Schedule or Exhibit hereto. 2.3 Knowledge. For purposes of this Article II, "knowledge of the Seller" or "best knowledge of the Seller" as used in connection with any representation or warranty made by the Seller means that the representation and warranty so qualified shall be deemed to be made by the Seller solely on the basis of the actual knowledge of any of the directors or officers of any of the Companies. It is expressly agreed by the Buyer that the Buyer shall have no claim or remedy against Seller for any breach or untruth of any representation or warranty that is qualified by the phrase "knowledge of Seller", "Seller's knowledge", "best knowledge of Seller" or "Seller's best knowledge" except upon a showing by the Buyer that such breach or untruth was known to any of the already mentioned natural persons. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to the Seller that: 8 3.1 Organization and Related Matters. The Buyer is a corporation duly organized and in good standing under the laws of Panama. The Buyer has full power, and is properly authorized and empowered (including corporate authorizations and others) to execute, to sign, to deliver and to comply with this Agreement. 3.2 Authorization; Absence of Conflicts. The signing, delivery and compliance of this Agreement on the part of the Buyer has been properly and validly authorized by all the necessary acts (corporate and others) on the part of the Buyer. This Agreement constitutes the valid, legal and binding obligation of the Buyer, enforceable against the Buyer according to its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally. 3.3 Legal Proceedings. At the signing of this Agreement, the Buyer has not been notified of any claim nor has any known threat of claim against the Buyer (or that which may affect it), that can have a material adverse effect upon the capability of the Buyer of complying with its obligations under this Agreement. 3.4 Brokerage. Except as set forth on Schedule 3.4, neither the Buyer nor any shareholder, employee or agent of the Buyer has dealt with any finder or broker in connection with any of the transactions contemplated by this Agreement or the negotiations looking toward the consummation of such transactions who may be entitled to a fee in connection therewith. Any fees payable to any finder or broker set forth on Schedule 3.4 shall be the sole responsibility of the Buyer or its shareholders and in no circumstance shall the Seller have any liability therefor. 3.5 Experience. The Sponsors have substantial experience: (i) in the production, distribution and marketing of soft drinks and beer; and (ii) operating and doing business in emerging markets such as Panama. 3.6 Support of Sponsors. Buyer has the financial ability to perform its obligations under this Agreement and the financial support of the Sponsors. ARTICLE IV DELIVERIES 4.1 Deliveries by the Seller. Contemporaneous with the execution of this Agreement, Seller shall deliver or cause to be delivered to Buyer: (a) a stock certificate representing the Shares, together with a certificate of the secretary of the Seller (or such other evidence reasonably acceptable to Buyer) certifying that the Shares have been duly registered on Coca Cola's share registry; (b) copies of the resignation letters of each of the directors of each of the Companies and the Subsidiaries, except for the persons set forth in Schedule 4.1; (c) copies of the Officers' Letters referred to in Section 5.11 hereof; 9 (d) the Coca Cola OPA Trust (as defined below), executed by the Seller, the Trustee (as defined therein) and the Representative (as defined therein); (e) the CBP OPA Trust (as defined below), executed by the Trustee (as defined therein) and the Representative (as defined therein); (f) the Coca Cola Holdback Trust (as defined below), executed by the Seller, the Trustee (as defined therein) and the Representative (as defined therein); (g) the CBP Holdback Trust (as defined below), executed by Trustee (as defined therein) and the Representative (as defined therein); (h) true and correct originals of the duly authorized and executed notices with respect to the issuance of the shares and the changes of the Seller's officers and directors to the Comision Nacional de Valores and the stock exchange in Panama as disclosed in Schedule 2.1(e)(ii); (i) the legal opinion of Arias, Fabrega and Fabrega in the form of Exhibit A hereto; and (j) a true and correct copy of the Seller's board resolution referred to in Section 5.1 hereof (as well as the resolutions authorizing issuance of the Shares) and attached hereto as Exhibit B. 4.2 Deliveries by the Buyer. Contemporaneous with the execution of this Agreement, Buyer shall deliver or cause to be delivered to the Seller: (a) US$61,570,956.80 of the Purchase Price in immediately available funds and the remaining US$27,146,290.50 in the form of a letter of credit in the form attached as Exhibit G hereto; (b) evidence, in form and substance reasonably satisfactory to the Seller, of the Buyer's board resolution(s) authorizing this Agreement and the transactions contemplated hereby; (c) the Coca Cola OPA Trust (as defined below), executed by the Buyer and immediately funded by the Buyer as provided for therein; (d) the CBP OPA Trust (as defined below), executed by the Buyer and immediately funded by the Buyer as provided for therein; (e) the Coca Cola Holdback Trust (as defined below), executed by the Buyer and immediately funded by the Buyer as provided for therein; (f) the CBP Holdback Trust (as defined below), executed by the Buyer and immediately funded by the Buyer as provided for therein; and 10 (g) the legal opinion of Tapia, Linares and Alfaro in the form of Exhibit H hereto. 4.3 Other Documents; Efforts to Close. The parties to this Agreement shall in good faith execute such other and further instruments, assignments or documents as may be necessary or advisable to carry out the transactions contemplated by this Agreement. Each of the parties hereto shall use such party's best efforts to consummate the transactions contemplated by this Agreement, including, without limitation, (a) requiring the Seller to issue additional shares to the Buyer (in addition to the Shares) to ensure that, after the date hereof and prior to the closing of the OPA, the Buyer will at all times own one share more than 50% of the fully-diluted shares of voting common stock of the Seller and (b) providing executed copies of this Agreement to the Trustee. Each party shall promptly notify the other (as well as the Representative(s) under the trust agreements (the "Trust Agreements") listed in Section 4.1) of any action, suit, claim or proceeding (collectively referred to herein as a "Proceeding") that shall be instituted or threatened against such party to rescind, void, restrain, prohibit, otherwise challenge the legality of or delay the transactions contemplated by this Agreement. ARTICLE V COVENANTS 5.1 Boards of Directors. Contemporaneously with the execution of this Agreement, the current board of directors of each of the Companies and their respective Subsidiaries shall resign (with the exception of persons listed in Schedule 4.1) and be replaced by the persons designated by Buyer. Exhibit B contains the resolutions of the board of directors of the Companies and their respective Subsidiaries in which all members (except for the persons listed in Schedule 4.1) thereof resign and appoint, effective as of the date hereof, the persons designated by Buyer. 5.2 Shareholders Meetings. As soon as practicable but no later than 20 days after the execution of this Agreement, the Seller will cause each of the Companies to hold a shareholders' meeting in order to provide information regarding the transaction contemplated hereby. Schedule 2.1(c) contains copies of the resolutions of the Board of Directors of Coca Cola and CBP calling meetings of shareholders thereof to be held on the dates indicated therein for all shareholders of record as of the date immediately prior to the date of issuance of the Shares. 5.3 OPAs. Subject to Section 5.9 hereof, within 30 days following the date of this Agreement, (i) the Buyer shall launch a revocable tender offer (an "OPA") to acquire up to 100% of the issued and outstanding capital stock of CBP for US$14.60 per share (the "CBP Purchase Price"); and (ii) Buyer shall cause Seller to launch a revocable OPA to acquire up to 3,934,245 of the issued and outstanding shares of capital stock of the Seller for the sum of US$22.55 per share (the "Basic Coca Cola Purchase Price"). In the event that there is a sale of the Subject Property under Section 5.8 hereof, the per share price for Coca Cola will be equal to the sum of $22.55 and the Net Subject Property Per Share Amount (as defined herein) (the "Adjusted Coca Cola OPA Purchase Price"). 11 Subject to the terms and conditions of the Trust Agreements with respect to certain indemnification obligations, it is understood by the parties that (i) on the closing date of the OPA for CBP, the Accepting Shareholders in the OPA for CBP will receive net proceeds of $12.74 per share (the "CBP Net Purchase Price"), which has been determined by subtracting the following amounts from the CBP Purchase Price: (A) $1.10 per share for the CBP Holdback Trust as provided in Section 5.3(d); and (B) $0.76 per share for the fees referred to in Section 5.3(g) with respect to CBP; and (ii) subject to the following paragraph on the closing date of the OPA for Coca Cola, the Accepting Shareholders in the OPA for Coca Cola will receive net proceeds of $20.00 per share ("Net Basic Coca Cola Purchase Price") if there is no sale of the Subject Property under Section 5.8, which $20.00 per share has been determined by subtracting the following amounts from the Basic Coca Cola Purchase Price: (A) $1.17 per share for the Coca Cola Holdback Trust as provided in Section 5.3(e) below; (B) $0.50 per share for the fees referred to in Section 5.3(g) with respect to Coca Cola; (C) $0.52 per share related to Coca Cola's and Credesa's proportional share of the CBP Holdback Trust; and (D) of $0.36 per share related to Coca Cola's and Credesa's portion of the fees set forth in clause (i)(B) of this paragraph. In the event that there is a sale of the Subject Property under Section 5.8 prior to the Subject Property Termination Date, then the net proceeds ("Net Adjusted Coca Cola Purchase Price") to be received by Accepting Shareholders will be determined by subtracting the following amounts from the Adjusted Coca Cola OPA Purchase Price: (i) $1.17 per share for the Coca Cola Holdback Trust as provided in Section 5.3(e) below, increased by an amount per share equal to 7.5% of the Net Subject Property Per Share Amount; (ii) $0.50 per share for the fees referred to in Section 5.3(g) with respect to Coca Cola, increased by a per share amount equal to the product of (x) the Net Subject Property Per Share Amount multiplied by (y) 0.0335; (iii) $0.52 per share related to Coca Cola's and Credesa's proportional share of the CBP Holdback Trust; and (iv) a total of $0.36 per share related to Coca Cola's and Credesa's portion of the fees set forth in clause (i)(B) of the immediately preceding paragraph. In connection with such OPAs, the Buyer will publish the notices and notify the National Securities Commission of Panama about each OPA, according to the laws of the Republic of Panama. The OPAs shall be made in accordance with the terms and conditions of this Agreement, the tender offer documents and the following: (a) each shareholder that properly accepts, tenders and does not subsequently revoke shares in either OPA (an "Accepting Shareholder" and collectively, the "Accepting Shareholders") shall, on an individual basis and without limitation on liability, make customary and appropriate representations and warranties regarding organization and related matters, title of its shares, governmental and regulatory authorizations, conflicts, legal proceedings and brokerage as reasonably determined by Buyer (the "Individual Shareholder Representations"); (b) each Accepting Shareholder in the OPA for CBP will (in addition to the Individual Shareholder Representations), by accepting, tendering and not revoking, its shares in the OPA be deemed to confirm the representations and warranties set forth in Article II hereof with respect to CBP and its Subsidiaries, provided that the liability of such 12 Accepting Shareholder shall be on a several, pro rata basis and shall be limited to and governed by the CBP Holdback Trust; (c) each Accepting Shareholder in the OPA for Coca Cola will (in addition to the Individual Shareholder Representations), by accepting, tendering and not revoking, its shares in the OPA be deemed to confirm the representations and warranties set forth in Article II hereof with respect to Coca Cola and its Subsidiaries (other than CBP and its Subsidiaries), provided that the liability of such Accepting Shareholder shall be on a several, pro rata basis and shall be limited to and governed by the Coca Cola Holdback Trust; (d) the OPA for CBP shall provide that US$1.10 per share of the CBP Purchase Price shall be paid and held in a trust (the "CBP Holdback Trust") substantially in the form of Exhibit C hereto to compensate Buyer for breaches of the representations, warranties, covenants and other matters provided for in the CBP Holdback Trusts and to be released, subject to Section 5.9 hereof, to the Accepting Shareholders in the OPA for CBP as provided therein in case such compensation is not required; (e) the OPA for Coca Cola shall provide that US$1.17 per share of the Purchase Price shall be paid and held in a trust (the "Coca Cola Holdback Trust") substantially in the form of Exhibit D hereto to compensate Buyer for breaches of the representations, warranties, covenants and other matters provided for in the Coca Cola Holdback Trust and to be released, subject to Section 5.9 hereof, as provided in the OPA for Coca Cola in case such compensation is not required; (f) it is intended that the two OPAs shall be launched simultaneously, with the OPA for CBP to close 30 days thereafter (or such longer period as required by applicable law) and with the OPA for Coca Cola to close as soon as practicable thereafter (but in no event more than 10 business days thereafter) in order to allow Coca Cola and Credesa to tender their shares of CBP in the CBP OPA, receive the proceeds therefrom and, in the case of Credesa, to distribute the proceeds to its shareholders as provided in Section 5.7 hereof; (g) the reasonable fees, commissions and/or expenses of the legal and investment advisors specified in Schedule 5.3(g) hereof shall be deducted from the proceeds payable to the Accepting Shareholders (after deducting the amounts held in the Holdback Trusts) and shall be paid directly to such advisors by the relevant Trustee; (h) each OPA shall provide for equality of terms and conditions among the shareholders of each Company; (i) the Buyer agrees not to tender the Shares in the OPA for Coca Cola described in this Section 5.3 in order to ensure that all of the shareholders (other than the Buyer) can fully participate in the Coca Cola OPA Purchase Price and receive the Coca Cola OPA Purchase Price; and (j) the Buyer may include such other terms and conditions in either OPA as, based on the advice of counsel, are necessary or advisable under Panama law, provided that 13 such terms and conditions may not be contrary to this Section 5.3 or any provision of this Agreement or adversely affect the terms and conditions of this Section 5.3 or the Agreement. 5.4 OPA Trusts. (a) To ensure Buyer's obligation to cause Coca Cola to launch the self-OPA for Coca Cola, Coca Cola shall, immediately upon receipt of the Purchase Price, place US$84,114,180.65 in trust pursuant to the terms and conditions of the trust agreement ("Coca Cola OPA Trust") attached hereto as Exhibit E. (b) To ensure Buyer's obligation to launch the OPA for CBP, Buyer, shall, contemporaneously with the execution of this Agreement, place US$51,895,539.00 in trust pursuant to the terms and conditions of the trust agreement ("CBP OPA Trust") attached hereto as Exhibit F. 5.5 Holdback Trusts. (a) the Buyer shall, contemporaneous with the execution of this Agreement, place US$4,228,525.40 in trust pursuant to the terms and conditions of the CBP Holdback Trust; and (b) the Seller shall, contemporaneous with the execution of this Agreement, place US$4,603,066.65 in trust pursuant to the terms and conditions of the Coca Cola Holdback Trust. 5.6 Approval of Tender. As soon as practicable, but no later than 20 days after the OPA for CBP is launched, the Buyer shall cause Coca Cola and Credesa to call and hold meetings of shareholders to consider the tender of their respective shares in CBP pursuant to the OPA for the purchase of the CBP shares. 5.7 Credesa Dividend. As soon as practicable, but not later than 15 days after the OPA for CBP is consummated, Buyer shall cause Coca Cola to cause Credesa to distribute a dividend to its shareholders in an amount equal to the proceeds (if any) received by Credesa for the sale of its shares in Coca Cola and CBP. 5.8 Subject Property. (a) Coca Cola shall use commercially reasonable efforts to sell the Subject Property (as defined below) prior to the Subject Property Termination Date. If, prior to the Subject Property Termination Date, Coca Cola sells the Subject Property, then the Buyer shall calculate the Net Subject Property Per Share Amount, and Coca Cola shall promptly deposit 92.5% of the Net Subject Property Amount in the Coca Cola OPA Trust and 7.5% of the Net Subject Property Amount in the Coca Cola Holdback Trust. (b) For purposes of this Agreement, the following terms shall have the meanings set forth below: 14 "Net Subject Property Per Share Amount" means the Net Subject Property Amount divided by 3,934,245 (or such number that represents 50% (minus one share) of the issued and outstanding shares of Coca Cola common stock immediately after the execution of this Agreement). "Net Subject Property Amount" means (X) the difference between (1) the purchase price for the Subject Property actually received by Coca Cola in cash or cash equivalents (as such term is defined by IAS) in respect of the sale of the Subject Property prior to the Subject Property Termination Date; less (2) $78,362.00; less (3) the book value of the Subject Property as reflected in the consolidated balance sheet (contained as part of the Financial Statements) of the Seller as of August 31, 2002; less (4) all costs and expenses (including, without limitation, all Taxes, as reasonably determined by the Buyer) incurred or accrued in connection with such sale. For the avoidance of doubt, all funds received by Coca Cola in respect of the sale of the Subject Property after the Subject Property Termination Date shall be excluded from the Net Subject Property Amount. "Subject Property" means the following properties belonging to Orinvest, Inc. to wit: (a) Real Estate property No. 50946, registered in volume 1198, page 340 of the Panama Province Property Section of the Public Registry of the Republic of Panama, with an area of approximately 5,109.83 square meters, and (b) Real Estate property No. 50956, registered in volume 1198, page 346 of the Panama Province Property Section of the Public Registry of the Republic of Panama, with an area of approximately 4,208.90 square meters. Both properties are adjacent and are located across the street from the physical plant installations of Cerveceria Panama, S.A. "Subject Property Termination Date" means the earlier of: (a) 21 days from the date of this Agreement and (b) the first date that either OPA described in Section 5.3 hereof is launched. 5.9 Certain Buyer's Rights. (a) Notwithstanding anything contained herein to the contrary, if any Proceeding is brought by any Person, against any of the Buyer, a Sponsor, the Seller or CBP: (i) that enjoins, rescinds or voids the sale of the Shares (or any portion thereof) or has the effect of materially and adversely restricting, limiting or delaying the ability of the Buyer to gain or maintain ownership and control of a majority of the issued and outstanding shares of capital stock of the Seller or CBP (directly or indirectly) or exercise any of the rights or any of the economic benefits of ownership of the Shares (or any portion thereof), including without limitation the ability of the Buyer to elect the majority of the directors of the Seller or CBP or operate the business of either the Seller or CBP in such manner as the Buyer directs (subject to the rights set forth in Section 5.10); or (ii) that, in the opinion of Dr. Eloy Alfaro (or a partner of Tapia, Linares and Alfaro if Dr. Alfaro is unavailable), such Proceeding, based upon the facts presented and applicable law, is reasonably likely to enjoin, rescind or void the sale of the Shares (or any portion thereof) or is reasonably likely to materially and adversely restrict, limit or delay the ability of the Buyer to gain or maintain ownership and control of a majority of the shares of the issued and outstanding capital stock of the Seller or CBP (directly or indirectly) or exercise any of the rights or any 15 of the economic benefits of ownership of the Shares (or any portion thereof), including without limitation, the ability of the Buyer to elect the majority of the directors of the Seller or CBP or operate the business of either the Seller or CBP in such manner as the Buyer directs (subject to the rights set forth in Section 5.10); then the Buyer shall, subject to Section 5.9(b), have the right (such right to be in addition to any other rights that the Buyer may have) but not the obligation, to rescind the sale of the Shares, this Agreement and all of the transactions contemplated hereby and to return the Buyer and the Seller to its respective position as it existed immediately prior to execution of this Agreement, including without limitation, the return to the Buyer of all funds paid pursuant to this Agreement and the agreements contemplated hereby in exchange for the return of the Shares to Seller. (b) The right of the Buyer described in Section 5.9(a) shall be the sole and exclusive decision of the Buyer for a period (the "Unconditional Period") that shall expire 15 days after the latest of: Buyer's receipt of written notice of (i) a Proceeding that qualifies as a Proceeding under Section 5.9(a)(i); (ii) the date that any Proceeding ripens into a Proceeding that meets the qualifications of Section 5.9(a)(i) and (iii) the date that the opinion described in Section 5.9(a)(i) of Dr. Eloy Alfaro (or a partner of Tapia, Linares and Alfaro if Dr. Alfaro is unavailable) is rendered. Upon the expiration of the Unconditional Period, Buyer may only exercise the right of Buyer described in Section 5.9(a) with the approval of Representative(s) under the trust agreements referred to in Section 4.1 and the unanimous approval of all of the members of the Board of Directors of the Seller. The foregoing notwithstanding, the right of Buyer described in Section 5.9(a) shall in all cases expire on the earlier of the consummation of the Coca Cola OPA or January 31, 2003. 5.10 Certain Obligations of Buyer. (a) Buyer shall, from the date hereof until the closing of the OPA for Coca Cola, vote its shares in favor of the election of the four current directors of Coca Cola listed in Schedule 4.1 and shall not permit Coca Cola to take any of the following actions ("Major Corporate Actions") without the prior consent of a majority of such four directors: (i) amend the articles of incorporation or bylaws in a manner that is adverse to the rights of minority shareholders; (ii) sell all or substantially all of the assets of the company; (iii) dissolve or liquidate the Company; (iv) cancel registration of the Company with the Comision Nacional de Valores or the stock exchange in Panama; (v) issue new shares of the capital stock of the Company without first granting all shareholders preemptive rights to participate in such issuance; (vi) make or declare a dividend or distribution to shareholders; (vii) enter into transactions with affiliates that are not either (x) on an arms-length basis or (y) with a direct or indirect subsidiary of Coca Cola; or (viii) change the Company's principal line of business. (b) Buyer shall, if the OPA for Coca Cola has not been closed for any reason by January 31, 2003, promptly amend the articles of incorporation of Coca Cola to provide that until the closing of the OPA for Coca Cola: (i) the Major Corporate Actions (with the exception of clause (vi) of Section 5.10(a) that will continue to require the consent of the directors listed in Schedule 4.1) shall require the approval of 75% of the issued and outstanding shares of capital stock of Coca Cola; and (ii) the shareholders of Coca Cola 16 other than the Buyer shall have the ability to elect four of the nine members of the board of directors of Coca Cola through cumulative voting rights. (c) Buyer shall, from the date hereof until the close of the OPA for CBP, vote its shares in favor of the election of the four current directors of CBP listed in Schedule 4.1 and shall not permit CBP to take any Major Corporate Action with respect to CBP without the prior consent of a majority of such three directors. (d) Buyer shall, if the OPA for CBP has not been closed for any reason by January 31, 2003, promptly amend the articles of incorporation of CBP to provide that until the closing of the OPA for CBP: (i) the Major Corporate Actions (with the exception of clause (vi) of Section 5.10(a) that will continue to require the consent of the directors listed in Schedule 4.1) shall require the approval of 75% of the issued and outstanding shares of capital stock of CBP; and (ii) the shareholders of CBP other than the Seller shall have the ability to elect three of the eight members of the board of directors of CBP through cumulative voting rights. (e) Notwithstanding anything herein to the contrary, all actions required or contemplated by this Agreement shall be deemed approved by all parties hereto and the minority rights provided by this Section 5.10 shall not apply to any such action, including without limitation, the right of any Company or Subsidiary to tender shares pursuant to the OPAs. 5.11 Officers of the Companies and Subsidiaries. All officers of each Company and each Subsidiary shall resign from all officer's positions (e.g., President, Vice-President, Secretary and Treasurer) with respect to the Board, but to the extent such officer is also an employee of the Company or any Subsidiary, such resignation shall not affect such officer's status as an employee. The Companies shall, contemporaneous with the execution of this Agreement, cause each officer to provide the Buyer with a letter of resignation (the "Officers' Letters") to such effect in form and substance reasonably acceptable to Buyer. 5.12 Distribution of Funds from CBP Holdback. (a) Upon receipt of any funds from the CBP Holdback Trust, Coca Cola shall allocate such funds, on a pro rata basis, to the shareholders of record of Coca Cola as of the date immediately prior to the date of issuance of the Shares, provided that the funds related to any shareholders of Coca Cola as of such date that do not become Accepting Shareholders shall be retained by Coca Cola. (b) Upon receipt of any funds from the CBP Holdback Trust, Credesa shall dividend such funds to its shareholders of record as of the date immediately prior to the date of issuance of the Shares, including Coca Cola. Upon receipt of such funds from Credesa, Coca Cola shall distribute the funds in the manner set forth in Section 5.12(a). 5.13 Good Faith. The parties will act in good faith to perform their respective obligations under this Agreement. 17 ARTICLE VI GENERAL 6.1 Amendments; Waivers. This Agreement and any related document or agreement may only be amended by written agreement between the Buyer and the Seller with the consent of Representative. No waiver of any provision or consent to any exception from the terms of this Agreement will be in force unless done in writing and signed by the obliged parties, and will only be in force for the specific purpose, matter and case provided. 6.2 Applicable Law. This Agreement will be governed by and will be interpreted according to the laws of the Republic of Panama. 6.3 Arbitration. Any controversy, dispute or claim between the parties arising out of or related to this Agreement, or the breach hereof, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce("ICC"). The dispute shall be referred to arbitration before a panel of three arbitrators, one of whom shall be selected by the Buyer, one of whom shall be selected by the Seller and the remaining arbitrator to be mutually selected by the other two arbitrators, provided that if the amount in controversy is less than US$250,000, there shall be one arbitrator appointed as provided in the rules of the ICC. Each arbitrator shall be fully bi-lingual in English and Spanish and is qualified to practice law in a civil law jurisdiction. Any such arbitration shall be conducted in Panama City, Republic of Panama. The award rendered by the arbitrator(s) shall be at law (and not in equity), shall be subject to the limitations on liability provided in this Agreement and shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Any party shall be entitled to seek interim measures of protection in the form of pre-award attachment of assets or injunctive relief. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Agreement and that, except as provided in Section 5.9, the parties hereto shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and the parties further agree to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Agreement but shall be in addition to all other remedies available at law or equity to the Companies. At any hearing of oral evidence, each party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other party and each party shall have the right to conduct reasonable discovery of the other party. 6.4 No Assignment. Neither this Agreement or any right or obligation under this Agreement may be assigned by any of its parties. 6.5 Confidentiality. The parties agree that they will not divulge to any other Person information related to this Agreement and the negotiations that have been conducted for the signing of the same, and that they will take the measures necessary so that their advisors, representatives and employees comply with this obligation and, to the extent practicable, will avoid that any information related to this Agreement be published or 18 known, except by the publications or communications that the parties should carry out according to the legislation that is applicable in their respective countries, in case that such disclosure is required by judicial or administrative order from competent authority or by legal provision or by mutual agreement among the parties. To the extent that it may be required by the law or that is necessary for the launching of each OPA, the duty of confidentiality of the parties set out in this section will terminate and will expire automatically at the moment in which the Buyer launches such OPA with respect to the information that the law or such OPA requires its disclosure. 6.6 Notices. Any notices or another communication under this Agreement, must be given in writing and be (a) delivered to the address indicated hereinafter; (b) transmitted by telefax or by a telecommunication mechanism, provided that any notice given in this form must also be sent by mail as provided in clause (c); or (c) sent by mail with 48 hour delivery (courier), or by certified or registered mail, postage paid and receipt confirmation requested as follows: If to the Buyer, addressed to: CA BEVERAGES, INC. c/o TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama with copies to: FABREGA BARSALLO MOLINO & MULINO Omega Bldg., M Floor Samuel Lewis Ave. & 53rd St. P.O. Box 4493, Panama 5, Rep. of Panama Attention: Juan Pablo Fabrega/Jose Raul Mulino Fax: (507) 263-6983 and TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attention: Eloy Alfaro / Mario E. Correa Fax: (507) 263-5305 and PANAMCO L.L.C. 19 701 Waterford Way Suite 800 Miami, FL 33126 Attention: General Counsel Fax: (786) 388-8191 If to the Seller, addressed to: COCA COLA DE PANAMA CIA. EMBOTELLADORA, S.A. Apartado 4411, Zona 5 Urbanizacion Industrial, Via Ricardo J. Alfaro Panama, Republic of Panama Attention: Joaquin J. Vallarino Jr. Fax: 507-236-5727 with copies to: ARIAS, ALEMAN & MORA Apartado 8799, Zona 5 Calle 50 y Calle 74, San Francisco Edificio PH Interfinanzas, Piso 16 Panama, Republic of Panama Attention: Alvaro Arias Fax: 507-270-0174 and ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attention: Francisco Arias G. Fax: 507-205-7001 or to any other address or to any other person that any party has appointed in last instance through a notice to the other party. Each one of the referred notices or communications will be effective (i) if given by telefax or with a telecommunications mechanism, when transmitted to the corresponding number specified in (or according to) this Section 6.6 and the sender device confirms sending and receipt; (ii) if sent by 48 hour delivery mail, two (2) working day and, if sent by certified or registered mail, seven (7) working days after placed in the mail with first class postage paid, addressed as previously explained; or (iii) if issued by any other means, when actually received at the address mentioned. Any notices required to be delivered to the Representative hereunder shall be sent to the address(es) set forth in the applicable Trust Agreement. 20 6.7 Expenses. Subject to Section 5.3(g) with respect to, the tender documents for the OPAs and as otherwise provided or contemplated hereby, the Seller and the Buyer will assume their own expenses in relation to the negotiation, preparation and compliance of this Agreement and the issuance of the Shares provided herein, including but not limited, to the fees, expenses and disbursements of their respective investment bankers, accountants and legal counsel. 6.8 Severability. If any provision of this Agreement is considered invalid, illegal or inapplicable by any governmental entity, the other provisions of this Agreement will remain in full force and effect. 6.9 Limitation of Liability and Survival of Representations and Warranties. (a) The Seller assumes the responsibility for the accuracy and truthfulness of the representations and warranties made in Article II of this Agreement. Such representations and warranties shall be in force for the respective periods set forth in the Coca Cola Holdback Trust and the CBP Holdback Trust. (b) The Buyer assumes responsibility for the accuracy and truthfulness of the representations and warranties made in Article III of this Agreement. Said representations and warranties will be in force for a period of 36 months from the date hereof. (c) The liability of each Accepting Shareholder shall be unlimited with respect to Individual Shareholder Representations made in the OPA and shall be limited on a several, pro rata basis to the amount in the Coca Cola Holdback Trust and CBP Holdback Trust with respect to the representations of the Accepting Shareholders referred in Section 5.3(b) and (c). Such representations shall be in force for the period provided in the Coca Cola Holdback Trust and CBP Holdback Trust. 6.10 Sole Agreement. This Agreement and its Exhibits and Schedules (which form integral parts of the Agreement) contain all the agreements, understandings, commitments and obligations of the parties related to the rights and obligations of the parties set out in this Agreement and, therefore, subrogates, replaces and leaves without effect any prior agreement, covenant or understanding among the parties, whether verbal or written, relating to the subject matter hereof. 6.11 Execution in Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement. 6.12 Language. This Agreement has been negotiated and executed in the English Language. The parties acknowledge that a translation into Spanish may be required for purposes of filings with governmental authorities; in such case the parties shall agree on the Spanish translation by initialing the same. The parties agree that, in case of conflict between the English and Spanish translations of this Agreement, the English version shall govern. 21 [THE SIGNATURES APPEAR IN THE FOLLOWING PAGES] 22 [SIGNATURE PAGE OF THE SHARE SUBSCRIPTION AGREEMENT] IN WITNESS WHEREOF, each one of the parties signs this Agreement as of the date first above written. "BUYER" CA BEVERAGES, INC. By: /s/ Han de Goederen ------------------------------- Name: Han de Goederen Title: President "SELLER" COCA COLA DE PANAMA CIA. EMBOTELLADORA, S.A. By: /s/ Roberto Ramon Vallarino Cox --------------------------------- Name: Roberto Ramon Vallarino Cox Title: Vice President and Director 23 EXHIBIT A - LEGAL OPINION OF ARIAS, FABREGA AND FABREGA EXHIBIT B - RESOLUTIONS OF BOARD OF DIRECTORS WITH RESIGNATIONS AND APPOINTMENT OF NEW MEMBERS IN COMPANIES EXHIBIT C - THE CBP HOLDBACK TRUST EXHIBIT D - THE COCA COLA HOLDBACK TRUST EXHIBIT E - THE COCA COLA OPA TRUST EXHIBIT F - THE CBP OPA TRUST EXHIBIT G - FORM OF L/C EXHIBIT H - OPINION OF TAPIA, LINARES AND ALFARO EX-10.50 9 ex10_50.txt COCA COLA OPA TRUST AGREEMENT EXHIBIT 10.50 TRUST AGREEMENT - COCA COLA OPA TRUST This TRUST AGREEMENT - COCA COLA OPA TRUST, dated as of October 2, 2002 (this "Trust Agreement"), is entered into by and among COCA COLQ DE PANAMA COMPANIA EMBOTELLADORA, S.A., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama (the "SETTLOR"), hereby represented by Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229; BANCO GENERAL, S.A., a corporation organized and existing pursuant to the laws of the Republic of Panama (the "TRUSTEE"), hereby represented by Jean-Pierre Leignadier, Panamanian, of legal age, with personal identity card No. 8-390-635; FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA, a private foundation organized and existing pursuant to the laws of the Republic of Panama, as Representative ("REPRESENTATIVE"), hereby jointly represented by Alvaro Arias, Panamanian, of legal age, with personal identity card No. 8-169-678, and Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229, as Council Members acting jointly, duly authorized pursuant to Section 13 of its Foundation Charter, representing and acting on behalf of the shareholders of the Settlor who, in accordance with the Tender Offer Documents (as defined below) and in compliance with the laws of the Republic of Panama, accept the OPA (as defined below), do not revoke such acceptance and consummate such acceptance by tendering their common shares of Settlor (the "ACCEPTING SHAREHOLDERS"); and CA BEVERAGES, INC., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama ("CAB"), hereby represented by Han de Goederen, male, of legal age, citizen of the Netherlands, with passport No. Z01328951, duly authorized to execute this agreement pursuant to a resolution of the Board of Directors of CAB dated September 30, 2002. WHEREAS, on the date first written above Settlor and CAB have entered into a Share Subscription Agreement (the "SHARE SUBSCRIPTION AGREEMENT") whereby Settlor has agreed to issue and sell to CAB, who has agreed to purchase, three million nine hundred thirty-four thousand two hundred forty-six (3,934,246) newly issued no par value common shares of the Settlor (or such amount corresponding to fifty percent (50%) plus one share of the total issued and outstanding no par value common shares of the Settlor) (the "SHARES"); WHEREAS, pursuant to the Share Subscription Agreement, the Settlor has agreed to launch a Public Tender Offer in the Republic of Panama (the "OPA") to acquire up to three million nine hundred thirty-four thousand two hundred forty-five (3,934,245) issued and outstanding no par value common shares of the Settlor; and WHEREAS, the execution and delivery of this Trust Agreement (including the deposit of the Trust Amount (as defined below)) is a condition to the consummation of the transactions contemplated by the Share Subscription Agreement. NOW, THEREFORE, Settlor, the Trustee, CAB and Representative hereby agree as follows: 1. Constitution of the Trust. Settlor, the Trustee, CAB and Representative hereby enter into an irrevocable trust agreement under the provisions of Law 1 of January 5, 1984 of the Republic of Panama, which regulates trust agreements in the Republic of Panama. 2. Objectives of the Trust. This Trust has the purpose of ensuring compliance with the obligations of the Settlor and CAB under the Share Subscription Agreement and, consequently, has as its objectives: (a) To permit the Trustee to pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA; (b) To make available to the Settlor the funds necessary to launch and consummate the OPA, as intended under the Share Subscription Agreement; (c) To guarantee to the Accepting Shareholders that the Trust Assets (as defined below) will be available for the payment for their shares on a per share amount (the "NET COCA COLA AMOUNT") equal to the greater of the Net Basic Coca Cola Purchase Price (as defined in the Share Subscription Agreement) and the Net Adjusted Coca Cola Purchase Price (as defined in the Share Subscription Agreement) and in the manner provided for in Section 7(d)(i) hereof; (d) To pay the fees described in Section 5.3(g) of the Share Subscription Agreement; (e) To provide to Settlor and CAB that, upon consummation of the OPA, the balance of the Trust Assets shall be distributed in accordance with Sections 7(d)(ii), 7(d)(iii) and 7(d)(iv) hereof; and (f) To provide for the return of the Trust Assets to CAB in return for the Shares upon the occurrence of an event described in Section 10 hereof. 3. Appointment of Beneficiaries. Subject to Section 10 hereof, Settlor hereby appoints the following as Beneficiaries of the Trust (also known under the law of the Republic of Panama as "Fideicomisarios"), and consequently, as Beneficiaries of the Trust Assets: (a) Primary Beneficiaries: The Accepting Shareholders; (b) Secondary Beneficiary: CAB, with respect to earnings accrued on the Trust Amount in accordance with Section 7(c) or Section 8 hereof; and (c) Tertiary Beneficiary: Settlor, with respect to the balance of the Trust Assets. 4. The Trust Amount. The parties acknowledge that, on the date hereof pursuant to the Share Subscription Agreement, CAB has made a capital contribution to the Settlor in the aggregate amount of US$88,717,247.30, by delivery of US$61,570,956.80 in cash 2 and an irrevocable standby letter of credit issued by ING Bank, N.V., Curacao Branch, in the amount of US$27,146,290.50, naming Settlor as beneficiary and assignable at the option of Settlor to the Trustee (the "LETTER OF CREDIT"). The Settlor shall transfer, assign or deliver to the Trustee in trust, with irrevocable instructions as described in the form of instruction letter attached hereto as Exhibit A: (i) the sum of US$56,967,890.15 in cash and the Letter of Credit; (ii) the Net Subject Property Amount multiplied by 92.5%; (iii) upon Settlor's receipt thereof, an amount equal to the funds received by Settlor as a result of the Public Tender Offer for shares of Cervecerias Baru-Panama, S.A.; and (iv) upon Settlor's receipt thereof, an amount equal to the dividend from Settlor's subsidiary Crecimiento y Desarrollo, S.A. made in accordance with Section 5.7 of the Share Subscription Agreement (all such amounts in clauses (i) through (iv) above are collectively referred to herein as the "TRUST AMOUNT"). 5. Appointment of the Trustee; Deposit of Trust Amount. Settlor hereby constitutes and appoints the Trustee as, and the Trustee hereby agrees to assume and perform the duties of, trustee under and pursuant to this Trust Agreement. The Trustee acknowledges receipt of an executed copy of the Share Subscription Agreement and, as of the date hereof, of the Trust Amount (except for the items set forth in clauses (ii), (iii) and (iv) of Section 4) from Settlor as provided in the Share Subscription Agreement. Settlor shall deliver to the Trustee, immediately upon launching the OPA, a copy of the prospectus (as may be amended from time to time) and the exhibits and schedules attached thereto that are delivered to shareholders in respect of the OPA (collectively, the "TENDER OFFER DOCUMENTS"). Trustee hereby accepts such appointment and agrees to hold, invest and disburse the Trust Assets in accordance with this Trust Agreement. 6. The Trust Assets. The Trust Amount, all earnings accrued thereon in accordance with Section 7(c) or Section 8 hereof and any shares or other assets placed in trust in accordance with the terms of this Trust Agreement (the "TRUST ASSETS") shall be held by the Trustee, to be used as specifically provided in this Trust Agreement. Except as expressly provided in Section 13 hereof, the Trustee does not have any interest in the Trust Amount deposited hereunder or the Trust Assets but is serving as Trustee only and having only possession thereof in that capacity. 7. Use and Release of Trust Assets by the Trustee. (a) The Trustee may only use the Trust Assets in the manner provided by this Trust Agreement. (b) The Trustee may pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA. (c) Unless and until the Trustee receives joint written instructions from CAB and the Representative pursuant to Section 8 hereof, the Trustee shall maintain the Trust Assets in an interest-bearing overnight account at Banco General, S.A. 3 (d) After the expiration of the relevant acceptance period of the OPA as set forth in the Tender Offer Documents (the "Acceptance Termination Date"), the Trustee shall proceed as follows: (i) The Trustee will deliver to Banco General, S.A. or another qualified financial institution appointed by Settlor to serve as the paying agent of the OPA (and performing the duties of a paying agent in connection with the OPA as required by the laws of the Republic of Panama) (the "PAYING AGENT") out of the Trust Assets an amount equal to the Net Coca Cola Amount multiplied by the number of shares tendered by the Accepting Shareholders. For that purpose, the Paying Agent shall certify (the "PAYING AGENT CERTIFICATION") to the Trustee the number of shares that each such Accepting Shareholder has tendered and sold and the aggregate amount to be paid to each such Accepting Shareholder (the "CERTIFIED AMOUNT") pursuant to the Tender Offer Documents. Promptly after the Acceptance Termination Date and receipt of the Paying Agent Certification, the Trustee shall deliver the Certified Amount to the Paying Agent. (ii) Representative shall notify Trustee of the name, address and related information about the persons to receive the fees described in Section 5.3(g) of the Share Subscription Agreement and promptly after the Acceptance Termination Date and delivery of the Certified Amount to the Paying Agent, the Trustee shall pay an amount equal to $0.50 per share (or such increased amount if an adjustment is made pursuant to the third paragraph of Section 5.3 of the Share Subscription Agreement) properly tendered by the Accepting Shareholders. (iii) Promptly after the Acceptance Termination Date and delivery of the payments under Section 7(d)(i) hereof, the Trustee shall notify CAB of the amount and form of the remaining Trust Assets. During the thirty (30) day period after CAB's receipt of such notice, CAB shall have the right to exchange such number of its Shares as CAB shall determine for all or a portion of the remaining Trust Amount, based on a per share price of the greater of $22.55 or the Adjusted Coca Cola OPA Purchase Price (as defined in the Share Subscription Agreement). In order to exercise the exchange rights granted hereby, CAB shall deliver notice to the Trustee together with a certificate representing the Shares and an assignment or endorsement thereof with respect to the number of Shares to be exchanged. Promptly thereafter, Trustee shall pay to CAB an amount equal to the number of exchanged Shares times the greater of $22.55 or the Adjusted Coca Cola OPA Purchase Price (as defined in the Share Subscription Agreement), it being understood that such payment may, at the option of CAB, be effected through the draw, assignment, expiration or cancellation of the Letter of Credit. 4 (iv) Promptly after payments are made in accordance with clause (ii) and (iii) above, the Trustee shall pay to CAB, by wire transfer in immediately available funds, the portion of the Trust Assets attributable to earnings accrued on the Trust Amount. (v) After payment by the Trustee to CAB in accordance with clauses (ii), (iii) and (iv) above, the Trustee promptly shall return to Settlor any remaining Trust Assets. (e) Notwithstanding anything in this Trust Agreement to the contrary, the Trustee shall have the right to draw upon the Letter of Credit only if: (i) upon the closing of the OPA, the cash portion of the Trust Assets is insufficient to pay the Certified Amount to the Paying Agent, provided that the right to draw upon the Letter of Credit shall be limited to the amount of such insufficiency; (ii) within five (5) business days after the Trustee has received written notice from Representative (with a copy to CAB and Settlor) stating that, in Representative's opinion, CAB has willfully breached its obligations under Section 5.3 of the Share Subscription Agreement and, to the knowledge of Representative after due inquiry, no Proceeding (as defined in the Share Subscription Agreement) exists with respect to the Share Subscription Agreement or the OPA (the "REPRESENTATIVE NOTICE"), the Trustee has not received written notice from CAB or Settlor objecting to the statements made in the Representative Notice; (iii) two (2) business days prior to the expiration of the Letter of Credit unless prior to such time the Trustee has received an extension of the expiration date of the Letter of Credit; or (iv) the Trustee receives written instructions from CAB granting the Trustee such right. 8. Investment of the Trust Assets; Taxes. (a) As per written instructions of CAB and the Representative delivered to the Trustee, the Trustee shall directly invest and reinvest the Trust Assets, in any of the following kinds of investments, or in any combination thereof: (i) Bonds or other obligations of, or guaranteed by, the government of the United States of America or any State thereof or the District of Columbia, or agencies of any of the foregoing, having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the date on which this Trust Agreement terminates in accordance with Section 9 or Section 10 hereof (the "TERMINATION DATE"); 5 (ii) Commercial paper of United States issuers rated, at the time of the Trustee's investment therein or contractual commitment providing for such investment, at least P-1 by Moody's Investors Service, Inc. ("MOODY'S") and A-1 by Standard & Poor's Corporation ("S&P") and having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the Termination Date; (iii) Demand or time deposits in, certificates of deposit of or bankers' acceptances issued by (A) Banco General, S.A. or a depository institution or trust company incorporated under the laws of Panama or the laws of the United States of America, any State thereof or the District of Columbia having a combined capital and surplus of US$10 billion, or (B) a Panamanian or United States branch office or agency of a foreign depository institution or trust company if, in any such case, the depository institution, trust company or office or agency is rated at least P-l by Moody's and A-1 by S&P (any such institution described in clause (A) or (B) being herein called a "PERMITTED BANK"), and having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the Termination Date; or (iv) Such other investments as CAB and the Representative shall jointly approve or direct in writing. The written instructions for the investment shall be given by CAB and the Representative to the Trustee. The Trustee shall notify CAB and the Representative of the amount of funds available to invest, in accordance with this Section 8(a). (b) Each of the foregoing investments shall be made in the name of the Trustee in accordance with this Trust Agreement. Notwithstanding anything to the contrary contained herein, the Trustee may, without notice to CAB or the Representative, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for release of any portion of the Trust Assets permitted or required hereunder, and Trustee shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. (c) The Trustee shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the Trust Assets. (d) Any interest or other income received on such investment and reinvestment of the Trust Assets shall become part of the Trust Assets. (e) All taxes (except for income taxes of the Trustee arising from the Fees (as defined below)), if any, in respect of the Trust Assets shall be allocable among and paid or reimbursed by the parties as set forth in Section 13 hereof. 9. General Termination. Subject to Section 10, this Trust Agreement and all obligations of the Trustee hereunder shall terminate on the earlier of: (i) the date that the 6 objectives established in Section 2 of this Trust Agreement have been fulfilled or (ii) the date on which CAB and Representative jointly notify the Trustee in writing of their agreement to terminate the Trust Agreement, subject to the Trustee's consent (such consent not to be unreasonably withheld). In connection with termination of this Trust Agreement pursuant to this Section 9, upon payment of all Fees due to the Trustee, the Trust Assets then held hereunder shall be distributed in accordance with Section 7(d). 10. Early Termination. If CAB exercises its rights of rescission under Section 5.9(a) of the Share Subscription Agreement, then (a) CAB (if such exercise shall occur during the Unconditional Period (as defined in the Share Subscription Agreement)) or CAB and Representative jointly (if such exercise shall not occur during the Unconditional Period) shall send notice of such exercise to the Trustee in the form attached as Exhibit B-1 or Exhibit B-2 hereto, as the case may be, (b) together with the delivery of such notice as described in clause (a) above, CAB shall deliver to the Trustee the certificate representing the Shares, duly endorsed in blank, (c) the Trustee shall deliver to CAB all of the Trust Assets (net of Fees due to the Trustee and net of the Trust Assets described in clause (ii) of Section 4 hereof, which Trust Assets shall be returned to Settlor), by wire transfer in immediately available funds, (d) the Trustee shall deliver the certificate representing the Shares to the Settlor for cancellation and (e) this Trust Agreement and all obligations of the Trustee hereunder shall terminate. 11. Duties and Obligations of the Trustee. The duties and obligations of the Trustee shall be limited to and determined solely by the provisions of this Trust Agreement and the certificates delivered in accordance herewith, and the Trustee is not charged with knowledge of or any duties or responsibilities in respect of any other agreement or document. In furtherance and not in limitation of the foregoing: (a) The Trustee shall not be liable for any loss of interest or earnings sustained as a result of investments made hereunder in accordance with the terms hereof, including any liquidation of any investment of the Trust Assets prior to its maturity effected in order to make a payment required by the terms of this Trust Agreement; (b) The Trustee shall be fully protected in relying in good faith upon any written certification, instruction, notice, direction, request, waiver, consent, receipt or other document that the Trustee reasonably believes to be genuine and duly authorized, executed and delivered; (c) The Trustee shall not be liable for any error of judgment, or for any act done or omitted by it, or for any mistake in fact or law, or for anything that it may do or refrain from doing in connection herewith; provided, however, that notwithstanding any other provision in this Trust Agreement, the Trustee shall be liable for its willful misconduct or gross negligence; (d) The Trustee may seek the advice of legal counsel selected with reasonable care (provided that the selection of such legal counsel shall require CAB's prior written consent, such consent not to be unreasonably withheld) in the event of any 7 dispute or question as to the construction of any of the provisions of this Trust Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel; (e) In the event that the Trustee shall in any instance, after seeking the advice of legal counsel pursuant to the immediately preceding clause, in good faith be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking any action in that instance and its sole obligation, in addition to those of its duties hereunder as to which there is no such uncertainty, shall be to keep the property affected by such uncertainty safely held in trust until it shall be directed otherwise in writing by CAB and Representative; provided, however, in the event that the Trustee has not received such written direction within thirty (30) days after requesting the same, it shall have the right to submit the issue to arbitration in accordance with Section 29 hereof; and (f) The Trustee may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through agents or attorneys selected with reasonable care. Nothing in this Trust Agreement shall be deemed to impose upon the Trustee any duty to qualify to do business or to act as fiduciary or otherwise in any jurisdiction other than the Republic of Panama and the Trustee shall not be responsible for and shall not be under a duty to examine into or pass upon the validity, binding effect, execution or sufficiency of this Trust Agreement or of any agreement amendatory or supplemental hereto. (g) The Trustee shall issue, or shall cause a financial institution (including Banco General, S.A.) to issue, a letter or a bank guarantee confirming the availability of sufficient funds to settle the obligations derived from the OPA, as required by applicable securities legislation of the Republic of Panama. 12. Cooperation. Settlor, CAB and Representative shall provide to the Trustee all instruments and documents within their respective powers to provide that are necessary for the Trustee to perform its duties and responsibilities hereunder. 13. Fees and Expenses; Indemnity. (a) Notwithstanding anything in this Section 13 to the contrary, the Trustee is authorized to deduct from earnings on the Trust Amount an acceptance fee of $10,000, and an annual fee of $25,000, both payable upon execution of this Trust Agreement. The annual fee will be payable thereafter on each anniversary of the execution of this Trust Agreement. The Trustee also shall be entitled to receive reasonable and customary out-of-pocket expenses incurred in connection with the performance of its duties hereunder. The fees, costs and expenses described in this Section 13(a) shall be referred to herein as "FEES". (b) The Trustee is authorized to, and may disburse to itself from the earnings on the Trust Amount, from time to time, the amount of any Fees due and payable to it 8 hereunder. If for any reason such earnings are insufficient to cover such Fees, CAB shall pay within the following thirty (30) days such amounts to make up such shortfall to Trustee upon the presentation of an itemized invoice. The Trustee shall notify CAB and Representative of any disbursement from the Trust Assets to itself in respect of any Fees under any provision of this Trust Agreement and shall furnish to CAB and Representative copies of all related invoices and other statements. (c) Prior to the consummation or termination of the OPA, CAB shall be liable for and shall reimburse and indemnify Trustee (and any predecessor Trustee) and hold Trustee harmless from and against one-half (1/2) of any and all claims, losses, actions, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) arising from or in connection with Trustee's administration of, or performance of duties and obligations pursuant to, this Trust Agreement; provided, however, that notwithstanding the foregoing, CAB shall not be required to indemnify the Trustee for any such claims, losses, actions, liabilities, costs, damages or expenses caused by its own gross negligence or own willful misconduct. In addition, when the Trustee acts on any information, instructions or communications (including, but not limited to, communications with respect to the delivery of securities or the wire transfer of funds) sent by telephone, telex or facsimile, the Trustee, absent gross negligence or willful misconduct, shall not be responsible or liable in the event such communication is not an authorized or authentic communication or is not in the form CAB sent or intended to send (whether due to fraud, distortion or otherwise). The Trustee shall have the right to offset an amount equal to one-half (1/2) of any indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described above against the Trust Assets. (d) Settlor shall be liable for one hundred percent (100%) of all indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described in Section 13(c) above that arise after consummation of the OPA (including payment of the Certified Amount to the Paying Agent) or termination of the OPA. (e) Notwithstanding anything in this Section 13 to the contrary, all of CAB's compensation, reimbursement and indemnification obligations set forth in this Section 13 shall be payable by CAB upon demand by the Trustee, and the failure of CAB to fund such obligations shall give rise to an additional claim by the Trustee with respect to the earnings on the Trust Amount. The obligations of CAB under this Section 13 shall survive any termination of this Trust Agreement and the resignation or removal of Trustee. 14. Resignation and Removal of the Trustee. (a) The Trustee may resign as such thirty (30) calendar days following the giving of written notice thereof to CAB and Representative. In addition, the Trustee may be removed and replaced on a date designated in a written instrument signed by 9 CAB and Representative and delivered to the Trustee. In the case of either such resignation or removal, CAB and the Representative jointly shall appoint a branch or affiliate located in the Republic of Panama of one of HSBC, BNP Paribas or Citibank, N.A. as the successor Trustee. Notwithstanding the foregoing, no such resignation or removal shall be effective until a successor Trustee has acknowledged its appointment as such as provided in Section 14(c). In either event, upon the effective date of such resignation or removal, the Trustee shall deliver the property comprising the Trust Assets (net of Fees due to the Trustee) to such successor Trustee, together with such records maintained by the Trustee in connection with its duties hereunder and other information with respect to the Trust Assets as such successor may reasonably request. (b) If a successor Trustee shall not have acknowledged its appointment as such as provided in Section 14(c), in the case of a resignation, prior to the expiration of thirty (30) calendar days following the date of a notice of resignation or, in the case of a removal, on the date designated for the Trustee's removal, as the case may be, because CAB and Representative are unable to agree on a successor Trustee, or for any other reason, the successor Trustee shall be appointed from the first of HSBC, BNP Paribas and Citibank, N.A. (in such order) to acknowledge its appointment as such, and such appointment shall be binding upon all of the parties to this Trust Agreement. (c) Upon written acknowledgment by a successor Trustee appointed in accordance with the foregoing provisions of this Section 14 of its agreement to serve as Trustee hereunder and the receipt of the property then comprising the Trust Assets, the Trustee shall be fully released and relieved of all duties, responsibilities and obligations under this Trust Agreement, subject to the provision contained Section 11(c) and such successor Trustee shall for all purposes hereof be the Trustee. 15. Notices. Any notices or another communication under this Trust Agreement, must be given in writing and be (a) delivered to the address indicated hereinafter; (b) transmitted by facsimile, provided that any notice given in this form must also be sent by mail as provided in clause (c); or (c) sent by mail with 48 hour delivery (courier), or by certified or registered mail, postage paid and receipt confirmation requested as follows: If to Settlor: COCA COLA DE PANAMA CIA. EMBOTELLADORA, S.A. Apartado 4411, Zona 5 Urbanizacion Industrial, Via Ricardo J. Alfaro Panama, Republic of Panama Attn: Joaquin J. Vallarino Jr. Facsimile: 507-236-5727 10 with copies (which shall not constitute notice) to: ARIAS, ALEMAN & MORA Apartado 8799, Zona 5 Calle 50 y Calle 74, San Francisco Edificio PH Interfinanzas, Piso 16 Panama, Republic of Panama Attn: Alvaro Arias Facsimile: 507-270-0174 and ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Francisco Arias G. Facsimile: 507-205-7001 If to the Trustee, to: BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier Facsimile: 507-265-0291 If to the Representative, to: FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA c/o Arias, Fabrega & Fabrega Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Alvaro Arias and Roberto R. Vallarino C., c/o Francisco Arias G. Facsimile: 507-205-7001 with a copy (which shall not constitute notice) to: ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama 11 Attn: Francisco Arias G. Facsimile: 507-205-7001 If to CAB, addressed to: CA BEVERAGES, INC. c/o TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 with copies (which shall not constitute notice) to: HEINEKEN INTERNATIONAL B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Attn: Rene Hooft Graafland Facsimile: +31-20-523-9790 PANAMCO L.L.C. 701 Waterford Way Suite 800 Miami, FL 33126 Attn: General Counsel Facsimile: (786) 388-8191 FABREGA BARSALLO MOLINO & MULINO Omega Bldg., M Floor Samuel Lewis Ave. & 53rd St. P.O. Box 4493, Panama 5, Rep. of Panama Attn: Juan Pablo Fabrega/Jose Raul Mulino Facsimile: (507) 263-6983 and TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 12 or to any other address or to any other person that any party has appointed in last instance through a notice to the other party. Each one of the referred notices or communications will be effective (i) if given by facsimile, when transmitted to the corresponding number specified in (or according to) this Section 15 and the sender device confirms sending and receipt; (ii) if sent by 48 hour delivery mail, two (2) working days and, if sent by certified or registered mail, seven (7) working days after placed in the mail with first class postage paid, addressed as previously explained; or (iii) if issued by any other means, when actually received at the address mentioned. 16. Bankruptcy of Settlor. In the event that there shall be filed by or against Settlor in any court pursuant to the bankruptcy laws of Panama or any other similar foreign, federal or state law providing for bankruptcy, insolvency, receivership or protection from creditors (collectively, the "BANKRUPTCY LAWS"), a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of the assets of Settlor, Settlor will be deemed to have waived, and therefore will not assert, any and all rights, remedies and recourses under the Bankruptcy Laws with respect to the Trust Assets, and the Trust Assets shall continue to be administered pursuant to the terms of this Trust Agreement, irrespective of such filing. 17. Severability. To the extent any provision of this Trust Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Trust Agreement. 18. Amendments, etc. This Trust Agreement may be amended or modified, and any of the terms hereof may be waived, only by a written instrument duly executed by or on behalf of all of the parties hereto. No waiver by any party of any term or condition contained in this Trust Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Trust Agreement on any future occasion. 19. Entire Agreement. This Trust Agreement constitutes the entire agreement between the parties relating to the holding, investment and disbursement of the Trust Assets and administration of the Trust Assets and sets forth in their entirety the obligations and duties of Trustee with respect to the Trust Assets; provided that any capitalized terms used but not defined herein shall have the meaning assigned to such terms in the Share Subscription Agreement. 20. Binding Effect. All of the terms of this Trust Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, executors, administrators, successors and assigns. 21. Representations and Warranties. CAB, Settlor and Representative each hereby represent and warrant (a) that this Trust Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (b) that the execution, delivery and performance of this Trust Agreement by CAB, Settlor and Representative do not and will not violate any applicable law or regulation. 13 22. Assignments. No party may assign any of its rights or obligations under this Trust Agreement without the prior written consent of the other parties, provided that no such consent shall be required for any such assignment by CAB to any of the Sponsors (as defined in the Share Subscription Agreement) or any direct or indirect subsidiary of the Sponsors. 23. Execution in Counterparts; Facsimile Signatures. This Trust Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction. Facsimile signatures shall be treated as originals. 24. Governing Law. This Trust Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Trust Agreement shall be governed and construed in accordance with the laws of the Republic of Panama, particularly Law 1 of 1984, without regard to conflicts of law or private international law rules. 25. Domicile. The parties choose as domicile for the Trust the City of Panama, Republic of Panama. 26. Business Day. For all purposes of this Trust Agreement, the term "business day" shall mean a day other than Saturday, Sunday or any day on which banks located in the Republic of Panama are authorized or obligated to close. 27. Headings. The headings used in this Trust Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 28. Resident Agent of the Trust. In compliance with Section 9 of article 9, of Law No. 1 of 1984, the law firm Tapia Linares & Alfaro, with address at P.O. Box 7412, Edificio Plaza 2000, 4th Floor, Avenida Gral. Nicanor A. de Obarrio (Calle 50), Panama, Republic of Panama, is hereby appointed as the Resident Agent for this Trust. 29. Arbitration. Any controversy, dispute or claim between the parties arising out of or related to this Trust Agreement, or the breach hereof, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The dispute shall be referred to arbitration before a panel of three arbitrators, one of whom shall be selected by CAB, one of whom shall be selected by Representative and the remaining arbitrator to be mutually selected by the other two arbitrators, provided that if the amount in controversy is less than US$250,000, there shall be one arbitrator appointed as provided in the rules of the ICC. Each arbitrator shall be fully bi-lingual in English and Spanish and is qualified to practice law in a civil law jurisdiction. Any such arbitration shall be conducted in Panama City, Republic of Panama. The arbitrators shall have the power to decide on its own subject matter jurisdiction. The award rendered by the arbitrator(s) shall be at law (and not in equity), shall be subject to the limitations on liability provided in this Trust Agreement and shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or 14 exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Any party shall be entitled to seek interim measures of protection in the form of pre-award attachment of assets or injunctive relief. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Trust Agreement and that the parties hereto shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and the parties further agree to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Trust Agreement but shall be in addition to all other remedies available at law or equity to CAB. At any hearing of oral evidence, each party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other party and each party shall have the right to conduct reasonable discovery of the other party. 30. Language. This Trust Agreement has been negotiated and executed in English. The parties acknowledge that a translation into Spanish may be required for purposes of filings with governmental authorities; in such case, the parties shall agree on Spanish translation by initialing the same. The parties agree that, in case of conflict between the English and Spanish translations of this Trust Agreement, the English version shall govern. 31. No Third Party Beneficiaries. Notwithstanding anything herein to the contrary, this Trust Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 15 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed in New York, New York, USA, as of the date first above written. "SETTLOR" COCA COLA DE PANAMA COMPANIA EMBOTELLADORA, S.A., By: /s/ Roberto Ramon Vallarino Cox ----------------------------------- Name: Roberto Ramon Vallarino Cox Title: Vice President and Director "TRUSTEE" BANCO GENERAL, S.A. By: /s/ Jean-Pierre Leignadier ------------------------------------ Name: Jean-Pierre Leignadier Title: Attorney-in-Fact "REPRESENTATIVE" FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By: /s/ Alvaro Arias ------------------------------------ Name: Alvaro Arias Title: Authorized Representative By: /s/ Roberto Ramon Vallarino Cox ------------------------------------ Name: Roberto Ramon Vallarino Cox Title: Authorized Representative "CAB" CA BEVERAGES, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ TAPIA LINARES & ALFARO, as Resident Agent of the Trust Agreement By:_____________________________________ Name:___________________________________ Title:__________________________________ EXHIBIT A FORM OF INSTRUCTION LETTER To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned Coca Cola de Panama Compania Embotelladora, S.A. ("Settlor"), pursuant to the Trust Agreement - Coca Cola OPA Trust, dated as of October 2, 2002, among Settlor, CA Beverages, Inc., Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby irrevocably instructs you to credit the funds in the sum of US$________________, transferred to you from our account number 03-01-01-012584-0 to the trust in accordance with the terms of said Trust Agreement. COCA COLA DE PANAMA COMPANIA EMBOTELLADORA, S.A., By:_____________________________________ Name:___________________________________ Title:__________________________________ EXHIBIT B-1 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. ("CAB"), pursuant to Section 10 of the Trust Agreement - Coca Cola OPA Trust, dated as of October 2, 2002, among CAB, Coca Cola de Panama Compania Embotelladora de Panama, S.A. (the "Settlor"), Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that CAB has exercised its option under Section 5.9 of the Share Subscription Agreement during the Unconditional Period (as defined therein) to rescind the sale of the Shares; (b) irrevocably instructs you to pay to CAB the full amount of the Trust Assets on behalf of the Settlor as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to CAB's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ Dated: __________, _____ [a copy of this notice is to be remitted to Representative] EXHIBIT B-2 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. ("CAB") and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), pursuant to Section 10 of the Trust Agreement - Coca Cola OPA Trust, dated as of October 2, 2002, CAB, Coca Cola de Panama Compania Embotelladora de Panama, S.A. (the "Settlor"), Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that CAB, with the unanimous approval of all of the members of Board of Directors of Settlor and the approval of Representative, has exercised its option under Section 5.9 of the Share Subscription Agreement outside of the Unconditional Period to rescind the sale of the Shares; (b) irrevocably instruct you to pay to CAB the full amount of the Trust Assets on behalf of the Settlor as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to CAB's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) enclose the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:_____________________________________ Name:___________________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:_____________________________________ Name:___________________________________ [Please Print] EX-10.51 10 ex10_51.txt COCA COLA HOLDBACK AGREEMENT EXHIBIT 10.51 TRUST AGREEMENT - COCA COLA HOLDBACK TRUST This TRUST AGREEMENT - COCA COLA HOLDBACK TRUST, dated as of October 2, 2002 (this "Trust Agreement"), is entered into by and among COCA COLA DE PANAMA COMPANIA EMBOTELLADORA, S.A., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama (the "SETTLOR"), hereby represented by Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229; BANCO GENERAL, S.A., a corporation organized and existing pursuant to the laws of the Republic of Panama (the "TRUSTEE"), hereby represented by Jean-Pierre Leignadier, Panamanian, of legal age, with personal identity card No. 8-390-635; FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA, a private foundation organized and existing pursuant to the laws of the Republic of Panama, as Representative ("REPRESENTATIVE"), hereby jointly represented by Alvaro Arias, Panamanian, of legal age, with personal identity card No. 8-169-678, and Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229, as Council Members acting jointly, duly authorized pursuant to Section 13 of its Foundation Charter, representing and acting on behalf of the shareholders of the Settlor who, in accordance with the Tender Offer Documents (as defined below) and in compliance with the laws of the Republic of Panama, accept the OPA (as defined below), do not revoke such acceptance and consummate such acceptance by tendering their common shares of Settlor (the "ACCEPTING SHAREHOLDERS"); and CA BEVERAGES, INC., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama ("CAB"), hereby represented by Han de Goederen, male, of legal age, citizen of the Netherlands, with passport No. Z01328951, duly authorized to execute this agreement pursuant to a resolution of the Board of Directors of CAB dated September 30, 2002. WHEREAS, on the date first written above Settlor and CAB have entered into a Share Subscription Agreement (the "SHARE SUBSCRIPTION AGREEMENT") whereby Settlor has agreed to issue and sell to CAB, who has agreed to purchase, three million nine hundred thirty-four thousand two hundred forty-six (3,934,246) newly issued no par value common shares of the Settlor (or such amount corresponding to fifty percent (50%) plus one share of the total issued and outstanding no par value common shares of the Settlor) (the "SHARES"); WHEREAS, pursuant to the Share Subscription Agreement, the Settlor has agreed to launch a Public Tender Offer in the Republic of Panama (the "OPA") to acquire up to three million nine hundred thirty-four thousand two hundred forty-five (3,934,245) issued and outstanding no par value common shares of the Settlor; and WHEREAS, the execution and delivery of this Trust Agreement (including the deposit of the Trust Amount (as defined below)) is a condition to the consummation of the transactions contemplated by the Share Subscription Agreement. NOW, THEREFORE, Settlor, the Trustee, CAB and Representative hereby agree as follows: 1. Constitution of the Trust. Settlor, the Trustee, CAB and Representative hereby enter into an irrevocable trust agreement under the provisions of Law 1 of January 5, 1984 of the Republic of Panama, which regulates trust agreements in the Republic of Panama, in order to guarantee payment to the Settlor for any General Loss (as defined below) or any Lawsuit Loss (as defined below). 2. Objectives of the Trust. The objectives of this Trust are to: (a) permit the Trustee to pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA; (b) maintain in trust (i) $4,603,066.65, representing US$1.17 per share of the total amount of shares that may be tendered in the OPA; and (ii) an additional amount equal to 7.5% of the Net Subject Property Per Share Amount (as defined in the Share Subscription Agreement) as contemplated by the third paragraph of Section 5.3 of the Share Subscription Agreement times 3,934,245 (all such amounts in clauses (i) and (ii) above are collectively referred to herein as the "HOLDBACK FUND"), as set out in the Share Subscription Agreement and in the prospectus (as may be amended from time to time) and the exhibits and schedules attached thereto that are delivered to shareholders in respect of the OPA (collectively, the "TENDER OFFER DOCUMENTS"), in order for the Trustee to use the Holdback Fund according to the terms and conditions of this Trust Agreement; (c) guarantee to Settlor that, upon consummation of the OPA, (i) the balance of the Trust Assets that is not retained with respect to shares of the Accepting Shareholders under the OPA shall be returned by the Trustee (on behalf of the Settlor) to CAB through a partial repurchase of the Shares from CAB, and (ii) all earnings accrued on the Trust Assets in accordance with Section 8 hereof shall be returned by the Trustee to the Settlor; and (d) provide for the return of the Trust Assets to CAB upon the occurrence of any of the events described in Section 10(b) hereof, through a repurchase of the Shares. 3. Appointment of Beneficiaries. Subject to Section 10(b) hereof, the Beneficiaries of this Trust and particularly of the Trust Assets shall be CAB and the Accepting Shareholders as provided for herein. 4. The Trust Amount. The "Trust Amount" initially shall be the aggregate amount set forth in Section 2(b)(i) hereof and which may be increased by the amount set forth in Section 2(b)(ii) hereof, all of which is given in trust, with irrevocable instructions as described in the form of instruction letter attached hereto as Exhibit A, to the Trustee by the Settlor. 5. Appointment of the Trustee; Deposit of Trust Amount. Settlor hereby constitutes and appoints the Trustee as, and the Trustee hereby agrees to assume and perform the duties of, the trustee under and pursuant to this Trust Agreement. The Trustee acknowledges receipt of an executed copy of the Share Subscription Agreement and, as of the date hereof, of the Trust Amount (except for the item referred to in Section 2(b)(ii) hereof) from Settlor as provided in the Share Subscription Agreement. Trustee hereby accepts such appointment and agrees to hold, invest and disburse the Trust Amount in accordance with this Trust Agreement. 2 6. The Trust Assets. The Trust Amount, all earnings accrued thereon in accordance with Section 7 hereof and any shares or other assets placed in trust in accordance with the terms of this Trust Agreement (the "TRUST ASSETS") shall be held by the Trustee, to be used as specifically provided in this Trust Agreement. Except as expressly provided in Section 13 hereof, the Trustee does not have any interest in the Trust Amount deposited hereunder or the Trust Assets but is serving as trustee only and having only possession thereof in that capacity. 7. Investment of the Trust Assets; Taxes. (a) Unless and until the Trustee receives written instructions from CAB and the Representative as set forth below, the Trustee shall maintain the Trust Assets in an overnight account at Banco General, S.A., available for immediate use. As per written instructions of CAB and the Representative delivered to the Trustee, the Trustee shall directly invest and reinvest the Trust Assets, in any of the following kinds of investments, or in any combination thereof: (i) bonds or other obligations of, or guaranteed by, the government of the United States of America or any State thereof or the District of Columbia, or agencies of any of the foregoing, having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the date on which this Trust Agreement terminates in accordance with Section 10 hereof (the "TERMINATION DATE"); (ii) commercial paper of United States issuers rated, at the time of the Trustee's investment therein or contractual commitment providing for such investment, at least P-1 by Moody's Investors Service, Inc. ("MOODY'S") and A-1 by Standard & Poor's Corporation ("S&P") and having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the Termination Date; (iii) demand or time deposits in, certificates of deposit of or bankers' acceptances issued by (A) Banco General, S.A. or a depository institution or trust company incorporated under the laws of Panama or the laws of the United States of America, any State thereof or the District of Columbia having a combined capital and surplus of US$10 billion, or (B) a Panamanian or United States branch office or agency of a foreign depository institution or trust company if, in any such case, the depository institution, trust company or office or agency is rated at least P-l by Moody's and A-1 by S&P (any such institution described in clause (A) or (B) being herein called a "PERMITTED BANK"), and having maturities as agreed upon by CAB and the Representative, such maturities not to extend beyond the Termination Date; or (iv) such other investments as CAB and the Representative shall jointly approve or direct in writing. 3 The written instructions for the investment shall be given by CAB and the Representative to the Trustee. The Trustee shall notify CAB and the Representative the amount of funds available to invest in accordance with this Section 7(a). (b) Each of the foregoing investments shall be made in the name of the Trustee in accordance with this Trust Agreement. Notwithstanding anything to the contrary contained herein, the Trustee may, without notice to CAB or the Representative, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for release of any portion of the Trust Assets permitted or required hereunder, and Trustee shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. (c) The Trustee shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the Trust Assets. (d) Any interest or other income received on such investment and reinvestment of the Trust Assets shall become part of the Trust Assets. (e) All taxes (except for income taxes of the Trustee arising from the Fees (as defined below)), if any, in respect of the Trust Assets shall be allocable among the parties as set forth in Section 13 hereof. 8. Claims Against the Trust Assets. The Trust Assets shall be used solely for payment of any action, cost, damage, disbursement, expense, fine, fee, liability, loss, deficiency, obligation, penalty or settlement of any nature, including but not limited to, interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims, whether in litigation or other proceedings or with respect to any action, and amounts paid in settlement that may be imposed on or otherwise incurred or suffered, directly or indirectly, by (i) any of CAB, Settlor, subsidiaries of Settlor (excluding Cervecerias Baru-Panama, S.A. and its subsidiaries) or any of their respective officers, directors, employees, agents or representatives and that arise in connection with any breach of, or inaccuracy in, any of the representations, warranties or covenants made by Settlor, or made or confirmed by the Accepting Shareholders, in the Share Subscription Agreement or Tender Offer Documents (a "GENERAL LOSS") or (ii) Settlor and its subsidiaries Ventas y Mercadeo, S.A. and Direccion y Administracion de Empresas, S.A. resulting from the lawsuit filed by Refrescos Nacionales, S.A. against the Settlor and its subsidiaries Ventas y Mercadeo, S.A. and Direccion y Administracion de Empresas, S.A. for alleged antitrust practices, to the extent such lawsuit is settled or is the subject of a final, non-appealable judgment (the "LAWSUIT LOSS"). For purposes hereof, any General Loss or Lawsuit Loss shall be referred to herein as a "LOSS" and together as "LOSSES". 8.1 Claim for General Loss (a) If at any time prior to the Final Termination Date (as defined below), CAB determines that any of CAB, Settlor, subsidiaries of Settlor (excluding 4 Cervecerias Baru-Panama, S.A. and its subsidiaries) or any of their respective officers, directors, employees, agents or representatives has suffered a General Loss, or is reasonably likely to suffer a General Loss, CAB shall deliver to Representative a notice summarizing in reasonable detail the nature and amount of the General Loss. If the amount of a General Loss is not yet certain on the date of such notice, CAB shall provide a good faith estimate of the maximum General Loss likely to be incurred. The Loss specified or estimated in such notice shall be referred to herein as the "Owed Amount". (b) Concurrently with the delivery of any notice by CAB to the Representative of a Loss pursuant to Section 8.1(a) above, CAB will deliver to the Trustee a certificate in substantially the form of Exhibit B attached hereto (a "CERTIFICATE OF INSTRUCTION"). The Trustee shall give written notice to the Representative of its receipt of a Certificate of Instruction not later than two business days following receipt thereof, together with a copy of such Certificate of Instruction. (c) If Representative objects to any claim of CAB reflected in a Certificate of Instruction, Representative shall notify CAB, and CAB and Representative shall promptly review the claim together and attempt to address Representative's objections. If, within 15 days following CAB's delivery of the Certificate of Instruction to the Trustee (the "CONCILIATION PERIOD"), CAB and Representative agree that CAB's claim as reflected in the Certificate of Instruction should be modified, CAB and Representative shall execute jointly and deliver to the Trustee a Resolution Certificate in substantially the form attached as Exhibit C. (d) If, within the Conciliation Period, the Trustee receives a Resolution Certificate signed by both CAB and Representative, it shall promptly pay over to CAB from the Trust Assets, by wire transfer of immediately available funds to a bank account of CAB's designation, the Owed Amount set forth in the Resolution Certificate. If Trustee does not receive a Resolution Certificate signed by both CAB and Representative before expiration of the Conciliation Period, the Trustee shall, notwithstanding any objection by Representative or any other party, promptly upon expiration of the Conciliation Period pay over to CAB from the Trust Assets, by wire transfer of immediately available funds to a bank account of CAB's designation, the Owed Amount set forth in the Certificate of Instruction from the Trust Assets. Such obligation of the Trustee shall be absolute and unconditional. (e) If the Representative should dispute or object to the Loss claimed by CAB in the notice to Representative given pursuant to Section 8.1(a) or in the Certificate of Instruction, and CAB has not agreed during the Conciliation Period to modify its claim by executing a Resolution Certificate, Representative shall have no right to object to or prevent the disbursement of funds to CAB by the Trustee pursuant to Section 8.1(d). The Representative's sole recourse shall be to commence an arbitration action against CAB pursuant to Section 29 hereof to reclaim the amounts paid over to CAB by Trustee pursuant to the Certificate of Instruction. If, following any disbursement from the Trust Assets to CAB 5 pursuant to this Section 8.1, the actual amount of an estimated Loss is finally determined by CAB to be less than the Owed Amount specified with respect to such Loss and paid to CAB, CAB shall within ten (10) business days remit to Representative the amount by which the Owed Amount exceeded such actual Loss plus interest at a rate equal to the annual rate of return of the Trust Assets for the period of time during which CAB held the excess funds or, for any period of time after the Trust Assets have been fully disbursed, a rate of five percent (5%) per annum. 8.2 Claims for Lawsuit Loss (a) If at any time prior to the Final Termination Date, the Settlor, Ventas y Mercadeo, S.A. or Direccion y Administracion de Empresas, S.A. has suffered any Lawsuit Loss, CAB shall deliver to Representative a copy of the judgment (including any form of settlement permitted under Panamanian law) issued by the corresponding court of justice, with the amount of the Lawsuit Loss. The Lawsuit Loss (including any interest thereon from the date incurred until the date of payment and reasonable attorneys' fees and other expenses) specified or estimated in such notice shall be referred to herein as the "Lawsuit Owed Amount". (b) Concurrently with the delivery of any notice by CAB to the Representative of a Lawsuit Loss pursuant to Section 8.2(a) above, CAB will deliver to the Trustee a Certificate of Instruction. The Trustee shall give written notice to the Representative of its receipt of a Certificate of Instruction not later than two business days following receipt thereof, together with a copy of such Certificate of Instruction. (c) Upon receipt of the Certificate of Instruction the Trustee shall promptly pay over to CAB from the Trust Assets, by wire transfer of immediately available funds to a bank account of CAB's designation, the Lawsuit Owed Amount set forth in the Certificate of Instruction. (d) Representative shall have no right to object to or prevent the disbursement of funds to CAB by the Trustee pursuant to this Section 8.2. The Representative's sole recourse shall be to commence an arbitration action against CAB pursuant to Section 29 hereof to reclaim the amounts paid over to CAB by Trustee pursuant to this Section 8.2. 8.3. Notwithstanding anything in this Section 8 to the contrary, (i) the Trustee shall not be required to make any payments to CAB for any Loss if all amounts in the Trust Assets have been released or otherwise previously distributed and (ii) CAB shall have no right to claim a Loss hereunder prior to the earlier of (A) the date of the closing of the OPA and (B) December 31, 2002. 9. Release of Trust Assets. (a) Promptly after the expiration of the relevant acceptance period of the OPA as set forth in the Tender Offer Documents (the "ACCEPTANCE TERMINATION DATE"), the 6 Trustee shall notify CAB of the amount of the Trust Assets not to be retained on behalf of the Accepting Shareholders. During the thirty (30) day period after CAB's receipt of such notice, CAB shall have the right to exchange such number of its Shares as CAB shall determine for all or a portion of the remaining Trust Amount, based on a per share price of the greater of $22.55 or the Adjusted Coca Cola OPA Purchase Price (as defined in the Share Subscription Agreement). In order to exercise the exchange rights granted hereby, CAB shall deliver notice to the Trustee together with a certificate representing the Shares and an assignment or endorsement thereof with respect to the number of Shares to be exchanged. Promptly thereafter, Trustee shall pay to CAB an amount equal to the number of exchanged Shares times the greater of $22.55 or the Adjusted Coca Cola OPA Purchase Price (as defined in the Share Subscription Agreement). (b) Fifty-three and one-third percent (53.33%) of the Trust Assets will be held by the Trustee for the recovery of Losses until the date which is twenty-four (24) months after the earlier of (A) the date of the closing of the OPA and (B) December 31, 2002 and (ii) forty-six and two-thirds percent (46.67%) of the Trust Assets will be held by the Trustee for the recovery of Losses until the date on which the lawsuit filed by Refrescos Nacionales, S.A. against the Settlor and its subsidiaries Ventas y Mercadeo, S.A. and Direccion y Administracion de Empresas, S.A. for alleged antitrust practices is settled or is the subject of a final, non-appealable judgment (the earlier of the dates described in clauses (i) and (ii) shall be referred to herein as the "INITIAL TERMINATION DATE" and the later of such dates, the "FINAL TERMINATION DATE"); provided, however, that such lawsuit shall not be settled without the consent of the Representative, such consent not to be unreasonably withheld, and any dispute relating to the granting or withholding of such consent shall be governed by Section 29 hereof; provided further, if any claims for Losses are pending as of the Initial Termination Date or the Final Termination Date, as the case may be, then such date shall be extended to such time as all such claims have been fully satisfied or otherwise disposed. 10. Termination. (a) Subject to Section 10(b), this Trust Agreement, and all obligations of the Trustee hereunder shall terminate on the earliest of: (i) the Final Termination Date, (ii) such earlier date on which all of the Trust Assets shall have been disbursed in accordance with the terms of this Trust Agreement, or (iii) the date on which CAB and Representative jointly notify the Trustee in writing of their intent to terminate the Trust Agreement, subject to the Trustee's consent (such consent not to be unreasonably withheld). In connection with termination of this Trust Agreement in accordance with this Section 10(a), upon payment of all Fees due to the Trustee, the Trust Assets then held hereunder shall be distributed pro rata for the benefit of the Accepting Shareholders, based upon the amount of shares tendered by each such Accepting Shareholder in the acceptance of the OPA. For that purpose, Banco General, S.A. or another qualified financial institution appointed by Settlor to serve as the paying agent of the OPA (the "PAYING AGENT") shall certify (the "PAYING AGENT CERTIFICATION") to the Trustee the 7 number of shares that each such Accepting Shareholder has tendered and sold and the aggregate amount to be paid to each such Accepting Shareholder (the "CERTIFIED AMOUNT") pursuant to the Tender Offer Documents. Promptly after the Acceptance Termination Date and receipt of the Paying Agent Certification, the Trustee shall deliver the Certified Amount to the Paying Agent. (b) If CAB exercises its rights of rescission under Section 5.9(a) of the Share Subscription Agreement, then (a) CAB (if such exercise shall occur during the Unconditional Period (as defined in the Share Subscription Agreement)) or CAB and Representative jointly (if such exercise shall not occur during the Unconditional Period) shall send notice of such exercise to the Trustee in the form attached as Exhibit D-1 or Exhibit D-2 hereto, as the case may be, (b) together with the delivery of such notice as described in clause (a) above, CAB shall deliver to the Trustee a copy of the certificate delivered pursuant to Section 10 of the Trust Agreement- Coca Cola OPA Trust, dated as of the date hereof among the parties hereto, (c) the Trustee shall deliver to CAB all of the Trust Assets (net of Fees due to the Trustee) by wire transfer in immediately available funds, and (d) this Trust Agreement and all obligations of the Trustee hereunder shall terminate. 11. Duties and Obligations of the Trustee. The duties and obligations of the Trustee shall be limited to and determined solely by the provisions of this Trust Agreement and the certificates delivered in accordance herewith, and the Trustee is not charged with knowledge of or any duties or responsibilities in respect of any other agreement or document. In furtherance and not in limitation of the foregoing: (a) The Trustee shall not be liable for any loss of interest or earnings sustained as a result of investments made hereunder in accordance with the terms hereof, including any liquidation of any investment of the Trust Assets prior to its maturity effected in order to make a payment required by the terms of this Trust Agreement; (b) The Trustee shall be fully protected in relying in good faith upon any written certification, instruction, notice, direction, request, waiver, consent, receipt or other document that the Trustee reasonably believes to be genuine and duly authorized, executed and delivered; (c) The Trustee shall not be liable for any error of judgment, or for any act done or omitted by it, or for any mistake in fact or law, or for anything that it may do or refrain from doing in connection herewith; provided, however, that notwithstanding any other provision in this Trust Agreement, the Trustee shall be liable for its willful misconduct or gross negligence; (d) The Trustee may seek the advice of legal counsel selected with reasonable care (provided that the selection of such legal counsel shall require CAB's prior written consent, such consent not to be unreasonably withheld) in the event of any dispute or question as to the construction of any of the provisions of this Trust 8 Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel; (e) In the event that the Trustee shall in any instance, after seeking the advice of legal counsel pursuant to the immediately preceding clause, in good faith be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking any action in that instance and its sole obligation, in addition to those of its duties hereunder as to which there is no such uncertainty, shall be to keep the property affected by such uncertainty safely held in trust until it shall be directed otherwise in writing by CAB and the Representative; provided, however, in the event that the Trustee has not received such written direction within thirty (30) days after requesting the same, it shall have the right to submit the issue to arbitration in accordance with Section 29 hereof; and (f) The Trustee may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through agents or attorneys selected with reasonable care. Nothing in this Trust Agreement shall be deemed to impose upon the Trustee any duty to qualify to do business or to act as fiduciary or otherwise in any jurisdiction other than the Republic of Panama and the Trustee shall not be responsible for and shall not be under a duty to examine into or pass upon the validity, binding effect, execution or sufficiency of this Trust Agreement or of any agreement amendatory or supplemental hereto. (g) The Trustee shall issue, or shall cause a financial institution (including Banco General, S.A.) to issue, a letter or a bank guarantee confirming the availability of sufficient funds to settle the obligations derived from the OPA, as required by applicable securities legislation of the Republic of Panama. 12. Cooperation. Settlor, CAB and Representative shall provide to the Trustee all instruments and documents within their respective powers to provide that are necessary for the Trustee to perform its duties and responsibilities hereunder. 13. Fees and Expenses; Indemnity. (a) Notwithstanding anything in this Section 13 to the contrary, the Trustee is authorized to deduct from earnings on the Trust Amount an acceptance fee of $10,000, and an annual fee of $15,000, both payable upon execution of this Trust Agreement. The annual fee will be payable thereafter on each anniversary of the execution of this Trust Agreement. The Trustee will charge a fee of $4 per check for payments to the Beneficiaries (as set forth in Section 3 hereof) and Settlor upon liquidation of the Trust. The Trustee also shall be entitled to receive reasonable and customary out-of-pocket expenses incurred in connection with the performance of its duties hereunder. The fees, costs and expenses described in this Section 13(a) shall be referred to herein as "FEES". 9 (b) The Trustee is authorized to, and may disburse to itself from the earnings on the Trust Amount, from time to time, the amount of any Fees due and payable to it hereunder. If for any reason such earnings are insufficient to cover such Fees, CAB shall pay within the following thirty (30) days such amounts to make up such shortfall to Trustee upon the presentation of an itemized invoice. The Trustee shall notify CAB and Representative of any disbursement from the Trust Assets to itself in respect of any Fees under any provision of this Trust Agreement and shall furnish to CAB and Representative copies of all related invoices and other statements. (c) Prior to the consummation or termination of the OPA, CAB shall be liable for and shall reimburse and indemnify Trustee (and any predecessor Trustee) and hold Trustee harmless from and against one-half (1/2) of any and all claims, losses, actions, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) arising from or in connection with Trustee's administration of, or performance of duties and obligations pursuant to, this Trust Agreement; provided, however, that notwithstanding the foregoing, CAB shall not be required to indemnify the Trustee for any such claims, losses, actions, liabilities, costs, damages or expenses caused by its own gross negligence or own willful misconduct. In addition, when the Trustee acts on any information, instructions or communications (including, but not limited to, communications with respect to the delivery of securities or the wire transfer of funds) sent by telephone, telex or facsimile, the Trustee, absent gross negligence or willful misconduct, shall not be responsible or liable in the event such communication is not an authorized or authentic communication or is not in the form CAB sent or intended to send (whether due to fraud, distortion or otherwise). The Trustee shall have the right to offset an amount equal to one-half (1/2) of any indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described above against the Trust Assets. (d) Settlor shall be liable for one hundred percent (100%) of all indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described in Section 13(c) above after consummation of the OPA (including payment of the Certified Amount to the Paying Agent) or termination of the OPA, and the Trustee will have no right to offset any amount thereof against the Trust Assets. (e) Notwithstanding anything in this Section 13 to the contrary, all of CAB's compensation, reimbursement and indemnification obligations set forth in this Section 13 shall be payable by CAB upon demand by the Trustee, and the failure of CAB to fund such obligations shall give rise to the right of the Trustee to offset any such unpaid amounts against payments otherwise due to CAB pursuant to this Trust Agreement. The obligations of CAB under this Section 13 shall survive any termination of this Trust Agreement and the resignation or removal of Trustee. 10 14. Resignation and Removal of the Trustee. (a) The Trustee may resign as such thirty (30) calendar days following the giving of written notice thereof to CAB and Representative. In addition, the Trustee may be removed and replaced on a date designated in a written instrument signed by CAB and Representative and delivered to the Trustee. In the case of either such resignation or removal, CAB and the Representative jointly shall appoint a branch or affiliate located in the Republic of Panama of one of HSBC, BNP Paribas or Citibank, N.A. as the successor Trustee. Notwithstanding the foregoing, no such resignation or removal shall be effective until a successor Trustee has acknowledged its appointment as such as provided in Section 14(c). In either event, upon the effective date of such resignation or removal, the Trustee shall deliver the property comprising the Trust Assets (net of any Fees due to the Trustee) to such successor Trustee, together with such records maintained by the Trustee in connection with its duties hereunder and other information with respect to the Trust Assets as such successor may reasonably request. (b) If a successor Trustee shall not have acknowledged its appointment as such as provided in Section 14(c), in the case of a resignation, prior to the expiration of thirty (30) calendar days following the date of a notice of resignation or, in the case of a removal, on the date designated for the Trustee's removal, as the case may be, because CAB and Representative are unable to agree on a successor Trustee, or for any other reason, the successor Trustee shall be appointed from the first of HSBC, BNP Paribas and Citibank, N.A. (in such order) to acknowledge its appointment as such, and such appointment shall be binding upon all of the parties to this Trust Agreement. (c) Upon written acknowledgment by a successor Trustee appointed in accordance with the foregoing provisions of this Section 14 of its agreement to serve as Trustee hereunder and the receipt of the property then comprising the Trust Assets, the Trustee shall be fully released and relieved of all duties, responsibilities and obligations under this Trust Agreement, subject to the provision contained in Section 11(c) and such successor Trustee shall for all purposes hereof be the Trustee. 15. Notices. Any notices or another communication under this Trust Agreement, must be given in writing and be (a) delivered to the address indicated hereinafter; (b) transmitted by facsimile, provided that any notice given in this form must also be sent by mail as provided in clause (c); or (c) sent by mail with 48 hour delivery (courier), or by certified or registered mail, postage paid and receipt confirmation requested as follows: If to Settlor: COCA COLA DE PANAMA CIA. EMBOTELLADORA, S.A. Apartado 4411, Zona 5 11 Urbanizacion Industrial, Via Ricardo J. Alfaro Panama, Republic of Panama Attn: Joaquin J. Vallarino Jr. Facsimile: 507-236-5727 with copies (which shall not constitute notice) to: ARIAS, ALEMAN & MORA Apartado 8799, Zona 5 Calle 50 y Calle 74, San Francisco Edificio PH Interfinanzas, Piso 16 Panama, Republic of Panama Attn: Alvaro Arias Facsimile: 507-270-0174 and ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Francisco Arias G. Facsimile: 507-205-7001 If to the Trustee, to: BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier Facsimile: 507-265-0291 If to the Representative, to: FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA c/o Arias, Fabrega & Fabrega Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Alvaro Arias and Roberto R. Vallarino C., c/o Francisco Arias G. Facsimile: 507-205-7001 with a copy (which shall not constitute notice) to: 12 ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Francisco Arias G. Facsimile: 507-205-7001 If to CAB, addressed to: CA BEVERAGES, INC. c/o TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 with copies (which shall not constitute notice) to: HEINEKEN INTERNATIONAL B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Attn: Rene Hooft Graafland Facsimile: +31-20-523-9790 PANAMCO L.L.C. 701 Waterford Way Suite 800 Miami, FL 33126 Attn: General Counsel Facsimile: (786) 388-8191 FABREGA BARSALLO MOLINO & MULINO Omega Bldg., M Floor Samuel Lewis Ave. & 53rd St. P.O. Box 4493, Panama 5, Rep. of Panama Attn: Juan Pablo Fabrega/Jose Raul Mulino Facsimile: (507) 263-6983 and TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor 13 Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 or to any other address or to any other person that any party has appointed in last instance through a notice to the other party. Each one of the referred notices or communications will be effective (i) if given by facsimile, when transmitted to the corresponding number specified in (or according to) this Section 15 and the sender device confirms sending and receipt; (ii) if sent by 48 hour delivery mail, two (2) working days and, if sent by certified or registered mail, seven (7) working days after placed in the mail with first class postage paid, addressed as previously explained; or (iii) if issued by any other means, when actually received at the address mentioned. 16. Bankruptcy of Settlor. In the event that there shall be filed by or against the Settlor in any court pursuant to the bankruptcy laws of Panama or any other similar foreign, federal or state law providing for bankruptcy, insolvency, receivership or protection from creditors (collectively, the "BANKRUPTCY LAWS"), a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of the assets of Settlor, Settlor will be deemed to have waived, and therefore will not assert, any and all rights, remedies and recourses under the Bankruptcy Laws with respect to the Trust Assets, and the Trust Assets shall continue to be administered pursuant to the terms of this Trust Agreement, irrespective of such filing. 17. Severability. To the extent any provision of this Trust Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Trust Agreement. 18. Amendments, etc. This Trust Agreement may be amended or modified, and any of the terms hereof may be waived, only by a written instrument duly executed by or on behalf of all of the parties hereto. No waiver by any party of any term or condition contained in this Trust Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Trust Agreement on any future occasion. 19. Entire Agreement. This Trust Agreement constitutes the entire agreement between the parties relating to the holding, investment and disbursement of the Trust Assets and administration of the Trust Assets and sets forth in their entirety the obligations and duties of Trustee with respect to the Trust Assets; provided that any capitalized terms used but not defined herein shall have the meaning assigned to such terms in the Share Subscription Agreement. 20. Binding Effect. All of the terms of this Trust Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, executors, administrators, successors and assigns. 14 21. Representations and Warranties. CAB, Settlor and Representative each hereby represent and warrant (a) that this Trust Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (b) that the execution, delivery and performance of this Trust Agreement by CAB, Settlor and Representative do not and will not violate any applicable law or regulation. 22. Assignments. No party may assign any of its rights or obligations under this Trust Agreement without the prior written consent of the other parties, provided that no such consent shall be required for any such assignment by CAB to any of the Sponsors (as defined in the Share Subscription Agreement) or any direct or indirect subsidiary of the Sponsors. 23. Execution in Counterparts; Facsimile Signatures. This Trust Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction. Facsimile signatures shall be treated as originals 24. Governing Law. This Trust Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Trust Agreement shall be governed and construed in accordance with the laws of the Republic of Panama without regard to conflicts of law or private international law rules. 25. Domicile The parties choose as domicile for the Trust the city of Panama, Republic of Panama. 26. Business Day. For all purposes of this Trust Agreement, the term "business day" shall mean a day other than Saturday, Sunday or any day on which banks located in the Republic of Panama are authorized or obligated to close. 27. Headings. The headings used in this Trust Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 28. Resident Agent of the Trust. In compliance with Section 9 of article 9, of Law No. 1 of 1984, the law firm Tapia Linares & Alfaro, with address at P.O. Box 7412, Edificio Plaza 2000, 4th Floor, Avenida Gral. Nicanor A. de Obarrio (Calle 50), Panama, Republic of Panama, is hereby appointed as the Resident Agent for this Trust. 29. Arbitration. Any controversy, dispute or claim between the parties arising out of or related to this Trust Agreement, or the breach hereof, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The dispute shall be referred to arbitration before a panel of three arbitrators, one of whom shall be selected by CAB, one of whom shall be selected by Representative and the remaining arbitrator to be mutually selected by the other two arbitrators, provided that if the amount in controversy is less than US$250,000, there shall be one arbitrator appointed as provided in the rules of the ICC. Each arbitrator shall be fully bi-lingual in English and Spanish and is qualified to practice law in a civil law jurisdiction. Any such arbitration shall be conducted in Panama City, Republic of Panama. The arbitrators shall have the power to decide on its own subject matter jurisdiction. The award rendered by the 15 arbitrator(s) shall be at law (and not in equity), shall be subject to the limitations on liability provided in this Trust Agreement and shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Any party shall be entitled to seek interim measures of protection in the form of pre-award attachment of assets or injunctive relief. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Trust Agreement and that the parties hereto shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and the parties further agree to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Trust Agreement but shall be in addition to all other remedies available at law or equity to CAB. At any hearing of oral evidence, each party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other party and each party shall have the right to conduct reasonable discovery of the other party. 30. Language. This Trust Agreement has been negotiated and executed in English. The parties acknowledge that a translation into Spanish may be required for purposes of filings with governmental authorities; in such case, the parties shall agree on Spanish translation by initialing the same. The parties agree that, in case of conflict between the English and Spanish translations of this Trust Agreement, the English version shall govern. 31. No Third Party Beneficiaries. Notwithstanding anything herein to the contrary, this Trust Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 16 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed in New York, New York, USA, as of the date first above written. "SETTLOR" COCA COLA DE PANAMA COMPANIA EMBOTELLADORA, S.A., By: /s/ Roberto Ramon Vallarino Cox ------------------------------------ Name: Roberto Ramon Vallarino Cox Title: Vice President and Director "TRUSTEE" BANCO GENERAL, S.A. By: /s/ Jean-Pierre Leignadier --------------------------------- Name: Jean-Pierre Leignadier Title: Attorney-in-Fact "REPRESENTATIVE" FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By: /s/ Alvaro Arias --------------------------------- By: /s/ Roberto Ramon Vallarino Cox --------------------------------- Name: Alvaro Arias Roberto Ramon Vallarino Cox Title: Authorized Representatives "CAB" CA BEVERAGES, INC. By: /s/ Han de Goederen -------------------------------------- Name: Han de Goederen Title: President TAPIA LINARES & ALFARO, as Resident Agent of the Trust Agreement By: /s/ Eloy Alfaro de Alba -------------------------------------- Name: Eloy Alfaro de Alba EXHIBIT A FORM OF INSTRUCTION LETTER To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned Coca Cola de Panama Compania Embotelladora, S.A. ("Settlor"), pursuant to the Trust Agreement - Coca Cola Holdback Trust, dated as of October 2, 2002, among Settlor, CA Beverages, Inc., Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby irrevocably instructs you to credit the funds in the sum of US$________________, transferred to you from our account number 03-01-01-012584-0 to the trust in accordance with the terms of said Trust Agreement. COCA COLA DE PANAMA COMPANIA EMBOTELLADORA, S.A., By:___________________________________________ Name:_________________________________________ Title:________________________________________ EXHIBIT B CERTIFICATE OF INSTRUCTION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA Beverages, Inc. ("CAB"), pursuant to Section [8.1(b)][8.2(b)] of the Trust Agreement - Coca Cola Holdback Trust, dated as of October 2, 2002, among CAB, Coca Cola de Panama Compania Embotelladora, S.A., Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that (i) CAB has sent to the Representative a notice of Loss under Section [8.1(a)][8.2(a)] of the Trust Agreement, a copy of which is attached hereto, and (ii) the amount of $________________________ (the "[Lawsuit] Owed Amount") is payable to CAB by reason of the matter described in such notice to Representative; and (b) instructs you to pay to CAB from the Trust Assets in accordance with the terms of Section [8.1(d)][8.2(c)] of the Trust Agreement the [Lawsuit] Owed Amount, by wire transfer of immediately available funds to CAB's account at ________________________, ________________________, ______________, ______________ (Account No.________________________). CA BEVERAGES, INC. By:___________________________________________ Name:_________________________________________ Title:________________________________________ Dated: __________, _____ EXHIBIT C RESOLUTION CERTIFICATE To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA Beverages, Inc. ("CAB"), and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), pursuant to Section 8.1(c) of the Trust Agreement - Coca Cola Holdback Trust, dated as of October 2, 2002, among CAB, Coca Cola de Panama Compania Embotelladora de Panama, S.A., the Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that CAB and Representative have, after further discussion of the matter described in the Certificate of Instruction dated ____________________ agreed upon an Owed Amount different from the amount specified in the Certificate of Instruction. Accordingly, the final Owed Amount with respect to the matter described in such Certificate is $______________; (b) instruct you to pay to CAB from the Trust Assets the final Owed Amount referred to in paragraph (a) above, by wire transfer of immediately available funds to CAB's account at _______________, _______________, (Account No.: _____), within two business days of your receipt of this Certificate; and (c) agree that the Owed Amount designated in such Certificate of Instruction, to the extent, if any, it exceeds the final Owed Amount referred to in paragraph (a) above, shall be deemed not payable to CAB and such Certificate of Instruction is hereby cancelled. CA BEVERAGES, INC. By:___________________________________________ Name:_________________________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:___________________________________________ Name:_________________________________________ [Please Print] EXHIBIT D-1 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. ("CAB"), pursuant to Section 10 of the Trust Agreement - Coca Cola Holdback Trust, dated as of October 2, 2002, among CAB, Coca Cola de Panama Compania Embotelladora de Panama, S.A. (the "Settlor"), Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that CAB has exercised its option under Section 5.9 of the Share Subscription Agreement during the Unconditional Period (as defined therein) to rescind the sale of the Shares; (b) irrevocably instructs you to pay to CAB the full amount of the Trust Assets on behalf of the Settlor as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to CAB's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses a copy of (i) the Notice of Early Termination delivered pursuant to Section 10 of the Trust Agreement - Coca Cola OPA Trust, dated as of October 2, 2002 among CAB, the Settlor, the Representative and you and (ii) the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:___________________________________________ Name:_________________________________________ Title:________________________________________ Dated: __________, _____ [a copy of this notice is to be remitted to Representative] EXHIBIT D-2 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. ("CAB") and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative ( the "Representative"), pursuant to Section 10 of the Trust Agreement - Coca Cola Holdback Trust, dated as of October 2, 2002, CAB, Coca Cola de Panama Compania Embotelladora de Panama, S.A. (the "Settlor"), Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that CAB, with the unanimous approval of all of the members of Board of Directors of Settlor and the approval of Representative, has exercised its option under Section 5.9 of the Share Subscription Agreement outside of the Unconditional Period to rescind the sale of the Shares; (b) irrevocably instruct you to pay to CAB the full amount of the Trust Assets on behalf of the Settlor as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to CAB's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses a copy of (i) the Notice of Early Termination delivered pursuant to Section 10 of the Trust Agreement - Coca Cola OPA Trust, dated as of October 2, 2002 among CAB, the Settlor, the Representative and you and (ii) the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:___________________________________________ Name:_________________________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:___________________________________________ Name:_________________________________________ [Please Print] EX-10.52 11 ex10_52.txt CBP OPA TRUST AGREEMENT -- CA BEVERAGES EXHIBIT 10.52 TRUST AGREEMENT - CBP OPA TRUST This TRUST AGREEMENT - CBP OPA TRUST, dated as of October 2, 2002 (this "Trust Agreement"), is entered into by and among CA BEVERAGES, INC., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama (the "SETTLOR"), hereby represented by Han de Goederen, male, of legal age, citizen of the Netherlands, with passport No. Z01328951, duly authorized to execute this agreement pursuant to a resolution of the Board of Directors of the Settlor dated September 30, 2002; BANCO GENERAL, S.A., a corporation organized and existing pursuant to the laws of the Republic of Panama (the "TRUSTEE"), hereby represented by Jean-Pierre Leignadier, Panamanian, of legal age, with personal identity card No. 8-390-635; and FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA, a private foundation organized and existing pursuant to the laws of the Republic of Panama, as Representative ("REPRESENTATIVE"), hereby jointly represented by Alvaro Arias, Panamanian, of legal age, with personal identity card No. 8-169-678, and Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229, as Council Members acting jointly, duly authorized pursuant to Section 13 of its Foundation Charter, representing and acting on behalf of the shareholders of Cervecerias Baru-Panama, S.A. ("CBP") who, in accordance with the Tender Offer Documents (as defined below) and in compliance with the laws of the Republic of Panama, accept the OPA (as defined below), do not revoke such acceptance and consummate such acceptance by tendering their common shares of Settlor (the "ACCEPTING SHAREHOLDERS"). WHEREAS, on the date first written above Coca Cola de Panama Compania Embotelladora, S.A. ("COCA COLA") and Settlor have entered into a Share Subscription Agreement (the "SHARE SUBSCRIPTION AGREEMENT") whereby Coca Cola has agreed to issue and sell to Settlor, who has agreed to purchase, three million nine hundred thirty-four thousand two hundred forty-six (3,934,246) newly issued no par value common shares of Coca Cola (or such amount corresponding to fifty percent (50%) plus one share of the total issued and outstanding no par value common shares of Coca Cola) (the "SHARES"); WHEREAS, pursuant to the Share Subscription Agreement, the Settlor has agreed to launch a Public Tender Offer in the Republic of Panama (the "OPA") to acquire up to one hundred percent (100%) of the issued and outstanding US$5.00 par value common shares of CBP at a price per share of US$14.60; and WHEREAS, the execution and delivery of this Trust Agreement (including the deposit of the Trust Amount (as defined below)) is a condition to the consummation of the transactions contemplated by the Share Subscription Agreement. NOW, THEREFORE, Settlor, the Trustee and Representative hereby agree as follows: 1. Constitution of the Trust. Settlor, the Trustee and Representative hereby enter into an irrevocable trust agreement under the provisions of Law 1 of January 5, 1984 of the Republic of Panama, which regulates trust agreements in the Republic of Panama. 2. Objectives of the Trust. This Trust has the purpose of ensuring compliance with the obligations of the Settlor under the Share Subscription Agreement and, consequently, has as its objectives: a) To permit the Trustee to pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA; b) To make available to the Settlor the funds necessary to launch and consummate the OPA, as intended under the Share Subscription Agreement; c) To guarantee payment, with the Trust Assets (as defined below), of the purchase price (less US$4,228,525.40 as a holdback (the "HOLDBACK") to guarantee the compliance with certain representations, warranties and covenants) for the sale of shares by the Accepting Shareholders; d) To guarantee to Settlor that the Trust Assets shall be used for payment of the purchase price per share (less the per share amount of the Holdback) for the shares of the Accepting Shareholders and for payment of the fees described in Section 5.3(g) of the Share Subscription Agreement; e) To guarantee to Settlor that, upon consummation of the OPA, the balance of the Trust Assets that has not been used to purchase shares of the Accepting Shareholders under the OPA shall be returned by the Trustee to the Settlor; and f) To provide for the return of the Trust Assets to Settlor upon the occurrence of any of the events described in Section 10 hereof. 3. Appointment of Beneficiaries. Subject to Section 10 hereof, Settlor hereby appoints the following as Beneficiaries of the Trust (also known under the law of the Republic of Panama as "Fideicomisarios"), and consequently, as Beneficiaries of the Trust Assets: a) Primary Beneficiaries: The Accepting Shareholders; and b) Secondary Beneficiary: Settlor, with respect to the balance of the Trust Assets. 4. The Trust Amount. The Settlor shall transfer to the Trustee in trust, with irrevocable instructions as described in the form of instruction letter attached hereto as Exhibit A, the sum of US$51,895,539.00 in cash, corresponding to the aggregate purchase price of up to one hundred percent (100%) of the issued and outstanding US$5.00 par value common shares of CBP to be acquired from the Accepting Shareholders (less the Holdback) (the "TRUST AMOUNT"). 2 5. Appointment of the Trustee; Deposit of Trust Amount. Settlor hereby constitutes and appoints the Trustee as, and the Trustee hereby agrees to assume and perform the duties of, trustee under and pursuant to this Trust Agreement. The Trustee acknowledges receipt of an executed copy of the Share Subscription Agreement and, as of the date hereof, of the Trust Amount from Settlor as provided in the Share Subscription Agreement. Settlor shall deliver to the Trustee, immediately upon launching the OPA, a copy of the prospectus (as may be amended from time to time) and the exhibits and schedules attached thereto that are delivered to shareholders in respect of the OPA (collectively, the "TENDER OFFER DOCUMENTS"). Trustee hereby accepts such appointment and agrees to hold, invest and disburse the Trust Assets in accordance with this Trust Agreement. 6. The Trust Assets. The Trust Amount, all earnings accrued thereon in accordance with Section 7(c) or Section 8 hereof and any shares or other assets placed in trust in accordance with the terms of this Trust Agreement (the "TRUST ASSETS") shall be held by the Trustee, to be used as specifically provided in this Trust Agreement. Except as expressly provided in Section 13 hereof, the Trustee does not have any interest in the Trust Amount deposited hereunder or the Trust Assets but is serving as Trustee only and having only possession thereof in that capacity. 7. Use and Release of Trust Assets by the Trustee. (a) The Trustee may only use the Trust Assets in the manner provided by this Trust Agreement. (b) The Trustee may pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA. (c) Unless and until the Trustee receives joint written instructions from CAB and the Representative pursuant to Section 8 hereof, the Trustee shall maintain the Trust Assets in an interest-bearing overnight account at Banco General, S.A. (d) After the expiration of the relevant acceptance period of the OPA as set forth in the Tender Offer Documents (the "ACCEPTANCE TERMINATION DATE"), the Trustee shall proceed as follows: (i) The Trustee will deliver to Banco General, S.A. or another qualified financial institution appointed by Settlor to serve as the paying agent of the OPA (and performing the duties of a paying agent in connection with the OPA as required by the laws of the Republic of Panama) (the "PAYING AGENT") out of the Trust Assets a per share amount equal to the CBP Net Purchase Price (as defined in the Share Subscription Agreement). For that purpose, the Paying Agent shall certify (the "PAYING AGENT CERTIFICATION") to the Trustee the number of shares that each such Accepting Shareholder has tendered and sold and the aggregate amount to be paid to each such Accepting Shareholder (the "CERTIFIED AMOUNT") pursuant to the Tender Offer Documents. Promptly after the Acceptance 3 Termination Date and receipt of the Paying Agent Certification, the Trustee shall deliver the Certified Amount to the Paying Agent. (ii) Representative shall notify Trustee of the name, address and related information about the persons to receive the fees described in Section 5.3(g) of the Share Subscription Agreement and promptly after the Acceptance Termination Date and delivery of the Certified Amount to the Paying Agent, the Trustee shall pay an amount equal to $0.76 per share properly tendered by the Accepting Shareholders. (iii) Promptly after the Acceptance Termination Date and delivery of the payments under Section 7(d)(i) hereof, the Trustee will release and pay to Settlor by wire transfer in immediately available funds (or through such alternative method as Settlor may instruct the Trustee), the balance of the Trust Assets that has not been used. 8. Investment of the Trust Assets; Taxes. (a) As per written instructions of Settlor and the Representative delivered to the Trustee, the Trustee shall directly invest and reinvest the Trust Assets, in any of the following kinds of investments, or in any combination thereof: (i) Bonds or other obligations of, or guaranteed by, the government of the United States of America or any State thereof or the District of Columbia, or agencies of any of the foregoing, having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the date on which this Trust Agreement terminates in accordance with Section 9 or Section 10 hereof (the "TERMINATION DATE"); (ii) Commercial paper of United States issuers rated, at the time of the Trustee's investment therein or contractual commitment providing for such investment, at least P-1 by Moody's Investors Service, Inc. ("MOODY'S") and A-1 by Standard & Poor's Corporation ("S&P") and having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the Termination Date; (iii) Demand or time deposits in, certificates of deposit of or bankers' acceptances issued by (A) Banco General, S.A. or a depository institution or trust company incorporated under the laws of Panama or the laws of the United States of America, any State thereof or the District of Columbia having a combined capital and surplus of US$10 billion, or (B) a Panamanian or United States branch office or agency of a foreign depository institution or trust company if, in any such case, the depository institution, trust company or office or agency is rated at least P-l by Moody's and A-1 by S&P (any such institution described in clause (A) or (B) being herein called a "PERMITTED BANK"), and having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the Termination Date; or 4 (iv) Such other investments as Settlor and the Representative shall jointly approve or direct in writing. The written instructions for the investment shall be given by Settlor and the Representative to the Trustee. The Trustee shall notify Settlor and the Representative of the amount of funds available to invest, in accordance with this Section 8(a). (b) Each of the foregoing investments shall be made in the name of the Trustee in accordance with this Trust Agreement. Notwithstanding anything to the contrary contained herein, the Trustee may, without notice to Settlor or the Representative, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for release of any portion of the Trust Assets permitted or required hereunder, and Trustee shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. (c) The Trustee shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the Trust Assets. (d) Any interest or other income received on such investment and reinvestment of the Trust Assets shall become part of the Trust Assets. (e) All taxes (except for income taxes of the Trustee arising from the Fees (as defined below)), if any, in respect of the Trust Assets shall be allocable among the parties as set forth in Section 13 hereof. 9. General Termination. Subject to Section 10, this Trust Agreement and all obligations of the Trustee hereunder shall terminate on the earlier of: (i) the date that the objectives established in Section 2 of this Trust Agreement have been fulfilled or (ii) the date on which Settlor and Representative jointly notify the Trustee in writing of their agreement to terminate the Trust Agreement, subject to the Trustee's consent (such consent not to be unreasonably withheld). In connection with termination of this Trust Agreement pursuant to this Section 9, upon payment of all Fees due to the Trustee, the Trust Assets then held hereunder shall be distributed in accordance with Section 7(d). 10. Early Termination. If Settlor exercises its rights of rescission under Section 5.9(a) of the Share Subscription Agreement, then (a) Settlor (if such exercise shall occur during the Unconditional Period (as defined in the Share Subscription Agreement)) or Settlor and Representative jointly (if such exercise shall not occur during the Unconditional Period) shall send notice of such exercise to the Trustee in the form attached as Exhibit B-1 or Exhibit B-2 hereto, as the case may be, (b) the Trustee shall deliver to Settlor all of the Trust Assets (net of Fees due to the Trustee) by wire transfer in immediately available funds and (c) this Trust Agreement and all obligations of the Trustee hereunder shall terminate. 11. Duties and Obligations of the Trustee. The duties and obligations of the Trustee shall be limited to and determined solely by the provisions of this Trust Agreement and the certificates delivered in accordance herewith, and the Trustee is not charged with 5 knowledge of or any duties or responsibilities in respect of any other agreement or document. In furtherance and not in limitation of the foregoing: (a) The Trustee shall not be liable for any loss of interest or earnings sustained as a result of investments made hereunder in accordance with the terms hereof, including any liquidation of any investment of the Trust Assets prior to its maturity effected in order to make a payment required by the terms of this Trust Agreement; (b) The Trustee shall be fully protected in relying in good faith upon any written certification, instruction, notice, direction, request, waiver, consent, receipt or other document that the Trustee reasonably believes to be genuine and duly authorized, executed and delivered; (c) The Trustee shall not be liable for any error of judgment, or for any act done or omitted by it, or for any mistake in fact or law, or for anything that it may do or refrain from doing in connection herewith; provided, however, that notwithstanding any other provision in this Trust Agreement, the Trustee shall be liable for its willful misconduct or gross negligence; (d) The Trustee may seek the advice of legal counsel selected with reasonable care (provided that the selection of such legal counsel shall require Settlor's prior written consent, such consent not to be unreasonably withheld) in the event of any dispute or question as to the construction of any of the provisions of this Trust Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel; (e) In the event that the Trustee shall in any instance, after seeking the advice of legal counsel pursuant to the immediately preceding clause, in good faith be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking any action in that instance and its sole obligation, in addition to those of its duties hereunder as to which there is no such uncertainty, shall be to keep the property affected by such uncertainty safely held in trust until it shall be directed otherwise in writing by Settlor and Representative; provided, however, in the event that the Trustee has not received such written direction within thirty (30) days after requesting the same, it shall have the right to submit the issue to arbitration in accordance with Section 29 hereof; and (f) The Trustee may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through agents or attorneys selected with reasonable care. Nothing in this Trust Agreement shall be deemed to impose upon the Trustee any duty to qualify to do business or to act as fiduciary or otherwise in any jurisdiction other than the Republic of Panama and the Trustee shall not be responsible for and shall not be under a duty to examine into or pass upon the validity, binding effect, execution or sufficiency of this Trust Agreement or of any agreement amendatory or supplemental hereto. 6 (g) The Trustee shall issue, or shall cause a financial institution (including Banco General, S.A.) to issue, a letter or a bank guarantee confirming the availability of sufficient funds to settle the obligations derived from the OPA, as required by applicable securities legislation of the Republic of Panama. 12. Cooperation. Settlor and Representative shall provide to the Trustee all instruments and documents within their respective powers to provide that are necessary for the Trustee to perform its duties and responsibilities hereunder. 13. Fees and Expenses; Indemnity. (a) Notwithstanding anything in this Section 13 to the contrary, the Trustee is authorized to deduct from earnings on the Trust Amount an acceptance fee of $10,000, and an annual fee of $25,000, both payable upon execution of this Trust Agreement. The annual fee will be payable thereafter on each anniversary of the execution of this Trust Agreement. The Trustee also shall be entitled to receive reasonable and customary out-of-pocket expenses incurred in connection with the performance of its duties hereunder. The fees, costs and expenses described in this Section 13(a) shall be referred to herein as "FEES". (b) The Trustee is authorized to, and may disburse to itself from the earnings on the Trust Amount, from time to time, the amount of any Fees due and payable to it hereunder. If for any reason such earnings are insufficient to cover such Fees, Settlor shall pay within the following thirty (30) days such amounts to make up such shortfall to Trustee upon the presentation of an itemized invoice. The Trustee shall notify Settlor and Representative of any disbursement from the Trust Assets to itself in respect of any Fees under any provision of this Trust Agreement and shall furnish to Settlor and Representative copies of all related invoices and other statements. (c) Prior to the consummation or termination of the OPA, Settlor shall be liable for and shall reimburse and indemnify Trustee (and any predecessor Trustee) and hold Trustee harmless from and against one-half (1/2) of any and all claims, losses, actions, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) arising from or in connection with Trustee's administration of, or performance of duties and obligations pursuant to, this Trust Agreement; provided, however, that notwithstanding the foregoing, Settlor shall not be required to indemnify the Trustee for any such claims, losses, actions, liabilities, costs, damages or expenses caused by its own gross negligence or own willful misconduct. In addition, when the Trustee acts on any information, instructions or communications (including, but not limited to, communications with respect to the delivery of securities or the wire transfer of funds) sent by telephone, telex or facsimile, the Trustee, absent gross negligence or willful misconduct, shall not be responsible or liable in the event such communication is not an authorized or authentic communication or is not in the form Settlor sent or intended to send (whether due to fraud, distortion or otherwise). The Trustee shall have the right to offset an amount equal to one- 7 half (1/2) of any indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described above against the Trust Assets. (d) Settlor shall be liable for one hundred percent (100%) of all indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described in Section 13(c) above that arise after consummation of the OPA (including payment of the Certified Amount to the Paying Agent) or termination of the OPA. (e) Notwithstanding anything in this Section 13 to the contrary, all of Settlor's compensation, reimbursement and indemnification obligations set forth in this Section 13 shall be payable by Settlor upon demand by the Trustee, and the failure of Settlor to fund such obligations shall give rise to an additional claim by the Trustee with respect to the earnings on the Trust Amount. The obligations of Settlor under this Section 13 shall survive any termination of this Trust Agreement and the resignation or removal of Trustee. 14. Resignation and Removal of the Trustee. (a) The Trustee may resign as such thirty (30) calendar days following the giving of written notice thereof to Settlor and Representative. In addition, the Trustee may be removed and replaced on a date designated in a written instrument signed by Settlor and Representative and delivered to the Trustee. In the case of either such resignation or removal, Settlor and the Representative jointly shall appoint a branch or affiliate located in the Republic of Panama of one of HSBC, BNP Paribas or Citibank, N.A. as the successor Trustee. Notwithstanding the foregoing, no such resignation or removal shall be effective until a successor Trustee has acknowledged its appointment as such as provided in Section 14(c). In either event, upon the effective date of such resignation or removal, the Trustee shall deliver the property comprising the Trust Assets (net of any Fees due to the Trustee) to such successor Trustee, together with such records maintained by the Trustee in connection with its duties hereunder and other information with respect to the Trust Assets as such successor may reasonably request. (b) If a successor Trustee shall not have acknowledged its appointment as such as provided in Section 14(c), in the case of a resignation, prior to the expiration of thirty (30) calendar days following the date of a notice of resignation or, in the case of a removal, on the date designated for the Trustee's removal, as the case may be, because Settlor and Representative are unable to agree on a successor Trustee, or for any other reason, the successor Trustee shall be appointed from the first of HSBC, BNP Paribas and Citibank, N.A. (in such order) to acknowledge its appointment as such, and such appointment shall be binding upon all of the parties to this Trust Agreement. (c) Upon written acknowledgment by a successor Trustee appointed in accordance with the foregoing provisions of this Section 14 of its agreement to serve as Trustee hereunder and the receipt of the property then comprising the Trust 8 Assets, the Trustee shall be fully released and relieved of all duties, responsibilities and obligations under this Trust Agreement, subject to the provision contained Section 11(c) and such successor Trustee shall for all purposes hereof be the Trustee. 15. Notices. Any notices or another communication under this Trust Agreement, must be given in writing and be (a) delivered to the address indicated hereinafter; (b) transmitted by facsimile, provided that any notice given in this form must also be sent by mail as provided in clause (c); or (c) sent by mail with 48 hour delivery (courier), or by certified or registered mail, postage paid and receipt confirmation requested as follows: If to Settlor, addressed to: CA BEVERAGES, INC. c/o TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 with copies (which shall not constitute notice) to: HEINEKEN INTERNATIONAL B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Attn: Rene Hooft Graafland Facsimile: +31-20-523-9790 PANAMCO L.L.C. 701 Waterford Way Suite 800 Miami, FL 33126 Attn: General Counsel Facsimile: (786) 388-8191 FABREGA BARSALLO MOLINO & MULINO Omega Bldg., M Floor Samuel Lewis Ave. & 53rd St. P.O. Box 4493, Panama 5, Rep. of Panama Attn: Juan Pablo Fabrega/Jose Raul Mulino Facsimile: (507) 263-6983 9 and TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 If to the Trustee, to: BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier Facsimile: 507-265-0291 If to the Representative, to: FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA c/o Arias, Fabrega & Fabrega Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Alvaro Arias and Roberto R. Vallarino C., c/o Francisco Arias G. Facsimile: 507-205-7001 with a copy (which shall not constitute notice) to: ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Francisco Arias G. Facsimile: 507-205-7001 or to any other address or to any other person that any party has appointed in last instance through a notice to the other party. Each one of the referred notices or communications will be effective (i) if given by facsimile, when transmitted to the corresponding number specified in (or according to) this Section 15 and the sender device confirms sending and receipt; (ii) if sent by 48 hour delivery mail, two (2) working days and, if sent by certified or registered mail, seven (7) working days after placed in the mail with first class postage 10 paid, addressed as previously explained; or (iii) if issued by any other means, when actually received at the address mentioned. 16. Bankruptcy of Settlor. In the event that there shall be filed by or against Settlor in any court pursuant to the bankruptcy laws of Panama or any other similar foreign, federal or state law providing for bankruptcy, insolvency, receivership or protection from creditors (collectively, the "BANKRUPTCY LAWS"), a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of the assets of Settlor, Settlor will be deemed to have waived, and therefore will not assert, any and all rights, remedies and recourses under the Bankruptcy Laws with respect to the Trust Assets, and the Trust Assets shall continue to be administered pursuant to the terms of this Trust Agreement, irrespective of such filing. 17. Severability. To the extent any provision of this Trust Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Trust Agreement. 18. Amendments, etc. This Trust Agreement may be amended or modified, and any of the terms hereof may be waived, only by a written instrument duly executed by or on behalf of all of the parties hereto. No waiver by any party of any term or condition contained in this Trust Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Trust Agreement on any future occasion. 19. Entire Agreement. This Trust Agreement constitutes the entire agreement between the parties relating to the holding, investment and disbursement of the Trust Assets and administration of the Trust Assets and sets forth in their entirety the obligations and duties of Trustee with respect to the Trust Assets; provided that any capitalized terms used but not defined herein shall have the meaning assigned to such terms in the Share Subscription Agreement. 20. Binding Effect. All of the terms of this Trust Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, executors, administrators, successors and assigns. 21. Representations and Warranties. Settlor and Representative each hereby represent and warrant (a) that this Trust Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (b) that the execution, delivery and performance of this Trust Agreement by Settlor and Representative do not and will not violate any applicable law or regulation. 22. Assignments. No party may assign any of its rights or obligations under this Trust Agreement without the prior written consent of the other parties, provided that no such consent shall be required for any such assignment by Settlor to any of the Sponsors (as defined in the Share Subscription Agreement) or any direct or indirect subsidiary of the Sponsors. 11 23. Execution in Counterparts; Facsimile Signatures. This Trust Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction. Facsimile signatures shall be treated as originals. 24. Governing Law. This Trust Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Trust Agreement shall be governed and construed in accordance with the laws of the Republic of Panama, particularly Law 1 of 1984, without regard to conflicts of law or private international law rules. 25. Domicile. The parties choose as domicile for the Trust the City of Panama, Republic of Panama. 26. Business Day. For all purposes of this Trust Agreement, the term "business day" shall mean a day other than Saturday, Sunday or any day on which banks located in the Republic of Panama are authorized or obligated to close. 27. Headings. The headings used in this Trust Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 28. Resident Agent of the Trust. In compliance with Section 9 of article 9, of Law No. 1 of 1984, the law firm Fabrega Barsallo Molino & Mulino, Omega Bldg., M Floor, Samuel Lewis Ave. & 53rd St., P.O. Box 4493, Panama 5, Rep. of Panama, is hereby appointed as the Resident Agent for this Trust. 29. Arbitration. Any controversy, dispute or claim between the parties arising out of or related to this Trust Agreement, or the breach hereof, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The dispute shall be referred to arbitration before a panel of three arbitrators, one of whom shall be selected by Settlor, one of whom shall be selected by Representative and the remaining arbitrator to be mutually selected by the other two arbitrators, provided that if the amount in controversy is less than US$250,000, there shall be one arbitrator appointed as provided in the rules of the ICC. Each arbitrator shall be fully bi-lingual in English and Spanish and is qualified to practice law in a civil law jurisdiction. Any such arbitration shall be conducted in Panama City, Republic of Panama. The arbitrators shall have the power to decide on its own subject matter jurisdiction. The award rendered by the arbitrator(s) shall be at law (and not in equity), shall be subject to the limitations on liability provided in this Trust Agreement and shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Any party shall be entitled to seek interim measures of protection in the form of pre-award attachment of assets or injunctive relief. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Trust Agreement and that the parties hereto shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and the parties further agree to waive any 12 requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Trust Agreement but shall be in addition to all other remedies available at law or equity to Settlor. At any hearing of oral evidence, each party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other party and each party shall have the right to conduct reasonable discovery of the other party. 30. Language. This Trust Agreement has been negotiated and executed in English. The parties acknowledge that a translation into Spanish may be required for purposes of filings with governmental authorities; in such case, the parties shall agree on Spanish translation by initialing the same. The parties agree that, in case of conflict between the English and Spanish translations of this Trust Agreement, the English version shall govern. 31. No Third Party Beneficiaries. Notwithstanding anything herein to the contrary, this Trust Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 13 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed in New York, New York, USA, as of the date first above written. "SETTLOR" CA BEVERAGES, INC. By: /s/ Han de Goederen ----------------------------------- Name: Han de Goederen Title: President "TRUSTEE" BANCO GENERAL, S.A. By: /s/ Jean-Pierre Leignadier ----------------------------------- Name: Jean-Pierre Leignadier Title: Attorney-in-Fact "REPRESENTATIVE" FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By: /s/ Alvaro Arias ----------------------------------- Name: Alvaro Arias Title: Authorized Representative By: /s/ Roberto Ramon Vallarino Cox ----------------------------------- Name: Roberto Ramon Vallarino Cox Title: Authorized Representative FABREGA BARSALLO MOLINO & MULINO, as Resident Agent of the Trust Agreement By:___________________________________ Name:_________________________________ Title:________________________________ EXHIBIT A FORM OF INSTRUCTION LETTER To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned CA Beverages, Inc. (the "Settlor"), pursuant to the Trust Agreement - CBP OPA Trust, dated as of October 2, 2002, among Settlor, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby irrevocably instructs you to credit the funds in the sum of US$________________, transferred to you via wire transfer to the account of Banco General, S.A. at Citibank, N.A. in New York, New York, USA, account number 10951934, with value today, to the trust in accordance with the terms of said Trust Agreement. CA BEVERAGES, INC. By:___________________________________ Name:_________________________________ Title:________________________________ EXHIBIT B-1 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. (the "Settlor"), pursuant to Section 10 of the Trust Agreement - CBP OPA Trust, dated as of October 2, 2002, among the Settlor, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that Settlor has exercised its option under Section 5.9 of the Share Subscription Agreement during the Unconditional Period (as defined therein) to rescind the sale of the Shares; (b) irrevocably instructs you to pay to Settlor the full amount of the Trust Assets as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to Settlor's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:___________________________________ Name:_________________________________ Title:________________________________ Dated: __________, _____ [a copy of this notice is to be remitted to Representative] EXHIBIT B-2 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. (the "Settlor") and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), pursuant to Section 10 of the Trust Agreement - CBP OPA Trust, dated as of October 2, 2002, among the Settlor, Representative and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that Settlor, with the unanimous approval of all of the members of the Board of Directors of Coca Cola de Panama Compania Embotelladora, S.A. and the approval of Representative, has exercised its option under Section 5.9 of the Share Subscription Agreement outside of the Unconditional Period to rescind the sale of the Shares; (b) irrevocably instruct you to pay to Settlor the full amount of the Trust Assets as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to Settlor's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) enclose the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:___________________________________ Name:_________________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:___________________________________ Name:_________________________________ [Please Print] EX-10.53 12 ex10_53.txt CBP HOLDBACK AGREEMENT -- CA BEVERAGES EXHIBIT 10.53 TRUST AGREEMENT - CBP HOLDBACK TRUST This TRUST AGREEMENT - CBP HOLDBACK TRUST, dated as of October 2, 2002 (this "Trust Agreement"), is entered into by and among CA BEVERAGES, INC., a corporation ("sociedad anonima") organized and existing pursuant to the laws of the Republic of Panama (the "SETTLOR"), hereby represented by Han de Goederen, male, of legal age, citizen of the Netherlands, with passport No. Z01328951, duly authorized to execute this agreement pursuant to a resolution of the Board of Directors of the Settlor dated September 30, 2002; BANCO GENERAL, S.A., a corporation organized and existing pursuant to the laws of the Republic of Panama (the "TRUSTEE"), hereby represented by Jean-Pierre Leignadier, Panamanian, of legal age, with personal identity card No. 8-390-635; and FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA, a private foundation organized and existing pursuant to the laws of the Republic of Panama, as Representative ("REPRESENTATIVE"), hereby jointly represented by Alvaro Arias, Panamanian, of legal age, with personal identity card No. 8-169-678, and Roberto Ramon Vallarino Cox, Panamanian, of legal age, with personal identity card No. 8-137-229, as Council Members acting jointly, duly authorized pursuant to Section 13 of its Foundation Charter, representing and acting on behalf of the shareholders of Cervecerias Baru-Panama, S.A. ("CBP") who, in accordance with the Tender Offer Documents (as defined below) and in compliance with the laws of the Republic of Panama, accept the OPA (as defined below), do not revoke such acceptance and consummate such acceptance by tendering their common shares of Settlor (the "ACCEPTING SHAREHOLDERS"). WHEREAS, on the date first written above Coca Cola de Panama Compania Embotelladora, S.A. ("COCA COLA") and Settlor have entered into a Share Subscription Agreement (the "SHARE SUBSCRIPTION AGREEMENT") whereby Coca Cola has agreed to issue and sell to Settlor, who has agreed to purchase, three million nine hundred thirty-four thousand two hundred forty-six (3,934,246) newly issued no par value common shares of Coca Cola (or such amount corresponding to fifty percent (50%) plus one share of the total issued and outstanding no par value common shares of Coca Cola) (the "SHARES"); WHEREAS, pursuant to the Share Subscription Agreement, the Settlor has agreed to launch a Public Tender Offer in the Republic of Panama (the "OPA") to acquire up to one hundred percent (100%) of the issued and outstanding US$5.00 par value common shares of CBP at a price per share of US$14.60; and WHEREAS, the execution and delivery of this Trust Agreement (including the deposit of the Trust Amount (as defined below)) is a condition to the consummation of the transactions contemplated by the Share Subscription Agreement. NOW, THEREFORE, Settlor, the Trustee and Representative hereby agree as follows: 1. Constitution of the Trust. Settlor, the Trustee and Representative hereby enter into an irrevocable trust agreement under the provisions of Law 1 of January 5, 1984 of the Republic of Panama, which regulates trust agreements in the Republic of Panama, in order to guarantee payment to the Settlor for any Loss (as defined below). 2. Objectives of the Trust. The objectives of this Trust are to: (a) permit the Trustee to pledge the Trust Assets to secure any guarantee required by applicable securities legislation in connection with the OPA; (b) transfer to the Trustee a portion retained from the purchase price of the shares subject to the OPA in the amount of US$4,228,525.40 (the "HOLDBACK FUND"), as set out in the Share Subscription Agreement and in the prospectus (as may be amended from time to time) and the exhibits and schedules attached thereto that are delivered to shareholders in respect of the OPA (collectively, the "TENDER OFFER DOCUMENTS"), in order for the Trustee to use the Holdback Fund according to the terms and conditions of this Trust Agreement; (c) guarantee to Settlor that, upon consummation of the OPA, the balance of the Trust Assets that is not retained with respect to shares of the Accepting Shareholders under the OPA shall be returned by the Trustee to the Settlor; and (d) provide for the return of the Trust Assets to Settlor upon the occurrence of any of the events described in Section 10(b) hereof. 3. Appointment of Beneficiaries. Subject to Section 10(b) hereof, the Beneficiaries of this Trust and particularly of the Trust Assets shall be Settlor and the Accepting Shareholders as provided for herein. 4. The Trust Amount. The "Trust Amount" initially shall be the aggregate amount of US$4,228,525.40, which represents the Holdback Fund retained from the purchase price of the shares subject to the OPA and given in trust, with irrevocable instructions as described in the form of instruction letter attached hereto as Exhibit A, to the Trustee by the Settlor. 5. Appointment of the Trustee; Deposit of Trust Amount. Settlor hereby constitutes and appoints the Trustee as, and the Trustee hereby agrees to assume and perform the duties of, the trustee under and pursuant to this Trust Agreement. The Trustee acknowledges receipt of an executed copy of the Share Subscription Agreement and, as of the date hereof, of the Trust Amount from Settlor as provided in the Share Subscription Agreement. Trustee hereby accepts such appointment and agrees to hold, invest and disburse the Trust Amount in accordance with this Trust Agreement. 6. The Trust Assets. The Trust Amount, all earnings accrued thereon in accordance with Section 7 hereof and any shares or other assets placed in trust in accordance with the terms of this Trust Agreement (the "TRUST ASSETS") shall be held by the Trustee, to be used as specifically provided in this Trust Agreement. Except as expressly provided in Section 13 hereof, the Trustee does not have any interest in the Trust Amount deposited hereunder or the Trust Assets but is serving as trustee only and having only possession thereof in that capacity. 2 7. Investment of the Trust Assets; Taxes. (a) Unless and until the Trustee receives written instructions from Settlor and the Representative as set forth below, the Trustee shall maintain the Trust Assets in an overnight account at Banco General, S.A., available for immediate use. As per written instructions of Settlor and the Representative delivered to the Trustee, the Trustee shall directly invest and reinvest the Trust Assets, in any of the following kinds of investments, or in any combination thereof: (i) bonds or other obligations of, or guaranteed by, the government of the United States of America or any State thereof or the District of Columbia, or agencies of any of the foregoing, having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the date on which this Trust Agreement terminates in accordance with Section 10 hereof (the "TERMINATION DATE"); (ii) commercial paper of United States issuers rated, at the time of the Trustee's investment therein or contractual commitment providing for such investment, at least P-1 by Moody's Investors Service, Inc. ("MOODY'S") and A-1 by Standard & Poor's Corporation ("S&P") and having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the Termination Date; (iii) demand or time deposits in, certificates of deposit of or bankers' acceptances issued by (A) Banco General, S.A. or a depository institution or trust company incorporated under the laws of Panama or the laws of the United States of America, any State thereof or the District of Columbia having a combined capital and surplus of US$10 billion, or (B) a Panamanian or United States branch office or agency of a foreign depository institution or trust company if, in any such case, the depository institution, trust company or office or agency is rated at least P-l by Moody's and A-1 by S&P (any such institution described in clause (A) or (B) being herein called a "PERMITTED BANK"), and having maturities as agreed upon by Settlor and the Representative, such maturities not to extend beyond the Termination Date; or (iv) such other investments as Settlor and the Representative shall jointly approve or direct in writing. The written instructions for the investment shall be given by Settlor and the Representative to the Trustee. The Trustee shall notify Settlor and the Representative the amount of funds available to invest in accordance with this Section 7(a). (b) Each of the foregoing investments shall be made in the name of the Trustee in accordance with this Trust Agreement. Notwithstanding anything to the contrary contained herein, the Trustee may, without notice to Settlor or the Representative, 3 sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for release of any portion of the Trust Assets permitted or required hereunder, and Trustee shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. (c) The Trustee shall have no responsibility for any investment losses resulting from the investment, reinvestment or liquidation of the Trust Assets. (d) Any interest or other income received on such investment and reinvestment of the Trust Assets shall become part of the Trust Assets. (e) All taxes (except for income taxes of the Trustee arising from the Fees (as defined below)), if any, in respect of the Trust Assets shall be allocable among the parties as set forth in Section 13 hereof. 8. Claims Against the Trust Assets. The Trust Assets shall be used solely for payment of any action, cost, damage, disbursement, expense, fine, fee, liability, loss, deficiency, obligation, penalty or settlement of any nature, including but not limited to, interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims, whether in litigation or other proceedings or with respect to any action, and amounts paid in settlement that may be imposed on or otherwise incurred or suffered, directly or indirectly, by any of Settlor, its subsidiaries or any of their respective officers, directors, employees, agents or representatives and that arise in connection with any breach of, or inaccuracy in, any of the representations, warranties or covenants made by Settlor, or made or confirmed by the Accepting Shareholders, in the Share Subscription Agreement or Tender Offer Documents (a "LOSS"). 8.1 Claim for Loss (a) If at any time prior to the Final Termination Date (as defined below), Settlor determines that any of Settlor, its subsidiaries or any of their respective officers, directors, employees, agents or representatives has suffered a Loss, or is reasonably likely to suffer a Loss, Settlor shall deliver to Representative a notice summarizing in reasonable detail the nature and amount of the Loss. If the amount of a Loss is not yet certain on the date of such notice, Settlor shall provide a good faith estimate of the maximum Loss likely to be incurred. The Loss specified or estimated in such notice shall be referred to herein as the "Owed Amount". (b) Concurrently with the delivery of any notice by Settlor to the Representative of a Loss pursuant to Section 8.1(a) above, Settlor will deliver to the Trustee a certificate in substantially the form of Exhibit B attached hereto (a "CERTIFICATE OF INSTRUCTION"). The Trustee shall give written notice to the Representative of its receipt of a Certificate of Instruction not later than two business days following receipt thereof, together with a copy of such Certificate of Instruction. 4 (c) If Representative objects to any claim of Settlor reflected in a Certificate of Instruction, Representative shall notify Settlor, and Settlor and Representative shall promptly review the claim together and attempt to address Representative's objections. If, within 15 days following Settlor's delivery of the Certificate of Instruction to the Trustee (the "CONCILIATION PERIOD"), Settlor and Representative agree that Settlor's claim as reflected in the Certificate of Instruction should be modified, Settlor and Representative shall execute jointly and deliver to the Trustee a Resolution Certificate in substantially the form attached as Exhibit C. (d) If, within the Conciliation Period, the Trustee receives a Resolution Certificate signed by both Settlor and Representative, it shall promptly pay over to Settlor from the Trust Assets, by wire transfer of immediately available funds to a bank account of Settlor's designation, the Owed Amount set forth in the Resolution Certificate. If Trustee does not receive a Resolution Certificate signed by both Settlor and Representative before expiration of the Conciliation Period, the Trustee shall, notwithstanding any objection by Representative or any other party, promptly upon expiration of the Conciliation Period pay over to Settlor from the Trust Assets, by wire transfer of immediately available funds to a bank account of Settlor's designation, the Owed Amount set forth in the Certificate of Instruction from the Trust Assets. Such obligation of the Trustee shall be absolute and unconditional. (e) If the Representative should dispute or object to the Loss claimed by Settlor in the notice to Representative given pursuant to Section 8.1(a) or in the Certificate of Instruction, and Settlor has not agreed during the Conciliation Period to modify its claim by executing a Resolution Certificate, Representative shall have no right to object to or prevent the disbursement of funds to Settlor by the Trustee pursuant to Section 8.1(d). The Representative's sole recourse shall be to commence an arbitration action against Settlor pursuant to Section 29 hereof to reclaim the amounts paid over to Settlor by Trustee pursuant to the Certificate of Instruction. If, following any disbursement from the Trust Assets to Settlor pursuant to this Section 8.1, the actual amount of an estimated Loss is finally determined by Settlor to be less than the Owed Amount specified with respect to such Loss and paid to Settlor, Settlor shall within ten (10) business days remit to Representative the amount by which the Owed Amount exceeded such actual Loss plus interest at a rate equal to the annual rate of return of the Trust Assets for the period of time during which Settlor held the excess funds or, for any period of time after the Trust Assets have been fully disbursed, a rate of five percent (5%) per annum. 8.2 Notwithstanding anything in this Section 8 to the contrary, (i) the Trustee shall not be required to make any payments to Settlor for any Loss if all amounts in the Trust Assets have been released or otherwise previously distributed and (ii) Settlor shall have no right to claim a Loss hereunder prior to the earlier of (A) the date of the closing of the OPA and (B) December 31, 2002. 5 9. Release of Trust Assets. (a) Promptly after the expiration of the relevant acceptance period of the OPA as set forth in the Tender Offer Documents (the "ACCEPTANCE TERMINATION DATE"), the Trustee will release and pay to Settlor by wire transfer in immediately available funds (or through such alternative method as Settlor may instruct the Trustee), the balance of the Trust Assets not to be retained on behalf of the Accepting Shareholders. (b) Fifty-three and one-third percent (53.33%) of the Trust Assets will be held by the Trustee for the recovery of Losses until the date which is thirty-six (36) months after the earlier of (A) the date of the closing of the OPA and (B) December 31, 2002 and (ii) forty-six and two-thirds percent (46.67%) of the Trust Assets will be held by the Trustee for the recovery of Losses until the date on which the lawsuit filed by Refrescos Nacionales, S.A. against Coca Cola and its subsidiaries Ventas y Mercadeo, S.A. and Direccion y Administracion de Empresas, S.A. for alleged antitrust practices is settled or is the subject of a final, non-appealable judgment (the earlier of the dates described in clauses (i) and (ii) shall be referred to herein as the "INITIAL TERMINATION DATE" and the later of such dates, the "FINAL TERMINATION DATE"); provided, however, that such lawsuit shall not be settled without the consent of the Representative, such consent not to be unreasonably withheld, and any dispute relating to the granting or withholding of such consent shall be governed by Section 29 hereof; provided further, if any claims for Losses are pending as of the Initial Termination Date or the Final Termination Date, as the case may be, then such date shall be extended to such time as all such claims have been fully satisfied or otherwise disposed. 10. Termination. (a) Subject to Section 10(b), this Trust Agreement, and all obligations of the Trustee hereunder shall terminate on the earliest of: (i) the Final Termination Date, (ii) such earlier date on which all of the Trust Assets shall have been disbursed in accordance with the terms of this Trust Agreement, or (iii) the date on which CAB and Representative jointly notify the Trustee in writing of their intent to terminate the Trust Agreement, subject to the Trustee's consent (such consent not to be unreasonably withheld). In connection with termination of this Trust Agreement in accordance with this Section 10(a), upon payment of all Fees due to the Trustee, the Trust Assets then held hereunder shall be distributed pro rata for the benefit of the Accepting Shareholders, based upon the amount of shares tendered by each such Accepting Shareholder in the acceptance of the OPA. For that purpose, Banco General, S.A. or another qualified financial institution appointed by Settlor to serve as the paying agent of the OPA (the "PAYING AGENT") shall certify (the "PAYING AGENT CERTIFICATION") to the Trustee the number of shares that each such Accepting Shareholder has tendered and sold and the aggregate amount to be paid to each such Accepting Shareholder (the "CERTIFIED AMOUNT") pursuant to the Tender Offer Documents. Promptly after 6 the Acceptance Termination Date and receipt of the Paying Agent Certification, the Trustee shall deliver the Certified Amount to the Paying Agent. (b) If Settlor exercises its rights of rescission under Section 5.9(a) of the Share Subscription Agreement, then (a) Settlor (if such exercise shall occur during the Unconditional Period (as defined in the Share Subscription Agreement)) or Settlor and Representative jointly (if such exercise shall not occur during the Unconditional Period) shall send notice of such exercise to the Trustee in the form attached as Exhibit D-1 or Exhibit D-2 hereto, as the case may be, (b) the Trustee shall deliver to Settlor all of the Trust Assets (net of Fees due to the Trustee) by wire transfer in immediately available funds and (c) this Trust Agreement and all obligations of the Trustee hereunder shall terminate 11. Duties and Obligations of the Trustee. The duties and obligations of the Trustee shall be limited to and determined solely by the provisions of this Trust Agreement and the certificates delivered in accordance herewith, and the Trustee is not charged with knowledge of or any duties or responsibilities in respect of any other agreement or document. In furtherance and not in limitation of the foregoing: (a) The Trustee shall not be liable for any loss of interest or earnings sustained as a result of investments made hereunder in accordance with the terms hereof, including any liquidation of any investment of the Trust Assets prior to its maturity effected in order to make a payment required by the terms of this Trust Agreement; (b) The Trustee shall be fully protected in relying in good faith upon any written certification, instruction, notice, direction, request, waiver, consent, receipt or other document that the Trustee reasonably believes to be genuine and duly authorized, executed and delivered; (c) The Trustee shall not be liable for any error of judgment, or for any act done or omitted by it, or for any mistake in fact or law, or for anything that it may do or refrain from doing in connection herewith; provided, however, that notwithstanding any other provision in this Trust Agreement, the Trustee shall be liable for its willful misconduct or gross negligence; (d) The Trustee may seek the advice of legal counsel selected with reasonable care (provided that the selection of such legal counsel shall require Settlor's prior written consent, such consent not to be unreasonably withheld) in the event of any dispute or question as to the construction of any of the provisions of this Trust Agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel; (e) In the event that the Trustee shall in any instance, after seeking the advice of legal counsel pursuant to the immediately preceding clause, in good faith be uncertain as to its duties or rights hereunder, it shall be entitled to refrain from taking any 7 action in that instance and its sole obligation, in addition to those of its duties hereunder as to which there is no such uncertainty, shall be to keep the property affected by such uncertainty safely held in trust until it shall be directed otherwise in writing by Settlor and the Representative; provided, however, in the event that the Trustee has not received such written direction within thirty (30) days after requesting the same, it shall have the right to submit the issue to arbitration in accordance with Section 29 hereof; and (f) The Trustee may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through agents or attorneys selected with reasonable care. Nothing in this Trust Agreement shall be deemed to impose upon the Trustee any duty to qualify to do business or to act as fiduciary or otherwise in any jurisdiction other than the Republic of Panama and the Trustee shall not be responsible for and shall not be under a duty to examine into or pass upon the validity, binding effect, execution or sufficiency of this Trust Agreement or of any agreement amendatory or supplemental hereto. (g) The Trustee shall issue, or shall cause a financial institution (including Banco General, S.A.) to issue, a letter or a bank guarantee confirming the availability of sufficient funds to settle the obligations derived from the OPA, as required by applicable securities legislation of the Republic of Panama. 12. Cooperation. Settlor and Representative shall provide to the Trustee all instruments and documents within their respective powers to provide that are necessary for the Trustee to perform its duties and responsibilities hereunder. 13. Fees and Expenses; Indemnity. (a) Notwithstanding anything in this Section 13 to the contrary, the Trustee is authorized to deduct from earnings on the Trust Amount an acceptance fee of $10,000, and an annual fee of $15,000, both payable upon execution of this Trust Agreement. The annual fee will be payable thereafter on each anniversary of the execution of this Trust Agreement. The Trustee will charge a fee of $4 per check for payments to the Beneficiaries (as set forth in Section 3 hereof) and Settlor upon liquidation of the Trust. The Trustee also shall be entitled to receive reasonable and customary out-of-pocket expenses incurred in connection with the performance of its duties hereunder. The fees, costs and expenses described in this Section 13(a) shall be referred to herein as "FEES". (b) The Trustee is authorized to, and may disburse to itself from the earnings on the Trust Amount, from time to time, the amount of any Fees due and payable to it hereunder. If for any reason such earnings are insufficient to cover such Fees, Settlor shall pay within the following thirty (30) days such amounts to make up such shortfall to Trustee upon the presentation of an itemized invoice. The Trustee shall notify Settlor and Representative of any disbursement from the Trust Assets to itself in respect of any Fees under any provision of this Trust Agreement 8 and shall furnish to Settlor and Representative copies of all related invoices and other statements. (c) Prior to the consummation or termination of the OPA, Settlor shall be liable for and shall reimburse and indemnify Trustee (and any predecessor Trustee) and hold Trustee harmless from and against one-half (1/2) of any and all claims, losses, actions, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) arising from or in connection with Trustee's administration of, or performance of duties and obligations pursuant to, this Trust Agreement; provided, however, that notwithstanding the foregoing, Settlor shall not be required to indemnify the Trustee for any such claims, losses, actions, liabilities, costs, damages or expenses caused by its own gross negligence or own willful misconduct. In addition, when the Trustee acts on any information, instructions or communications (including, but not limited to, communications with respect to the delivery of securities or the wire transfer of funds) sent by telephone, telex or facsimile, the Trustee, absent gross negligence or willful misconduct, shall not be responsible or liable in the event such communication is not an authorized or authentic communication or is not in the form Settlor sent or intended to send (whether due to fraud, distortion or otherwise). The Trustee shall have the right to offset an amount equal to one-half (1/2) of any indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described above against the Trust Assets. (d) After consummation or termination of the OPA, Settlor shall be liable for one hundred percent (100%) of all indemnifiable claims, losses, actions, liabilities, costs, damages or expenses described in Section 13(c) above and the Trustee will have no right to offset any amount thereof against the Trust Assets. (e) Notwithstanding anything in this Section 13 to the contrary, all of Settlor's compensation, reimbursement and indemnification obligations set forth in this Section 13 shall be payable by Settlor upon demand by the Trustee, and the failure of Settlor to fund such obligations shall give rise to the right of the Trustee to offset any such unpaid amounts against payments otherwise due to Settlor pursuant to this Trust Agreement. The obligations of Settlor under this Section 13 shall survive any termination of this Trust Agreement and the resignation or removal of Trustee. 14. Resignation and Removal of the Trustee. (a) The Trustee may resign as such thirty (30) calendar days following the giving of written notice thereof to Settlor and Representative. In addition, the Trustee may be removed and replaced on a date designated in a written instrument signed by Settlor and Representative and delivered to the Trustee. In the case of either such resignation or removal, Settlor and the Representative jointly shall appoint a branch or affiliate located in the Republic of Panama of one of HSBC, BNP Paribas or Citibank, N.A. as the successor Trustee. Notwithstanding the foregoing, no such resignation or removal shall be effective until a successor 9 Trustee has acknowledged its appointment as such as provided in Section 14(c). In either event, upon the effective date of such resignation or removal, the Trustee shall deliver the property comprising the Trust Assets (net of any Fees due to the Trustee) to such successor Trustee, together with such records maintained by the Trustee in connection with its duties hereunder and other information with respect to the Trust Assets as such successor may reasonably request. (b) If a successor Trustee shall not have acknowledged its appointment as such as provided in Section 14(c), in the case of a resignation, prior to the expiration of thirty (30) calendar days following the date of a notice of resignation or, in the case of a removal, on the date designated for the Trustee's removal, as the case may be, because Settlor and Representative are unable to agree on a successor Trustee, or for any other reason, the successor Trustee shall be appointed from the first of HSBC, BNP Paribas and Citibank, N.A. (in such order) to acknowledge its appointment as such, and such appointment shall be binding upon all of the parties to this Trust Agreement. (c) Upon written acknowledgment by a successor Trustee appointed in accordance with the foregoing provisions of this Section 14 of its agreement to serve as Trustee hereunder and the receipt of the property then comprising the Trust Assets, the Trustee shall be fully released and relieved of all duties, responsibilities and obligations under this Trust Agreement, subject to the provision contained in Section 11(c) and such successor Trustee shall for all purposes hereof be the Trustee. 15. Notices. Any notices or another communication under this Trust Agreement, must be given in writing and be (a) delivered to the address indicated hereinafter; (b) transmitted by facsimile, provided that any notice given in this form must also be sent by mail as provided in clause (c); or (c) sent by mail with 48 hour delivery (courier), or by certified or registered mail, postage paid and receipt confirmation requested as follows: If to Settlor, addressed to: CA BEVERAGES, INC. c/o TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 with copies (which shall not constitute notice) to: 10 HEINEKEN INTERNATIONAL B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Attn: Rene Hooft Graafland Facsimile: +31-20-523-9790 PANAMCO L.L.C. 701 Waterford Way Suite 800 Miami, FL 33126 Attn: General Counsel Facsimile: (786) 388-8191 FABREGA BARSALLO MOLINO & MULINO Omega Bldg., M Floor Samuel Lewis Ave. & 53rd St. P.O. Box 4493, Panama 5, Rep. of Panama Attn: Juan Pablo Fabrega/Jose Raul Mulino Facsimile: (507) 263-6983 and TAPIA, LINARES & ALFARO P.O. Box 7412 Edificio Plaza 2000, 4th Floor Avenida Gral. Nicanor A. de Obarrio (Calle 50) Panama, Republic of Panama Attn: Eloy Alfaro / Mario E. Correa Facsimile: (507) 263-5305 If to the Trustee, to: BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier Facsimile: 507-265-0291 If to the Representative, to: FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA c/o Arias, Fabrega & Fabrega Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 11 Panama, Republic of Panama Attn: Alvaro Arias and Roberto R. Vallarino C., c/o Francisco Arias G. Facsimile: 507-205-7001 with a copy (which shall not constitute notice) to: ARIAS, FABREGA & FABREGA Apartado 6307, Zona 5 Calle 50 y Calle 53, Marbella Edificio PH 2000, Piso 16 Panama, Republic of Panama Attn: Francisco Arias G. Facsimile: 507-205-7001 or to any other address or to any other person that any party has appointed in last instance through a notice to the other party. Each one of the referred notices or communications will be effective (i) if given by facsimile, when transmitted to the corresponding number specified in (or according to) this Section 15 and the sender device confirms sending and receipt; (ii) if sent by 48 hour delivery mail, two (2) working days and, if sent by certified or registered mail, seven (7) working days after placed in the mail with first class postage paid, addressed as previously explained; or (iii) if issued by any other means, when actually received at the address mentioned. 16. Bankruptcy of Settlor. In the event that there shall be filed by or against the Settlor in any court pursuant to the bankruptcy laws of Panama or any other similar foreign, federal or state law providing for bankruptcy, insolvency, receivership or protection from creditors (collectively, the "BANKRUPTCY LAWS"), a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of the assets of Settlor, Settlor will be deemed to have waived, and therefore will not assert, any and all rights, remedies and recourses under the Bankruptcy Laws with respect to the Trust Assets, and the Trust Assets shall continue to be administered pursuant to the terms of this Trust Agreement, irrespective of such filing. 17. Severability. To the extent any provision of this Trust Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Trust Agreement. 18. Amendments, etc. This Trust Agreement may be amended or modified, and any of the terms hereof may be waived, only by a written instrument duly executed by or on behalf of all of the parties hereto. No waiver by any party of any term or condition contained in this Trust Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Trust Agreement on any future occasion. 19. Entire Agreement. This Trust Agreement constitutes the entire agreement between the parties relating to the holding, investment and disbursement of the Trust Assets and administration of the Trust Assets and sets forth in their entirety the obligations and duties of Trustee with respect to the Trust Assets; provided that any capitalized terms 12 used but not defined herein shall have the meaning assigned to such terms in the Share Subscription Agreement. 20. Binding Effect. All of the terms of this Trust Agreement, as amended from time to time, shall be binding upon, inure to the benefit of and be enforceable by the parties hereto, and their respective heirs, executors, administrators, successors and assigns. 21. Representations and Warranties. Settlor and Representative each hereby represent and warrant (a) that this Trust Agreement has been duly authorized, executed and delivered on its behalf and constitutes its legal, valid and binding obligation and (b) that the execution, delivery and performance of this Trust Agreement by Settlor and Representative do not and will not violate any applicable law or regulation. 22. Assignments. No party may assign any of its rights or obligations under this Trust Agreement without the prior written consent of the other parties, provided that no such consent shall be required for any such assignment by Settlor to any of the Sponsors (as defined in the Share Subscription Agreement) or any direct or indirect subsidiary of the Sponsors. 23. Execution in Counterparts; Facsimile Signatures. This Trust Agreement may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction. Facsimile signatures shall be treated as originals 24. Governing Law. This Trust Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Trust Agreement shall be governed and construed in accordance with the laws of the Republic of Panama without regard to conflicts of law or private international law rules. 25. Domicile The parties choose as domicile for the Trust the city of Panama, Republic of Panama. 26. Business Day. For all purposes of this Trust Agreement, the term "business day" shall mean a day other than Saturday, Sunday or any day on which banks located in the Republic of Panama are authorized or obligated to close. 27. Headings. The headings used in this Trust Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 28. Resident Agent of the Trust. In compliance with Section 9 of article 9, of Law No. 1 of 1984, the law firm Fabrega Barsallo Molino & Mulino, Omega Bldg., M Floor, Samuel Lewis Ave. & 53rd St., P.O. Box 4493, Panama 5, Rep. of Panama, is hereby appointed as the Resident Agent for this Trust. 29. Arbitration. Any controversy, dispute or claim between the parties arising out of or related to this Trust Agreement, or the breach hereof, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The dispute shall be referred to arbitration before a panel of three arbitrators, one of whom shall be selected by Settlor, one of whom shall be 13 selected by Representative and the remaining arbitrator to be mutually selected by the other two arbitrators, provided that if the amount in controversy is less than US$250,000, there shall be one arbitrator appointed as provided in the rules of the ICC. Each arbitrator shall be fully bi-lingual in English and Spanish and is qualified to practice law in a civil law jurisdiction. Any such arbitration shall be conducted in Panama City, Republic of Panama. The arbitrators shall have the power to decide on its own subject matter jurisdiction. The award rendered by the arbitrator(s) shall be at law (and not in equity), shall be subject to the limitations on liability provided in this Trust Agreement and shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Any party shall be entitled to seek interim measures of protection in the form of pre-award attachment of assets or injunctive relief. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Trust Agreement and that the parties hereto shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach and the parties further agree to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Trust Agreement but shall be in addition to all other remedies available at law or equity to Settlor. At any hearing of oral evidence, each party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other party and each party shall have the right to conduct reasonable discovery of the other party. 30. Language. This Trust Agreement has been negotiated and executed in English. The parties acknowledge that a translation into Spanish may be required for purposes of filings with governmental authorities; in such case, the parties shall agree on Spanish translation by initialing the same. The parties agree that, in case of conflict between the English and Spanish translations of this Trust Agreement, the English version shall govern. 31. No Third Party Beneficiaries. Notwithstanding anything herein to the contrary, this Trust Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 14 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed in New York, New York, USA, as of the date first above written. "SETTLOR" CA BEVERAGES, INC. By: /s/ Han de Goederen ----------------------------------- Name: Han de Goederen Title: President "TRUSTEE" BANCO GENERAL, S.A. By: /s/ Jean-Pierre Leignadier ----------------------------------- Name: Jean-Pierre Leignadier Title: Attorney-in-Fact "REPRESENTATIVE" FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By: /s/ Alvaro Arias ----------------------------------- Name: Alvaro Arias Title: Authorized Representative By: /s/ Roberto Ramon Vallarino Cox ----------------------------------- Name: Roberto Ramon Vallarino Cox Title: Authorized Representative FABREGA BARSALLO MOLINO & MULINO, as Resident Agent of the Trust Agreement By: /s/ Juan Pablo Fabrega ---------------------------------- Name: Juan Pablo Fabrega EXHIBIT A FORM OF INSTRUCTION LETTER To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned CA Beverages, Inc. (the "Settlor"), pursuant to the Trust Agreement - CBP Holdback Trust, dated as of October 2, 2002, among Settlor, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative, and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby irrevocably instructs you to credit the funds in the sum of US$________________, transferred to you via wire transfer to the account of Banco General, S.A. at Citibank, N.A. in New York, New York, USA, account number 10951934, with value today, to the trust in accordance with the terms of said Trust Agreement. CA BEVERAGES, INC. By:__________________________________ Name:________________________________ Title:_______________________________ EXHIBIT B CERTIFICATE OF INSTRUCTION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA Beverages, Inc. (the "Settlor"), pursuant to Section 8.1(b) of the Trust Agreement - CBP Holdback Trust, dated as of October 2, 2002, among Settlor, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that (i) Settlor has sent to the Representative a notice of Loss under Section 8.1(a) of the Trust Agreement, a copy of which is attached hereto, and (ii) the amount of $________________________ (the "Owed Amount") is payable to Settlor by reason of the matter described in such notice to Representative; and (b) instructs you to pay to Settlor from the Trust Assets in accordance with the terms of Section 8.1(d) of the Trust Agreement the Owed Amount, by wire transfer of immediately available funds to Settlor's account at ________________________, ________________________, ______________, ______________ (Account No.________________________). CA BEVERAGES, INC. By:_________________________________ Name:_______________________________ Title:______________________________ Dated: __________, _____ EXHIBIT C RESOLUTION CERTIFICATE To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA Beverages, Inc. (the "Settlor"), and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), pursuant to Section 8.1(c) of the Trust Agreement - CBP Holdback Trust, dated as of October 2, 2002, among Settlor, the Representative and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that Settlor and Representative have, after further discussion of the matter described in the Certificate of Instruction dated ____________________ agreed upon an Owed Amount different from the amount specified in the Certificate of Instruction. Accordingly, the final Owed Amount with respect to the matter described in such Certificate is $______________; (b) instruct you to pay to Settlor from the Trust Assets the final Owed Amount referred to in paragraph (a) above, by wire transfer of immediately available funds to Settlor's account at _______________, _______________, (Account No.: _____), within two business days of your receipt of this Certificate; and (c) agree that the Owed Amount designated in such Certificate of Instruction, to the extent, if any, it exceeds the final Owed Amount referred to in paragraph (a) above, shall be deemed not payable to Settlor and such Certificate of Instruction is hereby cancelled. CA BEVERAGES, INC. By:_________________________________ Name:_______________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:_________________________________ Name:_______________________________ [Please Print] EXHIBIT D-1 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. (the "Settlor"), pursuant to Section 10 of the Trust Agreement - CBP Holdback Trust, dated as of October 2, 2002, among the Settlor, Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certifies that Settlor has exercised its option under Section 5.9 of the Share Subscription Agreement during the Unconditional Period (as defined therein) to rescind the sale of the Shares; (b) irrevocably instructs you to pay to Settlor the full amount of the Trust Assets as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to Settlor's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses a copy of (i) the Notice of Early Termination delivered pursuant to Section 10 of the Trust Agreement - CBP OPA Trust, dated as of October 2, 2002 among the Settlor, the Representative and you and (ii) the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:__________________________________ Name:________________________________ Title:_______________________________ Dated: __________, _____ [a copy of this notice is to be remitted to Representative] EXHIBIT D-2 NOTICE OF EARLY TERMINATION To BANCO GENERAL, S.A. APDO. 4592 Panama 5, Republic of Panama Calle Aquilino de la Guardia y Avenida 5ta B Sur Torre Banco General Attn: Jean Pierre Leignadier as Trustee The undersigned, CA BEVERAGES, INC. (the "Settlor") and Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias Baru-Panama, as Representative (the "Representative"), pursuant to Section 10 of the Trust Agreement - CBP Holdback Trust, dated as of October 2, 2002, among the Settlor, Representative and you (terms defined in said Trust Agreement have the same meanings when used herein), hereby: (a) certify that Settlor, with the unanimous approval of all of the members of the Board of Directors of Coca Cola de Panama Compania Embotelladora, S.A. and the approval of Representative, has exercised its option under Section 5.9 of the Share Subscription Agreement outside of the Unconditional Period to rescind the sale of the Shares; (b) irrevocably instruct you to pay to Settlor the full amount of the Trust Assets as full consideration for the repurchase of the Shares in accordance with the terms of Section 5.9 of the Share Subscription Agreement, by wire transfer of immediately available funds to Settlor's account at ________________________, ________________________, ______________, ______________ (Account No.________________________); and (c) encloses a copy of (i) the Notice of Early Termination delivered pursuant to Section 10 of the Trust Agreement - CBP OPA Trust, dated as of October 2, 2002 among the Settlor, the Representative and you and (ii) the certificate representing the Shares duly endorsed by us in blank. CA BEVERAGES, INC. By:______________________________________ Name:____________________________________ [Please Print] FUNDACION PRO ACCIONISTAS MINORITARIOS DE COCA COLA DE PANAMA Y CERVECERIAS BARU-PANAMA By:______________________________________ Name:____________________________________ [Please Print] EX-10.54 13 ex10_54.txt AMENDED & RESTATED TO US$60M CREDIT AGREEMENT EXHIBIT 10.54 AMENDED AND RESTATED PROMISSORY NOTE U.S. $60,000,000 City of New York October 15, 2002 State of New York, U.S.A. FOR VALUE RECEIVED as a loan (the "Loan"), the undersigned, PANAMERICAN BEVERAGES, INC., a Panamanian corporation (the "Borrower"), unconditionally promises to pay to the order of ING BANK N.V., ACTING THROUGH ITS CURACAO BRANCH (the "Bank"), at the time and in the manner set forth in Section 2 below, the principal sum of SIXTY MILLION UNITED STATES DOLLARS (U.S. $60,000,000) on April 1, 2003 (the "Maturity Date"). The Borrower promises to pay interest on the unpaid balance of the Loan from and including the date hereof until the Loan is paid in full, at a rate per annum equal to the sum of the Eurodollar Rate (as defined below) for the applicable Interest Period (as defined below) plus the Applicable Margin (as defined below), subject to the provisions of Section 2(c) and Section 4(c) and (d) hereof. Accrued interest shall be payable on each Interest Payment Date (as defined below), provided that interest payable pursuant to Section 2(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. This Note consolidates, renews, amends and restates the Promissory Note in the principal amount of Sixty Million United States Dollars (U.S. $60,000,000), dated October 1, 2002, made by the Borrower in favor of the Bank (the "Original Note"). Without any further action on the part of any party, as of the date hereof, the entire outstanding principal amount of said Original Note, together with all accrued and unpaid interest thereon, shall be deemed to be outstanding under this Note with the same allocation between principal and interest as under said Original Note. Nothing herein shall be deemed or construed as a novation, satisfaction or refinancing of all or any portion of the indebtedness evidenced by the Original Note, all of such indebtedness shall be deemed to be outstanding under this Note as full as under said Original Note. 1. Certain Defined Terms. As used in this Note, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): (a) "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise; provided, however, that neither TCCC nor any of its direct or indirect Subsidiaries shall be considered an Affiliate of the Borrower or any of its Subsidiaries. (b) "Alternate Base Rate" means, on any date, a fluctuating rate of interest per annum equal to the higher of (i) the Base Rate; and (ii) the Federal Funds Rate plus1/2of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Bank in connection with extensions of credit. Changes in the rate of interest on the Loan bearing interest at the Alternate Base Rate will take effect simultaneously with each change in the Alternate Base Rate. (c) "Applicable Margin" means (i) for the period from the date hereof to January 1, 2003, 0.60% per annum; (ii) for the period from January 1, 2003 to February 1, 2003, 0.80% per annum; (iii) for the period from February 1, 2003 to March 1, 2003, 1.00% per annum; and (iv) from March 1, 2003 to (and including) the Maturity Date, 1.10% per annum; provided, however, that (A) if at any time from the date hereof to the Maturity Date the Borrower's BBB-/Baa3 credit rating category is increased by one or more gradations by any two of the three Credit Rating Agencies which currently maintain an investment grade credit rating for the Borrower, the then Applicable Margin shall decrease by a margin of 0.125% for each such gradation increase; and (B) if at any time from the date hereof to the Maturity Date the Borrower's BBB-/Baa3 rating category is decreased by one or more gradations by any two of the three Credit Rating Agencies which currently maintain an investment grade credit rating for the Borrower, a supplemental margin of 0.375% per gradation will be added to the then Applicable Margin. (d) "Back-to-Back Loan" means Debt of any Subsidiary owed to a third party that is fully collateralized by the proceeds of Debt incurred by the Borrower. (e) "Bank's Account" shall mean account No. 001-1-067634 maintained at Chase Manhattan Bank, N.A., New York, USA (ABA No. 021-0000-21), for credit to ING Bank N.V., Curacao Branch, or such other account at such other bank in New York City as the Bank shall specify from time to time to the Borrower. (f) "Base Rate" means the rate of interest from time to time announced by the Bank at its principal office in New York City as its prime commercial lending rate; provided that if the Bank shall cease to announce a prime commercial lending rate, then "Base Rate" shall mean the arithmetic average of the rates of interest publicly announced by The Chase Manhattan Bank and Citibank, N.A. (or their respective successors) as their respective prime commercial lending rates (or, as to any such bank that does not announce such a rate, such bank's "base" or other rate determined by the Bank to be the equivalent rate announced by such bank), except that, if any such bank shall, for any period, cease to announce publicly its prime commercial lending (or equivalent) rate, the Bank shall, during such period, determine the "Base Rate" based upon the prime commercial lending (or equivalent) rates announced publicly by the other such banks. -2- (g) "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and on which dealings are carried on in the London interbank market. (h) "Capitalized Leases" has the meaning specified in clause (v) of the definition of Debt. (i) "Change in Control" means: (i) the failure of the Shareholders (as defined in the Voting Trust Agreement) parties to the Voting Trust Agreement collectively to: (A) own, directly or indirectly, on the date hereof and until all Obligations owing under this Note are paid in full, at least a majority of the outstanding Voting Stock of the Borrower on a fully diluted basis, free and clear of all Liens; or (B) control, directly or indirectly, whether by the percentage of ownership of Voting Stock imposed by any applicable law, the possession of voting power or otherwise, the power to direct the affairs or control the composition of at least a majority of the board of directors, management committee, or other equivalent body, of the Borrower; or (C) dissolution or termination of the Voting Trust Agreement; or (D) the failure of TCCC to own (as a result of a sale by TCCC of such Common Stock described below), directly or indirectly, on the date hereof and until all Obligations owing under this Note are paid in full, at least 25% of the outstanding Class B Common Stock of the Borrower, 22.6% of the outstanding Class A Common Stock of the Borrower and 100% of the outstanding Class C Preferred Stock of the Borrower, in each case, on a fully diluted basis, free and clear of all Liens (it being understood that such percentage will be reduced on a proportionate basis in the event of any issuance or sale of Class A Common Stock or Class B Common Stock in which TCCC does not acquire its proportionate share); or (E) any reduction in the number of directors nominated by TCCC to the Borrower's Board of Directors as compared to the number of such directors nominated by TCCC as of the date of this Note. (j) "Coca-Cola Entity" means TCCC and any Wholly-Owned Subsidiary of TCCC. (k) "Coca-Cola Facility" means the facility provided by The Coca-Cola Financial Corporation dated December 23, 1998. (l) "Compensation Plan" of the Borrower or any Subsidiary thereof means any program, plan or similar arrangement (other than employment contracts) relating generally to -3- compensation, pension, employment or similar arrangements to which the Borrower or such Subsidiary (individually or in connection with any other Person) may have any liability. (m) "Confidential Information" means information furnished by or on behalf of the Borrower or an Affiliate of the Borrower to the Bank in a writing designated as confidential, but does not include any such information that (i) is or becomes generally available to the public or (ii) is or becomes available to the Bank from a source other than the Borrower or an Affiliate of the Borrower other than as a result of a breach by the Bank of its obligations hereunder. (n) "Consolidated" refers to the consolidation of accounts in accordance with GAAP. (o) "Consolidated Debt" means the outstanding principal amount of all Debt of the Borrower and its Consolidated Subsidiaries; provided, however, that Debt of the Borrower's Consolidated Subsidiaries shall not include any Debt of any Subsidiary to the extent, but only to the extent, that such Debt, (i) is held by the Borrower, whether in the form of a loan, participating interest or other instrument evidencing indebtedness or other Obligation of the Subsidiary so long as material enforcement, waiver or amendment decision regarding such Debt may be taken only by the Borrower, or (ii) represents a Back-to-Back Loan. (p) "Consolidated EBITDA" means, for any period, the sum, without duplication, of (i) Consolidated Operating Income for such period, plus (ii) all depreciation and amortization of assets (including Intangible Assets) of the Borrower and its Subsidiaries deducted in determining Consolidated Operating Income for such period. (q) "Consolidated Operating Income" means, with respect to the Borrower and its Subsidiaries for any period, the Consolidated operating income (or loss), before interest, taxes and extraordinary items, of the Borrower and its Subsidiaries for such period. (r) "Consolidated Tangible Net Assets" means as of any date, the total amount of assets of the Borrower and its Subsidiaries, less (i) Intangible Assets and (ii) appropriate adjustments on account of minority interests of other Persons holding equity investments in Subsidiaries, all as reflected on the consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the fiscal quarter immediately preceding such date. (s) "Credit Rating Agencies" means Fitch, Moody's and Standard & Poor's. (t) "Debt" of any Person means, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all Obligations of such Person for the deferred purchase price of property or services, (iii) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all Obligations of such Person as lessee -4- under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (vi) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (vii) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any of its Affiliates or any warrants, rights or options to acquire such capital stock, (viii) all Obligations of such Person in respect of Hedge Agreements, (ix) all Debt of others referred to in clauses (i) through (viii) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss, and (x) all Debt referred to in clauses (i) through (viii) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt; provided, however, that Debt shall not include trade accounts payable arising in the ordinary course of business. (u) "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. (v) "Disclosure Schedule" means the Disclosure Schedule set forth as Annex I hereto. (w) "Eligible Assignee" means (i) a commercial bank, finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) having total assets in excess of U.S. $250,000,000 and (ii) any Affiliate or branch of the Bank. (x) "Environmental Action" means means any administrative, regulatory or judicial action, suit, demand, demand letter, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit, including without limitation (i) any claim by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (ii) any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. (y) "Environmental Law" means any supranational, federal, national, state, provincial, tribal, local or municipal law, rule, regulation, order, writ, judgment, injunction, decree, determination or award of any Governmental Authority within or outside the United States relating to or imposing standards of conduct concerning the environment, health, safety or Hazardous Materials. -5- (z) "Environmental Permits" means any permit, approval, identification number, license or other authorization required under any Environmental Law. (aa) "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. (bb) "Eurodollar Rate" means, with respect to any Interest Period for the Loan, an interest rate per annum equal to the rate per annum obtained by dividing (i) the rate per annum determined by the Bank based on the rate(s) quoted on the Reuters Screen LIBO Page at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If only one rate appears on the Reuters Screen LIBO Page, the rate in clause (i) above will be such rate, and if two or more rates appear on the Reuters Screen LIBO Page, the rate in clause (i) above will be the arithmetic mean of such rates. The Eurodollar Rate for each Interest Period for the Loan shall be determined by the Bank. (cc) "Eurodollar Rate Reserve Percentage" for any Interest Period for the Loan means the reserve percentage applicable two Business Days before the first day of such Interest Period, under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on the Loan is determined) having a term equal to such Interest Period. (dd) "Events of Default" has the meaning specified in Section 8. (ee) "Existing Debt" means Debt of the Borrower and its Subsidiaries outstanding on the date hereof. (ff) "Existing Debt Agreement" means any agreement or instrument pursuant to which any Existing Debt has been issued or incurred. (gg) "Federal Bankruptcy Code" means the United Stated Bankruptcy Code of 1978, as amended from time to time. (hh) "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Bank from three Federal funds brokers of recognized standing selected by it. (ii) "Fitch" means Fitch IBCA, Duff & Phelps. -6- (jj) "GAAP" means, in the case of the Borrower and its Consolidated Subsidiaries, generally accepted accounting principles in the United States consistent with those applied in the preparation of the financial statements of the Borrower and Consolidated Subsidiaries furnished to the Bank prior to the date of this Note. (kk) "Governmental Authority" means any federation, nation, state, sovereign, or government, any federal, supranational, regional, state, tribal, local or political subdivision, any governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission or any other similar dispute-resolving panel or body, and any other entity exercising executive, legislative, judicial, regulatory or administrative functions of government. (ll) "Hazardous Materials" means (i) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and radon gas, (ii) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law, and (iii) any other substance, exposure to which is regulated under any Environmental Law. (mm) "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in interest rates or foreign exchange rates. (nn) "Indemnified Party" has the meaning specified in Section 9(d)(ii). (oo) "Intangible Assets" means all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, write-ups of assets over their carrying value at the end of the last fiscal quarter ended prior to the date hereof or the date of acquisition, if acquired subsequent to the date hereof, and all other items which would be treated as intangibles on the Consolidated balance sheet of the Borrower and its Subsidiaries. (pp) "Interest Payment Date" means (i) the last day of each Interest Period, including the Maturity Date and (ii) the date of any prepayment or repayment of principal of the Loan. (qq) "Interest Period" means the period commencing on (i) in the case of the initial Interest Period, October 1, 2002, or (ii) in the case of any subsequent Interest Period, the date immediately succeeding the last day of the immediately preceding Interest Period, and ending on the numerically corresponding date in the calendar month that is one month thereafter; provided, that (A) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (B) any Interest Period that commences on the last Business 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 Business Day of the last calendar month of such Interest Period, and (C) notwithstanding the foregoing, if any Interest -8- Period would otherwise end after the Maturity Date, such Interest Period shall end on the Maturity Date. (rr) "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock, warrants, rights, options, obligations or other securities of such Person, any capital contribution to such Person or any other investment in such Person, including, without limitation, any arrangement pursuant to which the investor incurs Debt of the types referred to in clauses (ix) and (x) of the definition of "Debt" in respect of such Person and, in the case of any permitted Investment in which the company in which such Investment is made becomes a Subsidiary of the Borrower, the amount of such Investment shall include the amount of any Debt of such Subsidiary at such time; provided that the "cash amount" of any Investment shall not be deemed to include such Debt. (ss) "Lending Office" means Zeelandia Office Park, Kaya W.F.G. (Jombi) Mensing 14, Curacao, Netherlands Antilles. (tt) "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. (uu) "Loan Documents" means this Note and each other instrument, agreement, certificate, notice or other document executed and/or delivered pursuant hereto or thereto or in connection herewith or therewith. (vv) "Margin Stock" means any "margin stock" or "margin security" as defined in Regulations T, U and X of the Board of Governors of the Federal Reserve System. (ww) "Material Adverse Change" means a material adverse change in the business, condition (financial or otherwise), operations, performance, properties, assets or prospects of the Borrower and its Subsidiaries taken as a whole. (xx) "Material Adverse Effect" means a material adverse effect on (i) the business, condition (financial or otherwise), operations, performance, properties, assets or prospects of the Borrower and its Subsidiaries taken as a whole or (ii) the rights and remedies of the Bank under this Note. (yy) "Moody's" means Moody's Investors Service, Inc. (zz) "Net Issuance Proceeds" means, with respect to any issuance, sale or incurrence of any Debt in the international financial markets by any Person, the aggregate amount of cash received from time to time by or on behalf of such Person after deducting therefrom only (i) placement agents' or underwriters' commissions, and (ii) other reasonable and customary fees and expenses (including, without limitation, fees and expenses of counsel and bankers) payable by or on behalf of such Person in connection with such issuance, sale or incurrence, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate and are properly attributable to such transaction or to the issuance, sale or incurrence that is the subject thereof. -8- (aaa) "Note" means this Amended and Restated Promissory Note. (bbb) "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect to such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 8(f). Without limiting the generality of the foregoing, the Obligations of the Borrower under this Note include (i) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by the Borrower under this Note and (ii) the obligation to reimburse any amount in respect of any of the foregoing that the Bank, in its sole discretion, may elect to pay or advance on behalf of the Borrower in accordance with this Note. (ccc) "Other Currency" has the meaning specified in Section 9(i)(i). (ddd) "Other Taxes" has the meaning specified in Section 5(b). (eee) "Permitted Lien" means, with respect to any Person: (i) pledges or deposits by such Person under worker's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or government bonds to secure performance, surety or appeal bonds to which such Person is a party or which are otherwise required of such Person, or deposits as security for contested taxes or import duties or for the payment of rent or other obligations of like nature, in each case incurred in the ordinary course of business; (ii) Liens imposed by law, such as carriers', warehousemen's, laborers', materialmen's, landlords', vendors', workmen's, operators', producers' and mechanics' Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings of review; (iii) Liens for taxes, assessments and other governmental charges or levies not yet delinquent or subject to penalties for non-payment or which are being contested in good faith by appropriate proceedings; (iv) minor survey exceptions, minor encumbrances, easements or reservations of or with respect to, or rights of others for or with respect to, licenses, rights-of-way, sewers, electric and other utility lines and usages, telegraph and telephone lines, pipelines, surface use, operation of equipment, permits, servitudes and other similar matters, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Debt and which do not in the aggregate materially -9- adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (v) Liens existing on or provided for under the terms of agreements existing on the date hereof and described in Item 7(b)(i) of the Disclosure Schedule; (vi) Liens on property at the time the Borrower or any of its Subsidiaries acquired the property or the entity owning such property, including any acquisition by means of a merger or consolidation with or into the Borrower; provided, however, that any such Lien may not extend to any other property owned by the Borrower or any of its Subsidiaries; (vii) Liens securing Hedge Agreements so long as (A) such Hedge Agreements are of the type customarily entered into in connection with, and are entered into for, the bona fide purpose of reducing financial risk relating to interest rate or foreign exchange fluctuations, and (B) the collateral securing obligations in respect of such Hedge Agreements (1) consists only of cash or cash equivalents, and (2) does not exceed in market value on any date an amount equal to 1.5% of Consolidated Tangible Net Assets (calculated as of the end-date of the last quarter for which Consolidated financial statements have been distributed); (viii) Liens on accounts receivable, inventory or bottles and cases to secure working capital or revolving credit Debt incurred by any Subsidiary in the ordinary course of business; (ix) Purchase Money Liens; (x) Liens securing only Debt of a Wholly-Owned Subsidiary of the Borrower to the Borrower or one or more Wholly-Owned Subsidiaries of the Borrower; (xi) Liens on any property to secure Debt incurred in connection with the construction, installation or financing of bottling facilities financed through Debt issued by a Coca-Cola Entity or any subsidiary of it; (xii) Liens resulting from the deposit funds or evidences of Debt in trust for the purpose of defeasing Debt of the Borrower or any of its Subsidiaries; (xiii) legal or equitable encumbrances deemed to exist by reason of negative pledges or the existence of any litigation or other legal proceeding and any related lis pendens filing (excluding any attachment prior to judgment, judgment lien or attachment lien in aid of execution on a judgment); (xiv) rights of a common owner of any interest in property held by such Person; (xv) Liens on property or shares of stock of another Person at the time such other Person becomes a Subsidiary of such Person; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such other Person becoming such a Subsidiary of such Person; provided further, however, that -10- such Lien may not extend to any other property owned by such Person or any of its Subsidiaries; (xvi) any defects, irregularities or deficiencies in title to easements, rights-of-way or other properties which do not in the aggregate materially adversely affect the value of such properties or materially impair their use in the operation of the business of such Person; (xvii) Liens in favor of the issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of business; provided, however, that the obligations in respect of such letters of credit do not constitute Debt; (xviii) Liens arising in connection with Capitalized Leases in an aggregate principal amount not to exceed U.S. $75,000,000 at any time outstanding; and (xix) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements), as a whole, or in part, of any Debt secured by any Lien referred to in the foregoing clauses (v) through (xii); provided, however, that (A) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on or to such property) and (B) the Debt secured by such Lien at such time is not increased to any amount greater than the sum of (1) the outstanding principal amount or, if greater, committed amount of the Debt described under clauses (v) through (xii) at the time the original Lien became a Permitted Lien under this Note and (2) any amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement. (fff) "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. (ggg) "Process Agent" has the meaning specified in Section 9(j)(i). (hhh) "Purchase Money Lien" means a Lien on property securing Debt incurred by the Borrower or any of its Subsidiaries to provide funds for all or any portion of the cost of acquiring, constructing, altering, expanding, improving or repairing such property or assets used in connection with such property. (iii) "Reuters Screen LIBO Page" means the display of London interbank offered rates (commonly known as "LIBOR") of major banks for Eurodollar deposits designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page for the purpose of displaying such London interbank offered rates for Eurodollar deposits). (jjj) "Significant Subsidiary" has the meaning specified for a "significant subsidiary" as defined in Rule 405 under the Securities Act of 1933, as amended. -11- (kkk) "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of its liabilities, including, without limitation, contingent liabilities, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute an unreasonably small capital. (lll) "Standard & Poor's" means Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. (mmm) "Subsidiary" of any Person means any corporation, partnership, joint venture, trust or estate of which (or in which), directly or indirectly, more than 50% of (i) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (ii) the interest in the capital or profits of such partnership or joint venture, or (iii) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. References to Subsidiary, unless otherwise specifically stated, or the context otherwise requires, shall be a reference to a Subsidiary of the Borrower. (nnn) "Taxes" has the meaning specified in Section 5(a). (ooo) "TCCC" means The Coca-Cola Company, a Delaware corporation, or any successor thereto. (ppp) "United States" and "U.S." each means United States of America. (qqq) "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. (rrr) "Voting Trust Agreement" means the Voting Trust Agreement for certain shares of Panamerican Beverages, Inc., amended and restated as of April 20, 1993, and as further amended on July 15, 1993, among the Shareholders parties thereto and the Voting Trustees parties thereto. (sss) "Wholly-Owned Subsidiary" means, with respect to any Person, any Subsidiary of such Person if all of the common stock or other similar equity ownership interests (but not including preferred stock) in such Subsidiary (other than any directors' qualifying shares or shares issued to Persons to comply with local laws) is owned directly or indirectly by such Person. 2. Payments; Prepayments. (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 the Bank's Account 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 Business Days. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day such payment shall be made on the next succeeding Business Day (unless such next succeeding Business Day would fall in the succeeding calendar month, in which case such payment shall be made on the next preceding Business Day), and any such extension or reduction of time shall in such case be reflected in the computation of payment of interest. (c) Default Interest. Upon the occurrence and during the continuance of any Event of Default, the Borrower shall pay interest on the unpaid principal amount of this Note and on the unpaid amount of all interest, fees and other amounts payable hereunder that is not paid when due, from the date such amount becomes due until the date the same is paid in full, at a rate per annum equal at all times to 2% above the rate of interest applicable to principal hereof (including the Applicable Margin). (d) Optional Prepayments. The Borrower may, upon at least five Business Days' notice to the Bank at any time after 30 days from the date hereof stating the proposed date and aggregate principal amount of the prepayment, and, if such notice is given, the Borrower shall, prepay the outstanding principal amount of this Note in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid, without premium or penalty but subject to breakage costs pursuant to Section 4(e); provided, however, that each partial prepayment shall be in a minimum aggregate principal amount of U.S. $5,000,000 or an integral multiple of U.S. $1,000,000 in excess thereof. Any amount prepaid under this Section 2(d) may not be reborrowed. (e) Mandatory Prepayments. The Borrower shall prepay the outstanding principal amount of this Note in an aggregate amount equal to the amount by which the Net Issuance Proceeds of any public or private issuance, sale or incurrence of any additional Debt (other than short-term Debt incurred in the ordinary course of business) in the international financial markets by the Borrower and/or its Subsidiaries exceeds U.S. $30,000,000 during the term of this Note. Any prepayment pursuant to this clause (e) shall be made on the second Business Day (or sooner if elected by the Borrower) following the date of receipt by the Borrower of such Net Issuance Proceeds. Any prepayment under this clause (e) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. Any prepayment subject to this clause (e) shall be subject to Section 4(e). 3. 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 such interest is payable. -13- 4. Increased Costs, Etc.; Funding Losses. (a) If, due to either (i) the introduction of or any change in, or in the interpretation of, any law or regulation or (ii) the need to comply with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) adopted or made after the date of this Note (except, with respect to both subclauses (i) and (ii), any law, regulation, guideline or request addressed in Section 5), there shall be any increase in the cost to the Bank or any Person controlling the Bank of agreeing to make or making, funding or maintaining the Loan, then the Borrower shall from time to time, upon demand by the Bank, pay to the Bank additional amounts sufficient to compensate the Bank for such increased cost; provided, however, that, before making any such demand, the Bank agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of the Bank, be otherwise disadvantageous to the Bank. The Bank shall promptly notify the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amounts required fully to compensate the Bank for such increased cost or reduced amount; provided, however, that notice in respect of any additional amounts payable hereunder in respect of any Interest Period shall not be effective, and no such additional amounts shall be payable hereunder in respect of such Interest Period, unless such notice is given not later than the 360th day following the Maturity Date. No such additional amounts shall be payable hereunder for increased costs incurred in respect of any period from 90 days after the date on which the Bank becomes actually aware of such increased cost to the date on which the Bank delivers notice of such increased cost, except for additional amounts for increased costs incurred as a result of the retroactive application of any law, rule or regulation. A certificate as to the amount of such increased cost, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error. (b) If the Bank determines that (i) the introduction of or any change in, or in the interpretation of, any law or regulation or (ii) the need to comply with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) adopted or made after the date hereof affects or would affect the amount of capital required or expected to be maintained by the Bank or any Person controlling the Bank and the Bank determines that the amount of such capital is increased as a result of the transactions contemplated hereby and other commitments of this type, then, upon demand by the Bank, the Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank in light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of Loan made hereunder; provided, however, that, before making any such demand, the Bank agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increase in capital and would not, in the reasonable judgment of the Bank, be otherwise disadvantageous to the Bank. The Bank shall promptly notify the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amounts required fully to compensate the Bank for such increased cost or reduced amount; provided, however, that notice in respect of any additional amounts payable hereunder in respect of any Interest Period shall not be effective, and -14- no such additional amounts shall be payable hereunder in respect of such Interest Period, unless such notice is given not later than the 360th day following the Maturity Date. No such additional amounts shall be payable hereunder for increased capital requirements for any period from 90 days after the date on which the Bank becomes actually aware of such increased capital requirements to the date on which the Bank delivers notice of such increased capital requirements, except for additional amounts for increased capital requirements as a result of the retroactive application of any law, rule or regulation. A certificate as to such amounts submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error. (c) If the Bank determines that the Eurodollar Rate for any Interest Period for the Loan will not adequately reflect the cost to the Bank of making, funding or maintaining the Loan for such Interest Period, the Bank shall forth-with so notify the Borrower, whereupon the Loan will automatically, on the last day of the then-existing Interest Period, bear interest by reference to the Alternate Base Rate. (d) Notwithstanding any other provision of this Note, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for the Bank or its Lending Office to perform its obligations hereunder, then, on notice thereof and demand therefor by the Bank to the Borrower, the Loan will automatically, upon such demand, bear interest, at the end of the current Interest Period therefor (or sooner if required by law), by reference to the Alternate Base Rate; provided, however, that, before making any such demand, the Bank agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would allow the Bank or its Lending Office to continue to perform its obligation to maintain the Loan and would not, in the judgment of the Bank, be otherwise disadvantageous to the Bank. (e) In the event the Bank shall incur any loss, cost, or expense (including any loss, cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Bank to make, continue, or maintain any portion of the principal amount of the Loan), but excluding any loss of any margin above the Eurodollar Rate, as a result of any repayment or prepayment of the principal amount of the Loan on a date other than the scheduled last day of the Interest Period applicable thereto then, upon the written notice of the Bank to the Borrower, the Borrower shall, within five days of its receipt thereof, pay directly to the Bank such amount as will (in the reasonable determination of the Bank) reimburse the Bank for such loss, cost or expense. Such written notice (which shall include all calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. 5. Taxes. (a) Any and all payments to be made 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 liabilities with respect thereto, excluding franchise taxes, taxes, levies, imposts, deductions, charges or withholdings (and all liabilities with respect thereto) imposed on or measured by reference to net income which are imposed on the Bank by (i) the United States of America, (ii) any political subdivision of the United States or (iii) any foreign jurisdiction or political subdivision thereof under the laws of which the Bank is -15- organized, or in which the Bank has qualified to do or in fact does business (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "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 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) 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 required to be deducted to the relevant taxing authority or other authority in accordance with applicable law. The Bank shall provide to the Borrower such forms and certifications as are reasonably necessary to avoid or reduce the Borrower's obligation to deduct Taxes from any payment hereunder; provided that the Bank shall not be required to furnish any such form or certification to the extent such Person reasonably determines (consistent with its internal policy and legal and regulatory restrictions) that such action would be disadvantageous to such Person. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any excise or property taxes or any other charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Note (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) paid by the Bank and any liability (including penalties, additions to tax, 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 30 days after the date of any payment of Taxes by the Borrower, the Borrower will furnish to the Bank, at its address referred to in Section 9(b), the original or a certified copy of a receipt evidencing payment thereof (or, if a receipt cannot be obtained in the applicable jurisdiction, other appropriate evidence of payment thereof). (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section shall survive the payment in full of principal and interest hereunder. 6. Representations and Warranties. The Borrower represents and warrants to the Bank as follows: (a) The Borrower and each of its Subsidiaries (i) is a corporation duly organized and validly existing (and, in the case of any such Subsidiary incorporated under the laws of one of the States comprising the United States, in good standing) under the laws of its jurisdiction of formation, (ii) is duly qualified as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where failure to so qualify would not have a Material Adverse Effect, and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted except where the failure -16- to do so would be reasonably likely not to result in a Material Adverse Effect on the Borrower and its Subsidiaries taken as a whole. (b) Set forth on Item 6(b) of the Disclosure Schedule is a complete and accurate organizational chart for the Borrower and its Subsidiaries showing as of the date hereof (as to each such Subsidiary) (x) the jurisdiction of its incorporation and (y) the percentage of the outstanding shares of each such class owned (directly or indirectly) by the Borrower and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights as at the date hereof; and the information set forth therein is correct in all material respects. All of the shares of the Borrower and each of its Subsidiaries have been validly issued, fully paid, are non-assessable and are owned by the Borrower or one or more of its Subsidiaries and such stock ownership is shown on the stock registry of the relevant Subsidiary issuing such shares free and clear of all Liens. Except as disclosed in such Item 6(b) of the Disclosure Schedule, all the shares of outstanding capital stock of all of such Subsidiaries that the Borrower purports to own as set forth in Item 6(b) of the Disclosure Schedule have been validly issued, are fully paid and non-assessable and are owned by the Borrower or one or more of its Subsidiaries free and clear of all Liens. (c) The execution, delivery and performance by the Borrower of this Note and each other Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene the Borrower's constitutional documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) except as set forth on Item 6(c) of the Disclosure Schedule, conflict with or result in the breach of, constitute a default under, or cause or permit any mandatory prepayment or acceleration of the maturity of, any material contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting the Borrower, any of its Subsidiaries or any of their properties or assets, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties or assets of the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is in violation of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to result in a Material Adverse Effect. (d) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by the Borrower of this Note or any other Loan Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby or thereby, or (ii) the exercise by the Bank of its rights under this Note or any other Loan Document to which the Borrower is a party or the remedies provided hereunder or thereunder. (e) This Note has been, and each other Loan Document to which the Borrower is or is to be a party when delivered hereunder will have been, duly executed and delivered by the Borrower. This Note is, and each other Loan Document to which the Borrower is or is to be a party when delivered hereunder will be, the legal, valid and binding obligation of the Borrower, -17- enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors generally and general principles of equity. (f) The Borrower and each of its Subsidiaries is in compliance in all material respects with all applicable laws, rules, regulations and orders, except where the failure to so comply would not be reasonably likely to result in a Material Adverse Effect on the Borrower and its Subsidiaries taken as a whole. (g) The audited Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2001, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied (in the case of such Consolidated financial statements) by an opinion of Arthur Andersen & Co., independent public accountants, copies of which have been furnished to the Bank, fairly present in all material respects the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis. (h) Since December 31, 2001, there has been no Material Adverse Change. (i) All written information (other than projections with respect to the future financial performance of the Borrower and its Subsidiaries) heretofore or contemporaneously herewith furnished by or on behalf of the Borrower or any of its Subsidiaries to the Bank for purposes of or in connection with this Note, any other Loan Document and the transactions contemplated hereby and thereby is, and all written information (other than projections with respect to the future financial performance of the Borrower and its Subsidiaries) hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries to the Bank pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. All projections with respect to the future financial performance of the Borrower and its Subsidiaries heretofore or contemporaneously furnished by or on behalf of the Borrower or any of its Subsidiaries to the Bank have been, and all such projections hereafter furnished by or on behalf of the Borrower or any of its Subsidiaries to the Bank will be, prepared in good faith and represent or will represent the Borrower's realistic views as to such performance at the time such projections were prepared. (j) Except as set forth in Item 6(j) of the Disclosure Schedule, there is no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries (and, with respect to unasserted claims, to the knowledge of the Borrower) (including, but not limited to, any Environmental Action) pending or threatened before any court, Governmental Authority or arbitrator that (i) if adversely determined, would be reasonably likely to result in a Material Adverse Effect or (ii) would be reasonably likely to adversely affect the legality, validity or enforceability of this Note, any other Loan Document, or the consummation of the transactions contemplated hereby or thereby. (k) (i) Neither the Borrower nor any of its Subsidiaries has taken any action (including any steps to terminate any Compensation Plan), nor made any omission (including -18- any failure to make any required contribution to any Compensation Plan), with respect to any Compensation Plan, in either case which (A) would result in a liability to the Borrower or any Subsidiary in excess of U.S. $1,000,000 (or the equivalent in any other currency), (B) would give rise to a Lien over any of its properties, assets, or revenues, or (C) would be reasonably likely to result in a Material Adverse Effect; and (ii) the Borrower and each of its Subsidiaries is in compliance in all material respects with the regulatory requirements of applicable law relating to pensions, employee retirement benefits and social security and has made all payments required to be made pursuant thereto. Except as set forth in Item 6(k) of the Disclosure Schedule, neither the Borrower nor any of its Subsidiaries sponsors, or is required to contribute to, any Compensation Plan, except such Compensation Plans that do not require funding and that may be terminated by the Borrower or the applicable Subsidiary, as the case may be, without its incurring any liability. (l) Except as set forth in Item 6(l) of the Disclosure Schedule, each of the Borrower and its Subsidiaries has filed all material tax returns and reports required to be filed, and have paid all material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except (i) those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP or (ii) where the failure to do so could not reasonably be expected to have a Material Adverse Effect. There is no proposed tax assessment against the Borrower or any Subsidiary that could reasonably be expected to have a Material Adverse Effect. (m) (i) Except as set forth in Item 6(m) of the Disclosure Schedule, the operations and properties of the Borrower and each of its Subsidiaries comply in all material respects with all Environmental Laws, all materially necessary Environmental Permits have been obtained and are in effect for the operations and properties of the Borrower and its Subsidiaries, the Borrower and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, except where the failure to comply with or obtain such Environmental Permits would not be reasonably likely to result in a Material Adverse Effect and no circumstances exist that could (A) form the basis of an Environmental Action against the Borrower or any of its Subsidiaries or any of their properties that would be reasonably likely to result in a Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law; and (ii) Hazardous Materials have not been generated, used, treated, handled, stored or disposed of on, or released or transported to or from, any property of the Borrower or any of its Subsidiaries, except in compliance with all Environmental Laws and Environmental Permits, and all other wastes generated at any such properties have been disposed of in compliance with all Environmental Laws and Environmental Permits and except where the failure to comply with Environmental Laws or obtain such Environmental Permits would not be reasonably likely to result in a Material Adverse Effect. (n) Neither the Borrower nor any of its Subsidiaries is a party to any Existing Debt Agreement, indenture, loan or credit agreement or any lease or other agreement or instrument or -19- subject to any charter or corporate restriction that materially inhibits the conduct of its business, as currently operated or as planned. (o) Neither the Borrower nor any of its Subsidiaries is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company" required to be registered as such within the meaning of the United States Investment Company Act of 1940, as amended. Neither the making of the Loan, nor the application of the proceeds of repayment thereof by the Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (p) Set forth in Item 6(p) of the Disclosure Schedule is a complete and accurate list of all material Existing Debt, as of September 30, 2002, showing as of such date the outstanding principal amount thereof. No other material Debt has been incurred since such date. Except as shown in Item 6(p) of the Disclosure Schedule, on the date hereof, there is no Debt owing from the Borrower to any of its Subsidiaries. The Obligations of the Borrower under this Note rank at least pari passu with all other senior, unsecured Debt of the Borrower. (q) Neither the Borrower nor any of its property or assets has any immunity from jurisdiction of any court or from set-off or any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction of its incorporation. (r) The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. None of the proceeds of the Loan will be used for the purpose of, or be made available by the Borrower or any of its Subsidiaries in any manner to any other Person to enable or assist such Person in, purchasing or carrying Margin Stock. (s) The Borrower, individually and on a Consolidated basis with its Subsidiaries, is, after giving effect to the Loan, Solvent. (t) The Borrower used the proceeds of the Loan made by the Bank to finance the acquisition of certain assets in Panama. (u) The Board of Directors of the Borrower adopted by resolution a dividend policy whereby an amount equal to between 15% and 25% of the Borrower's Consolidated net income from the previous year will be paid to shareholders each year, in quarterly distributions, as determined by the Board of Directors. Such dividend policy remains in effect as of the date hereof. Pursuant to the Certificate of Designations in effect as of the date of this Agreement for the Series C Preferred Stock of the Borrower, any change in the Borrower's policy with respect to dividends or distributions to shareholders of the Borrower requires the approval of the holder of the two outstanding shares of Series C Preferred Stock. As of the date of this Agreement, the Borrower does not anticipate any change in its dividend policy or in the terms of the Certificate of Designations of the Series C Preferred Stock. -20- 7. Covenants. (a) Affirmative Covenants. So long as any Obligations under this Note shall remain unpaid, the Borrower shall, unless the Bank shall otherwise consent in writing: (i) Compliance with Laws, Etc. Except when the failure to do so would not be reasonably likely to result in a Material Adverse Effect, comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders. (ii) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (A) all taxes, assessments and governmental charges or levies imposed upon it or upon its property or assets and (B) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained (if required by GAAP), unless and until any Lien resulting therefrom attaches to its property or assets and becomes enforceable against its other creditors. (iii) Compliance with Environmental Laws. Except when the failure to do so would not be reasonably likely to result in a Material Adverse Effect, comply, and cause each of its Subsidiaries and all lessees and other Persons occupying its properties to comply, in all material respects, with all Environmental Laws and Environmental Permits applicable to its operations and properties; obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any reasonable investigation, study, sampling and testing, and undertake any reasonable cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (iv) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (v) Preservation of Corporate Existence, Etc. Except as permitted under Section 7(b)(ii), preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises (including, without limitation, any franchise agreement of the Borrower or any Subsidiary with TCCC or any Affiliate thereof, which agreements shall be preserved and maintained in a manner consistent in all material respects with past practice); provided, however, that -21- neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise, nor shall the Borrower be required to maintain the corporate existence of any Subsidiary if the preservation or maintenance thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and the failure to preserve any such right or franchise or maintain the corporate existence of such Subsidiary would not be reasonably likely to result in a Material Adverse Effect on the Borrower and its Subsidiaries taken as a whole. (vi) Visitation Rights. At any time during regular business hours upon prior written notice to and approval of the Borrower (which approval shall not be unreasonably withheld or delayed) permit the Bank, or any agents or representatives thereof, to examine and make notes with respect to records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their executive officers or directors and with their independent certified public accountants. (vii) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with GAAP. (viii) Maintenance of Properties, Etc. Except where the failure to do so would not be reasonably likely to result in a Material Adverse Effect, maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties and assets that are material to the conduct of its business in good working order and condition, ordinary wear and tear excepted. (ix) Transactions with Affiliates. (A) Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted hereunder with any of its Subsidiaries (x) in the ordinary course of business in accordance with past practices or (y) on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (B) Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted hereunder with any of their Affiliates (other than their Subsidiaries) on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. (C) Prior to the Borrower becoming indebted to any Affiliate of the Borrower, cause such Affiliate to execute a subordination agreement in form and substance satisfactory to the Bank, subordinating such Debt to be owed to such Affiliate to all Obligations of the Borrower hereunder, and thereafter deliver to the Bank a copy thereof certified by a duly authorized officer or agent to be a true and correct copy of the original. -22- (x) Compliance with Terms of Leaseholds. Except where the failure to do so would not be reasonably likely to result in a Material Adverse Effect, make all payments and otherwise perform in all material respects all obligations in respect of all material leases of real property and cause all of its Subsidiaries to do so, and, to the extent material to the business of the Borrower, keep such leases in full force and effect and not allow such leases to lapse or be terminated or rights to renew such leases to be forfeited or canceled. (xi) Sales of Assets. Cause any assets that are, in the aggregate during the term of this Note, material to the Consolidated financial position of the Borrower, to be sold or otherwise transferred by the Borrower or any of its Subsidiaries to be so sold or transferred at a value that shall reasonably approximate their fair market value (it being understood that "material," for purposes of this clause (xi) only, shall mean an amount equal to, for all assets during the term of this Note, 5.5% of Consolidated Tangible Net Assets (calculated as of the end-date of the last quarter for which Consolidated financial statements have been distributed)). (b) Negative Covenants. So long as any Obligation under this Note shall remain unpaid, the Borrower shall not, without the written consent of the Bank: (i) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties and assets of any character (including, without limitation, accounts and capital stock) whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any accounts or other rights to receive revenues, excluding, however, from the operation of the foregoing restrictions: (A) Permitted Liens; and (B) Liens securing Debt if, after giving pro forma effect to the incurrence of such Debt (and the receipt and application of the proceeds thereof) or the securing of outstanding Debt, the sum of (without duplication) all Debt of the Borrower and its Subsidiaries secured by Liens (other than Permitted Liens), at the time of determination would not exceed 10% of Consolidated Tangible Net Assets. (ii) Mergers, Etc. Merge with or into or consolidate with or into any Person, or permit any of its Subsidiaries to do so, unless: (A) either (1) such merger or consolidation is between any of the Borrower's Subsidiaries and any of the Borrower's other Subsidiaries, (2) the Borrower shall be the continuing Person in the case of a merger or (3) the resulting or surviving Person if other than the Borrower (the "Successor Company") shall expressly assume, by a written agreement, executed and delivered to the Bank, in form satisfactory to the Bank, all the Obligations of the Borrower under this Note; (B) immediately after giving effect to such transaction (and treating any Debt which becomes an obligation of the Successor Company or any Subsidiary of the Borrower or the Successor Company as a result of such transaction as having been incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default would occur or be continuing and the Borrower shall have delivered to the -23- Bank an officer's certificate to that effect; and (C) except in the case of any merger or consolidation under subclause (A)(1) above: (1) the Borrower shall have delivered to the Bank an officer's certificate and an opinion of counsel, each stating that such consolidation or merger and such written agreement comply with this Note and, if such consolidation or merger results in a Successor Company, that such written agreement constitutes the legal, valid and binding obligation of the Successor Company, enforceable against such entity in accordance with its terms, subject to customary exceptions, and (2) at least two of Standard & Poor's, Moody's or Fitch shall have notified the Bank in writing that the proposed merger or consolidation will not result in a withdrawal or reduction of its credit rating of the Borrower below the lower of the then existing rating thereof. (iii) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature and conduct of the business of the Borrower and its Subsidiaries taken as a whole as carried on at the date hereof. (iv) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required by GAAP or requested by any Governmental Authority (and in each case the Borrower will promptly notify the Bank of any such change). (v) Constitutional Documents. Amend, modify or change in any manner any material term or condition of any constitutional document (including, without limitation, the Voting Trust Agreement, any other shareholders agreement or any similar agreement) of the Borrower or any Subsidiary or take any other action in connection with any constitutional document that would reasonably be likely to result in a Material Adverse Effect, except as permitted by Section 7(b)(ii). (vi) Shareholders' Agreements. Enter into, or permit any of its Subsidiaries to enter into, any shareholders' agreement (or similar agreement or arrangement) with any holder of Voting Stock of the Borrower (other than with TCCC or any Subsidiary thereof or with Venbottling Holdings, Inc. or with the voting trustees under the Voting Trust Agreement). (vii) Change in Control. Suffer, or allow its Subsidiaries to suffer, a Change in Control. (viii) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any of its assets, including (without limitation) any shares of capital stock of Subsidiaries and any manufacturing plant or substantially all assets constituting the business of a division, branch or other unit operation, except (A) sales of inventory, scrap and by-products in the ordinary course of business; -24- (B) sales of equipment and vehicles in the ordinary course of business, provided that the proceeds thereof are promptly reinvested in comparable equipment or vehicles; (C) sales of assets (including, but not limited to, shares of capital stock of Subsidiaries) of the Borrower or any of its Subsidiaries, provided that at the time of such sale and after giving effect thereto no Event of Default shall have occurred and be continuing; and (D) sales of assets to Affiliates permitted under Section 7(a)(ix). (ix) Debt. Create, incur, assume or suffer to exist any Debt, or permit any of its Subsidiaries to create, incur, assume or suffer to exist any Debt other than: (A) in the case of the Borrower, (1) Debt under this Note; (2) the Existing Debt identified in Item 6(p) of the Disclosure Schedule; (3) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business consistent in all material respects with past practices; (4) any Debt owed by the Borrower to any Subsidiary incurred in the ordinary course of business consistent in all material respects with past practices; provided that all such Debt owed by the Borrower to any Affiliate of the Borrower shall be subordinated to all Obligations of the Borrower under this Note pursuant to a subordination agreement in form and substance satisfactory to the Bank; (5) any Debt not otherwise permitted hereunder, provided that (I) an amount equal to the amount by which the Net Issuance Proceeds from the issuance thereof (other than short-term Debt incurred in the ordinary course of business) exceeds U.S. $30,000,000 is promptly applied to prepay the Loan, in accordance with Section 2(e) hereof; and (II) at the time such Debt is incurred and after giving effect thereto (and to the repayment required hereunder) no Event of Default shall have occurred and be continuing; (6) any replacement, extension or renewal of any Debt permitted by subclause (2), (4) or (5) above; (B) in the case of any Subsidiary of the Borrower, -25- (1) the Existing Debt identified in Item 6(p) of the Disclosure Schedule; and (2) any Debt of any Subsidiary not otherwise permitted hereunder; provided that at the time such Debt is incurred and after giving effect thereto, no Event of Default shall have occurred and be continuing. For purposes of determining compliance with the foregoing covenant, (i) in the event that an item of Debt meets the criteria of more than one of the types of Debt described above, the Borrower, in its reasonable discretion, will classify such item of Debt and only be required to include the amount and type of such Debt in one of the above clauses and (ii) an item of Debt may be split between more than one of the applicable types of Debt described above. (c) Reporting Requirements. So long as any Obligation under this Note shall remain unpaid, the Borrower shall, unless the Bank shall otherwise consent in writing, furnish to the Bank: (i) Default Notice. As soon as possible and in any event within two days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto. (ii) Quarterly Financials. As soon as available and in any event within 60 days after the end of each quarter of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared (with respect to such Consolidated financial statements) in accordance with GAAP, together with a certificate of such officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto. (iii) Annual Financials. As soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, including therein a Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year, and Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case (with respect to such Consolidated financial statements) accompanied by an opinion of Deloitte & Touche LLP or other independent public accountants of recognized standing acceptable to the Bank, together with (A) a certificate of such -26- accounting firm to the Lenders stating that in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, and (B) a certificate of the chief financial officer of the Borrower stating that no Default has occurred and is continuing or, if a default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto. (iv) Compensation Plans. As soon as possible and in any event within five days after the Borrower knows or has reason to know of any action (including any steps to terminate any Compensation Plan), or any omission (including any failure to make any required contribution to any Compensation Plan), with respect to any Compensation Plan, in either case the result of which (A) could result in the incurrence by the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any Compensation Plan, (B) could give rise to a Lien over any of its properties, assets, or revenues, or (C) would be reasonably likely to result in a Material Adverse Effect, notice thereof and copies of all documentation relating thereto. (v) Material Adverse Change. As soon as possible and in any event within five days after the Borrower knows or has reason to know of any Material Adverse Change, or any event or circumstance which might result in a Material Adverse Change, notice thereof and copies of all documentation relating thereto. (vi) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, by or against the Borrower or any of its Subsidiaries or Affiliates of the type described in Section 6(j). (vii) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that the Borrower sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that the Borrower or any of its Subsidiaries files with any securities commission or similar Governmental Authority or with any national securities exchange. (viii) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to any other holder of the securities of the Borrower or of any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 7(c). (ix) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any property of the Borrower or any of its Subsidiaries that results in a material noncompliance by the Borrower or any of its Subsidiaries with any Environmental Law or Environmental Permit or could form the basis of an Environmental Action against the Borrower or any of its Subsidiaries that would be reasonably likely to result in a Material Adverse Effect. -27- (x) Other Information. Such other information respecting the business, financial condition, operations, performance, properties, assets or prospects of the Borrower or any of its Subsidiaries as the Bank may from time to time reasonably request. (d) Financial Condition. So long as any Obligation under this Note shall remain unpaid, the Borrower shall, unless the Bank otherwise consents in writing: (i) Interest Coverage Ratio. Maintain an Interest Coverage Ratio (calculated as of the last day of each fiscal quarter or year, as reflected in the quarterly or annual financial statements for such fiscal quarter or year, for the twelve-month period ending on the relevant date of determination) of not less than 4.00 to 1. (ii) Debt to EBITDA Ratio. Maintain a ratio of Consolidated Debt to Consolidated EBITDA (calculated as of the last day of each fiscal quarter or year, as reflected in the quarterly or annual financial statements for such fiscal quarter or year, for the twelve-month period ending on the relevant date of determination) of not more than 2.30 to 1. 8. 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) any representation or warranty made by the Borrower (or any of its officers) under or in connection with this Note or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in (i) Section 7(a)(v), Section 7(a)(xi), Section 7(b), Section 7(c)(i) or (v), Section 7(d) or (ii) Section 7(c)(ii)-(iv) or (vi)-(x) if such failure shall remain unremedied for five (5) days after the Borrower has knowledge thereof or written notice thereof shall have been given to the Borrower by the Bank; or (d) the Borrower shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 20 days after the Borrower has knowledge thereof or written notice thereof shall have been given to the Borrower by the Bank; or (e) (i) the Borrower or any of its Subsidiaries shall fail to pay any principal of, premium or interest on any other amount payable in respect of any Debt that is outstanding in an aggregate principal or notional amount of at least U.S. $20,000,000 (or the equivalent in another currency) in the aggregate (but excluding Debt outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (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 Debt; or (ii) any other event shall occur or condition shall exist under any -28- agreement or instrument relating to any such Debt, if the effect of such event or condition is to accelerate the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or (iii) any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof (other than, in the case of subclauses (ii) and (iii) above, any such Debt that has become due and payable as a result solely of any sale of assets by the Borrower or its Subsidiaries, provided that such Debt is paid when due from the proceeds of such sale); or (f) the Borrower or any Significant Subsidiary 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 its Significant Subsidiaries seeking to adjudicate it as a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in respect of an involuntary proceeding instituted against such Person, the same shall remain unstayed or undismissed for 60 days; or the Borrower or any Significant Subsidiary shall take any corporate action to authorize any of the actions set forth above in this clause; or (g) any judgment or order for the payment of money in excess of U.S. $20,000,000 (or the equivalent in another currency) which is not covered by insurance shall be rendered against the Borrower 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 30 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 (h) any non-monetary judgment or order shall be rendered against the Borrower or any of its Subsidiaries that is reasonably likely to result in a Material Adverse Effect, and there shall be any period of 30 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 (i) the Borrower shall have taken any action (including any steps to terminate any Compensation Plan), or shall have made any omission (including any failure to make any required contribution to any Compensation Plan), with respect to any Compensation Plan, which in either case would (i) result in a liability to the Borrower in excess of U.S. $1,000,000 (or the equivalent in any other currency), or (ii) be reasonably likely to result in a Material Adverse Effect; or (j) a Change in Control shall occur; or (k) any Governmental Authority shall condemn, seize, compulsorily purchase or expropriate all or a substantial part of the assets and properties of the Borrower or its Subsidiaries; or - -29- (l) by reason of any material interference by any Governmental Authority, or otherwise, this Note, in whole or in part, shall become invalid, or shall fail to be in full force and effect in accordance with its terms or the binding effect or enforceability thereof shall be contested by the Borrower; then, and in any such event, the Bank may, by notice to the Borrower, declare this Note, all interest hereon and all other amounts payable under this Note to be forthwith due and payable, whereupon the 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; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code or any similar order or adjudication under applicable law that would impose a moratorium on or stay of creditor efforts to collect debts to become effective, the Note, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 9. Miscellaneous. (a) Amendments, Etc. No amendment or waiver of any provision of this Note or any other Loan Document, nor consent to any departure by the Borrower therefor, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, facsimile or telex communication) and faxed, telexed or delivered, if to the Borrower, at Torre Dresdner Bank, 7th Floor, Calle 50, Panama City, Republic of Panama, Attention: Chief Financial Officer, Facsimile: (507) 223-8308, Telephone: (507) 223-8723, with a copy to Panamco L.L.C., 701 Waterford Way, 8th Floor, Miami, Florida, Attention: General Counsel, Facsimile: (786) 388-8191, Telephone: (305) 929-0800; and if to the Bank, at its Lending Office, with a copy to Monica Saynez/Javier Bernus, Bosque de Alisos #45-B, Col. Bosques de las Lomas, 05120 Mexico D.F., Facsimile: (5255) 5259-3218, Telephone: (5255) 5258-2127; or at such other address as shall be designated by any party in a written notice to the other party. All such notices and communications shall, when faxed or telexed, be effective when transmitted by facsimile or confirmed by telex answerback, respectively, except that notices and communications to the Bank pursuant to Sections 2 and 8 shall not be effective until received by the Bank. All such notices and other communications, if not in English, shall be accompanied by an English translation. (c) No Waiver, Remedies. No failure on the part of the Bank to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein and therein provided are cumulative and not exclusive of any remedies provided by law. -30- - - (d) Costs, Expenses and Indemnification. (i) The Borrower agrees to pay on demand (A) all reasonable costs and expenses of the Bank in connection with the preparation, execution, delivery, administration, syndication, modification and amendment of this Note and any other Loan Document, including, without limitation, (1) all reasonable out-of-pocket due diligence, transportation, computer, printing, bank meeting, duplication, appraisal, audit, search, filing and recording fees and expenses and, with the prior approval of the Borrower, insurance and consultant fees, and (2) the reasonable fees and expenses of counsel with respect thereto, with respect to advising them as to their rights and responsibilities, or the perfection, protection or preservation of rights, or interests, under this Note and any other Loan Document, with respect to negotiations with the Borrower or with other creditors of the Borrower or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting, claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto and (B) all costs and expenses of the Bank in connection with the enforcement of this Note and any other Loan Document, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Bank with respect thereto). (ii) The Borrower agrees to indemnify and hold harmless the Bank and each of its Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that are actually incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the Borrower's use of the proceeds of the Loan, (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries or (iii) this Note or any other Loan Document or any Indemnified Person's role in connection therewith, in each case whether or not such investigation, litigation or proceeding is brought by the Borrower or any of its Subsidiaries, directors, shareholders or creditors or an Indemnified Party, whether or not any Indemnified Party is otherwise a party thereto, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. (iii) If the Borrower fails to pay when due any costs, expenses or other amounts payable by it under this Note, including, without limitation, fees and expenses of counsel (including the allocated cost of in-house counsel) and indemnities, such amount may be paid on behalf of the Borrower by the Bank, in its sole discretion, and such amount shall be reimbursed by the Borrower. (e) Right of Set-off. Upon the occurrence and during the continuance of any payment Event of Default, the Bank is hereby authorized at any time and from time to time, to the fullest -31- extent permitted by law, to set off and otherwise 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 to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing hereunder, irrespective of whether the Bank shall have made any demand hereunder and although such Obligations may be unmatured. The Bank agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank under this Section 9(e) are in addition to other rights and remedies (including, without limitation, other rights of set-off) that the Bank may have. (f) Binding Effect; Assignments and Participations. This Note shall be binding upon 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 shall not have the right to assign its rights hereunder or any interest herein 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 hereto to an Eligible Assignee. (g) Governing Law. This Note shall be governed by, and construed in accordance with, the internal laws of the State of New York. (h) Confidentiality. The Bank shall not disclose any Confidential Information to any Person without the consent of the Borrower, other than (i) to the Bank's officers, directors, employees, agents and advisors to the extent necessary and to actual or prospective Eligible Assignees and participants, and then only so long as such Person agrees to keep confidential such information, (ii) as required by any, law, rule or regulation or judicial process and (iii) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. (i) Judgment. (i) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in U.S. Dollars into another currency (the "Other Currency"), the Borrower agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Bank could purchase U.S. Dollars in New York City on the Business Day preceding that on which final judgment is given. (ii) The obligation of the Borrower in respect of any sum due in U.S. Dollars from it to the Bank hereunder shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that, on the Business Day following receipt by the Bank of any sum adjudged to be so due in such Other Currency the Bank may, in accordance with normal banking procedures, purchase U.S. Dollars with such Other Currency; if the amount of the U.S. Dollars so purchased is less than the sum originally due to the Bank in U.S. Dollars, the Borrower agrees, as a separate obligation and notwithstanding such judgment, to indemnify the Bank against such loss, and if the amount of the U.S. Dollars so purchased exceeds the sum originally due to the Bank in U.S. Dollars, the Bank agrees to remit to the Borrower such excess. -32- (j) Consent to Jurisdiction. (i) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in the borough of Manhattan in New York City and any appellate court from any thereof and to the courts of its own corporate domicile with respect to actions brought against it as a defendant in any action or proceeding arising out of or relating to this Note or any other Loan Document, and the Borrower hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, any objection it may now or hereafter have as to the venue of any such action or proceeding brought in any such court or that such court is an inconvenient forum. The Borrower hereby irrevocably appoints CT Corporation System, Inc. (the "Process Agent"), with an office on the date hereof at 111 Eighth Avenue, New York, NY 10011, United States, 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. Such service may be made by delivering a copy of such process to the Borrower in care of the Process Agent at the Process Agent's above address, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, the Borrower also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Borrower at its address specified in Section 9(b). 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. (ii) Nothing in this clause (j) 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 its property in the courts of other jurisdictions. (iii) To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, 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. (iv) Any judicial proceeding by the Borrower against the Bank involving, directly or indirectly, any matter in any way arising out of, related to, or connected to this Note or any Loan Document shall be brought only in court in New York, New York, to the extent that jurisdiction may be effected against the Bank in New York, New York. (k) WAIVER OF JURY TRIAL. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. -33 (l) Limitation on Liability. The Borrower hereby waives, releases and agrees not to sue the Bank upon any claim for any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to this Note or the relationship established by this Note, or any act, omission or event occurring in connection therewith, unless it is determined by a judgment of a court that is binding on the Bank, and is final and not subject to review on appeal, that such damages were the result of acts or omissions on the part of the Bank constituting gross negligence or willful misconduct. -34- 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: /s/ Annette Franqui ------------------------------------ Name: Annette Franqui Title: Vice President, Chief Financial Officer & Treasurer ANNEX A DISCLOSURE SCHEDULE Item 6(b) --------- Organizational Chart -------------------- PANAMCO BRAZIL - ORGANIZATIONAL CHART [Graphic Omitted} CORPORATE STRUCTURE PANAMCO COLOMBIA, S.A. [Graphic Omitted] Panamco Costa Rica Corporate Structure [Graphic Omitted] PANAMCO GUATEMALA CORPORATE STRUCTURE [Graphic Omitted] CORPORATE STRUCTURE OF PANAMCO MEXICO [Graphic Omitted] Panamco Nicaragua Corporate Structure [Graphic Omitted] PANAMERICAN BEVERAGES, INC. NON-OPERATING CORPORATE STRUCTURE [Graphic Omitted] PANAMCO DE VENEZUELA CORPORATE STRUCTURE [Graphic Omitted] [Graphic Omitted] Item 6(c) -------- Conflicts --------- None. Item 6(j) --------- Litigation ---------- None, except as described in the Borrower's public filings with the Securities & Exchange Commission and in the footnotes to the Borrower's Consolidated financial statements dated as of December 31, 2001, and the lawsuit filed by Refrescos Nacionales, S.A. on September 10, 2002 and further amended, against Coca-Cola de Panama Compania Embotelladora, S.A. and certain of its Subsidiaries for alleged antitrust actions in the Republic of Panama for the total amount of US$ 97,622,676.00. This lawsuit is in the process of being admitted by the competent court in Panama. Coca-Cola de Panama Compania Embotelladora, S.A. has not been formally served with the summons of this lawsuit. As of the date hereof the Borrower has had access only to limited information on regards to this case. Based on the preliminary and non-official information that the Borrower has reviewed the Borrower believes that Coca-Cola de Panama Compania Embotelladora, S.A. will have sufficient legal arguments to vigorously challenge this lawsuit. Item 6(k) --------- Compensation Plan ----------------- Neither the Borrower nor any of its Subsidiaries sponsors, nor is required to fund any Compensation Plans, except those described in the public filings with the Securities & Exchange Commission and in the notes to the Consolidated financial statements dated as of December 31, 2001. Item 6(l) --------- Tax Returns ----------- None, except as described in the Borrower's filings with the Securities & Exchange Commission and in the notes to the Borrower's Consolidated financial statements dated as of December 31, 2001. Item 6(m) --------- Environmental Laws ------------------ None, except that the Borrower's Subsidiaries has spent approximately US$ 6.5 million during 2002 on plant upgrades to meet environmental objectives, including formal compliance with federal and local regulations in certain of the countries in which they operate. In particular to continue the process of bringing certain Subsidiaries into compliance, as permitted by applicable Environmental Laws in the countries in which they operate. Item 6(p) --------- Material Existing Debt as of September 30, 2002 ----------------------------------------------- (1) Material Existing Debt of the Borrower Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Public Senior Notes 150,000 04/01/03 Public Senior Notes 290,000 07/01/09 ING Baring (US) Capital LLC 130,000 11/22/04 BBVA 10,000 10/24/02 Wachovia 10,000 07/03/03 Total: 590,000 (2) Material Existing Debt of the Mexican Subsidiaries Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- BankBoston 3,244 09/01/05 Public Notes (UDI Denominated) 118,245 11/13/06 ING/BBVA 61,169 12/16/03 Rabobank 18,000 07/21/03 Total: 200,658 (3) Material Exiting Debt of the Brazilian subsidiaries Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Coca Cola 405 07/2003 Banco Itau 60 03/2003 Banco Sudameris 122 01/2003 Total: 587 (4) Material Existing Debt of the Colombian Subsidiaries Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Public Notes (Peso Denominated) 12,111 08/2007 Public Notes (Peso Denominated) 23,249 08/2005 Public Notes (Peso Denominated) 5,912 08/2006 Citibank 7,496 10/2002 Total: 58,768 (5) Material Existing Debt of the Venezuelan Subsidiary Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Santander Central Hispano 10,000 08/2003 Comerica 10,000 06/2003 Citibank 33,000 12/2002 Total: 53,000 (6) Material Existing Debt of the Costa Rican Subsidiary No Debt (7) Material Existing Debt of the Nicaraguan Subsidiary Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Citibank 5,500 09/2003 Total: 5,500 (8) Material Existing Debt of the Guatemalan Subsidiary Creditor Amount US$ (000) Maturity Date - -------- ---------------- ------------- Banco Granai & Towson 86 12/2002 Banco Granai & Towson 2,318 10/2005 Banco Industrial 104 06/2003 Banco Industrial 223 08/2003 Banco Industrial 809 10/2002 Total: 3,540 Item 7(b)(i) ------------ Existing Liens -------------- As of September 30, 2002, the Existing Liens of the Borrower and its Subsidiaries are the following: Panamerican Beverages, Inc.: None Spal Industria Brasileira de Bebidas S/A (Brazilian Operation): Bank Lien Amount US$(000) - ---- ---- --------------- Banco Itau Pledge on Machinery 60 Total: US$60,000 Panamco Mexico (Mexican Operation): Bank Lien Amount US$(000) - ---- ---- --------------- BankBoston Pledge on Machinery 4,153 Total: US$4,153,000 Panamco Colombia (Colombian Operation): None Embotelladora Panamco Tica (Costa Rican Operation): None (m) Panamco Venezuela (Venezuelan Operation): None Panamco Nicaragua (Nicaraguan Operation): None Embotelladora Central (Guatemalan Operations): Bank Lien Amount US$(000) - ---- ---- --------------- Banco Industrial Pledge on Machinery 104 Total: US$104,000 EX-10.55 14 ex10_55.txt AMENDMENT TO US$130M 2ND AMENDED ... CREDIT AGRT EXHIBIT 10.55 AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of November 20, 2002, among Panamerican Beverages, Inc., a Panamanian corporation (the "Borrower") and the financial institutions listed in the signature pages hereto (the "Consenting Lenders"). All capitalized terms used but not defined herein shall have the meaning given to such terms in the Credit Agreement (as defined below). The Borrower, the financial institutions listed on the signature pages thereto, ING Capital LLC, as administrative agent (in such capacity, the "Administrative Agent"), and The Chase Manhattan Bank, as syndication agent, entered into a Second Amended and Restated Credit Agreement, dated as of October 29, 2001 (the "Credit Agreement") and now have agreed, pursuant to Section 8.01 of the Credit Agreement, to amend Section 5.04(b) of the Credit Agreement in its entirety. Effective as of the date hereof upon the execution and delivery of this Amendment by the Borrower and Lenders constituting the Required Lenders, Section 5.04(b) of the Credit Agreement is amended in its entirety as follows: (b) Debt to EBITDA Ratio. Maintain a ratio of Consolidated Debt to Consolidated EBITDA (calculated as of the last day of each fiscal quarter or year hereinafter indicated, as reflected in the quarterly or annual financial statements for such fiscal quarter or year, for the twelve-month period ending on the relevant date of determination) of not more than (i) 2.35 to 1 through the periods ended December 31, 2002 and March 31, 2003 and (ii) 2.25 to 1 thereafter. In order to induce the Consenting Lenders to enter into this Amendment, the Borrower hereby (i) makes the representations and warranties set forth in Article IV of the Credit Agreement as of the date hereof (it being understood and agreed that any representation which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date), and (ii) represents and warrants that, (a) as of the date hereof, there exists no Default or Event of Default under the Credit Agreement as amended by this Amendment and (b) since December 31, 2001, there has been on Material Adverse Change. Except as expressly provided hereby, the Credit Agreement, each other Loan Document and all instruments and documents executed and delivered pursuant thereto shall continue in full force and effect in accordance with their respective terms. All references in the Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as modified by this Amendment and as hereafter modified by any amendment, modification or supplement thereto. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. [SIGNATURES ON FOLLOWING PAGES] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. PANAMERICAN BEVERAGES, INC., as Borrower By: /s/ Annette Franqui ---------------------------------- Name: Annette Franqui Title: CFO ING BANK N.V., ACTING THROUGH ITS CURACAO BRANCH, as Lender By: /s/ ---------------------------------- Name:____________________________________ Title:___________________________________ By: /s/ ---------------------------------- Name:____________________________________ Title:___________________________________ FLEET NATIONAL BANK, as Lender By: /s/ Ravi Kacker ---------------------------------- Name: Ravi Kacker Title: Director By: /s/ Janet G. O'donnell ---------------------------------- Name: Janet G. O'donnell Title: Managing Director BANCO BILBAO VIZCAYA ARGENTARIA, S.A., as Lender By: /s/ Hector Villegas ---------------------------------- Name: Hector Villegas Title: Vice President Global Corporate Banking By: /s/ Salustiano Machado ---------------------------------- Name: Vice President Title: Global Corporate Banking LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE, as Lender By: /s/ Imke Hallmann --------------------------------- Name: Imke Hallmann Title: Assistant Vice President By: /s/ Frank Drews --------------------------------- Name: Frank Drews Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN BOERENLEENBANK B.A., "Rabobank Nederland", NEW YORK BRANCH, as Lender By: /s/ Edward J. Prisner --------------------------------- Name: Edward J. Prisner Title: Managing Director By: /s/ Chris G. Kortlandt --------------------------------- Name: Chris G. Kortlandt Title: Managing Director WACHOVIA BANK, N.A., as Lender By: /s/ J. Tyler Rollins --------------------------------- Name: J. Tyler Rollins Title: Director SUNTRUST BANK, as Lender By: /s/ Donald M. Lynch --------------------------------- Name: Donald M. Lynch Title: Director CITIBANK MEXICO S.A., as Lender By: /s/ Jose Maria Urquiza --------------------------------- Name: Jose Maria Urquiza Title: Vice President EX-10.56 15 ex10_56.txt US$33M CREDIT AGREEMENT -- INARCO INTL BANK EXHIBIT 10.56 PROMISSORY NOTE FOR US $ 33,000,000 DATE: DECEMBER 16, 2002 Nro.1/1 For value received in cash, Panamco de Venezuela, S.A., a company chartered and existing under the laws of the Bolivarian Republic Venezuela, and domiciled in Caracas, Venezuela (the "Borrower") hereby unconditionally promises to pay on THREE (3) CONSECUTIVE INSTALLMENTS to the order of INARCO INTERNATIONAL BANK, N.V. a financial institution organized under the laws of Aruba, Netherlands Antilles (the "Lender") in lawful money of the United States of America, the principal amount of THIRTY THREE MILLION DOLLARS OF THE UNITED STATES OF AMERICA (US$ 33,000,000) as follows: Payment Date Principal Amount ------------ ---------------- June 13,2003 US $ 4,000,000 September 12, 2003 US $ 4,000,000 December 16, 2003 US $25,000,000 Interest shall accrue and be paid quarterly ("Interest Period") on the unpaid principal amount of this Promissory Note at the prevailing three month LIBOR plus 170 bps (the "Margin"). "LIBOR" shall mean the rate of interest per annum at which deposits in United States Dollars are offered by the principal office of Citibank, N.A. in London, England, to prime banks in the London Interbank Market at 11:00 am (London time) two Business Days before the first day of each Interest Period for a period equal to such Interest Period for approximately equal amounts for such Interest Period. Interest shall be paid at the end of each Interest Period. "Interest Period" means the period of time used to calculate interest, beginning on the date the Loan is disbursed and ending three months thereafter and each subsequent three months period; provided that, if an Interest Period ends on a day which is not a Business Day it shall be extended to the next Business Day, unless it falls on the next calendar month in which case it shall be reduced to the next preceding Business Day. If the Borrower fails to pay any amount owed to the Lender on the date it must be paid (whether at maturity, by acceleration or otherwise), the Borrower agrees that the total applicable interest rate shall be the three month Libor plus the Margin plus 200 bps until such amount is paid in full. Interest is to be calculated based on a 360-day-year and actual days elapsed. Payment of both principal and interest are to be made only and exclusively in Dollars of the United States of America and in immediately available and freely transferable funds, not later than 11:00 a.m. (New York City time) on the date on which due, by credit to account number 10999364 of Citibank N.A. (Aruba Branch) with Citibank N.A. New York, 399 Park Avenue, New York, N.Y. 10043, United States of America, (reference Inarco International Bank N.V. loan) or, if applicable to such other account as the Lender may specify in written notice delivered to the Borrower. Payments shall be made free and clear of and without deduction of any present and future taxes, levies, imposts, charges or other fiscal assessments of any kind whatsoever with respect thereto, which shall be paid by and shall be for the account of the Borrower, except such taxes as may be measured or imposed on the Lender's net income by the jurisdiction or any political subdivision thereof in which the Lender's principal office or lending branch is located. If the Borrower shall be required by law to deduct any taxes from or in respect of any sum payable hereunder, including without limitation the Venezuelan income taxes imposed and required to be withheld and paid at the rate of 4,95% on interest payments amounts, or if the Venezuelan tax rate applicable to interest payments is increased above the 4,95% withholding tax rate now in effect, (i) the sum payable by the Borrower shall be increased as may be necessary so that after making all required deductions the Lender receives an amount equal to the sum it would have received had no such deductions been made, and (ii) the Borrower shall make such deductions and pay the relevant taxation authority. The Borrower shall promptly deliver to the Lender the corresponding original or certified tax receipts. The Borrower hereby waives presentment for payment, demand, protest and notice of dishonor. It is agreed that this Promissory Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights and/or obligations under this Promissory Note without the prior written consent of the Lender. It is also agreed that the Lender without the consent of the Borrower may assign its interests in this Promissory Note or any portion thereof to any of its subsidiaries and/or affiliates and/or any third party. Prepayments are allowed and will not be subject to any premium or penalty provided that they are made on an interest payment date. This Promissory Note shall be governed by and construed in accordance with the law of the State of New York, United States of America irrespective of the principles of conflicts of laws thereunder. The Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any New York state or federal courts sitting in New York City, State of New York, United States of America, over any action or proceeding arising out of or relating to this Promissory Note. The Borrower hereby irrevocably waives to the fullest extent it might effectively do so, the defense of an inconvenient forum or to the maintenance of any such action or proceeding. The Borrower irrevocably consents to the service of any and all process in any such action or proceeding by delivery to CT Corporation System (the "Process Agent") at 111 Eighth Avenue, New York, New York 10011. As an alternative method of service, election upon the Lender, the Borrower also irrevocably 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 herein. 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. By: Panamco de Venezuela, S.A. By: Panamerican Beverages, Inc., as Guarantor /s/ Carlos Hernandez-Artigas /s/ Annette Franqui - ------------------------------- ------------------------------ Name: Carlos Hernandez-Artigas Name: Annette Franqui Title: Alternate Director Title: VP, Chief Financial Officer Address: Caracas, Venezuela Address: Panama City, Panama EX-10.57 16 ex10_57.txt MEMORANDUM OF UNDERSTANDING EXHIBIT 10.57 MEMORANDUM OF UNDERSTANDING Dated as of September 13, 2002 between INTER-AMERICAN FINANCIAL CORPORATION FLORIDA ICE AND FARM CO. and HEINEKEN FINANCE N.V. This Memorandum of Understanding (the "MOU"), dated as of September 13, 2002, is entered into by and among Inter-American Financial Corporation, a Panamanian corporation and wholly-owned subsidiary of Panamerican Beverages, Inc. (referred to herein as "Panamco"), Florida Ice and Farm Co., a sociedad anonima organized and existing under the laws of the Republic of Costa Rica ("FIFCO"); and Heineken Finance N.V., a limited liability company organized and existing under the laws of the Netherlands Antilles ("Beer"). RECITALS: A. Certain shareholders of Coca-Cola de Panama Compania Embotelladora, S.A. ("Coca-Cola") and Cerveceria Baru-Panama, S.A. ("CBP") have initiated a process to sell Coca-Cola and CBP (the "Transaction"); B. Panamco, FIFCO and Beer (each a "Party", and collectively, the "Parties") desire to establish a Panamanian company as a special purpose vehicle ("SPV") to submit a joint bid for the purchase of Coca-Cola and CBP; C. If the SPV is successful in the acquisition of control of Coca-Cola and CBP, then, subject to local laws and regulations, the shares of Coca-Cola will promptly thereafter be sold to Panamco and the shares of CBP will be sold to Beer and FIFCO, as provided herein. If such sales are not permissible under such local laws and regulations, then the Parties shall mutually agree upon an alternative transaction structure, as provided herein; D. If the SPV is successful in the acquisition of control of Coca-Cola and CBP, the Parties will work cooperatively to jointly operate those services that are currently operated on a shared basis by Coca-Cola and CBP; and E. The Parties intend for the SPV to be an initial step in the creation of a broader joint venture in Panama and throughout Central America and to work cooperatively towards that end. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein, the Parties agree as follows: ARTICLE I THE BID SECTION 1.01. THE BID. Panamco, FIFCO and Beer will work cooperatively to timely submit a joint offer through the SPV for the purchase of the Soft Drink Business and the Beer Business (as each such term is defined below). The offer may specify both the aggregate price for the Soft Drink Business and the Beer Business and the component prices for each of the Soft Drink Business and the Beer Business. In addition, the initial offer may indicate the price that Panamco, acting in its individual capacity and not as part of the SPV, would be willing to pay for the Soft Drink Business and the price that FIFCO and Beer, acting in their individual capacities and not as part of the SPV, would be willing to pay jointly for the Beer Business. The Contrato de Promesa de Compraventa de Acciones ("Contrato") to be submitted with the bid will be made in the name of the SPV. SECTION 1.02. Valuation. Panamco has valued Coca-Cola (i.e., 100% of the capital stock of Coca-Cola, but not including: (i) the 43.39% interest Coca-Cola holds in CBP; and (ii) the 8.15% interest that Coca-Cola's subsidiary, Crecimientos y Desarrollo, S.A. holds in CBP) (referred to herein as the "Soft Drink Business") in the amount (the "Soft Drink Price") as agreed among the Parties and the SPV. FIFCO and Beer have valued CBP (i.e., 100% of the capital stock of CBP and referred to herein as the "Beer Business") in the amount (the "Beer Price") as agreed among the Parties and the SPV. The SPV's bid for 100% of the capital stock of Coca-Cola and 100% of the capital stock of CBP will be equal to the sum of the amount for the Soft Drink Business and the amount for the Beer Business, as such amounts may be amended as provided above. SECTION 1.03. GENERAL RESPONSIBILITIES OF THE PARTIES REGARDING THE BID. In furtherance of the intent of the Parties set forth in this MOU, the Parties agree as follows: (a) Negotiations: The Parties will provide each other with copies of all draft agreements related to the Transaction and shall use their commercially reasonable efforts to negotiate jointly all material points thereto raised by the other Party in good faith. The Parties shall promptly advise each other of the substance of all past and future contact and communications with Coca-Cola, CBP, its selling shareholders or representatives thereof with respect to the Transaction. The final Contrato to be signed by the SPV will be approved in writing in advance by each Party. (b) Due Diligence: Each Party agrees to involve the other Parties in the due diligence process and to advise the other Parties of the results of their due diligence investigation. (c) Exclusivity: Each Party agrees to work exclusively with the other Parties and to cease negotiations or discussions with all other parties other than the selling shareholders, Coca-Cola, CBP and their representatives with respect to the Transaction. Except as set forth below, no Party shall submit a separate bid (either on their own or with a third party) with respect to the Transaction if the SPV submits a bid. In the event that the Parties decide not to enter a joint bid with respect to the Transaction, then Panamco shall have the right (with prior written notice to the other Parties) to individually submit a bid for the purchase of the Soft Drink Business and FIFCO and Beer shall have the right (with prior written notice to the other Parties) to individually or jointly submit a bid for the purchase of the Beer Business. In the event that the Parties, through the SPV, enter a joint bid with respect to the Transaction but, after the entry of such bid, the Sellers notify the Parties that the Sellers intend to terminate or materially delay the sale process with respect to either the Soft Drink Business or the Beer Business, then Panamco shall have the right (with prior written notice to the other Parties) to individually submit a bid for the purchase of the Soft Drink Business outside the SPV and FIFCO and Beer shall have the right (with prior written notice to the other Parties) to jointly submit a bid for the purchase of the Beer Business outside the SPV. Furthermore, in the event that the Parties, through the SPV, enter a joint bid with respect to the Transaction but the Sellers indicate that the bid for either the Soft Drink Business or the Beer Business is insufficient, then the Parties shall work cooperatively outside of the SPV to improve the bid through the SPV and failing an agreement of the Parties to so improve the bid, then Panamco shall have the right (with prior written notice to the other Parties) to individually submit a bid for the purchase of the Soft Drink Business outside the SPV and FIFCO and Beer shall have the right (with prior written notice to the other Parties) to jointly submit a bid for the purchase of the Beer Business outside the SPV. Such individual 2 bids do not preclude either party from cooperating or teaming up in the course of the bid with any third party with respect to the Soft Drink Business or the Beer Business, provided that the bid of such third party for the relevant business is higher than the highest bid of the other Party to this MOU, and provided further that before a Party teams up with any such third party, that Party shall have given written notice to the applicable other Party or Parties of the higher bid and a full opportunity for the applicable other Party or Parties to match the higher bid of the third party. ARTICLE II SPECIAL PURPOSE VEHICLE SECTION 2.01. FORMATION OF SPV. On (or prior to) the execution of this MOU, the Parties will immediately cause the SPV to be established as a corporation under the laws of Panama and in accordance with the terms and conditions of this MOU. The Parties will make contributions in the aggregate amount of $10,000. Of such amount, Panamco will make a contribution equal to the percentage that the Soft Drink Price represents to the sum of the Soft Drink Price and the Beer Price. Beer and FIFCO will make a contribution equal to the percentage that the Beer Price represents to the sum of the Soft Drink Price and the Beer Price. Beer will be responsible for 75% of the Beer/FIFCO contribution and FIFCO will be responsible for the remaining 25% of the Beer/FIFCO contribution. To the extent that the Soft Drink Price and/or the Beer Price is amended from time to time as contemplated by Section 1.02 above, then the Parties shall, if necessary, increase the capital of the SPV and make such additional contributions as necessary so that the relative contributions and equity interests of the Parties shall be based on the relative value of the Soft Drink Price and the Beer Price, as so amended. The SPV will use such funds to initially establish the company. All contributions will be paid in cash in U.S. dollars in immediately available funds. Each of the Parties will receive a number of shares of the equity capital of the SPV proportional to the total value of its respective contributions. The Parties will hold their equity participation in the SPV in the most tax efficient manner for each of the Parties, taking into consideration the particular features of the legislation to which each of the Parties is subject. In connection with the formation of the SPV, the Parties will cause mutually acceptable Articles of Incorporation and Bylaws of the SPV to be adopted. All costs directly related to the formation of the SPV will be borne pro rata by the Parties based upon their respective equity interests in the SPV. No Party shall transfer any of its shares of the equity capital of the SPV to any third party (other than to such Party's affiliates that are controlled by the transferring Party) without the prior written consent of each of the other Parties. SECTION 2.02. PURPOSE OF SPV. The purpose of the SPV will be to submit: (i) the bid for the acquisition of the Soft Drink Business and the Beer Business as provided by Section 1.01 above; and (ii) if the SPV is awarded the winning bid, to enforce its rights and perform its obligations under the Contrato, including, without limitation, the public offers (collectively, "OPA") for 100% of the outstanding shares of Coca-Cola and CBP. If the SPV is not awarded the winning bid with respect to the Transaction, the Parties will, unless otherwise decided by the Board of Directors of the SPV, cause the SPV to be liquidated and dissolved. SECTION 2.03. OPERATION OF THE SPV. The Board of Directors of the SPV will be 3 comprised of one representative appointed by Panamco, one representative appointed by Beer and one representative appointed by FIFCO. All acts of the SPV shall require the prior unanimous approval by the full Board of Directors. SECTION 2.04. FUNDING OF THE OPA. The SPV will fund the OPA through debt financing as follows. Panamco will loan the SPV an amount ("Soft Drink Purchase Price") equal to 100% of the amount of the Soft Drink Business. FIFCO will loan the SPV an amount equal to 25% of the amount ("Beer Purchase Price") of the Beer Business and Beer will loan the SPV an amount equal to 75% of the Beer Purchase Price. Such loans shall be evidenced by promissory notes mutually acceptable to the Parties and shall be made at such time as is necessary and appropriate to effect the OPA and/or consummate the Transaction. To the extent funds lent to the SPV by any Party pursuant to this Section 2.04 are not used by the SPV in the acquisition of the Soft Drink Business or the Beer Business, as the case may be, then such amounts shall be returned to such Party. The Parties acknowledge and agree that they will provide any funding requirements or credit enhancements, including without limitation guarantees, to the SPV on terms required by applicable law and to be mutually agreed by all of the Parties. SECTION 2.05. CONTINUED OPERATION OF SHARED SERVICES. If the SPV is successful in the acquisition of control of the Soft Drink Business and the Beer Business, the Parties (through Coca-Cola and CBP) will work cooperatively to jointly operate those services that are currently operated on a shared basis by Coca-Cola and CBP. During the six month period following the acquisition, the Parties will review and evaluate such shared services and will formalize the provision of such services pursuant to mutually acceptable agreements and terms, including the distribution of malt products; provided that, during such six month period, the Parties shall operate such shared services on substantially the same terms and conditions under which they currently are operated. SECTION 2.06. FUTURE COOPERATION. The SPV will be initially formed for the purposes set forth in Section 2.02 above. The Parties however intend for this MOU to be an initial step for further cooperation in Panama and in the countries in which Panamco operates in Central America. Towards that end, the Parties (and certain of their affiliates) will, contemporaneous with the execution and as a condition precedent of this MOU, enter into a mutually-acceptable non-competition agreement with respect to beer and carbonated soft drinks in Costa Rica. In addition, the Parties agree to use their best efforts to evaluate alternatives to expand the scope of the cooperation between the Parties, which may include among others: (i) the joint distribution of beer and Non-Alcoholic Beverages (as defined below); and (ii) the distribution of Tropical in countries in which Panamco operates in Central America and in Panama. If Panamco is precluded from distributing Tropical in Panama, then the Parties will use their best efforts to enter into a profit-sharing arrangement for the distribution of Tropical by CBP; it being understood that, absent such agreement, the non-competition provision set forth in Section 2.09 below precludes the distribution of Tropical in Panama by FIFCO or Beer (and their affiliates). SECTION 2.07. SPV'S TRANSFER OF COCA-COLA AND CBP. If the SPV is successful in the acquisition of control of the Soft Drink Business and/or the Beer Business, then promptly after such acquisition the SPV shall sell the Soft Drink Business to Panamco for the Soft Drink Purchase Price and shall sell FIFCO and Beer the Beer Business for the Beer Purchase Price; 4 provided that if such sales are not permissible under local laws and regulations, then the Parties shall mutually agree upon an alternative transaction structure (including, as a first alternative, the liquidation/dissolution of the SPV in which case Panamco shall have a liquidation preference over the Soft Drink Business and Beer and FIFCO shall have a liquidation preference over the Beer Business). Payment for such assets shall be effected by the cancellation and set-off of the respective Party's promissory notes referred to in Section 2.04 above. Costs and expenses incurred in connection with such sales or other transfers that are attributable to the Soft Drink Business shall be borne by Panamco and costs and expenses incurred in connection with such sales or other transfers that are attributable to the Beer Business shall be borne equally by FIFCO and Beer. SECTION 2.08. INDEMNIFICATION PROCEEDS OF THE CONTRATO. With respect to claims for indemnification (or holdback of funds through any escrow arrangement) that the SPV may be entitled to assert in connection with an OPA or the prospectuses, the proceeds received pursuant to any such claim shall be distributed as follows: (a) to FIFCO and Beer to the extent that such payments are attributable to the escrow/holdback relating to the acquisition of the Beer Business; (b) to Panamco to the extent that such payments are attributable to the escrow/holdback relating to the acquisition of the Soft Drink Business; and (c) to the extent that any such payments are attributable to both the Beer Business and the Soft Drink Business, to the Parties in the relative proportion that such payments relate to the escrows/holdbacks relating to the acquisition of the Beer Business and the Soft Drink Business, or if such relative proportion cannot be determined, then in the same proportions as the Parties' respective equity interests in the SPV. SECTION 2.09. NONCOMPETITION. If the SPV is successful in the acquisition of the Soft Drink Business and the Beer Business, then the Parties agree that for a period of twenty (20) years after such acquisition, (a) none of FIFCO and Beer or any of their respective current or future affiliates, will engage, either directly or indirectly, in producing, importing, bottling, distributing or selling non-alcoholic beverages, including carbonated soft drinks, juices, juice-based products, water, teas and isotonics ("Non-Alcoholic Beverages") in Panama and (b) none of Panamco or any of its current or future affiliates, will engage, either directly or indirectly, in producing, importing, bottling, distributing or selling alcoholic beverages (including, without limitation, beer, wine and spirits) in Panama; provided, however, that nothing in this Section 2.09 shall prohibit any of the Parties or any of their respective current or future affiliates from engaging in any transaction or other action described above with a counterparty that owns or otherwise controls Panamanian assets so long as such Party or affiliate promptly sells or otherwise divests itself of such Panamanian assets to the extent necessary such that, after the consummation of such sale or divestiture, such Party or affiliate is in compliance with this Section 2.09. Notwithstanding the foregoing, Beer and FIFCO may produce, import, bottle, distribute and sell all malt-based beverages and non-alcoholic beer in Panama. For purposes of this Section 2.09, "engage" shall mean to engage in, or own, manage, operate or control, or actively participate in the ownership, management, operation or control of 5 a business or entity, as a proprietor, partner, stockholder, director, executive, consultant, venturer or in any other capacity, other than investments (A) in non-equity securities of a publicly traded company not exceeding the lesser of (x) 15% of the outstanding non-equity securities of any such company or (y) $10 million in value of the outstanding non-equity securities of such company and (B) in equity securities of a publicly traded company not exceeding the lesser of (x) 15% of the outstanding equity securities of any such company or (y) $10 million in value of the outstanding equity securities of such company. SECTION 2.10. CROSS INDEMNITY. FIFCO and Beer agree (severally based on their relative equity participation in the SPV) to indemnify and hold Panamco and its officers, directors and representatives harmless from and against any action, cost, damage, disbursement, expense, liability, loss, obligation, penalty or settlement of any kind or nature, whether foreseeable or unforeseeable, including but not limited to, interest or other carrying costs, penalties, legal and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims and amounts paid in settlement (collectively, a "Loss"), that may be imposed on or otherwise incurred or suffered by Panamco arising, directly or indirectly, as a result of, or based upon or arising from, the Beer Business, except for any such Loss arising primarily from the actions of the indemnified party. Panamco agrees to indemnify and hold harmless FIFCO and Beer and their respective officers, directors and representatives from and against any Loss, that may be imposed on or otherwise incurred or suffered by FIFCO and Beer arising, directly or indirectly, as a result of, or based upon or arising from, the Soft Drink Business, except for any such Loss arising primarily from the actions of the indemnified party. ARTICLE III TERM, TERMINATION AND EXCLUSIVITY SECTION 3.01. TERM. (a) This MOU shall become effective on the date first written above and shall cease to have binding effect (except as otherwise provided herein) upon the Parties upon the earliest of the following events: (i) the selling shareholders terminate the bidding contest for the sale of the Shares; (ii) the commencement of the liquidation/dissolution of the SPV as contemplated by Section 2.02 above; (iii) the Parties mutually agree in writing to terminate this MOU; and/or (iv) upon the sale of Coca-Cola and CBP to the Parties as provided in Section 2.07 above (or any alternative structure as contemplated therein). (b) None of the Parties shall have a right of action or other claim against the other as a result of the termination of this MOU under the provisions established above. (c) In the event of a termination of this MOU pursuant to Section 3.01(a)(iv), the following sections shall survive: 2.05, 2.06, 2.07, 2.08, 2.09, 2.10 and Article V. In the event of a termination of this MOU for any other reason, the following sections shall survive: 2.08, 2.10, 5.01, 5.05 and 5.07. 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each Party represents and warrants to the other Parties as follows: (a) that it is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdiction of incorporation and has the full power and authority to carry on its business as contemplated hereby and fully to perform its obligations under this MOU; (b) that the execution, delivery and performance by it of this MOU does not and will not (i) contravene, violate or conflict with its by-laws, (ii) contravene, violate or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to it, or (iii) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any lien pursuant to, any note, bond, mortgage, indenture contract, agreement, lease, license, permit, franchise or other agreement or instrument to which it is a party; and (c) this MOU has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as enforceability may be limited by bankruptcy laws and regulations and by general equitable principles. ARTICLE V MISCELLANEOUS PROVISIONS SECTION 5.01. CONFIDENTIALITY. (a) The Parties recognize and agree that, in the course of their negotiations and due diligence, they have and will be exchanging nonpublic, proprietary and confidential information regarding the other Parties, the disclosure of which would be detrimental to the Party providing such information. Each Party agrees to treat all such information delivered to it by the other Party as confidential, and to protect such information from disclosure to any third Party, in whole or part, without the prior written consent of the providing Party; provided, however, that the following information shall not be considered confidential or proprietary and neither Party shall have any obligation to treat it as such: (i) information that was known to the receiving Party at the time of disclosure to it by the providing Party; (ii) information that was in the public domain at the time of disclosure by the providing Party; and (iii) information that was obtained by the receiving Party from a third Party who was under no obligation of nondisclosure with respect thereto; and provided, further, that either Party shall have the right to disclose any confidential information as required by court order or applicable law or regulation. The Parties agree to cause their employees, agents and representatives to maintain the confidentiality of any such information in accordance with the provisions of this paragraph. (b) The Parties agree to maintain the confidentiality of such information for a period of five (5) years from the effective date of this MOU or until earlier relieved of such obligation by 7 written notice from the providing Party or until such information passes into the public domain through no fault of the receiving Party. (c) The Parties do not intend to restrict a Party's use of information and know-how that it possessed prior to entering into this MOU or information and know-how developed by a Party or any of its affiliates in connection with work on other projects undertaken during the term of this MOU. (d) The obligations of confidentiality set forth in this Article shall survive termination, cancellation or expiration of this MOU or dissolution of the SPV. SECTION 5.02. NO IMPLIED WAIVERS. The failure of a Party to insist upon or enforce strict performance of any of the provisions of this MOU shall not be construed as a waiver or relinquishment to any extent of such Party's right to assert or rely upon any such provisions, rights and remedies in that or any other instance; rather, the same shall be and remain in full force and effect. SECTION 5.03. SEVERABILITY. The invalidity or unenforceability of any - -provision, clause or part of this MOU, or the application thereof under certain circumstances, shall not affect the validity or enforceability of the remainder of this MOU, or the application of such provision, clause or part under other circumstances. SECTION 5.04. SUCCESSORS AND ASSIGNS. This MOU shall be binding upon, and inure for the benefit of, the Parties and their respective successors (including, without limitation, by means of acquisition or merger) and permitted assigns. None of the Parties may assign its rights under this MOU without the prior written consent of the other Parties, provided that a Party may assign such rights to an affiliate without obtaining such consent so long as such assignor remains liable hereunder. SECTION 5.05. COSTS AND EXPENSES. Except as otherwise provided herein, the Parties agree that each Party shall pay the costs and expenses incurred by itself in connection with the Transaction and jointly shall bear the costs and expenses incurred by the SPV in connection with the Transaction. SECTION 5.06. NOTICES. All notices or other communications permitted or required pursuant to this MOU shall be in writing and shall be deemed given on the date received, whether by personal delivery or by mail, postage prepaid, certified with return receipt, to the following addresses: If to Panamco: c/o Panamco L.L.C. 701 Waterford Way Suite 800 Miami, Fl 33126 Phone: (305) 929-0800 Facsimile: (305) 856-3900 Attention: Annette Franqui 8 If to FIFCO: Florida Ice and Farm Co. APDO. 10021 San Jose, Costa Rica Phone: (506) 221-3722 Facsimile: (506) 223-7830 Attention: Rodolfo Jimenez If to Beer: Heineken Finance N.V. Kaya W.F.G. (Jombi) Mensing 32 P.O. Box 3056 Curacao, Netherlands Antilles Phone: 5999 461 5444 Facsimile: 5999 461 5523 Attention: Managing Director with a copy to: Heineken International B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Phone: +31-20-523-9800 Facsimile: +31-20-523-9790 Attention: Rene Hooft Graafland SECTION 5.07. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This MOU shall be governed by and construed in accordance with the laws of the Republic of Panama. (b) Any claim, dispute or controversy arising in connection with this MOU shall be settled by final binding arbitration under the Rules of Arbitration of the International Chamber of Commerce in New York City, New York. The arbitration shall be heard and determined by a panel of three arbitrators, with Panamco selecting one arbitrator, Beer and FIFCO selecting one arbitrator and the final arbitrator selected by the first two arbitrators. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The Parties waive, to the fullest extent permitted by applicable law, and agree not to invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Each Party shall be entitled to seek interim measures of 9 protection in the form of injunctive relief. At any hearing of oral evidence, each Party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other Party or Parties and each Party shall have the right to conduct reasonable discovery of the other Party or Parties. This provision shall survive the termination of this MOU. SECTION 5.08. STATUS OF RELATIONSHIP. No Party is hereby constituted an agent or legal representative of any other Party hereto, and no Party is granted any right or authority hereunder to assume or create any obligation, expressed or implied, or to make any representation, covenant, warranty, or guaranty on behalf of any other party or the SPV, except as provided herein. SECTION 5.09. ENTIRE AGREEMENT. This MOU constitutes the entire agreement between the parties with respect to the subject matter of this MOU and supersedes all prior or contemporaneous negotiations or agreements, whether oral or written. SECTION 5.10. EXECUTION IN COUNTERPARTS; FACSIMILE SIGNATURES. This MOU may be executed in two or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement. Facsimile signatures shall be treated as originals. 10 IN WITNESS WHEREOF, the Parties have caused this MOU to be executed by their duly authorized representatives, effective as of the date first written above. INTER-AMERICAN FINANCIAL CORPORATION By /s/ Annette Franqui ------------------------- Name: Annette Franqui Title: Authorized Signatory FLORIDA ICE AND FARM CO. By /s/ Pedro Dobles Villela ------------------------- Name: Pedro Dobles Villela Title: Director General HEINEKEN FINANCE N.V. By /s/ R. de Paus ------------------------- Name: R. de Paus Title: Director EX-10.58 17 ex10_58.txt LIMITED NON-COMPETITION AGREEMENT EXHIBIT 10.58 LIMITED NON-COMPETITION AGREEMENT This Limited Non-Competition Agreement ("Agreement"), dated as of September 13, 2002, is entered into by and among Panamerican Beverages, Inc., a sociedad anonima organized and existing under the laws of Panama ("Panamco"), Embotelladora Panamco Tica, S.A., a sociedad anonima organized and existing under the laws of the Republic of Costa Rica ("Panamco Tica"), Florida Ice and Farm Co., a sociedad anonima organized and existing under the laws of the Republic of Costa Rica ("FIFCO"), Florida Bebidas, S.A., a sociedad anonima organized and existing under the laws of the Republic of Costa Rica ("CCR"); Heineken International B.V., a limited liability company organized and existing under the laws of the Netherlands ("Heineken International"); and Heineken Finance N.V., a limited liability company organized and existing under the laws of the Netherlands Antilles ("Heineken Finance") (Panamco, Panamco Tica, FIFCO, CCR, Heineken International and Heineken Finance are collectively referred to herein as the "Parties" and each individually as a "Party"). RECITALS: A. Inter-American Financial Corporation (a wholly-owned subsidiary of Panamco), FIFCO and Heineken Finance have entered into a Memorandum of Understanding ("MOU"), dated as of the date hereof, pursuant to which such parties have formed a special purpose vehicle to submit a single bid for the purchase of Coca-Cola de Panama Compania Embotelladora, S.A. and Cerveceria Baru-Panama, S.A.; and B. As contemplated by Section 2.06 of the MOU, the Parties desire to enter into this Agreement, pursuant to which Panamco, Panamco Tica (Panamco and Panamco Tica are collectively referred to herein as the "Panamco Entities") agree not to compete in the beer market in Costa Rica pursuant to the terms and conditions set forth herein and pursuant to which FIFCO, CCR (FIFCO and CCR are collectively referred to herein as the "FIFCO Entities"); Heineken Finance and Heineken International (Heineken Finance and Heineken International are collectively referred to herein as the "Heineken Entities") agree not to compete in the carbonated soft drink market in Costa Rica pursuant to the terms and conditions set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein, the Parties agree as follows: SECTION 1.01 NON-COMPETITION. The Parties agree that for a period of twenty (20) years after the date hereof, (a) none of the FIFCO Entities or the Heineken Entities or any of their respective current or future affiliates (including parent and subsidiary companies), will engage, either directly or indirectly, in producing, importing, bottling, distributing or selling carbonated soft drinks (not including malt based beverages) in the Republic of Costa Rica and (b) none of Panamco Entities or any of its current or future affiliates, will engage, either directly or indirectly, in producing, importing, bottling, distributing or selling beer (either alcoholic or non-alcoholic) in the Republic of Costa Rica. For purposes of this Section 1.01, "engage" shall mean to engage in, or own, manage, operate or control, or actively participate in the ownership, management, operation or control of a business or entity, as a proprietor, partner, stockholder, director, executive, consultant, venturer or in any other capacity, other than investments (A) in non-equity securities of a publicly traded company not exceeding the lesser of (x) 15% of the outstanding non-equity securities of any such company or (y) $10 million in value of the outstanding non-equity securities of such company and (B) in equity securities of a publicly traded company not exceeding the lesser of (x) 15% of the outstanding equity securities of any such company or (y) $10 million in value of the outstanding equity securities of such company. It is the intent of the Parties that the provisions of this Section 1.01 be given the maximum force, effect and application permissible under applicable law. The Parties agree that the provisions of this Section 1.01 are reasonable with respect to the duration, geographical area and scope of the matters addressed herein. SECTION 1.02. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each Party represents and warrants to the other Parties as follows: (a) that it is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdiction of incorporation and has the full power and authority to carry on its business as contemplated hereby and fully to perform its obligations under this Agreement; (b) that the execution, delivery and performance by it of this Agreement does not and will not (i) contravene, violate or conflict with its by-laws, (ii) to the best of their knowledge, contravene, violate or conflict with any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to it, or (iii) result in any breach of, or constitute a default (or event which with the giving of notice or lapse of time, or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of any lien pursuant to, any note, bond, mortgage, indenture contract, agreement, lease, license, permit, franchise or other agreement or instrument to which it is a party; and (c) this Agreement has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as enforceability may be limited by bankruptcy laws and regulations and by general equitable principles. SECTION 1.03. NO IMPLIED WAIVERS. The failure of a Party to insist upon or enforce strict performance of any of the provisions of this Agreement shall not be construed as a waiver or relinquishment to any extent of such Party's right to assert or rely upon any such provisions, rights and remedies in that or any other instance; rather, the same shall be and remain in full force and effect. SECTION 1.04. SEVERABILITY. The invalidity or unenforceability of any provision, clause or part of this Agreement, or the application thereof under certain circumstances, shall not affect the validity or enforceability of the remainder of this Agreement, or the application of such provision, clause or part under other circumstances. SECTION 1.05. BINDING EFFECT UPON SUCCESSORS. This Agreement shall be binding upon, and inure for the benefit of, the Parties and their respective successors (including, without limitation, by means of acquisition or merger) and permitted assigns. None of the Parties 2 may assign its rights under this Agreement without the prior written consent of the other Parties, provided that a Party may assign such rights to an affiliate without obtaining such consent so long as such assignor remains liable hereunder. SECTION 1.06. NOTICES. All notices or other communications permitted or required pursuant to this Agreement shall be in writing and shall be deemed given on the date received, whether by personal delivery or by mail, postage prepaid, certified with return receipt, to the following addresses: If to the Panamco Entities: c/o Panamco L.L.C 701 Waterford Way Suite 800 Miami, Fl 33126 Phone: (305) 929-0800 Facsimile: (305) 856-3900 Attention: General Counsel If to the FIFCO Entities: Florida Bebidas, S.A. Florida Ice and Farm Co. APDO. 10021 San Jose, Costa Rica Phone: (506) 221-3722 Facsimile: (506) 223-7830 Attention: Rodolfo Jimenez If to the Heineken Entities: Heineken International B.V. Tweede Weteringplantsoen 21 P.O. Box 28, 1000 AA Amsterdam, Netherlands Phone: +31-20-523-9800 Facsimile: +31-20-523-9790 Attention: Rene Hooft Graafland and Heineken Finance N.V. Kaya W.F.G. (Jombi) Mensing 32 P.O. Box 3056 Curacao, Netherlands Antilles Phone: 5999 461 5444 3 Facsimile: 5999 461 5523 Attention: Managing Director SECTION 1.07. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) This Agreement shall be governed by and construed in accordance with the laws of the Republic of Costa Rica. (b) Any claim, dispute or controversy arising in connection with this Agreement shall be settled by final binding arbitration before the International Chamber of Commerce in New York City, New York. The arbitration shall be heard and determined by a panel of three arbitrators, with the Panamco Entities selecting one arbitrator, the Heineken Entities and FIFCO Entities selecting one arbitrator and the final arbitrator selected by the first two arbitrators. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with law in any court having jurisdiction thereof. The Parties waive, to the fullest extent permitted by applicable law, and agree not invoke or exercise, any rights to appeal, review or impugn such decision or award by any court or tribunal. Either Party shall be entitled to seek interim measures of protection in the form of injunctive relief. At any hearing of oral evidence, each Party shall have the right to present and examine its witnesses and to cross-examine the witnesses of the other Party or Parties and each Party shall have the right to conduct reasonable discovery of the other party. This provision shall survive the termination of this Agreement. SECTION 1.08. STATUS OF RELATIONSHIP. No Party is hereby constituted an agent or legal representative of any other Party hereto, and no Party is granted any right or authority hereunder to assume or create any obligation, expressed or implied, or to make any representation, covenant, warranty, or guaranty on behalf of any other party or the SPV, except as provided herein. SECTION 1.09. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior or contemporaneous negotiations or agreements, whether oral or written. SECTION 1.10. NON-DISCLOSURE. Each Party agrees to treat this Agreement and its terms (including its existence) as strictly confidential, and to protect this Agreement and its terms (including its existence) from disclosure to any third party, in whole or part, without the prior written consent of the other Parties. The Parties agree to cause their respective officers, directors, employees, agents and representatives to maintain the confidentiality of this Agreement and its terms in accordance with the provisions of this paragraph. This paragraph shall be subject to any disclosure that may be required by applicable law. SECTION 1.11. EXECUTION IN COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in two or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement. Facsimile signatures shall be treated as originals. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by 4 their duly authorized representatives, effective as of the date first written above. PANAMERICAN BEVERAGES, INC. By /s/ Annette Frangui ------------------------------- Name: Annette Frangui Title: Authorized Signatory EMBOTELLADORA PANAMCO TICA, S.A. By /s/ Carlos Hernandez-Artigas ------------------------------- Name: Carlos Hernandez-Artigas Title: Secretary FLORIDA ICE AND FARM CO. By /s/ Pedro Dobles Villela ------------------------------- Name: Pedro Dobles Villela Title: Director General FLORIDA BEBIDAS, S.A. By /s/ Pedro Dobles Villela ------------------------------- Name: Pedro Dobles Villela Title: Director General HEINEKEN INTERNATIONAL B.V. By /s/ Van Gitters ------------------------------- Name: Van Gitters Title: Director HEINEKEN FINANCE N.V. By /s/ RJJ Voorm ------------------------------- Name: RJJ Voorm Title: Director 5 EX-10.59 18 ex10_59.txt EMPLOYMENT AGREEMENT -- ANNETTE FRANQUI EXHIBIT 10.59 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of October 7, 2002 (the "Effective Date") between, PANAMCO, L.L.C., a limited liability company organized under the laws of the State of Delaware (together with its successors and assigns, the "Company") and ANNETTE FRANQUI (the "Executive"). W I T N E S S E T H : WHEREAS, the Executive has been employed by the Company since April 1, 2001 as Vice President Corporate Finance; WHEREAS, the Company has promoted the Executive to the position of Vice President, Chief Financial Officer and Treasurer of the Company; WHEREAS, the Company desires to enter into an agreement embodying the new terms of such employment; WHEREAS, the Executive desires to accept employment with the Company, subject to the terms and provisions of this Agreement; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Parties agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings set forth in Exhibit A. 2. Term. The term of the Executive's employment hereunder (the "Term") shall be for a period commencing on October 7, 2002 (the "Commencement Date") and ending October 6, 2005, provided, however, that the Term shall thereafter be automatically and indefinitely extended for additional one-year periods unless either the Company or the Executive gives the other written notice at least six (6) months prior to the then-scheduled date of expiration of the Term that such Party is electing not to so extend the Term. Notwithstanding the foregoing, the Term may be earlier terminated in strict accordance with the provisions of Section 11 below. Non-renewal shall not be considered a termination for Cause. 3. Positions, Duties and Location. (a) During the Term, the Executive shall serve as Vice President and Chief Financial Officer of the Company and Panamerican Beverages, Inc. ("Panamco"). The Executive shall report solely and directly to the Chief Executive Officer (the "CEO") of the Company. The Executive shall have all authorities, duties and responsibilities customarily exercised by an individual serving as Vice President and Chief Financial Officer in a corporation of the size and nature of the Company and/or Panamco. (b) During the Term, the Executive shall devote substantially all of her business time and efforts to the affairs of the Company and Panamco; provided that nothing herein shall preclude the Executive from: (i) serving on the boards of a reasonable number of business entities, trade associations and charitable organizations as reasonably permitted by the Board (which permission has been given to the one board the Executive is currently serving on), (ii) engaging in other charitable activities and community affairs and (iii) managing her personal investments and affairs, provided that such activities do not materially interfere with the proper performance of her duties and responsibilities hereunder. (c) During the Term, the Executive's principal office, and principal place of employment, shall be in the Miami, Florida area or such other place that the Executive consents to in writing. 4. Base Salary. Executive shall receive an annual base salary of $325,000 ("Base Salary"), which shall be paid in accordance with the customary payroll practices of Panamco, but in no event less frequently than monthly. During the Term, the Executive's Base Salary shall be reviewed at least annually by the Compensation Committee of the Board ("Compensation Committee") and may be increased from time to time as shall be determined by the Compensation Committee, provided however, that the next review of the Executive's Base salary shall be made no later than April 1, 2003. Upon any such increase, the term "Base Salary" as utilized in this Agreement shall thereafter refer to the increased amount. Base Salary shall not be reduced at any time without the express written consent of the Executive. 5. Bonus. For 2002, Executive will be eligible to receive an annual performance-based bonus award ("Bonus"). For the period January 1 through October 6, 2002, the target will be thirty five percent (35%) of Executive's Base Salary in effect on October 6, 2002 (i.e.$296,600.00). For the period from October 7 through December 31, 2002 the target will be fifty percent (50%) of the new annual Base Salary mentioned in section 4 above ("Target Bonus"). Beginning 2003 and for the Term of the Agreement, the Executive shall be eligible to receive a Bonus with a Target Bonus of no less than fifty percent (50%) of Executive's then current Base Salary pursuant to the terms and conditions of Company's annual incentive plan. During the Term, the Executive's Target Bonus shall be reviewed at least annually by the Compensation Committee and may be increased from time to time as shall be determined by the Compensation Committee. After any such increase, the term "Target Bonus" as utilized in this Agreement shall thereafter refer to the increased amount. The Executive shall be paid her Bonus when other senior executives of the Company are paid their annual bonuses, but in no event later than ninety (90) days after the end of the bonus period for which it is payable. 6. Equity and Long-Term Incentive Awards. During the Term, the Executive shall be eligible to participate in the Company's Equity Incentive Plan and any other equity or long-term incentive plans of the Company on at least as favorable basis as other similarly-situated executives. In any event, for 2002, the Executive shall be granted an annual stock option award, to be made at the same time other equity awards are granted to other similarly-situated executives, to purchase no less than 70,000 shares of the Company's common stock. 7. Retirement and Savings Plans. (a) Retirement and Savings Plans. The Executive shall be eligible to participate in all pension (including any 401(k) plan), savings, profit-sharing and deferred compensation plans presently and hereinafter offered by the Company to its senior executives, subject to general eligibility and participation provisions set forth in such plans or otherwise provided herein. 8. Executive Benefits and Perquisites. (a) Executive Benefits. During the Term, the Executive and her eligible dependents shall be eligible to participate in all Executive benefit programs applicable to senior executives generally, including as applicable medical/dental and hospitalization plans, life insurance, short- and long-term disability programs, accidental death and dismemberment protection and travel accident insurance, in each case at a level, and on terms and conditions consistent with her position. (b) Automobile Allowance. The Executive shall receive an automobile allowance of $900.00 per month minus applicable withholding taxes, which amount shall be payable at the same time and in the same manner as the Executive's Base Salary, as described in Section 4 hereof. 9. Reimbursement of Business Expenses and Relocation. The Executive shall be promptly reimbursed for all reasonable business expenses incurred by her, subject to documentation in accordance with the Company's policy. 10. Termination of Employment. (a) Termination Due to Death. In the event that the Executive's employment hereunder is terminated due to his death, her estate or her beneficiaries (as the case may be) shall be entitled to: (i) Base Salary through the Termination Date; (ii) a pro-rata Bonus for the year of death, based on the Target Bonus for the year of death, payable when the bonus is paid to other executives, but in no event later than 90 days after the end of such year; (iii) accelerated vesting of (A) any outstanding stock options, each option (including already vested options) to remain exercisable for 36 months following the Termination Date and (B) any other equity awards (if any) not yet vested at the Termination Date; (iv) any amounts earned, accrued or owing to the Executive but not yet paid; and (v) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company and its Affiliates. (b) Termination Due to Disability. In the event that the Executive's employment hereunder is terminated due to Disability, she shall be entitled to: (i) Base Salary through the Termination Date; (ii) a pro-rata Bonus for the year of termination, based on the Target Bonus for the year of termination, payable when the bonus is paid to other executives, but in no event later than 90 days after the end of such year; (iii) accelerated vesting of (A) any outstanding stock options, each option (including already vested options) to remain exercisable for 36 months following the Termination Date and (B) any other equity awards (if any) not yet vested at the Termination Date; (iv) continued participation for 12 months in all medical, dental, hospitalization and life insurance coverages and in all other employee welfare plans and programs in which she and her eligible dependents were participating on the Termination Date, provided, however, that in the event that any of the benefit plans do not permit her continued participation, Panamco shall provide her with the economic equivalent on an after-tax basis; (v) any amounts earned, accrued or owing to the Executive but not yet paid; and (vi) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company, and its Affiliates. No termination of the Executive's employment hereunder for Disability shall be effective unless the Party terminating his employment first gives 30 days' written notice of such termination to the other Party. (c) Termination by the Company for Cause, Voluntary Termination by the Executive or Termination upon Non-Renewal of the Term. (i) In the event the Executive is terminated by the Company for Cause, the Executive voluntarily terminates her employment (other than upon death, Disability or a Constructive Termination without Cause) or the Company terminates the Executive's employment by providing a notice of non-renewal in accordance with Section 2 above, the Executive shall be entitled to: (a) Base Salary through the Termination Date; (b) forfeiture of any unvested stock options, and any other unvested equity awards (if any), if not vested by the Termination Date; (c) 90 days in which to exercise any vested options; (d) any amount earned, accrued or owing to the Executive but not yet paid; and (e) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company and its Affiliates. (ii) No termination of the Executive's employment hereunder by the Company for Cause shall be effective as a termination for Cause unless the provisions of this Section 10(c)(ii) shall first have been complied with. The Executive shall be given written notice by the Board, with such notice stating in detail the particular circumstances that constitute the grounds on which the proposed termination for Cause is based. The Executive shall have at least fifteen (15) days after receipt of such notice to fully cure such alleged violation. If she fails to cure such alleged violation within such fifteen (15)-day period, the Executive shall then be entitled to a hearing before the Board. If after such hearing, the Board gives written notice to the Executive confirming that a majority of the members of the Board voted after the hearing to terminate her for Cause, the Executive's employment shall thereupon be terminated for Cause. (d) Termination Without Cause or Constructive Termination without Cause. In the event that (x) the Executive's employment hereunder is terminated by the Company (other than upon death, upon Disability above or for Cause or non-renewal in accordance with Section 10(b) above), or (y) a Constructive Termination Without Cause occurs, the Executive shall be entitled to: (i) Base Salary through the Termination Date; (ii) a pro-rata Bonus for the year of termination, based on the Target Bonus for the year of termination, payable when the bonus is paid to other executives, but in no event later than 90 days after the end of such year; (iii) an amount equal to one and a half (1.5) times the Executive's Base Salary, at the annualized rate in effect on the Termination Date, payable in 18 equal monthly installments commencing promptly (but not more than 15 days) after the Termination Date; (iv) an amount equal to one and a half (1.5) times the Bonus, based on the Target Bonus for the year of termination, payable in 18 equal monthly installments commencing promptly (but not more than 15 days) after the Termination Date; (v) accelerated vesting of (A) any outstanding stock options, each option (including already vested options) to remain exercisable for 12 months following the Termination Date and (B) any other equity awards (if any) not yet vested at the Termination Date; (vi) continued participation in all medical, dental, hospitalization and life insurance coverages and in all other Executive welfare plans and programs in which she and her eligible dependents were participating on the Termination Date (not including any disability plan) until the earlier of (x) the end of the 18-month period following the Termination Date or (y) the date, or dates, that she receives like coverages and benefits under the plans and programs of a subsequent employer (determined on a benefit by benefit basis), provided, however, that in the event that any of the benefit plans do not permit her continued participation, the Company shall provide her with the economic equivalent on an after-tax basis; (vii) any amounts earned, accrued or owing to the Executive but not yet paid; and (viii) other benefits, if any, in accordance with applicable plans, programs and arrangements of the Company and its Affiliates. 11. General Release Requirement. All payments or benefits to Executive under Section 10 above (other than payments or benefits already accrued and otherwise due under the Company's employee, executive or fringe benefit plans or programs) will not be given unless Executive executes (and does not rescind) a written employment termination agreement incorporating a general release, in a form prescribed by the Company, of all claims against the Company and related parties with respect to all matters occurring to the date of the release, including (but not limited to) employment matters or matters in connection with Executive's termination, except for matters relating to benefits or payments already accrued and otherwise due under the Company's employee, executive or fringe benefit plans or programs. 12. Change in Control. (a) Entitlements. Upon a Change in Control (as defined in the Equity Incentive Plan), any outstanding stock options shall vest and shall remain exercisable in accordance with the Equity Incentive Plan and other equity awards (if any) shall fully vest. In the event of any termination of the Executive's employment upon or following a Change in Control (as defined herein), the Executive shall continue to have the entitlements provided for in Section 10(d) above. The Executive shall also be entitled to any compensation, benefit or entitlement provided in accordance with any other agreement with the Company, or any Company and/or Panamco plan, policy or arrangement, relating to a Change in Control (as such term is defined in this Agreement or in such other agreement, plan, policy or arrangement) of either the Company or Panamco (with such other agreement, plan, policy or arrangement collectively referrred to as the "Change in Control Policy"), provided that if any item of compensation or benefit or any entitlement is provided under this Agreement which is more favorable to the Executive than the corresponding item of compensation or benefit or entitlement under the Change in Control Policy, or if an item of compensation or benefit or any entitlement is provided under this Agreement, but not under the Change in Control Policy, such item of compensation or benefit or such entitlement, as the case may be, shall be provided in accordance with the terms of this Agreement. In no event, however, shall the Executive be entitled to duplication as to any item of compensation or benefit or as to any entitlement that is provided under both this Agreement and the Change in Control Policy. In the event of any inconsistency between any provision of this Agreement and any provision of the Change in Control Policy, the provision most favorable to the Executive shall govern. (b) Parachute Payment Protection. In the event that any payment or benefit made or provided to or for the benefit of the Executive in connection with this Agreement or her employment with the Company or the termination thereof (a "Payment") is determined to be subject to any excise tax ("Excise Tax") imposed by Section 4999 of the Code (or any successor to such Section), the Company shall pay to the Executive, prior to the time any Excise Tax is due in respect of such Payment (through withholding or otherwise), an additional amount which, after the imposition of all income, employment, excise and other taxes thereon, is equal to the sum of (i) the Excise Tax on such Payment plus (ii) any penalty and interest assessments associated with such Excise Tax. The amount and timing of any payment shall promptly be determined by an independent accounting firm selected by the Parties and paid for by the Company. 13. Indemnification. (a) If the Executive is made a party, or is threatened to be made a party, to any Proceeding by reason of the fact that she is or was an officer, Executive, agent, manager, consultant or representative of the Company or any of their Affiliates or is or was serving at the request of the Company or any of their Affiliates, or in connection with her service hereunder, as an officer, member, Executive, agent, manager, consultant or representative of another Person, or if any Claim is made, or is threatened to be made, that arises out of or relates to the Executive's service in any of the foregoing capacities, then the Executive shall promptly be indemnified and held harmless (and shall be entitled to prompt advancement of expenses, including without limitation attorneys' fees and other charges of counsel) in each case to the fullest extent provided under the Company's charter documents and officers' and directors' liability insurance policies and programs. (b) During the Term and for a period of six years thereafter, a directors' and officers' liability insurance policy (or policies) shall be kept in place providing coverage to the Executive that is no less favorable to her in any respect (including without limitation, with respect to scope, exclusions, amounts, and deductibles) than (x) the coverage then being provided to any other present or former senior executive or director of the Company and (y) the coverage provided to her as of the Commencement Date. 14. Confidentiality. The Executive hereby agrees that, other than in the ordinary course of performing her duties for the Company or any Affiliate, she shall not divulge to any person or entity other than the Company or any Affiliate, without the Company's express written authorization, any information constituting trade secrets or proprietary information belonging to the Company, or other confidential information, including operating budgets, strategic plans, or research methods, projects or plans of the Company, received by her in the course of her employment by the Company or in connection with her duties with the Company ("Confidential Information"). Anything herein to the contrary notwithstanding, the provisions of this Section 14 shall not apply (i) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the Executive to disclose or make accessible any information, provided that, unless otherwise prohibited by law and provided such information is not related to any illegal activities of the Company, the Executive shall provide Company with immediate notice of any such requested or required disclosure and shall fully cooperate with the Company in any effort to prevent or otherwise contest such disclosure, (ii) with respect to any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement or (iii) as to Confidential Information that becomes generally known to the public or within the relevant trade or industry other than due to the Executive's violation of this Section 14. 15. Non-Competition and Non-Solicitation. Upon the termination of the Executive's employment, for a period of eighteen (18) months following the Termination Date, the Executive shall not provide services, as an Executive, officer, consultant or director of, to any company or other entity primarily engaged in the carbonated soft drink, juice or water business in the same geographic areas as the Company ("Competitor"), provided that the Executive may provide such services to any division, subsidiary or Affiliate of such a company or entity if the Executive does not have direct responsibility for any carbonated soft drink, juice or water business. Notwithstanding the foregoing, the Executive may serve as an Executive, officer, consultant or director of any company or other entity that provides investment, financial or consulting services to a Competitor, provided that the Executive does not have direct responsibility for or direct involvement in the provision of any such advice or services to such Competitor. (b) Upon the termination of the Executive's employment, for a period of eighteen (18) months following the Termination Date, the Executive shall not without the prior written consent of the Chairman of the Board, directly or indirectly solicit for employment, either for herself or on behalf of any company or other entity in which she is an officer, director, Executive or consultant, any Executive of the Company or any Affiliate, provided that nothing in this Section 15(b) shall prohibit the Executive from providing employment or personal references for any such Executive. (c) Executive acknowledges and confirms that (a) the restrictive covenants contained in this Section 15 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Section 15 (including without limitation the length of the term of the provisions of this Section 15) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. Executive further acknowledges and confirms that her full, uninhibited and faithful observance of each of the covenants contained in this Section 15 will not cause her any undue hardship, financial or otherwise. Executive acknowledges and confirms that her special knowledge of the business of the Company is such as would cause the Company serious injury or loss if she were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Section 15. Executive further acknowledges that the restrictions contained in this Section 15 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. (d) In the event that a court of competent jurisdiction shall determine that any provision of this Section 15 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 15 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. (e) If the Executive shall be in violation of any provision of this Section 15, then each time limitation set forth in this Section 15 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive relief from such violation in any court, then the covenants set forth in this Section 15 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Executive. 16. Assignability; Binding Nature. (a) This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. (b) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or obligations may be assigned or transferred pursuant to a merger, consolidation or other combination, reconstruction or amalgamation in which the Company is not the continuing entity, or a sale or liquidation of all or substantially all of the business and assets of the Company; provided that the assignee or transferee is the successor to all or substantially all of the business and assets of the Company and such assignee or transferee expressly assumes the liabilities, obligations and duties of the Company as set forth in this Agreement. In the event of any merger, consolidation, other combination, reconstruction or amalgamation, or sale or liquidation of business and assets as described in the preceding sentence, the Company shall, if deemed to be in the best interest of the Company, use its best efforts to cause such assignee or transferee to promptly and expressly assume the liabilities, obligations and duties of the Company and Panamco hereunder. (c) No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than her rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Section 20(d) below. 17. Representations. (a) The Company represents and warrants that, to the best of its knowledge and belief, (i) it will be fully authorized by action of its Board (and of any other Person or body whose action is required) to enter into this Agreement and to perform its obligations under it; (ii) the execution, delivery and performance of this Agreement by it does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which it is a party or by which it is bound; and (iii) upon the execution and delivery of this Agreement by the Parties, this Agreement shall be a valid and binding obligation of the Company, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. (b) The Executive represents and warrants that, to the best of her knowledge and belief, (i) delivery and performance of this Agreement by her does not violate any applicable law, regulation, order, judgment or decree or any agreement to which the Executive is a party or by which she is bound and (ii) upon the execution and delivery of this Agreement by the Executive and the Company, this Agreement shall be a valid and binding obligation of the Executive, enforceable against her in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 18. Resolution of Disputes. Any Claim arising out of or relating to this Agreement, any other agreement between the Executive and the Company or any of their Affiliates, or the Executive's employment with the Company or the termination thereof (collectively, "Covered Claims") shall be resolved by binding arbitration, to be held in the city in which the Company's principal offices are then located, in accordance with the Commercial Arbitration Rules (and not the National Rules for the Resolution of Employment Disputes) of the American Arbitration Association and this Section 18. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Parties shall be responsible for their own costs and expenses, including, without limitation, attorneys' fees. Pending the resolution of any Covered Claim, the Executive (and her beneficiaries) shall, except to the extent that the arbitrator(s) otherwise expressly provide, continue to receive all payments and benefits due under this Agreement or otherwise. The foregoing notwithstanding, in the event of any actual, threatened or suspected breach by any Party, the non-breaching Party shall be entitled to obtain injunctive and such other equitable relief with respect to such breach. 19. Notices. Any notice, consent, demand, request, or other communication given to a Person in connection with this Agreement shall be in writing and shall be deemed to have been given to such Person (a) when delivered personally to such Person or (b), provided that a written acknowledgment of receipt is obtained, three days after being sent by prepaid certified or registered mail, or two days after being sent by a nationally recognized overnight courier, to the address (if any) specified below for such Person (or to such other address as such Person shall have specified by ten days' advance notice given in accordance with this Section 19) or (c), in the case of the Company only, on the first business day after it is sent by facsimile to the facsimile number set forth below (or to such other facsimile number as the Company shall have specified by ten days' advance notice given in accordance with this Section 19), with a confirmatory copy sent by certified or registered mail or by overnight courier in accordance with this Section 19. If to the Company: General Counsel c/o Panamco, LLC 701 Waterford Way Suite 800 Miami, Florida 33126 Fax: (786) 388-8191 If to the Executive: The address of her principal residence as it appears in the Company's records, with a copy to her (during the Term) at her office in the Miami, Florida area. If to a beneficiary of the Executive: The address most recently specified by the Executive or beneficiary. 20. Miscellaneous. (a) Entire Agreement. This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, term sheets, discussions, negotiations and undertakings, whether written or oral, between them relating to the subject matter of this Agreement. In the event of any inconsistency between any provision of this Agreement and any provision of any plan, Executive handbook, personnel manual, program, policy, arrangement or agreement of the Company or any of their Affiliates, the provisions of this Agreement shall control. (b) Amendment or Waiver. No provision in this Agreement may be amended unless such amendment is set forth in a writing and that is signed by the Executive and by an authorized officer of the Company. No waiver by any Person of any breach of any condition or provision contained in this Agreement shall be deemed a waiver of any similar or dissimilar condition or provision at the same or any prior or subsequent time. (c) Headings. The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. (d) Beneficiaries/References. The Executive shall be entitled, to the extent permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit hereunder following the Executive's death by giving the Company written notice thereof. In the event of the Executive's death or a judicial determination of her incompetence, references in this Agreement to the Executive shall be deemed, where appropriate, to refer to her beneficiary, estate or other legal representative. (e) Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in, or entitlements under, any benefit, bonus, incentive or other plan or program of the Company, Panamco or any of their Affiliates for which Executive may qualify, nor shall anything herein limit or reduce such rights as Executive may have under any other agreement with the Company, Panamco or any of their Affiliates. (f) Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. (g) Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to carry out the intentions of the Parties hereunder the respective rights and obligations of the Parties hereunder shall survive any termination of the Executive's employment. (i) Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement taxes that are required to be withheld pursuant to any applicable law or regulation. (j) Governing Law. This Agreement shall be governed, construed, performed and enforced in accordance with its express terms, and otherwise in accordance with the laws of the State of Florida, without reference to principles of conflict of laws. (k) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument. Signatures delivered by facsimile shall be valid and binding for all purposes. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. PANAMCO, L.L.C. By: ---------------------------------- Craig D. Jung Chief Executive Officer By: ---------------------------------- Abilio Gonzalez Vice President, Human Resources The Executive By: ---------------------------------- Annette Franqui Exhibit A DEFINITIONS a. "Affiliate" of a Person shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. b. "Agreement" shall mean this Employment Agreement, which includes for all purposes its Exhibits. c. "Board" shall mean the board of directors of the Company. d. "Cause" shall mean: (i) the Executive is convicted of any crime under United States Federal, state or local law involving moral turpitude, fraud, embezzlement or dishonesty; or (ii) in carrying out her duties, the Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct resulting, in either case, in material economic harm to the Company, unless she believed in good faith that such action or non-action was in, or not opposed to, the best interests of the Company. e. "Change in Control" shall mean the occurrence of any of the following events: (i) any "person" (other than under any Executive benefit plan of the Company and excluding any shareholders (including indirectly through the Voting Trust) of the Company on the Commencement Date), as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated under such Act, of 50% or more of the securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; (ii) the majority of the Board of Directors consists of individuals other than Incumbent Directors, which term means the members of the Board on the date of the Employment Agreement; provided that any person becoming a director subsequent to such date whose election or nomination for election was supported by a majority of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director; (iii) the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; (iv) the sale of all or substantially all of the assets of the Company; or (v) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders with Voting Stock immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50.1% of the Voting Stock of the reorganized, merged or consolidated company's then outstanding voting securities. For purposes of the Change in Control definition, "the Company" shall include any entity that succeeds to all or substantially all of the business of the Company and "Voting Stock" shall mean securities of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation. f. "Claim" shall mean any claim, demand, request, investigation, dispute, controversy, threat, discovery request, or request for testimony or information. g. "Code" shall mean the Internal Revenue Code of 1986, as amended. Any reference to a particular section of the Code shall include any provision that modifies, replaces or supersedes such section. h. "Constructive Termination Without Cause" shall mean a termination by the Executive of her employment hereunder by providing 30 days' written notice, describing the basis for the termination, to the Company following the occurrence of any of the following events without her express prior written consent: (i) a material diminution in the Executive's duties; or assignment to her of duties that are materially inconsistent with her duties or materially impair her ability to function as Vice President and Chief Financial Officer of the Company (or in any other position the Executive is appointed to); (ii) any reduction in the Executive's then current Base Salary or target bonus opportunity as a percentage of Base Salary; or any material diminution of the benefits provided to her under the Company's benefit plans or the perquisites enjoyed by her; (iii) a change in the reporting structure so that the Executive no longer reports directly to the Chief Executive Officer of the Company (except to the extent she herself is appointed to such position); (iv) relocation of the Executive's principal place of employment to a location other than the United States or, if her principal place of employment shall have been relocated with her consent outside the United States, her relocation to a location other than such country; (v) any other material breach by the Company of any provision of this Agreement; or (vi) the failure of the Company to obtain the assumption in writing of its obligations under this Agreement by any successor to all or substantially all of the business or assets of the Company within fifteen (15) days after a merger, consolidation, sale or similar transaction. There shall be no Constructive Termination without Cause if the Company shall have fully cured all grounds for such termination within 30 days after the Executive gives notice thereof. i. "Disability" shall mean the Executive's inability, due to physical or mental incapacity, substantially to perform her duties and responsibilities under the Employment Agreement for a period of 270 consecutive days as determined by a medical doctor selected by the Company and the Executive. If the Company and the Executive cannot agree on a medical doctor, each shall select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose. j. "Parties" shall mean the Company, Panamco and the Executive. k. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, estate, board, committee, agency, body, Executive benefit plan, or other person or entity. l. "Proceeding" shall mean any threatened or actual action, suit or proceeding, whether civil, criminal, administrative, investigative, appellate or other. m. "Termination Date" shall mean: (i) in the case of death, the date of death; (ii) in the case of Disability, 30 days after the written notice is given as specified in Section 11(b) above; (iii) in the case of a termination by the Company for Cause, the date the Executive receives the notice as specified in Section 11(b) that a majority of the members of the Board voted after the hearing to terminate her for Cause; (iv) in the case of a voluntary termination or Termination without Cause by the Company, the last day of the Executive's employment; (v) in the case where the Executive's employment is terminated by the Company after providing a notice of non-renewal in accordance with Section 2 of the Agreement, the end of the Term; and (vi) in the case of a Constructive Termination without Cause, 30 days after the Executive gives the notice provided in this Exhibit A, subclass (h), unless the Company has fully cured all alleged grounds for such termination within 30 days after the Executive gives such notice. EX-10.60 19 ex10_60.txt LETTER AGREEMENT -- WOODS W. STATON EXHIBIT 10.60 February 5, 2003 Mr. Woods Staton McDonald's Argentina Arcos Dorados, S.A. R. Saenz Pena 432 Olivos Buenos Aires, Argentina Re: Panamerican Beverages, Inc. (the "Company") Dear Woods: On behalf of the Company and the Compensation Committee of the Board of Directors of the Company, I am pleased to confirm in writing for you that the Company has agreed to pay you an annual fee of $135,000 per year for your services as Chairman of the Company, with such fees commencing on the date you became Chairman of the Company and accruing monthly. With the exception of the per day fee payable to directors (currently $1,000) and any per conference call fee, you will continue to receive all the other payments and benefits made available to the other directors generally, including, without limitation: (i) the $35,000 retainer as a director of the Company; (ii) options under the Stock Option Plan for Non-Employee Directors; (iii) reimbursement of director's expenses consistent with the Company's policy; and (iv) fees (currently $3,000 per year) for serving a chair of a committee of the Board of Directors. Sincerely, /s/ Wade Mitchell -------------------------------- Wade Mitchell Compensation Committee, Chairman cc: Mr. Abilio Gonzalez EX-10.61 20 ex10_61.txt SECOND AMD. TO REVOLVING CREDIT AGREEMENT EXHIBIT 10.61 SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT This Second Amendment to Revolving Credit Agreement (this "Amendment") is entered into as of this 17 day of December, 2002, 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 ("Borrower"), 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 April 9, 2002, Bank, Borrower and Guarantor entered into a certain Revolving Credit Agreement (as amended from time to time, the "Credit Agreement"), and in connection therewith, Borrower executed and delivered to Bank a certain Revolving Note dated April 9, 2002 in the principal amount of $10,000,000 (the "Revolving Note"). B. In connection with the Credit Agreement, Guarantor executed a certain Guaranty dated April 9, 2002 in favor of Bank. C. The Bank, Borrower and Guarantor desire to amend the Credit Agreement to increase the Consolidated Debt to Consolidated EBITDA ratio, upon the following terms and conditions. NOW THEREFORE, for good and valuable consideration, the Bank, Borrower 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. Section 8.1(k)(ii) of the Credit Agreement is hereby amended and restated in its entirety as follows: "(ii) the ratio of Consolidated Debt to Consolidated EBITDA (calculated as of the last day of each fiscal quarter or year, as reflected in the quarterly or annual financial statements for such fiscal quarter or year, for the twelve-month period ending on the relevant date of determination) exceeds (X) for the fourth (4th) quarter of Fiscal Year 2002 through and including the first (1st) quarter of Fiscal Year 2003, 2.35 to 1.00; and (Y) at all times thereafter, 2.25 to 1.00." 3. REPRESENTATIONS Borrower 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 Borrower's and Guarantor's powers, have been duly authorized, are not in contravention of law or the terms of Borrower'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 Borrower and Guarantor, except as previously disclosed to Bank in writing, no default or Event of Default, or condition or event which, with the giving of notice or the running of time, or both, would constitute a default or an Event of Default under the Credit Agreement, the Revolving Note or any Credit Document 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, Borrower 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. Borrower, Guarantor and Bank acknowledge and agree that except as specifically amended hereby, all of the terms and conditions of the Credit Agreement, the Credit Documents and the loan documents related thereto remain in full force and effect in accordance with their original terms. 4.3. Borrower 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 Credit 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. Borrower 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 Borrower or Guarantor may have or may have made which (in any case) could be based on facts or circumstances known to Borrower 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. IN WITNESS WHEREOF, this Amendment has been executed as of the day first stated above. PANAMCO DE VENEZUELA, S.A. By: /s/ Carlos Hernandez-Artigas ------------------------------------- Carlos Hernandez-Artigas Its: Alternate Director PANAMERICAN BEVERAGES, INC. By: /s/ Carlos Hernandez-Artigas ------------------------------------- Carlos Hernandez-Artigas Its: Legal Vice President and Secretary COMERICA BANK By: /s/ Robert J. Hurley ------------------------------------- Robert J. Hurley Its: Assistant Vice President EXHIBIT "A" CLOSING CHECKLIST ----------------- Document No. 2375436 EX-10.62 21 ex10_62.txt AMENDMENT NO. 1 TO US$ 10M GUARANTY EXECUTION COPY EXHIBIT 10.62 AMENDMENT NO. 1 dated as of December 19, 2002 (this "Amendment"), to the US$ 10,000,000.00 Guaranty dated as of August 19, 2002 (as may be further amended, supplemented or modified from time to time, the "Guaranty"), made by Panamerican Beverages, Inc., a Panamanian corporation (the "Guarantor"), in favor of Banco Santander Central Hispano, S.A. (the "Bank") in consideration of a US$ 10,000,000.00 loan (the "Facility") made by the Bank to Panamco de Venezuela, S.A. (the "Borrower") on August 19, 2002 A. Pursuant to the Facility, the Bank have extended credit to the Borrower, and have agreed to extend credit to the Borrower, in each case pursuant to the terms and subject to the conditions set forth therein. B. The Guarantor in order to induce the Bank to extend credit under the Facility agreed and issued the Guaranty pursuant to the terms and subject to the conditions set forth therein. C. The Guarantor have requested that, pursuant to Section 14 of the Guaranty, the Bank agrees to amend certain provisions of the Guaranty as provided herein. D. The Bank is willing so to amend the Guaranty pursuant to the terms and subject to the conditions set forth herein. E. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Guaranty. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendment. Section 10(a) of the Guaranty is hereby deleted and replaced by the following Section 10(a): Covenants. The Guarantor covenants as follows: (a) Incorporation by Reference. The Guarantor will comply with and be bound by the covenant provisions set forth in Section 5 of the Syndicated Facility during the term of the Facility. The covenants under section 5 of the Syndicated Facility, 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 10 regardless of any amendment of, or any consent to any deviation from or other modification of the Syndicated Facility. If there is (x) any repayment in full of the loans, and termination of the commitments, under the Syndicated Facility, or (y) the termination of the Syndicated Facility prior to the Maturity Date of the Facility, then the Guarantor and the Bank shall negotiate in good faith mutually agreeable covenants with which the Guarantor shall comply hereunder to replace the covenants set forth in section 5 of the Syndicated Facility. As used herein, the term "Syndicated Facility" means the U.S.$130,000,000 Second Amended and Restated Credit Agreement entered into by the Guarantor and the banks listed therein on October 29, 2001, as amended on November 20, 2002, pursuant to an amendment agreement entered by and among the Guarantor and the banks listed therein. SECTION 2. Representations and Warranties. The Guarantor represent and warrant to the Bank that: (a) This Amendment has been duly authorized, executed and delivered by Guarantor and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (b) Before and after giving effect to this Amendment, the representations and warranties set forth in Section 9 of the Guaranty are true and correct in all material respects with the same effect as if made on the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. (c) Before and after giving effect to this Amendment, no event of default or default has occurred and is continuing. SECTION 3. Conditions to Effectiveness. This Amendment shall become effective when the Bank shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Guarantor and the Bank. SECTION 4. Guaranty. Except as specifically amended hereby, the Guaranty shall continue in full force and effect in accordance with the provisions thereof as in existence on the date hereof. After the date hereof, any reference to the Guaranty shall mean the Guaranty as amended hereby. 2 SECTION 5. Facility Document. This Amendment shall be a Facility Document for all purposes. SECTION 6. Effective Time. This Amendment shall be effective as of December 19, 2002. SECTION 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 8. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 9. Expenses. The Guarantor agrees to reimburse the Bank for its out-of-pocket expenses in connection with this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first written above. PANAMERICAN BEVERAGES, INC. As the Guarantor by /s/ Carlos Hernandez-Artigas ------------------------------------- Name: Carlos Hernandez-Artigas Title: VP, General Counsel & Secretary BANCO SANTANDER CENTRAL HISPANO, S.A. As the Bank by /s/ Gregory D. Testeman ------------------------------------- Name: Gregory D. Testeman Title: General Manager by /s/ Pierre Dulin ------------------------------------- Name: Pierre Dulin Title: Deputy General Manager 3 EX-10.68 22 ex10_68.txt KEY EXEC RETENTION, SEVERANCE AND NON-COMPET PLAN EXHIBIT 10.68 KEY EXECUTIVE RETENTION, SEVERANCE AND NON-COMPETITION PLAN Panamerican Beverages, Inc., a company organized under the laws of the Republic of Panama (the "Parent Company") hereby adopts this Key Executive Retention, Severance and Non-Competition Plan (the "Plan") on September 18, 2002 for the benefit of certain executives who are in a position to contribute materially to the success of the Parent Company and its subsidiaries, including, without limitation, Panamco, LLC (collectively, the "Company"). 1. Purpose. The Company believes that its ability to retain and motivate key executives may be adversely affected if, as a means of enhancing shareholder value, the Company considers or enters into a Change of Control (as defined below) transaction. For this reason, the Company has adopted the Plan with its principal purpose to: (i) assure that the Company will have the continued dedication and objectivity of its key executives, notwithstanding the possibility, threat or occurrence of a Change of Control; and (ii) to provide its key executives with an incentive to continue employment with the Company and to motivate its key executives to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. The Plan is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees of the Company. 2. Certain Defined Terms. Certain capitalized terms used in the Plan have the meaning set forth in Section 9 of the Plan. 3. Benefits. (a) Subject to Section 3(c), in the event that a Participant's employment terminates as a result of Involuntary Termination at any time during the Change of Control Window, then the Participant shall be entitled to the following benefits: (i) Cash Severance Payment. The Participant shall receive a cash payment in an amount (the "Severance Amount") equal to the product of: (A) the Participant's Annual Compensation; and (B) the Participant's Severance Multiple. The Severance Amount shall be paid in a lump sum, less all applicable withholding taxes, within 30 days of the Involuntary Termination. The Severance Amount shall not be taken into account for purposes of determining benefits under any other qualified or non-qualified plans of the Company. (ii) Continued Employee Welfare Benefits. The Participant (and any person entitled to claim by or through such Participant) shall receive continued provision of the Company's standard group employee insurance coverages (e.g., health, dental, disability and life), as elected by the Participant and in effect immediately prior to the Involuntary Termination, for a period (the "Company-Paid Coverage Period") that commences upon the Involuntary Termination and terminates upon the earlier of: (A) the expiration of the period (measured in the number of years and/or fractions thereof equal to the Participant's Severance Multiple) immediately following such Involuntary Termination; or (B) the date that the Participant becomes covered under another employer's group health, dental, disability or life insurance plans that provide the Participant with comparable benefits; provided, however, that if the continuation of any or all of such insurance coverages are not permitted under the terms of the Company's group insurance plans, the Company shall arrange for the provision of substantially equivalent insurance coverages to be provided under alternative plans or arrangements that provide such coverages on substantially the same terms and at a cost to such Participant that is not greater than that incurred by such Participant (determined on an after-tax basis) immediately prior to such Involuntary Termination. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the date of the "qualifying event" for the Participant and his dependents shall be the date upon which the Company-Paid Coverage Period terminates. (iii) Accelerated Vesting of Options and Restricted Stock. If such Involuntary Termination occurs prior to the date of the Change of Control, such Participant's outstanding stock options and restricted stock granted under the Company's Equity Incentive Plan (the "EIP") shall fully vest and, in the case of stock options, become exercisable as of the date of Involuntary Termination. (iv) Accrued Salary and Vacation. The Participant shall be paid all salary and accrued vacation pay earned through the date of such Participant's Involuntary Termination, less all applicable withholding taxes. Such payment shall be made at the same time as the Severance Amount. (v) Relocation Allowance for Expatriates. The Company shall provide each Participant who is an Expatriate an additional cash payment of $25,000.00, to be paid at the same time as the Severance Amount. (b) Upon a Change of Control, each Participant (i) who is then employed by the Company or (ii) whose employment terminated prior to such Change of Control as a result of an Involuntary Termination during the Change of Control Window shall become entitled to receive, in lieu of any payments that the Participant may be entitled to receive under the Company's Annual Incentive Plan for the year in which the Change of Control occurs, a lump-sum payment equal to the product of: (A) the Participant's target bonus (using the base 1x multiple) for the year in which the Change of Control occurs; and (B) the number of days from January 1 to the date of the Change of Control divided by 365. Such payment shall be made within 30 days of the date of the Change of Control. (c) No Participant shall be entitled to receive the benefits set forth in Section 3(a) and, if applicable, Section 6(a)(i) hereof unless he first executes a Release (substantially in the form of Exhibit "A" hereto) in favor of the Company and others set forth in Exhibit "A" relating to all claims or liabilities of any kind relating to his employment with the Company or a subsidiary thereof and the termination of such employment. 4. Nonqualifying Termination. In the event a Participant's employment is terminated (a) for any reason during any period other than the Change of Control Window, (b) during the Change of Control Window, by reason of his voluntary resignation (and such resignation does not -2- constitute an Involuntary Termination), death or disability or (c) during the Change of Control Window, by the Company for Cause, then such Participant shall not be entitled to receive severance or other benefits under the Plan. 5. Acceleration under Equity Incentive Plan. Except as otherwise provided in Section 3(a)(iii) hereof, each Participant's outstanding stock options and restricted stock granted under the EIP shall vest and, in the case of stock options, become exercisable, as provided by and subject to the terms of the EIP. 6. Excise Tax Gross-Up; Limitation on Payments. (a) Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment to a Participant would be subject to the Excise Tax, then: (i) Level 1 Employee. If a Participant is a Level 1 Employee, then such Participant shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that, after payment by such Participant of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, such Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (ii) Level 2 Employee. If a Participant is a Level 2 Employee, then the amounts payable to such Participant shall be reduced (reducing first the Payment under Section 3(a)(i), second the Payment under Section 3(b) and third the Payment under Section 3(a)(iii), unless an alternative method or order of reduction is elected by such Participant) to the maximum amount as will result in no portion of the Payments being subject to such Excise Tax (the "Safe Harbor Cap"), but only if the net after-tax amount that would be received by such Participant, taking into account all applicable federal, state and local income taxes and the Excise Tax, is greater than the net after-tax amount that would be received by such Participant if Payments are not reduced to the Safe Harbor Cap. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable to such Participant under the Plan (and no other Payments) shall be reduced, unless consented to by such Participant. (b) Subject to the provisions of Section 6(c), all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment or a reduction to the Safe Harbor Cap is required, the amount of such Gross-Up Payment or reduction and the assumptions to be utilized in arriving at such determination, shall be made by the firm engaged as the Parent Company's accountants immediately prior to the Change of Control (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and such Participant within 15 business days of the receipt of notice from such Participant that there has been a Payment or such earlier time as is requested by the Company. If the Accounting Firm determines that no Excise Tax is payable by a Level 1 Employee, it shall deliver to such -3- Participant a written opinion to such effect and to the effect that failure to report the Excise Tax on such Participant's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. If the Accounting Firm determines that a reduction to the Safe Harbor Cap is required in the case of a Level 2 Employee, then the Accounting Firm shall deliver to such Participant a written opinion to that effect, and that failure to report the Excise Tax on such Participant's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6(b), shall be paid by the Company to such Participant within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and such Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the Company should have been made (or that all or a portion of the reductions pursuant to Section 6(a)(ii) should not have been made) (the "Underpayment") or that Payments have been made to or for the benefit of a Participant in excess of the limitations provided in Section 6(a)(ii) (an "Excess Payment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 6(c) and a Level 1 Employee thereafter is required to make a payment of any Excise Tax (or, if it is otherwise determined by the Accounting Firm or a court of competent jurisdiction that an Underpayment has occurred with respect to a Level 2 Employee), the Accounting Firm shall determine that amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of such Participant, together with interest on such amount at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date such amount would have been paid to such Participant until the date of payment. If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed for all purposes to be a loan to such Participant made on the date such Participant received the Excess Payment and such Participant shall repay the Excess Payment to the Company on demand, together with interest on the Excess Payment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of such Participant's receipt of such Excess Payment until the date of such repayment. (c) A Participant shall notify the Company in writing of any claims by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but not later than 30 days after such Participant actually receives notice in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that the failure of such Participant to notify the Company of such claim (or to provide any required information with respect thereto) shall not affect any rights granted to such Participant under this Section 6 except to the extent that the Company is materially prejudiced in the defense of such claim as a direct result of such failure. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which such Participant gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies such Participant in writing prior -4- to the expiration of such period that the Company desires to contest such claim, such Participant shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company and reasonably acceptable to such Participant; (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold such Participant harmless, on an after-tax basis, for any Excise Tax or income or employment tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6, the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct such Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and such Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that, if the Company directs such Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to such Participant, on an interest-free basis, and shall indemnify and hold such Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of such Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and such Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by such Participant of an amount advanced by the Company pursuant to Section 6(c), such Participant becomes entitled to receive any refund with respect to such claim, such Participant shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund (together -5- with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by such Participant of an amount advanced by the Company pursuant to Section 6(c), a determination is made that such Participant shall not be entitled to any refund with respect to such claim, and the Company does not notify such Participant in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (e) Notwithstanding any other provision of this Section 6, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of such Participant, all or any portion of the Gross-Up Payment, and such Participant hereby consents to such withholding. 7. Restrictive Covenants. 7.1 Non-competition/Non-Solicitation at Option of the Company in Return for Payment. (a) As an inducement to the Company to provide the payments and benefits to the Participants under the Plan, each Participant acknowledges and agrees that in the event of such Participant's termination of employment for any reason (whether or not occurring during the Change of Control Window), the Company shall have the right (but not the obligation) to require a Participant to comply with the restrictions set forth in Section 7.1(b) for a term measured in years and fractions thereof equal to the Participant's Severance Multiple (the "Non Compete Term"), provided that if such Participant's employment is not terminated by reason of an Involuntary Termination during a Change of Control Window (and therefore is not entitled to receive the payments and benefits set forth in Section 3(a) hereof), then such Participant need not comply with the restrictions set forth in this Section 7.1 unless the Company shall pay to such Participant an amount equal to the amount that would have been payable to such Participant as a Severance Amount (assuming solely for such purpose that such Participant were entitled to such amount under Section 3(a) upon his termination of employment), with such amount to be paid in equal monthly installments over the Non-Compete Term. (b) Each Participant acknowledges and agrees that, so long as the Company complies with its obligations to provide the payments required under Section 3 or Section 7.1(a), as applicable, he shall not, directly or indirectly, (i) engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other person or entity (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Company (for this purpose, any business that engages in soft drink beverage distribution in any area in the world in which the Company engages in the soft drink beverage distribution business shall be deemed to be in competition with the Company) during the Non-Compete Term; provided that such provision shall not apply to the Participant's ownership of common stock of the Parent Company or the acquisition by the Participant, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Exchange Act, and that are listed or -6- admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Participant does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control of, more than five percent of any class of capital stock of such corporation; or (ii) for himself or for any other person, firm, corporation, partnership, association or other entity: (A) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months; (B) call on or solicit any of the actual or targeted prospective clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company; or (C) make known the names and addresses of such clients or any information relating in any manner to the Company's trade or business relationships with such customers. 7.2 Nondisclosure. Each Participant acknowledges and agrees that, as a condition of his participation in the Plan (whether or not the Company elects to trigger the obligations set forth in Section 7.1 (b)), he shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Participant with respect to the business of the Company (which shall include, but not be limited to, information concerning the Company's financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Company that is received by the Participant in confidence and as a fiduciary, and Participant shall remain a fiduciary to the Company with respect to all of such information. For purposes of the Plan, "Confidential Information" means information disclosed to the Participant or known by the Participant as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Participant) prior to or after the date of adoption of the Plan, and not generally known, about the Company or its business. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Participant from disclosing Confidential Information to the extent required by law. 7.3 Acknowledgment by Participant. As a condition of his participation in the Plan, each Participant shall acknowledge and confirm that (a) the restrictive covenants contained in this Section 7: (i) are reasonably necessary to protect the legitimate business interests of the Company, and (ii) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind, (b) his full, uninhibited and faithful observance of each of the covenants contained in this Section 7 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors and (c) the restrictions contained in this Section 7 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and permitted assigns. -7- 7.4 Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of this Section 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 7 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. 7.5 Injunction. The Company shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in this Section 7 by the Participant or any of his affiliates, associates, partners or agents, either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess. Each Participant shall, as a condition of his participation in the Plan, acknowledge the rights of the Company under this Section 7.5. 8. Plan Administration. 8.1 The Committee. The Plan shall be interpreted, administered and operated by the Compensation Committee of the Board of Directors of the Parent Company ("Board"), or such other committee designated by the Board to interpret, administer and operate the Plan (the "Committee"). The Committee shall have complete authority, in its sole discretion (subject to the express provisions of the Plan and the obligation imposed hereby to act in good faith) to interpret the Plan and to make any determinations necessary or advisable for the administration of the Plan. 8.2 Administration. The Committee may delegate any of its duties to such person or persons as it may determine in its sole discretion from time to time to assist the Committee in the administration of the Plan. Consistent with the requirements of ERISA and the regulations thereunder of the Department of Labor, the Committee shall provide adequate written notice to any Participant whose claim for benefits has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such Participant, and affording such Participant a full and fair review of the decision denying the claim. 8.3 Participants. The Committee shall from time to time select the employees (each a "Participant" and collectively, the "Participants") who are to participate in the Plan. The Company shall advise each Participant of his participation in the Plan by a letter (the "Award Letter"), which shall include the Level (1 or 2) at which he will participate and his corresponding Severance Multiple under the Plan and such other terms and conditions not inconsistent with the Plan. Each Participant shall sign the Award Letter and return it to the Company with an acknowledgment that the Participant has read the Plan, understands his rights and obligations under the Plan, and agrees to be bound by its terms and conditions. Without conferring any rights whatsoever upon a Participant or employee of the Company, it is generally intended that individual Participants will be assigned a level of participation as follows: (i) the Chief Executive Officer of the Company and each vice president or other senior executive of Panamco, LLC that reports directly to the Chief Executive Officer (but excluding any director, manager or staff-level employee that reports directly to the Chief Executive Officer) may be assigned Level 1 status; and (ii) director-level employees of Panamco, LLC may be assigned Level 2 status. -8- 8.4 Termination or Amendment of Plan. The Plan shall expire on September 18, 2005; provided, however, that on September 18, 2003 and on each September 18 thereafter (any such anniversary being referred to herein as a "Renewal Date") the term of the Plan shall be extended for one additional year unless the Board has determined, subject to the remainder of this Section 8.4, at least 90 days in advance of the immediately succeeding Renewal Date that the term of the Plan shall not be so extended. The Board shall have the right, prior to a Change of Control, in its sole discretion, to approve the termination or amendment of the Plan; provided, however, that no such action which would adversely affect the rights or potential rights of a Participant shall be taken by the Board without the consent of such Participant from the time the Board is informed at a regular or special meeting as to the identity of a person that may desire to enter into a Change of Control until, in the opinion of the Board, such person or the Board has abandoned or terminated any potential Change of Control. In no event shall this Plan be terminated or amended following a Change of Control in any manner which would adversely affect the rights or potential rights of a Participant under this Plan with respect to such Change of Control without the consent of such Participant. 9. Certain Definitions. 9.1 "Annual Compensation" shall mean: (i) the Participant's current base salary (determined immediately prior to the Involuntary Termination and without regard to any decrease in such salary giving rise to the Involuntary Termination); and (ii) the Participant's target bonus for the year in which the Involuntary Termination occurs (using the base 1x multiple). 9.2 "Cause" shall mean: (i) an action or omission of the Participant that constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties as an employee of the Company which is not cured within 90 days after receipt by the Participant of written notice of same and which termination is affirmed by a majority vote of the full Board; (ii) fraud, embezzlement, misappropriation of funds or breach of trust by the Participant in connection with the performance of such Participant's services to the Company; (iii) the Participant's conviction of any crime which involves dishonesty or a breach of trust; or (iv) gross negligence in connection with the performance of such Participant's services to the Company, which is not cured within 90 days after written receipt by the Participant of written notice of same and which termination is affirmed by a majority vote of the full Board. Any termination of employment for Cause shall be made in writing to the Participant, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. Any determination of Cause by the Board shall be binding and conclusive on all parties. 9.3 "Change of Control" shall be deemed to have occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than under any employee benefit plan of the Parent Company, and excluding stockholders of the Parent Company who are stockholders of the Parent Company as of the date of adoption of the Plan), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent Company representing 50% or more of the combined voting power of the Parent Company's then outstanding securities; (ii) during any period of two consecutive years -9- (not including any period prior to the adoption of the Plan) individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Parent Company to effect a transaction described in clause (i), (iii) or (iv) of this Section 9.3) whose election by the Parent Company's stockholders was recommended by the Board with a vote of at least three-quarters of the directors still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so recommended, cease for any reason to constitute at least a majority of the Board; (iii) the consummation of a merger or consolidation of the Parent Company with any other corporation other than a merger or consolidation which would result in the voting securities of the Parent Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of the surviving entity) more than 50% of the combined voting power of the voting securities of the Parent Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Parent Company approve a plan of complete liquidation of the Parent Company or an agreement for the sale or disposition by the Parent Company of all or substantially all of the Parent Company's assets. 9.4 "Change of Control Window" shall mean the period that commences 90 days prior to (a) the occurrence of a Change of Control or (b) any public announcement of the intention to undertake a transaction that if consummated would result in a Change of Control, and terminates (i) in the case of a Level 1 Employee, upon the expiration of the three-year period following the date of such Change of Control or (ii) in the case of a Level 2 Employee, upon the expiration of the 24-month period following the date of such Change of Control. 9.5 "Code" shall mean the Internal Revenue Code of 1986, as amended. 9.6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 9.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 9.8 "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 9.9 "Expatriate" shall mean a Participant who the Company has required, in connection with such Participant's employment with the Company and its affiliates, to relocate such Participant's principal place of employment to a location other than such Participant's Original Location. 9.10 "Involuntary Termination" shall mean: (a) any termination of the Participant's employment by the Company other than for Cause; or (b) the termination of the Participant's employment by the Participant following the occurrence of (i) without the Participant's express written consent, a material reduction in a Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities relative to -10- the Participant's position, authority, duties or responsibilities in effect immediately prior to the Change of Control, including the assignment to the Participant of any duties inconsistent in any material respect with the Participant's position, authority, duties or responsibilities in effect immediately prior to the Change of Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) without the Participant's express written consent, the Company's requiring the Participant's principal place of employment to be based at any location beyond fifty (50) miles of the location of such Participant's principal place of employment as it existed immediately prior to the Change of Control, except for travel reasonably required in the performance of the Participant's responsibilities; (iii) a reduction in the Participant's then-current base salary or bonus opportunity; or (iv) a material reduction in any of the Participant's then-current material benefits or perquisites, including without limitation and as applicable, life insurance, health insurance, disability insurance, dental insurance, car allowance and vacation days. For purposes of this definition, solely with respect to the occurrence following the first anniversary of a Change of Control of an event described in Section 9.10(b), a Participant's termination of his or her employment following the occurrence of such event shall not be treated as an Involuntary Termination unless such Participant notifies the Company of such event within 90 days of such Participant's knowledge of the occurrence of such event. 9.11 "Level 1 Employee" shall mean each Participant who the Committee has determined shall participate as a Level 1 employee. 9.12 "Level 2 Employee" shall mean each Participant who the Committee has determined shall participate as a Level 2 employee. 9.13 "Original Location" shall mean the location (city and country) in which a Participant's principal place of employment with the Company and its affiliates was located immediately prior to the first instance in which the Company required a change in such Participant's principal place of employment. 9.14 "Payment" shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of a Participant, whether paid or payable pursuant to this Plan or otherwise. 9.15 "Severance Multiple" shall mean: (a) with respect to a Level 1 Employee, three; and (b) with respect to a Level 2 Employee, one and one-half. 10. General Provisions 10.1 Assignment. Each Participant's rights under the Plan shall be non-transferable except by will or by the laws of descent and distribution and except insofar as applicable law may otherwise require. Any purported assignment in violation of the preceding -11- sentence shall be void. 10.2 Governing Law. Except to the extent preempted by ERISA, the Plan shall be governed by and construed in accordance with the laws of the State of Florida without reference to principles of conflict of laws. 10.3 Successors. The Plan shall be for the benefit of and binding upon the Participants and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns, and upon the Company and its successors (including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise). The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely, unconditionally to assume and agree to perform under the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. 10.4 Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in the Plan shall not affect the enforceability of the remaining portions of the Plan or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in the Plan shall be declared invalid, the Plan shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 10.5 Section Headings and Gender. The section headings contained the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require. 10.6. No Duty to Mitigate. Except as otherwise specifically provided herein, a Participant shall not be required to mitigate the amount of any payment contemplated by the Plan, nor shall any such payment be reduced by any earnings that the Participant may receive from any other source. 10.7 Noncumulation of Benefits. A Participant may not cumulate the benefits provided under the Plan with any severance benefits, social costs or the like ("Other Severance Benefits") that such Participant may be entitled to by agreement with the Company (including, without limitation, pursuant to an employment agreement) or under applicable law in connection with the termination of his employment. To the extent that a Participant receives any Other Severance Benefits, then the payments and benefits payable hereunder to such participant shall be reduced by a like amount. To the extent the Company is required to provide payments or benefits to any Participant under the Worker Adjustment and Retraining Notification Act (or any state, local or foreign law relating to severance or dismissal benefits), the benefits payable hereunder shall be first applied to satisfy such obligation. -12- 10.8 No Employment Agreement. The Plan does not obligate the Company to continue to employ a Participant. The Participant's employment is and shall, subject to the terms of any applicable written employment agreement between the Company and Participant, continue to be at-will, as defined under applicable law. 10.9 No Funding of Plan. The Plan shall not be funded. No Participant shall have any right to, or interest in, any assets of the Company as a result of his participation in the Plan. 10.10 Indemnification. If a Participant seeks, in any action, suit or arbitration, to enforce or to recover damages for breach of his rights under the Plan, the Participant shall be entitled to recover from the Company promptly as incurred, and shall be indemnified by the Company against, any and all expenses and disbursements, including attorneys' fees, actually and reasonably incurred by the Participant, provided that a Participant shall not be entitled to indemnification if it is finally determined that the action was brought by the Participant frivolously or in bad faith. -13- EXHIBIT "A" RELEASE AGREEMENT In consideration of the mutual promises, payments and benefits provided for in the annexed Panamerican Beverages, Inc. Key Employee Retention and Severance Plan (the "Plan"), and the release from [insert employee's name] (the "Employee") set forth herein, Panamerican Beverages, Inc. (the "Company") and the Employee agree to the terms of this Release Agreement. Capitalized terms used and not defined in this Release Agreement shall have the meanings assigned thereto in the Plan. 1. The Employee acknowledges and agrees that the Company is under no obligation to offer the Employee the payments and benefits set forth in the annexed Plan, unless the Employee consents to the terms of this Release Agreement. The Employee further acknowledges that he/she is under no obligation to consent to the terms of this Release Agreement and that the Employee has entered into this agreement freely and voluntarily. 2. The Employee voluntarily, knowingly and willingly releases and forever discharges the Company and its affiliates, together with its and their respective officers, directors, partners, shareholders, employees and agents, and each of its and their predecessors, successors and assigns (collectively, "Releasees"), from any and all charges, complaints, claims, promises, agreements, controversies, causes of action and demands of any nature whatsoever that the Employee or his/her executors, administrators, successors or assigns ever had, now have or hereafter can, shall or may have against Releasees by reason of any matter, cause or thing whatsoever arising prior to the time of signing of this Release Agreement by the Employee. The release being provided by the Employee in this Release Agreement includes, but is not limited to, any rights or claims relating in any way to the Employee's employment relationship with the Company or any its Affiliates, or the termination thereof, or under any statute, including, but not limited to, the federal Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1990, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993, each as amended, and any other federal, state or local law or judicial decision. 3. The Employee acknowledges and agrees that he/she shall not, directly or indirectly, seek or further be entitled to any personal recovery in any lawsuit or other claim against the Company or any other Releasee based on any event arising out of the matters released in paragraph 2. 4. Nothing herein shall be deemed to release: (i) any of the Employee's rights under the Plan; or (ii) any of the vested benefits that the Employee has accrued prior to the date this Release Agreement is executed by the Employee under the employee benefit plans and arrangements of the Company or any of its affiliates. 5. In consideration of the Employee's release set forth in paragraph 2, the Company knowingly and willingly releases and forever discharges the Employee from any and all charges, complaints, claims, promises, agreements, controversies, causes of action and demands of any -14- nature whatsoever that the Company now has or hereafter can, shall or may have against him/her by reason of any matter, cause or thing whatsoever arising prior to the time of signing of this Release Agreement by the Company, provided, however, that nothing herein is intended to release any claim the Company may have against the Employee for any illegal conduct. 6. The Employee acknowledges that the Company has advised him/her to consult with an attorney of his/her choice prior to signing this Release Agreement. The Employee represents that, to the extent he/she desires, he/she has had the opportunity to review this Release Agreement with an attorney of his/her choice. 7. The Employee acknowledges that he/she has been offered the opportunity to consider the terms of this Release Agreement for a period of at least forty-five (45) days, although he/she may sign it sooner should he/she desire. The Employee further shall have seven additional days from the date of signing this Release Agreement to revoke his/her consent hereto by notifying, in writing, the General Counsel of the Company. This Release Agreement will not become effective until seven days after the date on which the Employee has signed it without revocation. Dated: ____________________ _______________________________ [Employee Name] PANAMERICAN BEVERAGES, INC. By:____________________________ Title: EX-10.69 23 ex10_69.txt KEY EMPLOYEE RETENTION EXHIBIT 10.69 KEY EMPLOYEE RETENTION, SEVERANCE AND NON-COMPETITION PLAN Panamerican Beverages, Inc., a company organized under the laws of the Republic of Panama (the "Parent Company") hereby adopts this Key Employee Retention, Severance and Non-Competition Plan (the "Plan") on September 18, 2002 for the benefit of certain employees who are in a position to contribute materially to the success of the Parent Company and its subsidiaries, including, without limitation, Panamco, LLC (collectively, the "Company"). 1. Purpose. The Company believes that its ability to retain and motivate key employees may be adversely affected if, as a means of enhancing shareholder value, the Company considers or enters into a Change of Control (as defined below) transaction. For this reason, the Company has adopted the Plan with its principal purpose to: (i) assure that the Company will have the continued dedication and objectivity of its key employees, notwithstanding the possibility, threat or occurrence of a Change of Control; and (ii) to provide its key employees with an incentive to continue employment with the Company and to motivate its key employees to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. The Plan is intended to be an "employee welfare benefit plan" as that term is defined in Section 3(1) of ERISA. 2. Certain Defined Terms. Certain capitalized terms used in the Plan have the meaning set forth in Section 9 of the Plan. 3. Benefits. (a) Subject to Section 3(c), in the event that a Participant's employment terminates as a result of Involuntary Termination at any time during the Change of Control Window, then the Participant shall be entitled to the following benefits: (i) Cash Severance Payment. The Participant shall receive a cash payment in an amount (the "Severance Amount") equal to the product of: (A) the Participant's Annual Compensation; and (B) the Participant's Severance Multiple. The Severance Amount shall be paid in equal monthly installments over the period (measured in the number of years and/or fractions thereof equal to the Participant's Severance Multiple) immediately following such Involuntary Termination, less all applicable withholding taxes. The Severance Amount shall not be taken into account for purposes of determining benefits under any other qualified or non-qualified plans of the Company. (ii) Continued Employee Welfare Benefits. The Participant (and any person entitled to claim by or through such Participant) shall receive continued provision of the Company's standard group employee insurance coverages (e.g., health, dental, disability and life), as elected by the Participant and in effect immediately prior to the Involuntary Termination, for a period (the "Company-Paid Coverage Period") that commences upon the Involuntary Termination and terminates upon the earlier of: (A) the expiration of the period (measured in the number of years and/or fractions thereof equal to the Participant's Severance Multiple) immediately following such Involuntary Termination; or (B) the date that the Participant becomes covered under another employer's group health, dental, disability or life insurance plans that provide the Participant with comparable benefits. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the date of the "qualifying event" for the Participant and his dependents shall be the date upon which the Company-Paid Coverage Period terminates. (iii) Accelerated Vesting of Options and Restricted Stock. If such Involuntary Termination occurs prior to the date of the Change of Control, such Participant's outstanding stock options and restricted stock granted under the Company's Equity Incentive Plan (the "EIP") shall fully vest and, in the case of stock options, become exercisable as of the date of Involuntary Termination. (iv) Accrued Salary and Vacation. The Participant shall be paid all salary and accrued vacation pay earned through the date of such Participant's Involuntary Termination, less all applicable withholding taxes. Such payment shall be made at the same time as the Severance Amount. (b) Upon a Change of Control, each Participant (i) who is then employed by the Company or (ii) whose employment terminated prior to such Change of Control as a result of an Involuntary Termination during the Change of Control Window shall become entitled to receive, in lieu of any payments that the Participant may be entitled to receive under the Company's Annual Incentive Plan for the year in which the Change of Control occurs, a lump-sum payment equal to the product of: (A) the Participant's target bonus (using the base 1x multiple) for the year in which the Change of Control occurs; and (B) the number of days from January 1 to the date of the Change of Control divided by 365. Such payment shall be made within 30 days of the date of the Change of Control. (c) No Participant shall be entitled to receive the benefits set forth in Section 3(a) hereof unless he first executes a Release (substantially in the form of Exhibit "A" hereto) in favor of the Company and others set forth in Exhibit "A" relating to all claims or liabilities of any kind relating to his employment with the Company or a subsidiary thereof and the termination of such employment. 4. Nonqualifying Termination. In the event a Participant's employment is terminated (a) for any reason during any period other than the Change of Control Window, (b) during the Change of Control Window, by reason of his voluntary resignation (and such resignation does not constitute an Involuntary Termination), death or disability or (c) during the Change of Control Window, by the Company for Cause, then such Participant shall not be entitled to receive severance or other benefits under the Plan. 5. Acceleration under Equity Incentive Plan. Except as otherwise provided in Section 3(a)(iii) hereof, each Participant's outstanding stock options and restricted stock granted under the EIP shall vest and, in the case of stock options, become exercisable, as provided by and subject to the terms of the EIP. -2- 6. Limitations on Payments. (a) Anything in this Plan to the contrary notwithstanding and except as set forth below, the amounts payable to such Participant shall be reduced (reducing first the Payment under Section 3(a)(i), second the Payment under Section 3(b) and third the Payment under Section 3(a)(iii), unless an alternative method or order of reduction is elected by such Participant) to the maximum amount as will result in no portion of the Payments being subject to such Excise Tax (the "Safe Harbor Cap"), but only if the net after-tax amount that would be received by such Participant, taking into account all applicable federal, state and local income taxes and the Excise Tax, is greater than the net after-tax amount that would be received by such Participant if Payments are not reduced to the Safe Harbor Cap. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable to such Participant under the Plan (and no other Payments) shall be reduced, unless consented to by such Participant. (b) All determinations required to be made under this Section 6, including whether and when a reduction to the Safe Harbor Cap is required, the amount of such reduction and the assumptions to be utilized in arriving at such determination, shall be made by the firm engaged as the Parent Company's accountants immediately prior to the Change of Control (the "Accounting Firm"). The Accounting Firm shall provide detailed supporting calculations both to the Company and such Participant within 15 business days of the receipt of notice from such Participant that there has been a Payment or such earlier time as is requested by the Company. If the Accounting Firm determines that a reduction to the Safe Harbor Cap is required, then the Accounting Firm shall deliver to such Participant a written opinion to such effect and to the effect that failure to report the Excise Tax on such Participant's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and such Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that all or a portion of the reductions pursuant to Section 6(a) should not have been made (the "Underpayment") or that Payments have been made to or for the benefit of a Participant in excess of the limitations provided in Section 6(a) (an "Excess Payment"), consistent with the calculations required to be made hereunder. If it is otherwise determined by the Accounting Firm or a court of competent jurisdiction that an Underpayment has occurred with respect to a Participant, the Accounting Firm shall determine that amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of such Participant, together with interest on such amount at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date such amount would have been paid to such Participant until the date of payment. If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, such Excess Payment shall be deemed for all purposes to be a loan to such Participant made on the date such Participant received the Excess Payment and such Participant shall repay the Excess Payment to the Company on demand, together with interest on the Excess Payment at the -3- applicable federal rate (as defined in Section 1274(d) of the Code) from the date of such Participant's receipt of such Excess Payment until the date of such repayment. 7. Restrictive Covenants. 7.1 Non-competition/Non-Solicitation at Option of the Company in Return for Payment. (a) As an inducement to the Company to provide the payments and benefits to the Participants under the Plan, each Participant acknowledges and agrees that in the event of such Participant's termination of employment for any reason (whether or not occurring during the Change of Control Window), the Company shall have the right (but not the obligation) to require a Participant to comply with the restrictions set forth in Section 7.1(b) for a term measured in years and fractions thereof equal to the Participant's Severance Multiple (the "Non Compete Term"), provided that if such Participant's employment is not terminated by reason of an Involuntary Termination during a Change of Control Window (and therefore is not entitled to receive the payments and benefits set forth in Section 3(a) hereof), then such Participant need not comply with the restrictions set forth in this Section 7.1 unless the Company shall pay to such Participant an amount equal to the amount that would have been payable to such Participant as a Severance Amount (assuming solely for such purpose that such Participant were entitled to such amount under Section 3(a) upon his termination of employment), with such amount to be paid in equal monthly installments over the Non-Compete Term. (b) Each Participant acknowledges and agrees that, so long as the Company complies with its obligations to provide the payments required under Section 3 or Section 7.1(a), as applicable, he shall not, directly or indirectly, (i) engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other person or entity (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Company (for this purpose, any business that engages in soft drink beverage distribution in any area in the world in which the Company engages in the soft drink beverage distribution business shall be deemed to be in competition with the Company) during the Non-Compete Term; provided that such provision shall not apply to the Participant's ownership of common stock of the Parent Company or the acquisition by the Participant, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Exchange Act, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Participant does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control of, more than five percent of any class of capital stock of such corporation; or (ii) for himself or for any other person, firm, corporation, partnership, association or other entity: (A) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months; -4- (B) call on or solicit any of the actual or targeted prospective clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company; or (C) make known the names and addresses of such clients or any information relating in any manner to the Company's trade or business relationships with such customers. 7.2 Nondisclosure. Each Participant acknowledges and agrees that, as a condition of his participation in the Plan (whether or not the Company elects to trigger the obligations set forth in Section 7.1 (b)), he shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Participant with respect to the business of the Company (which shall include, but not be limited to, information concerning the Company's financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Company that is received by the Participant in confidence and as a fiduciary, and Participant shall remain a fiduciary to the Company with respect to all of such information. For purposes of the Plan, "Confidential Information" means information disclosed to the Participant or known by the Participant as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Participant) prior to or after the date of adoption of the Plan, and not generally known, about the Company or its business. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Participant from disclosing Confidential Information to the extent required by law. 7.3 Acknowledgment by Participant. As a condition of his participation in the Plan, each Participant shall acknowledge and confirm that (a) the restrictive covenants contained in this Section 7: (i) are reasonably necessary to protect the legitimate business interests of the Company, and (ii) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind, (b) his full, uninhibited and faithful observance of each of the covenants contained in this Section 7 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors and (c) the restrictions contained in this Section 7 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and permitted assigns. 7.4 Reformation by Court. In the event that a court of competent jurisdiction shall determine that any provision of this Section 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 7 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. 7.5 Injunction. The Company shall be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of the covenants contained in this Section 7 by the Participant or any of his affiliates, associates, partners or agents, -5- either directly or indirectly, and that such right to injunction shall be cumulative and in addition to whatever other remedies the Company may possess. Each Participant shall, as a condition of his participation in the Plan, acknowledge the rights of the Company under this Section 7.5. 8. Plan Administration. 8.1 The Committee. The Plan shall be interpreted, administered and operated by the Compensation Committee of the Board of Directors of the Parent Company ("Board"), or such other committee designated by the Board to interpret, administer and operate the Plan (the "Committee"). The Committee shall have complete authority, in its sole discretion (subject to the express provisions of the Plan and the obligation imposed hereby to act in good faith) to interpret the Plan and to make any determinations necessary or advisable for the administration of the Plan. 8.2 Administration. The Committee may delegate any of its duties to such person or persons as it may determine in its sole discretion from time to time to assist the Committee in the administration of the Plan. Consistent with the requirements of ERISA and the regulations thereunder of the Department of Labor, the Committee shall provide adequate written notice to any Participant whose claim for benefits has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such Participant, and affording such Participant a full and fair review of the decision denying the claim. 8.3 Participants. The Committee shall from time to time select the employees (each a "Participant" and collectively, the "Participants") who are to participate in the Plan. The Company shall advise each Participant of his participation in the Plan by a letter (the "Award Letter"), which shall include the Level (3 or 4) at which he will participate and his corresponding Severance Multiple under the Plan and such other terms and conditions not inconsistent with the Plan. Each Participant shall sign the Award Letter and return it to the Company with an acknowledgment that the Participant has read the Plan, understands his rights and obligations under the Plan, and agrees to be bound by its terms and conditions. Without conferring any rights whatsoever upon a Participant or employee of the Company, it is generally intended that individual Participants will be assigned a level of participation as follows: (i) manager-level employees of Panamco, LLC may be assigned Level 3 status; and (ii) staff-level employees of Panamco, LLC may be assigned Level 4 status. 8.4 Termination or Amendment of Plan. The Plan shall expire on September 18, 2005; provided, however, that on September 18, 2003 and on each September 18 thereafter (any such anniversary being referred to herein as a "Renewal Date") the term of the Plan shall be extended for one additional year unless the Board has determined, subject to the remainder of this Section 8.4, at least 90 days in advance of the immediately succeeding Renewal Date that the term of the Plan shall not be so extended. The Board shall have the right, prior to a Change of Control, in its sole discretion, to approve the termination or amendment of the Plan; provided, however, that no such action which would adversely affect the rights or potential rights of a Participant shall be taken by the Board without the consent of such Participant from the time the Board is -6- informed at a regular or special meeting as to the identity of a person that may desire to enter into a Change of Control until, in the opinion of the Board, such person or the Board has abandoned or terminated any potential Change of Control. In no event shall this Plan be terminated or amended following a Change of Control in any manner which would adversely affect the rights or potential rights of a Participant under this Plan with respect to such Change of Control without the consent of such Participant. -7- 9. Certain Definitions. 9.1 "Annual Compensation" shall mean: (i) the Participant's current base salary (determined immediately prior to the Involuntary Termination and without regard to any decrease in such salary giving rise to the Involuntary Termination); and (ii) the Participant's target bonus for the year in which the Involuntary Termination occurs (using the base 1x multiple). 9.2 "Cause" shall mean: (i) an action or omission of the Participant that constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties as an employee of the Company which is not cured within 90 days after receipt by the Participant of written notice of same and which termination is affirmed by a majority vote of the full Board; (ii) fraud, embezzlement, misappropriation of funds or breach of trust by the Participant in connection with the performance of such Participant's services to the Company; (iii) the Participant's conviction of any crime which involves dishonesty or a breach of trust; or (iv) gross negligence in connection with the performance of such Participant's services to the Company, which is not cured within 90 days after written receipt by the Participant of written notice of same and which termination is affirmed by a majority vote of the full Board. Any termination of employment for Cause shall be made in writing to the Participant, which notice shall set forth in detail all acts or omissions upon which the Company is relying for such termination. Any determination of Cause by the Board shall be binding and conclusive on all parties. 9.3 "Change of Control" shall be deemed to have occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than under any employee benefit plan of the Parent Company, and excluding stockholders of the Parent Company who are stockholders of the Parent Company as of the date of adoption of the Plan), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent Company representing 50% or more of the combined voting power of the Parent Company's then outstanding securities; (ii) during any period of two consecutive years (not including any period prior to the adoption of the Plan) individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Parent Company to effect a transaction described in clause (i), (iii) or (iv) of this Section 9.3) whose election by the Parent Company's stockholders was recommended by the Board with a vote of at least three-quarters of the directors still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so recommended, cease for any reason to constitute at least a majority of the Board; (iii) the consummation of a merger or consolidation of the Parent Company with any other corporation other than a merger or consolidation which would result in the voting securities of the Parent Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of the surviving entity) more than 50% of the combined voting power of the voting securities of the Parent Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Parent Company approve a plan of complete liquidation of the Parent Company or an agreement for the sale or disposition by the Parent Company of all or substantially all of the Parent Company's assets. -8- 9.4 "Change of Control Window" shall mean the period that commences 90 days prior to (a) the occurrence of a Change of Control or (b) any public announcement of the intention to undertake a transaction that if consummated would result in a Change of Control, and terminates 24 months following the date of the Change of Control. 9.5 "Code" shall mean the Internal Revenue Code of 1986, as amended. 9.6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 9.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 9.8 "Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. 9.9 "Involuntary Termination" shall mean: (a) any termination of the Participant's employment by the Company other than for Cause; or (b) the termination of the Participant's employment by the Participant following the occurrence of (i) without the Participant's express written consent, a material reduction in a Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities relative to the Participant's position, authority, duties or responsibilities in effect immediately prior to the Change of Control, including the assignment to the Participant of any duties inconsistent in any material respect with the Participant's position, authority, duties or responsibilities in effect immediately prior to the Change of Control, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) without the Participant's express written consent, the Company's requiring the Participant's principal place of employment to be based at any location beyond fifty (50) miles of the location of such Participant's principal place of employment as it existed immediately prior to the Change of Control, except for travel reasonably required in the performance of the Participant's responsibilities; (iii) a reduction in the Participant's then-current base salary or bonus opportunity; or (iv) a material reduction in any of the Participant's then-current material benefits or perquisites, including without limitation and as applicable, life insurance, health insurance, disability insurance, dental insurance, car allowance and vacation days. For purposes of this definition, solely with respect to the occurrence following the first anniversary of a Change of Control of an event described in Section 9.10(b), a Participant's termination of his or her employment following the occurrence of such event shall not be treated as an Involuntary Termination unless such Participant notifies the Company of such event within 90 days of such Participant's knowledge of the occurrence of such event. 9.10 "Level 3 employee" shall mean each Participant who the Committee has determined shall participate as a Level 3 employee. 9.11 "Level 4 employee" shall mean each Participant who the Committee has determined shall participate as a Level 4 employee. -9- 9.12 "Payment" shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of a Participant, whether paid or payable pursuant to this Plan or otherwise. 9.13 "Severance Multiple" shall mean: (a) with respect to a Level 3 Employee, one; and (b) with respect to a Level 4 Employee, one-half. 10. General Provisions 10.1 Assignment. Each Participant's rights under the Plan shall be non-transferable except by will or by the laws of descent and distribution and except insofar as applicable law may otherwise require. Any purported assignment in violation of the preceding sentence shall be void. 10.2 Governing Law. Except to the extent preempted by ERISA, the Plan shall be governed by and construed in accordance with the laws of the State of Florida without reference to principles of conflict of laws. 10.3 Successors. The Plan shall be for the benefit of and binding upon the Participants and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns, and upon the Company and its successors (including, without limitation, any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise). The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely, unconditionally to assume and agree to perform under the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. 10.4 Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in the Plan shall not affect the enforceability of the remaining portions of the Plan or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in the Plan shall be declared invalid, the Plan shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. 10.5 Section Headings and Gender. The section headings contained the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require. 10.6. No Duty to Mitigate. Except as otherwise specifically provided herein, a Participant shall not be required to mitigate the amount of any payment contemplated by the Plan, -10- nor shall any such payment be reduced by any earnings that the Participant may receive from any other source. 10.7 Noncumulation of Benefits. A Participant may not cumulate the benefits provided under the Plan with any severance benefits, social costs or the like ("Other Severance Benefits") that such Participant may be entitled to by agreement with the Company (including, without limitation, pursuant to an employment agreement) or under applicable law in connection with the termination of his employment. To the extent that a Participant receives any Other Severance Benefits, then the payments and benefits payable hereunder to such participant shall be reduced by a like amount. To the extent the Company is required to provide payments or benefits to any Participant under the Worker Adjustment and Retraining Notification Act (or any state, local or foreign law relating to severance or dismissal benefits), the benefits payable hereunder shall be first applied to satisfy such obligation. 10.8 No Employment Agreement. The Plan does not obligate the Company to continue to employ a Participant. The Participant's employment is and shall, subject to the terms of any applicable written employment agreement between the Company and Participant, continue to be at-will, as defined under applicable law. 10.9 No Funding of Plan. The Plan shall not be funded. No Participant shall have any right to, or interest in, any assets of the Company as a result of his participation in the Plan. 10.10 Indemnification. If a Participant seeks, in any action, suit or arbitration, to enforce or to recover damages for breach of his rights under the Plan, the Participant shall be entitled to recover from the Company promptly as incurred, and shall be indemnified by the Company against, any and all expenses and disbursements, including attorneys' fees, actually and reasonably incurred by the Participant, provided that a Participant shall not be entitled to indemnification if it is finally determined that the action was brought by the Participant frivolously or in bad faith. -11- EXHIBIT "A" RELEASE AGREEMENT In consideration of the mutual promises, payments and benefits provided for in the annexed Panamerican Beverages, Inc. Key Employee Retention and Severance Plan (the "Plan"), and the release from [insert employee's name] (the "Employee") set forth herein, Panamerican Beverages, Inc. (the "Company") and the Employee agree to the terms of this Release Agreement. Capitalized terms used and not defined in this Release Agreement shall have the meanings assigned thereto in the Plan. 1. The Employee acknowledges and agrees that the Company is under no obligation to offer the Employee the payments and benefits set forth in the annexed Plan, unless the Employee consents to the terms of this Release Agreement. The Employee further acknowledges that he/she is under no obligation to consent to the terms of this Release Agreement and that the Employee has entered into this agreement freely and voluntarily. 2. The Employee voluntarily, knowingly and willingly releases and forever discharges the Company and its affiliates, together with its and their respective officers, directors, partners, shareholders, employees and agents, and each of its and their predecessors, successors and assigns (collectively, "Releasees"), from any and all charges, complaints, claims, promises, agreements, controversies, causes of action and demands of any nature whatsoever that the Employee or his/her executors, administrators, successors or assigns ever had, now have or hereafter can, shall or may have against Releasees by reason of any matter, cause or thing whatsoever arising prior to the time of signing of this Release Agreement by the Employee. The release being provided by the Employee in this Release Agreement includes, but is not limited to, any rights or claims relating in any way to the Employee's employment relationship with the Company or any its Affiliates, or the termination thereof, or under any statute, including, but not limited to, the federal Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1990, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993, each as amended, and any other federal, state or local law or judicial decision. 3. The Employee acknowledges and agrees that he/she shall not, directly or indirectly, seek or further be entitled to any personal recovery in any lawsuit or other claim against the Company or any other Releasee based on any event arising out of the matters released in paragraph 2. 4. Nothing herein shall be deemed to release: (i) any of the Employee's rights under the Plan; or (ii) any of the vested benefits that the Employee has accrued prior to the date this Release Agreement is executed by the Employee under the employee benefit plans and arrangements of the Company or any of its affiliates. 5. In consideration of the Employee's release set forth in paragraph 2, the Company knowingly and willingly releases and forever discharges the Employee from any and all charges, -12- complaints, claims, promises, agreements, controversies, causes of action and demands of any nature whatsoever that the Company now has or hereafter can, shall or may have against him/her by reason of any matter, cause or thing whatsoever arising prior to the time of signing of this Release Agreement by the Company, provided, however, that nothing herein is intended to release any claim the Company may have against the Employee for any illegal conduct. 6. The Employee acknowledges that the Company has advised him/her to consult with an attorney of his/her choice prior to signing this Release Agreement. The Employee represents that, to the extent he/she desires, he/she has had the opportunity to review this Release Agreement with an attorney of his/her choice. 7. The Employee acknowledges that he/she has been offered the opportunity to consider the terms of this Release Agreement for a period of at least forty-five (45) days, although he/she may sign it sooner should he/she desire. The Employee further shall have seven additional days from the date of signing this Release Agreement to revoke his/her consent hereto by notifying, in writing, the General Counsel of the Company. This Release Agreement will not become effective until seven days after the date on which the Employee has signed it without revocation. Dated: ____________________ _______________________________ [Employee Name] PANAMERICAN BEVERAGES, INC. By: -------------------------------------- Title: EX-10.71 24 ex10_71.txt EMPLOYMENT AGREEMENT -- SPAL EXHIBIT 10.71 December 5, 2001 HAND DELIVERED Paulo J. Sacchi Panamco LLC 701 Waterford Way, Suite 800 Miami, Florida 33126 Re: Your Appointment as President of Panamco Brasil Dear Paulo: On behalf of Panamco, I am pleased to confirm your promotion as President of Panamco Brasil and your resignation from Panamco LLC d/b/a Panamerican Beverages Company. For your review, I enclose an outline of the terms and conditions of your resignation and new employment with Panamco-Brasil. If these terms are acceptable to you, please sign where indicated on the last page. Paulo, we look forward to your leadership, wisdom, passion and savvy style of management. We are confident that you will make an important contribution to the Company as head of Panamco Brasil. We appreciate all your valuable work during your tenure as Panamco's Senior Vice President, Chief Financial Officer and Treasurer. Sincerely, /s/ William G. Cooling ---------------------- William G. Cooling cc: Compensation Committee OUTLINE OF TERMS AND CONDITIONS A. Resignation from Panamerican Beverages, Inc. and Panamco LLC ------------------------------------------------------------ 1. You will remain on as Senior Vice-President, Chief Financial Officer, and Treasurer of Panamerican Beverages, Inc. ("Panamco") until your resignation on February 15, 2002, or until you have completed your responsibilities for the 2001 year, whichever is later. 2. Panamco promises to pay you the amounts due to you under Panamerican Beverages, Inc.'s 2001 Annual Incentive Plan (the "Incentive Plan"). Said payment shall be determined in the manner and payable at the time and upon the terms and conditions set forth in the Incentive Plan. 3. Except as otherwise provided herein, your Employment Agreement entered into on September 30, 1999 ("Employment Agreement"), is terminated on December 31, 2001, and Panamco has no further obligations thereunder. 4. For and in consideration of the undertakings of Panamco set forth herein, and intending to be legally bound, you hereby release Panamco and its affiliates and its and their shareholders, employees, representatives, and agents, past or present, and its and their respective successors and assigns, heirs, executors, and administrators, from any and all actions, suits, and claims which you ever had, now have, or which your heirs, executors or administrators may have, up to and including the date on which you execute this document. Particularly, but without limitation, you so release any claims arising from or relating in any way to your employment relationship or the resignation of your employment relationship with Panamco, including any claims under any U.S. or Brazilian federal, state or local laws, including the Florida Civil Rights Act of 1992, the Miami-Dade County Equal Opportunity Ordinance, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, and the Family and Medical Leave Act, any common law contract or tort claims now or hereafter recognized, and all claims for counsel fees and costs. As of your resignation date you shall also provide Panamco with a release up to the resignation date in a form acceptable to Panamco. 5. For and in consideration of your undertakings set forth herein, Panamco releases you from any and all actions, suits, and claims, which it ever had, now has, or may have, up to and including the date you execute this document, except those relating to any illegal conduct by you. 6. You agree that Panamco is under no obligation to rehire or re-employ you in the future. B. Employment With Panamco-Brasil ------------------------------ 1. You will be employed by SPAL, Industria Brasileira de Bebidas ("Panamco-Brasil") as President from January 8, 2002 until your retirement on December 31, 2002. You will also have the title and serve as Vice President--Operations of Panamco for no additional consideration. 2. During your employment by Panamco-Brasil, you shall diligently perform all services as may be assigned to you and devote your full time and attention to the business and affairs of Panamco-Brasil, render such services to the best of your ability, and use your best efforts to promote the interests of the Company. 3. Commencing on January 1, 2002 and during your employment, you shall receive a base salary at the annual rate of US$400,000 ("Base Salary"), payable in installments consistent with Panamco-Brasil's normal payroll schedule, subject to applicable withholding and other taxes. 4. During your employment, you may be eligible to receive bonuses pursuant to the terms and conditions of any incentive plan of Panamco-Brasil in effect from time to time. Your target bonus will be 50%. 5. During your employment, Panamco-Brasil will provide you with the fringe and car benefits as are accorded to other similarly situated employees from time to time under local policy. 6. During your employment, you may be eligible to be granted both restricted stock and options to purchase common stock of Panamco under (and therefore subject to all terms and conditions of) Panamco's Equity Incentive Plan. 7. It is understood and agreed that you shall retire from Panamco-Brasil on December 31, 2002 or such later date as mutually agreed to in writing by the parties (the "Retirement Date"). At the Retirement Date, you will receive the following retirement benefits (the "Retirement Benefits"): (i) the benefits determined in accordance with the applicable provisions of the International Pension Plan that governs the terms of your retirement; and (ii) continued participation (for no additional cost to you) in the Panamco Brasil-sponsored health and life insurance plans until your 72nd birthday. For purposes of International Pension Plan, Panamco-Brasil will recognize July 1, 1985, the date you began employment with Coca Cola, as your original hire date. On the Retirement Date, you shall provide Panamco-Brasil and its affiliates with a release up to that date in a form acceptable to Panamco-Brasil and its affiliates. You will be entitled to the gross amount under the International Pension Plan to be paid by Panamco Insurance Company Ltd. in one lump sum payment within 30 days following your Retirement Date. Your estimated Retirement Benefits under the International Pension Plan are attached hereto as Exhibit A. 8. If, on or before the Retirement Date, either (x) your employment is terminated by Panamco-Brasil without Cause (as defined in Section 5.4 of your Employment Agreement) or (y) your employment is terminated for Good Reason (as defined in Section 5.5(d) of the Employment Agreement), you will be entitled to receive from Panamco-Brasil your Base Salary and Target Bonus from the date of termination until the Retirement Date. If (i) a Change in Control (as defined below) of Panamco-Brasil shall occur on or before the Retirement Date, and (ii) on or before the Retirement Date, either (x) your employment is terminated by Panamco-Brasil without Cause (as defined in Section 5.4 of your Employment Agreement) or (y) your employment is terminated for Good Reason (as defined in Section 5.5(d) of the Employment Agreement), you will be entitled to receive from Panamco-Brasil your Base Salary and Target Bonus from the date of termination until the Retirement Date. For purposes of this document, the term "Change in Control" shall mean a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders with voting rights of Panamco Brasil immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50.1% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transaction, or a liquidation or dissolution of Panamco Brasil or the sale of all or substantially all of the assets of Panamco-Brasil. 9. You shall not at any time divulge, communicate, use to the detriment of Panamco or its affiliates or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of Panamco or its affiliates. Any Confidential Information or data now or hereafter acquired by you with respect to the business of Panamco or its affiliates (which shall include, but not be limited to, information concerning Panamco or its affiliates financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of Panamco or its affiliates that is received by you in confidence and as a fiduciary, and you shall remain a fiduciary to Panamco or its affiliates with respect to all of such information. For purposes of this document, "Confidential Information" means information disclosed to you or known by you as a consequence of or through your employment by Panamco or its affiliates (including information conceived, originated, discovered or developed by you) prior to or after the date hereof, and not generally known, about Panamco or its affiliates or its business. Notwithstanding the foregoing, nothing herein shall be deemed to restrict you from disclosing Confidential Information to the extent required by law. 10. All books, records, and accounts relating in any manner to the customers or clients of Panamco or its affiliates, whether prepared by you or otherwise coming into your possession, shall be the exclusive property of Panamco or its affiliates and shall be returned immediately to Panamco or its affiliates on termination of your employment hereunder or on Panamco or its affiliates request at any time. * * * This document sets forth the entire agreement between you and Panamco and Panamco-Brasil (or any of their affiliates) and fully supersedes any and all prior agreements or understandings between you and Panamco and Panamco-Brasil (or any of their affiliates) pertaining to the subject matter thereof. Any dispute or controversy arising under or in connection this document shall be settled exclusively by arbitration in Miami-Dade County, Florida, in accordance with the Rules of the American Arbitration Association then in effect (except to the extent that the procedures outlined below differ from such rules). Although arbitration is contemplated to resolve disputes hereunder, either party may proceed to court to obtain an injunction to protect its rights hereunder, the parties agreeing that either could suffer irreparable harm by reason of any breach of this Agreement. Pursuit of an injunction shall not impair arbitration on all remaining issues. If this document conforms to your understanding and is acceptable to you, please indicate your agreement by signing and dating where indicated below and returning it to be received by Panamco within 21 days, during which time you are advised to consult with an attorney. In the event that you fail to execute and return this document to Panamco within 21 days, this document will be of no further force and effect, and neither you nor Panamco will have any rights or obligations hereunder. You have the right to revoke this document within seven (7) days of its execution by giving written notice of such revocation by hand-delivery or fax to Panamco, 701 Waterford Way, Eighth Floor, Miami, Florida 33126, Attention: Carlos Hernandez-Artigas, General Counsel (fax no. 786-388-8191). I expressly agree to accept the terms and conditions outlined above and verify that I am signing this document knowingly and voluntarily, without any coercion or duress. Date:____________________ Signed:_____________________________ Agreed to and Accepted by: - -------------------------- PANAMERICAN BEVERAGES, INC. - --------------------------------------- William G. Cooling Chairman and Chief Executive Officer EX-10.72 25 ex10_72.txt FIRST AMENDMENT TO EMPLOYMENT AGREEMENT -- SPAL EXHIBIT 10.72 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT First Amendment to Employment Agreement, dated as of December 6, 2002, by and among Panamerican Beverages, Inc. (together with its successors and assigns, "Panamco"), SPAL, Industria Brasileira de Bebidas (together with its successors and assigns, "Panamco Brasil") and Paulo Sacchi (the "Executive"). W I T N E S S E T H : - - - - - - - - - - - WHEREAS, Executive is employed as the President of Panamco Brasil pursuant to a letter agreement, dated as of December 5, 2001, between the parties hereto ("Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement to extend Executive's term of employment until December 31, 2003 and increase Executive's base salary by seven percent. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Parties agree as follows: 1. Section B1 of the Employment Agreement is hereby amended to read as follows: You will be employed by SPAL, Industria Brasileira de Bebidas ("Panamco-Brasil") as President from January 8, 2002 until your retirement on December 31, 2003. You will also have the title and serve as Vice President--Operations of Panamco for no additional consideration 2. Section B3 of the Employment Agreement is hereby amended to read as follows: Commencing on January 1, 2002 and during your employment, you shall receive a base salary at the annual rate of US$400,000 ("Base Salary"), payable in installments consistent with Panamco-Brasil's normal payroll schedule, subject to applicable withholding and other taxes. Commencing on January 1, 2003, the Base Salary shall be increased to US$428,000. 3. Except as specifically amended in Section 1 and 2 above, the Employment Agreement remains in full force and effect. 4. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument. Signatures delivered by facsimile shall be valid and binding for all purposes. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. PANAMERICAN BEVERAGES, INC. By:/s/ Craig Jung ----------------------------------- Craig Jung, Chief Executive Officer and President By:/s/ Abilio Gonzalez ----------------------------------- Abilio Gonzalez, VP Human Resources SPAL, INDUSTRIA BRASILEIRA DE BEBIDAS By:/s/ Jose Luiz Weiss ----------------------------------- Jose Luiz Weiss, Director Human Resourses The Executive By:/s/ Paulo Sacchi ----------------------------------- Paulo Sacchi 2 EX-10.73 26 ex10_73.txt EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10.73 Panamco, L.L.C. Executive Deferred Compensation Plan PANAMCO, L.L.C., a limited liability company under the laws of the State of Delaware, hereby establishes the Panamco, L.L.C. Executive Deferred Compensation Plan (the "Plan"), effective January 1, 2002, to enable Participants covered under the Plan to enhance their retirement security by permitting them to enter into agreements with the Company to defer compensation on a pre-tax basis and receive benefits at retirement, death, separation from service, and as otherwise provided under the Plan. ARTICLE 1 - DEFINITIONS 1.1 ANNUAL DEFERRAL: shall mean the portion of a Participant's Compensation to be paid during the Plan Year that the Participant elects to defer under the Deferral Commitment pursuant to Article 3 of the Plan. In the event of a Participant's cessation of employment with the Company prior to the end of a Plan Year, such year's Annual Deferral amount shall be the actual amount deferred prior to such event. 1.2 BENEFICIARY: shall mean the person or persons or entity designated as such in accordance with Article 11 of the Plan. 1.3 BOARD OF DIRECTORS: shall mean the Board of Directors of the Company. 1.4 CHANGE OF CONTROL: shall mean the occurrence, in a single transaction or series of transactions after the date hereof, of any one of the following events or circumstances: (a) merger, consolidation or reorganization where the beneficial owners of the voting securities of the Company immediately preceding such merger, consolidation or reorganization beneficially own less than 50% of the voting securities of the surviving company (after giving effect to the merger, consolidation or reorganization); (b) merger, consolidation or reorganization where 50% or more of the incumbent directors of the Company are changed; (c) individuals who, as of the date hereof, constitute the Board of Directors cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company shareholders, was approved by a vote of at least a majority of the directors then comprising the incumbent board shall be considered as though such individual were a member of the incumbent board; or (d) approval by the shareholders of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company. 1.5 CODE: shall mean the Internal Revenue Code. 1.6 COMMITTEE: shall mean the Compensation Committee of the Board of Directors, or such other committee appointed by the Board of Directors to administer the Plan pursuant to Article 10 of the Plan. 1.7 COMPANY: shall mean PANAMCO, L.L.C., its subsidiaries and divisions, and any successor(s) in interest. 1.8 COMPENSATION: shall mean a Participant's base salary and annual incentive plan bonus, before reductions for deferral. 1.9 CREDITING RATE: shall mean the rate used to determine earnings and losses credited to each Participant's Deferral Account, which shall be: (i) a rate of return based on a pooled investment strategy determined by the Committee, (ii) a rate of return based on the specific investment strategy requested by a Participant, or (iii) such other rate of return designated by the Committee from time to time. The Committee, in its sole discretion, will establish administrative rules for determining and applying the Crediting Rate. 1.10 DEFERRAL ACCOUNT: shall mean the bookkeeping device used by the Company solely to measure and determine the amounts to be paid to a Participant under the Plan. One Deferral Account will be established for each Participant under the Plan. The balance in a Participant's Deferral Account shall mean the sum of (i) the Participant's Annual Deferrals, plus (ii) the Employer Matching Contributions made to a Participant's Account, plus (iii) the Employer Nonelective Contributions made to a Participant's Account, plus (iv) earnings and losses credited to the Participant's Deferral Account at the Crediting Rate, less (v) all distributions. 1.11 DEFERRAL CONTRIBUTION PERIOD: shall mean the period of one (1) Plan Year, or such other period as the Committee may permit in its discretion, over which the Participant has elected to defer Compensation pursuant to Article 3 of the Plan. 1.12 DEFERRAL COMMITMENT: shall mean a commitment made by a Participant to defer compensation pursuant to Articles 2 and 3 of the Plan for which a Deferral Election Form has been submitted by the Participant. 1.13 DEFERRAL ELECTION FORM: shall mean a written agreement between the Company and the Participant, entered into pursuant to paragraph 2.1 of the Plan, by which the Participant elects to participate in the Plan and make a Deferral Commitment. 1.14 DISABILITY: shall mean that the Participant has been determined to be Totally Disabled under the Qualified 401(k) Plan. 1.15 ELIGIBLE EMPLOYEE: shall mean an officer or member of the senior management of the Company as designated by the Committee to be eligible to participate in the Plan. 1.16 EMPLOYER MATCHING CONTRIBUTION: shall equal such percentage, if any, of Compensation deferred by the Participant under Section 3, as from time to time may be determined by the Company in its sole discretion, as provided in Section 5.1. 2 1.17 EMPLOYER NONELECTIVE CONTRIBUTION: shall equal such percentage, if any, of Compensation, as from time to time may be determined by the Company in its sole discretion, as provided in Section 5.2. 1.18 ERISA: shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.19 FINANCIAL HARDSHIP: shall mean a Participant's unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence as determined by the Committee. Cash needs arising from foreseeable events such as, for example, the purchase of a residence or education expenses for children shall not, alone, be considered a Financial Hardship. 1.20 PARTICIPANT: shall mean an Eligible Employee who is participating in the Plan as provided in Article 2, or a former Eligible Employee for whom a Deferral Account is being maintained under the Plan. 1.21 PLAN: shall mean the Panamco, L.L.C. Executive Deferred Compensation Plan as set forth in this document and as the same may be amended, supplemented and/or restated from time to time and any successor plan. 1.22 PLAN YEAR: shall mean the 12-month period from January 1 through December 31. 1.23 QUALIFIED 401(K) PLAN: shall mean the Panamco 401(k) Plan. 1.24 RETIREMENT: shall mean the date of the cessation of the Participant's employment with the Company for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's death, after the Participant attains age 55, or such other date as the Committee may determine in its discretion. 1.25 SERVICE: shall mean the period during which an Employee is employed by the Company, including periods before the effective date of this Plan. 1.26 TERMINATION OF EMPLOYMENT: shall mean the date of the cessation of the Participant's employment with the Company for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's Retirement, death, or, to the extent provided in Article 8 of the Plan, Disability. 1.27 VALUATION DATE: shall mean the last day of each Plan Year calendar quarter, or such other dates as the Committee may determine in its discretion, which must be at least annually, for the valuation of a Participant's Deferral Account. 1.28 VESTING DATE: shall mean the date on which a Participant is vested in the Employer Matching Contributions based on date of employment and each 12 month anniversary following. A vesting schedule is shown in the following chart. 3 ------------------------------------------------------------------- YEARS LESS 1 2 3 4 5 OR MORE THAN 1 ------------------------------------------------------------------- VESTING % 0% 20% 40% 60% 80% 100% ------------------------------------------------------------------- ARTICLE 2 - PARTICIPATION 2.1 ELIGIBILITY. An Eligible Employee who has completed at least three months of Service may elect to begin participation in the Plan and to make a Deferral Commitment by submitting a Deferral Election Form to the Committee prior to the beginning of the Deferral Contribution Period. An Eligible Employee who completes three months of Service after January 1, 2002 may elect to begin participation in the Plan and to make a Deferral Commitment after the start of the Deferral Contribution Period in which the Eligible Employee completes three months of Service by submitting a Deferral Election Form to the Committee, with such participation to become effective as of the first day of the month following the later of (i) the two week anniversary of the date on which the Committee receives the Deferral Election Form or (ii) the date on which the Participant completes three months of Service. An employee who has completed three months of Service before being designated an Eligible Employee may elect to begin participation in the Plan and to make a Deferral Commitment after the start of the Deferral Contribution Period in which the employee is designated an Eligible Employee by submitting a Deferral Election Form to the Committee, with such participation to become effective as of the first day of the month following the two week anniversary of the date on which the Committee receives the Deferral Election Form. Except as otherwise provided in this Plan, the Participant's Deferral Commitment shall be irrevocable. Eligible Employees shall be required to make a new Deferral Commitment for each Deferral Contribution Period by submitting a new Deferral Election Form to the Committee prior to the beginning of each Deferral Commitment Period. 2.2 CONTINUATION OF PARTICIPATION. A Participant who has elected to participate in the Plan by making a Deferral Commitment shall continue as a Participant in the Plan for purposes of such Deferral Commitment even though in any Plan Year after such Deferral Commitment such Participant elects not to make a new Deferral Commitment or ceases to be an Eligible Employee. A Participant shall not be eligible to make a new Deferral Commitment unless the Participant is an Eligible Employee with respect to the Plan Year for which the election is made. ARTICLE 3 - DEFERRAL COMMITMENTS 3.1 DEFERRAL COMMITMENT. Subject to paragraphs 3.2 and 3.3, a Participant may elect in the Deferral Election Form to defer an amount equal to a percentage of Compensation, provided that the deferral percentage must be a whole percentage of Compensation. The Committee, in its sole discretion, will determine other rules regarding the deferral of Compensation, as necessary. 4 3.2 MINIMUM DEFERRAL COMMITMENT. A participant may not elect to defer less than $5,000 in any one year, unless otherwise waived by the Committee. 3.3 MAXIMUM DEFERRAL COMMITMENT. The Participant may not elect to defer more than 50% of Compensation in the aggregate when deferrals under this Plan are added to deferrals under the Qualified 401(k) Plan. The Committee, in its sole discretion, may establish other maximum Deferral Commitment limits for the purpose of controlling the Company's financial obligations under the Plan or for any other reason deemed necessary. 3.4 INCOMPLETE DEFERRAL COMMITMENT. Notwithstanding anything contained herein to the contrary, if the Participant has not or will not actually defer the amount specified in such Participant's Deferral Election Form during the Deferral Contribution Period, the Participant shall, nevertheless, be permitted to continue participation in the Plan. No new Deferral Commitment will be accepted by the Company until the previously Incomplete Deferral Commitment is fulfilled by the Participant. ARTICLE 4 - DEFERRAL ACCOUNTS 4.1 DEFERRAL ACCOUNTS. A Deferral Account shall be established for each Participant. The Deferral Account shall be credited with the applicable portion of the Annual Deferral as of the approximate date such amounts would otherwise have been paid to the Participant. Deferral Accounts shall, except as otherwise provided in the Plan, be credited monthly with interest at the Crediting Rate on the balance in the Deferral Account from the approximate date such Deferrals would have been paid through the date of distribution of such balance to the Participant. Notwithstanding anything in this paragraph to the contrary, the Committee may, in its sole discretion, establish administrative rules for the purpose of crediting Deferral Accounts. 4.2 HYPOTHETICAL INVESTMENT CHOICE. In connection with the determination of the Crediting Rate, the Committee may, in its discretion, offer Participants a choice among various hypothetical investments, the rate of return on which the Committee may use to determine the Crediting Rate for their Deferral Accounts. Such a choice is nominal in nature and grants Participants no real or beneficial interest in any specific fund or property. Provision of a choice among hypothetical investment options grants the Participant no ability to affect the actual aggregate investments the Company may or may not make to cover its obligations under the Plan. Any adjustments the Company may make in its actual investments for the Plan may only be instigated by the Company, and may or may not bear a resemblance to the Participants' hypothetical investment choices on an account by account basis. The time, allowance and frequency of hypothetical investment choices, and a Participant's ability to change how his or her deferral Account is credited, is within the sole discretion of the Committee. 5 4.3 STATEMENT OF ACCOUNT. The Committee shall provide periodically (but no less frequently than annually) to each Participant a statement setting forth the balance of the Deferral Account maintained for such Participant. 4.4 VESTING OF DEFERRAL ACCOUNTS. Each Participant shall be one hundred percent (100%) vested at all times in the amount of Annual Deferrals he or she makes and the Employer Nonelective Contributions and interest actually credited at the Crediting Rate on these amounts to such Participant's Deferral Account. A Participant shall become vested in Employer Matching Contributions made on his or her behalf, and all earnings allocable thereto, in accordance with the Vesting Date. The balance, if any, of such Employer Matching Contributions and all earnings and losses allocable thereto shall be forfeited upon termination of the Participant's employment to the extent not vested. 4.5 ACCELERATION OF VESTING. Upon a Change of Control, a Participant shall become one hundred percent (100%) vested in all amounts credited to his Deferral Account (including the Employer Matching Contribution) as of the day immediately prior to the Change of Control. In the event a Participant dies or becomes Disabled prior to reaching one hundred percent (100%) vesting, the Benefits calculated under Article 6 of the Plan shall assume that the Participant became one hundred percent (100%) vested in all amounts credited to his Deferral Account (including the Employer Matching Contribution) as of the day prior to his date of death or Disability. ARTICLE 5 - COMPANY CONTRIBUTIONS 5.1 EMPLOYER MATCHING CONTRIBUTION. The Company may from time to time, in its discretion, credit the Deferral Account of each Participant who is an Eligible Employee with an Employer Matching Contribution. The amount of the Employer Matching Contribution, if any, for a Participant shall be limited to and contingent upon the Participant deferring at least a like percentage of Compensation under Section 4 hereof. The Company anticipates crediting the Deferral Account of a Participant with an Employer Matching Contribution at the same rate as the employer matching contribution under the Qualified 401(k) Plan. Compensation that exceeds the limit specified in Code Section 401(a)(17) shall not be taken into account for purposes of determining the amount of the Employer Matching Contribution.. Employer Matching Contributions held in the Deferral Account shall be distributed to a Participant only to the extent such amounts are vested. 5.2 EMPLOYER NONELECTIVE CONTRIBUTION. The Company may from time to time, in its discretion, credit the Deferral Account of each Participant who is an Eligible Employee with an Employer Nonelective Contribution. An Eligible Employee shall be entitled to receive the Employer Nonelective Contribution whether or not the Eligible Employee is a Participant (i.e., makes an Annual Deferral pursuant to Section 2 hereof). The Company anticipates crediting the Deferral Account of a Participant with an Employer Nonelective Contribution at the same rate as the employer nonelective contribution under the Qualified 401(k) Plan. Compensation that exceeds the limit specified in Code Section 401(a)(17) 6 shall not be taken into account for purposes of determining the amount of the Employer Nonelective Contribution. 7 ARTICLE 6 - PAYMENT OF BENEFITS 6.1 RETIREMENT BENEFITS. Upon Retirement, the Company shall pay to the Participant a benefit in the form provided in paragraph 6.2 of the Plan, based on the vested balance of the Participant's Deferral Account. 6.2 FORM OF RETIREMENT BENEFITS. The retirement benefit attributable to a Deferral Account shall be paid in accordance with the Participant's direction as set forth on a Deferral Election Form prescribed by the Committee for designation of form of payment; such payment election shall be made at the time the Deferral Commitment election is made. The available forms of payment after Retirement are as follows: (a) Lump Sum. A lump sum payment equal to the balance of the applicable Deferral Account as of the Valuation Date following Retirement. Payment is to commence no earlier than the first month following the date of Retirement and no later than the first month following his/her 70th birthday. (b) 15 Installment Payments. Annual installment payments in substantially equal amounts over a period of 15 years. Installment payments shall be made in January of each year following Retirement. Payments must commence no later than the January following a Participant's 70th birthday. Interest will be credited to the unpaid balance in the Deferral Account at the Crediting Rate. The Committee, in its sole discretion, may establish rules for making payments and crediting interest to the unpaid Deferral Account balance. (c) 3 Installment Payments. Effective January 1, 2003, annual installment payments in substantially equal amounts over a period of 3 years. Installment payments shall be made in January of each year following Retirement. Payments must commence no later than the January following a Participant's 70th birthday. Interest will be credited to the unpaid balance in the Deferral Account at the Crediting Rate. The Committee, in its sole discretion, may establish rules for making payments and crediting interest to the unpaid Deferral Account balance. The Participant may change this retirement benefit payment election to an allowable alternative payout period by submitting a new Deferral Election Form to the Committee, provided that any such Deferral Election Form is submitted at least one (1) year prior to the Participant's Retirement. Subject to the foregoing, the Deferral Election Form most recently accepted by the Committee shall govern the payout of the retirement benefit. If no election is submitted, payment will be made in 15 installment payments. 6.3 TERMINATION OF EMPLOYMENT BENEFITS. Upon Termination of Employment, the Company shall pay the Participant a benefit in the form of a lump sum payment equal to the vested balance of the applicable Deferral Account as of the Valuation Date following the Termination of Employment. Such payment shall be made within ninety (90) days of said Valuation Date. 8 Effective January 1, 2003, the Participant shall have the option to elect to have the benefit attributable to a Deferral Account paid either in a lump sum or in three annual installments in accordance with the Participant's direction as set forth on a Deferral Election Form prescribed by the Committee for designation of form of payment; such payment election shall be made at the time the Deferral Commitment election is made. If a Participant elects to have the benefit paid in three annual installments, the first of the three annual installment payments shall be made within ninety (90) days of said Valuation Date. The Participant may change this benefit payment election to an allowable alternative payout period by submitting a new Deferral Election Form to the Committee, provided that any such Deferral Election Form is submitted at least one (1) year prior to the Participant's Termination of Employment. Subject to the foregoing, the Deferral Election Form most recently accepted by the Committee shall govern the payout of the benefit. If no election is submitted, payment will be made in a single lump sum payment. 6.4 Small Benefit Exception. Notwithstanding any of the foregoing, in the event the sum of all benefits payable to the Participant is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay such benefits in a single lump sum payment on the date such benefits first become payable. ARTICLE 7 - Survivor Benefits 7.1 PRE-RETIREMENT SURVIVOR BENEFIT. If a Participant dies prior to Retirement or Termination of Employment the Company shall pay to the Participant's Beneficiary a lump sum benefit equal to the balance of the Participant's Deferral Account as of the Valuation Date following the death of the Participant. 7.2 POST-RETIREMENT SURVIVOR BENEFIT. If a Participant dies after Retirement or Termination of Employment, and after benefit payments have commenced, but before the entire vested balance of the Participant's Deferral Account has been distributed, the Company shall pay to the Participant's Beneficiary a lump sum benefit equal to the balance of the Participant's Deferral Account as of the Valuation Date following the death of the Participant. ARTICLE 8 - DISABILITY If a Participant is determined to have a Disability, the Participant shall, effective as of the date such Participant is no longer paid his Compensation by the Company, cease deferrals under the Plan except for any Deferral Commitment regarding any Compensation which is earned or payable subsequent to the Disability. The Participant's Deferral Account shall continue to be credited with interest at the Crediting Rate until such time as the Participant's benefits under the Plan are distributed in accordance with the Participant's election or as provided for in paragraph 9.2 of the Plan. 9 ARTICLE 9 - CONDITIONS RELATED TO BENEFITS 9.1 NONASSIGNABILITY. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or in any manner whatsoever. These benefits shall be exempt from the claims of creditors or other claimants of any Participant and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law. 9.2 FINANCIAL HARDSHIP DISTRIBUTION. Upon finding that the Participant or the Beneficiary has suffered a Financial Hardship, the Committee may, in its sole discretion and upon written petition by the Participant or Beneficiary, accelerate distributions of benefits under the Plan. Such a distribution shall be limited to the amount reasonably necessary to alleviate such Financial Hardship, plus the amount needed to pay federal, state and local income taxes reasonably anticipated from the payment. If a distribution is to be made to a Participant on account of Financial Hardship, the Participant may not make subsequent Deferral Commitments under the Plan until the Plan Year following the Plan Year in which a distribution based on Financial Hardship was made. Any Deferral Commitment in effect at the time such distribution is made under this section shall be canceled. A distribution made on account of Financial Hardship shall cause the Participant's Deferral Account to be reduced in a manner determined by the Company. 9.3 NO RIGHT TO COMPANY ASSETS. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participant and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. As its discretion, the Company may establish a trust, with such trustees as the Committee may approve, for the purpose of assisting in the payment of such benefits. Although such a trust shall be irrevocable, its assets shall be held for payment of the Company's general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, the Company shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Company. 9.4 PROTECTIVE PROVISIONS. Each Participant shall cooperate with the Company by furnishing any and all information requested by the Committee in order to facilitate the payment of benefits hereunder, assisting in the purchase of life insurance on a Participant's life, taking such physical examinations as the Committee may deem necessary, and taking such other actions as may be requested by the Committee. If the Participant refuses to cooperate or makes any material misstatement or nondisclosure of information, then no benefits will be payable hereunder to such Participant or his Beneficiary. 9.5 WITHHOLDING. The Participant or the Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no such arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required. 10 9.6 FORFEITURES. Any Employer Matching Contributions or Employer Nonelective Contributions and the earnings attributed thereto that are credited to the Participant's Deferral Account, whether or not vested, shall be forfeited in the event that the Participant is convicted of a crime involving the theft, fraud, embezzlement or other act of dishonesty against or otherwise adversely affecting the Company. ARTICLE 10 - ADMINISTRATION AND CLAIMS PROCEDURES 10.1 ADMINISTRATION. The Committee shall administer the Plan and, except as otherwise expressly provided herein, shall have the exclusive right to interpret, construe and apply its provisions in accordance with its terms. The Committee shall determine in its sole discretion those who are eligible to participate in the Plan and shall have the right to set guidelines for participation under the Plan including, but not limited to, the type, manner and level of Deferral Commitments. The Committee shall further establish, adopt or revise such other rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Committee shall be final and binding. The individuals serving on the Committee shall, except as prohibited by law, be indemnified and held harmless by the Company from any and all liabilities, costs, and expenses (including legal fees), to the extent not covered by liability insurance, arising out of any action taken by any member of the Committee with respect to the Plan, unless such liability arises from the individual's own gross negligence or willful misconduct. The expenses of administering the Plan shall be borne by the Company, except that each Participant may be charged a reasonable administrative fee as determined by the Committee. 10.2 WRITTEN CLAIMS. Benefits shall be paid in accordance with the provisions of this Plan. The Participant, or a designated recipient or any other person claiming through the Participant shall make a written request for benefits under this Plan. This written claim shall be mailed or delivered to the Committee. Such claim shall be reviewed by the Committee or a delegate. 10.3 DENIED CLAIM. If the claim is denied, in full or in part, the Committee shall provide a written notice within ninety (90) days setting forth the specific reasons for denial, and any additional material or information necessary to perfect the claim, and an explanation of why such material or information is necessary, and appropriate information and explanation of the steps to be taken if a review of the denial is desired. 10.4 REVIEW PROCEDURE. If the claim is denied and a review is desired, the Participant (or Beneficiary) shall notify the Committee in writing within sixty (60) days after receipt of the written notice of denial. In requesting a review, the Participant or Beneficiary may request a review of pertinent documents with regard to the benefits created under this agreement, may submit any written issues and comments, may request an extension of time for such written submission of issues and comments, and may request that a hearing be held, but the decision to hold a hearing 11 shall be within the sole discretion of the Committee. 10.5 COMMITTEE REVIEW. The decision on the review of the denied claim shall be rendered by the Committee within sixty (60) days after the receipt of the request for review (if no hearing is held) or within sixty (60) days after the hearing if one is held. The decision shall be written and shall state the specific reasons for the decision including reference to specific provisions of this Plan on which the decision is based. ARTICLE 11 - BENEFICIARY DESIGNATION 11.1 BENEFICIARY DESIGNATION. The Participant shall have the right, at any time, to designate any person or persons as a Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant's death. The Beneficiary designation shall be effective when it is submitted in writing and delivered to the Committee during the Participant's lifetime on a form prescribed by the Committee. 11.2 NEW BENEFICIARY DESIGNATION. The Participant shall have the right to change or revoke any such designation from time to time by filing a new designation or notice of revocation with the Company, and no notice to any Beneficiary nor consent by any Beneficiary shall be required to effect any such change or revocation. 11.3 FAILURE TO DESIGNATE BENEFICIARY. If a Participant fails to designate a Beneficiary before his death, or if no designated Beneficiary survives the Participant, the Committee shall direct the Company to pay the balance of the Participant's Deferral Account in a lump sum to the executor or administrator for his estate; provided, however, if no executor or administrator shall have been appointed, and actual notice of the death was given to the Committee within sixty (60) days after the Participant's death, and if his Deferral Account balance does not exceed ten thousand dollars ($10,000), the Committee may direct the Company to pay the Deferral Account balance to such person or persons as the Committee determines may be entitled to it, and the Committee may require such proof of right and/or identity of such person or persons as the Committee may deem appropriate and necessary. ARTICLE 12 - AMENDMENT AND TERMINATION OF THE PLAN 12.1 AMENDMENT OF THE PLAN. The Company may at any time amend the Plan in whole or in part, provided however, that such amendment (i) shall not decrease the vested balance of the Participant's Deferral Account at the time of such amendment, (ii) shall not retroactively decrease the applicable Crediting Rates of the Plan prior to the time of such amendment, and (iii) shall not otherwise, without the written consent of a Participant, retroactively make any changes that would materially and adversely affect a Participant's account or rights under the Plan. The Company or Committee may amend the Crediting Rates of the Plan prospectively. If the Company and/or the Committee changes the 12 formula for determining the Crediting Rate under the Plan, the Company or the Committee shall notify the Participant of such amendment in writing within thirty (30) days of such amendment. Within thirty (30) days of receipt of the notice of an amendment to the formula for determining the applicable Crediting Rate, the Participant may elect by written notice to the Committee to terminate an incomplete Deferral Commitment. 12.2 TERMINATION OF THE PLAN. The Company may at any time terminate the Plan as to all or any group of Participants. If the Company terminates the Plan as to all or any group of Participants, the date of such termination shall be treated as the date of Retirement for the purpose of calculating Plan benefits. The Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan in a lump sum after termination of the Plan. Interest at the Crediting Rate will be credited to the Participant's Deferral Account until distribution under this paragraph is completed, in accordance with the rules established under paragraph 6.2(b). ARTICLE 13 - MISCELLANEOUS 13.1 SUCCESSORS OF THE COMPANY. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 13.2 ERISA PLAN. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA and therefore to be exempt from Parts 2, 3, and 4 of Title I of ERISA. Notwithstanding any provisions of this Plan to the contrary, if any Participant is determined not to be a "management or highly compensated employee" within the meaning of ERISA or applicable regulations thereunder at the time a Deferral Commitment is elected, such Participant will not be eligible to complete such Deferral Commitment and shall receive an immediate lump sum payment equal to the unpaid balance of the Deferral Account as of the most recent Valuation Date. Upon such payment, no benefit shall thereafter be payable under this Plan either to the Participant or any Beneficiary of the Participant, with respect to said Deferral Account. 13.3 EMPLOYMENT NOT GUARANTEED. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company. 13.4 GENDER, SINGULAR AND PLURAL. All pronouns and variations thereof shall be deemed to refer to the masculine or feminine, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 13.5 CAPTIONS. The captions of the articles and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 13 13.6 VALIDITY. In the event any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan. 13.7 WAIVER OF BREACH. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. 13.8 APPLICABLE LAW. The Plan shall be governed and construed in accordance with the laws of the State of Florida except where the laws of the State of Florida are preempted by ERISA. 13.9 NOTICE. Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing or hand-delivered, or sent by registered or certified mail, return receipt requested, to the principal office of the Company, directed to the attention of the Committee. Such notice shall be deemed given as of the date of delivery, or if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 13.10 CHANGE OF ADDRESS. Any Participant may, from time to time, change the address to which notices shall be mailed by giving written notice of such new address. 13.11 ARBITRATION. Any claim, dispute or other matter in question of any kind relating to this Plan shall be settled by arbitration in Miami, Florida in accordance with the Rules of the American Arbitration Association. Notice of demand for arbitration shall be made in writing to the opposing party and to the American Arbitration Association within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrators shall be final and may be enforced in any court of competent jurisdiction. 14 EX-10.74 27 ex10_74.txt EMPLOYMENT AGREEMENT -- RUBEN PIETROPAOLO DE JONG EXHIBIT 10.74 1 INDIVIDUAL EMPLOYMENT CONTRACT FOR AN INDEFINITE PERIOD OF TIME (HEREINAFTER THE "CONTRACT") ENTERED INTO BY AND BETWEEN THE PARTY OF THE FIRST PART, ADMINISTRACION SA DE CV (HEREINAFTER THE "COMPANY") IN ITS CAPACITY AS EMPLOYER, REPRESENTED HEREIN BY MR. CARLOS HERNANDEZ ARTIGAS IN HIS CAPACITY AS LEGAL REPRESENTATIVE, AND THE PARTY OF THE SECOND PART, RUBEN PIETROPAOLO DEJONG (HEREINAFTER THE "EXECUTIVE"), IN HIS OWN RIGHT, PURSUANT TO THE FOLLOWING: STATEMENTS I. The Company states that it is a legally incorporated corporation according to Mexican law, domiciled at 22 Manuel Avila Camacho Boulevard, 21st Floor, Lomas de Chapultepec col., Postal Code 11000, in Mexico, Federal District, engaged primarily in the rendering of administrative services to third parties. The Company counts among its clients Panamerican Beverages, Inc. in its establishments located in Guatemala, Costa Rica and Nicaragua (hereinafter the "Nolad Group"), Panamco Mexico SA, de CV and its subsidiaries (hereinafter the "Clients"), among others, with which it has entered into contracts for the rendering of services, for which reason the Company needs to employ qualified personnel in order to develop the activities described herein. II. The Executive states that he is aware of the business relationship existing between the Company and its Clients, as well as of the Clients' consent to allow Company employees to use their logos, headings, marketing materials, uniforms, job cards, etc., without implementing any other kind of tie other than the said business relationship between the Company and its Clients. III. Both parties state that this Contract fully supersedes any other verbal or written contract or agreement, previously entered into by and between the Company and any of its affiliates or subsidiaries regarding the services of the Executive as an independent consultant, a subordinate employee or in any other capacity. IV. The Executive states that the Company or its affiliates or subsidiaries do not owe him any amount for previous relationships or contracts, whether oral or written, and grants the Company and its affiliates and subsidiaries the broadest release from obligations established in or derived from the applicable laws with regard previous contracts or relationships between the parties or their affiliates or subsidiaries. V. The Company requires the hiring of a person with the necessary experience, knowledge and capabilities to assume the position of C.E.O. in order to manage the company's day-to-day operations. VI. The Executive states that he has the necessary capabilities required by the Company in order to hold the post set forth in Statement V and the services indicated in the First Clause of this Contract. BY VIRTUE OF the above, the parties execute this Contract, subject to the following: CLAUSES FIRST CLAUSE. DESCRIPTION OF PERSONAL SERVICES. 1.1 POST. The Executive undertakes to render his personal services to the Company by holding the post of C.E.O. at all times with the greatest diligence and efficiency. With the exception of vacation periods, disability due to illness or authorized leaves, the Executive will devote to the Company substantially all of his working hours, attention, capabilities and energy, and will fully cooperate with the Company's Board of Directors to the benefit of the Company's interests. The Executive may engage in other activities related to his personal investments and for the benefit of the community as long as these do not interfere with the duties assumed under this Contract. 1.2 FUNCTIONS AND DUTIES. The Executive's main duties will include, but are not limited to, the following: all of the activities, functions and duties that are generally required or inherent to the position of C.E.O., 2 such as the management of the Company's day-to-day operations, under the supervision of the Company's Board of Directors, the supervision of the Noland Group's operations. In addition, the Executive will also carry out other activities related to his main duties, even when they must be performed away from the workplace. The Executive understands and agrees that he may be required to work and coordinate efforts with other companies or affiliates or with the Company's Clients. However, the Executive expressly acknowledges and pledges that under no circumstance will he be or become an employee of any enterprise other than the Company, whether or not it is an affiliate of the latter, and expressly recognizes that his only existing relationship is and will be with the Company. 1.3 ADDITIONAL FUNCTIONS. It is expressly understood and agreed that the Executive will report solely and exclusively to the Company's Board of Directors and to whatever person the latter may indicate, that the above list of functions and duties is not exhaustive, and that the Executive must fulfill the other functions, duties, limitations or instructions issued by the Company or derived from or related to this Contract. 1.4 COMPLIANCE WITH THE LAWS AND WITH COMPANY POLICIES / FOREIGN CORRUPT PRACTICES ACT. The Executive expressly undertakes to abide, during the performance of his duties with all professional and ethical behavior practices and labor regulations and to comply with any applicable domestic legislation. Moreover, the Executive expressly pledges that, for the duration of this Contract (as defined in the Twenty-Third Clause), he will comply with the U.S. Foreign Corrupt Practices Act, with which he is familiar, as well as with all other rules, policies and procedures adopted by the Company from time to time, including, but not limited to, the Policy on Business Opportunities, the Policy on Conflicts of Interest, etc. SECOND CLAUSE. EXCLUSIVITY OF THE SERVICES. Except to the extent allowed to him by Clause 1.1, the Executive expressly undertakes to render his services exclusively to the Company and likewise acknowledges that the Executive's only existing work relationship is with the Company. For the duration of this Contract the Executive pledges not to accept, whether through compensation or at no charge and in a direct or indirect manner (through third parties whether natural or artificial persons), activities that are similar or analogous to those stipulated in this Contract or to those that the Company may develop in the future, for third parties other than the Company, unless the latter specifically so authorizes it. THIRD CLAUSE. TRUSTWORTHY EMPLOYEE. Considering the confidential nature of the job to be performed by the Executive and the fact that the corresponding legal requirements have been met, both parties acknowledge and agree that the Executive is and will be considered trustworthy employees for all possible legal effects. FOURTH CLAUSE. PROFIT SHARING. The Executive understands and expressly agrees that since he will be the highest-level Company employee, he will not be entitled to share in the distribution of earnings, as provided for in article 127 section I of the Federal Labor Law. Therefore, the Executive will not be entitled to claim any additional payment for profit sharing. FIFTH CLAUSE. PLACE OF WORK. The parties agree that the place where the Executive will render his services will be the Company's domicile specified above, as well as in any area or in any other office space the Company may establish in the future (in Mexico City or in any other place within the Mexican Republic) or in any other place to which he may be assigned by the Company, within the Mexican Republic or abroad as required by the nature of the Executive's work, and he expressly states that he gives the Company the power to relocate him reasonably and in good faith from one place to another, wherefore the Executive expressly gives his consent and hereinafter accepts such change to the extent that it allows him to continue rendering his services for the benefit of the Company. 3 SIXTH CLAUSE. WORK SCHEDULE. 6.1 WEEKLY WORK SCHEDULE. The Executive's work schedule will be 48 hours per week and he will distribute them over a six-day week, in accordance with the provisions of article 59 second paragraph of the Federal Labor Law and with the needs of the Company, for the purpose of achieving the highest efficiency of the Company's human and material resources. 6.2 The Executive and the Company may modify said work schedule or the distribution of working hours according to the needs of the Company, without any responsibility to the latter, since the Executive expressly accepts that his work schedule is variable. 6.3 Given the nature of the duties assumed by the Executive, he will not be subject to any kind of control as to attendance. 6.4 The Executive agrees and accepts that, given the nature of the duties assumed by him, his working hours will not be measured, predetermined or directed by the Company. 6.5 The Executive will be required to report his absences due to illness, disability or other causes, in accordance with the policies established and made known by the Company. SEVENTH CLAUSE. COMPENSATION. 7.1 GROSS MONTHLY [SIC] SALARY. For the duration of this Contract, the Executive will receive from the Company as compensation for his services and duties assumed in conformity therewith, a gross annual salary of US$500,000.00 (Five hundred thousand and 00/199 [sic] U.S. dollars), as follows: Annual base salary: $456,730.78 Christmas bonus (30 days): $38,461.53 Vacation premium (25%): $4,807.69 Total gross annual salary: $500,000.00 7.2 GROSS MONTHLY SALARY. According to the preceding item, the Executive will receive a gross monthly salary of US$38,060.89 (Thirty-eight thousand sixty and 89/100 U.S. dollars). Said compensation will be paid proportionally at fifteen-day periods that expire on the fifteenth and final last day of each month (hereinafter the "Pay Day"). In case a Pay Day is a holiday in Mexico, the compensation will be paid on the immediately preceding business day. 7.3 FORM OF PAYMENT. The Executive expressly agrees that the Company may pay him his salary by depositing this and any other benefit in the bank account the Company may designate, once the pertinent tax withholdings and deductions have been made. It is understood that the mere deposit with the credit institution is equivalent to a salary receipt under article 804 of the Federal Labor Law. 7.4 PAYMENT CURRENCY. It is understood by and between the parties that the amounts paid by the Company to the Executive, including the payment of the salary stipulated in this Contract, will be paid in Mexican pesos at the official exchange rate effective on the payment date, except as otherwise agreed in writing and signed by both parties. EIGHTH CLAUSE. WEEKLY DAY OF REST. The Executive will be entitled to enjoy a salaried day of rest every week as determined by the Company according to its needs. It is understood that the compensation for said day of rest is included in the salary stipulated in Clause 7.2 above, as the latter represents the total amount of the Executive's monthly compensation. 4 NINTH CLAUSE. MANDATORY DAYS OFF. The Executive will enjoy those mandatory days off that are indicated in article 74 of the Federal Labor Law, the salary for which is also covered by the amount stated in Clause 7.2 above, since it involves the Executive's monthly compensation. TENTH CLAUSE. VACATIONS. 10.1 The Executive will enjoy a 21-day yearly vacation period for each year in service, under the understanding that said period will be granted to the Executive once each year of service has expired and as soon as the Company, Board of Directors, or whomever it designates, so authorizes. 10.2 The vacation period will be enjoyed in accordance with article 81 of the Mexican Federal Labor Law and at a time that is convenient to the interests of the Company, and the Executive must request said vacation period in writing to the Company's Board of Directors or to whomever the latter designates, at least one month in advance of the start of the respective vacation period. 10.3 The salary for the said period is also paid with the amount indicated in Clause 7.1 above, as well as the payment of the Executive's vacation premium equivalent to 25% of the total amount of base salary days that the Executive is entitled to for the respective vacation period. 10.4 Under the Mexican Federal Labor Law, if the Executive does not use his annual vacation period within the 12 months subsequent to the granting of it, said period will expire and will be lost. ELEVENTH CLAUSE. OVERTIME. The Executive is prohibited from working overtime hours unless it is with prior consent and according to written instructions issued by the Company's Board of Directors. When, for whatever circumstances, the Executive must work more hours than those indicated in the Sixth Clause as work schedule, he will request beforehand of the Company the written instructions and consent referred to in this Clause; otherwise no amount will be paid to the Executive for the time he works in excess of his work schedule. TWELFTH CLAUSE. CHRISTMAS BONUS. The Executive will be entitled to receive a Christmas bonus equivalent to 30 days of base salary, to be paid prior to December 20 of each year, pursuant to article 87 of the Federal Labor Law. This benefit is also included in the gross annual compensation established in Clause 7.1 above. THIRTEENTH CLAUSE. EXECUTIVE'S RECEIPTS. The Executive undertakes to sign on each Pay Day a receipt to the Company for the total sum of the amounts earned up to such date. The Executive acknowledges and expressly agrees that the issuance of said receipt will imply his acceptance of the fact that the compensation received covers the work performed by him to that date, and that he will not be later entitled to claim payment of any benefit for the respective period. His signature on the corresponding receipt will imply a full release for the Company from all salaries and benefits earned by the Executive for the respective period for services rendered to that date, whether or not said receipt contains a statement to that effect. FOURTEENTH CLAUSE. AUTOMOBILE. In order to facilitate the performance of his work, the Company will grant to the Executive an automobile including its maintenance and a driver, in accordance with Company policy applicable in general to employees at the Executive level, which may be changed at any time at the Company's sole discretion and in conformity with the commodatum (attached hereto as Annex A, which once signed by both parties becomes an integral part of this Contract). 5 FIFTEENTH CLAUSE. ANNUAL BONUS. 15.1 The Executive will be eligible to participate in the Annual Incentive Bonus Plan the Company has in place, subject to the achievement of budgetary outcomes previously set by the Company for the Executive, and that the latter states he knows and agrees with. 15.2 The Executive understands and expressly agrees that he may be eligible, at the Company's discretion, to participate in any bonus or incentive plan the Company normally grants to employees at the Executive level, which may be modified at any time at the Company's discretion. At present, the Company has a Benefits Program in place that includes a Life and Health Insurance as well as a Pension Plan. In said cases, the Company at its sole discretion may establish bonuses or incentives and must determine when and under what conditions the Executive will be entitled to receive said bonuses or incentives. The Company does not assume any obligation as regards the granting of said bonuses or incentives, and at its sole discretion it may modify, increase, reduce or cancel said bonuses or incentive plans. Any payment of bonuses or incentives within the terms and conditions of this Clause 15.2 will not be an acquired entitlement, even though the payment may have been made repeatedly or without a express reservation of the discretionary nature of said bonuses or incentives. SIXTEENTH CLAUSE. HOUSING. The Company, in accordance with its policies, and under a lease, will provide housing to the Executive during a period of only 3 years (from his first date of rendering of services referred to in the Twenty-Eighth Clause), for up to an annual rent and related expenses, including services, equivalent to US$120,000.00 (One hundred twenty thousand and 00/100 U.S. dollars), and the Executive pledges to vacate them as soon as required by the Company. SEVENTEENTH CLAUSE. AIRLINE TICKETS. The Company, in accordance with its policies, will grant annually to the Executive, his spouse and each one of his children, a round-trip airline ticket for them to travel to Buenos Aires, Argentina, and back to Mexico City. EIGHTEENTH CLAUSE. COUNTRY CLUB MEMBERSHIP. The Company, in accordance with its policies, authorizes the Executive to use a Membership owned by the Company in a Golf Club. NINETEENTH CLAUSE. REIMBURSEMENT OF EXPENSES. All costs and expenses incurred by the Executive in the performance of this Contract, including transportation, lodging and entertainment expenses, will be paid exclusively by the Company, provided that it has pre-authorized them in writing in accordance with Company policy (including the adequate itemization and substantiation of the expenses incurred), and that the Executive submits the respective vouchers, which must meet any and all of the applicable legal and fiscal requirements. TWENTIETH CLAUSE. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY. 20.1 CONFIDENTIAL INFORMATION. For the purposes of this Contract, confidential information will mean, without limitation, the contents of this Contract, all patentable applications, the know-how related to the patents and patentable applications, inventions, developments, discoveries, processes, manufacturing processes, procedures and methods, data registration, formulas, projects, designs, drawings, specifications including dimensions, tolerances, materials and components, administrative, commercial and particular facts related to the Company, its affiliates or its Clients, client lists and details of contracts with their clients, products, suppliers and other business partners of the Company or of its affiliates, information regarding Company or affiliate 6 staff, details or contents of any contract regarding Company or affiliate staff, financial data and material, prices and price strategies, sales volume, promotional methods, marketing plans and strategies, as well as any other secret and confidential information that the Company may try to make known by or make available to a limited number of persons (the "Confidential Information"). It is understood that the Executive will receive and have access to the Confidential Information and to the Industrial Secrets (as defined in the Mexican Industrial Property Law) of the Company and of its Clients and affiliates as well. For the duration of this Contract and at any time after same is terminated for whatever reason, the Confidential Information and Trade Secrets will remain secret and may not be revealed by the Executive in any way to third parties, unless the Executive is specifically compelled by the Law to disclose said Confidential Information and Trade Secrets or in the event that he is so ordered or authorized by the Company in advance. 20.2 All materials and documents related to the Confidential Information and Trade Secrets that the Executive receives or may have received during his employment whether in written documents, electronic or magnetic media, optical disks, microfilm, microfiche, CD ROMs, films or other similar medium, are and must remain the exclusive property of the Company (or of its clients or affiliates as the case may be), and must be returned to the Company, whatever their origin, promptly and fully at the Company's request together with all their copies, at any cost, and without an order, upon the termination of the work relationship, for whatever reason. The Executive will not be entitled to retain said materials. The Company will have no obligation to designate said materials or documents specifically or conclusively as confidential or secret, and the absence of such designation does not mean that the Confidential Information and Trade Secrets is not a subject of this Contract. In case of doubt, all written information will be a matter of this Contract unless excepted from it. 20.3 INFORMATION IN THE PUBLIC DOMAIN. Clauses 20.1 and 20.2 will not be applied to information or knowledge that becomes part of the public domain for any reason other than the disclosure of same by the Executive. 20.4 RETURN OF COMPANY PROPERTY. Upon the end of his employment or whenever the Company may so request, the Executive will immediately return to the Company all Company property, including business cards, corporate credit cards (including phone cards), all the originals and copies of documents and other written materials, computer disks and computer files related to the Company's business, and all Company equipment, including automobiles, telephones, beepers and computers that the Executive may have in his possession, custody or control. 20.5 Both parties agree that any breach by the Executive of the terms and conditions mentioned in Clauses 20.1 and 20.2 above will be deemed a just cause for termination of the work relationship without responsibility for the Company. Likewise, the Executive specifically states that if he fails to fulfill the obligations stipulated in this Clause, he will be subject to the corresponding legal liability, including, but not limited to, the criminal liability to which reference is made in article 223 sections III and V of the Industrial Property Law. TWENTY-FIRST CLAUSE. SOCIAL SECURITY. 21.1 The Company undertakes to register the Executive with the Mexican Social Security Institute. 21.2 The Executive is bound to undergo any to medical examinations that may be ordered by the Company. in accordance with the Federal Labor Law, whether through the Mexican Social Security Institute or a physician chosen by the Company. The medical examination may be as extensive as the Company may determine, including drug consumption detection. TWENTY-SECOND CLAUSE. TRAINING AND DEVELOPMENT. The Company undertakes to train the Executive or have him trained in accordance with the training and instruction plan and programs duly registered with the competent authorities. 7 TWENTY-THIRD CLAUSE. DURATION. This Contract is for an indefinite period of time and may be suspended, rescinded or terminated only as provided for in the Federal Labor Law, by the parties' consent or as stipulated herein. It is understood that the Company will be entitled to evaluate at any time and at its sole discretion the Executive's performance according to the conditions and requirements demanded by the business and day-to-day operations of the Company. Therefore, the parties agree that non-fulfillment by the Executive of his duties under this Contract will be just cause for his termination. TWENTY-FOURTH CLAUSE. CONFLICTS OF INTEREST. The Executive expressly states to the Company that he is qualified to enter into this Contract; that he has not entered into other contracts and that he has not undertaken commitments or obligations with any person or company that would prevent him in any way from complying with the duties he assumes under this Contract. The Executive also states that he is not in possession of any document or confidential tangible assets belonging to third parties that might affect the fulfillment of the duties assumed by him under this Contract and that he is ready, willing, and able to fulfill each and every one of them. TWENTY-FIFTH CLAUSE. TAX WITHHOLDINGS AND OTHER DEDUCTIONS. All payments to be made to the Executive under this Contract are subject to applicable tax withholdings according to the pertinent legal provisions regarding present or future Mexican taxes of a federal, state or municipal nature. TWENTY-SIXTH CLAUSE. STATEMENTS. For purposes of the Federal Labor Law, the Company states that it is a corporation duly incorporated according to the laws of the Mexican Republic, engaged in rendering administrative services to third parties, that it is domiciled at 22 Manuel Avila Camacho Boulevard 21st Floor, Lomas de Chapultepec col., postal code 11000, in Mexico, Federal District. For his part, the Executive states that he is an Argentine citizen, 50 years of age, civil status married, domiciled at 22 Manuel Avila Camacho Boulevard 21st Floor, Lomas de Chapultepec col., postal code 11000, in this city. TWENTY-SEVENTH CLAUSE. NOTICES. 27.1 Any notices, consents, authorizations, statements, approvals, documents and other communications (hereinafter and collectively the "Notifications") required or allowed by this Contract will be made in writing and delivered in person or sent by registered mail (with prepaid postage and return receipt requested) to the parties at their respective domiciles shown above or to any other domicile indicated by any of them to the other in writing. It is understood and agreed that unless the Company receives notice in writing of any change of domicile, the Executive's domicile mentioned in the preceding Clause will be the one to which all communications addressed to him will be sent. 27.2 The Executive undertakes to inform the Company in writing of his new domicile in case it changes. TWENTY-EIGHTH CLAUSE. GENERAL PROVISIONS. 28.1 STARTING DATE. Both parties agree that, notwithstanding the execution date of the Contract indicated in the final part thereof, it and the mutual obligations contained therein will become effective on January 8, 2002, and that the starting date of the Executive's services to the Company and consequently of his seniority, will be January 8, 2002, for all possible legal purposes. 28.2 ENTIRE CONTRACT. This Contract constitutes the entire agreement of wills existing between the parties and will become effective on January 8, 2002. No statement or promise has been made by any of the parties that are not included in this Contract. 8 28.3 CONFLICT WITH APPLICABLE LAW. Nothing contained herein has been set forth for the purpose of committing any act contrary to Law. In the event that any conflict were to arise between the provisions hereof and any present or future law, statute, regulation or provision, the latter will prevail, but in such case the affected provisions hereof will be limited and abbreviated only to the extent necessary in order to comply with the legal requirements. 28.4 CLAUSE HEADINGS. The headings of the clauses contained are only for herein reference purposes and therefore will not affect in any way this Contract's meaning or interpretation. 28.5 WAIVER OF RIGHTS. This Contract may only be modified and any of its terms and conditions abandoned through a written document signed by both parties, or in the case of a waiver, signed with the other party's consent. The failure or waiver by any of the parties at any time to request the enforcement of any of the provisions contained herein will not affect the right to exercise that same provision or any other. 28.6 APPLICABLE LAWS AND ARBITRATION. Except as stipulated in this Contract, the provisions of the Mexican Federal Labor Law will be applicable to the work relationship between the Company and the Executive. The parties agree that any dispute or complaint arising in connection with this Contract, its binding character or interpretation, due to nonfulfillment related to any of its provisions, in any way derived from or related to the termination of the work relationship, will be submitted to the jurisdiction and competence of the Federal District's Local Reconciliation and Arbitration Board. 28.7 UNDERSTANDING OF THE CONTRACT. The Executive expressly states that he has read this Contract, that he fully understands the contents and terms thereof, and that he understands the nature and legal scope of this Contract. IN WITNESS THEREOF, the parties, having read this Contract and being satisfied as to its contents and validity, sign it before the undersigned witnesses. RUBEN PIETROPAOLO DEJONG ADMINISTRACION, S.A. DE C.V. BY /s/ Ruben Pietrogolo De Jong BY: /s/ Carlos Hernandez Artigas DATE: January 8, 2002 NAME: CARLOS HERNANDEZ ARTIGAS TITLE: LEGAL REPRESENTATIVE DATE: January 8, 2002 WITNESS WITNESS BY: BY: Mr./Ms. Mr./Ms. Annex A: Commodatum. [Note: Each page of the Contract contains the initials of the Executive and the Company.] EX-10.75 28 ex10_75.txt AMENDMENT TO PROMISSORY NOTE -- ING BANK EXHIBIT 10.75 AMENDMENT TO PROMISSORY NOTE (the "Amendment"), dated as of December 13, 2002, between PANAMERICAN BEVERAGES, INC., a Panamanian corporation (the "Borrower") and ING BANK N.V., ACTING THROUGH ITS CURACAO BRANCH (the "Bank"). The Borrower executed and delivered an Amended and Restated Promissory Note, dated October 15, 2002, in favor of the Bank (the "Promissory Note"). All capitalized terms used but not defined herein shall have the meaning given to such terms in the Promissory Note (as defined below). The Borrower and the Bank agree that, effective as of the date hereof upon the execution and delivery of this Amendment by the Borrower and Bank, Section 7(d)(ii) of the Promissory Note is amended and restated in its entirety as follows: (ii) Debt to EBITDA Ratio. Maintain a ratio of Consolidated Debt to Consolidated EBITDA (calculated as of the last day of each fiscal quarter or year hereinafter indicated, as reflected in the quarterly or annual financial statements for such fiscal quarter or year, for the twelve-month period ending on the relevant date of determination) of not more than (i) 2.35 to 1 through the periods ended December 31, 2002 and March 31, 2003 and (ii) 2.25 to 1 thereafter. In order to induce the Bank to enter into this Amendment, the Borrower hereby (i) makes the representations and warranties set forth in Section 6 of the Promissory Note as of the date hereof (it being understood and agreed that any representation which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date), and (ii) represents and warrants that, (a) as of the date hereof, there exists no Default or Event of Default under the Promissory Note as amended by this Amendment and (b) since December 31, 2001, there has been no Material Adverse Change. Except as expressly provided hereby, the Promissory Note, each other Loan Document and all instruments and documents executed and delivered pursuant thereto shall continue in full force and effect in accordance with their respective terms. All references in the Loan Documents to the Promissory Note shall be deemed to refer to the Promissory Note as modified by this Amendment and as hereafter modified by any amendment, modification or supplement thereto. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Bank under any of the Loan Documents. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. [SIGNATURES ON FOLLOWING PAGES] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. PANAMERICAN BEVERAGES, INC., as Borrower By: /s/ Carlos Hernandez-Artizas ---------------------------------- Name: Carlos Hernandez-Artizas Title: VP, General Counsel & Secretary ING BANK N.V., ACTING THROUGH ITS CURACAO BRANCH, as Bank By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ EX-10.76 29 ex10_76.txt GUARANTY -- CITIGROUP INC. EXHIBIT 10.76 GUARANTY GUARANTY, dated as of December 16, 2002, made by PANAMERICAN BEVERAGES, INC., a corporation organized and existing under the laws of the Republic of Panama (the "Guarantor"), in favor of Citigroup Inc. and each subsidiary or affiliate thereof (including Citibank, N.A. and each of its branches wherever located) ("Citigroup"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce INARCO INTERNATIONAL BANK, N.V. to enter into the Promissory Note dated as of December 16, 2002 (as amended, supplemented and otherwise modified from time to time, the Promissory Note) with PANAMCO DE VENEZUELA, S.A. (the "Borrower"), the Guarantor agrees as follows: 1. Guaranty. The Guarantor unconditionally guarantees the punctual payment when due, whether upon maturity, by acceleration or otherwise, of all obligations (now or hereafter existing) of the Borrower under the Promissory Note, whether for principal, interest, fees, expenses or otherwise, in each case strictly in accordance with the terms thereof (all such obligations being the "Obligations"); provided that the Guarantor's maximum liability under this Guaranty with respect to that portion of the Obligations consisting of principal will not exceed Thirty Three Million Dollars of the United States of America (US$33,000,000). If the Borrower fails to pay any Obligation in full when due (whether at stated maturity, by acceleration or otherwise), the Guarantor will promptly pay the same to Citigroup. The Guarantor will also pay to Citigroup any and all expenses (including without limitation, reasonable legal fees and expenses) incurred by Citigroup in enforcing its rights under this Guaranty. This Guaranty is a guaranty of payment and not merely of collection. 2. Guaranty Absolute. The Guarantor's liability under this Guaranty is unconditional irrespective of (i) any illegality, lack of validity or enforceability of any Obligation, (ii) any amendment, modification, waiver or consent to departure from the terms of any Obligation, including any renewal or extension of the time or change of the manner or place of payment, (iii) any exchange, substitution, release, non-perfection or impairment of any collateral securing payment of any Obligation, (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any Obligation, (v) the existence of any claim, set-off or other rights that the Guarantor may have at any time against the Borrower, Citigroup, or any other corporation or person, whether in connection herewith or any unrelated transactions, provided that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim, (vi) any law, regulation, decree or order of any jurisdiction, or any other event, affecting any term of any Obligation or Citigroup's rights with respect thereto, including, without limitation: (A) the application of any such law, regulation, decree or order, including any prior approval, which would prevent the exchange of a Non-USD Currency (as hereinafter defined) for U.S. Dollars or the remittance of funds outside of such jurisdiction or the unavailability of U.S. Dollars in any legal exchange market in such jurisdiction in accordance with normal commercial practice; or (B) a declaration of banking moratorium or any suspension of payments by banks in such jurisdiction or the imposition by such jurisdiction or any governmental authority thereof of any moratorium on, the required rescheduling or restructuring of, or required approval of payments on, any indebtedness in such jurisdiction; or (C) any expropriation, confiscation, nationalization or requisition by such country or any governmental authority that directly or indirectly deprives the companies in such jurisdiction of any payment obligation under any Obligations; or (D) any war (whether or not declared), insurrection, revolution, hostile act, civil strife or similar events occurring in such jurisdiction which has the same effect as the events described in clause (A), (B) or (C) above (in each of the cases contemplated in clauses (A) through (D) above, to the extent occurring or existing on or at any time after the date of this Guaranty), and (vii) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by Citigroup that might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower or the Guarantor or any other guarantor or surety. Without limiting the generality of the foregoing, with respect to any Obligations that, in accordance with the express terms of any agreement pursuant to which such Obligations were created, were denominated in U.S. Dollars or any currency other than the Venezuelan bolivar, the Guarantor guarantees that it shall pay Citigroup strictly in accordance with the express terms of such agreement, including in the amounts and in the currency expressly agreed to thereunder, irrespective of and without giving effect to any Venezuelan laws in effect from time to time, or any order, decree or regulation in Venezuela. It is the intent of this Section 2 that the Guarantor's obligations hereunder are and shall be absolute and unconditional under any and all circumstances. 3. Waiver. The Guarantor waives promptness, diligence, notice of acceptance, notice of dishonor and any other notice with respect to any Obligation and this Guaranty and any requirement that Citigroup exercise any right or take any action against the Borrower or any collateral security or credit support. 4. Reinstatement. This Guaranty will continue to be effective or be reinstated, as the case may be, if at any time any payment of any Obligation is rescinded or must otherwise be returned by Citigroup upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. 5. Subrogation. The Guarantor will not assert, enforce or otherwise exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until payment in full of the Obligations and the termination of any and all agreements under which Citigroup is committed to provide extensions of credit. 6. Taxes. Any and all payments by the Guarantor hereunder will 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 liabilities with respect thereto, excluding income or franchise taxes imposed on Citigroup's net income by the jurisdiction under the laws of which Citigroup is organized or any political subdivision thereof or by the jurisdiction of Citigroup's lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being "Taxes"). If the Guarantor is required by law to deduct any Taxes from or in respect of any sum payable hereunder (i) the sum payable will be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) Citigroup will receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Guarantor will make such deductions, and (iii) the Guarantor will pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. In addition, the Guarantor will pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty or the Obligations ("Other Taxes"). The Guarantor will promptly furnish to Citigroup the original or a certified copy of a receipt evidencing payment thereof. The Guarantor will indemnify Citigroup for the full amount of Taxes or Other Taxes paid by Citigroup or 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, within 45 days of Citigroup's request therefor. Without prejudice to the survival of any other agreement contained herein, the Guarantor's agreements and obligations contained in this Section will survive the payment in full of the Obligations, principal and interest hereunder and any termination of this Guaranty. 2 7. Place and Currency of Payment. If any Obligation is payable in U.S. Dollars, the Guarantor will make payment hereunder to Citigroup in U.S. Dollars at 399 Park Avenue, New York, New York. If any Obligation is payable in a currency other than U.S. Dollars (a "Non-USD Currency") and/or at a place other than the United States, and such payment is not made as and when agreed, the Guarantor will, upon Citigroup's request, either (i) make payment in such Non-USD Currency and at the place where such Obligation is payable, or (ii) pay Citigroup in U.S. Dollars at 399 Park Avenue, New York, New York. In the event of a payment pursuant to clause (ii) above, the Guarantor will pay Citigroup the equivalent of the amount of such Obligation in U.S. Dollars calculated at the rate of exchange at which, in accordance with normal banking procedures, Citigroup may buy such Non-USD Currency in New York, New York on the date the Guarantor makes such payment; provided, however, that the foregoing provisions of this sentence shall not apply to any payments hereunder in respect of Obligations that have been re-denominated into a Non-USD Currency as a result of the application of any law, order, decree or regulation in any jurisdiction other than the United States, which Obligations shall, for purposes of this Guaranty, be deemed to remain denominated in U.S. Dollars and payable to Citigroup in accordance with the first sentence of this Section 7. 8. Set-Off. If the Guarantor fails to pay any of its obligations hereunder when due and payable, Citigroup is authorized at any time and from time to time, 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 Citigroup to or for the Guarantor's credit or account against any and all of the Obligations, whether or not Citigroup has made any demand under this Guaranty. Citigroup will promptly notify the Guarantor after any such set-off and application, provided that the failure to give such notice will not affect the validity of such set-off and application. Citigroup's rights under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that Citigroup may have. 9. Representations and Warranties. The Guarantor represents and warrants that: (i) the execution, delivery and performance by the Guarantor of this Guaranty are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (x) its charter or by-laws or (y) any law or any contractual restriction binding on or affecting the Guarantor or any entity that controls it, (ii) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance by the Guarantor of this Guaranty, and (iii) this Guaranty has been duly executed and delivered by the Guarantor and is its legal, valid and binding obligation, enforceable against the Guarantor in accordance with its terms. 10. Continuing Guaranty. This is a continuing guaranty and applies to all Obligations whenever arising. This Guaranty is irrevocable and will remain in full force and effect until the payment in full of the Obligations and all amounts payable hereunder and the termination of all of the agreements relating to the Obligations. 11. Amendments, Etc. No amendment or waiver of any provision of this Guaranty, and no consent to departure by the Guarantor herefrom, will in any event be effective unless the same is in writing and signed by Citibank, N.A., on behalf of Citigroup, and then such waiver or consent will be effective only in the specific instance and for the specific purpose for which given. 12. Addresses. All notices and other communications provided for hereunder will be in writing (including telecopier communication), and mailed, telecopied or delivered to it, if to the Guarantor, at its address at Torre Dredsner Bank, Piso 7, Calle 50, Panama City, Republic of Panama. Facsimil: (507) 223-8308, Attention: Chief Financial Officer, and if to Citigroup, at its address at Arulex Center, Punta Brabo, Oranjestad, Aruba, Fax.: (297) 886711, Attention: Juan Pablo Machado, or, as to either party, at such other address as is designated by such party in a written notice to the other party. All such notices and other communications will, when mailed or telecopied, be effective when deposited in the mails or telecopied, respectively. 3 13. Guarantor's Credit Decision, Etc. The Guarantor has, independently and without reliance on Citigroup and based on such documents and information as the Guarantor has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. The Guarantor has adequate means to obtain from the Borrower on a continuing basis information concerning the financial condition, operations and business of the Borrower, and the Guarantor is not relying on Citigroup to provide such information now or in the future. The Guarantor acknowledges that it will receive substantial direct and indirect benefit from the extensions of credit contemplated by this Guaranty. 14. Judgment. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in U.S. Dollars into a Non-USD Currency, the Guarantor agrees that the rate of exchange used will be that at which, in accordance with normal banking procedures, Citigroup could purchase U.S. Dollars with such Non-USD Currency on the business day preceding that on which final judgment is given. The obligation of the Guarantor in respect of any sum due hereunder will, notwithstanding any judgment in a Non-USD Currency, be discharged only to the extent that on the date the Guarantor makes payment to Citigroup of any sum adjudged to be so due in such Non-USD Currency, Citigroup may, in accordance with normal banking procedures, purchase U.S. Dollars with such Non-USD Currency; if the U.S. Dollars so purchased are less than the sum originally due to Citigroup in U.S. Dollars, the Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Citigroup against such loss, and if the U.S. Dollars so purchased exceed the sum originally due to Citigroup in U.S. Dollars, Citigroup agrees to remit to the Guarantor such excess. 15. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the law of the State of New York. 16. Consent to Jurisdiction, Etc. The Guarantor irrevocably (i) submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to this Guaranty or the Obligations, (ii) agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding, and (iv) irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Guarantor at Panamerican Beverages, Inc., c/o Panamco L.L.C. 701 Waterford Way, 8th Floor, Miami, Florida 33126. Attention: Chief Financial Officer. A final judgment in any such action or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing herein will affect Citigroup's right to serve legal process in any other manner permitted by law or affect Citigroup's right to bring any action or proceeding against the Guarantor or its property in the courts of other jurisdictions. To the extent that the Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Guarantor irrevocably waives such immunity in respect of its obligations under this Guaranty. 17. WAIVER OF JURY TRIAL. THE GUARANTOR IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY OR CITIGROUP'S ACTIONS IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF. Panamerican Beverages Inc. By /s/ Annette Franqui ____________________________ Name: Annette Franqui Title: Vice President, Chief Financial Officer & Treasurer EX-12.1 30 ex12_1.txt COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Amounts in thousands of U.S. dollars, except ratios) (Unaudited)
Year Ended December 31, ---------------------------------------------------------------------- 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- EARNINGS: Net income (loss) $ 33,242 $118,024 $(504,660) $(59,904) $ 120,322 Minority interest in earnings of consolidated subsidiaries 4,871 5,865 1,944 3,695 5,305 Provision for income taxes 51,126 50,369 21,800 31,254 51,374 Fixed charges 87,460 122,313 146,348 131,742 101,842 ---------- ---------- ---------- ---------- ---------- Subtotal Earnings 176,699 296,571 (334,569) 106,787 278,843 Less: Undistributed earnings (loss) of less than 50% owned affiliates (290) 516 (1,189) (4,371) (3,550) ---------- ---------- ---------- ---------- ---------- Total $ 176,989 $ 296,055 $(333,380) $ 111,158 $ 282,393 ========== ========== ========== ========== ========== FIXED CHARGES: Gross interest expense $85,312 $ 119,390 $ 142,299 $ 129,072 $ 98,152 Interest element of rentals 2,148 2,923 4,049 2,670 3,690 ---------- ---------- ---------- ---------- ---------- Total $87,460 $ 122,313 $ 146,348 $ 131,742 $ 101,842 ========== ========== ========== ========== ========== RATIO OF EARNINGS TO FIXED CHARGES 2.0 2.4 NM (a) NM (b) 2.8 ========== ========== ========== ========== ========== (a) For the fiscal year ended December 31, 2000, the Company's fixed charges exceeded its earnings by $479.7 million. (b) For the fiscal year ended December 31, 1999, the Company's fixed charges exceeded its earnings by $20.6 million. In the computation of the Company's ratio of earnings to fixed charges, earnings consist of earnings before income taxes, plus fixed charges, less undistributed earnings (loss) of less than 50% owned affiliates. Fixed charges consist of interest expense and a reasonable approximation of the interest component included in rental expense.
EX-21.1 31 ex21_1.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT PANAMERICAN BEVERAGES, INC. - --------------------------- Interamerican Financial Corporation (Incorporated in Panama) Panamco Insurance Company Ltd. (Incorporated in Bermuda) Alliance International Corp. (Incorporated in Panama) Panamco L.L.C. (Incorporated in Delaware) Panamco Aircraft L.L.C. (Incorporated in Delaware) Kristin Overseas (Incorporated in Panama) Panamco USA (Incorporated in Delaware) Rostock Company, S.A. (Incorporated in Panama) Glengarry Holdings, Inc. (Incorporated in Panama) MEXICO (Companies related to the operation in Mexico) - ----------------------------------------------------- Panamco Mexico S.A. de C.V. Panamco Bajio S.A. de C.V. Panamco Golfo S.A. de C.V. Compania Inmobiliaria de Puebla S.A. de C.V. Compania Inmobiliaria de Apizaco S.A. de C.V. Inmobiliaria Impulsa S.A. de C.V. Compania Inmobiliaria de Coatepec S.A. de C.V. Administracion S.A. de C.V. Prosein S.A. de C.V. Proyectos y Construcciones Azteca S.A. de C.V. Arrendadora Azteca S.A. de C.V. Industrial Metalica de Leon S.A. de C.V. Plastehsa S.A. de C.V. Impulsora Azteca S.A. de C.V. Compania Inmobiliaria de Leon S.A. de C.V. Compania Inmobiliaria de Irapuato S.A. de C.V. Inmuebles Urbanos de Apatzingan Compania Inmobiliaria de Celaya S.A. de C.V. Compania Inmobiliaria de Morelia S.A. de C.V. Impulsora de Michoacan S.A. de C.V. Compania Inmobiliaria de Zamora S.A. de C.V. Compania Inmobiliaria de Apatzingan S.A. de C.V. Administracion de Marcas Panamco S.A. de C.V. Compania Inmobiliaria de Veracruz S.A. de C.V. Arrendadora del Bajio S.A. de C.V. Panamco S.A. de C.V. Bebidas Azteca del Bajio S.A. de C.V. Embotelladora de Oaxaca S.A. de C.V. Panamerican Beverages S.A. de C.V. Refrescos de Oriente S.A. de C.V. Pan-Air S.A. de C.V. BRAZIL (Companies related to the operation in Brazil) - ----------------------------------------------------- Dixer Distribuidora de Bebidas S.A. Jurubatuba S.A. Industria & Comercio Refrescos do Brazil S.A. Spal Industria Brazilera de Bebidas S.A. ("Spal") Refrigerentes do Oeste Ltda. Supripack Industria Com. de Embalgens Ltda. Distribuidora de Bebidas No Lar Ltda. Distribuidora Capuava de Bebidas Ltda. Sabara Compania Administradora Ltda. American Participacoes Ltda. COLOMBIA (Companies related to the operation in Colombia) - --------------------------------------------------------- Panamco Colombia S.A. Embotelladoras de Santander S.A. Embotelladora del Huila S.A. Embotelladora Roman S.A. Friomix del Cauca S.A. VENEZUELA (Companies related to the operation in Venezuela) - ----------------------------------------------------------- Embotelladora Coca-Cola y Hit de Venezuela S.A. (Incorporated in Panama) Wape Investments Inc. (Incorporated in Panama) Coca-Cola Refrescos Holdings S.A. (Incorporated in Venezuela) Coca-Cola Refrescos S.A. (Incorporated in Venezuela) Panamco de Venezuela S.A. (Incorporated in Venezuela) Distribuidora CCC S.A. (Incorporated in Venezuela) Valores Nirgua S.A. (Incorporated in Venezuela) Comercial Vendosa S.A. (Incorporated in Venezuela) COSTA RICA (Companies related to the operation in Costa Rica) - ------------------------------------------------------------- Embotelladora Panamco Tica, S.A. NICARAGUA (Companies related to the operation in Nicaragua) - ----------------------------------------------------------- Centroamericana Investments S.A. (Incorporated in Panama) Panamco de Nicaragua, S.A. (Incorporated in Nicaragua) GUATEMALA (Companies related to the operation in Guatemala) - ----------------------------------------------------------- Embotelladora Central S.A. Bodegas de Distribucion S.A. Apoyos Industriales y Comerciales Integrados, S.A. EX-23.1 32 ex23_1.txt INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-9012 of Panamerican Beverages, Inc. (a Panamanian corporation) and subsidiaries (the "Company") on Form F-3, and in Registration Statements No. 333-70518, 333-65652, and 333-68320 of the Company on Forms S-8 of our report dated February 14, 2003, relating to the consolidated financial statements of the Company as of and for the year ended December 31, 2002, (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the application of procedures relating to certain disclosures and reclassification of financial statement amounts related to the 2001 and 2000 financial statements that were audited by other auditors who have ceased operations and for which we have expressed no opinion or other form of assurance other than with respect to such disclosures and reclassification) appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2002. Deloitte & Touche LLP Certified Public Accountants Miami, Florida March 27, 2003 EX-23.2 33 ex23_2.txt EXPLANATION OF CONCERNING ABSENCE EXHIBIT 23.2 Explanation Concerning Absence of Current Written Consent of Arthur Andersen LLP On July 1, 2002, Panamerican Beverages, Inc. (the "Company") announced that it had appointed Deloitte & Touche, LLP to replace Arthur Andersen LLP ("Arthur Andersen") as its independent public accountants. Representatives of Arthur Andersen are not available to provide an updated written consent required for the incorporation by reference of its audit report with respect to the Company' s financial statements as of, and for the years ended, December 31, 2001 and December 31, 2000 included in this Annual Report on Form 10-K into registration statements filed by the Company and currently effective under the Securities Act of 1933 (the "Act"). Because, after reasonable effort, the Company is unable to obtain Arthur Andersen's written consent to such incorporation by reference of their report, Rule 437a under the Act permits the Company to omit Arthur Andersen's updated written consent from this filing. Section 11(a) of the Securities Act provides that if any part of a registration statement at the time it becomes effective contains an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement or as having prepared or certified any report or valuation which is used in connection with the registration statement with respect to the statement in such registration statement, report or valuation which purpose to have been prepared or certified by the accountant. While Arthur Andersen did consent to the incorporation by reference of its audit report with respect to the Company's financial statements as of, and for the years ended, December 31, 2001 and December 31, 2000 contained in its Annual Report on Form 10-K for fiscal 2001, as noted above, Arthur Andersen has not consented to the incorporation by reference of such audit report contained in this Annual Report on Form 10-K. As a result, with respect to an applicable registration statement, the Company's investors may not be able to recover against Arthur Andersen under Section 11(a) of the Act or the lack of a currently dated consent may limit the time in which any liability under Section 11(a) could be asserted against Arthur Andersen. EX-99.1 34 ex99_1.txt CERTIFICATE OF CEO AND PRESIDENT Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned hereby certifies as follows: 1. I am the Chief Executive Officer and President of Panamerican Beverages, Inc. (the "Company") and I am delivering this certificate in connection with the Form 10-K of the Company for the period ended December 31, 2002 (the "Report") as filed with the Securities and Exchange Commission. 2. To the best of my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Craig Jung* - ----------------------- Craig D. Jung Chief Executive Officer March 17, 2003 * A signed original of this written statement required by Section 906 has been provided to Panamerican Beverages, Inc. and will be retained by Panamerican Beverages, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 35 ex99_2.txt CERTIFICATE OF CHIEF FINANCIAL OFFICER EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies as follows: 1. I am the Vice President, Chief Financial Officer and Treasurer of Panamerican Beverages, Inc. (the "Company") and I am delivering this certificate in connection with the Form 10-K of the Company for the period ended December 31, 2002 (the "Report") as filed with the Securities and Exchange Commission. 2. To the best of my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Annette Franqui* - ------------------------- Annette Franqui Vice Presidident, Chief Financial Officer and Treasurer March 14, 2003 * A signed original of this written statement required by Section 906 has been provided to Panamerican Beverages, Inc. and will be retained by Panamerican Beverages, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----